 And thank you for joining us today. I've got someone I consider very special with me today here in Finland. And let me explain why I think Alex Bengash is so special. There's kind of like a waterfall in startups that, frankly, in my experience, most founders aren't that well aware of, which is, you know, as an entrepreneur, you raise money from venture capitalists. But where does the money come from? Where does the money that the venture capitalists invest in your company actually come from? Well, it comes from limited partners, the LPs, who invest in the funds that the venture capital general partners, such as myself, that we manage. And now in the land of the limited partners, the LPs, there are players like pension funds, like here in Finland, Ilmarinen and Ella would be examples. There's also foundations. There's endowments of large universities, like in the US, Yale, Stanford, Harvard. And then there's these things called funds of funds, which are actually funds that then invest into venture funds. And Alex has one of these. He manages a fund which then picks out the VCs, who he thinks are going to be the next winners who are able to pick out the best company. So there's this kind of chain going on. And now for most of these LPs, traditionally, the way it works is you invest into Sequoia, or you invest into Benchmark, the most famous brand name venture capital firms. And that's pretty much a guarantee of good results. But this has now completely changed over the last six, seven, eight years. New funds have emerged that have outperformed many of the traditional brand name venture capital firms. And in many of those new exceptionally well-performing venture capital funds, guess who is their anchor LP? It's this guy, Alex, who has a very contrarian strategy compared with many of the other LPs. In fact, when I talked to people about him in the Valley, I heard things like, he's a contrarian. Not everybody agrees with him. He's a hated man. And also, he's a visionary. He's brilliant. He thinks like no one else in limited partner land does. And so that's the reason why I'm excited to have Alex here. And Alex, I wanted to start by asking you, can you tell us what are the dirty secrets of VC that you see as an LP that we don't normally talk about? Can you share us a little bit of the backstory of what's going on right now in venture capital? Thank you so much, Yuri. First of all, I just want to say I'm super excited to be here at Finland and super excited to be here in the land of Supercell and Yuri. And thank you for having me. Yeah, I guess I'm going to be a much more hated man after I give you the dirty secrets of venture capital. So I don't pander to VCs. OK, I always, always root for the entrepreneurs. The first biggest dirty secret of venture capital is that the value, the VCs don't add any value. Explain that one. Actually, most of the entrepreneurs succeed not because of their VCs. They succeed despite their VCs. So one of the most prominent venture funds, best performing funds, I was very lucky you alluded to it. I attribute all of it to luck. I love rooting for the underdogs. And I love it when the underdogs win. Well, VCs typically say that they help the entrepreneurs. They add all this value. So I want to tell you about, tell you this anecdote, which will kind of, so this is one of the best performing VCs, one of the top names, maybe top five. And so I was involved in that formation. I'm sitting down with their managing partner. And I'm saying, can please tell me, how will you help your entrepreneurs? And he looked at me in complete bewilderment. He said, Alex, we're never going to invest in a company that needs our help. So this is this misconception that the VCs add a lot of value. The second dirty secret is which most entrepreneurs know, or most entrepreneurs don't know, but which VCs know very well is VCs get paid by the amount of money that they manage, their assets under management. Correct, right. So because they raise larger and larger funds and they're incentive to do that, they then back companies that require more and more money. Now look at Bird, Open Door. And some of these will be great businesses. But increasingly today you are seeing prop tech businesses in grocery delivery, et cetera, raising billions of dollars. Why? Because VCs want to raise larger and larger funds and get paid on larger and funds. Contrast that. Now contrast that with Airbnb, one of the most valuable startups today that raised $635,000 in their seed round. Airbnb raised less than $5 million in their series A. And they didn't have to raise money after that. So that is the other dirty secret. And the last one, go ahead. So the valuations of companies, you're saying, are actually that VCs constantly complain about the valuations of companies, the deals going up and up and up. And you're saying that actually the VCs are at fault themselves. Oh, absolutely. VCs and even more than VCs, LPs, they're chasing returns all the time, all the time. Whenever they see returns, oh, now returns are in China. Now returns are, most of the times, sectors don't work. It's not just nice to be contrarian. It's profitable to be contrarian. You make asymmetric returns when you're right and alone. You make average returns when you're right and with a crowd. With everyone else, right. What's the third dirty secret? Well, the third dirty secret is that entrepreneurs create all the value. But actually, the VCs have a portfolio. LPs have a portfolio. And entrepreneurs do not have a portfolio. Entrepreneurs take all the risk. Well, we VCs don't like to see our entrepreneurs working on two different companies at the same time. We want them to focus, right? That is true. But one of the tectonic shifts that has happened, Yuri, and you are a great entrepreneur, right? You started Jaikoo, you're an inspiration to me. And so one of the things that we've seen is folks like yourself, Jeff Bezos, Elon Musk, Max Leftchain, they always have a portfolio. Why? Today, an entrepreneur can have a portfolio because the cost of starting companies has gone down. So you've got to explain that one. So you're seeing entrepreneurs, you're saying the best entrepreneurs right now are working on multiple companies at the same time. Multiple products. So they can now do, just like you do multivariate testing on features, well, as the cost of features has gone down, so has the cost of building product. So you can build product, test it, and then scale those products, which get a product market fit. And guess who is best prepared to do that? Entrepreneurs over VCs. VCs have a half-life. They're relevant, and then all of a sudden, they get irrelevant. Their sector goes out of favor. Their knowledge goes out of thing. Their network gets stale. But if you're an entrepreneur constantly building stuff, take Amazon, for instance. Amazon is not just irrelevant. It is the most relevant company. It is the biggest retail company and the biggest company in AI. Why? Because they're constantly building product. And so that is one of the tectonic changes that we are now focusing on. And in our LP land, we're now, just like in retail, you're going direct to consumer. We're going direct to entrepreneur. So you're skipping the fund managers and going directly to invest in the entrepreneurs? So we're not disrupting. It actually helps the fund managers because the fund managers are getting fat and happy, and they're happy to invest after us. So we as LPs can go to the entrepreneurs. They can build companies, and the VCs can invest in their series Bs and Ds. So everybody's happy. So what is what you're talking about here is what, in the valley, has become known as this venture studio model. Exactly. Where one entrepreneur, typically a famous entrepreneur, let's say, Max Levchin, you've got several in your portfolio. In fact, you've got one such entrepreneur here and at Slush with you, Peter Pham, who founded Science, which is a venture studio in Los Angeles. So is this one of the contrarian bets that you're making right now is investing into these kinds of serial entrepreneurs who are no longer just serially building companies, one after the other, but actually building multiple companies in parallel at the same time? Exactly, Yuri. Interesting. So we now have a program. So just like YC has a program, we have a program now for entrepreneurs that can get direct access to sovereign wealth funds, endowments, foundations, pension plans, insurance companies, and they can build an infrastructure. And why is this good? Because for the first time ever, an entrepreneur doesn't have to take any dilution at the top level and they can build compounding advantages. Interesting. And we've seen this. We've seen this. I mean, this is nothing new. You've seen this in Hollywood. There is a Disney film with film studios and music studios, and now it's coming to venture studios. So this is one way in which early stage investing, this is really you're talking about. These venture studios, they typically start the companies from scratch, right? Exactly. Early stage is changing, where it used to be that you'd go to a general partner at a fund who then invested in seed deals, but now you're investing into one entrepreneur who's kind of like a super entrepreneur who can then start multiple companies and you get a piece of each one of the companies that they start. Exactly. And depending on the optics, so some VCs will say, well, it is super unfair to the entrepreneurs who come and do it. Actually, it's not. They get to work with everybody. Everybody aspires to work with a Yuri Engstrom, with an Elon Musk, with a Jack Abraham, with a Mike Jones. So they can work with an amazing entrepreneur, and it's a way of getting quality co-founders. So it just depends on your optic. Well, OK. So Venture Studios is one new model that you see emerging. And now the thing that you're well known for, Alex, is spotting these trends before the other LPs. And you anchored these funds no one had heard of before, Founders Fund, or Chris Saca with Lower Case Capital. These are phenomenally successful funds that came out of nowhere and surprised everyone. What else is happening besides Venture Studios that you're seeing as a new trend that you're investing in right now on the market? Thank you, Yuri. And I just want to be very, very careful. So I just got lucky. So Venture and technology is a very, very humbling business. So if you take yourself too seriously, what we're doing is we're running experiments. So just like Amazon runs experiment, the thing to remember is that some of these small experiments may have asymmetric returns. So Venture is power law distributed and even on the fund side. So we hope, again, that some of these experiments would lead to exponential returns. So a couple of other things. One thing, one trend, which we're fairly deep on right now, is funds that have network effects. So YC, Entrepreneur first here in Europe, they are prime examples of firms that don't have just a brand effect. So a benchmark, a Sequoia baseline has great brand effect. They have their brand. Whereas these firms now have network effects. I'll just give you an example. I spoke with an entrepreneur who had raised their money from one of the best VC funds on the planet, top three VC funds. And so I saw him raise the seed round. And then he said, Alex, he's building one of these challenger banks, but in the business side. And he said, Alex, I think I'm going to go to YC. And I said, why would you like to go to? You've already raised the seed round from one of the best investors on the planet. I was like, that's the easiest place where I'm going to get up my first 100 customers. So these network effects are now so powerful, just like Amazon has network effects and Google has and Facebook has. So he's basically going through. He's willing to take the dilution 7% in the case of Y Combinator, YC, because he knows that Y Combinator now has over 200 companies that they've funded. 2,000. OK, over 2,000 now. Well, that's right, actually. Sorry. Gosh. And these companies, he can access through Y Combinator's platform and recruit us his first customers. The other startups are his first customers. And that's worth the dilution for just going into YC for that. Exactly. So here's this thing. So there's a lot of talk about these great big funds like Sequoia and SoftBank, raising these very large late stage funds. And I think that there's been a lot of attention in the media on these larger and larger deals that are happening late stage. But in the meanwhile, when I look at what you're doing, it seems like what you're doing is you're actually, it used to be that you had the earliest stage of investing was the seed stage. It's when a company went to raise their first round of capital before series A. But in fact, what you're doing with a firm like Entrepreneur First, is there, it was like you had the seed, and then there were firms that did pre-seed. But now you're talking about actually pre-company, because the way an entrepreneur first works is that they recruit potential founders who haven't even decided on what company they're going to build. So is this one of your bets is actually going, even earlier, to pre-company investing? I'll tell you, I'll tell you something. So those of you who are students of venture capital will know that venture capital is cyclical. There are good times and bad times. But it's always a great time to be an entrepreneur. During good times, you can raise capital. During bad times, you have a plethora of awesome talent. Yes, that is our strategy. Because today is probably one of the worst times to be a venture capitalist. Because of the valuations being so rich? Because of the valuations, because of the amount of capital that's there, which goes back to our first point. Why are VCs raising more and more money? Why are they focusing on models that are capital intensive? They're also capital efficient models. Those capital efficient models are being set to the wayside. So you see the opportunity in venture studios on the one hand, these platforms with network effects, such as Entrepreneur First and Y Combinator, that are really funding individuals. They're not even funding companies initially. They're just funding somebody to join a program like EF and figure out what company they're going to come up with during their period inside of that program. One of the reasons why we're so excited and Alice Bentic is here, those of you who listened to her from EF. So EF in this case is not only disrupting venture capital, it's also disrupting education. So so many, Peter Thiel amongst many others, so many people have said how ill-prepared are people coming from our education system for the needs of innovation? So that is, you know, that's kind of a blue dimension. And there's this notion that it used to be that we thought that the world was market limited, right? And now there's this concept that the world is actually founder limited. Exactly. That's a great point, you know? I think what we're seeing, what we're seeing again and again is these ideas that nobody, they say Airbnb was the worst idea that ever worked, you know? And so with platforms like EF and YC and others, you can test out those markets that others won't touch. And then lastly, there is this idea of these funds that are actually using machine learning, these API-based funds. Is that an area that you're playing in as well? So I think you've probably seen, you've probably seen a lot of firms now focusing on machine learning using scraping Twitter and getting data from public sources as well as filings and stuff. We think that most of that is, most of those efforts will not lead to something we have found instead that the best signal will actually come from APIs. So as all of you entrepreneurs know, when you build your company, you're building it on a tech stack. You're using Google Maps, you're using Stripe, you're using Segment, GitHub. And we are now partnering. That's again, if you have an API-based company, you should come talk to us. We are now partnering with these API companies to help them enhance their ecosystem and to get the earliest market signals. And if you talk of value, those API-based companies that also have a data co-op, that also have a marketplace, they can actually materially impact the fortunes of a startup. They can help that startup accelerate. And you've seen big ecosystems develop, like those around Shopify, Stripe, exactly. So huge ecosystems. And then that case gets us back to machine learning, right? That's where you get these APIs are the delivery mechanism for the training data. It's a small startup will not have the training data. That training data is then embedded with the voice, the first API-based fund that we're doing is actually a voice, a machine voice company, natural language processing company. Exciting. All right, well, there you go. Some new trends and some dirty secrets. Come talk to us later if you're interested in continuing the conversation. We thank you and thank you, Alex. Thank you, Yuri. This has been so amazing. And I'd like to give a shout out to the Slush team and Yuri for inviting me here. It's been an amazing, amazing experience. I hope to be back. I hope you're investing some Finnish firms. Awesome. Thanks.