Investing Billions - E37: Errik Anderson on Co-Founding 20 Biotech Startups Cumulatively Worth $10B+

Episode Date: January 30, 2024

Errik Anderson sits down with David Weisburd to discuss Pro-noia, the potential of the biotech industry, and the 82VS Seed Fund investment approach. They discuss practicing Pro-noia, the value of building a portfolio of relationships, and the idea of a forever company. The 10X Capital Podcast is part of the Turpentine podcast network. Learn more: turpentine.co -- X / Twitter: @errikanderson (Errik) @dweisburd (David) -- LINKS: 82VS: https://alloytx.com/venture-studios/  Alloy Therapeutics: https://alloytx.com/  -- NEWSLETTER: By popular demand, we’ve launched the 10X Capital Podcast newsletter, which offer’s this week’s venture capital and limited partner news in digestible news bites delivered straight to your email. To subscribe please visit: http://10xcapital.beehiiv.com/  The 10X Capital Podcast Newsletter is powered by Ikaria Labs, a full-service content marketing firm that partners with the top funds, fintechs, and financial services firms to grow their investor communities. To learn more, visit: https://www.ikarialabs.xyz/  -- Questions or topics you want us to discuss on The 10X Capital Podcast? Email us at [e-mail] -- TIMESTAMPS (0:00) Episode Preview (10:22) The potential scale of platform building in the biotech industry (20:22) Leading with work and following with capital - the approach at 82VS Seed Fund (28:13) Practicing Pro-noia: Cultivating optimism and generosity  (33:35) Building a portfolio of relationships and the compounding value  (40:01) Errik Anderson on involving his family in his work (46:00) Errik Anderson's management style: micro-managing or detailed involvement? (54:09) Errik Anderson explains the concept of a forever company (57:00) Collaborating with big pharmaceutical companies like Pfizer (1:00:56) 10X Capital Podcast Newsletter

One of our values at Alloy or in our family office in Alloy is pro-noia, sort of how you cultivate pro-noia and be like, what's pro-noia? And it's like, what's the opposite of paranoia? It's this irrational belief that there's someone conspiring behind your back to your success. Well, Eric, we've known each other since 2010. It's approaching 14 years, which is kind of wild. And you have definitely been busy in those 14 years. I asked you off camera how many companies you have co-founded. You didn't remember, but you said it was approaching 20, which is wild. You also have the VC hat going back to 2003 when you worked for Levin Brothers VC firm.

So it's an honor to welcome you to the Limit Partner Podcast. We had so many conversations over the last 14 years and seen the trajectory of your career and some of the companies we've done together, and thanks. So this is great. No, happy to be here and talk anytime. Back when I met you, you were already working on your first major company, Atomab, which you started in 2005. And it was based on the Royalty Pharma model. Tell me about how you modeled it after the Royalty Pharma model. Well, yeah, from a business model standpoint. So it's a, Atomab is an antibody discovery platform company. So creating drug assets, in this case, monoclonal antibodies, it was somewhat modeled after the royalty pharma model in the way that

royalty pharma generates their long-term returns for their investors. And Pablo Legaretta was doing this and he was generating like 20% IRRs consistently writing big checks, buying royalties or creating royalties. And so part of the observation and the idea in building the business model that was Atomab is could you actually create your own options of these royalty streams that actually had milestones and royalties on it? And that's part of the business model basis for Atomab, which now has a portfolio. Atomab just put out their annual release of how many programs. It exceeds over 500 partner drug programs, which is the largest portfolio of partnered pharmaceuticals that have sort of this milestone in royalty structure and sort of the history of the pharmaceutical industry. You're a biotech founder, and biotech is actually changing the world.

You've created a company that has over 500 targets. Do you ever stop and think about, you know, I've made such a big difference in the world? I'd like to say that that's, that's the way you feel. But I think even in biotech, when you're trying to make medicine every single day, which is the thing that keeps me motivated, like when you take a step back, and you're like, why do I still work so hard? I you know, I get up between three and four o'clock every morning. I have a discipline of rolling out some of those shots. Yeah, you know, always available to talk at that hour if you're up, obviously. But it's more the discipline to work that hard in part, you know, in the dark days,

when you don't want to do when you don't want to do the work, I think you do remember, this is creating medicine that may save someone's life. And so I think a lot of these things really come down to the human scale. And when we think too much in like a huge scale, we think in billions of trillions of dollars, or we think in 1000s, or 10,000s, or hundreds of 1000s, or millions of patients, you lose, I think, psychologically, you can lose track of that. So I always think about the patient, right? When you think about a family member who has died of cancer, and it's deeply personal to you, it makes it worthwhile to think about a trial. So in a company that we both invested in, we just saw a complete response in a drug that we designed on a whiteboard in our office.

And it's all the way through to like, we're in clinical trials, and this is in a lung cancer patient, and this patient is cured. It's a complete response. And you're like, that could have been my dad, right? That, that, that, that, that is someone's, that is someone's parent. That is someone's child. And so I think on that human scale, it really makes it worthwhile. So I don't, you know, are we changing the world? I do believe that in the next 30 years, we as an industry, we can cure most diseases. Our tools are getting incredibly good. And I just want to see the pace of that drug discovery and then the development be accelerating

as opposed to decelerating. What are those accelerants today? So obviously there's artificial intelligence in the future, but first off, are you seeing AI already affect your industry? And two, what are the other accelerants on the horizon? The AI definitely affecting the industry in material ways where some folks maybe are misperceiving the impact of generative AI or kind of call it machine learning and drug discovery is some people kind of jumped all the way to, Ooh, we can design a drug de novo from an idea and

it'll just work like that. And the day that that is true, I'm going to be so excited. Like it's going to be like perfect. Um, and if that puts us out of business and all the companies that we have in drug companies, like fantastic, because then we will have cured everything the next day. Um, I think one of the gaps in that expectation is our limitation of our understanding of biology. And just because you design a drug, you still have to test it before you put it in humans and then after you put it in humans in clinical trials. So there's still a process by which we're going to have to do work even with as a support tool. So the way I see Gen AI and large language models and everything we have and like our ability to crunch and organize data and derive insights from those

data, it's really about making the drug discovery process more efficient. So yeah, that's a key driver today. But right now I would say a minimal impact in the overall grand scheme of how we're doing drug discovery and development today, but one that's rapidly creating a ton of value. So you literally can't keep track of all the companies that you've founded. And for many reasons, I know you're very humble as well, but I think you have a different approach to it. You found a way to essentially create a startup factory of sorts. Can you talk to me about at a high level, like how have you created the engine that creates the engine? One of the reasons why I hate to say how many exactly companies we have is I truly do just like you.

I try not to take credit for some of the projects we work on. Oftentimes these things come up as there's a bunch of people that work on it. And at this stage of my career in my life, it's easy for one person whose name might be a little bit more prominent to overshadow the other members of the team. And so in creating this engine in this factory of new co-creation, I have been working out of my family office and the precursor of my family office to help create companies and kind of this shared infrastructure. So it really comes from this observation that I had back in venture capital when I had the pleasure and the honor of working at Lehman Brothers Venture Capital with a really great team.

So we're embedded inside an investment bank, but we had third party capital. It was a pretty tight knit team. There's a few people in New York, a few people in San Francisco. I was, you know, low person on the totem pole there. And I got to see some incredible patterns in the data in that period of kind of telecom deregulation, the end of the nineties, and then, and then the first internet bubble, you learn a lot more from your failures than you do from your successes as an investor. I think we don't, we want all of our investments to work, but at the same time, you think you're right when everything's up and to the right, but then you kind of really learn where you were misperceiving things when,

when things go down or companies don't work. So in creating a kind of the engine that creates the companies, it came from an observation where if you look back at our successes and failures and when we were doing late stage investing. So back then at Lehman Brothers, we were we were doing more mid to late stage investing, what we might call crossover in life sciences today or mezzanine investing. And it was a place where we could use our insights and our expertise and also the banking relationships to think about how we take that to an exit, an IPO or an M&A event. So it's a really smart strategy. We still had failures. And so it's kind of amazing to be investing in a company that in many cases already have revenue, some cases, maybe even profit. And even at that point, you can have failures in that venture portfolio. And so you look at what's the failure mode of these companies in that world. And it's like 75% of every company

is identical. So like your QuickBooks and my QuickBooks run the same. So like, don't let that be your failure mode that you somehow screw up your accounting. And so just make that a solved problem. And so that's like 75% of your business. But then even in life sciences and in biotech, there's like an incremental 15 plus percent where it's all the same. So the flow cytometer at one of my companies runs the same as the flow cytometer at another company. So if we need to be good at flow cytometry, don't let that be your failure mode. So you kind of now think about like, okay, great. Just make sure you know how to do that well. And now you're down into the last, maybe 10% of what makes a company truly unique. And a 10 probably overstates it. Maybe

it's like more like five and life sciences. It's what's the target you're picking. What's that keen biological insight that derives from one of your partners or an academic collaboration or something in the clinic or something. So you want to focus all of your risk and attention on managing the risk of that last 10%. And so with that as a model, I had a consulting business that was helping other people start companies. And for me, that didn't come from a place of like, hey, I'm trying to like create a venture capital shop. It really came from a place of I really want to help. I'm personally interested in helping other great scientists, entrepreneurs work on their companies.

And so it came from this basis of you can create your own companies by sort of eliminating or sort of mitigating the risk and the variability in that first 90%. So you can focus all of your attention in the last 10%. You're saying in biotech, 90% of kind of the problem set from company to company is kind of redundant or known problems? Is that what you're saying? Yeah, probably higher than that, actually. Yeah, that's right. Why hasn't the industry kind of coalesced on this model of repetitive production? I think you think of what like big pharma does well.

Pharma does everything well, pharma does everything well, right? They go from biological insights that might come from their clinical data or even their commercial products. And so they pick drug targets and then they discover drugs. They put drugs into the clinic, they run clinical trials and they commercialize. What's challenging in their model is that every bureaucracy fails in the same way or like has a challenge in the same way, which is, this is an observation I also had. So call it a novel insight that is not novel at all once you hear it, which is over the long run, all value accumulates to the shareholders in a company. Jeff Bezos is wealthy, not because of the dividends he receives, but because the equity held in the company that he started. So all value is going to accumulate to shareholders

over the long run, but all risk accumulates to the decision makers and sometimes in the very near term. And so the more the shareholders and the decision makers are different people, the worst long-term decision making you get. It's a classic principal agent problem. And in pharma, we've got two problems. It takes massive amounts of capital and very long periods of time. So when we're investing in funds, the duration of our fund is 10 years plus two bonuses. But from idea to commercialization is typically longer than that 10 to 12 year fund life. So we actually have a financial product that's modeled after tech investing that has an incredibly high cost of capital. But we don't actually go from wire to wire of idea to commercial product. Typically, there are exceptions to that to that rule.

And so we did end up having in our industry and biotech sort of handoffs along the way of how we manage that risk. Did you bring this tech model into the biotech industry? Not me into the whole industry, but I certainly, my insights, one of the things that passed for business model innovation is just borrowing insights from other industries and just bringing them over into your industry. So if you can have innovation in ride sharing in the United States, and then maybe that gets brought to France or it gets brought to India or to China, inside that domestic market overseas, it might look like innovation, but in reality, it's just replicating and then adapting it to the local market. So kind of in the same way, if you think about what are the things you can learn as a tech investor, that then the subset of those lessons that you can apply to biotech, but the rise of the contract

research organization is really about what's our middleware, what's our service model for discovering and developing drugs. So why don't we see more of it? And you kind of asked that question. Why don't we see more of that decentralization perhaps, or the service model? Because the businesses are terrible. They don't have billion dollar return potential, but they still require a lot of capital to build. And you need the world's best scientists doing this work for you. I saw in PitchBook, Adam, I've had a billion dollar valuation in 2014. And based on all the conversations I've had with people, it's been growing. Is a company that could be a $10 billion company or higher? How big are opportunities like this typically when you build a platform? All value in our industry comes down ultimately

to drug and a patient. And I think if you remember that as a biotech investor, like if you truly remember that and internalize it, then what you're trying to do is to get a slice of that ultimate revenue stream. It's truly like there is no value in discovering a drug until that drug makes it into a patient. Like the value is in curing a disease and treating the disease. And so when a drug is approved, then you start paying for it. Like you get reimbursed by insurance. But before that, you know, what we do in drug discovery is derivative value. What we do as investors is derivative value.

We invest in companies that then are bought by pharmaceutical companies, are acquired, or we sell them to the public markets or an IPO. And we have made money in doing that work, but we still haven't actually approved a drug yet. We haven't had a drug approval. And so that's derivative value. So I think remembering that as a mental construct is really, really important because then you can think with more clarity around how you actually make money.

What are the fundamentals of our business? And are we creating something of fundamental value or are we actually just kind of a sidebar that will never create value? When you're doing drug discovery, you're defining the composition of matter of the drug. And so you can command a bit of a premium for that. You can get a royalty on the product. You can charge milestones along the way because it's this deeply creative process enabled by technology that allows you to create something truly unique. And that actually that defines the composition of matter of ultimately the drug that then you probably have to spend two, three, $400 million, if not more running your clinical trials and proving that it actually works. So I think it's

helpful to take a step back and just remember where you are in the context of it, of the whole process of drug discovery. And, and one, I think that's super, super healthy actually in art. It's why Alloy Therapeutics looks the way that it does. That's because we deeply respect every single part of that value chain from the insight all the way through to drug in a patient, everybody has to do their job effectively and well, right? Otherwise the patient, the drug never makes it to the patient. And then there's the added component of duration of like time component. So if you, if you, if you delay by six months here or six months there, six months there, it like ends up stretching out the amount of time until that drug gets approved.

And I think that's personally very sad. A six month delay in getting a drug approved means a six month delay in the folks that can benefit from that drug actually benefiting from it. So that means, that means people die. You mentioned Alloy Therapeutics. I don't know what number company that was, but I know that's your main company right now. I'm lucky to be an investor. What is the premise for Alloy? The idea for Alloy is to create this biotech ecosystem company that can operate across very long time horizons, call it infinite time horizons, to invest in cutting edge and enabling platforms and technologies,

wrappering them in a service to make them accessible to the whole world. So for many really cutting edge drug discovery technologies and sort of the proprietary insights that you get from being really good at what we do, the only way that you can really transfer that to somebody else is you discover a drug and give them the drug. Or perhaps if they have an idea of how to use it, you have to offer it as a service. So platforms and services. And then the question becomes, great, well, who are going to be the most cutting edge and exciting users of that technology? And we have an attached venture studio. So we call that 82VS. And so it's

platforms and services as really creating new technologies, creating proprietary workflows, proprietary technologies to try to be the best at what we do in drug discovery. And then for the benefit of anyone who wants to access that, we can work really hard to be very efficient at discovering drugs. And in exchange for that, Alloy gets a thin piece of the ultimate slice of the drug revenue in the form of milestones and royalties that we receive. So imagine if you're a talented scientist entrepreneur graduating from her PhD down at Harvard, you might say, oh, I've got this idea for a drug. You can't just walk out and start a biotech company, but you can walk over to 82VS and say, I've got this idea. And if it's a drug that Alloy can help you discover, we can start working on that the next day. I mean, it takes a week or two or something,

but like we theoretically can just start doing drug discovery. And so the idea behind Alloy is that we reinvest 100% of our revenue. So 100% of our revenue gets reinvested back into innovation and access to innovation. So it's kind of that perpetual motion machine of innovation and having really talented folks

that are available to do really cutting edge drug discovery when a customer shows up. And some of those customers is the Venture Studio, which is how we make this integrated model. That's how we make the whole model work. By opening it up to non-Venture Studio clients, you're able to keep yourself honest and make sure that it provides a lot of value to customers. That's right. And keep yourself honest. Like, okay, so somehow you have to pay the bills. Like what we do is really expensive and you lose money doing it.

So there's a combination of like doing drug discovery is very expensive. And interestingly enough, there's not really a willingness to pay for high quality drug discovery out there. So the business models that have been effective in doing really high quality drug discovery are ones that have made it over that hump of starting to cash milestone payments on drugs they previously discovered, or perhaps a royalty. There's an ancillary revenue stream that gives them profit while they're losing money doing drug discovery. So that's what Alloy does. That's certainly what Adam has been able to accomplish back in the day. And then continuing, as you say, many years later, Adam, now at this point is 17 years after, it's actually crazy when you think about it to be in year 17, 16 and a half at this point, methodically building a really world-class organization that

can continue to discover drugs. We talk about product market fit, like when you're doing tech investing, right? You're looking for evidence that there is a product market fit between like an early prototype of a piece of software. And in biotech, you don't truly find product market fit until you're like deep in clinical trials. There's always a market. It's just the product, no? Yeah. And the market, well, that's a really good point. So how do you define your market? So is it all types of cancer? Is it pan cancer? Is it lung cancer? Is it a biomarker driven form of lung cancer? And so where we've become one of the drivers of innovation is this drive towards personalized medicine is really a drive towards identifying the commonalities among patients. So you can find a drug and it works. And so we call

that a responder. And so we see someone who responds to the drug. An interesting question is great. Now, how do I find more people who look like this patient? So that's a really exciting place to be because you don't have to invent a new drug. Personalized medicine doesn't mean that we're going to have 8 billion drugs, one for every person on the face of the planet. What it means is you find a drug that works, and then you try to find what are the other patients that present and that will also work. And so that's what's super exciting about being in drug discovery right now is our ability to organize that data, to exploit that data, and to find those insights around patients as much as we can find insights around basic mechanisms of biology and genetics. So take me, you mentioned the Harvard PhD that comes in

off the street of their PhD and could start two weeks later. How did the economics on that work? Okay, really expensive. That's the challenge. So, you know, call it $10 million is what it takes to start a biotech company. And in some cases, like, okay, well, that's not true for something to come out of academia. Yeah, that's because the infrastructure is being paid for by the academic institution. So there's a lot of money that goes into our wonderful academic medical centers and oftentimes connected to a great hospital network and a university. So that becomes it. But call it about $10 million to like open lab space, to like start buying equipment the reagents are very expensive getting the people in the right place it reminds me a lot of what tech investing looked like back in the late 90s in the early 2000s

I mean take like before we had like the lamp stack like you talk about that today and people like by the way like kids today don't even know what that is we're like so far past it but you're like before we had that it was like you had to set up like your individual servers and you had to you had to like build all your things and guess what what? Who did you trust with ten million dollars in 1999, 2000? You trusted somebody with a bit more years of experience that had a team. And so, you know, tech investing back then also required a lot more capital. The model back then was five million dollars on a five million dollar pre. You take 50 percent of the money used on servers, but essentially your entire seed round, which took 50% of the equity ended up, ended up going towards startup costs. In 2021, things have really went,

the pendulum swung the other way and people are raising, you know, $2 million out of $25 million pre or today in AI, they're raising at a hundred million dollars. So you've had a power shift from the investors to the founders, which I think is very positive. And that $2 million you're investing today, you're actually buying something where you have some evidence that it's actually working, like something has been coded, it probably like you can actually interact with it. And 25 years ago, it was much more, I've got an idea. I came from this other company, here's what we're going to build. As you say, $5 million went in and you're just like getting everything together. So biotech looks more like that kind of tech 25 years ago.

Now, we continue to see, and we've driven this at some of our companies we've started. We're certainly, this is, this is the drive at Alloy is how do you actually drive the cost of that first experiment down to zero? We're down as low as possible. It's the equivalent of like, Hey, can I just like put my credit card in and like start up a website? It's that simple, truly. Like we don't even think about that being hard. It's like all automated and automatic today. So it's never going to be like that for biotech because of the messiness of the wet lab versus the digital. But to get it closer to that than not.

So how do you make that $100,000 experiment or a $500,000 experiment instead of a $5 million startup? That's really the drive we have at 82BS at our venture studios. And we do that by having shared infrastructure, having profit recycled from other places. And the whole drive is how do we lower the cost of running those first experiments where you're actually able to answer an incredibly meaningful scientific question

that de-risks the investment that you're making, actually. So you're coming with data. So why does a company today have a $25 million pre coming out of YC or something? It's because you actually have evidence that things are working a bit. It's not just an idea, you have evidence. And so in biotech- You have a graph that goes from the bottom to the top right across the metric, 40% month-to-month growth from $1,000 in revenue to $55,000 over six months.

That's how a digital world works. And so the network effects of digital look very different than for biotech. And so digital can drive. There's a great momentum in driving the digitization of biotech, but it's never, we're still at the end of the day, all lab work is wet. So there's some limitations. I'm also a small LP in your fund, but essentially you give just enough money to run a test. What is that test? And what are the different milestones that you look for in your projects?

So it's actually running an experiment before we even write a check out of our seed fund, right? So this is the unfair advantage we have at 82VS Seed Fund is that everything we do, kind of call it a $10 million operating budget is actually paid for by an operating company. We're not a corporate venture capital, but it's the shared vision around how you're generating revenue in one place so that you can make this accessible to the world. And so in that proto company, it's an experiment. It says, hey, I've got a drug target. And in a most simple example, if I had a monoclonal antibody against that drug target, I think it would bind to this target. And

I think it would knock down, maybe knock down the expression of something. Okay, cool. So you can actually, in our model, we can start that discovery work in a week. And so one of the phrases we have is we lead with our work and we follow with our capital. And there's multiple reasons why we do that. One of them is it allows us to actually take massive scientific and sort of early risk, but with relatively low capital. So by reducing the amount of capital to take the same amount of risk, you have overall higher returns. But again, the fund hasn't even started coming in, like the fund you're in there, right?

So you know that we're able to extend that duration. We manage duration in a few important ways, like two primary ways, right? We have this model where we're able to run that experiment effectively off the balance sheet and we generate data. So by the time we're actually putting venture capital dollars in, we've already been working on it for a year, maybe even 18 months, and we have a drug lead in hand and then capital comes in. So there's a lot of proto companies that never make it to become a company because the result of that experiment was, hey, we don't think there's a drug here. And then the other way we manage the duration effect is having a flexible exit model then around how we ultimately partner those assets. When you have very low capital in, I mean, it's truly you've invested just a few

million dollars. When you exit that for a hundred million dollars, that's a great multiple of capital. And we can do that as a really small fund, right? You can have massive power law. Your fund size is your strategy. Fund size is the strategy. And we get away with it. People kind of like misperceive that, right? They're like, well, how can you have a $30 million fund? It's like, well. Not on this show. You'll find a very open audience.

Yeah, we've talked. One of the themes of the show is how incredibly difficult it is to return a high multiple on large funds. I got to spend more time on this show. I mean, I've listened to some of yours, of course. And so, I mean, it's just math, though. Like, I don't know how people get this. And so, people look for the pattern of, well, why doesn't everyone do a small fund?

And like, I mean, we all look at the same pitch book data and we look at it and like small funds have, you know, they can have lower, but they have higher, like the top quartile of returns on average is even higher than across the other sizes, larger sizes. It's of course, because of the power law nature of venture capital. The reason why it doesn't happen is you can't pay

for the team that's the best to do it. The management fee on a $30 million fund doesn't pay for, you know, more than two or three of my employees. So here's the trick. Instead, spend a decade building an operating company that is very good at what it does, that throws off cashflow, that you can then reinvest in projects. But here's the, also the additional trick that we do, we collaborate and syndicate everything we have. So it's not even, we don't even do this even just for our own benefit. We're always looking to bring other folks in. And we treat that as investors as well. I mean, you know, like with the fund itself, there's, there's, there's a mix of investors in there that we made it available to folks who are

people who are executives and friends that we know. Yeah, you blew my, you blew my mind. You completely changed my paradigm. I gave you a call and you were talking about all the people that you brought in for 50K checks and how you brought in these 20 top pharma execs. I'm like, Eric, what the hell are you doing? You gave great advice. You're like, that's terrible. That's a terrible way to do it. Do you not know what you don't know fundraising? You've done like you seem like a smart guy, Eric. We've talked about this a lot. And then we talked about how the intentionality of that, because we look to collaborate in everything we do and really talented executives and folks who know what we do and understand what we do, whether that's they're doing drug discovery themselves, or perhaps they're a small angel investor.

You know, if you write a small check into a $300 million fund or a billion dollar fund, like, first of all, I don't even know if you can get in there. It's challenging. But also, you, you're just not important to them. And we like to do things on a human scale, built around relationships. So that's one of the, as you know, that's one of the ways we help to manage risk is one of the three ways we fundamentally manage risk is by having authentic relationships. You said something again, it changed my paradigm. I had always just transparently looked at LPs as a cost of doing business. You know, I ask, I'll ask a lot of LPs on the show. What is your value add? And a common answer is, you know, there's no such thing

as LP value add. We were value add by not being difficult, but I think that's incorrect. I think there are a lot of LPs that are value-add. And what you said is the people that are putting in these 50K checks, you want them to call you. You want that relationship. You want to be building on that. And taking in the small checks is actually a mechanism for relationship building. You can't play poker with zero dollars. You can't build relationships. It's also managed. I mean, this is all true economically and otherwise. It's also managed my own personal psychology, which is why do you get up and work hard at 3 30 in the morning when you're kind of tempted to like do something else and it's attacking my own psychology which is i

will work really hard for the individuals who i know and i love and the bigger the pools of capital where like they don't care about i mean pension fund writing a big check i value all capital equally i'm a little bit provincial in my thinking it's because i grew up on a farm as you know it's like I'm a little bit provincial in my thinking. It's because I grew up on a farm, as you know. It's like I'm a little bit provincial in my thinking about capital. When you take money from someone, you're making a promise to give them back more capital. But they can't. Our relationships in our other funds and the other things that we do and we invest in, when you're a small investor, it's just like people can't give you the attention.

They just can't care about you. And I didn't want to build an organization that was on a scale that I couldn't care about my relationships. So everyone who works with me, they know they have my cell phone number, right? If you're, if we're doing drug discovery for you, I say this to people and they don't take it seriously. Like, no, no, like call me and text me anytime. If I don't pick up, it's because I'm asleep. But that's on me to make sure I'm on sleep mode. And I will call you back because we don't do a lot of projects. We have a, we have a focused set of relationships around people who really value what we do. So we're not AUM driven.

We're work driven. We're value driven. And so that doesn't scale, but it has a funny way of creating multi-billion dollar businesses and then taking a slice of it. Known you now for 14 years, and you've always been this radically ecosystem player, always kind of thinking non-zero sum. In what ways, A, has that benefited you? In what ways would you update that model to have more nuance? so the first one benefited me and maybe failed me um the benefits

are infinite i mean it's like we're like unmeasurable it has resulted in the highest of highs of relationships that are meaningful in kind of approaching the world with a sense of optimism and generosity and like believing that people can do the right thing even even the face of perhaps some data of their own even their their doubts for themselves. And so I think I'm by disposition or, you know, biochemically an optimist and very hopeful, but also I'd say that's deeply grounded in data. As you know, I'm an econometrist by background, undergraduate degree in economics. This is very big data and looking for natural data sets. I'm a student of history, a student of psychology, like good liberal arts background from my term of undergraduate training, well versed in the liberal arts.

But the benefits of collaboration is that you develop meaningful relationships with the people you spend time with. And what is the what is the point of life otherwise? I mean, you have you have money. It's all a means to an end. Right. And so you have enough money to live your life. And so I grew up very poor, right? And so I think I come, I'm so fortunate that I grew up the way that I did because I have a psychological outlook that everything is upside and you just see how amazing it is to be able to create value and to build value and to work with other folks. When you're investing in the later stages, it's actually, it's not quite zero sum, but it can be more zero sum. When you're creating from the beginning, you're writing the first check. And we know we've got an agreement that like, look, the first check is going to come in.

We're going to buy 20% of your company for a million dollars, right? Like our entry point in the venture studio and the expectations. We have these rules. We don't know. We can always, we have flexibility, but we do all of this work. And then we enter at a point with our fund that has really meaningful opportunity for upside for our investors, for the seed fund. But it also just sets a really clear expectation that like, I just don't work with us if you don't want to have that dilution coming in. But we're going to give you so much more hopefully like that greatly exceeds that. And then the other thing, I mean, the benefit of collaboration is five and 10 and 15 and 20 years out, you get paid in holiday cards. Like I get these notes of like people that like I'm embarrassed to say, like, I forget

that I ever like gave them advice or I talked to them or help them with something has just happened so frequently and so much. And you get one of these amazing notes where it's like, you've changed my life because you did this thing. And I'm sure there's a lot of professions that get that. But it's like super rewarding. And it like brings a tear to your eye. I've been running my own experiment, radical non-zero.

One thing, it's about six months in, I have noticed very much a lifestyle benefit. It does make you a happier person. I think it ends up being a self-perpetuating, but it actually just makes you a happier person. So one of our values at Alloy or in our family office in Alloy is paranoia and sort of how do you cultivate paranoia and be like, what's paranoia? And it's like, what's the opposite of paranoia? It's, it's this irrational belief that there's someone conspiring behind your back to your success. And people like laugh and they're like, that's crazy. That's not a thing. I have a master's psychology as you know, and I understand on some level when people have a very scarcity mindset and, and, you know, feel like they don't have enough and,

and want you to help them and give them things. Sometimes that could be, especially when you're having a long day, that could be hard, hard to do do how do you deal with that and you know how do you how do you maintain that when somebody's like truly just you know just basically looking to take something from you oh my gosh do we like you're like inside my brain you got to train yourself right there's like you train your body you train your mind you train your emotions we seek to be generous where others are needy greedy or fearful but how emily and i were talking about my wife and i were talking about that and what's the company that i would run for the rest of my life that we would run, we would be proud of that our kids would grow up. And like, so the infrastructure that is our family office,

and it ultimately became Alloy and 82BS came from one of those dinner conversations where we don't, when our kids need something, we don't seek to take advantage of them. When they are needy, we don't take advantage of them. But also when they are greedy, we don't seek to like to throw money at the problem. Like, no, no, we like, we have the patience. So generosity can manifest. People think of generosity as money, but generosity can also manifest as you invest in your skills. I mean, exactly what you were doing. Like you spend a lot of time preparing for this conversation. And so that I view that as a form of generosity or working hard to do something that is valuable to create good content. And like, you know, you could probably stop doing this and just

manage your investments and be fine, but you're putting yourself out there and you're investing in your own skills and you're sharing that with the world. If you're a really phenomenal attorney, it's, you know, you're sharpening the saw and you're sharpening the saw. And when someone comes up and asks for help, your ability to give someone advice, even if they're not paying you, is a form of generosity. So the downside is I came from one of my old mentors, Ron Price, who's an amazing human being. And Ron told me one point, he's like giving me feedback and he's like, he doesn't say a lot. And Ron says, Eric, people will use your virtues to manipulate you. And I was like, oh my God, Ron. And so you say this in the context of a betrayal of like of someone taking advantage of

my generosity or someone's generosity. And in the moment, it's kind of, you know, preparing your mind for this moment and your emotions. you've just got to lean in and recognize what is the life you want to live? Do you want to live a life that is cynical and skeptical so that you protect yourself from that very, very, very hard moment when someone takes advantage of you and you feel that sense of betrayal? Or when that happens, do you take a very deep breath? And by the way, it's not that it doesn't hurt. I'm just like every other human. It really, really hurts. But I remind myself that the great bliss that comes from being generous and feeling those deep personal moments with other folks, including

your wife and your kids and your friends and your family and other people you collaborate with. The downside of the shadow of that is that people might take advantage of you. So I feel like so much of what we do in investing and building relationships with folks, with our entrepreneurs, with other investors, we've done SPVs in all of our companies. you have done those with me, right? So the audience knows you got me into venture capital and you did it through an SPV and you taught me how to raise an SPV. So kudos to you. To be fair, that was like, we did some mechanisms together, but you were already quite entrepreneurial. You were incredibly generous and, and, uh, patient with me, which, which I didn't, I appreciate it, but I fully appreciate more in retrospect. David, I really

appreciate that about you as well. And like, and so there, there was kind of the answer to your question is like, sometimes you work with people. It's impossible to appreciate it, but I fully appreciate it more in retrospect. David, I really appreciate that about you as well. And so there's kind of the answer to your question is like, sometimes you work with people, it's impossible to appreciate it when you're young. It's like impossible to appreciate your youth when you're young until you're older. It's impossible to appreciate your health when you're healthy until you're sick. And so in the same way, what is our commitment to investing in our communities and other people so that every once in a while, like what you just said is like, that is the nicest thing you can say. Like, it will make my month.

It's not my year, it's like i really really am rewarded and appreciated fundamentally right by by you saying that and by the way you're like better at all this than i am now so it's great you feel like you've moved on and i learned so much from you now i'm a slow learner but uh eight years or nine years later it's like tortoise in the hair here yeah like you are you are you are definitely winning the race i think you've read give and take right i think we've talked about adam grant yeah yeah a while ago and i've met And I've met Adam, you know, actually more than once. He's such a great human being. One of the models that he talks about is basically making small bets until you see somebody's value set and how they're treating you. Do you believe in that? Are you always just

like, here's, here's the, I'm like, I'm like remembering the book. I've read it, you know, I don't know. When did it come out? Like a decade ago, you know, as a reminder, he found that givers were both the highest performing and the lowest performing people in society. Entirely my experience as well. And so let's think in portfolio theory, layered on top of that is what I like. And I forget, maybe he said this in his book as well. Like maybe he says in his podcast. Yeah. So it's, you're like, if you're going to be a giver, do it twice, do it three times. Like, cause you don't know if you're going to be taken advantage of, if you're going to be the high, if you're trying to like, if you're thinking like

in portfolio theory. But no, I, I placing small bets. I think one of my challenges is I don't know how to play small, but I mean, I know how to play small bets. You try to like have decentralized things and as an investor and otherwise, but I like to run small experiments perhaps, but I don't think of them as small. I just think about them as incremental to, to, to a lifetime relationship. Right. So when I joined Lehman brothers, it was, I don't know, you know, maybe I will be a great managing director and maybe I will love this job, but also maybe I will learn a lot. And, you know, so, so that, that was, that was an experiment. And like, I worked my way into the venture capital team and I, and I met some really wonderful people. And you think about the people who were like mentoring me back then, you've got

Michael Castleman, my direct boss and Mike Odrich, who started the firm. And you got, you got Tom Banahan and Brian Paul, Leo Russell. Like these were all the folks at the top. And they're like Jackson Gates is like my office mates, our goers out at CRV. Now, like, this is like a crack team of folks who were like phenomenal, all mentoring each other at like these were all the folks at the top. And they're like, Jackson Gates is like my office mates. Sargour is out at CRV. Now, like this is like a crack team of folks who are like phenomenal, all mentoring each other at like up and down the level. You know, did we all know we'd turn out okay? No, like, but they were very generous with their time and investing in these things. It is essentially a portfolio and you build that out and the wins are very big.

Naval Ravikant talks about the compounding value of relationships i certainly do that i literally get excited when i put in a small bet into somebody and they lose it or they do something unethical i'm like wow i ran a fast experiment great i just saved myself seven years and you're totally right like being able to run that fast experiment when you say someone does something unethical like it doesn't it happens rarely but when it happens you're like oh my gosh and this is this is one of the things with our spvs. Or even like not, not empathetic or not, you know, egocentric. You're not seeking out a second investment. You're not seeking out a broader relationship, but you're also not like throwing that person

away. I love, you know, Joseph Campbell, the myth, then like George Lucas wrote into Star Wars. I oftentimes think about, you know, I ask people this question, who killed the emperor at the end of Return of the Jedi? People are like, what do you mean? I was like, no, no, just like, let's like remember. And usually people say, oh, it's Luke Skywalker. That's the story. It's Luke Skywalker. They're like remembering the myth and they're saying like the hero is Luke Skywalker. And I was like, no, it's Darth Vader. Darth Vader kills the

emperor. He throws him down the shaft into the center of the Death Star. And there's a really important, that story works and the hero's journey of Darth Vader is the important one. And so Luke represents something different than Darth Vader. And so what I always believe when you're in those moments and something like you're placing these bets or you're thinking about working with folks is the person might be Luke Skywalker, the person might be Darth Vader. They're very rarely the emperor, but Darth Vader is the one that you work with that can come around. That like redemption is really important. And some of your most powerful relationships are ones where you got to give folks a chance to walk the path and to like find their way and like be appreciative of what they have. And it's in the deep hope that

they pay that back to somebody else as well. And, you know, and metaphorically they throw the emperor down the well, eventually. Amazing grace, especially for somebody that started 20 companies that's seen a lot in your career. You're probably the most optimistic, definitely the most optimistic high-performing person I've ever met. How do you balance your mental diet and what do you consume and what do you produce in order to keep such high optimism? Oh my gosh, like literally consume,

like my food, my diet? Or my mental diet? You can take it literally, but more figuratively. I'm guessing you're not on Instagram 24-7, but... I am, I'm not on Instagram, but that's because I just don't sort of have time and I'm relatively introverted.

And so that's not, let's say, no value judgment on social media for me. I'm deeply on Instagram for our rugby team, for the New England Free Jacks. So we have the highest following in Major League Rugby, so for sure. What is my mental diet? I mean, one of my groundings is in a hobby, perhaps a meditative hobby is translating the Tao Te Ching. And I think that is something that I found when I was relatively young. I was in middle school. And I think that was transformative to my life to just find something that almost becomes a prayer and a meditation.

And you can read different translations of it. And then people have their own translations. And so then you can go back to the original source material. And that's why I pursued learning Japanese and Chinese was in part because of my interest in the Tao Te Ching. So, you know, I have many, many, many different copies of translations of the Tao Te Ching, and I find a lot of very calm and personal wisdom in that. I think the, you know, the wealthiest person in the world is one who wants nothing because you have everything you want. There's just some basic groundings that I think are really, really important in those texts. But

otherwise my mental diet, you know, I have always read a few maybe extra hours a day than other folks. Once I started having a lot of, we have four kids, Emily and I do. So that crowds out a little bit of the discretionary reading of reading, you know, a hundred books a year or so, plus everything else we read in our day jobs. And so, you know, feeding your mind full of things that are not, not necessarily the job you have to do today, but are interesting. That helps. But, you know, as a student of history, you can become depressed in many different ways. You can see terrible things. You can study psychology, as you say, you master psychology. You can study psychology, you can focus on the terrible things. But you can also- Don't study evolutionary psychology. It's a dark hole.

Not so. There are so many dark holes, right? But then you can see the positive in that. So how do you actually look at that and be like, look, there are patterns across time of how humans behave. And you can see the positive in all of that, which is this incredible trajectory of our ability to turn raw materials into useful things that makes everyone wealthy. So, I mean, that is how wealth is created. That's just fundamentally, that is how all wealth is created. We can turn something useless into something useful. And the efficiency, so the drive, the overarching drive should be, how do we do more of that? How do we become more efficient as a society in doing that? And then we have to make a really

important societal decision around how do we share that wealth that we create? But first and foremost, are we creating wealth? And the answer is unequivocally, yes, we are creating wealth. How do we share that wealth is an important question. And this is why we choose to invest in our communities. And we have things that we do and invest in communities that are deeply local. The people we hire and then the in our communities. And we have things that we do and invest in communities that are deeply local. You know, the people we hire and then the infrastructure we build. But we think about it as making medicine is, you know, a drug that works in a human in the United States will also work in a human elsewhere in the world. And so it is one of the ways that we can participate as a family office and as a family in doing things that I connect our humanity with the rest of humanity.

It feels interesting and useful and like rewarding in some ways, many ways. Do you integrate your, your family, your, your wife and your kids in any, anything that you do? The joke is it's hard to be an Anderson, like these poor kids. I was telling a story at the office one time and I'm like, Oh, my son, he came in and like one of our, one of our phrases, we have it out of the 82 VS, but also at, at home, it comes from home, which is you work hard when no one is watching. And it's just like, look, I can't get inside my kid's head. Like you, like when the doors close and you're in your room, I don't know if you're watching your iPad. And by the way, I'm not going to come in and monitor you. Like you've got to develop your own mental fortitude to work hard when no one is there. So it becomes this important question in this like responsibility that gets pushed on them

to say, decide what you're going to work hard on. And, um, success is the prison you create for yourself. So as you become more successful, you get like stuck in the prison of where your success is. And the other thing is, so like kind of paired with this notion that like, you live in the prison of your own mind. Like, you know, if you tell a lie, we can convince ourselves we're not a liar. Like cognitive distance is an amazing thing. You're the psychologist. I'm the student of psychology. Like it's an incredible thing. But I believe in the back of your mind, you have two voices in your head and you have the one that tells yourself the lie that you're a good person. Then you have the voice in the back of your mind, you have two voices in your head. And you have the one that tells yourself the lie that you're a good person. Then you have the voice in the back of your head that says you're a liar.

And you live inside that prison of your own mind. And so it's tough to be an Anderson. And so my son did something that was actually not that bad. But, you know, it was probably happening. Maybe I was tired. Maybe someone took advantage of me on that day. And I was like, look, Kastner, you live inside the prison of your own mind. And inside that prison, you are shitting in the corner of your prison cell right now.

And you control that. And you know what? No one corner of your prison cell right now and you control that. And you know what? No one's coming in to clean it up. Like that's your responsibility. To build on that analogy, you shit on the corner of your mind and instead of confronting that and bettering yourself, you try to distract yourself through things like physical things,

alcohol, all sorts of stimulants. Because you smell the steaming pile of crap in the back of your prison cell. And so you're seeking something else to distract. That's a great extension of stimulants. Because you smell the steaming pile of crap in the back of your prison cell. And so you're seeking something else to destroy. That's a great extension of the metaphor. I will share that with all four of my, I have three girls and one boy. So Catherine got the tail end of that.

But all the kids heard that at the dinner table. And then, of course, my coworkers are like, wait, you said that at the dinner table? It's like, Jesus, Eric. The poor kid is like 11 years old. And he's maybe 10 at the time. Yeah, so I mean, do we involve our kids in our family? My wife and I have been together since we like 11 years old and he's maybe 10 at the time. The yeah. So, I mean, do we involve our kids in our family?

My wife and I have been together since we're 14 years old, which is scary. Now that we have a 14 year old, right? My oldest daughter is 14 now. Catherine, she's a lovely human being. She's like the best person ever. Next to him, like my next three kids were wonderful. But Emily and I have known each other for a really long time. And and we're 45 now.

So we've been together for a long time. So Emily knows who I am, you know, knows everything about me and who my who I am. So there is an incredible strength that comes from our partnership in what we do, right? Like there's, there's like, she has learned to live with the separate the good from the bad, that like these things that, that help us to create multi-billion dollar companies and make medicine. And that, you know, the unquiet mind that makes it so I only sleep a few hours a night. People think that's a good, that's a good thing. Like, wow, wouldn't that be great if you only had to sleep like four or five, six hours a night, but it's, it's not great. Like, there's a lot of things that make that very bad. Like you ever like, you know, it's lonely to be up and no one's awake, right? It's all these things.

So there's a shadow that comes with all the success that we create. Um, but she appreciates both of those things. And I think, you know, the, the, the wealth and the benefit that you created, she also knows that maybe that also makes me a little bit more like testing and patient when like my mind's moving fast and, um, you know, need someone to come along with me. Um, and my kids, God bless them. They, uh, I think they, they have many of my wife's strengths and they have many of my weaknesses. And you see that reflected in your own children. Like as you have children, you'll see that. And you just want them to grow up and be happy.

I mean, all I want for my children is the same thing I want from like all of my colleagues and friends, which is just find something that you really, you really, really, really want to work hard at. So like work hard at something and then find that thing that you really want to work hard at.

And recognize that that might change over the course of years or decades and let yourself off the hook. But if the thing you said that was like your life's work at 30 could be different at 40 or 50 or 60, because you're going to, you're going to change, right? I consider you a genius. I don't think I've ever told you this. And I've been interviewing geniuses like David Freeberg, and they all have one thing in common, which they're all very focused on one thing. And actually David Freeberg had C's in his theoretical classes, and he had A pluses in labs, he mentioned on our podcast. Do you kind of advise your children to just focus on their strengths?

I just had a parent-teacher conference this morning where this came up with my third child, my daughter, who is Elizabeth. I'm sorry, that's like terrible. Like I'm going to out in on my children. By the way, Eve is the youngest, Catherine is the middle, Catherine, they're all wonderful kids. Elizabeth's parent-teacher conference was today. And that's basically the topic that came up today, David. It's like, how do we, so she is, she gets intense and creates her own projects. And I think it's schoolwork because she's so intense about doing them. It's like a Saturday. She creates like a sour project and she's like making a PowerPoint slide and these things. It turns out she's just like doing something. So I just want, I think it's important

that everyone, I mean, including my children, they just, they find something that they really want to work hard at. And so, and then that'll change. So whether that's woodworking or that everyone, I mean, including my children, they just, they find something they really want to work hard at. And so, and then that'll change. So whether that's woodworking or that's, you know, chemistry or it's math or something, they'll find their way as long as we continue to encourage them that they should, they should work really, really hard. And I think that's a pattern for success in your career as well. You know, a young and talented scientist that isn't quite sure where to take her thesis. Well, what's the thing that interests you? What is like, what is the problem that drives you crazy when you're thinking about it at night? Like the problem that you just can't stand to still be a problem, like follow your crazy a little bit. So that when you're not being distracted, you're actually, that's the thing that's distracting you.

You know, just, just, just work hard, just, just work hard. And that happens to have this totally ancillary benefit of also creating value. So you actually get paid for these things. And so I think it's a rational model for how you keep your kids. I think the school system is, I look at this mass production issue, they have to basically put tens of millions of people throughput

and it tends to really disadvantage two standard deviations, the most gifted people, maybe the most difficult to learn people. And it tends to solve around kind of one standard deviation. So there's a big challenge we have then with public education, but it's also true of private education. The more money you spend, you can make a more, and the more accountability we have, the more you can make a bespoke educational sort of like

one-on-one. But even in the absence of that, let's take our learnings. When I was in second grade, I was in a public school in Manhattan, Kansas, the Little Apple. My teacher identified that like I was bored in class. I would wander out of class to the library and they would lose me in first grade and second grade. And they eventually realized like if Eric wasn't in class, he was just in the library. So I didn't realize that's like a total no-no until people were freaking out. So how do we use the things that we have and just recognize that most education around the world is not coming in some fancy Ivy League tower?

It's like most people are learning, um, by apprenticeship and they're learning the context of the family and the work that they do. And I, you know, if we, if we stick together and we help out, I, you know, it's hard to be a teacher. It's hard to be a teacher in a, in a public school. You hear incredibly challenging stories where, um, in, in inner cities or otherwise where there's also violence overlaid with the challenge of learning, it's hard to be a teacher. Right. And so it's also hard to be a learner. So creating, I look at what LeBron James does in how he leans in with his communities. And he just, you know, you get the feeling that LeBron is actually totally committed to his communities in the way that he is, he's attempting

to do the right things and to use his fame and his resources to create a fundamental infrastructure that is connecting humans with one another to excel in the fundamentals of their life. I mean, like being able to learn and to learn from each other. That's, that's an incredibly, like you don't go, that's not like a billion dollar company. That's not like something that, that pays off like a, like a biotech investment is going to pay off. Um, but it has these subtle ways of paying off. I'm sure it's, I'm, I'm, I w I would speculate that LeBron feels as proud of that work. Um, maybe more of being one of the greatest athletes of all time. And I would imagine the older he gets, the more that becomes the thing that he's the most proud of.

And you mentioned, I look at management as a form of teaching as well. I consider you a great manager. What is your management style and what would you tell people? What are your lessons learned from managing, especially across so many? Oh my God. It's like you're reading our reviews here at Alloy at 82. Yes. I may have gotten access. Did you truly like, I'm on with one of my coaches later today. so many oh my god it's like you're reading our reviews here at alloy at 82 yes i uh i may i may

have gotten access i apologize did you truly like i like i'm on with one of my coaches later today i'm gonna ask the um i what is my management style okay here's my feedback is like is eric a micromanager no i'm not a micromanager i am intimately involved in the details of my business and it was i just came back from the jp morgan conference's annual thing and i was with an old a colleague who i'd worked together at a company she was in BD and then she's now a very successful venture capitalist. And she's like, she's like, she's always been very direct. Right. And which I really appreciate about her. Like we have a great relationship and she like kind of offense. Sometimes like people can be, can be offended by directness. I do. I'm not offended by this directness. And she goes,

I heard you're a micromanager. I was like, it was like really aggressive. I was like, I was like, you've been reading my reviews. And she's like, no, no, I talked to somebody else and this thing is like, but, but that doesn't, I was challenging. it was like really aggressive. I was like, I was like, you've been reading my reviews. And she's like, no, no, I talked to somebody else in this thing. And it's like, but, but that doesn't, I was challenging because I never saw that to be true. Like, you don't micromanage. Like I worked with you for a long time and like, you're an intense person. I was like, well, of course, cause you're really good at your job. Like we're not like I'm, it would be this thing. We would talk about things we'd be doing and you would come back in a timely manner and you would do it. And so she, she was also in a place in her career where she was very good at it. So she didn't, she didn't need me also to do the mentorship aspect of it.

And so there are other places where the phrase that we, that I would use today, but it's a very fresh thing. Actually, my chief operating officer and I, uh, so Martin Leach, our COO here at Alloy, we're talking about this just a few weeks ago. And I said a very provocative thing at our K1 at our management team in, in October. And it was, we're talking about all these things that we do to help to support our people and how we grow. And we're really investing in talent.

It's like, it's very hard to manage talent, especially in a super high pressure environment where there's constant change. And we're creating new companies. And I was like, what if we don't do any mentorship? And everyone's like, the record skipped. And it's like, what, you know, like, and everyone knows, I'm like, I've probably got three calls scheduled tomorrow morning before six o'clock of like my open calendar, people can schedule time. And so like, it's like, no, no, I mean that if people are asking for mentorship outside of the context of something we do in our job. So really what we do is apprenticeship. So if we lean in on that, what do we do apprenticeship? And it's like, no, no, I mean that if people are asking for mentorship outside of the context of something we do in our job. So really what we do is apprenticeship.

So if we lean in on that, what do we do? Apprenticeship. And it's funny because even at our K1 and then even the rest of the company, it was like one of the messages that was heard is like, we don't do mentorship. We only do apprenticeship. And like, we don't care about people. I was like, OK, OK, revision, revision. I say I say these black and white things to try to grab your attention. We do mentorship by apprenticeship.

And I think that's the right way to say it, which is I will work. I try to work harder than anybody else. And if I perceive that someone is working harder than me, I feel like I am exploiting them. And so I need to work harder. So, and that's a, that's a, that's a psychological dysfunction of mine. There's a hidden assumption there. There's assumption that work is bad. I just don't want to be exploitive. There's two types of people in the world, the people that do the work and the people exploit the workers. So I mean, just to be reductious about it. The reason I say that is my partner who works with me and who produces the show, Zoe,

I asked her one time, what makes you happy? And she kind of thought about it. She's like, I really like working. I'm like, man, I wish she would have told me this years ago. Every time I give her a big task, I feel guilty, but I was actually like making her happy. So an old calling of mine, who you know, Andrea Moore. So Andrea, right?

Because Andrea and I have been in SBVs together, right? So Andrea has a background in accounting and I have a background in finance, right? So which means like Eric's terrible at accounting, but he's good at just like making stuff up from like the finance background. There's a lot of art to finance people don't appreciate. It's very creative and I love puzzles and so this thing for sure. But then when you're doing your QuickBooks and you're balancing your book, you're really trying to balance your books.

Like this is an actual discipline in accounting is there are rules in accounting, right? So Andrea and I, Andrea works in the family office and working together in this company and where we were working together right in that SPV. And I just, Andrea is incredibly talented person and we're just at the same age. And so we, and she's just a really great partner. And this is when we were in the huge kind of the war room in the first room. And it was just Ulysses in that one big room. And so we're all in those desks and offices together. And I kept trying to give Andrea like the strategic finance work. I was like, oh, we're structuring this thing and this thing, like you got to get on this call. Let's

do this thing together. And then Andrea, because I love how direct she is. And also we have a good relationship. She just, she's like, Eric, stop giving me the stuff that I hate. Like stop giving me the stuff that you like. And I was like, what do you mean? Like, I don't want you to just be like stuck doing this thing. Like I want you to pull it. These are the things that I hate. Like, stop giving me the stuff that you like. And I was like, what do you mean? Like, I don't want you to just be like stuck doing this thing. Like, I want you to pull it. These are the things that I like. And she goes, I hate the things that you like. I was like, but I hate the things that you like. And she's like, exactly. That's what you idiot. That's what makes us a good team. So why can't you just let me do the things that I'm good at and I like, and why don't you take those things that you like that I hate? And like, that's what makes us a team.

And I'm, you know, I'm embarrassed to say that was like, I mean, what year was that? It was like 2015 or something. It wasn't like too long ago. And I was like, I am this old in my life. And I, like, this is the first time that really took like someone like Andrea really like grabbed me by the collar and being like, just stop making me do these things that you love, that I don't love. And I was like, oh my gosh, now I understand teamwork like better. Like, oh my God, how could you make a team where we all love the things we love? You play your positions. In marriage and in work, right? So Emily and I, maybe that's a good thing.

Like Emily and I are good partners. We love different things. The things that I hate sometimes are the things that she loves, not always. So speaking of being direct, I've known you for 14 years. I've never asked you for direct feedback. Might as well do it in front of thousands of people.

What would be your feedback for me? Your paperwork is terrible. Like following up on all the paperwork and like and like that piece and and so i've seen how you've surrounded yourself with people who exactly but like but that's i mean that's that's not fair because it's a little bit the point of you know elon musk is the sort of guy that that is that is going to get us to mars and the sort of guy that gets us to mars is also the sort of person that might be a little bit tough to like live with around dinnertime if you're one of his children i'm sure so um yeah it's a balance but that's but that

doesn't mean you should change i mean maybe that would be the feedback i would give and i recognize because you're so highly functioning and talented it's it would be much more around surround yourself with people like who's well you just told me about zoe which i yeah i immediately connected with on linkedin and i'm trying to uh and i'm trying to poach right now, by the way. So Zoe, if you're listening, you know, I gave her a golden handcuff, so you don't have to worry about it. I myself, I'm a financial creative genius. So everybody needs a Zoe, right? Everybody needs like a good compliment to them. You know, there's, yeah. So, so, so other feedback now, I mean, you, you it's been kind of incredible to see how much you have evolved, but stayed the same. Like you can kind of see the pattern in your successes today and how those were all there when you were at Tuck and like the first time we found you. If you remember, like you didn't have a car and like our labs at Atomab were like over and it was, I think it was like raining cats and dogs and there's no cabs or Ubers at all. And somehow you like managed to find a way to get up to Atomab and, you know, not quite fully realizing maybe how far away the lab and office was like from campus. Um, but you

know what, you were on time and, uh, and you were there. And so you, maybe that, uh, I saw it in one of the first companies you made were, were invested in you. Right. And, uh, you were always dogged in your, in your follow-through and your follow-up and your communication and just like the willingness to do the work. Yeah. You're willing to work harder than anybody else. And I appreciate that. You know, I mean, we've talked about this before and there's no one, I have never had someone, I've interviewed thousands of people that we, you know, we've hired like tons and tons, right? We've hired them. I've never had someone come into an interview and say, I will work harder than anybody else. Like I will, like, like here are the things that I'm good at and here's the

job that I think it is. But like, here's what I can promise you, no matter what happens, I will work harder than anyone else. And like, maybe I'll burn out after a year, maybe I'll burn after two years. But like, what I ask in return for that is can I like get a lot of responsibility? And like, will you teach me I was like, I'm like, like, I'm just waiting for that person to show up. 45, we started some companies. You know, when you add it all up, it's like $10 billion of value for investors of companies we've started and like exited. and i've never had i've never had someone say that to me so like i do remember that yeah that was 2011 and i remember you were very surprised by it i mean i don't know like now that i'm like got elon on the mind like like who's your gwen shotwell right who's who's like and and those

are i'm folks like gwen or is as unique as folks like el, right? Well, Zoe's evolving into Gwen. So- All right, Zoe. Great. Well, Eric, I'm very lucky that we were able to cut this off after only an hour and a half. Usually our conversations morph into three, four hour discussions, but you've been an incredible mentor. And as I mentioned, you're the reason I'm in venture capital, literally.

So I really appreciate everything that you've done. I appreciate your approach to life and your philosophy, and I'm in venture capital, literally. So I really appreciate everything that you've done. I appreciate your approach to life and your philosophy and I'm learning from it every day. And you think that's gonna, I know it's essentially a pre-seed fund. Do you have plans to kind of grow that into a franchise? Yeah, it'll keep growing because Alloy is a forever company, right?

So Alloy, and what we mean by that is there's a class of stock, there's a controlling class of stock that cannot be sold. And so that keeps it. So as long as we make a dollar of profit, we reinvest 100% of our revenue back into innovation and access to innovation. You really got to look to the venture studio as the place where very intentionally our investors and our co-investors and collaborators, they get liquidity by going along with us with these seed stage, even pre-seed, the fund enters at the seed stage opportunities. Every one of those biotech companies, they need more capital over

time. So yes, the seed fund, I'd like to maintain the seed fund as a vehicle to write that first check for sure, because there's a different profile of investor. And a seed fund has 10x potential, right? It's like, I mean, 20x potential. And that's by design, the small fund, as you said, what is the strategy? And so you are, in every one of those cases, there's real opportunity for a co-invest fund for the bigger fund. And we'll move that direction. But I would say the through line in that will always be, we co-invest with other folks. It's why, it's why.

It's signal driven, but it's also, you learn when you co-invest, when you collaborate with other people, you get the benefit of all their insights and knowledge, even if they don't share it with you. Right. It is this kind of this notion of there's a stated preference and there's a revealed preference. So when we're all fundraising, whether, you know, I fundraise for my fund, right? But we also fund where you help our companies fundraise. When people decide to write a check into a company, I don't have to know all of their confidential information and all of their

life's experience, but you get that in the moment of like a decision has been made in their fiduciary to capital. And that actually increases the probability of success of our investments because we've got a friend and a collaborator, but we also have sort of like a decision has been made in their fiduciary to capital. And that actually increases the probability of success of our investments because we've got a friend and a collaborator, but we also have sort of like, we know we have some shared insight. And so that's why we try to syndicate our deals. You know, if you bring in five co-investors, it doesn't work, but you're always looking for the lead investor. We stand behind the lead investor and we stand behind the entrepreneurs. So we're kind of, that's how we, it's at the heart of our, part of our company. When you're an extreme optimist, as you are, it helps you price

when other people are going to come in. As you know, so, you know, Logan Snyder, my general counsel at Ulysses, and then also at, was the GC at Alloy for many years and represents Ulysses on the board. Yeah. Constantly, Logan's like, why didn't we ask for more? Like when we made that SPV, you did it at very low economics or no economics. We did these things. And it's like, you know, it had, but as you know, David, it has a funny way of working out. It was never in the way that we built those companies. And when we helped other folks build their companies, it was never about the money. It was always about the thing that we were doing. And it continues to be, it's about the medicine we make, it's about what we do. When you, and that's why I have been reluctant to start a

venture fund until the 82 VS seed fund, because you, when you, when you start a fund, you are a fiduciary to capital and you need to take that really, really seriously. It's also, it is a 15-year relationship with your partners. You got to have the right partners. I have two general partners there who are phenomenal, Vic Stone and Mike Schmidt. We've known each other for a long time. There's people at Allen 82VS have worked together across multiple companies for more than 20 years. So I had to become old enough to be in a stable relationship with enough people and enough of the platform and the infrastructure that I could get comfortable with the fact that if you take money, even in a small fund, even in a small pre-seed fund, if you're going to take money from

investors, you better be fully committed to being able to make that the most profitable vehicle in the world. And the way that I navigate that tension between creating massive upside for investors is through the act of creation. We write our options, we don't buy our options. And when you're writing options, you're managing risk. You're managing risk through the act of creation, right? We, we write our options. We don't buy our options. And when you're writing options, you you're managing risk. You're managing risk through the relationship with your entrepreneurs. We're able to do asymmetric information, asymmetric information. And then you collaborate, you get additional asymmetric information. And then also, you know, in that moment where like the shit's hitting the fan and you've got collaborators, you want people in your foxhole. And that's kind of the brand promise we give at

82 VS. And certainly at Alway with our collaboration. We collaborate with some of the biggest pharmaceutical companies and we collaborate with Pfizer. And Al Borla, who doesn't, I don't think he knows who we are. We're like small in the supply chain for everything that is Pfizer. But we've talked openly since the creation of the company that what if our purpose in life is just to make Pfizer 4% more efficient? And then like, what does it mean to be generous in a relationship with a $200 billion company that is like an anchor of the US economy and provides such incredible jobs? And there's others in the United States as well and around the world and some of our other collaborators and even international companies that work in Boston with us and

whatnot. So what does it mean to be useful to someone like Al Borla? It means that we show up and take what we do really, really seriously. We create drugs. We let them take credit for those drugs. We don't need the credit. They can take it. And in the act of creation, if your basis, this is like an investing. If your basis is coming into the $0 pre-money valuation, it's easy to make money. So it's hard to make money always, but it's like a lot easier if your

basis is a $5 million pre to take that, to take that high. Power laws work really well. Power laws work really well. So if your entry price is 50 or a hundred, but, and so what's the trick is we write our own options, right? We create our own drug assets. We create our own companies. We work with entrepreneurs. I mean, most of the projects that we,

when we're out there giving advice and we're helping folks, it doesn't lead to a company. And that's okay, right? Because it was a funny way that those people will come around much, much later. And so truly we've built, at Alloy, we've built a relationship engine

that then results in a few companies a year, starting with the folks who find the right match with us of today's the day that they really want to start a drug company that's a find the right match with us. Today's the day that they really want to start a drug company that's a match with our skills and abilities. And then the brand promise we have is we're not going anywhere. This is the only company I'm going to run for the rest of my life, a combination of platform services and venture studios. So what our entrepreneurs know is that their co-founders may leave them, their venture capitalists may leave them. Some of their investors may betray them. So their partners

might leave them. But Alloy will always be here And 82VS will always be here. We are, we are your co-founder that will never leave. And while you may have moved on and haven't called us in a few years, when you need help, we are here. And that is, I wish that entity existed when I was starting all of my companies. And I wish kind of as a family and as a community, we rely on these relationships and these institutions that stick around. And so we wanted to build an institution that would survive over decades, if not centuries, that always has that brand promise. And our investors get upside by participating in the creation of multi-billion dollar companies.

So while Alloy itself does not have to become an enormous company, we stay relatively small, we are working for the creation of many different, just billion dollar opportunities for venture capitalists and for our partners. Yeah. So just, you know, you're not alone when you work with us as our brand promise, but, and also paired with, as you asked, like, what's the, what's the downside to being generous? You know, if you take advantage of us, we will just not seek another relationship with you. So maybe we won't want to discover another drug. And so I actually don't believe in that we're

going to be the agent of retribution or justice. We're not going to punish anyone if they betray us, but we are also not going to seek out a further relationship to license our technology, to help them with services. Unless there is that moment of redemption and it's like, you know, you've seen the Shawshank Redemption, maybe sometimes, and I give this advice sometimes to my team when someone, when they feel betrayed, because we are generous is like, you know, maybe Johnny is going to climb through the sewer and come out the other side

and truly like make it out and there's going to be redemption. So let's maintain hope, but let's not give that person too many more resources because there are other people that are more deserving today and in this moment. But let's keep an open mind and an open heart that maybe that person walks the path and comes back. And hopefully that works out. And by the way, it has worked out many times in that way. And that's a wonderful thing. Well, on those beautiful words, we'll call it a podcast. And Eric, thank you for jumping on. Thank you for sharing your wisdom with myself and with the audience and hope to meet up very soon. I'll see you soon in New York. I'll come down and have a party. Thank you, Eric. Thanks, David. By popular demand, the 10X Capital Podcast has officially launched our newsletter powered by Carrier Labs, a full service content marketing firm that's partnering with us on the newsletter. In our weekly newsletter, we will keep you updated on all things emerging managers and limited partners, including industry trends that are critical to know as an LP, VC, or founder. To subscribe to our totally free newsletter, please visit 10xCapitalPodcast.com.

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