How Venture Services Actually Works | Andrew Ryan, Alex. Brown Raymond James

speaker-0 (00:00:00)
Before we dig in, please note, the views expressed by the guests in this video are their own and do not necessarily represent the views of Augment. This content is for informational purposes only and should not be considered professional or financial advice. Welcome to the Augment Exchange. I'm your host, Max Melmett. Today, we're sitting down with Andrew Ryan, Managing Director of the Venture Capital Services Group at Alex Brown, a division of Raymond James. For 25 years, Andrew's job has been helping venture funds.

Deliver shares or cash back to their LPs. Early on, that meant physical certificates. And at 22, he carried $100 million of stock between offices wrapped in his coat. The model used to be a free service. The incentives weren't aligned, and nobody had a reason to fix it. Andrew and his team fixed it anyway. They charge a fee, they require the whole team to become licensed traders, and they ultimately cut the delivery process from two weeks to the same day. Very few teams on Wall Street do this work.

And most of them actually came from the same desk. We get into the four ways out of a position to dribble it, sell it, transfer it, or hedge it. And we break down the three most common paths to going public: an IPO, a direct listing, or a SPAC, and where each of those falls short. We finish with rebuilding capital formation, U.S. capital markets as a geopolitical asset, and his advice for the newly liquid. Andrew is candid, principled, and generous with what he knows. I truly enjoyed this conversation, and I hope you do too.

Andrew, thank you so much for joining. I appreciate you making the time and a lot to get into. But before we get into Alex Brown, pre-IPO, IPOs, all that, where did you grow up and like what was your first real exposure to markets or to Wall Street?

speaker-1 (00:01:37)
I grew up in Greenwich, Connecticut. So I suppose just by nature of where I lived, it was pretty financially heavy. I really didn't have an interest in finance at all. So how I got here was a little bit by force, you know, post college. I guess I had a few buddies whose parents were in finance, but I never really understood what it was. You know, you kinda just hear it and it's one of those words that just like flies right over the head. So I wasn't paying much attention to it. But really just got into it when ⁓ post college. So after I graduated college, I ski cross country with a buddy of mine.

We got out to ⁓ Palo Alto ⁓ and to ⁓ Menna Park, which is where his brother was working at the time. So he was working for the Morgan Stanley investment banking team of old. Went there and I called my mom and wanted money to get home because I ran out and she was kind of like, ⁓ that's the deal, man. Like you're done. So I didn't really know what to do. So I could have gotten a job at I interviewed two places, got two jobs, ⁓ one at Google and one at actually at the time I Robertson Stevens.

And chose poorly and now I'm in finance. So ⁓ hence I got there. You know, my interest kind of built over time in finance. But, you know, truth be told, I really wanted to be a history teacher. That was kinda always where I wanted to be. I just kids are so cool and they're so fun and it's exciting. And so that has turned more into a hobby than it is a career. But hopefully I get back to it at some point. ⁓

speaker-0 (00:02:58)
Nice, nice. And I guess along that journey, was there a point where you you did feel like you you made the right choice between ⁓ Google and the Wall Street? T Okay. ⁓

speaker-1 (00:03:08)
It's TBD. ⁓ Yeah. The answer is yes. I've been very lucky and I feel rewarded by what I do, but it's an uphill battle. You know, because we kind of set out part of the reason why I stuck with it is one is I'm Irish and stubborn. And two is, you know, when I got into it and then as it develops, you know, I entered the market around two thousand one, which was not the best time to to join the market. It just was a different beast. And then we went through that recession, two thousand two, two thousand three.

And specifically for what I do in venture services, it was a tough time, right? I mean, you had this kind of internet bubble where everyone, you know, made a ton of money. That's where the four horsemen came to be, which was Robbie Stevens and Alex Brown of old, Montgomery and and Hamburg and Quest. What we did just kind of got ⁓ very f fragmented. Most of what we did was retired back into the retail system. Because you have venture capitalism, VCs generally don't have public positions all the time. They could own twenty, thirty percent of a company, but you know, they usually get covered by someone in retail.

And that wasn't the case when I first started. I mean, when I first started, we sat next to the trading desk. And so it was a very institutional business. And then as it developed, it became a very retail business. And I just didn't think that that's where it should sit. And so that's part of why I stuck with it and why I'm still doing it, which is how do we reinstitutionalize this business in a way that benefits the innovation economy or the entrepreneurial economy, however you want to call it, in a way that actually continues to give them the tools to support their own growth. And I don't think Wall Street does a good job of that.

speaker-0 (00:04:36)
It's it's interesting you hear wanting to democratize, wanting to democratize, but there's also value in institutionalizing certain things. But just to take one step back and you mentioned the four horsemen and those firms for folks who kind of don't know that or weren't around, what what was the deal with the four horsemen? Where where'd that come from?

speaker-1 (00:04:54)
That was kind of the beginnings of you know, the venture economy. I mean, venture general has gone back to, you know, the fifties. You can kind of find the the beginnings of venture capital back then, but really into the nineties and then extending into the early two thousands was that kind of internet bubble, which was crazy. Alex Brown, Robertson Stevens, Montgomery Securities, and HQ were really kind of on the leading edge there and from an advisory standpoint.

So they kind of carried the torch of bringing these companies to public. That's kind of why they call that. They just, you know, they were smaller firms that just punched well above their weight. They've kind of all either been dissolved or absorbed. Like Alex Brown now, which is where I work, is not the Alex Brown of old. You know, we still carry the the same flags, we still have all the history, but Alex Brown was bought by Bankers Trust, Bankers Trust was bought by Deutsche Bank. And so most of the institutional side of that business was absorbed into the Deutsche Bank infrastructure. And we carried the Alex Brown name on the retail side. That was the point in which

venture and the kind of economy became so relevant to everybody. Right. I mean, it was all these companies were coming public and like eBay and there was pets.com too and others. So that's I think the first time people really saw that wealth creation at a mass scale. And it brought a lot of eyes onto this alternative asset class. ⁓ And, you know, it has continued to kind grow and innovate well in excess of of what people had expected back then.

speaker-0 (00:06:11)
Yeah, yeah. No, and it's interesting you mentioned the Alex Brown name, doing some research and prep for this. They didn't realize Alex Brown was the the first investment bank that ran the first IPO for the Baltimore water company. which is fascinating. Eighteen eight, so we're a couple hundred years away ago. But then it looked like Microsoft Oracle Sun Microsystems, they brought them all public within a ten day stretch, which is just wild. It's insane. When I joined the electronic trading world.

had guys who were market makers or previously floor brokers and they would say, you missed the good times, you missed the go, times, you missed like the good old days. And kind of curious, when you joined the four horsemen or one of the four horsemen, it was later in that cycle. Was it a similar sentiment where they were like, man, you you missed the madness. ⁓ what was that like?

speaker-1 (00:06:58)
It was hard. I mean, you know, you go into finance and you know your stickers on the fridge are how much money you make, right? That's kind of how people define themselves. And I didn't make a lot of money. I mean, I just didn't. In fact, the first day I w I worked at Robbie Stevens, I got kicked out of the office because the only ⁓ formal attire I had was a bow tie that I wore in college. I didn't have a tie, I didn't have anything. And so I showed up on the first day of work wearing a bow tie.

And one of the managers there, he he came up to I mean he literally kicked me out of the office. I was there for like an hour and a half and he it basically said I didn't earn it. And so that was kind of my introduction to Wall Street, which is it's just a different vibe. You know, so you know, that kind of set in like, all right, well, if this is what it's gonna be, that's how I'm gonna have to prep and that's how I'm gonna have to kind of get myself. And so I went home and borrowed a tie and a suit from my roommate who is quite a lot bigger than me.

And I went to the equivalent, I was in San Francisco and I went to the equivalent of, you know, CDS. Bought a pair of crazy socks as my way to get back at this guy. That's continued to to this day, but I have found clothes that fit me and I have found a few ties quite too. But ⁓ yeah, so that was like introduction. But yeah, you definitely felt that. And then, you know, you kind of I was young and one of the things that someone had told me early was, Look, you're young, but don't make yourself young. And so learn and study, read about financial history to date.

Right. I mean, you have a junk bond market, you had all these things. And so I spent a lot of time reading books like ⁓ Dent of Thieves, a couple of other books in and around that, so that I could operate within that ecosystem feeling as if I knew as much of what other people experienced. And that was good advice because that did help me. Because when you're young in this business, people just assume you don't know anything. It can be frustrating, you know, and that it was it was certainly frustrating for me. And so that was kind of where I started to kind of build this idea that I I just didn't like to be caught not knowing something. ⁓

speaker-0 (00:08:46)
Absolutely. Similar sentiment and where I always felt like I was the youngest guy in the room and imposter syndrome every single day. And the same thing where somebody told me, just just read. You need to know the words, you need to know the history. Similar sentiment, but read books more in like the electronic trading world or dark pools. And so I could understand the history and when people were talking.

speaker-1 (00:09:09)
It also tells you a lot about personalities too, which is a big part of it. You know, like if you read Liar's Poker ⁓ and you read about John Merriweather, like you kind of get a sense of personalities as well. Cause I was not accustomed to that kind of environment where it was like killer be killed. Knowing the personalities that succeeded, whether rightfully or wrongfully, or those that kind of ended up not making it for whatever reason, was important to kind of get my mindset about how I wanted to operate in that world.

speaker-0 (00:09:33)
I like that. And I guess I'm curious from the the history of it to jump forward a little bit to kind of where you are today. And I know you've been in the venture services world for twenty, twenty five years. Like what does that mean for somebody who doesn't quite live in this world? Like, what does a venture services firm do? How does it work? Who are your clients? What's the model?

speaker-1 (00:09:45)
Just upped it. Twenty five years. ⁓

speaker-1 (00:09:56)
It's a good question. And I would say that it's changed quite a bit. So traditionally, we covered private equity venture capital firms. And, you know, we were talking a little bit about the internet bubble, so we can use that as an example. When those companies went public like eBay or other companies like that, they were funded by some venture type capital, typically, usually. And so that was a way in which the VCs were meant to realize those positions, right? They invest in the public market. I mean private market and then, you know, the company goes public or there's some type of capital markets transaction. And then they typically end up with

Securities. And then how do you find reasonable and responsible ways to introduce that supply to the market, whether by way of selling it? And that was kind of the beginning of electronic trading, right? Like that was ARCA and much different than it is today. Or distributing in kind, which basically means you take that position and then you distribute it pro rata amongst the LPs minus whatever carry the GPs would take.

A lot of it's operationally focused, but the idea is how do you get those shares into the hands of the LPs? And the reason why we exist, meaning teams like mine, and there's really only two other teens that do what I do, we actually all came from the same team, believe it or not. We really exist to bridge that gap, right? So like most people, it's changed over the years, but just to take the simplest form, most people would say, Hey, look, we're gonna mark a distribution as of the close today. And so all of a sudden, let's say the stock closed at 40.

You know, the next day you are now as an LP in receipt of those shares, meaning you are now the owner of those shares and you're paying Carrie to forty bucks if the funds in carry. But then now you have market risk. That's the other side of the ball. And so we exist to try to help bridge that market risk by giving people the ability to either come into the market right away or, ⁓ you know, really make it a much more efficient transfer process, which is what we've been working on for the last call it ten years. And

speaker-0 (00:11:35)
think a lot of people in ⁓ electronic trading, investment banking, who j I think finance in general may not appreciate what's going on behind the scenes to make things possible and the ability to ⁓ Yes, yes. I mean, even ⁓ what has to happen so that shares just show up in your account. There's a decent amount of infrastructure and tools that have been built to support it, but what does that process actually look like?

speaker-1 (00:11:49)
Lawyers to that too.

speaker-1 (00:12:04)
And that's part of why I stuck with this business for so long is it's a really broken process. You know, back in the day before Hurricane Sandy, which sounds weird as if it that would have some sort of impact here, but it duh it did 'cause, you know, DTC was flooded. We used to do physical certificates. So, you know, you invest in a company, you'd have a physical certificate. If you were you know, an officer director, an affiliate of a company, we'd have to pass back and forth physical certificates. And then you'd have to get stock powers and, you know,

signature medallion guarantees and all these things to kind of move that stuff. So I remember, you know, I guess at this point it's no longer an issue. But I mean, I was running back and forth between offices with, you know, certificates. I mean, I remember one time I went to go pick up a certificate at a client and it was like a hundred million dollars. And I was just like w I literally like had it wrapped in my coat. ⁓ I must have looked like a freak, but I was like, I can't I was like twenty two years old. I was like, what am I doing? It has developed some there, but not much. When Sandy came, it kind of pushed everything to be electronic. That was big.

So now, you know, we move electronically and then, you know, now we're moving into I'm not to get too far ahead, but you know, the SEC has just kind of moved into the pipeline tokenization by twenty thirty-five. So that's something that we need to be mindful of. So the kind of chain of ownership has changed a little bit, but the process really hasn't changed. And that was where I kind of got frustrated. I am by nature someone that likes to fix things. And sometimes that gets me into trouble. Sometimes it becomes a waste of time. My wife and my team at some point are like, dude, we don't need to

That has no impact on anything. But I was like, Yeah, but it's not right. And so it should it should kinda get fixed. And so I think that's kind of been the the continuous theme throughout this. And it's still not fixed. I mean, it is still a broken process. I think that is true that there's not a lot of appreciation for it, but we're just kind of used to it. I think our goal now is how do we minimize the impact?

speaker-0 (00:13:44)
I I love that. And I think I had the pleasure of working with folks in the electronic trading world who from a lot of different aspects from from traders and back office and market makers who lived in the world before things were tech enabled and automated, like the functions or the processes that were run what became a report or an overnight job or something, ⁓ they used to like physically have to manually do these things. So they had

this deep understanding for how things actually worked and how things broke. And I think that's super valuable knowing ⁓ the manual piece and living that. And then when you're looking at it in like a digital world. And I guess once it became digital post Sandy, the process through DTC. So I'm I'm an LP in your fund. I guess we could talk maybe SpaceX coming off off lockup in a weird sequence and maybe get into that in a little bit. What is the process for

And maybe I guess different from single asset SPVs versus funds and where the managers have some more discretion. Like if you could talk to me just the simple case and maybe we could build on it of, hey, I want to continue to own this thing for the future. How do I get the shares? What happens? Like what does that look like? And when can I expect that to happen? Is the IPO my event? Like what how does that work? ⁓

speaker-1 (00:15:04)
So it's funny you ask. There's a lot of things in there that are interesting to talk about. One is the IPO event is typically not unless it's a direct listing, right? Which is a a different beast. And I think it's also important to talk about direct listings and spacks and why they came to be too. So just using SpaceX as the example, right? You have this rolling lockup. That rolling lockup are applicable to most, but not all. And then there's certain people that are locked up for a year. We actually just found out that

Gibson had kind of reverse course. And so now there's a another hurdle for X AI shares. And how do people think about that? So it is a pretty complicated one, but you should be able to expect your shares at or around that, you know, the date of that lockup. Now again, that's for you mentioned SPVs. Typically that's the disposition methodology of an SPV. Once there's an event, the shares are distributed. Now if you get back to more traditional VC, it's a little bit more at their discretion, right? Which is like, hey, look, we might distribute at the lockup, we might distribute ten percent over ten quarters, we might wait.

for it to season. I mean, SpaceX has gotten itself caught up in in a lot of ⁓ this kind of tech online, especially in the chips sector and all that stuff. And so, you know, it is, it is trading quite weak. But streets generally positive. So in that instance, if you don't have an obligation to distribute, you may as a VC hold onto it for a period time. So I do think s SPVs relative to traditional more VCs is a little bit different.

Meaning there's a a a discretionary piece generally with a traditional VC versus an SPV. But then you get down to it. And again, let's just talk about an SPV where typically you're meant to receive those shares as soon as the lockup comes. You know, when I started in this business, ⁓ again, going back and certificates and all that stuff, it would take up to two weeks to get those shares transferred. we talked a little bit about how shares went digitally and Sandy and all that stuff. There's never been ⁓ any ⁓ pressure on us as distribution agents to kind of

do a better job. It's just assumed that it should take two weeks. It's just assumed that things go poorly. It's just assumed that transfer agents are terrible because it's easy to excuse, right? Who's going to question you? And that's where we took issue. It doesn't take two weeks to deliver stock. And so especially with this kind of boom, I would really say from Twitter on, of SPVs and kind of this whole network of, or you know, call it niche market, we've had to kind of improve on that.

speaker-1 (00:17:16)
Right. And SPVs especially because, you know, when you invest in a fund, you're investing in the investors, right? You're saying, Hey, look, you're a fantastic investor. I trust you to put my money where you think it makes the most. When it's an SPV, it's a manager who may have a successful track record saying, Hey, look, I want you to understand the story of SpaceX and give me money to invest in SpaceX. So as that, I have a much more personal association with it. And as a result, you know, I typically don't want to sell. I want to get those shares in kind.

So then that takes us to a a different part of this conversation, which is traditionally, you know, this business was done for free. We used to take a distribution mandate and say, Yeah, we don't charge. But how

speaker-0 (00:17:53)
How do how do you make ⁓ money if you're not charging and then what what does it look like, yeah, now?

speaker-1 (00:17:59)
So it still looks like that. And that's why what I mentioned before, it's a problem we've been trying to fix. So traditionally back in the day, we used to trade net, which is crazy. I mean, you beat VWAP by fifty cents. Someone's like, I'll take twenty five cents on the inside. Trade a hundred thousand shares, you can make twenty five grand. You're like, Great, I'm gonna go get a sandwich and go home. And so ⁓ that was one thing. But the overarching theme was like if I get a sh distribution of a million shares, hopefully I trade half of that and I'm gonna charge five cents a share.

And so that's kind of how it how it always worked. That's kind of how it continues to work. But there's a few things that have happened since, you know, I started in two thousand one to now. We used to make people open accounts. So every LP had to open accounts. And it was really easy to do that. Now people don't want to give out their personal information. And they also don't know who I am. You know, if I'm talking to the fund, let's say you're a fund and I'm talking to you, and all of a sudden you open me up to your single, single most precious asset, your LPs. And then I'm chasing them for their personal information. You know, I'm trying to get them to trade with me, all this stuff. It just didn't feel right.

And it didn't make sense. So now all of a sudden that takes off that because you know, that's how people would make money. You'd open an account, they'd hopefully trade with you because they want to reduce their market risk before the shares are actually eligible to be transferred. So we call that short sell exempt to get it into another account. Secondly, you know, kinda with the rise of these SPVs, we saw a lot of people that just wanted to hold on to the stock. So they wanted it really quickly and they wanted to hold on to the stock. That again cuts off our ability to make any money, which is fine. We're not looking to charge the world, but at the same time, you know, we gotta keep the lights on. So ⁓ starting about

Real infrastructure. Yeah. So starting about five, six years ago, we had a lot of SPVs come into us. ⁓ And, you know, a lot of people that do what I do were saying no, right? Because they don't make any money off. It's too small. And it just didn't seem right this way. No. And so we kind of took the position, all right, well, how do we make this work? How do we get this into a position? And so we started charging fees. ⁓ And the fees we charge, we try to keep it as simple as possible. But it was meant to kind of, ⁓ I mean, it's less than what we charge to sell. But at the same time, what we were trying to do is how do we improve this process?

And how do we get it there? So that was part of it. And then, you know, you kind of move into another part of this, ⁓ which is just the people that complain. It doesn't take two weeks. And, you know, there's still people out there that indicate, yeah, we'll give you seven to ten days to deliver stock. It just doesn't take that long. We realized that the better we got at our job, the less money we made. And so we kind of put it back to the funds and said, Hey, look, you know, if you want to wait two weeks and leave your LPs out there with market risk, that's up to you. You'll find someone that can do it for free. But we are in the business of making this as seamless as possible.

speaker-1 (00:20:25)
You pay accountants, you pay lawyers, you pay everyone else. This is less than what we charge to trade the stock, but we do need to get compensated. And then we try to close the gaps and then we put some timelines on it so that if we don't make those timelines from a delivery standpoint, we don't get paid.

speaker-0 (00:20:38)
And so the difference, I guess, ⁓ in ⁓ totally get it and your clients and not competing with your clients for their clients.

speaker-1 (00:20:46)
It was a weird model. It's just like and to also get paid indirectly just creates a fiduciary issue that was a little bit difficult to get our hands around too, right? Like we're doing this major service for someone, but then you're like, why are we doing it for free? Like what's the perception? And it's like, all right, well, we get paid indirectly through LPs. And then that just forces people to wanna drag their feet on delivering stock because the longer you keep someone at market risk, the more likely they're gonna say, just I'll sell it with you. I can't wait any longer. It kind of encourages bad behavior.

Right. Not suggesting anyone does it, but even the perception of bad behavior is not something that we want to have.

speaker-0 (00:21:19)
Yeah. If you're not monetizing it and somebody what's it if say they're not taking a little, you don't know it and they're taking a lot. ⁓ so there's other ways they're trying to take it or monetize it. But from like an account opening perspective versus what you need to actually deliver the stock, I've been through the process a few times. It's not fun. And especially when you go to like international ⁓ and global custodians and then coordinating with three parties, it becomes ⁓ a mess. In the US

It's still not easy and having that infrastructure is no joke. But like from a client perspective, you'll still need some information on the LP, where the brokerage account, where they want to receive the shares. So let's say super simple. ⁓ I'm your manager of an SPV. I'm an LP. I want delivery of the stock. Like if you will support it, I want distribution in kind. What does that look like? What do I need to give you? And then what does your team

actually do and I know maybe some of it is secret sauce, but I think the way you guys execute on it ⁓

speaker-1 (00:22:19)
It's it's no secret. So I mean, look, we're kind of an open book about this stuff because I'd like to see everyone move, at least does what we do. I'd like to see everyone move to a better process, right? I mean, I I think, you know, some I think we we talked about a little bit before, but to kind of reintroduce, like most of the innovation here is talked about how do you take advantage ⁓ of the inefficiencies of the market, right? That's where most of the money is made. We believe that longer term we have to make that uphill battle, you know, swim upstream, however you want to say it.

Of saying, look, we just need to make this better, right? We can take advantage of these inefficiencies now for our benefit now. But how does that leave a legacy for this business to continue well beyond my years and then my team's years and everyone else, right? I mean, we're not building a business for the next five years. We're building a business that we hope will continue to evolve over the course of time. In which case you need to invest in infrastructure and processes, and you have to improve and you have to be willing to improve. And sometimes that's gonna eat at your margins. In fact, almost always it will. If I take myself to zero, as long as my team makes money.

If we can get to a place where we are producing that much better of a product and trying to help bridge this gap that much more, you know, I'm willing to do it because I know longer term it will benefit. And I think that's part of the reason why we've had some success is because, you know, I'm constantly trying to reinvest in what we're doing to make it better. So the answer is ⁓ we only need delivery instructions. ⁓ And we get that all organized early and then we built a proprietary CRM that kind of takes that information and helps us manage the reports. You know, just as another side and kind of a

A nod to Raymond James. I mean, Raymond James, relative to the other firms that we compete with, probably doesn't have the same business card. I mean, it just is the case. You know, we are a firm based out of St. Pete. We're a $35 ⁓ billion firm. It's no joke. Fantastic management, fantastic place, but you know, it's just not well known in these circles. But they do put like $750 million to a billion dollars into technology every year. So we've been able to keep the team very small and just build an extensive tech stack. And that's really how we want to do it. It gives us the ability to kind of

manage the customer service and the client side of it because if we keep it small, everyone knows what's going on. Everyone on my team knows what everyone else is working on. If someone calls, we know exactly why they're calling. So that's a really important part. I mean, you get to a place where you've got a lot of people, some calls and you're like, I don't know what you're talking about. That's not a project I'm working on. That's just not something that we think is makes sense. I mean, think about it. If you're an LP, you're randomly calling because the GP told you to call this person. Now you're on your own trying to navigate and that person doesn't even know who you are or why you're calling, it can be a pretty frustrating thing.

speaker-1 (00:24:44)
So we've built heavy on the tech stack, which I think is a very, very important part of it. And then we put it in there and then that spits out reports and then, you know, Raymond James can deliver same day. It's amazing.

speaker-0 (00:24:54)
That's huge. From what we've touched on, I have a thousand additional questions. One that I'm I'm like that doesn't make sense to me. And when we did deliveries previously, we would have to mark the asset as well for either economics or for audits or whatever. But ⁓ the marking the prior day and delivering the next day, why does the mark happen ⁓ today four o'clock as opposed to when I make the delivery tomorrow and the closing price

or the VWAP over the course of the day that the asset actually gets delivered to the downstream client.

speaker-1 (00:25:29)
So it's a good point. And I can't really speak to that because that's mostly a legal thing, meaning that's how legal docs are drafted. You know, we have seen a shift of that mark going like five days prior, day of, five days post. So that kind of takes into consideration some of that market risk. But we also can't like even if I send out a thousand DTCs in a day, which we do all the time, I can't guarantee that each one will be seen at the same time. ⁓ Right. Like Charles Schwab is a good example. Charles Schwab posts overnight. So even if I deliver today, you're not gonna see it in your account till tomorrow.

Yeah. Right. So then all of a sudden I've got all these different things. And that's that's part of it. But you're asking a good question, which is, you know, you're just talking about next day. Most people aren't receiving their stock for ten days. It's insane. And it's just assumed that that's okay. I mean, the biggest uphill battle we've had, you know, I've had a number of them in my

career, because we've kind of always been low man on the totem pole, right? I mean we've been kind of the little guy fighting back. Cause I, you I did, I was in Jeffries for a bit and then I moved to Deutsche Bank and now I'm at Alex Brown. So, you we've had to recreate this business. I think in recreating that business, you've gotten rid of a lot of the relative inefficiencies that we saw on previous platforms. And so it did give us an advantage from that standpoint. You know, people just assume it's just gonna be a bad experience. And so if you're like, hey, we can make it better, but then we charge fees, people are like, well, this guy's gonna do it for free and no one complains. And so it's really hard

to help people create a better environment and a better ecosystem when there's just complacency because the process has been bad for so long.

speaker-0 (00:26:52)
We would joke sometimes, ⁓ people ⁓ ripping on their clearing firms and nobody's ever happy with the certain service providers. And we'd be like, Hey, we suck less. ⁓ So it's exactly it. And in a lot of the businesses, it's gotten to a point where that's enough to win the business. And then I'm curious, like from a winning the business perspective, how long does that take for somebody to say, Okay, I want to execute with you guys? Like

Your clients and and I've had folks where you you deal with them for five years before you can get a trade done. The B to B sales cycle can be longer. What is the onboarding sales cycle? Is it like some people get it and are on ⁓ next delivery in like two weeks? And some people it just takes time. Like what does that look like to to show the value?

speaker-1 (00:27:38)
Funny. I just spoke to someone ⁓ last week that fantastic person has since retired, but we were just catching up. And I remember specifically, I mean, it took him eight years before he ever gave us a trade. And he just was like, I don't trust you. And it wasn't specific to me, it was specific to Wall Street. And I think that's kind of universal. I mean, you know, look, without pointing things out, there's been a few incidents where people in the venture community should have every reason to not trust Wall Street. And so that's a very frustrating thing for us. So I think the sales cycle is very long. I mean, some of the biggest trades I've done were in like

the same day. And then, you know, someone just came in and was like, I need help. Can you do And you're like, well, all right, cool. Let's do it. But, you know, most of the clients have stuck with us through the years. I mean, this goes back, my first client who's since grown into a fantastic client, but I started with them in 2003. And so we don't try to be a mile wide and an inch deep. We try to kind of be five feet wide ⁓ and a mile deep. And so that's evolved quite a bit over time. I mean you asked what do we do and it it's a difficult thing to answer, right? Because it's specific to augment, right?

Private markets. ⁓ It's a huge thing. What are we doing in private markets? How are we thinking about that? ⁓ that has now become part of our core. Wealth advisory, family office services, that's become part of our core. And it's mostly just because, you know, on that particular side, you know, people get paid a disproportionate amount of their total wealth in some type of capital markets transaction. So you have this massive piece of equity that represents a a disproportionate amount of your wealth. But then what we saw over the course of the last 15 years was a lot of these. ⁓

People moving out to RIAs and they say, hey, look, you know, we're independent, we don't sell product, and they're focused on the innovation economy. They're focused on these people that have ⁓ huge amount of wealth in in various areas. And that will continue. I mean, we've got five just in tech alone, we've got five trillion dollars invested in unicorns. I mean, it's an insane amount of money. You take 30% of that, that's individual wealth. You know, what happened was we started doing a lot of trading for a lot of RIAs because they'd say, like, look, we don't, we don't have the ability to manage this type of transaction on Charles Schwab or Fidelity.

So will you manage this transaction and then we'll just take the money and we'll manage it. And so part of the reason why we started that wealth advisory and family office services was not to compete with those people because they're great clients, but there's just so many people that can't get to that level where they get specific family offices that are maybe worth 25 to 50 million and it just doesn't make sense yet. But they need a lot of help. So we try to do the structuring a lot earlier. And then as they grow their wealth through various transactions on the distribution side, it's kind of married under one umbrella.

speaker-1 (00:29:57)
Right. So you can think about I don't have to think separately about, hey, how do I manage this individual position and then how do I think about how do this work in my trust and estate? It's kind of married together. And so that's all on the same team. So that's that's an interesting part of it. But you know, it's just changed so dramatically over the course of the years that it's trying to get a sense of where and how we are and then staying in front of it. Right. We don't try to define what people want or need. We just try to get as many tools as we possibly can and get it into a place where we can pull them out as people need it. And

speaker-0 (00:30:25)
Curious in terms of what people need, how often do people come to you and just say, This is what I need versus this is my situation. I need help. And ⁓ meeting me and some of my buddies joke about one of the guys said, We're all ears. Tell us what you want, tell us what you need. We're here to help you. ⁓ And the guy on the other side of the table said, Well, we want this, this, this, and this. And what he was saying he wanted versus what he actually wanted was a little bit different and he didn't quite understand it.

Yeah. And and the guy on my team goes, that's not what you want. Here's what you want. And and when he first goes to that, I started laughing. Like, W you just said tell me what you want. But he was actually right in the sense of I understand that's what you're after, but there's more behind it. Are those kind of the conversations that you have with people where like, hey, this is what I want? You're like, Well, do you want these other services to accomplish that goal? How does that consultative approach work versus just like clear

Client vendor and how do you look at that? ⁓

speaker-1 (00:31:25)
It's a good point. Yeah. The answer is most often, I mean, people come to and they say, hey, look, I have this position and I want to distribute it. You know, capital markets ⁓ has changed dramatically. ⁓ And trading has changed dramatically. And so, you know, a lot of things that people say they don't want, they don't really realize how that comes into a process. Everyone on my team is a licensed trader. We all have our 57s, ⁓ and people are like, it's a gimmick or whatever. But it's not really. I mean, you were in electronic trading. The disposition methodology of a VC has not changed dramatically in the last 25 years. It's really one of four things.

It's a distribution of kind, some type of block transaction, a dribble or some sort of sell sell down or some type of hedging transaction. Market has changed dramatically. I mean, we went from NISE NASDAQ to ARCA to now, what is it, like 50 plus exchanges, 130 ATSs? But then the minimum tick size is about the same. And then you take into kind of consideration Citadel and Two Sigma and all these other firms that are buying all the retail volume, payment for order flow, that was a big thing, and now no one ever thinks about it. But that all that goes to consolidated tape.

So when you're doing your logic behind your algorithms, it's run off the consolidated tape. And so then all of a sudden, now you don't have accessible volume, right? Yes. Yes. And it becomes a huge issue. And so trading is a big deal. Like you have to understand how to trade. I mean, we still hear people say, like, yeah, just work 10 to 15% of the volume. We don't want to put pressure on the stock. That's insane. Like ⁓ we're like three to five percent at best. And then we use all the other tools to come. So we could end up at 15 to 20% of the volume, but it's not just, you know, set it and forget it in an algorithm.

It's a big I mean, right? Like you you know, it's it becomes training in general has just become totally different.

speaker-0 (00:32:58)
Completely agree. Yeah. I think the point you made about that's the volume going to the consolidated tape, but twenty, thirty percent of that is inaccessible. And especially as retail volumes have picked up. And to your point, that's never making it to an ATS, that's never making it to an exchange. It's happening with a market maker. And and now I guess payment for order flow

Can get ripped on. I also think there's a tremendous amount of value. And when you're servicing a retail customer, the retail customer fat fingers something and they need you to bust a trade. Schwab picks up the phone and calls Citadel and says, Hey, we need you to bust this trade. It's okay, done. If that happened at Naisey, now you're at like their policies, procedures, file clearly erroneous. Can't break that. Yeah. It's something that I think again, there's additional costs associated. There's so much nuance. ⁓

And like headlines and press releases will talk about the high level, but then when you really get into the weeds, there's reasons things kind of work. But I am super curious and I love the quote that you guys have around like most financial innovation is focused on exploiting the market efficiencies to increase alpha and not fixing them. And it you touched on this. And what along the way would you say, man, this was a gap or this was a hole that's been plugged or going forward?

This is a gap, this is a hole, this needs to be solved for, simple stuff, low hanging fruit that can be solved for. So

speaker-1 (00:34:15)
I'm glad you picked up on that. It is kind of our driving thesis, both within the team and then also just more generally, right? So we have like an internal and an external. The same theory applies, but it just applies in different ways. Right. So when we think about our team, part of it is being, you know, having everyone be a license trader. Part of it is ⁓ being that much more efficient. You know, part of it is like, hey, look, we may risk making less money because we're getting our deliveries out in a day or two days, but it's the right thing to do. And over time, people will see the value of that and be willing to pay for it.

And it may not be now, but it's at some point someone's gonna say, Why is it taking seven days or two weeks for me to get my stock? I still don't know. I mean, look at SpaceX or something like this. I mean, people are gonna want their stock right away. You know, part of that was that's you know, sticking with Raymond James. I mean, if we get stock in from the agent today, I can deliver it today. That's huge. You know, we can make journals and deliver it today. Now that may not seem like a big deal to people, but anyone else that we compete with, that's an overnight process at least.

There's a lot of things, you know, I run risk for my team for the most part. And so, you know, having a team that's exceptionally supportive and allows me to kind of move quickly gives us an edge too. So I mean, part of that is just how do we fix the business? Like, how do we fix what we do and how do we innovate? Because again, the money's not in the innovation. The money is keeping it status quo. Yeah. Right. And status quo is working just fine. And if no one's complaining and I'm making money, why am I gonna upset the apple cart? That just doesn't sit well with me. And it doesn't sit well with my team.

And so that's part of what I mean is that we constantly pushed processes in and look, it's like every one of my team was a licensed trader. We talked about it all the time and no one cared. They're like, dude, this is a 10X, 15X. I don't want to deal with the account paperwork. Like, you can make me an extra five or ten cents on trading. Fine. And what was really the inflection point for our team was the Uber IPO because it was such a wealth event that all of a sudden GPs that normally would never even get involved in these conversations were like, wait a second, I'm gonna get a lot of stock here.

Like, how am I gonna manage this? And and part of the reason why we punched well above our weight for Uber relative to our team, I mean we we traded a good amount of the pre IPO holders, whether by way of distribution or just outright trading it. It was a major event for us. People are like, Where did Raymond James come? Why are they here? And it was because we were able to talk to the market. It was because we were able to say, Hey, look, this is how you have to think about trading. Because you know, they're getting advice from people that aren't necessarily traders or they're operating in retail and they're just spitting the same thing, or they're dealing with an associate that doesn't really know how to trade. And that person's just saying, like, I don't know, we'll work ten percent of the volume.

speaker-1 (00:36:35)
Or like we'll cap it because you know we don't want to have the impact on the market, but it's a fluid market. I I looked at something yesterday, I was just pulling up here that Brian Wardle, who's our head trader, just sent me that Citadel was saying that right now, single day options or zero data options represent 48% ⁓ of the total option volume. That's insane. That is insane. And so if you kind of think about that, and like that's what we're dealing with. So when you introduce not only disproportionate amount of supply into the market,

But then you have especially some of the names on the venture side, you know, these are kind of the the meme names a lot of ways and they're the who retail darlings and all that stuff. I mean, it's a big problem. I mean, there was a period of time, probably three years ago, four years ago, where like you'd see Snowflake up or down 10% any given day, and you're like, what is going on? And then all of a sudden, you know, you look under the hood and you're like, Jesus, dude, there's like a ton of options. It's Tuesday and there's four, five, ten thousand contracts written for Friday. Three dollars outside of the market. And so all of a sudden now we have to deal with that.

All of that comes into that. So that's part of what I mean from innovation as it stands here. Like I invest a ton of money into resources for the team. I make sure everyone's got the best tech. I make sure everyone's got the best resources because it's valuable and it pays over time. It may not pay immediately, but it pays over time. Then it gets to the external side. And that's the real battle. And that's really where we struggled. And part of it is just how capital markets has developed. So there's just

straight capital markets. I'm talking about public companies. I mean, the pushback on the traditional IPO and the lockup has been dramatic. Yeah. Right. Why do we even have it? Like why do we have a hundred and eighty day lockup? Especially on VC back companies. And look, if you get a banker after a couple of cosmos or whatever they like and you ask them, they're gonna be like, I don't know. I mean, it's just what we've always done. ⁓ And it used to be because you wanted the company that went public to be reporting for two quarters. And then you have the ability to capture the follow on by not unlocking them. So it was a kind of a double dip.

Look at the cap tables on these companies right now. You're not going to get a Fidelity or a Wellington or a COTU to agree with a later stage company, to agree with a gross stage comp ⁓ VC, to agree with an early stage VC on the pricing dynamics of a secondary. It's just never gonna happen. So assuming the company doesn't need to raise money, which most of these companies don't need to do, there's no reason for a follow-bond. But then you get into something like the SpaceX one. And that's just a banker telling ⁓ a company, hey, look, this is how we limit market risk.

speaker-1 (00:38:51)
You know, we let it come out in tranches. But look, you've been a trader, right? To me, that makes the company basically uninvestable for a period of time. If you're gonna have a rolling lockup every two weeks, how do I know when to buy this thing?

speaker-0 (00:39:03)
Yeah. No, and what you touch on, and I I'd love to go a bit deeper ⁓ because the question we get a lot is, hey, what happens upon an IPO? Not all IPOs are created equally. ⁓ So you have kind of three models with the direct listing. And even that you have like the Google approach with the Dutch auction versus the Spotify or Airbnb, I think. Then you kind of have the other end of the spectrum with the traditional 180, 180 day lockup period or to

quarters reporting. So I think Rubrik was slightly earlier because of the two quarters. So it can vary. And then you also have this like hybrid model where I think Palantir was quite interesting with the 20% ⁓ direct and then 80% locked up. And it feels like firms maybe I think some of the trends that Elon has pushed in the private markets, other firms are starting to try to follow that same playbook. So I wouldn't be surprised if now this weird lock up schedule almost like if that starts to become a thing.

What are the three main approaches and kind of why, why not? Like what do you think about each of those? ⁓

speaker-1 (00:40:09)
So I'll take it from a different ⁓ perspective a little bit, right? You had the traditional IPO. And then rates went to zero. So then all of a sudden SPACs came out of nowhere. SPACs have been around Early Bird Capital was doing this stuff for a long time. So I mean specs have been around forever. And there's a reason why they stayed in the darkness. But there's a couple of things. Like, you know, Eric Reese started what's called the long term stock exchange, right? The idea was that you'd accrue voting rights over a period of time. The longer you held it, the longer you'd have a vote. It kind of was meant to avoid things like what happened with Twitter, where

You know, Elon came out of nowhere and just bought the company. But again, that is a to protect founder-led companies, so from activists. But what if the founder's not doing a great job? Right. So it doesn't really solve the problem. It solves a problem, but it doesn't solve the problem. Then you move to the direct listing. Direct listing one takes takes into consideration the ability to come out right away, right? Day two you can distribute. Day one you can distribute. So that's one thing. But there are restrictions by way of an S1, meaning how does that work? Who's willing to take the risk to do that?

How do they want to take the risk? Then you start to get into what we talk about a lot, which is like what's legally possible and then what's logistically plausible, right? Like it's legally possible to do this stuff. So, you know, SPACs, they were papering these things over and over because when rates were zero, as a financial advisor, I'm like, look, I get paid to put this person in it because it's a deal, right? So I'm getting some sort of credit to put this person into it. It's held in a trust. So the money's fine. And then I get a free option. I get a free option on like maybe they get a good company and I say, All right, great, I'll take that. It was a cash management. That's why we raise so much money.

But it was a nightmare because ⁓ when it came to papering these things, I remember and I'll leave names out of it, but like in the very early innings of this, I was called randomly by someone who we had was not a client, and they said, Hey, can you get on the phone with this lawyer? I just feel like we're getting screwed. And the way in which they were describing how fun could affect an in-kind was doing it at the transfer agent, which is nuts. ⁓ And I was like, I'm not representing you, but you clearly called for my opinion. And I got into like a pretty heated argument with the guy because I was like, This is like

And he's like, it's fine, it's fine. You know, you can do it. It's no big deal. But like once you do a distribution of the transfer agent, you lose all transparency. One. And two is then you put all of your LPs, then have to follow up with the transfer agent independently, which is notoriously difficult to do. They take 10 days to deliver statements, but you're marking it as of that previous day close. It's not advice. So Sam on my team and I spent a ton of time working with legal counsels to try to figure out a different way to try to do this.

speaker-1 (00:42:28)
But the reason why people like SPACs were because you could define the value of the company. You could say, look, we're coming out at five billion dollars. And they kind of reverse engineer the shares outstanding and all that stuff. So that was another way to do it. That was a way to say, Hey, look, that's tackling another issue, which is that people didn't like how IPOs are pricing. You know, you'd say you're worth here, you know, this amount and the banker says, Hey, look, this is where the market is. Well, SPAC says, Look, we're just gonna go out at this level.

That was another thing. So you're addressing founder-led things with the long-term stock exchange, but then you get the spacks. Now you kind of control your cap table and now you can control your valuation, but there's just a lot of issues. It's perpetually a restricted security. And that becomes a huge issue for a lot of people. So that was solving another thing. And then the direct listing solves what you call that kind of massive spike that has been an issue for people, meaning, you know, banks are self-serving, they're only giving it to the same clients. And direct listings probably are the closer to where we need to be, but then

What happens? You don't know who owns your company. At the end of the day, you're scrambling in the transfer agent and with all the primes saying, like, who is settling with my security rate? I don't know who it is. So you had all these different issues with the IPO process that were solved by independent transactions. So it was a very weird way. And each one had its own pros and cons. And that's part of the reason why it never developed. So now you're starting to see it retreat back to the IPO. So frankly, I think we didn't have enough pain in that kind of thing to kind of force bankers to not retreat back into.

The traditional like, hey, look, the IPO is the best way to go. Now we're back making fees. Because from a DL perspective, the most of the advisors, they're making as much, if not more, of a regular way IPO. So they're like, yeah, we love drug licensey is a great way to go. But from a fee perspective, they're still making the same amount. And then they're also aggregating all the order books.

speaker-0 (00:44:04)
Yeah. It's ⁓ tricky and many times I'd look at something and a huge believer, the Dunning Kruger effect, and we'll probably mention that episode after episode. But hey, I know something, and as soon as you know something, you feel like you know it really well. And then over time, and there have been many times where I've looked at something and been like, wait, why why does that work that way? It doesn't make any sense. And then as you start to dig in layer after layer, like, okay, I I kind of get it. And I'm curious from your perspective, the

Different approaches. Are there pieces that you've changed your opinion on where you said, hey, this doesn't make any sense and we would need to change it versus now ⁓ after going through it where you would maybe reverse course?

speaker-1 (00:44:45)
I don't think I've changed my mind on any of those particular transactions. I do like direct listings probably the most.

speaker-0 (00:44:52)
What pricing mechanism, how would you determine price on a direct list?

speaker-1 (00:44:56)
It's a good point. You mean like relative to like the Dutch auction and stuff like that versus Yeah. It'd be difficult. I mean, I thought, you know, you kinda have to I I think it's still owned by that was like a ⁓ a trademarked process. With I forget the bank that did it. ⁓ San Francisco based.

speaker-0 (00:45:11)
I think it was a ⁓ Hamburg and quisted with Google with the Dutch auction, I think. ⁓

speaker-1 (00:45:15)
Yeah, ⁓ yeah. ⁓ I I think something like that works. I think you need to consider, and I don't think there's an answer yet, personally. But you need to consider what was the pushback. Pushback is lockups, pushback is voting rights, pushback is pricing, pushback is you know, cap table. Who owns it? The problem with spacks and the problem with DLs ⁓ is it doesn't take into consideration how Wall Street works now, right? And so my biggest issue with where we are in the world right now is

You've got these really cool innovations happening in the private markets, in banking and all this stuff, but it's independent. It's operating in its own independent vertical. And there's no impetus ⁓ for Wall Street to change because they're making tons of money. You've seen the quarters recently. I mean, they're printing money. So why would I do anything differently? I think my pushback to that is because at some point you aren't building for now. You have to start building for the future, right? Like just in private markets in general. Well, we talked about that in a second, but you know, I wouldn't change much of what it is. I do think that you need to democratize it.

I do think you need to kind of include a lot more people. The idea that, you know, only certain firms get access to a company that may never, you know, SpaceX is different, but may never see that price again. I don't think that's that cool. So I think you need to kind of increase the exposure. That also increases the support, right? Like where direct listings and spacks went wrong is they they had, well, SPACs weren't effectively part of the issue with them is that no one really audited the financials.

Right. No one did. And so like you look at the company, but you know, you basically have a company that's out there that until they become a reporting company, doesn't really have like any financials that anyone can really rely on. And so that becomes an issue. Not to mention they didn't pay anyone. They maybe paid one or two people. But when it takes into consideration how Wall Street works, like what analyst is gonna pick up that company if they didn't get a banking fee for it? Their compensation structure is how do I

Increase fees for the bank and increase exposure. And how do I get people into the names that I cover to create trading revenue to justify my existence? And so that's why you have a lot of these companies failing, you're struggling. Like unless it's like a Roblox or something that someone knows, it's no one's gonna cover it. And so now you have a company that's public, but now it's probably trading a massive discount because there's other places to put money where people know. And so it doesn't take into consideration how Wall Street works and the infrastructure and the support structure that goes along with that advisory work. And so that's a huge problem.

speaker-1 (00:47:27)
So that's one is you have to figure out how you pay people. Two is you have to figure out how do you get more people involved, which I think democratization helps, including the Robin Hoods of the world, Charles Schwabs of the world, these people that have massive retail networks that would be good use of capital for them, but they don't have the infrastructure on top to add advisory work and all the other things. So I don't think I've changed my mind as much as I just continue to push back. I mean it's not really my job, right? Like I'm a broker at heart, but you know, when I get into it, it's like I I push pretty hard with our bankers and everyone else. Like we need to rethink this.

And not rethink it right now. We need to rethink it going forward. And I really think that the person that wins in this race, at least from now, is the person that realizes that infrastructure and aggregation is much better than transaction volume. Right. Like you might miss out on a few dollars here and there right now. But if you build the infrastructure for the future, meaning you start to sew together some of these innovations that are happening, whether you build it organically or you partner, that's the person that's gonna win.

Because right now there are so many different pockets of innovation in financial markets that are solving like Clear Street is a private company, but they do, you know, all their prime services, but they don't have anything else. So they have a great product, but they don't have anything else. You know, Airborne Bank was just started by Palmer Lucky and Jolon, so that's C Brand was like in February. And now it's talking about an eight billion dollar valuation, but they're basically redoing how lending works on a tech stack to kind of fill in the void from Silicon Valley Bank and First Republic.

It's a really interesting thing, but there's not a lot outside of

speaker-0 (00:48:52)
It's interesting a piece you touch on though with Erebor. $8 billion valuation. I mean, nobody outside of a limited group has access to that. Microsoft went public under a billion. Amazon, like $450 million. So now back in the day, anybody in their retail account gets access. The index funds, the mutual funds, the retirements, the pensions, everybody is in there and is able to enjoy that thousandfold increase in value. And now we've created a world

And I think it's a combination of like regulation, technology, general business environment, rates, the money in private markets, the returns, whatever the case may be, these companies are staying private longer. That's not changing. The solutions provided to them and the access that needs to be provided to more than just a select few. This real problem, I mean, that's why augment exists. But like as you look at the market and as you look at these private companies staying private longer.

What needs to happen there? And it's interesting also you touch on like the different approaches to go and sell out of a stock and the the four approaches basically or the three methods of a company going public. Like what needs to happen in order to solve this market? And like what's the right wrapper as well as we look at how do you provide that access? We've seen venture funds. Now we're seeing innovation listed closed-end funds that have their own issue.

Interval tender offer funds, SPVs, like I don't know if the market has found the ideal wrapper and all these are maybe different tools or different use cases. But like what do you think is the right approach or what makes sense to solve for ⁓ the challenges and looking at it holistically? Because if you solve for one, it has pros and cons for another. Like how could this work?

speaker-1 (00:50:35)
Yeah, you you identify something that's interesting and I don't have an answer, but I I can give you kind of my opinion. Everything that you touched on, like my biggest issue with private markets right now is that it's massively fragmented, right? But again, just to take that and then we'll expand it further. What is my reasoning for trying to make that a more efficient market? My margins go down, you know, like I mean again, if I could do a ten million dollar deal once a year, four percent or whatever the crazy amount is, like, great. I made four hundred grand. I'm doing just fine. Like I have no reason to make it better. But that works for right now.

Like all these other platforms that are solving you know, they kind of get these SP they're moving into these SPV wrappers and they're kind of moving that all that stuff makes sense ⁓ for now. We have a massive amount of liquidity needs right now, like DPI still at a low. How are we gonna do this? And you've got I Databricks, what the seed was in two thousand twelve. I mean, you're now on your third or fourth extension if you're in that seed round, right? So you've got finite vehicles that are supporting infinite companies, right? I mean, in theory, they could be infinite. And so that's an issue. Then

SPVs are kind of frowned upon. People don't love them because they don't know who owns their company, who owns their stock. I mean, you know, all Sam Altman, OpenAI, Anthropic, I mean, they went out, called people by name and was like, stop doing this. Companies don't like it. But then now all of a sudden they're raising five billion dollar rounds. There's a few people that can write that check, right? And so without SPVs, you've outgrown your pool of capital, which means you're basically just going to sovereigns. And so that doesn't work either. ⁓

speaker-0 (00:52:14)
Top tier venture funds that were setting up SPVs to enable their investors to coinvest, or even Anthropics, I think it was their B or their C with Menlo, the method of accessing that round was in a Menlo SPV with economics. So it's like SPVs are frowned upon depending on who's doing. And then Elon, he basically created this incredible situation where he allowed his friends to make money by giving him money.

He gave them access to and you don't have to say it, I'll say it. He like he created this system and that other people are leveraging where they're allowing people to give them money and by limiting who's able to do that, it just creates this easy way for these people, some registered, some doing it compliantly, some not, to just make a fortune just by having access. And it's like, is that the model? Is that where we're headed?

speaker-1 (00:53:06)
But it's right now, ⁓ you just hit the nail on the head though. They're making a fortune. So why would they change that? Right. It takes a very specific person to say, look, we need to take our margins lower. We need to increase breadth and depth. We need to kind of create more transparency. Like the whole idea of 401ks now being able to invest in this stuff, all that stuff is insane.

to me because it that should be the last thing that happens. But you've got all these big people that are saying like we don't have any liquidity. We have no more pools and we have nowhere to go with this paper. We have to find other places to buy it.

So they're gonna dump it into these accounts. There's no transparency. There's no real understanding of these companies. I mean, think about information rights right now. Like you go out and there's all this traffic in these forty or fifty names. Some have information rights, some don't. Some people are just saying, like, look, that person, I mean, this is how we got into FTX. No one did any diligence really on it. They're like, Well, if that person invested in it, they're good. So I'm gonna invest in it. That's fine for today, I guess.

But that's not an efficient market. And so, you know, kind of what I've is maybe call it a side project for me, but is kind of working on the evolution of capital markets and where we are, how we got here, right? You can go back to sixteen two and it'll kind of take you all the way up about how capital markets started to work, why we did it. And I think we're at a kind of an inflection point here, I think, which is we have too many issues. We've pushed into the regulatory framework. We've pushed into all the we've

push into capital. By the way, it's not stopping, right? I mean, companies are raising money nonstop. You're kind of building this backlog of issues after issues after issues. Like, yeah, that's in a 10 year fund, but six years down the road from now, we're gonna have to figure this out. And I don't think, you know, of all the private market platforms, all that stuff, they're talking about today's business. You know, I've spoken to leaders, most of them, and I never got the sense that they're building a business for the long term. And how are they thinking about it? Like how does this work on a go forward basis? What we need to do is create, I think, a kind of a ladder of how a company grows.

speaker-1 (00:54:52)
Right. And you create a regulatory framework at the beginning. As the company grows, that regulatory framework maybe comes bigger, but there has to be some transparency. There has to be some information. It's for the benefit of everyone. We're now too far down the road where we can now just say, hey, look, let's reverse course. We were wrong. We're gonna go back to A round, B round, and go public. I mean, you basically have generational wealth being created by a few people. So that K-shape economy is just getting worse. And everyone says they care about everyone, but like, well, if we do that, you're still gonna make money if you

make it better, but let's actually make it better. Meaning let's get this capital markets infrastructure in a way that reflects today's market. And and so the reason why I don't really have an answer to that is because there are limitations about how that can get done. But there is someone I spoke to recently that just went out and started by way of a a university kind of backing to focus on private markets. And I had wanted to ⁓ set up an advisory council because you know what happens is like, you know, you're in electronic trading, you go to like an electronic trading conference. You all talk about electronic trading, how cool it is. And like

The conversation doesn't really fit with like how does this fit with everything else? Like we've created this really cool product and you know, we love what we're doing, but like how does that fit to the ecosystem? And so I think what you need to do is you need to find people like who are the stakeholders here, right? It's the regulatory body, it's the major banks, it's the private market people, it's VCs. Like how do they see their landscape changing? It's the capital aggregators. You know, you have to get all of them into one room and then gotta find like a central theme, like you mentioned before, like a master. Like, what is the central theme here? Could it be liquidity? That's one.

But I think that might be too simple. But you got to get them together and say, hey, look, this is our problem. You have to take a look at what all the innovation is happening and why people are doing it. What are they trying to solve for? And then let's bring that into the equation. Let's figure out all the issues that people are trying to solve. What are the pain points? Because again, the innovation again is to take advantage of those fragmentations in the market, which happen kind of on the fringes. And then how do we take all of that and then create a thoughtful way in which companies can continue to raise, companies can continue to innovate.

VCs can continue in some sort of form, whether it's the same form, different form, how they're going to continue to allocate capital over a period of time. How and when can we open that up? And then that needs to come with thoughtful transparency. You can't just all of a sudden dump this into someone's four one K that's, you know, and say, Hey, look, by the way, you're gonna be restricted on this for six years and they don't know what it is. You know, at those points, those people end up holding the bag. And so I think the idea of opening that up without giving them protections is insane.

speaker-0 (00:57:11)
I agree. And I think you also touching on the point of how a few times people are making too much money to want to change it. And those are the people whose knowledge base you need in order to change it. I mean, it's a founding story of Augment with Noel, the rubric engineer looking for liquidity, figuring out how the market worked or didn't work, and then coming across and meeting Adam. And Adam was both crazy enough and smart enough and like just has the personality that says,

I know it and I know I could make a fortune doing these trades the way it works today and monetizing the inefficiency, but that's not the path forward. Like let's do this, let's build this. So I'm hopeful, and part of the reason it came here is like we want to solve some of these challenges forward looking, but it's really complex and it's biting off a lot. And you need a lot of different stakeholders where, like, if you look at the public markets, part of the reason the public markets are just so beautiful. And yes, there's issues and inefficiencies and problems, but like it has

all of these different participants. And because all of these different participants have different opinions, different time horizons, different approaches, that ultimately creates more liquidity and creates this like massively efficient market. But private markets very, very different. I'm curious from your perspective because you know private markets, you know public markets. Yeah. The nuance in private markets, when looking at like public markets and how they operate, how they trade, how it works today versus ⁓ what

a system could look like in private markets. Do you have any thoughts or opinions on like, hey, this works in public markets, but it is not the solution or the model in private markets or anything there between like the difference of the two or any pieces you would take that need to be applied here? Like how do you think about the connection there?

speaker-1 (00:58:53)
I think it's a little bit the opposite. Look, I mean, ⁓ the whole pitch ⁓ for private markets that I've seen is like, you know, we had eight thousand public companies in two thousand. Now we've got four thousand public companies. We've got all these companies that are private. All of that's right. But the data to me leads me to a different conclusion, which is that we got a problem, right? We have all this capital is going into a place that's exceptionally inefficient. And so the public markets to its credit is a reasonably efficient product, right? Price discovery, reasonably efficient.

Pricing, you know, transparency with numbers, reasonably efficient, right? Quarterly reporting, I don't know. Maybe you go to half year. But like again, you could start to think about that a little bit, right? Like, hey, you don't have to do, you know, some of the pushback is like, I mean, let's be honest, most of the pushback is they don't want to go public because they don't want to take a mark, right? ⁓ They're carrying themselves at eight billion and they don't want to go public at four billion. And so that's one thing. But then you get into things like caplight or

Early asset, they're actually putting numbers on this stuff. So there's going to be a valuation issue at some point, right? If this increases, ⁓ these C's are not going to be able to carry their same marks. I mean, it goes from a level three asset to a level two asset pretty quickly. And so now all of a sudden, like, okay, we're going to have problem here. So if we're going to get consistent trading or someone's going to go out there and say, hey, look, I can put a price on this, but this is based on current market, this is the price. That's kind of the price. So you can't carry your marks the same way. So again, that innovation that's happening on the fringes is going to have a massive impact.

On a go forward basis. Like how is PWC gonna think about this stuff? How are they gonna be able to sign off on audits saying it's worth X when it's worth Y? The biggest issue right now is one, transparency. Two is just like getting it done. I mean, just even like an STN and you know, you have to go, it's just a very inefficient process. I do think tokenization at some point probably will help with that. How does that fit in? I do think the public markets, getting public ⁓ is ⁓ kind of the question mark right now. But public markets in general are reasonably efficient. And I would even take this a step further to say like,

Why this should be on everyone's mind is not just because ⁓ it's inefficient and not just because people are making a ton of money on their marks and they don't have to worry about liquidity right now because it's five, 10 years down the road and we'll deal with it when it happens. I hear that a lot. We are opening up the United States, is the United States for a lot of reasons. But one of our crown jewels is our capital markets and our capital formation. I mean, we are the global center of capital formation and capital markets. When we start to push too much of our economy.

speaker-1 (01:01:12)
Into exceptionally inefficient, unregulated, and not very well thought out infrastructure, we run a geopolitical risk that all of a sudden someone comes in and solves it before we do. And then all of a sudden, all our companies are listing in Singapore, or they're listing in Australia, or they're listing in Hong Kong, right? Because they figured it out before we did. So it's a huge geopolitical issue. We have to unlock. I mean, five trillion dollars, and it's probably well in excess of that, is locked up in this stuff. You know, that's a lot of money. And so we need to solve this now.

So that we get, you know, again, maybe you grow, maybe you grow into it. So maybe an incubated company has the ability to kind of crowdfund alongside of the underwriting of a term sheet of a a VC. So the VC does it and they kind of do it, but then you can also have some ability to move into that there. And then that person or that company, you know, at its stand saying, This is where we are, this is when they raise money. And then they provide updates yearly.

And then as you move up into the growth stage, well, now you're gonna kind of move into growth investors. It's a different type of capital, it's a different type of participant. It's a little bit more mature, the business is growing. So now maybe you move to every six months. And then you kind of as you grow and you start to raise these insane rounds. Well, then now you're basically a public company. And that's people say. Stripe is basically a public company, but it's not because it's you can't get into it or out of it. And then how do you kind of figure out how do you centralize?

Like private markets are good right now, but you know, for the ATS that you're building, the A ATS that other one has, there's no connectivity, right? So you could have an order sitting here and an order sitting here that should match, that will never match because just this person doesn't have the call and this person doesn't have a call. That's not an efficient market. So how do we start to string together all this? So you can still have the relationship, you can still have the tech, but how do we start to marry these ATSs so that we start to get more of a combined market? You know, you have to bring in Nysi you have to bring in NASDAQ. Like I don't know where MPM is on this stuff, but

You need the ability to uplist. What point do we say, hey, look, we're going to move this into an up list? So this is moving off of this ATS or this is moving off of this platform and we're going to uplist it. And as part of the uplisting, now you have a regulatory requirement, but then it's expensive. So how do we reduce the costs? That's where the SEC comes in. How do you reduce the costs and how do you create transparency? So I think all these interested parties need to come in. We have to think about a common theme. I don't think it's as simple as liquidity, but I do think it's a good place to start. But I do think that there needs to be a real focus on this now by

speaker-1 (01:03:29)
those interested parties and say, Hey, look, my margins are going to go down, but the depth and breadth of my business should go and continue to grow. Also, this is where we need to be for this to continue to be an efficient capital markets. Otherwise we're going to lose our edge.

speaker-0 (01:03:42)
Love that. And I think the framing of how important it is from a geopolitical perspective, I don't think gets talked about or mentioned enough. The US, like capital markets, part of the reason so robust is the trust in the laws and the regulation. And I know people may complain about FNR, the SEC, like that's what makes the US so investable. But some of the laws that private markets are still operating under, I mean, are a hundred years old.

speaker-1 (01:04:08)
Everyone's operating in the gray. That's exactly where it is. Everything is subject to interpretation. There's no clear rules. I mean, this even goes to SPACs. There's no coordination of innovation with regulatory bodies, which means that they know everyone's operating the gray. The people that know what they're doing know they're operating the gray and they're making a ton of money doing it. But that's a today thing. Yeah. Who's taking the leadership and who's taking the lead to build where we need to be five years from now? Like we've got a rule on our team, which is every dollar we make today has to reconcile with a dollar we make a year from now.

Meaning I don't want people chasing tickets and doing that stuff not gonna have an impact on the business a year from now. It's a waste of time. Cause then you get yourself chasing tickets and you know, you're not really getting anywhere. You kinda just feel like you're skating on ice. So every single decision we make, every mandate we take, everything that we do has to take into consideration what is the value to the business today and what is the value to the business a year from now. I think someone needs to take that same mindset and says, What is the value of

Not just private markets, not just public markets. Let's think about all the pushback that we've had from all the various interested parties that have come up with their own innovations that maybe have worked, maybe haven't worked, and really think about why did that exist? Why, why are we doing a direct listing? Why did we do a spec? Is there value to this? Is there value to this? How do we take into consideration incorporating like the Robin Hoods of the world? We have to then kind of move into how do we get a company to thoughtfully move through that capital formation process, not kind of managed by a few.

Open it, but create transparency, create some risk profiles, create some risk management, protect people, but it's better for the companies, it's better for the markets, ⁓ and it's better for the people. Everyone bitches about the wealth creation. It's true, right? Like I live in a fairly affluent area. There's construction everywhere. You go in the middle of country where there's no access to this stuff. It's that K-shaped economy. And we have an obligation as a country for the benefit of everyone to kind of make sure that that K somewhat collapses.

And that means that we have to give people the ability, like this AI revolution is in a massive wealth creator across the board. Yeah. But as it stands right now, only a few people are benefiting. And it's because we're not creating opportunities for people to participate in the wealth creation, they get it at the point of realization. Look at all the people that bought SpaceX, you know, one point seven five trillion dollars where they put money in. Well, now they're trading underwater. Yeah. There's not one point in SpaceX's entire lifeline.

speaker-1 (01:06:25)
where they traded below the previous round. And now it gets to the public and it's trading below the previous round.

speaker-0 (01:06:31)
That's super interesting. And who gets access at that point?

speaker-1 (01:06:35)
It's like have at it. Now I've made my money. I got my boat. Like, go for it. And now you got someone that's like, man, I just want to buy SpaceX because look, longer term, SpaceX is gonna do fantastic, right? We know that. But if you think about it in that context, like it finally gets to the public, it's finally a big event and now it broke the issue price. It's the only time SpaceX has ever traded down in its entire life.

speaker-0 (01:06:55)
Yeah, it it feels wrong and I love how you the the picture and the geopolitical and the bigger picture of like what we're actually solving for and how it impacts people. And I think ⁓ sometimes ⁓ Wall Street capital markets in general gets caught up in what they do or how it works, but kind of forgets like, Hey, what are we actually trying to do? And like reading the series seventy nine materials.

Some of the different series tests are not the most enjoyable. You don't need melatonin or ZQL or NyQuil. You could just read some of that stuff. But ⁓ the the series 79, like just the first chapter, I almost feel like should be required reading. And I understand maybe it's different depending on who you get it from. For anybody in capital markets, like remember why we are here. Ultimately connecting people who need access to capital.

To go and grow a business and hire people and create jobs and innovate and make the world more efficient and a better place with people who have excess capital that you don't want that capital kind of sitting there stagnant. They want to deploy it, they want to invest it, they want to grow it or they want to see a change. And we're this function that sits in the middle to be able to allow them to make those investments, allow them to monitor those investments, allow them to monetize those investments, allow for liquidity as people, life changes, time horizons change.

opinions change, whatever the case may be, that is what a a market is. And so much of what private markets has focused on. You've been in it for 25 years. I'm an a leaven of like digging in the private markets. So often it's why would I want to change that? I'm making a fortune with the way it is.

speaker-1 (01:08:29)
Think about like even just the Trump accounts, right? I think it was a Peter Thiel email that was leaked out at some point. But basically it was the idea, and I think it like in twenty twenty, was saying, you know, this rise of socialism, whatever. And I and I certainly don't want to get too far into to politics at all, but the point being is that, you know, we force people to go to college. They take on all this debt. And now they can't get a job, they can't pay it down. Right. So like that is a problem that we've seen it in the political system. I get it. And, you know, why wouldn't you want to get more stuff from the government if you

Can't pay for it yourself. Not to mention, talk to a college grad. Yeah, they can't get a job. You know, four years ago when they started a college career, they weren't focused on AI. Now everyone's like, hey, look, you want to get job, you gotta know AI. And they're like, Well, I just studied art history for the last four years because I thought it was fine. And so that's an issue. And then you move to trump accounts, which is a fantastic idea, right? It's the whole idea, which is to bring kids into understanding and participating in the wealth of the market. That makes a ton of sense. But

Again, there's a big gap between those two things that's not being solved for. So, like, yes, Trump accounts are a fantastic thing, but we need to kind of create an open avenue for America to experience that wealth creation in all aspects. It's incumbent upon the leaders of the major banks, it's incumbent upon the regulatory body, it's incumbent upon the the administration and arguably a lot of VCs that made a ton of money that, like, hey, look, you need to figure out a way to get this capital formation process to be that much better.

It needs to be transparent, it needs to be open. You also have to have protections for the company, you have to protections for IP, all that stuff needs to be hashed out. But someone needs to take a leadership position here and say, look, if we want to stem the idea of ⁓ socialism, the growth of socialism, and we want to do that, we want to get, which was the the purpose of Trump accounts, get people to experience the wealth creation of our capital markets, which is again the crown jewel, we need to then take that seriously.

And that means you have to think about the entire capital formation process. There's just too much wealth being created now on the private side with access to very few people. ⁓ And that shouldn't be part of the case. Now, again, that's kind of an altruistic view of it, but at the same time, there's real thought behind it because again, it puts America back into the lead position and it puts America capital formation capital markets back to where it needs to be. We're losing our edge because we do not have a way to harness this kind of wealth creation here.

speaker-1 (01:10:49)
And if you think about America, mean, look, you go to Italy, you've got cultures for centuries. You go to Spain, cultures for century. We're two hundred and fifty years old, and part of it's built on the constitution and part of it's built on the declaration and founding fathers. You can argue all that. But what carried us ⁓ to like a very important top was like we can all find and do our dream. We can all start from scratch and get there. That's becoming a harder and harder thing because of the fact that most of the wealth that's being created is happening in a certain sector and is making it very difficult for people to live out those dreams in other ways.

There's no reason why a certain few should just be benefiting from this.

speaker-0 (01:11:20)
Completely agree. So you talk about this wealth creation and you've seen some cycles, you've seen some real wealth creation, you've interacted with some of the people who are benefiting from this K-shaped economy from the seat that you're in, like what would you say separates the different people and how they handle it? What lessons or advice would you give for people who may be SpaceX employees?

who are about to see this wealth creation or people who have a significant amount of paper wealth even in the private markets, like from what you've seen ups and downs, what would you say, like, man, people should be thinking about this or talking about this, but maybe maybe they're not enough.

speaker-1 (01:11:57)
So, you know, if you go back to like why Sequoia started their Evergreen Fund, it's because they effectively felt as if they left a ton of money on the table by exiting companies early, right? And they have a whole chart and they exited, you know, certain thing at two billion, now it's eight billion or eighty billion, whatever it might be. So there is reason to believe that is ⁓ if you get shares in SpaceX or you get an ink kind in a particular company, it's ⁓ reasonable to suspect that that company will continue to do well and you'll benefit from that. But the markets are risky.

The markets are volatile and that can be very stressful. So ⁓ generally what we do, I mean, we do with a lot of wealthy people. So that's a little bit different. But for those people that are new into the business or SpaceX employees that just finally got liquidity or, you know, newer GPs that are just starting to get distributions in kind, where we really focus are like, what are your needs? Like, what is it? Do you have kids? Do you have family? Take care of your needs. Meaning, don't worry about losing the upside on 15 or 20% of your position to

Get yourself set and put yourself in a good spot so that you can let the balance ride if you believe in the company, but you're taking away some of that stress. And so we really try to I've seen too many people that have held on to stocks because they thought it was going to go higher and they needed to buy a house, they needed to do something else. And then all of a sudden stock went lower and they don't want to sell, but they're forced to sell. They either get themselves into a position where they have to borrow money and it becomes landing and becomes expensive. I really would like to see people take care of themselves, make sure that gets all nailed down, and then you could take the risk. ⁓

speaker-0 (01:13:25)
that. I guess continuing in the the theme of some advice, first guest I ever had on a podcast pre-Augma was my dad. And it was a really cool experience. But over the time I think I was very lucky the lessons learned and the the advice that he would give and sometimes directly, sometimes through a story that you would have to read through to see the the advice he was trying to give. Yeah. I'm I'm curious from your side, are there any stories, any fables, any lessons, any things where like from your parents or in general

that you've picked up and then also I know you have kids and I like the the background pictures. I think they're a little older than they are in the pictures there. But any things where you'd say, I would hope that my kids kind of learn this or take this or Yeah, anything's you've picked up or anything you've passed along to your kids that maybe we'd share with the world. ⁓

speaker-1 (01:14:10)
It's interesting. So there was it goes back about probably fifteen, twenty years. I was at a bar, I don't know what it was, but this girl came up to me and she's like, what are you doing? I never talk about what I do. Well most times people don't even understand it, but I just don't even like to explain it, deal with it. I like make it up by saying, like I own hot dog carts, ROV circles, stuff like that. But I did choose to answer this girl and I said, I'm in I'm in Wall Street and she just said, you're one of those guys ⁓ and just turned around and walked away. That bummed me out. Like that actually got me in a bit pretty bad like I wasn't like depressed, but I was like

Dude, that sucks. Like she doesn't know what I do. And she doesn't know how we try to help people and how we're trying to do all this stuff. And so, you know, my team who are fantastic across the board is, you know, they're a bunch of ⁓ different personalities and different people. And what I really focus on them is I want them to be proud of what we do. I want them to be able to say, I work on Wall Street and be proud of it. But part of that means one, that's building confidence in themselves right now and confidence in themselves personally and professionally. But two is that means we to do work.

you know, when we were talking about innovation before, we gotta do work innovation on the inside and external. And that's part of the reason why we push this is because we need you know, big thing of what we do is we run down the middle of the road, we do things the right way, and we just try to be better than everyone else. There's a quote on our website that talks about race horses. And the idea is that race, you know, race horses have those eye covers because you don't need to look left. Don't look right. Don't compare yourself. Don't wait for feedback. And this is what I tell my kids all the time. Like, I'm proud of you, but are you proud of yourself? And the point is is that I don't want them to live

in a world where they're reliant upon me to be proud of them. Like my team is like, I did a good job. And I'm like, Yeah, but you're supposed to. Like that's why you're here. And if you remove yourself from the need to get feedback and you have confidence in what you're doing, you're going to outperform whatever it is that you could do by a material multiple. Meaning if you're looking left to right as a racehorse and you're just trying to stay right in front of them, it takes away your drive to say, I don't know where they are. So I'm just going to run as fast as I can. At that point, you're just trying to stay in front of them. That's really what I try to

Help my kids and my team is like we are very supportive and we try to make sure that everyone feels, you know, when they do a good job, like, that's awesome. And but don't have that be a driving force for you. Have that be like a bonus. If someone says something, great. If someone doesn't say something, it doesn't matter. Have the confidence to know that you did something well and move on. And that's your job. If you limit yourself to the feedback of others, you will always limit your abilities to succeed.

speaker-0 (01:16:27)
Love that. It's interesting. My my dad would it was tough and sometimes I didn't understand it. And it's amazing growing up and then like by the the Mark Twain or a lot of quotes get attributed to Mark Twain of a but the what it's amazing what my dad learned in like five years, but where I would get frustrated. It was a decent student and I'd come home with like straight A's ⁓ and other kids in class or they got straight A's or like were on a roll, they got a dinner or by like something or treat or new video game. I don't know, something and my dad, I'd be like, Here, Dad

Like, okay, good. I expect that. ⁓ and are you happy with it? Like they yeah. And it very much instilled

speaker-1 (01:17:03)
Really important skill, man. Too many people are married to the seed back of others. And I think it just limits it. And so I mean, it does also have to come with, you know, confidence. So we gotta build confidence in my team. We gotta build confidence in my kids, you know, from a professional's perspective. You have to give a mission and a vision. It may change over time, but you have to have people rally around something that they're fighting for.

speaker-0 (01:17:25)
I know you've touched on it a couple of times, but maybe right there, like the mission, the vision and looking forward. Right now, Alex Brown and for Andrew Ryan, person, like what is the mission? What is the vision? What is the next five, ten years? What does that legacy look like?

speaker-1 (01:17:39)
So ⁓ I would be disappointed in my career ⁓ if we didn't leave ⁓ a legacy impact that we changed Wall Street in some way. There's just too many people that do too many things that are nefarious around the fringe and we just keep fighting back and we do it internally at Raymond James. We'll d kind of do it on the street too. Like go down in the middle of the road, do things the right way and just be good at what you do. ⁓ And that changes the behavior over time of certain people. And we've seen it happen at our firm and hopefully that will continue.

And you know, longer term, I'd love to I mean, I've always said this, I've always wanted to start my own investment bank and to focus on the kind of entrepreneurial economy or the innovation economy. I just think there's too many needs that they need and no one is taking the time to address it. I mean, that's kind of getting back to my theme before, which is someone needs to take a leadership position and I don't know if it's me or someone else to say, Hey, look, we need to start stringing some of the stuff together. We need to have a conversation, we need to get people in the same room and we've got to figure out how this moves forward.

So, you know, I think that's probably it, but I would be disappointed. You know, I'm not here to write tickets. You know, I've I've done well and I feel very fortunate in that way. And but I've told my family and I've told my wife, like, look, if I have to take myself to zero to get this to work, I'm gonna do it. And we need to be able to have you gotta be proud to work on Wall Street. You gotta be proud of what you do. And then you have to deliver both profit and margins, but impact. Right. And I think those two often operate independently and they shouldn't.

speaker-0 (01:19:03)
Love that. Resonates because I I dropped out of finance sophomore year in college because I thought Wall Street, if I would have met you at that bar and I may not have wanted to like I would have said, ⁓ wall one of those guys. Like I would I had the same image in my head, but then you work it and live it, it's quite different and you can't change it unless you know it. But then the other one is the dollars and and I really struggled with like am I moving dollars on a screen in the electronic trading world or am I causing like

driving any impact and you tell yourself stories about how it's helpful or what impact and this guy, Daniel Epstein, who talking about impact and like how do you balance impact versus making money? And he's like, you're thinking about it wrong. It's like okay, okay. And he's like, it's not a straight line with a heart and like impact on one side and dollars on the other and you move on the spectrum. It's like ⁓ no money to money, ⁓ no impact to impact, and like a quadrant and you can focus on the top right where you can

Both make money and drive a real impact. Yeah. Sometimes all you need is just a different mental model, different perspective as like a game changer. I'm curious with fixing it, rapid fire, closeout, magic wand. I know execution is always difficult and nuanced, whatever, but ⁓ one piece of the pre IPO market, the pre IPO process, like venture back companies, one piece of that market that you could say, all right, this is fixed, it's done. What does that look like?

speaker-1 (01:20:26)
I would think for right now it would be transfer agents. Again, I think and to their credit, Fidelity, who's taken on the SpaceX mandate, has done a fantastic job. I mean, you've got someone that came out of tech that's running that that understands the impact and is really just trying to build a fantastic product. So if we could fix trans reagents, that'd be good. It's an industry that again is expected to be done poorly. And so there's no reason for them to change and they make a ton of money. So seeing some innovation there and and look, I've been exceptionally f impressed with Fidelity.

to date. I mean we still are pre lock up on SpaceX, so we'll see how goes. But ⁓ that would be one thing is the trans region as it stands right now. I think well this is a magic wand rapid fire, so I I won't go into what I think, but ⁓ i i it is that is a static answer to a a dynamic question. Yeah.

speaker-0 (01:21:10)
⁓ Even though it's rapid fire, I'm I'm I'm curious. What what do you think?

speaker-1 (01:21:13)
Yeah. Well, it's just like, you know, that that fixes today, but I think it everything needs to be revisited, right? How do we do everything? I mean, you know, we still operate with medallion signature guarantees. There's not a lot of electric you know, a lot of people don't they want wet signatures. You know, why? Like a digital signature is more secure than a wet signature. And you ask people why they do it and they're Well, I know, it's just what we've always done. And I see that in every process, both internally and externally. And there's just not a lot of thought because no one's been forced to do it any better.

And so I think a lot of the process can be done with some thought. It's just getting back to when we first spoke about like, you know, finding what is the common threat, what gets people motivated. Complacency is, you know, the death or status quo is the death of innovation. I mean, it just is. ⁓ And are we in this business to grow? You know, we're like Raymond Dean is public company. We gotta grow. We gotta, you know, so and they do a fantastic job. But I mean, again, there's just complacency everywhere. There's just not a lot of thought. Everything operates in and of itself.

And there's not a lot of people that are put into positions in business, especially at large organizations, that string together processes that says, Hey, look, how do we make this more efficient? So I mean, the static answer is transfer agents, if I was to pick one thing, like how do we make that better? And I think they're trying. But more generally, it's just every single process needs to be rethought. Everyone should ask themselves, why are we doing this consistently? ⁓

speaker-0 (01:22:32)
⁓ The concept of why do we do this because that's the way it works or that's the way we've done it? Or why do like growing up the concept of do this and why because I said so doesn't quite sit well with me. And I guess where you touched on previously in the conversation, 2035 SEC tokenization. And I've been close to that and actually wrote a five thousand word manifesto and no, you don't need a blockchain for access and liquidity in private markets. Part two is actually gonna be but you may want one.

And I think it's interesting some of these challenges and now with some of the regulatory clarity, but like zooming out a little bit, five ten years are now that the and I know it's tough to predict tomorrow, let alone ten years from now, but that mandates in place. What does venture services look like? Is it private markets and public markets? Is it just capital markets? What do things look like ten years from

speaker-1 (01:23:25)
I mean, honestly, that's what I'm trying to solve for right now. I don't know. I mean, tokenization could be good for us. It could be bad for us in terms of the business as it is today. I think by twenty thirty-five we'll figure it out, hopefully. Otherwise, ⁓ we haven't done our job. But again, we started in venture services, ⁓ like our business ⁓ was started because it was inefficient. Now we're kind of operating a little bit different, meaning we're trying to clean it up. But in some ways we're almost like trying to put ourselves out of business, right? And so

You know, I think that's part of the evolution and something I'm willing to continue to pursue if we see value on the other side, which there is, right? So efficiency will always drive innovation generally. And so I don't know what it looks like, but it's gonna look a lot different. And I think that's exciting. It could scare some. To me, it's exciting, but it's exciting because we want to continue to stay on the leading edge. We want to be, you know.

As forward as we can in terms of where things are going, how things are going. So I don't know where it's gonna be. I'm trying to figure it out right now. I think it'll look a lot different, but again, you know, our business was to take, was to basically build on the idea that there was an inefficient process and we bridged the gap. We should expect that that gap's gonna close at some point, in which case our relevance in its current form will not be applicable 10 years from now or 15 years from now, or maybe 20 or 30, or I don't know. And so

Our job is to kind of continue to reshape. When we started, we were just doing distributions and trading. Now we're doing all different things. You've got five or six different businesses. And that will continue to grow. And so, you know, how do we think about that on a go forward basis? I don't know. That's

speaker-0 (01:24:57)
Fair and I I respect that. I think really, really appreciate the time. Tons from here that I I'd love to dig in, follow up on. Love the perspective. I think the history, background, interest, how you can apply that super valuable. Yeah. And then hopefully one day people are reading in a history book about how Andrew Ryan made private markets, capital markets more efficient, change the way Wall Street works so that ⁓ people are proud to be on Wall Street. I think that'd be that'd be awesome.

speaker-1 (01:25:23)
I hope so. I don't need my name in there. I I have no no pride in authorship, but I would like to see that happen. It needs to happen. It has to happen. So, you know, that's kind of where I'm focused right now. And I'd love to keep talking about it. I mean, the more people that talk about it, the more it gets out there. And hopefully someone take you know, this is not my job. I'm a broker. That's what I do. Like that's my job. Yeah. So, you know, this is kind of like for the protection of our business, but also for the benefit of everyone. I mean, we need to focus on this or it's gonna be an issue.

speaker-0 (01:25:49)
Love it. Love it. So I will take you up on that. We will definitely have you back. So Andrew, thank you so much. I really appreciate the time. Yeah, of course.

speaker-1 (01:25:56)
I loved it. Thank you very much. Awesome.

speaker-0 (01:25:59)
Thank you for listening. ⁓ If you enjoyed this conversation, please feel free to share. If you have any feedback or guess you'd like to hear from, please feel free to reach out. And please note that this conversation is for informational purposes only. None of the information provided represents investment advice, an offer, or the solicitation of an offer to buy or sell any security. All views are subject to change. Investing in private securities is speculative, illiquid, and involves substantial risk, including the potential loss of principal.

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