Full Transcript
Slava Rubin (00:00)
In this episode of Smart Humans, we talk with Mark Klein, who's founder and CEO of SuRo Capital. SuRo is a unique company on the public markets, ticker SSSS, that is actually a wrapper for pre-IPO investments, everything from CoreWeave to OpenAI and others. He talks about the latest market for pre-IPO, how valuations are a bit frothy, what he thinks about the economy and where it's headed as to what's possible in the coming year. And of course, he gives us his perspective.
on Three Years Out.
Slava Rubin (00:58)
Hello and welcome to the latest episode of Smart Humans. I'm excited for today's guest who's an innovator in the markets for private markets with a public stock. So Mark Klein, welcome to the show.
Mark Klein (01:12)
Thank you for having me. I greatly appreciate it.
Slava Rubin (01:15)
Absolutely, so Mark Klein is the founder and CEO of SuRo Capital. And we're gonna get into that in just a second. But first we wanna get to know Mark. So how did you get into the world of alternative investments in these private markets? Go back as far as you'd like, whether it's born, childhood, grade school, college, first job, your parents, how did you get inspired to think about these types of things? How did you become who you are now?
Mark Klein (01:39)
That's a good question. I've been in and around Wall Street for about 40 years. And in the early 90s, started with a long short hedge fund and ran that and continued to run that for quite some time with a partner. In the late 90s, the rules sort of changed about accredited investors and the accredited investor rule and allowed for a great deal more investors to come into funds. So in 1998, we established Independence Holding, which was the first vehicle
fund-to-funds vehicle allowing high net worth investors to invest in private equity. And we were way in front of the wave of fund-to-funds and way in front of the wave of access. And access has always been something that I've focused on in asset management products throughout my career. Subsequent to our first one, we went and did two others, the last one being a venture capital fund-to-funds in around 2000. All of those were innovative. All of those were ⁓ highly sought after.
And it was a fun time. Post that, I moved into another world of creating access, and that was in the special purpose acquisition vehicles, and have been around it and have been considered one of the, really, the drivers of that business since the early 2000s. So I've been in that business from the banking side, the principal side, the investing side. We ran about a billion dollars in an investment fund in the mid 2000s.
in the SPAC business. In 2010, a friend of mine suggested that why don't we sit and talk about the private markets. And I went out to San Francisco and visited with him and discovered that one, companies wanted to stay private longer. The four horsemen were gone, they were merged, and the idea of taking companies public that had a couple hundred million dollar market cap or less wasn't really where the markets were going.
And at that point in time, there were less than 20 companies that were private that were worth a billion dollars or more. As you know now, there's about 1,500 unicorns. So a lot has changed. And in fact,
Slava Rubin (03:44)
Sorry, sorry,
what year was that? 20? 20...
Mark Klein (03:46)
We
started thinking about it in 2010. We went public in 2011.
Slava Rubin (03:51)
So in 2010, there was only like $20 billion private companies. Is that right? That's wild, because you did say quickly, but today you're saying there's over 1,500.
Mark Klein (03:56)
Correct, yeah.
Right. In fact, there's now 70 private companies worth over 10 billion and five that are hectacorns that are worth over 100 billion. We had this idea to do this and do this in a business development format. Talk to lawyers, talk to banks. Everyone thought we were crazy, but we thought we had a pretty good idea. then Goldman Sachs led a $500 million round in Facebook. that was from that point on, all systems were.
We went out, we went public, we had a successful public offering. And we've owned over the course of the years Facebook when it was called Facebook, Twitter when it was called Twitter, Dropbox, Spotify, Palantir, Coursera, Snapchat. The list is fairly endless over that initial starting time. So I've been in around the public and private markets for 40 years. I've always believed in creating
vehicles that democratize access and have been on the forefront of it, whether it was the fund-to-funds business, the special purpose acquisition company business, and now with several companies.
Slava Rubin (05:04)
What is it in your early days that got you excited about the concept of trying to marry public and private? Was it the regulatory changes or was it something in your own DNA about trying to navigate that, to democratize it that got you excited when those changes were happening?
Mark Klein (05:25)
Well, private equity in the 90s was sort of the platinum standard of investing. And they always had a significant unfair advantage. They had all the access to information that they could need. They had capital. They had the ability to construct capital structures to work. But it was not available for individuals to participate. You had big institutions, foundations, the like that had the opportunity to participate, but individuals
were shut out of that. And the returns in private equity at the time were in the mid-20s or higher, and no one could have access to it. So when the rules changed, it was an obvious idea, how do I create vehicles that allow individuals, wealthy individuals, small institutions to participate in these? And when we went out initially to, and our first fund to funds had Clayton DuBleur in it and Apollo in it, and went to those firms and said,
hey, we have an idea, can we get sort of shelf space in your funds? They didn't even know what we were talking about because it was so nascent, especially for individuals. And it worked out fine. So that was the belief. I have just always believed that there is a real desire for the individual or to be able to participate in institutional like.
investments or institutional investments. And clearly now that appears to be all the rage, whether it's the change in regulation that's going to allow for retirement accounts to be invested in it, all the interval funds that are being created. All the big asset managers are trying to say, wow, I should access individuals. But 20, 25 years ago, almost 30 years ago, that was sort of not what people were thinking.
Slava Rubin (07:08)
So 20 years ago, so we had some other pre IPO trading CEOs on our podcast and they mentioned this 20 years ago, the average IPO was around $500 million of enterprise value. Today, the average is over 5 billion. And obviously that's just average. Nevertheless, the ones that are obviously the bigger ones, you're way ahead on the trend. Where do you think this goes with the momentum that we have now in the next, let's call it a decade from now, I have you back on the show. What do you think is happening?
Mark Klein (07:35)
gee, was a decade seems like forever from now. You finally have, and we've been talking about this now for quite some time, we thought the IPO window would be opening with the end of last year with Service Titan and then leading into CoreWeave, which was going to be the bell cow, if you will, or the bellwether into the IPO market. It didn't quite work out exactly that way, although CoreWeave's obviously a very successful IPO, but the floodgates have opened up.
Right. You've had a bunch of IPOs that have done really well. The crypto IPOs, Figma, have Klarna coming. And by all accounts, September is supposed to be one of the busiest months in recent history. So I think you're in the part of the cycle now where, which is typical, the larger companies, the most well-known companies go out and go do their IPOs. And if the markets continue to remain robust,
then you start getting smaller companies that are going public a little earlier than they might have before. And that'll go along. There's a pent up demand for ⁓ monetization, whether it's the private equity portfolios, the venture portfolios. So they're going to continue to line up to either go public or more &A activity to occur. Where we are 10 years from now, as far as individuals access to all of this, I suspect it'll be everybody will have
access to almost anything. What form that takes in, I have no idea. When reading the articles about tokenization of private companies, that seems to be a bridge too far, at least right now. But that's what's going on. unfortunately, this is one person's opinion, I think the proliferation of products to individuals will end up with an overproliferation and where the level of
folks that are participating won't fully understand the risks, either with the volatility of marketplaces, the lack of liquidity or what have you. And there'll be some real stumbles as individuals really enter into a more riskier asset class, or certainly a more illiquid asset class, or set of asset classes.
Slava Rubin (09:38)
So you mentioned that there's now five, $100 billion private companies. There used to only be $20 billion companies 20 years ago. Fast forward that decade. Do you think the average IPO is up from 5 billion to let's call it, I'm just exaggerating here, 50 billion? Or is it up from five to 10? Or do you think it's staying at five? Like what do you think is happening?
Mark Klein (10:01)
Well, you're in this cycle right now in the private markets where companies that raise money at a billion dollars six months ago are now raising it five or they were raising, you know, two, three X their valuations in three, six, nine months. That's probably fairly unsustainable. And there is at least we believe that there's a huge amount of opportunity to participate, but there's a bit of froth in the market.
So you'll get some level of normalization. Does that mean that IPOs will be a lot larger? The first thing is, what are the value of being public? How is that going to change? mean, with the advent of these organized secondaries that have occurred, and there's been a couple of dozen of them I'm sure you've reported, or talked to people about them, it allows companies like Stripe to stay private longer or...
know, Canva is in the process of doing one right now. Or maybe they're just closing. But that allows them probably to stay private a little longer than they might have otherwise in different marketplaces. So you may find as we go out five years from now or longer that the ability to stay private is almost the same as being public as far as liquidity, price discovery, et cetera. And there may not be the same utility of being public in a decade from
Maybe that's a little unorthodox in thinking, but I suspect public markets have been around for a long time. They're going to continue to around for a long time. About what the size is, the average size will be larger than now.
Slava Rubin (11:35)
So we love to get to know our guests in regards to how they like to invest their own money, because it's always very helpful. The traditional portfolio is a 60-40-0, which is 60 % public markets, 40 % bonds, 0 % into alternative investments, which is anything beyond that. Obviously, you are offering a public product, which we'll get into in a second, but it's really mostly privates inside of that. So how do you personally like to invest?
How much of it is in public? We're talking about your net worth. So how much of it is into publics versus bonds versus alternatives? Are you zeroing on terms? I'm gonna guess not. So what percentage of your 100 % goes into alternatives?
Mark Klein (12:14)
100 % of my public ownership is in my company, 100%. Other than that, I have other asset classes, fixed income, real estate, et cetera, but my entire exposure to alternatives or publics is all SuRo I'm the second largest shareholder in SuRo. I'm all in on what we do. I think we have a competitive advantage to be able to deliver outsized returns.
So I put my money where my mouth is. I buy stock all the time. I bought stock, I think, two weeks ago. So for whatever that's worth, maybe that's silly, maybe it's not, but that's where my exposure is. I've always, whatever I've done in my career, I've put a great deal of my own money in, whether it was the fund to funds that we were doing earlier on, running a hedge fund, when I was CEO of all the public companies, I had significant investments in there.
and I have a rather large investment in SuRo.
Slava Rubin (13:07)
Awesome, I love the conviction. So just to be clear, so no like ETFs or Spider or Amazon stock, none of that.
Mark Klein (13:15)
No,
it's 100 % of my risk exposure outside of real estate is in SuRo
Slava Rubin (13:25)
So great, you brought up real estate, which is an alternative asset, obviously beyond your primary home that's considered an alt. So what percentage of your 100 % net worth do you put into real estate?
Mark Klein (13:35)
I have, I just have personal residences, let's put it that way. That's my real estate exposure. don't own REITs, I don't own apartment buildings. As I said, I have risk assets, that's SuRo I have safe assets, that's whatever my fixed income portfolio is. And I have use assets, which are residences. I'm pretty simple about how I do it.
Slava Rubin (13:43)
Okay.
Nice.
How about crypto, any exposure to crypto? Yeah, you're anti-crypto, is that correct?
Mark Klein (14:03)
Me personally? No. None.
No,
we, when the first wave of crypto several years ago, we looked at all the companies that are kind of that have come public or going to go public that are raising money. and we came to the conclusion back then is we didn't know as much as other people. And so if we feel that we're months behind where others are, then we're playing from behind. we didn't participate. We put a small amount of money into a fund that generated great deal return for us.
because they knew more than we did. But we've had no exposure and as of now, we continue to have no exposure. Although we've looked at a bunch of different ways to participate in crypto, but I personally don't. And I think it is an area that's interesting, exciting, clearly is a real asset class of however you want to define it now. And we continue to look at ways to participate.
Slava Rubin (14:59)
Nice one last asset class. about the world of like art or collectibles, cars, sports cars, watches, any exposure to that stuff or not for you.
Mark Klein (15:08)
Only if I have a watch I wear it, if I have a car I drive it. Whatever the art that's on our wall, you can thank my wife, but it's not for collection necessarily, it's for enjoyment.
Slava Rubin (15:13)
Very functional.
The takeaway is very clear. Your concentration is in what you do. I love it. I love the conviction. So let's move on to the market. And this can be a very open-ended question. What do you think you mentioned a little bit about the IPO window opening up, et cetera. What do you think of today's economy, today's market? It's very open-ended, obviously. So just give us your point of view as to where we are. Obviously you could touch on anything from jobs to inflation, to Fed, to IPOs, to, you know, P ratio, whatever you want to talk about.
Mark Klein (15:25)
Yes.
Slava Rubin (15:49)
where the bubble's at, AI, whatever. We just would love to get more client's perspective on where we're at in today's market.
Mark Klein (15:56)
Sure. I mean, my opinion in $3, I think, still gets you on a subway. Look, the economy has been more resilient, at least than a lot had thought would be, or at least the consumer continues to be around. And you have earnings that are continued to be driven. Clearly, you have some bifurcation in that. I think it's been, the markets have been surprisingly robust. I think if you would talk to
A lot of experts 12 months ago, they wouldn't think the market would be hitting all time highs right now. I think, that's typically markets tend to climb a wall of worry, any of this sort of sayings you want to do, they don't necessarily go where people anticipate they'd be going. So the markets have been pretty strong. Clearly there is stretching valuations, especially in some technology. That doesn't mean they can't stretch further. It doesn't mean it's not warranted.
I think when you start getting to different metrics that are manufactured in order to justify valuation, and we've had that several times over the times that I've been in the 40 years I've been on the street, you start to take notice. And I think we're a little bit there when you see in the private markets, as I discussed before, rounds being done at 3X, the value of the last round, which was announced close like two months earlier.
that seems unusual. and you know, the Fed, the Fed's probably a pretty interesting question. Everyone reads what they want to read. I think they're trying to balance a whole lot of things, whether it's inflation, you know, some level of the employment side, you know, the government pressure on what they do and how they do it. It's a tough balancing act.
I don't know the direction ultimately where they go or how many, if they cut, how many times they cut rates. But we'll see. But for us, our view is broadly, we're actually in more cash than we've been in and sometimes we were in the most cash in the middle of 2022. had sold most of our portfolio between, know, from 20 to the beginning of 2022 and carried that cash into basically into the 23.
We're more cash than we have been. There are lot of opportunities, but we are pretty price sensitive and some areas of the marketplace are clearly expensive.
Slava Rubin (18:11)
Can you expand on that? So more cash today. Last time you were in more cash, it was pretty down market, pretty rough days out there coming down from the COVID highs. So why more cash today? Just expand a little bit. You said maybe some lofty prices, but it's gotta be more thinking.
Mark Klein (18:25)
A
couple of things. So the last time we had a whole bunch of cash was when the run up between 20 and 22. We sold 250 million dollars worth of securities. We started the beginning of 2020 with net assets of 200 million. So we distributed more money than we actually had in our portfolio when we started that cycle. We've now started to monetize some of our investments. And so that is leaving us with with higher cash balances. We are seeing
mean, the deal flows, we went through seven different names yesterday alone in our team. So we're seeing an awful lot of opportunities, but we want to, it's hard. It's to make sure that you're disciplined with your deployment of capital. So we want to be invested. We think there's a lot to do out there. We just are trying to be a bit selective and that's why we really haven't made a significant new investment.
since we invested in Plaid, which was probably four or five months ago.
Slava Rubin (19:26)
So I know you're not Nostradamus. You said an opinion of three bucks that has gone up since a couple decades ago when it was a quarter. But I'm gonna put you on lightning round for a few of your opinions when you're out, which is recession or no recession in the next 12 months, yes or no?
Mark Klein (19:41)
No.
Slava Rubin (19:42)
inflation compared to where it is today. Up, down, flat.
Mark Klein (19:48)
flatish.
Slava Rubin (19:49)
Flatish. Fed, a year from now. Obviously it looks like we're going down. I love your perspective on how many basis points.
Mark Klein (20:00)
between 50 and 100.
Slava Rubin (20:03)
Great, you're doing great at this game. Employment, or unemployment. Is unemployment flat, up or down? Unemployment. Yes.
Mark Klein (20:10)
A year from now?
about the same.
Slava Rubin (20:16)
Okay, so you gave us no recession, flat or strong inflation, Feds going down 50 to 100 basis points and unemployment's not really changing. So what's gonna be the impact on the public markets? Pick your public market variable, whether S &P, Dow, NASDAQ, whatever you want. Is it gonna be flat, up, down, a year from now?
Mark Klein (20:39)
market will be higher a year.
Slava Rubin (20:41)
Any perspective are we talking 5 10 15 20 percent?
Mark Klein (20:45)
I think it's not going to a straight line for sure.
Slava Rubin (20:50)
Up a choppy. Okay, great. Thank you for playing. So not everybody knows, SuRo Capital. So can you tell us what it is?
Mark Klein (21:01)
So, SuRo Capital is a publicly traded venture capital fund. We invest in middle to late stage companies that are institutionally or venture backed. We've been doing it for 15 years. We've been public for 15 years. As far as we see, we are really the most direct way for individuals, small institutions to access the private markets.
with the liquidity of being able to buy and sell in the markets on any given day. And we've been successful doing it over the years. And I went through a bunch of the names that we invested in the past. Presently, own names. We owned CoreWeave We've sold some of our CoreWeave. We still own some CoreWeave. OpenAI, Vast Data, Canva, Whoop.
to just name a few of the names that we have in our portfolio. So we provide real access for people to, we made a large bet in AI infrastructure 12 months ago, 15 months ago, and CoreWeave was the biggest investment we ever made in 15 years. We made a $25 million investment in CoreWeave. The next largest investment before that was Twitter in 2014.
So we were highly convicted in that. Then we made a $17.5 million investment in OpenAI. And then we made a $12 million investment in VAST. We owned Oklo through a SPAC. So we had a lot of exposure to AI, sort of the infrastructure layer. And obviously that's played out really well for us.
Slava Rubin (22:30)
So I want to unpack this because it's definitely a unique offering, which is there's a lot of people who listen to our show. They're trying to figure out which private company to invest into before it goes IPO. So often they're thinking about how to invest into a VC fund or they're trying to find those shares on the secondary exchanges or they're trying to find somebody that knows access to the cap table or employees where they're trying to find some directs. You have this unique offering where you're actually on your own investing into these late stage companies.
but it's wrapped up in a public market wrapper, which allows for you to get in and out. Is that correct?
Mark Klein (23:05)
That's correct. Yeah, I think we are.
distinctively. So I'll say a couple of things. We're definitely different than folks trying to go into the secondary markets by themselves. We've watched the we were an early investor in shares posts that ultimately merged with Forge. We've been watching the secondary markets since before they were really secondary markets. We participate on the buy side. We participate on the sell side. We've been in around and watched the evolution of those markets where we differ. And I think this is something that hopefully will continue to
maybe crystallize a little better for folks to be able to access the private markets is price discovery is really hard. individuals going into the secondary markets because they want to buy, pick a name, they could call three different private markets and get vastly different offer prices.
So the ability for individuals to really access the secondary markets is still pretty hard because of that. You can probably do it. There's some logistical challenges, but price discovery is the biggest issue for, I think, individuals doing that. from our, you know, we, since we've been doing it for 15 years, talk to everybody, talk to companies, and when we do participate in the secondary markets, we have a pretty good idea of where we should, where the market
really is. And I think that's a distinctive difference. You know, the other ways, obviously, the SPVs that have been, you know, that have come up.
Those can be very good vehicles. Again, individuals have to be concerned on the fee construct. Is there a markup from the secondary pricing? So those are other ways to participate. Obviously, there's private funds. There's sort of a multitude of ways to participate. I do think the admin, I alluded to this earlier, of these organized secondaries is fantastic for investors. It's great for the company.
because they allow early investors or employees to monetize some of their investment. But for investors like us, it gives you...
price discovery, because the price is set, full data, access to data, access to management, that really didn't exist as much in the secondary markets even five years ago. It was much harder to get that level of information. So we're fortunate. We're in the flow of all that. We get to see all that. We get to curate, if you will, what's going on to create a portfolio that allows individuals to participate in some of the biggest and best names out there.
Slava Rubin (25:30)
So just to double click on those tenders. So what's happening in some of the biggest names, whether it's SpaceX, Stripe and others is about not exactly, but about every six months, there's almost like a new opportunity for some of the employees or shareholders that are older to be able to maybe get out at a new price that is established by the company, which is what you're referring to. Right. So there's this and it's almost like the public markets, but not exactly where it's not just constant buying and trading, but it's a little bit of market making for that day or that, you know, that tender offer.
Mark Klein (25:49)
That's great.
Slava Rubin (26:00)
So it creates a little bit of a buy and sell opportunity around that, right?
Mark Klein (26:04)
That's correct. mean, they've been run more and more like a traditional offering, which is great. And it really solves the issues for some of these really large private companies that just...
If they don't really need a lot of capital, or even if they do, it just gives them an opportunity to stay private longer. And there's advantages of being private if you actually can provide liquidity for your investors and your employees. You don't have all the other issues about being public, which are complicated.
Slava Rubin (26:37)
So let's say one of the listeners is an LP and I'm gonna make this up Thrive Capital. They give money to Thrive. Thrive puts in literally a billion dollars into OpenAI, like 80 billion, then again later at whatever it was, 300 billion, or they put in a billion dollars into Databricks at 100 billion. Databricks goes up, OpenAI goes up. Typically the fees are approximately two and 20.
which is kind of 2 % management fees per year, 20 % carry on top of the gains that you make on top of your investment. How does that fee structure incorporate versus like what you're doing? Like how does that fee structure work? Cause do you have a two and 20? I imagine I'm not sure if you have that in your product. How does that work?
Mark Klein (27:18)
So first of all, Thrive has obviously been a huge name in what's been going on in the private markets and by all accounts have been very successful in what they're doing. So if someone's an investor in that, I'm sure they're very happy right now. We are what is called an internally managed BDC. we don't have, we were external, we were an outside manager and we had a
a pretty typical 220 fee structure. In 2019, we decided to internalize that. So we don't have a management fee. We don't have an incentive fee. So our fee structure is significantly lower to our investors. And I make money when our stock goes up or when we make distributions. That's when I make real money.
and that's when my employees make real money. So we are super aligned with our investors as far as stock performance and monetizations because that's a huge part of our compensation.
Slava Rubin (28:14)
So
just to get into the weeds for a second, if you buy some OpenAI, just making this up at 300 billion, I don't know how much that is per share, but are you selling it to your shareholders at 310 and getting a little bit of a markup there? So it's just amazing. there's no.
Mark Klein (28:34)
We're like a
closed-end equity fund. We're mutual. We go and buy names. What we pay is what we pay. And when we sell it is what the gains are. two things, we have a rule, an internal rule. not, it's guideline. We don't keep our companies once they go public. Because our view is if you want to own a public company, you can go buy it. Yeah, you don't need us. So we have to.
Slava Rubin (28:55)
You could get exposure, right? How long
do you give yourself to sell it once it goes broke? Six months.
Mark Klein (29:00)
Well, typically we're locked up six months.
Right. So in the case of Service Titan, which was a great investment for us, we were locked up and right after we were locked up, we sold. ⁓
Slava Rubin (29:11)
And is that like
six months in day one or you give yourself a quarter, a quarter.
Mark Klein (29:14)
Yeah, mean,
you know, there's volatility around lockup periods. So in a timely fashion, post the lockup expiring is what we do. So and as a BDC and an equity BDC, which there's a population of one, which is us, I think there may be one other, but there's not really. We have to distribute functionally 100 % of our net realized gains. So our investors get
So they get the appreciation because our NAV goes up and then they get our distributions when we monetize our gains.
Slava Rubin (29:46)
super interesting. love the fact that you keep the fees low. That's really great. I this isn't a commercial for you. Obviously, this is just an objective conversation, but that's super interesting. I do have a question, which is how is it that somebody is able to sell their share? Because many of the investments you're making are into private companies that the money is locked up, right? So where does the cash come from to offer the shareholder their money back?
Mark Klein (29:52)
Hmm.
Right.
We're publicly traded.
There's a bid and ask every day. Our stock trades, sometimes it trades a million shares a day, sometimes it trades a couple hundred thousand shares a day. So there's a market. We trade on the NASDAQ, been on the NASDAQ, the highest tier for ever. And we report quarterly. We have a really robust valuation process. Our NAV is published. We're very accessible, but from our investors, obviously, we're doing a talk like this. But there's a market. There's buyers and sellers. We're covered by research analysts.
road shows with the research firm, you know, the firms that cover us. We're normally, we're publicly traded company.
Slava Rubin (30:46)
Very cool. You mentioned some of the names you have right now, CoreWeave, OpenAI, Vista, Whoop, Plaid, Oklo. Can you tell us what you think of the private markets right now? What are you looking at? What sectors are interesting? What sectors are not interesting to you? You don't actually have to tell us where you're gonna try to buy tomorrow, because maybe that's bad for your negotiation, but just give us some perspective as to what you think of the private markets.
Mark Klein (31:06)
Sure, mean, we continue to spend an awful lot of time in AI, AI adjacent sort of investments. The idea that AI is a sector is not a correct term. AI is everywhere.
It's, you know, we're looking at applications, agentics, things of that nature. And then AI and things that are enhanced by AI. I Canva is a great example where, you know, the AI tools that they've implemented is turned their growth rate is 30, 40%. They have 250 million monthly active users. I mean, their business went like that from AI. So we look at companies that by implementing AI tools,
significantly and enhance their business. We always are looking around fintech, so you know those sort of names. It's pretty consistent with what our portfolio looks like now as we continue to look.
Slava Rubin (32:00)
And is there a sweet spot that you're looking for your entry point? Is it a minimum of a $5 billion company? Are you looking for the $30 billion company? Are you looking for 18 months from IPO? Is there kind of like, ⁓ let's call it a bit of the criteria of what you're looking for?
Mark Klein (32:15)
Right. I'll go, we would like, we don't, we typically don't want to have a holding period that is more than three years for sure. The flip side is owning something right in front of an IPO, you know, literally a crossover round where they're a public offering shortly thereafter is not a super good strategy for us.
because the markets become somewhat efficient as you get close to the IPO date and all you're doing is buying effectively near the IPO price and then being locked up for six months. So that, we don't do that. So somewhere, you know, 12 months to 36 months is the time horizon we have in our investments. Fairly, I mean, we don't buy really early stage things, so seed or early. We like to see
that a company is in the position that there's product market fit, they have the right to win, know, what value that is continues to move given, you know, where the private markets are.
Slava Rubin (33:16)
Super interesting. What do you think of the latest trend in defense tech? Are you looking at that market?
Mark Klein (33:21)
We have, we looked at it a while back and saw where some of the good parts about it, some of the challenging parts about it, specifically government contracts and where that all leads. And we're looking at several of them right now because some of the trends are much clearer now than perhaps a few years ago.
Slava Rubin (33:39)
So you mentioned a company that raises a few months after a raise. I Anthropic falls squarely in that example. So just early last year, it's trading at like 20 billion. And then it was exciting that it got a $60 billion valuation earlier this year. then basically today, it's closing at 183 billion posts, which is pretty aggressive and fast growth. Obviously, the revenue with their various applications may be supporting it.
Where do you think of the anthropic versus AI valuations or kind of let's call it the competition? I mean, you're in OpenAI, so you must believe in OpenAI, but what's your thoughts on the competition?
Mark Klein (34:19)
Look, there's several companies on the frontier of AI that are going to be successful. What their end state valuations are going to be, think, watching Anthropic is good example going from 60 to 100.
183 in a few months or OpenAI ⁓ going from 157 to 300 then discussed at 500 But their growth rates are you know off the off the job sort of you're in parts of what we're seeing we haven't seen before where you have a Tam that seems to be you know limitless if you will and the growth rate staggering even on top of staggering so
I think Anthropic is a great product offering. was obviously extremely well received, massively oversubscribed even at that valuation. And it's a great company. whether all of these are worth these levels or 3X these levels, it remains to be seen. But if you're buying Anthropic at $183,000,
billion dollars, your exit number's gotta be 350 to 750, otherwise you wouldn't do it. And if you're buying OpenAI at 500, you certainly think OpenAI's gonna be a trillion dollar company, otherwise you wouldn't invest in it.
Slava Rubin (35:35)
And typically when we talk about pre IPO, one of the darlings of SpaceX and Elon, we haven't really mentioned SpaceX, which I think is fascinating. It's not in your portfolio today. I'm going to guess maybe it's been there in the last several years and you decided to exit. have no idea. What's your thoughts on SpaceX overall or today at 400 billion?
Mark Klein (35:53)
So we passed on SpaceX multiple, multiple times. again, it's trying to be where you understand and where you could really sort of wrap your arms around and where you can't. And I love science fiction. I love all of that. we just couldn't reconcile the valuation one way the other of SpaceX. Obviously, we were wrong because we could have bought it, you know.
infinitely, you know, whatever way, way lower than it is now. But we just opted not to because again, we try to stay as best as we can to stick to our knitting, if you will.
Slava Rubin (36:28)
I'm a fan in case that matters. I would still suggest picking some up. But ⁓ I think it's a $5 trillion company in the making, especially with the Starlinks and such.
Mark Klein (36:33)
Yeah
Yeah,
it clearly can be. And the reason why they continue to able to raise money at, you know, stepped up valuations is a lot of people are in your camp. It's not that we're not in your camp at all. It's just we just couldn't wrap our brain around it. And so we deployed our capital elsewhere. mean, there's there's a lot of opportunities out there. Should we invest in it? Well, 2020 hindsight, of course we should have. But we didn't. And will we in the future? I don't know.
Probably unlikely, but we'll see.
Slava Rubin (37:06)
Anything else you want to share with our audience about SuRo Capital? Obviously, can you tell us this ticker and then anything else you want to share?
Mark Klein (37:12)
Sure, our ticker is SSSS. We've been around for 15 years, as I've discussed. Look, it is a really exciting time. I've been saying this to folks for a while. It was less exciting from 2022, the middle of 2022, till sometime in 2024. But we're in a really exciting time.
For our portfolio, we're very fortunate that we zigged when we should have zigged and zagged when we should have zagged. We have a really robust portfolio with names that still have an awful lot of room to move higher. And the opportunity set is pretty amazing of new names to invest in.
Slava Rubin (37:50)
Amazing. So we'd love to be as smart as you. So we'd love to know what you like to read or watch or listen to. Can you give us any examples of anything, any content, whether it's podcasts, books, newsletters, shows, anything that kind of makes you you to keep you smart in the space?
Mark Klein (38:04)
Look, I wake up and read anything I can, right? From the journal to the FT to Bloomberg to all the other different data feeds that come in, whether it's a pitch book or it's what have you. mean, can always, I have obviously clipping services. being on top for me, understanding and seeing what's going on.
maybe at 30,000 feet and then coming down, I think is hugely important. And I'm fortunate to have a team that is really super in the weeds on a lot of these things. And they'll spend all their time in AI applications or FinTech or what have you. being around for, I'm old, so being around for 40 years gives you a different perspective.
And I still have effectively a news ⁓ tape running on my screen all day long. I'm reading the news all day long. It's ingrained in me for all these years doing this.
Slava Rubin (39:01)
Sounds like you're a curious guy, which is a typical quality for somebody who likes pre-IPO. And our final segment, which is three years out, we like to put our guests on the spot and we ask for one public markets pick, literally a ticker that's not SSSS, and also one non-public markets pick. It could be anything in the pre-IPO world. It could be crypto. It could be real estate play, et cetera, et cetera.
Mark Klein (39:19)
Yeah
Slava Rubin (39:27)
But yeah, if you could just tell us your two picks and why those two picks, that'd be great. And obviously this is not financial advice since you are running a public company. You know, this is totally not financial advice.
Mark Klein (39:37)
So I'll speak my book because if we didn't like them, we wouldn't own them. I think OpenAI is the private company to own. I think we have a lot of great companies in our portfolio, but I think OpenAI is a trillion dollar company sort of before we know it. Their growth is amazing. They're everywhere and they're very successful. We have a large position in it, obviously, but I'm...
a huge fan of OpenAI. And I'll go with my other public company, which is CoreWeave. Obviously, company went public and then went up 5x or 4.5x, and it's come back and it needs to digest the run. They're at the front end of all of this. They're really smart.
They're really good operators. have the platinum product in the space. The spend in AI and AI infrastructure is not going away. They continue to be at the forefront. And I think the stock is significantly higher a couple of years from now, for sure.
Slava Rubin (40:40)
All right, Mark Klein. We covered a lot of information from 40 years of Wall Street, always looking to democratize how folks get access to it, whether it's fund to fund, SPACs, VC funds to funds. Back in 2010, there was only $20 billion company evaluations that were private. Now there's over 150. There's even five companies that are worth over $100 billion, which is crazy. People have to wonder for IPOs, what's the value of going public, which was really smart from your perspective.
You did tell us that the market is in really a surprisingly robust place. The valuations are a bit stretched, but it's going well. You don't predict recession, inflation staying flatish, Fed who knows what's going to happen go down maybe up to hundred basis points, employment flash, but you're still pro the economy and the stock market, which is great. You are in more cash today than normal. Last time was when the bubble was popping from COVID. So you are looking for opportunities. Maybe that has to do with valuation. You talked about some of the companies you're in.
whether it's CoreWeave, OpenAI, Whoop, Plaid, Oklo Vista, et cetera. Super ensure, I love your low fees with your product. You have a public wrapper and you're getting into these private companies. Usually that has two and 20, but you don't have that, which is awesome. A lot of your gains come in from your own performance. AI is not a sector, it is everywhere. Probably the quote of the podcast. Thank you very much. And if anybody wants to pick up some of your actual stock, it's SSSS, which is pretty straightforward.
You think AI is gonna continue being robust. You gave us a few different examples of how you like to stay smart. Pretty straightforward, you're just a curious guy. And of course, the three years out picks, OpenAI and CoreWeave. Thank you very much, Mark.
Mark Klein (42:11)
Thank you, greatly appreciate your time.
