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Arjun Sethi, co-founder of Tribe Capital, on investor allocation strategies and democratizing access to capital

Jan-Erik Asplund

Questions

  1. I'm here with Arjun Sethi, cofounder of Tribe Capital, a $150 million stage-agnostic venture fund. Arjun was an early investor in Carta and he's on the board of directors. Thanks for joining us, Arjun.
  2. I'd love to talk about secondary in particular and how you think about it. You do early stage and also you do late stage. Are you a buyer or seller, both or neither?
  3. So, let's dig into that a little bit. So you participate in secondary as part of primary rounds. Do you also do it outside of that?  And through other means like through brokers or off cycle tender offers, et cetera?
  4. One thing I heard talking to some secondary funds is that a lot of them do primary at early stage so that they have access to as much information as the primary investor would have. But as a secondary investor, they build that relationship with management and then commit to buying up all the secondary that might become available and break off at different points. Do you have that type of relationship with companies when it comes to secondary?
  5. Can you talk a little bit then about the sell side?  A lot of what I'm hearing is buy and hold. Do you have any ideas about de-risking for an early stage investment, at series C and D? How do you guys think about that?
  6. One of the things that you talked about in your article about Carta and 1 trillion in equity is that you see CartaX and highly liquid secondary markets as affecting and changing capital allocation strategies for VCs. Can you talk a little bit about that, in relation to what you just talked about, but anything beyond that?
  7. I'm curious to hear you talk a little bit more about the auction mechanic.  It gives you price discovery in a market driven way, but it also introduces some risks to the company. Can you talk about some of the pushback you've gotten from management about participating in this type of novel price discovery in the private markets?
  8. I'd love to hear you talk more about that.  Some of the pushback that I hear is that, well, the best companies are always able to hire and retain talent, and they're able to do so because they have an amazing growth trajectory. And so employees at those companies aren't necessarily thinking about liquidity, or, to the extent that they are, their price expectations are much higher than what they might be able to get even in a process like this.
  9. Can you talk about incentive alignment as between VC funds and LPs? I'm curious because one of the theses I've heard is that a product like CartaX would allow LPs to invest directly into these companies, whereas today they're investing into funds to get exposure to these companies. Does that create an incentive misalignment with LPs? Is it quite possible that they will disintermediate VCs and go directly into these companies, et cetera?
  10. Switching gears a little bit, one of the things that has come up repeatedly in conversation is the sharp distinction between public and private in terms of liquidity, and platforms like CartaX enabling more of a gradient of liquidity, a progressive continuum, that ramps up into going public perhaps through direct listing or SPAC. Can you talk a little bit about how you see the future of the public/private distinction and the public/private markets?
  11. In talking to folks on the CartaX team, some talk about this longer term vision of companies staying private indefinitely -- the idea of private and liquid as a competitive advantage that companies want versus liquidity in this stage as a stepping stone to going public. How do you think about that?
  12. From a product perspective, one of the things that you've talked about is the power of creating an issuer centric platform, and that's one of the things that's been missing. When I was chatting with Alessandro, one of the things he mentioned was -- he framed CartaX as a way for every company to create a custom stock market. And I thought that was interesting in the sense that it describes it a little bit more as SaaS than, let's say, as an aggregator. In this world where everyone is building a custom stock market, who brings the buyers? And one of the pushbacks I hear about CartaX is that it's not buyer focused enough, it's not focused enough on the entire ecosystem, it's too issuer centric. I'm curious for your thoughts on that from a product perspective.
  13. Along those lines, do you see companies having to ramp up an investor relations function sooner? That's part of having companies at an earlier stage be able to tell their story better, sharing disclosures, et cetera.
  14. On that note, is there anything we haven't talked about that you'd be interested in bringing up?
  15. On that note, I really appreciate you joining us, and super interesting conversation. So thanks so much.

Interview

I'm here with Arjun Sethi, cofounder of Tribe Capital, a $150 million stage-agnostic venture fund. Arjun was an early investor in Carta and he's on the board of directors. Thanks for joining us, Arjun.

Thanks for having me, Walter.

I'd love to talk about secondary in particular and how you think about it. You do early stage and also you do late stage. Are you a buyer or seller, both or neither?

Secondary is a little bit of a tricky term to use because you can have secondary in any round, when there are any sellers that are on the cap table that want to sell during the primary round.

So, for example, if I was to do a series A, let's call it a simple 10 on 40, and there are a couple of founders that want to take some liquidity, and that's all defined as secondary. Or, if a company decides to buy back some shares and redistribute it out, that's considered a secondary. Or, if you buy from an early shareholder outside of a round, you do a transfer agreement, that's a secondary. So there's just so many definitions of what secondary really means, but I guess the truest sense of the word is that it's not primary capital going under the company's balance sheet for them to use it as a use of proceeds to go to war.

So, let's dig into that a little bit. So you participate in secondary as part of primary rounds. Do you also do it outside of that?  And through other means like through brokers or off cycle tender offers, et cetera?

Yeah, that's a good question. So we have not done one, yet to date.

That doesn't mean we won't. It just means that it has to fit in our paradigm of how we underwrite. So at Tribe, we have this quantitative approach to product market fit. In order to build that bottoms up view of a company, we need primary data, and that means we need to ingest all that raw data and then build their bottoms up view.

And in secondaries, you don't get the ability to get that data. I would call it the Wild West, where you might have the word of some people. It might be someone's SPV of an SPV of another brother's mother's SPV. It could be that you're doing a transfer agreement, but the company is not willing to share any of the information.

So there's just a lot of information that's not asymmetric. And so I would say is what you have access to is asymmetric gossip. If you look at the majority of the secondary transactions that exist in the ecosystem, it's pretty much focused on the head. It's these companies like, in the past, Slack, it was companies in the past that were Robinhood and I can just go down the list -- you know, SpaceX, et cetera. It's name brands that people understand.

And it's not the emerging class of companies, because it's a different set of folks that focus on those securities. So primarily the secondaries that we've participated in have been -- the majority of them have been our own portfolio. And then there've been a handful of companies that we know really well, where at some point we had underwritten the risk of the company, or at some point we had worked with them and we still have a good relationship, so as we are trying to transact on a transfer agreement of a secondary, we'll let the company know that we're doing that. And we're excited to be a part of the cap table and build a relationship longterm. 

We're doing one actually right now where we are buying series A and series B shares from early shareholders that need liquidity and we have a long hold period that we're okay with. We like the company and we know they are planning to go public in three to five years. We can help with the narrative, the story, the bottoms up view and what we do really well, given our experience and how we've done that with past companies.

And so I would say those are far and few, but if we do it, then we'd play lots of capital towards it if we think it's strategic.

One thing I heard talking to some secondary funds is that a lot of them do primary at early stage so that they have access to as much information as the primary investor would have. But as a secondary investor, they build that relationship with management and then commit to buying up all the secondary that might become available and break off at different points. Do you have that type of relationship with companies when it comes to secondary?

Yeah, I think it really depends on what stage the company is at. So our primary focus as investors are finding alpha style returns, is looking for 5x to 10x style return profiles depending on our entry point. And so there's a natural saturation point where these companies may not fit that mold,  when they're starting to get into the three to five to $10 billion valuation ranges. And that's why I think it becomes harder to underwrite at that stage, given their growth patterns. It's not to say it's impossible.  

Till date, I think we have deployed around $250 million, we have multiple facilities that we use across early stage and late stage primary and secondary. And so what we're really trying to underwrite for at any given point in time is around , at the lowest end, 3 to 5x return profile for a later stage, then a 5 or 10x at an earlier stage. 

And then I think a lot of reasons why people do secondary in these markets is because they are having exposure to one stock versus a portfolio.

Can you talk a little bit then about the sell side?  A lot of what I'm hearing is buy and hold. Do you have any ideas about de-risking for an early stage investment, at series C and D? How do you guys think about that?

Again, I think it depends on your entry point. So, let's take an example. Say I'm a seed fund or an operator angel , whatever it might be, because the asset class at the earliest seed stage is becoming a little bit more commoditized. You know, anyone can become a so-called investor. But if you really go back and take a look at the history, it's not necessarily a bad thing in any capacity. I'm a big fan of it. It's the people that have the most context into a certain type of sector, region, a value proposition, would support their community, right? So you had angel slash seed investors. Now you're enabling more of them, and more capital behind them, to be able to invest at the earliest stage.

So the highest failure rate, highest attrition, highest loss ratio is at these stages. I'll call it pre seed to seed for now. Now when you have a -- let's just say, a $10 to $20 million early stage pre-seed, seed fund, and let's just say you've invested in Robinhood at the earliest stage. And now that position is looking, taking into account dilution , let's call it like a 25 to 50x return profile already.

The question is how much do you want to take off the table? Do you want to take all of it? 50% of it? 1x your primary of what you put in, right? The rest, you start thinking in that direction, when you have the belief that liquidity can exist. Normally you wait for M&A, or an IPO round. And over time, over the last 10 to 15 years, you've had a larger proliferation of capital coming in to buy secondaries, by buying outright the stock and you're finding sellers that are amenable to a certain price.

So you're kind of negotiating it. So I would say the primary sellers that we've seen and that we interact with are traditionally pre-seed, seed and series A. 10 years ago there wasn't pre-seed so it's usually seed funds or early stage funds. And the later the company is in its life cycle, the more you'll see some of the early shareholders try to take some capital off the table to return it back to their shareholders who have been holding on for four or five, in some cases, eight years. And so I don't think we think of it differently. For us, we are always thinking in two ways. One, if we're active on the cap table, your selling amount is pretty de minimis. But if you are passive on the cap table -- where you have a couple of million here or there, or you just invested as a participatory check and you're not active, as I mentioned, like an activist on the cap table, you know, taking a board seat, et cetera -- then you've seen more of those types of folks sell at a certain inflection point when the company is scaling or you feel they might be getting to a certain maturation.

Again, there's no hard and fast rule here, and it's not to say that they make better decisions or worse decisions. It really just comes down to liquidity, and how much do you need at any given point. Some can hold for a longer period of time because they don't need the liquidity. Some have a harder time because their cycle times and  when's they need on the board for their LP base matters a lot.

One of the things that you talked about in your article about Carta and 1 trillion in equity is that you see CartaX and highly liquid secondary markets as affecting and changing capital allocation strategies for VCs. Can you talk a little bit about that, in relation to what you just talked about, but anything beyond that?

Sure. If you look at a company today, and you're scaling. So let's just say you raised a ton of early money and you were successful when you raised your next subsequent rounds.

And let's just say, generally unicorn companies -- I don't have the data behind this, so I'm kind of pulling this out of anecdotal evidence -- but say you're roughly raised between $50 to $100 million, to be worth between $500 and a billion in valuation. Let's just call that kind of like the even numbers.

And once you get there, you have this preference stack of $50 to $100 million. And you have early employees of these early shareholders that are no longer as significant or as actively involved in the company's success, moving from next lifecycle stage to the next lifecycle stage. By no means are we saying they're not valuable in any capacity. It just means that, do you want to free up your cap table to take on more capital or get other people aligned into the company that could be strategic? 

So, for example, let's just say Tribe comes in and says, hey, you know what? I need to hit a certain threshold, let's call it 5% of your billion dollar valuation, and I'm willing to deploy that much capital, but I need to hit this threshold. But if you're not raising, you don't want to get diluted, you want to raise primary .  Then you say, okay, well, let me do a mix of primary and secondary, or all secondary. And it makes it -- in my opinion, one, you get to lose part of the preference stack in some cases, or you add onto it in some cases. 

But the way that Carta works I think is really interesting, is that you are now putting into place an auction style mechanism to get strategic investors into the company on a quarterly basis. Assuming that's the structure in which they roll out publicly, that you're able to do that and reduce your preference stack for you, your employees -- when I say you, I'm talking about the CEO and the management team -- your employees and your investors that are on the cap table.

It's a big deal. And the reason that's the case is that you're providing liquidity to the folks that are willing to sell at that time. That's like a first in private markets in a way that's structured and organized. 

Whereas today it's Wild Wild West. It's not to say you can't get it structured and organized, or you have the Forges and the SharePosts of the world that do it, but it's one off.  It's kind of the chicken or the egg game. You go to a company and you say, hey, I can help you with your secondary. And the company says, okay, great, at what price point do you think we could do it? And then they go out to the world and say, maybe I can do it at this price point and that world says -- they can change their mind, on a week to week basis. 

That's really hard. I like to come to a conclusion. And I've seen it. I've been on both sides, where we had a company that was doing secondary and the number kept changing on a week to week basis. It's painful. You don't want the board to think about that, you don't want the CEO and management team employees to think about that, you just want to have a structured liquidity pool at a certain point.

And that's been what the goal has been focused on for Carta and like minded folks in the ecosystem. And that's what we're really behind and what we think can happen pre-IPO, pre-a timeframe for when a company wants to go public. And frankly, if a company wants to stay [private] forever, this is a great mechanism for them to be able to do it because now they can truly control the cap table on who comes in and who doesn't and the amount of stakeholders that are in the company.

I'm curious to hear you talk a little bit more about the auction mechanic.  It gives you price discovery in a market driven way, but it also introduces some risks to the company. Can you talk about some of the pushback you've gotten from management about participating in this type of novel price discovery in the private markets?

To be honest, I haven't really seen a lot of pushback because it just makes a lot of sense, which is that you provide liquidity to your employees yourself. And it's a benefit akin to payroll.   You don't really argue with payroll, in market prices, you just say, okay, that's what it is.

And then when it comes to market comp and equity and what the equity is priced at. And then you're coming into a place, which is like, should I value at fair market value, the same way in which my employees get an option strike price. Should I value it at the last round, but what if I grew 3x since the last round. So how should I do it? 

And so I think the big hesitations are, if you haven't been frequently fundraising, what's the value of the company, and how do I deliver that? The debate, in my opinion, goes back to what is the market willing to bear paying for your company when you give them a certain amount of information and disclosures.

And I think it's not too different than what you do today. Most of the venture firms and the mid stage growth firms have an idea of how a company is performing at a certain stage. And they have an idea of the speed at which they're growing and what amount of capital it'd take for them to get to the next level.

Now there's all these certain nuances to it. You don't have the board and management take on it. You don't have the way in which they're projecting growth and internal milestones that might be secret or trade secret orientation. Now, besides that, you have a generally good direction of how a company is performing, especially when there's a certain amount of revenue traction at the $500 million to $1 billion in valuation range. And of course there's always the outliers.

So the question you ask is, well, then, how do you feel about price discovery? When you're at that stage, let's just call it 1 to 1.3 billion in EV -- do you really care? If you are at 1.15 versus 1.25, the answer is no. And if you are providing a benefit to your employees, if you are providing a benefit to your management team, if you are employing a new way of compensation that no one else has. This is the first time in history where you can start competing with the likes of Facebook, the likes of Google, Amazon, et cetera, where you're not just telling someone I can give you salary plus stock, and trust me, the stock will be worth something in the future. You're telling them that it's going to be liquid based on your vesting in possibly a year.

And it's a different value proposition for bringing in different types of talent, as well, as these companies get larger and larger and larger. And so that's what I'm actually most excited about. And when I talk to companies that are excited about it -- even our own portfolio is excited about it in that same way, which is what's that on ramp to getting access to capital and democratization of capital as well, not just to the issuer or the company, but also the employees and early stakeholders that are in the company in the first place.

I'd love to hear you talk more about that.  Some of the pushback that I hear is that, well, the best companies are always able to hire and retain talent, and they're able to do so because they have an amazing growth trajectory. And so employees at those companies aren't necessarily thinking about liquidity, or, to the extent that they are, their price expectations are much higher than what they might be able to get even in a process like this.

If that was true -- I mean, this is I think where people have a hard time -- like that's an anecdotal statement, and people have a hard time doing the math. If that was true, then why are the majority of the secondaries at high growth companies and logo companies at the head, where the early employees and the stakeholders need liquidity.  Just those two statements, they don't work for each other. And the reason is that, for precisely what I said, liquidity matters. And, you know, if a company goes from a billion to 6 billion in two years, are you saying that the employees might not want to take some off the table?

And the answer is absolutely not. Of course they want to, because they don't know if it's going to go from 6 to 8 or 6 to 7 and what that growth trajectory looks like. Of course you're focused on it and you're hoping that over the next 5 or 10 or 15 years that you can get it to these massive megacorn and decacorn outcomes that we've seen in the past. But imagine if you're an employee and you don't have liquidity for 12 years, that's not an environment any employee wants to stick around. 

And so I think our argument is that you have higher retention because you're actually able to provide liquidity. Whereas in the past you have lower retention because people are basically jumping from company to company and saying, I'm here for four years, I vested, I'm going to go to the next one for four years and vest, because I don't know which one's going to do better. 

And you're right, the best companies do tend to raise more money because they're growing at a faster rate. But if you look at their cap table, if you look at their frequency of secondaries, if you look at their buybacks, they are the most active.  And so then you ask the question, well, why are they the most active? Because they need the most liquidity.

Can you talk about incentive alignment as between VC funds and LPs? I'm curious because one of the theses I've heard is that a product like CartaX would allow LPs to invest directly into these companies, whereas today they're investing into funds to get exposure to these companies. Does that create an incentive misalignment with LPs? Is it quite possible that they will disintermediate VCs and go directly into these companies, et cetera?

Yeah. I think everyone always feels like a certain type of product is going to disrupt the VC model. The reason the VC model exists isn't because of anything but you want to rely on professionals and folks that are focused on a certain region, sector, stage manage your capital. So let's take an example.  If you're a family office that's worth a hundred million, of course, you want to be able to go direct every once in a while, versus invest into funds, because you don't have a good sense of what their black box mentality is.

Now, if you're a pension fund and you have a hundred billion to allocate, or 50 or 10, I mean, these are just large numbers. Do you really think a pension fund is going to go and try to figure out which stocks they should buy? The answer is no. They don't do it today in the public markets. Why would they do it today in the private markets? So there's these extremes, and then everyone in the middle. And so absolutely there's going to be some folks that say, I'm really excited about getting space exposure, I'm going to invest in the 10 biggest space stocks, private and public. Great. Then there's climate change, and there's healthcare, and there's tech. It's not to say that they won't do it, or they will do it. It's more what's their focus, and how much capital do they want to deploy, and who do they want to have managing it? 

The reason why you have professional managers that exist is that all they do is focus on this ecosystem to provide the best returns, and on a cost adjusted basis it's cheaper to go through a manager than it is to do it yourself. And I think that's historically been proven true, more so lately than even in the past. And yes, of course you have tier one, tier two, tier three, or tier four style return profiles of folks that do a good job and bad job, but that comes down to access, your focus and what your exposure is to certain asset allocations and how much of it is available to private capital versus not.

And venture, people really try to focus on it, but venture wasn't that large of an asset class til even 10 years ago. And it's slowly been getting larger and larger. When compared to private equity, venture is such a small nugget.

Switching gears a little bit, one of the things that has come up repeatedly in conversation is the sharp distinction between public and private in terms of liquidity, and platforms like CartaX enabling more of a gradient of liquidity, a progressive continuum, that ramps up into going public perhaps through direct listing or SPAC. Can you talk a little bit about how you see the future of the public/private distinction and the public/private markets?

You know, I think it really comes down to risk liquidity hold periods and where else you can find yields. So I'm forgetting where this metric came from, but I think it was roughly, between Europe and Asia, there's about 13 trillion of sovereign capital that is looking to be deployed outside of their traditional asset classes and they have earmarked that to go into private equity and venture capital. 

That is a lot of capital coming into the markets. You have to figure out what liquidity looks like when you have that much capital coming in over the next -- and again, that target, it was like over a five year period. So imagine what it's gonna look like over 20 years with low interest rates and yield across other asset classes just being low.

And so the only truly unique place to be able to put this capital is going to be in the equity markets, public and private. Now, what the public and private markets look like, and how that's going to be good or bad for investors, that's really hard for me to say, in my opinion. These days, if you look at it with COVID, you would think that risk attribution into highly risky assets, like Tesla -- you have copycat energy vehicles and space rockets -- and biotech companies would be considered lower valuation, but the public markets value those companies and those innovations higher than they do in the private markets. And so you're seeing this delta and I would say this dichotomy between the two worlds. And I'm sure you're going to see the same thing in tech and SaaS and transactional payments companies, kind of go down the list.

But I think what you're really seeing now for the moment is this final awakening of the transformation from retail to digital infrastructure. And everything that comes with digital infrastructure, and the types of companies that you value because of that. From enterprise infrastructure to payments to the stacks, to the workflow, bottoms up SaaS, mid market SaaS, top-down SaaS, HR, et cetera -- all of it is exploding in its own way because they believe that's how the new economy is going to form. In some cases it's overzealous, in some cases it's not. I think you have to think about it ecosystem to ecosystem. 

So it's hard for me to say what the private and public markets are going to look like. I would say that you're just going to see more private companies because of the ability to deploy more capital into that ecosystem. I think you're going to see higher attrition rates at the earliest stages, which is not necessarily a bad thing. It just means we're going to have more experiments. And so I'd like that to continue to happen worldwide, not just here in the United States.

In talking to folks on the CartaX team, some talk about this longer term vision of companies staying private indefinitely -- the idea of private and liquid as a competitive advantage that companies want versus liquidity in this stage as a stepping stone to going public. How do you think about that?

I think it just comes down to a matter of focus. And if you ask a company why did they go public, it's going to be able to access capital markets. It's not necessarily, I want to go public for liquidity. Liquidity is a part of it. It's multiplicative. But it is what kind of access to capital markets do you need, what type of expansion do you want? You know, domestically versus internationally, you might be international and you need domestic recognition. There's a whole host of reasons why people do it. 

To say that CartaX can do that today -- it's really early, but 20 years from now, can CartaX be head to head with what's happening in the public capital markets perspective? Yeah, absolutely. But there's a long way to go before you start getting into the places where you can get access to debt and access to the different types of investors and financial products and facilities that exist for companies that are public and that are more transparent.

From a product perspective, one of the things that you've talked about is the power of creating an issuer centric platform, and that's one of the things that's been missing. When I was chatting with Alessandro, one of the things he mentioned was -- he framed CartaX as a way for every company to create a custom stock market. And I thought that was interesting in the sense that it describes it a little bit more as SaaS than, let's say, as an aggregator. In this world where everyone is building a custom stock market, who brings the buyers? And one of the pushbacks I hear about CartaX is that it's not buyer focused enough, it's not focused enough on the entire ecosystem, it's too issuer centric. I'm curious for your thoughts on that from a product perspective.

Yeah. I mean, look, if you're issuer centric, you will have more issuers. That's  our high level thought. 

It's kind of like Shopify being merchant centric versus customer centric towards the end consumer. It's not to say they don't care, but Shopify cares about merchants, or they care about onboarding that experience, their ability to control their CRM and their shipping and quality. 

And when you think about an issuer centric model for equity, it's no different, right? Like you want to create and control your experience for your employees, who are your own customers, your management team, your stakeholders. And the ability for them to feel like they're in control and empowered by the way in which you enact an issuer centric model and customer centric model.  In my opinion, the buyers are always there and they're always willing to transact for a product or a company that's going to provide yield. I actually think it's that simple. 

Now, will it be perfect in the beginning? I don't know. Is it going to be really easy to onboard? I don't know. But like the last 30 years has been so fucking buyer-centric, it hasn't worked. And the reason it hasn't worked is that it doesn't work for the seller. It's too onerous. It's too complicated. It's too Wild Wild West. And it's not in benefit to the company and the employees or the stakeholders. And it's one of the reasons why you've seen them close themselves up so much over the last 20 to 30 years. Anyone who says that they need to be more buyer centric, I think is just losing the point of why this exists in the first place. 

Let me take a step back for a second. You hear a lot of VCs complain and say that round was too hot, it was too hard to get into. Because the company was good. It means their experience is good, their product is good, the way in which they talked about their scale and vision was good. So you had a lot of buyers around the table. But it was really hard to get into the company. So it's issuer centric. That's the same problem. 

And so again, I'll always go back to this, which is, there's never going to be a perfect world, but at the end of the day, the demand far outweighs, by an order of magnitude, the amount of supply that exists there. And if you have a good company and a mechanism to be able to create a structure in which that company gets liquidity and they get the right types of buyers around the table, they will find buyers.

Along those lines, do you see companies having to ramp up an investor relations function sooner? That's part of having companies at an earlier stage be able to tell their story better, sharing disclosures, et cetera.

I think it truly comes down to an example.

When you have your first set of auctions or your first set of transactions that go through, people kind of get used to it. For example, SPACs have been around for 18 years. And they really only got popular two or three years ago. We were one of them that popularized it, at a firm called Social Capital, with the Virgin Galactic deal.

And over time, what happens is you get this example of, wow, there's this tool that's out there in the financial markets, and it's now finally being used in a way we never thought of it before, but it's in benefit to the companies and benefit to the issuers, it's benefit to the stakeholders. And so how else can you manipulate it to make it work for everybody on each side? 

I don't think it's going to be any different here in the private transaction world  and in launching these auctions. Which is, as it becomes more normalized, as it becomes something that employees want or demand as a part of their benefits, companies naturally move in that direction. Which is they want to hire the best people, they want to retain the best people, and they want to find the best investors. And when you have all three in concert saying, I want this product, you start changing the narrative, you start changing the ecosystem and you start building around that. And I think that's key here. That's what I've seen a lot of in the last five to seven years. 

We were also investors in SecondMarket, so we're very familiar with what worked, what didn't work. The major issue has always been issuer centric versus buyer centric. And the more you stay issuer centric, in my opinion, as a guiding principle or a north star for these types of transactions, the more you're going to be able to win.

And the folks that have been naysayers or negative about this, they've been negative because they've been on the buy side.

On that note, is there anything we haven't talked about that you'd be interested in bringing up?

You have to think about what really matters. If you provide liquidity at different stages of a company's life cycle, regardless of if it's private or public, what that allows you to do is give folks a certain amount of regular liquidity, and that helps propel entrepreneurship. I think more than anything, what do we want more of in the United States or worldwide? From the United States perspective, you want more entrepreneurship, you want more innovation, you want to have more risks. But in order to do that, you need to have more of the winners to be able to provide liquidity for themselves, as well as their employees and stakeholders. And then those stakeholders and employees will just reinvest back into the ecosystem -- may not be the same company, but back into it.

And so we've had this DNA in the Silicon Valley of like, when we get liquidity, you see a lot of angel investors or new firms or investors come on to the table. And they reinvest in new ideas, either folks that are leaving that company or new folks that have similar ideas that are being propelled by that ecosystem. 

I think that's really important from a DNA and ecosystem of innovation and entrepreneurship. And we've had less of that over the last 15, 20 years, not more of it. I think as more happens, we're just going to see better and better outcomes. I won't comment on the macro or micro state of when this works or when this doesn't work, but directionally, when there's more liquidity at the earliest stages, where people can reinvest into innovation, you have better outcomes and better ecosystems.

On that note, I really appreciate you joining us, and super interesting conversation. So thanks so much.

Yeah. Thanks for having me.

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This transcript is for information purposes only and does not constitute advice of any type or trade recommendation and should not form the basis of any investment decision. Sacra accepts no liability for the transcript or for any errors, omissions or inaccuracies in respect of it. The views of the experts expressed in the transcript are those of the experts and they are not endorsed by, nor do they represent the opinion of Sacra. Sacra reserves all copyright, intellectual property rights in the transcript. Any modification, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, or selling any transcript is strictly prohibited.

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