“The city has to be doing more, around transportation, around housing… You have to get rid of the nimbyism and you need to quadruple, if not quintuple, the amount of housing. You need to tell that engineer from the University of Michigan that he can live here on a salary of $80,000.

[In the meantime], we look at our startups, and the minute that they start to spend more than 15 percent of their burn – good money that we give them – on rent, a huge red flag goes up. When they, on a per-head-count basis, are spending so much, we start looking at the productivity of the technical team. And if it’s good but not great and they’re spending this insane amount of money [versus] a different team in Redwood City, we start to ask ourselves: “Are you so convinced that success is going to happen in this city at 1.5x the cost?”

Because for every dollar that someone in Mountain View or Redwood City is raising, you [in San Francisco] have to raise one-and-a-half to two times that just to get to the same point. So you’re cutting your half life in half. To prove that you can take an Uber from some fuckin’ shitty bar to another shitty bar? Like, I don’t understand.”

And here he talks about the possibility of his venture firm also getting into the real estate development business. I couldn’t resist blogging about this.

“We made a big decision with our last fund to build an organization that looks really different than a venture firm, and that organization is going to be this hybrid, bastard stepchild of Berkshire Hathaway and Blackstone and BlackRock.

What I mean by this is that we want to have a large permanent capital base and we want to make really long, discontinuous bets on companies and sectors and trends.

And one of the things we talked about was having a real estate fund …[because] we owe it to our companies to alleviate some of these problems when no one else is going to. If we went and built one million square feet somewhere of mixed use, where you work and live, and we rethink what it means to have a modular living environment for a millennial cohort that wants to work at companies and doesn’t necessarily have kids, we can do that in a way and give that back to our CEOs as a benefit of working with us.

And you can probably make the economics work. Because we only really care about the equity of the company anyways. And the equity in the real estate will take care of itself if you take the 30-year view. So we’re at the point now where we’re like, wow, we should raise a few billion dollars and get into the real estate business and solve this problem systematically for our companies. And maybe in that, it becomes a blueprint for how others should do it. We’re just basically going to act as our own city-state and decide how to do it ourselves.”

It’s interesting to think about what the economics might look like if your primary goal is simply to provide space to your portfolio companies (entrepreneurs) so that they get more (financial) runway and, therefore, have a greater chance of success. I’d love to see that pro forma.

“The city has to be doing more, around transportation, around housing… You have to get rid of the nimbyism and you need to quadruple, if not quintuple, the amount of housing. You need to tell that engineer from the University of Michigan that he can live here on a salary of $80,000.

[In the meantime], we look at our startups, and the minute that they start to spend more than 15 percent of their burn – good money that we give them – on rent, a huge red flag goes up. When they, on a per-head-count basis, are spending so much, we start looking at the productivity of the technical team. And if it’s good but not great and they’re spending this insane amount of money [versus] a different team in Redwood City, we start to ask ourselves: “Are you so convinced that success is going to happen in this city at 1.5x the cost?”

Because for every dollar that someone in Mountain View or Redwood City is raising, you [in San Francisco] have to raise one-and-a-half to two times that just to get to the same point. So you’re cutting your half life in half. To prove that you can take an Uber from some fuckin’ shitty bar to another shitty bar? Like, I don’t understand.”

And here he talks about the possibility of his venture firm also getting into the real estate development business. I couldn’t resist blogging about this.

“We made a big decision with our last fund to build an organization that looks really different than a venture firm, and that organization is going to be this hybrid, bastard stepchild of Berkshire Hathaway and Blackstone and BlackRock.

What I mean by this is that we want to have a large permanent capital base and we want to make really long, discontinuous bets on companies and sectors and trends.

And one of the things we talked about was having a real estate fund …[because] we owe it to our companies to alleviate some of these problems when no one else is going to. If we went and built one million square feet somewhere of mixed use, where you work and live, and we rethink what it means to have a modular living environment for a millennial cohort that wants to work at companies and doesn’t necessarily have kids, we can do that in a way and give that back to our CEOs as a benefit of working with us.

And you can probably make the economics work. Because we only really care about the equity of the company anyways. And the equity in the real estate will take care of itself if you take the 30-year view. So we’re at the point now where we’re like, wow, we should raise a few billion dollars and get into the real estate business and solve this problem systematically for our companies. And maybe in that, it becomes a blueprint for how others should do it. We’re just basically going to act as our own city-state and decide how to do it ourselves.”

It’s interesting to think about what the economics might look like if your primary goal is simply to provide space to your portfolio companies (entrepreneurs) so that they get more (financial) runway and, therefore, have a greater chance of success. I’d love to see that pro forma.

Share Dialog

Share Dialog