00:14:52 · Trae Stephens, Aditya Agarwal
I was like, is there a problem? Do we need to solve something? And he's like, I would like for you to leave Palantir and come join me at Founders Fund. I'm like, I don't know anything about venture capital. I don't know anything about finance. Like, I haven't taken a math class since high school. I do not understand why you think this is a good idea. Am I being fired? Like, technically, you're my boss at Palantir, but you [00:15:16] S1: want me to leave Is this a soft landing?
00:15:16 · Aditya Agarwal, Trae Stephens
[00:15:16] S1: want me to leave Is this a soft landing? [00:15:18] S0: Or Yeah. I'm like I'm like, I'm pretty sure I'm being fired. This is really weird. And he's like, just meet the team. And so a couple weeks later, I went up to New York. For some reason, the Founders Fund team was there, and I I sat down with Lauren Gross, who's the CEO. She runs... COO. She runs Founders Fund. And she's like, why am I talking to you? And I'm like, I I don't know. Peter asked me to talk to you. And she was like, why are you interested in venture capital? And I'm like, you misunderstand. I am not interested in venture capital. And so I had, like, this nine month process where everyone was just confused. And then on Thanksgiving Day of twenty thirteen, Peter called me, and he was like, okay. You're gonna join Founders Fund. And I'm like, I don't understand. There's no offer. I haven't agreed to leave my job to join Founders Fund. And he's like, no. You're gonna join January first of the year. You're gonna move to San Francisco and work at Founders Fund. I'm like Great. Alright. I guess that's what I'm doing. So it was not it was not the good decision that you made it sound like.
00:16:21 · Aditya Agarwal
[00:16:21] S1: I mean, nine months is a long time. I mean, I I wanna get back to what the first, you know, four or five years I found this one were like before you also did enter. But coming back to your point about Zuck, you are right that Facebook led a charmed life in the beginning. However, internally, Zuck always kept on raising the bar. We never felt like we were winning. It was always like, why are we not winning more? Right? Like, why... Like, every... Like, there would be either some fucking competitor that we needed to crush or some metric that, like, was the next... Like, you if can get to a 100,000,000 users, why can't we go a billion? If it's a million mile... If it's a billion miles, why can't it be a billion DAOs? Right? And so it was always a case of our ambitions grew faster than I think our success. And so my my almost, like, visceral memory of Facebook is always like, we can do more. We must do more because it's almost... It would be a shame to not capitalize on this opportunity that we have because it's a... Know, these opportunities don't come around very often. So I think Mark is just like... I mean, Mark is still pushing the company super hard today, I and think this is one of his best qualities. You come to Founders Fund. What is the biggest kind of, like, culture shock that you have relative to being an operator?
00:17:31 · Trae Stephens
[00:17:31] S0: I I think I come in... Again, not knowing anything about venture. I come in thinking there are probably, like, hundreds of startups, and we're gonna spend a bunch of time, like, learning about these companies. And we're gonna sit around a table, and we're gonna make really hard decisions about which companies we're gonna deploy capital into. That was totally wrong. It turns out there are thousands of companies. As I said before, you generally know pretty quickly whether or not it's gonna be one that you're going to back. And it wasn't really about the decision making. It was really more about, like, having an understanding and an opinion on what was likely to work and what what wasn't likely to work. And so, you know, in the first couple weeks, Brian Singerman, was one of the GP at that time, he's he's now running his own fund, he sat me down and he said, your only goal for the first year, your goal is not to make investments. Your goal is to take as many pitch meetings as you can. And he was like, I'm going to challenge you to take 500 pitch meetings in your first year, which is A lot? A lot. Without making any investments? That's just Right. Right. And I didn't really understand why he wanted me to do this. But after like 200 pitch meetings, I was like, oh, man. He's trying to show me this critically important lesson about investing, which is that almost all these companies are completely uninvestable. And you only get to get that knowledge if you lower your bar and you have a lot less discrimination, which you can do when it's your first year in venture capital. I can't do this today. This would be an incredibly poor use of my time. But it was really important for me to see everything in the market Mhmm. So that I I was able to tighten it up so that I could make much more efficient use of, you know, what a good intro looks like, what a good founding team looks like, what, you know, types of companies have the potential to return the fund rather than just be, like, good acquisition targets, which for a billion plus dollar venture fund
00:19:27 · Aditya Agarwal
[00:19:27] S1: doesn't move a needle. Yeah. But you said something earlier, which is interesting, which is that you said that it's you expected venture capital to be surveying the landscape and then kind of making decisions, but instead it was about coming to a shared understanding of what good looks like. So is it... Is that what you were trying to... Like, is... Do you think that one of the key aspects of Founders Fund's success is that as a partnership, have a very strong point of view, a shared point of view on what great looks like?
00:19:54 · Trae Stephens, Aditya Agarwal
[00:19:54] S0: Yeah. Yeah. So, like, a great example of this... And my chief of staff, Ellie, is somewhere over here. Eli does a lot of this work for me now, which is great. But like as the GP of the Venture Fund, if someone on our team says, I believe this is an investment that we should make and I need to get Trae to meet with the company, there's like a 90% chance that I will agree. Because our bar is really high, and we generally understand what it means to create fund returning opportunities, what concentration means, like what is the fund strategy for deploying capital, how we're thinking about average entry price. Like, we're we're kind of, like, pretty aligned on this. And so when someone brings something to the GP, it's gonna be pretty baked. Like, it's not just an exploratory meeting at that point. Mhmm. And I I think you just need a lot of reps to get there. Like, a a brilliant person, like, you know, 160 IQ person can't walk in and be good at this just because they, like, understand science. Yeah. Like, you need to have thousands of reps before you truly are able to understand what a good opportunity looks like. [00:21:00] S1: So maybe this is too much inside baseball on venture, but I'm curious. When do the... When does that 10% occur? Like, where does, like, where is the often the source of disagreement? Is it in priors on market shape, product shape? Is there just like a different read on founder characteristics? Are there, like, common sources of misalignment or disagreement?