This memorial day weekend, book tv features three days of nonfiction books and authors. Here are some programs to watch for. Tonight at 10 00, on afterwards, amy goodman interviews tamara thet sleeping gian,t how working class will transform america. On sunday at 10 00 115, an interview with the editorinchief of one world. He discusses his work with the likes of jayz and the author of the awardwinning book between the world and me. Sunday evening at 10 00, a Book Release Party for steve hilton and his book more human. A former Senior Adviser to David Cameron an cofounder of crowd we need to redesign our economic and political systems to meet the needs of americans today. Then on monday, memorial day, an extra day of book tv featuring on the intellectual life of thomas jefferson. A talk radio hosts on the importance of the 10 commitments and npr on the right to die movement. Go to book tv. Org for the complete weekend schedule. Now a look at th economice state of Silicon Valley with Technology Investors and Venture Capitalists. This was part of the annual Techcrunch Disrupt conference in new york. Its 25 minutes. So, im very excited to do because i mean, lets face it, valuations are down. The ipo market for tech Company Seems all but shut. There is a lot of nervousness out there and yet somehow vcs managed together more and Capital Commitments in the First Quarter than they have since 2006. So, if you are wondering what is going on, join the club. Were hoping these three savvy investors can help us out today. Guys, thank you for joining us. Chris, you are an investor in joshs fund. So, my biggest question right now is it seems like vcs are returning to their investors much faster than they have historically. I think maybe over the last decade it has been stated to raise a fund every three or four years. That might even be conservative. Now we are seeing xl, like the coming back in two years and lightspeed. Whats going on . As an lp on the money behind the money. So, people in my seat find people like josh and andy. I used to be at princetons endowment. So were kind of the sunlight of the venture world. All of the energy comes from us. Stop showing up. The trees with wither. Does that sound grandiose . The pool isnt infinite. Dollar going into Venture Capital compete at the institutions where these dollars come from against other asset classes. And so, one of the challenges that venture faces is that its further side of the money, longest dated option that most institutions buy. As a result there is a lot of pressure on venture. And one of the things that has been challenges is you over the last few years, the period has really shortens. It is a twoyear cycle. The challengee is that investing or vona for an nirv lp if you get to the point where you are recycling distribution. Hopefully each dollar comes back with three trends in short order. Dollars andnd out they would come back and find your commitments. As fundraising cycles have shortened, liquidity cycles have gotten longer. There is this huge exits thinker. Sphincter. He did just say what you thought he said. We are pushing this capital out and feeding the snake. Lps give gps money. Gps give status money. Snakeou got the the getting backed fuller. We are in brooklyn. For those of you who are familiar with the group wung tang klan. Im going to sew your rectum shut. The dynamic you describe is an unsettling longterm dynamic for longterm ecostatement ecosystem health. Happening . T it did seem like startups were raising funding every six months or so, but critics including bill gross said these guys are racing back to investors before their paper gains disappear. It is an important point because right now a lot of venture funds are looking amazing on paper. Right . In fact, one thing that is a pet peeve of mine is we get emails every day that says our fund summit is that we just had a bunch of marcus. Markups. Cash on cash. No, its paper on cash. In Business School we always talked about that you get you when a trade turns into an investment. Are headedi fear we for this moment where the , there is this moment where the unrealized becomes the unrealizable. And that will be the moment of nausea. Bill is absolutely right. Nobody wants to be the last fund in the market when the music stops. It is going to be a game of musical chairs. From the lp perspective, everybody is tapped out. People blow through their budgets because Companies Come back so fast. And were all so, just exhausted. There is this kind of psychic exhaustion among lps. Everybody has been running too hard. Reacting rather than being proactive. Andy you are from union square ventures. Just closed a 166 million fund. We dont talk about our five. You filed a form with the sec. You are sticking to your traditional trajectories. Josh, what about you . You raise your last fund in 2014. Are you in the market this year . We target raising every two and a half years. So that would put on pace to raise at the end of this year. Ok, great. I guess, chris, do you feel like, you can say no. You would never say no to josh. When i spoke to bill he made this point it is very hard for lps, because you say no, you can lose your seed at the table for the duration of your career if you lose your seat. That is absolutely true. We were just talking about this backstage. Yale Investments Office which is the exemplar of, they basically invented the game from the Institutional Investment perspective. One of their secrets of success has been getting off the bus on e stop too early. But that takes courage. Most investors lack courage because they focus too much on career risk. What you say no, you are forever in bad graces. We all have examples of, i wrote a blog post called the vista melody of investing. The pistol balaji epis tomology of investing can i said no the xl facebook find twice. Everything in that moment said that was an easy no. Boom they put up one of the greatest funds ever. I have been persona non grata there. Lets just say i am not on their speed dial. Andy, usv has famously wonderful returns. Speaking more broadly, this is a very funky market. How do vcs turn their paper gains into cash on cash returns . Its not really up to us. We dont have control. The companies have control. My partner has been outspoken that company should be going public as a way to get liquidity. That is one way to do it. That is one of the issues. Ipos has of decreased so we do not get liquid. Im having trouble hearin gyou. Josh, what do you think . I tend to agree with you that we are seeing a lack of ipos. Part of that is caused by the fact that there is a massive dislocation between how private markets are valuing companies and how Public Markets are valuing companies. Moment in time private companies would aspire to go public so that they could achieve the Public Market valuation. Were in the rare moment in time where it is the opposite. It is if the Minor League Ballplayers are getting paid far more than the professional allstar mvp major league ballplayer. Until that works itself out in the market, it is going to create a really challenging time for these companies that are being valued in the private markets to realize anything near that price in the Public Market. Markets are efficient, that equilibrium should occur. It looks like we might be seeing some of that correction now in the market. Its interesting because there is a real echo chamber dynamic. One thing that strikes me as an lp, when you get these disconnects, it is very difficult to kind of glide back to kind of this rational ordering. As a result, you get these funky, riskadjusted return inflections where you have got private companies more value than Public Companies. If i could wave a magic wand, i would invent a way to short private companies because that would recreate the equilibrium. The stale prices associated with private companies makes it Public Companies trade every day. Good news. They trade. Bad news, they trade. Private companies typically trade one of two reasons. When there is good news and the company was to fund raise. Or when the Company Needs cash so badly that they are willing to trade on bad news and capitulate on price. What that means is that youre going to need to see Companies End up having to, some of these companies will have to work through their cash before these private companies trade to sort of where the market should be. I think we are at this interesting point where we dont know where the industry is trying to fit what the industry is trying to figure out, are we using the right comps. Are Lending Companies innovative marketplace and should be valued as such, or should they be valued as letters . Should Ecommerce Companies be technologyreal innovators, or are they a Mattress Company . They get valued differently based on that. Even companies that are clearly creating markets like uber nobody knows what to price it at. Ventures talk to business insiders this weekend. Tradedght uber if publicly would go at 25 billion which is far less than its private company value. Do you think there is a watershed moment . Sometime when i talk to experts they are like, the Stock Exchange operator went public and they thought maybe that would be. I believe we may be seeing the first Tech Companies go public this year, this week. I dont know, i think it is a networking company. Are you sort of thinking is there a Certain Company that everybody is waiting on to open up this market . Not necessarily . [laughs] stage investor. For me, i find that the earliest end of the cycle. Ill leave the prognosis getting the prognosticating to the tor. Ic market investig google, companies, microsoft, apple and facebook have a enormous sheets but they seem like very reluctant buyers. Your companies talking to these companies . Yeah. Were, there is a high level of activity. I do not know if there is a high level of desire to pay prices that maybe divorced a little bit from fundamentals. And maybe there was more of that in the past. Seems like there is less of that right now. I guess it is probably also catching a falling knife. Why not wait another six months . There are some companies where they buy them for a far in termstegic reason of access to technology, access to talent. Filling a strategic call or access to customers. Tsappan look at the wha acquisition by facebook in that regard. If it is financially driven, it is going to be subject to the same Market Forces that the ipo are subject to. What are you seeing in terms of valuations . On the west coast it seems like valuations are down a bit. Interviewed last week, was saying the one exception is celebrity investors, meaning serial entrepreneurs created companies and the space where they have expertise. Is that true on the east coast as well . We have seen it on both coasts. Valuations of taken a slight dip. Remember in the last four years, the average valuation has almost tripled. So, even if it is down 10 or 20 , its still a very attractive time to be an entrepreneur. What you think, andy . We dont really track valuations that much. Every deal there is a moment in time where theres a company that desires to have an investor and has a certain price desires to invest at a certain price. I dont see any generalizations that it is higher or than before. That is is higher or lower than before. There is uncertainty, so entrepreneurs may be more flexible than in the past. I do not track valuations. The vcs you dont think are more price sensitive . As a firm that does not invest that often. Eight to 10 times a year. It does not extend out to generalization. You see amany companies. Sure. For us, we need to invest what we think is the right amount of money and get an ownership position that allows us to deliver people like chris their returns. You said entrepreneurs are being more flexible. Can you get more for your dollar . Maybe a couple years ago they say, we will give you 15 . Now they are, take 20 . We dont attempt to get more for our dollar. It is not like a commodity. The right amount relative to the risk relative to ask the expectations to deliver our lps some money. We do not want to be that much because that means it comes out of the other side. It is interesting because i talked to a lot of they see honest broker in a sense. And not one of these sharks from shark tank. Im kidding. But its interesting because in palo alto valuations expectations have been kind of cranking ever affords. Upwards. I think we are seeing the first chill where we started to see some tech company layoffs. From my feed, i invest in a couple of dozen funds. I am a big Second Derivative guy. Im not terribly smart. I remember it is the rate of change. While the market is still going up. The rate is slowing. That is what we saw in q4 and q 1. As we see the market plateau in terms of expectations im seeing some investors. The market is not clearing for some companies. For the transactions to get done. Hopefully we will see a reset of Investor Expectations and entrepreneur expectations to get us back to an interesting kind opportunity. Ential as the market has gotten choppy over the last couple quarters, it is also important to realize that you have a whole generation of founders, and to some degrees funders, investors who have never been through a downturn. If youve been in the industry for the last seven years, you have seen straight up. So, its also just important i dont think its ever as bad as people think it is. It probably was not as good for the last seven years in terms of where the markets are. Most and venture firms have inflated marks. Josh, you identified seven years. I will even say that i think08 was a gag. Most companies, and i should not say that necessarily but most gobies have cash for 1218 months at any given time. That was a very short dying to. Downtrun. Urn. I meet with a lot of folks that are raising funds and say in 08 this is what i did. I remember 01 and 02. I was at princeton. I relearned what you saw this grinding. Every quarter we are down 20 . 8 quarters ofd, markdowns. That was a grinding downturn that is where you had financing risk. You had all kinds of syndicate risks. Nobody has seen for 15 years. You dont think we are heading into that . I dont. I think people will say, puff their chest and say i have lived through a downturn have no clue. We are two generations removed. At some ellevel it is differt this time. Yes. Part of the challenge is to figure out how it is different or in what way. I agree it is a challenge when you have been an environment of 10 years of thriving asset prices. That is the cadence you know rising prices. When they are not rising, you need to learn new rhythms. At the same time, in that 10 period we got computers in our pockets. Figure out what ways it is different and find the right clearing prices. At the same time, it does not feel like the world is falling apart. It does not feel like the world is falling apart but the question is how different is it . It seems to me like it is different but you hear investors say there is a fundamental misunderstanding even though the opportunity is global. Even though everyone has a smartphone and their pocket. There is going to be a small number of breakout winners. Do you guys agree, disagree . Has the opportunity is the size of the Winners Circle changing . Are the winners getting bigger . Yes and yes, right . At some level, the leaving companies today the leading companies that did not exist 10 years ago are incredibly powerful position. They have an incredible advantage. At the same time, the opportunities seem broader, too. And thats a tough balance i found in my First Company in 1992. Right when the year before the web browser was invented and saw the internet rise. I remember everyone talking about how the internet is going to disrupt every portion of daily life. It really has. Yes, while you now can go global and yes, you are mobile. I dont believe that we are done creating amazing companies. But i also do not believe that this time is fundamentally different and this time is 3x larger than the last time. And the market is going to need to figure out how to price that. Everyone was talking about a speculative bubble when amazon went public. They went public at a value of 500 million. You now have the amazon 2. 0 raising in the private markets at a 1. 5 billion price. So, you know, the opportunities are still there. But im not a believer that you are going to see a massive increase in the number of Epic Companies that are created. From my seat, one thing im cognizant of is the return is a function of the price you pay. As weve seen pricing go up and up in terms of startups, jet is an example. Literally you can point at any start up. Theyre raising one thing that strikes me, if i look at my portfolio and josh is in my portfolio first round, first round has a Budget Companies that would be in the s p midcap 400, which is amazing. I see entrepreneurs raise money in the private markets. You have to think about how my going to put the mooah in the coolah. You have got from the valuations to the exit, we open up that the capitaler and comes back to me, are we getting the kind of returns we expect or are the returns becoming more pedestrian . I believe thiss, time it is different, that you will see larger outcomes. That is great, but all of the losses portend bigger holes. That is what i worry about. The paradox is that i think maybe i disagree with josh. I think the opportunity is much greater than 3x. Couuld be could be 10 or 20 or 100x. Is a reality. The question is where do investment returns come from that . And thats uncertain. If the investment returns dont we need toeed what return to you, what are the implications of that to the next generation of funds or entrepreneurs . I dont have an answer