May 1, 2025 • 51 mins
Joel Palathinkal converses with Devon Melotra from Valhalla Ventures, emphasizing the significance of identifying enduring moats in venture deals. Devon recounts his career journey and Valhalla Ventures' mission, detailing their investment strategy and first fund. The discussion touches on how his New York upbringing influenced his approach to business and investing. Devon shares valuable advice for launching a venture fund and crafting effective differentiation strategies. They explore emerging trends in space investments, autonomous vehicles, biotech, and the rise of Canva-like platforms. Insights into gaming sector investments and the Los Angeles tech scene round out the conversation, concluding with key takeaways.
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Episode Transcript
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(00:00):
Again, it's a power law industry.
(00:02):
There's very few deals every year that areactually returning your fund many times over.
Right?
And so we think that and and I guess the adviceI would pass on is, you know, find what those
enduring motes exist to you and and where youcan actually find edge in getting into those
deals and or seeing those deals early.
Right?
(00:23):
Welcome to The Investor, a podcast where I,Joel Palafinkel, your host, dives deep into the
minds of the world's most influentialinstitutional investors.
In each episode, we sit down with an investorto hear about their journeys and how global
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
(00:48):
All right.
So excited about my new guest and new friendhere, Devon Melotra.
He's a general partner at Valhalla Ventures.
So, Devon, you know, excited to have you here,and, thanks for making time for me.
Really appreciate it.
Yeah.
Thanks, Joel.
I'm super excited to be here.
Yeah.
Well, you know, why don't we kick off with justa little more about, you know, your firm, your
(01:08):
background, and, you know, how you got here.
You know, just for for background, you know,Valhalla Ventures backs visionary founders
building enduring moats.
They mainly invest in seed to series a and alsoin between.
I've also done the same.
And, you know, series a, seed, pre seed, it'sit's different terminology for different people
(01:28):
and different people have different constraintsfor what they describe it.
So excited to kind of see how you look at thosedeals and kind of how you classify them based
out of Los Angeles.
So excited to learn more.
So why don't you kind of talk about your earlycareer, maybe your education and then how you
(01:48):
got to where you are now?
Yeah.
Awesome.
Thanks, Joel.
Yeah, I grew up in New York City.
I'm a city kid.
I went to the University of Pennsylvania whereI was lucky enough to be surrounded by people
much smarter than I am.
I was a mediocre student, skipping class andreading books in my free time, and always had a
(02:10):
knack for for building companies and andwanting to to be involved with with, again,
people much smarter than I, building at the theforefront of of of industries, and that's
really, in my opinion, what venture capital is.
So went to Penn in Philly and soon thereafterstarted a company and, you know, got got
(02:31):
experience in the operating side.
After Penn and after being an operator, joinedMadison Square Garden Company, MSG being the
publicly traded entity that owns the Knicks,the Rangers, the Tau Group, etcetera.
I primarily operated in new ventures under MSG,where I got exposure to a whole consortium of
things.
(02:51):
But really, you know, MSG's guiding ethos isaround entertainment.
Right?
And that's entertainment in all forms.
You know, owning the Knicks and the Rangers isone thing.
But looking forward, you know, what is the nextiteration of entertainment?
You obviously have what we covered a lot at MSGVentures was on the gaming, real money gaming,
consumer social side of things.
(03:13):
But also now, have the Sphere in Las Vegas,which is one of the most amazing pieces of
property and one of the most amazing, I think,technological innovations that we've seen, at
least in terms of stadium hardware over thelast few decades.
And so I got to have exposure to all thesethings and, you know, was lucky enough to be a
(03:39):
part of a few amazing projects at MSG and andwork with some amazing folks and really get
exposure to within a big company kind of thatfast moving energy of, you know, new
enterprises and new ventures.
You know, I thought about what was next for mycareer and, you know, got the idea kind of
popped to my head by a friend around what a newventure fund would look like.
(04:01):
And I kind of hemmed and hawed a little bit tobe quite honest with you.
You know, I think that there's a lot of venturefunds that do the same thing kind of time and
time again.
And so, you know, ideated on it for about ayear, maybe two.
But really, our guiding thesis at Valhalla wasdeveloped over the course of 2019, '20 '20, and
(04:21):
2021.
We saw this massive boom in venture driven by azero interest rate phenomenon world, where we
saw money flowing into venture at anunprecedented rate, but really seeing it flow
into spaces that we thought largely wereincremental changes and not massive step
(04:44):
changes.
And so as we looked at the venture ecosystem,the last twenty, twenty five years of venture
returns have largely been driven by softwarereturns.
Right?
And we think that's for two different reasons.
One, software has allowed for this massive newdistribution with high margins.
But more importantly, almost, software hashistorically been very, very hard to create.
(05:08):
And so the best and brightest minds, you know,starting in Sand Hill know, starting on Sand
Hill Road in Silicon Valley in the 1960s,physics physicists, chemists, biologists moved
from those hard science spaces into beingcomputer scientists, and as a result, built the
businesses that we know of today as thegreatest businesses of the world.
Right?
Apple, NVIDIA, Amazon, etcetera, etcetera.
(05:29):
But the fact of the matter is five, ten yearsago, that actually started shifting back to the
point where we saw software as not only easy tocreate with rise of low codeno code businesses,
but now actually as somewhat of a commodity.
And I say this with a touch of vanity as anontechnical person myself, but we largely
(05:50):
think that there are very few moats that existin the software space right now, in pure b to b
enterprise software right now, as a result ofsoftware becoming quite easy to make.
And Sure.
I think it's a surprise to many in venture thatthis is actually reflect reflected pretty
deeply in public data.
(06:11):
So there's about 80 companies created over thelast twenty years that are b to b enterprise
businesses that are over a billion dollars inmarket cap.
75% of those businesses and those areenterprise software businesses.
75% of those businesses have negative operatingmargins, and only two of those businesses have
(06:31):
operating margins above 10%.
And so the our consensus is that actually we'vebeen fed this I wouldn't call it a lie, but
we've been fed this tale that software is theonly place to actually create real alpha within
Venture.
The fact of the matter is is all of the datashows that that's not true.
And so and if you look at the flip side,there's about 40 companies be 40 companies that
(06:55):
are publicly traded that are what we considerphysical technology companies created over the
last twenty years.
Mhmm.
75% of them have positive operating margins,and about a third of them have operating
margins above 10%.
Yeah.
And so we took this data, and we played aroundover 2020 and 2021 with a series of SPVs to
build out this thesis.
But really, to your introduction, and thank youfor that, where are the biggest enduring moats
(07:21):
over the next ten to twenty years withinventure capital?
And we think they exist in two unique realms.
One is in the world of physical technology andphysical engineering and that talent pool.
And so that's for us bioenergy, materials,manufacturing, space, air defense.
And then the second is in the world of IP.
So that's for us therapeutics and also gaming,giving my background in MSG.
(07:44):
And so, you know, kind of bringing together,you know, all my experience, you know, at MSG,
you know, kinda having exposure to the gamingside, but also the sphere side, and then doing
a deep dive on really where we believe thatthose moats exist over the next ten to twenty
years, that's where we settled.
So we raised fund one at the end of twentytwenty one.
It's a $66,000,000 fund.
(08:06):
We write $2,000,000 checks really only at seedplus and off cycle, and I'm happy to dive into
more of what that actually looks like.
And and we're about halfway through that fundright now.
And I think, you know, we've seen now kind ofthe writing on the wall.
I think a lot Yeah.
Are now flowing into our spaces, which has madethe fund perform quite well, which is exciting.
(08:27):
And we've seen, you know, some nice marks as aresult of a lot of money flowing into hardware
and into deep tech.
And also, have all these tailwinds at play too.
Right?
We have, things like the Build Back Better Act,like the Infrastructure Act, all the movement
around onshoring and nearshoring that hasplayed a really heavy hand in terms of where
venture we think is going.
(08:49):
But that's largely what drives us.
Right?
Are we rebuilding you know, both the physicalworld and the world of IP Mhmm.
Over the next ten to twenty years.
And and as a result, how do we create alphathere?
Yeah.
No.
That's helpful.
Well, I got a question for you that's a littleunrelated to the investment practice.
But how was it like, you know, growing up inNew York?
(09:11):
You know, I'm raising kids right now in NewYork City.
So what's your opinion, you know, despite whateverybody else says in terms of just being
raised or raising families in in the city?
And now you live in LA, so I'm not sure ifthere's any strong opinions around that.
Yeah.
Listen, mean, I get the question a lot, right?
(09:33):
Because it's everyone lives in New York, butdoes anyone is anyone really from New York?
And I think I'm one of the few people from NewYork.
I think that I mean, growing up in New York, Ididn't know any different, right?
Was an eight, nine, 10 year old, So I didn'treally know that there was a whole other world
that exists out there.
I think growing up in New York has massive prosand big cons, right?
(09:55):
I think that for me, was the perfect place togrow up just because son of an immigrant father
and an nth generation American mother.
And so it was a perfect kind of melting pot forus.
I got exposure to the amazing hustle culturethat is New York and also all of the different
(10:20):
beautiful, you know, cultural inputs that NewYork has.
Right?
The food, the shows, the art.
It's it's you know, it it really I the BobDylan quote.
Right?
The center of the capital of the universe.
Right?
And it really is the capital of the universe.
It is.
Yeah.
Even as, you know, as you said, having livedoutside New York now for a while, right, it
still it draws you back in.
(10:40):
You feel that that that pull like the like thesun that that New York has.
Right?
Yeah.
And even if you, you know, you go to London,you go to Tokyo, you go to Beijing, I don't
know that any place really can touch New Yorkthese days.
And so it really still is the capital of theuniverse.
I think that for us, California and Los Angeleshas played a really pivotal role in terms of
(11:08):
our development as a firm.
And I do believe that in terms of startupinnovation, California still is Mecca.
But listen, I think there was a time and I'msure your kids will go through this as well,
where they really embraced New York, theydetested it and needed to get out.
But I think it always draws you back in.
(11:30):
There's something there's something specialabout New York, and I think it's it's a really
amazing amalgamation of different cultures.
And and also, I think it's uniquely the onlywalkable city or one of very few walkable
cities in in The US.
You have that beauty of happenstance thathappens a lot in Europe, but you have the
(11:52):
American innovation on top of that, which Ithink is a very, very special mix.
Sure.
What are the cons?
I'm assuming space is one of
them.
Right?
Yeah.
I mean, I think space cost.
I I think we were lucky as as kids that ourparents forced us to to to, you know, try to
(12:15):
develop more real world attributes.
But I do think Yeah.
I often run into friends of New York include Imean, myself certainly included that, you know,
because ordering in is so easy.
So folks sometimes kids sometimes don't knowhow to cook or, you know, doing basic things
like fixing a car, you know, like Mhmm.
Like like changing car oil or or things likethat.
(12:35):
I think those skill sets for for kids in NewYork certainly fall through the cracks at some
level.
Sure.
And then I think one thing that I've lovedabout being in LA is part of the underbelly of
New York is that you think only New Yorkexists, right?
Because it is the capital of the universe, itfeels like only New York exists.
(12:58):
And so as a result, I think that it's good toget out there and realize that there's more out
there while also knowing that New York willalways be home.
But I think all the things they say about NewYork are true, right?
It's too small.
I mean, you don't have enough room.
It's, you don't have enough money, but, thoseare the sacrifices people make to live in New
(13:20):
York.
Yeah.
No.
Absolutely.
I mean, I think, you know, for me, you know,two kids, I mean, I think the pros are that,
you know, I I think these are the pros that Isee, right?
So I I live in Midtown.
So it's easy to, you know, drop your kids offif the school is nearby.
Obviously, there's some people who go toprivate school where like their school is
really far away or they gotta take a, you know,they go to, you know, a gifted school and they
(13:42):
got to take a school bus.
So I think logistically sometimes there'sbenefits.
A lot of events are in Midtown and then I feellike the cocktail events are like the
networking events.
The cool ones are like in the Lower East Side,which are both either walking distance or just
like a really quick Uber ride.
Sure.
But you're right.
You don't get the space.
(14:03):
Right?
So you don't get like the the picket fence inthe backyard that you would if you if you lived
in Jersey or like the suburbs.
So I think that's kind of the pros and consthat I see, but I totally agree with you.
I think the ecosystem here is very unique.
And then I think what's exciting is if you havea platform, the entire platform becomes the
(14:25):
culture and the ecosystem, right?
So our fund accelerator that we have, we havegraduates that have come from, there was one
guy from The Bronx that has launched the fundin Southeast Asia.
He lives in, he'd been living in Singapore forthe last ten years, but he flew up to New York
for some event and I met him.
So I think the cool thing about, like, LA, SanFrancisco, New York is people will ping you if
(14:46):
they're in town and maybe you never met them,at all in person.
Right?
So I mean, I just you know, I was when I was inSF last week, I mean, there's probably at least
close to 100 people that I just met for thefirst time over knowing them after knowing them
over Zoom for the last four years, you know, sojust kinda really finding that connection point
(15:06):
is agnostic of your region.
I think if you if you've done a good jobbuilding a good community, in my opinion, I
feel.
No, I completely agree.
And I think New York has proven to be a reallyspecial breeding ground for startups that has,
I mean, been built in the trenches for a longtime by folks that kind of were in the know,
(15:27):
but it's certainly a force to be reckoned withnow.
And my partner Rohan lives in New York, mybusiness partner.
I mean, he's a big believer in the New Yorkecosystem.
And then you have folks that have been buildingit for a long time.
I mean, some of the best funds in the worldhere at the USVs.
I mean, what Fred and Andy and Albert have doneto bring New York up to speed.
I mean, our friends at ENIAC Ventures haveinvested heavily in New York.
(15:53):
And I certainly, I think New York, especiallyfor some very specific sectors, a force to be
reckoned with in the start of the ecosystemthat folks did not expect, you know, even five
years ago.
Mhmm.
No.
I totally agree.
What advice would you give for people that arelooking to start their first fund and tell me
(16:18):
about the whole ideation process?
Like, did you decide to finally burn the boatand say, look, I'm gonna launch a fund and then
what's some advice that you give for peoplethat are just starting to think about that
process?
Yeah, I think that Two questions there, but Ithink that when we started the fund originally,
(16:42):
we started as kind of a deal by deal SPVaggregator.
And we were lucky enough to get into some greatdeals and to ride the coattails of those great
deals and to also raise our capital at a timein which capital was generally easier easier to
raise.
Yeah.
I think my moment was that the deal by deal SPVroute is great in some capacities, but I think
(17:14):
it falls short in terms of what I wanted toaccomplish, which was being at the forefront of
innovative companies at their earliest or, youknow, alongside their earliest journeys.
And venture capital at its core, even more sotoday than it was five years ago, is a power
law industry.
Right?
In which you need to have those few breakoutwinners for for for it to make make sense,
(17:41):
right?
And and, you know, I forget the exact data, butthere's, you know, there's basically five
companies a year that you need to be in themixer, right?
Within the early stages, right?
And and so we soon realized that, hey, youknow, we we're getting into great deals on the
SPV side, but it's actually not at our corewhat we wanna do and what we wanna be a part
of.
We wanna be a part of supporting founders atthe earliest stages of what they do, right?
(18:05):
And so and and to do so, we think you need tohave some sort of fund model that one, allows
for you to take that risk to get that upsidebecause you have a fund model that protects the
downside risk of your LPs.
Right?
If you're investing pre seed and seed andseries a companies with with deal by deal LP
capital, the downside risk is fairlysignificant.
(18:27):
Right?
Because you if they don't invest in every deal,they could have six, seven, eight deals that
end up, you know, going to zero when that onedeal that they didn't do is the the a thousand
xer.
Right?
Yeah.
And so for for us, we we thought that that waswas very important, and we were able to to
parlay our success in the SPV route to to beable to raise, you know, a a nice sized fund
(18:49):
one.
I would say, you know, listen, I I'm not in thebusiness of giving giving advice as a 30 year
old still in this industry.
But I I think that where we have beensuccessful, and and kudos to my partner Rowan,
as he's built a lot of this thesis out, is I Ithink the old adages of venture are still quite
(19:15):
true.
I think that concentration is key.
We are big believers in in in having a fairlyconcentrated fund.
So this fund will be about 20 to 20 to 22,maybe if maybe a little less than that core
investments.
Yeah.
And I think that that allows for us to haveenough ownership, work hand in hand with teams
(19:40):
in a way where we're we're boots on the groundwith them.
We take board observer roles and board boardseat roles.
And and but also, you know, allowing for us tohave enough breadth and a lot and enough
diversity.
So I think that that's one very core learningthat I would, you know, share on with with
other, you know, other investors.
Mhmm.
And then the second thing is, I think as our asour thesis has developed around, you know, the
(20:04):
world of physical technology is is listen, Ithink that largely sector specificity within
venture is a ploy to bring around LPs.
Right?
Yeah.
It is the the best funds to ever exist, first,been generalist funds.
Mhmm.
(20:25):
And two, have been funds that invest in whatwe're calling enduring moats.
But whatever you wanna call them.
Right?
You know, blue oceans, you know, monopolies inin some capacity.
Right?
The the the best funds to ever exist haven'tsaid, oh, we only invest in construction tech
or we only invest in fintech.
Because Yeah.
(20:45):
There's again, it's a power law industry.
There's very few deals every year that areactually returning your fund many times over.
Right?
And so we think that and and I guess the adviceI would pass on is, you know, find what those
enduring motes exist to you and and where youcan actually find edge in getting into those
deals and or seeing those deals early.
(21:06):
Right?
And so I think saying, hey, you know, I havebuilt my entire career in, you know, whatever
it is.
Right?
Gaming.
And so I'm only gonna go do gaming deals.
I think that has that has a ceiling.
Right?
So I would advise folks to to say, okay.
Within gaming, how do you take your knowledgebase and parlay that into, you know, x y z?
(21:32):
Right?
I mean,
Yeah.
You know, even Mitch Lasky, right, who is thegodfather of modern day gaming venture
investing, even Mitch who leads all or who hashistorically led all of Benchmark's gaming
deals, you know, he does a deal or two a year,right, in the gaming space because he
recognizes that there's, you know, there's ifthere are five companies a year that are
(21:57):
hitting that $10,000,000,000 market cap pointMhmm.
That, you know, the likelihood of them morethan one or two of them being gaming is quite
low.
Right?
Yeah.
And so, you know, he's thus expanded his hiscapability elsewhere as well.
So I would say, you know, concentration and andsticking to your guns is quite important.
And then for us, something that's been hugelyvaluable, I think, given the fund our size has
(22:20):
been our entry point and where we're investingat seed plus.
And so I think finding that edge too is isgonna be important.
Sure.
What are some ways that you can differentiateyourself?
I guess as, you know, advice to fund managers,you know, because there's so many funds focused
on gaming, so many funds focused on SaaS, AI,right?
Mean, one thing I've seen with AI is I've seensubsector granular specialization.
(22:45):
So I've seen somebody just launch a fundspecifically on AI copilots.
What are your thoughts on that?
Do you think that helps or are there otherthings that you can do in terms of
storytelling, in terms of brand building, interms of business development opportunities or
just business development activities?
(23:05):
Right?
Is it Yeah.
A volume game?
You know, I guess yeah.
Any any advice you have on those on thosepoints?
Yeah.
So I think to reiterate the kind of point Ijust said a little bit and and tweak it is I
think the best way to differentiate yourself isto get into good deals.
And and that sounds like almost pejorative, butit's true.
(23:28):
Right?
Like, I I think that saying, you know, hey.
I only focus on AI copilots or or I'm thebiggest, you know, podcaster in x y z space,
that can only take you so far.
And and and I think that in in this case,launching a new fund and being able to be a
(23:49):
little more patient is gonna be key.
I mean, you you look at Chris Saka's fund runone.
Right?
It was a $7,000,000 fund, and it had, you know,Twitter and Uber.
And, you know, as a result of that, he becameChris Saka.
Right?
He didn't become Chris Saka by saying, I'mgonna invest in software companies in Silicon
Valley and then branding himself like that.
(24:10):
Right?
Mhmm.
Yeah.
He's he's Chris Saka because he got he his hishis fund one was, you know, whatever it was a
thousand x.
I don't know.
And and and that's how he became Chris Saka.
Right?
And so I think that as we think about ourdifferentiating factor, you know, as I said,
we're gonna be a hardware first fund.
Right?
But that's largely because we think that thebest companies over the next ten to twenty
(24:33):
years are largely gonna be in hardware.
And we're gonna have gaming exposure because webelieve that IP creation over the next ten to
twenty years is going to be, you know, where alot of alpha is gonna be created within the
entertainment space Yeah.
And now within broader software.
And so I think that, you know, the answer tothat is is is get as much ownership as you can
(24:55):
in good companies.
And that sounds Mhmm.
Way more simple than it should.
You know, we're not hugely active on, you know,being a promotional firm.
Maybe we should be more active and obviously onthis podcast now.
But, you know, we we we have a very, you know,core group of LPs that we've worked with now
(25:16):
for quite a bit, you know, half a decade thattrust us and and kind of see in us that we're,
you know, sticking to our guns.
And then on the flip side, you know, we have avery small group of founders that we work with
hand in hand on a day to day basis.
And and I think that as a result of that, youknow, we've we've been able to to, you know,
show marks and and to get into good deals.
(25:37):
And and and that's all to say that we're still,you know, learning new things every day and,
you know, get punched in the face every everyday doing so.
But I think, you know, differentiation islargely, you know, a ploy to get LPs in early.
Mhmm.
And if you're optimizing for medium and longterm success, the the best success is always to
(26:00):
get high concentration in in in the best dealspossible.
Sure.
When you say high concentration, do you thinkit's what are your thoughts on a high
conviction concentrated portfolio versus a morediversified portfolio.
What what I think is obviously if you're highlyconcentrated, you're making like 12 bets,
(26:20):
right?
Those are highly super high conviction.
You know, you're you're better.
You're I'm assuming you're you're thinking eachof those deals.
You have so much conviction.
Hopefully, each of those deals you're youbelieve that they'll return the fund.
Right?
That's how much high conviction you have.
But any thoughts on that in terms of like bothboth strategies?
Yeah.
I mean, I'm I'm a huge believer in in in highconviction and and high concentration.
(26:45):
So the point of like, you know, a little bit ofdanger.
You don't wanna, you know, tip too far over,but I think that having a, you know, high
concentration and and high conviction fund isis where you see real, you know, real alpha
created.
And and I think actually the only way toactually Mhmm.
Have those massive venture style returns.
(27:07):
I mean, if you look at, like, a three x fundover ten years right now, that's a 12% IRR a
year, which compared to to the Nasdaq isterrible.
Sure.
And so, really, what you have to do is you haveand three x fund, if you told any early stage
manager that, they'd be like, awesome.
I'm great.
Yeah.
(27:27):
Because very few folks actually can hit that.
And so Mhmm.
You actually have to be shooting quite a bithigher than that.
And to do so, I think you have to havesignificant ownership in your in your winners
to be able to actually get there.
Right?
And so we're this fund, as I said, will be 20to 25 core investments.
I think actually so we'll go out and raise fundtwo at the end of twenty one excuse me.
(27:49):
At the end of twenty four, early '20 '5, andwe'll probably target less than 15 core
investments for fund two just because that'ssomething we've learned along this the course
of this fund.
So we'll we'll try to be even more targeted.
There's, you know, there's hearsay and rumorsout there that, you know, Founders Fund three,
their their third fund had, you know, a thirdof their fund in Palantir.
(28:10):
Right?
Yeah.
Wow.
And I think that, you know, Peter is probablythe the preeminent example of saying, hey.
We we we take, you know, big shots on ourwinners.
Right?
Sure.
And and, I mean, I think if you look at overthe the the the data stack of who are the best
funds that we think of when we think of, youknow, returns.
(28:34):
You know, Benchmark is a perfect example.
Right?
Benchmark raises, what, 300 to $400,000,000funds.
Mhmm.
And they only write series a 20% lead checks.
Right?
That's all they do.
And they don't hold for follow on reservecapital.
They only buy they buy 20% upfront so that bythe time the company exits, they'll have about
10% of the company.
And they do that, you know, for you know, sobecause say they raised $300,000,000 fund, you
(28:57):
know, that'll be $60,000,000 or so inmanagement fees.
So say they have about 200 ish to invest, youknow, that's about 20 investments for them.
Right?
So they're fairly concentrated.
And and I think that that's really, especiallyin today's day and age, we're seeing kind of
companies fall by the wayside every day and thewinners really take off.
(29:22):
I think that that's the only way to to to togenerate an amazing fund these days.
Yeah, no, I totally agree.
I noticed that you've invested in a handful ofspace companies as well.
So you've invested in large satellites, smallsatellites, and also lunar refueling.
And I've also invested in space tech as well.
So what are some of the things that you'relooking for in terms of standout satellite
(29:46):
companies?
Then I think I saw a few in space refuelingcompanies as well.
What were some kind of unique things that yousaw with those companies you invested in?
And where do you see the trends in space as awhole heading in general?
Like, I mean, the launch sector, I noticed youdidn't invest in launch.
I'm not sure if you feel that that's kind of acrowded or risky area.
(30:09):
But yeah, we'd love we'd love maybe some trendson space and then maybe I can I can go to your
other deals in your portfolio, maybe just talkabout those those too?
But I think the space was kind of interesting.
Yeah.
Absolutely.
So space is an area that we think I mean, he'sa controversial figure in many circles, but I
mean, Elon Musk has really, you know,commercialized an entire industry that Yeah.
(30:33):
A multi trillion dollar industry.
Right?
Mhmm.
And I think a lot of the revolutions and andthat we're seeing now that are are going to be
off the backs of of you know, SpaceX taking thelead.
Right?
In terms of how we think about space, we thinkabout things generally in conjunction with
(30:57):
SpaceX.
So where is SpaceX not building?
Where is there a white space to own?
And what has been made possible now as a resultof SpaceX.
Right?
I think k two is a perfect example.
We invested in the c plus of k two in June2023, and the company has absolutely gone
(31:19):
haywire since or they were starting to gohaywire, you know, before that.
It's founded by two brothers.
One, a former SpaceX engineer and one was aconsultant at BCG.
And they had a had a concept that the large bussatellites that are created by Raytheon and
(31:42):
Lockheed can be done much cheaper and much moreefficiently.
And they've proven that out in space.
And so we invested, as I said, in our c plus.
They raised a $50,000,000 series a led byAltimeter in December Yeah.
2023.
And they're currently in the process ofnegotiation negotiating some some massive
(32:04):
contracts.
And we we think that this is largely onlypossible in a post Starship, post Falcon nine
world.
Right?
And I think if you look at a lot of theprogression that we're going to see in space,
it is it follows the same, you know, the thethe same story.
Right?
Where we see things that are available and seethings that are possible now in a in a kind of
(32:29):
post commercial, post SpaceX world.
Right?
And so Yeah.
That is really a a kind of and where SpaceX isnot going after.
Right?
So that's a really big thesis by which we, youknow, we we invest.
It also comes down to talent.
Right?
I think, you know, if you look at, you know,the the the teams that are able to and part of
(32:50):
the reason we love being in SouthernCalifornia, the teams that are able to draw
from the SpaceX ecosystem and and, you know,what Southern California has and, you know,
this kind of El Segundo, you know, renaissancethat's going on right now that we've seen is is
folks being able to draw talent from, you know,the SpaceX, you know, ecosystem and and, you
(33:10):
know, everything that's going on in the SouthBay.
And so it's it's been pretty amazing to to be apart of and, yeah, we're we're really excited
about our space investments.
I'd say we think that they're like in anyindustry or a few areas that are interesting
rather than kind of the full gamut.
To your question, right, we don't think thelaunch is an area that is is is is gonna be
(33:36):
really viable for any anyone in the startupspace just because we think SpaceX owns the
entire ecosystem and and has largely created amonopoly at this point.
But I think that I think that there is ampleroom across the stack for us to to generate
huge returns.
(33:57):
Yeah.
No.
I totally agree.
Let's see what else you got here.
So you've got some gaming, and you've got letme see what else I thought was interesting too.
I think wow.
Firefighting helicopters.
That's really interesting too.
So tell me about that one and then also the DNAchips.
Yeah.
So I'll tap out of the DNA chip company becausethat was led by Rohan who knows.
(34:19):
Oh, sure.
He's much more integrated in the in thebiospace Okay.
Than I am.
But yeah.
So RAIN is a company that we invested in justearlier this year.
Yeah.
They are doing autonomous firefightinghelicopters.
And so Mhmm.
They're able to adapt military and civilautonomous aircrafts with the intelligence to
(34:42):
perceive, understand, and suppress wildfires ina fraction of how they're able to do so right
now.
And so, you know, currently fighting a wildfirefires is extremely dangerous.
Mhmm.
Takes a lot of manpower.
And the RAIN is doing is they're adaptingexisting Blackhawks that are actually are are
(35:03):
already autonomous with ability to detect fireearly to then enable aircraft response and then
contain that fire.
And so the way it works is kind of that threestep process where, you know, you have regional
early wildfire detection centers sensors thatlook for, you know, smoke, lightning, you know,
(35:24):
things of that, you know, ilk Mhmm.
Especially in American American West.
So, you know, looking at California, Idaho,Nevada, Washington, etcetera, etcetera.
Then there is going to be a rain equippedautonomous helicopter that launches and flies
to the coordinates relayed by these sensors.
Mhmm.
(35:44):
And they will perceive the fire, understand itsbehavior, size, direction, and spread, and then
use that information to design a suppressionstrategy.
And then the software on the aircraft is ableto deploy fire retardant while RAIN's wildfire
intelligence system builds a strategy thatconsiders subsequent subsequent responding
(36:05):
aircraft, incorporates their resource andarrival time into an optimal suppression
strategy.
And then there are, you know, obviouslycommunicating at all times with ground crews.
Right?
So it's a pretty amazing thing that is that theteam is building.
We were again, we're in that c plus round thatwas alongside DBL partners, Nancy Fund, who's
(36:25):
an amazing amazing person to be investingalongside.
And Rohan, my partner, sits on their board withalongside Nancy there.
But an amazing team that's based in NorthernCalifornia and solving a huge issue.
And and not only, you know, they'll able to goafter a big issue in terms of saving lives, but
(36:48):
really, the business applications here arepretty outstanding.
You look at the amount of money that Californiaspends every year on insurance.
Right?
And being able to bring that number down by asignificant portion or not risking lives in the
process.
Mhmm.
And and given the current technology that RAINis adopting is pretty amazing.
(37:12):
Sure.
Yeah.
That's interesting.
And I was also looking at the company, Womp.
What I feel is there's gonna be a big marketfor the Canva of X.
Yeah.
So it looks like there's a lot of easyintuitive interfaces for kind of doing three d
modeling, which I and there's probably someother tools out there.
I wanted to kind of three d print like a toyand Yeah.
(37:35):
You know, but I couldn't figure out how to doit.
I actually, like, watched the YouTube video andit looked really complicated.
You had to, like, go into CAD and, like, designit and there's all these complex parameters,
where with Canva, you can easily just kinda puttogether a deck or design, like, really cool
social social media art and then I recently sawso now on TikTok, there's a lot of cool content
(37:56):
where, like, you see these startup pitches, youknow, and, like Yeah.
Founders will pitch a VC in, a a minute.
So there was this really interesting founder.
I forgot the name of it.
I gotta go maybe scroll back up, but there wasa company that that does Canva for gaming.
So, like, obviously, right, if you wanna launcha game, you gotta go into iOS and, you know,
deploy a gaming app or you gotta hiredevelopers.
(38:19):
But she pretty much built this software thatcan help you author games.
And then I think you can create all the logic,create the characters, and then ship it, I
believe, to different devices.
But, but there I think she was saying they'reat, 500 k 500 k in revenue, year one, year two,
year one or two.
(38:39):
So I thought that was really impressive.
So I think just kinda like the Canva of x.
I think also there there needs to be some typeof Canva for video editing because, I mean,
even right now, if you wanna do video videoediting, you still need a, you know, an editor
to go in and kinda crop everything and andcompletely do all of this manually.
There's probably some AI applications that canautomate some of that.
(39:02):
I've played with a few of them.
But yeah, I mean, truly believe there'sopportunity to kind of just make this workflow
just super easy.
Right?
What you see is what you get.
Yeah.
And so, yeah, I mean, completely agree.
I think that WAMP is taking a really amazingapproach to doing just that, right?
(39:22):
They're essentially creating, you know,blender, you know, Canva style, And being able
to, make three d assets purely using the web.
And I think it's a huge there's a hugecapability here, to your point, in both three d
(39:47):
printing, right? You
You can design three d design software on theweb, any normal guy, right?
I mean, Blender takes a year to learn, right?
It's a fairly complex software, whereas Womp,you can do the same thing, you know, in in a
matter of minutes.
Right?
And and, you know, projects three d printed athome, you know, create thousands of assets to
(40:09):
be able to to drop into any of your creations.
And, you know, extremely, extremely easy tolearn.
Right?
Yeah.
And we've also seen we've seen a huge value inthe ability for them to look at, you know,
gaming assets.
Right?
I think one of the big barriers to entry tocreating games over the last, you know, two
decades has been it's been really hard tocreate assets.
(40:31):
Right?
You need, you know, computer scientists thatare trained at the utmost level to be able to
create three d assets, and this solves thishuge problem there.
Right?
Yeah.
And so I completely agree with you.
They're they're an awesome team based in theBay Area, you know, browser based, you know,
(40:52):
allowing it to work on all devices without theneed for, you know, as I said, high end
training.
Mhmm.
And, you know, I think one thing that they'vedone really well is you own your assets.
Right?
So it's, know, once you create a new WAMPasset, it's yours.
And so folks have already started, you know,using their assets across all sorts of of
(41:15):
different of different asset classes, which wethink has been has been pretty amazing.
And Yeah.
They'll they'll go out and raise a series aearly this early later this year, which we're
we're obviously pretty excited to see.
And and they have some crazy statistic.
I mean, they've created you know, I thinkthey're creating that 10,000 assets a month or
something like you know, it's it's it's it'spretty amazing.
(41:38):
Yeah.
No.
It's amazing.
And then let me see.
We'll do one more.
So gaming, you know, so I think you got somesports media and then you got, you know, these
board games.
What's your high level thesis on just kind ofthe gaming space?
Yeah.
So gaming is going through a bit of a rocky eraright now.
Yeah.
There's been huge layoffs at Blizzard andActivision and you know, I think you know, as I
(42:05):
said about 8090% of our portfolio will be inthis kind of hard tech deep tech area.
Yeah.
But you know gaming is something that I leadwithin our firm and something that's very near
and dear to my heart and something that I'm I'mI'm I'm very focused on.
Mhmm.
I think if you if you look at the gamingecosystem and and our I think our thesis as a
(42:28):
whole is, you know, where are you know, whereis there going to be, you know, alpha that's
gonna be created in in gaming?
I think that Yeah.
If, know, if you look at 02/2009 to 02/2014,you saw the rise of mobile, and that allowed
for huge, you know, exits within within thegaming space.
(42:49):
Right?
Mobile Mhmm.
Was hybrid entry because of the creativitylevels, but was massive distribution with big
margins.
Right?
You know, IDFA killed that to some extent Mhmm.
With Apple's new regulations.
You know, we have the ongoing epic lawsuit.
And so the question then becomes, okay.
Where is there going to be opportunity withingaming over the next decade or two?
(43:13):
And the two areas that I love and that I spendthe most time in are, one, what we call capital
efficient IP.
So, you know, while gaming IP is historicallyvery lucrative, back back in AAA studios is
extremely capital intensive and makes littlesense from a venture perspective.
Right?
We've seen companies raise everywhere anywherefrom 50 to 2 hundred million dollars before
ever getting a game launched and validated.
(43:34):
And so our focus is to is to look at oftenoverlooked or even entirely novel mediums of IP
degeneration.
Mhmm.
Right?
In the forward category, we've made aninvestment in the tabletop space.
So that company that you mentioned, IncredibleDream.
And what Jane's thesis is, I sit on her board,is she, you know, was a spinout of Riot Games.
(43:56):
She said, hey.
I think there's a huge white space toessentially create a platform level approach to
creating IP.
You can raise, you know, 2 to $5,000,000, andyou can release x amount of IPs.
Those IPs that you that you create successfullyon the in in the tabletop space, you can then
scale digitally into more scalable mediums andthen more profitable mediums after that.
(44:17):
Right?
Movies Yeah.
Television combined.
And that's exactly what she has done.
Right?
So she released she's now released five IPsover the course of the last year and a half
since we've invested Mhmm.
Which have put her on the brink ofprofitability.
She is now scaling that IP into digital, andthen soon thereafter, we'll scale into more
(44:38):
profitable mediums that look like, you know,more classic video games, movies, etcetera.
Right?
Yeah.
And so I think that is one area.
How do you basically recreate what happened inmobile Mhmm.
Yeah.
With current day technology.
Right?
Sure.
And then I think the second thing is whereyou're creating faster of IP and then scaling
it.
The second thing that we like and we spend alot of time in is real money, you know,
(45:02):
competitive platforms.
Right?
And specifically, verticalized real money andcompetitive platforms, right, that own their
own IP.
Right?
So Yeah.
One of the companies that we've invested in iscompany called 1v1Me.
That's doing staking Mhmm.
For you won't find it on there yet, but it'sdoing staking for competitive gamers.
(45:24):
So, you know Mhmm. It
It takes the playbook of old poker players.
So, you know, any poker player would go intothe World Series of Poker.
He or she would raise money from their fans,put it up, and then you would get a pro rata
way of of of owning of of of your distribution.
Right?
Yeah.
What that allows for is a few different things.
(45:44):
One, it works around current day gaming andgambling.
Oh, there's a thumbs up.
It worked it works around current day gamingand gambling regulations.
Yeah.
Two, she own or they own all of their IPbecause it's verticalized.
And so the way in which one v one me works isany gamer logs on to the site, they have a
(46:04):
series of matches every day.
Mhmm.
And the you you put your money on whatevergamer you think is gonna win in that stream,
and you get paid back.
And and the amazing thing about owning all yourIP is you basically capture a % of GMV as a
result.
And
so and we've seen, I think, a huge movementtowards real money and towards Pick'Ems and and
(46:31):
things like that across the entire space.
We only think it's gonna get bigger with themass adoption of mobile in Asia, with, you
know, deregulation across the globe when itcomes to to betting in real money gaming.
And so Mhmm.
Within gaming, those are the two areas we spendthe most time.
Yeah.
No.
It's exciting.
Well, hey.
I you know, I really appreciate all of theinsights.
(46:52):
Maybe you could give us a few more nuggets onLos Angeles, just kinda some of the
observations that you're seeing with thatecosystem.
I met some amazing managers and LPs from LA.
Obviously, the Milken Institute, they're doingtheir they do their events every May in LA.
There's definitely a huge robust communitythere.
But and the food is awesome there too.
(47:14):
But any other just high level insights thatyou're seeing in terms of just the community
developing the tech VC ecosystem, the LPecosystem?
Yeah, we think that LA is a really specialecosystem.
I think that for us, particularly, it makes alot of sense.
I mean, we only do hardware and gaming.
(47:37):
Yeah.
And that just so happens to be where LA isnumber one in both.
Yeah.
I think that we've seen there was actually areally interesting article you should check out
yesterday released about Mark Schuster, who'sup the founder of Upfront, you know, I think
calling him the godfather of LA venturecapital.
But we've seen the ecosystem maturing, I think,over the last decade to the point where it
(48:01):
certainly is a major player at this point,especially, I think, in the arenas we operate
in.
Yeah.
I think within the, you know, hardware deeptech ecosystem, as I mentioned, you have, you
know, everything that's that's spun up aroundaround SpaceX.
And SpaceX is actually the gen two of that.
Right?
The gen one is actually post World War twoindustrial Boeing, Lockheed, Raytheon Mhmm.
(48:24):
That really has has has become a result of alot of, you know, a lot of these refineries
that have been in Southern California for along time.
Right?
People talk a lot about the El ecosystem rightnow.
El Segundo is the second.
It's talking about the second refinery.
Right?
That was in you know, right on that on thatbeach line in near Manhattan Beach.
(48:45):
Right?
And so the LA ecosystem on the hardware sidehas kind of really sprung from that.
Right?
You have everything that's, you know, come fromEnduro.
You have everything that's come from SpaceX.
You know?
You have this this real genesis going on aroundhardware.
And then subsequently, also on the gaming side,right, I think everything that's spun out of
(49:07):
entertainment, you know, in the thirties,forties, fifties into what became the gaming
ecosystem, you know, Activision, Blizzard,Riot, all of these companies have been
headquartered in LA forever.
And now you have, you know, what is the genthree of that coming out of that.
Right?
And then I think on top of that, you know Mhmm.
At the end of the day, capital is great, buttalent is more important.
(49:27):
Yeah.
So you
have you know, you do have, you know, placeslike UCLA, places like USC, you know, Caltech
that are, you know, giving, you know, thisamazing talent to the ecosystem Mhmm.
You know, free.
You know, they're just flowing in there afterafter Yeah.
University.
Mhmm.
And and so it has you know, I think it stillpales in comparison to SF and and certainly,
(49:51):
you know, is a is a third fiddle behind NewYork as well.
But Mhmm.
There is a really amazing ecosystem here thatis that is that is growing day by day, and it
doesn't hurt for founders when they're bangingtheir heads against the wall to wake up and
it's 75 and sunny every day.
Yeah.
No.
Absolutely.
No.
That's that's exciting.
Well You do you obviously have you know youhave, you know, Andreessen opening up a big
(50:15):
presence here.
You have Yeah.
You have the the kinda hardcore hitters whohave been here for a long time up the up
fronts.
But it's it's it's becoming a place to bake forsure.
Yeah.
No.
Absolutely.
Well, thanks so much for all the time, Devon.
I know you, you know, spent a lot of timereally just unpacking several topics.
Right?
Living in New York, different sectors thatyou're investing in along with more granular
(50:37):
details, along with just different ecosystems.
So excited to, you know, continue thefriendship, and thanks for sharing your story
with the, the community.
And, hopefully, I see you back home in in NewYork at some point.
Absolutely, man.
Yeah.
Take care, man.
Have a good one.
Awesome.
See you, Joel.
Alright.
See you.
Bye.
Again, it's a power law industry.
(00:02):
There's very few deals every year that areactually returning your fund many times over.
Right?
And so we think that and and I guess the adviceI would pass on is, you know, find what those
enduring motes exist to you and and where youcan actually find edge in getting into those
deals and or seeing those deals early.
Right?
(00:23):
Welcome to The Investor, a podcast where I,Joel Palafinkel, your host, dives deep into the
minds of the world's most influentialinstitutional investors.
In each episode, we sit down with an investorto hear about their journeys and how global
markets are driving capital allocation.
So join us on this journey as we explore theseinsights.
(00:48):
All right.
So excited about my new guest and new friendhere, Devon Melotra.
He's a general partner at Valhalla Ventures.
So, Devon, you know, excited to have you here,and, thanks for making time for me.
Really appreciate it.
Yeah.
Thanks, Joel.
I'm super excited to be here.
Yeah.
Well, you know, why don't we kick off with justa little more about, you know, your firm, your
(01:08):
background, and, you know, how you got here.
You know, just for for background, you know,Valhalla Ventures backs visionary founders
building enduring moats.
They mainly invest in seed to series a and alsoin between.
I've also done the same.
And, you know, series a, seed, pre seed, it'sit's different terminology for different people
(01:28):
and different people have different constraintsfor what they describe it.
So excited to kind of see how you look at thosedeals and kind of how you classify them based
out of Los Angeles.
So excited to learn more.
So why don't you kind of talk about your earlycareer, maybe your education and then how you
(01:48):
got to where you are now?
Yeah.
Awesome.
Thanks, Joel.
Yeah, I grew up in New York City.
I'm a city kid.
I went to the University of Pennsylvania whereI was lucky enough to be surrounded by people
much smarter than I am.
I was a mediocre student, skipping class andreading books in my free time, and always had a
(02:10):
knack for for building companies and andwanting to to be involved with with, again,
people much smarter than I, building at the theforefront of of of industries, and that's
really, in my opinion, what venture capital is.
So went to Penn in Philly and soon thereafterstarted a company and, you know, got got
(02:31):
experience in the operating side.
After Penn and after being an operator, joinedMadison Square Garden Company, MSG being the
publicly traded entity that owns the Knicks,the Rangers, the Tau Group, etcetera.
I primarily operated in new ventures under MSG,where I got exposure to a whole consortium of
things.
(02:51):
But really, you know, MSG's guiding ethos isaround entertainment.
Right?
And that's entertainment in all forms.
You know, owning the Knicks and the Rangers isone thing.
But looking forward, you know, what is the nextiteration of entertainment?
You obviously have what we covered a lot at MSGVentures was on the gaming, real money gaming,
consumer social side of things.
(03:13):
But also now, have the Sphere in Las Vegas,which is one of the most amazing pieces of
property and one of the most amazing, I think,technological innovations that we've seen, at
least in terms of stadium hardware over thelast few decades.
And so I got to have exposure to all thesethings and, you know, was lucky enough to be a
(03:39):
part of a few amazing projects at MSG and andwork with some amazing folks and really get
exposure to within a big company kind of thatfast moving energy of, you know, new
enterprises and new ventures.
You know, I thought about what was next for mycareer and, you know, got the idea kind of
popped to my head by a friend around what a newventure fund would look like.
(04:01):
And I kind of hemmed and hawed a little bit tobe quite honest with you.
You know, I think that there's a lot of venturefunds that do the same thing kind of time and
time again.
And so, you know, ideated on it for about ayear, maybe two.
But really, our guiding thesis at Valhalla wasdeveloped over the course of 2019, '20 '20, and
(04:21):
2021.
We saw this massive boom in venture driven by azero interest rate phenomenon world, where we
saw money flowing into venture at anunprecedented rate, but really seeing it flow
into spaces that we thought largely wereincremental changes and not massive step
(04:44):
changes.
And so as we looked at the venture ecosystem,the last twenty, twenty five years of venture
returns have largely been driven by softwarereturns.
Right?
And we think that's for two different reasons.
One, software has allowed for this massive newdistribution with high margins.
But more importantly, almost, software hashistorically been very, very hard to create.
(05:08):
And so the best and brightest minds, you know,starting in Sand Hill know, starting on Sand
Hill Road in Silicon Valley in the 1960s,physics physicists, chemists, biologists moved
from those hard science spaces into beingcomputer scientists, and as a result, built the
businesses that we know of today as thegreatest businesses of the world.
Right?
Apple, NVIDIA, Amazon, etcetera, etcetera.
(05:29):
But the fact of the matter is five, ten yearsago, that actually started shifting back to the
point where we saw software as not only easy tocreate with rise of low codeno code businesses,
but now actually as somewhat of a commodity.
And I say this with a touch of vanity as anontechnical person myself, but we largely
(05:50):
think that there are very few moats that existin the software space right now, in pure b to b
enterprise software right now, as a result ofsoftware becoming quite easy to make.
And Sure.
I think it's a surprise to many in venture thatthis is actually reflect reflected pretty
deeply in public data.
(06:11):
So there's about 80 companies created over thelast twenty years that are b to b enterprise
businesses that are over a billion dollars inmarket cap.
75% of those businesses and those areenterprise software businesses.
75% of those businesses have negative operatingmargins, and only two of those businesses have
(06:31):
operating margins above 10%.
And so the our consensus is that actually we'vebeen fed this I wouldn't call it a lie, but
we've been fed this tale that software is theonly place to actually create real alpha within
Venture.
The fact of the matter is is all of the datashows that that's not true.
And so and if you look at the flip side,there's about 40 companies be 40 companies that
(06:55):
are publicly traded that are what we considerphysical technology companies created over the
last twenty years.
Mhmm.
75% of them have positive operating margins,and about a third of them have operating
margins above 10%.
Yeah.
And so we took this data, and we played aroundover 2020 and 2021 with a series of SPVs to
build out this thesis.
But really, to your introduction, and thank youfor that, where are the biggest enduring moats
(07:21):
over the next ten to twenty years withinventure capital?
And we think they exist in two unique realms.
One is in the world of physical technology andphysical engineering and that talent pool.
And so that's for us bioenergy, materials,manufacturing, space, air defense.
And then the second is in the world of IP.
So that's for us therapeutics and also gaming,giving my background in MSG.
(07:44):
And so, you know, kind of bringing together,you know, all my experience, you know, at MSG,
you know, kinda having exposure to the gamingside, but also the sphere side, and then doing
a deep dive on really where we believe thatthose moats exist over the next ten to twenty
years, that's where we settled.
So we raised fund one at the end of twentytwenty one.
It's a $66,000,000 fund.
(08:06):
We write $2,000,000 checks really only at seedplus and off cycle, and I'm happy to dive into
more of what that actually looks like.
And and we're about halfway through that fundright now.
And I think, you know, we've seen now kind ofthe writing on the wall.
I think a lot Yeah.
Are now flowing into our spaces, which has madethe fund perform quite well, which is exciting.
(08:27):
And we've seen, you know, some nice marks as aresult of a lot of money flowing into hardware
and into deep tech.
And also, have all these tailwinds at play too.
Right?
We have, things like the Build Back Better Act,like the Infrastructure Act, all the movement
around onshoring and nearshoring that hasplayed a really heavy hand in terms of where
venture we think is going.
(08:49):
But that's largely what drives us.
Right?
Are we rebuilding you know, both the physicalworld and the world of IP Mhmm.
Over the next ten to twenty years.
And and as a result, how do we create alphathere?
Yeah.
No.
That's helpful.
Well, I got a question for you that's a littleunrelated to the investment practice.
But how was it like, you know, growing up inNew York?
(09:11):
You know, I'm raising kids right now in NewYork City.
So what's your opinion, you know, despite whateverybody else says in terms of just being
raised or raising families in in the city?
And now you live in LA, so I'm not sure ifthere's any strong opinions around that.
Yeah.
Listen, mean, I get the question a lot, right?
(09:33):
Because it's everyone lives in New York, butdoes anyone is anyone really from New York?
And I think I'm one of the few people from NewYork.
I think that I mean, growing up in New York, Ididn't know any different, right?
Was an eight, nine, 10 year old, So I didn'treally know that there was a whole other world
that exists out there.
I think growing up in New York has massive prosand big cons, right?
(09:55):
I think that for me, was the perfect place togrow up just because son of an immigrant father
and an nth generation American mother.
And so it was a perfect kind of melting pot forus.
I got exposure to the amazing hustle culturethat is New York and also all of the different
(10:20):
beautiful, you know, cultural inputs that NewYork has.
Right?
The food, the shows, the art.
It's it's you know, it it really I the BobDylan quote.
Right?
The center of the capital of the universe.
Right?
And it really is the capital of the universe.
It is.
Yeah.
Even as, you know, as you said, having livedoutside New York now for a while, right, it
still it draws you back in.
(10:40):
You feel that that that pull like the like thesun that that New York has.
Right?
Yeah.
And even if you, you know, you go to London,you go to Tokyo, you go to Beijing, I don't
know that any place really can touch New Yorkthese days.
And so it really still is the capital of theuniverse.
I think that for us, California and Los Angeleshas played a really pivotal role in terms of
(11:08):
our development as a firm.
And I do believe that in terms of startupinnovation, California still is Mecca.
But listen, I think there was a time and I'msure your kids will go through this as well,
where they really embraced New York, theydetested it and needed to get out.
But I think it always draws you back in.
(11:30):
There's something there's something specialabout New York, and I think it's it's a really
amazing amalgamation of different cultures.
And and also, I think it's uniquely the onlywalkable city or one of very few walkable
cities in in The US.
You have that beauty of happenstance thathappens a lot in Europe, but you have the
(11:52):
American innovation on top of that, which Ithink is a very, very special mix.
Sure.
What are the cons?
I'm assuming space is one of
them.
Right?
Yeah.
I mean, I think space cost.
I I think we were lucky as as kids that ourparents forced us to to to, you know, try to
(12:15):
develop more real world attributes.
But I do think Yeah.
I often run into friends of New York include Imean, myself certainly included that, you know,
because ordering in is so easy.
So folks sometimes kids sometimes don't knowhow to cook or, you know, doing basic things
like fixing a car, you know, like Mhmm.
Like like changing car oil or or things likethat.
(12:35):
I think those skill sets for for kids in NewYork certainly fall through the cracks at some
level.
Sure.
And then I think one thing that I've lovedabout being in LA is part of the underbelly of
New York is that you think only New Yorkexists, right?
Because it is the capital of the universe, itfeels like only New York exists.
(12:58):
And so as a result, I think that it's good toget out there and realize that there's more out
there while also knowing that New York willalways be home.
But I think all the things they say about NewYork are true, right?
It's too small.
I mean, you don't have enough room.
It's, you don't have enough money, but, thoseare the sacrifices people make to live in New
(13:20):
York.
Yeah.
No.
Absolutely.
I mean, I think, you know, for me, you know,two kids, I mean, I think the pros are that,
you know, I I think these are the pros that Isee, right?
So I I live in Midtown.
So it's easy to, you know, drop your kids offif the school is nearby.
Obviously, there's some people who go toprivate school where like their school is
really far away or they gotta take a, you know,they go to, you know, a gifted school and they
(13:42):
got to take a school bus.
So I think logistically sometimes there'sbenefits.
A lot of events are in Midtown and then I feellike the cocktail events are like the
networking events.
The cool ones are like in the Lower East Side,which are both either walking distance or just
like a really quick Uber ride.
Sure.
But you're right.
You don't get the space.
(14:03):
Right?
So you don't get like the the picket fence inthe backyard that you would if you if you lived
in Jersey or like the suburbs.
So I think that's kind of the pros and consthat I see, but I totally agree with you.
I think the ecosystem here is very unique.
And then I think what's exciting is if you havea platform, the entire platform becomes the
(14:25):
culture and the ecosystem, right?
So our fund accelerator that we have, we havegraduates that have come from, there was one
guy from The Bronx that has launched the fundin Southeast Asia.
He lives in, he'd been living in Singapore forthe last ten years, but he flew up to New York
for some event and I met him.
So I think the cool thing about, like, LA, SanFrancisco, New York is people will ping you if
(14:46):
they're in town and maybe you never met them,at all in person.
Right?
So I mean, I just you know, I was when I was inSF last week, I mean, there's probably at least
close to 100 people that I just met for thefirst time over knowing them after knowing them
over Zoom for the last four years, you know, sojust kinda really finding that connection point
(15:06):
is agnostic of your region.
I think if you if you've done a good jobbuilding a good community, in my opinion, I
feel.
No, I completely agree.
And I think New York has proven to be a reallyspecial breeding ground for startups that has,
I mean, been built in the trenches for a longtime by folks that kind of were in the know,
(15:27):
but it's certainly a force to be reckoned withnow.
And my partner Rohan lives in New York, mybusiness partner.
I mean, he's a big believer in the New Yorkecosystem.
And then you have folks that have been buildingit for a long time.
I mean, some of the best funds in the worldhere at the USVs.
I mean, what Fred and Andy and Albert have doneto bring New York up to speed.
I mean, our friends at ENIAC Ventures haveinvested heavily in New York.
(15:53):
And I certainly, I think New York, especiallyfor some very specific sectors, a force to be
reckoned with in the start of the ecosystemthat folks did not expect, you know, even five
years ago.
Mhmm.
No.
I totally agree.
What advice would you give for people that arelooking to start their first fund and tell me
(16:18):
about the whole ideation process?
Like, did you decide to finally burn the boatand say, look, I'm gonna launch a fund and then
what's some advice that you give for peoplethat are just starting to think about that
process?
Yeah, I think that Two questions there, but Ithink that when we started the fund originally,
(16:42):
we started as kind of a deal by deal SPVaggregator.
And we were lucky enough to get into some greatdeals and to ride the coattails of those great
deals and to also raise our capital at a timein which capital was generally easier easier to
raise.
Yeah.
I think my moment was that the deal by deal SPVroute is great in some capacities, but I think
(17:14):
it falls short in terms of what I wanted toaccomplish, which was being at the forefront of
innovative companies at their earliest or, youknow, alongside their earliest journeys.
And venture capital at its core, even more sotoday than it was five years ago, is a power
law industry.
Right?
In which you need to have those few breakoutwinners for for for it to make make sense,
(17:41):
right?
And and, you know, I forget the exact data, butthere's, you know, there's basically five
companies a year that you need to be in themixer, right?
Within the early stages, right?
And and so we soon realized that, hey, youknow, we we're getting into great deals on the
SPV side, but it's actually not at our corewhat we wanna do and what we wanna be a part
of.
We wanna be a part of supporting founders atthe earliest stages of what they do, right?
(18:05):
And so and and to do so, we think you need tohave some sort of fund model that one, allows
for you to take that risk to get that upsidebecause you have a fund model that protects the
downside risk of your LPs.
Right?
If you're investing pre seed and seed andseries a companies with with deal by deal LP
capital, the downside risk is fairlysignificant.
(18:27):
Right?
Because you if they don't invest in every deal,they could have six, seven, eight deals that
end up, you know, going to zero when that onedeal that they didn't do is the the a thousand
xer.
Right?
Yeah.
And so for for us, we we thought that that waswas very important, and we were able to to
parlay our success in the SPV route to to beable to raise, you know, a a nice sized fund
(18:49):
one.
I would say, you know, listen, I I'm not in thebusiness of giving giving advice as a 30 year
old still in this industry.
But I I think that where we have beensuccessful, and and kudos to my partner Rowan,
as he's built a lot of this thesis out, is I Ithink the old adages of venture are still quite
(19:15):
true.
I think that concentration is key.
We are big believers in in in having a fairlyconcentrated fund.
So this fund will be about 20 to 20 to 22,maybe if maybe a little less than that core
investments.
Yeah.
And I think that that allows for us to haveenough ownership, work hand in hand with teams
(19:40):
in a way where we're we're boots on the groundwith them.
We take board observer roles and board boardseat roles.
And and but also, you know, allowing for us tohave enough breadth and a lot and enough
diversity.
So I think that that's one very core learningthat I would, you know, share on with with
other, you know, other investors.
Mhmm.
And then the second thing is, I think as our asour thesis has developed around, you know, the
(20:04):
world of physical technology is is listen, Ithink that largely sector specificity within
venture is a ploy to bring around LPs.
Right?
Yeah.
It is the the best funds to ever exist, first,been generalist funds.
Mhmm.
(20:25):
And two, have been funds that invest in whatwe're calling enduring moats.
But whatever you wanna call them.
Right?
You know, blue oceans, you know, monopolies inin some capacity.
Right?
The the the best funds to ever exist haven'tsaid, oh, we only invest in construction tech
or we only invest in fintech.
Because Yeah.
(20:45):
There's again, it's a power law industry.
There's very few deals every year that areactually returning your fund many times over.
Right?
And so we think that and and I guess the adviceI would pass on is, you know, find what those
enduring motes exist to you and and where youcan actually find edge in getting into those
deals and or seeing those deals early.
(21:06):
Right?
And so I think saying, hey, you know, I havebuilt my entire career in, you know, whatever
it is.
Right?
Gaming.
And so I'm only gonna go do gaming deals.
I think that has that has a ceiling.
Right?
So I would advise folks to to say, okay.
Within gaming, how do you take your knowledgebase and parlay that into, you know, x y z?
(21:32):
Right?
I mean,
Yeah.
You know, even Mitch Lasky, right, who is thegodfather of modern day gaming venture
investing, even Mitch who leads all or who hashistorically led all of Benchmark's gaming
deals, you know, he does a deal or two a year,right, in the gaming space because he
recognizes that there's, you know, there's ifthere are five companies a year that are
(21:57):
hitting that $10,000,000,000 market cap pointMhmm.
That, you know, the likelihood of them morethan one or two of them being gaming is quite
low.
Right?
Yeah.
And so, you know, he's thus expanded his hiscapability elsewhere as well.
So I would say, you know, concentration and andsticking to your guns is quite important.
And then for us, something that's been hugelyvaluable, I think, given the fund our size has
(22:20):
been our entry point and where we're investingat seed plus.
And so I think finding that edge too is isgonna be important.
Sure.
What are some ways that you can differentiateyourself?
I guess as, you know, advice to fund managers,you know, because there's so many funds focused
on gaming, so many funds focused on SaaS, AI,right?
Mean, one thing I've seen with AI is I've seensubsector granular specialization.
(22:45):
So I've seen somebody just launch a fundspecifically on AI copilots.
What are your thoughts on that?
Do you think that helps or are there otherthings that you can do in terms of
storytelling, in terms of brand building, interms of business development opportunities or
just business development activities?
(23:05):
Right?
Is it Yeah.
A volume game?
You know, I guess yeah.
Any any advice you have on those on thosepoints?
Yeah.
So I think to reiterate the kind of point Ijust said a little bit and and tweak it is I
think the best way to differentiate yourself isto get into good deals.
And and that sounds like almost pejorative, butit's true.
(23:28):
Right?
Like, I I think that saying, you know, hey.
I only focus on AI copilots or or I'm thebiggest, you know, podcaster in x y z space,
that can only take you so far.
And and and I think that in in this case,launching a new fund and being able to be a
(23:49):
little more patient is gonna be key.
I mean, you you look at Chris Saka's fund runone.
Right?
It was a $7,000,000 fund, and it had, you know,Twitter and Uber.
And, you know, as a result of that, he becameChris Saka.
Right?
He didn't become Chris Saka by saying, I'mgonna invest in software companies in Silicon
Valley and then branding himself like that.
(24:10):
Right?
Mhmm.
Yeah.
He's he's Chris Saka because he got he his hishis fund one was, you know, whatever it was a
thousand x.
I don't know.
And and and that's how he became Chris Saka.
Right?
And so I think that as we think about ourdifferentiating factor, you know, as I said,
we're gonna be a hardware first fund.
Right?
But that's largely because we think that thebest companies over the next ten to twenty
(24:33):
years are largely gonna be in hardware.
And we're gonna have gaming exposure because webelieve that IP creation over the next ten to
twenty years is going to be, you know, where alot of alpha is gonna be created within the
entertainment space Yeah.
And now within broader software.
And so I think that, you know, the answer tothat is is is get as much ownership as you can
(24:55):
in good companies.
And that sounds Mhmm.
Way more simple than it should.
You know, we're not hugely active on, you know,being a promotional firm.
Maybe we should be more active and obviously onthis podcast now.
But, you know, we we we have a very, you know,core group of LPs that we've worked with now
(25:16):
for quite a bit, you know, half a decade thattrust us and and kind of see in us that we're,
you know, sticking to our guns.
And then on the flip side, you know, we have avery small group of founders that we work with
hand in hand on a day to day basis.
And and I think that as a result of that, youknow, we've we've been able to to, you know,
show marks and and to get into good deals.
(25:37):
And and and that's all to say that we're still,you know, learning new things every day and,
you know, get punched in the face every everyday doing so.
But I think, you know, differentiation islargely, you know, a ploy to get LPs in early.
Mhmm.
And if you're optimizing for medium and longterm success, the the best success is always to
(26:00):
get high concentration in in in the best dealspossible.
Sure.
When you say high concentration, do you thinkit's what are your thoughts on a high
conviction concentrated portfolio versus a morediversified portfolio.
What what I think is obviously if you're highlyconcentrated, you're making like 12 bets,
(26:20):
right?
Those are highly super high conviction.
You know, you're you're better.
You're I'm assuming you're you're thinking eachof those deals.
You have so much conviction.
Hopefully, each of those deals you're youbelieve that they'll return the fund.
Right?
That's how much high conviction you have.
But any thoughts on that in terms of like bothboth strategies?
Yeah.
I mean, I'm I'm a huge believer in in in highconviction and and high concentration.
(26:45):
So the point of like, you know, a little bit ofdanger.
You don't wanna, you know, tip too far over,but I think that having a, you know, high
concentration and and high conviction fund isis where you see real, you know, real alpha
created.
And and I think actually the only way toactually Mhmm.
Have those massive venture style returns.
(27:07):
I mean, if you look at, like, a three x fundover ten years right now, that's a 12% IRR a
year, which compared to to the Nasdaq isterrible.
Sure.
And so, really, what you have to do is you haveand three x fund, if you told any early stage
manager that, they'd be like, awesome.
I'm great.
Yeah.
(27:27):
Because very few folks actually can hit that.
And so Mhmm.
You actually have to be shooting quite a bithigher than that.
And to do so, I think you have to havesignificant ownership in your in your winners
to be able to actually get there.
Right?
And so we're this fund, as I said, will be 20to 25 core investments.
I think actually so we'll go out and raise fundtwo at the end of twenty one excuse me.
(27:49):
At the end of twenty four, early '20 '5, andwe'll probably target less than 15 core
investments for fund two just because that'ssomething we've learned along this the course
of this fund.
So we'll we'll try to be even more targeted.
There's, you know, there's hearsay and rumorsout there that, you know, Founders Fund three,
their their third fund had, you know, a thirdof their fund in Palantir.
(28:10):
Right?
Yeah.
Wow.
And I think that, you know, Peter is probablythe the preeminent example of saying, hey.
We we we take, you know, big shots on ourwinners.
Right?
Sure.
And and, I mean, I think if you look at overthe the the the data stack of who are the best
funds that we think of when we think of, youknow, returns.
(28:34):
You know, Benchmark is a perfect example.
Right?
Benchmark raises, what, 300 to $400,000,000funds.
Mhmm.
And they only write series a 20% lead checks.
Right?
That's all they do.
And they don't hold for follow on reservecapital.
They only buy they buy 20% upfront so that bythe time the company exits, they'll have about
10% of the company.
And they do that, you know, for you know, sobecause say they raised $300,000,000 fund, you
(28:57):
know, that'll be $60,000,000 or so inmanagement fees.
So say they have about 200 ish to invest, youknow, that's about 20 investments for them.
Right?
So they're fairly concentrated.
And and I think that that's really, especiallyin today's day and age, we're seeing kind of
companies fall by the wayside every day and thewinners really take off.
(29:22):
I think that that's the only way to to to togenerate an amazing fund these days.
Yeah, no, I totally agree.
I noticed that you've invested in a handful ofspace companies as well.
So you've invested in large satellites, smallsatellites, and also lunar refueling.
And I've also invested in space tech as well.
So what are some of the things that you'relooking for in terms of standout satellite
(29:46):
companies?
Then I think I saw a few in space refuelingcompanies as well.
What were some kind of unique things that yousaw with those companies you invested in?
And where do you see the trends in space as awhole heading in general?
Like, I mean, the launch sector, I noticed youdidn't invest in launch.
I'm not sure if you feel that that's kind of acrowded or risky area.
(30:09):
But yeah, we'd love we'd love maybe some trendson space and then maybe I can I can go to your
other deals in your portfolio, maybe just talkabout those those too?
But I think the space was kind of interesting.
Yeah.
Absolutely.
So space is an area that we think I mean, he'sa controversial figure in many circles, but I
mean, Elon Musk has really, you know,commercialized an entire industry that Yeah.
(30:33):
A multi trillion dollar industry.
Right?
Mhmm.
And I think a lot of the revolutions and andthat we're seeing now that are are going to be
off the backs of of you know, SpaceX taking thelead.
Right?
In terms of how we think about space, we thinkabout things generally in conjunction with
(30:57):
SpaceX.
So where is SpaceX not building?
Where is there a white space to own?
And what has been made possible now as a resultof SpaceX.
Right?
I think k two is a perfect example.
We invested in the c plus of k two in June2023, and the company has absolutely gone
(31:19):
haywire since or they were starting to gohaywire, you know, before that.
It's founded by two brothers.
One, a former SpaceX engineer and one was aconsultant at BCG.
And they had a had a concept that the large bussatellites that are created by Raytheon and
(31:42):
Lockheed can be done much cheaper and much moreefficiently.
And they've proven that out in space.
And so we invested, as I said, in our c plus.
They raised a $50,000,000 series a led byAltimeter in December Yeah.
2023.
And they're currently in the process ofnegotiation negotiating some some massive
(32:04):
contracts.
And we we think that this is largely onlypossible in a post Starship, post Falcon nine
world.
Right?
And I think if you look at a lot of theprogression that we're going to see in space,
it is it follows the same, you know, the thethe same story.
Right?
Where we see things that are available and seethings that are possible now in a in a kind of
(32:29):
post commercial, post SpaceX world.
Right?
And so Yeah.
That is really a a kind of and where SpaceX isnot going after.
Right?
So that's a really big thesis by which we, youknow, we we invest.
It also comes down to talent.
Right?
I think, you know, if you look at, you know,the the the teams that are able to and part of
(32:50):
the reason we love being in SouthernCalifornia, the teams that are able to draw
from the SpaceX ecosystem and and, you know,what Southern California has and, you know,
this kind of El Segundo, you know, renaissancethat's going on right now that we've seen is is
folks being able to draw talent from, you know,the SpaceX, you know, ecosystem and and, you
(33:10):
know, everything that's going on in the SouthBay.
And so it's it's been pretty amazing to to be apart of and, yeah, we're we're really excited
about our space investments.
I'd say we think that they're like in anyindustry or a few areas that are interesting
rather than kind of the full gamut.
To your question, right, we don't think thelaunch is an area that is is is is gonna be
(33:36):
really viable for any anyone in the startupspace just because we think SpaceX owns the
entire ecosystem and and has largely created amonopoly at this point.
But I think that I think that there is ampleroom across the stack for us to to generate
huge returns.
(33:57):
Yeah.
No.
I totally agree.
Let's see what else you got here.
So you've got some gaming, and you've got letme see what else I thought was interesting too.
I think wow.
Firefighting helicopters.
That's really interesting too.
So tell me about that one and then also the DNAchips.
Yeah.
So I'll tap out of the DNA chip company becausethat was led by Rohan who knows.
(34:19):
Oh, sure.
He's much more integrated in the in thebiospace Okay.
Than I am.
But yeah.
So RAIN is a company that we invested in justearlier this year.
Yeah.
They are doing autonomous firefightinghelicopters.
And so Mhmm.
They're able to adapt military and civilautonomous aircrafts with the intelligence to
(34:42):
perceive, understand, and suppress wildfires ina fraction of how they're able to do so right
now.
And so, you know, currently fighting a wildfirefires is extremely dangerous.
Mhmm.
Takes a lot of manpower.
And the RAIN is doing is they're adaptingexisting Blackhawks that are actually are are
(35:03):
already autonomous with ability to detect fireearly to then enable aircraft response and then
contain that fire.
And so the way it works is kind of that threestep process where, you know, you have regional
early wildfire detection centers sensors thatlook for, you know, smoke, lightning, you know,
(35:24):
things of that, you know, ilk Mhmm.
Especially in American American West.
So, you know, looking at California, Idaho,Nevada, Washington, etcetera, etcetera.
Then there is going to be a rain equippedautonomous helicopter that launches and flies
to the coordinates relayed by these sensors.
Mhmm.
(35:44):
And they will perceive the fire, understand itsbehavior, size, direction, and spread, and then
use that information to design a suppressionstrategy.
And then the software on the aircraft is ableto deploy fire retardant while RAIN's wildfire
intelligence system builds a strategy thatconsiders subsequent subsequent responding
(36:05):
aircraft, incorporates their resource andarrival time into an optimal suppression
strategy.
And then there are, you know, obviouslycommunicating at all times with ground crews.
Right?
So it's a pretty amazing thing that is that theteam is building.
We were again, we're in that c plus round thatwas alongside DBL partners, Nancy Fund, who's
(36:25):
an amazing amazing person to be investingalongside.
And Rohan, my partner, sits on their board withalongside Nancy there.
But an amazing team that's based in NorthernCalifornia and solving a huge issue.
And and not only, you know, they'll able to goafter a big issue in terms of saving lives, but
(36:48):
really, the business applications here arepretty outstanding.
You look at the amount of money that Californiaspends every year on insurance.
Right?
And being able to bring that number down by asignificant portion or not risking lives in the
process.
Mhmm.
And and given the current technology that RAINis adopting is pretty amazing.
(37:12):
Sure.
Yeah.
That's interesting.
And I was also looking at the company, Womp.
What I feel is there's gonna be a big marketfor the Canva of X.
Yeah.
So it looks like there's a lot of easyintuitive interfaces for kind of doing three d
modeling, which I and there's probably someother tools out there.
I wanted to kind of three d print like a toyand Yeah.
(37:35):
You know, but I couldn't figure out how to doit.
I actually, like, watched the YouTube video andit looked really complicated.
You had to, like, go into CAD and, like, designit and there's all these complex parameters,
where with Canva, you can easily just kinda puttogether a deck or design, like, really cool
social social media art and then I recently sawso now on TikTok, there's a lot of cool content
(37:56):
where, like, you see these startup pitches, youknow, and, like Yeah.
Founders will pitch a VC in, a a minute.
So there was this really interesting founder.
I forgot the name of it.
I gotta go maybe scroll back up, but there wasa company that that does Canva for gaming.
So, like, obviously, right, if you wanna launcha game, you gotta go into iOS and, you know,
deploy a gaming app or you gotta hiredevelopers.
(38:19):
But she pretty much built this software thatcan help you author games.
And then I think you can create all the logic,create the characters, and then ship it, I
believe, to different devices.
But, but there I think she was saying they'reat, 500 k 500 k in revenue, year one, year two,
year one or two.
(38:39):
So I thought that was really impressive.
So I think just kinda like the Canva of x.
I think also there there needs to be some typeof Canva for video editing because, I mean,
even right now, if you wanna do video videoediting, you still need a, you know, an editor
to go in and kinda crop everything and andcompletely do all of this manually.
There's probably some AI applications that canautomate some of that.
(39:02):
I've played with a few of them.
But yeah, I mean, truly believe there'sopportunity to kind of just make this workflow
just super easy.
Right?
What you see is what you get.
Yeah.
And so, yeah, I mean, completely agree.
I think that WAMP is taking a really amazingapproach to doing just that, right?
(39:22):
They're essentially creating, you know,blender, you know, Canva style, And being able
to, make three d assets purely using the web.
And I think it's a huge there's a hugecapability here, to your point, in both three d
(39:47):
printing, right? You
You can design three d design software on theweb, any normal guy, right?
I mean, Blender takes a year to learn, right?
It's a fairly complex software, whereas Womp,you can do the same thing, you know, in in a
matter of minutes.
Right?
And and, you know, projects three d printed athome, you know, create thousands of assets to
(40:09):
be able to to drop into any of your creations.
And, you know, extremely, extremely easy tolearn.
Right?
Yeah.
And we've also seen we've seen a huge value inthe ability for them to look at, you know,
gaming assets.
Right?
I think one of the big barriers to entry tocreating games over the last, you know, two
decades has been it's been really hard tocreate assets.
(40:31):
Right?
You need, you know, computer scientists thatare trained at the utmost level to be able to
create three d assets, and this solves thishuge problem there.
Right?
Yeah.
And so I completely agree with you.
They're they're an awesome team based in theBay Area, you know, browser based, you know,
(40:52):
allowing it to work on all devices without theneed for, you know, as I said, high end
training.
Mhmm.
And, you know, I think one thing that they'vedone really well is you own your assets.
Right?
So it's, know, once you create a new WAMPasset, it's yours.
And so folks have already started, you know,using their assets across all sorts of of
(41:15):
different of different asset classes, which wethink has been has been pretty amazing.
And Yeah.
They'll they'll go out and raise a series aearly this early later this year, which we're
we're obviously pretty excited to see.
And and they have some crazy statistic.
I mean, they've created you know, I thinkthey're creating that 10,000 assets a month or
something like you know, it's it's it's it'spretty amazing.
(41:38):
Yeah.
No.
It's amazing.
And then let me see.
We'll do one more.
So gaming, you know, so I think you got somesports media and then you got, you know, these
board games.
What's your high level thesis on just kind ofthe gaming space?
Yeah.
So gaming is going through a bit of a rocky eraright now.
Yeah.
There's been huge layoffs at Blizzard andActivision and you know, I think you know, as I
(42:05):
said about 8090% of our portfolio will be inthis kind of hard tech deep tech area.
Yeah.
But you know gaming is something that I leadwithin our firm and something that's very near
and dear to my heart and something that I'm I'mI'm I'm very focused on.
Mhmm.
I think if you if you look at the gamingecosystem and and our I think our thesis as a
(42:28):
whole is, you know, where are you know, whereis there going to be, you know, alpha that's
gonna be created in in gaming?
I think that Yeah.
If, know, if you look at 02/2009 to 02/2014,you saw the rise of mobile, and that allowed
for huge, you know, exits within within thegaming space.
(42:49):
Right?
Mobile Mhmm.
Was hybrid entry because of the creativitylevels, but was massive distribution with big
margins.
Right?
You know, IDFA killed that to some extent Mhmm.
With Apple's new regulations.
You know, we have the ongoing epic lawsuit.
And so the question then becomes, okay.
Where is there going to be opportunity withingaming over the next decade or two?
(43:13):
And the two areas that I love and that I spendthe most time in are, one, what we call capital
efficient IP.
So, you know, while gaming IP is historicallyvery lucrative, back back in AAA studios is
extremely capital intensive and makes littlesense from a venture perspective.
Right?
We've seen companies raise everywhere anywherefrom 50 to 2 hundred million dollars before
ever getting a game launched and validated.
(43:34):
And so our focus is to is to look at oftenoverlooked or even entirely novel mediums of IP
degeneration.
Mhmm.
Right?
In the forward category, we've made aninvestment in the tabletop space.
So that company that you mentioned, IncredibleDream.
And what Jane's thesis is, I sit on her board,is she, you know, was a spinout of Riot Games.
(43:56):
She said, hey.
I think there's a huge white space toessentially create a platform level approach to
creating IP.
You can raise, you know, 2 to $5,000,000, andyou can release x amount of IPs.
Those IPs that you that you create successfullyon the in in the tabletop space, you can then
scale digitally into more scalable mediums andthen more profitable mediums after that.
(44:17):
Right?
Movies Yeah.
Television combined.
And that's exactly what she has done.
Right?
So she released she's now released five IPsover the course of the last year and a half
since we've invested Mhmm.
Which have put her on the brink ofprofitability.
She is now scaling that IP into digital, andthen soon thereafter, we'll scale into more
(44:38):
profitable mediums that look like, you know,more classic video games, movies, etcetera.
Right?
Yeah.
And so I think that is one area.
How do you basically recreate what happened inmobile Mhmm.
Yeah.
With current day technology.
Right?
Sure.
And then I think the second thing is whereyou're creating faster of IP and then scaling
it.
The second thing that we like and we spend alot of time in is real money, you know,
(45:02):
competitive platforms.
Right?
And specifically, verticalized real money andcompetitive platforms, right, that own their
own IP.
Right?
So Yeah.
One of the companies that we've invested in iscompany called 1v1Me.
That's doing staking Mhmm.
For you won't find it on there yet, but it'sdoing staking for competitive gamers.
(45:24):
So, you know Mhmm. It
It takes the playbook of old poker players.
So, you know, any poker player would go intothe World Series of Poker.
He or she would raise money from their fans,put it up, and then you would get a pro rata
way of of of owning of of of your distribution.
Right?
Yeah.
What that allows for is a few different things.
(45:44):
One, it works around current day gaming andgambling.
Oh, there's a thumbs up.
It worked it works around current day gamingand gambling regulations.
Yeah.
Two, she own or they own all of their IPbecause it's verticalized.
And so the way in which one v one me works isany gamer logs on to the site, they have a
(46:04):
series of matches every day.
Mhmm.
And the you you put your money on whatevergamer you think is gonna win in that stream,
and you get paid back.
And and the amazing thing about owning all yourIP is you basically capture a % of GMV as a
result.
And
so and we've seen, I think, a huge movementtowards real money and towards Pick'Ems and and
(46:31):
things like that across the entire space.
We only think it's gonna get bigger with themass adoption of mobile in Asia, with, you
know, deregulation across the globe when itcomes to to betting in real money gaming.
And so Mhmm.
Within gaming, those are the two areas we spendthe most time.
Yeah.
No.
It's exciting.
Well, hey.
I you know, I really appreciate all of theinsights.
(46:52):
Maybe you could give us a few more nuggets onLos Angeles, just kinda some of the
observations that you're seeing with thatecosystem.
I met some amazing managers and LPs from LA.
Obviously, the Milken Institute, they're doingtheir they do their events every May in LA.
There's definitely a huge robust communitythere.
But and the food is awesome there too.
(47:14):
But any other just high level insights thatyou're seeing in terms of just the community
developing the tech VC ecosystem, the LPecosystem?
Yeah, we think that LA is a really specialecosystem.
I think that for us, particularly, it makes alot of sense.
I mean, we only do hardware and gaming.
(47:37):
Yeah.
And that just so happens to be where LA isnumber one in both.
Yeah.
I think that we've seen there was actually areally interesting article you should check out
yesterday released about Mark Schuster, who'sup the founder of Upfront, you know, I think
calling him the godfather of LA venturecapital.
But we've seen the ecosystem maturing, I think,over the last decade to the point where it
(48:01):
certainly is a major player at this point,especially, I think, in the arenas we operate
in.
Yeah.
I think within the, you know, hardware deeptech ecosystem, as I mentioned, you have, you
know, everything that's that's spun up aroundaround SpaceX.
And SpaceX is actually the gen two of that.
Right?
The gen one is actually post World War twoindustrial Boeing, Lockheed, Raytheon Mhmm.
(48:24):
That really has has has become a result of alot of, you know, a lot of these refineries
that have been in Southern California for along time.
Right?
People talk a lot about the El ecosystem rightnow.
El Segundo is the second.
It's talking about the second refinery.
Right?
That was in you know, right on that on thatbeach line in near Manhattan Beach.
(48:45):
Right?
And so the LA ecosystem on the hardware sidehas kind of really sprung from that.
Right?
You have everything that's, you know, come fromEnduro.
You have everything that's come from SpaceX.
You know?
You have this this real genesis going on aroundhardware.
And then subsequently, also on the gaming side,right, I think everything that's spun out of
(49:07):
entertainment, you know, in the thirties,forties, fifties into what became the gaming
ecosystem, you know, Activision, Blizzard,Riot, all of these companies have been
headquartered in LA forever.
And now you have, you know, what is the genthree of that coming out of that.
Right?
And then I think on top of that, you know Mhmm.
At the end of the day, capital is great, buttalent is more important.
(49:27):
Yeah.
So you
have you know, you do have, you know, placeslike UCLA, places like USC, you know, Caltech
that are, you know, giving, you know, thisamazing talent to the ecosystem Mhmm.
You know, free.
You know, they're just flowing in there afterafter Yeah.
University.
Mhmm.
And and so it has you know, I think it stillpales in comparison to SF and and certainly,
(49:51):
you know, is a is a third fiddle behind NewYork as well.
But Mhmm.
There is a really amazing ecosystem here thatis that is that is growing day by day, and it
doesn't hurt for founders when they're bangingtheir heads against the wall to wake up and
it's 75 and sunny every day.
Yeah.
No.
Absolutely.
No.
That's that's exciting.
Well You do you obviously have you know youhave, you know, Andreessen opening up a big
(50:15):
presence here.
You have Yeah.
You have the the kinda hardcore hitters whohave been here for a long time up the up
fronts.
But it's it's it's becoming a place to bake forsure.
Yeah.
No.
Absolutely.
Well, thanks so much for all the time, Devon.
I know you, you know, spent a lot of timereally just unpacking several topics.
Right?
Living in New York, different sectors thatyou're investing in along with more granular
(50:37):
details, along with just different ecosystems.
So excited to, you know, continue thefriendship, and thanks for sharing your story
with the, the community.
And, hopefully, I see you back home in in NewYork at some point.
Absolutely, man.
Yeah.
Take care, man.
Have a good one.
Awesome.
See you, Joel.
Alright.
See you.
Bye.
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