0:00

Could the most money possible and the best company's

0:02

possible, the best price possible? That's Venture

0:04

Capital. There's nothing else in it. My word,

0:06

we have such a great show in store state. This

0:08

is twenty VC with me, Harry, step and stay

0:10

were joined by the one only Brian Simon

0:12

at Founders Fund. And for those that missed our prior

0:14

episodes, Brian is a partner at Founders Fund,

0:16

where he's led investments in the likes of a firm

0:19

or a health wish, asana,

0:21

oculus, and Postmates to name a few.

0:23

Brian also sits on the board or is an observer

0:25

to the long term stock exchange. SolioGen,

0:28

Cloud Nine, Modern Health, and of course,

0:30

Angel. But before we dive into the show

0:32

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0:34

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0:36

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ventures dot com and check out their YouTube

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channel, Market X Ventures. But that's

2:49

enough for me. So now I'm so excited to hand

2:51

over to a dear friend in Brian Singham and

2:53

partner at founders fund.

2:58

You have now

3:01

arrived at your destination.

3:03

Brian, I always love our chat. So first,

3:05

thank you so much for joining me once again.

3:07

Stay, Brian. No problem hearing. For those that may

3:09

miss our star show, How did you make your way

3:11

into the world of adventure? And how did you come

3:13

to be a GP at Founders Fund? In short,

3:15

one's two minutes. Man, it's been a long

3:17

time now. started at founders fund

3:19

almost fifteen years ago. I was at

3:22

Google. I was an engineer and an engineering

3:24

manager. I started investing on the side

3:26

there in two thousand six two thousand seven,

3:28

investing in a whole bunch of y Combinator companies

3:30

when y Combinator was still brand new,

3:32

decided to make that my full time

3:34

thing, and o seven trying

3:36

to figure out what to do? Do I raise my

3:38

own fund? Do I do something else?

3:40

That's when I met Sean Parker, and

3:43

he hey, why don't you check out what we're doing

3:45

at founders fund? I came in and that's when

3:47

we were considering a little investment in a company

3:49

called SpaceX and said,

3:52

this is what I wanna do. So I joined up wanna

3:54

dive straight in on investing mechanics, to be

3:56

quite honest, Brian. I had Keith on the show

3:58

not too long ago, and he vigorously

3:59

kind of debated orders agreed with my

4:02

dear, which is buy low high.

4:04

Do you agree with that principle? And

4:06

can you give me an example of either way

4:08

where it's worked for you? venture to

4:10

me is just very different from normal investing.

4:13

I don't claim to know anything

4:15

about macroeconomics. I

4:17

don't follow it all that much.

4:19

At the end of the day, Venture is a game

4:22

where you make an investment and you're not gonna see

4:24

any payoff from it a decade. that's

4:26

going to span a whole bunch of different

4:28

macroeconomies. So this

4:30

concept of buy low, sell high,

4:32

like using regular stock market,

4:34

phrases and mentor to me just doesn't make

4:36

any sense. You have to just invest in really

4:38

good companies. Now, you can't

4:40

pay ridiculous prices because that

4:42

limits your upside. Right? venture capital is a game

4:44

of upside maximization and the higher

4:46

price you pay for something that it's gonna limit

4:48

your upside potential on that. So you

4:50

can't just go and invest at ridiculous end

4:52

of twenty twenty one prices and things.

4:54

However, either the company is going to do

4:56

really well over time in which case

4:58

you'll be able to sell it high

5:01

or sell it higher or it won't, in

5:03

which case it won't matter to you at all.

5:05

Do you agree with the thesis or notion

5:07

that Adi's Asian Masters because of by

5:09

very nature of liquidity being ten years out

5:11

and the long nature of our business that we don't need

5:13

to pay attention to macroeconomics and macro

5:15

markets because it is so far away from

5:17

where we are in the insertion I think

5:19

it's good to pay attention to it

5:22

because for instance right now we're

5:24

at a point in time and we're talking in October

5:26

twenty twenty two. There's such a huge price

5:28

mismatch between, let's say, a

5:30

company's last round of financing

5:33

and what the macro is that

5:35

it's really difficult to invest

5:37

right now simply because private companies

5:40

lag public markets in

5:42

terms of pricing by quite a bit. Because

5:44

private companies don't have a

5:46

new price associated with their companies unless they

5:48

raise another round of financing, many

5:50

great companies are opting to just not raise

5:53

money now and try to ride it out. Right? And

5:55

so I don't think it makes any sense to

5:57

not pay attention to macro. You have to

5:59

pay attention to I just don't believe anybody

6:01

can actually predict it. Right? My partner

6:03

Peter Teal is brilliant macroeconomic on

6:05

this and probably the best in the business at this and

6:07

he can't even predict this. Right? Correcting

6:09

macro is extremely hard. So

6:11

I think you pay attention to it. You let

6:13

it impact your investing, but I don't

6:15

think you try and predict it or sweat

6:17

it too much because there's nothing you can do.

6:19

In terms of what we go from here, I see these three

6:21

stages, structured rounds coming

6:23

now, increased late press, you name it

6:25

and then down rounds and then recaps.

6:28

Would you agree with that kind of stage of

6:30

process of how we're gonna see this shake into

6:32

the ecosystem? mean, you're already seeing a

6:34

whole bunch of companies go out of business

6:36

or companies trying to just raise bridges

6:39

to get them through this or the best companies just

6:41

simply say, we can let some people

6:43

go and ride this out or not even let some

6:45

of the best ones who don't even have to let people go and

6:47

just ride it out. Right? So it's tough to do

6:49

a deal. you don't wanna just be doing these deals, like

6:51

doing recaps while theoretically

6:53

playing into your buy low sell

6:55

high, it does have a lot

6:57

of negative impact on

6:59

companies. And so sometimes they just

7:01

can't ever get out of that. And again, with

7:03

Venture being about upside max optimization.

7:05

Are you really just looking for a good

7:07

deal? Or do you just want to

7:09

invest in the best companies? And I would

7:11

argue it's all the latter.

7:13

I totally agree that you and you're saying

7:15

about kind of it's hard just to get a deal done. Is

7:17

that not a prime opportunity for someone like

7:19

founders funding the notion of be really when

7:21

others are fearful and keeping that in

7:23

mind. It depends. We only want to invest in

7:25

the best companies. Right? And so if one of best companies,

7:27

if we see something as a best company, we can

7:29

actually get a reasonable price on it? Absolutely.

7:32

we're going to invest. But even the best

7:34

companies want end of twenty twenty one, beginning of

7:36

twenty twenty two prices where other

7:38

comps in their market have gone down by eighty

7:40

percent we're just we're also just not gonna play that

7:42

game. Like, we don't have any pressure to invest

7:44

capital. We've done very well by RFPs.

7:46

They trust us with their money, and

7:48

we feel zero pressure to invest

7:50

capital. We can just wait. There's always gonna

7:52

be really good companies regardless of the macro

7:55

cycle, and so we can just wait

7:57

until prices actually catch up. and then we can

7:59

invest in great companies at great prices.

8:01

Can I ask when you look back at twenty one and

8:03

twenty? On reflection, do you think you deployed

8:05

too fast? Yes. in twenty

8:07

one. That said, like, we had our best

8:09

year ever in twenty twenty one. Our strategy

8:11

has always been to distribute

8:14

shares, slash capital right

8:16

when we can in companies simply

8:18

because we don't think we know the

8:20

public markets better than anybody else. Well,

8:22

we do better than anybody else's private

8:24

company investments. And so why would

8:26

I do anything else? But you had to make decisions

8:28

in twenty twenty one on whether you had a

8:30

bunch of companies go public, it was kind of a

8:32

crazy year for Venture Capital, and you had to make a

8:34

decision on whether you held those or

8:36

distributed and we've just always had

8:38

a history of distributing these

8:40

shares at lockup just because we don't know more

8:42

about the public company investing than

8:45

anybody else. and so we tend to not

8:47

hold those. If you think about the last few years, I

8:49

have two big lessons. One is he bluntly, I should

8:51

have been more strategic about taking cash off the

8:53

table. And two, I think I should have

8:55

been less focus on what the next round

8:57

ambassador would want because you can't predict how that

8:59

changes over time as it has done

9:01

recently. Are there any kind of lessons or key

9:03

observations you're telling the team that

9:05

you think through from the last few years?

9:07

We've had so many discussions about this and

9:09

about what the last couple of years

9:11

means. And did we go too fast in twenty

9:13

twenty one? And of course, we did, but you

9:15

could always predict the past. And

9:17

predicting the future is much harder.

9:19

To me, I've never been able to be convinced

9:21

that we should be doing anything other

9:23

than investing in the

9:25

best founders or best companies

9:27

possible at the best prices. I don't really

9:29

know what we could have done, what to

9:31

do differently. And right now, I've

9:33

personally slowed down investing a ton simply

9:35

because you cannot get a good price on the

9:37

best companies. Okay? So I'll slow down.

9:39

But I don't know any other way of doing

9:41

venture capital We always have any lessons or

9:43

anything else. I have not

9:45

found anybody who can change my mind that this

9:47

is just about investing in the best

9:49

companies possible or putting the most money into

9:51

the best companies possible or the best price possible.

9:53

The weird thing I find is I'm almost especially

9:55

the early stage scene. It's price

9:57

inversion element where you see the

9:59

migration of later stage capital down earlier

10:01

and earlier stage, and so actually for

10:03

obviously the best pedigree founders. the

10:05

price is actually higher than ever because you've

10:07

got an increased amount of capital going

10:09

in. And how do you think about that then? It's

10:11

why we haven't deployed such capital and

10:14

we'll have Six months, my typical strategy is to try and

10:16

deploy just a huge check into

10:18

the best companies. We did a two hundred

10:20

million dollar check this year into

10:22

Andrel. That for us is

10:24

no brainer to plow a large check at

10:26

this time, but there's been nothing

10:28

else. Even though I've seen great companies,

10:30

they're not interested in raising

10:32

yet October twenty twenty two prices. And

10:34

so I would love to invest in them, and we'll

10:36

see there's probably going to be some, then

10:38

it'll be like, alright, we get it. raise a little

10:40

more capital right now. We won't raise a lot

10:42

more capital because we don't want to take that decision, but

10:44

we'll raise a little bit more capital now just

10:46

to shore up the balance sheet and

10:48

do it at a regional price and those were gonna be all

10:50

over. But so far in twenty twenty two, the only big

10:53

check I've done is Andorale. Can I ask if you were to

10:55

draw up a list of 123 names companies

10:57

that you would love to deploy capital to, but

10:59

I haven't. Where where should those be? No. I'm

11:01

not gonna do that because I'm actively trying

11:03

to do those right now, and I don't

11:05

want there are actively companies that I'm

11:07

trying to deploy. A large amount

11:09

of capital to its is always just a matter

11:11

of can you come to the right

11:13

turns with the team? do you advise your

11:15

founders today? Anders that are saying, hey,

11:17

fundraising markets have changed. We've

11:19

got eighteen months left. Is it gonna get

11:21

better? Is it gonna get worse? Should we raise

11:23

more out? My answer is I do not know. I

11:25

don't try and predict macro

11:27

economy. Period. I only play games that

11:29

I know that I can win at. Right? This is why I

11:31

don't do public I don't buy any public

11:33

stocks ever. And I don't try and do one of

11:35

those VCs who sits there and says, oh,

11:37

the funding environment's gonna be bad for a

11:39

long time or it's gonna get better,

11:41

nobody knows. You only do what

11:43

you can for right now and you

11:45

assume that right now is how it's going to

11:47

be. And so if you're a company that needs to

11:49

raise some money, like, I advise doing

11:51

it at a reasonable price that doesn't

11:53

kill the company, or some companies

11:55

are going to have to shut down. This

11:57

is just the reality of this business is you get

11:59

into these cycles, and I've seen this before. I've been

12:01

doing this for a long time, where, yeah, a lot of

12:03

companies are just gonna shut down and that just is

12:05

how it is. Brian, do you know what I love? You're

12:07

so different to every other VC with the

12:09

pontifications and the heart. It'll

12:11

it'll pontificate. Here's what I do. I have

12:13

a really what I think is a pretty good knack

12:15

of picking the best founders,

12:18

doing things that have a potential to

12:20

be very outsized. have no

12:22

fear of backing the truck and

12:24

plowing a whole bunch of money into those companies.

12:26

That's what I do. I don't sit here and try and

12:28

tell you about macro. I don't I

12:30

don't know how to run a company. That's not what

12:32

I do either. I'm not I would be a

12:34

terrible CEO. All I can do

12:36

is spot really good founders in

12:38

outsized markets doing things that have

12:40

true motes. and I'm pretty good at

12:42

that. So I lost money for the first

12:44

time earlier this year. And my take away was

12:46

actually that no matter how well class I

12:48

found it, no matter how brilliant the team is, If

12:50

they're in a market which is just inherently

12:52

challenging, vulnerable, no teams can get out

12:54

of it if it's sometimes so hard. How

12:56

much does market play a role in your mindset then

12:59

given your ability and not to pick

13:01

founders. A lot. If you have a really good

13:03

company in a tiny market, it's still not gonna make a

13:05

move the needle on a multibillion dollar venture fund.

13:07

Right? It's gotta be both. it's gotta be really

13:09

good company in really big market to move

13:11

the needle on funds of these size. And

13:13

so thinking through the market and thinking through

13:15

that definitely plays some role. I mean, founder

13:18

quality is still eighty to ninety percent

13:20

of my investment thesis. Right? Do you think

13:22

that Abiomed was a big market? Of

13:24

course. If you could see that this was, like,

13:26

taking over in terms of, like, people were thinking

13:28

about staying at hotels versus

13:30

staying somewhere else. Especially, we had a

13:32

huge advantage living in San Francisco at

13:34

the time because the

13:36

hotels here are just like terrible, and the

13:38

hotels are in such terrible locations in San Francisco. I

13:40

don't even know how people come visit San Francisco. Right?

13:42

Like, the hotels are just in terrible

13:44

locations that you just have to stay in an

13:46

Airbnb here because you don't wanna

13:48

stay in downtown San Francisco. We definitely

13:50

saw at the time that the network effect on

13:52

Airbnb was time was huge. And it

13:54

was clear that they could penetrate into

13:56

the travel market or

13:58

even the lodging market, which I guarantee

14:00

Harry is huge. Do think your winners

14:03

are obvious early? Oh, depends on which

14:05

stage we invest in. Do I think our winners are

14:07

obvious at the seed stage? No. Do I think

14:09

that we invest? Do we plan a better dark more

14:11

than most people because we can see

14:13

founder quality better and get

14:15

into those deals with the best founders.

14:17

Yeah. I think they're pretty good. But, no, I don't

14:19

think you can predict hundred billion dollar

14:21

companies at the seat stage. That's silly. But you can

14:23

predict, hey, this company has a way

14:25

better shot at being a big company

14:27

than most. and that's what you're doing at this at the

14:29

early stage. You said about kind of loving to

14:31

see the larger checks, kind of

14:33

what a year, say, your two hundred million dollar check,

14:35

like you mentioned earlier. In terms of, like,

14:37

reserves, that mean you kind of put the check-in

14:39

and that's your position? Oh, I

14:41

don't think about reserves ever. I never think

14:43

a second about reserves. we are

14:45

good investors, we raise another

14:47

fund, which we've done,

14:49

and there's no reason the best companies

14:51

can't go across multiple funds, but I don't

14:53

think any of our LPs are upset that

14:55

there's multiple rounds of SpaceX in

14:57

multiple different funds. How do you respond to

14:59

LPs? We both know LPs. you don't have

15:01

to invest in founders. Again, we're in a good

15:03

position. Again, success

15:05

breeds success and we're in an unfair

15:07

advantage here, but this is why you have to take advantage of

15:09

unfair Right? We've been so

15:11

successful at cross fund investing

15:13

and we've done everybody so

15:15

well ourselves, our LPs, and everybody

15:17

else that, yeah, we've got broad

15:20

latitude to do this is because we've

15:22

historically just made a ton of money for people

15:24

by cross fund investing. So why wouldn't they

15:26

want the LPs want to make money? I think the

15:28

success in Manchester is like cyclical and

15:30

self fulfilling. I said this to Doug at

15:32

Sequoia, and he was like, no. People

15:34

don't just come to me and say, hey, take

15:36

your best company from me. But it does not get

15:38

easier with more success necessarily. Certain

15:40

things don't. Right? We Yeah. What doesn't

15:42

what doesn't. When we've made money for people, you

15:44

have a lot of more latitude to it on how you

15:46

can invest money. So you've got the freedom to do

15:49

whatever you want without people breathing down

15:51

your neck. Now does it get easier to invest

15:53

in the best companies? Well, sometimes, yes,

15:55

sometimes, no. Right? success breeds good

15:57

brand. And the venture capital

15:59

is, do you see the right deals? Can you pick the right deals?

16:01

Can you get into the right deals? The getting

16:03

in part has a huge amount to do

16:05

with brand. founders wanna be associated with

16:07

winners. That part does breed success. Now,

16:09

does it help with the seeing stuff?

16:11

No. And that's why I'm so always so

16:13

obsessed with are we seeing the right

16:15

companies? And brand can be noise and

16:17

detrimental for the seeing part, for the

16:19

diligence, for the seeing company's part,

16:21

but I'm obsessed with making sure that we've got

16:23

a broad range of people sending us deals.

16:25

Oh, if you go one level beyond the

16:27

seeing, people often be quite binary

16:29

around it's a picking game and know

16:31

the best deals are the picked ones.

16:33

The seeing, picking, and getting in parter

16:35

equally is important to me. The best firms

16:37

all know Like, you have to be topped here at

16:39

all three of those things. And even if you can pick, you

16:41

could luck winning a deal over us

16:43

or whatever if we're there at the same

16:45

time. Right? You've gotta be topped here at seeing,

16:48

picking, and getting it, they're all equally as

16:50

important. The part that's just harder and harder

16:52

over the years as you do this longer

16:54

and quite frankly get older

16:56

is the seeing. You've got to keep your

16:58

networks fresh. You've got to make sure that you're

17:00

somehow still connected. Right? because your

17:02

networks get stale and we know adapter die.

17:04

in this game. Right? You can't just rely on,

17:06

like, the PayPal mafia forever. You've

17:09

gotta just keep adapting, keeping our

17:11

networks fresh, interesting ways of doing

17:13

sourcing is I'm obsessed with that

17:15

stuff. I think we're we're fine at

17:17

picking and I think success breeds

17:19

even more success at the getting in,

17:21

but the seeing part is just really hard.

17:23

But when you sit around the table with

17:25

other partners today, slung time at fans

17:27

fun, and you're saying, this is our

17:29

main challenge. This is our main challenge. Well,

17:31

right now, it's a little bit different. Our main challenge

17:33

right now is there's just a huge price

17:35

mismatch between the public and private markets

17:37

so there's not much you can do about that. There's not much we can

17:39

control about that. Right? because that's a lot macro related,

17:41

and I never try and control macro. Of the

17:43

part that we can control, and

17:45

this is literally what I obsess about

17:47

at the lunch table is the sourcing part.

17:49

How are we making sure that we at least

17:51

talk to founders of awesome companies

17:53

that are out there? Where does that conversation go? Like,

17:55

you you see other funds creating

17:57

products like accelerators, in key

17:59

bases, scout networks, how

18:02

where's your authorization there? I mean, look, the

18:04

way that we do things at founders on this,

18:06

everybody runs their own strategy based on what

18:08

they are the best at. I don't know how to run a company, so

18:10

I'm not gonna go start a company, but Prae

18:12

is excellent at starting companies. Keith

18:14

is excellent at starting companies. So

18:16

great. So train Keith, start companies

18:18

And, yeah, hopefully, one of the reasons they do

18:20

that is to have an awesome company in both Andirl

18:22

and Open Store are fantastic. Right? But

18:24

another reason is to keep their networks fresh.

18:26

they were gonna have a lot of people working for them that are eventually

18:29

gonna go start companies and hopefully you get an

18:31

Anduromafia and an open store

18:33

Mafia or whatever. Right? Like, absolutely,

18:35

that's part of it. I was listening to a a podcast, the other

18:37

line, about Benchmark's journey. And they would've been mad

18:39

actually a really challenging time for Benchmark, and

18:41

I comment what it was exactly. I

18:44

was just in my head and from the outside foundries has

18:46

been this continuous progression of

18:48

success. I'm sure internally there are

18:50

moments when there's like a year or two where

18:52

it's actually harder. Can you take

18:54

me to one of those years or two? I mean, I think one of

18:56

the reasons that we're successful

18:58

is that we as a firm, we

19:00

try and have no dogma.

19:03

Honestly, I think we are just better at adapt

19:05

or die than other people. We're better

19:07

at realizing that even the things we

19:09

said last year or the things, honestly, that

19:11

I'm saying on this show. They might be

19:13

total bullshit. Like, you have to change it. If the

19:15

world changes, you change. And we're really

19:18

good at not having specific set

19:20

views that are set in stone here. One of the

19:22

things I think we've done really well is our

19:24

hiring. We've been able

19:26

to focus our hiring on

19:28

people that come in that have a

19:30

unique, truly unique angle or

19:32

mode, if you will, that makes them specifically

19:35

special whether it's in the sourcing,

19:38

picking, connections, getting in anything. If it's a

19:40

unique strategy that is

19:42

differentiated from the current partners that are

19:44

here, we are interested in

19:46

higher hearing that person and that's really paid off. Our

19:48

focus on not hiring clones, our focus

19:50

on not hiring just people who are generically

19:53

good Our focus on just hiring people who have strategies

19:55

and strengths that can pay off is what we've

19:57

been really good at. We just hired Sam. Our

19:59

newest partner, Sam elaborate, like,

20:01

Sam has a phenomenal unique

20:04

story. Like, usually when I'm in these interviews

20:06

and I'm interviewing candidates, specifically

20:08

say I'm like, okay, what is the thing that you're better at

20:10

than anybody else? And I honestly, I don't care what

20:12

that is. I just want somebody to have something.

20:14

Sam's answer is just phenomenal. There's

20:17

not many people who understand high

20:20

growth tech and actual sales

20:22

and enterprise sales and high growth tech better than

20:24

Sam. And so he is such a

20:26

unique skill set that most people don't have that it

20:28

made him a no brainer to hire. And to answer

20:30

your question of why we've been

20:33

successful throughout our two

20:35

decades now of existence is that.

20:38

It's being able to see just like we can

20:40

see, unique motes in

20:42

companies, we see unique motes

20:44

in people just hire those

20:46

people. With traditional firms,

20:48

when they bring in partners like Sam, they have a

20:50

lot of structure around them, a lot

20:52

of mentorship can sit with you in boards

20:54

and they can learn craft of vanishment

20:56

beside you. Farms, farms, obviously, a lot less

20:58

structured than my traditional

21:00

farms. how do you think about providing those

21:02

same positive educational guardrails to

21:04

someone like Sam? I can never do what

21:06

Sam does. Right? So I'll try and tell him, oh, here. Sorry,

21:08

you should do this. But we strategize about angles

21:11

that he can be playing in order to see,

21:13

pick, and get into the best deals all

21:15

the time. And those are some of our most fun

21:17

conversations when we're just like strategizing about

21:19

how to leverage his strength, which he

21:21

is the best in the world at

21:23

understanding actual sales of high

21:25

growth tech companies. And remember,

21:27

I'm a gamer, true and just

21:29

focus on what are my strengths? How

21:31

do I exploit those? How do I leverage those

21:33

in a way that nobody else can catch

21:36

up with? and that's what I talk about all the time too. Brian, do

21:38

you think boards add value? I can't

21:40

stand boards. Private company boards? I would

21:42

much rather do strategy

21:44

dinners with founders and they know that. My

21:46

strengths is not corporate governance

21:48

or financials or I'm really

21:50

bad at that kind of stuff, Harry. I'm not

21:52

good at corporate governance and financials. I am pretty

21:54

good at strategy. And so the founders that want

21:57

to work with me are typically the ones

21:59

who like instead of needing to have me in a

22:01

board room where I don't it's not my

22:03

strength. Right? They would rather just be like, oh, hey, every

22:05

month, every other month, we're gonna grab dinner

22:07

and strategize on like great that's the

22:09

part of this job that I love. We've been pretty

22:11

successful, and after doing this for fifteen years,

22:13

you start to think, okay, well, what am I doing this

22:15

for? The main reason, the thing that I

22:17

love about this job still is

22:19

strategy dinners with top founders.

22:21

What makes us What makes the best

22:23

strategy dinners with top found

22:25

is a multicycle. It's very clear what

22:27

the moat is. It's very clear what

22:29

the unique thing that this company has,

22:31

that nobody else has is, and then we

22:33

can really talk about leveraging that

22:36

into the next level and

22:38

beyond. That's what I love. And a lot of people can

22:40

say this, but I don't think they're good at it. At

22:42

founders fund, we are simply just

22:44

really good at being open to the fact that

22:46

there are multiple different

22:48

strengths, motes, uniqueness and

22:50

things about people that other people can't see

22:52

a lot of firms are looking for tracked founders

22:55

or they have a good sense of what they're looking for.

22:57

I'm like, I have no idea what I'm looking for.

22:59

Surprise me was something that is

23:01

truly unique and I'm in regardless of

23:03

what it is. I love when

23:05

you're dealing with a company, a founder, and

23:07

a company that know what their strengths are and

23:09

are very honest about what their weaknesses are, and we

23:12

can talk about leveraging the strengths of

23:14

the company into a much more

23:16

dominant situation. That is

23:18

strategy game in 101 and that's what I love. Can I

23:20

ask, have you ever thought there was a moat?

23:22

And actually, you overemphasized it,

23:24

thought it was stronger than it was,

23:27

it didn't pan out the way you threw it in. Of course. This is such

23:29

a generic thing to say, but you're not going from having

23:31

all no way in venture, especially when

23:33

you do these, like, massive bets

23:35

are gonna have every single one of these be right, nor do

23:37

you need that. Right? Trying to

23:39

maximize your upside. You're not trying to minimize

23:42

your down This is why I've never understood these.

23:44

Oh, we're gonna do a round with

23:46

three x participating preferred and a

23:48

round with a whole bunch of structure. I mean, like, I

23:50

get that from If I'm a debt guy or I'm a

23:52

bank guy, yeah, that's exactly what you

23:54

want. If I'm a upside venture guide, that's

23:56

just totally irrelevant. What do I care if

23:58

I, like, get two x my money back in

23:59

a downside scenario. It's like the same thing

24:02

as going into zero. I just

24:04

maximize only for upside.

24:06

And so, of course, I'm gonna be wrong. I'm wrong all the time. This is what

24:08

I say to founders too. Right? Somebody who needs perfect

24:10

information before making a decision is going to be

24:12

terrible at this job. you never have

24:14

perfect information in this job ever. If you need

24:16

it in order to do a deal, don't do this job.

24:19

Because of that, you're going to be wrong. So all

24:21

you can really do is follow

24:23

your gut, whether you're me or whether you're a

24:25

founder. And then when you are wrong, not

24:27

if, but when you are wrong, you refine

24:29

your gut. You what happened there? Probably

24:32

won't fall into that same trap another time. Right?

24:34

For instance, for me, meeting a

24:36

founder in person is just critical.

24:38

I was terrible at this job during

24:40

COVID. I needed to not do a

24:42

lot of investing when the only way you can meet

24:44

founders was over Zoom. Now that's over and now

24:46

that people are meaning back in person, great. I can do

24:48

this job But that's

24:50

kind of a recognition of

24:52

what you're good at honing your skills,

24:55

realizing something went wrong,

24:57

and not trying to make the same mistake twice, but still

24:59

trusting yourself and trusting your gut enough because you

25:01

are never going to have perfect

25:03

information. And if you get shell shocked

25:05

in the business, you're not gonna be successful because you'll never

25:07

make an upside investment. There's gonna be a hair

25:09

on every single deal. Right? There's never is

25:11

any deal gonna be perfect. I

25:13

totally agree that you said there about kind of the importance

25:15

of upside in how actually if you got one x back,

25:17

but zero point five x back doesn't make a difference.

25:19

On pay the I don't really care if I get one,

25:21

expect, two, expect, three, expect on this visit. There's no

25:23

difference between a I mean, honestly, our

25:25

funds are multibillion dollars. Right? If

25:27

we have ten million dollar check, there's no

25:29

real difference between that going to zero or that

25:31

going to thirty million. I mean, there's just no

25:33

difference between those numbers. Does that not make it I

25:35

mean, given the size of your say, is that gonna make it

25:37

incredibly hard? I mean, you can do a hundred million dollar check. It

25:39

makes it incredibly hard. If not talking to new

25:41

managers, the advice that I always

25:43

give them is and this is

25:46

but it's the right answer. Raise

25:48

as small of a fund as you

25:50

can in order to just crush

25:52

it because then you can write your ticket

25:54

for a number of funds. It is

25:56

much harder to get returns on

25:58

larger funds than it is on smaller funds.

26:00

It just is. I would say until you know that

26:02

you can write a twenty five to thirty

26:05

percent of fund size check, raise

26:07

whatever fund size you can in order to, like, be

26:09

comfortable writing at twenty five to thirty percent of

26:11

fund size check. Right? If you're not

26:13

comfortable writing a more than a five

26:15

million dollar check, do not raise more than a

26:17

twenty five million dollar fund. Just go crush a

26:19

twenty five million dollar fund. maybe raise more

26:21

frequently. For me, this fun

26:23

size is important because remember

26:25

what I do, where I'm

26:27

best is that writing these 234

26:30

hundred million dollar checks. If I'm

26:32

using my own practically, what I owe

26:34

preached, if the biggest check on uncomfortable writing

26:36

is a five hundred million dollar check. probably roughly that, then I should raise

26:38

a two and a half billion dollar fund. But not many people

26:40

can say that they're truly comfortable writing

26:42

a five hundred million dollar check-in venture. Do

26:44

you go when

26:46

you are riding that check. I wish we'd

26:48

written a five hundred million dollar check-in Airbnb at

26:50

the one and a half billion dollar round instead of

26:52

a hundred and fifty million dollar check. put the most money

26:54

possible and the best company's possible, the

26:56

best price possible. That's Venture Capital. There's

26:58

nothing else in it. Most money in, best

27:00

company's possible, best price possible. loss ratios

27:02

don't matter. And you don't wanna lose a five hundred million

27:05

dollar check. Right? because it's gonna be then

27:07

ridiculously hard for you to return multiples

27:09

on that fund. Whereas if on

27:11

that side, if you lose a five million dollar check, it

27:13

doesn't really matter at all. But no, you don't wanna lose a five

27:15

hundred million dollar check. And that's why I reserved those for and

27:17

I brought a two hundred million dollar check-in and girl this

27:19

year because Enduro is going to be an extremely

27:21

valuable company. I am sure of that. We are not going

27:23

to lose that two hundred million dollars check. That two hundred

27:25

million dollars will turn into two billion Have

27:27

you always been this style of investing in mind? That's the only way

27:29

of investing that I know how to do. I think it's

27:31

one of my unique moats and unique

27:34

angles is that I'm good

27:36

at this type of investing and I'm honest

27:38

with myself on what I'm good at and what I

27:40

am not good at. I'm good at this kind of

27:42

stuff and I'm not good at other things in this

27:44

space which is why we try and partner

27:46

with people who are totally different from us. Right? I don't

27:48

know how to start a company. Great. Do I love

27:50

having Keith and Trey as partners? A

27:52

hundred percent. They're great at it. I don't know how to

27:54

do financial analysis. on companies? Do I love having

27:56

Napoleon as a partner? Absolutely. I know

27:58

nothing about macro. Do I love having Peter

28:00

Teals as a partner? Right? I mean, you don't try

28:02

and hire clones of yourself. You try and work

28:04

with people who have their own unique strengths that

28:06

are the best in the world at something. Is there

28:08

any partners that way you feel you're

28:10

missing that skill set. You mentioned that the

28:12

financial analysis with Napoleon. You

28:14

mentioned the macro. Peter, are there any way you're

28:16

like, we really miss a

28:18

sales data. I didn't know how much we were missing to

28:20

Sam until we met Sam, but I'm just very open

28:22

to there being somebody who's really good

28:24

at something that I never even considered. Again, this

28:27

is the same thing that I do on the

28:29

company side is on the team side.

28:31

I'm open to anything. I'm the most sector

28:33

agnostic person you can possibly

28:35

imagine. And I'm open to any company

28:37

that has a unique moat in a huge

28:39

market run by a great founder. I'm open

28:41

to hiring anybody at founders one

28:43

that has a truly unique angle that I didn't

28:45

even necessarily know I was looking for. When you asked me,

28:47

it's just like, oh, are there like a specific hole?

28:50

I'm sure there's an infinite number

28:52

of holes. that we have at

28:54

founders fun. Right? And I'm open to

28:56

seeing whatever they are. Right? I didn't know we had

28:58

a hole until we met Sam, and then I realized, oh,

29:00

man. a good fit of you talk. Oh, no. I find really

29:02

hard about hiring and preceding and massing

29:04

in particular is trust. And trust, I

29:06

think, is built over time in many

29:09

interactions, in many differences situations.

29:11

And both with pretty seasoned with hiring,

29:13

you're often thrown a meeting. Hi,

29:15

Brian. Lovely meet you. I can sell really

29:17

well. believe it or not, I'm good at marketing

29:19

myself. And we both know people who may

29:21

not be as good as they see more or not or much

29:23

better than they see. How do you think about

29:26

that? Because I find that really hard and

29:28

I don't have an answer for that. You

29:30

have multiple conversations with people, like, backchanneling is

29:32

still important. And I like the type of

29:34

backchanneling that I like is where they can't tell

29:36

what you want to hear. It's quite

29:39

easy to backchannel and do

29:41

diligence on something when the human being

29:43

that you're doing diligence with. kinda

29:45

knows what you wanna hear, and they're just, like,

29:47

inclined to tell you what you wanna hear

29:49

because no downside to them. Right?

29:51

So the stuff that I like the best is

29:53

when you ask questions that the

29:55

other person doesn't know what

29:57

the answer should be or what you're looking for.

29:59

And so that's how we kind of backchannel all

30:01

of these. candidates to try and figure out, like,

30:03

well, is Sam truly an expert

30:05

at high growth tech enterprise sales? And

30:07

of course, we've been wrong sometimes on that

30:09

front too, but that's okay. Right?

30:11

We're really good at adapt or die. We

30:13

don't just sit there and be like, oh, we made a

30:15

mistake. So let's never do this again. Have you made

30:17

mistakes on hiring? Of course. a

30:19

minimum mistake. On investing, on hiring, that's the

30:21

same thing to me. Right? Like everything. I

30:23

make tons of mistakes. Again, you do not

30:25

have perfect information in

30:27

this business. if you are the type of person that is gonna

30:29

do work and make sure it's perfect before

30:31

you invest or make sure it's perfect before you hire,

30:33

you are just not gonna do well in

30:35

this business. period. How do you advise your

30:37

younger members of the team who saw their books last

30:39

year, blown up, and they thought they were

30:41

fantastic ambassadors. And now everyone's

30:43

looking a little bit less confident. As a,

30:45

like, patriarchal leader, how do

30:47

you sit them down and we now have this

30:49

conversation? This has happened when emerging team. It's like, if you get

30:51

shell shocked in this business, like, you want a little bit

30:53

of shell shock because you don't wanna just deploy

30:55

capital building a little bit. If you get so shell shocked that you

30:57

can't do another deal, you're not gonna last

30:59

either. anybody we hire or anybody that

31:01

comes onboard here, we see something

31:03

that they have. And,

31:05

yeah, maybe stuff is blown up, but you

31:07

get shell shocked, you may as well leave. For those who do what, you've

31:09

seen partners rise through the ranks very

31:11

efficiently in wealth. And then commonalities in

31:14

what makes them rise through the rounds

31:16

versus the Shell Shop in full. The

31:18

investors that are waiting around

31:20

for pure perfect information

31:22

are not going to last. So therefore,

31:24

there's all this debate. I see a lot of chatter

31:26

on the Internet. I love this whole concept

31:28

of gut in investing as nonsense. I'm like, what

31:30

are you talking about. Like, when do you ever have

31:32

perfect information? Like, you can't just analyze a

31:34

business plan and know, oh, this is going to

31:36

work. That's like total nonsense. Right?

31:38

And so the team members that we have take the punch

31:40

in the gut from these companies and learn

31:42

from and do maybe make some refinements on

31:44

your strategy, but unless you can keep leaning

31:46

into your strengths, just leave. Right.

31:49

If you're too shell shocked to, like,

31:51

leverage what made you special, then you're just not

31:53

gonna laugh in this business at all. I totally

31:55

agree with you. I just love the way that

31:57

you put things. So bluntly Brian, to

31:59

be honest. Yeah. It doesn't to me, it's

32:01

just it's refreshing. Can I ask what was

32:03

your most successful investment out of Brian? We've

32:05

had a bunch of these things in terms

32:07

of returns. tens of stuff, stentrics,

32:09

affirm, Airbnb, Stripe.

32:11

I mean, we've had a lot in the

32:13

most SpaceX. Right? And I I'm not gonna talk about,

32:15

like, me personal But from a founder's son perspective, we've been

32:18

fortunate to have a lot of successful investments and we

32:20

don't have hubris about knowing the public markets

32:22

better than anybody else. the fact that

32:24

we were able to distribute end of twenty

32:26

twenty one when a lot of people kind of

32:28

held was worked out in our favor this time. It

32:30

is interesting that because you have this a bit

32:32

more lone wolf style partner

32:34

approach internally than most do.

32:36

But then to the external Well, because we all have

32:38

very unique strengths. Rachel, trust

32:41

me, and then to the external world. no

32:43

star culture. Do you see what I mean? It's interesting.

32:45

My life strategy is to

32:48

maximize my dollars to fame

32:50

ratio. Like, I want to

32:52

make a lot of returns for myself and

32:54

LPs and have the minimal amount of

32:56

fame possible. Right. Like, you have to

32:58

do some things to kinda get your name out

33:00

there and I get it, but we don't have

33:02

a need to be the star thing. I

33:04

just want to make the returns. Someone once

33:06

told me you wanna be the most famous person in the

33:08

private jets Santa and no one know you

33:10

in McDonald's and I thought that was well put. But I guess it's one way

33:12

of looking at it. Yeah. But I wanna move into a

33:14

quick fire round, Brian. So I say a short statement

33:16

and you give me your immediate thoughts. Does that sound

33:18

okay? Sure. Okay. So what's your biggest

33:20

strength and what's your biggest weakness? My

33:22

biggest strength I am truly

33:24

open to anything. I have

33:26

no dogmas. about

33:28

how the world should be, how the

33:30

world will be, how the world is.

33:32

I'm open to unique angles of any

33:34

type. I'm waiting this. I don't

33:36

put skill points in the things that I know that I

33:38

am weak at, which could be kind

33:40

of a strength, but it's also a weakness and

33:42

that I remain weak at what I'm

33:45

weak for very long periods of time. Maybe

33:47

that's more of a life weakness than it

33:49

is a but it's a life weakness.

33:51

Right? Because there's always things in life where

33:53

you kinda need to get better at them

33:55

where you are weak, that you can't

33:57

just hire a team member to

33:59

supplement, and I just remain weak at

34:01

those things, and that's not a that's

34:03

weakness. to becoming a father impact, your mindset,

34:06

investing, or how so? Well, two things.

34:08

Right? Are you used to be able to do

34:10

this job every night I was having dinner with a different founder

34:12

or I was doing stuff at odd hours

34:14

and doing all kinds of stuff.

34:16

Right? And

34:18

now post having two kids. That's just a lot harder. So I guess there's

34:20

the mindset and then there's the physical. Yeah.

34:22

I'm with my kids or dinner every night. Right?

34:24

And so it's harder and harder to do

34:28

dinners. with founders. And in terms of a mindset

34:30

of knowing that I need to get better

34:32

at certain things that I'm not good at, well, you

34:34

need to do

34:36

that with kids. Right? There's lots of things you can outsource in life, but child

34:38

raising is not something you want to entirely

34:40

outsource. Right? You want to spend time with your kids

34:42

and I do.

34:44

And so I suck at a lot of those things and needing to get better

34:46

at those things is is hard for somebody

34:48

who's always put skill points into things they were

34:50

already good at. who's the best

34:52

board member you sat on a board with? I'm

34:54

why. Usually, the best board

34:56

members are ones who

34:59

really know the sector that the company

35:01

is and no people in

35:03

that sector really well such that they

35:05

can easily connect said

35:08

company with other people that might be

35:10

relevant to them. Right? That's not the same as

35:12

the best strategizer. Right? These people could be

35:14

very stale on strategy, the best board

35:16

members, you do want board members who are

35:18

good at governance, rolodex,

35:20

financials. That's not me. And

35:22

so the best board members I've

35:24

seen are ones where like they're just

35:26

so good for that specific

35:28

company. So I don't think there's any investor. Right?

35:30

I think that the best board members are like

35:32

the specific

35:34

ones the outside ones that you find that really are truly door

35:36

openers for your company. Who's the person that

35:38

when they send you a deal, you jump on it?

35:40

You're like, oh, shit. Harry Stebbings.

35:43

Now you're at Chalma Macron. When somebody who I

35:45

think is talented sends me

35:47

a company highest priority to do that

35:49

meeting just because again, the part of this

35:51

I think we're if Venture capitalists see the right deals, pick

35:53

the right deals, get into the right deals, I'm not too

35:56

worried about my picking and getting

35:58

in skills, and I'm very worried about

36:00

my seeing skills, especially as I get older and my networks get more stale.

36:02

So for people who send me stuff that I think are

36:04

awesome, I'll take that meeting. Tell me, the final

36:06

one, you managed it

36:08

before, but Angel. What in the most in particular, I'm intrigued

36:10

you mention most a lot. What got you the

36:12

confidence that Angel's moat was just so compelling that

36:14

he wanted

36:16

to hundred million dollars. We put four hundred million dollars of that company total now. It's just our

36:18

most recent one was two hundred million dollars It's an example of

36:20

cross fund. I don't think any of our investors are upset

36:22

about the fact that Andrel is in

36:26

and the modes are extensive. They are in a space that

36:28

hasn't had true new

36:30

tech entrepreneurship in decades. your

36:33

most valuable companies in the space are

36:35

Lockheed, Boeing, Raytheon. These are companies that

36:37

have been doing cost plus models and

36:39

defense forever and have had no real

36:41

true ingenuity. You take the Andero team, a

36:44

team who is seasoned, who knows what they are doing,

36:46

has great government relations, pair it with a

36:48

person as brilliant as Palmer Lucky in

36:50

terms of product, tech product

36:52

brilliance, to be quite frank. Right?

36:54

And you've got something truly special paired

36:56

with a space that until recently was

37:00

considered Oh, you can't do that in Silicon Valley. Now let's

37:02

not post Ukraine and post a couple of

37:04

other things. But before, oh, you can't work

37:06

on defense. That's not the a

37:08

proper thing to work on. You should work on chat instead. And so you take a

37:10

team that has the culture of working on things that

37:12

nobody else is was willing to

37:15

work on with top tier product,

37:18

top tier government relations, and top

37:20

tier execution team. There's nothing

37:22

like that period. Defense tech is an area that I'm

37:24

bullish on. but there's nothing like Enduro. It's just there's no other

37:26

team like Enduro because they came

37:28

around and they came together at a

37:30

time where nobody

37:32

else could possibly pull off

37:34

what they were doing, so they got the best

37:36

people who wanted to do that. Brian,

37:38

I absolutely love our ass always. I can't

37:40

thank you enough for being so

37:42

unstating and for answering my very

37:44

prying questions. I really appreciate that

37:46

as always. So thank you. No problem, Harry.

37:48

Thank you.

37:50

I

37:50

always so enjoy my discussions with Brian. I find he has a way of

37:52

cutting through the bullshit unlike any other venture investor

37:54

I have on the show. So huge science to him

37:56

for giving up the time. If you'd like to see

37:59

more from us, Of course, you can on twenty v c dot

38:01

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so appreciate all your support, and I can't wait to bring you

40:22

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40:24

with Raff Itishai ever found and

40:26

CEO, Gopah, for an incredibly

40:28

special Villano

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episode.