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20VC: Altimeter's Brad Gerstner on Why Supercycles and the Powerlaw is the Most Important Thing In Investing, Why Portfolio Diversification is the Opposite of Risk Mitigation and The #1 Question Brad Asks All New Recruits

20VC

Oct 9, 2022

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Brad Gerstner is the Founder and CEO of Altimeter, a life-cycle technology investment firm
that manages public and private portfolios. Brad has personally participated in more than 100 IPOs as a sponsor, anchor, and investor. Brad’s notable deals that he has helped lead include Snowflake, Mongo, Bytedance, Gusto, Unity, Okta, dbt, Modern Treasury, EPIC Games, Hotel Tonight and Zillow. Prior to founding Altimeter, Brad was a 3-time co-founder where he sold all three businesses (to IAC, Google and Marchex), a founding principal at General Catalyst; a securities lawyer, a former Deputy Secretary of State of Indiana, and a pilot.

In Today’s Episode with Brad Gerstner We Discuss:

1.) From Humble Beginnings in Indiana to 100 IPOs:

When did Brad realize his original love of finance and entrepreneurship?
What one single question does Brad ask all potential new recruits to determine if they have hustle?
What does Brad know now that he wishes he had known at the beginning of his career?

2.) The Power Law and Supercycles:

What is a power law? Why is it the single most important thing in investing?
How do the best investors in the world build a framework around supercycles?
How does Brad approach market sizing? How does Brad think about market creation when aligning that to his thesis of investing in power laws?
How does Brad determine if a large opportunity is a “super-cyle” or a short, time-stamped fad that is unsustainable? How does Brad assess the importance of market timing?

3.) Building Anti-Fragile Portfolios:

Portfolio Construction: Why does Brad disagree that the answer to risk mitigation is portfolio diversification? How many companies is enough companies for a diverse portfolio?
Price Sensitivity: How does Brad reflect on his own relationship to price? How does this process and mindset change on re-investments? What is needed for Brad to re-invest?
Time to Exit: How does Brad analyze when is the right time to exit a position? What are the single biggest mistakes people make when it comes to timing their exit?

4.) The Venture Landscape: Today, What is Happening?

Why does Brad believe what has happened over the last 24 months is a great disservice to founders?
What are the biggest examples of a complete lack of investor discipline?
How should we think about private company valuations in today’s market? Is today’s pricing actually just the new normal? How has the public market pricing impacted the deployment of growth stage checks? How will this play out in the next 12 months?
Why does Brad believe there is “not blood on the streets yet”? How does the speed of interest rate change impact our ecosystem so dramatically?