E341: Why VC is Changing Forever ($150 Billion LP)

What if the best venture returns come from the LPs that are most patient and most strategic? In this episode, I sit down with Scott Voss, Partner at HarbourVest, to explore how the $150B multi-manager firm generates consistent outperformance across venture, growth equity, buyouts, and secondaries. Scott shares how consensus risk, vintage year timing, and strategic co-investing shape returns, why continuation vehicles and evergreen structures are transforming private markets, and how long-term relationships with GPs create first-look access to top deals.

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

• 0:00Speaker 00

  Tell me about consensus risk. I spend a lot of time in the field with investors and kind of the last question I always get asked is what keeps you up at night related to the things that you're investing in? And as I thought about it, it's consensus risk. For some background here, it builds on an idea by a psychologist named Irving Janis, but people like Buffett, Marx and Thiel also talk about it. And I specifically referenced this thing called the consensus risk trap, which is group think, right? It's the illusion of some kind of invulnerability or collective rationalization that occurs when groups converge on a popular theme without really thinking about what could sit around the corners. So, you know, in venture specifically, which we're going to spend a lot of time on, it's, I think about it as those hundred companies that today are valued at, you know, $10 billion or greater.

• 0:43Speaker 00

  And there's a lot of capital that wants to find their way into those companies, but it's not thousands of companies, it's less than 100. And that kind of gives me some concern. I ran this algorithm when I came up with this idea of if I just picked the top 10 themes that define private markets in 2025 and fed those into an AI and asked it to stack rank them based on how much media coverage each theme got. I think as I worry about 2026, it's which themes got the most coverage from the media that was generally promoting. And, you know, I think there's some risks that we could face there. And we've actually seen a few of those play out in the last month or so. It's a quantification of a potential bubble of sorts. Yeah, I think that's right. How do you know something's a hot sector versus a bubble? It becomes pretty obvious when things move up into the right pretty fast. It's, and look, with that kind of growth, there's always kind of bubble-like characteristics.

• 1:27Speaker 00

  So one of the questions I get a lot in these same meetings is, are we in an AI bubble? For example, and my answer is like, when Sam Altman or Jensen Huang say things feel a little bit bubbly, they're probably a little bit bubbly. And one of those risks I talked about in the consensus risk trap is, is there an AI valuation reckoning? I honestly didn't contemplate it being, could AI disrupt the software business model? But we've seen a bit of that play out right now.

• 1:53David Weisburd?

  This whole question of are we in a bubble? I think is actually the wrong question. A bubble is just downstream of human beings investing, meaning everything will eventually bubble with enough returns. And you see this in other asset classes. You saw this in SPACs, you saw this in Bitcoin treasury. It's like, it's not a question of are we in a bubble? It's how far are we into the bubble? And potentially, how far before the bubble pops? In other words, if you know that you're five years away from the AI bubble popping, the right thing to do is to stay invested. There's always a bubble for any asset class that goes up. The question is, how far into it are you? And how big of a bubble is it? Not are we in a bubble?

• 2:31Speaker 00

  I think that's right. And maybe the bubble never pops. It just lets a little bit of air out of the system and then it reinflates as it kind of, you know, makes its journey to kind of the future state. People have made this analogy. If you think about the internet bubble of 1999, which is when I first joined Harborvest, there was a lot of venture capital flowing into companies that were measuring eyeballs and then that bubble burst. And when internet 2.0 came around, there were a lot of VCs that decided they weren't going to invest in the internet. Well, that was exactly the right time to invest in the internet because that's where the business models kind of got sorted out.

• 3:00David Weisburd?

  In the dot com boom, it took three, four years of 20-plus percent losses. It's not like a literal bubble that just popped. It actually just went down over three, four years.

• 3:09Speaker 00

  If you go back to late 99, early 2000, when the bubble burst, there was this weird thing that happened where I think a lot of entrepreneurs abandoned startup activity. They actually went back to big technology companies. And there was a bit of a dearth of innovation that didn't happen from 2000 to 2010. What you need is these kind of moments, like these innovation cycles to play out that allow entrepreneurs to recognize there's an opportunity to build a company on top of the cycle. And I think this has been referenced before, probably 2007, and the iPhone was that moment. But from an institutional investor standpoint, there was a period in like 2010 where if you look at performance data from Cambridge Associates on the venture industry. The 10-year return was negative and a lot of institutions had concluded that this is not an asset class. The venture model is broken. And the irony is from 2000, if you measured

• 3:54Speaker 00

  performance in private markets from 2010 to 2020, it is by far the best performing sub-asset class within private markets.

• 4:01David Weisburd?

  So I know it's never one-to-one and it's never like a textbook or like an academic thing, but do you see a direct correlation between investing in venture in the worst possible year, if you just consistently did that, versus investing in the best possible year, you would have outperformed? Or is there more nuance to how you should invest?

• 4:16Speaker 00

  I think there's more nuance to it. What I tell investors if they're going to allocate to venture is they just need to be committed that they're going to do it over the long term, because there are these windows where the outcomes are very big, but the windows are pretty narrow. And you need a ripe portfolio to sell into that type of market to make your return. And the mistake a lot of investors make is they're confident investing when the returns are phenomenal, but there might then be this period of time where those returns dry up, but you're planting the seeds that are going to sell into the next part of the cycle. There is correlation, if you look at vintage year performance in venture and leveraged buyout, in the years that the most capital is raised, there tends to be the lowest performance. And in the years the least capital is raised, tends to be higher performance. I think that correlation is-

• 5:00David Weisburd?

  Shocking.

• 5:01Speaker 00

  Yeah, I know. But I think it's actually stronger in the buyout space than it is in the venture space.

• 5:06David Weisburd?

  Taking a step back, give me a sense for how big Harbor Vest is today and tell me about your role.

• 5:11Speaker 00

  Harbor Vest is a global private equity firm, but we call ourselves multi-manager. Our model is built off of building really core LP investor relations with some of the top managers around the world. So think large investor relationships with 150 to 200 of the top performing venture growth equity funds and leveraged buyout funds. But then we have a platform approach where we invest directly into companies alongside these managers and we're also a very large secondary investor. So we provide liquidity into the market many times around these managers. And that's what we call platform approach. But to answer your question specifically, today we are more than 150 billion of assets under management. We have over 1,200 people around the world. We have 15 offices around the world. Our original strategy was a venture fund.

• 5:56Speaker 00

  So our founders, Ed and Brooks, when they set out to raise our first fund, it was a multi-manager venture fund of funds, thought to be, if not the first, one of the first of its kind. But today, we give investors access to private markets, venture, growth equity, leveraged buyout, private credit, infrastructure. And more importantly, we give them access through three different entry points. You can be an investor in a blind pool fund that might be raised by Excel or Index or somebody like that. You can invest directly into companies alongside those firms or their respected buyout cohort. And then the secondary strategy, we give them access through that access point. And that type of diversification across all those different areas just results in a very consistent, diversified, high-quality performance experience for the investors.

• 6:42Speaker 00

  In the world we're in today, with 150 billion plus of AUM, there's probably, we're not on an island on our own, but there's probably just a couple of other peers that are at the same size that we're at.

• 6:51David Weisburd?

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• 7:36David Weisburd?

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• 8:12David Weisburd?

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• 8:44Speaker 00

  So we want to be not just an investor with leading firms. We want to be thought of as a strategic partner to leading firms. So in select situations, we have capital relationships across fund investing, direct investing, secondary investing. That might be $2 billion, $3 billion, $4 billion or greater of capital alongside what are some of the larger, larger leading funds in the industry. And therefore, because of that scale and the capability that we bring to the table, it's not just passive investor. Our partners look at us more strategically than they do perhaps other firms. So I won't name names, but there's company examples, some that were recent exits. You know, I think $20 billion plus exits where through our fund investment, we gained access to the company at the formation stage. It could have been seed or series A.

• 9:29Speaker 00

  And let's say it was a $20 billion plus outcome. We would have gotten in at $100 million or less through our fund investments. And then as that company grows and deep risks, we might be presented with the opportunity to come in as a direct investor to price around in the company. And then through our secondary strategy, we, we could accumulate interest in that company that give us indirect access to the cap table through that process. So, so there was a recent cybersecurity exit, put it in the $20 billion plus category where we participated in the A through our managers. That was probably a 30 or 40 times return. We did a preemptive direct co-investment where we made three times our money. And then we did a continuation vehicle in the secondary market where we made two times our money. And it was a, it was a sizable total return for, for our LPs.

• 10:10David Weisburd?

  Continuation vehicles just past $100 billion as an asset class. LPs are ambivalent to say the least. They both love it and hate it. And oftentimes it's within the same LP. They both love it and hate it. Talk to me about the best practices for investing in continuation vehicles in venture specifically.

• 10:26Speaker 00

  First, the evolution of this continuation vehicle really just started. It was nascent if you go back to six or seven years ago, and it started in the buyout space and maybe the growth equity space. And now, as you noted, within the secondary market where there was 200 billion of volume in secondaries last year, CVs, either single asset or multi asset, accounted for about 50% of that that total volume. So it's very sizable, and I believe it's a it's a part of the market that's here to stay. The buyout market was the innovator. Venture has kind of been a bit of a slower follower, I would say. Venture really hasn't embraced this concept until maybe two or three years ago. But now with companies staying private longer and the duration of the whole period for these companies just being elongated as they they stay private longer.

• 11:08Speaker 00

  Secondary market has stepped in and provided a solution for an investor that wants liquidity. That's not going to happen through the the normal course of action. Now, to get to your question, as as the GP and the original LP or the buying LP, you got to create alignment. You got to remove as much of the potential conflict that could exist in that type of trade. And the conflict really kind of centers on the GP who owns the asset because they're kind of they're selling on one side and they're buying on the other side, which in many cases, two different constituents, right? And you want to just make it a fair trade. Where the markets evolved is there's intermediaries now that facilitate these transactions. They they run a broad process, just like any investment bank would, and they go out and get a market price. And then what's fortunate is the original LP.

• 11:51Speaker 00

  If you have the ability to work within the constraints, which are usually time constraints, you have the decision to either take the deal or not take the deal. So if you think the secondary buyer is getting a good deal, you can roll into that same deal. But maybe you're prioritizing liquidity and you're going to take some money off the table because of where your your plan might be or, you know, things that are unique to to your your institution situation.

• 12:12David Weisburd?

  My personal view is that it's very difficult. It's been very difficult for LPs to block this activity because they essentially have the option to roll. So it's it's a hard psychological position to have that I'm against it, but I could be part of the deal.

• 12:25Speaker 00

  So those that are against it, in many cases, just aren't built to operate under the timelines and constraints that are required to actually make some kind of decision, right? So they there's many institutions that might be quarterly with their investment committees or they have governance that makes it just hard for them to be nimble. So almost by default, they're forced to take the default provision. Given how young this is, I think those original LPs are going to kind of evolve over time and they're probably going to pre-negotiate what their deal should be. When they sign up to the fund originally, right? So it's understood and I think we'll see some evolution there. I also, I've seen certain GPs, you know, are you a price taker or a price maker, right? Or setter? And I've seen some recent CVs where the GP kind of sets the price and the secondary market

• 13:10Speaker 00

  has to decide whether to take or not take the price that's on the table instead of having the secondary market come forward and offer a price. So I think we're going to see continued innovation and evolution with respect to the CV that frankly will probably further cleanse any concerns around, you know, conflicts.

• 13:28David Weisburd?

  I had Michael Woolhouse from TBG Capital who created a $1.9 billion fund to go after these CV opportunities and they're all indirect buyouts. And there's so much demand for this that he's literally bringing in his competitors to co-invest with him. That's how much demand there is for this product. One of the interesting things about direct investing in general, I talked about this with Roger Vincent, who was at the Cornell Endowment.

• 13:49Speaker 00

  Yeah.

• 13:49David Weisburd?

  And there's this misnomer of diversification when it comes to investors where they feel the need oftentimes to diversify on two different levels. What does that mean? That means if I have a $20 million position in a company, yes, that could go to zero. But if I have 30 of those positions, then that could be diversified. And then you could also get diversification if you're in multiple managers. But people become so focused on, oh, I can't make this single investment that's in one company, I'm not diversified. There's almost like this disconnect between diversifying on the company level and on the portfolio level. As incredibly simple as it sounds, it seems like something that people have trouble with.

• 14:25Speaker 00

  At Harborvest, we have what's called our quantitative investment sciences team. It's over 50 people that are literally rocket scientists who have now come to kind of synthesize all this proprietary data that we sit on related to private markets, whether it's at the fund level or at the portfolio company level. And that really informs us on portfolio construction and specifically on how we should be thinking about diversification. On the diversification front, I think it has to do with what is the range of potential outcomes? What is the dispersion in the part of the markets that you're investing into? And if there's limited dispersion, then you probably don't need as much diversification. But if there's greater dispersion than you do. And then it's also the skill piece. You're not blindly selecting these assets, right? You're underwriting them and you're making a decision on what you want to buy and what you don't want to buy.

• 15:08Speaker 00

  I kind of go back to what is the original law of diversification? Like you're adequately diversified when you buy, I don't, I think the number is like 22.5 investments that you've made.

• 15:18Speaker 00

  The other thing, like where we sit, we're on the fund side, where we build portfolios of funds. Should our number be 25 funds in a portfolio? If those funds are each putting us into 30 underlying portfolio companies, what is, what is the, the right diversification at, at that level? So I don't, I don't know if this addresses kind of where you're going with your question, but that's kind of how we, we think about diversification inside Harbor Vest.

• 15:37David Weisburd?

  There's also these questions that seem very simple or dumb, but are actually good questions, which one question is, are you diversified? And the follow-up question to that is, what does that even mean? I define diversification as in, what percentage of the time will your portfolio have a certain type of drawdown? In other words, some investors might be comfortable with a 10% drawdown, some might be with 20, some might completely not be comfortable with any drawdown. So they should be in like bonds and cash and things like that. But I think there's actually a scale to diversification as well. Is that structural alpha? What is that exactly? Or is it, is it access? Is it all the above?

• 16:11Speaker 00

  So I, I think it is a bit of all of the above. So it's, it's an inform on how we build out portfolios, but then it's, it's both access and identification. So there is academic research that shows there's persistence in performance across managers in private markets. So a new entrant, especially in venture capital. So a new entrant might quickly figure out, these are the top firms I want to invest in, but they may not be able to get into them.

• 16:33David Weisburd?

  You're quoting Professor Steve Kaplan, previous guest. He found that 52% of funds that in venture were in top quartile ended up again in top quartile. If it was completely random, it would be 25%. Some would though say, yes, venture has been persistence, but now you have these mega funds, these 15, 10, 20 billion dollar funds. How do these funds continue to return venture returns? Or is it just a new asset class? Call it somewhere between traditional venture and public?

• 17:00Speaker 00

  When you say I invest in venture, I think the next question is how do you invest in venture? And I think the asset class is bifurcating, right? And, and the profile of an early stage Portfolio is going to look very different than the profile of some of these mid or late stage portfolios. And I go back to this consensus piece, I was having this discussion with a, what I call the life cycle investor, the mega fund, just the other day. If, if there's a fund that's targeting those hundred companies that are 10 billion to, you know, SpaceX is at the upper end at the $800 billion valuation, what is the mortality rate of those companies? It's much less probably than the mortality rate of, you know, the seed funds. So it's a different risk return profile. We have messers taking on. I think the other,

• 17:42Speaker 00

  the thing you identify here is all these large firms used to define the early stage and then they became life cycle investors. So the asset class has changed considerably. Is investing in OpenAI that's, you know, doing tens of billions of dollars in revenue at a, you know, at a $800 billion valuation, is that a venture deal? The industry says yes, but we can debate that. But it's clear to me, there's a ton of investor interest, whether it's coming from the traditional venture firms or other financial services firms to gain access to those types of companies.

• 18:10David Weisburd?

  It reminds me, David Sachs, when he started Kraft Ventures, he went to Bill Gurley and he asked him about this heuristic, every single portfolio company having to return the fund. Bill Gurley told him it's a rule of thumb. Obviously, if you're investing in a Series D, you don't need it to return the fund, but it's been kind of repeated as if it's gospel at every single round, every single situation. It's a really useful razor and it basically teaches you never underwrite a company to a three or five X or you're going to have a bad portfolio. But it's more meant to be taken figuratively, not literally.

• 18:38Speaker 00

  I think that's right. Everybody, I think Bill Gurley is kind of the voice in the room here, right? There's a lot of wisdom there. One of the more recent discussions I've been having with firms and it's with these scale deals, is it harder, if you're a seed fund and you say, I can return the fund with a $500 million exit versus one of these scale funds, let's say you have $5 billion fund size and you need a $50 billion or $100 billion exit to return the fund. If you're investing in a company, even at the formation stage, is it harder to find a company that's going to be the $500 million exit versus the one that's going to be the $100 billion exit? Because you know, the $100 billion exit is that big, big idea that's kind of changed the world where the 500 million could just be this little tuck in, kind of nice to have widget that, you know, you know, service now might go.

• 19:22David Weisburd?

  Talking invariably about beta, what is the beta of the investment? And is the beta of an investment at different stages, does it change different timelines? You do one of my favorite strategies and I think one of the most underrated strategies in venture. And it's a derivation essentially of the Stanley Drunken Miller Invest Investigate, which is you go with your top managers and you help them preempt rounds in their best companies. Tell me about that.

• 19:45Speaker 00

  So that comes out of our direct co-investment strategy and it's about being strategic like I referenced earlier. So as a direct co-investor who is generally perceived to be a friendly, you know, addition to the cap table by the managers that are leading these early-stage deals, sometimes they need a third party to come in and price the round. It may be preemptive because there's a bigger round that's down the road when a milestone is hit and they want to shore up the balance sheet and just make sure that the company doesn't need cash when that happens, when it hits that big milestone. So, you know, in select situations, that's those are areas, times that we've been brought in and, you know, it's at the midlife stage of the company. These are, you know, valuations that might be 500 million or a billion dollars in value. So there's scale, but, you know, these companies are on their way to potentially become $10 billion companies.

• 20:29David Weisburd?

  There's a seed investor, a Series A investor that wants to preempt the next round and wants to put in some capital. How prevalent is that in the industry?

• 20:35Speaker 00

  In the example we just talked about where Harbor Vest can play a role, it's probably a small minority of things that we do. I do think there's insiders who are in this, in these deals when it is at the Series A or still very early on, that kind of have, you know, they're at the table. They see the things that the outside investor doesn't have. So they will be very active with that preemptive round. And sometimes if their fund isn't big enough to speak for their prorata that they might want to fully take, that's another way that, you know, having a friendly partner like us is a large LP in their funds, but also a source of direct capital. You know, we can be value-added in those situations. The last thing I'll say though is with these funds getting bigger and having to deploy more at scale, they're always looking for kind of what is my advantage to get into the companies that I really believe in when everybody else is trying to get into

• 21:20Speaker 00

  them. So there's tactics that are constantly emerging there that will allow them to do that.

• 21:24David Weisburd?

  Today, you're $150 billion. In 1982, you started with $150 million, so 1,000 X smaller. Tell me the story about how Harbor Vest raised its first fund in 1982.

• 21:34Speaker 00

  You had Yasmin Lacalade on recently in one of your programs and it was like demystifying the fundraising, but talking about how that first fund is hard, right? The founders need to work really hard to kind of build the confidence and then Investor that's willing to take that that first time risk. So our founders, Brooks Zug and Ed Kane, pioneers in the industry. And I will say, I was so fortunate to spend 15 plus years of my life, sitting alongside those guys, learning the business. But they were part of the John Hancock Insurance Company, and they went out to raise a third party dedicated fund to execute on this idea that wasn't broadly understood, this multi manager strategy, which which I alluded to earlier, was a venture focused strategy. And they were in the market. Brooks tells this story so well, you know, it was probably over two years that they were in the market trying to raise that

• 22:17Speaker 00

  capital. And I'm not going to say who the anchor investor was, but it was $150 million fund where there was a $50 million investor that anchored the fund. And if you go back to 1982, think about who are some of the top five companies that defined the US market, who had the biggest pension funds? And it was one of those companies that took the leap of faith, and they invested with us for a long, long period of time. But, you know, it took them, there was a never say die, kind of, we're going to do this type attitude that, you know, allowed them to just persist and keep going for 24 months or whatever it was. But that the watershed moment was when that institution came in with their big check, because it was the stamp of approval. In Peter Thiel world, I call that was the zero to one moment for Harbor Vest, right? And, and I would tell

• 23:00Speaker 00

  any person at any organization that's now become scale, you have to look to those founders that did the really hard thing at day one, and give them so much credit for for getting the enterprise off the ground.

• 23:13David Weisburd?

  And you've been at Harbor Vest for coming up 27 years. How has the organization grown? And more specifically, what exactly has compounded?

• 23:22Speaker 00

  27 years, I can't believe it. You know, what does that mean? I was like, 31 when I joined.

• 23:29Speaker 00

  So when I joined, it was less than 100 people. It was, I think it was 75 people. We had just finished raising, or were setting out to raise our our Fund Six program, and we had less than $10 billion of AUM at the time. But I'll be honest with you, there was a period of time where our part of the industry kind of stagnated, and we were flat. And then there were certain parts of the market that just totally took off. So today, our secondary strategy is the largest part of what we do. And there's just tremendous interest in secondaries. If you look at fundraising in traditional private markets versus what's being raised in the secondary market, you can clearly see that strategy has gone mainstream, and it's taking share from other things that investors were allocating to in the market.

• 24:11Speaker 00

  We moved into other asset classes like private credit and infrastructure with which are both, you know, scale areas for investing. If I take a step back, you know, we're raising and investing between 20 and 25 billion dollars a year now. So that's, think about a run rate number around that. We're talking venture today. We are a scale venture investor, but it is probably the most boutique of scale in what we do. So we're, we're probably raising and investing a billion and a half dollars of venture capital a year. And that puts us in a class that's very unique. There aren't too many peers of ours, but it's less than 10% of what Harbor Vest is doing across all private markets. And we have dedicated teams that focus on each of these areas. So the team, I sit in the venture team and it's a very sophisticated, long-term team. My colleagues who are the senior members of

• 24:56Speaker 00

  that team have been with the firm, not as long as I have, not 27, but it's, I want, my Amanda, who runs the program has been 26 and my colleague Mac is probably going on 20 years right now.

• 25:05David Weisburd?

  And I've been obsessed about this concept of things that compound versus things that grow linearly. Don't ask me why. It's just an obsession. So I'm very curious, what in your career or what Harbor Vest has grown exponentially and what has, kind of you start from zero, January 1st and it's more of a linear process?

• 25:20Speaker 00

  Yeah. So everything has a bit of a life cycle, right? So when we first came up with this multi-manager fund of funds model, that was kind of the new thing. And, and there was lots of capital that was being raised there. And that probably got us to the 20 billion dollars plus of AUM. And that's when the secondary market was kind of invented. I think the first secondary deal we did was in 1996, but it was probably 2010 where secondaries really began to accelerate. And at the same time, co-invest where investors recognize this opportunity to buy the asset class at a discount because of the, the ability for a co-investor to get into a deal at reduced or zero economics and, and pass that benefit along to the investor. So that went through its own life cycle. Honestly, today, which,

• 26:02Speaker 00

  which could be transformational for the industry, but something the industry has to digest is this new thing called open-ended evergreen funds that are catered more towards the individual or wealth channel, but institutions are buying them as well. And if you think about that investor that's never had access to private markets that is now, has it being made available to it, that's trillions of dollars that could come into the industry. And not only would be a, you know, exponential compounder for Harbor Vest, but an exponential compounder for the industry. And, and that's going to transform what private markets are, right? Like private markets will not be the same when that amount of capital is coming in than they were as they were 10 years ago.

• 26:39David Weisburd?

  I want to double click on, you said something there, which is sophisticated investors are going to evergreen structure. I was shocked to find this out. Some of the top pension funds, endowments, foundations. And the reason that they're doing these evergreen funds, and to be fair, they're typically not venture. It's typically buyout, is because the cash track that they're getting when their money is sitting in cash for two, three years, actually significantly decreases the returns versus investing into an evergreen fund where your capital is, it's almost like a mix of a secondary and a primary, but you're getting primary type returns with no cash track.

• 27:13Speaker 00

  And I like to call it institution versus individual. I like to assume they're all sophisticated and they shouldn't be investing in the asset class if they're not. But the institutional investor has been investing in the asset class for 70 years and has never asked for the evergreen structure, or if they did, it was like corner cases where they did. But now they're marrying the two. So as you noted, when you invest in one of these open ended funds, it's fully funded or nearly fully funded. So all your money goes into the ground. If you do it through the traditional model to build to a target allocation, it might take you five, six, seven years to get to that allocation. There are nuances related to each of them, which investors need to understand and contemplate. So in the closed end, when call it TPG sells its company,

• 27:56Speaker 00

  it sends that money back to the investor and the investor has the decision of how they want to recycle it. In the open ended, it gets recycled back into a new deal unless that investor wants to redeem as part of their contracted redemption right. And that changes kind of the liquidity model for each of those.

• 28:11David Weisburd?

  The way I look at a 10 year structure is you have no liquidity for 9.9 years. Obviously you have earlier DPI, but just to simplify, you have no liquidity for 9.99 years, then you get 100% liquidity and forced liquidity. And the odds of that lines up with the liquidity needs of the underlying investor, especially when you put in taxes is basically 0% or approaching zero. So having the ability to be more

• 28:35David Weisburd?

  Proactive about when you exercise liquidity, I think is an interesting feature, especially for taxable investors where they have to worry about tax drag.

• 28:41Speaker 00

  Yeah, but this is a good platform to just kind of educate that investor. Look, the redemption rate in these Evergreen funds is typically up to 5% per quarter. So think 20% per year. So even if you decided today, I want out, it's going to take you five years to get out. You're not going to get out in the next two quarters.

• 28:58David Weisburd?

  You've referenced some of your competitors and some of the secondary funds out there and other LPs. You're obviously not the only LP in the world, but you do get the first look at a lot of deals. Maybe double click on first look alpha. How are you able to generate first looks for Harbor Vest? And what's that sustainable edge?

• 29:17Speaker 00

  I'll go through three things. First, we're, we're an institution that's informed and it's been around for a long period of time. And, and the people, as you kind of heard, I've referenced a few of my colleagues, myself. We've been at the firm for a long time. So we have not only institutional relationships with organizations, we have personal relationships with organizations. That just builds that word trust, right? And then because of our knowledge around all these different types of things, whether it's you're starting a first time fund, how should you think about your term sheet? How should you think about ODD versus you're going to do a continuation vehicle? You've never done it before. How do you educate yourself on the options? We become the educator in that situation. So even before the fundraising starts or the CD occurs, we've had an engagement with that, that stakeholder, that counterparty. And then, and we further kind of created that trust.

• 30:02Speaker 00

  And then finally, we need to be predictable, right? We need to be transparent and predictable. And, and this is probably most obvious in how we co-invest. Managers bring us deals because we've educated them on what deals we like and what deals we don't like. And then if we don't like the deal, even though it's in the definition that we shared with the manager, we get back really fast. And, and I'm a fund investor. I'm not the one that's saying yes or no to the direct deal. I actually have a counterparty on my direct team that this is all they do all day long. So we really put it over emphasis on communicating fast and why, whether it's yes or no. And, and I think these general partners really appreciate that, all of that, those types of behaviors.

• 30:42David Weisburd?

  Funny, because I sometimes, I used to have a naive view on this, which is, you know, my whole view was, well, it's all economics maximizing all this. And then I would notice in my own behavior, why am I going to this person? Sometimes this person even has worse economics than this person. And I started asking, questioning my own, and it's because that was an honest person. I could trust them. They got back to me in time. They gave me rationale, why or why not? Not that they have to write a five paragraph essay. I just naturally gravitated to the person that was the best partner, economics aside. Obviously, economics matters, but I think it's an underrated thing that you don't really realize until you're kind of in the game.

• 31:16Speaker 00

  Yeah, that's right. And then the value prop that I talked about throughout this call, just being strategic, where we can intersect their business as a fund investor, as a secondary solution, as a direct co-investor, to fill an equity hole. They want to form relationships with all parts of our firm to satisfy each of those kind of needs that they have, right?

• 31:33David Weisburd?

  If you look at these GP relationships, what pays the bills is the fund commitments. Co-investors, secondaries, all that is nice. It's nice to get a $10 million carry check in 15 years on your winners. That's great. But ultimately, it's the LPs that pay the bills. And what GPs that are over allocated, what they care about is stable capital. And there's actually two aspects to that. So a lot of LPs will go around and say, you know, we're an endowment, we're a foundation, this is very stable, we're 100 year, 200 year, 300 year. But that's only as stable as the relationship at that organization. Yale University, famous, I believe they had somewhere around a 17 to 20 year average tenure. You've been there 27 years. This is highly underrated. But having stability on both the partner level and also on the institutional level is pretty cool.

• 32:18Speaker 00

  Yeah, no, it's absolutely the truth. And as you noted, what that general partner values most is you're going to be there to fund their next blind pool fund. The reality is in the market, that's the hardest capital to secure. So to be able to secure that at scale from our investors allows us to fuel the rest of the...

• 32:35David Weisburd?

  It's only getting harder. It's probably one of the top two trends in private markets. One is the rise of retail over the next decade. The second one is, I guess, people going away from blind pool funds, which is so many different things, continuation vehicles, secondaries. If you go to the buyout space, there's entire, not even cottage industry now, entire big industry of independent sponsors. There's thousands of them from very high quality firms that are just doing deal by deal. I imagine that's going to proliferate into venture as well, if I had to guess. But this like, the, the blind pool fund is so important because it pays the bills. It pays for the infrastructure, the people that you have to hire that are upstream of everything. It's great if you could be Eliot Gill or Orin Zev, that's, you know, an individual deploying a billion dollars.

• 33:20David Weisburd?

  I think they're literally the only two people in the world. Everybody else needs to have a team. I think that's, that's an important thing that people underestimate.

• 33:27Speaker 00

  I agree, and there's another dynamic in which you talked about that I'm not sure the market fully appreciates. So all of this new capital that you're, is coming in, actually, the primary funds aren't purposely built for that type of capital because it's got to cycle money faster. And when somebody asks me, what is private equity? I, I give them two sides of the definition. It's taking economic interest in a private company where it's a privately negotiated one-to-one transaction. But there's also the expectation that you're going to deliver value add where public market investors generally more passive. But that value add tends to come in many cases from that closed end, drawdown, blind pool fund. And that, that catalyzes the rest of this other capital that's coming in, that's just seeking economic interest. And so that's an area that I, we spend a lot of time focusing on the equilibrium between the two.

• 34:10Speaker 00

  I don't think it's crazy that you would see secondary firms actually build value added capability. So they can deliver both the economic interest and the value added capability.

• 34:20David Weisburd?

  One thing is for certain, things are changing.

• 34:22Speaker 00

  Yes.

• 34:23David Weisburd?

  Scott, this has been absolute masterclass. We just opened up a studio in New York. We're going to have to do it in person soon. Thanks so much for jumping on, looking forward to catching up soon.

• 34:31Speaker 00

  Yeah, thanks for having me. I really enjoyed that. Take care.

• 34:33David Weisburd?

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