Invest Like the Best, EP. 219

Kanyi Maqubela – Dawn of the 21st Century

Host: Patrick O’Shaughnessy
Guest: Kanyi Maqubela, Co-Founder of Kindred Ventures
Date: March 30, 2021

Episode Overview

This episode explores the current era as a potential “dawn of the 21st century,” comparing today’s investing landscape—particularly in seed-stage venture capital—to the "Roaring Twenties" of the last century. Patrick and Kanyi dig into market optimism, the misunderstood risk curve of seed investing, the qualities they look for in exceptional founders, and the fundamental changes in the venture ecosystem. They also touch on broader themes like the rise of the creator economy, increasing entrepreneurship, and personal lessons from Kanyi’s own journey—spanning teaching Stanford's "Design Your Life" class to his family's immigration story.

Key Discussion Points & Insights

1. Are We in "Roaring Twenties, Part Deux"?

(05:37 – 13:19)

• Market Exuberance & Parallels to the 1920s:
  Kanyi reflects on Peter Thiel’s comment that, post-COVID, we may see this period as the true start of the 21st century. He questions whether we’re experiencing a new “Roaring Twenties,” noting aggressive valuations and a dramatically changed funding landscape in seed and early-stage venture.
  • “I'm seeing companies that are getting a discount to terminal value when they've been alive for six months... in a way that really just defies the bounds of rationality.” (06:18)
• Bubbles & Opportunity Cost:
  Kanyi describes the anxiety of missing out (“Can one afford to sit it out? Is the opportunity cost of being out of the market too high?”) and the need to learn from past bubbles, acknowledging that many current investors lack first-hand experience with significant market downturns. (07:16)
• New Dynamics in Seed Funding:
  Compared to mid-2000s, pre-seed and seed rounds have ballooned in size and valuation, with traditional lines between investor types blurring.
  • “A crossover multibillion dollar hedge fund doing a pre-seed today is frankly what we're seeing.” (08:43)
• Lessons from the 1920s:
  Despite hype, the 1920s were not "all up and to the right"—there were several mini-recessions and fortunes were lost in rapidly advancing sectors like transportation and telecom.
  • “When you've got a lot of emotions and we all know how that decade ended, there's a lot of fortunes to be lost.” (13:02)

2. The Importance of "Moving Atoms" and Infrastructure

(13:19 – 16:16)

• Digital and physical infrastructure (“moving atoms and bits”) have never been more central.
• COVID made supply chains, logistics, and essential workers more visible and integral to innovation.
  • “The world is moving stuff around as something invisible...certainly happening in the foreground now. And Covid was a big part of that.” (15:17)

3. Origins of Kanyi’s Investment Philosophy

(16:16 – 24:59)

• Non-Consensus Seed Bets:
  Retrospectives show that half of winning investments were “non-consensus” at inception—contrarian both internally and to the market.

  • "There's a persistent non-consensus opening at the beginning of the startup journey that...one can conceivably...pursue consistently at quality over time." (17:08)

• Founder Quality:
  The most successful investments often had founders with “an inevitability to them,” visible in the first meeting—even pre-product or pre-team.

• Reframing the "Risk Curve":
  Instead of a smooth continuum, Kanyi likens seed-stage risk to quantum physics:

  • “I think that there's actually something more like an instantaneous jump that happens in the risk in the earliest stages...” (20:13) — i.e., risk changes not gradually but in big leaps—often due to exogenous events or inflection points.

4. Implications for Seed Investing Discipline

(22:57 – 31:09)

• Focus on Founders:
  Exceptional founder quality and “movement-builder” capacity are central and often underweighted by others.

• Avoiding Overbuilt Pre-PMF Companies:
  The toughest investments are when a startup is overbuilt but hasn't achieved product-market fit—the risk remains high, but the price is high too.

• VCs’ True Role:
  Most value-add is in “helping companies that aren’t going well die gracefully” rather than propelling winners.

  • “He said, 'for once we didn’t add net negative value to the company and they continued to proceed ahead.'” (25:13)

• Where to Actually Add Value:

  • Being a “mirror” (honest broker) for founders.
  • The critical importance of the “second yes” (doubling down as an insider investor during tough points).

5. How Kindred Ventures is Different

(31:09 – 33:21)

• Concentration:
  Kindred invests in about half as many companies per fund as most peers, preferring depth over scattershot breadth.

• Reactive/Founder-Led Investing:
  Thematic flexibility—they let founder “eagles” lead them to new categories, refusing to force-fit founders into pre-defined theses.

6. Evaluating Founders Non-Conventionally

(33:21 – 39:43)

• Risk Tolerance Misunderstood:
  Risk aversion and a desire to de-risk efficiently are more valuable than recklessness.

  • “I want somebody who doesn’t love risk, and I also want somebody who feels confident they can de-risk things quickly.” (34:31)

• Domain Insight Over Domain Experience:
  Non-obvious, orthogonal insight into a market trumps experience; they look for “write-this-down-and-tweet-it” moments in pitches.

  • “If somebody says something that you want to repeat...that’s Domain Insight.” (36:51)

• System Design & Internal Consistency:
  Founders must show evidence of systems thinking—capacity to architect plans and pivot intentionally.

• Missionaries vs. Mercenaries:
  They seek “movement builders” over operators motivated solely by money or trend.

7. Favorite Founder Assessments & Questions

(42:26 – 45:53)

• Questions for Founders:
  1. What risks are you (or your investors) underrating? (Transparency with downside thinking)
  2. What does the perfect upside world look like for this company? (Optimistic vision)

8. Evaluating Problems and Markets

(43:54 – 46:49)

• Nascent Markets:
  Small groups with intense passion > large, tepid audiences.
  • "Small groups with intense passion are way more interesting than big groups with modest interest..." (44:48)
• Existing Markets:
  Look for acute pain signals during interviews with users/customers.

9. Crypto & NFTs: Early Adoption to Mainstreaming

(46:49 – 52:03)

• Early bets in crypto often seemed ill-timed (“very wrong, very right”), but founder conviction and the right tactics trumped short-term timing.
• NFTs represent a breakthrough—enabling digital scarcity, programmable royalties, and creator empowerment.
• Major theme: Primacy of the creator, programmable contracts, and the infrastructure needed to support new creator-focused economies.

10. Broader Trends: The Creator Economy & Upward Mobility

(52:03 – 57:57)

• Rise of the Creator:
  The “creator” is becoming central to the economy—transforming from small-business owner to multi-platform entrepreneur, needing new financial/social infrastructure (e.g., company Catch for benefits).

• Stimulus & Opportunity:
  Unprecedented government stimulus, decline in old employment models, and Covid-driven shifts are combining to unlock new entrepreneurial opportunity.

• Supporting Upward Mobility:
  The need to empower more new businesses and rebuild the “coral reef” of small business for true economic health.

11. Design Your Life & Venture Lessons

(57:57 – 64:54)

• Stanford’s "Design Your Life":
  Apply design thinking (empathize, define, ideate, prototype, test) not just to products, but to one’s own career.

  • Key: Journaling, writing down reasoning, allowing delightful “wows and giggles” in exploration.

• Advice to Aspiring Investors:

  • "Make bets. Make as many as you can. Make calculated bets. Learn how to make bets..." (63:14)
  • Meticulous note-taking at the time of decision will clarify real learning and avoid ex post rationalization.

12. "If You Could Change One Thing..."

(64:54 – 68:24)

• Kanyi would:
  1. Encourage more LPs to support diverse venture capital risk-takers, not over-rely on “references.”
  2. Fund more VCs outside traditional centers—think Nigeria, Brazil, etc.—because “demographics are destiny.”

13. Formative Experiences: Lessons from Obama Campaign and Family Immigration

(68:24 – 70:33)

• On joining something much bigger than yourself:
  • “When there’s something that’s much bigger than you that you have a chance to be a part of, especially when you’re young, just do it.” (68:50)
• On kindness: Kanyi recounts how a US ambassador helped his family immigrate from apartheid-era South Africa—a chance that shaped his life.

Notable Quotes & Memorable Moments

• “It is vertigo inducing, to put it mildly.” (07:52, Kanyi, on current seed round valuations)
• “I actually think there’s something more like an instantaneous jump that happens in the risk in the earliest stages...” (20:13, Kanyi)
• “The founder, whether that was persuasiveness or some indefatigability or an inevitability to them that you could underwrite emotionally... that was a consistent throughline.” (16:52, Kanyi)
• “Making a bet means putting skin in the game, putting your reputation at stake. It means investing your emotion behind your conviction...” (63:14, Kanyi)
• “Small groups with intense passion are way more interesting than big groups with modest interest, especially in nascent markets...” (44:48, Kanyi)
• “Most value-add [from VCs] is in helping companies that aren’t going well die gracefully…” (25:13, Kanyi recounting another VC’s insight)

Timestamps for Key Segments

• 05:37 – Roaring Twenties parallels, exuberant valuations
• 13:19 – Infrastructure, COVID’s lessons for moving atoms vs. bits
• 16:52 – Seeds of Kanyi’s investment philosophy
• 20:13 – Quantum leaps in risk at seed
• 23:29 – Founder quality and portfolio construction strategy
• 31:09 – How Kindred is distinct: portfolio size, founder-led approach
• 34:04 – Non-traditional founder evaluation: risk, insight, systems
• 43:54 – What makes a problem space promising
• 46:49 – Crypto/NFTs: from failed early bets to "right time, right team"
• 52:23 – Macro trends: creators, small business, stimulus, infrastructure
• 57:57 – Design Your Life framework and its investing analogs
• 63:14 – Advice to aspiring investors: the importance of making bets
• 64:54 – What Kanyi would change about the investing industry
• 68:24 – Lessons from Obama campaign, the value of joining “rocket ships”
• 69:24 – Personal story of kindness and immigration

Conclusion

This conversation is a must for anyone interested in navigating (or investing in) the volatile, opportunity-rich market of 2021 and beyond. The episode combines historical reflection, practical frameworks, personal stories, and deep insights into what it means to truly back the future—one “maniac on a mission” at a time.