LIQUIDITY: Elon Musk Raises $6 Billion for his New AI Startup, and more! | E1944

David Weisburd intros Joshua Berkowitz, Donald Stalter and Jason Calacanis (00:00:00)

• David and the host express their enthusiasm for the New York Knicks' playoff success.
• The host shares his positive experience attending game four of the Knicks vs. Philadelphia 76ers series and commends the Knicks' performance.
• David and the host make a friendly wager on the outcome of the Knicks vs. Indiana Pacers playoff series.
• The host promotes the podcast's sponsors, OpenPhone and NetSuite.
• Elon Musk's AI competitor, Anthropic, has secured $6 billion in funding.
• Data reveals that emerging VC managers in their first three fund vintages are outperforming established managers.
• The podcast will delve into these topics and conclude with the guests' three most recent investments.

Elon Musk raises $6B for his new AI startup (00:05:02)

• Elon Musk's new AI startup, Neuralink, has secured $6 billion in funding.
• The AI industry is experiencing a trend of commoditization in large language models, leading startups to focus on acquiring unique datasets for differentiation.
• OpenAI is considering licensing its datasets, potentially causing conflicts with entities like the New York Times.
• The AI landscape is expected to comprise a few dominant players and numerous open-source, verticalized ones, with venture capitalists and limited partners unlikely to be major participants due to the substantial financial demands.
• Despite entering the AI field behind well-funded competitors, Elon Musk's proven success with Tesla and SpaceX, combined with his network of companies and access to proprietary datasets, positions him as a strong contender.

OpenPhone - Get 20% off your first six months (00:09:49)

• OpenPhone is a business phone app that simplifies business communications.
• It offers features such as shared phone numbers, customer support, and easy integration with existing numbers.
• Twist listeners can get an extra 20% off any plan for the first 6 months at openphone.com/Twist.
• Elon Musk's new AI startup has raised $6 billion in funding.
• The startup aims to develop artificial general intelligence (AGI), which is a type of AI that can perform any intellectual task that a human being can.
• Musk believes that AGI is the key to solving some of the world's most pressing problems, such as climate change and poverty.
• Some experts are concerned about the potential risks of AGI, such as the possibility of job displacement and the development of autonomous weapons.

Sequoia leading a $6B round for AI (00:13:16)

• Sequoia is leading a $6 billion investment round for an early-stage, pre-revenue AI startup.
• This is a growth equity investment, not a venture investment, with a focus on downside protection and a 3-5x return.
• Elon Musk's track record of success with SpaceX, Tesla, and other ventures reduces the risk of a total loss.
• Sequoia is betting on Musk's ability to attract top talent and compete with other AI companies like Anthropic and OpenAI.
• Musk's commitment and drive give him an edge in the competitive AI landscape.
• The hype surrounding LLMs (large language models) and Musk's reputation attract capital from various sources, including family offices and institutions.
• Tesla's strong financial position provides additional downside protection through potential strategic investments.
• The combination of factors creates a virtuous cycle of capital inflow and growth opportunities.
• Sequoia's investment in OpenAI and backing of its competitor XAI is seen as an economic decision based on profit potential.
• Sequoia has a successful track record of making money with Musk's ventures.
• OpenAI's connection with Microsoft and Sam Altman's influence further enhance its investment potential.

PitchBook's report on Emerging Managers (00:17:32)

• PitchBook's report suggests that emerging managers (in their first, second, and third vintage) have outperformed established managers.
• Correlation between successful founders from certain universities and successful emerging managers does not imply that only investing in such founders is the best strategy.
• Venture capital follows a power law outcome, with the best funds persistently outperforming and most returns concentrated in the top 10%.
• Different correlations push investors towards different categories of firms to back, depending on their situation and access.
• Finding talented emerging managers can yield high returns.
• LPs should view their investments as being in the underlying companies, using GPs to access these companies and paying a fee for this service.
• Following a power law distribution, the more investments an LP makes, the higher their mean return, making diversification important.
• Aim to invest in as many great companies as possible, subject to administrative and relationship constraints.
• A well-diversified portfolio for an LP might include 10 to 15 funds per year.

NetSuite - By popular demand, NetSuite has extended its one-of-a-kind flexible financing program for a few more weeks! Head to (00:20:38)

• NetSuite, a cloud-based financial system, centralizes accounting, financial management, inventory, and HR into one platform, reducing costs and improving efficiency for businesses.
• Jason, an LP in several funds, invests in both emerging and established managers and believes that deal flow is crucial for venture capitalists.
• Jason's team meets with 10% of the emerging managers who contact him and selects one new manager to invest in each year.
• Participating in emerging manager funds generates intelligence, wisdom, and a strong network, helping avoid missing out on deals.
• The speaker compares the current state of emerging fund managers to those before the Silicon Valley Bank (SVB) collapse and emphasizes the importance of being thoughtful and selective when choosing emerging fund managers to invest in.
• Scrappy, resilient, and actively seeking the best investment opportunities are valuable traits in emerging fund managers.
• A generational shift in larger venture funds, with some becoming less hungry and focusing more on portfolio management, creates opportunities for emerging managers.
• Survivorship bias in data from platforms like Pitchbook and Carda suggests that the true performance of emerging managers may differ from what is reported.

The impact of the surge of venture capital in 2021 and its implications for the ecosystem (00:28:18)

• There has been a significant attrition rate among venture capital fund managers, with an estimated 10-20% already gone and another 20% likely to follow.
• Many of the new venture capital funds that were created in 2021 were enabled by the liquidity in the growth stage, with wealthy executives and early employees plowing money back into the ecosystem.
• These "tourist" venture capitalists are likely to wash out in the next few years, leaving the ecosystem healthier with those who are truly committed to the long term.
• Multi-stage funds that are not actively deploying capital are raising their subsequent funds through big investment banks or other parties.
• The speaker's firm has focused on investing in scrappy emerging managers and startups.

Attio - Head to to get 15% off for your first year. (00:30:41)

• Attio is a custom CRM that is flexible and deeply intuitive.
• Attio automatically enriches contacts by syncing emails and calendars.
• Attio provides powerful reports and lets users quickly build automations.
• Elon Musk raises $6 billion for his new AI startup, Neuralink.
• Neuralink aims to develop brain-machine interfaces to connect humans and computers.
• Musk believes that AI poses a greater existential threat to humanity than nuclear weapons.
• Musk emphasizes the importance of developing safe and ethical AI systems.
• A seed investor shares his journey of raising funds and transitioning from collaborative checks to leading deals.
• The investor found that leading deals meant competing with friends, reduced deal flow, and increased obligations.
• After three years, the investor decided to go back to basics and write small collaborative checks again.
• It's important for investors to consider their energy and passion when making investment decisions.

The impact of a positive investor attitude on founders (00:34:42)

• Elon Musk's new AI startup has secured $6 billion in funding.
• Venture capitalists' happiness and enjoyment in their work positively impact the founders they support and the overall success of the fund.
• The pull-through rate, which measures the percentage of startups that receive subsequent rounds of funding, is a crucial metric for venture capital firms.
• GP (General Partner) commitment, as seen in firms like Sequoia and Benchmark, where partners invest significant portions of their personal wealth, is a key indicator of alignment between GPs and LPs (Limited Partners).
• The lack of a preferred return and the potential for carry without performance in venture capital can create misaligned incentives, leading to issues within the industry.
• Less committed partners in VC funds tend to be less involved with their portfolio founders during challenging market conditions, while those with more of their net worth invested work more closely with founders and are more passionate about achieving exits and ensuring success.

The Silicon Valley Bank (SVB) venture portfolio situation (00:44:18)

• Valley Bank is nearing completion of its restructuring after 14 months since its collapse.
• Brookfield and Sequoia Heritage are acquiring SVB Capital, a prominent fund of funds, subject to bankruptcy court approval.
• The acquisition of SVB Capital could lead to spin-out opportunities for its experienced professionals to start their own funds.
• The new entity, Pine Grove, has $340 million in cash upfront and significant earnouts for starting and launching new funds, indicating plans to hire staff and potentially rehire those who left during the limbo period.
• Sequoia Heritage's acquisition of SVB raises questions about Andreessen Horowitz's potential LP allocation to Sequoia.
• The competition and collaboration between top funds are discussed.

Lightning round of last 3 investments (00:49:33)

• Donald invested in Slope, a promising B2B payments company alongside Sam Altman and others. It has explosive growth potential and deep involvement from OpenAI.
• Permit Flow, a software platform for the housing industry, received a $20 million investment from Ciner Perkins at a $100 million valuation. Felicis Ventures also provided a note at a different valuation.
• Field Guide, a trust and auditing software company, has experienced rapid growth and attracted investment from various sources, including Josh's seed investment. Led by Samir at Besser, it has expanded into multiple verticals.
• Dexa AI, co-founded by Josh, is a search and answer engine for podcasts. It transcribes and embeds audio from popular podcasts, allowing users to quickly search and discover information without listening to the entire podcast.
• Elon Musk successfully raised $6 billion for his new AI startup.
• Casey Caruso, formerly of Google and Paradigm, launched Topology, a fund that supports highly technical founders.
• Jake Zeller, founder of AngelList and Spearhead, initiated Pow Set, a group that provides top technical founders with their own mini funds for investments.
• The Liquidity Summit, hosted by the Liquidity podcast, will take place in June with 125 attendees, including 25 speakers and 60 GPs.
• HScore is a real estate investment tool that offers insights and analysis for potential investments.
• Jenny AI is a writing assistant that aids users in composing professional papers and articles.
• Spark Plug is a platform that assists retailers in motivating, engaging, and educating their staff, resulting in increased sales and employee retention.
• David, the moderator, is highly skilled and continuously improving.
• Connectors are individuals with an extensive network of acquaintances.
• Malcolm Gladwell featured the author Keith in a 1999 New Yorker article, referring to him as "the connector."
• David possesses the exceptional ability of being a connector, maintaining an unusually large network of contacts.