E359: What Charlie Munger Taught Me About Venture Capital

What if the real edge in venture isn’t price—but who you choose to partner with for a decade? In this episode, I sit down with Jamie Montgomery, Co-Founder and Managing Partner of March Capital, to discuss how long-term relationships, not transactions, drive venture outcomes. Jamie explains why asymmetric upside matters more than negotiating the last percentage point, how conviction and discipline shape follow-on decisions, and why understanding your own biases is critical when doubling down. We also explore capital cycles, liquidity dynamics, and how AI is forcing every company to either reinvent itself or fall behind.

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

• 0:00David Weisburd?

  So Jamie, you have 1.65 billion AUM and you've been investor for the last 25 years after being a banker. You used to have a weekly meeting with Charlie Munger. What did you guys talk about?

• 0:13Speaker 01

  He did most of the talking. I did a lot of listening. I was probably afraid to say anything for a couple of years. He's just an incredible intellect and he had so many ways of thinking about businesses and life. And we first got together, I was at the age of where my father had passed away that year. And his wife had passed away and we had a small group of us would get together and we thought, well, it'd be nice to have breakfast with Charlie. And another good friend of his, Rick Garen, who's a very prominent investor and talented individual to talk about. Kind of what should we look forward to in life, you know, in the next 30 years of our lives?

• 0:51Speaker 01

  And I think he was happy to have some younger friends because when you're in turn 90, a lot of your friends have, you know, passed away or no longer active. And, you know, we, I think, you know, we kept him young and he shared a lot of wisdom with us.

• 1:06David Weisburd?

  What did you learn from him?

• 1:07Speaker 01

  You could spend hours on that. I mean, I, I think.

• 1:10David Weisburd?

  What surprised you the most to hear Charlie say?

• 1:14Speaker 01

  Well, Charlie was in the last decade of his life and so he was probably more patient with us. And maybe he would have been with people earlier in his life. And so, um, and I, I, I think he was always very consistent about knowing what your zone of competency is and sticking to that. And, and not compromising at all of any values or whatnot. Just he had the highest standards for, you know, individual conduct and company conduct and complete intellectual honesty. And, and, you know, if you don't know something, know what you don't know. People get in trouble when they think they know something when they don't actually know it. So I think a certain intellectual honesty is, you know, real hallmark of those conversations.

• 1:51David Weisburd?

  Chairman of Jefferies, Joe Steinberg, who's a relative of mine and also did a couple of deals with Warren Buffett. He always talks about how difficult it is to get Warren Buffett and Charlie Munger to get out of their kind of buy box. They're such, they were such disciplined investors.

• 2:06Speaker 01

  That's true. And I think if you look at Berkshire Hathaway, the lesson there was you sort of had to be Charlie Warren to build Berkshire and their concept of succession was they had some principles and the type of companies they want to build, the amount of capital that they had to deploy, their long-term point of view on owning companies and the values that they have. And you needed to be Charlie Warren to build that, but afterwards, I think they felt very comfortable for Greg to take over. And so those weren't just Charlie and Warren, they became pretty ensconced within that entity. And I don't think that will change.

• 2:42David Weisburd?

  You mentioned that you differentiate yourself in banking by being relationship versus transaction driven. Does that always work in banking? To me, from the outside, it seems like sometimes transaction oriented in the short-termism is the right model for that business.

• 2:56Speaker 01

  You're correct.

• 2:58David Weisburd?

  Is that why you changed to investing?

• 3:00Speaker 01

  One of the reasons. I mean, banking rewards transactional bias and the culture attracts people who are fairly coin operated and that leads to certain behavior. My idea of fun was never bonus time when running an investment bank. It's just everybody has claims to do and everything. And I think one should be more modest in life about one's accomplishments. So were we, did we build a successful bank? Absolutely. But, you know, and what was the joyful part of it was working with entrepreneurs to help them be successful, bringing in young people and teaching them the business and training them. And they've gone on to incredible jobs and responsibilities throughout Silicon Valley and elsewhere.

• 3:42Speaker 01

  So that was very rewarding, but the nature of it is very financially driven and in some ways driving for an extra five or 10% or more on a transaction, it's great, but that doesn't really lead to massive wealth. Massive wealth is when you have alignment and you have long-term compounding and that's where I've been focused on.

• 3:59David Weisburd?

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• 4:43David Weisburd?

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• 5:26David Weisburd?

  alongside filings, broker research, news and more than 240,000 expert call transcripts, turning raw conversations into comparable, auditable insight. Take advantage of AlphaSense AI-led expert calls now. The first to see wins, the rest follow. Learn more at alpha-sense.com/howIinvest. Al Graham had this essay about nice people could still make great investors on this exact point, which is if you're in the next Stripe, if you're in the next Airbnb, if you're in the next Uber, even if you under negotiate and give up that last 5%, you still will get 100x versus a 95x or you'll get a 300x versus a 240x and you could still be very successful in certain industries that inherently have high upside and non-zero sum dynamics.

• 6:09Speaker 01

  You're looking for what we call asymmetric upside and we're never the high bidder in the things that we go into. We always try and offer a fair price because you have to have some margin of error. But at the same time, you're trying to get in the best companies at a reasonable price. So we're not looking for a deal per se. We're looking to align ourselves with really high quality entrepreneurs and be their financial partner. Being a successful partner is having a real balance in the relationship in terms of governance, in terms of equity ownership, incentive, mentoring and development of the team and helping them be successful, not just in the work environment or elsewhere in their life as well.

• 6:54David Weisburd?

  Tell me about this turkey sandwich test that you use to determine whether you want to invest in a company.

• 6:58Speaker 01

  Well, I think maybe American cuisine is evolving a bit, but you kind of look at it and say, I'm going to invest in a company for five years, seven years or longer, and you're going to have at least four board meetings a year. So you say, well, do I want to have 20, 30 turkey sandwiches with this individual, he or she? And now maybe you get a little more diversity and food choices nowadays, but it really is a long-term commitment. And you realize the balance sometimes recently we were recruiting a new CEO for one of our companies and interviewed 30 candidates. I thought to myself, this is more dates than I went on when I got married. What is going on here? And it comes down to it's a long-term

• 7:40Speaker 01

  commitment. So it's like, do you want to sit next to this person flying from New York to LA or LA to London? I mean, because you're going to spend a lot of time with the CEOs and is there a certain chemistry there that you can mutual respect and ability to communicate? And everyone's different and we have very different types of CEOs or not just different animals, there may be different species. But it's great. I mean, it's a beautiful thing about it, but you really have to sit and think about that long-term commitment.

• 8:10David Weisburd?

  It's interesting because there's almost two aspects here. There's managing the fund, which is where can I invest to maximize my returns? But there's also managing the career and the compounding benefits of career. Some of the top angels, going back to some of my mentors, some of them would make checks into companies, 25, 50K checks, just to learn about the industry and for information, knowing that that information in a new side of the market, like say crypto, will allow them to later deploy $5, $10 million much more effectively. There's these different ways that you manage your own career and the compounding on your career that you don't necessarily in a single fund.

• 8:42Speaker 01

  I agree with you. One has to think about not just your income statement in life, but your balance sheet, your goodwill, and your network.

• 8:54Speaker 01

  Translate in your ability to help companies. I mean, sure, we've put our toe in the water in certain sectors or backed certain seed funds to get access to information. And I don't know if that's worked or not, but you're trying to help people be successful. And usually that comes full circle. With our investors' money in March capital, we're trying to build portfolios of 12 to 15 companies per fund. Also, our money comes in in years two to five, what we call early growth. We're helping the company scale up and we invest and we follow on. If there's a big follow on, we might do a cross fund investment. We also offer to the later stage investments to our LPs. We have about $650 million worth of co-invest on top of the 1.65 billion. But you have to be very careful that the dollars you're deploying are well deployed.

• 9:42Speaker 01

  That's the key.

• 9:43David Weisburd?

  You're known for taking very high conviction bets and doubling down, sometimes tripling down into companies. What's your framework for when you know to double down?

• 9:51Speaker 01

  That's why I go to church every week.

• 9:54Speaker 01

  It's important to understand the psychological forces that exist in investing. And I was pleased to be invited on today. And you've got a background in psychology at Harvard. It's an interesting mix of the MBA and the psychology. And there's a lot in the psychology investing that people tend to overlook. And it's biases. We all have biases. And oftentimes, when you're doubling down, you already have a conviction about that company and it's hard to change your mind. There's recent information that gives you a recency bias. There's some star investor coming into the rounds. That's another bias.

• 10:32David Weisburd?

  Social proof.

• 10:32Speaker 01

  Yeah, social proofing. And so you think about it's like a half dozen. And you say, wow, the last round, we did it 30 times forward revenue. This round's only at 15 times forward revenue. So it's a great deal. So you have this transitory valuation bias. But then you gotta step back and say, wait a second. What do we really think the outcome is going to be here? And invert down to usually we build a risk curve where you say, all right, what are the three probabilities? And so I'm like, current in the intelligence world where you say, well, there's a, you know, what's the percentage that something bad happens? Like you lose money or, you know, and then, or you're just dead money, you know?

• 11:14Speaker 01

  What was the bad scenario? And what's the most likely scenario? And what's the upside? And then what are the probabilities across those three? And how do you weight it?

• 11:21David Weisburd?

  Speaking of doubling down, you have one of the most famous conferences in tech, the Monty Summit. I was, I was lucky enough to be invited this past-

• 11:29Speaker 01

  We were delighted to have you join us.

• 11:31David Weisburd?

  Thank you. And you've compounded that over 23 years.

• 11:34Speaker 01

  Yeah.

• 11:34David Weisburd?

  Now, I went in year 23 and I saw something really nice, but I imagine it didn't start like that in the beginning. How has that evolved over time? And what's made you invest so much into this conference?

• 11:43Speaker 01

  The first conference was in, gosh, what would it be? 2000 and-

• 11:49David Weisburd?

  2003, I think.

• 11:50Speaker 01

  Yeah, 2003. And, you know, you say to yourself, what are we doing? We're coming out of a tech bust, right? And I had the, the theme, technology is back. And some of our investors said, that's just so asinine, you know? And Forbes really liked us. They ran a cover story, technology is back. And the guy, publishers said to me, no, hey, I just had to take that line. It's great. You know, and we had 48 private companies and 24 public companies. And, you know, and one of the companies was the Facebook, you know, year one. And, and there was a fellow running it, Van Ato or something like that.

• 12:32Speaker 01

  He was president and he came down and he presented and, and we had some amazing companies there that year, I remember. But I didn't know what would make people show up. So I used to coach Little League back there for my boys and my, one of my assistant coach was Glenn Frye, who was from the Eagles. So I said, so I hired Glenn to come play with his band, you know? And I figured if we had a dinner the night before with the Eagles playing, people might show up for the conference the next day, second half of the conference. And so- And it worked, you know, and we, we had about, I don't know, 425 people there that year. And, and we launched it and it was, at that time, it was a conference for the bank. And so our goal was to bring clients and then finance them, bring clients and then sell them to a larger strategic share there, or take companies public.

• 13:17Speaker 01

  And we'd build these great relationships. That worked very well. We were able to monetize it that way and that how we paid for it. And when I sold the bank, you know, exited 2012, I'd run and see people and I'd say, I'm appreciate working with you over the last decade or two. And I want to tell you what I'm planning to do with this is March Capital. And they'd say, well, you know, I really admire you and everything you've done for the tech community. And I'm glad you're going to stay in the tech community and I'm not going to miss any of your bankers, but I'll miss the conference. So I get here, it is over and over again. I thought, geez, we ought to keep the conference, right? And so we relaunched it at March Capital. And it's been a great way for us to bring investors, including our own LPs, you know, other LPs,

• 13:59Speaker 01

  sovereign wealth funds and whatnot, and entrepreneurs and corporate execs together and some industry government leaders and military leaders and whatnot, together to talk about the, you know, the innovation economy and the key issues facing it and how we could all collaborate to, you know, and it's sort of nonpartisan, not really political. It was just like right down the middle of the aisle and, and but very practical. And we had about 1,200 plus people there this year, about 180 speakers and 120 companies were there in different capacities, presenting and talking. And, you know, it's a great success, but it, what it really is, is a community. It's a lot of work to do it right. We pride ourselves in doing it right and being well run, but it's all, but it's, it brings joy too.

• 14:41Speaker 01

  And I mean, you think about, I have people from all over the world who come in and, you know, from a couple dozen countries and I think of the travel that saves me.

• 14:50David Weisburd?

  Yeah.

• 14:50Speaker 01

  You know, and, and our ability, the velocity of the meetings that we have and it's great. And the companies really like it and it gives us a chance to have all of our investors together in the front end of it and then roll into the summit and we do some things in the community during it as well to have a reception at the Getty and we fund children's education programs there. So it's one of the many things that we do as part of our, you know, foundation outreach at March Capital and also myself, family. And, you know, so there's a lot of good things going on alongside. You see a lot of people in the government there that maybe we've supported through, you know, tough times or good times and all bipartisan initiatives and, you know, at the national level, worked with most of presidents up to recently. And, you know, you just, it's good, right? It's all good.

• 15:31David Weisburd?

  Yeah, I think a lot of people misunderstand. People always ask me, how do you have time for a podcast? Or I'm sure people ask you, how do you have time for a conference? They don't understand the downstream efficiencies. If you just focused your effort on something, one singular thing that you could compound, that you could invest in and make it great and make it as a resource for people, you don't have, there's a lot of things we, we don't have to do. We don't have to really spend a lot of time fundraising. We don't have to spend a lot of time branding ourselves with GPs, having these 30 minute Zoom meetings that nobody knows who you are. You don't know who they are.

• 15:58Speaker 01

  Yeah.

• 15:59David Weisburd?

  There's so many downstream consequences of doing one thing really well.

• 16:01Speaker 01

  All right. One fellow came and said, you know, I read about you in the Stiefel annual report and everything you're doing in the community. They featured you. I said, they did? Oh, can you, you know, send me a copy? You know, it's like, yeah, well, okay, because of that, we want to invest. You're like, great. You know, I mean, so there is this downstream. You don't even know what it is, right? You don't get in the way of compounding. That was one of Charlie's. If something's compounding, like the conference is compounding. I think I got 10 million social views in the couple of weeks around the conference, you know, 10 million. I mean, usually you have to get arrested to get that many, you know, social views, you know, but it was, it's all positive, right? You know?

• 16:38David Weisburd?

  You're very bullish on American dynamism and this new crop of companies trying to solve now Department of War issues for, for the US. Why are you so bullish on American dynamism?

• 16:52Speaker 01

  I just don't think it's America, it's Western Europe as well. We had a former Defense Minister of Germany there and Katie Guttenberg, I don't know if you heard him speak, but he said, yeah, we have a hundred billion dollars set aside for spending or investment in infrastructure, the defense industry in Germany, and we could grow that to 500 billion, his partner is the number two in the administration, so he's speaking with some authority. And 40% of that will come from traditional suppliers, 40% of that will come from new suppliers, and 20% will come from commercial sector. So you just basically had someone there signal that there's 200 billion dollars of funding available for innovative defense companies, just in Germany alone.

• 17:35Speaker 01

  So that's actually a big number. And I think Silicon Valley was always allergic to Department of Defense or acted like it was, and recently they've become a lot more focused on it. There are things you can do that are in the intelligence world with software, or you can do things that go bang, or you can work on areas that are critical technologies, and that's where we're more focused on, which could be quantum computing, cyber, superintelligence. And some of that's manifested through the Genesis Project, which has been run out of the Energy Department by Deputy Secretary Harry, who came from IBM as the head of research. As this year, they're going to spend about $3 billion on funding competitive technologies

• 18:19Speaker 01

  to prove our standing vis a vis China in some of these critical technologies, and several of our companies are in the middle of that. For example, could we use superintelligence to create synthetic versions of rare earth minerals, provide a little bit more independence from certain supply chains, and things like that. So there's various ways to play it. It's a huge opportunity. We can't do everything, and so we're kind of focused on the intelligence side of it. The other question, though, is kind of like, there's American dynastism and there's sort of a dynamic US economy, and I think that's a very interesting question. I mean, I think... When one works with new early stage companies and growth stage companies and you're helping them scale, you have to be optimistic. You just kind of play it out. I mean, the US economy is about

• 19:02Speaker 01

  a $30 trillion economy now. And, you know, in between 10 and 15 years from now, say 12 years from now, it could easily be a $50 trillion economy. Sort of wealth creation is unprecedented, and it creates a lot of opportunities across the board in government revenue to pay down debt, investment in infrastructure in different areas. So I think we're entering a very dynamic period of innovation and growth and wealth creation. Now, one could argue that it's skewed between the concentration of wealth, and I think that's a real issue. I think it's,

• 19:39Speaker 01

  but I would rather double the wealth than not double it. And we just got to figure out how to handle that properly. Now, at the summit, we had a gentleman there named Matt Mahan, who's a centrist candidate, Democrat, running for governor, and he's not liked by his fellow Democrats because he's basically saying, you know, we haven't done a very good job in California. That's controversial. Yeah, that's controversial. It shouldn't be, right? But if you look at what I just talked about on a national level, going from 30 trillion to 60 trillion, or the global economy going from 120 trillion to doubling, let's look at California. 10 years ago, our economy was about $2 trillion. And now the economy is 4 trillion. So the economy in California doubled in 10 years. So this is a

• 20:23Speaker 01

  real world scenario we're going to face. And what's happened in those 10 years? Well, government, the population of California is flat to down. You've probably had a couple of million people leave and a couple million illegal immigrants show up, but it's roughly the same population. You've had a 25% increase in government employment by the state of California, and you've had a doubling of tax revenue from around $170 billion to over $350 billion. Yet, even with $350 billion of revenue, we're still can manage to run an $18 billion deficit this year, plus have massively unfunded off-balance-sheet pension obligations. So even if you double the economy, you can still make a mess out of it if you're not careful. And then on top of that, they'll say, well, we don't tax enough, so we're going to put a

• 21:06Speaker 01

  wealth tax in, which then you have people buying homes in Florida, right? And you'll see it, the headline news is correct, because a 5% tax on the assets of people, assets they control of people of more than $1 billion. And it's written as a, an initiative, so the language can't be changed if it passes. And it's poorly written, so if you control 10 to 1 voting shares, like Zuckerberg does, he'll be taxed on the shares that he controls rather than the ones he actually owns. So it's like a 50% tax on wealth, you know?

• 21:36David Weisburd?

  Yeah, and Sergey Brana and Larry Page.

• 21:38Speaker 01

  I guess the good news is they're just saying tax the rich, they're not saying eat them. So there's some upside there. But you look at it and say, okay, and why is that? Well, the problem is, is that you have this K-shaped growth where you have the highest level, you know, in spite of the all the investment in California, you have the highest level of homelessness in the country, you have about a poverty rate, which is the highest in the country, about 16, 17% in California, it's tied with Louisiana, it's one of the worst schools in the country. I mean, going on, it's, you know, we're not getting what we should get for the money. And as a result of that, we have a situation where between the median, the top 10% income is a much higher ratio than it's ever been, you know,

• 22:22Speaker 01

  or lower, if you're on the low end of that. And, and there's this greater and greater inequality of, of, you know, now the median income in California has grown from about, you know, about $60,000 a year to $100,000 a year over the last 10 years. So that's gone up quite a bit. But there's that bottom 20% have really suffered. A lot of them are new immigrants because people, middle class left, so you had a little bit of hauling out. But, you know, the challenge is, is how do you give that bottom 10, 20% a leg up? And a lot of the policies that we're pursuing don't actually work. And then we get in our own way by making housing so expensive, because of permitting, we can't get insurance in California, and the schools aren't very good. So I say all that because I say, we're going to be like the dog who catches the car. So.

• 23:08Speaker 01

  We've got to figure out what the hell we're going to do, right? If we can really double our economy to 30 trillion to 60 trillion, what are we going to do when we do that? I mean, it's a great opportunity. We just had a golden opportunity. Imagine being governor of California and say, you know, you're here for eight of these 10 years and we're going to double the wealth of the state. Your tax revenues are going to double and let's do something good with it. And they pooch it entirely, right? You know, and that's what's happened. And by just bringing that subject up, he's ostracized, right? It's not like, this is all facts. I didn't say anything that isn't factual. It's not political and I'd rather blame somebody in Washington for all this, right? And so I think it's a really interesting question about how, as a citizen, investor, and you're growing entrepreneurs and you're helping to be successful

• 23:52Speaker 01

  and you're creating jobs, you're doing a lot in the community. How can you effectively partner with the government to sort of, you know, keep things on track?

• 24:02David Weisburd?

  David Freiber recently publicly said that 87% of founders that he knew were thinking about or already planning to leave California. And I think there's two different questions. One is, what do you do from a tax standpoint? And this wealth tax, I've run it through AI. There doesn't seem to be a positive economic rationale on it, except like as a political stance.

• 24:25Speaker 01

  Yeah.

• 24:25David Weisburd?

  And then if you don't do the tax and you have all this innovation, how do you distribute and how do you invest into the wealth gap? But it's two different questions and people are really combining into one question because it's politically expedient. But the question is, A, first, don't, first do no harm. First, make sure that you're not killing the golden goose. And now that the golden goose is there, how could you make the system work better for the state? How do you improve education? How do you do all these things without actually killing the revenue source?

• 24:52Speaker 01

  Yeah, that's it. That's the challenge. And I'm not a, you know, government employee, but I, you know, I think we need to elect people at, you know, Los Angeles and then a whole nother case, California and elsewhere that can do that, you know? And it's,

• 25:12Speaker 01

  Lower the noise a bit and get on with the work. I worked closely with Steve Wesley when he was the CFO, a Democrat, and Arnold, a Republican, a bipartisan to balance the budget 25 years ago. We were very successful.

• 25:26Speaker 01

  It can be done. I mean, the opportunities are massive. So I say we're creating this massive amount of wealth. Let's invest it intelligently. Let's create a better world.

• 25:37David Weisburd?

  As a VC, you've really been investing since 2014. What's something that you've recently changed your mind on?

• 25:43Speaker 01

  I've been giving that some thought lately and I think we're pretty Socratic. And I change my mind every week, you know, because at the end of the day, there's nothing better than to get around the table with eight or 10 intelligent people and say, what are you seeing? And we start most of our board meetings with our portfolio of companies. We might have three or four really great funds in it with us. Usually there's a, and I always say, all right, before we start, and we go down this path of power point, can everyone talk for a minute or two about what's the most interesting things they're seeing in the market? At least a fascinating conversation. And it puts the whole board conversation in a context which is kind of relevant and current.

• 26:25Speaker 01

  The great news about AI is, you know, I think it gives everybody a chance to reboot their business. People say, you know, you're going to be killed by AI or this business, we put out business. It's really giving everybody a new, if they have the right mindset, a new lease on life. Because you say, you know, I can, we bought all of our companies together and I challenge them the morning of the 10th, like, you know, we're doing things differently in March Capital, very differently.

• 26:56Speaker 01

  And I want each of you to really think hard about it, listen and learn over the next couple of days. And we have McKinsey here doing some case studies and BCG and others and thought leadership and come back the next month or so with how you're going to do things differently. And it's like, it's all quite positive. It's not the sort of SaaS apocalypse and all doom and gloom. I kind of changed my mind and said, you know what? Everybody has a reboot here, right? The venture business was kind of going down the drain in 2022. People put a lot of money into work and really bad investments.

• 27:34Speaker 01

  There was no liquidity. And AI gave it a whole new lease on life. It was like dead.

• 27:41David Weisburd?

  It's it's the one thing I learned the most potently through the podcast is you have to keep on investing in every vintage. I was extremely lucky to invest in Anthropic before billion dollar round in 2023. And had I not known this idea of just keeping money at stake and investing in every vintage, I would have missed it.

• 27:59Speaker 01

  You do up to a point, you have to be in every vintage, but every vintage may not be a year. That's one thing I would say. So

• 28:07David Weisburd?

  Tell me about that.

• 28:08Speaker 01

  Well, so as I was talking about AI is comes along, creates a whole new lease on life. And and you have AI native companies and you have the companies that are we had to reinvent themselves. And that's really interesting work. We have companies that say, I'm going to double my sales, triple my profitability and grow. And over the next three, every day I got a note from one of our CEOs that they've gone off. I once said, well, I got back and my co-founder didn't want to do what I did. And five of the eight management members agreed with me. So three of them have left, the co-founder is gone. And we've cut a third of the team. We're going to accelerate our growth and we're going to be profitable. We don't need to raise any more money. Well, you know, Bob, you know, it's like, this is great. I can't believe it was every day now. Right?

• 28:50Speaker 01

  And so I'm thinking, hallelujah, right? I want more of this, you know? And and and it's like, now, come back to the vintage thing. It's like, we raised a fund in 2021 and we do a final close in 2022. We do a few investments and I'm like,

• 29:06Speaker 01

  oh my God, what did we just do? And early 2022, interest rates go up. The iron rule capital markets, a 1% increase in interest rates results in 10% change in valuation. So five and a half.

• 29:19David Weisburd?

  That's basically math.

• 29:20Speaker 01

  Yeah. 55% draw. Boom. Flow through the privates. And so I said, look, we're going to freeze investments for a year, let things settle down, let this AI permeate. And then we'll start making some investments at the end of 2022, early 23. So we invested then. We put our money to work and then the average series B was probably 220 and 21 dropped to half of the, oh, 50%. Well, dropped about 140 to 120 and then went back up when 25 to 240. So we had these Vs. And it was a couple of years cycle. So to answer your question, you know, there was a peak in 2021 trough in 22, 23, peaking again late 24, 25 and

• 30:06Speaker 01

  It's pretty high right now. People say, well, okay, what's gonna happen next?

• 30:13Speaker 01

  Um, first of all, I'll start by saying I have no idea, but I'm gonna uh give you a uh I summarized in New York, I gave a talk, I was at the New York Athletic Club and a lot of LPs and family offices. And I asked, what do you guys have the most exposure to? And most of them were exposed to private equity and the largest within that was software. I said, all right, well, you're not gonna like this, but you're all screwed, you know, because there's gonna be a 40% reset on software prices and you're in leveraged bets. And so the debt holders are gonna own the companies. And so, you know, but even then, the debt probably won't be very high quality. So you really shouldn't be investing that category, you know, everyone's like, looking at me, who is this guy? You know, where do you find this? Yeah, who brought this guy? You know, and I, you know, and I'm like, yes, right? You know, you want, you want the honest answer.

• 30:57Speaker 01

  And then now people go, how do you know that? You know, and you say, well, you know, I was just kind of looking at it, you know, it seemed to me like what made sense. And but people believe what they want to believe and they, they see what they want to see and they hear what they want to hear. And we have these filters, the biases from earlier. Now people think, okay, there's this incredible investment in AI infrastructure, really is, it's unprecedented. And even with all that investment, assume it is made and there's power to power it, which I think we'll figure some of the stuff out is, you know, it's not gonna be easy. There's still gonna be a shortage of supply of compute, you know, and you have compute, you have inference computing, which is higher margin, training, compute lower margin, maybe they go to more pre-training, you know, shift to higher margin compute. We're at this inflection

• 31:42Speaker 01

  point where companies are really gonna grow. So this is a great time to put money to work. And so I'll suck it up on the valuations.

• 31:50Speaker 01

  But I'd say, well, wait a second, there's only so much money in the world, right?

• 31:55Speaker 01

  As I walk around New York this week and call on heads of banks and big investors and you look at where the capital flows going and, and there's more and more money being sucked out of the system by the large hyperscalers who never needed financing before to build out infrastructure, you know, and

• 32:17Speaker 01

  You go, okay, that's great. But the effect of that is there just isn't as much liquidity around for the other areas. And so I think we're, you know, unless there's some change, I think, you know, you're starting to see the liquidity start to dry up. People don't really think about liquidity flows when they're in venture. They, you know, they.

• 32:36David Weisburd?

  They don't think about the relative competition for capital.

• 32:39Speaker 01

  They think, well, you know, I'm a midsize fish.

• 32:42David Weisburd?

  When I tell some venture capitalists that they're inherently competing with lower middle market PE, they look at me like I'm a fool. What do you mean I'm competing with lower middle market PE? I'm competing against other emerging managers. But from the LP standpoint, they're looking at their entire portfolio and they're thinking, where do I get the best?

• 32:56Speaker 01

  Yeah, where do I get the bank? And the capital markets, money is flowing in, the structured finance with the hyperscalers, and there's less money available for other categories. And I think it's going to be a tough financing market for a number of companies. And I think you will see a correction in the private valuations again. And therefore, let's revisit this in a year and see if I'm right. Come back for Monte 2027.

• 33:21David Weisburd?

  Well, Jamie, you're an absolute legend. Thanks so much for jumping on the podcast and looking forward to doing this in a year.

• 33:27Speaker 01

  Well, we'd be delighted to do it and come on out to sunny Southern California next March 9th and 10th will be, and we'll set up a studio for you there and we'll do a few of these. So I look forward to having you. Thanks for having me today.

• 33:39David Weisburd?

  Thank you, Jamie.