Ben Gilbert: evaluation

Transcript context

…Yes, it definitely keeps running. That $2.5 billion, because they didn't need money, they only took a little bit of money into the company and then the rest of it was a tender offer to purchase secondary shares. There was a whole process going on, everybody got a chance to sell a little bit. If you remember, we sold a little bit and the last round was $500 million. At $2.5 billion, we told the company, you know something, thanks but no thanks. We're not going to be part of this tender process. What we did was we ran our own little tender process. We said, you know something, we will do this SPV and we’ll participate in the round. Then we will run a tender process amongst our LPs and say, if anybody really wants a chance at liquidity, here it is. If they want to rollover, you could also roll over. We don't want to force anybody out. We wanted to give them a chance to roll over on a no-fee-no-carry basis. The reason we were going to provide no-fee-no-carry is, first of all, no fee, because we're going to work with this company regardless because we still had a big position. Why should we charge any fees? No carry, because we were crystallizing the carry as we did that distribution. They already paid us that carry from that fund, so if they rolled over into this new vehicle, we shouldn't charge anymore. It was a free rollover if they wanted to roll, but a lot of people decided to cash out. It was interesting and we cashed out some too. As GPs, we know we've been toiling away for a long time. We didn’t have a whole lot of fund returners at that point. We cashed out half of our carry and rolled over the other half. It was a good thing for everybody. We did that and then fast forward later, there was another round. When we did the $2.5 billion, it was $125 million SPV. After we did that, we didn't think we would ever do another SPV on top of that. But yet again at $4 billion when that deal happened, we did another $125 million. That's how it starts to get big, $125 million plus $125 million, now you got $250 million, plus we had another round after that, the pre IPO route that $45 a share. Now, when you think about all these rounds, though, it's crazy to think even at the $45 a share, which people thought was crazy. That was a $30 billion market cap. All the rumors about Roblox went public at $8 billion. I have no idea where they pulled that out but I think it was the reporters saying well if the last round was $4 billion then the IPO must be two times that. It must be at $8 billion. Everybody said it's going to go public at $8 billion, maybe $10 billion. This is famously the IPO that got pulled because people or the company presumably have thought looking around at where tech companies are being valued going out today, this wouldn’t make sense. We actually should raise more in the private market and then decide if we want to go out next year. That's right. Those pops were just insane. We felt helpless to control it because if you do a traditional IPO, you have such a limited supply. You just can't and a lot of people wanted access to this deal. They didn't get a chance to invest, so they were going to buy, but as soon as they did the price would spike up, and then we knew that it would come back down. We just didn't want people to get burned. It just didn't seem right. Also for the sellers. All these employees and shareholders wanted some liquidity. Why should they sell at this artificially low price just because that's what the bankers wanted? It doesn't make sense. We wanted to try to explore and find the right price and we thought the right price was going to be much higher than the IPO price. We did find some investors to validate that. It should be at least $45 a share, which is a $30 billion market cap, way higher than the $10–$15 billion, maybe people thought it should be priced at. We bought more at that point. That's again a key lesson in terms of how we think about the business and holding on to our winners longer. I think that tells the whole Roblox story. I skipped a whole bunch of other things that happen in between because this whole Roblox journey would not have happened at all in terms of making these big investments without this other little company called Woowa Brothers in Korea. That was one of our early winners. We always said that we didn't think Woowa Brothers was going to be our biggest winner, but we always said for a number of years that this is our most important company. If we screw that up, we screw up all of Altos. The reason is we use that company to test out so many different theories about the business and about what we want to do, what kind of VC we want to be. Woowa Brothers was the main reason that we registered to be in RIA to do the first SPV. Woowa is this little food tech company in Korea that did $1 billion in net revenue last year in GMD. I'm not sure what it is, $7 billion or $8 billion, surprisingly big for a little country of South Korea. We had been involved with that company again from very early stages as well. That company is so fascinating because the founder is one of these non-consensus founders. He did not go to one of the top colleges in Korea. In Korea going to a top college is like a really big deal. Education is everything there. He was a designer, went to design school and started this little company that failed. He was in debt and he had to go back and try to pay off his debts. He started this company after he paid off the debts or most of it. The company was growing pretty fast. We decided to bet on it. We thought it was like the Grubhub of Korea at the time before the whole physical delivery. We thought this company could be maybe $30–$40 million in revenue. Maybe we can exit. In Korea, you could take a tiny company like that public. We didn't think it would be that big, but it got to a $10 million run rate.…

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