Jai Das

Welcome to the Puck Venture Capital and Beyond, the 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 how they got to where they are today. If you don't have a visionary founder who's going to go all the way, you're not going to have a very successful company of consequence.

Right? Because at the end of the day, everything boils down to the CEO and the team that they hire around them and the culture they create. So we spend a lot of time, you know, not only with the CEO, but also with the rest of the team. On today's episode of The Puck, we sit down with Jay Doss, managing director, president, and cofounder at Sapphire Ventures. Jay shares has experience working with leading innovative companies including Oracle and Intel Capital.

We discuss the startup world, how it has changed, and what challenges and opportunities exist in the venture space today. There's a lot to cover, so let's get to it. Jay Doss, welcome to the puck. So can you take a minute and just give our listeners a little bit about your background? Yeah.

Jim, thank you for having me on the on the show. Really excited to be here. So my background, I kind of tell people that I'm a developer in recovery. Right? I started out as a developer long time ago, and I still kinda create the ethos, the way I look at things, the way I evaluate companies, from a product standpoint, you know, and playing around with technology even now.

So, yeah, my background, you know, I I immigrated to the to The US. I went to Brown, you know, and came out to the West Coast, fell in love with San Francisco, and started working at Oracle, and kind of got my job as a developer over there. Went off and started a little start up during the .com bubble, and then have been investing for over twenty years now. And so I've seen, you know, lots ups and downs in the whole, you know, investment cycle coming from the .com bubble to bus to, you know, something like the Gen AI bubble that's going on right now. And along the way, I cofounded Sapphire Ventures about twelve years ago with, my cofounder Nina Morakovich, with whom I actually been working on for about over twenty years now.

Wow. So we have been kind of you know, we kind of joke that we are are are work partners, right, in some ways, almost married at work. We can finish each other's sentences. But, yeah, it has been, it has been a long journey, and, you know, it has been also, as part of being in the venture industry, have really seen venture grow up from being a boutique y kind of, you know, a little network of people who invest and not being the focus of media, focus of what's going on, and not really driving innovation as much. It was driven by larger, maybe, you know, more established companies to venture capital.

The whole industry become much more institutionalized. You know, there's career paths now for young professionals. You know, the amount of money that venture funds are raising and deploying have grown tremendously. And, of course, I would say that, you know, the driver for most innovations in in The US, and I would argue in the world, is really being driven by venture capital investments. Yeah.

I certainly would agree with that. So tell us a little bit about Sapphire and what's your mission. So Sapphire, you know, we are, enterprise focused investment firm, managing about, 10 and a half billion and investing out of our sixth fund. We focus only on enterprise software and in the space and the stage of companies which we think as the most fun part, which is they have found product market fit. Now they are getting customers, and you come in and you help fund their go to market strategy.

So that is why, you know, we typically invest in company that are growing 60% and, you know, help them grow, keep growing 60% with our investment for the next, you know, four, five, six years so that they can become a company of consequence. But to help them grow, we actually have a dedicated platform team, which is really focused on getting our portfolio companies' customers and also go to market talent. So, yeah, we spend a lot of time with our portfolio companies, you know, just helping them strategize on their go to market or, you know, the people type of people they need to hire. And, you know, in our stage of investing, it's not all about cost cutting. It's really about how do you develop products and go into adjacent markets so that you can keep growing at that pace.

And we spend a lot of time on on the product strategy for the company, especially that is what I like to do, to help them kind of keep growing at the 70% growth rate. That's incredible. So, Jay, you've been involved in this space for decades. And one of the reasons we at the Puck wanted to have you on the show was you do have a grounded perspective. And if I'm not mistaken, you sold a startup before the .com bubble.

Yep. And you've had a front row seat to this industry for twenty or twenty five years. Do you think we're in a bubble again, or are there different dynamics that are at play today? No. I I think, you know, I fundamentally think we are in in the middle of a bubble.

But, you know, that is how it always happens and how technology and new innovations happen. You know, you go back and look at the tulip mania. You look at the railways, right, in The US. You go back and look at the, you know, the when Internet was first starting to happen. So it's the same way that a lot of companies and, you know, a lot of innovations get funded, and then out of them, some giants come out like Amazon or Google.

Right? And I think the same thing is going to happen, you know, but on the other hand, you can't really stop these hype cycles or these manias because people look at the opportunities, and they don't want to miss the next Google. Right? They don't want to miss Amazon, so you have this mania. But that's the way innovation cycles work, and and, you know, you just have to be more disciplined about how you deploy your own dollars.

But there is a school of thought that says that, hey. You would have been better off maybe investing in all the 12 search companies, and one of them would have made back all your money. Yeah. That's true. Well, so we at my restructuring firm, which is CMVG, we've Sure.

In in this market, we've noticed, at least our perception, is that companies are burning through cash much faster, and they're finding it more difficult to raise money in this environment. And that we've seen that boards need to give some more realistic guidance to management. How do you approach the balance of growth versus sustainability when you're working with your portfolio companies that may be stretching themselves too thin? Yeah. No.

No. Absolutely. I I think the number one thing as a board member, I the first thing that goes to my notice is the cash in the balance sheet. Right? Because and the burn rate because, you know, I try to tell my CEOs that, look, there is no company if you don't have any cash to meet payrolls.

Right? Right? So if you don't manage your cash, no matter what you develop, you're not going to, you know, have an exit. You won't have a great company. So for us, you know, when we look at the p and l, when we look at the financials, first and foremost, the first thing we look at is not just the cash burn, but really the sales and marketing efficiency.

Right? Because, you know, that is one place that, you know, if you are going to be a growing company, you'd have to make investments in sales and marketing. But the challenge a lot of people have and CEOs that they don't focus on the efficiency of your sales and marketing. Right? It's not about, you know, how much you're spending, but is spending a dollar in sales and marketing really bringing you a dollar of new revenue?

So that is one big metric that we talk about. Right? And then the second thing is we really you know, and and I'm just talk speaking about this because I just came back from Denver where we actually went through this whole process. And then we kind of look at how much money is going into r and d and what are the things that you're spending the dollars on. Right?

It's not just about headcon. What are the major initiatives? Right? Do you have a platform debt, a tech debt? Do you have, you know, new AI initiatives that you need to spend money on?

So you kind of go with the board and say, okay. This is why we need this many engineers. This is why we need to spend this much in r and d. You know? And then you kind of come and look at, okay.

What is the outlook look like if you spend all this money? What happens to your cash balance? And then you kind of go into a discussion. Okay. You know, you're projecting by spending this money, you're going to grow only at 20%.

That is not going to be able to help you raise a next round of funding. Right? So then it kind of comes back. Okay. You need to either grow faster with the same amount of dollars or you really need to cut you know, get to a cash flow breakeven.

So it's a very nuanced kind of a discussion, and I think you really need a good CFO to Yep. Help you kind of understand all of that. But but, yeah, for me, you know, the cash runway is the lifeblood of the company after the employees. Right? You need to have a great management team and employees.

But if you don't have money to pay payroll Yeah. You're not going to have a company. That's that's for for sure. So switching to the more positive, you've invested in companies like Square and Box Yeah. Which have had successful IPOs.

How did you and your team find those companies, and how did their founders catch your attention? What what what stood out? Yeah. Look. I I think in general, you know, there is if I one wish I had, was that I could kind of tell from meeting a founder for two or three times how much grit, how much determination, and how much ability to operate they have.

Right? That is you know, in in some ways, I'll tell you that everybody is unique. Like, Aaron is unique. Jack is unique. And and I think the vision and the ambition is what kind of made us gravitate towards them and invest in those companies.

Because at the end of the day, you know, these companies are all built by the people and the founders. And if you don't have a visionary founder and who's going to go all the way, you're not going to have a very successful company of consequence. Right? Because at the end of the day, everything boils down to the CEO and the team that they hire around them and the culture they create. So we spend a lot of time, you know, not only with the CEO, but also with the rest of the team.

And we try to understand how does the, you know, CEO interact with this team? Do they give them a lot of leeway to, you know, develop on their own, build kind of the, you know, the functions that they need to be to be built, or do they micromanage them? You know, do they over or look over their shoulders all the time? So all of that kind of, you know, helps us do some pattern matching to understand, okay. Is this CEO scalable?

You know? Can they go all the way? And then along the way, you know, we also advise CEOs that, hey. You need to hire independent board members. Maybe you need to hire, you know, executive coaches to help you grow because, you know, CEOs have taken somebody from zero to 10, then taking them from 10 to fifty, fifty to a hundred, hundred to a billion are very different skill sets.

Yeah. And there are some CEOs who can manage, who can do that, and there are some CEOs who who don't. And, you know, they also do a great job of like, a great example is ServiceNow. Like, Fred, you know, brought in Frank Slootman, and then, you know, he grew it to a certain point. And then there was another CEO, and now Bill McDermott has kind of come and taken the company for, I don't know, 95,000,000,000 to over almost 200,000,000,000 market cap.

Right? So that's the journey. And, you know, and there are different people for different stages of a company, and there are some CEOs that, you know, like Zuckerberg who can who can do this. But then you look at Google, you look at ServiceNow. Right?

They were all companies that were had multiple management teams over time. Yep. And that makes that makes sense. You know, as we're recording this, I eyed the market, and the headlines were that I think Meta and Microsoft were down because people are concerned about the AI cost. And, you know, that that segues into what I wanted to talk about, which was that, again, my understanding is Sapphire announced that they were gonna invest a billion dollars in AI over the next decade.

Yes. Given the current market conditions, how do you advise companies when they're seeing these massive AI valuations? And are are you seeing companies becoming more cautious, or are they still pushing aggressive growth models? I I think people are still pushing aggressive growth models, but we are only funding. So we have invested in companies like Elise AI and Glean recently.

We are only funding companies where the sales and marketing, you know, are still efficient. Right? Where they are spending a dollar in sales, you know, to get a dollar of net new, you know, ARR back. So for that, that doesn't go away. Right?

Fundamental business metrics, You know, just like in the .com bubble, people said it was all about the it was the eyeballs and things like that. And, ultimately, it's all actually about cash flow. Right? That's what people get valued at. So we are still fundamentally looking at those metrics.

Now about the question you made about the AI and the cost of AI, you know, I'm always optimistic as a technology investor, and I think the costs will go down. Like, Google actually announced that their cost of AI for their search has gone down 90%. Wow. And I also think back at, you know, trends that had happened in the past. You know, if you remember, people said that that that video would be too expensive, that, you know, we were going to run out of bandwidth.

We would not and and look at us now. We, like, use our phones, you know, to view everything. Right? Like, even on a on a plane, like, with you know, when Starlink shows up, we'll be able to look at video, you know, on a United flight. Right?

So so I think so my thing is that, look, the cost of AI is definitely going to come down over time. People will find ways to optimize it. And that is one of the reasons why I also think a lot of people who raised a lot of money for these foundational models might not be the best place for venture returns because the cost of, you know, of those models to develop them are going down, and how much you can charge is probably also go down because the cost of building them is going down. That makes sense. So we touched on this before when you said that you have to make sure that companies, you know, are managing their cash so that they don't miss payroll.

Yes. We've seen more and more companies that are kind of having to develop what I would call a wind down budget. And, you know, hopefully, right, in especially in a in in your model where you've got revenue producing companies, you're gonna see less of that. But in those situations where cash is tight and there is a negative burn and there doesn't seem to be a way that they're gonna really get to the other side of it, How do you guide a company that's trying to avoid that scenario? And and then when they get close to that, how do you help them manage that situation?

Yeah. So, look, I I think, first and foremost, the the guidance that we give to the CEOs saying that, hey. You gotta live to fight another day. Right? And if you don't cut your burn and become cash flow breakeven immediately, you will not be able to fight another day because you will be done.

You will have to, you know, sell it to somebody, you know, get whatever is worth for whatever IP you have, and that is not what you want to do. So I think a lot of CEOs do get that. So once we get that, I think one of the beauties of the enterprise software, the recurring revenue model, is that you have a lot of customers. Right? So you I I think the number one thing we advise them is first and foremost, shore up your customers to make sure that they're not churning away.

Because, again, you know, you are making these projections based on, okay, you're not getting any additional customers. But on the other hand, you have a recurring customer base. So you go in and, you know, focus on making sure they don't churn churn out. And the second thing we also say is that, you know, can you focus on upsells more? Right?

I had one company that, you know, one year had went through a really, really turbulent times. And, you know, they only had, like, three new logos, but they survived and they actually got to cash flow breakeven because they got really good at upselling and, you know, most of their growth, which was, like, only 15% came through upsells. So that was the other one that we talk about saying that once you have, you know, cut to make sure that your cash flow breakeven, you go focus on your customers and see what you can upsell. And then once you have stabilized the business, you can do two things. You can either find a home for the company, you know, so that at least the employees and, you know, preferred shareholders make some returns.

Or there are cases where, you know, we have cut, and then the company actually has started growing again, and then they were able to raise the financing in, like, eighteen months. So that is you know, of course, it's not the typical situation, but I would say 10 to 15% of the case, that is a situation where they cut get to a point. And, you know, and the other thing that a lot of CEOs don't realize is that actually cutting to and making everybody to a cash flow breakeven actually makes the company more efficient and sometimes does not hurt growth as much as they're projecting. Right. Right?

So one of the things we try to hit the puck is help our listeners figure out where the world is going and and and help them think things through that they wouldn't get there on their own. In that regard, what problems are you most interested in seeing AI solve? Yeah. So one of the ways I look at it is I think AI is going to solve a lot of boring and dangerous work that people do. Cool.

Right? And and, you know, and hopefully and also make people more productive. Right? Things that you don't really want to do, like, you know, type in a lot of data entry. Answer, like, you know, customer support calls that, you know, that is not really that critical.

Right? And then how do I set my password? Or, you know, I lost something. How do I reset it? AI is going to come in and make those kind of work really redundant.

So all the boring and dangerous work is going to go go away. Right? So we are investing in a lot of things. Like, you know, at least AI is a good example. It is focused on people who manage properties, large properties.

Right? And for them, you know, when you talk to them, their headache was I'm taking all these phone calls for renters. They're They're asking me the same question about what is the price, you know, what are the least things. You know, at least AI with their agent, you know, AI agent can actually answer all these questions, and you make the property managers much more productive and actually happier. Right?

Because now they're not answering kind of questions that is very redundant and, you know, very small, and it's all get getting taken care of. So I think you're going to see, and that is one area that we are focused a lot in how do we find areas where, you know, this, you know, boring and and dangerous work is out there that we can, you know, replace with with these spots. So that's that's one area. And we're also very careful because, you know, in this era, in generative AI era, the incumbents are actually quite strong. Right?

Everybody you know, you look at Microsoft, Google, Amazon, for sure, but even on the enterprise software side, you know, people like ServiceNow, people like Oracle and SAP, they are very, very strong and and making sure. So we are trying to figure out areas where the incumbents don't have a data mode or a distribution mode to be able to to go in and, you know, do things, around that. So that's one area. So, you know, Gen AI is going to, you know, kind of permeate every things that we do in enterprise software. You know, we don't do consumer oriented investments, but I also think there's a huge going to be a huge number of companies letting probably making everybody become a developer, you know, because development costs are going to go down so much.

But the other area that I spend a lot of time focused on is in defense tech. That is actually one of my areas of interest. You know, we have one investment in a company called Defense Unicorns, and we have a term sheet out for another another company. And the reason is, you know, first and foremost, you know, just like every venture capitalist, you know, it's the potential returns. Right?

So, you know, large, large buying center spending almost trillion dollars a year in software and, you know, and other products. So it's a huge, huge market that you can then can target. You know? And and also, they are not you know, they're kind of in the in the dark ages in some ways that they don't use a lot of software in a proper way. You know?

Everything is custom built from them by by defense primes. And then, of course, you know, I I want our country's, you know, people in the military kind of have the same kind of technology, like, not only our adversaries do, but also, like, what they do use in day to day life. Right? Why should they be kind of hampered by decades old technology while, you know, they're using much more advanced technology in their day to day life. Right?

So that is another area that we we've I I'm personally focused on quite a bit, but all of them comes with the lens of enterprise software. When you talked about danger I mean, I understand the boring. When you talk about danger, is that are you referring to drones and that kind of things, or are there other things you're referring to? Yeah. I I I'm not referring to more the military side.

I'm also referring to things like, you know, robots going in and, you know, going in through a tunnel or, you know, or, you know, mining or, you know, like, you know, when you're looking for gold or you're looking for, like, copper. Right? Like, we are not we still have to mine. Right? Because, we have an insatiable demand for a lot of these minerals with the EV.

You know, I feel like, you know, EVs really take hold. And so those kind of things are all going to be or even maybe it's not as dangerous, but if you are moving around a forklift in a warehouse, right, Those things kinda done by humans, and they're kind of boring as well as semi dangerous. So I'm talking about those kind of tasks. So in the same way we're talking about self driving cars, which will be heavily dependent on AI, you're talking about, again, going into a mine or other exploration, even deep sea or otherwise, you'll be able to use autonomous autonomous tools, so to speak, to do a lot of this work. Exactly.

That makes you very good sense. Exactly. Yeah. So recently, I think was it the Fortune magazine's Brainstorm tech, you were asked what fictional tech you'd bring to life, and you answered the DeLorean time machine from Back to the Future, which I thought was great. Yep.

But you said you'd want to ask your parents questions you never got to. Yep. Can you talk more about that answer? And and what kinds of questions you would ask, and and how does that personal reflection influence the way you approach your professional life? Yeah.

You know, like, I I think one of the questions I would like to ask my my father, who was a professor, about all the things that he was, you know, he wanted to achieve or or do. Like, you know, the the great example is that he had come to visit me, you know, in the early nineties. Right? And he was talking about and we all had, remember, you know, individual voice mail systems. Right?

You would have this machine in the in the house, and you would come in and, you know, you would ping it and, you know, you had left all the voice recordings left. He was talking to me at that time was like, hey. Why don't you have it all centralized? Why do you have a machine like that? Why can't you just dial in and, you know, get the answer, like, have one place?

And so he kind of so my my biggest question would have been because he was a technologist. You know, he was involved with, India's first space program. Like, what are the things he would have done with, with all this technology that's going on? And just have a discussion because, you know, I think I was too immature at that time. And I you know, just like anybody in their twenties, you know, you think that you know everything and your parents don't know anything.

And and I think that that would be one one big question. And then the other question is, you know, unfortunately, my parents did not get to see any of their grandkids. And I would also like to see you know, ask them what would they have done and how would they have reacted and, you know, kind of worked with with their grandkids and seen the reaction of my grandkids with my parents. That makes sense. Were you when when did you find out that your parents were wiser than you thought?

Actually, I think when you had kids. I don't know if you have kids. I do. But I think once you had kids, you're like, okay. You know, all the things that my parents told me and did, you know, were all the things that make sense now.

Right. And, you know, in some ways, you go back to what your parents did to you or taught you when you were a kid because you don't have any other role model. So it kind of, amalgamation of what your wife and you kind of have grown up with, and you kind of make a mixture. It's a little bit new, but a lot of it is really based on how your parents brought you up. Do you ever wonder what your father would think of all this AI technology going on and that his son is, you know, managing billions of dollars investing in this stuff, and he's talking about answering machines?

That must be a wild thing to think about. Yeah. Although, he would still say that I didn't do enough, you know, professionally, you know, or educationally because I don't have a PhD. Uh-huh. Because because you know, so a lot of his, you know, office students are actually in the in the Bay Area.

Some of them have built large companies. So yeah. So he would have been very proud, and I think he would have been proud of not only the people, you know, me, but also a lot more about all the students of his who have been really successful in The US. And, you know, and the other thing I think that would be very, you know, to say is that people I think he would be very surprised at how good The US has been for entrepreneurship because, he was very much of, you know, focused on helping entrepreneurs in India and was a struggle. And to see a lot of people who grew up in India but came here and, you know, The US actually provided an opportunity and a platform for them to become entrepreneurs and become successful, I I think he would be really happy and, you know, proud of that too.

Do you see any changes taking place in the overall economy that gives you any concern that we, as this capitalistic country, need to be careful about? No. I I I don't think so. I I I think, you know, despite of all the media and everything, US economy, I think, is one of the most stable and probably the most, what I would say, entrepreneur friendly than anything else in the world. You know?

Yeah. You can talk about on the margins. Hey. Can the regulations be a little less? Right?

Sure. But if you go and look at what companies have to go through in in Europe or even in India, you know, let alone some other nondemocratic countries, I think US is still doing really well. So, I I would I want more you know, I I believe in crypto. I believe, you know, we have investments in crypto. Do I want more regulations to make people kinda understand what can be done or can't be done?

Yes. Do I want strategics to kind of come back and start doing more m and a? Sure. But, overall, I think there is no other place to build large companies. And that is why you see so many entrepreneurs, even if they start their company in Europe or even if they start their company in India, start their company in Israel, all want to come to The US and make this, you know, big company based you know, that sells in The US.

That makes sense. And I think, you know, that ties into the fact that we do have a relationship between the government and tech here. And and with so much innovation taking place, how how do you see things like cybersecurity and defense tech play a role in shaping the future of technology? Yeah. Look.

I I think that is a very critical part of of our infrastructure in The US. I think a lot of the, you know, infrastructure for our power plants and, you know, those kind of areas is not as up to up to date, and we really have to fix it. And there are companies that's doing that. I think if you look at the military, they are cybersecurity, their defenses, you know, all of that stuff. Right?

So I think, you know, having a private public kind of partnership where private companies are brought in to kinda fix these issues is kind of the way to go. And I think the government does do that. You know? Yeah. It's not as perfect or as good as all the private companies want it to be.

But overall, I think there is a desire, and I I think the government is going in the right direction. Right? But the other thing I would point I would touch upon is that, you know, people are all talking about GenAI and regulations around that. And I think, again, there, you know, having the government just come up with the law, I don't think makes a sense makes any sense. I think there has to be some kind of regulations about what the AI you can use it for.

You know? You can use it for deep fix. Can you use it for for some some other kind of nefarious activities? But the regulations around that really should be driven by, you know, government, private industry, as well as academics. Right?

Because there's a lot of work that academics are doing in lots of universities and, you know, computer science departments. And you should kind of put together something that you build a framework in how these regulations need to be looked at. And then a lot of those things will go to the Supreme Court, right, and will get decided over there. But I think that framework needs to be done for GenAI to understand, okay, what can be done and what can't be done. And not be in a limbo, like, you know, like it's in the crypto industry where, you know, there is no regulation and no guidance about in The US about what can be done and can't be done.

When you look at where we are today and the use of debt and and the fact that we have much more debt going into these technology companies, and for instance, I saw back in o seven and o eight, and you look at the discussions we're having around the federal deficit and kind of the use of debt in general, how do you see that playing out over the next few years in the overall economy? So, look, credit, I think, you know, if I'm not mistaken, is actually much, much larger than equity. Right? If you look at just the size of, you know, transactions and how much gets done. And in some you know?

And then if you take the whole mortgage industry, you know, the credit, like, far, far more outstrips the size of, you know, what we do on equity. So yeah. So credit is something that is almost the lifeblood of of the economy. Right? That's why people look at interest rates so so closely.

Now, you know, credit for a technology company can be the death knell if you don't play it right. Right? If you take on credit without having a pro form a, which shows how you're going to pay back that credit, that debt, and, you know, how much is going to affect your cash flow and what is going to kind of leave for your product development, then, you know, you're in a in a lot of hurt when when when kind of the credit payments comes due. Right? So I think it is I I I actually think that using credit for large transactions for large companies makes a lot of sense, especially if you can you know, if the interest rate comes down.

But I also think that a lot of CEOs and management teams are not cognizant about the downside of using credit. Right? If your rosy projections don't go, you know, as you have projected in your pro form a, what happens to your cash flow? How do you kind of pay back the interest? Right?

And then at the end, how how do you pay back the actual loan? You know, what you need to do. So I I don't think credit is is bad, but I think a lot of times people make judgments on using credit without really thinking through things. Well, you know, we see a lot of companies now where there's layers, and there's, you know, an equity round, and then there there may be a PPP, there was SBA, there's there's a secured loan, there's an unsecured loan. I mean, there's all these layers.

And and recently, I've I've seen these non banks lend, you know, millions of dollars at, let's say, 20%, and they're not being amortized. The thought is they're almost like a a a different form of equity, and you're either gonna sell the company or you're gonna take another round of debt or equity to pay it off. But as the market seems to have tightened up, that seems to be less practical. I'm wondering, in your experience, because you've been around doing this, is there a percentage of companies out there that have this kind of ticking time bomb that haven't really planned on having it be amortized that are gonna get caught by this tsunami of debt? I I I think so.

I I think there is there is a lot of you know, especially a lot of beyond companies that have a lot of debt on their balance sheet because, you know, they have used debt to kind of, you know, finance the return of capital so that they have a great IRR. Yeah. No. I I think there's going to be lots of companies kind of selling because they cannot pay their debt, you know, their interest, right, or have to pay back their debt. So absolutely.

And, you know, I would say a lot of times, you know, that's why PEs will also transact. Right? Even though it might not be the optimal time to transact, they'll try to, you know, liquidate and sell the company to somebody else because a debt payment just gets so much so onerous. So so yeah. No.

And and we have we have been we don't do as much late stage investing, but we have been doing a little bit, you know, dipping our toes in the water into that area. And, yeah, the the debt kind of instruments of paying back somebody that's come due, you know, is a is a big issue. Right? And there's also other things that, you know, one of the interesting thing that I've learned over my experience is that the the debt you provide actually resells the debt. Yeah.

And then if an activist investor gets in and buys that debt, you're in a lot of trouble because, you know, these activist investors, you know, are not just buying equity. They also buy debt instruments of large companies and kind of use that as a way to get their pound of flesh. Yeah. We we when we had Larry Summers on the podcast, we asked him what the exposure was, for instance, to kind of this non bank financing out there, and he he acknowledged it. It's it's not something that we've really tracked before.

And at least, you know, trying to tip our listeners off to kind of the changes and and what to be on the lookout for, the debt seems to be a new development from, again, the last recession we had, and it's gonna be interesting to see how, you know, when Yeah. We do have a little bit of a soft landing or a recession Yeah. Whether or not the debt's gonna cause some pain for some of these companies that weren't, as you say, they they weren't really versed in how to deal with it. That's right. That's right.

But but I do think that's why the interest rates come, you know, come down a little bit. I think then people are going to refinance. Right? I think that's the as but but, you know, the the challenge, what happens is when you have a huge debt overhang is that you don't have a lot of cash to actually do product development. And, you know, you it's like a almost like a vicious cycle.

Right? You spend all this money to kind of pay the debt that interest, which means you have less less amount of capital to put into r and d and growth. And, you know, your growth slows down and your cash flow goes down. Right? So it it is like a vicious circle that you can get yourself into if you leverage yourself up with a lot of debt.

So, Jay, I thoroughly enjoyed this. It was great chatting with you. And and all I would say is that, you know, everybody who's listening should at least try giving it a shot to be an entrepreneur at least once in their in their lifetime. Right? It's not like it is being an entrepreneur is meant for everybody, but, you know, in in part of their career, you know, I think the The US has such an entrepreneur friendly kind of economy trying.

And you can be an entrepreneur, like, you know, be learning a franchise, you know, running a small law firm. You know, it doesn't have to be that you have to build a tech company. Right. But I think, you know, I encourage everybody to be an entrepreneur for at least, you know, part of their career. That's a great way to end, and and I appreciate it, Jay.

It was great having you on the puck, and and, we'll stay in touch. Thanks, Jim. Thanks for having me. Okay. Have a wonderful day.

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