The v C Firms Don't Get Money Up Front, Right?

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A, that's exactly right. I think there's three sort of scenarios that play out historically. One is new fund managers. If you're just getting started for the first time, if you're an l p and you've already seen the sort of re balancing happening, you're way less likely to go and give a net new manager funding. O right, you're still dealing with what's a capital calls. Capital calls are just a fancy way of saying, when you've decided to invest that hundred thousand dollars into the v c. Yu, don't give them all the money up front. Yes? They only give you a specific amount up front,. And then you overtime draw down

Recently in the Lux Capital office, my colleague Chris Gates, the producer of the "Securities” podcast, along with biotech investor Shaq Vayda were talking about the global macro environment and venture capital. Tech stocks hit their zenith in November 2021, and now a lot of VCs have slowed down their investments over the last couple of months. That's led to something among limited partners and asset allocators known as the “denominator effect”, where portfolio managers move money from one asset class to another as each asset class performs relatively differently.

And so they talked about the denominator effect, they talked about a couple of other different patterns that they’re seeing in the venture world, and I figured that since it's summer, and it's July and we’ve already have talked about enough terrible news on the “Securities” podcast the last couple of weeks, I figured we could do something a little bit different, which is sort of a Venture 101 on the denominator effect, and talking about basically what we're seeing in the world today. So here's Shaq and Chris, take a listen.