Brian Singerman – Investing in the Best Founders - [Invest Like the Best, EP.127]

I know firsthand how complex the tech stack is for asset managers, and seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount, and more risk. Ridgeline offers a better way forward, one unified platform that automates away all that complexity across portfolio accounting, reconciliation, reporting, trading, compliance, and more, all at scale. Ridgeline is revolutionizing investment management, helping ambitious firms scale faster, operate smarter, and stay ahead of the curve. See what Ridgeline can unlock for your firm. Schedule a demo at ridgelineapps.com. Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com. Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast. My guest this week is Brian Singerman, a partner at the venture capital firm Founders Fund. Founders Fund is widely considered one of the top VC firms and its partners are known to have diverse investment strategies. Brian invests across industries and focuses on backing exceptional founders. You'll hear right off the bat that he cares about moat, market, and strong execution. I love his point that the only way to become a good investor is to do a lot of investing. He describes himself as an investor who uses his gut a lot, which took me a while to get used to in our conversation. But I have to say that at the end of this episode, I felt refreshed and generally excited to keep putting in reps in my own way, both in the podcast and in quant research settings. I hope you enjoy our conversation. So Brian, thank you for doing this with me. Your perspective is going to be a neat one because of the variety of different sectors or industries that you've been involved in. I know you are famously agnostic as to where you invest. Maybe that's a great excuse to begin by talking about what the kernels that you're looking for as part of your investment process. If it's not a top-down thesis in healthcare or something else, what are the things that you're looking for when evaluating a business at this stage? Market execution. It does not matter the sector. It does not matter the stage.

We'll write checks anywhere from $100,000 to $300 million. Totally stage agnostic within that. But always I'm looking for, okay, does the company have an existing moat? Not one of these, oh, if I do this and this and this and this and this, then I'll have a moat. But does it have an existing moat? Is it a big enough market to have an impact on a, our latest fund is about 1.4 billion or so. So it's got to be a big enough market to support a large return. for that kind of fund? And does it have a founding team that can execute from moat to market? We only invest in founding teams, founding CEOs. Are they good enough that on their own, they can take this from whatever moat they have to the big market? So moat is an interesting concept extended from 100K all the way up to such a big check size. At 100K, I guess it's this, maybe you think it's the same throughout. So maybe describe in more detail what a moat looks like. Totally open to any sort of unique definitions of, but maybe it's the team has certain inside insight, especially at the early stage, or this is the only team that could potentially pull this off. Maybe an early stage moat to something as when we invested in Airbnb, it was kind of posted already having a huge international network effect the likes it would. which we had never seen before. So that's a moat. What's the most memorable initial moat impression you've ever had? We made the decision to put 150 million into Airbnb in like less than a week, even though it was one of our largest in history, because that was the clearest moat we had ever seen, maybe since Facebook, but pretty clear moat also. So other examples of moats are SpaceX. It's like, okay, good luck. Go build the rocket factory yourself. That's probably not getting cloned. I love things that aren't easily cloned by the talented software companies we have in Silicon Valley. What do you think about the requirement of capital? So SpaceX makes me think of obviously a mega capital intensive business. Do you care one way or the other about how capital intensive it is? Is that a good proxy? We care, but some businesses require very little capital. Some businesses require a lot of capital. It doesn't really matter. The question for us is always, I mean, how much money can we make on this investment? Sure, sure. So even if it requires a lot of capital, if it means we're going to...

make a lot of money off of it, then we'll consider it. The evaluation of the market, is that a science? Is it an art? How do you feel about that? I think all of this is an art. But Founders Fund, we have a very small investment team for the amount of money under management. But it's very important we all run our own strategies. I do not know how to do spreadsheet analysis. I've never looked at a model. in my life. I have no idea how to do that stuff. For me, I'm very gut driven. Other people are absolutely numbers focused. And that's totally welcome here. You can kind of have whatever strategy you want. For me, market analysis or anything else for that matter is going to be purely an art. Whereas for some other people, they might like do rigid analysis on the market sizing and maybe do it in a more scientific way. What's the rate of improvement of your gut's ability to evaluate a deal? And how does that manifest in terms of like the speed with which you evaluate something? How much does that change over the years? A lot. The only way to learn about investing is by investing. We have an awesome team here. Even the junior members are everybody can drive investments here of a certain check size. And I think that that's kind of the only way you learn how to do this. And it's the only way to actually get your gut going is by making investments. You know, on the positive side, if we make an investment, if we make a couple hundred K investment and it goes to zero, it doesn't really have that much of an impact on us. Venture capital is all about upside maximization. You have to train your gut by making investments, period. When it comes to the team, you know, something obviously you need a strong founding team that can persevere probably maybe is one way of thinking about execution risk. Are there common attributes that you're looking for in founders? And if so, how have those manifested historically? What's shared across them? Honestly, we've had authors come in to try and help us put that into words. What is a Founders Fund founder? We've never been able to... put that into specific terms. There's certainly certain personality types that I tend to be attracted to. I don't feel like I'm a good pure mentor. I'm attracted to founders that know how to run their business. I don't know how to run a business. I'm an investor. I'm attracted to founders who really know how to run their business or looking for strategic soundboarding or looking for somebody who can do honest back and forth with them, but not the types of founders that need actual help running their businesses. And so that probably plays into...

what I'm looking for in a founder. But again, other people are different. So I'm always interested in, especially for somebody, like you said, the only way to learn how to be an investor is to do it a lot, in three kind of major types of winds of change. I'd just be curious to get your take on each of these three. So the three will be economic, technological, and social. So starting maybe with technological, what do you think are the most significant changes, let's say, in the last couple of years that are affecting either the opportunity set or the way that you think about investing, if any? I mean, there's the standard answers like the prominence of the cloud and stuff, but I'm not sure that impacts how we think of things specifically because I'm what I call a purely reactive investor. And to do that well, I think you have to be open to anything that comes in the door. So I don't assume to know what the big... forces are. Yeah. No, that's really important because if something comes in, if I have these preconceived notions of what, oh, this thing is a trend, I should look for that or built on this technology or this technology is enabling this. No, I mean, I'm always looking for like, why didn't this exist before, right? And sometimes it's a technological answer. Sometimes it's a, I never thought of it. Nobody ever thought of it before answer, but I'm very open to anything that comes in the door. And so I'm hesitant to talk about specific technological changes that lead to better companies. Because I still always believe it's the best founders lead to the best companies. What about framing it slightly differently, which is not what are the forces causing you to make your investment decisions, but rather maybe just trends that you've observed in the last year that are distinct from years prior in terms of what you're seeing? Again, if any, and I may be trying to force the issue. It's a totally fair question. It was more prominent. In 2008, we would see... social network for dogs and social networks for dead people and social network for whatever, right? Just because we were the Facebook guys. And so, of course, if you liked Facebook, you must love this. And the answer is, of course, always going to be, no, we actually don't like that because we're in Facebook, right? And if we believe that's such a huge company, then we don't want to see clones of it or byproducts of it. And so, I mean, trends of the last...

couple of years or this is going to sound so derivative crypto is of course a trend of the last couple of years and bottoms up enterprise sas is a trend and rockets are actually a trend these days in space technology and i mean i'm always just looking for great companies, I'm not paying attention to trends. So then maybe an appropriate place to go is really the sourcing of the deals, right? So obviously, you're in a good position for that. A long, incredible track record, a lot of cash that you can allocate to great founders. But talk about the nuance around where this stuff comes from. I'm always especially interested in the $100,000 type check versus the more mature businesses. Anything that put $100,000 check is because I know the founder personally. and think they're really good, period. It doesn't matter. At that stage, it doesn't matter what they're doing. It's just kind of like, eh, the center is ridiculously good. Of course, I'm going to put in a check here. But sourcing for not those checks, sourcing for different kinds of companies, man, that is one of the biggest areas that we need to work on. I think probably every firm needs to work on. Venture capital comes down to, do you see the right deals? Can you pick the right deals? Can you get into the right deals? Part four is how do you help the company after you're in? I actually think that part's... the least important part because the best founders can do it themselves. Exactly. But parts one, two, and three, see, pick, get in are equally as important. There's no one part more or less important than the other. So I think that, again, for me, the gut of picking, I think has been honed and it's pretty good right now. So I'm not worried about my picking skills per se and getting in. I mean, that's a lot about brand. I think we're pretty good at that too. But do you see the right stuff? That is all about network. In fact, brand is kind of a negative there. Because then you're seeing a lot of noise. But I'm obsessed with keeping my network. For instance, one of the things I'm going to ask of you after this interview and reasons to do it is all like, hey, you know, the kinds of stuff I'm looking for now are the kinds of founders, the kinds of crazy ideas, the kinds of if you see anything, please send it to me. And that's critical. It's kind of we are a very small team. So in order to source properly and see everything, we just have to have interesting, unique.

networks. How do you stay on top of that? Because on the one hand, I would think like the breadth of the network is key. But on the other hand, depth of relationships with say me is equally important. Like how do you balance those? You're always the first thing that you send to me, I will absolutely look at. If it's terrible, maybe I'll look at the next thing you send to me a little bit less. If it's awesome, maybe I'll look at it even more. But this is the case. You're always doing kind of a weighted graph on your network. But I absolutely want to give it a shot because you probably do see a lot of interesting stuff that I absolutely do not see in my bubble in Silicon Valley. And so it is critical to me that you feel totally welcome to send me stuff. And then I'll give you actual feedback on why I do or don't like it or why it might not be right for us. we do this. I'm always interested in like the numbers and ratios in these sort of funnels. So in a given day or a given week or something, is it hundreds? Is it thousands? How many ideas are you evaluating? And maybe what percent of those make it through stage one, whatever that level is? I only do meetings from direct network connections at this point, if I don't already know the founder. There's never going to be a response from a blind email to me. Because one of the key things that you need to be able to do as a founder is at least network. Network to one of my portfolio companies and have them intro you to me. If you get a portfolio company founder introing you to me, you will always get that meeting. But that's what you kind of have to do. I have no idea how many blind emails come in because we kind of don't care. It gets filtered. In terms of direct connection emails, probably... 5 to 10 a day is probably the non-exaggeration answer. The true answer. It's not hundreds of people who say, oh, I get hundreds of network connection emails. No, that's not that much. It's not one either. So it's probably like 5 to 10 a day of direct network. Hey, you should meet this company kind of things. And of that, I probably do. Most of them get either somebody else on my team is better suited for it or it's not right for us for whatever reason. So I probably do.

I would say of those, I probably take five to 10 a week. And of those, probably zero to one result in an investment. I'm curious about the qualities that you like at, we'll call it the email or deck stage and then the in-person stage. And if it's literally just the communication of those three things. The deck stage is just, the only reason I would look at that is. you know, before an in-person meeting is to see if there's somebody on my team who would be better at taking a look at the company than me. Otherwise, it's all about the in-person interaction. I don't even, I try and never do phone meetings at all anymore because you don't have that level of interactivity on the phone or video conference that you do in person. And that's critical for my investment decisions. Is it fair to call the meetings that you do just a stress test of those, you know, market moat execution ideas? Yes. But it's mostly about the third one, which is get a good sense of the founding team. Do I think that they are A plus caliber founding teams? Are there any things, questions, like specific questions that you return to again and again to do that? Or is it just purely organic? No, I think I'm pretty good at understanding what the strengths and weaknesses of a company are at this point. And so I kind of usually just blanket give on good faith. The parts that I can tell the strengths of the company, I don't even want to talk about. And then I kind of try and dig in on what I see as potential weaknesses. And based on how those interactions go, it's purely about how the interactions go. I'm not sitting here knowing the answer or knowing how it's going to turn out. But I do want to see how the interactions go when I talk about the weaknesses of a company with a founder. What are some examples of weaknesses? Because I'm thinking back to what you said about the only thing that matters is upside, which makes me think like you should focus on what is the strength, but like how.

Like what are the dimensions of the strength? Because that's going to be the source of the upside, I would think. Maybe weaknesses are just a way of like mitigating the risks to those strengths or something. No, no, no. It's all about do I think this is an A plus founder, period. And an A plus founder knows how to like own the weaknesses and knows how to account for them via some other way. Maybe they've got a team member who is really good at that kind of stuff. Maybe they've thought that through and have some other answer. Maybe they're thinking it through on the fly during our meeting, but I get to see how they think through things that they don't really get. I have to discuss usually like, you know, on the fly. And that's a good thing. But that part is just about, it's less about evaluating the business and more about evaluating the founder. How do you think about price? So something you read a lot about that, I mean, just in general, equity markets in every way, we can look at them are roughly as expensive as they've been in a long time. Venture seems from the cheap seats to be sucked up into that a little bit. And obviously entry price is a huge determinant of ultimate return. So what's your take on today's price landscape? I mean, there's, again, no one right answer here. One company may be ridiculously expensive. Another company in the States might be ridiculously cheap. That being said, we are price sensitive because price determines upside. Here's the things I don't care about. Ownership percentage. I think that that is the worst. metric a venture capitalist can focus on. And I know a lot of firms do focus on it, but I've never understood that. I'd rather own 1% of Facebook than 20% of most other companies on the planet. I don't ever focus on stuff like that, but I do focus on price because that is where your upside comes from. And so I don't ever focus on any sort of other terms, any sort of downside protection terms. I don't care if I can get a better price. I mean, I've bought common stock at way cheaper than the preferred stock. And I'll do that all day if I can, if it gets me a way better price. How do you think about your time allocated as a board member? So there's a couple of companies that I saw you're the board member of that I'd love to ask about in a couple of minutes. But you mentioned before that maybe your strength isn't in helping companies other than as like a sounding board. How do you think about that time spent as positive versus just...

the opportunity cost of it instead, just looking for more businesses. For a company that we've invested in, I am much more comfortable going out to dinner with the founder and just talking strategy to the company than I am in a formal board meeting. I'm not your deep financial analysis board member or your governance board member or anything like that. And so I'm just as comfortable not having a board seat and just going out to dinner with the founder. I do like that part. That is probably my favorite part of what I do actually is... Once we've decided that this is an A-plus founder, we want to make this investment, I love just hanging out with them. I'm totally happy if my time spent with the company is going out to dinner with the founder. Hey, what are you thinking through? You want to strategize? I'm a gamer. So let's play that strategy through. Let's discuss that. Let's cut through the crap on that versus a formal board meeting. Maybe talk about, you mentioned Eric Ries before. I'm really interested in the model behind long-term stock exchange. Talk about your thoughts there, what you view as so interesting and attractive about that business. You can probably answer that question at this point. One of the things I found so attractive about that business is I think Eric is a top tier founder. And so if I think Eric is an A-plus founder, here's what I love about that. Eric is an A-plus founder. This is not the kind of company you see every day. In fact, I don't even know how many companies I've seen in my 13-year whatever career doing this, but it's something close to 20,000. And this is the only time I was ever pitched on a new stock exchange. So I love that if it's unique, run by a ridiculously good founder who is the right founder for this thing and for a thing that could have tremendous upside. So Moat is, it is highly regulatory sensitive. We are absolutely playing within all of the rules with the SEC and every other government organization that has a thing to say here. And so you need a founder who can navigate that properly. The market is, very large. And Eric has shown execution. in lots of areas of his life. So pardon my thick-headedness if the answer here is just founder again, which I realize it will be in a lot of these. But what I'm curious about is, especially on some of the healthcare type stuff, so like StemCentrics and Oscar Health, a tangled, messy world, that whole market is, at least for me, difficult to understand the ins and outs of. How much time do you do industry-type research trying to familiarize yourself with the goings-on just as a checkpoint on the founder's ability to get through that stuff?

It's a great question and probably not as much as I should. I try and be a really, really, really good generalist investor because I need to be open to anything that comes to the door. as opposed to a proactive venture capitalist who kind of has this vision of what the world looks like and then goes out and finds a company doing that. Like, for instance, Sean Parker is actually, in my opinion, one of the greatest proactive VCs of all time. He would stick his head up and say, oh, Facebook or Spotify. And that's because he had this sense of what the world should look like and then went out and found the company. The problem with the proactive VC strategy is you have this strong view of the world. What if there's not a company doing that well yet? Then are you just sitting there kind of just waiting for that? And I'm not good at that. So to be a good reactive VC, I think you need to be a really good generalist. To be a good generalist means you're not going to be as in depth on everything that you see because you need to be open to anything from oncology to space travel to... social networks, to stock exchanges, to FinTech, right? To health insurance. I mean, it just, it runs the gamut. And so I probably not enough industry specific other than I know if something seems hard. What about other formative flows of information or content that you're consuming outside of? the five to 10 businesses you're looking through a day? Are there writers you like? Are there sources that you return to over and over again? I'm trying to understand what you're feeding the soil that you're working with. Yeah. I mean, I definitely read all of the prorata term sheets of the world just to kind of get a sense of where the rest of the industry is going, whether it's to then be like, ah, everybody's doing that. We're not going to do that. Or, wow, I'm wondering why I'm not seeing more like this. And it's all just, I mean, I talk to lots and lots and lots of people, spend time with lots of founders, spend time with lots of venture capitalists, spend time with lots of people who could potentially give me deal flow. And from those meetings, I'm always trying to gather what's their sense of the world, you know, so we can kind of either know where to go or where not to go. Yeah, it's a really interesting thing, trying to like hone that decision-making ability, especially when it's...

very gut driven. I'm fascinated by that model. Yeah. I mean, I had probably pretty terrible gut during the first few years of doing this. But to me, if you're doing gut driven, not thesis and numbers driven, that's really the only way of doing this. So much of what you said is really just like your own muscle being informed by your own experience. So it's like this positive feedback loop. Are there other, you mentioned Sean Parker, are there other investors that you've learned a lot from their style, especially ones that are more different from you? Sure. I love Kirsten Green because she has a specific thesis focus. I have no thesis focus, right? So the people that can pull off thesis-driven investments are, I think, pretty awesome, right? I like the GGVs of the world because they figured out how to straddle the whole China-US thing. I have no idea what I'm doing in China, so I could never do that. So I love the kinds of investors that have different strategies in mind that seem to pull it off. But most of all, I value... returns at the end of the day. You've got to have really strong returns. We all know where those are for me to respect the firm a huge amount. I'm not into hype. At the end of the day, there's a scoreboard. To me, the scoreboard is not how many tweets you get retweeted, but it's what are your returns and your real returns. How often do you lose at the funding stage where you want to be the investor and they don't pick you? Pretty rare these days, but that's a great question. And that is, again, that's one of the three equally important categories. Like we need to, if we really want something, it's usually, we spent enough time with the founder. We kind of know where we are and kind of where they are in things. So we typically won't lose it at that stage. But yeah, at the times that we do, we need to figure out why. Is there something with the brand? Is it something that we did? Is it the specific person they were working with at the firm? Fortunately, it rarely happens, especially because we're not usually chasing the hot deals. And so there's not a ton of competition. What, if any, cultural values does Peter Thiel instill around here in the partners? I mean, what's really interesting to me, you know, I walk by Keith Verboe on the way in. Obviously, I know he's got a very different process. You've got a very unique process. He seems to be very good. The firm, I guess, is very good at collecting unique takes on things. What, if anything, is Peter?

instill across the board. Neither me nor Keith founded Founders Fund. Peter founded Founders Fund. And so all this stuff comes from the founding kind of attitudes. And the founding attitude at Founders Fund is there's no right answer. There's no one right way to do venture capital. There's no one political belief that everybody has to have. There's not one right way. We are a collection of individuals who we all think are pretty smart or we wouldn't work with each other. We are a collection of individuals that are self-starters, that have our own strategies. And that comes from the founding of Founders Fund. It's like, no, there's not one right way to do this. Maybe talk through the process of STEM centrics. I wasn't familiar with the business until this morning. I'm just doing some preparatory reading for this conversation. It seems like a fascinating business. So I would love to hear the story of you seeing it kind of through the very large outcome, realizing that there's some survivorship bias here, right? It's a huge outcome are the ones you tend to be able to Google and read about. But nonetheless, I would love to hear how it went through your process. Well, the ones that aren't huge outcomes don't actually aren't that relevant to venture capital. Because again, it's not about the downside ones. It's about the winners. And so I met again through network. I met the founder of StemCentrics one day for coffee. I'd seen a bunch of people know that we're interested in anything. So we're not just into tech. So totally open to investing in biotech companies, unlike a lot of firms. So somebody from my network was like, ah, here's an interesting one. So I met the founder for coffee, not expecting much at all. Just because most founders in biotech are not necessarily what I'm looking for in a founder. This blew that away in spades. In fact, the day that I met Brian Slingerland for coffee on our first meeting, I was so blown away. That night happened to be the holiday party at Peter Thiel's house. It also happened to be his one-year anniversary with his wife. But I'm like... wow, we have to get going on this. And we don't have anything such as like, we don't have any such thing as a Monday morning partner meeting. So we just kind of say organic, just meet us. Let's go from there. So I was like, hey, do you want to come to the holiday party tonight? Because a lot of us are going to be there and it'll be an easy way of doing this. So he had to, of course, check with his wife. One year anniversary, right? I don't think, I don't know if my wife would have been as thrilled, but she said yes. And he came and

That started that process of everybody realizing just how special Brian, Scott, and Dan were for STEM centrics in a way we had never seen in a biotech company. Can you describe the business in a little bit more detail for those unfamiliar? Yeah, it was a biotech company that had... that was developing novel therapeutics to treat certain forms of cancer. Yeah, that's simple. So what else has you most interested today other than just all the same stuff we talked about? That's just it. I really want to stress there is no, I'm not, there's no way to even trip me up into saying a sector that I like. I can say sectors that I love personally, but like not necessarily from an investment perspective, we're kind of open to literally anything. I think, you know, our last few investments were in fintech, oil and gas. freight forwarding and chemical engineering and e-sports. Can you say anything about the oil and gas? What that was? I mean, we have an investment, a large investment in a company called Rig Up. Okay. Yeah. I know Rig Up. Yeah. Like a jobs marketplace. Sure. There's that. But yeah. Or defense. We have a large investment in Andurl, of course. Right. And so just. It's really anything. I'm not going to ever get tripped up into saying a sector that I like because I really don't have one. What was appealing about the particular opportunity in esports? That's something that I've just started kind of getting. Well, first of all, just on a personal level, if professional esports was a thing in 99, 2000, I would have a very different career. I mean, our specific esports investment is in a company called Cloud9, which is one of the big teams, or think of it like a holding company for a bunch of different teams across different games. And it was one of the last remaining awesome founder driven. One of these, a lot of these teams in various different franchise leagues have been bought up by Dan Gilbert, the Cavaliers or like the Houston Rockets or whatever, right? We love that this was one of the endemics, one of the awesome like founders and OGs in the space. And it's just by far the most well-run esports organization we'd ever seen. And so I don't know what's going to happen.

within eSports as a whole. I know that it is going to grow like crazy. I know that the average age of somebody who I see it like a League of Legends game is 23, whereas the average age of a baseball fan, I think is this one is 58. And so which would you rather bet on in terms of the and growing? So which would you rather bet on in terms of the future? I know where I would go with this, but no, we again, same thing. We loved the founders. I love the macro, i.e. the market here going forward. And the moat here was brand. Cloud9 is a definitive brand in esports. What game were you best at? Soul Calibur. Soul Calibur. I'm trying to remember that game. Was it a fighting game? It was, yeah. And like a person-to-person fighting game. Yeah, yeah. What character? I mean, I played a lot of Mitsurugi. I used to like, I mean, I won a bunch of Soul Calibur tournaments. And even at, when I started at Google, it said I was a, maybe like seven to 10 people a week were starting at Google. And they would say, it would give you a little blurb about you. And the blurb about me said, oh, was a former US Soul Calibur champion. So, of course, these people at Google, this is in early 2004, were like, oh, we play Soul Calibur. You can't be that good. I'm like, well, yeah, I am that good. I will beat you. They're like, oh, you can't be that good. I'm like, I don't play this for fun anymore. I would only play it for money. And they're like, well, we don't have any money. This is, again, pre-IPO Google. We don't have any money, but we do have these Google shares. So your skill paid off. So I got to play them for Google shares and that was fun and profitable. But yeah, I was definitely quite good at that game. I'm sure I played it, but I'm trying to think like what would distinguish you as good? Is it just reflexes? Is it combinations? You have to know all that and you have to know every move of every character to be at that level. I talked to a lot of our League of Legends players on our Cloud9 League of Legends team and there's something like 150 champions in League of Legends and like they know by sound.

If they hear it on the map, every spell from every champion, no matter what it is, it's just like the amount of processing power that you have to have and the amount of hours put in to even learn that stuff. Soul Calibur was nothing compared to the modern day gamers, what they have to do. Still, yeah, I knew every move of every character and knew what the counter that and could see it coming and know how to play that. It feels kind of like a proxy for your investing, right? Sure. I mean, I was hugely obsessed and won a bunch of tournaments playing like things like Settlers of Catan in like 95, 96. That forms the whole investment thesis is just pure. What's your mode? All these games are like, what are you really good at? And how do you exploit that to win? To me, that's the same thing with a company. Like, what are you already really good at? How do you exploit that to win? What games in the landscape today? I don't know. Do you still play a lot of games? Some board games. I haven't played a new PC game in a really long time. Why not? Just lack of interest? I like watching them. Yeah. I mean, I think the skill level involved in... I like watching professionals play these games. I watch more esports than I watch anything else. If someone has never watched a game before, like on Twitch or anything, what would be a good gateway game to watch? If you're an adult, Counter-Strike. Oh, the best. My all-time favorite game. Yeah, it's by far the easiest of all of the top esports. To grok, like understand. It's so simple. You can totally understand it. You know what's happening and you can understand it. Whereas a lot of these other games, you might be overwhelmed or have no idea. Or you might not be overwhelmed, but it might be boring. Hearthstone is not the most exciting esport to watch. I mean, my favorite to watch, and it's not close, is League of Legends. But I know what's going on. And once you know what's going on, that's like... watching action-oriented chess with team fighting it's like pretty awesome from a both strategic and a tactical level to watch that once you know what's going on but counter-strike is so easy to consume

In terms of memory seared on my brain, playing Dust on Counter-Strike growing up is like the number one memory I have. And of course, I'm not saying I recommend that one for kids, right? But like, sure, for if you're an adult wanting to get into esports and watch something that you can actually understand, Counter-Strike is a great one. Going a whole different direction. I'm curious how you think about the relationship of the firm with LPs and how you express to them your commitment and how much time you spend with them relative to like all the other stuff that you do. Is this... I'm just curious to hear your take on interacting with LPs. Yeah, this has evolved over the years too. I mean, we're fortunate to have gotten to the point where our returns are good enough. So fundraising is important and it still takes up a bunch of time, but it's not the most challenging part of my job. And so we've gotten to the point where we're fortunate enough to have LPs that we like. So we like our LPs. So actually, I'm happy to whenever they come into town. In fact, you probably passed an LP meeting with some of my partners were taking with some of our LPs right in the front room when you came in here. When they come into town, I'm totally happy to meet up with them and talk to them about our latest investments and why we love it or why we love the founders or current thoughts going on around here. So yeah, no, we actually have a very positive relationship with our LPs. They usually just come back for the next fund and the returns are good. That's what actually drives that. That is the most important thing. Yeah, very positive relationship. And I'm always happy to talk to them. Is it any different in terms of how you would evaluate someone that was coming to work here as an investor, someone that you wanted to groom to be a good investor relative to what you're looking for in a founder? So we're not LPs at this point. We're off LPs. We're talking about partner. Oh, it depends, right? Like when I'm interviewing somebody for a junior position, again, this is very different than when we hired Keith. Very senior hire. When I'm hiring for somebody on the junior, I want to know that they're thinking and that they're thinking differently. My favorite question is a pretty standard one that you should have an answer to if you're going into any meeting, any interview at a venture firm, which is what's your favorite company and why? And what company do you love that other people don't? And what company do you hate that other people love? Yeah, better be softball. I just want some interesting answers. If somebody comes in and is like,

well, I love Uber. I'm like, okay, well, why do you love Uber more than everybody else? Like, what is it about it that you love? It's still a fine answer, but what about it do you love more than everybody else loving Uber, right? Like, I want to know, we do like interesting differentiated thought. Again, it's critical to our success because we have people running their own strategies. I'm not looking for people who are going to be clones of myself. I don't think you can do that. I want people who are going to be able to play to their own strengths. And I want to know that those strengths are interesting and different than mine. or endeavors that you partake in regularly outside of board games and investing? Is that not enough? That's funny. Sometimes relationships can be like strategic warfare, I guess. Like, I don't know. I've got a one-year-old playing games with him and trying to get him not to cliff dive off the side of the bed is a pretty big challenge for me right now. Any concerns about literally sitting where we're sitting in this part of the world? ever being a hindrance to what you see and the opportunities being more distributed than they have been in the past. Yeah, absolutely. Stage agnostic, sector agnostic, absolutely geography agnostic as well. Now, we want to invest in only the top tier companies. That being said, we don't know exactly where they're going to come from. Like we spoke about Rigup. Okay, that company is based in Texas. I think it's... Phenomenal company. We've had great companies outside of the US before. We've had Spotify. We've had DeepMind. Nubank in Brazil is one of our top performing companies, right? Totally. So we are very, very, very much geography agnostic. It is critical to be. So that being said, there's Silicon Valley and everything is becoming more distributed, but it's not that it's becoming. centralized in one other place other than Silicon Valley, right? So I'm still going to stay in Silicon Valley because people come through here. You get to talk to more people. As a reactive VC, more people are going to come through my office based here. That being said, I don't believe that all the good companies will start here. It's just they all come here and there's no one other place to go that they are all starting. It's becoming more distributed in some ways. How do you think about that as an edge for Founders Fund and cultivating the networks necessary to get that?

get those looks. It seems like it would be a very different network that would bubble up. And that is one of the things that I worry about, right? For instance, like we don't have anybody on the ground in China, so we don't do Chinese investments because we have no edge there. We have no edge also. We don't see it, but we have no edge. Forming relationships with people on the ground in different places, absolutely critical. Again, one of the things I'm going to ask you out to this interview is please send me anything that you see. where you are that could be interesting for us? And to all of your listeners too, like maybe go through you, but like if there's anything interesting. I don't know. Deal flow is critically important. What about going up market? So are there times at which you feel the best opportunities are public companies, let's say, instead of private companies? Yeah, it's another great question. And we have the ability to do that if we want. That being said, we are always looking for where is our edge. And public companies usually have a bunch of analysts at a bunch of firms covering them at least or somebody's covering them with the same information that we have. So therefore, I'm not sure our edge is strong enough. It would have to be a pretty special case. And one special case meaning like we just know the founder really, really, really, really well or something like that without any sort of inside information. But we just know the founder really, really well in order to be able to pull the trigger on something like that. Because your information edge on public companies is... almost non-existent. Yeah, it's hard to do. Versus with what I do with private companies, you absolutely can have an information edge. These are private companies. They can kind of choose who their investors are. What about financing type? Would you ever get into something credit related or into esoteric stuff like real estate heavy stuff or anything outside of equity? Your upside focus makes me think it's just that. Open to it. It depends on the upside. Not closed to anything. Probably not out of our venture slash venture growth fund, but maybe. We've discussed things like that. But again, we want to focus on where our unfair advantages are. And our unfair advantages are going to come from, we know private companies and we know how to evaluate founders of private companies. My advantage is not going to come from spreadsheet analysis of credit, you know, worthiness and this and that. Last question and then my typical closing one, which is we haven't talked about the dimensions of a business that the founder has to oversee. Those being like,

product, technology, marketing, sales. Do you care much about whether it's a single founder or multiple founders? And how do you think about someone's ability, if it's a single founder, to be a generalist that can do all that stuff? Yeah, we do not have any rules about single founder, co-founders, whatever. It's, again, very idiosyncratic, very company dependent. Sometimes a single founder is the only way a certain company can relate. Elon is the founder of SpaceX. There's nobody else who could have founded that company. Is he perfect at this? No, he needs to. He has Gwen, right? Operating, you know, operating the company. She's awesome. He has a top tier CFO. He has a top tier everything to kind of round that out. So no, no rules on that. But we are looking for the kinds of founders. And this gets back to like what my questions with founders are and covering their weaknesses. We do like it when founders. I mean, I know what my strengths and weaknesses are, and I'm very open about those. I know exactly what those are. I like it when a founder also knows that, and they know that they need to then supplement it, whether it's with a co-founder or hiring a COO or whatever. We don't have any rules on that, but I like it when people know where their strengths and weaknesses are. It makes it easier to play the strategy game when you know what your strengths and weaknesses are. If you think that, oh, I'm good at everything, then... No, that's not. The business is a ruthless world. You're not good at everything. You're going to have people better than you at certain things. Why don't you focus on the things that you are best at and exploit those into winning? That's strategy game 101. So my closing question for everybody is for the kindest thing that anyone's ever done for you. You mean business related or not business related? Because if it's not business related, this is just going to be something is... How about one of each? My grandmother loving me so much. I mean, my parents as well, but my grandmother recently passed and... She was always just like so nice and loving to me. So I think it's like one of those things where you can't put a price on having loving family between, you know, my parents and especially, you know, my grandparents. I was just so lucky that with having that family base and it's tough to put a price. And then you see when somebody doesn't have that and you're like, oh, man, I wish I could level the playing field in that regard. But that is really difficult to do.

I don't know how something could be kinder than that from a personal relationship perspective, if that makes sense. From a business, the kindest thing. I don't know. There's not like a lot of kindness in business. I do appreciate, just like any founder that remembers who their first investor is. And actually, I'm going to give a little bit of a long-winded answer, but it's important. Founders Fund 6, which is what we're currently investing out of, is like a $1.4-something billion fund. So people are always asked, well, why is it important to do half a million dollar investments out of that? And I always say it is critical for us to be still doing seed investments out of this fund. And the reason it is critical is, first of all, they can have outsized returns, fine. But also, founders know who their first money was, period. It's something that founders will always remember is who their first money was. They will tell all their friends, like, hey, these guys were my first money. There's a special place in a founder's heart for their first money. Therefore, it is critical that we be first money and do seed investing, not just for like, because we're nice or whatever, but for the future of our business, it is critical that we do that. So similarly, founders remember that, you know, I always remember who took chances on me. And so from a business perspective, again, I come back to, I met Sean just by like talking about, I was thinking about maybe I'll do VP of engineering at one of his companies. And he was like, no. you need to come here now and was like so sure of that and just kind of pushed that through so quickly that like from a business perspective, that was pretty awesome. And so I'll always remember that. Fantastic. Tons of simple, powerful core themes throughout the conversation. So thanks for your time. Sure. Hey, everyone. Patrick here again. To find more episodes of Invest Like the Best, go to InvestorFieldGuide.com forward slash podcast. If you're a book lover, you can also sign up for my book club at InvestorFieldGuide.com forward slash book club. After you sign up, you'll receive a full investor curriculum right away and then three to four suggestions of new books every month.

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