$700M Venture Capital: Top 5 Strategies For Launching a Fund

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Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller and today I have my dear friend Tomasz Tunguz.

Tomasz is the managing general partner at Theory Ventures, a $700 million AUM venture fund that focuses on one to $25 million investments in software companies. He's invested in companies such as Looker, which was acquired by Google for get this $2.6 billion software company called Kustomer, which was acquired by Meta for a billion dollars. Data observability pioneer Monte Carlo last valued at 1.6 billion and several other unicorns.

So what does this mean? Well, it just means that Tomasz understands how to find the best deals, raise capital and exit for eye popping returns.

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[THE GUEST]: Tomasz Tunguz is the managing general partner at Theory Ventures.

[THE HOST]: Ryan is an Angel investor in technology and energy. 

Transcript

Ryan Miller  

My name is Ryan Miller, and for the past 15 years, I've helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, this show will give you the answers so that you too can enjoy your pursuit of Making Billions. Let's get into it. 

Ryan Miller  

Raising capital and launching investment ideas that people love can be challenging at times. Lucky for you, my next guest and I chop it up on how to raise capital and build a pipeline that investors love, all this and more coming right now. Let's get into it. 

Ryan Miller  

Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller and today I have my dear friend Tomasz Tunguz. Tomasz is the managing general partner at Theory Ventures, a $700 million AUM venture fund that focuses on one to $25 million investments in software companies. He's invested in companies such as Looker, which was acquired by Google for get this $2.6 billion software company called Kustomer, which was acquired by Meta for a billion dollars. Data observability pioneer Monte Carlo last valued at 1.6 billion and several other unicorns. So what does this mean? Well, it just means that Tomasz understands how to find the best deals, raise capital and exit for eye popping returns. So Tomasz, welcome to the show, man. 

Tomasz Tunguz  

Thrilled to be here, I love the show, so it's a real privilege. Thanks again. 

Ryan Miller  

Yeah, yeah, absolutely, we're really fortunate to have someone with your background. I'm excited to get involved in venture capital and how you built this thing and really open it up to our fans around the world. So you've launched this your investment fund, we're not necessarily, we're not going to solicit anything here, but I'm just curious of how you did it. Let's unpack more of the mechanics of what you do. And so when starting out, a lot of people, a lot of investment managers, fund managers, asset allocators, follow this show from your experience, what advice would you give to someone who's building out a fund or raising capital, or any of that on how can someone who's starting out get some early wins on the board? What would you say? 

Tomasz Tunguz  

Yeah, I mean, I think there a couple different parts, the first is, you really have to understand your business model, right? And I think especially in the zero period, it's easy to forget about business models if you are an investor, because capital was so easy to come by. And the 2020, decade will be very different, because at least in venture capital, distributions have not come about. There's big pinch overall on a P fund raising market. So I think the first thing is, really to understand, suppose you're raising $100 million fund, how many fund, how many investments are you making? What loss rate Do you think you total loss rate do you think you expect to make? Typically, on average in venture capital, it's about a 40 to 50% loss rate on a position basis. And then understand, okay, venture capital part of an overall asset management portfolio. It exists on the, in my mind, it's the right hand side. So it's extremely long dated, extremely illiquid, very expensive asset class, but it can produce outsized returns and and so if you have that business model, you should be able to generate pretty significant out performance relative to the S&P or other kinds of investment opportunities, so that's number one. And once you have that, you can decide, am I building concentrated fund like ours, are you building an index fund like like a seed incubator would be an example of a big index funder. Once you have that, then you now you have a strategy, right? If I'm building an index fund, I don't need to do a lot of diligence on these companies, particularly at the seed it's predominantly evaluation of people. But if you're building a very concentrated, research oriented firm, then you'll need some researchers, and you may need some technologists. And so building out that team will be really important. 

Tomasz Tunguz  

And then the last is, once you have those two pieces, you need to craft a story that will be very well received in the market by the kinds of entrepreneurs and founders you want to pursue. But if you can get those three things, if you get the business model, the team and the story together and aligned, I think you're ahead of many people. 

Ryan Miller  

That's right. And when you're, let's say you're on the side you want to raise and fill out your fund on capital raising, really, when you when you're not clear on your story or any breaks in what you just said, the investors are going to know. They're going to know. Maybe you understand the business model, but his team, I'm not sure what they do, and I have no idea why you're doing it, there's no story. Or vice versa, maybe it's like you got a great team, but doesn't really seem well organized or led. It's like a bunch of really smart guys all going in a bunch of really smart directions. I don't know where my money's gonna go. So when, if you have a break in any of those, like, totally agree, man. It makes it really hard in raising capital or finding deals and convincing people to work with you. Would you agree?

Tomasz Tunguz  

Totally I mean, the this is a long raising capital is a long sales like, I'm a software investor, so I speak that language, I think about it is like, this is a 9 to a 24 month sales cycle before somebody will give you money to invest because they're giving you that money for 15 years, typically from us venture firms. And so this is not a one in close this is not selling a car. This is, this is really about, how do you build and develop trust and develop credibility with somebody over a long period of time before they'll ultimately commit and be your long term business partner, because that's ultimately what you're asking from someone.

Ryan Miller  

Yeah, it's a bit of in the business world of proposing marriage, almost.

Tomasz Tunguz  

It is, ya.

Ryan Miller  

In investments, you're like, you want to do this. It's going to be a while, but let's see where this goes, so.

Tomasz Tunguz  

Right.

Ryan Miller  

Yeah, I love it, man. And so, so doing that is understanding the business plan, building a winning team, tying that all together with an effective strategy and story. And then now we're in a position of saying, okay, great, we've built this thing. Now we got to run it, and that's typically, and I'm going to overly simplify it. It's a function of finding good deals and raising capital. Maybe unpack that a little bit of what have you found to be effective as far as setting up a pipeline to just have that continuous feed of deal flow, what are you seeing? 

Tomasz Tunguz  

So again, I think about as a software company, but the very best software companies, they typically have three lead sources or four lead sources. So there's inbounds, somebody's really excited about founders, really excited about you as an investor, and maybe you've written or published a market map or been on an amazing podcast like this one and hear you, and so they email you. And inbound typically increases as a firm's prestige or awareness or brand increases. So for the very, very, very first time, founders out there or new emerging managers, unless you've had a brand that you're bringing to the firm that you're starting, it's likely to be slow at the beginning. The second is outbound, and this is classic regeneration, I'm really interested in synthetic biology, hear are all the companies that exist within synthetic biology, let me go and email them and meet them at events and host events and hustle. The third is around referrals. So most invest if you're a pre seed investor or formation stage investor, there are no downstream, upstream investors of you, there's nobody who's investing in a company before you. Referrals are therefore impossible, but at any stage later on, there are investors who are investing before you, building relationships with people who you admire in those roles, they'll send you investment opportunities because we all want our companies to succeed, and we all want them to raise capital and create a bond of mutual respect that is a very easy introduction to make. And and then the very last part is maybe you can form a company yourself, you can incubate. And I think we've seen incubations maybe in like the 2010 to 2015 range, and a start of Y Combinator, that was quite a bit of incubation company formation. And in there was significantly less, because capital was lower, founders could raise a whole lot more not, not be so dependent. And now we're actually starting to see especially in like web three and other categories where there have been big valuation resets, formation investing makes a lot of sense. So those are the four categories, and as the firm matures, the ratio of those will change, but, but I think it's important to start building those strategies from day one. 

Ryan Miller  

Yeah, brilliant. So inbound, programmatic, outbound, channel or referral, and then incubators, either bolting onto one or creating your own. Is that, did we get that right?

Tomasz Tunguz  

That's right.

Ryan Miller  

Yeah, brilliant, so that's the deal. So high level, 30,000 foot view those four categories, really explore building out your investment fund and really trying to get that steady pipeline of deals. But it does you no good if you don't have money to fund those deals. So the other pipeline that we mentioned is building a pipeline of investors. What are you seeing out there or what's from your experience, what would make creating a pipeline for investors an effective endeavor? What are you seeing that works?

Tomasz Tunguz  

Yeah. I mean, like I said, it's a tough fundraising market, especially for first time funds, I was chatting with a friend of mine, who's an LP, who said she had, she was processes, they were evaluating more than 40 current funds in market this month.

Ryan Miller  

Wow.

Tomasz Tunguz  

And you know that means, kind of put it in perspective, the average year, there are about 7-800 first time funds that raise during that.com not the.com, around like 2020, 2021, that number hit a few 1000, and the total number of distributions that there, that LPs are receiving is less and less and so there's this, there's short term to medium term liquidity crisis, so to speak. No, it is definitely a hard market out there. I think the, you know, we talked a little bit about this before. I mean, the sales cycles are really long, so the pull make sure the goal of a fundraising process is really to engender trust and develop a long term relationship. And it's important to also think about the very best software sellers in the world, they might close one in six accounts. And so for a venture firm, it's probably something similar, maybe a bit less, to have 10 times the pipeline that you think you need to close a business. And then the way I think about it is, there's this arc of meetings, you might have a first introductory meeting where, let's say I'm pitching you, Ryan, you're an LP, you're considering investing. The goal the first meeting is just to get to the second meeting. How do I interest you enough and demonstrate a little bit of credibility and find alignment in our strategy? I need to know what kind of NLP are you? What's your venture capital strategy? What's your typical check size? What is your process? Who are the people in the Investment Committee who might have a view and then how do you think about emerging managers? In our case, how do you think about a solo GP are those blockers? So I'm gathering as much information about whether or not there's an Initial Fit, and demonstrating enough competence to you that I can get that second meeting and I don't want that second meeting immediately. Probably want that meeting three or four months from now, because I want you, Ryan, to go to the annual general meetings the AGMs and see your peers and ask, hey, have you met this guy? What do you think? Have you heard about him in market? What's his reputation? 

Tomasz Tunguz  

And the second time we meet, I want to build on that first meeting, demonstrate to you some depth, bring you some research that I've done, or talk to you about some interesting investment opportunities that might pique your interest and that helps build additional trust. I also want to tell you a bit about what my goals are, either in first or the second meeting. So by the third meeting, I can come to you, say 9 or 12 months later, and say, remember when I said I'd hire a CEO? Remember when I said we would build this particular software system, or we were running a thesis in web three ad networks, which we did, here's what we learned. And then again, now I'm bringing you some value that deepens the relationship, it builds more trust. And then the fourth meeting is typically the ask, right? I'm raising a fund, we're probably going to go out in three or four months, it'll look like this. We've had interesting conversations seems like we're aligned, what do you think is this something that you'd like to do some work on? And by that time, you've had lots of conversations with peers, you've floated it, probably within your IC, if you're excited about it, you've done some background work. And there's enough of a trust where you, as an asset allocators are willing to take some risk within your firm to bet on ours.

Ryan Miller  

Brilliant. I have this viewpoint on raising capital in this industry, and that is really scaling your fund from an AUM and capital raise standpoint. Well, that sounds those are a lot of big words that would maybe make my college professor blush. In reality, very simply, is to scale a fund is really scaling trust and just my opinion. And so your ability to implement and create credibility and trust in the eyes of investors, said simply, I've said this many times, If they don't know you, they can't flow you. And so often, right, it's just like, who are you? What are you about? I don't know anything about you. And learning, so sometimes it happens you go on call, you literally have no idea who this person is, they don't know you. And so your objective, if you want to raise capital and keep raising capital, what are you doing to create trust in the market? What are you doing to create credibility in the market? And by that, I mean in the eyes of allocators, potential LPs, and so showing that you can be trusted, showing that you have stuff together that earlier point of that you have a story that ties your strategy and a great team together. Really, your goal is to build trust and I don't mean fool them into trusting, that's not what I'm saying. 

Tomasz Tunguz  

No deception.

Ryan Miller  

Yeah, that is, if that's what you do this is not the show for you, yeah, and you should go to jail. Well, what I'm saying is actually showcasing and so we talk about the three R's that really tie into the heart of what you're saying is it really comes down to reputation, relationships and results. And so as you invest in those things and see them as assets and grow them and protect what you have as well. So never do anything or say anything or conduct yourself in a way that would make people kind of not be so certain if you're worth trusting. Don't do that, man, not worth it. Don't cut any corners, any anything else to add to that. 

Tomasz Tunguz  

No, I think that's exactly right. I mean, this is it's a reputation business, and so making sure that you take a long time to build that reputation and don't do anything that should quickly destroy it. 

Ryan Miller  

Yeah, take a lifetime to build it, and one false move to take it down. So you know, now that we're talking about some downside risks. I'm just curious, like those are talking wins on the board, is getting meetings and kind of staggering the intention of those meetings while you're capital raising. What about some downside risk, like starting out, or even some of the seasoned bets, there's still missteps that can happen. What are you seeing and what advice can cautionary tales Can you showcase for people starting out in this industry on how not to lose.

Tomasz Tunguz  

I mean, I think the first thing is, this is a business of patience. We invest in a company, it takes 10 or 10-12 years to go public from that investment, and just as much as we're taking advantage of compounding there on the investing side, it's the same thing for a firm. You really need to have a very clear plan, be patient in deploying the capital mission, sure that you're sticking to your strategy, and that's the second point. Pick the strategy, whatever it is, concentrated, index, vertical, specific, focus, debt, equity, stick to that strategy, they were really good reasons, and it's important to remember, we're not traders. As a venture capital the market moves. That's okay. I mean, look at robotics, right? If you were investing in robotics four years ago, you really believed in robotics, it was not a great time. It was capital was very difficult to come by, especially for those companies, super capital intensive. A lot of the machine learning models that are used to manipulate those robots were really good, but not there. And then fast forward into the post chat GPT era, particularly after three, five GPT, three, five, these, and I was just watching a humanoid robot at CES they're pretty impressive. And so it's again, patience and sticking to your strides. If you're deep in robotics, waiting, waiting, waiting, evaluating, picking the right bets and then the market will come to you. And at that point, you generate venture scale returns because you were paying attention to a market that you believed in, that very few others or small number of others were believing in. All of a sudden, it now becomes obvious that robotics is an incredible category to be in. It could be crypto, it could be deep tech, it could be different kinds of software. And so I think those are two of the most important lessons. And then the third thing is, just like any startup or any new business, there will be very difficult days and the ability to manage your emotional state, both as a leader for a firm, if you have teammates, but also just for your own psyche as an investor, is really important, and so they're picking an investing Kira, a Fund Hero who you really admire, whether it's the origin story of the KKR guys or the first 10 years of BlackRock or the challenges that Bridgewater and Ray Dalio had reading those stories under and understanding that these journeys are never straightforward and and investing is ups and downs. I think if you can do those three things, be patient, stick to your strategy, and then have an investing hero who, whether is in the flesh or figment of your imagination, you can talk to Ray Dalio and you can commiserate over a tough day. 

Ryan Miller  

Yeah, or listen to a show without interviews fund managers, just as a non specific example. You know, I love that, that's that's absolutely brilliant. So patience, stick to your strategy and really just have a good support network around you, of people that get it, not just your mom. I mean, that's fine, nothing wrong with that. But I'm just, I think what you're saying is guys that can really go deep on some of the systemic issues that you're facing right now. I think that really comes a long way and and often, I couldn't agree more Tomasz and, you know, I, I've I say this every once in a while, but patience to me is not about waiting, but more about how you act while you're waiting. And also, a lot of us are like, you gotta be patient. Is like, what does that mean? Sit on my hands and just wait for stuff to show up. No, that's not what we're saying, please don't confuse that. What we're saying is it's going to take some time but that doesn't mean you can't be adding value, adding credibility, how are you conducting yourself while you're waiting? So don't go into this, I think what you're saying and correct me if I'm if I'm putting words in your mouth. But I think what you're saying is, if you're going to be in this industry, just know it's a long sales cycle, raising money, doing deals, this takes a while, but have a plan. Don't just be like, I gotta wait for these things to bake and then seven or 15 years later it turns into something cool. Actually say, how are you going to build it? What are you going to do while these port cos are well, as I like to say, they're baking in the oven, right? They're really turning into something, how are you going to conduct yourself? How are you going to build your business? How are you going to communicate with your investors?  How are you going to know how it's coming along and send that out? There's so much stuff that you can do while you're waiting, and so patience has more to do with the conduct you have while you wait, more than just waiting. Would you agree?

Tomasz Tunguz  

Absolutely, yeah, one of them, one of my mentors, told me you should invest like a lion, and rest, rest, rest, rest and then when you find something it really loves, you go after it with everything you have. And then rest, rest, rest, rest, rest. And that's kind of funny, because it's not, you know, true to the animal world, because male lion, I would have imagined, man, I had that bias doesn't actually hunt, but quite right. But I think it kind of it conveys some of the ethos at least? 

Ryan Miller  

Yeah, absolutely. So let's transition to the market, we couldn't have a show called Making Billions, and I'll talk about the market. So what are you seeing out there right now? 

Tomasz Tunguz  

I mean, it's one of the most exciting markets I've seen in a long time. It's also one of the most challenging markets for the same reason. So I started in venture in 2008 and, you know, the top to sell companies were going maybe 1 to 3. They were tripling in their second year of commercialization, so 1 million to 3 million and annual recurring revenue. And then 00 came, and that growth rate started to see top to sell companies grow 1 to 5, 1 to 6 within a single year. And now with AI, it's not uncommon to see companies growing 1 to 10 or 1 to 20, sometimes even 1 to 30. And so okay, let's, let's think about it right here. Traded software company, maybe median forward multiple on revenue is 10 times forward. Company that grows great, maybe you're 20 times forward. So if you go to a 1 to 30, you're expecting a $600 million plus valuation, probably picking more about a billion. But you've grown in a single year and so there's very little information on long term customer behavior. You don't know whether customers are growing, whether customers are shrinking. What's the churn rate? What's the long term quality of that revenue? Whereas 10 years ago, if you were 30 million in ARR or annual recurring revenue, there was probably four or five years of historical customer performance data where I, as an investor, sure I can give that company price, that company, price that company at half a billion dollars, but if I'm looking at a company that's gone from 1 to 30, it's very difficult to look at that longitudinal data because it doesn't exist. And so yes, you have the incredible growth rate, and at the same time you have this quality of revenue dynamic.

Ryan Miller  

Brilliant. And you know, you and I, on another time that we were talking and catching up, you mentioned something that's interesting about the software industry. There's like, a trillion or a trillion and a half in invested assets. It's a big industry, but maybe there are some shifts that potentially could be happening. I know we're not giving advice, but just we're seeing things and trying to draw conclusions as best as we can. I'm just curious, from that one to one and a half trillion dollar industry. What are you seeing out there? 

Tomasz Tunguz  

Yeah, I mean cloud, like you said, cloud is one and a half trillion it's only about 30% penetration. Our best guess is it's probably six. You'll see a doubling of the cloud market cap, because you'll see 60% terminal penetration. And I don't know how long it will take, it to 25 years to get to that first 30%, I don't think it will take that long to get to get to the next 30% because cloud, this is the default at this point. But I do think I mean, with AI, the rates of adoption of technology are significantly faster, right? The deployment of railroads, I don't know, took 50 years. And then you look at the adoption of the radio, it probably took 30 years and then fast speed for television, mobile phone took 10 so. So maybe in the case of AI, you reach 30% penetration of workfloats within an enterprise 10 or 15 years. And the incredible part about all this is that one and a half trillion that we were talking about before for software. Well, most companies spend 3 to 5% maximum of their total OPEX on software, the second or the third largest expenses, typically people. The best part about AI, and reason that we're so excited about it, is AI pursues those labor budgets. You are replacing human work, typically in high toils roles with computers, and you're probably doing it for 1/6 to 1/6, 1/5 to 1/6 of the cost. So this is huge one time or sustained profitability improvement that we expect to see in a lot of these companies. And so the combination of extremely fast growth rates, the ability to produce better outcomes with broader efficiency, I think, paints a very rosy picture for investing in the right categories. And so then the question is, okay, well, what are the categories? And they've historically, or at least in the last 18 months, really been the categories that have been unloved by software. So legal Tech has been extremely challenged, we see a lot of investment there, accounting automation and even roll ups within the accounting world, injecting AI into those organizations, transforming its strategic consulting. You can see that Accenture book, 3 billion, I think, in the first nine months of last year on the AI, which made it the second, first or second largest revenue producer of AI. Second to open AI last year and so there are these really massive opportunities, pretty important to see change, that's why we're so excited.

Ryan Miller  

Yeah, and, you know, I've heard talk of people, and we're on my side, we're certainly involved in this is the infrastructure of cloud companies as well. So there's the direct cloud companies that are producing the solutions, and then there's the underlying foundations of actually building the cloud, data centers and power plants. Do you see them also being an interesting, maybe second order effect in as part of this growth rate? 

Tomasz Tunguz  

Oh, absolutely, Ryan. I mean, I think you look at the distribution of data centers in the world, I think the US has 1100 next closest country might have maybe 100.

Ryan Miller  

Yeah. 

Tomasz Tunguz  

So it's a huge strategic advantage, I think, as a country, for the United States, that we should continue to invest major cloud infrastructure vendors. They spent about 70 billion last year in capex building out data centers. We predicted that number probably reach 120 to 130 billion this year, just across the top three or four infrastructure companies. And the major limiter here is power. I mean, blew my mind. I was talking to a friend who is pretty deep within the energy world, and I was asking him, what is the relative power consumption of electric vehicles compared to data centers? And he said, you don't understand, electric vehicles are just a drop in the bucket compared to these data centers. If you're putting an electric charging station, that might be like 5 megawatts, if you're building a big data center, you're talking about 15 to 30 gigawatts. You're talking about 1000, 1000 extensions in power consumption. And so, you know, I think there's a version of the world where every small town has a little data center and has a modular nuclear reactor or a solar farm or a wind farm, and that that little data center powers the GPU needs, processing needs of that little town and provide some business and and we need to build a build an awful lot of data centers.

Ryan Miller  

Yeah, that's right. And I saw Google was looking to build a data center with a power plant, nuclear power plant. And so you're starting to see that building a data center is not as hard as it is to build a power plant. So building power plants clean energy, a lot of the regulations. I did a whole show on a friend of mine's podcast called, The frontier line. So shout out to those guys who talk about data centers and all of that, and we talk about some of the impediments, and we're saying, hey, a lot of the regulation right now, not to knock on regulators is a very hard job, but a lot of the regulation was written for an energy abundant and now we've got these, like energy hog projects, and we're like, I think we need to update our regular, our power regulation, because with these data centers, which we sorely need to be competitive with, AI really hard to get those to take off and really turn into what we meaning the country needs it to be without proper power. But unfortunately, data centers are really slow to get approved, and the reason why is, if they actually approved all the applications, you might have some serious brown out, blackout issues. So the issue is not, do we need it? Yes, we need it. The issue is, do we have enough power to fill the demand? So anything to add to that? 

Tomasz Tunguz  

I think that's exactly right, I was reading a Goldman report data centers now consume about 3to 5% of electricity, and within four or five years, expected in the US to be closer to 10.

Ryan Miller  

Yep, yeah. 

Tomasz Tunguz  

And so that's huge. And then you also have, like, the cooling systems right to wing, rainwater collection, and they impact the local community, so they're very challenging problems, but I'm excited to see that we will be solving them. And Three Mile Island, we're talking about reopening and attaching it to a Microsoft data center, so.

Ryan Miller  

Yeah, well, I'll keep you posted on how our projects going as well, so I love that.

Tomasz Tunguz  

Huge success. 

Ryan Miller  

Yeah, thank you, likewise. So that's where we're seeing right now, is data centers and cloud companies, and then also data cloud infrastructure companies and power generation. So there's. It's really coming down to AI and based on this dimension of the market. Now, that being said, we also like to look forward and pretend we know what we're talking about every once in a while. But in all seriousness, what are you seeing as far as looking forward, what kind of things are you paying attention to right now?

Tomasz Tunguz  

Yeah, I mean, I think we'll see, I mean, I really hope we see a vibrant IPO market in 2025 that will help fundraising. It will help provide DPI or liquidity to LPs, and you have a lot of investors, retail institutions who are looking to find exposure to AI. It's been very, very difficult to find that. You can maybe see it in the chip sector with Nvidia, but again, maybe you don't want to invest in the hardware layer, and then finding a pure play exposure to AI is tough, and have to invest in a conglomerate, whether it's Microsoft or Google or someone else, maybe Broadcom again, if you want to play in the chip segment. So I think there'll be a pretty significant demand for the for our new listings service Titans, a critical software company that went public earlier this year, traded up 20 to 30% on its first day, even after pricing at the upper end of the range. I think there's pretty clearly demand and then vibrant IPO market, plus a laxer M&A regime, and you ask for the FTC and the change in leadership there, I think should produce a lot of liquidity and everybody's thrilled when there's liquidity. So that's, I think, number one, the macro economically and I'm not a macro guy, and so I would put a big asterisk, but in my armchair, macro economics. For my macroeconomics hobby, I've been looking just at the bond curve in the US. So there's about $8 trillion worth of debt that needs to roll over in 2025 that needs to be renewed, and then an additional 2 trillion for the deficit that we will amass. And so you have 10 trillion, which is us is running about 120% debt to GDP. GDP is around 20, 20 trillion. So you have a pretty significant amount of debt that needs to be rolled over. The long bond is increasing. It seems like the incoming administration is likely to pressure short term rates and and so if you look at the dot plots, you're looking at maybe 50 to 75 basis points, maybe 100 basis points on the upper end of cutting and so you'll have this sort of divergent behavior where the short term bond rates will be falling 50 to 100 basis points, and maybe the long term rates will be increasing, because the unclear who the net new buyers are of US debt and bond market, I think historically, it's more the more conservative market you have the equity risk or premium being at 20 year highs. And so I'm paying attention to that, because if the reverse repo market continues to show signs of decreased liquidity and and overall, the US can't finance it's, or has hard time rolling over the debt, there, there are bigger questions. But I hope, I hope we figure those out and I hope the IPO market rips, and there's lots of M&A and liquidity balance.

Ryan Miller  

Yeah. And every, everybody's, uh, sleeping well and eating well, when, when that happens. So that's, I love it. So would you say just paying attention to the US Treasuries is kind of the key on that, on that one, is that kind of where you're looking?

Tomasz Tunguz  

Yeah, exactly.

Ryan Miller  

Brilliant. So, you know, as we round third base man, this has been great, it's always good to catch up with you man. You've been in this industry for almost, almost two decades man, so I would say there's a little bit of wisdom that would come from this. If you could not pass along any of your money to your kids, but only the principles that you possess today to get there. What advice would you give your kids and pass that down? What's some of the best advice you could provide to your children to achieve success without any money given to them? What would you say?

Tomasz Tunguz  

I'll give you some of the advice I was given when I started in venture and the first thing is, become a great seller. I remember meeting an esteemed venture capitalist, and I asked him, I didn't even know the job existed. And said, How does one become a VC? He said, learn to sell. And one of the reasons is we're market makers. It may not seem that way, but we make a market between limited partners and their capital and founders and their capital needs. And so you need to be able to sell. And there are many different ways of learning some you can sell, boys Girl Scout cookies. You can sell vacuum cleaners. You can sell NFTs and memes. But learning how to handle people's objections, how to build trust over long periods of time, is absolutely essential. So that would be number one, I think, to understanding what the market is. Mr. Market, in other way that Benjamin Graham thought about it, is really important. So teaching children, if they're interested about this is a stock, right? Let's say they love they love their Kindles, or they love their Alexa. Well, Alexa is made by Amazon. Amazon trades. Amazon's worth this much. And why? Why are they worth this much? Will they generate this amount of revenue? It's growing really fast. And what is let's start following the stock. Are other people buying lots of Alexas? And then one day, the stock moves a lot. Why does the stock moves a lot? Well, it's earnings. What does that mean? And let's start talking about multiples and expectations. If you can instill a small sense of what, what that means, what the market does, it puts a lot of the business world in context. And then the last, and I think the most important part, is instilling a level of learning. Because I think if you're an investor, you have to be naturally curious. Literally any conversation that you have with someone on an airplane or at the party or playing pickleball could be relevant. And you need to learn, because you need to learn about what's happening in different countries it can impact. You need to learn about what different technologies might have impact on water filtration or desalinization, because ultimately, maybe you need water that's fresh. In a particular part of the world, and he creates an investment thesis. So those two things, I think, being an excellent seller, running a shadow portfolio to help you understand exactly what the market how the market works. And then the third is a persistent love of learning.

Ryan Miller  

Brilliant you know, one thing that I found in this, I'm totally stealing concept from a book called, Atomic Habits, where he was saying, you know, your identity really matters. So don't get a habit of doing things actually become that thing, so don't work out, but identify as someone who works out. And so saying, like, I had this job 20 years ago where I sold, and it was like, did you sell something, or are you a closer? So you didn't say that, but incorporating that is like you literally feel this in your bones, right? You ever have those meetings, maybe you raise capital, or you do a deal, and you just know deep down, you're like, this thing is going to happen. It is such a good fit. So having that conviction deep in your bones, and you're like, I'm a closer, right? Just like Michael Jordan on a slam dunk, that's like, the guy just he's like, it's going to happen, I already know. And so having that level of commitment, I love it, running a shadow portfolio, phenomenal, just really understanding what the stocks are starting out and really diving into the market. And of course, love learning, because if you're in finance, you're going to read all the time. You have to. So, so before we wrap things up, is there anything else that you'd like to say, any any ways to reach out to you, or anything at all?

Tomasz Tunguz  

Just Ryan, want to thank you for this wonderful opportunity there. The show is spectacular, been a fan for a long time, and it's a real privilege to be here with you going through these questions. So thank you.

Ryan Miller  

Yeah, you're welcome. So just just to summarize everything that we talked about, so become a closer learn how to close deals, close ideas, and really convince people to come together and support a vision and a thesis and really bring whatever support that is, their time, their talents, their capital, whatever that is, learn how to close the deal. The other thing that we talked about is learn how you just got to get involved, and you could, heck, you can run a shadow portfolio, like we talked about. You don't have to have real money on the line, I mean, figure out what's right for you. Talk to your financial advisor but the important thing is you need to pay attention and learn what to see. I think about it like The Matrix movie with all those green squiggles going down, and someone says, I see a lady in a red dress like you got to be able to look at all of that chaos and really see what's actually going on. And then finally, just instill a love of learning you do these things, and you too will be well in your way, in your pursuit of Making Billions. 

Ryan Miller  

Wow, what a show, I hope you enjoyed this episode as much as I did. Now if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better, and make sure to come back for our next episode, where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.