YouSaid · the spoken record

Ryan Caldbeck

lines on the record: 83
first: 2018-10-30
most recent: 2018-10-30
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Trying to get into consulting, trying to get into business school at Stanford, a number of different things, even starting circle up. And I look back at that memory and at each of those points in my life. And I'm just so grateful that he in that moment and in so many other moments was able to inject in me confidence and a self-worth that led me to just want to try. I think that that is so critical to being an entrepreneur. But more importantly, I'm just A parent myself now, I think what a special thing. Is there anything better that you could give your kids than the self-worth and confidence to want to try? So that's the kindest thing anyone's ever done.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Could do it, and you could do anything if you believed in yourself more. And it sounds, I don't know if it sounds corny or whatever, but just said it with so much conviction and so much belief. And when I think about, I've thought about that moment at so many different points in my life when I ended up going to Duke for college and I ended up trying to make the team, I ended up playing at Duke.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Midway through my junior year, we were kind of talking while I'm doing shooting drills and he's rebounding. We're talking about college basketball, not about me to be candid with you, but about, I think, Syracuse. And he said, I shot the ball. He caught it, and he held it. And he wouldn't pass it back to me. And he said, you know, you could play for Syracuse. And I just, Dad, I'm a mediocre player. I'm barely starting for a poor team in a not a basketball hotbed. To give you your sense, Vermont hadn't had, you can count on one hand the number of people that played college basketball outside of the state of Vermont in the last 20 years. And I said, Dad, I'm not going to be able to play for Syracuse. That's never going to happen. He said, you don't believe in yourself enough. If you saw what I saw,”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“I love this question I grew up in a small town in Vermont called Shelburne, and both of my parents were small town lawyers. They worked together in a private practice about 100 yards away from where our house was. And I started playing basketball relatively late in life around seventh grade or so. And by the time I was a sophomore, I knew I wanted to sophomore in high school. I knew I wanted to try and play in college. And so my dad used to leave work every day to go rebound for me. So he'd leave work at around 3 o'clock. And we were middle class for him to take off a couple hours in the afternoon every day. He was for going income. He didn't work as part of a larger firm that would still pay him a salary. When he didn't work, he didn't get paid. And so he did this every day for three years. He'd come and rebound for me for two or three hours. And then we go home and have dinner and do homework. And one point.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“They've given it to us for six years. So it started because we had a marketplace and then because we have credit and equity funds. And they were willing to give it because they needed the capital and resources to thrive. It's unlike if you hang a shingle in tech, I've got 700 other options I can go to. And they don't, which is why amazing companies like Halo Top or Beyond Meet Real and work with us. That training data set is core to everything we do. So that's the one data set that I would keep.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh gosh. I'm not sure any of the factors themselves would be valuable without the training data, the training data that we have is by far the most important data we have. So the training data, just give a little bit of background. We've got factors that I mentioned before, like distribution, brand, product, et cetera, that we seem to be correlated with future success. The only way we're able to see that is because we have private financials on thousands and thousands of consumer companies. We have by far the largest data set in the world of financials for consumer companies.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it began to help inform and reshape how I approached a lot of different conversations. It gave me a thirst candidly that I did not previously have to talk with other entrepreneurs about the problems that they were solving, talk to other investors about our problems, to poke holes in it. It gave me a thirst to learn from different types of people. I'd always have a thirst to grow and to learn, but it opened my mind to new frameworks, new mindsets that I hadn't yet had. It was a small question. I'm sure he doesn't even remember it, but it transformed how I thought about things.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“I remember it being so important because I immediately realized A, I don't have an answer to that question because I've never thought about that question before because it's totally different than anything I could imagine. And B, this is a new world. What I'm doing as an entrepreneur is very different than what I was building or what I was doing as a private equity investor.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“The second conversation that I had with one of our investors, Andy Weissman, he pushed us to lower our pricing. It was then a marketplace, right? And we had a pricing strategy. And the pricing strategy was working really well, to be candid with you, which is, I think, one of the reasons that they were interesting. And he pushed us to lower our pricing. It doesn't sound like a big deal, but from the world that I came from, I used to work in consumer-focused private equity and the concept of trying to lower price when things were working was just totally antithetical to what I believed to be right in the world. And so I remember him asking me, well, why don't you drop price as just a pivot point in my career where, and I remember where I was sitting at the time with my co-founder Rory.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Those things help. I think in terms of the entrepreneurs that we're serving, we don't have any plans to move outside of consumer. So that's another way that we focus. We get opportunities and asks to can you move this into healthcare or real estate, as we talked about before, education, whatever it is. That's not something that's interesting to us. So those are some of the building blocks or I guess constraints that we have to help us focus, but it is still a challenge in that long versus short-term trade-off is still a very difficult one to make.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Our mission and our values are things that don't change. And that helps to set an interesting balance for us. Our values are do it right, be brave, and be a solution. And so, you know, there's also been cases where we will get a business opportunity or an opportunity to do something with a product that may not be consistent with one of those values. That's happened in the last six months. And we someone on the team will raise their hand and say, hey, a little bit of a flag here. This isn't consistent on our values.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think so. I don't know if it's as crisp as what Jeff Bezos would say, but a couple things that the team that we have all lined on as a team. One is that our mission is not changing. Our mission is to help entrepreneurs to thrive by giving them the capital and resources that they need. So what does that mean? A real example is, and this is going to sound like a little bit of a humble brag, and I really don't mean it to be. We've had 30 public consumer companies reach out to us in the last year and said, we want to give you money for Helio. We want to use Helio to help us. And when you kind of scratch the surface on what they want to do, well, they want to help grow their $5 million yogurt line, $5 billion yogurt line rather. That's not consistent with our mission, right? And that's not going to change. We don't want to lean in on that. It could be short-term revenue. It could be amazing short-term revenue, but it's not going to be consistent with our mission in 2018 or 2028. That has acted as a North Star. Our vision...”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“And that balance is really, really hard. And so then you get into well, maybe I should set five year goals and one year goals and six month goals. And at some point, when you add so many goals on that become, to me, a bit worthless. And it's almost like you see some companies have 10, 12 values. You ask someone that works at that company what the company values are, they can't name one. So we try to limit the number of goals to three to five so that they're actionable and memorable, but that long and short-term balance is very difficult.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Help to not prevent but limit micromanaging, meaning if you and I agree on what your OKRs are this quarter, go run. Do what you need to do to get those things done. But if we agree that your OKRs are X and Y and you end up working on A and B, that's a problem. We need to have that conversation. So we find it really useful to align and prioritize. Now we also struggle with a short and long-term balance. So you talked before about longer-term vision. There are things that we know we should do now to make us more successful in a decade. But if we only focus on those things, we won't be here in a decade because we won't have a business in three years.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, John Door, and there's a great Google Ventures video about it. We set them quarterly and we have year-long goals, the goals then are for the company, then each of the teams has goals, and individuals can also have their own goals. We have found them to be an interesting framework to align on where we're rowing as a company. We also find it to be constructive to help prioritize on their own. And those frameworks, we think”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“We use them at the company, and I use them individually. I think it's interesting the way you ask that question because I do think that there are pros and cons. And I'm not sure we've totally figured out how to balance the pros and cons. But as a company, we call MoKRs, objective and key results. We took it from, there's a great...”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it is particularly refreshing, inspiring to hear that from an investor. That's been amazing. Another person is Sam Hinkey. I know you had on this podcast. I love analogies from other categories. And he is as good as anyone I've ever seen at being able to pull obscure analogies from categories or situations that I've never heard of and learn a ton from. So he's a friend for the past 10 years or so, but in particular as an entrepreneur, I've learned a lot from him.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“I love that So, Jeff, another person that has had a lot of influence on me in the last five or six years is Matt Christensen, who is son of Clayton Christensen, who wrote a book called The Invader Silema. Matt was one of our first investors. He's had a big influence on me for a couple reasons. One is just able to see not the five-year vision, which you kind of get sucked into a bit as an entrepreneur, particularly because vessels talk about it. The team talks about, et cetera. He's really pushed me and us to focus on the 20-year vision. This can change industries over 20 years.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Integrity. I care a lot of integrity from the people around me, from myself, perseverance, being able to run through difficult things. I think as an entrepreneur or in my personal life, being able to get over challenges has been a really critical thing for me. And I look for that from other folks. Another that we have as a company value is trying to just be a solution. I really don't like spending time with people who just complain, which is part of the reason I'm sometimes hesitant to read Twitter. I post a lot on Twitter, but I'm hesitant to read it because there's just a lot of complaining there. I like folks that are able to offer solutions and come to a conversation with the opportunity to build, not just tear down. So those are three. Integrity, perseverance, and being a solution.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“A lot of folks. So personally, my parents have influenced me a ton, mostly just in terms of work ethic, values, and helping me to believe in myself. But in terms of professionally, a number of folks, some of which you've actually had here on the podcast that have influenced me longer term and more recently, Jeff Jordan at Andreesen Horowitz, I've learned a lot from him just in terms of VC tech, that market historically has not been a market where there's a lot of good actors, where people are able to maintain their value system. Jeff has done that in just an amazing way. He is a really high quality guy who also has built some amazing businesses and also been a phenomenal investor. And his ability to maintain both a set of values be a good person and be successful in that world has been just truly inspiring.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Similar analogy was with Jet and Walmart. Walmart wasn't necessarily buying Jet. They were buying e commerce capabilities.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Remember it very well. And look, it's no one can ever build an ad that they know will go viral. That thing happened to go viral, but they relied on that for a couple years. And what I was impressed by was that they did not take another road, which was, okay, let's now go raise money to put into the Us Weekly ads or do the traditional, they relied on that channel. They also then stuck to the D2C channel. I think in a way that gave them the opportunity to get bought by Unilever. And what I mean by that is by all accounts, the metrics on that business would not have justified a billion dollars. Unilever was buying capability. They weren't buying dollar shave club. The capability that they were buying was the ability to sell products online in a D2C fashion. And the hope was that Michael, the CEO, that the CEO and the team there could help teach Unilever how to sell other products online.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“They recognized, and unclear how much of this was fully fleshed thought out, but I think a large portion of it was, they recognized that we were moving from an era where you paid kind of fixed fees for marketing, buying an ad in us weekly or whatever it is, to social, where it was effectively a variable cost marketing. And they put $50,000 or so into a minute-long ad on YouTube. It's an ad that's been seen between.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think we talked before about D2C direct to consumer and how I think D2C is an amazing way to test a product, a very difficult way to scale a product. The exception to that has been probably the most interesting strategy, distribution strategy that I've seen in the last 10 or 15 years, which is Dollar Shave Club Club was able to build a pretty sizable business before it sold for a billion or so to Unilever. Basically solely through B2C. And when you ask about distribution, there were two things that I thought were interesting there. One was the distribution of their brand.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. And that marketplace was where Halo Top raised money twice. So anyone could have invested into Halo Top and several folks did, but other folks could have and passed.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“So we used to have a marketplace that companies would come onto, raise money from other investors. This was before we had a fund. The marketplace, and the investors might be family offices, might be individuals, might be really small funds.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it was funny, it took off and it was, we can show this in a graph about a year later after it began taking off, I got calls from 18 of the 20 best consumer private equity firms in the country, all in a two-week period. I mean, it was an absolute clown show. They were all reaching out one after another and they're saying, hey, can you make an introduction to Halo Talks? They knew we had worked with them. What was happening is they all got the exact same data dump from the exact same data provider, which is a retail level sales provider. And then they all saw the same thing, which is this company is taking off. They wanted to then trade on that, but that's the problem with everyone using the same source of commoditized data, that they were focused, that they were all trying to get in. At that point, the company had already passed. So that, to me, is the most interesting, unique brand. They were able to hone in on that value proposition”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Ben and Jerry's on taste because it's not very good for you. And I'm from Vermont. And in the case of Halotop, they said, look, our ice cream is going to taste good enough, but we're going to destroy everyone else on another dimension, which is number of calories in the pint. So they took out all those claims, and then the front of the package, they just put one thing, which was that the whole thing is 300 calories. When they did that, sales took off like no one has ever seen before in the consumer space. It is probably the most successful consumer company of the last 15 years.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“And it just was overwhelming to the consumer. You looked at it and you just got dizzy. They changed the package sometime around mid-2015. And we can demonstrate we've done this in a blog, the growth of the company before and after that point. They changed the package to strip out all the ancillary claims and just focused on one thing. They had an insight that when you eat a pint of ice cream, you either have two bites and don't feel satiated, you don't feel full, satisfied, or you eat the entire pint and you feel guilty about yourself. But either way, it's a bad experience when you're done eating the ice cream from the pint. They had the insight that if you could give the consumer permission to eat the whole pint, that they would love that as a different quality dimension. See, ice cream companies historically have just focused on one quality dimension, which is taste, which is what is the best tasting. It's really hard to beat.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Ice cream something, yeah, excuse me. Yeah, so HaloTop is an ice cream company independent company, now sells more pints of ice cream than Ben& Jerry's and Hagen's. And 2014, 2015, the company was doing well. And we worked with them. If you look at the package, though, the package had nine or ten different claims. So I don't remember all the claims, but let's say it was gluten-free, sugar-free, everything free”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Of work to understand how that brand billboard relates to the performance of the product from a brand standpoint. Haven't found enough of a correlation there that we get excited about yet. Those are the things we look at.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Then when it doesn't tweet that. So if you think about why that is, why would a company send someone a message which says send me a direct message on Twitter? The answer is because they're responding to some negative comment on Twitter where the person's complaining about a product and they want to take it offline so that no one else can see that conversation. That's another example of like it's a really small detail that we look for other things like that that have high correlations with success that also make intuitive sense. We've also found, and this isn't particularly proprietary because I think other folks have found this too, that number of stars, for example, doesn't really matter that much. It's a lot more about the volume of engagement with a brand. So we look at quality of engagement, we look at amount of engagement, we look at rate of growth of engagement for a brand. We look at a number of those factors to try to understand how that brand is connecting with the consumer. We have done a little bit of work also going back to the product. The product is often the best brand billboard and we've done a little bit of brand.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is very fuzzy, and it's the type of factor that if you talk to consumer investors, they will all agree that brand is important, but that it takes 10 years of experience to tell you what a good brand is. We took the viewpoint that we can't replicate what the investor sees necessarily, but we can replicate or we can evaluate what the consumer is saying. So we're kind of skipping that middleman of the investor and just going directly to the consumer. And we're looking at what they're talking about and how they're interacting with a brand. And we find that what we see people say in reviews, on social, how they interact, there's a high correlation between that and the performance of these consumer companies. So I'll give you some examples. When a company tweets, send me a direct message, that company is three times more likely to not end up being”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“We've been able to show that we get it right more often than humans can. But there's still, there's not that need for interpretability. When the user cares about the prediction, about why the prediction was made, interpretability is vital to us. So the models we've talked about before are the kind of factors that we talk about related to brand distribution, product, and then predicting the future revenue, predicting the future distribution, those things need to be interpretable, think. And so we are building models that they're able to dig into. We call those brainy models, that they're able to understand, well, why do we think that this company will go from 100 doors to a thousand doors over the next years? That's really important to us. Most of the team is more focused.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“We use the term brawny models to talk about non-interpretable models, often machine learning, models where the end user doesn't really need to know why that prediction was made. Brainy models, on the other hand, are very interpretable. They might be regressions. They might be other types of models that are very interpretable. The Broni models we will use for something like industry classification. So we need to, when we identify a company or a product from afar, we need to say it is a popcorn company, not a pair of shoes. Because if we're comparing popcorn companies against pairs of shoes, that doesn't work. So when that model, the industry classification model, another example is entity resolution, when that model is looking at a popcorn company and classifying it, the end user then looks at the results. The end user doesn't need to know why the prediction was made. It's either right or it's not. And sometimes it is wrong. We get it right.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Information sharing here in a partnership. Some are trying to hire data scientists in house to leverage the broad concept of more sophisticated data sources, application of data science to what they're doing. We're seeing that almost universally at funds above a billion dollars.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm seeing a huge bubble in tech investing, to begin with you. And there's a lot of folks in the city I live that are not going to be happy with me saying that. But tech VC, you kind of look at the things that are getting funded, the valuations that they're getting funded on, and the what you need to believe in order to make money on this. And it just terrifies me. And we see that in Tech VC, then we see TechVCs also trying to expand other categories because tech has become so crowded. So we see Tech VCs investing into industries where they're not as familiar, might invest into a food company and give the food company $75 million. That food company shouldn't raise $7 million. And that's an issue. In private equity, kind of later stage private equity, we're seeing private equity firms really begin to lean into data. Now, they're trying to figure out how to do it. So some are partnering with quant hedge funds in the public markets and saying, gosh, could we have some mutual”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Them. It's a very robust market where they're bidding up the price. Or two, we can just ride the winners. Why do we need to hand it off to them? We could just either give it to our LPs as Coinvest or raise a fallen growth fund. That attracts them. To your original question, the returns that we're targeting for this systematic fund that we'll do are about 3x, which is in line with, I think, what most VCs and private equity firms would say their target. I think if you look at Tech VC, it tends to be dramatically lower than that in reality. But they'd say they target that. We just think we have a process and a technology that can deliver those returns in a more repeatable and predictable way. But we need to prove that.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“But it's not a reliable thing. So that asset class, that long-term trend, has resonated a lot with LPs. Then to demonstrate the performance of what we've done, we've worked with some amazing brands like Halo Top or Beyond Meat, which just said they're going to go public, and to show them that the models work, that this is a scalable, repeatable process for building an investment firm. We look to work with LPs who have a longer-term vision for what we're trying to build here. And we've been really fortunate to work with some absolutely amazing LPs so far in our current funds. But the LPs see that disconnection in the consumer market. They also see a broader trend, which is if we're investing at the early stage, let's say $1 to $15 million in revenue, and there's this $80 billion of consumer-focused private equity comes after us. We have two options. One, we could sell into that.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, a couple things. First, it starts with exposure to an asset class that the LPs effectively can't get anywhere else. So they can get late stage consumer, but they can't get early consumer. And that's an important difference. In consumer, just to go on a little bit of a tangent for a second to explain, in consumer, large brands are losing market share to small brands. They are getting slaughtered by small brands. If you see that trend, you can play it in one of two ways. You can short the large companies in the public markets, or you can go long the small companies. But private equity is stuck in the middle. Private equity, which is, you know, there's $80 billion of consumer-focused private equity in the US, that is a space that is kind of, they're investing into kind of the mid-tier brands that are doing fine, but they're not playing that trend. That massive trend that everyone consumer talks about. So the only way to play this trend is to work with CircleUp. There aren't 10 other firms in the country that do this reliably. You might have a family office that'll invest in one food company every two years.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Think that's a core risk. The other risk relates to what you mentioned around LPs. It is raising capital for the funds. In the public markets, when you've got a quant strategy that works, and you could tell me if you disagree on this, but you can often backtest it and show those results to LPs. Not all LPs will believe it. You can poke holes and backtests, et cetera. I understand that. But there's still something to show fairly robustly. In the private markets, it's much harder to demonstrate success. The feedback loops are longer. We can do the backtest, but it's certainly not in as many companies or as long of a time period. And so being able to get LPs to believe in our vision is a very big challenge. And that doesn't just stop then with that technology. In our case, we also have to demonstrate that we can build an operations machine, a well-oiled machine that can reach out to the companies, convince them to work with us, help them post close, lead them to exit. Or in the public markets, that isn't needed.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a lot. The two biggest challenges, and I think risks to what we're doing, or if anyone else does this as well, one is attracting and retaining talent. Look, I think any CEO would probably say some flavor of that. I believe we have a pretty good argument on why it's trickier for us. Our team is basically two sets of people, business folks and technologists, engineers, data scientists. The business folks often come from finance. Well, that's a world where there's a lot of money floating around. And if you believe for a second that private investing will move more towards a quant space, or at least quant will become more of a thing in private markets, those firms, whoever is going to do that is going to look at circle and say, why don't we...”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Look for categories that have those characteristics of repeatable business models, a lot of data. So real estate is one that makes a lot of sense to me. And there are some folks that are kind of doing this either publicly or privately, trying to do this in some way or another. I think that that's a space that is ripe for this. Now, there's also a problem of, I'm not sure it's a very inefficient industry, but there still may be an edge that you can gain in real estate. I've heard some folks lean in on parts of the media industry. So whether it is music rights or certain areas in movies. So if you think of like the long tail in both music and movies, could we capture that long tail more effectively with data, with some sort of quant strategy? Not to say that you'd use it to base the next $400 million budget film on, but to do the next $10 million horror movie, it may make a lot of sense. And other industrial categories where”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Very little money, or there's a lot of bad tech companies that did hire a ton of engineers and didn't work out. We think though that the other problem in this space is if I build an algorithm and a series of data sets, they're able to accomplish and get over the problems that I just mentioned, you still have the issue of competitiveness in that market. So if I build the helio of tech and I find the next Uber, the problem is that that company is going to call Sequoia and Union Square and benchmark. And now I have to beat them. And I don't believe that they're going to be beaten. That doesn't make sense to me. Maybe I can do it in a couple cases, but to build a sustainable, repeatable, scalable ass manager, I really struggle to believe that. That's very different than some other industries, consumer being one, where there aren't a ton of venture-style investors in that space.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Companies of Uber or Lyft, you're comparing it to an N of two. And yes, the growth patterns look similar, but we've got two companies we're comparing to two companies. That doesn't pass muster with a lot of data scientists. That worries me about tech. The other thing that worries me about tech is the lack of data. So we see some VC firms that are trying to be data driven. They still have human heuristic driven investment committees. There's a team of folks sit around and make a decision, yes or no. It's not a systematic fund. It's just a data-driven VC fund, which sounds novel in VC because VCs traditionally haven't used a lot of data. But in the case that they're pulling data, they might have one engineer in house. The data that they're pulling is almost always linked in data. It's data on where engineers are moving. I view that as a derivative metric of success. So just because a company raised a lot of money and can hire engineers does not mean that that is a good company. It may end up being a good company, but there's a lot of amazing tech companies that raised”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“And that, I think, is going to be extremely attractive. The ability to know why I found a company and be able to replicate that over and over again. Now, I don't think this works in every market, to answer your other question. I think that there are some markets where this will be really tough. Tech is actually an example. So in tech, let's go back to the framework that we had before about why this works in consumer. Same business models, a ton of data that's out there. In tech, there aren't the same business models. But on top of the not being the same business models, there usually aren't prior examples of success. So when Uber hit, there weren't 100 other Ubers. In the case of our X bar, Snack Bar that hit, there's a lot of other food companies that looked really similar in terms of those hitting. That's an issue in terms of building the training data to know what success looks like. So now I see analysis, especially on Twitter, of the scooter companies, Bird or Lime, and they compare them to the ride share.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“That's right. And so if a big endowment comes to them and says, we want to give you three billion, it's really hard to do that. Whereas in the public markets, not all strategies, but some strategies can scale much more easily than they can in the private markets. I can't take Bill Gurley at benchmark or Fred Wilson or Andy Weissman at Union Square. I know you had Albert on the show and replicate them infinitely. So what their brands do and they do is a really good job of maintaining their position with what they're doing, but they can't scale the fund infinitely. We think that you can scale a quant VC fund much more easily because you're not relying on just Andy at Union Square or Freddy Union Square to make decisions themselves. You're relying on the models.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“So, of course, main fund or benchmarks main fund or Union Square, most of the funds that we'd list as the top five that have stayed in the top five have remained relatively consistent in terms of the size of their funds.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that's a great point. So I wouldn't say it's scalable though. So most of those firms, so think of Sequoia's main funds, or benchmarks.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source
“And you can't figure out however someone found Uber or Snapchat, they can't repeat that into other things. That's a problem for large asset managers and large LPs who want to believe in something.”
2018-10-30 · Invest Like the Best · Ryan Caldbeck – Quant in Private Markets - [Invest Like the Best, EP.110] · IDENTIFIED FROM THE TRANSCRIPT · source