Invest Like the Best with Patrick O'Shaughnessy
00:22:44 · Sarah Guo
[00:22:44] S2: It varies based on company. I'm very instinctive on people. I often know I want to do something immediately. If I know what somebody has worked on and then I interact with them and I hear the idea and I have some basis, some background in the idea, We have a rating scale, a one to 10 scale. I'm like immediately an eight or a nine. What I'm then doing between that and a real decision is often figuring out where the holes in my understanding, where my judgment of their premise or them is incomplete or wrong. What do I not know? If you're an investor looking for the most ambitious, impactful companies, you can't know every domain. We have biology and defense and robotics and law. I'm like spending the next day to few weeks desperately trying to ground myself and being like, okay, what does everybody else believe about this space? Are they the people I think they are? That's what my process looks like. And then I wanna get feedback, I wanna get like second reads on people. I wanna understand what the core questions are. I'm a memo person. Even at the very beginning of the firm when it was just me, I would like write the full memo, perhaps Greylock style, ship it off to a friend that was an investor who I trusted for their perspective outside of the funds. You and I have talked about what do you value about a partnership? And I'm like, I'm comfortable making investment decisions, but I think other people can make me better. I want people to push at the logic and have me reflect. So I used to take the memo and send it to John Lilly or Dylan Field or something. We ran a memo. I go see what Bella or Pranav or Mike wants to know about the person, try to complete the picture. Other people I think are like more even in their decision making. They're like thinking about it and thinking about it. They climb to conviction versus I start there and then I like work backwards. But I think a similarity between both Mike and I is we'll start at a point and explain what will move us. I met a really interesting company earlier this week with my partner, Bella. And I'm like, okay. Instinctively, I, like, am positive on it, but I don't know enough about the science here. And I have to, like, go make sure this makes sense. Can you really be an eight or a nine if you don't get it? No. I couldn't get there.
00:25:01 · Sarah Guo, Patrick O'Shaughnessy
Then as we were talking about is one of my concerns for this period of time where I'm like, if you don't feel like you have any grounded intuition on the bet itself, what are we doing here? I'm trying to think about if that's fair. If Bret Taylor wanted to like Yeah. [00:25:17] S0: That's like what the in [00:25:18] S2: volcanoes or do dog streaming or something, I'd be like, yeah. Of course, man. But he wouldn't do that. [00:25:24] S0: There's some version of I don't even care if it doesn't compile in my brain. The person is so undeniably good that I would just back them. Brett, as an example. [00:25:33] S2: Yes. I feel like these things are so inextricably intertwined in my mind because part of what makes people great... Like, was trying to help one of my companies, the candidate, yesterday. And they're like, oh, what did you see in these people? And I'm like, they're just so right. He's right all the time. Their industrial logic is impeccable. They love these great character traits too. They're amazing at recruiting, but they have a point of view that I think is going to be right in the world. I've seen them just make repeatedly correct decisions, including when I am wrong. And I'm like, I have a lot of respect for that. When you say like these people are amazing and part of what I think makes them amazing is I believe in their judgment. If I don't understand what they're doing, I can't have an opinion on their judgment. Brett's doing enterprise AI. I understand what he's doing.
00:25:33 · Sarah Guo, Patrick O'Shaughnessy
[00:25:33] S2: Yes. I feel like these things are so inextricably intertwined in my mind because part of what makes people great... Like, was trying to help one of my companies, the candidate, yesterday. And they're like, oh, what did you see in these people? And I'm like, they're just so right. He's right all the time. Their industrial logic is impeccable. They love these great character traits too. They're amazing at recruiting, but they have a point of view that I think is going to be right in the world. I've seen them just make repeatedly correct decisions, including when I am wrong. And I'm like, I have a lot of respect for that. When you say like these people are amazing and part of what I think makes them amazing is I believe in their judgment. If I don't understand what they're doing, I can't have an opinion on their judgment. Brett's doing enterprise AI. I understand what he's doing. [00:26:19] S0: If I were to build a pie chart of your time now, not when you started the firm, but today, there's meeting new companies. There's helping existing companies. There's talking to researchers. There's time with other people. There's talking to candidates. I have no sense of what it would be. If you had to sum it up, what are the things that you spend your time on and what's the percentage allocation?
00:26:19 · Patrick O'Shaughnessy, Sarah Guo
[00:26:19] S0: If I were to build a pie chart of your time now, not when you started the firm, but today, there's meeting new companies. There's helping existing companies. There's talking to researchers. There's time with other people. There's talking to candidates. I have no sense of what it would be. If you had to sum it up, what are the things that you spend your time on and what's the percentage allocation? [00:26:40] S2: I think I spend two thirds, three fifths of my time working on portfolio company stuff. And that is recruiting, helping people think through things, trying to influence the outside ecosystem in some way. Then raising money. The next largest piece is looking at companies. I don't know if this is right or wrong. Get paranoid about it and, like, move the number, but I probably see four to six new companies a week. It's not a very high volume. My first couple months at my old firm, I saw 500 companies. And so I'm like [00:27:13] S0: Wow.
00:27:13 · Patrick O'Shaughnessy, Sarah Guo
[00:27:13] S0: Wow. [00:27:14] S2: Now I feel more calibration where I just have much more confidence I can tell. The balance of my time, I am doing a combination of help one of my partners look at something, meet people that might teach me something about the world. And that could be a researcher. Or if you are purely early stage in a larger firm, you can be very myopic because your ecosystem is big enough. And we are a very small firm. We're ecosystem oriented. And so I've learned so much from just getting to know investors who think differently than I do, including different asset classes. Well, I never spent that much time with public markets people before, and it is very educational how they think about the world. I spend time with other investors of all skills and asset classes. I spend time with companies. Right now with a pharma company who is thinking about how AI is gonna transform their business. This is very interesting to me because I've learned a lot about what they believe about the future. Doing a lot, but I'm like leaving room in my calendar for learning, feeding curiosity. And then there are pieces that are other parts of bridges to DC, external communication. [00:28:21] S0: Where you going about raising money?
00:28:23 · Sarah Guo
[00:28:23] S2: I stand with the belief that I advise entrepreneurs with, which is you should understand people's objections to what you are doing and their questions, but you should not tell them what they want to hear. When I started the fundraise for Fund One, I knew a lot of LPs over a long period of time already. So it was not very complicated. But I had one of my friends who is a private equity investor who stated you have to have like a very differentiated story for LPs. Every part of the funnel should be the specific thing you're gonna do. And I'm like, let's be honest, I don't know yet, but I need to raise some money so I can go experiment and figure it out. So I never made slides and told a specific story about all the things that we attempt to do now. I think you don't know until you make contact with reality and think about it and you're in the market. There were definitely LPs who did not like that. I gave people a two pager on my background and investing history and claimed that I was good at identifying extraordinary people, being useful to that set of people and being genuine supporters. If you combine that with investment judgment and ability to recruit, you got a starting point. Mostly some things I imagine about firm culture, and then we'll go execute like hell and figure it out. I can see how this is tough from an LP perspective. And I deeply value the people who bet on us early because they go write a memo for their investment committee. And they're like, she's going to execute like hell. We'll find out. Sometimes the cleanliness of the story is what people are looking for. I can't advise other managers on this because people have different outcomes. If you tell people what you are going to do, life is much simpler and what you actually believe life is much simpler. And for me as an ambassador, when somebody can convince me that the world works differently than I thought, I'm, like, immediately incredibly excited. Maybe I can convince people that this is just how it actually works. I've met a lot more investment managers for the last four years. I knew a lot of VCs, but people who are doing creative things.