FULL TRANSCRIPT
Slava Rubin (00:00)
In this episode of Smart Humans, we talk with Alan Feld, who's founder and managing partner at Vintage. We discuss what it's like to manage $4.5 billion of AUM and invest into other funds. What does he think of the current venture market? What are the opportunities and where are those possible to invest? Of course, he talks to us about his predictions of the economy, geopolitical issues, and the pick for three years out.
Slava (00:48)
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Slava Rubin (01:36)
Hello and welcome to the latest episode of Smart Humans. I'm super excited for today's episode. We have a legend in the venture world, Alan Feld, welcome founder and managing partner at Vintage.
Alan Feld (01:47)
Thank you very much, Slava It's an honor to be here.
Slava Rubin (01:49)
Yeah, so we always start with the same question, which is where did this all begin? Take us back to how you got into this world. Was it from your childhood? Was it from growing up? What's the background of how you got into the world of alternative investments?
Alan Feld (02:03)
So I studied law and MBA in university, grew up in Canada and I was taking Canadian companies public in the US. Knew that I didn't want to continue to be a lawyer. It's a lot more fun to be a client than it is to be a lawyer. And then decided to actually go into investment banking, worked with a firm called Roberts and Stevens in Israel.
and helped them get their activities going here and then from there went into the venture industry and you can certainly identify with this. Had a burning desire to start my own firm and hence started Vintage.
Slava Rubin (02:43)
So you were practicing law but then felt the legal side wasn't as interesting as potentially the client or the business side. Tell us more about that.
Alan Feld (02:50)
Great.
know, look, even as a lawyer, I enjoyed actually being more an advisor to companies and helping them think through issues than drafting contracts. And one of the things I learned throughout my entire career, especially you see this in the venture industry, this is a relationships business. In fact, most businesses are relationships.
And you know, I think the aspect of working with people and helping people and actually frankly putting up a mirror to them and letting them understand themselves what's, you know, where they should be going, what they should be going on, know, the directions they should be going. You know, it's something I actually I find rewarding. And so, you know, as I say, it was kind of natural to move into the
into the investment banking advisory side and then from that into the venture side. You know, I think one of the things that I've learned again from my experience, know, venture is all about the entrepreneur, right? And I think one of the key skills of any investor is understanding other people and building relationships with them, right? So it all comes back to the same thing.
which is the human building the relationship.
Slava Rubin (04:04)
amazing and how long did it take from starting in law to then starting vintage? How long was that for you? Just to give people perspective.
Alan Feld (04:10)
Oh my God. Wow. So, you know, I started learning, you know, study for law in 1983 and I started vintage.
20 years, you know, 30 years later. Yeah, 30 years later? No, 20 years later.
Slava Rubin (04:27)
in about like 2003.
Alan Feld (04:29)
20
years later, yeah, yeah, 2002, 2003, working on digital studies in 1983, so yeah, 20 years later. No, I was an investment banker in the middle. And then I was a VC at another firm before I started my own firm.
Slava Rubin (04:36)
So you were practicing law for a while.
Okay, got it.
Got it, so it was a transition basically from the law side to the investing side, taking steps along the way. Amazing.
Alan Feld (04:49)
Correct. Correct. I think
one of things that people, you know, don't sufficiently do in their careers is they don't think sufficiently strategically. You know, it's funny, all of us are advisors, you those of us who are VCs or advisors, we're always helping people try and figure out their own strategies, but we don't look, you know, strategies of company, but we don't look at our own careers strategically. And I think one of the things that, you know, and I do a lot now these days is I...
approach the end of my formal career next year on the B65 is working with younger people and helping them figure out what they want to do career-wise. And I think one of the important things, at least, I try to do along my career is rather than hold into things that I didn't want to do, think, okay, what's the end game? Really, what is burning in my gut that I want to do?
And then how do I get to that?
Slava Rubin (05:42)
Amazing. What's the end game? Besides what's the end game as your piece of advice, given the fact that you have all this wisdom now, what would be two other pieces of advice you would give to somebody who's a little earlier in their career trying to become one day as accomplished as you are? Or what would you tell yourself, you know, now that you have all this experience, your younger self?
Alan Feld (06:01)
So I had a wonderful mentor by the name of Aaron Dobrat, and I think he had a really interesting comment. He said, Alan, be long-term greedy. I think it's a great concept, which is greedy. In other words, don't squeeze the lemon to the end. Look longer term. Every single thing you do, think, what does it do to allow me to build my business in a sustainable,
Slava Rubin (06:11)
Long-term what? Greedy.
Alan Feld (06:27)
successful way. you know, and, and I think that advice was great because I think there's too many cases that I see in both people's careers and in the way businesses have been built that everybody is racing from day one. You know, it's, this is much more a marathon than it is a sprint. And I think too many cases you see people sprinting and then
You know, it blows up. And what I try to do and what I learned from Aaron was, you know, build the thing, build the business you're trying to build in a solid way. Grow a bit each fund. Don't get out of control. make sure that you've got all your ducks in a row and you, and there's a good, really good, deep, strong foundation. So I think that was one thing that I learned.
is to build for the long term. And the second thing that I learned is, and frankly this is the culture I try to build into vintage, which is, you know, again, as I mentioned at the beginning, life is relationships. And, you know, we do a lot of stuff, you know, for free, you know, per se.
to help our investors, help the funds which we invest in, to help the companies we invest in. In other words, we're not looking for immediate payback around everything we do. We want to be helpful to people. And what I've learned again from business is, you know, it's a, beside the positive feeling of trying to help somebody, you know, not everybody's going to remember it, but there'll be times that people will remember it.
So I think it's also an element of optimizing for the long term. But I think being fundamentally decent, another thing that we've done at Vintage, for example, is we've never signed on an LOI letter of intent that we ever backed off of a renegotiate. I mean, don't know of any other group. I mean, we wanted to be a situation where we gave our words to somebody, it messed up.
Slava Rubin (08:14)
that's awesome.
Alan Feld (08:21)
So, you know, the culture that I've tried to build and frankly that I feel comfortable with is, as I say, it's always been long-term, not trying to squeeze the lemon to the end, not always looking for a quid pro quo on stuff, but hopefully being fundamentally decent to other people, being respectful to other people, and, you know,
And it fits with the inherent strategy that I think is fundamental, is business is all about building relationships.
Slava Rubin (08:50)
Those are great. mean, lots of very easy words to say, but a lot of them take a lot of hard work to be willing to implement those long-term thoughts, you know, to be able to not squeeze the lemon, as you say, in the near term and to be thinking about the end game, building relationships, a lot of great wisdom there. Turning the chapter here for how people like to invest their net worth, we love to ask our guests. So obviously your personal net worth, I imagine, is somewhat tied up with vintage. So let's put that aside ⁓ and just think about...
Alan Feld (09:15)
Bye.
Slava Rubin (09:17)
How do you like to invest? So the classic historical example is 60-40-0, which is 60 stocks, 40 bonds, zero in total turn of investments. How would you say you're allocating across those three major buckets for your personal investments?
Alan Feld (09:32)
Well, I'm personally very, very exposed. One of the things I, again, connected to the way I look long-term and the way I look at our relationship with investors, I'm personally very invested in our own funds beyond the curve. So I strongly believe that you shouldn't be taking money from other people unless you've got something on the line.
Slava Rubin (09:46)
course.
Alan Feld (09:52)
So in that sense, if you look at my equity exposure, each percentage, probably a unreasonable percentage in relative terms of my net worth is tied into Vintage. Because I keep reinvesting in many respects, right? So that's one. I think the second, one of the things I think that the mistake that a lot of people do when they look at
especially technology investing. They look at tech investing and venture investing, I think, and you see this with institutions and you see this with certain standards, look at this as this super risky category. I think they're looking at it wrong. I keep saying to people, look at your venture investments actually as a hedge on everything else. I mean, we'll talk about this, I'm sure later, but
You know, I mean, I've been doing this for some capacity for over 30 years, right? I don't remember a period where, there's as much disruption as we're now starting to see. And, you know, imagine say 20 years ago, where if you were buying indexes or you were, you know, investing what was then significant, right? You would have had a lot of exposure to retail stocks. Well,
You know, Amazon, which didn't have anything close to the valuation 20 years ago, it does now. And you put a little bit of your money, you know, into Amazon, that would have been a hell of a hedge against the retail stuff that you were holding, right? I think we're going to see very significant disruptions in a lot of industries which have not been disrupted to this point. So if you're, you know, sitting on a portfolio,
Slava Rubin (11:15)
For sure.
Alan Feld (11:29)
broad, know, portfolio of equities, it actually makes sense for you to have, you know, a certain percentage of your assets in the disrupt doors and not in disruptees. And so I, instead of looking at, you know, venture investing as a risk, you should look at it as something that's hedging the technology disruption risk you're facing on the rest of your.
And I say this frequently to institutions because they look at, my God, technology investing, venture investing is so per risky. I think the bigger risk, frankly, is sitting on stuff that's going to get disrupted and having large positions in that. And I think the technology investing strikes a balance. So it's not just, in my view at least, it's not just the equity versus debt component, the 60-40 thing. It's what's in that 60-40
⁓ on the equity side.
Slava Rubin (12:19)
Of
what's, again, outside of the vintage exposure, which is obviously significant, what's your like equities exposure to public markets out of 100 %? Again, outside of vintage, which is obviously gonna be hard to calculate.
Alan Feld (12:33)
It's
well, so I, you know, we're in addition to everything else, the way, we were because we have certain, U S pension money, we're private pension money, we're restricted and all sorts of stuff. I, by law, we, we have a hard rule just because we're also exposed to a lot of. You know, data points about public companies that we don't do individual stocks. So most of my stuff is, you know, ETFs and that kind of stuff.
Slava Rubin (12:58)
Gotcha.
Alan Feld (12:59)
on the equity side. But it's mostly because of regulatory issues more so than anything else.
Slava Rubin (13:03)
Of course,
how much do you like to do the ETFs there? Is that 10 % of your 100 or is that 50? what kind of, gotcha. And then outside of your... ⁓
Alan Feld (13:08)
I remember offhand.
Frankly,
I wish I managed my money as well as I managed other people's money. Quite frankly, I'm so focused on managing vintage, I've kind of left it to other people to manage my personal gap.
Slava Rubin (13:18)
Yeah, yeah, it's kind of like the cobbler.
Of course,
it's like cobblers with no shoes. I fully understand. Or I even have to argue with my mother who's a doctor and she sometimes doesn't take care of our own health. I fully...
Alan Feld (13:30)
You got it. You got it. It's a, you know.
Correct,
you know you take I take the fact that I'm managing other people's money extremely seriously and
Slava Rubin (13:44)
course, beyond the venture stuff, are there other alternative
investments that you like to invest into personally? the things that would include there are like private credit, real estate beyond your primary home, crypto, art or collectibles?
Alan Feld (13:54)
Right. Yeah, no,
I am. like, you know, on the, on the private side, you know, I've got some exposure to distress funds. think this response are, you know, interesting opportunity if they're matched well, and I like infrastructure funds. You know, I find the returns of the infrastructure funds and, you know, relatively stable returns.
Slava Rubin (14:18)
And for the audience, what is an infrastructure fund exactly?
Alan Feld (14:21)
Yeah, you companies that are building say, you know, private toll roads or you know that kind of stuff, public private partnership kinds of deals.
Slava Rubin (14:32)
Amazing, Changing topics again, the market. So you have exposure to lots of investors. You see a lot of companies. There's a lot of things always going on and today is no different from geopolitics to economy to inflation to where interest rates going to jobs to all kinds of stuff going on. Obviously change in administration in the US, lots of stuff going on in the Middle East and other parts of the world.
So just what's your high level view? What's Alan's view on today's market and economy?
Alan Feld (15:00)
You know, I don't know. I think we're in a period of enormous uncertainty, certainly geopolitically. There's a lot of uncertain factors. know, the China-Taiwan issues, Russia and the rest of Europe, what's going on here in the Middle East. There's a lot of uncertainty politically.
You know, certainly the US administration is sending inconsistent messaging. So, you know, we see this as a very volatile market. You know, frankly, I've never believed in timing markets markets. I remember when I started in my career,
in 1987 it was just before the crash that year and I remember having you know I was a cyber security lawyer security's lawyer taking companies public in the US from Tampa and I remember having ten prospectuses on my desk one day and then having nothing you know for two years after look none of us can predict markets I don't think that at the end of the day is
At that's not what I feel that people pay me to do. I think my job is to, I think many of our jobs, and again it goes back to some of the conversation we had before, is to think long term. Not to think as traders, but to think as investors. And investors who are long term investors are saying, okay, where's the world going? Where's the world going technologically? What are the fundamental changes that are gonna happen? What industries, no matter,
what happens geopolitically or politically could because of technologies or other factors be fundamentally changed and then look at investing in those the winner, what you believe to be the winners in those industries industries. Again, looking for value, looking for having a thesis around
Where the disruption opportunity where the disruptions gonna happen and who those who the disruptors will be to me I think that's the right Investment strategy Much more so than saying I you know this you know tomorrow the market's gonna be up or tomorrow the market's gonna be down There are people maybe who do that. Well, I certainly don't ⁓
Slava Rubin (17:01)
That makes
Yeah, I'm right.
I'm right there with you. I'm definitely a long term investor as well. But people always love to hear smart people's opinions and you're a smart person. So we everybody's got opinions in the near term. Let's call it the next 12 months. What's your point of view? Do you think that we're headed towards recession in the US or globally? Or do you think the economy is getting better? Do you think like
Alan Feld (17:30)
I don't know.
genuinely don't know because I think there's just way too many, probably more so than again, in period that I remember, so many factors. I don't know what's going to happen in the China-Taiwan situation. If you would have asked me at the beginning of Trump's administration whether he would have, I believe he was going to put tariffs on, but...
I believe you put this level of tariffs and then would you take them off quickly and will there be agreements, not be agreements? I mean, there's a lot of factors that are not necessarily classic economic factors that could cause a recession that aren't really, I would call it inherently fundamental issues and stuff that may be created, recession could be created by conduct of governments or some geopolitical blow-up.
Look, we're in a period of geopolitically, we're in a period of pretty significant uncertainty. And it's concerning. So what I decided to do is say, look, I can't predict all this. But what I can do is do the work necessary to understand where the technological changes are being made, where the value theoretically could be.
and spending my time on that and not try to guess whether China's gonna go into Taiwan or Russia's gonna go into someplace other than Ukraine.
Slava Rubin (18:54)
Yeah,
I mean, that was really valuable. You even mentioned going back to 1987. So you've seen a ton of, you know, market dynamics or geopolitical issues and gave a lot of good wisdom there. Is there anything else that you would say from how you've navigated all these dynamic markets historically? Cause obviously you've been so successful as to a lesson of wisdom beyond what you just mentioned, like what we could take today to navigate all this and come out, you know,
Alan Feld (19:17)
You know, again, I
think the core thing is you can't predict what's going to happen tomorrow. There's, you know, one of the things that I, again, I, my perspective has always been long term. So, you know, every time I've attempted to predict what's going to happen in the short term, I usually get it wrong. I think the, you know, the right thing to do is to say with horizon of five to 10 years.
which in itself is hard to do, don't get me wrong, but where's the general trend? I believe, for example, let me give you an example of something. I have a sector that I think is gonna go through some pretty dramatic changes. I think, for example, agricultural technology, food production is gonna go through some pretty dramatic changes over the next, let's say 10 to 20 years.
Slava Rubin (19:46)
Yep.
Alan Feld (20:07)
You know, a few things that are happening. One is, you know, clearly global warming. Second, we're seeing, you know, essentially the death of the family farm, right? You know, it's very hard to take a small farming operation and continue to be long-term viable. So you're starting to see people buying off farming land, not for construction or for real estate development, but to aggregate
food production and make it much, more efficient and effective. Well, maybe a family farm wouldn't be the first to adopt technology, but you know, clearly a consolidated farming operation that has a CIO is going to start wanting to, you know, to do that. You know, at the same time, you've got growing middle class around the world, right? I mean, you, you know, even if there may be ups and downs in the Chinese economy, you know, if you look at the size of the middle class today,
relative to where it was 20 years ago. And if you look at where it's going to be 20 years from now or in India, usually when people get more wealthy, they consume more food, right? So you look at the potential for, on the one hand, increased food consumption or demand. On the other hand, the combination of global warming, water problems globally, you've got to be far more efficient in
in delivering that. So I think that in itself is going to create some fairly significant disruption, but also create a really interesting opportunity around, okay, what do we do in the next 20 years to make sure that we can provide for this demand? So you can take multiple sectors and say, wait a minute, doesn't make any sense where we are, what's the way the...
the structure of the industry is today, that structure will not serve the market in 20 years from now. So I think you can go across multiple sectors that frankly haven't been sufficiently touched and that I think will go through dramatic changes. And I think that's going to create massive opportunities in the next 20 years. so what I try to do in our firm is I get, we're somewhat unusual in the final funds world.
is we divide by sector. And none of us is smart enough to know every sector. So what we do is that person in that sector tries to learn the sector and build a thesis of what that sector is going to look like in five, 10, 15, 20 years from now. And then we will invest in funds that are consistent with that thesis.
Slava Rubin (22:38)
I love the-
Alan Feld (22:38)
When you're investing,
especially in early stage venture, what you care about isn't what's hot today. What you care about is what's going to be hot in 10 years from now. ⁓
Slava Rubin (22:47)
Absolutely.
I love that prediction around agriculture and food production and you brought up a term fund to fund. So it's a perfect segue into all the work that you do at vintage. obviously you have decades of experience and lots to learn. Not everybody on the call knows what a fund to fund is. So can you share what is vintage? I mean, you're managing billions of dollars of AUM and doing incredible work. So if you could just start with the high level as to what you all are doing.
Alan Feld (23:05)
Sure.
Sure,
so we do four things today. We mentioned roughly about $4.5 billion. We do four things. One is we invest in other venture funds and at the end of the day, venture is an interesting asset class. First of all, it has limited ability to scale and I'll explain that in a minute. If you look at the returns of venture funds, they're highly concentrated around relatively few.
And in certain cases, and I'll say, you know, if you want to get into it, we can talk about what cases this isn't a problem, but in a lot of cases, size has been the enemy of return and venture. Because there's only so many, you know, gigantic exits and our experience, least we found, that if you don't have at least one company that returns roughly one and a quarter, one and a half X your fund.
you're not going to generate a 3x or 4x net to your investors. it's ventures about elephant hunting. And so we're looking for funds where the ownership that they have, the size of the fund, the strategy is consistent with generating for us, know, outsized returns. Now, the really, really good funds can...
Generally tend to be consistently good going forward right if I want to invest in the public markets And I believe in a certain stock. I've got access to it right I can invest anywhere in any company I want right like just question paying the price of the stock rate That's not the case in venture and private equity general right it's the best entrepreneurs Want to go to the best in that?
They want to go to people who they feel comfortable with because at the end of the day, this is a partnership. It's almost like quasi marriage in a sense, because a lot of these companies, you you're going to be together with your investors for at least 10 years, in many cases, much more. Second, you want somebody who can add value to your company that you can consult with, who can open up doors, who can give you advice.
You know Slava. You're a great example of it right? You're a repeat entrepreneur You know you can add you add a lot of value to your entrepreneurs because you've been it and and so you know the really great entrepreneurs are Actually picking their investors not just Having investors pick that Now there's so many great entrepreneurs right and there's so many great exits. You can take a look at it. It's probably about
you per cycle about 150 of these companies. And you want to have at least one or two of those in your portfolio. And if it's your funds way too big, those 150 aren't going to make a difference on your return. you know, there is a connection between size and, and return, which means that a lot of really great funds are oversubscribed.
Right? Because everybody knows, this guy's going to attract or this matter woman's going to attract the best entrepreneurs. Well, then what happens, just like the entrepreneurs select their investors, the venture funds select their investors. And so, you know, what we try to bring to the table is hopefully, you know, decent assessment of new managers. And then, you know, when managers are proven, hopefully access to the
to the better managers who are, who have shown the ability to, you know, be a magnet for great investors. So that's what the fund is. Second thing we do is what's known as a secondary fund where we're buying positions in venture funds. So if somebody wants liquidity in their, you know, they're an LP in a fund or even a direct investor, an angel investor in a company and they don't want to wait the 10 to 15 years or they don't want to their hand in their pocket.
in subsequent rounds, we can buy them. So that's what our secondary does. Finally, because we're very close with the GPs, which we invest in, the general partners and funds we invest in, and because we divide by sector and are attracting a ton of companies, we also do direct investing into companies, but at B level, B rounds and above. And the reason we're pretty restrictive about that is we don't...
feel it's ethical for us to be competing with the funds in which we're investors. So we don't do early stage investing. Typically what we do is we'll join around. Our core business still is our fund the funds business, but because our attitude is not to be competing with the funds, a lot of the funds are showing us opportunities to join them in rounds because they see us as a hopefully helpful investor and not.
somebody who's using the data to compute. The final thing that we do, and remember I mentioned before, to win the best entrepreneurs, you've got to be adding value. think to win, to get access to the best funds, think LPs have to be adding value. So we looked at frankly what the best GPs are doing for companies, and we said, well, wait a minute, what can we do?
for the companies of the GPs we invest in. Now we track over 30,000 companies, over 4,000 venture funds today. And we created a value team that is working with large corporates where large corporates tell us where their pay points are. And then we identify startups that we're tracking that can solve that problem. So we introduce those startups to those large corporates.
And essentially, know, those corporates become, you know, sorry, they become customers of those startups. It's a free service. We don't take a penny from anybody. goes back to what we said at the beginning. The belief that if you're good to people, hopefully they'll remember it. you know, our hope is that if investor, if the GPs see that, unlike other LPs, Vintage is actually helping their companies. We also have, by the way, in addition to this, is dev service. have a...
a free service around recruiting, you know, they'll give us a bigger allocation. So essentially it's what equity for allocation. Similarly, you know, if we're helpful to the, their underlying companies, hopefully they'll want us to join in subsequent rounds in their companies because again, they could just help me. So again, the approach is let's do whatever we can to be helpful to the funds and to their companies. And hopefully people will want us in a bigger position around the table.
Slava Rubin (29:17)
Amazing. And I'm going to take you into the way back machine, which is, you were a lawyer, then a banker, then a VC, and then you started vintage. But before you started vintage, you probably in your mind at some level thought, should I start my own VC fund? Or should I invest in other funds? And what was that thought process? And how did you make that decision? And why do you think investing into funds? Because you obviously at any time could have switched, right? So why is investing into funds for you better than investing?
into companies as a VC.
Alan Feld (29:46)
So, know, as you mentioned, in my career, was at DC and I did okay. you know, so I made some good investments, by the way, I still make some good investments and sometimes I make a lot of bad investments too. So far, more good investments than bad investments, but you know, one of the things that I realized and I think that all of us have to do this, I you have to be honest with yourself, which was I came to the conclusion that it was better for me
to focus on funds than to be an early stage investor in companies. And the reason I thought that way was with all due respect to a minus A to an entrepreneur, this is how you should build your business.
You know, I've seen too many guys who are telling people how to build their sales force who have never, you know, gotten a PO in their lives. You know, I mean, I think one of the things that all of us has to do is to put ourselves into perspective where we bring to the table. And I think, you know, I've seen investors really help companies, but I've also seen investors kill companies. And I came to the Prisma conclusion.
that and so slavier again you and your partner grade samples of it. think people who have themselves built companies and have been doing this since day one. Now it's obviously I built vintage but it's a different kind of animal. I've never sold software. You know I think people who've done that in their careers can bring a certain level of value that people like myself who you know come with financial backgrounds or legal backgrounds or whatever
can't necessarily do.
Slava Rubin (31:07)
Makes sense.
When you think about investing today, how has it changed now to be a vintage investor versus in 2003?
Alan Feld (31:17)
I think probably the one word is AI. I think AI is gonna change a lot of stuff. And obviously it's gonna cause destruction in lot of industries, but I also think it's gonna cause a bifurcation of the venture.
Remember I said that size is the enemy returns. And I mentioned that there's a caveat to that. I think we're going to start seeing, because of AI, some companies that are absolutely enormous, that are much larger than a lot of things that we've seen before. If you look at what happened, and software's a great example.
We are I'm on the board of a company that helps large companies see how many applications they have, right? See what's being used. What's not being used. You know, there was one customer of this company that had 5000 applications, 2000 of them weren't being used at all. know, what ended up happening was a lot of power went to the business units and people were just putting stuff into the system. You know, frankly, there wasn't really.
coordinated in the central way, right? And you see, you know, this massive amount of overeating, I would say, of sort of point SaaS solutions. And that's created a real mess in IP and data and other things. I think if we're going to start seeing, you know, genuine AI, you're going to have, you know, and you're starting to this with companies like Databricks, which I think is a great company, and others that are trying to...
better manage that data. But I think you're going to see a huge amount of consolidation from these tiny sort of narrow point solutions to much broader solutions. We're going go back away from best of breed to something that's a real platform that works together. Well, to build those, you're going to need significant capital. And you're going to need to do a lot of &A of stuff into your company.
and you're going to have to figure out a proper financial strategy and you're going to need to build something at very significant scale. And to a certain extent, I think you're going to see certain funds who have grown almost acting in many ways like private equity funds with a lot of the functionality that you saw around private equity groups. So if you look at the leading private equity groups and you see
You know what they bring to the table where they do an acquisition around, you know, rethinking it rethinking, you know, go to market, bringing new people in help around and a help around, you know, all these different factors functions to build this business. I think you're going to start seeing groups investing in that infrastructure and they're going to be separated out. think from the last.
There will always be a room, I think, for seed investment, for seed firms. And I think as some of these larger firms get even larger, the most senior partners there are not going to deal with seed investment. They'll put the most junior people on. So I think there's always going to be room for seed funds with experienced people to win great seed stage entrepreneurs.
I think the guys are going be in the problem, funds are going to be the ones in the middle. The ones who have scaled, right? But their scaling has meant they've raised a lot more money and frankly, they're putting more money at a higher price, but they're not getting bigger outcomes. And that I think is going to be the challenge. So I kind of think, and we're spending more and more time.
Slava Rubin (34:25)
I completely agree.
Yeah.
Alan Feld (34:43)
I would almost call it a barbell stretch.
Slava Rubin (34:45)
Yeah, I mean, I think the middle is gonna be hollowed out as well. Super early or super late is where there's gonna be an opportunity to make money and venture and you're obviously leading the charge on that with what you're saying even.
Alan Feld (34:54)
Well, and it's not just super late. It could be early, but you've got to be following it all the way through. And the value you add along that process, like just because you're a good early stage investor, doesn't mean that when the company gets to three, 400 million in revenue, you're to be adding the same value as somebody who understands what scaling is at that level. It's a different skill set. It's a different basket of services that you need to be doing. So I think.
You know, the some of these more integrated platforms are going to build very, very big companies and will have the infrastructure to allow them to do that. I think the guys in the middle have to kind of make some tough decisions of how they want to run their business. Do they want to be that kind of platform or do they want to really continue to focus on seed early stage and they have to right size their funds?
Slava Rubin (35:29)
So.
Absolutely. So if one of the listeners right now has a little bit extra money that they want to put in the venture. So let's say they have a hundred K total or they have 5 million total. So it could be anywhere in between for now, let's say. And obviously you work mostly with institutions and I'm talking about an individual, whether it's, you know, a small family office or a more sizable family office. So should they be thinking about, you know, trying to get direct investments and diversifying that hundred K or 5 million?
Alan Feld (35:57)
Mm-hmm.
Slava Rubin (36:10)
Should they be thinking about not doing any direct investments and just find one fund to fund to let them deploy across funds? Should they be trying to deploy across funds themselves? Should they be doing direct end funds? What's your guidance to somebody who's trying to get into this space? And let's say, like I said, they have maybe 100K total or they have up to 5 million K total to diversify across.
Alan Feld (36:31)
You know, we've had a lot of opportunities to expand vintage well beyond what we're doing, Beyond tech and venture investing or venture fund investing, et cetera. And we came to the conclusion, let's focus on what we're good at and what we know. I think it's the same thing here, right? I mean, if you're a really good money manager and you've got a relatively small amount to deploy.
Are you going to invest the time and the money to recruit the people necessary to be able to look at every opportunity? I mean, I don't, I know I'm not smart enough to know every sector in venture, right? I'm not smart enough to know, you know, be able to look at a, at a company in, you know, a huge area, you know, variety of areas and assess it well. Maybe there are other people who are, I'm not.
So I've always taken the view that I'd rather invest in people who have an infrastructure and a depth of team that can make that decision. And yeah, I realized that, know, funds of funds are fees on fees, but frankly, you know, they do a good job. What I care about is the net return, not the fiance. So, you know, I think quite honestly, I think now that we're, you know, today we're...
the changes are so dramatic and so quick. If you don't invest with people who understand what they're doing, it's not a good sign. I always ask also if you're not a professional investor in this space and an opportunity comes to you, why doesn't it to you? Right? you know, so I would say to you, either pick a fund with people that you trust, diversify to a fund to fund, but I...
Slava Rubin (38:00)
Absolutely.
Alan Feld (38:11)
You know, if you're a one-time investor, I'd be very cautious about doing stuff without a depth of team that tells the area well.
Slava Rubin (38:20)
What's your point of view on today's venture market? You obviously have so much experience and have seen so much. People have all kinds of different perspectives. There's a lack of liquidity where the returns, AI is destroying everything. So how am gonna pick the right ones? On the flip side, we have open AI and these huge companies, you have small amounts of people creating huge results.
we had the inflation and let's call it the overvaluations of the ZERP days just a few years ago. And now we practically have whiplash behind that where people are afraid of the asset. So can you put us some perspective, the fact that you've been doing this for decades as to where we are today and where you think at the moment, like should we be investing into this class and where are we at in the market?
Alan Feld (39:01)
You know, so, yeah, if you look at the average venture fund, the returns aren't great. The gap between the great venture funds and the average is huge. This is an asset class that is, you know, if you're not in the top quartile or top decile funds, you shouldn't be investing in it. And frankly, you know, I mean, at the end of the day,
If you don't have access to those guys or you don't have income, you shouldn't be investing. The average return just isn't there. It doesn't justify the risk and the illiquidity. And that's true, not just today. That's been true for, you know, since venture started. And actually it's quite true in private equity. Look, in the public markets, the gap between the best and, you know, the medium is really not that huge. Why? Because there's a quality of information notionally.
and an equality of access, right? If I want to go into a certain company, I can invest in it. And if you have more information about that company than I have, then you may have inside information that you trade on it, you're going to jail, right? That's not the case in venture capital and private equity. By definition, there's inequality of information and there's inequality of access. And so the best funds continue to generate outside returns because the best on
Entrepreneurs go to them and they have the capability to make the two judgments, right? So, you know, even even when markets are, you know, choppy and The really good funds are still going to generate great returns. It may take longer Markets go up markets go down, you know, I've been through five downturns in my career five, maybe six depending when you count But this is a simple market
I never get excited when it goes up too much and don't get too excited when it goes down. This is a long-term asset class and you'll make money if you're invested with great people. What we look for, by the way, in a fund is, you know, who's the magnet for the best entrepreneurs? I mean, when we do due diligence in a fund, we're looking at the quality entrepreneurs that they attract. If they're attracting great entrepreneurs, then they'll be a great fund.
Very simple. At the end of the day, the guys who really build the companies, look, you've been an entrepreneur. The guys who build the companies with all due respect for the funds aren't the funds, it's the entrepreneurs. The funds can help all along the way to make the company more successful, but let's put it this way, if a VC starts managing the company instead of the entrepreneur, you may as well shut down the company. So at the end, it's really about attracting the best entrepreneurs.
helping them where you should be helping them and getting out of the way where you...
And those funds that do that and do that well will make money no matter what the market is. Because there's always going to be something that's being disrupted and it will be the best people disrupt.
Slava Rubin (41:34)
And.
Awesome.
What's your speaking of disruption? What's your point of view on Bitcoin, crypto and the public tokens as it relates to, you know, fund picking, liquidity challenges and where venture is at?
Alan Feld (41:56)
So I have a partner who covers the space, Seth Horish, and he understands this way better than me. personally do believe in the blockchain infrastructure. I think it could be dramatic for securitization of assets. I think one of the good things that's happening with the current administration is that there'll be some regulation coming out.
If it's if the industry is actually regulated, it will attract attract significant institutions to be even more active in this space. I think if big institutions are in fact, you know, active in this space, then it's going to make it, you know, it will will take off. So actually, this is one of the few areas where if it's properly regulated, it's actually a plus to, you know, to the industry. So.
You know, think the potential for blockchain as an infrastructure is huge and I think it could be very dramatic over the next number of years, especially with the attitude of this administration, which seems to be very pro-block.
Slava Rubin (42:53)
Awesome, and then you obviously are super knowledgeable. We all wanna be as knowledgeable and as smart as you. What is it that you watch, listen to, or read? Like what is it that you like to engage with regarding to content?
Alan Feld (43:05)
So I love to read a lot. By the way, besides the obvious stuff, reading, and again, covered, in my particularity, I B2SmallB software. That's my responsibility within our firm. So I read everything I can about that and meet with companies all the time and meet with our investors all the time, all the time trying to understand what's going on in space and so forth. I have to tell you.
One of the things that I learned a lot about is I love history. And, you know, as I mentioned to you before, I've seen a lot of cycles and you realize maybe at my advanced age of at least 65 next year, you know, I've seen a lot of, a lot of stuff repeat itself and history books are extremely informative because you start seeing a lot of patterns.
my god, this this has happened before and so I think we don't Let's put this way when people say to me this time it's different it's usually a good time to sell your stock ⁓ Because you know one of the things I've learned is it's very infrequently different You know, it's it there's different changes. There's different technologies, but at the end of the day human nature
Slava Rubin (43:59)
Hahaha
Is there a, is there?
Alan Feld (44:11)
you know, for good and for bad doesn't change.
Slava Rubin (44:13)
Is there a book or two that you would recommend?
Alan Feld (44:15)
No, have a very large library of history books, so I don't lose anything one particularly. I just like reading lot.
Slava Rubin (44:21)
All right, perfect. Is there
any specific newsletter or podcast or any kind of website or anything that you like to go to that?
Alan Feld (44:27)
No,
no, I'm not, not anybody specific. just try to read as much and listen to as much
Slava Rubin (44:33)
All right, perfect.
Well, Alan, we have covered a lot of ground from starting in Canada, getting into law, moving all the way to banking, VC, and then starting vintage. You you gave us some great wisdom knowing what is the end game? Be long term greedy, not about the short term and life is all about relationships. Today, you think there's massive uncertainty, you still have to have long term thinking, a lot of geopolitical concerns.
You did have a great prediction around where is agriculture and food production going 10 to 20 years out. So a lot of people should think about that and see if there's investment opportunities there. You're now managing a four and a half billion dollars of AUM, have four different products offering, but mostly known for the fund of funds. Obviously you were telling us about you're looking for great managers, especially with entrepreneurial experience and the empathy. You think AI is changing everything. People should ask themselves, why are you even seeing this deal?
The average returns in VC are not so great, which is why you only got to get into the top quartile or the top decile funds, which is not very easy to identify those. So you've got to make sure you're getting into one of those exactly. And you have this great quote, which is entrepreneurs make the returns, not the VCs. I love that. And you're a big fan of history. So you read the history books and if anybody says to you today is different, well, that's the time to sell. really love that.
Alan Feld (45:30)
or access them.
Slava Rubin (45:44)
Thank you very much, Alan.
Alan Feld (45:45)
It was an honor, Slava. Thank you very much for doing this.
