20VC: Altimeter's Brad Gerstner on Why Supercycles and the Powerlaw is the Most Important Thing In Investing, Why Portfolio Diversification is the Opposite of Risk Mitigation and The #1 Question Brad Asks All New Recruits
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC
4.4 • 637 Ratings
🗓️ 10 October 2022
⏱️ 69 minutes
🧾️ Download transcript
Summary
Brad Gerstner is the Founder and CEO of Altimeter, a life-cycle technology investment firm that manages public and private portfolios. Brad has personally participated in more than 100 IPOs as a sponsor, anchor, and investor. Brad’s notable deals include Snowflake, Mongo, Bytedance, Gusto, Unity, Okta, dbt, Modern Treasury, EPIC Games, Hotel Tonight, and Zillow. Prior to founding Altimeter, Brad was a 3-time co-founder where he sold all three businesses (to IAC, Google, and Marchex), a founding principal at General Catalyst; a securities lawyer, a former Deputy Secretary of State of Indiana, and a pilot.
In Today's Episode with Brad Gerstner We Discuss:
1.) From Humble Beginnings in Indiana to 100 IPOs:
- When did Brad realize his original love of finance and entrepreneurship?
- What one single question does Brad ask all potential new recruits to determine if they have hustle?
- What does Brad know now that he wishes he had known at the beginning of his career?
2.) The Power Law and Supercycles:
- What is a power law? Why is it the single most important thing in investing?
- How do the best investors in the world build a framework around supercycles?
- How does Brad approach market sizing? How does Brad think about market creation when aligning that to his thesis of investing in power laws?
- How does Brad determine if a large opportunity is a "super-cyle" or a short, time-stamped fad that is unsustainable? How does Brad assess the importance of market timing?
3.) Building Anti-Fragile Portfolios:
- Portfolio Construction: Why does Brad disagree that the answer to risk mitigation is portfolio diversification? How many companies is enough companies for a diverse portfolio?
- Price Sensitivity: How does Brad reflect on his own relationship to price? How does this process and mindset change on re-investments? What is needed for Brad to re-invest?
- Time to Exit: How does Brad analyze when is the right time to exit a position? What are the single biggest mistakes people make when it comes to timing their exit?
4.) The Venture Landscape: Today, What is Happening?
- Why does Brad believe what has happened over the last 24 months is a great disservice to founders?
- What are the biggest examples of a complete lack of investor discipline?
- Why does Brad believe that for all positions valued over $500M, we should apply a 20% discount?
- Is today's pricing actually just the new normal? How has the public market pricing impacted the deployment of growth stage checks? How will this play out in the next 12 months?
- Why does Brad believe there is "not blood on the streets yet"? How does the speed of interest rate change impact our ecosystem so dramatically?
Items Mentioned in Today's Episode:
Brad's Favourite Book: The Snowball: Warren Buffet and the Business of Life
Transcript
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| 0:00.0 | Welcome back. This is 20VC with me, Harry Stebbings, and wow, I'm so excited for this show today. |
| 0:05.1 | I was first introduced to this guest by Sinali Dureka at Excel, and since he's given me the most incredible wisdom, time and advice, one of the greats of our business, and I've wanted to do this one for a long time, and so this one was such a joy to do. I'm thrilled to welcome Brad Gersner, found and CEO at Altimiter, a life cycle technology |
| 0:21.8 | investment firm that manages both public and private portfolios. Brad has personally participated |
| 0:27.2 | in more than 100 IPOs as a sponsor, anchor and investor. And some of Brad's notable deals |
| 0:32.5 | include Snowflake, Mongo, bite dance, gusto, Unity, octa, modern treasury, and many more. And prior to founding |
| 0:39.5 | Altimiter, check this out for a career diversity. Brand was the three-time co-founder, where he sold |
| 0:44.6 | all three businesses to IAC, Google and Marchex. He was a founding principal at General Catalyst. He was |
| 0:50.1 | a securities lawyer, a former deputy secretary of state of Indiana, and even a pilot. What an |
| 0:55.6 | incredible array there, and I want to say again a huge thank you to Rich Barton, Bob Pittman, David Fialco, Franks Lutman, Jammin, Bull, Martin Casado, Lexi Reese, and many more for some amazing |
| 1:05.3 | questions suggestions, such a team effort on the schedule. But before we dive into the show today, if you are a venture capitalist or corporate strategist, I want to tell you about Teegas. Teegas is the only company in the |
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... |
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