Full Transcript for Aydin Senkut: Growing Felicis from $4M to $4B

Haydn, welcome to the show. Thanks, Turner. Thanks for having me here. So you had something interesting that you said recently. It was something along the lines of once you see success for the first time in venture, it's kind of like the downfall of a good investor. I forget exactly how you put this quote. You probably know the quote or know the thinking.

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So what happens there? Um, I studied venture a lot before I got started and now I have 20 years behind me. And what happens is venture is one of those markets where when success happens, it's an outlier success and it makes you think like whatever cause

that success is going to be the thing that drives it forward like you know what i had my dog in the office that way and i was wearing a blue sweater whatever it is like oh this market like whatever it was that led to that it gives you the sense that uh it's almost like wow this is invincible this is addictive you get the rush of that hit but i feel the thing that makes venture seen interesting is the high variability and outliers, which means that the venture market, the thing that made you successful and the thing that was hot and interesting is probably not going to remain so.

And the only way you can go back and reset your priors is literally the day after you've succeeded to say, you know what, let's go all the way back to the basics, reset all the expectations that cause where we are today might not be the ones that will take us and move us forward to tomorrow and beyond. My favorite analogy on that is a surfing analogy.

You have an amazing wave, you hit the beach, you go back out there, not knowing if you're going to catch another big wave, but that's what the very best venture capitalists do. The concept of reinvention and repotting is that just because you had the trill of that amazing wave, Now roll back, you know, like paddle back, like get back on there and like find the next big wave.

So what does that kind of look like in practicality, like actually doing it in practice? I mean, look, I think in very simple terms, the way that our firm runs, we're a generalist firm and we have one obsession and that is we want to catch all the major waves that's happening globally. The simplest way to succeed in venture is it's all about high growth.

And high growth is all a function of outlier funders and outlier markets. And the way you find outlier markets is it always comes on the back of like a wave, not even like a normal wave, but like a tsunami wave. And now is a very interesting time because I started my career at Silicon Graphics and Google. I've seen client server, I've seen internet, I've seen mobile, I've seen all the other waves, consumer and all of that.

But now this AI wave is, I would say, the waves are starting to get more and more monstrous. The growth is staggering. You have companies that can start with billion-dollar contracts. We are having trillion-dollar IPOs. Just the sheer scale of things and sheer intensity and velocity of things have so drastically increased. So that's basically what makes venture interesting, but it was not what people expected.

I don't think anybody expected like five years ago that this AI wave was going to be so huge or it was even going to hit. And it's been around for 20, 30 years. Yeah, we kind of already had these like AI hype cycles and machine learning. But then it hit this thing and took off. Like same thing, it's going to happen in robotics. Like it happened in many other areas where like, oh, AI can't even draw a picture.

And next thing you know, it's like photorealistic movies two, three years later. I mean, it kind of happened in the chip industry. Like you look at the early chips, they basically like, you know, a little bit better than calculators. And now they're doing like insane things. So there is this like insane growth that it is very difficult for human minds to get around because it is exponential.

It is not regular math. So it's just, again, it's just one of those things

you somehow want to find it, want to catch it, and want to ride that wave. And then what we do as a generalist firm is to basically like find multiple of those waves. And we're never religious, right? Like 20 years ago, like when I first started, I'm like, oh my God, YouTube just got acquired. The big thing is going to be video monetization.

Then it was consumer. We found e-commerce. It was mostly platforms. payment platform, credit platform. Next thing I know, we're looking at the security and infra and that AI. And today it's chips, defense, but it is not by chance. All of these things are going through some major structural shifts where there was so much critical demand of like right now, billions, if not tens of billions of dollars of like product or services wanted, needed.

And that's a great way to build a company and scale it.

How do you, like, identify when something's changing and maybe when it's permanent and real? Because to this point, there's almost, like, false starts with some of these things. Yes. Like, I mean... I don't believe this, but there's like a lot of people that say AI is like a massive bubble and like it's all fake revenue or something like that.

Go back to like with NFTs, you know, there's definitely time for like our imaginations get captured by new technology. Like how do you, you're coming across it. How do you decide this is worth it? allocating some capital and time to and resources to? When I started in business, what people thought would be my greatest Achilles heel turned out to be an interesting strength for me.

And that is, I'm not an engineer. I'm not a specialist. I'm not a doctor. I wasn't like VP, like I didn't run thousands of people. So everybody thought it's like, oh, you weren't like a very senior leader. You're not technical. There's no way you're going to understand the nuances of all these things. But what they did not understand is that this is more about understanding people.

And of course you need to understand markets as well. But I mean, I worked at Google, I worked at technology companies. I've been with an extreme outlier and I've seen like how different that was then from a standard company where things have kind of gone wrong. So I have seen the most extreme like place where things have gone right. And I also seen the most extreme place at Silicon Graphics where things went like horribly wrong and like all the time.

Layoffs after layoffs. What was Silicon Graphics? I've heard of the company before. So for you and other people who don't know about the company, it was one of the highest flying technology companies in 96. They were behind the special effects at Jurassic Park. Steven Spielberg was visiting it. Bill Clinton was visiting it. They had these incredible computers and servers that were used in all kinds of different areas.

I mean, it was almost like a Google-like company of its era. And it was started by these incredible engineers. And the guy who started it was, you know, like with Marc Andreessen, like started like the internet browser Netscape. That was like the founder of Silicon Graphics. If you do any DVR today, that technology was developed at Silicon Graphics.

A lot of critical things we use today was developed at the firm. But what basically they underestimated is they had these expensive servers and machines. It's kind of like we make Ferraris and then one day the Subarus and Hondas are like, oh, we're just as fast. And then that was the end of the company and they didn't have like a second act.

Okay, so it was like super expensive product and they were not able to compete with like a lower cost. The Windows machines came up too fast because it's kind of like open source, right? Like you have millions of people working to make that efficient and better. And Silicon Graphics is a proprietary system. It just couldn't keep up. You could say there's some analogies to today, potentially.

Potentially. AI now will probably go a little bit more to open source models. People will be more cost-conscious. And look, history does repeat itself and rhyme. But going back to what we originally started talking, the generalist approach is really important because the way that we make investments and we need to understand what's going to make a market important at a very fundamental level.

Like, hey, if we cure cancer, it's going to save billions of lives. AI infrastructure, whether you think the revenues, everybody's trying it. You can see people actually use the product. So the infrastructure is really important. And there's a trillion dollars spent. That is not bullshit. You can see in public reports, Google, Microsoft, Meta, all these public companies, like you can see Nvidia's earning reports, like people are buying chips.

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Oh my God, now the next big like bottleneck is memory chips. The next big bottleneck is data centers and energy. We don't have enough energy. China has 10 to 100 times the energy we have. It's actually also national security risk. So the way that I like to combine things is, first of all, is this something that every person in the world or every business in the world is interested or can use? And then is there urgency to it? So for instance, like payments, when we invested in Adyen, if you're a business, the thing that makes you a business is processing payments.

You know, like Shopify, as long as humans existed, there has been trade. I don't think you need to be an expert to understand that if you are an amazing trading platform of somehow commerce platform, if you do it really well, you're gonna succeed. So like none of these things were rocket science. I didn't need to be like, I worked at eBay and I was a commerce expert.

All I was looking for is from what I learned at Google, each founding team and each company, what makes them unique and an outlier where I'm like, no other company or founder has ever paid attention to this. or has ever excelled in this one area, or they have this one or two secrets that nobody else seemed to be realizing, even though there might be other players.

And that's basically what we do. And then we build a book of like these kind of companies and all the big waves that we think are going to be important. And so far it has served us very well. So I think maybe Shopify is an interesting one because I know there's like this famous story of Toby, like biking up Sand Hill Road and like pitching everyone.

And it's like a snowboard selling website or something that he just kind of made. And it's like, ah, get out of here. Like nobody's going to buy stuff online. So what was it like when you met Toby? No, it's the real story because I showed up. This episode is brought to you by Monaco. Monaco is the first revenue engine built specifically for startups.

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In addition to like, also it's an incredible company. Were you guys married yet or dating? We were married. Oh, you were already married. So we were already married. I mean, she's not gonna get out of the marriage just because I can't win the company. But the funny thing is I keep sending email after email to Toby, like there's just no response.

So seven emails, no response. Then I find this Canadian woman, Debbie, who was like partially like also like in media PR. I'm like, Debbie, look, he hasn't responded to any other email. Will you also send another email? And she sends the email and Toby responds. He probably was waiting like, look, if I don't say yes, this guy is going to like...

keep sending me emails and intros from, like, 20 different people. But he basically threw me a curveball and said, it's whatever, January, February. In Ottawa, it's, like, negative 30 degrees. So I remember getting ready for the trip, and I'm like, God, I don't have, like, a coat thick enough to handle the weather. So I go, like, buy this special coat, get on a plane, show up, and...

Every single thing Toby told me was like the early days of Google, where everything you expect that a search engine would do, that was not what Google was doing. Like, oh, like search engines add more buttons and Google is like, we have zero buttons. Search engines hire experienced people and Google is like, nope, we hire the smartest people and they figure it out.

Every single dogma, they basically took it and turned it on his head. I show up and the first statement from Toby's mouth was, you are here because the Silicon Valley VC that we wanted, and I'm not going to name the firm, basically told us that we cannot build this firm in Ottawa. We have to relocate to Menlo Park. I am not going to relocate to Menlo Park.

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And so that was our opening. So if you convince me and you're a good person and you believe in our company, you might have a room in the syndicate. Took six months, a lot of work, but, you know, we were in. Took you six months? That's a long... I mean, six months, including all the emails. I mean, it wasn't like six months from when I showed up, but one of the things that was really cool is we also have the saying of engineering serendipity.

So I was also thinking, like, God, I'm not an e-commerce expert. Like, how can I help? But this is... This is the kind of founder hustle. Sometimes you're in this situation, you're like, wow, I've never experienced this before. I need to figure out a solution. So at the time, Shopify was just as good of a platform. They just didn't really have a big marquee customer to keep increasing the awareness.

And we also just invested in Angry Birds maker Rovio. And Rovio badly needed an e-commerce site right before the holidays. So I connected to two of them and Rovio was like so happy because they were like, this is going to be a huge like merchandise business. I don't know if you remember, but people were loving those. Yeah, there's like a movie and stuff.

Yeah, there was a movie. So before the movie, even like the merchandise was huge. And then Shopify loved it because they got this like marquee customer. It wasn't like, oh, this is... a huge chunk of the revenue share, but it was very public and it really boosted their awareness. And so they love the fact that we were thinking like we're an early employee of the company.

Like how can I move the needle for this founder and companies like you help them hire somebody important, you help get like a really impressive customer. By the way, when the connection is made, both companies are like, this is amazing, but neither company knew about each other. There are so many situations in the world where a good match exists, but that doesn't mean that the people are aware that that should be made.

And so that's why we like this concept of engineering serendipity a lot. So then how do you figure out how to be valuable in that sense in a way that is helpful for the founders? Because I feel like a

lot of founders will say that VCs, if you just do nothing, you're in like the top 10%. And so there's a lot of this like trying to help too much. So how do you know that you're actually being helpful and doing something that the founders actually want you to do versus like just getting too involved? Let me give you this like crazy, like complicated answer.

I just asked the founder. What do you need? What is the most important thing to you? So first of all, it is something that does not scale. Everybody is so smart that they're thinking, oh, I can't afford to ask every founder, I'm gonna do this one thing and I'm gonna like offer that one thing to every founding team and every company. It's great because then it's like very easy to talk about it.

We have this one thing, that's what we do. But the reality is we have, you know, hundreds of founders. We ask every single one of them and the answer was never the same. You're a founder, every founder is going through different trials and tribulations. There was something they need, It's very scary to us because, a priori, you don't know what they're going to tell you.

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They might tell you, I need X. And you're like, we're out of luck. I don't really know what to do about that. But guess what founders do? They're faced with curveballs all day long. They're in situations where they're like, I don't know. I'm not experienced to handle it. But your job as a founder is to figure it out. And so the benefit of being a founder and investor is I know what's going through their mind because I had to do it for my own firm.

I'm a startup in venture capital, maybe now like on 10 Fund, maybe a more mature startup, but that attitude of like, no hustle is too little, we're here for you. And to your point of like, even if you're doing nothing, you're in the top 10%, there is actually something that is not called out where it's been a rallying cry is that most founders do not trust their investors.

So the other thing that we did was, you know, we have the founder pledge. We basically say, we will never vote our shares against you. So even just doing that puts us in a small number of firms that are really special and unique. And I don't think like anybody followed us. So like to this day, every founder that comes through the door, you know what I heard about Felice is, you guys vote your shares with the founders and you give founders the founder pledge, which is 1% of our investment from our management fees that they can use for, therapy or coaching or anything.

So we're like, you know, like the horrible example of Travis with Uber, our job is to make founders unbreakable. So you're not, you know, like in your most fragile state, people come after you and we're like, we want to do the exact opposite. We want to invest in your mental strength. We want to make you more resilient so that you're unbreakable when you're facing stress.

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And actually when they're most successful, they're facing the most stress. So talking about sort of like determination and, you know, being unbreakable, Felicis fund one, it was all your money, which is a little bit unusual for a VC fund. I mean, yes, not very, I mean, there are other people that have done it. Somewhat unusual. So it was a $4 million fund.

So like, why was it only your own money? because nobody wanted to give me money. So I'm like, I have a little bit of extra money. I can go take a chance. And look, I don't blame them. Like whether it was friends, like, look, I totally understand.

If somebody said, hey, Turner, I'm raising a fund. And you're like, well, why are you raising a fund? Why would I back you up? You want to look for some validation. Have you run a company? No. Are you an engineer? Are you a technical? No. I was the first PM at Google and the first international sales manager. And people are like, have you done venture capital? No.

And then my strategy was very unique. I thought we always had this strategy, even from day one, we had zero logos. Like you have no podcast, you're getting into podcasting. And my dream was like, I'm getting into venture capital. I am not going to copy other firms. I'm going to do something drastically different. And that was to look for like underestimated founders globally and invest across sectors.

And I wanted to break every orthodoxy rule in venture capital that LP sat. And as a result, almost every LP that I talked about is get out of here. Like we don't back people like you. And I'm like, I'll start with my own money. And after four years, I had 12 exits and 100 investments. Two things really happened. One is, if you make 100 investments, it's like you want to be a professional athlete.

If you basically put in more hours and work than anybody else to a factor of 10, I think no matter what your natural talent is, you're going to be pretty decent. And the second thing is I got 12 exits. I mean, there were so many new funds getting started and then LPs are asking, well, why are we backing you? And people are like, I have three markups or whatever.

Like it's paper markups and that's not bad. It's great. But having a real exit and like, I wanted to raise like 40 million and I already had like a hundred million dollar company exit. and then multiple exits to various different firms. So in some ways you can say the LPs, I think, looked at me, but then for the first LPs they backed, like this guy is ex-Google.

There's hardly any ex-Google people. He already has 12 exits. He made a lot of investments. He seems to be a really good fit for a strategy. It just happened to be other LPs that were like me that were starting out and they were backing this new breed of investors called super angels. So you think that's probably like a crucial thing to consider when you're a fund manager or maybe a founder too, is like finding the investors who are already preconditioned to kind of buy into your thesis that you're pitching, whether it's very legible to them down the fairway or whether it's a little unorthodox, like you need to find people who are already preconditioned.

And preconditioned meaning that like, Years after I went back to my LP, I'm really curious, why did you even take a chance on us? She said, number one, there were a lot of factual things to support the decision to back you, but also, you know, my very first LP said something really interesting. Like, look, we're also just starting out. The very best funds are not giving us allocation.

So we think the alpha is going to be in these new class of managers that like maybe the very upper echelon, like don't care about them. But we think they're going to have a lot of alpha because they're underestimated. And it's kind of like one of that, this kind of you know, overlook part of the market, but we think this is going to be where the puck is going.

And they did extremely well. Yeah. In a way, it's almost like what your strategy was, was I'm going to go to these like on... unproven founders in weird markets that other people don't really want to give a chance to, because there's something better next door that's more attractive. It's more, the markup's going to come quicker. You know, like what I'll tell you, like the most amazing thing is like, everybody thinks this business is all about making money and crazy returns and all of that.

Yes, it is. But people really underestimate how much of a people business it is. And I think what has happened is, at a fundamental level, the founder sells somebody just like them. that has been underestimated and trying to break through. Trying to like break the orthodoxy, like prove the skeptics wrong. So we always connected at a human level.

There was a reason why, even though we were the smallest fund, we were not the most established, and we somehow always like managed to break into these incredible companies and founders where they looked at us and like, you just need to be in the syndicate. And so raising fund too, I know that one was also, it was a hard though too. It was a bit hard.

But it was easier in the sense of somebody actually did say yes. You did have people that didn't. The first yes was the most meaningful. And then basically what happened is, Then several people said yes, but we still had a big gap. And then our law firm made an introduction to one of the largest LPs in the country. That was an endowment. I sit across from this man who runs the endowment.

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He basically grills me for a whole hour, asked me the toughest question. I'm like, at this point, it's like a CIA interview. Do you remember what kind of questions he was asking you? It was basically, like, all kinds of detailed questions. Like, if you basically applied to CIA, like, Turner, you know what? We don't care, like, how charged.

Like, we got to freaking go all in on, like, all your trauma. I mean... We got to go very deep. So he just went very deep. And at the very end of the conversation, he said, I'm going to tell you a crazy story. I think our story really inspired him. He said, my grandmother from a small village in Virginia was the first of the state to go and relocate to Turkey and become a teacher in the American school in Turkey in 1927.

And so there was something in his mind that like somehow connected to his grandmother's background. And he's like, I'm gonna give this guy, he still grilled me by the way, like grilled the crap out of me. But there was something in his mind, like there was something I see in this person. And I don't know if that really helped or not, but look, human beings like are always looking for something.

And he just gave us a chance. And one thing that I'm really proud of is we rewarded that faith in us. Like the funds that they invested in perform really well. And like all our funds are performing well, but the early ones perform exceptionally well with incredible liquidity. So he was, he was very, like, I was very happy that thank you for your faith, but we've done our job to show that you are right to back us.

Yeah. You are, are you Turkish? I am Turkish. Turkish born. Turkish born. American now, but Turkish born. Okay. So there's like a little bit of, there's like the, the preconditions to want to identify with, support the broader, someone who is related to you, like in a way, like similar to you. I mean, look, I think every human being does that in some sense.

And it doesn't just have to be like where you're born or your religion or your sports team or college. Look, I mean, human beings are tribal. I mean, that's how we survive, like through the ages. You just want to know, like, you don't want to be like in kind of more than like, you want it to be more than arm's length. You want it to be more than a transaction.

Like, do I get you as a human being? Do I understand what makes you tick? And I think at some level, like he realized that all my life, I was always in a minority situation. I was always underestimated. And I think what makes people great, what makes Outlier great, is like everybody is like, it's this one thing and every outlier founder has it, but it's mostly the motivation.

They're unstoppable. Like they have amazing grit and resilience. And in some ways, like I can relate to it because when people tell you you suck and you're never gonna amount to anything, like what are you gonna do? Either you take it and like you're depressed for the rest of your life, or you're gonna show them like, no, actually I can amount to something.

But that thing is like rocket fuel. Like you are so motivated to prove people that you're not a loser and you don't suck. that a lot of founders go through that. And I think that's why I relate to them and that's why they relate to us. And they definitely see it in our absolute fabric. It's definitely part of how we bond with them and how we relate to them.

Yeah. It's actually kind of funny. So before I started the podcast, there was this one really popular business podcast that had almost like an open call for like, hey, we're expanding the show. We want a couple new guests or new hosts to come on and try some new formats. And I was like, oh, that'd be kind of fun. I'd probably be pretty good at hosting a podcast.

I'll kind of try out and do it. And essentially, I was basically like, I didn't make the cut. Maybe I wouldn't be that good at the podcast. And it kind of like always like kind of hung on me there. I was like, you know what? I actually think I'd be pretty good at this. Like, I'm actually going to do it. That's not the only reason, of course.

But there's this, like, kind of in the back of my mind, it's like, man, I kind of actually just want to sort of just prove that I can in a way. Obviously, having a podcast is not the end goal in life. It's a means to an end, I guess. Well, I think it's really cool. I mean, you get to meet a lot of very interesting people. You get to ask a lot of questions.

Yeah. Because it's like all these stories, there is the obvious part of the story and there is the non-obvious part of the story. So I think you're doing an incredible job. Yeah. It's pretty interesting because, um, like there's, I mean, I'm a really small early stage fund, probably not very many of them. They get to go hang out with like the CRO of a company that's about to go public and just hang out for two hours.

How'd you do it? You open source it, put on the internet or, you know, co-founder of another company that's doing over a billion in revenues for like two hours yesterday. He's also, I found out and even realized he's also in charge of a lot of their, uh, acquisitions that they're doing. And I'm like, Oh, that's pretty good. Like, yeah. So, you know, I've got a portfolio here just in case, you know, you kind of, you like kind of build up.

It's almost like, um, you're not thinking necessarily you have like strategically, or maybe you are like, how can I use this to build my network? Right. Yeah. So same with us. Like we probably wouldn't have hung out for two hours if I didn't, if we weren't recording this. But look, at the end of the day, I think another part that you're touching is network is, you know, human networks.

I mean, this is a networking business. Yeah. And you need to find out where the great talent is. We were very lucky. And I think one of the ways to find a talent before it's obvious is, again, like you got to like figure out the ways and you got to go after them. But kudos to you for, you know, following your passion. One thing that I feel like comes up a lot, you were a solo GP, especially with Fun2 still, right? At Fun2, Sundeep ended up joining me.

So he was the first person that I hired. So I had another investor, but it was still a very small team. It was Sundeep and I, and then we had an office manager who wore many hats. Okay. Did you get any big pushback on, as you were raising Fun2, Fun3, was there a lot of non-belief? from folks like, what was the biggest, like, hey, you probably, this is the reason that we're not investing? Look, I think the early pushback was a lot less about solo GP or not solo GP, whatever.

I think, first of all, we were trying to do something unique where it was very awkward to have a general, like, it wasn't very common that they would back like generalist funds. And then we're like, hey, we can invest anywhere in the world. That was another big anatoma because the traditional Silicon Valley wisdom is like these founders, you got to keep them on a leash, invest close to you because you can keep a close eye on what they're doing.

I'm like, these people are pretty great. Why would you want to keep close eye? It's not like you're in kindergarten. They do not need adult supervision, which a lot of VCs thought that the founders need adult supervision. Because look, we're talking about outlier people here. Like you do not want to kibosh the thing that gives them this outlier potential and the energy.

And so I think a lot of the pushback was, you know, people thought generalist fund, like no prior venture experience or in fund two, like at least we could say a hundred investments, 12 exits, but then they're like, okay, well, these exits are not significant enough. Like, how is it going to continue? And then every time we're like, nope, like it's the exact same strategy, exits multiply drastically, the scale of the exits multiply drastically.

We literally said exactly what we're going to do and that we're in Fontaine. It keeps getting bigger, keeps getting like a lot more exits. Now, I think there is like almost no disbelief on that. It's more like other questions. But I think another thing that, you know, people were wondering is like, hey, how is this strategy going to scale and is it going to be important enough? But the more score we put on the board, we put score pretty early on the board and we made some really interesting decisions.

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Like on Fundtree, we hired a CFO and most of my peers were like, why would I spend money on a CFO? I'll just get somebody who's outsourced. And I will never forget this. We had the Fitbit exit. There was a small window. We sold the stock and the stock crashed. And then I had peers who didn't have a CFO, who did not sell, and then they rolled the stock to the bottom.

So I think There were a lot of reasons that they were initially like, we don't know if this is gonna work, but then we did one thing extremely well, and we basically really leveraged our board. I literally came in front of them and said, our aspirations is not just to be a venture fund. I wanna be among the very best. I want you to absolutely battle test us with everything you know of what it will take to perform at that level.

First year or two, the board meetings were brutal. They're like, this is wrong. You're off. What were some of the biggest things people were like? I asked stupid questions like, why do you need reserves? I don't want to like reserves. I made these statements, and then they put me in my place. And then I'm like, yes, later on, I understand why they want to partially defray their fees with recycling.

It wasn't the reserves. It was the recycling. But anyway, look, they had like really good questions and they thought most VC managers are pretty stodgy and they're pretty stoic and oh, like nothing has got to change. We're like a year and a half later, like we had a board meeting and like the meeting started. I'm like, what do you think? And like, there was no question.

It was incredible. They thought that it's gonna take us 10, 15 years to do like 10% of what they asked. And in a year and a half, we just ran through the whole list and then everything else they had. And I'm like, bring it on, what else you got? And it was really great because it's kind of like having a very tough coach And it sucks when you're in the gym and when you're practicing.

But that's what excellence requires. You want people to question everything that you're doing, hold you to the highest standards. And then later on, when we have sometimes really tough times with the founders that we work with, it's something that I do. So one of the things you asked earlier is, what do you really do for your founders? Sometimes what you need to do is to tell them the truth.

And the truth is very difficult to hear. But the one thing that we do is we always put data behind it. I never say, Turner, as a founder, look, this is a bad situation, whatever. But I say, you know what? Let me break it to you. We have hundreds of companies. Here's the ranking and everything you do across the portfolio. Because we're journalists and we have a broad book, we never tell somebody you're good or bad.

We just tell them, here's the market and here's where you are. What do you think? You can process the data. And it's very hard to argue with that. So what might I be seeing if I'm a founder? I'm looking at this from you. What am I looking at exactly? When you're showing the

cross-portfolio, cross-market. Very critical things. For instance, I'm doing really great. My growth is awesome. Well, your growth is like 48th percentile. I'm doing very well.

We're hiring a lot of people. Your burn is in the bottom quartile.

Both are factually true. One is kind of like impression of someone like X, and then I'm putting hard data behind it. And this is kind of like my obsession with F-Fun is that one of the reasons why F-Fun is really cool is everything is like micro measured. Every single detail is measured. So when you have data for every small tiniest thing in the tiniest possible increments, it's almost impossible not to manage it really well.

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There's a lot of complexity, but my dream is to come in front of founders, not just say, you're good, you're bad. It's just put data. Data is something that it's hard to argue with. Yeah. So then something like that, it might be, we're hiring so many people, things are going great. We're in the bottom quartile burn, but also my pipeline looks really good.

And pipeline is like- rate of velocity of deals closing is in top decile. So then you could say, OK, maybe it's OK that the burn rate is a little higher, because it looks like it is ramping even faster. Absolutely. Look, every founder is getting some great things right. I think there is a more subtle point here, is that every company is going through these things where something's basically kind of wavering.

Some things are not great. There is one thing that nobody talks about. It is not like whether something is good, whether something is bad, but people forget that there is a clock ticking. So the most important thing is for you to be aware of it before the clock ticks and you're basically in the 11th hour. So if I basically said something is good or bad, people just get stuck on, you're telling me something is good or something is bad.

But what you really should be asking is how much time do I have? So we also keep a very strong eye on, okay, what is the cash runway of the company? How much time do we have to make decisions? So it's not just you have to make hard decisions, but how much time do you have to make that decision? The earlier you know about something, the more time you have to make a decision, especially if it's a hard decision, that's going to change the trajectory of the company.

Any time that that's like played out in a good way? It always plays out in a good way. I mean, I don't think there has been a single instance where there's good feedback or constructive feedback. Now, the founder might not appreciate it as much at the moment, but I don't think there's been a single founder at the end. You know what? that was tough love or that was not easy to hear, but then like stuff actually materializes and because it's data and because we can see the market, they can see it too.

And then later on, like something happens and they're like, yep, like that's exactly what happened. Or you were right, like the data was correct. And so that to me is sometimes really, really important. And not sometimes, it's one of the most important things because I was underestimated. So to me, like one of the things that drives me is I want the founders to see that we really care.

and more than writing a check to them that we really wanna help them change the trajectory of the company. Whether it's like doing the thing that they ask us, hopefully we will do a good job consistently. We really try. We work very hard. We're building a team like to help us even more to do that. But it's also like seeing like the right things at the right time.

so that it's not too late before you have to make a decision. Because there are many instances where sometimes you're on a board, you're a lone voice, and then other people are saying, everything is good. And then nine months pass by. It's like, oops, everything is not good. And not just that, oh, we have three months left. What are you going to do about it? So there is time when you know something and you have time to react.

And there are other times when you know about it, but now you know about it too late. People did not tell it to you and you did not realize it. Now you do not have time to go actually handle it. So that to me is the reason why it's super important. And the only way that you can do that is you have trust. Like if you didn't trust me and I told you something hard, you would say, get out of here.

I don't even know you. But if we somehow like earn your trust, we did something that moves the needle for you. We proved that we can really help you. You're like, I didn't, I might not enjoy what you're about to tell me, but I'm willing to listen to you. I don't promise that I will act on it, but I'm willing to listen to you. Well, I feel like that's something that seems to be a common trait of the best founders is like they know how to take different feedback from different people and know when to act on which feedback.

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Yeah. which I mean, sounds super easy when we just say it like that, but like in certain circumstances, someone might say, like with the example of burn rate and pipeline ramping, like some people might say, you need to cut the burn rate right now. Some people might say, you've got to go with your intuition of like, if these deals are closing, it's okay.

Yeah. I do need to add something though. So then there was like another part of this, which I think is even more rare, which is sometimes funders want to do crazy things. And then the investors are like, that's just batshit crazy. And sometimes what they really want is one of the investors to say, you know what, actually, that is batshit crazy, but you should absolutely do it and I trust you and then you will do great.

And then I will prove it with like, I will put even more money in the company. There's been a number of situations where it was like N8N or Semgrip. The company is doing really well. And inevitably there was like a little hiccup. And as soon as the first hiccup happens, people like start getting like agitated. Oh my God, like we missed like this quarterly goal and this one stat.

And we do something very unusual. We're like, you know what? Yes, you had a bad quarter. Maybe you had two bad quarters. But through... the main trajectory of the company is going to a really great place. The reason why the numbers were off is because we have a very small end. Every startup when they're starting, there's not enough deals, there's not enough people.

One thing is slightly off, it's going to derail the results. Yeah, you have a deal that closes in July. If you look at it, you're like, wow, but that's the point where the founder is really vulnerable. And we do something different. We're like, we'll give you more money. We'll give you support. We do believe in you. And the founder is like, wow, like this investor is not just telling me things.

They're also willing to back it up. Like they want to put even more money in our company at a moment where things seemingly were not really that great. Yeah. And that part is, I think, very unique, Felicis. And if I say like, look, if we basically exist like 20 more years from now, I would like to say that one of the key reasons that means that we made a lot of good decisions, but we've also done right by the founders.

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I don't think without that, we even have like 1% chance of, you know, persisting through the next two decades, the three decades. So one thing that comes up a lot where you started with a $4 million fund, I think is the latest fund, 900 million? Just about, yes. Okay. A little over. Okay. So a lot of people will argue, I mean, the scale that is like 25X more.

Am I doing the math right? No. Roughly. I mean, it was a billion. It would be 25. Yeah, 100. Well, 250.

250 times more. So, like, do you have, like, the same edge that you had with a smaller fund? Like, do you lose anything as you, like, scale up the size of it? Because it's like a common, just general, in venture. They're like, oh, you're just getting fat and old and, like, you know, you lose the edge. It is. Matt is Matt, and on the topic of fat and old, I'm not gonna say I'm a young person, but I was meeting with another investor today who was an ATP top 200 player.

We were talking about exercise in tennis, and I'm a tennis fan. I mean, I work out six days out of seven weeks. I measure my sleep. I train like an F1 or NFL athlete. I am very serious about... Because this business is very stressful. And I think what people don't realize is if you're not in the best shape, you're not going to be able to make good mental decisions.

And when you're dealing with a lot of stress, one of the things that gives you resilience is the shape that you're in. So I'm absolutely freaking committed in every possible way to be a high performer. But look, I mean, Matt is Matt, but I think what is overseen, first of all, is the people that make it really special. But the other thing that I will say is, look, I mean, first of all, we own like five to 10 times more of the companies.

The exits have grown in scale 10 to 100x. And, you know, we are also writing bigger checks to companies. And it's because of our fund size that we were able to to get into some companies. So when you run the math that way, so there's been about, like, I would say two to three X inflation, just in terms of like venture valuations. Like if you say, hey, like a $4 million fund of 20 years, like that would be at least 12 to like 16 million today.

Like it's not the official inflation figure. If you take the 250, you cut it down to like 100 X. So like a billion is already like 250 from that. Like a billion today is more like 250, like 20 years ago. The Xs have been 10 to 20X larger. So now we're down at like 10 to 20. And then we own like 5X of each company. So actually when you do the math that way, It sounds like, oh no, with this large fund, you're absolutely going to get crushed.

And it's exactly the opposite. Actually, the fund size is what allowed us to continue with our ambition and scale and even get into some companies and rounds. And that's been always the dream. Every time our fund size increased, we tried to expand the strategy. We used to only do seed and a little bit of A, maybe, if we're lucky. then it was seed and A.

And we still do majority seed and A, but there are other situations where like good examples of like SubaBase and Runway, we did like what looked like a growth round, but it's really like was a seed or early A. Like they had hardly any traction. It was a crazy valuation, which is another hot topic I know. And people thought we were back shit crazy for being in those rounds.

And then those companies went literally from like a hundred thousand to hundreds of millions of revenue in a matter of years. And I think even as we speak, there's so A6 and Z is like the epitome of high fund sizes, large fund sizes. And I think within the past day or two, they've had multiple companies in the portfolio that have been acquired for or exited for high 11 figure amounts.

Yes. 9, 10, I guess, yeah, 9 and 10 figure amounts. 12 and 13 figure. Open router, almost 10 billion, it seems like. 7, something like that. You've got Cursor getting acquired by SpaceX. Like, And now I'm pretty sure they both own a good chunk of both of those businesses. Pretty good chunk, yes. Yeah, so you have this class that's been saying, oh, you can't get returns that big of a fund size.

And it's like, it looks like you can actually. Not only that, but look, I mean, the world has changed. 20 years ago when I started, it was a software wave. So actually you didn't need a lot of money and you could start a company. And every week some company was getting bought out. So we had so many like, hundred million, couple hundred million exits, scaling to billion dollars.

Now you have a different situation where you have exits that are much, much larger, but it's also deep tech, hard tech. We talk about AI, infra, defense, a lot of these sectors. These sectors are not capital light. You do need a lot of capital, which means that you need a minimum check to enter. And so without this fund size, honestly, there are a bunch of companies, I would say, maybe a quarter to nearly half of our book, I don't know if we would have been able to get into those companies.

So how does that happen? So why are the round sizes bigger and the capital required more? What's going on that's different? Are they opening a factory? Are they manufacturing things? It could be factory. It could be manufacturing. I mean, you are seeing Nvidia's earning reports. You have to train models. You have to get GPUs. You have to hire people.

Very expensive. Even outside of Silicon Valley today, it's very expensive. You need to buy a lot of data. I mean, everything in deep tech is very expensive. And you need to put a lot of money upfront to get there, but then you get rewarded because it's very difficult. Very few companies are in there. I mean, we have companies like Periodic Labs.

They're doing something insanely difficult. They basically said, look, a lot of AI is focused on experiments and data, but there is one area that we do not have data and has never been captured, which is physical experiments. science, like a lot of it was simulation, especially in key things like, Hey, like we want to have new material for transistors, or we want to have a new superconducting material.

I mean, these are very important physics and there's other like chemistry problems and you cannot like, it's very difficult thing to say, Hey, you know what? We have a new synthetic material, but you need to test it in the real world, in the lab. And so this company literally like span the God, like, tens of millions, and they might spend hundreds of millions to basically build a new kind of, like, rapid scaling.

Like, they want to be able to do, like, go from tens, like, dozens of experiments to, like, thousands of experiments a day. And they are like, listen, nobody in the world is doing this. Everything was simulation. So, like, on the one hand, you're like, this is batshit crazy, because they were going to spend all this money to build, like, a simulation environment, which at the moment is you have a very good understanding that it could be important, but there is no like immediate like commercial thing because the commercial thing only comes if you have a discovery.

So you have to suspend disbelief and say, I'm gonna do thousands of experiments. I will know this synthetic material will work. So I will be the first to market with the next superconducting material or the next, you know, metal, synthetic metal that can be part of the new generation of transistors. But the promise of those are so big that the company will keep raising the money, and I think they will have the breakthroughs, and then it'll be very important money.

But they have to put a lot of money upfront to be able to do that. And that becomes the mode of the company. Then they're like, we are the only company in the world that has that infrastructure that can do those experiments. Yeah, because kind of this classic, you know, if...

It takes a ton of investment to get to that scale. And it's not like it's software where the margins are like 99% on a new dollar revenue. Like there's some physical things. So just like the math and the physics of like trying to get up there and compete, it's pretty difficult. Pretty difficult. And it's a fantastic story. I mean, there was like a machine there that's made in Austria.

And I think there are like 20 of them in the world. What is the machine? It's a very weird machine. So it basically consists of X-ray spectrometry so that when you basically have a new invention, it's very difficult to see it on an atomic level what the composition is. And this machine combines two very difficult technologies and can see at a molecular level whether you have certain things present in what you think has come up from the experiment that you run.

Interesting one thing that you said earlier that I think is worth touching on That we're getting like the size of the outcomes that we're seeing a lot bigger so that is

people a lot of people are saying this also like in the past it's been like a you know say like in 2021 very common argument everyone has like oh the outcomes are way bigger so let's let's also go bigger are we just doing the same thing again with the valuations these companies getting bigger we're saying 100 billion is the new 10 billion or 1 billion i mean i think One thing that's a little bit different is some people make arguments without the data to back it up.

We have a different attitude. I mean, we look at the data. We might be generalists, but we know how to do our homework. We know how to read. So this is why I basically call it trillion-dollar markets with billion-dollar contracts. The companies we have now is either like a billion dollar contract or multi-billion dollar contract. And you can see if that works, it's going to scale to 10 billion.

And I'm like, take that contract. If they ship it, we know like it's going to be like 3 billion in revenues. And you put a multiple five to 10, it's not difficult at all. Like we're coming into this company at like a billion or $3 billion valuation. I'm like, I will take that bet any day. It's not going to be like we're going from 5 million, if we're lucky, 20, and 20 will become 50.

We're way past that. Now, even Entropic, they had a billion-dollar contract with their first, I think, AWS, and then Databricks, they had a billion-dollar contract with Microsoft. Now, the company is much broader and bigger than that. And they're not necessarily our companies, but we're seeing other companies, whether it's in defense or chips and other areas where there are people out there.

I mean, we are in an era where Google is spending $100 billion plus a year on data centers. And there are five other companies like Google. If you asked me 10 years ago, Google is going to be spending $100 billion a year on data

on anything. I'm like, you are not just bad shit crazy, but you're like, you should be at Mars. Like, there's just no way that that's going to happen. So I think what we say is like, when we say something, it is actually rooted in data and not like, oh, we're just like guessing that numbers seem to be going up. We will be a little bit bigger.

No, like it's real data. It's real growth. I mean, I've been doing this for 20 years. And if you add the other 10 years that I was an operator, I've never seen growth figures like this. I've never seen initial contract sizes like this. I've never seen companies that can like recruit like 50 people in just like three months. And you know why it's happening also? Because we have so many more startups.

Like this is one of my favorite data that nobody captured. When I first left Google and Facebook was about to go public, there was this like Google Facebook, I can't call it meta, dynamic. And I said, the reason why Facebook seceded, because they hired 1500 people from Google. It was pre-trained and ready, waiting to be deployed at a new company.

If Google did not first hire and train those people, I don't know if Facebook would have ever become this big. Really? And you know what's happening in the fast now? Because of Android and because of SpaceX, there are hundreds of super qualified, super ambitious engineers that once thought they had crazy dreams. And now they have seen that crazy dreams can become real.

So nothing is going to stop them. Guess what's going to happen next? Between like SpaceX, Android and Palantir, you're going to have some insane hard tech companies and they're absolutely going to crush it. I can absolutely see that they're going to crush it. So why are they going to crush it? What's kind of changed? Because you have very brilliant people that are approaching classical areas with a completely different lens.

And in the past, it's never been done. So let's say you're one of those engineers. It's never been done. So maybe you would second guess yourself and say, you know what? I'm probably crazy. It's not going to work. But now that we have had rockets made at a cost of 100 of NASA, the rockets are self-landing, do you think anybody's now ever going to have doubt that something batshit crazy cannot be done? That's the human ingenuity at its core.

There's been so many times that humans are like, it can never be done. And lo and behold, an outsider comes and like, I think it can be done this way, and next thing you know. It is done. And so I feel like for the most part, technology was focused on software only. But now it is like touching everything else. So this is the new era where you can truly suspend disbelief.

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And there actually are people now, like when we're talking to somebody like, oh, this new nuclear technology. And I'm like, who is this person? Oh, it was one of the core people at SpaceX. Like we backed one of the SpaceX founders, Scott. He wrote every piece of software for the Falcon rockets. You think the guy that figured out, like, how to build these rockets from scratch, you know, did the simulation, did the testing, like, launched them, made them land, like, he's not gonna be able to figure out the next thing? Of course he will.

I mean, I think, you know, you might say you're batshit crazy to think it's inevitable, but I've seen the fire, and I've seen how different he is, and it reminds me very much, like, Lyra and Sergey, where for 10 years, like traditional people told us, we're batshit crazy and this stupid little search engine is never going to monetize and we're never going to create a real business that can make real cash.

And $5 trillion valuation later, you know, I wish I had some of those comments. We are like by a factor of thousand X beyond what people said, like we could do. Isn't there like, you know, he's kind of, there's like a famous line where people are like, you know, could you ever get to a hundred million in revenue? And he's like, I want to get to billions in revenue.

And then now they're doing closing on 200 billion revenue. Yeah. I mean, this is the funny thing. Like when I was at Google, like early days, I'm like, God, please make this a billion dollar company. I was off by three orders of magnitude. And same thing, like as a VC, like I had my first exit and it was literally like a 50,000 convertible that returned $25,000.

I'm like, can I make like a million dollars one day? And then it's like 10 million, then it's like a hundred million, then it's like a billion, like IPO. And like, next thing you know, like we might have like a hundred billion dollar IPO. And like, there was a $2 trillion IPO now with SpaceX. I think one of the things that I'm seeing, especially in things like robotics, I don't think people realize how vast the market is.

A lot of these markets, I think, are misunderstood because we never had somebody build a product that truly captured the market. We have 190 million people like labor. And by the way, just because you have robots doesn't mean that people are unemployed. They're not going to do other stuff. I mean, we are teller machines. It doesn't mean that.

We still have people at banks that talk to customers. So I just think that this is like a really strong argument that a lot of jobs will be taken by technology and robots, but then there will be other really interesting, even more intellectually rewarding jobs and even more creative and satisfying jobs for people. Like, I don't think it's a zero sum game.

I don't think it's like one of those things where for technology to basically scale from here and do these immense things means that humanity has to lose. I don't think that is true.

I've heard in terms of some of these like outside of software kind of categories that we're seeing startups made, I've heard some of it is in the past when we have tried this, like, you know, 20 years ago, 30 years ago, someone in, you know, a certain industry, whether it's like energy, whether it's healthcare, it's someone who is from that industry and doesn't move at startup speed per se.

And so, you know, you hit a wall and can't get around it versus like today it's, the guy who did it at SpaceX is he's done it before. He's got the same kind of mentality. So that's why it's kind of worked today is because we've adapted the software mentality to other, to the real world now. I think it's the software mentality, but it's also outlier mentality.

I mean, Elon Musk is an outlier for a reason. Jeff Bezos is an outlier for a reason. Larry Page, like one of the things like they freaking like don't do anything by convention. Every single thing that was done at Google had nothing to do with the way those things were done ever before. Every single thing, they were like, nope, we don't like it.

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It's not good enough. It's not fast enough. This 10x rule, most of it is like, nope, we're going to do it completely differently. It was crazy, but it really worked. So anything interesting, like most memorable kind of

unconventional way of doing something? I mean, there were like... More basic stuff like, Larry basically designed these crazy servers at 10 p.m. at night. We thought, oh, we have all this money. Why don't we just go buy servers? He's like, why would I buy servers? It's a huge waste of money. They're inefficient. They're very expensive. They're not designed to do what I want.

I'm going to go buy these cheap Intel CPUs and we're going to buy a crap ton of disks. We're going to literally duct tape it. And this guy, Sanjay, who just started a new company with GF Team, he's going to write, like, he basically wrote the precursor of AWS, you know, like the S1. Like, he literally, 10, 15 years ago, before Amazon did that, he did, like, an inside version at Google.

And he's like, Sanjay is going to run software. And there was even, like, software that checked, like, we basically use such cheap chips and disk. It failed all the time. And it, like, pissed people off. They were like... It's okay, we'll just write software. Like there was literally like somebody whose job was to write babysitter software that basically knew when things were failing.

And then somebody is like run to the data center, 10 more disks need to be replaced. Literally people would go with drives and like they would like plug the drives. And that's like early Google days. Like nobody like rational would ever do that. But then Google fucking scale like way faster and way more economically than people imagine. Have you figured out, like, when is it a good time to do something like that? Was it, so there was a reason that they built the servers differently? Well, that was the more obvious thing.

Then let me give you the more batshit crazy example, is that there was a moment, like, one day, like, Larry and Sergey, like, look, I think one of the biggest threats to us is all the knowledge captured in books. What if somebody captures it? Because we are only working with knowledge that's already on the internet, on the internet pages.

There's a lot of knowledge that's not on the internet. And there was a Skype work project for a whole year where they took a bunch of 10 to 20 people and said, okay, you're going to basically come up with a scanner that is insane. It has to scan 10,000 books a day or something like that. I forgot. It's some crazy stat. And they literally spent a whole year on it.

I didn't know any other company where, first of all, rational people would go into a room, let alone like, everything that you're asking me is virtually like impossible. Like no fucking way it's gonna work. And they made it work. And then it kept happening over and over and over again. Like one day they come to Google and they're like, we bought a satellite data company.

Why we need a satellite data company? Became Google Maps. You know, like one day we came to work. 96 people of the world, percent of the world uses search.

98% use email. And one year later, like six months later, Gmail was born. So it was beautiful. It was these moments of such extreme clarity where everybody realized, and by the way, not everybody agreed, but everybody realized it's important. And even though we didn't figure out monetization or it could be useful, 10 years later, they were not afraid to take these huge bold bets.

And you mentioned something 10X. I don't know if that's what you're talking about. You have this like 10X filter or framework that you kind of use. So what is that? It's very simple. It's just something that it was like Larry's mental framework. I had many times where he asked me something really difficult and I'm like, shit, I really don't know how I'm gonna do it.

It's very tough. But he basically told me, look, I have this 10X mentality that everything that you do has to be at least, by the way, at least, 10X is not like maximum, it's like minimum. 10X faster, 10X cheaper, 10X better, ideally all three, three orders of magnitude. And he said, first of all, if you do that, whatever you put out is going to matter, right? Like, if basically I say that Apple Watch I can give you for $1.10 to cost, you're like, fuck yeah.

Like, let's get the watch. Like, of course I would want to pay $1.10 to price. Or can I get you a watch that has 10 times the battery life? you're like, God, please, I've been waiting for this. Oh, action of notification, 1% battery life. There you go. There you go. So first of all, it is definitely going to fucking succeed. But the second thing, the only way you can do that is you need to be batshit crazy and think of a very creative way.

Because if that was easy to do, That would have already been done. So the only way to push beyond convention and force people to outlier thinking is to ask them something that is so difficult that they have to completely unwind and unbuild like their mental framework and then recreate it again to make that happen. And it's almost like you almost can't have the framework.

No, you have to start from absolute scratch. There's no way to make it work. Now, it was scary like hell. And then he said, look, the reason why I'm doing it is because if I told you, hey, Aydin, 20% would be great, you're going to use all standard methods. If you basically said, I know how to make it 10% better or 20% better. Because you're doing something that is not game-changing enough where the standard method is going to scale.

But if I'm asking you for 10x, the standard method is not going to scale. Yeah, because you might just make this 20% smaller and it just costs 20% less. And there you go, like solid it. Or whatever, like you give like a little bit more battery space and because you have battery, like it can last like 20, but then you have this more stress on your wrist, right? Yeah, like it like overheats more or something like that because you made the battery bigger.

Yeah, yeah. And it feels like maybe that ties back to when Felicia's kind of had a lot of success investing in like outside of the... the bubble founders outside Silicon Valley. Is that part of the success of a company like Hanyun, Canva, Shopify? Is it they're not in the conventional tech bubble in way of thinking about things? I think the answer is yes or no.

I mean, look, I've still seen Google-like elements in those companies. I remember... My first meeting with Shopify, Toby was telling me how excited he is when he had only like 40 or 50 engineers to take two, three of the best ones and create a real-time data warehouse. And he's like, they're gonna work on something that's gonna make no money.

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It's gonna take a lot of time and it's like his best talent. But then the infrastructure is so important that it's going to set up the company for major success. The only other people that I knew that were crazy enough to do something like that were Larry and Sergey. They did things that were very unscalable, but also very important, this 10X mentality.

And then I went to Adyen, and the reason why I found Adyen is because I found out even Google and Meta were having major issues in countries like Brazil, couldn't process payments. The financial system was too complicated. I'm like, well, did any company figure out how to do it? They're like, yes, there is one company, it's Adyen. And most people didn't know about it because they powered Braintree in the US.

So people just didn't realize this company even existed. In fact, my favorite story is Adyen was a special company, but when they were first getting announced in the US, I called Wall Street Journal. Wall Street was like, we don't have the company in our database. We don't even know it exists. I am not making this up. It's a real story. I was so proud.

I freaking found an investment that Wall Street Journal doesn't even realize where the company exists. Talk about being a contrarian, right? But all of these companies, I mean, the Adyen team had like a hundred year of payments experience. What they realized was like a lot of payment stuff. Like if you take the Google approach, it was all old rails and nobody like freaking wanted to change the old rails.

We're like, fuck this. We're going to do the new rails and we're going to do something that we always wanted to do, but couldn't do in the old, like, FinTech companies, we're going to build a new breed of FinTech platform. And it was amazing. So was there a common reason that a lot of Silicon Valley investors, maybe, or like the top, quote unquote, miss some of these opportunities outside of the Bay Area?

I think it's much easier to say we're going to invest in the Silicon Valley version. You don't have to work as hard. There is less risk. Nobody's going to blame you if it goes wrong. Like, well, you back some amazing Silicon Valley founders. Who's going to tell you that you were stupid to do that? It's definitely more risk. It's definitely more work.

It's definitely more suspending of disbelief and having more faith. But to me, it's more rewarding. The journey is the reward. I used to tell my kids when they were very young, that is just like Indiana Jones, except that I searched for these amazing companies that are diamonds in the rough. That's my true- Indiana Jones. Yeah. I'm like, he looks for treasures, I look for treasures that happens to be companies that most people don't realize how special they are.

Yeah. And you've talked a lot about being a generalist investor. So a lot of people will say, oh, you should specialize. Generalist, you don't know what you're doing. You don't have the expertise. You overlook things. You get too excited. So what do you think a lot of people miss on this sort of like generalist versus specialist debate? Why is being more generalist generally outperform being a specialist? I mean, we have the data to prove it.

So I've made, myself alone, probably about 250 investments. We have well over 400 investments. We have 55 unicorns, which probably doesn't matter today. Nobody cares about a billion mark anymore, but- Yeah, you can start a company- We have roughly 20 IPOs and more. So we had some decent successes. We had about like 160 M&A exits, and not a single one of those companies was led by an expert.

Not one. Hundreds, dozens of companies, not a single one was led by a subject expert. So this argument of specialists saying, if you're not a specialist, you're not going to understand it. I think what ends up happening is if you're a specialist, you are so deep in subject matter that you're going to look at like batshit crazy way of doing things and you're going to say that can't be done.

Now, there is also benefits where you're really smart and you can find companies. So there are multiple different arguments. One, sometimes when you're an expert and when there is like a crazy way of like outlier way of doing things, you're going to say, no, it can't be done. It's easier to say it won't work than say it will work because you are so deep.

You've been trained for 20 years. Now somebody is saying all those 20 years and the experience you had and the thing that you learn is wrong. It can be done this way. It's very against human nature to say yes to that. Versus if you're a generalist, you know what? I'm not a cheap expert. I can say, wow, this is a new approach. I can see why it's going to work.

Let's fucking go. And look, we're not stupid. We do diligence. We obviously understand the market. We know the things that makes a company special. I do think that the generalists have a much larger playing field. Like I kind of think about a tennis example, like we're on a tennis court and the specialist is like, I'm going to hit the shot and I'm going to thread the needle and I'm going to put it like right in that little area where like, you know, close to the line.

And the margin for error with that is really small. With the generalist approach, I'm like, you know what? I can hit the ball on this court. I can hit the ball on the next court. Like I have the whole court. And in fact, I have seven different tennis courts. I have a lot greater margin of error. Now, I also need to choose where to play and where to place my shot.

But I have so much to work with. It gives me a lot of margin for error. I think I'm going to be much more likely to make the shot. And I have this also contrarian attitude that sometimes like one of the things that I learned about being a generalist investor is that there is a lot more common about companies that we have in different verticals.

So the argument is like, oh, Shopify has nothing to do with Adyen, it has nothing to do with Rovio. One is a gaming company, one is a commerce company, one is a fintech company, now we have a defense company, we have a chip company. But I like to argue that all of these founders had very interesting common threads. They were all outlier in completely different businesses, and they did some very simple, crazy things that might not overlap one-to-one, But I think understanding the outlier nature of these companies and founders trained us really well to pick other ones in different geos and different industries.

And by the way, we did not invest in Canva because it was in Australia. We thought, wow, this company is going to change creativity forever. It just happened to be in Australia because there was an ex-Google and ex-Meta team from failed products, and those engineers really wanted to prove right. There was an incredible founding team with Melanie and Cliff and also Cameron.

And they were like, hey, let's take these engineers and build something great. And the engineers wanted to prove they were not losers. there's kind of this like almost you, there's like an overlap of different specialties, like sector specialties that was in something like that, like Australian focused investor or design focused investor or like a cloud investor or something like that.

And if you, or in all those like different mega trends kind of all coming together, whereas like, you know, if you look at sort of in um in isolation maybe you might say like oh design isn't big enough or like you know we've seen like in australia this won't work or something like that or but when it's i feel like there's a lot of cases like the best companies it's kind of overlaps a bunch of different dms or like you know kind of like fills and they kind of like create a new market or like create the need for a new expertise in a way i don't know i don't know if that's if that's like fair to say I mean, look, I think part of it, it comes down to in an outlier business.

I think even if you look at like sports, for instance, if you look at like all the quarterbacks or whatever, like pick any sport, I don't know what your favorite sport is, but the very top echelon, those people are different. than the others. Everybody's good to be in that league, but then if you look at the people that go to the highest level, the playoffs and even beyond, the ones that are in Super Bowl, they are absolutely a different breed.

And so what I basically learned is if you're an outlier business, but your business is like, we're only going to look at companies in Australia. There's been a lot of VCs that were like, oh, we're Canadian VC. Well, how many of them invested in Shopify? Like, oh, we're like a Finnish VC. How many of them were in Roreo? You know, like, so there were so many instances and there was like Blackbird famously from Australia and Canva because they were like, wow, like we're supposed to invest in Australian companies.

Thank you Canva for being here. But most of the time, the local VCs like don't have a large position or they actually don't see it because they're just basically like doing something different. They're like, hey, our mission is to invest in Australian companies. No, your mission as a VC, and this is the generalist dream, is like the very best companies in the world, like regardless of where they are, versus if you're a specialist, like, oh, I love the world and I'm an optimist, but I can only invest in like FinTech companies, or I can only invest in consumer companies.

And what if something happens that's no longer true? What are you going to do? Yeah, right. I can see like, oh, you know, we're fintech, but we're B2B. We're not consumer. Or, you know, we invest in Australia, but Canva, you're trying to go to the US. So I'm sorry, this isn't for us.

I think one thing interesting with Canva, people said you were crazy when you invested because I think the revenue multiple was like 100x or something like that. I'm not sure exactly what the number is. So is it super important to focus on the valuation? Like what's the thinking around like... When do you bend the rules? How do you price a C round, a series A, even if it's like a series D? How do you think about the valuation of these companies? I studied Charlie Munger and Warren Buffett a lot.

And they talk about this concept of one of the secrets of making great investments is to have a large margin of error. In the beginning, they were buying the companies cheaply. And the margin of error is you're buying it so cheaply that you're almost guaranteed to make a return. later on they're like quality assets, but we're gonna find it when the quality asset is distressed or like right at the perfect moment.

It was their formula. So everybody thinks like, oh, like to be like them, you need to copy. No, you just need to understand that concept and apply it to your specialty. So the way that I think about it is look, We have one-in-one business only, and our business is not called invest in the cheapest company. Our business is not called invest in lowest valuation.

Our business is supposed to generate the best returns. The way to generate the best returns, you need to have the company that is the fastest growing. To be the fastest growing company, you need to be an outlier founder. Do you think an outlier founder is going to want to give up his shares very cheaply? They're not stupid. They know that they are the best, so they're going to demand a premium valuation.

So that doesn't mean that every premium valuation company is going to succeed and become a huge company. So the way we think about success and margin of error is that I want a company with a growth path so promising, I like to use the word 100x. We talked about 10x. When I look at a company, the very first thing I ask, is there a true 100X revenue growth potential in this company? Grow 100X revenue? 100X.

So if I'm wrong and the company grows like 50X and I paid like 2X, I'm still going to get 25X. So I'm not even saying 5X. I'm not even saying 10X. What I'm really looking for is a true 10X potential. Now, I know it's pushing it a little bit. But that's why we choose the markets that we choose. That's why we choose the funders we choose. It's like such special combinations and slightly also get the timing right.

And so then, look, people, I can tell you, even from our own data, you look at all the companies where we have the highest ownership, where we got the best valuation, none of them have made it to the top. And every single one of our outlier companies, oh my God, like we barely eat like a 1% ownership. Like the valuation was horrible. Like I was having heart attacks.

We paid like 700, like multiple for super base and everybody thought we're absolute effing idiots. And then you look at it and the company grew like a thousand X, not even a hundred X, thousand X. I was off by a 10 X, all the hundred X growth goal. How can that be not great? Like they are missing the whole fucking point. The whole fucking point is to find a company that's gonna grow like not even a hundred X, like thousand X.

And then it doesn't matter what price you paid. You know what I mean? Like the founder is not gonna tell you my company is 10 billion when he has like a hundred K revenue. It's going to be expensive, but it's going to be expensive with a mad function. So if you basically pick a company in the right place at the right time, that has so much growth function, then valuation becomes absolutely not important.

And if you're so hung up on the valuation, you're always going to miss those outlier companies. The same thing happened to Google. They basically said to PhD students, people are like, it's never going to work. Notion said, by the way, we're the only VC that invested in Notion and Canva. Notion engineer, I remember Ivan, now it's at scale, every VC wants to be his friend.

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We basically wrote them the first check on the back of a napkin, right? Like, and then Canva people said, oh, it's Australia, Sydney. Like, what do these people know about scaling a company? It's a design company. Look at Adobe is like a $200 billion company. And what's going on today? You know, like it's totally different. So people always look at all the things that can go wrong instead of all the, like the one thing that can go right that would make this an incredibly large company.

And then Canva became very large and it wasn't about the hundred X multiple. We're like, oh my God, the true creativity company does not exist. There is basically Microsoft PowerPoint was a piece of shit. And then there's Adobe, which is great, but it's so complex that you need a university degree to run the product. Yeah. It's kind of a different product in Canva and like different customer that they're going after.

But the point is that everybody in the world wants to be creative. Do you want to feel like dumb when you use a product? Like the first thing is you open Adobe. I don't know what the fuck to do with this product. Yeah. I mean, I did. I opened Photoshop. I mean, wow. Like I need to go back to graduate school to learn Photoshop. I mean, yes, people learn it, but you just want to create.

And that's something that I learned at Google. When you came to Google, there was one button. There was no other stuff. You just search. You just search. And you know what? The result is fucking great. I love it. That's it. That's what people want. Give me the one button product. And so that's why I'm like, Canva Vision was really great. If the founders execute it, do you think it's really difficult to execute? Like they have this killer crack team of like, it's Google and many, they have this beautiful idea.

And I'm like, I think they're gonna execute. And then next thing we know, the company goes up thousand X in sales in eight years. Yeah, well, I think too, when you just look at,

you don't look at the data per se. So like, I feel like there's this one guy who's been saying open AI is on like the verge of collapse, financial collapse for like a couple of years now. What's his name? Ed Zitron or something like that. Yeah. And he's like this journalist. He's like, does these really long exposés of like, you know, I've looked at the numbers, like open AI is like six months from insolvency.

And he's been saying this for like a couple of years. And, But it's almost like you can look in isolation of, you know, wow, Facebook paid a billion dollars to acquire Instagram. That's never been done before. Like a billion dollars for like a photo sharing app. That's the worst deal ever. It was the best deal actually. You can actually make a lot of money from the photo sharing app.

Or Google paying a billion dollars for YouTube. They're making like 10 billion in profits now a year. Off of YouTube? Off of YouTube. Yeah, I guess it's just it's like to the founder making like a bold bet of like doing the real time data, doing like the we'll acquire YouTube or we'll build our own server because it does X, Y, Z. Yeah. Do you have questions? Do you have a favorite like founder, maybe investor or historical figure that you've gotten a lot of inspiration from? Could be an athlete, too.

one of the historical figures that inspired me the most is actually Benjamin Franklin. So I went to Penn in grad school, but the thing that I love about Benjamin Franklin is how many different things he has invented or innovated. He started a university. He started a hospital. He did all these crazy things. It's like one person. Didn't he negotiate France also? Yeah, he also did that.

He also did that. I mean... I just want to be like 1% of Benjamin Franklin. Like I'm so inspired by him. And one of the reasons for that is because the reason why I do this job and I love this job is I'm an eternally curious person. And I just want to keep finding like, I'm not starting these companies, but I want to be part of their journeys.

I want to find these founders that remind me a little bit of Benjamin Franklin. They want to do these insane like, and I want to be part of that journey, and I want to repeat it over and over again. I just love that rush. I love the journey. By the way, the journeys are never perfect. There's also really tough moments in the journey. It's emotionally taxing.

I love every minute of it. I don't just love the goodness. I can also take the badness.

So I think Benjamin Franklin is really inspiring. And he basically pushed humanity forward. As a result of the university, he started 250 years

hundreds, thousands of students got educated and got really smart. And look at like what they have done collectively as a result of his innovations, like science's progress. We negotiated whatever, like treaty with France. Just think about like how, like even just one of those things would be important. He's done like dozens of those things.

It's just super inspiring is that we have this one life. And sometimes I think we think of it as in a very limited way. Like this is like the little box and this is all I'm going to do. And all my dream is all my life. I'm like, no, I do not want to be in that little narrow box. I'm going to invent my own box. This is the box and I'm going to create it.

And it's going to be a lot bigger and it's not going to have these narrow lanes. And I love doing that with founders. So whenever I'm like with a founder and they're like, this is the dream. I'm like batshit crazy. Love it. Let's go. I mean, that's like the point of, of starting a startup. Yes. Kind of the point of venture capital is like, is funding just doing kind of crazy shit and maybe it will work.

And like, what happens if it works? Kind of the point of it. Maybe, but I think the founders also have kind of like a good idea, you know, like fair. Yeah. Yeah. Yeah. There's like a little twinkle in their eye. Like, yes, there's a lot of risk, but there's this little thing or two. And then next thing you know, some really amazing things happen.

Next thing you know, you got Google and Canva and now you're in Shopify. The list goes on. Yeah. Well, cool. This has been a lot of fun. Thanks for coming on the show. Thanks for having me at your office. Thanks, Dana. Appreciate it. Thanks for being here. And thank you to this episode's sponsors, Monaco, Flex, Clerk, and Numero. If you like this conversation, share it with a friend who's raising their first fund or anyone who still thinks the playbook that got them here will get them there.

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