DeepSummary
The episode features an in-depth interview with Roger Ehrenberg, the legendary founder of IA Ventures, discussing the future of venture capital and the changing dynamics of the industry. Ehrenberg shares his views on the commoditization of venture capital, the influx of new limited partners (LPs) like sovereign wealth funds, and the impact on returns. He also explores strategies for finding liquidity in the absence of IPOs and M&A activity.
Ehrenberg delves into the nuances of managing a portfolio, including when to sell versus hold positions, and the challenges of maintaining investor psychology during downturns. He reflects on his personal journey with wealth, sharing pivotal moments that shaped his relationship with money. Additionally, Ehrenberg offers insights into parenthood and the secrets to a successful marriage.
Throughout the interview, Ehrenberg draws from his extensive experience, providing candid advice on topics such as raising capital, structuring incentives, and navigating the evolving venture capital landscape. His perspectives offer a unique and seasoned viewpoint on the industry's current state and its future trajectory.
Key Episodes Takeaways
- Venture capital returns are likely to be compressed due to the influx of capital and the rise of large, institutional firms, while boutique, artisanal VC firms may struggle to scale.
- The existing incentive structures for limited partners (LPs) are broken, enabling the proliferation of venture capital firms and potentially contributing to the "dumbing down" of the industry.
- Finding liquidity in the absence of IPOs and M&A activity is a significant challenge, with continuation funds emerging as a potential strategy for providing liquidity.
- Successful portfolio management involves carefully considering when to sell versus hold positions, and maintaining a balanced investor psychology during downturns.
- The influx of new LPs, such as sovereign wealth funds, is expected to have a significant impact on the venture capital industry, influencing returns and fee structures.
- Personal wealth can shape an investor's mindset and approach to investing and exiting, with Ehrenberg sharing his own journey and pivotal moments that shaped his relationship with money.
- Bringing up children with ambition and hunger in an environment of financial abundance requires constant vigilance, leading by example, and aligning actions with values.
- Successful marriages involve choosing battles wisely, accepting inherent differences, and fostering an environment of mutual understanding and respect.
Top Episodes Quotes
- “I would say the existing incentive structure for LPs is totally broken. And I've spoken a lot about this. I feel a lot of the dumbing down of venture, and too many venture firms being created. Lps have been enablers.“ by Roger Ehrenberg
- “I think the best founders aren't dependent. I think the best founders benefit from really good vcs to act as a sounding board, especially in those earliest days, and to give them, honestly, empathy and psychological support, because that is often the hardest thing to get when you're struggling at the beginning and trying to get to product market fit again.“ by Roger Ehrenberg
- “Picking your battles. And what I mean by that, Harry, is as long as we've been together and as well as we know each other, there are ways in which we still bug the shit out of each other. That's just natural. We're humans. There's stuff that used to irritate me that I would call out and she would get angry and vice versa, earlier in our relationship. And I think what has happened over time is a bunch of those things. Stupid things, but annoying things. A bunch of stuff is hardwired that's very, very hard to change.“ by Roger Ehrenberg
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Episode Information
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
Harry Stebbings
2/19/24
Roger Ehrenberg is a legend of the venture industry as the Founder of IA Ventures, among the most successful seed-stage venture firms of this generation, having seeded companies including Datadog (NASDAQ: DDOG), Digital Ocean (NYSE: DOCN), The Trade Desk (NASDAQ: TTD) and Wise (LSE: WISE.L). Today Roger is the Founder and Managing Partner of Eberg Capital, a pioneer in bridging the gap among sports franchises, sports betting, media and entertainment. Roger’s current sports investments include stakes in the Miami Marlins, Real Salt Lake, Alpine Racing, Betr, Commonwealth, Kero Sports, Simplebet, SlamBall, Smarkets and WagerWire.
In Today's Episode with Roger Ehrenberg We Discuss:
1. The Commoditisation of Venture and Worsening Returns:
- Why does Roger disagree with Doug Leone that "we have moved from a boutique high margin business to a commoditised low margin industry"?
- Why does Roger believe we will see consistently worsening returns in venture?
- Is this influx of LP capital cyclical or is it here to stay?
2. The New LPs and The Broken Existing LP World:
- Why does Roger think the existing incentive structure for LPs is totally broken?
- Who are the most important new LPs entering the venture market?
- How do sovereigns and pension funds entering venture change the industry?
- Which players have capitalised on this new LP class best?
3. Where Does the Liquidity Come From:
- With the closed IPO window and lack of M&A, where will liquidity come from in the next 24 months?
- Would a Trump administration open M&A markets? Does Roger agree M&A markets are shut down?
- When does Roger believe IPO markets will open again? Will Databricks and Stripe go out in 2024?
- If Roger were to run a continuity fund strategy, how would he structure it? What would he do?
4. When to Sell and When to Hold:
- How does Roger advise managers on when to sell vs when to hold?
- How important is it for a new firm to have a company go public in the first five years?
- What are Roger's biggest lessons from selling The Trade Desk at a $2.5BN valuation?
- How does Roger think about managers thinking they should manage the public book of their portfolio for their LPs? What are the pros and cons?
5. Relationship to Money:
- Do rich investors make better investors? How does investing when you have a lot of cash already change your mindset around investing and exiting?
- How does Roger analyse his relationship to money today?
- What have been the single biggest needle movers in his wealth journey? How did it feel when he made a $6M bonus?
6. The Secrets to Parenthood and Marriage:
- What does it mean to be a great father for Roger?
- How does Roger think about bringing his children up with the same level of hunger and ambition, despite being brought up with such wealth?
- What are Roger's two biggest lessons on the secret to a great marriage?