Ramtin Naimi
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Invest Like the Best with Patrick O'Shaughnessy · Ramtin Naimi on the State of Venture Investing
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What Is the Biggest Mistake Ramtin Naimi Made Building Abstract?
Ramtin Naimi says the biggest mistake he has made building Abstract is raising every fund too small. On every fund, he could have kept an identical return profile with about twice the capital. Limited partners would have received the same quality of return. Founders would have received more capital. Abstract would have led rounds more often, instead of coming in as a co-investor, and the firm would also be known for leading later-stage financings.
Limited-partner comments on size flipped with the market. The first fund was $100 million in 2018, and limited partners told him a first-time fund of that size was too big and that he should raise less. The latest fund is $800 million, and limited
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Is the Current Venture Cycle More Like 2019 or 2021?
Ramtin Naimi says the current venture cycle could still be 2019 rather than 2021, even where the behavior rhymes with the last boom. In 2021 the companies were not that interesting. SaaS businesses growing 5x, then 3x, 3x, and 2x were called best in class. A company with $8 million of SaaS revenue and a very constrained TAM could raise at a billion-dollar valuation, and a seven-year path to $100 million of annual recurring revenue was the exciting case. Round structure, deal volume, and the pressure to keep up with the market all look similar. There was a six-month window in 2021 when firms were ripping checks, and a lot of the investors from that window look back and wonder what they were t
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Why Are Hot Venture Rounds Getting a Second, Pricier Tranche?
Ramtin Naimi says the hottest companies now sell a second, much more expensive slice of the same round to the firms that lost the first one. A handful of firms get preferential pricing, which he calls tranche number one. Firms that lose the deal used to keep a relationship with a small check and wait for the next round. In 2021 a fast follow a couple of weeks later came in at about 2x the valuation. In the current market the losing firms do not want to wait for the next round. They ask what they have to pay to get into the financing the same day, and the price is usually not 2x. It is usually three, four, or five times the primary price, raised in tandem with the primary. He calls that slice
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Why Is Silicon Valley the Best Place to Start a Company?
Ramtin Naimi says Silicon Valley stays the best place in the world to start a company because of how many people there write personal checks before any institution shows up.
No other startup region has ever taken off the same way. Silicon Valley has the largest density of individual check-writers by an order of magnitude, probably 100x or greater. People there run around writing 100k to $1 million personal checks off their own balance sheets to put companies in business before they are institutional. Some employee balance sheets are already the size of a huge angel fund or a huge seed fund. A person will write a million dollar check and, if the money is lost, will not care. The mentality be
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Why Do Seed Deals Assume a Trillion Dollar Outcome?
Ramtin Naimi says seed prices follow a moving goalpost for how big a startup might become, and the current goalpost is a trillion-dollar outcome. In 2016, when he started early-stage investing, people priced every company as if the best case were a $10 billion outcome. Toward 2021, Stripe, Databricks, Airbnb, and DoorDash approached $100 billion valuations, and investors priced other companies as if a $100 billion best case applied to them. Only the companies already on track to be worth $100 billion in 2021, give or take two or three more, actually got there.
SpaceX, Anthropic, and OpenAI are three trillion-dollar companies. He bets there might be two to three more, not 40, yet people now
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Why Is One Neolab Spending a Billion Dollars on a Single Training Run?
Ramtin Naimi says a neo lab he met a couple of weeks ago was raising $1 billion in a financing he thinks was its second round, and planned to spend the entire billion next year on compute for one training run. The company said it would probably need to raise another $5 billion throughout next year.
People once expected two or three great neo labs. The count is now probably 80 or 90 neo labs that have raised somewhere between $1 billion and $5 billion. The segment is still small beside the hyperscalers, and the combined scale is not small. All of them need to raise tons of cash, and underwriting how well they are doing is very hard. The practical read often tracks how well they are doing and
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What Is the Customer Value Fund?
Ramtin Naimi says GC's customer value fund finances growth when a company can prove that every $10 million unlocks $30 million of revenue. Patrick O'Shaughnessy calls the fund enormously successful as a product, and it has raised tons of money.
Some venture firms now finance companies with compute as opposed to cash. For a lot of the founders, bringing compute instead of cash is more attractive, because the company will spend the round on compute and the compute can lock in the allocation. The firm still has to secure the compute and get good pricing, then decide whether the compute lasts in perpetuity or covers one training run, and whether the same amount can be recycled three times, two
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Why Are Mega Venture Funds Raising Two or Three Times in One Cycle?
Ramtin Naimi says mega platform funds have probably raised two to three times inside a single 18 to 24 month window, so deployment is about 3x faster than the firms expected.
A venture fund normally raises for an 18 to 24 month initial deployment period, the cash it wants to put into first checks, and then reserves follow-on money to keep financing companies and maintain ownership. Firms raise an amount that fits a portfolio model: a set number of bets and a set ownership level over an 18 to 24 month period. Every mega firm dramatically underestimated how much capital it takes to get that ownership. A larger number of companies looked worth backing, prices were higher, and the checks requir