The Trust Game

Notes on trust from different people in the ecosystem

1/ From a Head of IR: Trust is an interesting thing. When you’re a founder with no backing, you have very little trust in the ecosystem, but as you raise your Series B then C, your trust drastically increases. The greatest local maximum of trust is when you return shareholder value (usually via an IPO). Then a few months after the IPO, your trust once again drastically falls. And it’s until you once again become the top 10 most valuable companies in the world, do you have an insane amount of trust again.

For instance, Elon Musk has a trillion dollar premium.

That said, one of the most enduring ways to extend society’s trust in you past the IPO is going public sooner than you think you need to. When there is still more capital in the private markets that’d love to give you money, but you choose to go liquid instead. “Shopify, for example, has enduring trust as Tobi’s been a public market CEO.”

2/ From an LP: “Early in my career, I found myself biased towards managers that I spent more time with. The ones who shared more ended up building the most trust with me. But I realized that sometimes, the best investors aren’t those who are building relationships with LPs, and just doing the work. And quite a few of our investments, we unfortunately got the cold shoulder on, but have done very well.

“Obviously as a large family office, there’s still the preference to build a real relationship with each of our managers. But I don’t index on time spent as much anymore.”

P.S. Our latest episode on the differences between PE and VC (with respect to, GP stakes, duration of the assets, secondaries, continuation vehicles, etc.) with the amazing Julia Rees Toader, who helped build Goldman Sachs into a top 5 asset management institution.