E389: The Future of Investing: Data Centers, AI & the Next Trillion-Dollar Companies

What happens when one investor sits at the intersection of venture capital, natural resources, AI, space infrastructure, and geopolitics? In this episode, I sit down with Rob Stephens, Director of Investments at Spider Management, to discuss how institutional investors are adapting to a world where private markets are capturing more value, AI is reshaping capital allocation, and the boundaries between asset classes are disappearing. Rob shares lessons from both the GP and LP sides of the table, explains why traditional portfolio construction frameworks may be outdated, and explores how themes like power generation, data centers, space infrastructure, and venture capital are becoming increasingly interconnected. We also discuss emerging managers, co-investments, continuation vehicles, concentration versus diversification, and the future of private markets.

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

• 0:00Speaker 00

  Power is the main bottleneck for everything that the US is trying to do in the AI space. And in technology broadly speaking, we have data centers in Richmond, Virginia, out by the airport that I didn't even know existed. I drive by there all the time to go home to my childhood town. And these massive Meta and Amazon data centers are just hidden back there behind the trees. And you get back there and you say like, how big is this building? And they don't answer you in square footage. They answer you in megawatts.

• 0:39David Weisburd?

  Rob, you're Director of Investments at Spider Management, which has over $6 billion. And before you were an LP, you were also a GP for 10 years. How does that change how you approach being an LP?

• 0:49Speaker 00

  I think honestly, it provides a little bit of a different lens than a lot of my peers have, because they don't have the experience having sat on the other side and recognizing some of the nuance to the way that GPs speak to LPs. Some of the things that might get hidden behind the marketing materials, behind the return figures that are presented. There are ways to massage the numbers and also to tell a story that befits the GP more than perhaps the LP knows if they're not kind of aware.

• 1:16David Weisburd?

  And being on the LP side now for half a decade, what are some of these patterns? What are some things that GPs are doing that may not be apparent to LPs?

• 1:24Speaker 00

  More subtle things. It's not always in writing. It's not always something that you can find in the materials. Perhaps the easiest one is just recognizing whether or not the GPs are putting their performance. If they have it, if the fund or firm has been around long enough, then the performance should be front and center or at least available. If it's not, you have to know that it's probably not worth sharing. And there's a reason why it's not included. There are also times where you'll see situations where the GP will say underwriting targets as opposed to underwriting returns. And you say, okay, this is what they're thinking that they can generate in terms of their portfolio returns. But in reality, that may not be exactly what they've been able to achieve.

• 2:04David Weisburd?

  What's the hardest part of being an LP?

• 2:06Speaker 00

  For me, it has been adjusting to the pace of being an LP, working within

• 2:14Speaker 00

  The LP mindset, the philosophy, the construct, the speed at which things move. I feel like GPs on that side of the table was a little bit more dynamic, a little bit faster paced. And part of that was because I worked for a smaller company where there was one decision maker. I would say that there are kind of philosophical norms that have come through, if you call it the Yale model or the typical endowment allocation setup that are hard to shake for folks. So that's all they've known in their careers and have grown up in that.

• 2:43David Weisburd?

  We were talking before we started recording about Michelle Del Buno, who now runs A16Z Perennial. And one of his views is that there's a lot of dogma in the asset management space around portfolio construction and methodologies. What do you think is too dogmatic in the space that you'd like to see changed?

• 3:00Speaker 00

  Love Michelle, wahahaha, a great guy that I've enjoyed getting to know over the years. The easy one for me is the allocation buckets. In that when I first joined Spider, I wasn't familiar with the way that the allocations were established and how they were targets for each asset class. And there would be opportunities that were tweeners, that it was special sits where it was half credit, half equity. Well, where does that live? There's the crossovers where it's public equity and private equity. Does that live in the public equity portfolio? Does that live in the venture capital portfolio? How do we treat that? Who's responsible for that? And then there are situations where there are increasingly thematic strategies that apply to specific asset classes. So for example, met a team this past week on a venture firm

• 3:45Speaker 00

  that's building a strategy explicitly around the electron economy. So all of the AI power and electrification required, but it's entirely venture, but it's an entirely natural resources theme. So which portfolio does that live in? To me, I feel like there are opportunities for investors out there to kind of blur those lines and pursue the best investment opportunities available.

• 4:08David Weisburd?

  You have a similar phenomenon right now in the public and private markets. Because of the lack of IPO and public IPOs, there's just not that many ways to be exposed to public growth. Now you have Anthropic, OpenAI, SpaceX coming out. But before then, there's just not that many growth companies in the public markets. So a lot of investors are looking at late-stage private as the new small growth in the tech space. What do you think about that?

• 4:38Speaker 00

  We are seeing a concentration of winners in the late-stage private growth companies, and private tech in particular, that are creating a haves and have-nots of LPs and investors, in that the Anthropics, the OpenAI, SpaceX's, the largest companies in the private markets are accruing more value there, that if you don't have exposure to those, you are missing out, because a lot of the value that used to happen in the IPO markets no longer occurs, once the average retail or institutional public investor has an opportunity to buy in. It is a great seat to be in for us, because we have opportunities to invest and participate in some of these rounds early on, while the companies are private, and we are very fortunate that we can do that for our clients and our university. But it

• 5:21Speaker 00

  does create an imbalance across public and private investment markets.

• 5:25David Weisburd?

  You referenced earlier, the slack of DPI in venture capital. Now you have three of the largest IPOs in history coming out. Does this solve the DPI crisis?

• 5:34Speaker 00

  It certainly helps, but these are three of thousands. There are something like 1,500 unicorns in the US alone right now. And those three, while that's going to be great for a lot of people, and great for a lot of GPs, to be honest, because that will create track records that they can rely on for a long, long time. There's still going to be a lot of dead weight, in terms of the underlying portfolio companies that have not gotten to maturity. They have not gone public. There are going to be kind of second-order effects, though, of these IPOs, that I think are going to be really intriguing for new investment opportunities. But at the same time, that doesn't absolve the managers that have not been able to cycle these assets through their lives, on the schedules that

• 6:16Speaker 00

  the terms of their funds and our expectations as LPs require. But the exciting part is that when these companies all do go public, or they generate liquidity, think of all the wealth and new money that it's going to create for a lot of their employees, as well as the potential opportunities and spinoffs it's going to create.

• 6:34David Weisburd?

  Last year, something like 75% of the money went to a handful of firms in venture. They're not having any problems fundraising. The rest of the industry, and especially emerging managers, are having a lot of trouble. Just came back from a lunch with a $100 billion-plus multifamily office, and he said that emerging managers are going to have to innovate on the structures and how they access growth companies. Do you expect structural innovation, venture capital?

• 6:56Speaker 00

  I do, but I think it's going to be very hard for emerging managers, unless they come from extremely strong pedigree backgrounds, to access these late-stage growth companies. It's going to have to be the ones that have come from the tier-one firms, where they were already personal investors in some of these brands and businesses, and have the personal relationships in order for them to then go out and say, you know, "XYZ, my new platform, we would like to participate in your Series E, because we were there when we did the seed at my old firm." Otherwise, I think it's going to be extremely hard, because there's so much capital being raised by these growth funds at the tier ones that they can continue to preempt rounds and write hundreds of millions of dollars into a single check.

• 7:39Speaker 00

  So unless the emerging managers are able to compete on a capital scale, it's going to be extremely difficult for them to get into those rooms.

• 7:47David Weisburd?

  A lot of people don't really realize how these mega rounds come together. And what I've been told by many people is Sam Altman or Dario will text his favorite 5-10 funds and say, "Look, we're looking to raise some more money." And implicitly, that means send me term sheets in the next 48 hours. He looks at the different term sheets, decides which two or three funds he wants to lead. They do the lead, figures out the valuation, and then everybody else comes in.

• 8:14Speaker 00

  Your guess is as good as mine, honestly, because I haven't seen how that sausage is made. But it does sound like that is the approach that some of these hottest, most in-demand founders are able to engage the VCs that they want to work with.

• 8:27David Weisburd?

  The CEOs are setting both the terms, the price, and the timing of these rounds, all three.

• 8:34Speaker 00

  I'm not sure that they get all three at once. I'm sure there are situations, but I would imagine that the VCs on the other side are sophisticated enough that they're not necessarily going to give everywhere.

• 8:45David Weisburd?

  And if you believe this process to be either literally either Dario and Sam are texting these fund managers, or figuratively, they're emailing them, the second order effects of that, you could argue that there's economies of scale, or capital itself could become a moat. Why? When you're raising $25 billion, you need to go out only to funds that could write $1 to $2 to $3 billion checks. You can't go to most of the investors.

• 9:11Speaker 00

  Correct. And that's what creates such an opportunity for the big tier one VCs out there that do have that much money to extend their lead on the rest of the VC landscape. Because they are the ones who can write those checks. It's them and the sovereigns, which play a big role in the environment today. There are only a small handful of these tier ones that have the checks to be able to follow that playbook that the founders are seeking right now.

• 9:38David Weisburd?

  That's exactly the thesis for Mubadala Capital. So I had the CIO, Oscar Falagran, he said that there's just not much competition of people that could write $5, $10, $15 billion checks. I've come to think of this as an hourglass. So you have hundreds of thousands, maybe even millions of people that would like to put 25K checks into startups, obviously popularized by platforms like Angel List, but also directly through angel investing. And then you have hyper-competition, maybe 10 to 500 million, and then again, starts to thin out. And when you're looking for billion-dollar-plus check writers, there's just not that many people that have blind pools of capital that could put that kind of concentration in single asset.

• 10:17Speaker 00

  And then it comes down to, what are your return expectations? What is the growth potential for that business? Is that where you want to continue to put money? And there are certain financial dynamics that make it more attractive for the Mubadillas of the world, that they want to write 100, $200 million checks, because they're so large that they can't go smaller and get the kind of 10x upside from earlier stage. I think the hourglass analogy is great, because it does create opportunities for those of us smaller fish down at the bottom, where we can write and do smaller things.

• 10:44David Weisburd?

  You know you're in the right market, where a $6 billion LP considers themselves a smaller fish.

• 10:49Speaker 00

  We like to say we are right-sized, because we're big enough to get the attention Of most folks that we would want to have a conversation with, but small enough that we can do $10 million checks into funds where we're not going to have to really elbow or scratch and fight for allocation if there's an opportunity.

• 11:07David Weisburd?

  One of the most fascinating things about your model, I don't think I've ever seen this, speaking to now over 1,000 conversations of people in the space, is that you guys force all of your limited partners into the same exact portfolio. Tell me about that.

• 11:19Speaker 00

  So we have about 30 in total. We don't force anybody to do anything. We offer it to them and that is the opportunity to work with us. From our perspective, it's hugely valuable to have the network, the relationships, the shared history of investing across all asset classes that we have at Spider in Richmond, Virginia, and it's a best ideas portfolio. So across all of our public assets, all of our private assets, it is, here's what we think is going to generate the best long-term return for perpetual sustainability of our clients' missions.

• 11:52David Weisburd?

  What are the advantages of this model?

• 11:54Speaker 00

  Let's say that we do get a slug of $20 million into a great tier one VC and we are trying to figure out, okay, of the 30 clients, how much is the university going to get? How much is our largest client going to get outside the university? Is there going to be anything left at the bottom for the smallest? Perhaps that doesn't always work out and at the benefit of all of them on an equal basis, but because they all have the same gross exposure to the entire portfolio's returns, it really benefits clients so that they can enjoy the rewards of our long-term success and experience in this industry. We invest on the collective shared experience of our investment team and put together the

• 12:33Speaker 00

  best portfolio that we can, which the returns have proven out to be worth them continuing to work with us.

• 12:41David Weisburd?

  And what I love about this model, I love this razor that everybody, what I would call is forced into the same portfolio. It has so many second order effects in terms of making sure that the hurdle is really high for every new investment, making sure that they're underwriting you philosophically before they invest, all these things. Also, another part of your model is you're both an endowment, but you also have outside investors, which are constantly sparring partners for you, constantly asking you questions on every single investment and making you better as thinkers. How does that play into your model versus a traditional endowment model?

• 13:11Speaker 00

  Absolutely. It keeps us sharp. I mean, we have, obviously, a much more robust reporting schedule and cadence with all these outside clients that typical endowments don't have that because they might have quarterly meetings, perhaps with the university that they're affiliated with. We have that with the university, but then we have the 29 outside clients. And in terms of the actual meetings, our team, we are constantly on our toes because it's, okay, there's a new presentation, let's run the numbers, let's get their updated reports and their results, and let's get ready to go in there and address the questions that this specific group has on their minds about what's in our portfolio and what's happening in the world. So it sharpens us because of the frequency with which we have these conversations.

• 13:51David Weisburd?

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• 14:36David Weisburd?

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• 15:12David Weisburd?

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• 15:54David Weisburd?

  It's one of the reasons why I have this podcast is I come in confidently with an idea. I talk to the world's smartest people and every day I get corrected on my thesis little by little and over time I start to get closer and closer to ground truth.

• 16:08Speaker 00

  I'm jealous of you. I'm sure you've learned a lot of interesting things.

• 16:10David Weisburd?

  Going back on venture capital and this concept of capital formation. Last time we chatted, you said that more venture capital firms to build out co-investment programs, what do those look like?

• 16:22Speaker 00

  It's probably a good opportunity, use your hourglass example again, in that there are the large firms that are putting as much of their fund allocation as they can into a given round and opportunity, but they want to commit more to these large fundraising rounds and so then they go out and they raise SPVs on top of that in order to maintain their ownership and potentially provide additional equity for both their LPs or non-LPS. Those are typically into the premier elite assets that are all access constrained and the ones that we talked about earlier that you would want to be able to have an opportunity to invest in and have exposure in your portfolio. On the other side of it, though, there are increasingly number of smaller emerging

• 17:03Speaker 00

  managers or smaller GPs that are raising their hands for allocations and rounds that they can't fulfill from their fund. So they are raising SPVs in order to kind of meet that gap and kind of pinky promising the founders that, hey, we'll go find this money.

• 17:18Speaker 00

  There are a lot of different incentives across both of those as to how it works. One of the main ones that we're constantly aware of is the fact that providing a co-investment opportunity to an LP like us puts the venture investment strategy decision in our court. We invest in the smartest people we can find so that they are making those decisions on our behalf. But if there's an opportunity then to invest in co-investments, which increasingly there are, and there are a lot of interesting ones out there, it changes the portfolio construction. It changes the concentration. It changes our budgeting to then decide on what we had long relied on the managers to do for us.

• 17:55David Weisburd?

  I had the former CIO of CalSTRS, Chris Aylman. They tried everything at CalSTRS over 23 years there, and he said that the only thing that worked was a rules-based approach. The alpha that they received in that rules-based approach was actually the fee alpha that you would expect. What do you think about that?

• 18:12Speaker 00

  I would love to see the data, but I'm honestly not surprised. And the thing about a rules-based approach is that you have to have predictability around how the program might evolve from your managers as well. With the market evolving, as we touched on earlier, I don't think that any manager can have a full kind of blueprint for how they expect some of these SPVs and co-investment opportunities to come over the course of an investment period for a fund. That is a huge perk of the opportunities that we see is that you get additional exposure to high conviction ideas at lower fees, which LPs love. If we can blend down fees, then great. But at the same time, if we're going to see an opportunity to co-invest in multiple of our fund investments, especially if there are situations where the GP is not putting

• 18:56Speaker 00

  their full commitment from the fund in, then we've got some serious questions to try to sort through.

• 19:01David Weisburd?

  Is that the main thing that you're looking for, which is alignment?

• 19:04Speaker 00

  Of course. Everything is alignment. Like, for me, investing generally is in people and ensuring that we are aligned on both sides of the table as best as possible.

• 19:13David Weisburd?

  Because this goes to the question, what are some first principles they use in order to process these co-investments?

• 19:18Speaker 00

  We were looking at one this morning, actually, where one of our highest conviction managers across the entire portfolio, a well-renowned VC in Silicon Valley. Brought us a co-investment opportunity that he had fully maxed out the allocation from his fund and the concentration limits made it so that he could no longer add any further. So, one, that's a great sign that he thinks this is worth backing up the truck in the main fund because that is where track records are made and that's what people are able to raise subsequent vehicles on. Then he came to us and said, "I've got so much extra conviction that I really want to fill this because I can continue to back this elite management team and business model." And so, first order, it's are they making

• 19:58Speaker 00

  sure that the fund that we have exposure to going to have the maximum allocation to this opportunity? If that's not true, then we have to figure out what are the incentives there because from the GP side, there are different incentives that they are pursuing. And that's whether that's additional management fees, whether that's duration, whether that's the opportunity to obscure the potential outcomes from their flagship vehicles. Because in the event that an SPV goes sideways, that doesn't flow through to their main fund's track records. And almost all the time when they're fundraising, it's only, "Here's our main fund track record." The SPVs all get lumped together and it doesn't necessarily come with a number.

• 20:34David Weisburd?

  Reminds me of a strategy by Scott Wilson, University of Washington, St. Louis, famous CIO. And he would meet with his fund managers and he would ask them one very specific question, which is, "At which positions are you at your max, whether public or private?" And the idea being that the fund positions that they had that were at their max, they were actually under allocated into. Why? Because portfolio construction. You want to make sure that you maintain longevity on your career, especially in venture capital. What is the highest amount of conviction you could have on something working? 60%, maybe 70%? Are you going to risk little Johnny's university tuition in order to back the truck up even more into these investments so your fund could go from a 3 to 5X? Unlikely. So, he would go and

• 21:16David Weisburd?

  he would source these best ideas within these managers and back them in SPVs or co-invest to do even more in those investments.

• 21:26Speaker 00

  The portfolio construction and the model that we operate within dictates a lot of our strategy despite conviction. This is something we talk about frequently and as we hit on earlier with the increasing value of companies at the private levels, there is an interest and incentive to continue to hold on to those despite them potentially pushing allocation boundaries beyond the norm. But the best ideas in my mind shouldn't necessarily be constrained by concentration limits.

• 21:55David Weisburd?

  So what you mean is as these companies get more and more valuable, they start to be more and more the fund position? That's not necessarily a bad thing, that could be a good thing.

• 22:03Speaker 00

  On the GP side of the construction, we absolutely want them to stay within the bounds of whatever the legal terms are that we agreed to. Because that is one thing that when we are underwriting, it is with the full expectation that what we negotiate upfront is what they're going to abide by and we need to make sure that that is something that they follow through on to ensure that alignment. On the LP side, what I'm referencing is when our allocation to privates or illiquids, and this is something that we debate frequently, both internally and with our clients, there is a certain threshold where people are most comfortable. And if you exceed that threshold, people start to say, what about in the event of a recession or a downturn, something sideways, but what about the fact that the best performing companies in our portfolio happen to be these private ones?

• 22:48Speaker 00

  And there's an opportunity there that sooner than later, they will cycle through and they will go public. The thing about venture investing is long duration, patience, and recognizing that the upside is worth that weight.

• 23:01David Weisburd?

  Do you think endowments in general or private investors are over diversified? In other words, do you truly need 100 individual positions or should be focused on the best 25, 35 positions?

• 23:15Speaker 00

  There are certainly models that I've heard of where if you have access to the cream of the crop managers, then 20 to 30 is really all you need. Because you know that those are the highest conviction, best investors across the asset classes, that then it is an allocation game. And if you're able to fill those spots with the best, then concentration's wonderful because you have an opportunity to really be partners, hopefully with your managers, to get to know their portfolio as well, know the items that you really want to push on and monitor so that you keep track of them as time goes on and as portfolios evolve. On the other hand, one of the things that's great about our business is that we see and get to talk, much like you, to so many smart people all over the world, every given day,

• 23:58Speaker 00

  any given strategy. And the idea that we are reducing the opportunity for potential investments with exceptional folks because of concentration gives me a little pause.

• 24:13David Weisburd?

  Tell me more.

• 24:14Speaker 00

  So let's say if you want to establish strict limit on this is the number of venture managers, this is the number of public equity managers, this is the number of hedge funds we want to have in the portfolio. Yes, that is good for discipline and making sure that you have almost like a one in, one out.

• 24:27David 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.

• 25:11David 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.

• 25:55David 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.

• 26:39Speaker 00

  Out there's a ruthless competition for capital in order to make a change. But at the same time, what if you like all 10 of your managers? And you just found something else that's really, really intriguing? And you think it's complimentary of the portfolio? And you think that there's a chance that could be

• 26:56Speaker 00

  a new, long-term kind of mainstay in your book?

• 27:00David Weisburd?

  And by complimentary, you mean it gives you exposure to some part of the market you didn't have previously exposure to? And there's some asymmetry there? So there's some non-zero chance that it could go up 10x, 100x, maybe on an individual asset basis? And it brings more diversification to the rest of your portfolio?

• 27:16Speaker 00

  Yes, so I think that there are certainly a lot of angles to it. My colleague Jeff loves this word orthogonal nature of some of these relationships. Gives an opportunity for the portfolio. If you're bringing a new entrant to create breadth and optionality in the book that you don't necessarily have prior to it.

• 27:36David Weisburd?

  I mentioned earlier, 75% of funds last year went to a handful of managers. You also have emerging managers going through what some call an extension level event where half or three fourths of them will not be around or are on their last fund. And you also have some spin outs as well from the top funds. What do you make of this industry known as venture capital?

• 27:58Speaker 00

  I'm grateful that I get to pay attention to it every day because it's fascinating and it is evolving quickly. That said, it feels like there might be a little bit of hyperactivity in terms of all the new spin outs, the new launches, the new investors. We hear frequently from our managers as well as people in the industry and founders that

• 28:20Speaker 00

  To the point of the spinouts, increasingly, portfolio companies are working with individual partners over firms. But I feel that there's only so many of those partners that are value add without the firm. It remains to be seen. We don't do a lot of spinouts. We try to keep an eye on them in case that there are interesting opportunities. But the key question for us when we see spinouts, when we see emerging managers is just, when is the right time for us to engage? And historically, our approach has been, we want to see either long-duration, first-quartile returns across the various metrics, including DPI where possible, or if not the return streams, the potential to generate that. And there has to be something from their background that exhibits that potential.

• 29:03Speaker 00

  Otherwise, for us, it is extremely hard to do any of these spinouts, any of these emerging managers, because we just recognize the dynamics and the potential challenges that a new firm faces.

• 29:14Speaker 00

  But never say never. We have done it. I've been proud to Port One in the last 12 months, that really excited about. But I'll tell you, it takes a lot of conviction and banging your head against a wall around the office at times to convince everybody else that it's worth making that leap.

• 29:28David Weisburd?

  When doing diligence, how should LP separate the partner from the firm when assessing whether he or she could continue to persist?

• 29:38Speaker 00

  References. That is the holy grail in terms of trying to figure it out. There's an opportunity to do track record analysis on a given partner. But for the most part, even if there's a lead, there's often support. And if that supporting group is not going on to the next organization with them, then you can't really tell if it's transferable. The references across the ecosystem are what's going to be most valuable in my mind. That's talking to who they worked for, who their mentors were, what portfolio companies they had invested in, what their value add was, what they were able to introduce, or who they could bring to the table to support ongoing rounds for the portfolio companies. It is our aim to be as plugged in as we possibly can, sitting from however many miles away Richmond is, from Silicon Valley or New York.

• 30:23Speaker 00

  Because we recognize, to our point earlier around the stories that we are told from fundraising meetings, and what goes on behind the scenes and a layer down between the VC and the founders are different. And we need to make sure that we can try to eliminate the opacity there as much as possible.

• 30:41David Weisburd?

  It's such a hard challenge, because even the track record itself is not necessarily black and white.

• 30:49David Weisburd?

  And to make it even more difficult, sometimes the firms are negotiating what the manager's track record was retroactively. So they're saying, we'll give you this deal, we'll take that deal. But also, the firms have a huge incentive not to give track record to the spin out. Why? It's not because they're bitter that the partner left. It's because now they're going to go out and fundraise and LPs are going to ask, well, which one of this spin out GP's deals were his and which were the firm's? So there's almost a zero sum nature to the track record, which makes it even more difficult to kind of figure out what's narrative versus ground truth.

• 31:27Speaker 00

  To be honest, I'm glad we haven't had to face many of these situations. The firms that we tend to back are ones that have trusted long duration partnerships that have largely stayed together. And in the event that the ones who have spun out have not tended to be ones that we were crediting for being return drivers. But you're right, that zero sum makes it really challenging. And I can see that also being valuable from an LP's seat to make sure that if there are stars that are walking out the door, you might better understand how your fund was performing that you might not have, even though that wasn't someone that you were personally interacting with.

• 32:02David Weisburd?

  So you could kind of do the math, well, if this GP did this deal, then this firm minus those deals, what would that return be?

• 32:08Speaker 00

  You could. But again, I think it's more of a team sport than an individual game. And there are a lot of people that have their own, their own deals, their own kind of companies, and they champion them. But again, it's without the surrounding team, I'm not sure that anybody would be as successful in this industry because it is such a relationship driven business.

• 32:32David Weisburd?

  When you sparse out the economic incentives, what percentage of these spin outs are driven by purely financial decision making versus non-financial?

• 32:41Speaker 00

  It feels like whenever we hear about them, it's financial because the teams that we hear about Bring a story where I led XYZ deals for and I went back to the managing partner, the GP, and said, hey, I would like to renegotiate. And typically that doesn't go well because that senior investor is comfortable at the top and appreciates the kind of splits that they have and the amount of work it requires. And so giving that dynamic up is a challenge. So I'd say that the ones we hear about, the stories we hear about, tend to be more about misalignments of those financial incentives.

• 33:17David Weisburd?

  Second order to incentives is also all these things, respect, autonomy, all these things. Of course, no one will ever say, I left because I didn't feel respected. It sounds childish, but there is a semblance of that. If you respected me more, you'd give me a higher title, you'd give me more autonomy, you'd give me more economics.

• 33:33Speaker 00

  Yeah, totally fair. But at the same time, I don't think anybody wants that to be the rationale for why they're leaving, especially if it's a name brand, great firm, because then it's going to cause questions of, well, why weren't you respected? Why wasn't it that you didn't feel like you got that kind of credibility from a team that has a great reputation? I would imagine that when people bring that as the rationale, they're going to have a little bit of trouble with that story.

• 33:58David Weisburd?

  One of my hobbies is talking about continuation vehicles. I'm fascinated by the space. It's grown to $110 billion in the last year. Do you think continuation vehicles will proliferate within the venture capital space?

• 34:10Speaker 00

  If venture-backed companies continue to stay private for longer, I think they probably will at LP's request. I don't know that they should. And there's a little discrepancy nuance there because we have spent a fair amount of time in our buyout portfolio, looking at CV strategies and recognizing the pros and cons, the various things you have to consider as a rolling or selling LP and what you want to do there. In private markets, especially for these large, private venture-backed companies, the managers know the business is better than the LPs do. And if there's a situation where the LP is pushing for CVs to generate DPI or close out a line item in the book, or some other non-economic reason,

• 34:55Speaker 00

  the GPs are going to happily do it. But I think that the GPs that are going to run CVs are going to have to be the ones that are large and have significant operational resources and budgets in order to make it happen, because these things take a long time. And there are a lot of players involved that I think on the buyout side, it takes anywhere from six to nine months, from soup to nuts. And for a VC, my guess is that unless they have an army of lawyers, it's going to be that or longer. Now, on the other hand, I think that sometimes the VCs save LPs from ourselves in that if there were opportunities in prior years for certain large private companies to generate liquidity through a CV, we might have elected.

• 35:38Speaker 00

  And I think that would not be the right decision. So in my opinion, we will see more of them. Again, when you are investing in venture, the duration is often well beyond the 10 years that the term suggests. And it probably pays the stomach for waiting a little longer.

• 35:56David Weisburd?

  It also comes down just to the incentives. So continuation vehicle is when you take one or multiple assets from a fund that's past its term life and you essentially secondary it into another fund. And then LPs get to decide whether they want to roll their economics into the new fund or whether they want liquidity. And incentives really depend on who you are. So if you're a GP that's worried about going out to fundraise without enough DPI, you could use a continuation vehicle because it's classified as a secondary, which is classified as DPI. I think they will proliferate in venture capital. And I think similarly to buyout, LPs need to be very careful about these CVs because these CVs could be used for

• 36:41David Weisburd?

  The right incentives or for the wrong incentives? The right incentives are the Stanley Drunken Miller. Invest, investigate. I'm investor in this company. I know I'm on the board. I think it has another 2, 3, 4, 5 X to go. I know that you guys are asking for liquidity, but I don't want to sell it. I'm going to CV it so that if you don't need liquidity, we could continue rolling, continue compounding on the assets. The negative aspect of that is, as I mentioned, some people need to go out and fundraise, and they might have assets that are not good, and they might CV these into a new vehicle, hoping to hide those losses against the rest of their portfolio.

• 37:18Speaker 00

  It is absolutely a precarious game of incentives in CVs because the GP sits on both sides of that deal in that the sponsor who owns 1 to 3 or however many assets they're trying to roll over, they are selling to themselves. Now, they have to get a fairness opinion. There are still limited data points to prove out that those are always rightly assigned.

• 37:40David Weisburd?

  In the buy-side, you sometimes have these CVs that are stapled with a primary check into the underlying asset. Have you seen that execute on the venture side?

• 37:49Speaker 00

  Not for CVs, but saw an SPV offer this week for that, where a manager that we do not work with yet sent us an email saying, hey, I've got an opportunity to invest in XYZ's Series D. We would offer you attractive economics on the SPV in exchange for a staple to our next fundraise. Or if you don't want to do the fund, then we will offer you kind of standard SPV terms. But yes, the GPs are getting more and more creative with the offers of access because that is what they have to sell. Even if they don't have the relationship necessarily with us, it is the access to the companies that they're bringing to our portfolio that would be beneficial.

• 38:29David Weisburd?

  What's the framework to look at these staples? Are you just re-underwriting the managers for the first time? And how do you look at the dynamic?

• 38:39Speaker 00

  We do very few co-investments in SVVs and venture at all. And the ones that we do are only with managers that are already fund commitments for us. If we are going to consider anything that is outside of the portfolio, it has to be at the fund level first. Spider has been investing in venture capital and private assets for almost 30 years. So we have a mature book and we are fortunate that the managers that we had the highest conviction and the longest relationships with are bringing us plenty of opportunities that we're not looking for additional exposure through newer relationships.

• 39:12David Weisburd?

  As I mentioned, I've had probably over a thousand conversations with mostly LPs and some GPs. I've never met anyone whose role was both venture capital and natural resources. What makes this really interesting today is that natural resources and venture capital are starting to converge. Tell me about that and through which lens do you look at natural resources?

• 39:32Speaker 00

  When I joined Spider five years ago, the team was all generalists, which I was really excited about because that was going to give me an opportunity to broaden back out from my Chinese credit backstory. When I got exposure to learn about the other assets that Spider invested in and the various kind of strategies that we have, we got to the point where our CIO at the time said, "We're going to switch from a generalist model to privates and publics." And on the privates team, it's buyout, venture, natural resources and real estate. And I had done enough VC work and underwriting and relationship building that that was kind of my primary objective. The trade-off there was they said, "Okay, well then you also have an opportunity to help us with natural resources," which is a smaller part of our portfolio

• 40:15Speaker 00

  and one where there are a lot of relationships that we are still trying to optimize and figure out how best to continue to invest there in the future. But it wasn't long after that, and especially at the time, I didn't understand or think about the connections and the way that they would come together until AI. And as soon as AI became a buzzword or ChatGPT became a household name, we started to realize just how interconnected natural resources and venture capital are today. The power is the main bottleneck for everything that the US is trying to do in the AI space and in technology broadly speaking right now. So it is a fascinating intersection, especially as venture tends to become more and more...

• 40:59Speaker 00

  Industrial tech, hard tech, deep tech. All of these are power hungry. This is not asset light software that a lot of the people are investing in and backing these days. And natural resources are right at the heart of it. But I will take you back to the first time I ever really put it together, which was we have data centers in Richmond, Virginia, out by the airport that I didn't even know existed. I drive by there all the time to go home to my childhood town. And these massive Meta and Amazon data centers are just hidden back there behind the trees. And you get back there and you say like, how big is this building? And they don't answer you in square footage. They answer you in megawatts. And they talk about data centers based on what power generation is required to run the racks in there.

• 41:42Speaker 00

  I think that today with the United States electricity and power demand finally growing for the first time in a long time, and the energy independence that the US has been able to achieve, that the AI race, as well as a lot of the venture backed businesses that we are actively backing and investing in today are directly reliant on the natural resources portfolio. And so that intersection is creating really interesting opportunities for us.

• 42:10David Weisburd?

  What's the investment thesis there?

• 42:12Speaker 00

  The thesis broadly is that demand for AI and new technology and electrification here in America is insatiable. And with our legacy power grids, with the interconnect systems, with the regulatory environment, they are going to need to be alternatives such as the small modular reactors in nuclear, or they're going to be battery cells, or they're going to be different ways that all these devices will be powered.

• 42:43David Weisburd?

  You're not the only one investing in natural resources and this data center and this power thesis. A lot of money is going into this space by a lot of unsophisticated investors.

• 42:55Speaker 00

  Mm hmm.

• 42:56David Weisburd?

  What mistakes are investors making when it comes to investing in this space?

• 43:00Speaker 00

  The premise of your question is insinuating there's a bubble of some sort in data centers. And there may be, but I don't know that there's a bubble in demand for what they produce. And your point about

• 43:13Speaker 00

  The AI, the data centers, the power. It's funny that all of that also kind of connects to outer space and the data centers that all of these firms are now realizing that there are opportunities to streamline the process and complete the biggest need for all these companies by doing orbital data centers. So I think that terrestrial data centers, it seems to me that there's a big difference between how quickly a traditional data center, construction group, or builder can put one up, but then getting the power hookup is a multi-year process. Contrast that with what Elon and the Colossus facility were able to do in Memphis, where

• 43:55Speaker 00

  they were putting up an entire data center from scratch, the first one in four months. And second one, they did in three months. So there's just a pace at which kind of legacy industry is continuing to operate that venture and venture-backed businesses are seeking to upend.

• 44:13David Weisburd?

  So what are the second or effects of that?

• 44:15Speaker 00

  Data centers in space. Like, one of the things I love about this job is that we get to talk and learn about businesses that sound wacky. And I remember when one of these companies came through Y Combinator and they announced the batch two years ago and it said, "We're going to put data centers in outer space." And I thought, "You've got to be kidding." There is no world in which that makes sense. And now we have all our just tech companies, but public and private actively building out plans to pursue just that.

• 44:44David Weisburd?

  When I invested in SpaceX, it was a rocket company. Today, you could argue it's an infrastructure company. If you were reinvesting in the company, you would almost have to look at it on the natural resources side, not the venture side.

• 44:58Speaker 00

  Or an AI company. The rocket business is the lowest revenue of all the business lines. There's Starlink, which is the wireless communications. There's the XAI and Colossus, which is the data center and the power. And then there's the rockets, the transport. We're all watching carefully as it seems to be a generational entrepreneur that has continued to defy people's expectations about what's possible. But you're right. SpaceX was a rocket company and then it became an internet service provider. And now it's an AI company. And I think it will continue to pivot and evolve and create new markets.

• 45:35David Weisburd?

  What's mind blowing about this is you mentioned this YC startup that a couple of years was talking about data centers in space. At the time, it did not violate physics. It's pretty much doable. But this entire space essentially overnight was created by Elon Musk having a thought experiment, which is can we do data centers in space? Yes, we can. What are the cost savings? What are long-term cash flows? And then suddenly Google's investing into it. Suddenly Anthropic's doing an LOI and buying compute from Elon. But he literally willed this entire industry into existence just through a thought experiment.

• 46:12Speaker 00

  A thought experiment and extremely deep capital at his back.

• 46:16David Weisburd?

  And credibility.

• 46:17Speaker 00

  And credibility. But where we started today was around private markets getting bigger and raising more and more at each subsequent round. That is one of his superpowers is he's been able to attract more and more capital to allow him to pursue these wild ambitions. As long as he continues to make people money, there will be people that continue to give him more in order to pursue the next big dream.

• 46:39David Weisburd?

  Going back to our previous conversation, through my podcast, I'm able to develop my thinking and essentially defalsify my thesis. And I've had this idea of this perpetually private company for a long time, this thought experiment. And Matt Wiltshire from Wellington gave me a very important stat, which is private markets in a year is $2 trillion. The public markets is over $100 trillion. So another way, these companies end up being a victim of their own success. So if you're a $900 billion company like Anthropic, you could raise 60-plus billion. But what if they double in a year and now they're at $1.8 trillion? Can they raise $120 billion? Now, what if they double again? Could they raise 200? At some point, if a company continues to grow.

• 47:23David Weisburd?

  It must access the public markets. Even though I would argue companies should stay private longer, or it's easier to stay private longer, all things being equal. All things are not equal. And what's crazy about this thought experiment? Let's just imagine a world where there's now five, $10 trillion private companies. And they go public at $10 trillion. What happens as a second order effect of that? Now you have a multitude of funds that are 10, 50, 75, 100x. And you probably have a couple of funds that have now returned 500x. Call them seed fund. What happens when there's an asset class that's returning now 4 or 5x median return versus the public markets that might be returning 10%?

• 48:04David Weisburd?

  You start to have, at the LP level, CIOs look at, well, maybe we shouldn't be 60% public, 40% private. Maybe we should be 40% public, 60% private. So now, these funds and these private pools of capital get more money. And as a result of that, now Anthropic, instead of having to deal with a $2 trillion private market, maybe they're dealing with a $3 trillion or $4 trillion. So they're able to stay private longer. So there's this evolution of the public and private markets. And they're, in many ways, they're competing against each other to fund these breakout companies.

• 48:39Speaker 00

  What I wonder is that if these elite companies are staying private longer and continuing to accrue value before going public, is an opportunity for the investors in the private markets to compete with the publics of recent years? And that the public markets have been so strong, everyone started to wonder, why do we continue to commit capital to venture, to buy out, et cetera?

• 49:01David Weisburd?

  QQQ has beat almost all venture capital firms.

• 49:03Speaker 00

  Maybe the GPs out there wised up and said, you know, well, let's really lean into these big ones that are true compounders that just blow those away, so that people will remember why we invest in venture and buy out in the first place.

• 49:15David Weisburd?

  Brad Conger, the CIO of Hurdle Callahan, mentioned that the reason that the Fama-French model, so Fama-French came up with this model that small in-value stocks in the public markets will outperform other stocks. In the last decade, that hasn't proven to be the case. And his thesis on this is that what was small in-value 10, 20 years ago is today, private companies, bio companies, and also on the small side, venture-backed companies. 20 years ago, Google and Amazon went public years and years and trillions of dollars before today, OpenAI's, Anthropic's, and SpaceX's are going public. So we also have that, almost a survivorship bias. Why has Tesla went from $100 billion market cap

• 50:00David Weisburd?

  to several trillion dollars? It's because they want public at $100 billion. And if now Tesla is going to $1 trillion or $2 trillion in the private markets, the next Tesla, now you only have that 2X. There's a cyclical nature to these markets that you can only see looking back.

• 50:14Speaker 00

  I think that's a great point. And our managers continue to try to convince us otherwise. The law of large numbers is that they will continue to exceed the highest ceilings and keep growing. This is a theory from some of our managers that I have trouble wrapping my head around at times because I agree with you that on an absolute basis, the idea of going from $100 billion to a trillion is a lot easier than going from a trillion to 2 trillion. But they say it's the exact opposite. The first trillion is the hardest, and then it just opens up.

• 50:45David Weisburd?

  It's like that we're talking about trillion-dollar companies. Even six months ago, it's crazy. And what's even crazier about this, I'm talking my own book, I'm investing in Anthropic in full disclosure. But I've talked to some of the growth investors in the round, and they said, it actually was pretty cheaply priced, $900 billion valuation. And revenue now is north of 40 AR. So on an AR basis, if you take away the $900 billion sticker shock, it's actually not that expensive. And Dario didn't optimize on price. With so much evolution, so many different things going on in the public and private markets, you really have to step back and think from first principles. Not what sounds crazy or what has always worked, but what is ground truth today? What do we know? What don't we know?

• 51:30David Weisburd?

  Explicitly think about what your exact thesis is. Put it down and keep yourself to that thesis when you look at it three to six months later. And constantly try to think from first principles on what's the right move forward, even though it may look nothing like historically what you've done.

• 51:48Speaker 00

  I agree with you. We have to constantly underwrite and stress test our own assumptions in order to try to identify the right opportunities for the long term. And kudos to you for getting Anthropic at 4 billion. Like, that is an amazing outcome. I'm sure you're very proud, but you wear it modestly.

• 52:03David Weisburd?

  Rob, thanks so much for jumping on the podcast. I'm looking forward to doing this again soon.

• 52:07Speaker 00

  Thank you, David. Appreciate you having me.