YouSaid · the spoken record

Roger Ehrenberg

lines on the record: 71
first: 2024-02-19
most recent: 2024-02-19
sittings or episodes: 1
sources: podcast

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“Think probably the greatest source of liquidity now is going to be continuation funds and it's going to be existing portfolios, raising money from net new investors, yet it reflects today's valuations. And you basically get fresh capital to join the partnership, provide an off-ramp for those who have your facial expression right now and are like, I just need some fucking liquidity. And it ends up being a win-win. And I think that's a perfectly reasonable intermediate strategy for an environment where there's so much liquidity that's looking for returns to mark somebody's attractive portfolio to market and say, okay, we're going to price this at a 20% IRR from our projections. We will step into a portion of your LPs. In some cases, GP shoes in order to generate liquidity. Great. Honestly, that's what insights do.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“We're starting to converge on what I believe is the right answer, which is yes. If you're getting paid 500 to 700 basis points for illiquidity and you're either a perpetual institution by charter or just so massive that you effectively act like that, yes, that occupies a perfectly fine place in your portfolio.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Above liquid strategies over long periods of time in order to have that illiquidity. That's really what it comes down to. And if you're doing mid and late stage, it's not the same degree of illiquidity as the stuff that you and I do, Harry, right? Because these are real companies with hundreds of millions in ARR and it's much more a function. It's almost like PE. It's like early PE versus venture. It's a completely different asset class to what you and I do.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Know exactly what you mean. That's true. I think the principle is the same. The absolute returns are different. But I would also argue depending on your portfolio construction, you could construct a less higher returning but less volatile portfolio than Swenson had because so many of these managers that you would be investing in today and deploying larger amounts of capital are more institutional. The returns might not be as high, both because of an industry washing liquidity and where they sit on the stage strategy. Most of the capital is in mid and late stage just because that's where the dollars are so great. But if you could get risk adjusted returns of 12 to 15 percent pretty freaking good. If it's below 10%, then you're not getting paid for the risk. It's what is the premium that you're”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“In order to be the optimal investor in the asset loss. However, if instead of allocating 20, 30, 40% of your endowment to venture for alternatives that are illiquid, you did 5%, 7%, as if you put it on the shelf, you focused all of your energy in manager selection, then you just let it ride, let it ride, let it ride. That five to seven percent provides a lot of convexity in return when you have those liquidity cycles because these things happen in bunches, Harry. Illiquid, then it's massively liquid, and then a liquid, massively liquid. But again, if you look at the compounding with the best managers, you want those returns in your portfolio. You just need to build a manager liquidity profile during those illiquid times.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I would, but I think when you think about how venture plays in a diversified portfolio, unless you are a perpetual institution, this was Dale Swanson's whole argument at Yale, right? Which was I'm investing money forever. I have some liquidity needs, but at the end of the day, my objective function is having the base of the endowment compound and attractive rates over extremely long periods of time. So he would, I think it was north of 40% of Yale endowment and alternatives. And people thought that was batshit crazy. And then you look at Yale's performance over very long periods of time and they've kicked ass. I mean, he started doing this, I guess in the 80s. So 25 years of putting this or 90s and started putting this thing together. And they built a gorgeous portfolio. But you need that kind of a holding period.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Everybody that works at ND went to ND. They believe in the institution and its mission and the students. And they're amazing, very smart, very long-term oriented, do unbelievable diligence, and they really invest in relationships. But the people that work there could be at any number of places making way more money and they choose to be at ND investment office because they love their colleagues and they love the mission of the institution. So endowments are funny. I really think it's less about fee structure and it's more about either providing a fertile learning environment for the best young people or the sense of mission associated with the institution itself.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Walt endowments are tough as opposed to like, let's say a horsely bridge who, I mean, they have their own equity culture as a profit-making enterprise who takes endowment money and deploys it versus an endowment itself who has this public good. If you choose to be in this field and you go work for an endowment, it's not profit maximizing. That's not why you're doing it. You're doing it, in my opinion, for one of two reasons. One reason is working with great people and learning and building relationships. And that's super valuable, even if you're not going to get paid as well as you would if you worked for a private investor. Conversely, there's mission. A particular institution in mind that to me is the most extraordinary culture, University of Notre Dame and their investment office. So that's obviously a very mission-driven institution. They've got a very clear set of goals and a very clear choice.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Forward. So I think there's always the fair weather LPs, but I think it's much more the corporates going like this. But I think sovereigns and the largest wealth accumulators, they're not going anywhere.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Corporates, I don't even need to make the argument. They are fair weather and they are cyclical, but it is very much a fruit of the day. Oh, there's new management and they're like, we're going to foster this innovation culture. We're going to put money to work alongside VCs. And then there's a downturn. They get fired and then they exit the asset class for a period. Then they come back and it's back and forth. I think that for the reason that we touched on earlier, that there is this just inexorable rise of wealth and liquidity that needs to be deployed venture is here to stay. And I see these sovereigns developing durable asset allocation strategies of which ventures apart, they can't leave. They need to deploy capital. And for them, it's going to be much more around who should I deploy my capital with? And do I fire certain managers? Or have I really backed the best ones? And I'm happy to just keep rolling.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So LP structures, traditional LP structures, are completely broken. And I've spoken a lot about this. I feel a lot of the dumbing down adventure and too many venture firms being created. LLPs have been enablers. They've been enablers on that end. And they've also been enablers on the completely opposite end, which is name your venerable Silicon Valley venture firm 12, 13, 14, 15. When they have any return capital from Fund 4, they've raised billions and billions and billions of dollars getting two and twenty managers that haven't actually had DPI in a generation are getting paid $10 million on their fees. So the answer, Harry, is yes, but I would posit those traditional LPs.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So, when you see some of these hedge fund launches, I remember when Eric Mindich launched Eat Park, there were like three different share classes, a three-year lockup, a five-year lockup, and a seven-year lockup. And the fees went down, the longer the lockup, which makes intuitive sense. I mean, that's logical. But in VC, everything is a long David lockup. There is no differential. You could say, well, I'll invest in a mid or late, late state strategy. Those necessarily should have lower fees because the time to hold and the amount of work is less and the assets are generally larger. So what I would expect is a normalization that would look a lot like the hedge fund industry. Smaller, longer dated, higher returns, differentiated managers will still command premium fees and then more mature strategies, late stage growth pre-IPO, massive AUM, that will become commoditized and you will see fee compression.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it will very much be a function of performance. It's going to be just like hedge funds. The very, very best hedge funds charge exorbitant fees. But on an after fee basis, they still outperform. Canonical example there being rent tech, right? 5 and 44. Look at Sequoia. Look at their fees. The best firm's charge premium fees and will be able to get it because on an after fee basis, they still outperform. So I think you're going to have that continuum. And then you've got a bunch of hedge funds that are big asset gathers that are now one in 20. Sometimes they have share classes that are one in 15, 1 in 10 for longer lock of capital. But on billions of dollars, so something that's different about hedge funds versus venture funds is because of strategy type, you have these massive differences in liquidity. There is a cost curve for wanting to access long-dated liquidity in a hedge fund context.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“That's the thing very early artisanal VC is not scalable and it never will be. People have tried and they have failed. And because of the small asset size, IA is certainly one of the best examples. It's hard to access as a result. There will be relatively few LPs that will have the opportunity to invest in the very best, very early stage firms, but that's okay, even if you can have a little bit of exposure to those best firms. Those returns can be quite significant on an absolute basis as a blend to an overall portfolio. So long story short, tectonic shift and liquidity, if there's no going back because there are now these much larger firms that are institutionally investable that can take sovereign money and massive family office money, that wave is just going to continue.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Would save a ladder, Harry. I think that things have fundamentally changed and partly it's with new sources of liquidity becoming LPs and venture firms. If you just look at sovereigns, sovereigns were not major players. And the last cycle of VC. And now sovereigns are everywhere. And then you've got the number of family offices that are multi-billionaires or deck of billionaires has skyrocketed. So just in prudent asset allocation, where is this money going to go? And this is where people like Mark and Ben were really very early in saying, we really need to build something that's scalable, that offers an array of products that can serve the largest and most sophisticated, limited partners. That was a very keen insight and something that has served and likely will continue to serve them well. Now, it doesn't make them great very early stage investors.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this has happened forever and it tends to be very steam specific and highly cyclical. You could say the same thing about cloud computing or machine learning. And now I would say, I, there are these trends where large asset gatherers are going to want to have a lot of bags and they're going to need to have that convexity in their portfolio because they need those grand slams in order to justify the huge asset base that they're deploying to generate institutionally acceptable returns. But if I'm, and again, I've got my focus over here, I'm not in pure tech anymore. But if I was, I would literally be spending almost no time in pure AI, almost none. I would be looking for other things where there are still massive opportunities, but that are not getting the attention that the hype themes of the moment.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Don't I think what Doug is referring to is the asset class being a wash in capital. There's going to be a compression of returns when you look at the denominator effect because you're spreading aggregate returns over a much larger asset base and unless you're creating proportionate exit outcomes that are at least proportional to that asset rate, then of course you're going to have return compression. But to me, it just further indicates, and this is something I talked about back when I was on Wall Street and wrote about when I was doing early blogging in 2006 and 2007 is this barbelling of the industry where, yes, you're going to have more VN reasons and the insights and these platforms that they're not really venture firms, they're corporations that are multi-stage investment firms that have some venture, that have some growth, that have some pre-IPO.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“No humble brag or false humility. If you look at when I left IA, that was pretty much the peak. And then the last couple years have obviously been very, very challenging. Again, I'm not going to sit here and say, it seems that venture is really overheated. Maybe this is a good time to step out and monetize my stuff, but that's effectively what happened. So I do think that there's something about this intersection of macro circumstances in the industries where I'm spending my time and this emotional pull that tells me it's time for a change that has aligned with these cycles. And then now, you know, being on the buy side as opposed to the sell side and liquidating stuff, it's pretty good time to be on the buy side. I think if you've got a long time horizon.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Curve had stopped, and I couldn't really imagine another traditional job on the street that was exciting and would enabled me to grow. That's really what precipitated my spending the next five years really digging into the seat stage technology world. And then it was really during that period that I crystallized my hypothesis that very early, very concentrated that kind of big data infrastructure theme was something that ultimately was going to be a mega trend.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I felt like there was almost a euphoria on the street back in those days. You know, I had been running derivatives desks at city in Deutsche. And then my last tour of duty on the street was as the CEO of DB Advisors, which was this multi-billion dollar trading platform. Money was coming really easily, but also with that knives were never sharper in terms of the politics, whether it's inside hedge funds or at the top of Wall Street, the pie is big. and people in those cultures want as much of the pie as they possibly can. And I just found that culture corrosive. And I also felt like this fell too easy. The markets were up into the right. Money was being minted really across the street. Debt and equity markets in addition to trading. And that sense that things feel a little too good and I personally had felt my learning.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“There's going to be a compression of returns, you're going to have more of the end reasons and the insights and these platforms. They're not really venture firms. Very early artisanal VC is not scalable and it never will be. I'm not in pure tech anymore. But if I was, I would literally be spending almost no time in Pure AI, take risk. Don't play it safe. Have a deeply health thesis and just put it out there. Don't be a sheep. Don't follow the playbook.”
2024-02-19 · The Twenty Minute VC · 20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital · IDENTIFIED FROM THE TRANSCRIPT · source