The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Why VC Returns Will Get Worse, Why LP Incentive Structures are so Broken, What is the Answer to Liquidity with No M&A or IPOs, When to Sell vs Hold Your Winners & Turning $5M into $250M with The Trade Desk | Roger Ehrenberg, Eberg Capital

Feb 19, 2024

Roger Ehrenberg discusses the commoditisation of venture capital and worsening returns. He explores broken LP incentive structures and new players in the market. The podcast also covers challenges with liquidity in the absence of IPOs, the strategy of holding vs selling winners, and personal reflections on success and wealth.

01:11:04

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Episode guests

Roger Ehrenberg

The Trade Desk

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Quick takeaways

Venture capital returns are projected to worsen, LP incentive structures need reform, Liquidity challenges persist without IPOs or M&A.

Deep dives

The Validation of Success

One of the major turning points in the speaker's mindset towards wealth was receiving a substantial bonus early in his career. It provided a sense of validation and confidence in his abilities. Another significant moment was when his boss awarded him a special equity program, which further solidified his belief in his skills and value. These experiences helped shape his perspective on wealth and success.

Where is liquidity going to come from?

01:01

How seed can create strong returns

01:55

Advice for Managers: Be Different, Take Risks, Have a Strong Thesis

01:21

Importance of Recycling Investments in Fund Deployment

00:58

Introduction

3min

Reflecting on Market Shifts and Personal Growth in Transition to Venture Capital

2min

The Complex Landscape of Venture Capital

14min

Navigating Liquidity Challenges in Venture Capital Investments

18min

Strategic Decision-making in Public Markets and Venture Capital

12min

Reevaluating Success and Wealth

16min

Envisioning Future Ventures and Personal Passions in Ten Years

2min

Venture Capital and Gratitude with Sponsor Promotions

3min

Roger Ehrenberg is a legend of the venture industry as the Founder of IA Ventures, among the most successful seed-stage venture firms of this generation, having seeded companies including Datadog (NASDAQ: DDOG), Digital Ocean (NYSE: DOCN), The Trade Desk (NASDAQ: TTD) and Wise (LSE: WISE.L). Today Roger is the Founder and Managing Partner of Eberg Capital, a pioneer in bridging the gap among sports franchises, sports betting, media and entertainment. Roger’s current sports investments include stakes in the Miami Marlins, Real Salt Lake, Alpine Racing, Betr, Commonwealth, Kero Sports, Simplebet, SlamBall, Smarkets and WagerWire.

In Today's Episode with Roger Ehrenberg We Discuss:

1. The Commoditisation of Venture and Worsening Returns:

Why does Roger disagree with Doug Leone that "we have moved from a boutique high margin business to a commoditised low margin industry"?
Why does Roger believe we will see consistently worsening returns in venture?
Is this influx of LP capital cyclical or is it here to stay?

2. The New LPs and The Broken Existing LP World:

Why does Roger think the existing incentive structure for LPs is totally broken?
Who are the most important new LPs entering the venture market?
How do sovereigns and pension funds entering venture change the industry?
Which players have capitalised on this new LP class best?

3. Where Does the Liquidity Come From:

With the closed IPO window and lack of M&A, where will liquidity come from in the next 24 months?
Would a Trump administration open M&A markets? Does Roger agree M&A markets are shut down?
When does Roger believe IPO markets will open again? Will Databricks and Stripe go out in 2024?
If Roger were to run a continuity fund strategy, how would he structure it? What would he do?

4. When to Sell and When to Hold:

How does Roger advise managers on when to sell vs when to hold?
How important is it for a new firm to have a company go public in the first five years?
What are Roger's biggest lessons from selling The Trade Desk at a $2.5BN valuation?
How does Roger think about managers thinking they should manage the public book of their portfolio for their LPs? What are the pros and cons?

5. Relationship to Money:

Do rich investors make better investors? How does investing when you have a lot of cash already change your mindset around investing and exiting?
How does Roger analyse his relationship to money today?
What have been the single biggest needle movers in his wealth journey? How did it feel when he made a $6M bonus?

6. The Secrets to Parenthood and Marriage:

What does it mean to be a great father for Roger?
How does Roger think about bringing his children up with the same level of hunger and ambition, despite being brought up with such wealth?
What are Roger's two biggest lessons on the secret to a great marriage?

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