This Week in Startups - Founders Fund's Brian Singerman on building a legendary VC firm, “Adapt or Die” and "Ikigai" | E1896

Starting point is 00:00:00 I can take you through SpaceX because it's actually the thing that attracted me to the fund in the first place. You know, I was doing my own small fund while still at Google, made friends with Sean Parker. And he was like, hey, come check out what we're doing over here at Founders Fund. That's the time when they were starting to consider investing in this ridiculous rocket company called SpaceX. I got to tell you, when we were looking at that, obviously those guys knew Elon extremely well, you know, from the PayPal days. But none of the rockets had worked yet, right? And they had all blown up. But we said, wow, this is clearly differentiated.

Starting point is 00:00:31 We love things where it's not like, you know, huge amounts of competition. It's like, right. End of one companies, man. Where's the other ride sharing app? Your food delivery service, dating app. No, there's a one rocket company. This is an end of one company. And so as a venture capitalist, as a true venture capitalist, you love those because

Starting point is 00:00:50 the upside is just unlimited, right? Like, yeah, it's harder to get the conviction and it's harder to make the bet. But if it's when it's right, the upside is just, is gargantuan in those companies. This Week in Startups is brought to you by Imagine AI Live is an AI conference where you'll learn how to apply AI in your business directly from the people who build and use these tools. It's taking place March 27th and 28th in Las Vegas and Twist listeners can get 20% off their tickets at ImagineaI. dot live slash twist. Open phone brings your team's business calls, texts, and contacts into one delightful app

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Starting point is 00:01:49 to get 15% off the first four weeks. All right, everybody. back to the program. Probably have heard of Founders Fund. They do things a little differently at their venture fund. Obviously, in the name, it's explicitly pro founder. But they even let their partner start companies. And they've got a very unique investment strategy. They often put a large percentage of their fund into just one of the portfolio companies. You know their portfolio, SpaceX, Palantir, Airbnb, Andrew, friend of the pod. Last time, Brian Singerman was on, the program was back in July of 2017, episode 7, 4-8. That was 1,000 episodes ago. My Lord. Brian, welcome back to the program.

Starting point is 00:02:26 Thanks for having back, Jason. So you heard my little intro there of Founders Fund. What fund are you on now? And how has the strategy evolved over time? So we're currently on Venture Fund 8 and Growth Fund 2, investing out of those simultaneously. The strategy is always the same, which is always adapt or die and change up and everybody run their own strategy and figure out ways to make returns. So obviously, we're in a return-based business, but you trust to hire partners and let them kind of figure it out for themselves. This is like different than many of the partnerships in Silicon Valley where everybody gets together on Monday. You have to debate your ideas. You have to fight for your idea. Maybe they even have a vote. Should we do this?

Starting point is 00:03:14 Thumbs up, thumbs down. And it's more like a. well, like a partnership where, you know, everybody has to have some amount of alignment. Why has Founders Fund chosen a different path here? And how does it work practically? We have both of those, just to be clear. It's just that you can. We try and support all sorts of individuals and individual partners with the fund. Some people have a much more lone ranger strategy where they're kind of just going to go and make a lot of money on their own. Some people want to collaborate a lot with other people. Great. Both are totally welcome. We do often have debates about companies because even the people who are running their own deals, running their

Starting point is 00:03:52 own strategy, they still want to collaborate with the team because it's an amazing team. And why wouldn't you want to do that? So we're trying to find people who can run deals end to end, run their own strategy, have a unique strategy, be a unique individual, but also ability to collaborate, right? So we don't hire very often. And so when you do add partners to the fund, how do you do that? because you're the leader of the fund now. I wouldn't say that.

Starting point is 00:04:19 All right. Who leads the fund then, or how does the fund work in terms of leadership and adding a partner? All of us kind of get together before we add somebody. So we add a lot of principals, associates. That's great. Find smart people who have unique, you know, deal flow or unique and, you know, ideas on sourcing. Add them. Great.

Starting point is 00:04:42 People that we get along with. Great. Add those people. For partners and. above, we all meet with them. It's not like one person saying, oh, we're hiring this person. That's why I say it's not really a leadership model. It's more a, it truly is a hire people who are good people who get along with the team, who are unique, who have their own strategy, who we think can make us money and hire them. But we all interview anybody, partner level

Starting point is 00:05:09 or above, all of us. So some firms don't have associates, researchers, and some do. You have young guns or up-and-comers at the firm, yeah? Yeah. And somebody, yeah. And so how do you pick for those? How do you select for those? And then what is the responsibility you give to, let's just use the term associate, I guess, or researcher versus a partner? How does that line sort of overlap, not overlap? And how do you develop your own talent? I mean, maybe just check size, but I don't think you can be in this business and not do deals. So no matter who you are at the fund, you know, you're, you've got the ability to lead with checks, right?

Starting point is 00:05:50 The way that we work is different check sizes involve different votes, if you will, or different people or whatever it is. But anybody, anybody can actually lead a deal and Founders Fund. And that's pretty important to us. Why is that important? Because there's no, there's no way to just learn about this business and do this business without being able to do that, without being able to lead the deal. Like, you can help with diligence, but if you're going to be a good venture capitalist, you've got to be able to do a deal.

Starting point is 00:06:17 It is the nature of what we do is you place a bat. Indeed, it is. And so it's like kind of playing poker. If you don't actually get to play a hand of poker, you don't get to place a bet, you're never going to learn what it's like to win or to make a bad decision or make a great decision, right? Indeed. And that's why we do it. I mean, the check size is kind of varied based on level, but everybody can write a check, basically. When you look back on your career now as a venture capitalist, as somebody placing bets, and you're, let's say, mentoring some folks who are new to the business, what do you tell them is important when placing a bet?

Starting point is 00:06:54 To me, the most important thing about being an up-and-coming venture capital is figure out who you are. Figure out, like, how you're differentiated. This business is crazy packed right now, as you know. There are so many people in this business. There weren't 20 years ago. Now there are. And so it is really important, whoever you are, whether you're the most senior partner or just

Starting point is 00:07:15 starting off in your career, to eventually try and figure out who you are and what differentiates you. Like, what is that intersection between what you are really good at and what makes money, right? Like, and figure that out and go do that. So we love people who can like, who are unique, who can lean in on something. totally different than the rest of us can't lean in on, right? And so that figure out who they are, that become the best at what they do. And so that is a differentiator, I guess, is a way to say it, in the space because you have so many people running around with checkbooks. The founders have to,

Starting point is 00:07:54 at some point, make a decision who they want to be in business with the next 10 years. So what is it that founders look for in your experience in their investors? Totally, totally depends on the founder, right? You've got some people who are interested in like a venture capital, somebody who can mentor them, somebody who can really help them, somebody who's got a lot of operational experience, right? Like somebody who can help them with that. You've got some founders who have that down pat and they're looking for somebody to strategize

Starting point is 00:08:19 with. You've got some founders who are looking for a specific Rolodex, right? Like a specific connection that they need for their business. You've got some founders who are just looking for capital. I mean, it really does vary. And so that's why it's so important to have a differentiated partnership in terms of what everybody's strengths and weaknesses are because, you know, there's very few really good companies. Let's just be clear. There's, you know, there's lots and lots of lots of companies in the

Starting point is 00:08:42 world and very few that matter to venture capital. And you've got to find those and win those, right? And that's going to take a difference. And it's not going to be the same person finding and winning every single deal. So you've got to be really differentiated. And you've got to have, be the kind of, you know, have the kind of partnership where the really good founders want to work with one of you at least. Right. Right. For whatever reason. Yeah, they might say, hey, this person did the SpaceX investment. They understand hardware. They understand, you know, manufacturing.

Starting point is 00:09:11 I'm doing something that's related. Totally. It's like adjacent, I guess, to SpaceX in some ways. So that gave your firm a massive leg up in, I'm sure, according Palmer Lucky, yeah? Absolutely, right? And so it's, and then different of people like a lot of consumer experience, different people have a Roll-a-X, different people are really good at global macro, right? Different people have a lot of ton of operating experience, right?

Starting point is 00:09:33 Like, it's, we really do try and have a variety and a, you know, a group of really smart, collaborative, differentiated people at the fun. What have you learned about your own risk taking and betting when you started in venture capital? And I don't know how many bets you've been involved in, but I'm certain it's over a hundred now. So being involved in, let's call it, low hundreds of bets here over a decade, over, I mean, how long have you been doing this now? Let's see. I've been at Founders Fund for 16 years. I've been doing venture capital for 18 years.

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Starting point is 00:11:11 The founders of this conference are big fans of this podcast, so Twist listeners can get 20% off at ImagineAI. Live slash Twist. That's ImagineAI.com live slash twist to get 20% off your tickets. So you've placed hundreds of bets. Now, when you look back at the first, you know, portion of your career and then you look at how you do it now, what's changed? What were the leaks in your game? What were the things, the mistakes you just kept making and that you corrected as you moved on? I love it. That's because that's the adapter die question, right? And so, by the way, that is why we have junior people making investments, you know, with small checks because, like, you've got to learn. That's the only way to learn, like the poker analogy, like how to do this. And so for me, I learned that what I'm really good at, is just founder picking. I am not an operator. I'm not the fanciest Rolodex. I'm really, really good at picking founders and then the ones that want to strategize. So I'm the one that you want to go with if you

Starting point is 00:12:09 don't need operational help, right? If you already know how to run a company, but you really want somebody to like get into the hairy nuts and bolts on strat, right? Like, I'm pretty good at that and I'm pretty good at making, you know, founder bets. And then I just have the tolerance to go all in on those bets, right? Like, if I see an awesome founder and I've hung out with the awesome founder and strategize with them, I'm willing to put a large portion of the fund into those companies. And I don't think that that's a standard thing in venture capital. Like most funds have, oh, 3% of fund checks, 5%.

Starting point is 00:12:44 I mean, one of the things that we've done really, really well over the years is 20% of fund checks. Yeah. Our third fund, we put 33% of the fund in Palantir. You know, we've done those bets historically. And they've- So that high conviction, unique strategy to founders fund, you know, putting some extraordinary large percentage, double-digit percentage, sometimes, you know, 33% of an entire fund.

Starting point is 00:13:09 That's the highest one, but yeah. Yeah. I mean, SpaceX was 11% I think. In my notes that had that. It was 11 and then it grew to 15% of that original fund. But then we put SpaceX in almost every fund. And this is something you and I have talked about, which is when you have a winner, you know it. Like it is, it becomes clear over time. So take me through SpaceX, Palantir,

Starting point is 00:13:32 Airbnb, Andrew, whichever ones, you know, you want to touch on here, take me through each of those and how your conviction grew over time so that pushing more and more capital into those bets became like a no-brainer for you. Yeah. Or was it a no-brainer? I don't know. You tell me. It was for most of the ones that you just said, right? And so, you know, there's others where it's a little bit trickier, but space, I can take you through SpaceX because it's actually the thing that attracted me to the fund in the first place. You know, I was doing my own fund, my own small fund, while still at Google, made friends with these guys, made friends with Sean Parker. And he was like, hey, come check out what we're doing over here at Founders Fund. And they were, that's the time

Starting point is 00:14:12 when they were starting to consider investing in this ridiculous rocket company called SpaceX. And I got to tell you, like, when we were looking at that, obviously those guys knew Elon extremely well, you know, from the PayPal days, but none of the rockets had worked yet, right? And it, it all blown up, but we said, wow, this is clearly differentiated. There's, we love things where it's not like, you know, huge amounts of competition. It's like, right. End of one companies, man. Where's the other ride sharing app?

Starting point is 00:14:43 Your food delivery service, dating app. No, there's a one rocket company. This is an end of one company. And so as a venture capitalist, as a true venture capitalist, you love those because it's the upside is just unlimited, right? Like, yeah, it's harder to get the conviction and it's harder to make the bet. But if it's when it's right, the upside is just gargantuan in those companies, right? And so because if it's N of one, they're going to get there and they're going to sweep the table. If the table can be swept. If there's a market there. We saw it

Starting point is 00:15:16 with Airbnb. We saw it with Uber. We've seen it with SpaceX. Yeah. Absolutely. And so we got, that was an example of like, wow, we know how good this founder is. The market yet does not know how good this founder is. Turns out to be the greatest founder in the history of the world, right? Like, yeah, apparently. Maybe number two. Just going to performance. I mean, jobs, maybe. But like, you know, I mean, you can put Bezos jobs. Yeah, yeah, yeah. You can put a couple of these guys in there. Yeah. But it's rare that you have a founder who's done it multiple times, right? Like, and so maybe jobs. There you get like jobs and and Elon. And so then we just were willing to be like, you know what? We are going to bet on this

Starting point is 00:15:54 founder in an end of one company where the market is gargantuan when it works. We got the conviction. Lots of people, you know, lots of people who, I remember a, I'm not going to say the name of the LP, but we had one LP who passed on Founders Fund 2, which is now one of the greatest venture funds in history. And who passed on that, who right after we made the SpaceX investment, literally wrote us a letter being like, oh, we were new we were so right to pass on you guys. That deal had hair all over it. Oh, gloating. A gloating.

Starting point is 00:16:24 Gloating about passing on us, right? And so seriously, we haven't framed. I mean, where is the, I just have to pause for a second here of how deranged that is. It's unbelievable. You're invited to participate in rarefied air. Like what we do is a very unique pursuit. And then you have this need to tell the people. who are in the arena making crazy bets and putting their careers on the line,

Starting point is 00:16:50 ha ha, you're going to fail. Like, I mean, that's like saying to somebody going to the Olympics as they're walking on the field, like, you're going to break a leg. No, I don't mean break a leg. I mean, like, you're going to literally fall on your face. Like, what is the upside? It was pretty, there's no upside. And me and you have learned to not take bets when there's no upside.

Starting point is 00:17:07 Right. And so they hadn't learned that yet. I don't think that they currently have jobs, right? And we are still here. I've known you now for, gosh, those 17. years, right? And we're still here doing this, right? And so, because we don't do that. There's no, you're exactly right. There's no upside in doing something like that. They did it. And Founders Fund, too, is the one of the greatest funds in the history of venture capital.

Starting point is 00:17:26 And so as time goes on, you have to do a gut check on some of these. Airbnb was like an interesting one because, again, nobody saw that. The founders didn't even see it. They didn't think they were going to figure it out. They were struggling with it when they went to Paul Graham. We're like, this isn't working. You know, I've had both of them on the program. And they, you know, were questioning this. So maybe you could talk a little bit to dealing with founders when they're doing something truly unique in the world and their own conviction and this, the role of capital and the

Starting point is 00:17:59 backer to the founder and keeping the dream alive and staying focused because you can, if you're doing something outrageous like Airbnb or SpaceX, I mean, some founders could get shaken as well. And you've got to be there with them, yeah? Totally. And let me, so the Airbnb one is another extremely interesting one, totally different than the SpaceX one. And so I'm happy to talk about that too.

Starting point is 00:18:20 On the Airbnb one, we were going through again, one is a common theme with us is what is an end of one company? What are the companies that have the ability to just be the only game in town? And Airbnb, the reason why we made that investment and the reason why they went with us, and by the way, that was a, we put, we striped that investment across three funds. We put $150 million in. you know, we put a hundred million out of a $500 million fund, right? And so, but the reason why they went with us on that is because they did know this was going to work.

Starting point is 00:18:49 And in that case, in the Airbnb case, what they wanted, I don't know how to say this properly is to somebody who was just going to like let them do it. Be able to write that big of a check and get the hell out of the way. And not many people can do that. I got to say like a lot of people in this industry, especially if they write a large check, are going to be like, oh, I need to be involved. Right. We didn't even need to take a board seat, right? I think I was an observer. To write a nine figure check and not vote, that takes true conviction. And you said before, you got to meet the founder where they are. That's right. Some of them want your strategy. Some of them want your operations guilt. Some of them want the capital and get out of the way.

Starting point is 00:19:27 Absolutely. Let's not screw this up. And I think it takes a certain amount of humility and listening to be able to determine that. Yeah. Yeah. And that venture capital is a pure upside maximization. game. Let's just be clear. Like, you're not going around for your two-xes or there's really no difference between a company going to zero and a company two-xing, right? It's just a pure upside maximization game. And those are one when you find these top tier founders and you just, they believe in themselves, you believe in them and you know how to like let them do it. Let them use you for what they want to use you for. Right. Let them use you for your strat. Let them use you for your Rolodex. Let them dictate how you can best do the company, not

Starting point is 00:20:09 the other way around. And by the way, this is why I do sometimes think that entrepreneurs don't make the best venture capitalists. I mean, sometimes they do. I mean, Peter Thiel. And sometimes they don't because a lot of entrepreneurs just by their nature are like, let's dive in, let's do this. Like, I'm an operator, right? Like, I want to help operate this. And that's not the right strategy. That's not my right strategy. We are just really good at getting out of the way and letting them build these end-of-one companies. And placing the second, third, fourth bet. You do that well, too.

Starting point is 00:20:43 That is, I think, you know, the thing I've learned from you so much in talking to you, I think at some point you said to me, like, you can't overpay for one of these companies. And now, that's a dangerous statement to make and apply without thoughtfulness. But it's also true. So maybe unpack that for a second. Well, let's be clear. We are still price discipline. It's just that when you see one of these companies and you have high.

Starting point is 00:21:05 conviction, it's less important. Like, for instance, I just meant like on Airbnb, you know, we paid, we did the round, I think it was like one and a half billion. Like, you know, if we had not done it, if we had only said, oh, we're going to go to 1.35 or 1.4, whatever it is and no higher than we would have lost billions of dollars. And so, I mean, you still have price discipline and you still, but you don't, when you see one of these, one of these high conviction companies that you're going to write a large check into, you just win the deal. Yeah. And that's the, most important part. Are you still using your personal number for business? Well, stop. Such a common mistake that founders make, but you never have to make that mistake again because of open phone.

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Starting point is 00:23:05 When you're trying to win a deal like that, what is the approach? What is the technique to, you know, letting the founder know, you're serious about being their partner? Yeah, the founders just have to get to know you. I don't see any other way around that, right? Like the best founders of the best companies, they're not going to just pick a, you know, they've got choices, as you, as you correctly pointed out at the start of this, right? They've got, you know, maybe if you're dealing with a completely unknown company, completely unknown founder, sure, that that's a different story.

Starting point is 00:23:31 But if you're dealing with a company that, you know, is at the stage the Airbnb was when we made the investment And I mean, they've got plenty of choices. And so I think the smart founders, the best founders, get to know you as much as you're getting to know them. And then it just becomes clear. Nope, they want to work with us. I mean, it was the same with the stripe round and the same with, you know, all of these, you know, amazing companies that it was just clear that they wanted to work with us as much as we wanted to work with them. And so we are always, always happy for one of these companies just like repeatedly grab dinner, repeatedly grab drinks. like spend real time, strategize, let them always give the founders a chance to ask you more questions

Starting point is 00:24:11 than you ask them. Because again, this is about upside maximization. This is not about imparting your will or VC prognosticating or gloating or whatever. This is about making money and those guys are going to be the ones making you money. And so you've got to let them pick you. So to recap, in terms of making money, which is how we judge venture capital firms by returns. There is a scoreboard. There is a scoreboard in what we do. It may take 10 years for the score to update. I mean, that is a weird lag.

Starting point is 00:24:41 But there are ways to kind of get an idea when things get marked up, et cetera, revenue of companies, of course. But what makes money, an outlier company that could sweep the table and then maximizing your ownership in it, getting that third, fourth bet in. So clear. I mean, I literally, after we had that conversation, I don't know, it was maybe it's back in 2017 when you were on the program and interviewed you, I just looked at our portfolio construction.

Starting point is 00:25:02 We're a seed stage. But I said, you know, there's. spray and prey, Ron Conway, Y Combinator, and, you know, it's people maybe say that's derogatory, but it's true, you know, at that early stage, you know, the chance of hitting a unicorn, you know, you probably got to get between 50 and 100, 150 bets. And then there's consolidating, you know, into the winners. And these were considered different pursuits in venture. And I looked out and I just was like, huh, with my next fund, I'm going to try to do both in the same fund. Absolutely.

Starting point is 00:25:29 It's kind of crazy. But we're going to have 300 names. And then I'm reserving half the fund for the top 10 names. And then I told folks, don't be surprised if one of those gets 20% of the fund. So 300 to 1. And you know what? Most LPs do not understand what we're doing. And I'm like, huh, but then some do. And they're like, got it. But so, you know, this is like one of the weird things about bet sizing and fund strategy. LPs actually don't understand in many cases what we do, do that. Sure, but I don't know that that matters. The thing I love, the thing I love about RLPs and LPs in general, and I'm always good talking to one of our LPs, and we choose them because we love them, is like, they also care about returns.

Starting point is 00:26:10 Right. And so they're not sitting there trying to tell the best LPs, just like the best VCs, don't try and tell a founder, oh, this is how you should run your company. No. The best LPs are like, oh, that's unique. Great. Make me some money. Right.

Starting point is 00:26:23 And so they're not trying to necessarily like tell you how to run your firm or they don't even want to for the best funds. They're just like, the best ones are just like, yeah, would love to hear about portfolio updates because we love companies, we love startups, we love investing the stuff. That's why we're doing this. But otherwise, figure out the strategy and make us money. And so, yeah, the best LPs really do, that is how they feel. They're just like, great, you guys do you.

Starting point is 00:26:49 For instance, you know, I mentioned before that we've put SpaceX in multiple funds. We don't really think through reserves in a fund. we think through make put most money into best companies possible at best price possible. And maybe that's one of our own companies. And maybe we've invested a previous fund, but great. So we'll put it in the next fund. Like founders fund too owned 10% of SpaceX or whatever that didn't stop founders from four, founders from five, founders fund growth, founders fund growth to, you know, from investing

Starting point is 00:27:18 in SpaceX, right? They all did because it was still a really good investment, even if previous fund is out of money. Yeah, you are making that continuation bet based on, you know, one of the great things about our industry and what we do is it is based on inside information. You do have information asymmetry. Now, you can't do that in public markets because retail is participating. I don't invest in public market stocks. Yeah, but we can. And in fact, the whole name of the game is to have information asymmetry. You're on the board, even if you're just an advisor of Airbnb, even if you're just getting dinner with the founders regularly, yeah. Yeah, if you're if you're

Starting point is 00:27:50 hanging out with Brian and Joe and they're like, yeah, you know, Europe's taken off. That's incredible. We didn't know if Europe would work, but we got more Airbnb in Paris. You know, I was like, uh, yeah, we should probably make a bet here. And we should probably make a bet here. Yeah. So let's talk a little bit about Sean Parker. Okay. You know, Sean's been out of the game, uh, you know, doing philanthropy and all kinds of

Starting point is 00:28:11 interesting stuff. But man, this is one of the sharpest minds. Absolutely. In our industry, brought Zuckerberg to the Bay Area. When did you first meet Sean Parker? 2007. 2007. Tell me about your impressions of him and, and his unique genius in the world.

Starting point is 00:28:28 You know, I love. talking about Sean. And I will say this. Like, I owe Sean a ton. And, you know, Sean, when I, when I, I will say this, when I joined Founders Fund, I'd become friends with Sean. I didn't know who the other guys were. You know, I was just like, oh, Sean is amazing. Yeah, I want to, of course I want to join with him. And so my first meeting with Sean, it was almost like a scene from the freaking movie, because we started dinner at 9 p.m. and we went until 2 a.m. It was just like, it was just nonstop, but he is just one of the most brilliant. And I know a lot of smart people, right?

Starting point is 00:29:06 Like I've met a lot of smart people through my work, through whatever. And Sean is just the one of the probably maybe the smartest, right? Like, Sean was the best example of a proactive venture capitalist, I think maybe in history. There's reactive, which is somebody like me. It's like, I'm open to anything, but I'm not like sitting there going like, oh, this is how the world should be and finding it. Sean would be like, oh, this is what the world's going to look like. I need to go find the best company's face.

Starting point is 00:29:32 Facebook. Oh, man, the world is shifting to, you know, streaming music. Spotify. Right. And he just had this, like, unique ability to just know what the world was going to look like and find the best company that was going to do that. Otherwise, the best proactive VCs have to start the company if it doesn't exist. Let's talk about that.

Starting point is 00:29:53 You've allowed founders, again, this is very non-traditional, and startup studios. as the concept goes, they've all essentially failed or stalled. They've had a very mixed bag of results. Why? When you start a company, you need a CEO. Pretty hard to get a CEO or hire. We all know that. And why would a founder who's absolutely extraordinary,

Starting point is 00:30:16 a Palmer Lucky, whoever, why would they join a startup studio, or join a startup studio company? So you have that exact example. Let's talk a little bit about how you've tried to make this work. and if it is in fact working and when it works and when it doesn't. Yeah. So I don't know how to start a company.

Starting point is 00:30:33 I won't be starting a company. However, remember, our mandate is returns. And sometimes, right, not all the time, because you don't get many of these things, right? Because it's a lot of work. Sometimes if I did just generate returns just to start a company, right, if one doesn't exist. So Trey and Palmer, you know, we were the first investors in Oculus, right? And that's how we got to know Palmer, right?

Starting point is 00:30:54 We invited him to one of our, you know, let's get together with all of our portfolio founders and hang out and play paintball kind of events. And he met Trey at that event. And then they were both, you know, being like, oh, man, nothing really good exists in defense. This is really important. Boom. Founding of And Dunderal. And I don't think you do this every day, right?

Starting point is 00:31:14 But you do this when the time is right, when the energy comes together. And again, it is an important part of generating returns. Not everybody can run that strategy. I cannot run that strategy. Sean can, Tray can, and Peter can, right? And therefore, we can do it. Right now, startups have to do more with less. We all know that.

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Starting point is 00:32:41 to work with. There's a famous four quadrant chart that one of the founders of Sequoia made, which is like how agreeable a person is and how competent they are. And you draw four quadrants, incompetent, you obviously don't want an agreeable or a disagreeable incompetent person. But you have competent, agreeable, competent, it may be hard to get along with. The character of founders who actually do change the world and pursue these outlying things, does that track with you that they can be challenging to work with? And then, you know, if so, what's your approach to that? Yeah, of course.

Starting point is 00:33:14 And remember, the reason those kinds of founders love us. And we love those kinds of founders. And here's why. we don't claim to know more about their company than them. We don't claim to try and run their company. So those kind of founders that you're talking about, the very competent but disagreeable or whatever, as long as they're like still a good person, maybe they're a disagreeable strategy. You know, we don't, we don't go over the line.

Starting point is 00:33:36 We don't ever invest in people who are doing anything like illegal or anything like that, right? And so. But as long as they're on that other side of the line and they're just like unique or disagreeable or something, but they could be doing something amazing that nobody else has done before. We love those kinds of founders and they tend to love us. And honestly, that is where so many of our outsized returns have come from, are those kinds of founders because we don't tell them what to do. We don't tell them how to run their company.

Starting point is 00:34:03 We let them dictate how to best use us. If you're going to take on, you know, something that's going to challenge incumbents, I hate to use the word disruptive, but that is actually disruptive. Sure. You might, you know, ruffle a few feathers. If you're Elon doing SpaceX, you know, the Russians who are putting satellites, that might not be so happy about having a competitor. If you're Airbnb and the incumbents who are, you know, selling hotel rooms, they might get a little tweaked.

Starting point is 00:34:28 If you're Uber, whatever, if your New Bank, you know, a lot of these companies, incumbents might not be too pleased with their aggressive entrance into the market. And so you have to, you have to be there with them and guide them sometimes if they need help. But other times, you just got to be like, this is a war and this is a wartime CEO. So be it. I love my role. What I tell founders, my role. I want my role to be is founder consigliary. So you just said like that's what I don't want to,

Starting point is 00:34:55 I don't need to be on the board. I don't need to tell you what to do. It's like, I'm your consigliary. Like, come to me during wartime stuff when you really want to chat about some of the hairy stuff, right? Like, otherwise, you've got this on operations. I wouldn't be investing in you if you didn't. That happened with Airbnb. I mean, they were, you know, this is like something that, you know, I witnessed firsthand at a couple of companies. You've got lawyers saying like, hey, you're bending some rules here. This is like a little dicey. And they always give you the same advice. They're all about minimizing risk. But a lot of times winning is about taking risk, and pushing the envelope a little bit. Maybe take us to that. Maybe with Airbnb, there were people

Starting point is 00:35:30 who said like, hey, you just shouldn't do this. You shouldn't be allowed to do this. How do you get over that objection? Yeah. I remember, I'm going to sound like a broken record, but remember, venture capital is upside maximization. So sometimes, if you're an investor, who's like, maybe don't take that chance because we don't want this investment to go down. Honestly, I don't ever think about that. I just don't think about that. It's like, oh, great, yes, as long as it's legal and as long as, you know, playing within some guidelines, it's like, okay, yeah, take that risk.

Starting point is 00:36:00 I'm all about it, right? Like, we are all about the founders who also want to take that risk with us, right? Also want to take those risks to maximize upside, not just be like, play it safe and, you know, double my money, right? Like, you need as a venture capitalist to find the upside maximized investments, period. And so a lot of times that comes with, you know, the risk of ruin, let's call it. The risk of ruin. Perfect. That's a, that's a perfect.

Starting point is 00:36:25 I am very much okay with the risk of ruin. Like, let's just be clear. Whereas in exchange for the upside maximization that we get from these companies. Yeah. I mean, if you're going to take on, I don't know, you know, a country like France that might be very protectionist, unionist, whatever, it's like, okay, we're going to take on France. What if we lose? Okay, we get kicked out of France.

Starting point is 00:36:46 I mean, this happened. I remember when Travis was, you know, we just told me, well, no, we've won when London and Las Vegas fall. When you're able to order an Uber in Las Vegas or London, and then, you know, it's whatever number of years later, and Dara just signed up the taxis in London. This is after five, six years ago, they were trying, they literally were trying to ban Uber from existing in London. And now you can call those awesome London taxis.

Starting point is 00:37:14 So it's funny that you brought up Sean because think about what he, he defined that. It's like, oh, that's the regular. Right. Once the regulators say like, oh, you can't do, but it's like, it wins anyway. And now it's the Spotify existed. It's a legit company. It's like, you've won. Let me ask you a hard question.

Starting point is 00:37:32 You got, not that any of these are easy, but I want to go for two, two hard ones here. Regulation in the United States and the regulatory environment. You're watching very big companies like Apple do very anti-competitive things. They block I message. You got the App Store, you know, 30%, you know, Google, where I think you're an alumni of, you know, has the Android store. It's like some on the margins, things that in that duopoly are anti-competitive, right? And so do you think Lena Khan should be blocking more of this M&A and attacking these companies based on bad behavior? Or are you free market, let it rip if Apple wants to squeeze too tight onto the App Store?

Starting point is 00:38:12 well, then somebody created better apps or a better phone. What are your thoughts? My thoughts are that I don't VC prognosticate and I am not a global macro or a policy expert. And so I tend to focus on what I know that I'm better than everybody else at and not focus on that stuff. And so a lot of that stuff changes with politics, right, based on who's the head of these organizations.

Starting point is 00:38:36 And we're going for in a game where these companies span generations and are not specific on politics. And so for me, what I don't like doing, I will say this, I don't like crying about the game, right? So in other words, like, okay, let's say you're in an environment where that is the political environment where they're going after these companies, they're not going to let these acquisitions happen, right? It's going to be tough to get an exit other than going public yourself, right? Because great, play that game.

Starting point is 00:39:06 Play that game and win it. Right. And so to me, it's like regardless, because that's going to change. It'll change in the next administration, you know, maybe like, who knows, right? Part of Adapter Die is play the game, don't cry about the game. And so we love the founders that don't cry about the game. Like, here, let me take you through somebody who I think is a winner on this, right? Like Dylan, right? Like for Figma, okay, they block the acquisition.

Starting point is 00:39:33 Dylan's still going to have an amazing company. He's still building said company. He's not going to sit there and going like, oh, wine, wine, this didn't happen. No. It's like, okay, that's the, that's the current situation. We're building this company to be bigger and better than ever. Right. So huge respect to somebody like that.

Starting point is 00:39:48 You have to accept reality, right? And the game on the field is a game on the field. Correct. Got a bad beat. $20 billion valuation. They just cut it to 10. But he's still in the game. He's still building the kid.

Starting point is 00:39:58 And who cares if he builds a $50, 100 billion company, then like, this is like the Stripe thing, right? It's like, yeah. So Stripe took a, you know, raised around and, you know, less than what it was previously training at? So what? At the end of the day, if Stripe is one of the most valuable companies in the world, then amazing, right? At the end of the day, if Figma just keeps building a bigger and bigger and

Starting point is 00:40:17 awesome company, so what? You don't cry over that stuff. You just play the game and you win. And this is, I think, what you learn after you've had maybe two decades, maybe three decades. You and I have been in the field for a while. You've seen the boom bust, and you've seen Clinton go to Bush and Obama and Trump and Biden. You know that these things are transient. The great companies build through ZERP and crashes and dot-com crashes, great financial crisis. And in fact, you and I benefited in terms of timing as investors. We started our career when things were, let's face it. Biggest boom cycle in history, right? Yeah. I mean, pretty easy to be good at this game if you do that, but you also then need to have some self-awareness. Let's talk about self-awareness.

Starting point is 00:40:58 What are the things that now you've added to your quiver? Are there things that you're working on right now and you're asking yourself, you know, do we need to change this or that? Because right now, people don't believe in venture capital. People think this is like a broken asset class, yada, yada, the fees are too high, the carries too high. There's never going to be exits again. It's, I don't know that I've lived in a moment in my career where people were so down on venture capital.

Starting point is 00:41:25 So what, what's your take on sort of like the state of venture capital now and how you're thinking about strategy at Founders Fund going into the next era? because too much money raised, too many competitors, all these late stage people coming in and doing weird distortions that we then have to deal with, whether it's Masa coming in and making big bets or the tigers and the co-toos doing all this crazy betting during SERP. When you look at our game on the field, what are you thinking about? Yeah. So I will tell you, this is an analogy that I'll go with this. When I started doing this, when I started doing this at Founders Fund, so call it, you know, the year around early 08. what percentage of companies then do you think were social networking, photo sharing, chat related that I saw. And by the way, my first year of doing this, I saw 1,200 companies.

Starting point is 00:42:11 I met with 1,200. Mobile social local? All the most. How many? What percentage of companies were mobile social local? It had to be 80. It was 60, which is a crazy number. Yeah.

Starting point is 00:42:21 For one field. Okay. 2023, what percentage of companies had that is a little bit unfair, but what company percentage of companies had AI or LLM in their picture? deck by page two. Oh, it's got to be above the 60% number seven. Close to 100. And it's by definition was the least contrarian possible thing you invest in. Right. And so we just take our strategy of like, okay, we're just going to invest in the best thing, put a lot of money in open AI, call it a day. But one of the things that we've started to do really, really well is, okay, if everybody is chasing

Starting point is 00:42:53 after this stuff, let's go for things that we still believe in, right, but that are not necessarily that. Right. So we hired Joey Croke, right? like best crypto investor in history. He's amazing, right? And he's doing all, you know, the best crypto stuff because crypto is less hot now. Fine. Great. Take the best assets and invest in them.

Starting point is 00:43:11 You know, I don't do very many deals now. When I do, I try and sink my teeth into one. You know the one that I'm just doing, you know, very well. We're doing Ohio with Friedberg, right? I think you do a podcast with him or something. Yeah. I think I've met them. Not AI.

Starting point is 00:43:25 Not AI. In fact, but it's a space that's ridiculously important. It's, you know, Gene editing, right? It's like food. It's ag. It's going to be one of the most amazing companies on the planet, not AI, right? And so we try and find these things with amazing founders. That part doesn't change. And in fact, I think I was the worst at this job during COVID because I didn't meet the founders in person. I couldn't. Right. That was a weird distortion. It was bad, right? But now that we're back, right, like you spend time with these founders, you find people you know well who are doing

Starting point is 00:43:58 things in, you know, contrarian spaces that in three years will not be contrarian, right? Like, the bioengineering for ag will not be contrarian in three years. He is the best in the world at that. Easy. No brain or investment, right? So tell me about Heath leaving founders fund and going to Kostla. I saw that. And he was kind of like, I want to have a different experience, like people arguing over stuff every Monday in a meeting. And then I looked at it and I was like, yeah, that's a difference between the funds. But I also thought, well, was he going to just take over Kosla. That sounds to be like the session planning. What was your take on that? Maybe. And remember, I love Keith and I've always loved Keith. Yeah, yeah. And so like,

Starting point is 00:44:38 but there's different, you know, Founders Fund, the person, right? Like, there's not one right answer. And maybe in some ways it's better for him at Coastla. Either way, it doesn't matter. Like, I love Keith. We still work together. We still are going to do a lot. The reason why Keith was at, you know, we got Keith to founders from the first place. We were doing all sorts of deals with him. And I'm like, oh, let's let's get. Let's get him. Let's get a lot. Let's get a on board, but, you know, understood. It's, he's going back, you know, with Venote that, no, no problem. We're still going to work with Keith really well.

Starting point is 00:45:06 I still think Keith is a phenomenal investor. And yeah, we're still both going to make a lot of money. Yeah. But that's a session planning in your mind, right? That sounds to me like, I have no idea. I said that. I was like, wait a second. It is amazing that Kostla is his age and still so sharp.

Starting point is 00:45:23 He was at the, one of the, one of the only ones, one of the only ones that that's that, that's that's that sharp. that's still in the game, that's still top tier in the game at this age. It's unbelievably amazing. Why? When you look at that, I mean,

Starting point is 00:45:34 I look at that and I'm like, that's who I want to be. I want to be 70-something years old, like Kolsla and be shit posting on Twitter X, be like making bets, being mixing it up with people. Yeah. Here's what I'll say about that.

Starting point is 00:45:49 Yeah. I've only met Vinod in person a couple of times, but I will say this. He does not care about what's popular and the right way to be and the right way to do things and what's like the proper thing to support. And he is the opposite of a virtue signaller. Okay? And that's one of the reasons why you last in this game.

Starting point is 00:46:08 Like, I'm sorry, you do not last in this game virtue signaling. You last in this game being who you are, figuring out what you're better at than everybody else and leaning in on that. And he just has that in spades and is unapologetic about that. And so certain types of founders just will only want to work with him. Certain types of founders will only want to work with me. Certain types of founders will only want to work with Peter Thiel. Vnode has that in spades, right?

Starting point is 00:46:28 Keith has that in spades, right? On the operation side. And therefore, yes, very bullish on all the people who don't spend time, virtue signaling, but spend their time just leaning in on what they are the best at. You've done, well, you've got a ton of money. You'll be, you could retire any time. You think you're going to go as long as like Vinod? Do you see like an end to this?

Starting point is 00:46:45 How do you think about that? I think, I think, here's what I think about this. There's certain parts of this job that you don't like in certain parts of this job that are just always going to be amazing. And I think if you can figure it away, like I think Vinod has, right? And Peter has and all these guys who are legends have is you figure out what you love about this and just keep doing that stuff, right? And it'll fit in, right?

Starting point is 00:47:06 I'm never, ever, ever going to get sick of having dinner with Friedberg, having dinner with Chesky, having dinner with Slingerland, right? Having dinner with these guys. Like, I see no reason to ever stop doing that, right? So you figure out how to make this what you're, the intersection of what you love and what you're good at. and you just, there's no reason to ever stop doing that part of things, right? Yeah. There is a Japanese term for that, like what you love and what you're good at.

Starting point is 00:47:32 What is the term? Ikigi is a Japanese concept, I-K-I-G-A-I, Japanese concept discovering your purpose through exploring the intersection of what you love, what you're good at, what the world needs, and what you can be paid for. I think you just figured out the name of my next company, but like I didn't even know that. Yeah, a key guy. And it really is like a beautiful concept. And people who are like career coaches will kind of work on that. And I've talked to Elon a lot about this, like what he loves to do and what he doesn't like to do. And I remember the early days, you know, when he was pre-SpaceX and when he was just starting to work on Tesla. And it was like, we were lamenting chores. He's like, I just got to do so many fucking chores. And the chores piling up and piling up. And I was like, why don't you get. people to do chores. And he was like, they don't do it properly, right? And I think part of his journey was, you know, when you're as good as he is and exacting, he's now built a bench of

Starting point is 00:48:33 people who can do those chores for him that maybe he doesn't want to do. But that's a decade or two decade process of being able to say, I love doing engineering challenges. And you and I both, you know, luck enough to know, Elon. And, you know, when I've been with Elon in meetings, I just watch him love the engineering and the product challenges, right? That's his, like, that's his circle. Always. He's like uniquely good at the world. And then like just peeling back from that, like the stuff you don't like is so important.

Starting point is 00:49:02 And in venture, it's the same thing. Like you, you like hanging out with the great founders. It's probably really annoying. I don't know if it is for you or not. I was talking to Sachs about this. Like the number of first meetings is just arduous and painful. Like the sourcing of companies and dealing with your deal flow. I can't do that anymore.

Starting point is 00:49:19 it's exhausting. I used to be able to do it, and I can't anymore, so you surround yourself with people who can do it really, really, really well. The first level sort, yeah. All right, listen, Brian, thank you for taking the time. I appreciate you. Anytime, man. Maybe, this is fun.

Starting point is 00:49:31 If you say anytime, I'm booking you for one year from now. Okay, let's do it. At the time, it's going to be yearly. Because five years in between, I mean, we get to talk to each other socially. But we're going on a regular one-year calendar. Let's do it. Let's do it next January. Okay, perfect.

Starting point is 00:49:46 All right, man. There you have folks, Brian Singerman, from Founders Fund. one of the great venture capitalists of this generation. And we'll see you all next time. Bye-bye. Thanks, J-Cal.

This Week in Startups - Founders Fund's Brian Singerman on building a legendary VC firm, “Adapt or Die” and "Ikigai" | E1896

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