Andrea Lamari Walne

Welcome to the Puck Venture Capital and Beyond, a show that examines the changing landscape of our world. We'll have candid conversations with VCs, entrepreneurs, and thought leaders grappling with our current challenges and providing solutions to key problems we face as a nation. I'm Jim Beer, president of CMBG Advisors. This podcast brings change makers to the table to discover the inner workings behind their decision making strategies and ultimately to how they got to where they are today. I feel as though I'm always of the mindset that if you're coming from a unique background in a sea full of fish, the rainbow fish is always gonna stand out.

And quite frankly, I think being very vulnerable in any essence of who you are as a person, whether you're male or female, always bodes well for you. That was Andrea Lamari Walney, a partner at Manhattan Venture Partners, a venture capital firm redefining liquidity options in the highly competitive private market. Andrea takes us through her journey as a fledgling founder and her transition into investing with an eye towards disrupting startup financing in the secondary market. She brings us up to speed on the regulatory changes that are helping to shake up her industry and the surprising technological changes driving the future of creative content. Andrea Wahl, welcome to the Puck.

We are excited to have you. And as a general partner of Manhattan Venture Partners, tell us a little bit about your background and kind of why and how you left Forge Global and joined Manhattan Venture Partners. Sure. No. Thank you so much for having me.

It's an absolute pleasure. I've had a really interesting trajectory going from startup founder, operator, really small and scrappy building out of the equivalent of a garage in San Francisco, but a bit more expensive because you have to pay up to be anywhere in San Francisco, always, to a full blown venture capitalist without any sort of traditional financial investment banking experience, which I'll definitely be happy to talk more about. Absolutely. Humble beginnings of being a founder who really was green enough to think that we could shake up the entire financial industry by creating a new financial instrument for private companies. And that's what we did at Forge Global ten years ago when we built the business, transcending into a world of taking a leap into the corporate life, working at the Nasdaq Stock Exchange, really learning how stock exchanges globally operate and are built, which is a fascinating mechanism of the entire market.

And then now in my role as a general partner at Manhattan Venture Partners, we work with some of the biggest private start up businesses in the world, many of which are valued above $10,000,000,000, where we go in, add my team, we're working directly with the CFOs, the general counsels, the CEOs, and, of course, the cofounders of these startups and really figuring out how do we invest not only in the business directly, supporting the balance sheet of these businesses, but also working with those executive teams to pinpoint which shareholders our shareholders who've never or traditionally never received any form of cash compensation other than their salary. And so so much of the value of their overall assets as individuals or as investors in those businesses have never seen that liquidity other than maybe the prospect of cashing out some of their startup stock. And so what we do as part of our investment thesis is create a mechanism alongside those management teams to let those shareholders cash out. And that's where we invest, and that's what we invest in. So that's this kind of really fun secondary market where my team operates and where my career, going from Forge Global to Nasdaq to Carta to now Manhattan Venture Partners really transcends this very specific function of venture capital, which is the secondary market.

I've been a venture lawyer for a long time, and I remember working with an early stage venture company years ago, and one of their huge problems was liquidity. And they basically wanted to do another round and pull some money out, and the investor said not in a million years. You're kind of breaking the traditional model because a lot of people like Bill Gross at Idealab, part of the whole idea is we want your backpack thrown over the wall. We want you all in, and what you're saying is we're gonna let you take chips off the table. So that's unusual.

Right? So how does that work? The founders taking out the money, they must love it, but do you get pushback from board members and or the other investors? Yeah. So this is where things get really exciting and funny.

Back ten years ago when we were building Forge Global, which at the time was actually we called the startup Equidate. Equidate being a combination of equity and liquidate. Equidate. So took a few years to rebrand to Forge Global, but we thought it was really precious at the time. What we learned back then and, again, you know, as I said a moment ago, I think we were just green enough as founders to think we should pull this off and create a new financial instrument.

But to your point, it's that the companies, even a decade ago, they didn't love this as a function of shareholder compensation because at the end of the day, you work at a start up to ride that rocket ship up to the top, take it public or sell it, and then cash out. And I think, traditionally, many companies said, well, those are the only people we want to hire or to bring on as investors are the people who wanna ride that rocket ship and stay on for the ride in totality until the exit. And so, yeah, I mean, we did shape things up. And going back to Forge Global, what we did was we created a derivative financial instrument that ultimately got dubbed as a security based swap, which came within a litany of issues that you would totally understand from a legal and regulatory perspective, where we said, why don't we learn how to effectively navigate the bylaws and the governance of startups to allow shareholders to cash out some of their stock? And that's because ten years ago, a lot of companies just really were not friendly to this mechanism of shareholder liquidity.

And quite frankly, this function of the secondary market is one of the key reasons why Facebook was forced to go public when they did. Before title two of the Jobs Act came out, pushing the shareholder limit from 500 to 2,000, it was because there were too many of these transactions that took place in Facebook stock pre IPO. So what we're talking about is a particular universe of companies because in the typical startup, you've got four year vesting. Right? And so even legal, you're not allowed to sell out for a period of time.

You're focusing on later stage companies, I'm assuming, that for whatever reason, either don't wanna go public or not ready to go public, or they're doing well enough from a cash perspective and operation perspective. They don't wanna sell, but yet they wanna take some of their chips off the table. Yep. That's right. That's exactly right.

And you know what? As we know, investing in these businesses is really, really difficult because the bar is so high to be an investor in a round of funding in the best companies in the world that are still private. So what happens is this mechanism of the secondary market really enables the ordinary investor, in air quotes, the ability to get into the company. They're not gonna be allowed or be invited to invest in the round of funding, the series a, b, c, the primary rounds. Instead, the access that many investors get is through the secondary market because it's that second wave of capital infusion where they're not padding the balance sheet of a company.

Instead, you're putting cash in the pockets of the shareholders, and effectively, it's kind of a backdoor way to access some of the best private companies globally. It makes sense. And I know people have phantom options, and there are companies that create their own liquid market within the company that allow you to put back your shares and get bought out. So there are different mechanisms for liquidity. I will tell you, I have not heard ever.

I know people will buy out investors. That happens. But to have a business plan aimed at just that seems pretty unique. I don't need to hear about all your competitors, but are there other people that are copying you now? You know, I would say generally, the function of the secondary market and this type of investment strategy is something that you really have to gear your entire thesis around because it's not predicated on sitting on the board of directors of a business or betting on the future growth of a company after the round of funding you're investing in, which is the traditional venture capital model, what you're doing as your thesis is choosing an exact entry point and saying, to achieve the type of return model I'm looking for as an investor, I'm picking that price point that is exactly where I think the target is in order to achieve the returns.

And so with that said, it's really hard to say that we have, like, direct competitors because in our model, it's that our entire business revolves around what I just described. And what I do see is some venture funds, you know, using the secondary market as a mechanism to build a position in some of the businesses they really already believe in because they wrote a check into that series a, b, c, d, e, f, g. So then they say, okay. Well, we just wanna re up a little bit. We got cut back in the round of funding or, you know, we're pushed out of the round or whatever it might be.

So we do see some funds using the secondary market strategy as something to be a tack on to the traditional venture model. But in terms of direct competitors, there's a couple funds that do this in a few you know, lesser volume. They do it as a slight mechanism to their overall strategy, but we don't see that we have any direct direct competitors when it comes to the totality of our investment thesis. So are you only investing by buying out shareholders as opposed to doing a traditional VC round where the money goes to the company? We will only invest in a round of funding if we believe that there is a way to build the position in the majority sense of our position using secondary.

So if we can invest in a late stage round, like a series c, d, e, f, g, but it's that we put a small check into the round only as a way to provide our commitment to the business, to the issuer, that, hey. We're here for the long run, and we wanna do secondary investing. That's when we'll invest in a primary round of financing. Got it. And so I'm gonna contradict something I said before because I said it would be for companies that, for instance, are not gonna IPO or get bought.

But if you're buying any liquid investment like this, you must still think there's gonna be an exit down the road or you wouldn't be doing it. Absolutely. I mean, we are definitely looking for an exit in the next one to three years, give or take, for these businesses. That's usually the holding duration we're looking for. But at the end of the day, because we get to act as a venture fund, which by the way, another function of our business that I haven't talked about is that we wholly own a regulated broker dealer internally, which is really unique as like an investment strategy as well, we are actually traders of these shares.

Like, we are market makers and we're traders. And so what that means is that we, in real time, have visibility into where startup stock is trading theoretically. And so with that said, if we ever needed to exit our position for any reason, because, you know, who knows? Maybe the company told us they're never gonna go public and we need to show some form of returns. We could trade our own stock if we needed to.

In the history of our firm, we've only done that a couple times because of specific instances where we had limited partners of our fund who needed their own form of liquidity before an exit. But from a perspective of our own positions across all of our venture funds that we've raised to date, we've never had to deploy that strategy or never thought to do so. We are definitely, like, the long term holders that hold until the exit. So I'm a somewhat retired securities lawyer, meaning I don't really specialize in securities anymore. But in the old days, the notion of a public market for a private company was a non sequitur.

I mean, it just you couldn't do that. So have the SEC regulations loosened up enough that you are now able to create a secondary market in private securities? Yep. And this is why I couldn't wait to join and be a guest on this podcast because I know you have the background to be able to say, hey. Let's talk about the regulation, the safe harbors.

So from a regulation perspective, there's obviously various rules under the Jobs Act and and otherwise and related to, you know, exempt transactions and unregistered securities. So with that said, there's a safe harbor under rule one forty four, which allows for the private resale of securities. You know, there's one safe harbor called four a seven and four one and a half that, from a regulating perspective, allows for the resale of these securities. And, of course, we're always talking about unregistered, unlisted securities. And those safe harbors really took into effect, you know, in the years following the jobs act.

So after 2012 is when those safe harbors really surfaced and became strong and independent. So with all of that said, even though it was possible to do these transactions before the Jobs Act, it was made even easier in the last five to seven years. Interesting. I did hear an entrepreneur talking recently about how for their company that if they wanted to exercise their options and actually sell their stock in the private market that there was a way to do it. And at the time, it went in one ear and out the other because I'm like, that doesn't make any sense, Unless it was a private transaction, but you're bringing me and our listeners up to date, which is that these rules are liberalizing, and so there is an opportunity for these private companies.

Again, I remember under rule one forty four, you have to hold it for, like, whether or not it's a year, two years. There's a period in which you have to hold it before you're eligible. But if they've exercised their options and they've held the stock long enough, and again, there's tacking issues. But if they've held it long enough, then they're able to sell. Yep.

Six months. Six months duration for the hold. Interesting. So give us a range of the companies you've been working with and just so I get an idea of what's out there because this is a whole new world to me. Yeah.

Yeah. So, you know, I would just wanna reiterate again. I I really think the advent of the commercialization of this type of strategy, the secondary market strategy, was really brought to light, but done so in in kind of a negative correlated way before the Facebook IPO. Because every Bob, John, and Peter, who was a dentist, lawyer, and school teacher wanted to buy into that IPO, if you remember. Right?

Like, that was gonna be the hottest IPO ever. Biggest one Sure. Rivian, the auto EV makers, the only kind of US based IPO that's eclipsed this since. But with that said, the types of companies since Facebook really had, you know, a groundbreaking stance in saying, oh, we're gonna welcome these kind of secondary transactions. But what ultimately happened was that there were too many secondary transactions.

They exceeded the shareholder limit. They ultimately were forced to go public sooner than they wanted to. You kind of fast forward to today, and some of the most actively traded, I mean, I'm truly saying traded, private companies in today's market are companies like SpaceX. And before they went public, it was Palantir and Airbnb. In today's landscape, it's companies like Discord, the communications app, and companies like Epic Games, which is the maker of Fortnite, which is a company valued above $20,000,000,000 today.

I mean, these are big companies where I think the really important emphasis is they're generally considered and I mean, disclaimer, disclaimer, disclaimer, generally considered more derisked because they're so late stage. So that when you're buying these securities in the secondary market as an investment strategy, you're not necessarily worried about where in the cap stack you're buying the stock. You might buy common stock. You might buy preferred stock. You might buy early preferred stock or late preferred stock.

But in some essence, you're kind of buying whatever you could get if you want to buy and own these shares. And so that's why the late stage companies are so much more attractive in the secondary market because you might be buying common stock, and that means you're at the bottom of the barrel in the event anything goes wrong in that business. Okay. So when I buy you worked at Nasdaq. When I buy on Nasdaq or the New York Stock Exchange or otherwise, there's disclosure that's required.

You've got s ones on file. You've got 10 k's, 10 q's. There's a lot of public information. In the private market we're talking about that you're part of, are there disclosure requirements and documents that are on file for the investors? Yeah.

So as part of those security safe harbors that we talked about under rule one forty four a, there are minimum gap accounting disclosure requirements that the issuer is expected to provide to the counterparties involved in these transactions. Now I will say it's not overly traditional for the issuers to gladly provide these disclosures. Right? I mean, that's a function of being a private company is that you get to be secretive. Right?

You don't have to disclose. You don't have to file. You don't have to publish quarterly reports. So you have to understand how to navigate those discussions with the issuers, right, with the CFOs, with the legal and finance teams to be able to show that it's basically worth their time to provide you with access to this diligence information. And I will tell you, you know, what worries me about this market is there are definitely investors who will wanna buy SpaceX stock just to say they own SpaceX stock, but they're not getting as much financial disclosure by any means as what you'll see in a 10 q, right, or a 10 k.

And so knowing that that's what you're buying into, you better have a ton of conviction about those businesses if you're not gonna get the full kimono access. But like I said, if you go into the issuers and you very much so describe your stance and how you're going to be a value add investor even though you're coming in through a secondary market investment, we ourselves are having a lot of success with those discussions, but that's, I think, just our stance in the market. There's plenty of investors out there who kind of fly blind, and they buy these securities just because, like I said, they wanna add that name to their portfolio. When you're buying private securities like this, a couple issues. One, do you have to be accredited?

Yes. Yep. Okay. Got it. Because under 10 b five, and I know we're throwing a lot of legal terms out there, you still as a private company have a duty to disclose everything that's material and not omit anything that's material.

Obviously, there's a gray area, and the SEC will tend and the regulators to look kind of less intensely at investors that know how to protect themselves because they're sophisticated and they're accredited. So if you're trading in these markets and you use specific categories of people that are trading, they're certifying they're an accredited investor, which gives the issuer some comfort. These are big people that know how to take that risk, essentially. Yes. Exactly.

They are. And the bar for being an accredited investor keeps changing. Now, you know, as as we've seen in the last couple years, they've changed the rules so that if you hold various securities licenses like a series seven, you fall under the accredited investor definition. So I think that's really interesting. So they're clearly from a SEC level trying to democratize the definition of an accredited investor.

So I see that moving in the right direction. But, you know, at the end of the day, the SEC puts protections around investors for a reason. So those of us who operate in this market just have to respect it, and, you know, the issuers just have to ensure that that accreditation is met by the shareholders, which, you know, from every stance we have, I see an issuer is doing a really good job of maintaining that. Got it. So when you're finding these companies, and presumably, they can be in any particular industry or otherwise, you're coming in late.

So for instance, in terms of serving on boards or leading rounds or or other traditional metrics that VCs look at, how do you get involved with the day to day management of these companies? Yeah. Well, so what's interesting is that usually the foot in the door with these late stage businesses is that many of them have never had a mechanism for supporting shareholder liquidity. And so many of them look at the business that we operate in as more or less of a shareholder benefit program that has never been offered before. So as much as I keep mentioning, like, a CFO or a general counsel or a CEO, many of the time, the other executives in the room who are kinda deciding how all of these transactions and secondaries and liquidity events are gonna shake out are members of the HR and people teams within these startups.

And so they're looking at this and saying, hey. How do we incentivize, retain, excite, and placate more or less our shareholder base while we remain private and keep our heads down. And so the discussions that we have with the businesses is here's how to do it legally, audit wise, tax wise, estate planning wise. And so we're really guiding those companies and working with their lawyers, working with their accountants, and audit practices to structure things that are very programmatic, very ad hoc, very just workflow oriented. So a lot of the burden on maintaining this liquidity while the company remains private is shifted off the company's plate and in into the plate of, like, a team like Manhattan Venture Partners.

So that's how we really get our foot in the door is we'd be helpful. We are not a nuisance. We don't wanna bother the company. At the end of the day, when you're doing this investment strategy, I mean, just to put it really simply, I'm not padding the company's balance sheet. Right?

I'm not putting cash in their balance sheet, which is what happens in a new round of funding. I am padding the pockets of the shareholders. And so I have to remember that, like, that's not helping the company grow. What I'm just trying to do is be additive, supportive, and if they are friendly to this, which 95% of companies these days are, which is very different than ten years ago, how do we make it easier on them to see this as the benefit to shareholders that it truly can be? It's interesting.

I mean, I'm I'm gonna use the word hedge. There has to be an optimism on the part of the company that they're gonna go public, they're gonna get sold, and that they're doing well for you to be excited about investing. But these investors, either they have a liquidity issue or they just wanna have a little bit of a hedge, they wanna get some money now. I mean, that's an interesting universe you're looking for. Yes.

Absolutely. It's a very specific universe of companies where there is an exit trajectory, you know, line of sight. Right? A 100%, that's what we are looking for. You know, in some instances, they're just really unique buying opportunities that we can capitalize and kinda figure it out as as the company grows.

But, generally, I think the essence of all of this is that the companies are excited because this allows them to retain that engineering talent that otherwise they're competing against the likes of FAANG for. Right? Right. Because those engineers, those top executives, they can go work at Netflix and immediately sell that stock in the open market as soon as they invest that stock. And so the startups have a really hard time competing with those compensation packages going to public company employees.

And so this is another arrow in their quiver to say, hey. Come work at our start up. You know, I know it's not public, so you can't just sell your stock in the market. But we do have these programs that we've set up to recruit, retain, and and incentivize you to stick around and and not go off to a big public company. Do you feel comfortable disclosing kind of the range of money that you actually put out into these kind of investments?

Oh, yeah. So we ourselves at Manhattan Venture Partners have invested just under $2,000,000,000 across 49 companies ourselves across the spectrum of various sectors and stages. We have traded through the broker dealer and agency capacity across our history before and after the history of the firm over 12,000,000,000 of these transactions on these investments. I think from an overall market perspective, there's gotta be close to a trillion dollars of this activity that's traded hands in the last ten years. So as a liquid as it is relative to other asset classes, it's still a relatively liquid market for those of us who are really keeping an eye on it and watching it grow.

So I will not feel insulted, but is this something that is really ubiquitous where everybody knows about this and it's just old timers like me that are late to the party? Or is it still important to get the word out there that this is a new form of investing and an opportunity for companies? Oh, yeah. No. No.

No. Not old timer at all, my friend. This is definitely a still somewhat of an underground function of venture capital as an ass class. I mean, as I mentioned, it really was rather taboo for a long time. And I think with what happened to Facebook, there was a number of years that companies said, don't even come to us and ask to do something like this because look what happened to Facebook.

They would point to Facebook as the textbook example of what could go wrong. And so I would say it's really only taken off in the last handful of years that it's something that companies could use to be competitive against their peers, and it is public company peers, I mean, and other private companies who might not be in a strong enough position to allow for this form of liquidity for their shareholder base. So now let's get into some fun stuff. We are in a little bit of a different economy right now. Everybody's not sure what Jay Powell's gonna do.

Is he gonna turn on the liquidity again and flood the market? But I'm friends with a lot of VCs, and I talk to a lot of people. This is not a happy time in the venture capital world. Pensions are overextended because their bonds and stocks are down, so they're telling people we're not gonna put as much money out. There really is a little bit of a panic out there in terms of if you don't have profitability and an exit in the horizon.

From your perspective, is that impacting the things you're doing at all? And what do you see out there right now? You know, it's absolutely insane. So I will tell you in my decade of doing this kind of secondary market activity through the years going into, you know, the latest bull market, I'll call it, of, like, 2019 through 2021. Overall, there was this kind of inherent belief that the kind of activity we partake in, right, back to, you know, the secondary market where you're buying and selling, the securities, the shares of private companies, there was an inherent belief that because you were kind of buying the stock secondhand more or less, that there should be a discount attributed to where you were buying it.

You know, you're buying it at 10% off or 20% off the last round of funding's price, and that was great. So going into, like, 2019, that was the perception. Now enter into those kind of few years, right, where we just came off of that, everything was overly priced and insane. What happened was the polar opposite of what I just described, which was that shareholders of these private companies going into 2019, 2020, and 2021 would tell investors like us, hey. You know how you're using secondary market investments as a form of getting access to our company, whether it's SpaceX or something similar?

Well, because you couldn't get access to the round, we actually want a premium. We want you to pay a premium to buy our stock because it was so hard and so exclusive of a club. So shareholders kind of tried to wise up a little bit and ask for pretty extensive premium pricing. You know, a company might raise around. SpaceX might raise around.

Two weeks later, the market would go nuts because it would be flooded with capital like us, who would say, hey, we want in. But then shareholders who are counterparties would say, nope. You don't get to pay that price. You have to pay a premium because you didn't get into the round. And that was, like, a mentality that I was people like myself and my team and others were very flustered by.

But, of course, that's ebbs and flows in the market. Now fast forward to today, we are seeing that because of the volatility overall, we're going nuts in a really positive way by saying that inverse has come back into play. And now you can go in and enter these businesses at 50 or 60% off the ticket price of where they raise their last round because most of these high valued businesses raise money in the bull market. They price themselves well and above their peers on a public comps basis. And so with all that said, you know, we're just seeing bargain shopping across the board.

And so there's a lot of activity happening right now. And, actually, the biggest question my team asks every day is, is this the bottom? Or should we just keep waiting a little bit longer, and will the price drop even further? So it's like that opportunity cost is, like, the biggest thing weighing on our investment thesis. Well, to go on a limb a little, the puck is looking at where the world is going from our newsletters and everything else.

We still think there's bubbles out there. And at the end of the day, it's kinda simple. The fed printed $9,000,000,000,000, and we had zero interest rates, and we had crypto going crazy, we had housing going crazy, we had inflation all over the place in health care, housing, and essentially, the market and all these earnings have been inflated by the fact that with COVID distribution checks and everything else, if you look at Robin and all this other stuff, people had so much liquidity that they threw in the market. So if the Fed holds the line and pulls that liquidity out and says, we gotta get back to a new normal, then I think we're not even halfway through the cycle. If on the other hand, the Fed blinks and says, oh my god, this is gonna be too catastrophic, and they throw another several trillion dollars at this, the party will go on.

But I still believe it can't go on forever because you can't just print your way out of fundamentals. You still have to have companies that are making money. There still has to be real demand for these things. And again, as somebody who liquidates companies for a living and gives advice, just what you're saying I experienced. Meaning, the last two years was the slowest.

So when COVID started, there was an interview I did where I said we're gonna see bankruptcies, we're gonna see restructures, we're gonna get back to normal. I was dead wrong because the Fed stepped in and printed all this money, and then, wow, the party just went on another few years. But we have to unwind that, and people don't believe that it's gonna end. And so I still think there's air that's gotta come out of the market. I do too.

I absolutely do. And I think, you know, where I will be a raging optimist, because that's the nature of of venture investing is that I do wholeheartedly still believe that startups are startups because they are expected to grow at a 100 times the rate of a public company because they can. They don't have the red tape to hold them back in essence. And so fueling that fire merits a premium. I I fullheartedly believe that.

However, it's like the premium goes a little crazy if you're doing a discounted cash flow model for thirty years into the future expecting a company to grow at above a 100% year over year even as a public company. I think all investors going into the asset class of venture capital are coming back down to earth a little bit and saying, you know, sure, these are start ups and they're expected to hyper grow relative to their public company peers. But at the end of the day, we just got a little ridiculous and quite frankly, just a little too prideful, I think, and big for our britches and competitive. VC got very, very competitive. And so now that we're seeing that some of the funds that really acted in a crossover capacity, right, where they had private company exposure and public company exposure, and they're these are the hedge funds, the mutual funds, some of the biggest in the world, a lot of them pulled back, and they said, maybe introspectively, we went a little too big to compete with each other.

And so I really think that humbling nature and stabilization of the overall venture capital asset class is still being stabilized. So I definitely agree with you that there's still some time to see the market shake out. The last thing I'd say about that is a very smart friend of mine once said, there are a certain number of companies that should have a 30 or 40 or 50 multiple because they are very much outliers, and they're going at these ridiculous rates. And therefore, they don't need to be within that one to 15 typical range from a trading perspective. But we we did get ahead of ourselves on the skis.

I mean, there are an awful lot of companies trading at these crazy PE ratios that for sake of argument, they'd never catch up to. So switching for a second, you're in a very male dominated industry. And as a female general partner in the VC world, what do you see as exciting and what are your frustrations in that regard? Yes. So on the note of being a woman in a male dominated space, I don't know.

I feel as though I'm always of the mindset that if you're coming from a unique background in a sea full of fish, the rainbow fish is always gonna stand out. And quite frankly, I think being very vulnerable in any essence of who you are as a person, whether you're male or female, always bodes well for you. And to be honest, I think that vulnerability, like, really resonates in the startup landscape because it's a bunch of folks building things. And, you know, as I said earlier, being green and being humbled and hungry, like, that bodes well in the culture of the start up environment. There are more times than I can count where I was in a room, maybe male, maybe female dominated.

But at the end of the day, if you're vulnerable and you raise your hand and you say, can you answer this question? Can you describe that further? Coming in with that attitude is something that I think just generally is an awesome culture complex that I really value in start up and venture. And so I think that that's what's done well for me and I think many others. And as long as we continue to have that level of grit vulnerability and just transparency, like, the world can continue growing in in the startup culture landscape.

So I think, you know, whether or not venture and startups become more or less distributed and remote, if we can keep that characteristic going, all will do really well. And I hope just humbly that that that's the kind of character I portray going forward too. That makes total sense. So one of the things we like to talk about in the Puck is kind of personal interest and things that you're passionate about outside of the venture world. What gets you up in the morning outside of business that you're excited about?

Oh, goodness. Well, I would say outside of the business on a day to day basis, I am someone who is an absolutely avid NFL and college football fan. I guess I'm always going to be a numbers and quant nerd at heart. So I like when there are deep stacks and analytics I can follow, which is why I like the NFL. It's why I like baseball and and, basketball as well.

Separately, I'm a huge fan of wine curation. I'm like a big, you know, somm at heart, somm in the making, very novice in my skill set, but I'd love to do the sommelier training in, Sonoma and Napa at some point. So I think that's just a passion kind of foodie project of my own. And then I am just a travel aficionado. I mean, I probably live on planes half of the year.

And so for me, it's going out, meeting the founders and the companies that we work with. Knowing that everyone is distributed right now and not everyone is so concentrated in New York and Silicon Valley does, I think, propel many of us who live a travel life to be everywhere all the time, which, you know, right now, I'm embracing that fully. Maybe I'll stop and slow down at some point. But for now, I mean, I think it's just been awesome because, quite frankly, I love going to meet the founders of these billion dollar businesses, like, on a remote island in The Bahamas. I mean, this has actually been happening.

So I think that that's been really, really interesting and really opens up a new perspective where you're not just stuck to an office environment. I fullheartedly believe that the world is moving towards more of a nomadic kind of a rent to own model where you don't have to just live in an apartment or own a house, and there is democratization of what real estate ownership is gonna look like going forward. So I'm really, really excited about that. So when you talk about democratization real estate and or you talk about changes out there, there are challenges of today whether or not it's housing prices or global warming or other things. Do you see Venture playing a role in solving some of those complex issues?

Oh, I definitely do. And I mean, hey, I think the glaring example that is most recently been coming into light is Adam Newman's new foray into real estate. And it's just kind of funny because I think we all said, hey. Listen. Didn't we just trust this guy and then lose trust in this guy, not too long ago?

But I guess that bodes well to the Silicon Valley culture that, you know, you can mess up or show bad faith in one function, but if you know how to scale a business, you're still gonna be able to get that support. And so I actually as much as we all like to, you know, ding Adam Newman for this or that, what his new company flow is building, I think, is really, really interesting because it's going to, I think, completely shake up residential real estate. And I truly believe that as we see this demographic shift as generations get older, there's more independent single people, childless families or childless individuals and adults every single year. I truly feel as though what I was always worried about from a macro perspective was that we were going to enter the next generation of being elderly where people weren't gonna be able to rely on a spouse as their key caretaker. And what I see generationally is going to be a major shift is that these kind of communities, these sub micro culture communities where it's a lot of people who just generally are single or childless will be able to get support in their older elder years.

I think these models and things like Flow, these companies coming out of the space, are trying to do is build community around another form of function, and it's not just a traditional family lifestyle. So I I really do see that generational divide happening. And, you know, as scary as it kinda seems to me, it's also really exciting that we're embracing things like that. So for those listeners that don't know what Flow is, you wanna take a second and tell people where Flow is going? Yes.

So Flow is a residential real estate company that was just announced, kind of came out of stealth, founded by the founder of WeWork, Adam Newman, who, of course, kind of miraculously had, one of the most valued private companies in commercial workspace real estate of all time, who very much so kind of flamed out based on, you know, this, that, or the next reason. Overall is not, you know, as successful as a public company as it was pronged to be. And now he's really shifted as a founder who's focused into the residential real estate market. And what Flow is aiming to do is acquire residential real estate units in mass. And right now it's a business that has They've actually acquired 3,000 apartment units across The United States.

And what they're doing is shifting that entire residential real estate model from a lease tenant landlord model to a rent to own model so that renters can actually experience the upside value of the residential real estate that they are living in. And so it's not just that you're feeding a landlord rent money every month, but instead you're actually sharing in the ownership value increase of residential real estate for the first time ever, which I think will then lower the bar so that home ownership could be reduced across the board, the value, and allow people to actually get access to seeing upside when normally it's been a very, very high barrier to entry for residential real estate. So I'm excited. Like I said, Adam Newman, he's got a lot of interesting, personality traits and and experience behind him. But if anyone could really shake up real estate again, I truly would, you know, make that bet on him to be able to do it.

Years ago, there were people doing this in small ways where they were trying to let you essentially rent to buy. You know, I always thought it was a brilliant idea in the sense that you didn't need the 20% down payment. You could have bad credit. And essentially, you're paying your rent, but if over a period of time, you are able to be consistent and stay there for a period of time, you're essentially turning that it's almost like a lease option. Right?

You're leasing with an option to buy, and you're turning those rental payments if you've been consistent in the option to buy. It always made total sense to me. The challenge with any of these things is like timeshares is the promoter has to stay solvent and do it and make it work because otherwise, you're buying into something that fails. But if the financing is done intelligently and the promoter makes it work and stays solvent, then I think it's an amazing opportunity for renters. Absolutely.

I absolutely agree. And that's where I hear you fully. Right? Like, this model is not new. It's just the way the execution goes about it.

And I think that, overall, there has to be incentives at play to maintain the quality control of these types of properties. And I think, generally, if the model makes it easy enough to go in and out of the ownership structure and realize some level of upside value, there's a lot that could be done here. I'm just really eager to see where it goes. And like I said, I think this really plays into this kinda nomadic community driven generation that is much less reliant on a traditional family structure and much more independent. So that's why I'm excited.

I'm excited. I think this is a macro shift in how we see the Yeah. And how we live. So that's obviously an area you're excited about. Are there other technological changes or or industries popping up that you're excited about?

Oh, yeah. Well, I'm gonna say this. The ability to just create and distribute content, but specifically large scale cinematic content, both in the format of video games and movies and television is being so truncated down to months and weeks compared to years to make because of the advent of some of these gaming engines that are coming out, such as the Unreal Engine, which was created by Fortnite and and Epic Games, and obviously, I'm a biased individual because we are investors in Epic Games. But I can't stress enough how much of a shift Hollywood is experiencing because content creators do not need to be as reliant on massive movie production houses to create the same level of insanely high quality content. I'm so excited to see the shift of how we get distribution on content going forward because I think that, you know, the less we can rely on Netflix and HBO to be our single source of content consumption is going to be huge for all of us.

And it just like I said, it it spans across the entire entertainment industry. So I'm keeping a really big eye on that. I think it's super exciting to see just how fast we could get really, really crazy high quality content in the hands of consumers. There's two issues there. Right?

There's one, these distribution outlets other than Netflix and so forth, the traditional links. But are you alluding to the fact that in the traditional way of making a movie where you go out with a camera, and you film, and then you bring it back, and you do post production, and you add your soundtrack, and you edit, and you do all that stuff, which to the frustration of a lot of young producers and directors takes longer than they would like, and it cost a lot of money and time. Are you saying that there's now technology that the entrepreneur filmmaker is using that's expediting that process to get your movie in the can, so to speak? Yep. So exactly.

So I've been spending a lot of time in Southern California, you know, seeing this play out. A movie, a full feature length film that would normally take two and a half years to film, edit, and distribute can now be done in three to four months because of some of the gaming engines that are being built. Right. It's absolutely miraculous. I mean, I cannot emphasize enough.

I mean, there are movies like The Mandalorian, Ready Player One, the new Star Wars films that were built on gaming engines more so than ever just traditional film. And I think that's what's so interesting is that you can literally get the content out in a matter of four months. Like, you could do a feature length film in four months at this point in time. And so I think that that's fascinating, and it'll let us keep up with the pace of consumption that all consumers need. And so I'm just really seeing how that plays out.

And, obviously, that also means a massive cost reduction in the production of all of this as well. So I just see, you know, the more we can nail that formula, reduce that spend, the better the entertainment industry is gonna grow going forward. That is crazy, crazy interesting. I would say, overall, you know, we are seeing a massive shift in how I think the venture and start up asset class is moving towards a completely remote and distributed world. And I think we were all a little scared going into 2020 thinking, oh, startups are going under and companies are going under.

But at the end of the day, I just wanna, like, emphasize that I think the best companies will always be in a position to succeed and pull levers to control their growth so that they might not be too big to fail, but at least they're big enough to know better at this point. And it gives me a lot of positive outlook mindset in terms of the next wave of startups coming to market that they're not so reliant on being in Silicon Valley or New York to succeed. And that alone is just like a really awesome macro shift that I'm excited to continue watching. Yeah. Look, as Mark Twain said, rumors of my death are greatly exaggerated.

Venture is not going away. We are in a, I think, a nuclear winter that hopefully won't last that long. But, you know, one of the brilliant things about American capitalism and entrepreneurialism is this ability to reinvent yourself in this creative engine, and I do see, talking to a lot of people, that it is amazing. And COVID, I think accelerated this, that you can find young smart entrepreneurs anywhere on the planet creating these communities, and so I think it's gonna unlock a whole host of a generation of talent that otherwise would not have had access to capital, and I think we are living through some incredibly exciting times. 100%.

I cannot agree with you more. You really did hit on two or three things that I had no idea were going on right now, and that's the whole point of the puck is it keeps me relevant to tell you the truth, and also then for our listeners. So this was fantastic. The Puck Venture Capital Beyond is produced by CMEG Advisors. If you enjoyed the conversation and haven't subscribed yet to the show, you can find us on iTunes, Apple Podcasts, and SoundCloud.

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