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Justin Fishner-Wolfson

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2021-05-25

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2021-05-25

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1. “Business context when I was at Founder's Fund at the very beginning, there was a limited partner who really put me front and center to that fundraising process and that LPA negotiation and really helped me get an incredible amount of credibility inside Founders Fund very quickly. And so I will forever be grateful for that.”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

2. “I just had a kid. My daughter's four months old actually today, which basically sucks up anytime that's not on that list that you made. So that's the rest of my time.”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Can join our team start at the bottom end up at the top, and that has allowed us to get really great junior talent. And I think that's a long-term competitive advantage in our industry. That's part of how we're thinking about the business today that we didn't quite touch on, but I think is important. I would like the firm to have not just a good next 10 years, but if you have a good next 10 years, then you're going to have a good 10 years after that.”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

4. “For us, because we've now been doing this for 10 years, we've sort of earned the right to think about it for the next 20. And for me, the important thing for the firm is what is our team and is our team set up for the generational transitions that will ultimately happen? Because I'm not going to do this for the next 50 years. At some point, I will just be too old and no one will want to talk to me anymore or I'll be dead. So we need to set things up in a way where we can build this team. And I think this is what we want to do. And I don't think all firms need to do this, but where this thing will outlive any one of us. And so that's really about hiring. It's really about getting people the right experience, promoting people from within. I think we've done a good job. I mean, one of our investment partners, Nick, he joined us as a summer intern and is obviously an investing partner now. We didn't obviously promote him because we wanted to tell the story about how you could do that. But by doing that, I think we've demonstrated to other folks that”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

5. “Because most of the people who are the customers don't want to buy a unit that is a warehouse. They want to buy a unit that is a package. And then everything can be super efficient. And all the people who then build on top of that layer can grow their businesses exponentially faster”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

6. “It makes everything faster, and then all the things that are then built on top of it grow even faster. The fractionalization makes all of the stuff that people had to internalize before go away and they can just buy it as a unit. You don't have to go buy your servers, set them up and hire people. You can just buy an instance. You don't have to know very much to do that. And so all of that expertise gets moved off out of your operating costs onto someone else's. And then they hire people who really know what they're doing. I was talking to the founder of Stord who's kind of building this for warehouses, which is why warehouses off the top of my head. And all of that management is actually quite hard and all that software is really quite hard. And the owners of these warehouse businesses are basically REITs. Like these are not technology companies. Like they're a real estate companies. So if you can build the software layers on top of a lot of the infrastructure in the world and then sell it off in unit sizes, you can make it so much more efficient for everybody.”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Hard for me to answer because I'm not always sure what other people are focused on. We've been seeing more and more businesses that are taking large complex things and breaking them up. And so in some sense, like the first iteration of this was the cloud. And I think the second iteration of this is actually physical things. Think about warehouses in the context of flexible.”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

8. “Matters a lot. There's a very virtuous cycle in the industry, which I think is heavily driven by survivor bias, which is if you can survive long enough and you have a good reputation and your good long-term partner for people, then better people want to work with you, even if you're like a somewhat random picker of companies, the companies that you're now picking from are a better pool of companies to pick from. So you'll make better investments and then that cycle just perpetuates itself. And so over time, if you make one good investment, you're more likely to make other good investments in the future in a way that's like very not true in the public market. There's no virtuous cycle to being a good investor in the public markets. Like every day is a new day. It's a hard game to play. The venture ecosystem, the better companies that you're associated with, the more good entrepreneurs want to work with you and therefore you're more likely to invest in good companies, which causes more people to want to work with you.”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Think the answer is absolutely, although ironically, it does to a large extent go back to my comment about brand, which is I think it's hard to identify, at least for us, like which brands are ultimately going to be the ones that are defensible. I'm not sure it's as important, quite frankly, because if you think about a venture firm, it's much more like a small business than it is an equity-driven business. It's like a law firm or a consulting firm, like all the talent walks out every day. If that's true, there's no value in that business if all the people are gone. Whereas I think if you looked at Salesforce, if you fired all the people tomorrow and replaced them with different people, I'm not sure it would be as good a business, but like it would still be a business, right? Like there's still equity value in that business. I do think there are different businesses, but I do think that they can be defensible. I'm not sure it's as important. I don't know if that's a metric that should matter to an entrepreneur. Like, is this venture firm going to be defensible for the next 20 years? I do think you care if they're going to be stable for maybe like the next 10. You want good long-term partners. I do think brand.”

   2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

10. “It's really great to be able to benchmark things. All of these metrics are useful because they're consistent on a relative basis, but for every individual company, there's always something wrong with them. So it's like, sure, you want to look at net dollar retention, but maybe net dollar retention is high logo churn. You're somehow churning a lot of customers, but the ones that you keep are really expanding with you. And so net dollar retention is good. And like that might be okay. It might also not be okay. But like you want to understand what's going on. So I do think that the metrics that the industry is kind of standardized around are helpful, but it's kind of just the first pass on understanding the businesses because averages hide all sorts of numbers, not looking at things on a cohort basis can really hide things. If you have a fast growing business and you're just looking at averages, everything is basically a week old because all the customers are a week old. You got to break things out.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

11. “That's always true, but you need to be able to make trade offs, right? If I told you that if you waited from three months to six months, but you got 100x more money back, you should probably wait. So you need to understand what the trade-offs are. And I think the thing that people don't think about are the trade-offs relative to time. I think time is sort of the missing variable in a lot of these decisions.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Compounding effect of that can be astronomical. So you really do need to think about the time that it takes for a customer to pay back and how that customer pays back over their lifetime because it dramatically affects growth rate because this to me is a simple example.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

13. “People really need to think about time when they think about capital allocation. This shows up very obviously when you look at customer acquisition. So everybody likes to talk about LTV and like LTV by CAC, but the one major thing that you forget when you look at it like that is time. If I tell you that you can invest a dollar in a customer and you get back $100,000, you would think that's amazing. If I told you that customer only costs a penny to acquire, you'd be like, this is even better. But if I told you that that whole process took 20 years, you'd be like, oh, well, this is completely irrelevant and useless to my life. And I think that the problem that people have is they don't make the right trade-offs between getting cash flow sooner, even if it's slightly less versus cash flow later. And so it's not obviously on the scale of 20 years because that's obvious to everyone, but it could be on the scale of six months or three months because once you get the money back that you spent to acquire a customer, you can reinvest that to acquire a new customer.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

14. “In people's knowledge, so people do what they know how to do. And so when you learn how to raise a seed round that's kind of very similar to learning how to raise an A round and a B around in a C round, at some point you have to make a transition to the bigger capital markets and deal with Goldman Sachs and JP Morgan. And that's not the same thing as raising a D round. It's actually a very different process with different people who expect different things and you have to talk to in a different way. People are not as efficient at making that transition as you might hope for understandable reasons, but I think that is one of the, for people who are good at making that transition faster, they have access to much larger amounts of money and much lower cost of capital.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

15. “People should frame it that way as opposed to. If it turns out you didn't need it, fine. The marginal dilution isn't astronomical. And if it turns out you didn't need it, it's the difference between the whole business going to zero or not. So it feels like it's pretty worthwhile to take the insurance. And a few companies were sort of in that process of raising money and it basically got them to accelerate it and get termsheets and close things when things were looking really ugly. Now it turns out that the capital market stayed opened and it wouldn't have ultimately been a problem. No one knows that up front and this is why insurance exists, right? You're trying to protect yourself against black swan events. So I guess that's like my more contrarian answer to your question. But I do think having access to lower cost capital is important. I think too many people, equity finance businesses that could otherwise be debt financed and you're starting to see more startups trying to help companies debt finance businesses, which I think is generally speaking correct. I think there's a gap.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

16. “That's interesting. I would maybe give you the opposite view. I do think having access to more capital at lower prices can be an advantage, but there are also situations where if you give people too much money, it ends up killing the business. It's not all people, right? But some people don't do well if you just give them an unlimited line of credit. They'll just run the business into the ground. Whereas if that hadn't been the case, they would have been totally successful. So I think there's actually some danger in that side of things. The opposite view is I think people optimize on price a little bit too much. It's oftentimes better to get long-term partners than it is to save an extra point of dilution that when all is said and done isn't going to matter. I think that the other way to think about raising money is insurance. Some of the best times to raise money or take a little bit of extra dilution is when there's a lot of uncertainty. And if that additional capital cost you one or two percent of the business, to me that's an insurance premium.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

17. “I mean, for us, our cost of capital is based on where we're raising money from, right? So if you look at the endowments and foundations, kind of large family office is that in our investing venture, broadly speaking, they're looking for net 20s, IRRs. Everyone will say they want higher fund multiples, but broadly speaking, people want at least 2x net. Generally speaking, the industry doesn't accomplish that. So those are sort of the very basic things. If you roll that down to an individual investment level, we're looking for things where we can get a 5 to 10x because we're not going to be right 100% of the time. You've got to blend this stuff out. That'll get you to, I mean, we think we can do kind of 3x net funds. That's what you need in order to hit those numbers. That's our cost of capital. And actually, when I tell entrepreneurs that it clicks for them, because I think a lot of people just never bother to explain what they're trying to accomplish. They just say, well, we're trying to invest your company. It's like, that's great, but what are you trying to get out of this? My view is if you don't know how people are making money, then they're probably screwing you. This is just a...”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

18. “Effectively going to be married to for longer than a lot of marriages, quite frankly, if you're not going to see eye to eye about how you want to have that relationship. There are lots of great investors. It just depends on what you're looking for.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

19. “I mean, I spent a lot of years with Peter TO. I think Peter's very impressive. He's very smart and he's very good at focusing on the one issue that might matter in that situation. So that's a real skill, right? I mean, people can get distracted by lots of things. I think the other thing that Peter's really good at is new information. He's willing to change his mind very quickly. A lot of people kind of get stuck in whatever decision they make. And then it doesn't change. Even when there's new information, they don't update. I think David Sachs, he's really a great operator. He's a great product person. I think he can give people very practical advice from both a product and a sales perspective given his operating experience. I think different investors add different value. It just kind of depends on what companies need at the stage that they're at. You got to find the right fit. A lot of this stuff is personality and it's kind of like a marriage. People are going to be running this company for a decade and you don't want to include investors who you're afraid of.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

20. “Can get a lot of value from your investors if you leverage them for things that are not core to your business. For example, obviously we're in the space, but like if you want to know how to run a tender process successfully, call me. I can just tell you what's going to make your life better, faster, easier. But that's not core to your business, right? It is important to your business, right? You want to be able to manage liquidity for your employees and help people achieve their financial goals, but that's not core to your business. That's like not a product level decision at a late stage. So I think you want investors who can take all of the non-core parts of your business and just make it easy. These are the 10 things that you should do. It'll make your life a lot easier. When you're a really early stage business, like having people that you can talk to about product and balance ideas off of, maybe help you out with sales to get you some customers who might not otherwise be willing to talk to you if there wasn't like a really strong relationship. Investors can be helpful. I generally think investors overstate how helpful they can be or should be for that matter.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

21. “I think if you're going to raise money, you have to understand what your investors need from you. And I think that you have to understand where they sort of are in their capital cycle. Are they going to raise a new fund? Are they at the end of a fund? Are they at the beginning of a fund? What's their ability to follow? And I think there are a lot of rather specific technical things that entrepreneurs generally don't ask. And I think for all these people would be easy to find out and do affect how investors think about whatever they're investing in. So I think those are really simple things that entrepreneurs, broadly speaking, should do. But also like when you raise venture money, it comes with a lot of strings. You're looking for certain kinds of exits, certain size exits and like all the things that come along with that. So I think people want to factor that into their decision making. And then in terms of what kind of capital partners, I think you want people who have the opportunity to be helpful but aren't going to be the ones who try to run your business. That's usually not a good recipe for a good working relationship in this industry, especially.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

22. “It did land, but then the skirt cracked and it trapped some methane there, and that ultimately blew up the rocket like 10 minutes later. So I think we technically were at the one that landed first, but they've now gone on to, I guess, land it more successfully.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Ironically, it was kind of a bad timing thing. We've got a few companies that are talking about doing some business with SpaceX. We had mentioned WorkRise and they've got a big labor marketplace. And SpaceX is building, they have some of the largest construction projects going on in the world, right? And especially when you include things like Tesla that are related entities. These are some of the biggest construction projects going on in the US. And so we were going to go down to Boca Chica where they're building Starship. And the day that we were going, they scheduled a launch because they don't really schedule these things far in advance. So like literally just happened to be the same day. And when they do that, they close the roads. So you can't get on site for like liability insurance reasons. So we kind of got stuck just waiting around for them to launch because then we could go and actually have some meetings, which is not uncharacteristic. The launch kept getting pushed back and pushed back and pushed back. And so it basically burned the whole day. But we did get to go see the starship launch, which is the one where.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

24. “Falcon 9 to service even more missions, then they got crew working. They're building a satellite constellation. Now they're building Starship. I mean, it's just how big the opportunity set for the company is today versus 2008 is crazy. And if we'd only been right about the stuff that we thought in 2008, it still would have been good, right? Like it still would have been a good outcome. But now you can still look at this thing and understand how you can get a 10x from here. That's the crazy part.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Some kind of weird error. I mean, the fact that they're launching Crew now is incredible, right? The US hasn't had the ability to launch astronauts from U.S. soil for a decade. I think this is incredibly important for the country, if not the world. What they're doing with Starlink is amazing. They're going to ultimately provide service to people who haven't been able to participate in the global economy in a meaningful way. It's crazy even in the US. You've got over 10 million people who don't have access to high speed internet. I mean, this is in the US, right? This isn't a global number, right? This is literally just in the US. They're about to bring service that's the equivalent of cable speeds to everyone. It's incredible. And I think the interesting thing about great entrepreneurs and great teams is that they just keep expanding their total addressable market. Like when we first invested in 2008, this was the Falcon 1. It didn't even work yet. It had two failures. They didn't even have a working rocket. Then they got the Falcon 9, the Falcon 9 could serve us a whole bunch of other missions. They upgraded.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

26. “I mean, the crazy thing is that it worked. You really think about it, and Elon, he freely admits to is not necessarily the best at hitting his deadlines, but no matter what he has said that they would accomplish, they absolutely will accomplish that thing. It might take longer, but just the ability to deliver on the things that you said you will in that arena is pretty amazing. I remember right before, I can't remember what year this was, but right before they landed the first Falcon 9 booster, there was, I think it was the CEO of like Ariane Space. Public was like, oh, they're not going to be able to land that thing. Two weeks later, it lands. It hasn't been that many years. Like it's been five years or something since they've landed boosters. And now everybody thinks it's normal, right? Like it's amazing what people get used to and how quickly they get used to these things. Right now, if they don't land the booster, people are like, oh, well, they had a failure. And you're like, wait a second, guys, this is something that wasn't even considered practical 10 years ago. Like no one even thought this was possible. And now if they don't do it, it's like.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

27. “We've done some direct to consumer healthcare businesses that I do think are actually very data driven and interesting businesses, but are maybe a little bit more focused on a specific product for a specific customer. So that might not be as easy of a fit, though most things were invested, I mean, Intercom is a great business where they just collect a ton of interesting information that they use to make their services better. So I think a lot of things you might have to shoehorn a few things in. I mean, SpaceX really isn't using data externally. I mean, they are definitely improving their products with data. It's one of the most data-driven organizations in the world, but you certainly wouldn't fit that model, I think, very well that we're talking about.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

28. “Think that's like a good description of a large segment of the stuff in our portfolio that definitely reflects a lot of the portfolio. And I think that you some of the traditional, as you mentioned, seven power things to talk about marketplaces. You mentioned WorkRise. It's a big labor marketplace. It's just incredibly important, but they've also then layered on things like insurance and factoring and whatnot. So there are lots of other products that you can build to serve their customers.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

29. “Information advantage that sort of structural based on some kind of like enterprise SaaS product. I think that's really interesting.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

30. “In the US, and you have direct access to the company bank account because you're the one who pulls payroll, that's a risk free loan. So there's a huge arbitrage there, and Gusto is taking advantage of that to provide much lower cost capital to consumers, right? If you walk into a check caching store, they're going to charge you a crazy amount of money because they're going to assume you're not paying them back. Whereas Gusto actually knows that you're paying them back because they know that you worked and they know you have the money, things like that, or you look at Flexport where they're lending against the freight that they have in the system, right? Because they're the freight forwarder, they actually have like physical possession of the goods, which is very important from a lending perspective, but not only that, they know how much the goods cost because they're coming through customs. In general, I think people don't lie in the customs forms. They know what your velocity is because they see how much you order. They know what you sell it for. They know what your gross margins are. Some of these things you could figure out as a third party lender, but in that case, they just have much better access to data. So it's like I find a lot of these lending businesses that are standalone very challenging, but if they're tied to a real”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

31. “Found it hard to invest in lending like businesses because the easiest way to drive growth is to dial up risk and just put out more loans. And even if you believe management is great and they're smart and they're awesome, you don't have a guarantee that management won't change. And so even if you like the book today, it's like somewhat hard to understand if you'll like the book tomorrow. It could be because management turned over. It could be because they changed their underwriting criteria to chase growth or whatever other metric they're being incentivized to chase. I think these things are somewhat of a challenge for us. The interesting opposite counterpoint to that is I really like platform businesses that layer in financial services because I think there's just an incredible information advantage when you do that, right? If you're gusto and you're going to offer a loan to a consumer, but you know that consumer has actually been employed the last two weeks and that person, they're lending that money to their employer, right? Because everyone gets paid two weeks behind.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

32. “I mean, I just think there are companies that investors target market for. It's like we're invested in Wish, right? It's a globally commerce marketplace, but it's focused on people who aren't rich, that aren't willing to pay Amazon for prime and things of that nature, right? And their customer base is absolutely not the investor class. And so I just think investors buy things that they understand. And I mean, that makes sense because people are people and people like to buy things that they understand. On the other hand, there are lots of things that have nothing to do with investors who are, broadly speaking, very rich people. Most of the world is not very rich. And so there are lots of companies that are focused on other problems. And so clearly some things are just getting ignored.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

33. “I'm confused about various valuations across the board. I think some are very high and some are very low and I can't quite figure out why this is the case. I think people just, like I said earlier, aren't paying as much attention to margin profile, how these things should trade. You can't just normalize everything on revenue. Theoretically, at the end of the day, everything is discounted cash flow. And obviously for businesses that are losing money, it takes a while to model that out. It's very easy to be wrong, but I think you at least have to start from first principles. We talked about this. It's like technology just gets used for everything. Like what company is a technology company right now? I mean, if you're not at least somewhat of a technology company, you're probably not going to be in business for very long, but it's a term that just gets incredibly abused.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

34. “Comfortable with these sorts of arrangements which will allow a lot of the enterprise SaaS companies to do interesting stuff on a going forward basis.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

35. “Think Seven Powers does a good job of listing out all the potential ways people can be defensible. The things that we've struggled with is like, I think brand is actually a very powerful thing that is defensible. I just don't know how to identify which brand is going to be the one that ends up being defensible. So like we've struggled with that in terms of the kinds of companies that we would invest in. I think people like underestimate the adjacencies when it comes to data that companies can leverage. So there tend to be a lot of interesting areas that companies can branch into once they have access to the data. And so it's a lot about like, how do you set up your infrastructure to allow data sharing across your customers so that way you have the right to do interesting things. And this is evolving right now, but I think it's sort of like the move to the cloud, right? Everyone said, oh, I'd never put all my data in the cloud. That's just not secure. And then everyone said, well, I can't keep my stuff on-prem anymore because that's clearly not secure. I think companies are getting more.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

36. “Way that I think we apply to how we view the world now. But yeah, it's usually the things that didn't work where you learn the most.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

37. “I mean, I think you always learn the most from the stuff that didn't work, the things that we invested in that we were wrong about. Because when you're right, generally people stop looking for reasons and also you are right. So you attributed to the things that you assumed made you right in the first place, which may or may not be true at all. We invested in doing this for a long time now. So we've definitely invested in things that didn't work out. But we invested a company that was in kind of e-commerce marketplace space. They allowed the individual people in the marketplace to advertise on the platforms like Google and Facebook. And when those people violated terms of service, the major platforms would turn off advertising flow for everyone on their platforms. This obviously broke. And so we just learned that you can't have that sort of single platform risk. You either need to control the ad spend or you need to make sure that individual sellers take on that responsibility and don't create collateral damage. So like there are lots of things that we've learned along the way.”

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38. “These things are related to really big outcomes. It's not people who are trying to solve a small problem. It's not people who are trying to build a company and sell it. It's people who are trying to solve a really large complex problem. If you can do that, you tend to have very big outcomes. That's a little bit of a psychology of the people who build these sorts of businesses. You can be a great seller something on Amazon and like, that's a totally great business. But I think it's a somewhat different personality than people who are going to go take a whole bunch of venture money, not make money for a long time, and then ultimately scale a business that dominates some individual market. They're different businesses.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

39. “Hadn't really thought about it until you asked the question. I mean, I do think Gusto fits really well. I mean, that is a very customer driven organization where everything that they do is thinking about how to serve their customer and their customer being the person inside the organization that manages like payroll and HR and all that sort of stuff. So they're actually a really good example of that. I think Flexport would be a good example. I think SpaceX, I actually think as I talk it out, 30 Madison would be a good example of this. I really think that our companies are very focused on understanding their customer and then expanding to cover all of the related things for that customer.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

40. “That's like a different thing, but these other products that are very natural extensions that's not about lack of host, I think it's actually just focused on what the customer needs.”

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41. “Think I would frame the question about focusing on the customer. So you want to focus on the customer and what their problems are and what they trust you to do. So in Asia, like you have all these super apps, I think it makes more sense than it does in the US because there aren't that many places where a consumer can go do their banking and get a ride hailing car. These things make more sense in Asia than they would in the US. At the same time, if you're gusto and you're doing payroll for people, you may actually also want to provide health insurance. Like that's a thing where like if they're trusting you with payroll, then they will also trust you with health insurance. And this is another thing that you can bundle together that actually makes that customer's life a lot easier. I think you do want to stay focused and you want to stay focused on like what the customer needs, what they trust you with, and how you can make their life easier. It's not necessarily that like Gusto should start helping people buy office supplies.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

42. “Underwriting decision and more information arbitrage because they know something about the customer that a third party finance partner, they wouldn't know or they would have less confidence in because they don't have direct access to the underlying data. And so I think those are really great businesses because the core business is like a good business anyway. And then you can layer on these other sort of information asymmetry opportunities that make it incredibly compelling”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

43. “It's an interesting question because it depends a little bit on the stage of the business. You know, if you're investing in a seed company, you can have a theory about what these things could be. And I think it's actually important to have that theory. But what ultimately happens is somewhat uncertain. You know, if you're investing in a later stage business, I think you actually want to see the marketplace dynamic, right? If you're investing in Airbnb, you actually want to see that there's a marketplace and that as you grow supply of homes and that actually increases engagement amongst consumers. You actually can track that with data. So depending upon the stage of the business, I think you're looking anywhere from having the story about how this will play out to clear, understandable data about why this competitive advantage is going to persist.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

44. “Margin profile of these businesses, right? The reason why technology companies traded at high revenue multiples was partially gross margin, but ultimately that flows through to net income and free cash flow. And you look at businesses like Google and Microsoft. I mean, these are giant businesses with incredible free cash flow. And so that's why they tried at higher revenue multiples than a traditional retailer would.”

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45. “Technology has gotten used for anything that uses a cell phone. So if you have an app, you're a technology company company. I mean, like, I think Target's actually done a great job with remote app. I was kind of shocked at how good they've made this. I'm not sure I would describe Target as a technology company. There's nothing bad about Target. It's just, I don't think that they're like a technology company in that regard. The thing that we focus on is margin. The weird thing the industry has kind of gotten lazy on. I think this is partially just heuristics are great, but when people forget why the heuristics were created, everything breaks. And so there used to be like a quasi-magical, like things traded at 10x revenue. Now, obviously, that's changed, things traded much higher than 10x revenue these days. But there was like no distinction between 85% gross margin business and a 25% gross margin business. People would say, oh, well, you just multiply revenue by 10 and that's the valuation. And that sort of laziness, I think, has continued to carry on without people looking at the underlying.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

46. “Think it's about navigating the sales process and having the balance sheet, which gives you the time to do it right. You can't rush the government. Fast for them is just not fast in startup time. And so you need to have the balance sheet to have the patients in order to navigate that process effectively. And you need to know how to talk to the government. There aren't a lot of people in Silicon Valley who've spent a lot of time in that ecosystem. And so you can't just be like, hey, we're going to save you money because that's not necessarily their incentive. They're not running a business. You can't just say, well, it's going to save you time because they have different incentives. So it's like you need to understand what the problem is that they're trying to solve and then how to navigate that politically. It's a much more political process. I mean, big companies are political as well, but it's just you take a big company and multiply it by 100 and that's the government.”

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47. “That's quite high margin, actually. I think that's what the public markets realize that the private markets guys were just kind of stuck in the old view because they hadn't paid attention to the business in a long time.”

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48. “That criticism of Palantir was, in many respects, anchored on the company from 10 years ago. So while I'm not sure that it was ever totally a correct criticism, it was certainly a more correct criticism a decade ago. And that I think people never updated their views. So one of the big problems that I think investors have to overcome is especially in technology, these companies change pretty rapidly. So just because you didn't like the company six months ago doesn't mean you shouldn't like the company today. The entire business may have shifted. And I think if you looked at Palentir, they did a really good job of making the transition from a more consultative sales pitch where it was more customized to a more standardized product that you could literally stand up in a short period of time with a government customer or an enterprise customer for that matter. It took them a long time to build that sales motion efficiently, but they got there and they built a really big, sticky business.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

49. “Went out and didn't. I think you find this cost plus modeling across a lot of government contracting, right? And we've seen this with Palantir and Androil and other companies that we've been investing in that touch that space. And the government's gotten a lot better and smarter about buying things that work generally speaking in the enterprise space. And they're not necessarily solving unique problems anymore. For launch, it's like, it's not a unique problem. You shouldn't cost plus this stuff for software. Broadly speaking, you don't want customized solutions because they're very hard to maintain, right? So you either buy things like Palantir. If you're trying to do drone defense and things like that, like there's a bunch of technologies that you can leverage today. You don't need people to build like crazy customized stuff where you just want to say, hey, let me know how much it costs and I'll just add 20% to it.”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source

50. “It is absolutely a counter positioning model, right? And this is true especially along a lot of government contracts. If you think about like getting to the moon originally with NASA, it's like we were solving a problem that no one had ever solved before. And so the government solution was, well, we'll pay whatever it costs plus 20%. And that's a really incredible thing to do when you're trying to solve a problem that no one has ever solved before. No one knew how much it was going to cost. So you just keep spending money until it works. But the weird thing, Elon always used this analogy. It was like we have planes. If you build a plane and you fly it from New York to LA and then you throw it away at the end of that, ticket costs are going to be really expensive. On the other hand, if you keep reusing the plane, you end up just having to pay fuel costs back and forth and some maintenance and then ticket prices are a hundred bucks. The question is how do you build the Boeing 747 of rockets? That's effectively what SpaceX”

    2021-05-25 · Invest Like the Best · Justin Fishner-Wolfson - Secondary Investing in Private Markets - [Invest Like the Best, EP. 227] · IDENTIFIED FROM THE TRANSCRIPT · source