Pedro Sorrentino - Managing Partner, Atman Capital

Welcome to another VC Wisdom pod. We have Pedro Sorrentino with us today, manager, managing partner at Atman Capital in SF, spends time between there and Brazil. Interesting person altogether, has been angel investing before Atman, has been the venture capital world for quite some time. Pretty sure you pulled out investment in LATAM as well, and you were co-founder, CEO at Recomind.net. So Pedro, I'm glad to have you on the podcast. Tell us a bit more about yourself and what you've been up to.

Yes, uh, thanks for the time and thanks for the invite, Charles. It's a pleasure to be here.

Uh, what have you been up to as of late?

Uh, most of what I've been doing right now has been trying to validate certain pieces within AI, uh, inside, uh, the fund. I think with everything that has happened in the past 3, 4 months, like, a lot of my professional life has changed. And, um, now, you know, I'm going to be here all summer, uh, and in San Francisco, just meeting with tons of people, founders, sometimes other investors, and so forth, to try to figure out what are some of the next opportunities within, uh, within the, the, the AI world. Um, so, so that, that's how I spend like most of my time right now.

Nice. Uh, give me examples of your last investments, how they reflect your, your thesis, and yeah, what have you found in the market as of late? What insights in the AI world have you found, uh, contrarian but true?

Um, the latest one is a company called Bluefin. Ai. So, uh, you know, blue is the color and then f-y-n. Uh, and basically they're trying to— they're automating economics for the infrastructure of fintech companies. So ultimately, understand it's an API-first agentic solution for any fintech that's trying to make sure that, you know, sending the right amount of money that it should be sending and receiving the right amount of money that should be receiving. Without having to spend, you know, lots of times in, you know, running a back office infrastructure with a dedicated controller and so forth. So, uh, the, the, the real issue is that, uh, oftentimes they're running billing in one place, reconciliation on another, accounting and doing their booking on another place, and so forth. And the certain aspects of moving money internationally are simpler with stablecoins. But when you add stablecoins, multi-quarter finance, you know, different, uh, currencies, embedded financing, agent systems, and so forth, just trying to just move money around without a human in the loop is very hard. And that company in particular is trying to make sure that, uh billing is, uh, is actually the right, uh, and, and accountable, accountable way, both for the client side as well as, you know, who is actually responsible for, for moving that money.

Before you were a VC, you were a founder, right? And also you worked at SendGrid. Tell me about your time there and, uh, how you converted yourself in an investor in VC.

Yeah, I, I joined SendGrid at a very early age. I, uh, for the company, so I was our 11th employee. When I left, we were more than 400 people. So kind of like lived through multiple different SendGrids within that same company. You know, we went from a different era, pre-AI era, but we went from 0 to 100 million in 4 years, went public, uh, without being in the course. Went public at an $800 million valuation and then sold the company for $3 billion. Um, but the, you know, and I did a little bit of everything there. I was a product manager, I helped us grow internationally, and my last job was running our corporate startup programs. And, uh, you know, I, I was the email guy, the service provider guy that would help certain entrepreneurs raise more money or, you know, hire and find some of the right people to work with. So through that, I ended up building this reputation and then got an opportunity to interview with a fund that I joined as an associate in San Francisco. And then for the last, uh, 8 years or so, I've been running my own funds and raising capital. Uh, then that's, that's, that's basically what, what my life has been for the past few years.

And SendGrid, right? Like, I feel this company has not evolved in the past, like, 10, 15 years. They've been acquired by Twilio, maybe to put them out of competition. But yeah, even Twilio stock, I'm not sure how it's doing nowadays. Yeah, it doesn't seem to have moved the needle that much. Exploded in the last days, interestingly enough, but What are your thoughts about that company itself nowadays? I'm a heavy user of SendGrid, but I've been dissatisfied many, many times with like their customer service or their prices and the way that they treat their customers. I was even like at some point, yeah, maybe I should acquire that company. Of course, it's not possible because it's publicly listed, but I feel Twilio are not managing them the way that they should. What are your thoughts on this?

I have no thoughts. I'm not a customer. I, I was there more than a decade ago, but like, I'll share this, like, have you built a $30 billion public organization? I have not. Uh, so I don't know. I, I, uh, that, you know, if, if you're personally dissatisfied, you can use, uh, there's Resend. There are like other APIs as well for that type of stuff. You know, oftentimes acquisitions become— they sometimes will kill innovation. But like, my only thoughts about the— about Centurion are thoughts of gratitude. You know, it was the first time I've had a liquidity event. I've— it was a fundamental part of my career and very transformative. You know, everyone that was from the era that I was there, it's been 11 years, so I had no one's head anymore. So be difficult for me to give you a really sincere opinion because I don't, I don't live that life anymore. But, uh, for me, it was— I got nothing but, uh, you know, gratitude for it, for that.

It's not, it's not what I'm asking. I know that you're grateful. I mean, you're, you're— I'm asking like your time there, how was it? It's a YC company, SendGrid, as well, right? So I think it was fun. No, when were they founded? The 2005?

2009-ish, I think. I, I think it might, it might have been 2010 or 2009, I don't recall. But, uh, no, no, they, uh, uh, YC invested in a competitor called Mailgun, uh, but the— that I think ultimately was acquired by Rackspace. But the, the SendGrid was the first IPO of, uh, Techstars.

Techstars, right? And your time there, so they employed you, you, you were a bunch of hats, right? Because they were still small at the, at that stage. And the Twilio acquisition was 2018 for reference, right?

Yes. Okay.

Um, yeah, interesting company altogether. I just think, yeah, uh, sometimes sadly when, uh, bigger companies acquired smaller companies, they don't do do much with them and they sort of stagnate. And I feel the public markets is like playing such a different game. It's mostly about just hiring a good CFO that will tell the masses to, yeah, upvote the stock and the rest of the business most of the time suffers. Have you, have you followed the GameStop CEO trying to acquire eBay as of late?

Yeah, I mean, I, I was just reading it on the, on the news, um, you know, but, and I saw that eBay rejected it, but not, uh, just more in terms of, uh, I have this like audio routine with my Alexa in the morning and then we talked about it, but it hasn't been something I took a deep look into, uh, something like that, because I would not be interested in being a shareholder of, uh, you know either eBay or GameStop.

You think that the future is more on the private side of things rather than public? Uh, have you observed the secondaries market as of late a lot?

No, I think that the future, um, you know, when it comes to the secondaries market, it is just so messy right now and so unregulated. I think maybe you've seen what Anthropic posted, I think a couple of days ago, about like, listen, all these providers are banned, and effectively, if you think you bought our stock through one of them, the purchase would be considered void. So if you see how some of these, um, you know, I've— I get offers to buy SpaceX, Anthropic, kaoshi or whatever every day, or almost every other day. And you never know what you're getting yourself into because this could be synthetic products or multi-layer SPVs, and it's just really hard to make sure that like you actually have a legal guarantee that there's someone with a fiduciary responsibility on the other side doing the right thing. Uh, so I— my, my recommendation is more You know, I think the two most interesting products that I've seen that have been launched as of late to give retail investors this type of exposure has been USDC by AngelList, and then another, uh, like late-stage venture funds that Robinhood launched. I think those are quite credible and an interesting way for people that want to have some sort of exposure there. No more than 10% of your net worth. Um, because you got to be ready for both the illiquidity profile of the asset as well as just the, the potential that like you might lose all your money.

You're fundraising nowadays. Tell me a bit more how you raise from LPs. What's your strategy when it comes to this?

Uh, I, I think that, you know, to raise capital from other people, it's all about trust and reputation, especially when you're asking them to, you know, hey, this is going to be a blind pool of capital, and this is a thesis about like what we think that the world's going to look like in the future, and we're going to go after and pursue it. So you're fundamentally selling yourself at all levels. You're selling your, you know, your ability to make decisions about how the future is going to look like at present value. So it's very much a game of a reputation and and past returns. I think that the lives for people like myself, you know, small managers, you know, we're a $50 million fund, so it's, uh, it's so much harder because the— there's just like incredible concentration of capital into the super, super large players, um, and that's just becoming a more prevalent, uh, reality. So I think that the most, you know, interesting thing I would say probably to do right now, uh, in many ways, is to just, uh, start companies because you have so much, uh, and not necessarily companies that look like VC funds, but just companies in general, because you have so much leverage with, uh, artificial intelligence. And if you manage to properly organize yourself, uh, and, you know, make content like how you're making so you build the correct distribution channels. I think, uh, you know, that, that can be super interesting, right? Like, um, AI leverage combined with distribution and taste equals a positive future, right?

I still think it's, uh, some thesis to start your own fund. Generally speaking, I would advise founders to found something first and potentially then have exits. Before that for sure. But yeah, we can hear your cereals, Pedro.

You can what?

You can hear your— we can hear your cup of tea or whatever you're playing with right now. Yeah, I think your audio— I think, yeah, founding a company nowadays is still super hard, if not even harder than before, right? I don't fully subscribe to the, the fact that it's— yeah, it's never been easier to start a company, but to be successful, it's still really hard, uh, because, yeah, like, all people woke up at the same time. Everyone have access to ChatGPT and Anthropic. I think a bunch of young founders are making older generations obsolete, but it's still a fair thesis to bet on like 10 to 100 of them and leverage the power a lot to be successful as a fund. I think that can be great even for young, youngish founders like myself, and take all the best winning bets that you made and potentially repurpose them in some ideas that you have while getting data from them. I think that, that can be a cool thesis. I'm saying this because I'm launching my funds as well. Do you agree with these points?

No, I disagree. And the reason why is because, um, the experience that you get as an investor is, uh, you know, so much more about sales and networking, uh, and, uh, but when it comes actually to the certain types of hard skills that you need in order to build the company successfully, uh, you know, you just have to be executing and doing that. The other, the other aspect about what you say, or you said, like, sure, like, you, you get diversification on the portfolio construction, like you've mentioned. That's true. But the underlying security that you have, that, um, whatever you're gonna do is gonna do okay, uh, lies on the fact that you have to be investing in people that are good people and honest people. Because if you invest at the earliest of all the stages, um, it could take over a decade for the company to actually have any sort of liquidity event. And by that, by the time that he reaches that point, he might have already raised a bunch of money. You sit on a different part of the pref stack, the governance might have changed, you, you could be a very irrelevant part of that cap table. So, um, what I've learned, at least doing this for about 11 years, over 120 investments, 10 unicorns, um, is that it's actually a much slower game to build wealth with venture, uh, than what I've anticipated. The only way you can get wealthy faster in venture capital is if you have access to start with a minimum of $100 million, uh, and then, uh, for your fund. So then your stream of income through management fees is actually what's making that a reality. But, uh, I have funds that are 7-year funds, and they've, they've returned like 30% of the capital that was invested. Right? So like they said, like 0.3 DPI 7 years down the line. Uh, if I, you know, just grabbed that money and bought Microsoft or Nvidia or Bitcoin, it would have been better. So it's not really like a super easy, uh, type of a proposition. And then statistically also with Anthropic in particular, just that company alone might return 30% of all the dollars that were invested in the asset class altogether. So the power of AI is just becoming more powerful. I, you know, there's just this whole concept in economical concept called the Matthew Effect that comes from this idea from the Book of Matthew in the Bible that talks about like those who have will have even more, and those who don't have it will have nothing. And I think that that bifurcation is becoming significantly more true faster. So, uh, in the end, it depends a lot on the goals that you have in, uh, in your life. But I, I, but I disagree with you because it's just based on my experience, uh, the time that it takes for you to actually get your liquidity is just so long that if your idea is to basically make a set amount of money, uh, so you have enough wealth and security for your family and so forth, like, it's much faster to do that as a founder than an entrepreneur, even if you're a founder investor, you know.

But your odds are so small, and I do feel that, yeah, if you're a founder and an investor, I do think that gives you like a extra wings. Generally speaking, I think as a founder, you need to be a great allocator as well. Where should I allocate my money? On this bet, on this person? And that, that's a skill to have. I feel that, yeah, like VCs that were early, like the first VCs like Sequoia, right? They hit the jackpot. The market was like fully theirs. They were at the right place at the right time. Dot-com boom and bust, got to be careful as well. But I think VCs leveraging AI is a better opportunity than most founders because most VCs are quite old and don't leverage these technologies. To your point, my goal is not to get rich off like my management fee. I think that would be pretty ridiculous. But getting rid of carry for sure. And I think, correct me if I'm wrong, but I do think that the exit cycle is getting shorter. Nowadays, uh, which would make it also a more interesting thing.

No, no, it's, it's the opposite. The exit cycle is getting longer. You're having funds extending their lifetime period that, you know, significantly more than a decade long. There are literally more than 1,000 private unicorns that were expected to have gone public in the last like 3 to 4 years. There's a big liquidity crunch that everyone is hoping that the SpaceX IPO combined with OpenAI and Anthropic will just unleash a bunch of different public— Stripe as well. Just, I mean, there are so many examples. Um, I think that if you are telling someone that, you know, you're trying to raise money and your funds are 10-year funds, you're lying because you're going to need extensions. Uh, that has been what I've observed in true several funds that I am an LP at. And, um, but 10 years, right?

Like, I'm talking about the post-window after COVID. Anthropic is still a very young company and We speak from first principles, right, with AI and one-man billion-dollar company, no need to hire a lot of people and to wait, and liquidity being able to be accessed faster. I do think we should see way faster exits than historically a company that needed to scale for 10 years, 20 years. And I think generally speaking, compliance is getting smaller on most deals. So technically we should see like deals that can exist in months, uh, in the future. So I think the window is getting smaller.

I see your point. Well, I think in, in— I mean, but it's just for like a really small subset of, of companies in that regard. If they're building that some of these big conglomerates want, uh, then yes, like if you actually are falling under, um We've had a company, for instance, that, um, in 2 and a half years, almost $100 million, uh, because they were just developing something that was core AI for a very large fintech. So you're right in the sense that, like, but you have to be building something that is just really, really, really focused on, uh, the roadmap of some of these very, very large organizations. For everyone else that isn't doing, you know, applied artificial intelligence focused on this one particular territory, then I think that the path is different. And we can't forget, of course, the thousands and thousands of companies that were around before this AI explosion and are still looking for uh, a path, right, um, of either liquidity. And, you know, I haven't— I have a comparable example for another company that I've invested 8 years ago, and it was a 10-year company, and they were sold for the same amount of money than this other AI fintech. So I think it depends a lot on the market that you're working on, you know.

Good point. Pedro, where can people find out more about you and your VC?

You can follow me on Instagram. It's my handle, or X. My handle is the same for everything. It's @pedrosorin. And yeah, that's usually where I am all the time.

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