Office, which s is kind of the exemplar invented y basically the game in a sense from the Institutional Investment perspective. One of their secrets to success getting off the bus one stop too early rather that ne stop too late but takes a lot of courage. And you know, most investors lack courage because they focus career risk and theres a whole principal agent problem there. Furthermore, once you say no to fund, youre forever in that gps bad graces. Right. And we all have examples, ill say i wrote a blog a long epistemologyed the of investing. Why do we believe what we believe. What justifies our beliefs . What made me think of that when to the xl i said no Facebook Fund twice when i was as rinceton and once again they were raising. Everything in that moment said that was an easy no and boom greatest p one of the personaer and ive been nongrata, not explicitly but speedsay im not on their dial. Andy, us v has famously returns. L but speaking more broadly, this is a very funky market. How do vcs turn their paper into cash on cash returns . Its not really up to us. We dont have control over it. The companies have control over it. Partner fred has been outspoken that the company should be going public as a way to get liquidity. Companies should be going public. Thats one way to do it and thats the number of issues is decreased of ipos has so therefore companies dont get liquid, we dont get liquid, chris doesnt get liquid. Im sorry, im having a bit of trouble hearing you. But josh, what do you think . I tend to agree with andy of iposre seeing a lack in the market. I think part of that is caused y the fact that theres a massive dislocation between how are valuing ts companies and how Public Markets are valuing companies. Were at this rare moment in time you know, it used to be hat private companies would aspire to go public so that they could achieve the Public Market valuation. Were in the rare moment in time where its almost the opposite. Minor league ball players are getting paid far the professional allstar m. V. P. Major league ball players. Out ntil that works itself in the market, its going to create a really challenge iing e these companies that are being valued in the private markets to realize anything near price in the Public Market. If mashlts are efficient, occur atlibrium should some point, correct . And it looks like we might be seeing some of that correction in the market. Its interesting because heres a real echo chamber dynamic, and one thing that lways strikes me as an lp is when you do get these disconnects, its very difficult glide back to kind of this rational ordering. You get these , funky kind of riskadjusted inflections where youve got, you know, kind of private companies more value than public companies. If i were if i could wave a magic wand id invent a way to private companies because the would kind of create equilibrium. The steal prices associated with private companies makes it impossible to do. Right. Public companies trade every day. Good news, they trade. News, they trade. Private companies typically of two reasons. When theres good news and the to fundraise or when the companies needs cash so badically that theyre willing news and n bad capitulate on price. And what that means is that need to see to companies some of these work ies will have to through their cash before these private companies trade to sort of where the market should be. Know and i also think that were at this interesting point where the nt know industry is trying to figure ut, are we using the right comps . In tech ng Companies Innovation marketplace and should be valued as such or hould they be valued as lenders . Should ecommerce disruptive be labeled ompanies as Real Technology innovators or mattress company, and valued differently based on that. And Even Companies that are very clearly creating markets, like uber, nobody knows what to price it at. I thought it was interesting, ventures talked to business siders friday or this weekend and he thought eber if publicly would go out at about 25 million, which is far than some of these values. Do you think theres maybe a moment . D sometimes when i talk to ipo experts, oh, i think it went thought maybe that would be it. I believe we may be seeing the First Tech Company go public this week. I dont know i think its a acacia ng company, communications. Are you thinking once bloomberg goes. Certain Company Everybody is kind of waiting on to open up this market . Not necessarily . [laughing] investor so stage for me, i typically funda the earliest end of the cycle and sort of e the prognosticating on what is that public ed moment, the market investors. What are you guys seeing in m a. Investors also like to point out the fact that these companies, google, microsoft, apple, facebook have these enormous Balance Sheets but they seem reluctant buyers. I mean, are your companies these companies . High think theres a level of activity. I dont know if theres a high prices desire to pay that may be divorced a little bit from fundamentals. And maybe there was more of that seems like and it theres less of that right now. I guess probably also sort of a catching a falling knife sort f a thing, you know, why not wait another six months and see where prices are. Yeah, i mean, there are bviously some companies where they buy them for far more strategic reasons in terms of technology, access to talent, filling a critical strategic hole. You know, or access to customers whatsapp look at the acquisition by facebook in that regard. Its financially driven its obviously going to be subject to the same Market Forces that the are going to be subject to. And what are you seeing in terms of valuations . At least it oast seems like valuations are down a little bit. Zachary of crv who i interviewed maybe last week was aying the one exception is celebrity investor, meaning serial entrepreneurs who created in a space where they already have some expertise. Is that true on the east coast as well . Seen it on both coasts. Weve seen valuations have taken a slight dip. Four member in the last ears, the average seed stage valuation has almost tripled. 20 , en if its down 10 or its still a very attractive entrepreneur. What do you think, andy . Dont , you know, we really track valuations that much. Every deal, theres a moment in theres a company that desires to have an investor price and a invest at a ires to certain price. I dont see any generalations lower than gher or before but i suggest theres uncertainty in the market so flebl eneurs may be more than they have in the past but i dont really track valuations. Vcs, you dont think are more price sensitive than in the past . Investa firm that doesnt that often, you know, 8 to 10 times a year, 8 to 10 data really expandsnt out to generalizations. You do see Many Companies . Sure. H, and were focused on it obviously but for us we need to think is the we right amount of money and get an ownership position that allows like chris r people their returns. Entrepreneurs are being more flebl. Can you get more for your dollar . Maybe a couple of years ago they oh, well give you 15 . Now, theyre like take 20 , 25 . I dont know how you think about it. We dont attempt to try to get more for our dollar. A commodity. Is the right amount relative to the risk relative to our just to deliver our lps some money. We dont want it to be that much because it comes out of the entrepreneur side. Point. T its interesting too because i talk to a lot of Portfolio Companies because they see me as a be an honest broker in sense. Nd not one of these from shark tank. Just kidding. But its interesting because alto at least where i live, valuations xpectations have been kind of cranking ever upwards and i think were seeing this first kind of chill where, you know, to see some tech layoffs and, you know, from my feed, i invest in a funds. Of dozen from my feed, im a Second Derivative guy. Terribly smart but i remember from math change, the rate of change is the rate of change i guess. Market is still going up, the rate is slowing in terms of mark up. We saw in q4s what and q1 and i think as we see the arket plateau in terms of expectations, i am seeing some investors, you know, the market is not clearing for some right, for the transactions to start getting done and hopefully well see a expectations tor and entrepreneur expectations, i should say, you know, to kind of interesting o an kind of return potential opportunity. As the market has gotten choppy over the last couple of its also important to ealize you have a whole generation of found ers and to some degree of fund ers and investors who have never been turn. Gh a down if youve been in the industry the last seven years, youve up. Straight so its also important. I dont think its ever as bad it is and it k probably wasnt as good for the last seven years. Where the marks are, most venture firms probably have inflated marks right now that topic ay on josh you have identified seven years. Kind of and ill even say that i think 08 was kind of a gag. And i nies shouldnt say that necessarily but most companies have cash for 18 months at any given time and that was a very short down turn. Deck as more of a slide than a down turn. With a es, and i meet lot of folks raising funds and 08, i did xyz. I remember in 01 and 02. I was at princeton. I remember speaking in math what asymptote meant. There was a grinding and every value and we a were asymptoting towards that line. Grinding down turn. Thats where you had financing risk and operations risk. Thats where you had all kiepdz syndicate risks. Nobody has seen for 15 years. And you dont necessarily you dont think into that . I dont think were heading into that but i think people who kind of puff their chest and say ive lived through a down turn have no clue. Generations removed in terms of companies from the last. Al down turn but on some level it is different this time. Yes. Is nd part of the challenge figuring out how and in what ways its different. I agree its a challenge when an environment of 10 years of rising asset prices, thats the rhythm or the cadence know, rising asset prices. When theyre not rising, you to learn new rhythms and cadences. At the same time in that 10year period we all got computers in our pockets. So the dynamic does feel like. Ts different obviously our jobs are to figure out what ways its different and prices. Earing at the same time, it doesnt feel like the world is falling apart here. It doesnt feel like the falling apart but the question really is, how different is it . Me its different but then again you hear investors say, you know, theres fundamental misunderstanding even though the opportunity is global and even though everyone a smartphone in their pocket, theres going to be this very small number of breakout winners. You guys agree, disagree . Is the ortunity size of the Winners Circle changing . Getting e winners just bigger . I think thats sort of always yes. Ou know, yes and at some level, the leading today who are the incumbents that really didnt exist 10 years ago are positions. Powerful they have an incredible advantage to them. T the same time, the opportunity set seems broader too as well. And thats a tough balance to strike. Found in my first company, cofounded it in 92. The year before the web browser was invented and saw the internet sort of rise remember everyone talking about how the internet is going o disrupt every portion of daily life and it really has and yes, while you now can go global nd yes you now are mobile, i dont believe that were done creating amazing companies. Believe that t this time is fundamentally is 3x nt and this time larger than the last time and, you know, the market is going to said o figure out as andy how to price that. Everyone was talking about a amazing ve bubble when went public and they went public at a value of 500 million. You now have jet. Com which is the amazon 2. 0 which is raising markets at a 1. 5 billion price. Still opportunities are there. Believer that youre going to see a massive increase in the number of Epic Companies that are created. From my seat, one thing im always cognizant of is the asset is largely a function of the price you pay and also the capital you consume. Weve seen, you know, pricing go up and up and up in terms of startups, you know, jet an example or literally you can point at any startup. Raising one thing that always strikes me as a quick aside is if i look at my and josh is in my portfolio first round and First Companies bunch of that would be in the s p mid00, which is amazing, right. Entrepreneurs raise money in the private markets of these valuations and at the end of the day youve got to think do i put the moolah in the coolah. Valuations were investing in now to the exit exit e open up that sphincter and the capital stream comes back to me, are we getting expect s of returns we or are the returns becoming more pedestrian . So what do you need to believe . And i believe this time it is different, you know, that you will see larger outcomes, thats great, but all portend bigger holes. Thats what i worry about. The paradox is that and josh. I disagree with i think the opportunity set is much greater than 3x than it was first started your company. Could be 10 or 20 or 100x. So i dont think that to me is a reality. The question is where do investment returns come from that . Thats uncertain and if the investment returns dont come to feed what we need to return to you, what are the implications of that . What are the implications of to the next generation of funds or entrepreneurs . I dont have an answer to that. I find that to be a key question. Me, the question is less or greater than the opportunities . They are. Fundamentally bigger. In the meantime, are you ipo market is the kind of shot right now and i slow, are you seeing that your followon investors are changing at all . Keep hearing about hedge funds, mutual funds sort of recharging, these parent opportunities to do deals, a menlo of funds recently, ventures raised opportunity funds to tackle this particular gap. Rceived real is it real . Hard to take one quarter or two quarters and try to extrapolate. Ere still seeing that Good Companies can get funded in the followon market by good investors. Are, you know, as the markets have grown as the moretions have gone up, as companies have sort of achieved nicorn status, weve seen more investors, nontraditional investors come into the space, seen the nt yet surrender of the existing traditional venture investors. And i want to go back to something i said. Is never either open is neither open nor shut. It is what it is. Companys choice to go public. They might not like the process, they might not like the it is always open and the challenge some of us are is the disconnect between the private valuation and what Companies Think they can get in market. The ipo market is always open. Time. Ost out of any last thoughts . Put the moolah in the coolah, guys. Thank you so much for being here. Thank you. Thanks, guys. Applause] cons of internet advertising. So let me get just a little bit more audience participation the interview. How many have downloaded and used an ad blocker . Of the room. 0 most of the front part. The back people arent even listening so thats fine. Like, you know, theres people at least that are exposed to the technology. On a good at least day, im a journalist. I actually get paid mostly advertising and through wonderful events like this. Off ear ck plus takes or obviously has taken off, as it continues to grow, am i going a job . Of no, i think why this potentially hurting is the Business Model that doesnt work apps that clearly dont provide any value to the consumer is to me a failed which i think is the reason this needs to evolve and the interesting thing is all the people that install an ad blocker, they ads. T hate theyre just annoyed by the really intrusive ones so thats a program called acceptable ads, which basically publishers helping show alternative less intrusive targeted at lly people who have opted out of traditional online ads and what found out is that fewer but better ads provide more value. Were creating this winwin situation in which the user gets better experience at the same time publishers can make ore money while still honoring user choice. So lets talk about the acceptab ads program. Just to make sure i understood you. There are publishers now who make more money with acceptable of than they were with sort the traditional banner ads before . Till yeah, i think its just realize theyre a different segment of users. May re regular users that be completely fine with the flash banner ads but then there techsavvy lly the people that install an ad blocker and just need to be in a different way and what were establishing is a way on arget users not only their profile but just under ad references and i think this really creates a lot of value for publishers which is why now out of the top 100 web sites in u. S. , 40 of them have acceptable ads on their page and shows that this works for publishers but also on board. Moderator tell me a little bit more about what makes an ad acceptable. The distinction there . Till i think the most important every user can decide that for himself. Every ad blocker, every user can figure out what preferences they have. But for us, it is important to good default settings that find exactly the perfect Balance Experience on er the one hand and enough opportunities for publishers on the other hand. We put a lot of research into but were t balance now in the process of opening that up so were currently stablishing an independent committee which will have members from all the relevant that have a roups stake in Online Advertising and handing control over what constitutes an acceptable ad we theeve we can really evolve problem so we will have journalists there. E will have publishers, advertisers and also ad companies and if we bring table e together at one we think we can really evolve this program. Oderator so it will be what you call a council essentially, like a board or Something Like that . Ill yeah we call it the acceptable ads committee. Moderator so theyll kind of set what the broad guidelines user can e individual still decide what their settings are even if they want to see at all. E ads till absolutely. Moderator i think there are some people who see this idea but hey were an ad blocker we make money from adve