The Underserved VC Secondaries Niche, Explained | Alpha Uncovered x Chris Shen, Revere

speaker-0: Known each other for a long time.
speaker-1: Well maybe let's just stop there and we'll Okay cool. Let let's step back a bit. First of all, welcome. Welcome back to Hong Kong. Thank you. ⁓ maybe for those of us who are meeting you for the first time, maybe just introduce a little bit about what you do. I knew you very well as an investor, family office, you're a platform builder, but maybe, you know, we can hear from from your own voice. No
speaker-0: Thank you, Alvin. And ⁓ great to be back in Hong Kong. I lived here for about 11 years, Asia for 13. My name is Chris Shen. I've done many things in my nonlinear career. Started my career ⁓ in corporate finance, MA Law with Baker McKenzie. I spent half of my career doing that all through Asia, Beijing, Hong Kong, every small city in China, down up to Korea, down to Asia to Southeast Asia. ⁓ in 2015, I co-founded a family office ⁓ called West 22nd Capital. We're a very close friend of mine. I was a member of a retail real estate family in China and we proceeded to invest ⁓ across sort of different asset classes, ranging from equities fixed income in our public book, all the way to private alternatives, et cetera. During that time, I oversaw, I guess, the external fund managers program. I looked at everything from seed to buyout hedge funds to credit. And it was that time that I met Alvin ⁓ through the hedge fund world where he taught me quite a bit about sort of how that sort of industry worked and sort of how to allocate to different liquid strategies. That was in Hong Kong. I I left Hong Kong in 2019, right before COVID, moved back to the United States, and then co-founded a FinTech platform called Revere, which was recently acquired by another company, but essentially that platform focused on emerging manager venture capital data. So think like a morning star for venture capital, ⁓ where we worked with global emerging managers, 600 plus around the world and the LPs that were interested in them. And derive data, insights, and investment opportunities through that. Stepping down from after the acquisition, I co-founded a fund called NUCO Academy, which essentially, in a nutshell, buys out LPs, smaller LPs in VC funds, right? So we transfer in as an LP, we negotiate with the LP, get the GP approval, and we're in some really interesting look through names like Anthropic, OpenAI, SpaceX, ByteDance, CalShi, et cetera, through these transfers. ⁓ so yeah, I'm back in town and ⁓ you know. had to make a pit stop in Seattle.
speaker-1: Well, it's ⁓ it's always a real pleasure to have you in town and to, you know, exchange notes because it seems like every time we sit down, news happening, the world has changed. Everything from the political landscape, geopolitics, and what's hot this year is exactly the topic we've been that you started on many years ago, which is AI and V C investing.
speaker-0: Something new is happening. Yeah. Yeah, that's right. I I think ⁓ every time I come back to age about once a quarter. And Alvin is, you know, sort of gracious and hospitable enough to let us use this space. And we'll be doing something in October with him. Stay tuned. Yep. ⁓ for Milken F one coming through the region. But every time we sit down, it was last time we spoke, it was like Liberation Day, right? Like the craziness around that, like you Americans, in the government. ⁓ and then we've come back during kind of obviously what's going on in the Middle East. ⁓ we've seen sort of, you know. Trump one and Trump two, kind of all these different things that go on. And it never sort of, I guess, ceases to amaze me or surprise me that we still have a lot of things interesting to talk about, but the core themes are kind of the same around innovation, the kind of development of technology.
speaker-1: So so let's let's start with the macro view. Twenty thousand foot view. ⁓ I from this I want to hit the elephant in the room right off the bat. Okay, recent news, number one, markets are all time high. It's it's we've been saying it's been frothy for the last two years, but it just keeps going up. The trickle down effect, or perhaps one of the big drivers, is the private markets, which everyone is still staring at with with an obsession, both fear and envy about how how large the the private market space has been. It's now close to Twenty two trillion, I think. Yeah. ⁓ as of the time of recording. The space that Yes. Now the news over the last couple of weeks is anthropic, halting or stopping or barring secondaries in the private space. And that forced a ⁓ a major drawdown in the valuation. So why don't you walk me through what this means to to you, how you view it, and and for the investors who who are who are in the secondary space.
speaker-0: Yeah, absolutely. Great question. So we'll break this down piece by piece. I think everyone here kind of knows what anthropic is, you know, Claude and sort of the inroads and sort of the staggering kind of changes that app and sort of the entire platform is causing sort of in work, right? Like in terms of financial services, asset management, research, et cetera. So we won't dig into that. I think what's interesting is that about six to eight months ago, if I recall correctly, there were a lot of anthropic secondaries floating around, but nobody was buying it. Right. I think they were priced at anywhere from four, four hundred to five hundred billion valuation. Again, don't quote me on this, go look it up. But the the the takeaway was that no one was really looking to buy it, right? Like, you know, the channels and everything like that, which was interesting, right? I would say fast forward today, sort of the fever pitch and the you know, it's not hype in the negative sense, but the fever pitch demand for anthropic. I think most people who have done secondaries on the either sort of direct investing, primary or secondaries has never seen that kind of Pent up demand, maybe in instances for SpaceX and for Byte Dance, but those kind of ebb and flow, right? The sustained demand for Anthropic in the last, I would say, three months, in anticipation of their primary offering that I was was was leaked, I would say, a couple of weeks, a couple of days ago at 900 billion, putting aside that valuation, it's is it's incredible. Like it's everyone, their mother, their grandma, their asset management firms are looking for that, right? What we've seen sort of anecdotally and through different channels is that. Obviously, a lot of the brokers, a lot of the GPs, the funds that have invested Anthropic and they're waiting for their pro rot allocation, and others that are trying to get in new at the sort of primary round were building their books very early, but all knew that they were going to get cut back. Right. Really? It's this is nothing new. Right. I think you see it in a Hong Kong IPO with cornerstone investing and sort of ⁓ you know, capital markets. Far too oversubscribed and essentially no one kind of knew.
speaker-1: To oversubscribe it.
speaker-0: Th these things were happening even before, again, this is all sort of, you know, s sort of hearsay, that the board had approved what they were going to do, right? In an IPO, you know that everything is sort of done by the book. You book build and sort of all that. They're desk, you know, big franchises, banks, working those things all under sort of regulatory scrutiny that, you know, non-deal versus deal road shows, et cetera. But none of that stuff, that apparatus or that infrastructure exists in private markets. You just kind of go and do your thing, right? So that resulted, I think, in the last, I would say 72 hours. I landed in Hong Kong last night, but when I landed, it was all these messages around like what happened to people's allocations, et cetera, right? Big firms, you know, again, you can if you know sort of who these people are, big firms were getting cut back and they were being very selective around two larger firms, you know, their big institutional names that everyone knows that were had their sort of allocations sort of solidified, right? So we'll leave it at that. And you can kind of check your channel.
speaker-1: So maybe there's pause right there. So who does this affect? Because you have investors who have purchased shares from pre-IPO investors, and then you have those who are purchasing shares from those who are are vehicles that are still invested in.
speaker-0: Yeah. So that's a good distinction that that you're right to flag. I would say when you talk about the nine hundred billion valuation primary offering, there are a lot of people there trying to angle into the firms that have commitment to that, right? So you're paying top of the market in addition to fees, and your valuations usually come out at one trillion.
speaker-1: Right. So this would be ⁓ either like a KKR or like a
speaker-0: Yeah, any position. Any or I would say any of the firms that have been blessed to invest in the primary, and those names will come out. So you can look them up on press, in addition to sort of other investors that are already on the cap table that have pro rata allocation or sort of subscription rights to a new offering around, right? So we'll put them here as a sort of direct primary investors, right? There's a lot of people that are doing the secondary. So they're existing investors on the cap table that are looking to sort of now they have a valuation mark. It stepped up from like say 300 to 900. They've made some money. They want to sell, right? And then they will negotiate private transactions. They will typically lurk toward the board or the CFO to run, so not run a foul of right of referst refusal, rofer rights. And that's another sort of pocket of people, right? What we do obviously is a little different in that there are a lot of other fund managers that are in on the cap table of anthropic or any s any big company, right? You think about SpaceX, think about Open AI, et cetera, there are hundreds, if not thousands, of individual line items on their cap table, predominantly sort of early stage investment funds, late stage investment funds, pensions, endowments, what have you, right? A lot of these early stage funds have LPs, limited partner investors, who have been in that fund for a very long time, and they may be looking to rebalance and exit those positions in that GP, right? So that's another way of accessing, I would say, these. Bigger names in terms of these three different ways, right? As I illustrate the spectrum, you can kind of tell where you're going to pay top dollar and where you can find a discount, right? Because the more opaque the fragment the market, in theory, the better discount pricing you're going to get as a buyer simply because there's no other sort of game in town. When you think about that spectrum on the primary, plenty of people, plenty of people, big fish looking in a big pond. And you know, again, at the end of the day, if you look at sort of the big institutional firms, you know, they have. connectivity and sort of networks that I certainly don't have, right? You drop into the middle and you think about again the different sort of funds, you know, they're they're pretty well connected for that individual name, but they may not have coverage to other names, right? Other sort of, you know, silos, other verticals, et cetera. And when you think about the LPs in these funds, they have absolutely zero buyers, right? If you think about that market where I think many of you may not even know that market even existed in venture capital, I certainly didn't a couple of years ago. But if you think about secondary offerings in private equity, if you think about real real assets, real estate, there are plenty of larger, really great firms like Lexington, Ardean, St ⁓ you know, I would say Hamilton Lane, Blackstone, Goldman that do these dedicated secondary strategies, but buying out LPs of those asset classes, very much less so venture capital.
speaker-1: These LPs, I I would imagine there's also somewhat discount to an extent because you have for one, multiple layers of fees. Number two, these are smaller positions. And thirdly, they they have no voting rights. They themselves are not on the cap table. It's the vehicle that they subscribe to that's on the cap table.
speaker-0: Correct. And that's an important distinction that we talked about because everyone saw the news around anthropic and sort of other late stage startups, late stage pre-IPO companies, I should say, canceling or not honoring sort of these individual deal-by-deal SPVs, which again, in the past, most companies tolerated because they were forms of liquidity and sort of getting the name out, forms of capital, et cetera. But the best companies simply don't want to deal with that. And there are a lot of other very bad actors, charlatans. you know, outright fraudsters that run these kind of deals, but then actually don't have allocation to the shares, right? They're just kind of book building. And then when companies go public, a lot of these SPVs are sort of when the tide washes out, kind of see who's swimming without pants on, right? So what the distinction there is that on the primary and sort of on the on the direct and secondary, on the primaries, there are a lot of those things that anthropic was looking to cancel and sort of get rid of these bad actors, right? But Your comment on sort of those GPs that are already on the cap table. They may invest in this company at pre-seed seed series A. Sometimes these GPs sit on the board of those companies and they almost are always audited in terms of the fund and they have sometimes they have information rights from the company. We think that is a b the best way to invest in these companies. If you are not a Thrive or a Goldman or a Tomasek going in the primary where you have enough weight to say, I need one, two, three, four, five. You'll need to grant those for me to write that one billion dollars. check. The vast majority of people kind of sit in this middle abyss where there's just no information rights, roafers kind of here and there. You're not getting the attention of the company, you know, sort of the vehicles that you may invest in may or may not be audited. It's kind of like all over the place.
speaker-1: Like a gaslight version of rights in a way. It is very correct. Because you you you think that yes, you might be on the cap table, but you really don't have information rights for one, and you don't sit on the board, but but you're also restricted. Correct. Whereas the LP of the GP or the LP of the investment firm that does have board rights and has aggregated those rights has more moving power in the organization. Correct.
speaker-0: I I would say that absolutely. I I think that's a great point because when you think about kind of private companies obviously operate at a different reporting, if any standards than public companies, right? 10K, 10Q, sort of different things in Hong Kong, different markets. You have reasonably good information. And I would say with the advent of AI, which we can talk about later, you can find information from different sources, get it to your fingertips pretty quickly and then add to that, right? ⁓ even in public markets, it's still really hard to find that, right? Like, you know. ⁓ You have info rights on those board insider presentations. They're good. You know, they're pretty good information. But again, there's no substitute for being sitting at that board or virtually on Zoom and sort of going through those double liberations. And that just doesn't exist for 99% of the investors out there. You just don't have that access.
speaker-1: Well that well that's good news for air investors, that's for sure. so this is really primarily affecting those in the mid range who are trying to find liquidity. That's not gonna happen. But it could also be an opportunity.
speaker-0: ⁓ absolutely. I I think, you know, w when we talk about ⁓ the things that I work on
speaker-1: Valuations are coming down quite quite dramatically. I I
speaker-0: Say valuations for certain companies earlier stage. I think the discipline around, you know, a cap no safe note, right? A simple agreement of future equity. We talked about this. Look it up if you guys don't know what that is. There was a period of discipline, I would say, from like post FTX First Republic and sort of the implosion all the way up to maybe the mid 2024-ish, maybe late 2024. But then I think with AI and kind of, you know, the one person, you know, unicorn that those coming out. those rules have been again thrown out the window, right? Why? When we talk to the early stage, ⁓ so we're in touch with a lot of emerging managers, early stage. ⁓ you know, first check writers, specialists in certain sectors like hardware logistics, ⁓ you know, built worlds, sort of foundational AI, et cetera, et cetera, they are talking to that next wave of founders who again have all these tools at their disposal and can build companies like this, right? The crazy thing I always tell people is that, you know, you always get the kind of
speaker-1: I
speaker-0: ⁓ my gosh, it's the 20-year-old Stanford Bay Area kid dropout wearing a hoodie, you know, eating at his desk and whatever, building these companies, right? It's a reality, but I would argue that I meet more people who are in their 50s, people that worked at Boeing, Microsoft, et cetera, that hold patents and they're able to kind of build companies in a way where they don't have to offshore or sort of work with product teams and take forever. They can ship stuff in a week. Now it's not commercially rentable, you know, commercially usable and or sort of, I would say.
speaker-1: No, that's a reality.
speaker-0: you know, Microsoft is buying it, but it's enough for people to get a prototype out there, a beta, and then off you go. Right. So that for me is fascinating. It's something when I come to Hong Kong, when I go to New York, London, that people just, you know, unless you're in it, you don't see it. You kind of, you know, if you're doing real estate in Hong Kong or if you're, you know, you know, running a hotel in London or whatever, you're not thinking about these things unless it's touching you day to day, right? Like affecting your operations day to day. And I know, you I'm come on, I'm wearing a suit today with a pocket square, right? I'm not your typical kind of AI guy, like, ⁓ my gosh, it's coming to see. I'm not a crypto, I'm definitely not a crypto bro. And we can talk about that later. But if you think about when you sit in the Bay Area and you drive through like Market Street in San Francisco, you go down to Palo Alto, this is all that people kind of talk about. It's kind of like, wow, this stuff is, you know, we're we're seeing it real time. And you get kind of used to it when you're from there. But when you leave and you take a step back, you're like, holy smokes, no one's really thinking about this in
speaker-1: Yeah.
speaker-0: you know, in central in Hong Kong. Yeah. So I find that that's where I try to, you know, when we take the do these roadshows, just bring interesting people to come talk about it with very s I mean, again, these people are very smart. They've done well. They just it's like trying to get someone to understand Hong Kong local real estate market if they sit in like Menlo Park, right? They don't care.
speaker-1: Obviously tremendous amount of excitement in the market. SpaceX just announced as well. The valuations are insane. I don't want to talk about the valuations because that point is belabored on YouTube already. Yep. But I do want to talk about the other side of the coin about what keeps us what should be keeping you awake at night right now. Okay. Because there's a couple of buckets. One is the private space, it's unregulated, but it is improving in in almost self regulatory manner. And how much juice is there left for for retail by that point? And then the third bucket is now with more retail participation in the private space, what's really left for capital markets? So there's a lot of here and some of it is maybe ⁓ a red herring, but give me your thoughts.
speaker-0: Yeah. So if you go on LinkedIn, you'll see a lot of the graphics where once a company goes public, people will roughly estimate what, you know, a founders fund, what a, you know, an early stage whatever fund that bought in or backed that company, what they'll make, right? And you can look it up, but founders fund, these early sort of really good, you know, these are really good fund managers, right? Like founders fund is still one of the top five global BC funds in the world. If if not the best. What they're looking to make, and these graphics obviously need to be taken with a grain of salt. It's in the billions, right? Like in terms of they they were either Series A earlier, their friends and family, they built positions over time. And that money will, you know, hopefully when this gets distributed to their LPs and sort of all their participants, be recycled back into early stage and other parts of you know the market, right? Venture capital market. So I would say that and it's a multi-pronged question, but those folks have done well, right? That SpaceX is just going to continue that story of like, you got and going early, you have to have access. But if you have the holding power for what? FaceX has been around for eighteen years or so. That's an eighteen year hold period. What else would you invest in? But again, it's like if it's this versus this, then obviously Yeah.
speaker-1: For one every SpaceX position I've taken eighteen years ago, I also have nine percent nine other pets dot com.
speaker-0: A hundred percent, right? And like that is sort of again where, you know, it's human nature to see that and be like, okay, not because I'm smart enough, but you know, I've got to I've got to put my bets on the table for that, right? For the future of companies. So it it has a good effect in that, you know, capital's finally recycled, people will come back in, they'll back earlier stage managers and companies, and sort of the cycle will hopefully begin anew, right? Think about the downside is that to your point, like, ⁓ my gosh, I'm gonna start spraying and praying at early stage. Because whatever happens, happens, right? But I think that's also, I would say, in rough, roughly like how venture capital kind of works. Yeah. Like power law, we all talk about it, look it up. Power law does its thing to portfolios and just like, ⁓ my gosh, I need to be right like two times out of a hundred. Whereas, you know, we joke around the public markets managers who are like, dude, I'm I'm mark to market every day, right? If I if I'm right two out of a hundred times, I'm out of a job in a month, right? So it's just the name of the game, right? ⁓ I I would say that. You know, retail investors buying in, there's no shortage of like quasi ETFs, you know, the ARC Invest, Liberty Street Ventures, all these different groups buy these kinds of names. Yeah. And you can buy like hybrid portfolios, you know, public, private, yada, yada, yada. Go look read the terms. Okay, guys. The fees on those are sometimes pretty incredulous. You know, those tools that Alvin mentioned are kind of there for you. You kind of know need to know where to look, right? I would also argue, and I would sort of say this, even though I'm in this industry. That venture capital is not for everybody. Like if you're a retiree and you just need to eke out some income, right? You should not be investing in a 15 year fund that, you know, if you're 75, right? Like the numbers are not great for for on both sides, right? It is what it is. I would say that if you are, if you're really good at investing in something, you see like Hong Kong real estate, if you're good, you know, at manufacturing doing this, keep doing what you're doing, right? I think there's a question in there about if you're working with family offices and high net worths and sort of what you want to do next, it's your money, right? If you Want more money and do your thing, just stick to what you do. If you diversify, diversify wisely, right? Like that's that's kind of where a lot of people get themselves into trouble. I always joke that it, you know, there's that saying, it's tribute to Mark Twain. It's not what you know that gets you in trouble. It's what you don't know that you think you know that actually does, right? And we see that all the time with investing in particular tech and venture capital investing.
speaker-1: So so when you when you look at I mean, when you look at GPs right now and you have a pretty good bird's eye view, more importantly, not who's good, but who's evolving through this space.
speaker-0: Good question. ⁓ okay. So if you break down venture capital in general, you have the earliest check writers, angel, friends and family, pre seed managers that essentially look are betting on teams, right? Literally, there's an idea, it's scribbled down, but they know this founder. She went to school with them, she built something before, she left Microsoft, and now she's doing that, right? So
speaker-1: pedigree and you also have pedigree, you have an A team player, you have a bit of innovation in there. The product might be a B product.
speaker-0: No. Earlier stage, most startups, as everyone knows, pivot somehow, some way. ⁓ they find out something. But these check writers, I would say the evaluation of these investors is very different from say someone sitting over here, a Andreessen, Sequoia, Thrive, household names that if you're lucky to get in, you write the check and you move on, right? In the vast middle of so-called, you know, series B early growth equity, it's kind of muddled because the guys over here have come down market because they can. And these guys, the early stage guys and gals who may not find success here have tried to back some of their winners and they're kind of intersecting and colliding at series A, series B, right? Driving valuations up and sort of assess impacting overall how venture is done, right? Traditionally. So the evaluation metric on metrics on these type of managers are very different, right? I think in your in your line of work, evaluating a sort of quant fund that only uses black box versus like a traditional stock picker. Yeah, the ODD is the back end's the same, but like how you ask the questions and go through diligence is going to be a little different versus PhDs versus like the old school sort of stock picture.
speaker-1: It almost feels like there's like the dilution of the traditional value investor is is going extinct. We're seeing that in public markets as well. Right. Because of the because of the valuation compression towards the midsection, you have early VC needing to pay higher prices or looking for right. And and then and then and then those who are in the more established space established space, ⁓ check writers with a higher moat are are able to come down and provide a higher valuation as well.
speaker-0: That's a great analogy.
speaker-1: And this ultimately to my earlier point could be sucking liquidity away from capital markets as
speaker-0: Yeah, we we had talked about last trip, and I don't think things have changed that much in the sense that you have emerging man go switching back to venture capital. Yeah, you have emerging managers that again they have difficulty raising the primary fund. So they may be a specialist in like alternative protein, energy transition, carbon renewability, sustainability, or sort of that sleeve. But they have these companies that are graduating in their portfolio, so series A, series B. They have these pro rata allocation rights. And now they have to refashion themselves almost as a multi-stage manager, right? So that's kind of the encroachment over here. Whereas those big brand names can literally find a company, come in and say, I want to write a check. You're going to take the money. And then they come down, right? Yep. So the hedge fund, I guess the public markets hedge fund comparable is spot on. I don't I don't know how to talk about it, articulate it as well as you, but I would say that that leaves this broad middle of like competing interests. Because I think someone wrote really eloquently on like the the the misalignment before it was get these companies to a certain phase, a certain multiple, hand it off to that growth equity manager, let them run and move on. But then now, because of early stage needing a bigger return, they want to hold longer, which encroaches into the early growth equity, which then pushes everything else out. I think it was Charles Hudson that wrote this at Precursor Ventures. Wow. And I and I'm sort of botching it, but you should read that if you if you get a chance to read it, you know, look it up. But that misalignment, I think, has dramatically impacted early stage managers, right? On top of not having enough capital, the good ones do still, but how do they position their portfolio where their bread and butter has always been early stage seed pre
speaker-1: So how do you evaluate? When you talk to a new manager now, do ⁓ do you tell him do you d ⁓ do you require that he's a multi stage manager? Require that he has a minimum AUM that is ten times more than it used to be the requirement was ten years ago? So
speaker-0: Good good question. So That is that is the that is the question to ask. And the answer is sort of unfortunately, it's dependent. So the really interesting and really experienced emerging manager investors have been doing it for 20 years, right? I count my co-founder revere Eric Wu as one of them. He and I built this rating system that evaluated emerging managers without a track record, right? And we found out that the top three sort of metrics were not like social media presence or sort of where they worked before, like at a VC fund. It was operator experience. Like they had been engineered of one of a startup that went rocket ship. They were like head of go-to-market at a good company. They they were founders themselves that took companies public. They were the best emerging managers by different metrics that we saw over the data set, right? The second one was pretty obvious. It was people that are able to keep their companies alive through pilots, the fundraising around. So it can demonstrate that, hey, I made that intro to that Series A investor, Survivor, right? And helping them. And then third was It was those mainly those two. The third one didn't matter as much. It wasn't social media followers. It wasn't the use of the word grit in their decks, which everyone uses grit. How do you define grit? I don't know how to define grit. Read the book. So we found that interesting, right? For those managers. But to your point, when they start moving to later stage, a lot of really smart emerging manager investors are like, I'm picking you for Asia prop tech, right? Early stage. Because when I do the modeling, I can see that you can make this if you're zero. It doesn't impact the rest of my portfolio across Asia AI, European this, US that. But if you guess what? If you start going outside of AI because AI is touching hardware, logistics, everything, then your the modeling here and the backing your winners, then it becomes you're you're doing this on the portfolio versus this, right? So some investors love it because they allocate to a certain s number of managers and that's their VC bucket and they move on, right? But for the pro the pros.
speaker-1: You're broadening versus
speaker-0: that invest in fifty plus managers, right? A hundred. You are fitting certain buckets. And if you get out of that bucket, you may be flagged by that investor and trying to be like,
speaker-1: That's like style drift in public investing. Style drift, exactly just like style drift, right? But then where do you draw the line? Right, you have style drift and then you have diversification.
speaker-0: It's a hundred percent. You know, diversification in venture capital. Yeah, it is 100% the allocated. It's their money. They have the duty to sort of run it, or if it's their money, it's their money. So they're different schools, right? Concentration, you know, these type of layers, foundational models, application, whatever, to like, I like food tech this versus that. It's in the eye of the beholder. I I don't make an argument either way. There's been successes I in in both camps. In any one I would argue that tries to
speaker-1: That should be the allocator's decision, right?
speaker-0: Say one way or the other is talking their own book, right? Full stop. Right. But I I I understand like these really intelligent, sort of highly thoughtful LPs that have done very well through the years with that sort of this is your bucket. The club deals and kind of those party rounds where everyone gets in is maddening to them. They're just like, this is it's style drift. Sometimes it's off thesis. We're like a super duper, like, you know, cognitive brain tech GP, right? There's those out there suddenly does like. Anthropic at late stage because they got in valuation or like because the valuation or their friend ran in and got them in, right? They're like, Yeah, what is this doing your portfolio? Right. Yeah, you made money, but then for that instant investment, I think LPs are like, okay, you made money on their whatever. But guess what? On the second fundraise, they're gonna nail you for it because they're like, You're off thesis, right? Right. Conversely, when you think about that manager spinning out, right? Like, say if Alvin, he's not gonna do it, guys. Don't worry, but he's he comes out and says, I want to run a fintech. Focused AI fund because I know that these emerging managers and hedge fund world need this and I found this little space, 10 million, I would back Alvin because he knows that space, he's operating that space. And then basically he's a specialist focusing on certain things. That's interesting, right? Contrast if Alvin suddenly came out and said, Hey, I got an MBA, I'm doing food tech now because I want to get healthy, I'd be like, I'm running from the hills for the hills from Alvin doing that. Right. So that's kind of the analogy, right? So, anyways, he's not gonna do it, but I just use him as, you know.
speaker-1: You never know. Everybody's got a second career coming up, right? When let let's talk about okay, so let's let's go into the sectors that you're excited about, right? Now it's kind of broken down into subgenres, right? You have AI and digital assets, crypto, what's happening with near protocol right now is insane. And that's triggered by obviously valuations, ⁓ valuation madness on anthropic. SpaceX purchasing cursor was a massive deal. So every everyone's now looking at these harness models. And then there's applied AI as well. So and that's just off the top of my head. In you see the flow much earlier than anyone else. So what are you seeing coming down the pipe? I think let's talk about alpha.
speaker-0: Yeah, I Okay. ⁓ okay. So again, going back to I I rely my venture as a young person's game. It's hard to like chase these companies, especially when they're twenty year olds and hoodies. They don't want to talk to this guy. I mean, look what I'm wearing, right? They don't want to talk to me. Okay. So because they don't want to talk to me, I talk to the emerging managers that they those founders are talking to, right? So when you think about different application layers and different sort of specialization infrastructure and AI, obviously that stuff is exciting, right? I think the data centers play because cheap capital is coming in. The smarter money is rebalancing and getting out already. And you can kind of look this up, do a do a Gemini search and look at the news on who is k getting out versus who is coming in, right? On the data center plan.
speaker-1: Sorry, so when you say smart money, I sorry cheaper money meaning demand for yield is lower.
speaker-0: Mm-hmm was lower. ⁓ the big boys and girls that were in earlier are basically selling those assets, right? And we you can look that up. We won't name names here.
speaker-1: And now that the Dana Centers centers are mature, the ⁓ the cheaper money's coming just looking for the annuity.
speaker-0: There's always going to be a need for that because again, when you look at those documentaries of, you know, and I'm from Houston, Texas, like those random cities that no one from Houston would ever go visit. And they're sort of building these communities of, you know, energy, this, subsidized rent, that, all the entertainment options, et cetera. It's like oil and gas rigs offshore since like God, time immemorial that's being basically applied for, you know, feeding the need of energy for AI, right? It's insane. It's it's it's there's so many documentaries on Bloomberg. Go watch one, okay. The second part, I think, to your question is that the specialization of vent early stage venture capital is so neat. I can't think of a better word, but it's just so awesome seeing like operators who are like the best in this space, like sustainably regenerative technologies, which is captured under the broad sort of climate. But basically, like these things can be, you know, you can take shrimp shells and turn them into foam. Like that kind of stuff for me is like UTF, right? That's incredible, right? They're fund managers that basically back those kinds of companies. Okay. So for me, like whenever I get an inbound from LPs, friends, and whatnot, where I need to get smarter, I just spend time with these emerging managers. I like, hey, what are you seeing? Right. And they will spend 30 minutes, an hour, whatever with me breaking down what they're seeing. And I just like level up there.
speaker-1: Right. Right. So we have sustainable regenerative technology.
speaker-0: ⁓ app, you know, different application infra layers within sort of AI. And I would always say that like financial services, despite the slowness of adopting certain things, I mean blockchain that it blockchain was never a fad. It's just, you know, not accessible enough for everyone, where not everyone wanted to be their own bank, right? It's like, I want to deal with this, man. AI, I think, is sort of leaping that. And when you put those two together, that's also fascinating for me, right? I think. Logistics supply chain hardware, where you know, not everyone likes that space because of the capital intensity. There are really cool managers that are focusing on the supply chain aspects of that. ⁓ and I think sort of when we saw sort of US China kind of going off the rails, ⁓ straight up for moves sort of all these different things that relate to our supply chains, people are like, How do we move from letters of credit that have been around since the 15th century to like something a little more modernized and streamlined? That for me, being the nerd that I am, I love that stuff, right? So those are all I give you those spaces, but if you use that as an example, you can literally have different sectors, silos, verticals, subverticals of anything. And there was gonna be an emerging manager backing those companies in those spaces.
speaker-1: Thank you. That's that's real alpha. If anyone's paying attention, I'm sure you're gonna be doing your your homework on Gemini right now. I wanna I wanna pick up something that you mentioned earlier about the one man companies. And maybe this is an observation I d and I don't know if I'm extrapolating it too much, but most of the guests that I've had on the show, we've talked about how the the new generation is kind of cooked. Like the the fresh crads, those who don't have the the experience like like we do in our generation, we're probably the last generation to have judgment to be able to to to be critical about the outputs of AI because the the interns that I have now, the new generation, they they don't have that. So they don't know what they don't know. No. So let's just put that on one side. The point that you kind of alluded to earlier, where you now have older generation founders with the use of AI and technology can spin out early product designs. They own patents and can use technology now To replace the product go to teams that are younger than them. Are we seeing a trend here where you know the OGs might make a comeback almost like the boomer of this generation?
speaker-0: Yeah, that's a great question. I I would say that, you know, in my in my sort of life, I have a nine year old and a four-year-old, Annabella Cohen. my four-year-old, when he was two and a half, knew how to do voice prompts to Google home, right? Like that's how crazy it was. He knew how to swipe away things when notifications were coming down when he was watching like his space video, right? My nine year old, like Canva AI, designs spreadsheets on her own, like just, you know, all that, right? I also adjunct I I'm not an adjunct, but I speak with a lot of adjuncts who bring me in to talk to pr you know college students 18 to 22 in the United States. And all of them, when they send their CVs, first they're much more mature. Like they they actually pay attention, they're taking notes, they ask questions. Feels like you're at a investment conference, right? It's insane. Versus like when we're in college, like you know, like that, and just like, ⁓ my gosh, I'm hungover from yesterday, whatever, right? You're still hungover. You still know, you I landed yesterday. Not enough time, not enough time to drink. So
speaker-1: Yeah.
speaker-0: When I think about that in their resumes, whether it's finance, liberal arts, they all know how to vibe code and they all have spent time sort of doing that. And when you test them, they actually can do it, right? So my belief is that there's a middle crust of people. I think you talked about this class of people that kind of saw AI but went through sort of traditional schooling and now are facing difficult realities in the workforce, right? And my and I'm confident because they're young and intelligent that they'll sort of up up level their upskill their skills and they'll figure it out. Okay. So that's that, right? This younger generation, good lord. Like, I don't know what they're going to come out. The schools are going to be different, curricula, et cetera. And it remains to be seen, right? Like I'm a parent. We'll figure out how that goes. Like we're seeing it real time, right? But Alvin's point about the OGs, certain OGs, you know, their adaptability isn't pretty incredible to see. Like the the cool thing when I talked to this one guy, he's an engineer, ex Boeing, a couple of patents, did like the breaking technology. He was like, I know that there are going to be like a hundred different, if not more, competitors building what I'm building, right? It's like an HR. HR tech AI thing. And he's like, he's like, but you know, I kind of know my space, I know the lane, I know what to develop. And I have other suitors that may buy this part of it because I've been through this circus before, right? That's interesting because if I'm in a you know going back to an emerging manager, I want to back that founder. Yeah. That kind of knows what they're doing because 22 year old, if they've got this brilliant idea, and they do a lot of them do, but go to market commercialization, right? All these things, these muscles.
speaker-1: Rapid year old kid.
speaker-0: A lot of these things cannot be outsourced AI, right? That one person team is usually that little little older guy or gal that has been through, you know, battle scars in the trenches, worked at big tech, has, you know, usually exited a company or two, some failed. That's interesting because they can get to where they go and then the go to market muscle and all that stuff. Yeah, you got AI agents for agents and sales this and blah, blah, blah, that. But you know, at the end of the day, a lot of the selling is still human to human. And those people have social skills where A lot of those younger kids just do not, right? It is what it is. Or they're hiring those old guys and girls to do the go-to-market and all that. So that that that push and you know, the sort of that tug, you know, back and forth and all that is nothing new, right? Like we've seen that different generations, different technology. But you know, every everyone jokes, it's like this time is different, but this time it kind of feels a little different, right? It may not be different, but it feels a little different, at least right now.
speaker-1: You know, a lot of work that you do, I'm gonna pivot a little bit now to we all we have to talk about geopolitics to some extent. China's soft power seems to be working to some extent. Doing nothing seems to be winning to some extent. We just saw the visit of Trump to meet with Xi. Yeah. A couple of deals came out of it. ⁓ more of a handshake than anything else. When when you're when you're now looking at companies in Asia and in China or Korea, which has been super hot in the last 18 months versus what you're seeing in, say, San Francisco, which is still the hotbed of innovation. Mind you, you're probably due for a trip to Shenzhen this time. I am. Where are you seeing the trend now? Because right now Hong Kong has arguably, without, you know, without counting SpaceX and Anthropic, it's probably the hottest place for raising capital right now. We have a backlog of something close to 400 years for IPO. Having said this, a lot of the
speaker-0: Absolutely.
speaker-1: founders and the issuers still prefer going to Nasdaq because of a higher valuation that they would that they would gain. Where are you seeing kind of where the world is going now with that?
speaker-0: I would say top down the sort of she Trump getting together. And again, I'm not a member of any government, just macro geopolitics geek. Okay. Seriously gotta say this these days. It's better than nothing. The handshakes and all that. They're talking, the back channels. That's good. This is a good thing. Okay. Because, you know, when you don't talk in any relationship, it just goes off the rails, right? So that's a good thing. I think, you know, obviously for sort of, you know, each respective domestic media will will sort of spin it the way they need to spin it. Which is what media is supposed to do, but it's a good thing. Okay. It's great. This trip I'm not going to send in. So this, you know, this is a end of May, but I will be at Beyond Expo in Macau. So Jason Ho, shout out to Jason Ho and the Beyond Expo team for bringing a delegation of, you know, sort of mostly Hong Kong, US, Singapore groups. We're gonna go see what's going on. There's thousands of companies presenting, right? So that's two. Generally speaking, I think we talked about this, I think, in 24. And even because I I made my first trip back to Hong Kong in 22, I believe. Post-COVID and we hung out here. This is before you moved here. That dual polar system was ready here. Like that was here when I was still here in 19, I believe. Right. That's not going away anytime soon. Right. I think there are more and more kind of weirdo, I say kind of weird. I'm not on TikTok, but you see, like, you know, non-Asian people trying to be Chinese, where they did the whole Marie Kondo thing. They did the Korean K-power K-pop in Korean soft power is still at its zenith, not going away anytime soon. But like, ⁓ how to be Chinese, right? Which I found kind of amusing because
speaker-1: ⁓ I was like
speaker-0: What is what does that mean, right? Because the Chinese are I always joke around, but the Chinese, as you know, like you're Canadian, Hong Kong, Cantonese. I am Taiwanese, Shanghainese, American. Yeah. But we get along because, you know, we were always these lone China bulls. We're like, people are like, what are you doing here? Right. Yeah. Are you gonna go back to Canada, US? I'm like, well, maybe. And you're smart, right? So that's that's that. So like when you think about these different groups, it's like, are you Shanghainese? Are you from the South?
speaker-1: The Jet Alpha thing.
speaker-0: Are you a northerner? Yeah. Are you, you know, where what Chinese are you, right? Because they're so different, right? Like you come here, the Chinese are like, ⁓ the southerners are this, north that, this and that. But then when you say one thing about China, they're like, ⁓ can't say it about China, but we could criticize each other, of course. So I asked these people who, you know, China max it, like, tell for more legitimacy, say which part of China you're from. Say you're Shang'inese, say you're from Guangzhou, say you're from the north and you like your dumply thing, dumply skin.
speaker-1: Okay. Thick or thin, right?
speaker-0: More sort of cred, right? But anyways, I digress. I would say that going back to kind of what you asked, the bipolar thing is here to state. I think you talk about
speaker-1: ⁓ So investors are still not coming, ABC trade is still on the table.
speaker-0: It's stall on the table. It's stall on the table. I think those who can put take off their kind of geopolitics, I'm in whatever camp hat, stand to make money, right? If you understand, I take these trips and I bring mostly like investors with me because and service providers because I want to see them to see what's going on, right? They have a view of I'd say Hong Kong or San Francisco, right? And it's always a negative view. It's like, ⁓ my gosh, San Francisco is like the walking dead.
speaker-1: Union Square. Yeah, that's what I think right now.
speaker-0: Lord, but you know, the new mayor, Daniel Lurry, well, new ish mayor Daniel Lurry has really changed things. Like you can feel it being different in San Francisco. When I come to Hong Kong, I'm like, dude, it's like it's it hasn't changed. It's just maybe some of the signs are different, the restaurants have moved around, but it's still an incredible place to do business. It's full stop. It's so you can set up a company in like three hours, right? So like these are the kind of things where I when I think about.
speaker-1: Cal Bass says that we're we're ⁓ we're we're dying. Cal Bass says we're dying. Daylight home called the short
speaker-0: No, I you know, they're at the end of day if people are shorting, you know, every stock in Hong Kong, they're gonna say that, right? On the flip side, like, you know, you mentioned about going to Nasdaq to list. Yeah, they're hiding list you know, I used to be an IPO lawyer, it's like hiding listing requirements and all that. But it's also like, you know, a lot of the the powers that be in different countries are not stopping their homegrown native sons and daughters and their winners to go list over there. Because it's still incredible to list overseas. Yeah. It's incredible to list anywhere. But NASDAQ, NYSC, you know, it's incredible. So those things haven't changed, right? But at the end of the day, like domestic technologies were like, I look at the cars, like I I ride in like a BYD, I drive a Tesla, Model Y, you know, I got I still haven't got an FSD because I'm like I'm an old school driver. I gotta get FSD and I will, right?
speaker-1: Why aren't you getting F S D Everyone's got F S D
speaker-0: Versus like writing in a BYD that's like a third the price in the suspension. I'm like, good lord, right? If I import a BYD to San Francisco, I might as well buy a Ferrari because of the taxes and the import duties if I can get it. So it's it's the powers that be, right? So for me, like this dual polarity world or multipolar world is kind of what we're seeing. Probably gonna be here for a while. But as an investor, it's like, can you take off your home, like sporting sort of whatever hat, jersey, and understand the other place?
speaker-1: Thank you, Charles.
speaker-0: you're gonna be better off in the line.
speaker-1: That's an information edge. It's as simple as that. Yeah. Yeah. It's an information edge that that, you know, folks like you can obviously take advantage. Right. So when you know, when you look at the next six months, and if I were to ask you, you know, what's one project? Just one. I would say And you're not allowed to say anthropic, you're not allowed to say, you know, SpaceX. Okay. Because I I would say the moment it hits the tape, that trade is done. Company or B. Yeah. Just ⁓
speaker-0: Project, you mean like a opportunity, like a I would say what I've learned, and this is more US centric, given that I'm there, post SpaceX and sort of those bigger names that you mentioned, the kind of how should I say this? ⁓ we call it dual use, right? So civilian, military, government applications, that's just getting started. I think you see similarities in China around sort of more humanoids, which I think I saw some pretty crazy sort of military videos about like how an amphibious invasion would work. With humanoid robotics. I'm like, whoa, that's kind of wild, right? Yeah. Anyways, you guys can look that up. I can't believe it got through like I saw it. I'm like, that's pretty interesting. I it might be that. Yeah. Versus like what in the US, you're seeing that sort of through the Ukraine-Russian conflict and sort of what's going on in the Middle East, that, you know, tomahawks versus this, you know, sort of naval superiority versus nimble sort of attack drones that cost like 500 bucks to make. That is kind of leaning back that way, right? To the future. That for me is fascinating.
speaker-1: U Unitry, right? Yeah.
speaker-0: Because ⁓ geopolitics, I think, you know, I'm also a h ex history major. My family was very much sort of dispersed during World War Two from Asia. And that's kind of how we ended up where we ended up. I'm also a military sort of geek, history geek, right? And I think ebbs and flows where, you know, sort of firepower, superiority, and sort of all that warfighting capabilities are good until something suddenly shifts and then you have to kind of catch up and kind of go there, right? War is sort of changing versus like you see those historical picks with like Napoleon. you know, like this and charging across the ice. Obviously war is not fought like that anymore, right? And the weapons change and the tactics change. The technology will also change with that too, right? Or guide that. So keep a lookout for that. That's pretty interesting. Obviously it's gonna be hard for a a US investor to invest over here and then for a Chinese investor over there.
speaker-1: That's for nothing other than Palantir, Andro, your your friend Palmer Lucky.
speaker-0: Yeah, there's a lot of interesting companies. Yeah, I would say a lot of interesting companies doing things naval, drones, small ordnance, low orbit satellites. That's the future. And this is the stuff that I think made the United States post-World War II the technology leader. And then now obviously China has built its own ecosystem and sees a lot of the things the same way, right? Despite being competitors and sort of the usual. So that for me is fascinating. Keep an eye on that. I think once these other bigger companies go public andor sort of reach the upper strata like the Canvas, the Databricks, the Stripes, et cetera, you're gonna have a wave of these dual use companies, you know, Saronic, Varda, Loft, you name it, that are gonna be doing really, really interesting things. Excellent.
speaker-1: Well, look, ⁓ you know, I'm I'm mindful of time. I do wanna thank you so much for coming by.
speaker-0: Thanks for having me. It's always good to see you guys. And ⁓ again, you know, I think communication is the key. Like if you guys are looking to do stuff, obviously in hedge funds and alts, this is the guy to do it. We'll get we're gonna be back in October doing a full roadshow with a bunch of people from the states that want to see what's going on. We'll be in Hong Kong, Singapore, and Bangkok, seeing some of the bigger investors ⁓ just doing events and all that around F1 Milk in Asia, Token 2049, and obviously with my friend Alvin. So, you know, thank you guys for listening.
speaker-1: That's right. And we'll see you guys on the next one and definitely for the ⁓ F one milk in quarter three. I think that's
speaker-0: End of September, early October. Yeah, cheers. Awesome.