SpaceX, Stripe, X, Ramp, Anduril: Navigating Liquidity in Private Markets

Molly O'Shea speaks with Christian Garrett, Partner at 137 Ventures. Christian shares his insights on the current state of private markets, the mechanics of high profile secondaries, and the growing liquidity squeeze faced by VCs. We also take a closer look at SpaceX's financing history, how 137 Ventures got involved, and why SpaceX runs tenders every six months. Christian discusses the potential reopening of the IPO window, the rise of generational talent from companies like Anduril, SpaceX, and Palantir, and why he thinks defense tech might be overrated right now. Other highlights include the evolving relationship between Silicon Valley and Washington, D. C., government initiatives like the Replicator Initiative and FedRAMP, and the origins of the Hill & Valley Forum. On a personal note, Christian reflects on his career journey, his mentorship with Trae Stephens, and shares some spicy hot takes on topics like return-to-office policies, San Francisco’s future, and his unexpected bullishness on Europe. If you're interested in venture capital, private markets, or the intersection of tech and policy, this is a must-watch episode! Molly on X: https://x.com/MollySOShea Christian on X: https://x.com/CGarrett_15 Follow Sourcery for the latest updates! https://www.sourcery.vc/ TIMESTAMPS: 00:00 - Welcome to Sorcery: Christian Garrett's Journey 00:39 - How Secondaries Work: SpaceX, Figma, Ramp, Plaid, Databricks 04:46 - 137 Ventures: Origin and Investment Thesis 06:36 - SpaceX: A Case Study in Private Market Success 10:38 - The Benefits of Staying Private 18:28 - Generational Talent in Tech: Anduril, SpaceX, Palantir 21:07 - Defense Tech: Opportunities and Challenges 26:02 - Tech and Government: Building Stronger Partnerships 34:25 - Hill and Valley Forum: Bridging Tech and Policy 38:58 - Christian's Journey to Becoming a Partner 42:02 - Trae Stephens & The Role of Mentorship in Success 43:45 - Helping Founders Beyond Capital 52:00 - Christian's Spicy Takes on Industry Trends 01:02:54 - The Future of 137 Ventures 01:09:31 - Looking Forward: Exciting Prospects Ahead #podcast #investing #technology #venturecapital #entrepreneur #startup #siliconvalley

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

• 0:00Molly O'Shea?

  Christian Garrett, welcome to Sorcery.

• 0:03Speaker 01

  Thank you. I'm happy to be here.

• 0:05Molly O'Shea?

  I know you traveled a long way to get here. Where were you just coming from?

• 0:08Speaker 01

  I just flew directly for this. So I was in Europe for a work trip and I flew back for two things. Trey Stevens and I did a fireside chat at this event that him and his wife really helped coordinate. It was awesome at Gary Tan's. And more importantly, I had to rush to get here and make the pod. So I'm excited.

• 0:31Molly O'Shea?

  Well, we appreciate it. The entire sorcery universe. You're a hot commodity. What can we say?

• 0:37Speaker 01

  That's definitely not true, but.

• 0:39Molly O'Shea?

  Okay, so we have a lot to cover today. Companies are staying private longer. In the last year, we've had some massive tenders. SpaceX does one pretty regularly. Figma, Ramp just had one. We have Plaid, Databricks, and I know 137 Ventures is a part of some of these. So could you explain more about what's going on in the market?

• 1:01Speaker 01

  Yeah, absolutely. The current moment is really, you know, you had a cycle change coming out of 2021. A ton of cash was put on the balance sheets of a lot of businesses, some at really, really high valuations, all at really, really high valuations. And you've had kind of two sets of companies. You've had companies that have been able to grow into their valuation through the cycle change, reduced OpEx, cut burn, got very lean and kind of kept growing. You've had some that have done the same in regards to like reduction of OpEx, getting more fit, but they've continued to grow and compound extremely fast through the cycle. And some have even compounded past those marks in 2021. In either case, you basically have an opportunity set that's interesting where the companies have compounded past,

• 1:46Speaker 01

  cash flow positive, they're not burning too many cash, they don't need cash on the balance sheet. And so they've been using tenders and liquidity as not just a tool from an employee retention or recruiting perspective, but as a way to remark the business. And you have another host of companies that have strong balance sheets, have a ton of cash. They're doing well, but they haven't yet grown to that mark. And so there's no reason for them to fundraise as they're still growing back into it, but they can use tenders as a way to still. Offer liquidity and keep employees morale pretty high going after the large opportunity. The meta point or the larger backdrop is that companies have generally just been trending towards staying private longer. You know, companies used to go public in three to four years, you know, back just in the 2000s.

• 2:29Speaker 01

  And that has progressively trended towards seven, 10, I think now on average, companies stay private, you know, 12 plus years.

• 2:35Molly O'Shea?

  Infinite.

• 2:36Speaker 01

  Yeah, extrapolate trend out.

• 2:40Speaker 01

  And that's for a couple of things, you know, one is, I think the most important is just the small cap premium. And the small cap universe in the public markets has completely shifted to the private markets. You've seen that in like the number of publicly traded companies is more than halved. You've seen that in the growth of the private equity industry, which has trillions of dollars of dry powder. And venture has hundreds of billions of dollars of dry powder as a subset of that.

• 3:02Speaker 01

  And you've seen the ability for companies to access the private markets as a source of growth capital and liquidity capital in order to stay private longer. They don't need to go public from a capital needs or liquidity needs standpoint. The other piece is actually structural, which is kind of interesting, which, you know, companies actually used to be forced to go public because of hitting the shareholder account number, which used to be 500. The Jobs Act extended that to 2000. Facebook's invention of double trigger RSUs also extended that, which basically allowed people to skirt around this shareholder account issue and pump the clock a bit to going public. And so all that is combined, you know, over the last almost, you know, let's call it a decade plus

• 3:45Speaker 01

  to where we are today, which is companies have the flexibility to stay private longer and compound the private markets. And the private markets are capturing a lot of that value. A lot of these companies will go public one day, but there's a lot of opportunity in private markets. We could talk a little more about maybe like what the opportunity is and why they're doing it, but that's kind of the setup.

• 4:04Molly O'Shea?

  And for those that might not know what a tender is, it's going to be mentioned, I'm sure, plenty of times throughout our conversation. Could you just define that really quickly?

• 4:13Speaker 01

  Yeah, so a tender offer is when a company, instead of raising primary capital, raising primary financing, they'll do a tender offer in order to create liquidity for the shareholder base. Most tender offers are for employees in order to get liquidity, kind of in the venture context. And so, you know, think of this like a secondary offer that the company is managing. And so it's, it's different from a primary fund raise where they're issuing new equity. This is basically facilitating liquidity of existing equity from the shareholder base.

• 4:46Molly O'Shea?

  Got it. So to dial this back a little bit and talk about you and the fund itself and how we got here in the later-stage markets, I want to talk about 137 Ventures. So it was founded in 2010. You've invested into, like I'd mentioned, a couple of the most notable companies. 137 Ventures has invested in SpaceX, Palantir, Uber, Anduril, Flexport, Figma, and more. Can you just give us more understanding of the origin story and how 137's evolved?

• 5:17Speaker 01

  My two partners, our two co-founders, Justin Fish and Wolfson and Alex Jacobson, were at Founder's Fund in the early days. So Facebook was the first company to stay private a long time and grow in the private markets and really saw an opportunity to build a firm around capturing what was kind of the bet of the firm, which is that companies can stay private longer. Facebook was the beginning of a trend. It was not an anomaly. And in order to do so, they're going to need growth capital and liquidity capital. And so we built the firm to provide both in order to build large positions in these generational companies and partner with them.

• 5:49Molly O'Shea?

  So what is the investment thesis of 137 Ventures?

• 5:52Speaker 01

  Fundamentally, our investment thesis is really dictated around, we want to partner and invest in generational businesses that we think can be long-term compounders and dominate their market.

• 6:06Speaker 01

  And we want to...

• 6:09Speaker 01

  Invest in these businesses and we want to be really good at underwriting the durability of that growth as that's the big driver there. And so for us, we look for what we call powers or sustainable competitive advantages that really support the durability of that growth. And we think if we're really good at underwriting durability, really good at picking what we think of these generational businesses, and if we can get some information or access asymmetries, then we can drive alpha and drive returns for our investors.

• 6:35Molly O'Shea?

  I would assume one of these generational companies is SpaceX.

• 6:39Speaker 01

  Definitely.

• 6:40Molly O'Shea?

  It is the largest private company at around $300 billion, $350 billion. And they're one of the pioneers here in secondaries as well. Could you just explain their financing history? I would love to learn more about them and how you got involved very early on at 137.

• 6:58Speaker 01

  Yeah, so SpaceX is a pretty unique company. As you mentioned, obviously the pioneer for companies staying private longer, they've been around for 23 years. It is the largest private company in the world, really incredible business. And what's not appreciated about the business is actually how capital efficient it's been. The company has only raised $10 billion in its life cycle as a 23-year-old business. And we had the pleasure of being invested in Uber, which is an incredible business, and Uber raised significantly more than that in the private markets. And the reason for that was SpaceX has been cash flow positive most of the life cycle of the business. The core business, the launch business, for years had negative working capital.

• 7:40Speaker 01

  And therefore, the only way to invest in that business was actually through their tenders that they were running. They started running tenders because they were competing against aerospace talent from Boeing, all these other places that could offer larger packages and more liquid packages. And so they started running these tenders strategically. And we had the fortune of being one of the investors that were kind of close to the company and around for a long time and were able to build a position. And it's an interesting example where a company stayed private for a long time, so there's a lot of value creation in the private markets. And uniquely, the only way to access that value and participate in that was through secondary and being a liquidity partner or one of the liquidity partners for the company. And so

• 8:25Speaker 01

  That story has now obviously played out where more and more companies have kind of followed in SpaceX's footsteps from a staying private longer and compound in the private markets, and then also kind of using liquidity strategically and picking liquidity partners like us.

• 8:40Molly O'Shea?

  So how has liquidity been a part of their story particularly? I know they run tenders every six months, right?

• 8:48Speaker 01

  Yep, yep. Yeah, they run tenders every six months. It's interesting. So actually, they're, the company, the company employees actually have single trigger RSUs, not double trigger RSUs.

• 9:01Molly O'Shea?

  What does that mean?

• 9:02Speaker 01

  So, single trigger RSUs are what publicly traded companies have, and they're taxed on vesting. Whereas double trigger RSUs are not. They're taxed at settlement in the future. They're not taxed upon vesting. And that was one of the things I mentioned. It was kind of a structural change in the private markets where companies were, started issuing out double trigger RSUs as a way to get on the shareholder account number. So on SpaceX's side, because their employees are taxed throughout the year, they have to do these tenders as a way to facilitate liquidity upon that settlement for them to pay the tax bill. And so it's a very unique structural thing. If you saw recently with Databricks and Stripe, those

• 9:46Speaker 01

  big massive rounds and tenders were actually to cover the tax bill for the employees after they hit their seven-year cliff on the double trigger RSU. So they converted from double trigger to single trigger in order to not be forced to go public and stay private longer.

• 10:00Speaker 01

  And they also now have to run these tenders every six months to facilitate liquidity to cover the tax bill. So it's actually a structural thing.

• 10:06Molly O'Shea?

  Wow.

• 10:07Speaker 01

  For why they run these. They obviously use it strategically as well. But that's kind of been one of the setups for the years for why they kind of run these things every six months. And it's great for private market investors. As I mentioned, there's a ton of dry powder in the private markets. And as these companies that are long compounders stay private and are even able to run a market and run these tenders continually, it's a great way to continue to invest and participate in some of the value in the compound that's happening in the private markets.

• 10:38Molly O'Shea?

  So why do companies benefit from staying private longer?

• 10:42Speaker 01

  Yeah, I mean, I think, you know, we've talked about SpaceX and Stripe, Databricks.

• 10:49Speaker 01

  And yeah, I think what a lot of these companies are seeing overall right now is they, for the most part, like in the private markets, a lot of things have changed more recently. And I mentioned earlier, right, there's a ton of capital there to support the growth needs and the liquidity needs. And so now you don't need to go to the public markets to access that. And in the private markets, you get a ton of additive benefits. One of them being you have a longer term shareholder base, you're not succumb to quarterly earnings calls and analysts. The stock is not rerating continually. And so you can make longer term decisions with that longer term capital and partner base. And that's really beneficial

• 11:31Speaker 01

  for things like R and D, right? Companies can invest on longer R and D time horizons and make bigger R and D investments and think about things in a 10 year view. Companies like SpaceX really benefited from this, right? The company was able to invest for years into Starlink and Starship R and D and not have to deal with, you know, potentially a larger universe of public market investors, you know, scrutinizing or putting pressure to change that decision. M and A is easier in the private markets because you can take this long term view. You don't have the public markets.

• 12:00Molly O'Shea?

  Potentially.

• 12:01Speaker 01

  Potentially, potentially. You don't have the public markets scrutinizing decisions there on M and A. And so as a capital allocator, as a, if you're running a business, it's just much more attractive. And now that liquidity and the growth capital is there, then there's really no forcing function for you to go out. Now, companies will go public. It's part of the life cycle business. Companies should go public. But it's basically afforded companies to use the private markets to go after much larger outcomes and think much for a longer term with their business. And as venture grows as an asset class, there's going to be more growth and liquidity capital that will support companies making those decisions. So I think that's really been the biggest driver. Another driver definitely, I think, is, is, is valuation. You know, some companies.

• 12:47Speaker 01

  Have large valuations that were set on them in 2021. The investors are still holding those valuations in the books. There's not much of incentive to go out at a price that's below that mark.

• 12:59Molly O'Shea?

  Yeah.

• 12:59Speaker 01

  And so you have companies that are just gonna stay private longer and try to compound back in that valuation. And they're gonna use tenders along the way, you know, to continue to keep, from an employee retention perspective. And the best companies are still gonna, you know, have grown past their valuations. The delineation in multiples is pretty crazy from a like, from a growth perspective in the public markets. You know, companies are growing fast and have strong free cash flow margins and still trade at huge premiums. And so I think the best companies are not, they're not going out, not because of valuations, right? I think some of them would even be priced higher in the public markets than they were in the private markets. A lot of it is decision on a capital allocation basis, right?

• 13:42Speaker 01

  They can invest much more in growth and the opportunity while still private and go public at a more opportune time.

• 13:48Molly O'Shea?

  Well, we're seeing this also with companies like Plaid. Like Plaid just did a big repricing. They repriced down a bunch to hopefully maybe go public. I mean, who's to say? Because I don't know. I mean, like, everything that you mentioned is very positive. Like, I think even the Colisons, they were on the All In Pod and they're like, well, why, why do we need to go public? We have enough capital. There's plenty of financial institutions that are private. There's actually no need for us to go public. So why don't we, why do we have to do anything? There's not to say, like, we won't think about it in the future, but there's nothing that's actually like pressuring them because they have access to capital and they have everything they need to stay private.

• 14:30Speaker 01

  Yeah, I mean, it's a great question. People ask it a lot. You know, I think you'll get different answers based on what founders you talk to, which is kind of interesting for their thoughts on this. As an investor, my general view is I think there's a ton of advantage in the private markets. And as I mentioned, there's, there's capital support there. But at the same time, also structurally, in order to do, you know, what SpaceX has done, you really like N of one companies that can do that. And I think, you know, not every single company is on that same sort of path or timeline in order to be a compounder, you know, a 2030s IRR for, you know, decades. I think a lot of businesses are just generally going to have to go public.

• 15:14Speaker 01

  And, you know, the ultimate fate of every business is not to be a, you know, multi-decade compounder at the end of the day. And so I don't think the capital market is going to support every business staying in private forever.

• 15:23Molly O'Shea?

  Yeah.

• 15:24Speaker 01

  I think, you know, in some sense, they're, they're setting the example, but that doesn't mean that it's the full path that you're going to follow. And so, you know, I think that's one piece of it for sure. Another is like, there's a ton of benefits to going public as well, and I think a ton of companies see that and they definitely will go out. You know, we're talking about just a cycle. There's like a moment right now in a cycle where companies see the benefits staying private longer for this moment.

• 15:47Molly O'Shea?

  We've been stuck in this cycle for a very long time.

• 15:49Speaker 01

  Couple of years, a couple of years.

• 15:50Molly O'Shea?

  It's like only been this cycle, so.

• 15:53Speaker 01

  A couple of years, but you know, I mean, look, in 20, in, like all things, like cycles change, right? And so I think, you know, people will see the private markets as even more attractive in the private market, the public markets as more attractive in the private markets at some point. And I think you'll see a wave of companies going out, starting this year and continuing through next year. You know, I think the options that are there and that are available are great. And as for founders, as an entrepreneur, this is a great time where you can make these decisions as a capital allocator, as a founder, as an operator. And, you know, this is just one of the menu of options and paths that you can go on. But I think ultimately, all companies, you know, will ultimately end up going public, you know, that are a certain scale and that are winners in their category and have the ability to kind of control their destiny.

• 16:37Speaker 01

  I think at some point, you know, there's a, there's more reasons to be public than be private. Right now, I think folks are seeing more reasons to be private than public, though.

• 16:45Molly O'Shea?

  So, speaking from the investor side of things, there is immense pressure for DPI and getting returns. How do you see the shift in the broader venture landscape with all of this pressure on getting exits and having this massive lockup of private capital?

• 17:04Speaker 01

  Yeah, I mean, it's, um, this is on the earlier point, right? It's not just, you know, these liquidity needs are not just for one part of the shareholder base, right, which are the employees and founders, but they also extend to the investor base. And I think, you know, you've seen as a part of these tenders, investors 100% will also seek liquidity. And, uh, yeah, I think in the best companies, there's a ton of demand there and, um, and that's just, you know, another part of, like we mentioned, the ability for companies to stay private longer is also the investors can get liquidity, right? You've seen continuation funds, a lot of companies have, a lot of firms have done this as well. And I think, you know, this is just like the evolution and growth of the asset class and the timing and dynamic here.

• 17:49Speaker 01

  But also investor needs for liquidity, uh, sometimes will be a forcing function for companies to go public. Like I mentioned, not every company has the ability, um, to, uh, to run a liquid market effectively or a semi liquid market like some of these companies you mentioned earlier. So I think there's a clear delineation and you see this in the public markets too. There's just a clear delineation or flight to quality. And I think some of the best businesses can do a lot of things that we're talking about. And I think some other businesses, you know, still can have that forcing function to go public.

• 18:22Speaker 01

  So.

• 18:22Molly O'Shea?

  Since you're operating in the later stage markets, are there any surprising trends that you're noticing?

• 18:27Speaker 01

  Yeah, I mean, uh, I'll give a like what's, you know, underappreciated and what's overrated, uh, right now within venture, um, underappreciated is actually, there's a ton of like incredible generational talent, um, that is, that I think is actually underappreciated in our, in broader tech and the, and the venture ecosystem. You know, in some of our companies, you have, uh, co-founders and C-suite, um, that are less public facing than, you know, some of the other co-founders and that are truly like some, like generation talent, some of the best, uh, in the, in. In I think all of business, not just obviously tech and venture. You have Matt Grimm from Anduril is one of the best COOs, if not, I would say the best COO

• 19:12Speaker 01

  in our industry. Gwen Shotwell, one of the best operators, if not the best operator in industry, president of SpaceX. Matt Grimm is COO of Anduril. Shom Sankar, CTO of Palantir, also in this category. And all these folks are, what's really fascinating about them is, you know, Matt being a co-founder, but Gwen and Shom, starting as, you know, one of the first employees at their companies at SpaceX and Palantir respectively. All of them have grown with the company as leaders and operators, and that's extremely rare for founders and operators to do. You look at SpaceX, right? Gwen has been with that company since it was a small upstart, trying to figure out they could actually even launch a rocket or build a rocket, to running arguably, you know, one of the biggest and best businesses

• 19:55Speaker 01

  in the world. Shom, you know, started as one of the first employees at Palantir as a startup, to, you know, now helping lead and run one of the largest enterprise software businesses in the world and most impactful. And then Matt, particularly not just a co-founder, but you know Grimm's been COO of this business from the early days, and it's very hard to scale, especially in this kind of super complex businesses as a COO, right? To scale from tiny startup with a small warehouse to now having millions and millions of square foot of manufacturing space being built out, and it's incredible.

• 20:34Speaker 01

  And so I think that's very underappreciated, which like we have a lot of generational talent that is able to scale with these businesses and go from, you know, tiny startup to hundreds of billions of dollars of market cap value and scale with the operations of that. So I think that's incredible. And the other sort of comment on your question would be around, well, what's, what's overrated? And I would say it was overrated, actually, is defense tech. Okay. And so, yes. Now, why is that? This is not a comment on the opportunity size. The opportunity size is massive. You have a

• 21:19Speaker 01

  Massive TAM, which are defense budgets, not just in the US, but called the US and its allies. So trillions of dollars overall, you know, 800, you know, something billion dollars in the US. That is growing and accelerating as you see companies are investing more and more in modernizing their defense budgets and spending more on defense. A growing percentage of that budget, however, is also shifting towards modernization and towards autonomy and software and kind of the next generation and next set of capabilities in the defense industry. So huge trend, right? Massive TAM, growing, large percentage of that TAM that's addressable, growing even faster.

• 22:02Speaker 01

  However, in these categories, you know, governments tend to want to partner. You look in the US, right? There's really like a handful and you'll call it 10 plus primes, but really a handful that, you know, captured 50% of the budget. And so, you know, the government tends to really concentrate a lot of that spend in the large providers and winners. And so, you know, I think in aerospace and defense, but definitely defense, you're going to see a lot of great outcomes. We've had the pleasure of investing in, you know, companies like Anduril and Hadrian and Varda and Palantir, Second Front and others. But I think, you know, it's not like enterprise software where there's going to be hundreds of great companies that go after a multi-trillion dollar TAM.

• 22:47Speaker 01

  In defense tech, multi-trillion dollar TAM, but I think it's going to be a much smaller number of companies where all the value accrues. And, you know, we've had this same experience in aerospace where, you know, most of the value accrued towards, you know, one real winner in SpaceX. And, you know, I think for us, you know, our view is that I think a lot, there's going to be a lot of great opportunities, but a lot of the value is going to accrue to a small handful of companies. And sometimes, you know, marginally, we end up, you know, realizing that the best thing you can do as an allocator of capital is probably just invest more in that winner, which for us has been Anduril.

• 23:21Molly O'Shea?

  Yeah, well, I'm definitely surprised to hear that from you because you're obviously a big supporter of the space and also just truly remarkable stories between all the operators scaling up those businesses, remaining private and continuing to grow and exploding growth. Like, they're all reaching another round of inflection points and it's fascinating to watch. Like, it's truly exciting, especially here in LA because we're like very close to it.

• 23:45Speaker 01

  Yeah.

• 23:47Molly O'Shea?

  But I'm curious from your side, being so close to defense, like, what role do you think defense and hard tech have in the broader like venture market and what other challenges do you think they're facing?

• 23:58Speaker 01

  Um, I mean, back to your point, right? It's a, it's a clear category. Um, there's clear trends and there will be really good businesses built and it's extremely exciting. Um, it's also great when you can invest in a category that, you know, uh, that is actually going after a problem you feel like really good about, right? Like, they're solving real problems that you want to see, right? They're putting the best technology in the hands of folks in the public sector, putting the best technology in the folks of, you know, armed forces and people that are putting their lives at risk. Um, they're helping, uh, uh, you know, America and our allies, um, have a technological advantage and, uh, fundamentally deterrence has been one of the greatest forces for good. And so being able to invest in that is, is, uh, makes you feel good. Um, and it's also, I think,

• 24:41Speaker 01

  a great, uh, opportunity. So it also, from a, you know, uh, returns perspective is, is a great place to invest. But, um, I think, you know, here has been the, you know, Southern California has really been the epicenter for manufacturing and aerospace and defense.

• 24:58Speaker 01

  This is why SpaceX, uh, right, you know, first, first built, uh, and really concentrated here and put their HQ here was because you had a ton of aerospace talent locally. Um, Boeing, Raytheon, all these folks north up, they have, you know, massive facilities here. It's a ton of talent. Uh, and that is obviously, you know, continuing to compound with Anduril deciding to, uh, base down in Southern California, um, and the next set of kind of defense companies and, and, uh, and hard tech companies all being down here. Um, and so, you know, anywhere there's a concentration of talent, um, it's going to be much easier. To start companies, it's going to be much easier to see that cycle, that compounding flywheel, where talent gets trained and gets to be a part of a really incredible business.

• 25:41Speaker 01

  And then they go off and start a business from the learnings that they had while operating at that previous business. And that cycle, that flywheel is really great for the venture industry because that's where folks want to invest in and be a part of. And so I think LA's and Southern California has really benefited from the growth of the aerospace and defense ecosystem and all these startups. And you'll just see that continue to compound.

• 26:02Molly O'Shea?

  This particular category is super close to Washington DC. I know you go there a lot. These founders go there a lot. How do you think about the collaboration between this category? They're very close to Washington DC and policymakers. Is it real? Is it hype? Like, we've seen so much over the course of the last couple of years, especially with the new administration. How much of it should we be watching out for?

• 26:30Speaker 01

  Yeah, it's a great question. It's definitely real.

• 26:35Speaker 01

  You know, like all things, government is like any big organization. It's even with Doge, it'll still, it'll still take time for them to move. But you see the desire and the realization that it's somewhat existential for them to move faster. And I would say you can look at the growing relationships between the tech industry and DC and policymakers has been really incredible to see what was somewhat contrarian for folks who wanted to either do business full-time or as a second business line, as a dual-use company. It was very contrarian to focus on that, right? Like SpaceX, Anduril, Palantir.

• 27:19Speaker 01

  These companies were not obvious for consensus. And now that that has changed, you've seen the investment community and the entrepreneurs, the entrepreneurs, these founders, really, really going after opportunity sets to sell hardware and software to the government, specifically in the aerospace and defense industry. And so that's been great. I think the relationships have also deep And grown and to your point, you know, if you look at trend over the last couple of years, the number of firms, the number of founders spending time in DC has grown exponentially. And that's only going to lead to not just, you know, deeper partnerships between these two ecosystems. And most importantly, lead to helping policymakers, you know, draft a really important policy. And I think it's one of the most important things right now because if you look, you know,

• 28:04Speaker 01

  backdrop, we're in a second Cold War. During the first Cold War, we won because of our technological industrial prowess. And government was a huge partner to the tech industry and really was helped fund the beginnings of the tech industry. And really like going back to that original partnership, I think is, is, is how we'll win the second Cold War. And so I think it's critically important. I think the other side is if you look, the next set of policy is either going to have to do directly with or be implemented by technology. And so, you know, a lot of the economic opportunities ahead of us and a lot of the

• 28:46Speaker 01

  policy that's going to drive that, you're going to need tech very close.

• 28:52Speaker 01

  And that's just a nature of kind of what's different in the world today.

• 28:56Speaker 01

  And on that, like even more so, it's not just aerospace and defense companies that are spending time there.

• 29:00Molly O'Shea?

  Yeah.

• 29:01Speaker 01

  Back on that last point, you have fintech companies, you have cybersecurity companies, you have healthcare companies, you have energy companies, manufacturing companies, semiconductor companies, I mean, it's going down the list, right? It's not just kind of what we would think is just, you know, purely kind of defense companies doing this. And so that's what's also exciting is like the entire ecosystem is embracing this reality, which is like policy really matters. We should spend time educating policymakers who've given their life to public service, but there's no way that they can be experts on thousands of topics and try to draft policy and bills around that. And also government's a real partner. And I think, you know, that, that has definitely been very, very real and you just see it.

• 29:42Speaker 01

  Every company, you know, that I spent a lot of time with on this category, you know, they're going after kind of what we're talking about. It's a broad range of them and I enjoy that personally, being a part of kind of, you know, companies of different categories, not just defense, who are trying to build relationships in DC and try to, you know, focus on selling their products to the government or focus on, you know, helping government, you know, draft kind of good policy. On the flip side, you know, government's response, like I said, will be slow, but it's definitely, it's definitely like trended towards a really great direction. You've seen early signs of that. Two examples, you know, during the last administration, there were two, during the Biden administration, you know, there was a replicator initiative, which was a really incredible.

• 30:27Speaker 01

  Can you explain that? Yeah, the replicator initiative was a really led by Kathleen Hicks, who's under Secretary, under Secretary of Defense at the time, and was really initiative to basically push hard on faster procurement and procuring a ton of mass. And basically, let's get a ton of autonomous attributable unmanned systems. Let's procure them super fast based on various needs across the military forces. And that initiative was an early sign of, you see like from the top down, the Defense Department's desire to modernize and speed up its procurement

• 31:09Speaker 01

  process, and particularly go after procuring technology from the tech sector in order to solve some of the critical problems that they have. The other thing that I think is also just interesting trend is like you look, you even look at things like FedRAMP, which has a lot of problems, but the Biden administration expanded it in 2022 and modernized it a little bit. There's actually going to be some more work done on FedRAMP during this administration, which would be great. But FedRAMP is a good example where it's like, it's actually been great for the tech industry. It's created a forcing function for contractors who want to sell their products to the government to make sure that they all have standardized

• 31:51Speaker 01

  compliance and security frameworks in order to sell cloud services to the government. And so it's actually created opportunity for a ton of startups to make sure that vendors to the government all have, you know, secure cloud infrastructures. And these are like the beginnings, I think, of where, you know, government can actually draft good policy that creates opportunity for the tech industry and is showing like a willingness to try to modernize their thinking. And that's just going to continue to trend during this administration. Yeah, that was.

• 32:25Molly O'Shea?

  I think like one of my biggest realizations going to the inauguration and being in the room with everything, it like really felt like an authentic, real embrace of technology. Like it felt like a tech conference.

• 32:38Speaker 01

  Yeah, no, totally. I mean, that, that, it's funny. I remember having a great conversation. Actually, Keith Raboy had a great tweet about this, based this conversation was like, Sean, Keith, a bunch of us. And, and we were just discussing this very thing, which is like, it was strange. You basically have like two centers of gravity. And you had the inauguration, you had Davos going at the same time.

• 33:02Molly O'Shea?

  Yeah.

• 33:03Speaker 01

  And you had the tech community, which traditionally has not gone really to either. A lot of the folks, I mean, I mentioned in that circle and a lot of folks there, like, none of us have ever gone to Davos. Never was a priority for us, didn't make sense for the industry, for a lot of, you know, especially the venture investors, a lot of the operators. But you had always people in DC at the inauguration. And I think it showed this like shifting in the world, this like realignment, which is very interesting. And you sort of have like, you know, the sort of, the old world and the new world in some sense, which is kind of fascinating. And like I said, I think that's just really positive for the country overall. And it's, you know, this trend has continued, right? It's, it's been going on through previous

• 33:47Speaker 01

  administration, it's been going on this administration, accelerated during this administration, and it'll just continue. And I think it's very important for the country, given the backdrop, like I mentioned, of where we are and kind of the role that tech's going to play. You know, tech doesn't have a trade association. So these relationships really need to be built out across, you know, all parts of government, from policymakers to program officers to, to other folks, you know, directly between kind of the ecosystem. And that's, that's going to be an exciting opportunity. As you know, you've spent a lot of time on this with, with the Hill and Valley Forum.

• 34:19Molly O'Shea?

  Oh, I'm going to get into that. Let me lead into this. So you, you've been embracing this for a while now. You've created the Hill and Valley Forum. There was recently an entire profile in the Washington Post that I had to pay for. So thank you for that.

• 34:34Speaker 01

  Well, I, you know, I would say you should have called me. I would have happily send you a PDF. But, you know, honestly, I think Bezos has been struggling financially lately. And so I think getting more subscribers to the Washington Post is probably a good thing. So.

• 34:47Molly O'Shea?

  Yeah, it's hard to keep up with that lifestyle. And then, you know, opening it up, I think they lost like 75K subscribers. Once they announced that they weren't going to be communist anymore.

• 34:57Speaker 01

  That's another reason why I think you could have signed up. Exactly.

• 35:00Molly O'Shea?

  So let's get into the Hill and Valley Forum. Could you just explain more about that and how it started?

• 35:06Speaker 01

  Yeah, so the Hill and Valley Forum was started by Jacob Helberg

• 35:12Speaker 01

  from Palantir, who's going in as the Undersecretary of State of Economic Growth, Delian from Founders Fund and Varda and myself.

• 35:23Speaker 01

  We started it about four years ago. And initially, and, and it was, you know, the desire was really just to create a kind of small dinner to gather kind of, you know, leaders from tech and leaders from government to discuss policy on the very point we were talking about earlier. And it's grown to be much larger than that. And now it's, you know, one of the largest gatherings of the tech industry and, and government in, in the country. We have, you know, more elected reps that go there than attend Davos. And so it's, it's become a pretty fun

• 36:09Speaker 01

  thing to work on with, you know, two friends. And it's been cool to see kind of the impact and, and the ability for us to kind of set the stage for, you know, broad conversation that, you know, hopefully can lead to some really cool things.

• 36:22Molly O'Shea?

  What's come out of it so far?

• 36:24Speaker 01

  Yeah, so what's come out of it? You know, we, we run it every year. It's, it's, we do a daytime forum and dinner after and.

• 36:31Molly O'Shea?

  He livestreamed the last one, right?

• 36:33Speaker 01

  He livestreamed the last one. And I think it's one of the only places where you'll have, you know,

• 36:39Speaker 01

  Donald Trump speak through a livestream and also have Chuck Schumer, you know, give a keynote address. I mean, it's extremely bipartisan.

• 36:46Molly O'Shea?

  Yeah.

• 36:46Speaker 01

  And I think it's funny you mentioned the impact. Like, what I love about it is, first off, it's one of the only places where you really see true unity from somewhat disparate, or at least competitive ecosystems, right? Like, within, obviously, DC, things are very polar and things are very polarized. And you see, like I mentioned, right, leaders from Democrats to Republicans all coming together in a bipartisan way. In the venture ecosystem, right, there are actually folks there like, whose companies really compete against each other pretty aggressively. You have venture firms that all, you know, compete with each other, all coming together in a bipartisan effort, because this matters much, much more, right? And so it's been cool to create kind of an event every single

• 37:30Speaker 01

  year that gathers these leaders and tries to foster discussion. And it's cool to see that, you know, this topic really like, keep making sure that America has technological supremacy, trying to draft good policy to implement that, and, you know, build bridges between the tech industry and government. You know, that trumps any sort of a polar or competitive dynamics that exists, you know, in our ecosystems. And it's very cool to find subjects that, you know, really unify people.

• 38:04Molly O'Shea?

  It's also incredible you're doing this with your friends. Like, you've really accomplished friends.

• 38:08Speaker 01

  Yeah. Yeah. Yeah. I think we've just all been fortunate to be in really great positions to have some of these relationships and be able to be a bridge between these worlds. And, you know, it's something I particularly really enjoy. And, you know, we're not the only ones doing this work. Like, we have a ton of partners in the Only Value Fund that are all other companies and great venture firms that are also doing this work. And it's, like I mentioned, you know, tech doesn't have a trade association, so we're all kind of one part of the puzzle. And it's fun to kind of get together and all work on this together. And it is a very collaborative work among the investors and the companies. And so I think, you know, that's what makes it really exciting. So I would say, like, yeah, it's awesome. We get to do it from friends and we're in a good position. But quite frankly, it's really the whole industry behind it. And everyone really supports the

• 38:53Speaker 01

  work. So it's been great.

• 38:54Molly O'Shea?

  Yeah, it's amazing. Like, really incredible. Very impressive. I want to shift more towards the personal angle. Christian, you've had a very fast track to partner at 137 Ventures. I know you didn't start in an investing seat either. So could you just like explain how you got into venture? How you carved your path up to partner and being on the investment team?

• 39:20Speaker 01

  Yeah, um, so, yeah, I was one of the rare few. I always knew I wanted to be an investor. And so when I kind of started my career, uh, you know, I looked and kind of saw, which asset class I want to invest in. And it became very clear I want to invest in venture and tech. Kind of threefold reason for that, you know, my desire to be an investor was driven by, uh, two family members of mine that are big inspirations in my life. My grandfather was Bernard Garrett, senior, who was, uh, one of the, who was the wealthiest black man in the country in the 50s and 60s. Built his wealth through real estate and was the first black man to own banks in the country. This was during the height of Jim Carrey era. And I saw, you know, some of the impact that he had as a real estate investor.

• 40:04Speaker 01

  And a godfather of mine was a guy named Teddy Forstman, uh, who started one of the first private equity firms, um, Forstman Little. And, uh, also a larger than life figure like my grandfather. And growing up and seeing kind of, uh, the, the, the impact in the world that they had and learning a lot of their lessons that they had as investors always stuck with me. It was kind of a big inspiration for me for a long time. But I knew also, once again, like, wasn't just, I want to be investors, like which asset class and, um, tech was a very obvious asset class. I grew up a gamer. I built computers as a kid. I fell in love with technology, actually because of, uh, old MMORPG game called RuneScape, um, which was sort of my foray into tech. So, uh, um, you know, this was, uh, I was born in 92, so I got to grow up at kind of

• 40:46Speaker 01

  the right time and, and, uh, be a part of the, the, the PC era, um, internet era and, uh, you know, kind of the growth of gaming. I think all those began my love of technology. I read every Kevin Kelly, Ray Crowe's book as a kid. And so it was always a futurist. So it's very obvious I want to invest in tech and build in the future. And then I read Peter's book as well, Zero to One.

• 41:09Molly O'Shea?

  What's that?

• 41:10Speaker 01

  Surely have to college. Yeah, it's a very under the radar book. Most people haven't read. But and so I think all those things were like this confluence of like very made it very obvious for me that this is kind of the career path I wanted. And so ended up, long story short, you're doing a quick stint in startups, worked on the investing side at a firm, was going to go to business school, ended up joining 137 Ventures instead of going to business school, and met the team back in 2019 and kind of built a relationship that summer. And yeah, I ended up committing to join a business school and been a homegrown product. On my end, I think, being able to move fast, it's really been a confluence of a couple of things. But you know,

• 41:54Speaker 01

  there's a there's a great quote, right, which is what luck is when preparation meets opportunity. And so, you know, I think I just happened to be at the right place, right time. You know, one, a mentor of mine is Trey Stevens, and he happened to start a company called Anduril, which now apparently is the most popular company in the world.

• 42:12Molly O'Shea?

  Yeah.

• 42:12Speaker 01

  It was not that way, you know, back in the years and years ago. And, you know, being able to have that, you know, be my first investments was an incredible opportunity. And and you I think through that relationship has compounded and been able to partner and, you know, with a ton of other really

• 42:30Molly O'Shea?

  That was your first investment?

• 42:32Speaker 01

  Yeah. And I think, and I would say another another thing that's, you know, been really beneficial for me moving fast has also been the firm that map is they gave me way too much autonomy responsibility, way too young in my career in order to develop. And, and, you know, it's a testament to the place. Very few places, you know, I think have the ability like 137 Ventures has. And a lot of it really stems from the same kind of playbook and training and

• 43:06Speaker 01

  Kind of how to develop talent that Peter still has and that you find smart people, you give them a ton of responsibility and you let them prove themselves and you give them more. And so I think one of these ventures is very unique in that it's done incredible job for that. And I've been a beneficiary. And if you look at the investment team outside of the founding partners, from partners all the way down, all homegrown products, all products of promotion. And I think it just speaks to the ability for one of these ventures to develop talent from within. And so I think I've also been a beneficiary of that alongside, obviously, you know, being at the right place, right time with some incredible companies.

• 43:45Molly O'Shea?

  On that point, many of your founders credit you for being one of their most helpful investors. So could you explain more on that?

• 43:51Speaker 01

  Yeah, you know, Keith Roy has a great quote when he talks about evaluating talent, which I think is applicable to, you know, if you're trying to look at yourself, which is you want to find places where you spike. And for me, I think one of the things that I've found most impactful for founders is being able to fundamentally just help them and give them kind of strategic introductions or relationships that they would not otherwise have. And I think giving founders advice is really helpful and giving them information is really helpful. But you know, one of the most helpful things you can do is open a door for a founder that he wouldn't have business otherwise having gone through.

• 44:33Speaker 01

  And so for me, I very much enjoy that, whether that's playing a role in companies, building out their relationships in government or their strategy in government, whether that's making company introductions, whether that's trying to help unlock new opportunities or new markets or new strategic initiatives. For the most part, I think as a venture investor, you want to find areas where you can be more helpful outside of capital, which is a commodity. And being able to leverage your relationships to kind of help your company scale and being able to be very good at that and have a vast network, I think is something that's a strategic tool as an investor, especially when you're trying to help differentiate your capital.

• 45:16Molly O'Shea?

  To this a little bit earlier, but Trey Stevens has been a mentor of yours. What have you learned from him and how has it impacted your investing strategy?

• 45:23Speaker 01

  Been very, very fortunate to have Trey as a mentor in my life and you're pretty open about that. Some people, for some strange reason, like get competitive things with their mentors or they like, don't talk about that. I'm very open with like all these people that, you know, I would not be where I am if it wasn't for them. So it's, I find that kind of interesting how some people struggle with that. Like, um, so I, I, I don't take all the credit for things that have, you know, worked out so far in my, in my career, in my life. But, uh, I think Trey's been incredible because, you know, look, he's, he's obviously open. Once again, I mentioned earlier, like being able to invest in and roll, you know, early in your career is, it really set, set things up. And, you know, and was just incredible opportunity and, and, um,

• 46:06Speaker 01

  but the thing that's interesting is like Trey also has been an incredible source of real wisdom for me because, you know, I'm, I've always been, uh, you know, younger, more optimistic, more energetic and Trey is default skeptical and pessimistic of many things. I think it's been really great to have a sounding board and kind of have wisdom from someone that's, you know, experienced a lot and has pioneered a lot, um, uh, in our industry. And, uh, also, you know, we'll, we'll default always bring a different view, which I think has just been super helpful to have as you're kind of growing up in your career.

• 46:38Molly O'Shea?

  Also incredible writing. Has he inspired you to write? Cause I know you write as well.

• 46:42Speaker 01

  Yeah. Um, I think, you know, Trey, Trey's incredible writer. He writes on topics that people don't really write about or think about, which I think really stands out. Um, you know, his piece like choose good quests was incredible.

• 46:54Molly O'Shea?

  Yeah, banger.

• 46:55Speaker 01

  And, uh, for me, like the writing thing I think has been, um, you know, personally, like I just memorialize what I've been thinking about a lot better when I actually enforce or write it and tweak it and, uh, and put it out. And so I've generally just have enjoyed that perspective, which is like, it's a way for me to memorialize something that's really top of mind. I wish I had more time to write more. There's like a couple of topics that, uh, I really want to like dive into.

• 47:18Molly O'Shea?

  Like what?

• 47:20Speaker 01

  I mean, the, the two that have really been, been like irking me that I really want to spend time on. Um, one is the impact of government on the tech ecosystem. And I think it's very underappreciated, like how important, uh, government has actually been to unlocking and, uh, and, uh, shifting and guiding the tech industry. An example. So we talked about the like companies staying private longer. In 2012, the Jobs Act was passed and the Jobs Act actually changed the shareholder count from 500 shareholders to 2,000 shareholders before you're forced to go public. Technically like 2,000 shareholders and 10 million in assets. But for a venture startup, it's really the shareholder count that matters. And that was also another further supportive accelerant to like why companies could stay private longer.

• 48:04Speaker 01

  Like, the whole purpose of that policy was to encourage more capital to flood to mid-market businesses, right? It was literally built to keep more capital growing the private markets and how to foster that ecosystem. Underappreciated, but like Dodd-Frank posted GFC, the Durbin Amendment literally was like probably one of the core pieces of legislation that created the fintech industry, right? Like, you actually had interchange-based business models that could compete and enter the market. Not really appreciated or talked about as much. I think that our industry, another one that's very esoteric, but like Title X, US Code 23777, which I encourage people to go look this up. Okay.

• 48:47Speaker 01

  Also a piece of legislation that was litigated by Palantir that is like directly a tributary and rule existing, which basically forced the government to have to act on the fact that they have to look at a cheaper and better commercial alternative in the market, if there is one, versus just basically not bidding out contracts, right? Once they have a prime in there. So like, open the floodgates for competition, basically. I'm generalizing.

• 49:12Speaker 01

  There's like massive industries and massive businesses that are literally the direct result of like major policy decisions. SpaceX benefited a ton from the fact that the government just basically shut down NASA and Russia also invaded Crimea at the time, excuse me, not Crimea, Russia invaded Georgia at the time. And so it's like, where else was the US government gonna go in order to launch things? And so basically, I kind of want to write a piece about just historically how, and you can go back further and further and further, but like how the US government has played a role, I mean, all the way back to the railroad industry or the telegram industry, but like, you can go back to basically and see how government has played a massive role in unlocking private industry and specifically technology. And so I think it's just not as appreciated.

• 49:51Speaker 01

  That like the winds of capital tend to shift based on decisions made in DC in bigger ways than we appreciate. The other piece I really want to write is actually going to involve a ton of research. But I'm kind of obsessed with this dynamic where it is basically like two economies. This is kind of what I want to talk about and in two facets. One, there's like two economies that's like the percentage of GDP that's that's driven by directly indirectly by the public sector. It's like government spending, how much of our economy is actually attributable to government spending and directly and indirectly. So like directly, there's there's probably like it's probably much larger.

• 50:30Speaker 01

  The other piece is like on the two economies is like there's an economy for, you know, call it the 1%. There's a economy for the 99% and like they're very disconnected. And our overall economy like GDP, how much of that is driven by one or the other? And like, how do they interplay and work with each other? And so that's been another thing that's like been interesting to for me personally, like I want to go a lot deeper in and read. If anyone has any papers on either of these.

• 50:57Molly O'Shea?

  I actually have a chart I will send you because it has to do with a high net worth spending and how most of consumer spend like almost 50% of it is driven by like, I I forget the exact percentage, but it's like the top 10% of earners or something like that. Like, and then you can see by category, which it is.

• 51:14Speaker 01

  There's a ton of data points that have like, that are really interesting on this, but like, yeah, like I actually want to do like a deeper dive.

• 51:20Molly O'Shea?

  You should do it. You should write these. Just carve out some time.

• 51:24Speaker 01

  Yeah, it's easy to carve out time 100%, especially in this environment. Every company is fundraising every single day, it feels like, so.

• 51:30Molly O'Shea?

  Well, I support it. You should do it. Get a little research team going.

• 51:33Speaker 01

  That's true. I mean, you know, chat GPT five is coming soon and.

• 51:38Molly O'Shea?

  I've heard great things about deep research.

• 51:40Speaker 01

  Yeah, exactly. So maybe I just need to pay.

• 51:42Molly O'Shea?

  You might be closer than you think.

• 51:43Speaker 01

  I might be too cheap. I probably should be.

• 51:45Molly O'Shea?

  You actually might just be able to prompt this.

• 51:47Speaker 01

  Yeah, sure. I probably I probably should pay $200 a month and solve this. If Kevin Wales listens today, he'll probably he'll probably tell me that that's all I need to do. So maybe I'm just not using the tools in front of me.

• 51:57Molly O'Shea?

  No, you should. I'll help you. Okay, so. Just driving off of that a little bit, I want to get into your spicy takes.

• 52:04Speaker 01

  Yeah.

• 52:04Molly O'Shea?

  You have like a couple like really awesome spicy takes. One of them is on return to office.

• 52:09Speaker 01

  Yeah.

• 52:09Molly O'Shea?

  Can we start off with that one? Can you explain more on your spicy take for return to office?

• 52:13Speaker 01

  Yeah, um, all right, listen, let me caveat and then I'll probably have Delian and Keith tell me how wrong I am.

• 52:19Molly O'Shea?

  Okay.

• 52:19Speaker 01

  Which is fine. You can't be a contrarian if you only agree with your friends.

• 52:23Molly O'Shea?

  Exactly.

• 52:23Speaker 01

  I gotta find something that I disagree with. So I generally think like, one, I have a strong, like, I think in-office culture is great. I think certain companies, they need to do it. I think, uh, you know, if you look, if you're a, you know, early, small startup, uh, of, you know, three people just finished YC. It's like that time in person is very, very valuable. If you're a hardware startup, like, obviously, like, you need to be in person, like, uh, that's not debatable. What I've seen, though, has been like, basically, like, return to office has become like a scapegoat.

• 52:55Molly O'Shea?

  Yeah.

• 52:55Speaker 01

  For businesses, uh, through a down cycle to basically blame everything that's going wrong. Like, effectively, like, if you're a bad business and things are going wrong, return office is a scapegoat. If you're a good business and you're just growing slower, return office is a scapegoat. And, uh, and then also, if you're a, yeah, and so like that, to me, has been somewhat like, okay, like, it's just a scapegoat, basically. It's like, oh, the business is struggling. It's like, it's because people aren't in the office. And that, to me, is like, kind of felt like, okay, a little off. The other piece is like, I think people tend to, you know, not remember that, like, tech has not been like investment-making finance culture. Like, it was always a much more flexible dynamic. Pre-COVID, yes, people were in the office a lot more in San Francisco, but like-

• 53:38Molly O'Shea?

  I don't think VCs have ever been in their offices, but that's a tiny part of it.

• 53:42Speaker 01

  I mean, yeah, like, it was, I think there's a bit of like somewhat, you know, I don't know, revisionist history on this of like, you know, it was this golden age where I was in the office non-stop, like, not fully.

• 53:51Molly O'Shea?

  Typically, engineers need to be in dark rooms alone.

• 53:54Speaker 01

  Like, people, it was definitely a lot more than COVID. So I don't want to like caveat, but like, it was a much more flexible environment, right? Um, and tech industry has always been much more like forward-thinking on this stuff like that. So I think, you know, I, I'm not sure if that's like fully the case. And then the other piece is like the success rate of RTO. So all these people will talk about like going back to the office. And, you know, we, we had a company, uh, I won't name who, and I'll skip one of their headquarters, so it's not obvious. But they have headquarters in, in, in X city I won't name, uh, San Francisco and New York. And they did an RTO and in their RTO in New York is like 90% success rate, which makes sense. People generally, the office is probably nicer than their apartments in New York.

• 54:39Speaker 01

  It's a close commute, it's blah, blah, blah. In San Francisco, in this other city, it was like 50 to 60%.

• 54:46Speaker 01

  And they're trying everything they can to get the remaining. And a lot of that remaining are like top, top talent. So this isn't like, you know, we're just gonna fire all these people. It's like, we don't want to get rid of these people. So it's like, what do you do? And I think a lot of companies are in this mode where it's like, it's good, but like realistically, they're not like 100% back. And the only point I'm making is like, I think there's nothing wrong with having that. Like I think it's, like I said, I'm very positive on office culture, but I think the reality is, is like, everyone de facto is just becoming a hybrid company. So like, we're just, you know, not saying it because it's like a dirty word, but like everyone de facto is becoming a hybrid company in certain industries. So like, once again, this is just like certain types of industries. And I think that's fine. So I guess what really irked me is like, RTO became like a scapegoat, basically.

• 55:29Speaker 01

  And, uh, and I don't think that was like fully honest in regards to kind of what we're seeing. But so, yeah, I guess my contrarian take is that like, uh, you know, work from home is not the bastion of all evil for certain kind of companies. Because de facto, everyone is hybrid right now. No one is 100% back in the office. So.

• 55:48Molly O'Shea?

  Especially also if you're like a high contributor, like if you're high quality.

• 55:52Speaker 01

  Yeah, exactly. And I mean, this is like a debate. It's like, you know, you can find 100 different examples that are completely different. Like there's no flavor fits all, which is actually my point, which is like, yeah, you're right. Like some people got rid of all their high contributors because they didn't want to go back. Or some people made exceptions for them. Like every company is different.

• 56:08Molly O'Shea?

  That's what makes a company so hard to build.

• 56:11Speaker 01

  No, totally. It does. And, uh, but I think the answer is like, yeah, like I think flexibility gives optionality. And now companies have a bunch of flavor of options they can do based on their various needs. And where the company operates, what type of product they're building, the talent pool they need to access.

• 56:31Speaker 01

  Like, for example, there's like operating like expense optimizations you can make, right? Based on this decision, like, do I hire a bunch of teams, you know, that are cheaper labor in certain states or other countries? Do I not? You just have a menu of options now, and I think like that's a good thing. So I guess I mainly just got irked at like the scapegoat of our of like work from home. And then RTO was like the sort of panacea, but so I don't think I'm not making a view that like, you know, office culture is bad, like I'm very pro it. And I think all the arguments for it are true. It's just also like all the arguments for work from home are like also true. So like the answer is like, the answer is everything is everything.

• 57:08Molly O'Shea?

  The answer is your opinion.

• 57:09Speaker 01

  Everything is everything.

• 57:10Molly O'Shea?

  Okay, so there's two other spicy takes that we have. One is San Francisco.

• 57:16Speaker 01

  Yeah.

• 57:17Molly O'Shea?

  So is San Francisco back or is it dead? Where are we at?

• 57:20Speaker 01

  I mean, I guess a derivative of the earlier point, like, you know, during COVID, San Francisco was dead and going to become Detroit, which is like obviously not fully true for all of its problems. And, you know, then post-COVID, San Francisco is back and it's the greatest city on earth and you have to move here, your career is over, just like, you know, in the 2010s. It's like also not true. So I think the answer is like San Francisco will always have the largest density of talent. It's clearly like the AI hub, which is, you know, very big opportunity. But it's no longer the only center of gravity, right? We talked about earlier, like the growth of the Southern California ecosystem. Like if you're building aerospace and defense companies, like or manufacturing companies,

• 58:04Speaker 01

  you should be down in Southern California. If there's a ton of great startups in New York, there are literally like founders of some of the largest startups in our ecosystem that are down in Miami, that are down in Austin, like the ecosystem's just got a lot more distributed and like, I think that's a great thing. So it's like this overestimation of like, you know, SFC there is zero or 100. And it's like, no, like it's always important and the ecosystem grew and now other cities are also important and like, that's fine. So I, you know, for us, it's like our largest positions are, you know, across all these cities, San Francisco, New York, New York and LA. Yeah.

• 58:45Speaker 01

  So I mean, like, you know, SpaceX and Android are down, down in Southern California. And

• 58:52Speaker 01

  And you know, we SF for us is extremely valuable and still the hub and and and but you know, it's it's obviously in today's universe, there's there's companies being built everywhere. And some of the top companies in our ecosystem are all very spread out. They're not all concentrated in one city per se.

• 59:08Molly O'Shea?

  The other spicy take is also contrarian to Delian. I know for sure. So you're actually bullish on Europe. Can you explain this?

• 59:18Speaker 01

  Yeah, I guess all my takes are directly attacking that.

• 59:21Molly O'Shea?

  You're spending too much time with Delian. You need to just.

• 59:23Speaker 01

  Yeah, I just realized that. I can't wait to get fired on on Twitter. I am. Yeah, my contrarian bullish in Europe. Once again, like on all these arguments, on all these points we're talking about, every argument that people would make on the other side, I agree with. So like, I am, I fully agree with all Europe's problems. I was born there. I'm half European. So there's a bit of some like naive optimism here. That's totally fine. But the reality is like the two things that are interesting to me about Europe. One is for how difficult it is to build a company there, because the capital markets are not so mature. When you build a winner, you don't have what you have in the US, which is like, once there's a large, massive winner and outcome, in the US, there's like 20 startups that get funded to go compete,

• 1:00:06Speaker 01

  right? And Europe, it's not like that. The capital markets aren't mature. So you have, you know, we have a revolute type outcome. There's just not, you know, eight other revolutes in, you know, Romania, the revolution Romania, the revolution of Spain, the revolution of France, they all get a ton of venture funding, they all try to eat share, just doesn't happen. It's just because of the lack of a mature capital markets there. So the winners there become really, really, they just accrue a ton of value and become real compounders. And so I think that makes Europe interesting, which is like any of the growth companies that that break through are probably worth really leaning in on. And so I've I've been very, very like, just very fascinated, spending a lot more time there as an investor. I'm sympathetic to all its problems. And then the other piece is there's a real trend there in the in the defense ecosystem.

• 1:00:51Molly O'Shea?

  Really?

• 1:00:52Speaker 01

  Yeah. So what's underappreciated is actually one of the reasons why I was out there before. One of the reasons that.

• 1:00:59Speaker 01

  I'll give like what's sort of talked about a lot now in public, but maybe what's less appreciated. So what's talked about a lot is that there is obviously the administration is putting a lot of pressure on NATO countries in Europe to up their spending and reach their commitments. Most of them don't hit 2% of GDP. Some countries, you know, and then after really more recently with the administration making that very clear that they're not just going to support Europe blindly and they're going to push for peace in Ukraine and that, you know, they need to take more responsibility for deterring Russia because the US, you know, can't and won't do it by itself. That's led to a real wake up call. And in Europe now folks are gearing up to pump a ton of more money into their defense industrial base. Some are even trying to talk about surpassing 2% of GDP.

• 1:01:43Speaker 01

  And that's going to be a, you know, tens of billions of dollars of spend that's going back into the defense sector there. The other thing that's not appreciated is most NATO countries, the majority of their spend is on US products. So it actually gets funneled back into the US industry. For some countries, like 80% of their GD, of their percentage of defense spend on GDP, 80% of that spend goes back to US companies, primes. For some of the more share companies, like 50%, but even then it's a lot.

• 1:02:11Molly O'Shea?

  Yeah.

• 1:02:12Speaker 01

  A percentage of that is also going to shift to buying European, not buying American. So you get this like increase in spend that's going to flow and then a larger percentage of that spend is going to just flow just to the European defense ecosystem. So it's a huge opportunity and a difficult opportunity because Europe has very different dynamics than the US, a lot similar too. So I won't say where I think the value actually is, but I have some ideas and I've been spending time there. And yeah, I think that's contrarian take is basically, I think Europe is going to have some pretty large opportunities and outcomes and the lack of capital markets there makes it difficult, but if you cross the chasm, there'll be big wins.

• 1:02:53Molly O'Shea?

  I guess this leads like perfectly into what I wanted to ask next on the future of 137 Ventures and for you in Ventures. So like, what does that look like in the next five to 10 years?

• 1:03:08Speaker 01

  Yeah. Um, you know, I think for us, we're seeing a lot of pull into a lot of different opportunities and across stages and strategies and.

• 1:03:21Speaker 01

  I think something really exciting. When we get pulled into things, we want to find areas where we think we have a competitive advantage and where we think there's less competition. And that still fit our investment thesis, right? Which is, you know, we want to build concentrated positions in generational businesses and do them in ways where we think we have an information or access asymmetry or some competitive advantage. Fundamentally, we run a business with and our investors, our partners in that. You know, our big drivers in these decisions that we make. And so, you know, if we see an opportunity that they're supportive of, then we want to go after it. So I think, you know, what that looks like, you know, I think fundamentally, it's going

• 1:04:03Speaker 01

  to be, you know, things that allow us to, you know, do what I was talking about earlier, right? Where we can be longer term partners to these businesses, invest in different avenues across the lifecycle of that business, and maybe even find creative ways to continue to support kind of investing in the ecosystem.

• 1:04:23Molly O'Shea?

  If you had to sum up your philosophy as an investor, what would it be?

• 1:04:28Speaker 01

  You know, it's, I'll start with like a broader point, and then, you know, hit on my like investment philosophy. So broader point is, you know, one of the things that I don't think people think a lot about is how we talk a lot about the power law in venture, but the power law exists across the entire investment universe. There's a study by an ASU professor that looked at all publicly listed stocks over the last century. And it turns out that like 4% to 5% of those publicly listed stocks, so 45% of the companies, drove more than 50% of the returns. And 50% of those publicly listed companies returned less than treasuries.

• 1:05:13Speaker 01

  So basically, it turns out that like in the investment universe, publicly, in public equities, half of the companies barely performed against treasuries. And then like a tiny handful of companies drove, you know, the majority of the returns. So the power law exists in all the investment universe, in all equities, right? Public and private. And so with that, you know, the thing that for me, what's really driven my investment philosophy is that markets tend to over extrapolate the good and the bad. When they do, they make mistakes and there's dislocations. And when there's dislocations in the market, there's opportunity. And when there's opportunity, the best thing you can do is concentrate and double and

• 1:05:56Speaker 01

  triple down on that opportunity. And so, you know, when, when there's a dislocation in the market, you make money. When you concentrate on that opportunity, you make a lot of money. And so, you know, for me, it's, it's basically, uh, there's very few companies that matter. There's very few things that matter. Markets tend to make mistakes. And if you ever can find a dislocation in the market, you should plow as much money as possible into it.

• 1:06:20Molly O'Shea?

  Great. Wow. That's a pretty dense philosophy. That's, that's good. Just to close out, two more questions. One, what were your favorite moments of the last year?

• 1:06:34Speaker 01

  I think, uh, you know, one of them is actually our, our Founder Summit that we do.

• 1:06:42Speaker 01

  You know, we, uh, as a firm, we'll host a bunch of our founders every single year. Uh, we rent a resort out. Uh, we actually host our LPs and then overlap. So they get time with their founders. Then we have our other founders. Founders bring their, their, their, spouses. They bring their kids. It's, it's very much like a, just a retreat and just kind of, you know, get time away and build relationships with your peer group. And, uh, they bring, they bring their spouses, uh, and their kids. Um, and it's really like a retreat and a vacation. And, you know, we have, you know, all of our, you know, top position, all our investments, all the founders come. Um, and it's a really incredible time. Um, one, because, uh, it's just, you know, it's, it's pretty beautiful. Uh, but two, it's, it's, you really see like the power of relationships. And, you know, I

• 1:07:27Speaker 01

  think one of the things in our industry, uh, even at growth, like founders and the talent matter and like relationships matter. And like, no matter where you go on the stage of investing, uh, I think that like never gets lost, which is people just like doing business with people they like. Um, relationships really matter and being able to create an ecosystem of, you know, relationships between all our founders is just really awesome. And so I look forward to that because, you know, there is a bit of like, What we do in venture is incredible from a relationship perspective and a lot of people become some of your close relationships and your friends. And so being able to kind of have those lines blurred at times is great. And then another thing for me personally,

• 1:08:11Speaker 01

  great memory from the year, I got to do a road trip and a road trip all around the Alps, the Swiss Alps, the Italian Alps.

• 1:08:19Molly O'Shea?

  Wow.

• 1:08:20Speaker 01

  It's pretty cool.

• 1:08:21Molly O'Shea?

  Oh, my gosh.

• 1:08:21Speaker 01

  That was pretty cool.

• 1:08:22Molly O'Shea?

  Any trains?

• 1:08:23Speaker 01

  No trains, just rented a car and drove. And the highlight was, which I recommend anyone to do, well, actually, no, I don't know if this experience will happen, but you should still try it. Maybe it will. Literally, this was end of May-June, drove from Zurich all the way through and then hit Switzerland. In Switzerland, it was snowing in the mountains. So this was like full snowstorm, like end of May-June, which is crazy. And then you kept driving and you went down the mountains more and you end up crossing the border into Italy and it was full on sunny like spring weather. It was like craziest 24 hours I've ever had. Never experienced that. That was pretty cool.

• 1:09:04Molly O'Shea?

  Wow.

• 1:09:05Speaker 01

  Just like one of the most beautiful drives that I've ever done. I tell people all the time, like rent a car and just go drive around and explore. Like it's unbelievable. So.

• 1:09:16Molly O'Shea?

  I've done that in Italy before with a group of friends. It's the best experience.

• 1:09:20Speaker 01

  It's awesome.

• 1:09:21Molly O'Shea?

  It's good memories.

• 1:09:21Speaker 01

  Oh, my God. It's awesome.

• 1:09:22Molly O'Shea?

  You get to drive with some crazy people around you.

• 1:09:24Speaker 01

  Yeah. Yeah. Yeah. It's great. It's great. So that's, that's definitely up there.

• 1:09:30Molly O'Shea?

  That's great. Okay. So just to close out, what are you most looking forward to this year?

• 1:09:35Speaker 01

  One, I'm really excited to continue to partner with some of these generational businesses that we've had the, you know, good fortune of being partners with. And as they stay private longer, we can continue to invest more and more and more and be along that journey. So I'm excited for that. I'm excited to, you know, these next set of companies that hopefully we get the chance to invest in and partner with. And so, you know, in some sense, like I love, I love what I do and I love being able to help founders go after big dreams and big goals and, and see the impact that these businesses had and play a small role in that in any way I can.

• 1:10:09Speaker 01

  I'm excited for the Hill and Valley this year. We have the next one coming up in April. And I think this one is just continuing that momentum and just seeing like the level of excitement for folks to have connectivity within government and be a part of being a bridge to that, I think is really exciting. And the last is, you know, there's a lot of volatility in the world right now. There's a realignment going on, there's a ton of shifts. And I think those are always great opportunities, as I mentioned, because when there's volatility, there's dislocations and there's opportunities. And so I'm really excited this year to find an opportunity as an investor that I think is underlooked and maybe slightly contrarian, which is getting harder in ventures, becoming

• 1:10:53Speaker 01

  a lot more consensus in our industry. So when you find the opportunity that people aren't looking at or are fully seeing or appreciating, it's really exciting. So I'm hoping for one of those this year.

• 1:11:04Molly O'Shea?

  Amazing. Well, I'm really excited for you.

• 1:11:07Speaker 01

  Awesome.

• 1:11:07Molly O'Shea?

  This was an awesome conversation. We covered a lot. Christian, it was a pleasure. Thank you so much.

• 1:11:12Speaker 01

  Thank you.