Peter Harris

We incubated this thing called University Impact Fund which didn't actually have a fund. It was more they were just learning how to do deals and that got absorbed into the University of Utah as the Sorenson Center for Global Impact impact investing. >> Oh yeah. >> And then it was kind of like the child eating the the parent. So when we split off, University Venture Fund was absorbed into the Sorenson Center for Global Impact Investing as one of their different pillars. >> And today that is called the Sorson Impact Fund >> essentially. Yeah. bike. >> Welcome back to the Startup Ignition podcast. Thank you so much for watching the last episode. If you watched it, if you're tuning in just now, welcome. I am Tyler Richards. This is John Richards. >> Hello. Hello, everybody. We are your coolest VC friends that eat pizzas on Tuesdays. I don't know, maybe I can make that claim without getting in trouble. Um, [laughter] but today we are joined by Peter Harris, our dear friend who pre-podcast I was just saying I have seen so much recently because we run in so many of the same circles and I'm so happy you could finally make it here on our podcast. Thank you for accepting the invitation. So, Peter Harris, welcome to the podcast. >> And I've known him a long time. >> You have? >> 20 years. >> We'll have to talk about 25 years. 20 to 25. Let's not date ourselves here. >> I was just around college students for the last 2 hours and man, they are just looking younger and younger. I'm like, you're 21 years old. You look like you're 14. >> Yeah. [laughter] >> I'm I'm having this experience. I'm running into students from my 12 years I taught at BYU. Dave Baitman, the founder of Intrada. >> Yep. >> He was a student of mine. I mentored him. >> He went from one company into Intrada and helped him. He's 48. Yeah. 48. Yikes. [laughter] And he's got gray hair in some places now. >> He's got grandkids. [laughter] >> Is it crazy? >> It's wild. Time flies too fast. But I'm sure you don't feel that old, right? >> I don't until that happens. >> I mean, when I have a student that I mentored when he was a student that didn't know what he how to tie his own shoes before started a company and now he's like, you know, mega successful and I go, you're 48 years old. It's crazy. I mean it I seriously it's amazing how everybody says that time flies and as you get older >> I just I I opened up um Instagram this morning and my past co-founder of Dev Mountain that I you I think you know Kayn don't you know he posted like a crazy like throwback video that was like super sentimental about you know the Dev Mountain days just barely and I'm like man was it that long ago yeah it seems like yesterday. It's crazy how time just flies. You're like, I look like I'm 14. >> I s I sold the company 10 years ago. It was 10 years ago. >> That's crazy. We're old news. But, okay, we have to introduce Peter before we get into this chitchatting phase because we people need to know who they're dealing with here and who we got on the podcast. So, Peter, I have a bio here for you. So, I'm going to read it real quick here and then we're going to get into something more interesting. >> Correct anything that's not correct. >> Yes. >> All right. [laughter] All right. >> And I'm going to do an icebreaker with you. I don't know if you've watched any of our podcasts. After the bio, I'm going to do an icebreaker. We're just going to do a quick little game. It'll be fun. But here we go. Okay. Our guest today is a massive driver in the Utah startup ecosystem, Peter Harris, and a pioneer in the venture capital space. He is the co-founder and partner of University Growth Fund, which has grown into the largest studentrun venture capital fund in the United States. Um, through your work, you've helped train the next generation of entrepreneurs and investors while backing massive tech giants. I saw, is this true? Open AI, >> anthropic, >> data bricks. Yeah. >> Okay. Do I need to say anything more? [laughter] Like >> I I got into I got into Lyft through Peter. >> Yeah. >> What am I in now? Am I in data bricks with you too? >> You are in data bricks. Yeah. Yeah. >> Lucky you. Look at this guy. He doesn't even know his investments, huh? >> Um so you're also a fellow podcaster um co-hosting the venture capital podcast, which is really cool. and uh the mastermind behind Utah founder 100 which celebrates region's top innovators. Uh beyond the tech world, you've dedicated yourself to social entrepreneurship. Uh you've built uh microenterprises across West Africa doing a lot of philanthropy and to combat poverty through market solutions. It's really cool to have Peter here on the show. >> He's just a nice guy, too. That's refreshing. >> Yeah. [laughter] >> And yeah, I feel like every time I see you out and about, like I always gravitate towards you. I'm just like, "Oh, I need to go say hi to Peter. I need to talk to Peter. I need to see what Peter's doing. What does Peter got to say?" Like, I just He's just an interesting guy. So, this will be an awesome fun episode. So, thank you so much for coming on the podcast. This is going to be awesome. >> What I really like is Peter and his partner have helped me train train the massive entity known as Fidelity Investments on how to how to handle >> where is this going >> because it's crazy. I one of the things we've spent years doing is training Fidelity how to get capital calls in a IRA situation over to their fund. It's been crazy >> and we finally got it down now. But gosh, it took what three, four years of multiple attempts to literally you think they know how to do it, but they don't. >> Well, for better or for worse, Fidelity is very secure and locked down and it's really not. >> They're conservative and that's safe, but they're so conservative they sometimes don't do some modern things we want. Right. So, >> yeah. >> But anyway, >> it's fine. It all works out. >> We're just all glad we get to deal with things like that, right? So, there you go. >> That's right. >> Okay, Peter, we're going to play a quick game of favorites with you. Okay. >> Okay. I'm going to list a couple of prompts here and I just want you to tell me what your favorite thing is. So, so the audience can get to know you just a little bit outside of like who of your career. Okay. >> Okay. Well, first we'll start easy. Who's your most uh favorite entrepreneur? Like that one that people would know? So, not like local, but like who's your favorite famous one? >> Uh, so this one I mean is a little controversial and maybe a little overplayed, but I think it's Elon Musk. And I say that cuz >> I don't I've been an Elon Musk fan >> for a couple decades, right? Not just recently. So, >> yeah. Why Elon? Any reason? I like the fact that he dreams very big and tackles things that nobody else is willing to tackle because he is a mission-driven person at the end of the day and he puts his money where where his mouth is, right? Like the idea of like I'm going to sell my position in PayPal and then I'm going to invest like a hundred million into like rockets is mind-blowing, right? Like point to me another entrepreneur that has that tenacity. >> Yeah. What he's doing with Neurolink everything, right? I mean, all that stuff. I I want to get some street credit with you because our audience has heard this before on another episode somewhere, but literally Elon Musk and I competed against one another at one point. >> Oh, really? >> I I was the first guy to put Yellow Page on the internet back real early in the day because I was in the yellow page industry, which you may remember, but Elon Musk >> was one of his first things was he did a company called Zip 2. >> Oh, that's in the online search and directory business. So, kind of. So, it's very likely we were at a trade show together or something. Oh, I just [laughter] I read a like a quote or something from Elon Musk recently. It was like, I didn't like seek out to go into the car business or the rocket business or um you know, the solar business or everything that he's tackling. He's just like, I just thought things just need to be better and so I'm just going to go make things better. And he wanted to create something substantially better than what existed and that's all he thinks about when he's creating and innovating, which is really cool. >> Yeah. >> Okay. Cool one. Okay, how about this next one? Let me get back to my uh prompt list here. Um, what company do you wish you'd invested in early that you ha that you didn't or and wish you had? >> So, my anti Okay, so this is kind of a fun story and it goes back to Elon Musk. So, we had an opportunity to invest in SpaceX at 20 billion, which 20 billion is a big number. seems astronomical, >> but you compare it to where it is today and like, you know, >> you didn't do it. >> We didn't do it. And um yeah, I mean, look, I think at the time rocket ships were still blowing up on the launch pad and you know, Starlink was just an idea and you know, at the time we were like, this company could be one rocket ship explosion away from bankruptcy, right? And it just felt really >> risky. risky. Little did we all know they would drive the cost of sending a rocket into space down by 1 1,000th of the cost. I mean, who knew, right? >> So, I had the chance as a member of Space Angels. I'm a member of Space Angels. >> Yeah. >> And it came across the first I joined Space Angels 8. Wasn't one of the first ones there and it was 180 to 200 billion. >> Uhhuh. >> And I said, I'm not going to invest 180 or [laughter] million. I could have 10 times my money at least, right? I mean, who knew, right? Just to let you know, out of 20 billion today in September of 2026, that's where we're at. It's worth about two trillion. >> So you you would have made a 100redx your investment. >> Oh, I I am well aware. I'm well [laughter] aware. Um >> from 20 billion to two trillion, right? That's the right math there, right? Crazy. >> Yeah. I mean, there's dilution in there, but yes. Yeah. I mean, it would have been a >> They raised a ton of capital. Um, the fun part about it though is I had a student and he he was the team lead on the deal and he was just like, "We got to do this deal." And he was literally pounding the table like, "It is Elon effing Musk and we got to do this deal." And um, of course, who is the first person to text me the day they go public? Right. I mean, [laughter] he did. >> Okay. >> So, and maybe we should give everybody Oh, I'm still in the icebreaker. We haven't even gotten to the I thought we were in mid-con conversation. Go ahead. Icebreaker. >> No. Okay, we'll do a couple more icebreaker and then and then we'll get into the podcast. Um, one more. Let's do one or two more. >> What is the most used app on your phone? >> Uh, it's it's probably a tossup between Gmail and WhatsApp. >> Gmail and WhatsApp? Why WhatsApp? Is is that how you communicate with everybody? >> Yeah. So, I have a bunch of properties in Mexico and I'm chatting people there and I'm part of a few different investment groups that for whatever reason chat foreign on there and >> WhatsApp is very popular outside of the United States by the way. Everybody's on the US. >> Everybody uses it outside the >> That's probably a tossup between those two. >> Okay, last one. Here we go. Or actually, let's do a two more. These ones are easy. What's your favorite place you've ever visited or been? Like the most memorable place. Um, that's a hard one because I love to travel. Um, I would say I don't know. We really enjoyed kind of the Amalfi coast of Italy. >> Yeah, that's a good one. I love I is the Maui coast chinker. Is that or is that a different south? >> Yeah. >> Um >> Oh gosh. What's the island off of there? What's the island of the one >> uh like Sicily or? >> No, Capri. >> Oh, yeah. >> Yeah, the island of Capri is where Malfi coast you go off and that's all beautiful. Yeah. >> Okay. I don't know if this is true or not, but >> do you play board games? >> I do play board games. >> Okay. I think I I think my AI found that online. Okay. [laughter] I don't know where that's online. What's your favorite board game? >> Oh, this is I mean it's kind of the flavor of the month, right? Um >> are you like an avid game like board gamer? Like, do you have board game nights? >> Yeah. >> Okay, now I'm mad. Why haven't I been invited? [laughter] >> Well, I didn't know you like to play. We'll have to have you come up. Um, I'll tell you my u my addiction is uh I've backed over 200 projects on Kickstarter. >> Really? >> And probably close to half of them are board games. >> Board just so like Exploding Kittens and everything else in between. >> All that kind of stuff. >> Yeah, because I know Exploding Kittens was huge on Kickstarter >> and that was a card game. >> That was a card game. Yeah. >> Yep. >> Um, >> yeah. I don't I don't know. Like I'm I'm a big fan >> no judgments here. >> I'm a big fan of like, you know, the obvious ones like Settlers of Katan and um >> but you like the like hardcore strategy. >> Oh, you know what? I'll tell you which which game is my all time favorite >> and that is Twilight Imperium. >> Oh, I've never even heard of it. >> It is. It takes five hours to play so I don't get to play it very often. And it is like >> that's worse than a round of golf. >> Yeah. It's like playing risk in space mixed with settlers of katan. >> Oh, >> and the best part is all the negotiation that happens. >> My pupils just enlarged. I got really interested there. >> Risk in space with mixed with settlers of Katan. >> Really? >> What? >> And and lots of diplomatic negotiating. >> So then if you're this fan of that, I knew somebody up in Seattle 30 years ago and I'm not sure exactly his job. just kind of a modest, humble, good guy. And in since I left Seattle and been down here in Utah, he became Grandpa Beck. >> And he Have you ever heard of Grandpa Beck's games? Cover your assets and all those. Oh, yeah. >> And they've made millions from their games. They have so many popular titles. And I go, >> where did that come from? I didn't know. So play Grandpa Beck's games, everybody. I mean, it's crazy. He's an entrepreneur. That's an entrepreneur. And he's invented and frankly I probably only like five of his games. Oh, that's lovely. [laughter] >> Have you ever played Escape from Sunset Island? >> I have not played. >> It's a zombie. It's a It's a zombie apocalypse board game. >> Okay. >> Where you have to go around the map >> and zombies chase you and one of the players in the group is the zombie. So, they control the zombie, but you grab >> items like weapons, gasoline, food, water, and you have to escape off the island after you get one of each of those items around the board. Y >> and the zombies power increasingly gets bigger. Uh my family play See, so I I'm a I'm a board gamer. My >> wife's extended family plays that game every year when we go on vacation with them. It's like the highlight of the trip. >> Highlight of the day. I love it. >> So look it up. Escape from Sunset Island. It's it's a it's a it's a very niche weird one. >> You should play uh Zombies is what it's called. >> Just Zombies. It's one of the original zombie board games. And what's fun about it is you build the map as you go. Oh, >> so on your turn, you grab a square of the map and you put it down >> like the katon pieces, but you load it up and the map is different every single time. >> Yeah, that's cool. >> Yeah, it's fun. Anyways, >> okay, we can nerd out for a [clears throat] while, it seems like. Okay, thank you for playing my icebreaker. We just want to get to know you a little bit more outside of the VC Peter. So, um, but now we can go into the VC mode. So, I I you talked about how you met Peter 20 years ago. I don't know if we want to go further back than that, but what where do you want to be? >> I'm trying to remember. Were you already at Okay, we'll go let's let's just take you through your history and we'll talk about where I intercede in there. So, let's Where did you grow up and where'd you go to high school and college? >> Sure. So, born in Utah, but when I was four, my family moved uh to New York. So, upstate New York, Syracuse. So, that's where I grew up. >> Uh I went to high school at Jamesville Dit High School, a suburb of Syracuse, New York. And uh you know at the time I was in high school I my dad was an engineer at Loheed Martin big defense contractor >> computer a rocket scientist. >> Yeah. [laughter] Kind of computer engineer. >> Yeah. >> And uh you know I thought that's that's what I wanted to do right. I love solving problems and I thought you know engineering is solving problems and that's what I wanted to do. And then when I was in high school, my dad quit his job at Loheed Martin, this like very prestigious great job, >> because he had read the book um Rich Dad Poor Dad and Cash Flow Quadrant and some of these, right? >> And so I read those books and I spent my summers uh remodeling apartments and flipping them and renting them and all that kind of stuff. And so I got very much into this idea of well I'm going to shift from engineering to entrepreneurship as a mechanism to solve problems. Uh and so uh yeah graduated from high school again my summers were driving around looking at you know tax auction properties and bidding on them and all kinds of stuff. So, um that's that's ultimately what helped pay for college, but um went and served a mission for my church in the Canary Islands, Spain. >> Wow. >> And while I was there also, you know, you when you're in that role, you run into a lot of people that don't have a lot of means, right? And I just kept thinking like, hey, you know, business could be this incredible tool to help solvate a lot of these financial challenges people have. So that that kind of sparked that desire. And then when I came back to the US and started school at BYU, um, >> did you go your freshman year before that? >> No, I just went straight out. So then you started as a freshman at BYU afterwards. That's right. You're about >> 20 years old, 21 years old. >> 21. >> Uh, and so when I got there, I was like, I'm just going to do entrepreneurship, so I'll just study business. Well, I work on building a company. And uh my first business idea was in Spain. They had these vending machines where you could rent uh DVDs. And I was like, "This is a great idea. How come we don't have this in the US?" Uh and so I was working with this guy who owned like 150 Little Caesars and we were going to put, you know, this vending machine and like, you know, pizza in a movie for six bucks. And uh right as we were like getting ready to buy the first machine, Redbox announces that they have over a hundred million in funding, a partnership with McDonald's. >> They were CoinStar. People don't realize they were CoinStar first and Coinar was very lucrative. >> Wait, what what was the brand or thing called in Spain? What? >> So like Blockbuster had them. >> Oh, Blockbuster had them. >> Yeah. Wow. It was predominantly Blockbuster. >> So then Redbox came in and >> Yeah. So they came in and Utah was their pilot market and I was just like I can't I can't compete with that. >> Did Redbox really launch in Utah first? That's interesting. >> And that they got a smoking deal with McDonald's. >> Yes. Yeah. >> And so >> so when that happened, a buddy of mine was like, "Hey, there's this really cool thing called University Venture Fund. Uh I think you would find it fascinating. You should check it out." So I checked it out. I applied. Um got in. University Venture Fund at the time was an $18 million studentr run fund um >> housed at a university. >> Actually, it was independent. It was always independent. >> It was Why did I just think it was >> It seemed to be really tied to the University of Utah. >> It was very tied to the University of Utah. They claimed it as their own, but technically it was fully independent. >> It was Okay. Okay. >> And that what the actual exact name was not your current name. What was it? >> University Ventures. >> It was University Venture Fund. Yeah, >> a venture fund. Okay. So, I joined that as a student. Probably about six months after I joined, the two guys that were running it uh left to go pursue other interests and they brought in uh the gentleman who's now my business partner, Tom Stringham, and together we revamped Soup to Nuts, the whole fund. So, >> okay. So, let's let's back up. So, yeah. To tell our viewers and listeners. Okay. So, you're a student at Brigham Young University. >> Yep. >> And you hear that there's an internship. Is that what it is? Yeah. >> Internship >> for students, any student probably in the state of Utah or something. >> Yeah. >> Okay. Could be an intern at this venture fund that kind of tacitly was connected to the University of Utah a little bit more than the others, right? >> Or quite a bit more. And then you got that you were awarded and they what did they have 10 20 students are helping or how many? >> Yeah, probably somewhere in there. Yeah. 10 to 20. >> And you became one of those interns. >> That's right. >> Okay. How and then how how did you were doing that for a year or two before the two general partners left or something? >> So I was there for like six months before they left. >> Six months. Yeah. As a student. >> And why who were they and why did they leave? >> Uh so it was Mark Campbell and Jared Hutchings. Um, and you know, they they had made some investments in some other companies and went to go support those companies and and wanted to >> so how was >> kind of pivot a little bit to more early stage stuff. >> Where did the $18 million come from? >> So, they helped raise the money largely from large financial institutions and the University of Utah. >> The University of Utah put in money into a venture fund. >> Yeah. From the endowment. So I I feel like we need to let people in a little bit more on what the univer university growth fund is. It it literally is a fund with the mission of allowing the students to come in on the investment decisions. You applied for that as one of the students to >> again it was called University Venture Fund and then he he'll tell the story. Let's get to I'm just saying because you you said university growth fund. >> Oh, sorry. It's now today known as University Growth Fund, but I'm just wanting to set the tables. This is not a normal VC model. It's a a student ran literally tied to the student bodies of accepting students to come in and make investment decisions alongside now you and Tom. Right. And what's the goal of university venture fund when it started was since you know it again Tyler saying how unique it is you know 10 to 20 intern students that are literally almost on the investment committee right like voting invest >> they scout the potential deals they literally perform the due diligence they do everything right so you were doing that they leave in six months and then how did you just said how did you and Tom was Tom coming in as what what did he come So Tom was an adviser uh to the organization and the it that that fund had a board and the board invited him to come in and you know temporary basis just manage things. Okay. >> And then it turned into full-time >> and then he saw you as one of the top students and you guys just became friends. >> Yeah. How did >> to a certain extent? So what happened was a lot of the students when when um Jared and Mark left the program kind of suffered, right, and had to go through a big restart and so a bunch of the students left. >> Um but I stuck around and you know worked hard to revamp the whole fund. So we we we revamped how do we recruit, how do we train, how do we mentor students so that they do good quality work. >> What a great what a great opportunity for a young man to have. Right. >> Oh yeah. No. you stepped into a great one there. >> Yeah. [snorts] >> Uh as well as like how do we source deals, how do we underwrite deals, all those things. So then when I graduated in '09, which was a very challenging job market? Yes. Um >> I was very fortunate to be able to stay >> on at University Venture Fund and come on full-time. >> So Tom, so basically when those two left, did Tom become the effective managing partner? >> That's right. >> Okay. And then he selected you to be a fellow general partner? >> Uh I was a principal, but yeah, >> over time. Okay. And then Okay. So, back in 2009 when those two left and he was left with that, was there any capital left to deploy or was the 18 million deployed or you How much capital was in there still? >> It was like uh like 50% of the capital was still >> So, you still had like $9 million to deploy? >> Yeah. So, we we were fortunate enough to make some really fun investments in companies like Instructure, which makes the product Canvas, which now has about 60% market share of the learning management software space. >> Yes. Um that was probably our biggest winner. We were also investors in a company um locally here in Utah called uh Atask and later Workfront. Um that was a deal that was kind of my first deal that I sourced and underwrote and did. >> Scott Johnson's been on this podcast. >> Those two deals from my past. I mean I got Josh Coats to come teach a class y >> at BYU and he hated Blackboard so much >> he created the Blackboard killer. >> Yep. Yep. Y >> So is that awesome? >> It's great. Yeah. >> Um and we did some others um companies like Control 4 that went public and so forth. So we we worked together at that fund for um kind of call it six to eight years together. Um and that fund funds last you know 10 years. >> Yes. >> And you need to raise another fund um if you want to continue. And so that fund was coming to the end of its fund life and the board decided that what they really wanted the next iteration of university venture fund to be was a pure play impact investment fund. >> And so you know we had said great you guys go do that. We want to keep investing in the instruction work fronts of the world. >> What year was that about? >> So that would have been like 2014. >> Okay. So in 2014 since all the people that were behind the original university venture fund were saying let's be an impact fund. >> That's right. >> Okay. And you and Tom said no we want to be a venture fund. Not an impact fund. >> Not an impact fund. That's right. And so then that's now explaining what I understand. Then that did go and be an impact fund somewhere but under a different brand name. >> Actually retain the name University Venture Fund. So, it became it, this is kind of backing up a little bit, we had a lot of students that were really interested in impact investing. >> Um, and so we incubated this thing called University Impact Fund. >> Can you explain to our viewers and listeners what an impact fund? >> That's what I was going to say. I said we should probably >> We're the acronym and and terminology police. >> Okay. >> I love it. I love it. So an impact fund could be a lot of things but the general idea is that you're investing as much for social impact as you are for financial returns. And so for them it was like we are going to invest in technologies that enable you know micro finance in Africa or we're going to invest in you know clean water technologies that could be deployed in South America. U it was that type of stuff. >> Okay. social or environmental impact. Really? >> Exactly. Kind of this idea of double bottom line, right? >> Yeah. >> So, >> and and like we don't have anything against it. We we think it's great. Um >> so where did UN So you and Tom said no, you don't want to do that. Where did that tell me where that university venture fund impact fund then went? You were about to say that history. >> So we incubated this thing called university impact fund which didn't actually have a fund. It was more they were just learning how to do deals and that got absorbed into the University of Utah as the Sorenson Center for Global Impact Impact Investing. >> Oh yeah. >> Um and then it was kind of like the child eating the the parent. So when we split off, University Venture Fund was absorbed into the Sorenson Center for Global Impact Investing as one of their different pillars. And today that is called the Sorson impact fund or something like that. >> Uh essentially. Yeah. >> Okay. >> Yeah. Actually, okay. >> And that's when you broke off. So then you were successful in breaking off with Tom and that's what we we know today. >> Did you did you keep any of the infrastructure or the I mean are and how did you explain how you kept the name you kept and how and >> well we're just not super creative, right? So >> yeah. Okay. So >> add growth in there. [laughter] >> Yeah. and you kept that name because you continued the legacy of all these students helping you. Okay. So, explain that a little bit. >> Yeah, there really was no major difference um in terms of the student program between University Venture Fund and University Growth Fund while we were managing it. Um we looked at the same similar deals, same basic um processes around recruiting and teaching students as well as underwriting deals and co-investing with funds. So, all of that remained the same. We called it university growth fund because we wanted to retain this idea that we are working with university students which is a big part of our model >> right >> um and the other thing is that like venture tends to denote this idea that you're going really really early stage and the first thing that a lot of people think about when they think about like a small student run fund is that we must do like preede and seed stage investing and we don't we do series A and redo and up and and and mostly really focused at growth stage businesses that are doing tens of millions in revenue and growing fast. Um, so those are all the reasons why like we kept that name. Um, >> by the way, >> you got you just recently uh got me to go into data bricks with you and during our startup ignition boot camp which we do every three months. It was just this last three days and one of the participants in the boot camp goes was talking you know data bricks because we were talking about the naming of rounds of investment and they said that recent one was series M. >> Is that correct? >> That's right. >> Series M. >> Yeah. [laughter] Well, we brought you in series N. So, you know >> N M. No, sorry. >> M or N. >> No, let Sorry. The one before M. Whatever that letter is. [laughter] >> L. There we go. >> L O P. I'm in series L. >> Series L. Series L. >> You got in so early. >> That doesn't stand for loser. [laughter] >> So basically you started the university growth fund in what 2015? Is that kind of when it was? Y. >> Yeah. >> And how and so then you went out with the universities. Is it just Utah universities or but you went out to Utah University and say hey this is continuing. We want to have interns from students and all that. And everybody goes great. We love that. And that's how you've kept that up now for 11 years. >> That's right. So, >> okay. >> I was gonna ask so how so obviously you have this model of bringing students in. >> Yep. >> What's the side of the VC fund, the growth fund that gets you access to the access that you have because I feel like that's really >> maybe explain that. So, just take us from 215 forward and how you >> have been able to get into these names. >> Yeah. You're kind of independent from the university now. >> Yep. You're not Sorenson, which is a huge billionaire name in Utah, right? >> You guys are the managing partners and you do this student teaching, you know, internship practice. How do you get access to these sweetheart deals? >> Yeah. So, you know, I think if you're like capital is super funible today and if you don't have something that differentiates you, it's it's tough, right? And so, >> for us, it's our student program. Uh I think about all of our deals that sit they sit on a spectrum when it comes to deal sourcing. So on the one hand it could be you know when we invested in we had a former we there was a student at another fund. We actually helped him get his internship and his job at that fund >> and they had an allocation in Lyft and they weren't going to do all of it and so he was like hey could we share this deal with University Growth Fund that ended up being our very first deal. Um and so we came in and co-invested alongside them in that deal. Um so that's one end of the spectrum where >> so kind of another fund brings us into a deal, right? >> And they're saying, "Hey, it must be a good fund because they're doing good by helping these students." >> Yeah. Yeah. >> Yep. Yeah. I mean, here's the thing. Fund managers and entrepreneurs are generally speaking really good people and they want to do good in the world. And this the value prop that we offer is twofold. It's, hey, do good in the world by letting us give you a million bucks, right? >> Yeah. >> Uh, that's a pretty compelling uh value prop. And then, oh, and by the way, I have like 50 interns and we can crank on all kinds of projects for you that no other VC is staffed up to help on. So, >> so you actually do operating tasks sometimes for the companies. >> Yeah. Okay. >> Yeah. Yeah. Well, we we've built financial models when a CFO has unexpectedly left in the middle of a fund raise. We've uh reached out to hundreds of micro influencers to place product for consumer products businesses >> where you've analyzed marketations. We're doing all kinds of >> getting in the trenches. >> Yeah. Yeah. Which is great for the students. So, >> so, so how do you feed that beast of students of like the internship side of things? you're just working with universities now I'm assuming outside of just Utah everywhere or or where do you have that kind of pipeline set up for the internships? >> So today we have offices in San Diego and Atlanta in addition to Salt Lake City and we draw from all the local schools in those regions. Um we do typical internship recruiting. So it's uh email blasts, flyers, info sessions, all those kinds of things. We do a venture capital case competition that's really opened up for anybody who wants to participate and just learn what venture capital is, which has been an incredible tool for attracting women and minorities into into the venture world uh and our program. So, it's it's a lot of those kinds of things. We recruit three times a year. Um and expectations are like 20 hours a week and most of our students are with us for um one to two years. So, it's it's a meaningful commitment. >> Yeah. But the the outcome is, you know, we're looking for students that are good investors, not just financially in the deals we're doing, but in themselves. Uh, and what we've seen is students that are willing to make the commitment to participate in our program. Uh, we essentially have 100% placement rate, and our students make about 115 to 120% more than their peers at graduation. Uh, which translates to a starting salary of around 120 grand. >> Wow. >> So, it's, you know, it's it's a meaningful step up. It's a huge kickstart for them. Yeah. >> Yeah. Yeah. >> That's very cool. >> Really good. How so in I guess I we could go back to university venture funings, but university growth fund. How many students have you mentored and gotten through the system in the 11 years? >> Oh my. Yeah. How many? >> I don't know. It's I should go back and count. It's probably pushing close to a thousand. >> Really? >> Yeah. Wow. >> Yeah. And so and uh what a legacy. And I know and you even sometimes invite me. It was fun that one time I ran down to you in Las Vegas and you had me talk to the group down there. Remember that? And go to dinner with you guys. I love that. That was that was so fun. But yeah, it's really just a fantastic um experience and what you're doing for that. And then also the access you get and for those of us that have been blessed by being invited to participate sometimes it's just been fun. >> I think that student card works great in other aspects of business, right? whether you're trying to reach some kind of high executive or you know any kind of partnership or deal. Yeah. Hey, I'm a student. People just like to interact with students. They like to help and reach out and and help the next generation. Of course, as obviously working in the VC model as well, right? Like I think it's a genius model. I think it's a genius opportunity for these students to get involved. the experience that they're going to gain. I think it's a great great idea >> and and these students are getting to rub shoulders with mega noteworthy companies. >> Oh yeah. So give us an idea now of like the size. So you just dropped kind of a million dollars. Is that like your average check size now in these rounds? >> Yeah. So we're about half a million to a million. Anywhere from 250 to 2 million. >> And you're usually kind of a junior member of the syndicate. You're not like leading the rounds rounds. And that that's on purpose. Like I don't want to ever be competing with you guys, right? To lead the round, right? I'd much rather just slide in a small check. >> What's so funny is that we actually write sub $1 million checks. We won't even write you guys a little earlier. These are guys are series A to N. >> Yeah. [laughter] >> Okay. So, let let let's ask this a little bit. Okay. So, $18 million was the one you joined as a student here. Give us a sense. What fund number are you on now as University Growth Fund? So, University Growth Fund one, you had to go raise money. Tell us about the experience of the first fund you and Tom on your own had to go raise money. How was that? And what did you achieve and how many funds have you done since? And what have the size of those been if you're willing to share? >> Yeah, of course. So, fund one ended up being a $32 million fund. >> Uh, it took us two years to raise it. >> Yes. Uh we went to market and we had some great supporters um that anchored us. But you know the first close was $5 million and we wanted to do lift and that was a million dollars. So we had to get all kinds of approvals and it was a race to get it done but it really kind of set the precedent. Yeah. Uh going forward, >> right? And then we we leveraged, you know, we had additional capacity and so we said, "Hey, as part of our fundraising tactic, let's go like sell the fact we have great access and invite people like yourself to to participate in in that deal with us and kind of build a bit of a track record and relationship." >> Uh, so we did that. We raised kind of a little bit more here and there, but mostly we were just focused on deploying capital. And then you know what was interesting is we were coming up on the two years literally in the last month we doubled our fund size right before we closed. So we were operating at roughly 15 million and then ended up closing at 32. So um that was the process there and then it would you call it it was a grind a little. >> It was totally a grind. Two years of fundraising is a grind, right? >> That's a long time. So yeah, it's it's actually I think some people have this vision that a VC's job is easy and great, right? It's hard, isn't it? >> I think fundra I mean you guys tell me what you think but I think fundraising for a venture fund is one of the hardest things to fundra for ever because >> and especially I mean we were talking pre-podcast about this especially in today's era right where where the VC model is being turned on its head. >> Yeah. But but you think about the pitch, right? And the pitch is so I want your money for the next 10 years. I have no clue what I'm going to invest it in. I will probably lose money on a lot of the underlying investments because they're super risky, but I don't even know what they are yet. But just trust me, it's going to be great. Like that is the pitch of venture, right? Like >> tell me that is not like a crazy hard pitch to make. So >> it is. It is. Okay. So fund one 32 and two-year grind and all that. Then how did fund two go? And your best one out of fund one was Lyft or that was just your first? >> Uh that was our first. >> Okay. >> Uh so fund one we have some really nice uh >> you're not going to get a dragon that you know the word dragon to me means re one deal returns the whole fund and the rest is gravy kind of. >> So >> we would have on SpaceX. >> Yeah. [laughter] Yeah. You would on SpaceX. We already determined that was >> 100x but it's pretty rare in the way you're investing to have a dragon. So yeah. So but okay. So fund one, what was fund two size and what year was that? What vintage year? >> So fund two the story there is we went to market to start raising fundraising fund two in February of 2020. >> Oh. So you fund one was a fiveyear kind of run. >> Fiveyear yep investment period. Okay. And then 2020 for fund two. And you did it >> right as co hit. >> Yeah. Right as co hit, we went to market and uh fortunately again we had some really strong believers in what we were doing and >> so you got anchored the first one, you got anchored on the second one >> and yeah, we did a first close in April and we ended up making some great investments uh when everybody was freaking out in companies like pattern >> which just went public. Yeah. Um and and then yeah, it actually because of COVID and a number of different factors, it ended up taking us about 18ish months to raise fund two, which ended up being a $56 million fund. >> Okay. >> Yeah. >> Got it. >> And so that same thesis still applies with fund two. You're doing kind of a $250 to $2 million check. You're doing an series A or later. and you're doing student vetted and found and discovered opportunities. >> Are you still on fund two right now? >> We are. We're at the very tail end of fun two. >> Okay. Are you and you going into a fund three? >> Uh next year we will raise fund three. We are also um launching a new strategy that um you know we're not talking about publicly yet but that we're very excited about that will expand the student experience across almost all areas of what is generally considered private equity. >> Oh really? >> Wow. Very cool. >> Well when you're able to talk about it we want to hear about it. >> Yeah. >> Okay. So >> how about the entrepreneurs that you're investing in or the um deals that you're finding? How do you know at the stage you're investing what makes a good OP like what made you decide no on SpaceX or yes on SpaceX, no on Lyft, yes on the because they're all generating millions of dollars of revenue. They're very latestage opportunities. What does your fund specifically look for? Like yes, this is the one because for us it's very different where we're investing versus where you're investing. I'm just curious to understand your thesis around a good investment. So to John's point, like we are not trying to swing for the fences and get a dragon, a fund returner on every investment we make. Right. >> Right. >> Uh we're targeting companies that have good revenue, good product market fit, good traction, a good go-to market strategy, and they're looking for more cash to put on, you know, more fuel for the fire, right? To grow it. you you're kind of a would this be a way to say it that you're like a junior syndicate member of somebody else leading the deal that you join in and you're a member of the syndicate in a junior position. Is that right? >> I mean yes. Yeah. >> Okay. >> You know we're always coming alongside other larger funds. Yes. So, um, you know, there's maybe some slight differences, but for the most part, we're at the same terms >> because you've already got a prominent noteworthy fund already taken the lead position. That's maybe half your due diligence, right? >> Yeah. Yeah. >> I mean, we do all of our own due diligence, of course, and we have turned down deals uh led by some really good funds. Um, but yeah, generally that is a big part of our >> So, can you double click on that a little bit more? Like, are you looking for a growth rate? Are you looking for a specific founder? Are you looking for a specific revenue line? Like what what is it that's like Peter's like, "Okay, yeah, >> metrics matter to a universal growth fund." >> So, I would say on the early stage side of things, it's what I'm telling people right now is probably at least two to four million of revenue, annualized revenue. >> And early stage is A and B. >> Yeah. Series A and B. >> Okay. um and not too much customer concentration. And really what we're trying to get at is like you have figured out how to solve a problem for a large number of customers and all you need and they really want your product and all you need to do is get more money so you can get it in front of more customers, right? Like and I don't care like what sector it's in. So like this year we did a geothermal power company. We did a cyber security company. >> Yeah, I heard you say that you Yeah, you're everywhere. >> We're we're everywhere. >> How about How about B2B versus B to C? You'll do >> We'll do both. >> And B2B to C. You'll do you're you're kind of agnostic. >> Yes, very much so. >> But not on stage a certain stage. >> Yeah. Well, at least series A and up. So about >> uh half of the deals we do, a little less than half the deals we do are series A and B's. >> Uh the other half are generally like series CDE kind of in that growth stage. >> And then we do a small sliver into like late stage preIPO type deals. So like we did Airbnb 18 months before they went public. It >> was a great return. Wow. >> You know, it was like a 2x in 18 months. It was great. >> I man I feel like this would be so hard for me. I like I'd have conviction but also delusion in these opportunities. I'd be because if you're seeing brand names, right, that you know are successful or on their way. >> That's what I'm saying. I think your job's really hard. People say that precedes really hard because there's no metrics to go off of. There's no revenue. There's no financials. There's no back. >> But if your goal is a 2x or 3x, I think theirs is much more they know what predict. Like I feel like I would be overly persuaded just by the brands and the founders coming to me. It's like if I see Airbnb on an opportunity, I'd be like, "Yes, yes, yes, yes, yes." Right. [laughter] >> It's, you know, I mean, it's it a lot of it comes down to valuation at the end of the day. So, we passed on. >> What are you getting? Because the valuation was the same thing. Blake Morzki came on on here on the podcast and, you know, they've been wildly successful by hitting Cloudflare and others. amazing track record now that they can tout. But at the same time, he says people I have to tell entrepreneurs all the time, you understand, you're a great company, everything's good, but these terms I cannot get the venture return I need. >> Yep. >> Okay. And we have to say that too to people of course they come in we h we can't invest at a 10 million valuation and preede. It's too high because it doesn't matter how good the company does, we won't get the return we need for the massive risk we're taking. >> And unfortunately that's kind of the the standard now. you know, the YC companies that are coming out that are perfect opportunities for us, they're just that that their their terms are >> so expensive for us, right? >> Yeah. I read somewhere that the average seed round, so not preede, but average seed is now at 30. >> 30, which >> well, out of California, >> that used to be I remember when we did instructure, I think the valuation was like closer to like 15 or something. >> I know. It's crazy, [clears throat] isn't it? Yeah. >> Can I ask you a question? Go back. So, so before we move on real quick, go ahead. There's a there is a difference between seed and preede though, right? So what used to be seed is now definitely like preed, right? That's why the whole preed category was invented because seed was getting so big. So I'd maybe believe that the average seed round is 30 million. But if you tell me the average preed round is 30 million, I I'd be very shocked. >> Well, it depends on two guys from Facebook and a guy from Google and Silicon Valley, they are very connected. They start their own company. They often get 30 40 million size of round pre- revenue. Okay. But we a lot of those flake out and don't mount to anything. That's the game out there. You're literally saying if I hit one that gets me uh you know gargantuan return, it makes up for all those, right? >> So it's that's the venture game. I I I do have a question here though for you. I want to hear how did you navigate >> 2020 and 2021? And what I mean by that, let me set up the question here. So as we went into the COVID era, which hit about March of 2020 when everything shut down, the governments of the world printed so much new money, you know, not printed, they put it in a computer and it hit the reserve banks and all that, right? But you know, we all know how that works. So this money came in, more money than had ever been created before was created in about two years. Okay? So massive amounts of money and then inflation hit and including in the valuations on venture and private equity. I mean y >> the fall of 2021 to me was insanity on valuations. >> Yeah 100%. >> It was crazy right. So how did you as a fund manager especially in the series A and beyond realm especially not just A and B but you do A and B 50% and then C and beyond for the other 50%. What did you see in valuations and how were you feeling as it went from 2020 into 2021 in those valuations because they got so sky-high and then in 2022 when the Federal Reserve did you know 11 rate increases in one year and all the valuations crashed like one metric I distinctly remember >> is in just a couple quarters series D average valuation in the United States went from 3.5 billion down to 500 million in just a couple quarters. Yeah. >> Do you remember those days? >> Oh, yeah. I remember them well. >> Okay. I want you to tell me how you navigated that whole era. >> So, yeah, 2021 rolled around and the valuations were eyewatering and you know, we were we were in this like tricky spot because as a fund manager, you have a limited window to deploy capital and so you want to be in market deploying. But we passed on a lot of deals, you know, high-profile, great brands, great funds backing them, but just couldn't get there at, you know, a hundred times revenue valuations. Right. >> Right. Right. >> So, we passed on a lot of those. Um, >> I think one of the other challenges just generally speaking is um money was easy and so there were a lot of business models that were dependent on cheap cash, right? And so that was the other thing that you had to really be mindful of and watch out for. Um, and look, I think honestly like we did a good job in some ways and and not a perfect job in other ways. Uh but the investments we made um we were very picky on the the terms that we were investing in so that we had good downside protection and we would pass on deals that didn't have that because we knew there would probably be a reset in valuation and we wanted to at least protect ourselves if and when that happened. And we also wanted to back companies that had really good strong growth that and that were close to like like had a way to get to break even if needed so that even if the market turned and capital dried up, they could continue to grow their way back up into that valuation worst case, right? So that's how we approached it. Um and then you know we but we also slowed down. We did a lot fewer deals than we otherwise would have, >> which is part of the reason why we're at the tail end of fund two because we basically took a year off and said, "Hey, you know, >> we're not doing a lot of deals right now. The market is really challenging. There's not a lot of liquidity events happening. >> So, why would we feel pressure to do stuff?" So, we talked to our LPs and they were accommodating and said, "Hey, uh, yeah, >> I think a lot of LPs were, well, you're charging me 2% management fee." Yeah. And you're not deploying anything. >> Yeah. Yeah. Right. And Tyler and I as angel investors, we didn't do any in that time because we could not stomach the valuations. >> So, um, follow up to that. So, so it seems like, and I know you because you're very sharp and you're now very experienced as well. So, but like how what do you attribute like some of the best funds and have the best people and massive amounts of capital all the mistakes they made in 2021? Like let's just take Tiger Capital Management if you've heard of them, right? Yeah, >> they were the largest fund in 2021 to deploy six or $6 billion from one fund deployed in the year 2021 and like 18 months later that portfolio is down 80%. >> Yeah. H >> what do you attribute because to me it seems insane that somebody would do that. What what what do you think about that and how do we explain that to people? I think part of it so I have a lot of thoughts on tiger but I think >> share those thoughts please because it's an interesting case right >> generally speaking venture capital runs on momentum >> right so if you're in the fundraising process and you're a founder you feel this because if the moment you lose the momentum nobody really wants to do your deal right but if you have lots of momentum and everybody wants to do your deal it's easy to get closed if revenue is growing fast then it's easy to raise more money and if you raise more money the typically you can do more in revenue and grow. So like everything is momentum and so as a venture fund there's a lot of pressure to be in the momentum of these deals because that's those are the companies that become the Ubers right of the world. >> And so I think that's a big part of what happened in 2021 is you just had to be part of the momentum and you had you know these funds had raised a lot of money and they had to deploy. So I think that's part of it. The other piece of it that relates to Tiger, and honestly I think Tigers played this wrong, um I was actually kind of disappointed um by the way that they responded. Um but their model was super innovative and very disruptive. So a lot of people just talk like, oh, they have this big fund, whatever. Here's what they did. They would they were paying Bane Consulting $und00 million a year to go and find which were the sectors that had the highest potential of being, you know, really big sectors in the future and then have them narrow down and find the one company in that sector that they should invest in and do all of the preliminary due diligence and get as much detail as they could on that company. And then they would hand that over to Tiger's partners. Tiger would pick up the phone and most entrepreneurs will pick up the phone when Tiger calls because of who they are and their brand. >> Pick up the phone. They would clarify and confirm a few details and then they would say, "We will issue a term sheet today at this valuation which is higher than what you were thinking you were going to be able to raise and we will close it in two months and we won't take a board seat." And so Tiger Global shows up in 2021 and starts snapping up some of the best entrepreneurs and businesses out there at high valuations. And so what is the response of everybody else? Well, they have to respond in kind, but they're not built for speed, right? Venture funds are typically take four to to eight weeks to get a deal done, right? With all the due diligence and docs and everything. >> So they're not built for speed. So what does that mean? the only thing they can really do is pay up higher in valuation to beat out Tiger um from stealing all these deals from them because the other piece of venture if you believe you know Mark Andre there's only a handful of deals that matter every year and you need to be your job as a VC is to be in at least some of those and so if Tiger comes in and starts stealing all of them you're in a tough spot as a VC if you can't figure out how to get into at least some of those deals and so I think that was the cycle that ended up like compound pounding on itself. >> Yeah. >> Plus, we printed a ton of money, so there was a ton of money flowing into it, right? And it became this like self-fulfilling prophecy loop of like, well, there's more money going into it and then the valuations go up. So, then the returns on paper look really good, so more money goes in. >> So, but then the rug got pulled on everybody. >> Got pulled on everyone. Yeah. The music stopped. >> Yeah. The music stopped. >> I mean, to our viewers and listeners, the stats are somewhere between 7 to 11 rate increases in 11 months. the most interest rate increases in any society in human history in that period of time and it just crushed this valuation issue right I mean it was it was crazy so how how did you feel your you fared during that period you just didn't invest you said and did did were some companies hurt by that were because they were so overvalued in 2021 they couldn't survive afterwards did you have some of that >> yeah you know it's interesting we um I would say you know our portfolio is a little bit mixed during that specific specific time period where um some businesses, you know, really struggled and it was less to do around valuation and more to do with the dry the drying up of free capital effectively, right? So >> we had some of that and then we had some that you know despite our best efforts were frankly a little overvalued. >> Yes. >> Um and like you know fortunately those are been those have been great businesses and they've grown back up into those valuations but it's taken time, right? And that that was part of it. And then I think the other piece is you know to the extent we did do some deals we did really you know more early stage deals where we thought you know companies got a long way to grow and they can kind of survive through this period right >> yeah so we really are big believers in the cycles right >> for sure >> federal reserve sends us on the other cycle so one of the new lessons I learned this last time around is that >> the because we focus in preede to series A not series A and beyond >> exact opposite complimentary to what you do. Right? >> So >> we noticed that >> the companies even preede to series A >> that in mid22 to fall of 22 downsized and cut their payroll and made all the right business moves you would in a frugal mindset survive. Okay. But there were so many that thought they didn't understand what was going on and thought the easy money would come back and they literally burned all their cash for 18 months without downsizing >> before figuring it out. Yeah. >> Yeah. And and I'm wondering did you I kind of saw that even at the BNC level happening. Did you did you see that too? >> I think it was more impacted at the BNC level. >> Oh yeah, for sure. And and and so like some of the companies that said, "I don't want to take a down round." But they took a down round and laid off 50% of their people, they made it through the gauntlet. >> But the ones that said, "No, we're going to fight for our people and keep them." That sent everybody into the toilet. I mean, I just don't understand the mentality of that. But that that was hard to watch for a couple years. Tyler and I had companies way beyond our ability to save them with our capital. >> Yeah. >> Coming to us begging to pay their next month's payroll. >> Yeah. Like a series B coming down to a precede. Can you give us 300,000 for the next payroll? >> But, you know, >> that's hard. >> Yeah. >> That's definitely the the past. But before we end the podcast, I want to talk a little bit about the future of VC cuz we talked a little bit about this pre-podcast, too, Peter, cuz you've now been doing this what, 20 years. Yeah. >> You've been doing this for 20 years. You've seen the cycles, the economic cycles, but also you've seen the innovation cycles. And we talked about this, I think, at the last event I saw you at about AI and how it's impacting not only just startups, but I think it's impacting investors, too. So, >> Oh, for sure. >> I I think it actually might change venture capital itself. And we talked a little bit about this, and I'd love for you to share your thoughts, maybe what the next >> 10 to 20 years, maybe even 5 to 15 years. >> Why don't you just give us a >> Peter Harris's opinion of AI's impact on the venture ecosystem. >> Yeah, let's look forward a little bit. the venture ecosystem impact of AI. Go ahead. >> Let's pull out the crystal ball. What do you think? >> So, I'll I'll add a little piece to this too that I don't know is necessarily AI related because it was already happening. And that is when you had a contraction in the venture capital space, you had a flight to safety. So, what that meant was that tier one funds, so the Sequoas, the Andreas, the Excelss of the world ended up raising >> a lot, >> a lot of money, right? All the money flowed to them. a lot less money flowed to uh emerging managers, smaller funds. Um that was actually the greatest thing about 2021 is the number of emerging managers that were funded and you know came on the market. Anyways, so I flagged that because I think it's important to understand where we are today as in the venture capital industry and that is I think what AI is doing is one it's driving down the barriers to create anything. Um so like you want to create software yes it lowers that barrier but it also lowers the barrier to create consumer products it lowers the barrier to start services business all kinds of things right because now you don't need a marketing team you don't need all this stuff so you're having this like explosion of new businesses and I think we're just going to watch and see that accelerate more and more and more as people who have ideas can actually execute on those ideas like never before. What that does though is it creates a tremendous amount of competition. So I'll give you two stories that happened to me this year that I think about a lot. And the first one was I went to a demo day uh for a fund and at the end of the demo day I was chatting with some of the other VCs and we were like all of the companies that got up and pitched if they had pitched four years ago we would have been fighting tooth and nail to get into every single one. They had phenomenal traction. They were solving real problems. good teams, but at the end of it, we were like, I don't know if any one of those is actually fundable from a venture capital perspective because I think they can build a great business that may do 5 million in topline revenue with 20% Ebida margins. That's a business I'd love to own. If printing a million in cash annually, that's great. But that's not a deal that I can do as a venture fund because I need them to get to hundreds, if not billions of dollars in valuation on the back end. So you have this like explosion of startups um and then at the same time you have these funds that are managing tens of billions of dollars in some cases that have to deploy that. >> Yeah. The big ones. >> The big ones, right? Um and you have uh these frontier models and other companies that are associated around AI infrastructure and so forth that are growing so fast and getting so big that it is sucking all of the capital out of the market. >> 80% of this year's capital has gone to five companies. >> Yeah. Effectively. So last year I was talking to an investment banker um head head of the investment bank and he was like in 2025 there was like I can't remember the exact numbers but it was basically like there was 180 billion of capital raised in the public markets and there was like $240 billion raised in the private markets and it's like the first time that that you've ever seen that like >> you call that an inversion right? Yeah, that's right. So I think what's happening is the power law of venture capital is shifting where the outcomes are much higher than they ever have been before because you know if you can be the one if you can be the anthropic or the open eye or the equivalent you're not just impacting software you're not just impacting one sector or another you're impacting like every single part of American life right >> anthropic thinks their TAM is essentially human labor which is nuts Right. So, uh so you have this like shift uh to bigger and bigger and more extreme outcomes. And so what that means for venture capital is I think that you know I've said this a bunch like you're either first or you're big. Mhm. >> And as a fund, that means like you are either the first check into that company that could eventually return like a thousandx. >> Uh or you're the big fund that you don't even like you look at the fund returns on these big funds. They're not that great. No. No. >> The product that they sell is not returns. Yes. Much to everybody's like, you know, misunderstanding. What they sell is the ability to cut a hundred million check into venture. Yeah, >> that's what they sell, >> right? Because you and I like I couldn't absorb $100 million from one fund and still like execute my strategy well, right? >> Um, so that's not a product I can even offer. Um, and so like all of these things kind of build on each other where I think we're going to have fewer deals that actually merit venture capital but have much much bigger outcomes relative to the explosion of startups and companies that will come on market, >> right? >> Which I think is actually great. >> Yeah. >> Um I think we're in a shift from an economy where most people work for a big company to one where most people run their own small business. >> Right. >> Yeah. And and we are the other end of that spectrum that you talk about that first check writer like we wholeheartedly believe that preede is one of the best returning stages of venture capital and a lot of people don't know that but a lot of data actually shows that >> and so that's why we've kind of married oursel to where we are. It's also the stage that we know just like you the stage that you know and you're investing in. So >> interesting viewpoints I I think VC is really trying to figure itself out right now. Um, we're going through that this period. I wholeheartedly agreed on every data point that all the capital is rushing to the top five firms. AI is disrupting everything. AI is also taking 80% of every dollar in VC. It's just a weird time. >> The story hasn't been written yet. I mean, is it going to violate the Gartner hype cycle? We don't know. I mean, right now, I I believe we might have even hit the the apex of the in peak of inflated expectations. And now because a lot of people are now questioning AI, they're saying, "Well, it's not quite as easy to spin up the software as I thought it was and get it really production ready and it's not >> producing what I expected and all that's starting to happen." But it's because it was so exciting and it still is exciting what it can do, but there's also we're going to find out it can't do what we thought it could do and it won't happen as fast as we thought it was. And so as we go up to the peak of inflated expectations, I think we are going to go through a trough of disillusionment just a little bit. Maybe not as deep as other disruptions in the past, but it's going happen. And a lot of money is going to be lost by people that have bet on a continued slope up, right? But nothing in human history has had to continue slope up. There's always an adjustment. >> Always been an adjustment. Although there's never been a technology again that touches every aspect of a of an economy in a person's life, right? One of my favorite things I've seen in the last little while is in the year 1980 they were saying all jobs will be wiped out by the personal computer. >> In 1996 to the year 2000 I saw some videos of news reports all the jobs be wiped out by the internet. All >> brickandmortar stores would go away in five years. Yeah. They said in 1998. >> Well, we're in 2026 and we still have a lot of brick and mortar stores. >> But not as many. Yeah. >> Yeah. But but still, yeah, no, it usually what happens is in these predictions, it does eventually happen, but instead of 5 years, it could take 80 years. So, I'm going to be dead by then. [laughter] >> So, I'm going to take advantage and exploit what I know now for the time I have remaining. >> Well, let's let's bring this back to the listeners a little bit because we're not a venture capital podcast per se. We do touch on venture. That's what they listen to your podcast for. You have a great podcast. It's the venture capital podcast. Everybody should look it up and look at Peter and his his co-host on that show. But what about for the entrepreneur, Peter? >> Like taking this insight and all your opinions on what's happening in the venture capital ecosystem. >> What do you think that means for the founder? Let's bring it back to startups a little bit here. What should founders be doing differently? What how should they be navigating this? >> A couple tips you would give a founder. >> Yeah. So my first thing is, and maybe this is heresy on this podcast, I don't know, but [laughter] um don't raise venture capital. >> Yeah. No, we say that all the time. >> I think there's, you know, I used to say there's like 3% of all businesses can raise and probably only 2% should raise and only 1% will, you know, or less will have a great outcome. I think that's that's contracted even smaller. >> Yeah. Um, so unless you're part of the 1%, it's it's probably not a good fit. And like I think a venture capital, it's like it's like taking heroin to run faster, right? Like yeah, you can run faster, but then you're going to be, you know, addicted to heroin. So [snorts] just like with venture capital, you take that first check, >> you're addicted. >> You got to raise the next one and the next one. >> That's kind of that unicorn philosophy versus elephant that people talk about. Just so you know, we're kind of an elephant believer that yes, build a stable, profitable company and you keep all your options open. If you >> immediately go for the unicorn, once you're on that track, you can't get off it. Yep. >> That's what you're saying, right? >> Yep. >> For sure. And so for the other like nine for for the other 99% of businesses out there like leverage AI uh because it can give you so much uh runway effectively and so much leverage on your time, right? Um and can open up all kinds of new businesses and opportunities and so forth. Like for example, like my mom runs a bankruptcy practice. We are rebuilding her entire bankruptcy practice from scratch using AI. agents to automate 90% of what she does. >> Those types of opportunities I think are super interesting. Yeah. >> And I don't think you need a lot of capital to do them. >> No. And I I think that needs to be double underlined when you say, "Hey, utilize AI." We're not just talking about go and converse with chat GPT every once in a while. We're saying actually dive in and change the workflows and implement the agentic era. >> Take a workflow and decrease its economics by 90%. That's what you do. >> Yeah. So, so that's what Peter's saying and I wholeheartedly agree. Founders, all you should be doing is implementing AI wholeheartedly so that you can use way less capital, not even need capital for starting out and executing on your idea. >> Let me reflect back what you said and see if the the viewers and listeners like too. So, what you're saying, you use the word leverage. So the leveraging of AI, I believe what you're saying is you're telling them leverage AI means and you said that extended runway that means leveraging AI if they can do things 10 times faster and 10 times less expensively or a hundred times less expensively you're saying their runway is extended that's the word you use because >> they're not spending so much time and money to get the same things done and so they can survive longer and every startup viewers unless offers is in a race against time. You must become sustainable before you run out of cash. >> That's right. Right. >> That's right. >> Okay. >> Well, and and part of this too is look, there's so much of your business that doesn't add a tremendous amount of actual value, right? You know, so I think about my mom's practice as an example. >> She does a decent amount of data entry andor has staff that do data entry. Doesn't add any value, right? What she should what she really loves doing is working with her clients and helping them solve their problems. But that's only today like 10% of what she does. So this is where like I'm really excited where like okay let's automate the stuff that doesn't add a ton of value so that she can move from 10% of her time to 100% of her time doing the thing that is the most value ad the most impactful >> and I like to say the human brain is still the best machine in the universe right >> put it to more work and use and spend more time using that instead of >> a in human inputting things into a computer which the now AI can do all of those, you know, drudgery work, right? Yeah. That's what you're saying. I'm just putting in simple terms and that's really important. >> Okay. Yeah. >> Amazing. So, I we've already been speaking for over an hour. I know it's gone [laughter] super fast. >> I can't believe it went so fast >> and I So fun. >> I typically like to cut the episodes around an hour and I don't want to take Peter Harris away from everybody listening, but at the same time, >> um, >> great tips. >> Yeah. Been amazing, Peter. So, I want to wrap up because I think my takeaway from what I've been hearing just over the last 15 minutes of the podcast is about how founders need to utilize AI, but also fundraising isn't just about convincing an investor to give you a check. It's really about uh I don't know, building a good business is what Peter's basically saying. Like if you can actually go around and actually build a healthy business model, a healthy business, and not even have to raise VC dollars, that's honestly the best outcome for everybody listening to this podcast. So, which is so funny from three VCs sitting around and talking [laughter] at a table here. So, but anyways, Peter, thank you so much for coming. It's been amazing. I've been wanting to have you on the podcast for months now, and I'm so happy we finally found a date with everybody's busy schedule. Um, anything to add? Last parting words from either of you? >> Thanks again for coming and visiting with us. Well, thank you for having me. I've uh long respected both of you as investors and >> Oh, that means a lot coming from you. So, thank you. >> Yeah. All right, we are out. Thank you so much for listening. [music] Back next rock.