← Uncapped with Jack Altman
Loading summary
Transcript235 lines
- [00:00]
Brian Singerman
It is less important to be exactly true than it is to be directionally true. Because it's really hard to shift the Overton window. Most people are, like. They try to, like, sort of moderate their approach to something. Because of that, they're not directionally pulling hard enough to shift any strategy. Whereas I think Peter is just like, I'm going to get, like, super. I'm going to dig in my heels on this.
- [00:22]
Hunter Walk
Just to move the window a little bit.
- [00:23]
Brian Singerman
Just to move the window a little bit. And that tiny adjustment that ends up being made, it is really powerful.
- [00:30]
Hunter Walk
All right, well, very excited for this. What a crew we have here. Delian, you excited to be here?
- [00:34]
Delian Asparouhov
Oh, yeah, yeah.
- [00:35]
Hunter Walk
I've been looking forward to this for a while.
- [00:36]
Delian Asparouhov
In the line Zen.
- [00:37]
Hunter Walk
100%. It's gonna be hard and train.
- [00:40]
Delian Asparouhov
Oh, sorry. Tiger Den.
- [00:41]
Hunter Walk
The Tiger Den.
- [00:42]
Evan Korth
Yeah, that's right.
- [00:43]
Hunter Walk
Can we run that back?
- [00:46]
Brian Singerman
There was a lot of discombobulated commentary there.
- [00:50]
Hunter Walk
We're gonna try to. We're gonna try to have a serious conversation.
- [00:53]
Evan Korth
That's gonna be this whole two hours.
- [00:54]
Hunter Walk
No. And I got to do this with Trey, and that was amazing. So we wanted to bring it all together. My first question is actually for Ev, and we're going to start in a really positive place. We really respect what you guys have done and what you do as a firm. I hope that's the same. But, Ev, you've worked at both. You've talked a bunch about, like, what makes Benchmark unique. I've obviously gotten to hear a lot about that from you. But I'd be curious for you to talk about what you loved about Founders Fund, maybe compare it a little bit to, like, what's different from other places. Maybe Benchmark. But I'd just be curious for you to start here.
- [01:20]
Evan Korth
I think when people that aren't in the investing business think about what investors do and, like, what the day to day or, like, what an investment committee looks like within a venture firm or any investing firm. I think they have this. This idea in their head that, like, you know, the team comes together, they've done a bunch of research, they've done a bunch of work, and they have this, like, very intellectually honest debate about the merits and considerations of the investment and, like, weighing the risk reward and then coming to some, like, intellectually perfect decision about that investment, given all the information that they've gathered. And that's just, like, not how basically any firm actually operates. There's so many, you know, politics or organizational structures and incentives that, like, push you away from this like truth seeking place. And so I think that the really unique thing about Founders Fund that, that when I came in I thought was just so amazing and unique was like, not only that, it was like a culture that bought like truly bought into the like process of truth seeking and like really putting like truth seeking on a pedestal above like, you know, the hierarchy of who's a GP and who's not a GP or any of these other things. But then also there was like even like organization incentives and structures in place to keep that the same basically, no matter who is in the halls of Founders Fund. To the one that I've mentioned before, Is this the 1% mechanism or provision or whatever it's called, which is for any investment that you do at founders fund, 1% of that investment on a dollar basis is set aside for the people that worked on the investment to basically angel invest up to 1% of the total dollar amount. And it's not just like some, you know, workplace benefit. The entire idea of that mechanism is to basically measure the conviction of the partners or the investors that are sponsoring a given investment. And so do that.
- [03:10]
Hunter Walk
Yeah, like if somebody doesn't want to do it, are you, Is that like a thing?
- [03:13]
Brian Singerman
No, I think like it's, it's really important to be mindful to liquidity constraints. Obviously, like, you know, people on the team have very different personal financial situations. Um, so it's not super prescriptive, but it is like a useful tuning because you don't have to do the full 1%. You can split it up between the different parties that work on the deal or you can say like, hey, I have five grand or whatever that I want to put towards this. It's not a signal lack of conviction. It's just like based on liquidity constraints.
- [03:42]
Delian Asparouhov
I think it's more helpful like on an individual comparative basis, like if you're known for doing lots of 1% and on this one you're choosing not to, people will ask, but it's like if you typically don't and then don't, that's not necessarily a signal.
- [03:52]
Hunter Walk
Are there any other like incentive aligning mechanisms like this that you guys have going or what would you, I guess,
- [03:58]
Evan Korth
what would you two ascribe? Obviously you've been at Founders Fund much longer than I was, what would you ascribe and do you agree that like the thing about truth seeking kind of being like the highest calling of the team and like what do you ascribe that to? If it's cultural, if there's organizational things that lead to it.
- [04:12]
Brian Singerman
You know, when I first joined Founders Fund, as you guys know, like I didn't have any interest in venture capital. I just ended up there because Peter basically told me that I was going to do it and I wasn't clear that I had an option.
- [04:25]
Hunter Walk
I love that. That's the best kind of recruiting process.
- [04:29]
Brian Singerman
And so when I showed up, I kind of didn't know what I was doing. And I had this hypothesis that venture capital was going to be more like what you said. It's like this diligence exercise and you meet with hundreds of companies a year and you know, you do like a deep process on each of them. And the hard part is making the literal investment decision. It's like not what it is at all. It's like there are tens of thousands of companies that are raising at any given point, 99% of them are obviously knowably bad within a second. And so really it's about access and finding the super high conviction things that you want to pour your energy into. And I think that's like really what makes Founders Fund unique is that we're just very internally honest about that. And if you're not personally super high conviction. I really want to do this deal. I'm going to fight for it. I'm going to be willing to argue, I'm going to be willing to like put my reputation on the line disagreeing with Peter. If you're not willing to do that, you're just never going to get a deal done. And so that's really all it is at the end of the day.
- [05:32]
Delian Asparouhov
Yeah. I spent a little bit of time early in my venture career at kv and one of the things that I find very uniquely different between the two models is at ff, so much more of what we do and I'd have to look at on a dollars basis or deal count basis. But there's so much more that I feel like sort of rises from below, if that makes sense, where it's like individual team members that have really strong conviction and then are steadily presenting that case to other colleagues and working their way up. And then at ff still every check above meaning full size, requires Peter's approval. But it's almost always like that person steadily sort of gaining conviction and convincing others and then eventually presenting that case to Peter. Much more so than top down Peter saying we need to go invest into sort of this thing. And I think that creates some truth seeking by default because there's such high activation barrier of Peter's got many things going on. Trey's got many things going on. And so if you're going to take up their time, especially because venture is not the only thing that they do, going to want to have a really compelling case as to why versus at other places where the GPS are really full time only investing gps, I find that they also are the ones leading a lot of the investments themselves, which I feel like that's less the case at ff.
- [06:44]
Hunter Walk
The incentive thing is interesting. I feel like one of the things I've noticed here that Evan and I have talked about is that because there's nothing at benchmark to fight everybody's equal, you're never going to get a promotion, you're never going to get a raise. And so because a lot of that stuff is stripped out, it leads there to be nothing other than just. Just try to make good investments and try to help your teammates make good investments versus I think at a lot of big firms that gets harder because there are other competing interests that people have. But I think Founders Fund seems to have avoided a bunch of that through a lot of these sort of mechanisms that we're talking about. There's the 1% thing, there's the fact that a lot of senior people are crazy busy. But I also feel like you guys have a cultural thing where there seems to be something to it. I think EVs talked about how in a Founders Fund partner meeting, people can get pretty heated over ideas or even maybe at each other, but somehow at the end everybody still really likes and cares about each other, which I think is the inverse of that, which is ruinous empathy or sort of just like toxic collegiality that I think is much more common where people, like, everyone's very polite, very polite. And then after the meeting they're like, look at that idiot. Like, I can't believe you thought that.
- [07:53]
Brian Singerman
I just think the EQ of the team is high enough to be able to operate in that way.
- [07:57]
Hunter Walk
We just got a little sprinkle of it. And so as a result we. Everybody just says what they think and moves on.
- [08:02]
Brian Singerman
Yeah, because I just don't think people are tuned to even understand how the things they say have like an emotional impact on other people.
- [08:09]
Hunter Walk
Does a super high EQ person not work particularly well at Founders Fund?
- [08:12]
Brian Singerman
Either that or they'd be like really good at manipulating one or the other. Yeah, sure. It could go.
- [08:21]
Evan Korth
They'd never know.
- [08:22]
Brian Singerman
Yeah, never know. Yeah, exactly.
- [08:25]
Hunter Walk
Actually, can I ask what is like Peter's interpersonal sort of what's the experience? Because I think he, like, I could imagine you sort of saying this in either direction, but he clearly is deeply attuned to people in some important way. Is this thing you're describing about eq, is that related to him? Is it different from him? Because obviously, you know, when you have a founder of a firm, of course like a lot of the DNA is going to go through it. But like does much of this kind of come from him?
- [08:50]
Brian Singerman
One of the things that he said to me very early on we were talking about having kids and what we wanted for our kids and stuff. And we were talking about intellect as being one of these things that you as a parent think about wanting for your kid. And he said something to the like along the lines of I think like 130 is like roughly the right IQ because anything over 130 there are too many trade offs. And I think that's like sort of you're like, you're not hiring people for their EQ or lack thereof. You're hiring people to have really high IQ that are able to hold their own, hold their own in these debates. And the reality is like when you do that there are trade offs.
- [09:31]
Delian Asparouhov
Right.
- [09:31]
Brian Singerman
And so we're kind of experiencing the result of those trade offs.
- [09:34]
Hunter Walk
Many times too smart for your own good.
- [09:36]
Brian Singerman
Yeah. Or maybe it's exactly for everyone's good because we don't have these like weird harbored politics and animosity. At least I don't feel, I've never felt Delian before.
- [09:46]
Hunter Walk
The pod told me that he can't stand you. But other than that, everyone likes each other.
- [09:51]
Brian Singerman
Of all people. I think Delian and I are very cool with one another.
- [09:53]
Delian Asparouhov
So I think like Peter deeply understands people but like from like an intellectual framework level, like I think he's very good at like quickly understanding where is somebody biased? Where do they have blind spots? Like you know, what are they good at? What are they not good at in terms of like how his words will have like XYZ emotional impact. Like you know, Trey said. Yeah, I think that you know, sort of poor rat. But I think when it comes to like deciding on whether or not to make an investment, it's actually much better to understand I think somebody's intellectual capabilities versus the like emotional impact side of it. And I think also right now is probably amongst the best cultural states it's been in, in the time that at least I've been there. But then even from the like history that I've heard and I think there's a variety of reasons as to why that is, but definitely one of them is if you, like, look at the. Call it median age or median tenure of somebody on the team, it's probably something on the order of like seven or eight years, which is, I think, reasonably high relative to most years at a venture firms. Amongst a spread of 12 people that are there.
- [10:50]
Hunter Walk
Has a culture gone through, like, ups and downs? I mean, you've been there a long time.
- [10:53]
Brian Singerman
Oh, for sure.
- [10:54]
Hunter Walk
And do you think it matters, like, maybe ask more accurately, what do you think the impact is of, like, good and bad cultures at various points in time? Because obviously you can make a great investment in the context of a terrible culture and vice versa, primarily.
- [11:04]
Brian Singerman
It's like, can you retain the people that you have that are doing a good job? I think that's like, ultimately the thing, because you're right. Like, you could have, you know, Bridgewater as like an example, like, great performance, but I think it's a really hard place to work for a long period of time. Yeah, that's sort of the trade off that you're making at some of these funds. It's usually not like a systemic problem. It's usually like there are individuals inside of these systems that tend to sort of buck against what the general expectation is from the team for what they signed up for, if that makes sense. And then when they feel like there's been some sort of violation, things get, you know, they get dicey. When I first came into Founders Fund, it was definitely like people were kind of in their offices, staying very quiet, staying away from each other. And know I was walking through the halls trying to give people high fives, and they were like, what's going on right now? This is really weird.
- [11:57]
Hunter Walk
Yeah.
- [11:57]
Brian Singerman
But then, like, things got really collegial, and, you know, it. Yeah, it kind of goes in waves depending on how people are vibing, how we're, like, adding to the team, whether or not we're, like, exiting rapidly when people aren't working out and just being, like, really honest with ourselves about what we want in the long run.
- [12:18]
Hunter Walk
You know, I was just thinking as you were saying that, like, you obviously worked really closely with Keith for a long time and then you didn't. And I'm actually interested to hear we've never talked about this, but, like, what are your reflections on, like, you had this, like, sort of like, apprentice relationship for, I don't know what it was. Five, seven years.
- [12:33]
Delian Asparouhov
Yeah. And a half years? Six years. Yeah.
- [12:35]
Hunter Walk
You're kind of like, doing your own now, you know, with him going back to Khosla. Has that been, like, seamless? And smooth. Like, do you reflect on that a whole lot? Because I think it's like it was like an uncommonly sort of tight apprenticeship model. You don't see it all the time.
- [12:48]
Delian Asparouhov
Yeah, I mean, obviously, like, single biggest influence I've ever had on, like, you know, sort of my career. And I think that'll be the probably the case for the rest of my life because it's just like there's nothing that compares to those like, early period where it was like, he was the only person that I basically like, you know, sort of worked with for like a really extended period of time versus now, even though, like, Trey and I work together a lot. But doesn't compare to like, yeah, I'm also not spending 12 hours a day, you know, with Trey. Even, like when we're most, you know, sort of collaborative, there's always this like talking point that I give to founders or investors, which is within an operating company, there are actually a decent set of constraints that you have to live by, which is you have to serve your customers, you have to fundraise, you have to actually hire talent, et cetera. And so if you were to examine the cultures of Anduril and Varda as an example, there's for sure differences, but in the grand scheme of distribution curves, they're probably not that different relative to the distribution curve that you see in venture, because in venture there's effectively only one. One rule which is like IRR and make money and then the rest is sort of like totally free form. And so if you were to compare the benchmark versus FF cultures, my guess would be that you would see way more differences in that versus XYZ to sort of top tier, basically startups would actually be much more similar. I do think that seeing Keith operate in these different environments very closely with him, I do think my net reflection on it, and I think he would agree with this is I do think his work style, personality, how he likes to do things actually just does fit into how KV's culture, et cetera, like, operates a lot better than I think it did like at ff. I'm not sure that would have been obvious without actually like literally doing what he did and in some ways, like sampling the two. And I do think also him coming over to FF helped fix some of the things that he wanted to get fixed at kv. So I think actually like the whole process and outcome was like the best for everyone all around. Obviously now not working with him like day in, day out is like an interesting experience where it definitely like, you know, took me some time. And I remember, you know, Trey and I went on this like super long walk, maybe like a week after. It was sort of clear that's where sort of things were headed. It had already steadily been happening over the prior year or two where I was doing more deep tech, I was doing more sort of art of things which are very not the Keith Fintech, et cetera type of things. The thing that made me comfortable with, in some ways staying was actually looking back at the prior year of investments and realizing of the people that I worked with on votes on a do check. The prior year was actually 80% Trey and Scott Nolan and it was only like 20% Keith. And so I was like, oh, well, I'm already sort of doing this job
- [15:05]
Hunter Walk
out of the wing.
- [15:05]
Delian Asparouhov
Yeah, yeah, I'm out of the wing already, basically.
- [15:07]
Brian Singerman
The other thing that's worth mentioning about this is that Keith stylistically is like a really good coach or mentor because he's very hands on. He wants to do updates, he wants to get in the weeds with how something is going. That's like the opposite of really. Peter and myself, we're not like that at all. I think I'm a terrible lead. I'm a bad. I don't mean lead investor. I mean my board manager. Yeah, I'm not a good board member. I'm not a good manager, I'm not a good mentor. I just like, I'm not wired.
- [15:44]
Hunter Walk
Are you sure that that means not a good board member? Because I think a lot of great board members are. I agree about the manager thing, but
- [15:49]
Brian Singerman
I think it depends on what you're looking for out of a board member. If you're looking for someone that's like going to get their hands dirty and like help you with things tactically, then it's probably, I'm probably not going to be very good at that. If it's, you know, protect the founder and be an advocate for the founder and stay out of the way and don't create unnecessary friction. Well, yeah, that's. I'm, I'm great at that. I'm great at not creating additional friction. But I think that like, it's just like stylistically super different. Delian will reach out to me and be like, hey, there's a company that I would like your read on. Or there's a question that I have that's hyper tactical, but like, am I going to reach out to Delian and be like, let's review that email? I don't know. I'm just like, it's just not, it's not me. And I think that maybe you got to the point where the thing that you legitimately got in droves from Keith was not something that made sense in the long run.
- [16:41]
Delian Asparouhov
I remember when I first started working with him, I would describe it as, you get to work with this person that's one of the greatest of all time. And he has this knowledge tree through all the situations that he'd been with the different business model, startups, founder conflict lawsuits, et cetera. In each situation that I get to observe him in, I got to see one branch of that tree. And then as you get to observe him over the course of six years, you kind of actually create the meta layer tree and it's like, ah, this is the tree of knowledge that works for Keith. And I've definitely adapted a lot. Right. Like, I would say like, of my equivalent, it's probably like 60, 70%. It's probably like mostly overlapped with Keith. And then my 30% is mostly just that, like, I like a little bit more of the like hardware y physicsy materials, like those types of things. But 70% of like how I get excited about a seed round, how I operate with a founder afterwards. Like, I definitely still largely take a little bit more of the Keith style, like venture assistance role balance with like, you know, I'm deeply involved with Varda, so like, I maybe can't quite do what sometimes sort of Keith does in terms of like, depth of involvement with companies. But like, I definitely take a different approach to it than like, you know, sort of Trey. Trey and Peter do.
- [17:41]
Hunter Walk
Yeah, like what you said about, you know, Keith Fitz, beautifully at kv. He's like a particularly distinct personality, so maybe you see it more sharply with him. But I think like, we probably all are great in one environment and terrible in another. It's probably the same. You know, there's people who are being an amazing founder for one thing, horrific for the next. I think so much of like life is like getting yourself into the place that you're supposed to be in.
- [18:02]
Brian Singerman
And if I was at a venture fund where there was like an expectation that I take a board seat on the, on the deals that I lead, like, I would quit, there's just no way I couldn't do it. I don't like being on boards at all. Even for companies that I started myself.
- [18:17]
Delian Asparouhov
Even Monday partner meetings, if we had to do those, like, if you told us, yeah, if we had to sit through like four or six hours of us like taking pitches all together and then discussing them all together. And discussing the portfolio every single week. I think the entire founders fund team would quit.
- [18:31]
Hunter Walk
Yeah. Do you not like the board member stuff because you think the board member theatrics or it's because you're like, I made the investment and you should figure it out and I don't want to be part of it.
- [18:38]
Brian Singerman
Like, I've thought about this a lot. There are three things, okay. The first reason I hate it is the board member theatrics. It's like people who, it's exhausting. Who believe that somehow they are better at running the company than the founder and they like stand on a soapbox and try to convince everyone in the room that they're really smart. I, I hate when you say, you're
- [18:56]
Hunter Walk
like, you're in a board meeting and like someone's there and they're like this, you could tell that they're like, this is my Super Bowl. Like, I'm about to show up.
- [19:02]
Brian Singerman
I'm about to show up. Exactly.
- [19:04]
Hunter Walk
Come on.
- [19:05]
Brian Singerman
And also, like, if we, if you invested in the company, you should probably believe that the founders are the right people to run the company. Otherwise you shouldn't have invested. So that's first. The first thing, the second thing is information density is at an all time low. A pitch meeting in 30 or 45 minutes, I can like do a full dump of everything that I believe that I need to know. And if I have follow up questions, I can do that asynchronously or whatever. But I can't tell you how many times I'm sitting in a board meeting that's like scheduled for three hours. And it's like, dude, we could have done this in an email. Like, just tell me what the numbers are. Tell me what your struggles are.
- [19:38]
Hunter Walk
Yeah.
- [19:39]
Brian Singerman
Answer a couple questions.
- [19:40]
Evan Korth
Let's get.
- [19:40]
Hunter Walk
And then you think about how expensive that three hour meeting is. They had their whole exec team there.
- [19:43]
Brian Singerman
Yeah. Crazy how low the information density is. And then the third reason is that I don't actually think that I'm adding a lot of value. And I don't like being in situations where I don't feel like I'm adding a lot of value. And so when I sit through this thing where I like sponge up a bunch of information, maybe I interject one or two things, it's like, this is not only a waste of my time, it was a waste of everyone else's time to have me sit here and pretend that I'm going to know the right things for you to do in all these moments.
- [20:12]
Hunter Walk
Okay, so you don't want to do it. But do you think Venture should have people who do want to do it and are engaged and do the whole board member thing or do you think
- [20:20]
Brian Singerman
the whole construction at some stage? I think you need to have governance. Like there should be a board that serves a function. I think these boards are pulled together way earlier than they should be. Like a series A company should not have a board. It's just really stupid, you know? What are you reporting on? Oh, we like built additional features into our product. It's like, who cares, dude? It's like, I don't.
- [20:45]
Hunter Walk
I just, I can't imagine a series A board meeting. And they're like, yeah, we had a great month. I don't give a shit, man.
- [20:51]
Brian Singerman
I really don't care. It's exhausting. There's almost a perfect correlation between the funds or people that think you should have a board at a seed or series A and the type of people you don't want on your board long term.
- [21:03]
Hunter Walk
Okay.
- [21:04]
Delian Asparouhov
I think the core thing at FF is for a decent chunk, especially with the Venture team. We're constantly comparing it against just going to go work on our own companies. And so I just think the way that we view Venture is very different where it's like we are working on this because we're explicitly choosing to not work on the company. And so this better be very high value relative to somebody who's doing it full time. That is like, well, I need to figure out some way of making myself feel valuable in this world. And so board member theatrics is one way of feeling good about it.
- [21:27]
Evan Korth
Well then you both have boards at Varda and at Anduroll. Do you feel like you've been able to take these things that you really don't like about boards? And how would you grade? Not to put you on the spot, but how would you grade the work that you've done to make the boardroom
- [21:39]
Brian Singerman
at Varda and Anduril massively condense information density. That's like the number one thing is that there's no such thing as a useful three hour board meeting. It's like 90 minutes tops. Only run through the most important stuff. Obviously you can have additional materials if people want to dig in more deeply. Async. But keep it, keep it really, really tight at Anduril. One other thing, there are only three board members, me, Palmer and Brian. And we've controlled that. We don't want to have seven investors as board members because it just increases friction in a way that isn't Actually useful for the company from the third point on, like my ability to add value. I feel differently because what Delian said, which is that this is also like sort of my full time job. And like I actually feel like I am doing the things that are most valuable for me to be doing personally with the company as chairman, as, you know, a co founder of the business. My biggest point of feedback to most companies is just on the information density side. It is crazy to schedule a two hour board meeting or a three hour, four hour board meeting. I mean like if you can't do this in 60 to 90 minutes for an early stage company, like what are we even doing? It's just absolutely out of control.
- [22:55]
Delian Asparouhov
Trey is actually on like the, you know, sort of barter board. So he can maybe, you know, sort of grade how, you know, sort of we do. Independent of my assessment of it. I do think early on we did a pretty decent job of. Yeah. Keeping it, you know, sort of very dense. And now in the later stages there's almost sort of like, I think of it as like three sections of the board meeting where because we have sort of completely different customer sets from our Dow business and our pharma business, we typically end up doing like a Dow update. And it's like basically just for Trey, like, no, like, because it's like, I mean look, it's like he's like one of the best D O W people of all time and definitely way better than anybody else on the board by like many orders of magnitude. And then even then, we just did our last one yesterday and I'm sure Trey, like midway through was just like we were asking like, do you know this customer group? Do you know this? And Trey's like, nope, completely different than where Anduril works and does, et cetera. I can give high level guidance, but you guys are the ones that know this is kind of what I imagine was going through sort of the back of your head.
- [23:39]
Brian Singerman
We also did the whole thing in 30 minutes.
- [23:41]
Delian Asparouhov
Yeah, it was 30 minutes. So we ran through it sort of quickly. And then on pharma we do find it incredibly valuable. Some of our external born rumors, including Samir from KV where they're on any particular deal, pharma, asset, et cetera, there's just so many dynamics that it's actually honestly hard to have all of that internal expertise. And so there I actually find it deeply valuable. And then third sector is like ops, finance, et cetera there. It's like, yeah, it's where at our current stage of amount of capital Raised deployment, et cetera. It is helpful to have like some external governance on like even down to just like founder comp, executive comp and just like, you know, you know, getting external perspectives.
- [24:15]
Hunter Walk
But this is another area where I would say benchmarking Founders fund are like pretty opposite where you guys are like, it's, you know, as much of the work as possible is on building. It's like in some ways the investing is like we'll do as much of it as we can, but it's kind of competing with operating in a lot of ways. Versus at Benchmark, everything is designed so that there's literally nothing else to do but invest. And that's sort of like the goal almost is like Benchmark wants there to be nothing for the partners to do but make investments and work with those companies. You want it actually to be very hard to make investments.
- [24:46]
Delian Asparouhov
You want there to be lots of things that compete for your attention that aren't investments that are better things.
- [24:50]
Brian Singerman
Exactly, yeah. It's sort of like being professional at anything. It's like if you're a professional baseball player, you're going to hit a lot in the batting cage, you're going to take a lot of ground balls because that's what you're being paid to do. It's like you have to do it. And so if you're a professional investor, you're going to feel like I have to be doing deals all the time. Now the challenge is like having discipline around that because sometimes the right decision is not to invest. That's right.
- [25:12]
Hunter Walk
And so if by the way, one good way to implement that is by saying if you want to make an investment, you have to be on the board for the next 10 years.
- [25:20]
Brian Singerman
I mean I would never make an investment. You're going to pay 1000x multiple and you're going to be on the board
- [25:31]
Hunter Walk
for 10 years, 2000 hours of board meeting.
- [25:35]
Evan Korth
Delian, you said something recently that did really resonate which is like the investing side of things should almost be like an exhaust or you see it almost as like a side hobby or like an exhaust of what you already do in your operating day to day job at Varda. And I do think that there's like even as like a mental framing, I was trying to frame that for myself and it's like in some ways like, you know, depending on like the stage of investing that you're doing, like you could see your job as like I'm a researcher and I am a networker with this group of people. Whether it's like let's say you're in cybersecurity, like cybersecurity experts or whatever. And then the exhaust is that once in a while I do an investment.
- [26:09]
Delian Asparouhov
There's this investment that we were just talking about earlier that you guys met yesterday, this week that we just led the seed round on, that I think is like a like perfect example of this, where it's just like I, over the past couple years have just gotten deeply frustrated watching like cognitions and, you know, cursors, etc. Of the world completely transform how like a backend software engineer at like a ramp or a meta or, you know, name your favorite software company, you know, significantly improve their productivity. And then you just look at the sets of tools that we like use internally at Varda for our firmware engineers, thermal modeling, et cetera. It's the same stuff that I was using in 2012 when I was building robots. And it's like there's effectively no change. Like the software is like slightly up to dated, but there's no improvement in productivity. And so I just started spending a ton of time looking at all the tools in that category. Some are now later stage companies in our portfolio, like Nominal, I think, is one of these. That was like an early sort of example of this. But the one that you guys sort of met this week was this example of like, I was just so frustrated that there's this like very rote manual work that our junior mechanical engineers do that felt like the classic type of thing that AI should clearly be able to not just like slightly improve the workflow on, but just completely remove. And then was like, I'd probably met at that point maybe like 15 different companies that were like in this space frustrated by all of them. I met like the 16th one and I was like, great, this is the one. Like, it's just the best founder, the best product, the best idea. And I was like, I want to invest. And it's like, I partially like doing it because I like doing the early stage, you know, get 10%, like, you know, start to be a little bit of like that founder coach. But then I also specifically like it because it like solves a problem at work or another one that we like did together way back in the day. That is just one that solves a problem. Personally is like we both did eight sleep together back in the day. And it was not because, like we like had some deep hypothesis on like mattress markets or anything like that.
- [27:46]
Hunter Walk
You're just like, I'm so hot in the middle of the night.
- [27:47]
Delian Asparouhov
I'm just so hot in the fucking middle of the night and I'm just like, I don't want this to happen anymore. And this is a product. And I remember at the time we were like, we have no idea if this is going to be a good business, but like it is a really good product and like typically over time good products turn into good businesses.
- [28:00]
Brian Singerman
My memory is that I actually was, I was crapping all over this deal. I was like guys, this is so dumb. Why are we investing in a mattress company? And I think it was Keith that actually said like, just try it, try it. Yeah. And I just like I slept on it for one night and I was like, let's friggin go, let's invest in this company. But yeah, I think that's totally true. On the, on the like, like being a professional investor side of things, like, you know, I think if you look at different vintages, like 2022, you could argue that actually like the best investors were the investors that stopped investing. How do you deal with that if, if like you've tuned your whole system for like building a track record by making good deals?
- [28:39]
Hunter Walk
I think there's a couple. One is because I was actually just looking so we, we had a fund that I wasn't here obviously, but there was a fund that was, that had 2022 included in it. I don't think it's like, it's hard to be excited about much of what happen 22, but it's a three year fund and then it also has 2023 and 2024 in it. And so one answer to this is you're consistent through vintages, you have some time diversification per fund and you hope that the 2022 also includes the 2023. And so you get through some of it that way.
- [29:08]
Brian Singerman
Yeah, this is. Brian Singerman used to always say that venture is not a macro asset class, it's a micro asset class. As long as you're in the right companies, it doesn't really matter. But like, like if you just look at the data around the 2022 vintage or the window around that, it's massively underperforming other vintages. I think there's like some truth to that and then there's also some risk.
- [29:32]
Hunter Walk
There is, there is risk to it, but it's also like, unless you're Peter Thiel, I think trying to call the market moment is also very risky. And like you look at like, let's take like public market index investors, people who just buy and hold the S and p Destroy people who try to like, time it almost, almost every time.
- [29:47]
Brian Singerman
Right? Yeah.
- [29:48]
Hunter Walk
And so I think if you're not one of a small number of that, you know, you guys might have on your team, I think it's, you can, you can mess it up in a big way. Because I think there was a lot of people who were like, Ah, 2017, this is a bad time, we're at the top. Don't invest for the next few years. And then, you know, you miss some good companies or 2023, 2024, you still don't have your foot back on the gas, you can miss it. So I guess my counter to that would just be that like most people can't call the macro very easily. And if you can't call the macro very easily and then you miss the
- [30:14]
Brian Singerman
good vintages, you have to focus on the micro. You miss it all if you can't call the macro. So there's at least enough data that you should be able to remember prior cycles, which it doesn't seem like we have the ability to do it all. Memory is so short. 2022 is not that long.
- [30:32]
Hunter Walk
And like, man, we can't do that again. Maybe if this happens in 20 years, our kids won't remember 34 months ago.
- [30:43]
Brian Singerman
It's crazy.
- [30:44]
Evan Korth
A core investing memory of mine was actually an offsite at your house, Trey. And this was peak in 20. The crazy thing was like the consensus in the room was that it was the bubble was about to pop. Like one, that we were in a bubble and then two, that it was definitively about to pop. And the conclusion that we came out of that off site actually was to Peter wanted us to go to the beach for a year and do a sabbatical. But the conclusion was let us invest in our very best companies. We made two investments. I won't say them in case that's weird, but we did two investments and both of them have been actually even vintage adjusted really, really good. And so I think that like to the micro versus macro point, like the winner of 2021 was the worst possible time to make an investment probably in the last 15 or 20 years in Venture. And I think if you still get the micro right, maybe you would have made more money if you would have done those investments in the summer of 2022, because you still probably could have done them, but they're still really good investments.
- [31:38]
Brian Singerman
This is the nature of Peter, is that no matter how annoyed you are with him, he's always right on some timeline, he's always right. I can't tell you how many times I've been like, oh, this is so ridiculous. Like you. He's getting so emotional about this thing that, like, I don't understand why he's so charged about it. And then 12 months later, I'll look back and I'll be like, shit. Wow. He can't believe how well he nailed that.
- [32:04]
Hunter Walk
But I think it's really dangerous to try to do this if you don't have someone like that.
- [32:08]
Brian Singerman
Yeah. If you're not Peter, I couldn't do that. There's no way I could.
- [32:11]
Hunter Walk
I think almost nobody can do that.
- [32:12]
Brian Singerman
Yeah. And I think there's, like, something really unique about him as well as well, where he understands that it is less important to be exactly true than it is to be directionally true. Because it's really hard to shift the Overton window. And so most people are like, they try to sort of moderate their approach to something, and because of that, they're not directionally pulling hard enough to shift any strategy. Whereas I think Peter is just like, I'm going to get super. I'm going to dig in my heels on this just to move the window a little bit. Just to move the window a little bit. And that tiny adjustment that ends up being made is really powerful. And I come up with this all the time with Andrew, with our executive team, where, like, everyone wants to be reasonable. And I feel like I'm constantly coming in over the top, being completely unreasonable. And I think it's just, like, not
- [33:06]
Hunter Walk
actually wanting the outcome that you're saying.
- [33:08]
Brian Singerman
Right. It's just a learned behavior from Peter. It's like. Like I'm going to say something that even if I don't believe that we should do exactly what I'm saying, I'm just trying to pull people out of their unintentional stasis that they've kind of locked themselves into.
- [33:23]
Delian Asparouhov
The quote that I remember from that offsite was basically Peter saying something along the lines of, I know that you guys are going to want to deploy. There's going to be people that are on this team that want to make investments right now, because the category is so hot, everybody thinks everything is best. Bubble's about to pop. And so the rule is only go figure out what are the two, three best companies. We'll invest at that, whatever the market clearing price is, and bubble will pop. But because we've invested in the truly best ones and gone hands off on everything else, the best ones will make it out through the other side. And so one of those investments was the $9 billion post ramp round. Nine months later, the company did a down round at 6 billion basically in valuation. And so in theory, that late 21 early 2 investment looked bad now obviously at like a $40 billion valuation. And so even the IRR with the like, you know, down and up still made sense. And so I think it was Peter sort of pushing this, like, you guys are going to deploy. I can't stop you. Even if I wanted to, like stop you guys from fully doing it, it's not going to happen. So therefore, at least just do the very best ones and then stop. And then we did kind of feel good because it was like, yeah, we made two really big investments and we're like, okay, like, you know, we can stop now.
- [34:24]
Hunter Walk
Is there any like rising discomfort in Founders Fund at this current moment? That's like 2021 or is that not the tone?
- [34:31]
Brian Singerman
I think it's probably different across different people. I am very uncomfortable. I am not enjoying this moment at all. Maybe some other people are.
- [34:40]
Hunter Walk
Why aren't you enjoying it?
- [34:41]
Brian Singerman
I feel like we're getting back to this point where the prices are untethered from reality. And it reminds me a lot of 2021.
- [34:51]
Hunter Walk
I mean, you're also, obviously there's AI, but I know you spent a lot of your time in hard tech, which is now probably just as hot as AI, it seems like, totally, yeah.
- [34:58]
Brian Singerman
If not hotter. In some ways I feel like there's almost been a bit of a reset, particularly on like vertical AI SaaS where people are like, oh crap, the labs are kind of going to do a bunch of this stuff. So maybe there's even been a bit of a reset. But there hasn't been any form of a reset on hard tech. And I think Founders Fund for over a decade has had this sort of Founders fund science concept of we wanted flying cars and Instead we got 140 characters. And we've probably been more active than anyone and investing in these hard tech companies. And did they work out? They did not. For the most part. They did not work out well.
- [35:34]
Hunter Walk
But you got, I mean, you got the ones that mattered.
- [35:36]
Brian Singerman
Yeah, we got the ones that mattered. But if you think about where most of those gains came from, it was actually PayPal mafia. It wasn't like a thesis that turned into great returns. It was not like that turned into great returns.
- [35:48]
Hunter Walk
It's funny because most people in your position would obviously say, oh, well, our thesis played out and yeah, we had some losers, but we had Andura and SpaceX. And so it was basically Right, but you're saying that actually the thesis didn't really serve us and we would have made those investments any way.
- [36:00]
Brian Singerman
And I think they were actually hard to make even with the thesis. You know, were it not for Luke Nosek, basically like putting his career on the line, I don't know that FounderSun would have done the early SpaceX investments. When I pitched the FounderSun team on Anduril, they were basically like, who's running this company? I guess it's not you and it's not Palmer, so you need to come up with a better solution. So these things weren't even obvious even when they were direct network. And so I think, I think the thesis side of this, like we're just way more careful around it now than we were historically, where it's like it's not sufficient to have a really strong technical founder. You have to have somebody that's equally good on the business side, otherwise it's just not going to work. And what we're seeing a lot of today, whether it's like hard tech or defense tech or manufacturing, industrial automation, whatever it is, is that there's a lot of people with great ideas and interesting technology, but significantly accelerated rounds for the commercial progress. And the belief, I guess, is that, well, if the product works, the company will just obviously work. And I don't think that's actually obvious at all that the company will work.
- [37:14]
Delian Asparouhov
I admit I don't mind the current moment as much, but I think a part of it is probably 50, 60% of the investments that I do are these sub 30 post rounds. And then it's like sometimes some hot founder from some XYZ thing spin out comes and says, I have offers at 7,500 posts. And I'm like, like, great, that's just not the business that I'm in. And you're welcome to go raise that. And so I think I mostly ignore it. And then I feel like the current. Not to speak on behalf of the entire firm, but I feel like maybe if I were to give the what is the closest that we have to the 2022 sort of take, it's that there are a set of generational companies that we are involved in, OpenAI, Anthropic, SpaceX, Anduril, et cetera, that are all now at this point largely priced in so late stage, all ipoing soon that it's not very obvious with that next cohort, support of companies is that could even accept a billion dollars of investment sort of right now. And so I think that's probably the biggest question is like we've had a pretty wild deployment rate over the last three, four years in terms of especially some of our growth checks. Maybe not as possible over the next three or four years. If there aren't logos like that, we're
- [38:13]
Brian Singerman
sort of deleum making these investments at under a $30 million valuation. He has to spend a lot of time at preschools finding young founders who are willing to accept such low valuations for their C drills.
- [38:26]
Evan Korth
Is that why you're not allowed allowed within 50 yards of school? I've always been wondering why that was
- [38:34]
Hunter Walk
before we had that. It's a little bit on the line for me.
- [38:38]
Delian Asparouhov
It's not even close to the line.
- [38:39]
Brian Singerman
The idea of like a 30 million dollar seed round valuation is like, oh wow, that's huge. That's reasonable. It's like 3x what reasonable would have been 10 years ago.
- [38:50]
Hunter Walk
It was so recent that it was unreasonable. Like it's five years ago. People were like, whoa, these YC companies think they're raising at 25. Who do they think they are?
- [38:57]
Delian Asparouhov
I did a six mil post seed round like you know, two months ago.
- [39:00]
Hunter Walk
Six posts.
- [39:01]
Delian Asparouhov
Yeah, six posts. Yeah.
- [39:02]
Brian Singerman
I think the thing that the founders are missing in this equation is that like the economics at these different prices at the early stages shift significantly. And so like there's so much money in venture. There are all these new funds that are setting up. It's like way too aspirational. There's way too much money in the
- [39:19]
Hunter Walk
system when they forget them new funds, it's really just the mega platforms are consolidating $40 billion or whatever.
- [39:26]
Evan Korth
Even that.
- [39:26]
Delian Asparouhov
Yeah.
- [39:27]
Brian Singerman
And because those terms are shifting, it's like the deals that you could do 10, 15 years ago that led to these. They're gone. They're gone. They're totally, they're gone. And so then the question is like can you actually over a venture cycle, like a venture fund cycle, can you actually beat the S&P 500 with this new unit economic? Even if you are hitting the Monopoly player, I don't know. It seems like it's way harder than it has been.
- [39:52]
Hunter Walk
I think it is way harder than it has been. I mean I think it seems like you'd expect across the industry multiples to compress, but the power law is still super strong, obviously.
- [39:59]
Delian Asparouhov
One thing we've noticed is in our latest venture fund that we kicked off maybe six or seven months ago, the average entry price right now I think is something like 700 million in valuation. And if you compare it to the prior five. Those would probably be on average because we do some mid stage rounds in there, but it would probably be like 80 to 100 million in entry point average price. This probably speaks to the fact that even seed rounds that we're doing are so high that then when you add in some of the mid stage things
- [40:22]
Hunter Walk
that are also high, we don't talk about this much. What's your current comfort with the temperature and venture and funding and everything like that?
- [40:29]
Evan Korth
Yeah, I'm also deeply, deeply uncomfortable. I think the similarity to 2021 that I draw is that in 2021 there was this just like unanimous sense because 2021 people were like, investors were making a lot of money. There was a lot of things that were ipoing. Everyone was getting like a great cohort in 2020, 2019, 2020 and 2021 of really big IPOs that gave everyone kind of like a big taste of liquidity at the same time that everyone was getting markups very, very quickly and very, very like high markups very rapidly. And there just started to become this sense where you'd have a company that would be at say like 100 of ARR and it would get priced at $10 billion. So you'd have this like 100x multiple on it and the investor would be like, well, but like obviously it's going to go like 100 to 300 and then 300 to 700 and then 700 to 1.4 and that's going to be worth 30 billion and I'm going to make a 3X in four years or whatever. It was just this sense of inevitability without really digging deep into one. Just the immense difficulty and the base rates of how many companies that are at 100 of ARR that ever make it to 1.4 billion of ARR in that arbitrary example. But there was a lot of situations that looked like that where everyone was like, well of course it's here, there and like the trend's good, so it's going to be there. And it's like, well, wow, like if it does get there, it's a 3x from where you're investing in. And two, like in history, the amount of people that have gone from here, there's 5% of all companies. And so you're like over underwriting relative to historical norms by 20 mention all
- [41:55]
Brian Singerman
the dilution along the way and you're
- [41:56]
Evan Korth
not incorporating dilution in that equation. And so you only have these situations when people are, you know, making a lot of money. And, and like I I also, I think this duality is the key to a bubble where it will also, these last three years unquestionably is going to be the period where venture capitalists have made the most amount of money in history. Anduril, SpaceX, OpenAI and Anthropic, they're going to produce the most amount of returns that we've ever seen, probably by two orders of magnitude of any batch of companies. But then when you strip out those four companies or five or six companies, then you start one, playing with house money and two, you start assuming that everything is going to be daisies and roses because of the success that has been baked in other parts of the market. And so it's just that feeling like I'm feeling investors have that feeling of inevitability where it's like, yeah, I'm going to invest at 5 billion, but it's going to be 15 billion in two years. And then we're going to IPO or we're going to sell it at that price. And it's like, oh, just we've forgotten how hard, how brutally hard it is to go from one to a second
- [42:53]
Brian Singerman
even if you go down from the 100 million ARR line. One of the things that I've noticed in my 12 years doing this is that there's this weird glass ceiling between 20 and 30 million where like a reasonably managed enterprise SaaS company is going to get to 20 or 30 million in revenue. But then like getting through that glass ceiling is super freaking hard.
- [43:16]
Hunter Walk
Yeah, like the percent that make it from 20 to 100 is a missing huge drop off.
- [43:19]
Brian Singerman
Huge drop off. And so I think that early on in my time in venture I would meet with these companies that are like, yeah, in three years they've gone from 0 to 15 million in ARR and it's like, oh, that's really good. That's a really good trip trajectory. We should like dig in. And now I'm just like, I don't know.
- [43:33]
Hunter Walk
I mean, well, it's tough because the way VCs are underwriting is forcing founders at 1 to 5 million of ARR to tell a story that we're going 2 to 30 to 150. And like you see that all the time. And then it forces people to build companies in weird ways. Like it's all kind of distorting.
- [43:50]
Delian Asparouhov
I think what's different about this cycle relative to 21 is that in 2021 you still had not even the best companies were able to beat the original Google early years of revenue growth. And then Anthropic in this cycle is literally the first company that since Google has actually shown an even steeper, basically curve. And then I think that feeds into both the, hey, you're playing with house money. There's so much liquidity coming. But then also assuming that anybody else will be able to now match that same revenue trajectory. And there are things even in our portfolio. Cognition is obviously wild growth rate. And then I think it just goes down the stack where people assume even the seed stage, 1 million ARR thing is going to be able to fall,
- [44:25]
Hunter Walk
but it goofs up a lot of businesses that could raise at, you know, a quarter of the valuation that they're raising at. But because the market's where it is, it's like, well, I, rather than just saying I'm going to go from 1 to 4 to 11, whatever, which, you know, there is a way to venture finance that business. It just looks different.
- [44:41]
Brian Singerman
How do you guys respond to the, like, the pitch at a seed or a series A or series B? Kind of where you're focusing, where the founder is super confident that they're going to go from. From 1 to 10 to 100 to 500 over the course of like, three years.
- [44:56]
Evan Korth
The running joke is that it doesn't matter what market you're in or what company you're running. The running joke we've had is at the end of your plan for any company under 5 million of ARR this year is 30.
- [45:06]
Hunter Walk
It's all. It's always 30.
- [45:07]
Evan Korth
It's all.
- [45:07]
Brian Singerman
It'S always 30.
- [45:08]
Evan Korth
It's just like, you see a deck and it's like, we're at 4. It's like, are you going to go to 30? And they're like, yeah, how'd you know?
- [45:14]
Hunter Walk
It's crazy. We had like, yeah, nine of them in a row.
- [45:16]
Evan Korth
There's like a little bit of like, don't hate the player, hate the game in there as well. Where it's like, you know, you have like hammat on a podcast. Being like, if my partners bring me Something that's growing 3x, I tell them, don't bring it to me. Like, the new. The new bar is 10x. That's not nothing against himat. That's like sort of where the market is. It's obviously investors are. It's a game of opportunity costs, not absolutes. Like, you're trying to do the best thing in any given year, not something that just meets some bar. And so there's some, some of that where it's like, well, you know, part of. Of Being a good founder is being able to raise capital and, like, playing the capital raise game well. But I think you do have to mix that with like, like a, like a large amount of, like, you have to be genuine as well. And you have to ideally have, like, worked out the idea maze in order to, like, show a path to actually doing that. Like, it can't all be bluster.
- [46:02]
Brian Singerman
Yeah.
- [46:02]
Hunter Walk
And I think also, like, we're, you know, our model is that we're gonna work closely with them for a long time for, you know, that's just what it is. And so I think, think, you know, it'd be very frustrating for us to work with somebody who's like, my plan is 10 to 100, but I've got no plan beyond how I'm going to manage that. And I don't know what team I need to hire. I haven't thought about what team I need to hire. I haven't thought about what that product service area looks like. I haven't thought about what if you're going to sort of take the role of, I'm going to work with this person, and then they're going to say that in order for that to be an enjoyable plan, as you work with them on it, you'd want to. You want to believe that they're going to think about, okay, like, I know actually what's going to go into it, and it's going to be really hard.
- [46:35]
Brian Singerman
This is sort of Peter's quad chart. From 0 to 1 around indefinite optimism versus definite optimism. If you're going to be optimistic, you should at least have a plan.
- [46:44]
Evan Korth
Yes.
- [46:44]
Hunter Walk
It's too frustrating.
- [46:45]
Evan Korth
Otherwise I feel like you would probably be more allergic to any version of that tray. I just remember there was some company we were meeting back in the day, and they're like, I'll be coming from a dinner with Mark Andreessen. And you just email back. You're like, don't do that. You're like, that's not a game that we should be playing.
- [47:04]
Brian Singerman
Oh, the competitive game of look at me peacocking all of my connections.
- [47:09]
Evan Korth
Yeah. It's like, well, like, oh, you guys better move quick because, like, afterwards I have like a dinner with, with this famous person. And you're like, this is just founder to founder feedback. Don't do that.
- [47:18]
Delian Asparouhov
Sounds like dry.
- [47:20]
Brian Singerman
I don't remember doing that, but it sounds like something I would say. The thing that I feel is so triggering to me about these, like, crazy plans is, is not the, like, optimism and obvious, like, I believe that they should have the ambition, it's the like, like willful like, like removal from all historical examples.
- [47:42]
Hunter Walk
And it's an easy time to be like things are different now, the rules are changed. You know, you can have billion dollar companies with four person teams and like you can kind of, I think convince yourself that just because the rules have changed that there's no rules at all anymore.
- [47:55]
Brian Singerman
Well, you can kind of do that with software, but with hardware it's like you have to like make real things and like this idea that you can like like 100x production in a 12 month period, it's just like. I, I'm, I'm sorry, you, you literally can't. I'm just going to say that like.
- [48:11]
Hunter Walk
Okay, can we talk about. I, I want to go to a hardware topic. Before we all sat down we were talking about chips and I spent some time with some like public market investors recently. But you know, everybody knows that like people love semis right now. People don't like software, they like semis. We obviously have like, you know, huge compute shortages. We have, have the situation with Taiwan and China. We've got America sort of without its own real ability to fabricate anything. There's a lot of startups working in chips and semis in various ways. But I would just be curious to hear your sort of lay of the land of the situation where we are kind of as a tech industry. Maybe then we can get into country positioning and some of the broader things. Maybe that connects to Andrew and whatever. But maybe just starting with chips as a point in time, like what's the lay of the land? What are people excited about? Like what are we missing?
- [49:01]
Brian Singerman
I think the biggest challenge is just around fabrication. It's like there's a lot of energy going into chip design, you know, making more efficient AI chips or making more leading edge chips or you know, whatever it is for memory or for inference, like there's all of these different things that people are working on and that's great, I'm glad that we're doing that. But at the end of the day like, like these chips are all coming from the same place, like they're being made. And for decades the United States was the really only player in semiconductor manufacturing. That was actually where Silicon Valley came from. And we've completely lost our way with this almost entirely happens outside of the United States. To the extent that we were doing anything in the United States over the last couple of decades. It's not leading edge anymore. It's some of the more mass scale, like automotive of chip fab and things like that, or low scale kind of research and development fabs. And we haven't really figured out how to reassure the leading edge fabrication and obviously this is what the Chips act was intended to do. It doesn't seem like there's a whole lot of traction coming out of the money that was spent there. The government has made this big bet on intel taking an equity position in the company to try to get them to the point where they can be not only a manufacturer of their own chips, but also as a merchant supplier of chips to other people. Their yield rates are still really low. Obviously Litboo is doing everything he can to level that up and has the Terafab project that he's working on with Elon now as well. So it's sort of our best bet, but not at all certain that it's going to work. The other companies that have leading edge processes like TSMC and Samsung have been getting attention from the government to try to get them to build domestic fabs in the United States, but the incentive structure for those is totally wrecked. It's not clear why they would build any of these fabs. It's not clear that the talent even exists to do it domestically anyway. So I feel like our focus has just been sort of wrong. It's been on the ease. I will say this and I actually mean it. It we're focusing on the easy part design, which I'm not saying is easy on an absolute basis. I'm saying on a relative basis we're focusing on the easy part and there's a lot of money to be made there. But if we don't fix the hard part, none of this is actually going to work.
- [51:26]
Delian Asparouhov
There's not even an optimistic plan right now. I think if you were to just look at all the chess pieces today and how they're playing for the next five years, there's nothing that would indicate it would be any different five years from now. At least when you had in 2015 we lost access to space because we shut down space shuttle and we were dependent on the Soyuz for taking people up to space, at least you could be like, at least Elon is trying. There's a path to something where those would be brought back. 2020, we have it. If you were to analyze what everyone is doing today and say in 2030, whatever one is there going to be leading edge fabs in the United States at scale? It's like, no, there's not even anything that anybody's working on that would lead
- [51:59]
Evan Korth
towards that today over the next decade. And if you haven't thought about this, no need to give an answer, but over the next decade, what do you think the probability is that Taiwan is quarantined or otherwise?
- [52:08]
Brian Singerman
I think it's high probability that it's not what it is today. If that's like a Hong Kong like situation or if it's some sort of the United States reaching a detente where we continue to have access to critical supply chain and we've given up something in that arrangement, or like a full scale invasion where we have to make a really hard decision about whether or not we want to actively support Taiwan, one of those outcomes is wildly probable. 90 plus percent in the next 10 years.
- [52:42]
Hunter Walk
I feel like your views must be something along the lines of we need to be able to. We need us chip fabs, right?
- [52:49]
Brian Singerman
We both need to create a credible deterrent threat for a full scale invasion of Taiwan. And that's the Android side of the problem that we're focusing on, which has led to our co founders being sanctioned in China. So that's that. And then on the other side of it it's like, yeah, we need to figure out some way to reshore the manufacturing credibly with a real plan.
- [53:11]
Hunter Walk
Is it basically impossible to start a new company? Like is there anybody, are there any entrepreneurs with any amount of capital that could just start a net new chip fabric? Or is that just. Is it too big of a problem?
- [53:24]
Brian Singerman
I wrote this article about choosing good quests and I made some joke about how celebrities monetize their brand by selling consumer goods like tequila or popcorn or whatever it is. Just it's a commodity. They just slap their brand on it and they make a bunch of money. Good for them. Our version of this in Silicon Valley is like starting a venture fund. It's like all these people that have the ability to raise gobs of cash and do really hard things, they sit on the roof like big head from HBO's Silicon Valley and raise a venture fund and piddle around with AI. And we really need them to be founders. We need them to be heroes. It's a big ask, but I'm shocked that no one has taken it more seriously because it feels like the most important thing that people could work on right now.
- [54:15]
Hunter Walk
Like what does it take? Is this like Elon plus $100 billion? Like what, what actually is required for this problem for somebody to net new start one?
- [54:25]
Brian Singerman
I think it's Elon plus tens of billions of dollars. I don't know that it will require hundreds of billions, but definitely in the mid-10s to do it. I mean, there's all sorts of levers that you have to pull. Like you would have to get the US Government involved in pulling you to the front of the line with ASML to get the ev. You would have to figure out the supply chain stuff. You would have to build out the process, which is literally thousands of tiny steps that you have to get high yield rates on so that you don't fail out as you make them, which is a talent problem. We don't have enough skilled labor that understands how that works. It's really hard because it's sort of death by a thousand cuts. And it will require someone that has the ability to manage that complex process as a leader. As I said, I'm not a good manager, so I'm not sure I'm the right person to do it.
- [55:19]
Hunter Walk
But Dylan can help.
- [55:22]
Delian Asparouhov
I need to get Vard a little further along before I sign up for
- [55:24]
Hunter Walk
another one, two at once.
- [55:26]
Brian Singerman
But I think that there are ways that we can shortcut some of this system. We've invested in a company called Substrate that's building a new form of lithography that simplifies the process for the rest of the steps that are involved. And it's really important that things like that get pushed down the road so that we can actually pull this off. But this is civilizationally important. It's not just a technology problem, it's a geopolitical problem.
- [55:54]
Hunter Walk
I was gonna say this before. I feel like this, the China, Taiwan thing on some level feels like we're all willfully looking the other way about it. And it's just, if we're to believe what you said, that it is wildly probable and it's a big problem and we have no plan and we're all just like, that's all right. Just keep doing well.
- [56:12]
Brian Singerman
Yeah. Every time I meet with one of these chip design companies, I think of them as like pinch runners. You know, they're like, all right, check this out. I'm like really good at stealing second base. And I'm like, yeah, but how did you get on first base? Like, who hit the ball? It's like, ah, just like really focused on that pinch running. Like I'm the greatest base runner in history. Don't really know how to solve the problem of getting the bat on ball. And I feel like that's what we're doing over and over again with semiconductors. It's like we've solved with hundreds of pinch runners and we have nobody that can actually make contact.
- [56:46]
Delian Asparouhov
Trump also Visited China for the first time basically in like a decade this past week. And like Xi Jinping was extraordinarily clear in all of the communications of like. Our number one problem in an issue is Taiwan references the Thucidus trap and says like, you know, we're clearly the rising power, you're the decaying hegemony. The only way to avoid kinetic war is like you need to accommodate our needs. And our number one needs that we've made very clear throughout this entire week is that like Taiwan reunification is something that we deeply, deeply care about. If we end up letting that happen, it's just like a huge betrayal of all American values where we're the world police and you're letting a sort of westernized democracy get taken over by an adversary.
- [57:19]
Brian Singerman
And I think you have to take Xi seriously when he says that. He's saying I am staking my reputation as an authoritarian on my ability to execute on my plan, man. He is held accountable by his populace for following through on the things that he said he's going to follow through on. I think no one in the west takes that seriously because in our mind it's like that's a four year cycle. Like politicians come and go and they say stuff and they very rarely follow through on it. And so we have this tendency to just like not take it seriously. But it's like he has to follow through. There's like there's no other way for him to stay in power.
- [57:56]
Hunter Walk
We need some fabs.
- [57:58]
Brian Singerman
We need some fabs.
- [57:59]
Hunter Walk
Also in hardware. Vinod said this on the podcast that like, you know, robotics will probably be the biggest thing of all time. Obviously Elon's, you know, thinking about this a lot with Tesla. Have you spent a bunch of time meeting with robotics companies? It seems like robotics would be something that would be square in sort of your guys interest. Are you guys looking at it a lot?
- [58:16]
Brian Singerman
All the time.
- [58:18]
Hunter Walk
Seems like it should work, right? Like why wouldn't it work on some timeline?
- [58:21]
Delian Asparouhov
Yeah, I think we haven't like yet made any like huge either. Like let's say like humanoid or like generalist model, you know, sort of investment yet. But like we do have a whole set of portfolios, companies that either use robotics a lot, Like Anduril has plenty of robots in foundry. Hadrian, one of our portfolio companies uses robotics all the time. We've made some vertical specific robotics plays. I think we're a little more bearish on the humanoid as a venture category. We are comparing it to Unitree in China and thinking is there Even an American ecosystem that can support something like this. I think the hope that at least I personally have is that, you know, humanoid robots play out somewhat similar to, you know, sort of phones where it's, you know, Chinese hardware but American software. And that forces this like, you know, forcedent that neither side is happy with. Like, China would much prefer that it was Chinese software running everywhere. America would much prefer that iPhones are made in America.
- [59:10]
Hunter Walk
Did you like Jensen Huang's point on the Dwarf Cash podcast about like, he's got to win. America should go win every market, including the Chinese market.
- [59:18]
Delian Asparouhov
I think my view is somewhere in between that, like, I don't think we should be like helping them, but I do think that some of the chip sanctions actually heavily incentivize them to set up their own sort of fab ecosystem. And so I think that sometimes winning the Chinese market is a way to weaken them. And so I agree with him in that narrow point, but I do think it requires looking at that on a market by market basis. I don't maybe agree with the American venture capital should be funding Chinese companies because that feels like you're just strictly helping the Chinese ecosystem versus Yansen. Selling chips to China feels like you're sort of just giving them the opioid addiction, but in the form of chips. And it's probably good for them to be addicted to us, provided that there
- [59:54]
Brian Singerman
actually is such a thing as a US company owning a market in China. This is not how it works. I mean, I think that's probably the thesis that Tesla had as well before they realized that BYD was just going to copy all their best stuff and cut the price. And I think that's the much more likely outcome. It's like the super naive ramblings of a monopoly hungry American who ignores geopolitical reality. I think, well, obviously the right thing to do is just to do business with them because they were mercantilist and like this is just going to work, work obviously until your IP is gone and they've taken the market that you thought existed for you and they've exported it to the rest of the world at a much lower cost.
- [60:36]
Evan Korth
I have a hypothetical, mostly for Dalian. So if there is Chinese citizens that aren't CCP members that deeply want to come to America or come to a Western country and build Western AI, build AI that enriches the Western world away from China that they might not want to be citizens of anymore, or want to leave or not want to build for that ecosystem. Do we have a responsibility or Even should we invest in those very hypothetical companies or should we stay away from those teams that actually deeply want to contribute to and advance Western AI but because of where they were born, have to go through different means to do this.
- [61:18]
Delian Asparouhov
So I think if somebody is working on national security technologies, which I would argue like leading AJI effectively is, you know, I don't think it's like an unreasonable argument to make that you should have to roughly abide by the regulations around that, which is ITAR compliance at Varda at Andre. We would not be allowed to, you know, hire someone like that if they renounced their Chinese citizenship, if they fully became an American citizen. If there's also strong confidence that the CCP doesn't have some of their like family members under gunpoint and can leverage that fact to get them to do things on behalf of China in America? Sure. But I think that's just really, really difficult about if it's just an individual citizen that has made it over, China still controls their life. Even if they hate China, they don't want that to be the case. If they've got their grandma by a gunpoint and they convince that person to fly back to China and then detain them, doesn't matter what that person's personal beliefs are. What matters is the system that you're interacting with.
- [62:08]
Brian Singerman
The alternate version of this is suicidal empathy. It's like none of us want to believe that every multi billion Chinese people in the world are bad. Like no one, I don't believe that. I don't think delegates. It's crazy to believe that there's like some, some racist tendency and having a concern around this. But like there are people in our society who have that level of suicidal empathy where they're like well obviously you can't say anything negative about the, the obvious logical like fall through of, of doing the, you know, investing in, in Chinese nationals with family ties back in the country and stuff.
- [62:51]
Hunter Walk
Do you think that there is a like a de escalation path between you know, America and China? Like, you know, it's kind of implied in a lot of this conversation is that it's just like we're going to a tenser and tenser place over time. Is that just like, like what happens when you have a rising power and you just have to plan for that to be the case or do you think there's like any de escalation path?
- [63:13]
Brian Singerman
I'm certainly hopeful that there's a de escalation path. That there's diplomatic solutions and you know, hard power deterrence that will prevent us from going into war with one another. I think that's like the worst possible outcome for sure. We, I don't think the American people have any memory of what it's like to go into great power conflict, like, and the scale of destruction that would
- [63:34]
Hunter Walk
be doing that last one, I think it would just be a lot worse.
- [63:38]
Brian Singerman
It would be devastating. We can't afford to do that. And so I think part of it is we have to hope that China has that same belief that it's unthinkable and that we should do everything we can to stay out of it. But they've also spent the last 50 years with a very intentional strategy to box the west out of of the whole supply chain to make their success inevitable. If you've read the book 100 Year Marathon, it kind of talks about this in the terms of Chinese fables, where there's this story that gets cited a lot in Chinese fairy tales. Essentially, that's hide your strength, bide time. And it's this idea that in Western literature we have this sort of tradition of chest thumping where it's all about showing strength and we expect that other people will do the same because we're like, show us what you can do and we'll show you what we can do, and then we'll decide how that gets litigated. Whereas the Chinese strategy is always cower, like, oh, no, we're so weak. We don't have any power. Our GDP is so low. And they're just going to keep repeating these messages until the moment where the full flip is inevitable. And then we're going to look back and be like, wait, we have no leverage. We have no leverage. The Belt and Road just completely eviscerated our whole ability to control the supply chain. We don't own any of the ships that are required for global trade. We don't have any military advantages because we haven't invested in it. We have no access to semiconductor manufacturing. And then they're standing there with the entire deck of cars in their hands, and where does that leave us? And I think this is kind of like the fallacy about the moralism or the moralizing around this where it's like, look at all these things that the US Government could do with technology. We're so concerned about how this technology is going to be abused for all of these unethical use cases. And it's like, guys, if you're concerned about a Western democracy, imagine a world in which we have no say in how these technologies are governed and we're walking ourselves willingly into this situation where you think it's bad now, wait until you see what's on the other side of a dominant China, because it's not going to look like the effective altruist version that people believe that it's going to look like. It's just like complete banana pants.
- [66:05]
Hunter Walk
Yeah.
- [66:06]
Delian Asparouhov
The chess something versus being quiet, I think, was exemplified the day that we basically started striking Iran. Iran, where you had Trump obviously everywhere thumping your chest effectively. On that day in the China Post, there wasn't basically a single mention in any of the headlines about anything that was happening in Iran. For them, it was just like, this is not a thing that we even pay attention to, categorize, have no opinions on. Xi Jinping effectively just said that. I forget his exact quote that day, but it was something like, that's America's issue, America's challenge that they've sort of chosen to step into. Whereas I think if you imagine the equivalent of that versus in the Cold War with the Soviet Union, all the headlines within the Soviet Union would have been about, like, here's what America's doing. Here's what we're doing to counter it. It was all this, like, soft power through proxy wars, et cetera. China's just not. Even though, like, a lot of their oil comes from Iran, they're like, effectively just not engaging on this, like, you know, so proxy war. And it's the difference between being against a great power. That is another chess thumper versus the Chinese approach.
- [66:57]
Hunter Walk
Yeah. Fascinating. I know you guys have to go in a minute, so I want to end with a couple light topics just to palette. One is our boy, Sam Blond. He worked with you guys as at Founders Fund, and then you guys led a prior round. We did a recent one. I'm actually curious. Obviously, we're both really excited about the company, but what was your experience with him like as a teammate? Did that inform why you're like, I want to back him. What was the experience there for you guys?
- [67:25]
Delian Asparouhov
I worked with him a lot in the Miami office where he was based, and it was incredibly clear that he is just a phenomenal salesperson person. Like, he is somebody that, like, knows how to close a deal, wine and dine, et cetera. I think, unfortunately, as we've talked about over the course of this podcast, the venture job is not really necessarily a sales job. Once you've, yes, you know, come to a conclusion, you want to invest, there's for sure a little bit of sales that happens in terms of, like, you know, Convincing somebody to take your capital. But the vast majority of it is a, like, don't try and close every 10,000th investment that is out there in the world. You need to like, you know, discern, which is like the one to five that like, you know, sort of matter a lot. And so I think that was partially why he even came to the conclusion after like a year at Founders when he was like, this is not the world for me. I'm glad that I learned it very quickly. I'm going to go do the world that is for me. And like, part of why we love Monaco is it literally just feels like Sam embodied in a company.
- [68:12]
Hunter Walk
It really does.
- [68:13]
Delian Asparouhov
Like, it's just like I've never seen it so clearly in a company where it's just like you people talk about, oh, the founder personality shows up personality.
- [68:20]
Hunter Walk
But this is. Yeah, it's like usually like the founder. It's like you can kind of smell the founder everywhere in a company. This, this is, this is.
- [68:26]
Delian Asparouhov
It is. It is Monaco is Sam. Sam is Monaco.
- [68:28]
Hunter Walk
Yeah, totally. I think you guys just closed a big new fund and you know, we talked a lot about sort of, you know, discomfort and. But then there's obviously a lot that we're excited about and everything like that. And I realized some of it's for early, some of it's for growth. But like, as you guys think ahead and we're not, you know, this is not, you know, Peter in 2022 or whatever saying, everybody take a break. Like, I expect you guys are planning to deploy it. Is this going to the same type of stuff you've been doing recently? Or are you like, this cycle has actually played out. We need to find the next trillion dollar companies that we're not currently in. Like, what's, what's the headspace?
- [68:59]
Brian Singerman
Right now we have a separation between funds. We have the venture fund on one side and growth on the other. The venture fund actually we raised years ago.
- [69:10]
Evan Korth
2021.
- [69:11]
Brian Singerman
2021, yeah.
- [69:12]
Hunter Walk
And you're still deploying out the same fund.
- [69:13]
Brian Singerman
Well, what we did is we realized that we raised it, it was too big and that again, the economics of these things are really tricky. And so we ended up splitting the fund in half, half. And then we just back them chronologically up against each other. So we're currently investing out of the second of those two funds that we created. And then growth is focused almost entirely on companies in the portfolio already that are seeing continued growth. I think it's only about 20% of
- [69:41]
Delian Asparouhov
the fund is not new, 80% is doubling down.
- [69:44]
Evan Korth
Was OpenAI already in the venture fund at one point?
- [69:46]
Brian Singerman
No, that was first growth.
- [69:49]
Delian Asparouhov
Yeah, but that's probably one of the very few. Basically, like OpenAI anthropic, both originated from growth and we've doubled down through growth almost every other meaningful position or check across the fund. And sometimes it's in like a totally different category. Like Crusoe is probably one of my like favorite examples of this. Of like, you know, originally started off as like a, you know, miner and now obviously turned into like data center producer. But yeah, we've sort of doubled down throughout.
- [70:12]
Evan Korth
It's funny, we were actually, I was talking about this, I think with, with the partners here, talking about the, the Founders Fund growth strategy and how this doubled down within the own portfolio as like 80% of the portfolio. I think can only work at a place like Founders Fund because it's maybe the only firm that's invested in. Yeah, the companies that have compounded at like a 30 plus percent.
- [70:35]
Hunter Walk
Like this only works when you have SpaceX like 30 years.
- [70:38]
Evan Korth
So it's like, oh, it's like, okay, well you have SpaceX, you have Stripe, you have Android, you're like, there's probably three or four more of them forgetting you. Like Palantir ran. Yeah, it's like, oh, it's like it was just as good of an incremental IRR at 30 billion as it was at like, you know, 500 million 10 years later. And it's like only if you're collecting those and like burning those types of companies early, it's hard because you have
- [70:57]
Hunter Walk
to be so rational to say we're not going to just invest in our three best companies. Yes.
- [71:01]
Evan Korth
Like, it has to meet like an absolute bar, not just a bar within your own portfolio. And the Venn diagram of those also just happening to be the best investments at growth.
- [71:08]
Delian Asparouhov
But then the advantage of being involved in the early stage, it's like the fact that like Andre Incubation, Ramp Seed,
- [71:13]
Brian Singerman
Stripe, like series AER incubation.
- [71:16]
Delian Asparouhov
It's like, it's not to say that we have like, you know, perfect access or perfect pricing, but like we almost always are able to invest the amount that we want to. And so if you just look at the like sizing that we're able to get into, these companies also is part of what makes the growth.
- [71:26]
Hunter Walk
It's got to be a little hard to like match the time allocation to the dollar allocation though, because it's like how much time do you need to spend on deciding on these companies that you already work on. And then it's like you're going to meet a lot of these net new companies, but you're going to only deploy 20% of the fund. So it just has to be the case that a bunch of times going into net new stuff and you just do very little of it.
- [71:44]
Delian Asparouhov
Why do a net new defense tech thing? We can just deploy another billion dollars in Andrew. Just doesn't make sense to do that.
- [71:50]
Hunter Walk
Thank you guys for doing this with us. It's super fun.
- [71:52]
Brian Singerman
Of course.
- [71:52]
Delian Asparouhov
Thanks for having us.