20VC: Scaling from a $4M Angel Fund to $900M, Why Seed May Be The Best priced Asset Class and Not Overpriced At All & The 3 Stages of Fund Scaling and What it Takes To Build a Firm with Aydin Senkut, Founder and Managing Partner @ Felicis

Aydin Senkut is the Founder and Managing Partner of Felicis. An original super angel turned multi-stage investor, he has been named on the Forbes Midas List for the past nine years (2014-2022). Felicis has been an incredible 16-year journey starting with a $4M Fund I back in 2006, their most recent fund in 2021 was $900M. Along the way, Felicis has invested in over 45 unicorns including Adyen, Canva, Shopify, Notion, Opendoor, and Plaid. Prior to starting Felicis, Aydin was a Senior Manager at Google where he spent an incredible 6 years. In Today’s Episode with Aydin Senkut: 1.) The Founding of Felicis: How did Aydin transition from a successful angel to the first $41M institutional fund with Felicis? How did Aydin's mindset change moving from investing personal to LP capital? What does Aydin know now that he wishes he had known when he started Fund I? 2.) Fund Mechanics: Building a Portfolio Why does Aydin believe portfolios need to have 40-50 positions to be diversified enough? Given Aydin being multi-stage, how important is ownership on first check for Aydin and Felicis? Does Aydin believe it is possible to really concentrate capital into your best performers? How does Aydin think through outcome scenario planning? What is his biggest takeaway from this? 3.) Aydin Senkut: The Investor What have been the biggest changes in Aydin's style of investing over the last 16 years? What was Aydin's biggest miss? How did it impact his mindset moving forward? What is Aydin's biggest insecurity as an investor today? How has it changed? Where does Aydin still believe he is weak as an investor? What is he doing to combat it? 4.) The Venture Landscape: Why does Aydin believe that despite the pricing, seed is the best risk-adjusted asset class? How does Aydin evaluate where crossover funds will move with the death of many growth rounds? What segment of the market will be hit hardest by the crunch? What worries with this? What would Aydin most like to change about the venture landscape today? Why? Item’s Mentioned In Today’s Episode with Aydin Senkut Aydin’s Favourite Book: The Black Swan: The Impact of the Highly Improbable

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Welcome back. This is 20 VC with me, Harry Stebbings, and I'm so thrilled to be joined today in the hot seat by one of the greatest in venture of the last two decades. He has scaled his firm from a super angel with a fund one of $4 million to their latest 900 million fund just last year. An incredible 16-year journey involving investing in 45 unicorns, 14 IPOs. And so with that, I'm thrilled to welcome Aiden Senkut, founder and managing partner of Felicis. Aiden's been named on the Forbes Midas List for the past nine years. And along the way, as I mentioned, 45 unicorns, including the likes of Adyen, Canva, Shopify, Notion, Open Door, Plaid, just to name a few. And prior to starting Felicis, Aiden was a senior manager at Google, where he spent an incredible six years.

• 0:41Harry Stebbings?

  I'd also want to say a huge thank you to Victoria and Dasha at Felicis and Harley at Shopify. Some amazing question suggestions today and really made the show so much more special. But before we move into the episode today, Harvard Management Company is constantly seeking out the next generation of great investors and entrepreneurs. HMC has managed Harvard University's endowment for nearly 50 years and was one of the first institutional investors in venture capital. Their experience and long-term investment horizon makes them ideal partners to get world-changing ideas on a path to viability and success. They work as a true partner, providing insightful perspectives to help managers succeed. I personally have had the pleasure of working with the HMC team and can say that they're truly exceptional partners, people, and incredibly savvy investors.

• 1:25Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:55Harry Stebbings?

  Go to bots.io forward slash two zero VC. Try the bots app now and let the bots do the work for you. But that's enough from me. So now I'm so excited to hand over to an old friend. I didn't thank it founder and managing partner at Felicis Ventures.

• 3:15Speaker 01

  You have now arrived at your destination.

• 3:18Harry Stebbings?

  I didn't, this is such a joy to do. I cannot believe it's been so long since our last episode. So thank you so much for joining me first.

• 3:24Speaker 02

  Thanks, Harry. I really appreciate it. It's a privilege to be here for a second time. And I'm really, really proud of how far the show came and your incredible audience and your grit. Very excited to be here on the show with you.

• 3:36Harry Stebbings?

  When we last spoke, I was actually young, I didn't. So sadly, some things have changed, but I do want to start. And for those that missed our first episode, how did you make your way into the world of venture? And talk to me about the founding of Felicis and how that came together in a brief two to three minutes.

• 3:50Speaker 02

  This is something I always dreamt of doing. Both my parents were entrepreneurs. I just think that it's one of the coolest things one can do to start a company. It is an arduous journey, but it is a very fun one. Everything that I've done in my life until the point that I started Felicis was really designed for me to be a great venture investor. The turning point really for me was when I left Google, where I was for roughly six years, a little bit as a product manager, and then a strategic sales manager. And I realized when I went with the company from Thirty to three thousand people, that was getting too big for me, let alone the hundred thousand plus that it is today. And I wanted to do something again that is a little bit more entrepreneurial, something from scratch. After much deliberation, I realized this is kind of the way of Silicon Valley, right?

• 4:34Speaker 02

  Like after being an operator, it's kind of nice to consider getting into angel investing and then I leveraged that to become a full fledged VC. Most importantly, I thought I always wanted to be an investor when I was a little kid, but we didn't have the concept of venture capital when I was growing up in Istanbul. It was more like being in a hundred percent plus inflation country where like every night my parents and I are like, okay, where are we going to invest now? German marks, French francs, like are we going to do something else? And then I used to read my parents' magazines. We didn't have iPads, maybe for the better. I would read Fortune, Time and Businessweek and I would read these articles with CEOs. I'm like, I want to be like that one day and I want to be like an investor one day. And little did I realize that I could actually like combine all the things that I aspire in this little flagey thing

• 5:17Speaker 02

  that started as an angel investment activity and turned into a venture firm. And also just a really good excuse to practice something different. As a complete outsider to venture, I thought there is an opportunity to do something new in it. And the last interesting thing in terms of the most important part of the founder's story is, I actually was thinking, maybe I should work at a firm first and learn the ropes before I started. But I didn't really have a typical background and nobody really wanted to give me a job. So it ended up being the best thing that happened to me because I literally burned the bridges, turned my back to the wall and the only thing I could do was start and make it great.

• 5:53Harry Stebbings?

  Don't worry, I didn't, no one hired me, but I totally get you there. I do want to ask you, I look at my angel investing idea and honestly, wasn't that great? And then I started fund investing and the world got a lot, lot better. I'm trying to figure out why and what happened in that change. But my question to you is, Josh at First Round said before on the show that he became more conservative when he moved to being a VC. How did you change your mindset when you moved from angel to investor with other people's capital with Felicis?

• 6:19Speaker 02

  Yeah, I mean, I think it was a different journey for me. I made a switch from angel investing to VC for two main reasons. Number one, I wanted to do it with a team and I truly wanted to build a team. A firm, a real franchise. I think the second thing is, I always had a broad strategy in mind, maybe because, I mean, I worked in four different continents in the world. I speak five languages. I worked in tens of different countries. I've done every single discipline known to man. And so I always had a broad purview. It wasn't like, oh, we're only gonna do like seed deals, like in enterprise, only in Silicon Valley or something like that. I always thought there is one universe of great companies and I wanna have the highest share of those companies as possible.

• 6:59Speaker 02

  And I realized that it was very difficult to do that as an angel investor because you're limited by capital, you're limited by time, you're limited by resources. So for me, actually, going from angel to VC was like opening the gates, unleashing this like, hey, listen, now we gotta know if the strategy is really gonna work or not. So it's a really interesting journey. I don't know if you know, but the very first fund we had was only forty one million. And we invested in Rovio in Finland from that. The whole round was bigger than our whole firm. Shopify's A round and Fitbit's B round, whereas all my colleagues and peers like Josh is like, we're gonna be the best seed investors. We're gonna be the first money. And I'm like, that's really crowded. A lot of people trying to do the same thing.

• 7:39Speaker 02

  I always had this crazy thought of, I'm gonna do things exactly the opposite or exactly outside of the orthodox way. That's the only way I know how to get to success. You cannot copy and paste to the top of competition.

• 7:51Harry Stebbings?

  Man, did that make fundraising hard for that first fund? Cause you're not in the early bucket. You're not in the west coast bucket. You're in no bucket for LP.

• 7:58Speaker 02

  I'm in no bucket at all. I mean, I just tell people, like, it's a little bit like a Jamaican bobsled. I don't know, Turkish VC, there aren't a lot of Turkish VCs or people that have not had certain checkmarks. In some ways, I'm really grateful for that because I have a huge appreciation empathy for our founders because I've been in their shoes. Similar to you getting no's, like, not only did I get a lot of no's in the job offers in VC. I also got a lot of no's in first LP conversations for good reason. I mean, I don't blame them. I did have a really ambitious strategy, but it was unorthodox and I didn't have any experience to prove that it was gonna work, other than a lot of hustle. Some people did take a chance on me and, and we were able to close that first fund with some incredible LPs.

• 8:39Speaker 02

  Those LPs have done really well. So all I can say, it was a really great learning and growth experience. And I think for people that get into VC and that never seen that side of it, some people never see the VC fundraising. And I feel it's a very necessary part of it, like it's a very necessary part of franchise and firm building.

• 8:56Harry Stebbings?

  I think actually kind of knowing how hard it is to get a firm off the ground and fundraise fundamentally impacts how you think about deployment. I see a lot of like thirty year olds who come in, wanna deploy, deploy, deploy as principals or junior partners. Do you have any idea how hard it is to get cash in the door? It's really hard. So I totally agree. Can we look at the markets today? We said about kind of the deployment pace there. I'm seeing twenty, thirty, forty, pre, so pre-launch. I didn't, Bill Gurley called me okay boomer when I said this to him, so be warned. How do you analyze the early stage markets today when we see this kind of craziness?

• 9:32Speaker 02

  I think the most important thing to say is, I was actually running this calculation last night. Even if you said regular inflation is anywhere from three to five percent, it's been roughly sixteen years since I started. We end up anywhere roughly around like two X. So every number that you look at today, we're comparing was like ten years ago. But really like twenty million of today is ten million of like ten plus years ago and forty million is really twenty plus of ten years ago. On top of that, when you look at where we are, like in London and Silicon Valley, and you look at things like house prices, car prices. That number is really more like four X realistically. I just wanted to put this in perspective because we look at the numbers and we freak out and I'm like, I don't think people have done the math. Like nobody's very good with compounding. Like these numbers are actually not that different than when we started.

• 10:16Speaker 02

  The absolute demand scares us sometimes. And the second thing is, math is math. So what happens is the markets change and unfortunately we have to adapt if we wanna be in the market. Essentially, you have three options. Prices double, so you're gonna do half the deals. You're gonna do the same amount of deals at half the ownership. So what you need to do with that then is say, okay, well, out of all those things, what is the one thing that matters? Or you're gonna do things at half the valuation you used to do, none of which are really great options. I think what we decided as a firm is the only thing that matters for us is to be in the world's best companies. Because out of all the things that you can optimize for, unlimited upside is the single most important one.

• 10:58Speaker 02

  Basically, like if you're trying to optimize around valuation and ownership, that's like one thing you can do at entry. And then like, let's say that. That hey, it's like a fifty percent difference. But what I have seen with all the great companies we add, whether it be like Shopify or Canva or Adyen, it ended up being like ten to twenty times bigger than what we expected. Maybe some of them we got a great deal, some of them we paid a very high price. Let's say that we even paid like two to four X on the entry. But if the company ended up being ten to twenty X bigger and you manage to get into the best company, it makes it a mute point. What I basically am trying to say is, listen, there are only so many things you can manage. And out of those things, I realize that I would rather sacrifice valuation, ownership,

• 11:40Speaker 02

  but I would absolutely not sacrifice being in the world's best companies at the time when we make the decision, right? Like, that's kind of like a little bit of the magic in the art of investing. So that's kind of like what we optimize around for.

• 11:51Harry Stebbings?

  I mean, this is where kind of me and you are the same in some respects, which is like, we can double down over time. Ownership for me on first check isn't actually what's crucial. What's crucial is getting into the best companies in the world and then being able to concentrate capital. For your seed funds, it's not the same. They have to get their ownership on. So how important is ownership on first check for you? And at what point does it not make sense? This is something I'm struggling with because even a fifty K check could make sense as a customer acquisition cost for me to put five million in at the A or the B.

• 12:21Speaker 02

  Yeah, I mean, listen, I think it's very strongly correlated to fund size. We need to go back to math and what is really important is how you manage it. I think we manage it to a range because at every fund size, we have a model that comes with it. Where we're like, listen, we need to have a deployment model. That's also how we address pace, other things. So the most important thing is actually ownership in the first check is important as much as we can. But sometimes the only way to get into a company is a small check. And then we need to like double down, triple down after we show more value, after we convince the founders, it's worth it. So having a flexible strategy allows us to really focus on getting into the best deals. And we have multiple scenarios.

• 13:03Speaker 02

  Obviously, ideal scenario is to get in at high ownership, but we also have scenarios where what we call strategic. And we can get in lower ownership, but then gradually build up our stake. And that has served us extremely well over our tenure, over our history. And some of our best companies, like we came in and, you know, build up our ownership over time after we demonstrated value for the founders. It's also been extremely helpful for the team because especially when you're a firm, you're trying to prove yourself. One of the few advantages you have is your flexibility and moving fast and making it delightful to work with the founders.

• 13:35Harry Stebbings?

  I totally agree with you in terms of the flexibility of moving faster. You mentioned deployment pace. This is something that's changed a lot from 10 years ago. When you think about the deployment pace then, it was three years, four years even, and that's kind of what I was always brought up on. Now it's 12 months, sometimes even less. How do you think about deployment pace? What do you make of the compression that we've seen?

• 13:53Speaker 02

  I think this is why I'm looking forward a little bit, but one of the most formative books that I read was Anti-Fragile. I think you need to be ready for anything in the world. I mean, we're kind of in our comfort zone and we think things are not going to change and lo and behold, they do. The best feedback we got was actually from our LP board. Like, one of the things that I will say that I really benefited from, probably the only people that really helped me in my career was the LPs who are on our board. And they're like, listen, no matter what happens, obviously stay in the market, stay active, but don't forget about vintage diversification. Getting beyond the 12 months, right? I mean, there is like, you can always say, like, there are so many great companies, our bar is really high. But I think like being able to exceed that 12-month threshold and you can manage it, like especially

• 14:37Speaker 02

  when you're at our size and scale, like you essentially change the stage mix and all of a sudden you can still not give up on speed, but changing the stage mix because of check sizes, you can make the fun last a little bit longer. And I think what they're basically saying is, listen, I think in success, one of the most important things is to have multiple lines of diversification, right? We always care about sector diversification. This is, by the way, completely opposite of some great strategies, right? Like, we're the exact opposite of concentrated. I really do think that in venture, the ideal size is around 40, 50 companies and not 20. It's impossible to only choose two companies a year. So the number of companies, shots on goal, sector diversification, geographical diversification, a little bit of vintage diversification.

• 15:20Speaker 02

  So trying to get it more than just one vintage year definitely helps in terms of both the LPs, but also like as a manager.

• 15:28Harry Stebbings?

  When you mentioned 20 to 40, I'm very much with you. The challenge there is like, if you're leading rounds and you're doing 40 to 50, I didn't, me and you know, like board seats and the interaction and the help across 40 to 50. Oh, I didn't, I'm old already, like. So how do you think about? Like portfolio growth at scale when you're a lead.

• 15:47Speaker 02

  Well, I mean, welcome to the brave new world. Sorry, I didn't have something as creative as a old boomer. But listen, I think what it comes down to is, I think, just like in anything else, there are many different ways, but one way you can deal is if the market is growing and booming, you have to grow and boom yourself and like with the firm. I don't think it was a coincidence that we went from forty one million to nine hundred million. And now as a fund family, it is very high growth, but that allowed us to transcend stages. That allows us to go from participating investor to lead investor. I mean, you just have to do the math. Once you do the math and a fund model and you're like, we want to do minimum X number of deals, even if you're not intending to lead all of them. I think we basically arrive at the fund size.

• 16:30Speaker 02

  And by the way, that fund size can become old and incorrect in a matter of months. So you might want to put a little buffer on it. But what I have seen is that's why it's really important that each one of our funds is driven by a model and by a plan. And that's why how we calculate fund size. It's not like, oh, this is a good number. This is a bad number. This is how much our LPs have thrown at us. That number is also strongly a factor in whether you are able to lead rounds or not. Like, people might love you. Hey, like Harry, I really want to work with you. I want to have you on my board. But if you don't have the fund base to be able to say, listen, I can make right at least this many checks and this many of them I can lead, even when the round sizes are going up by fifty to hundred fifty percent. I mean, we've seen the extreme in twenty twenty one.

• 17:13Speaker 02

  We had a great plan with the new fund and all of a sudden, all the round sizes and valuations ended up fifty to one hundred fifty percent higher than we expected. So we had to adapt very fast. Luckily, with a larger fund size, you have more flexibility. But with a smaller fund size, it's tough. You have to make really hard decisions.

• 17:30Harry Stebbings?

  Speaking of making hard decisions with concentrated pools of capital. And on the other end of that spectrum, we've had the crossover funds make their entry. With the market crashing in the way that it has done, what should we expect from them in this market crash potential correction? Where will they move to, do you think?

• 17:46Speaker 02

  In some ways, this is very Darwinian for them because you're seeing like how difficult it is to be successful in the public markets. Let me attempt at simplifying the last. Ten years, there was one alpha strategy and that is long tech. Same thing happened to me when Google went public. All my Wall Street friends are like, don't be like too optimistic. And Google grew like beyond like forty fifty X even from the point it went public. You look at Shopify, it went public at twenty, went all the way up to two hundred. It's still a multiples of where it was as a public company. I think like we forget sometimes that the most important thing is to understand and like catch that growth. When you look at crossover funds and the hedge funds, what they're realizing is, listen, in public markets, I'm limited.

• 18:28Speaker 02

  If I want to be in the world's best companies and some of them are in private, I by necessity have to move into privates. And they're gonna have to keep doing that until they feel like they have the right portfolio size or they have the right balance within the portfolio. What I think is really hard is when you're coming from that angle. And unlike our angle, which is like, hey, we are operators and we're coming from like the seed. The earlier stage that you go, you need to be an original and you need to be able to make decisions with very little signal. And these people are used to making decisions with a lot of signal, like public markets, everything is on a Bloomberg terminal. Good luck getting that with a seed or series A check. I think they are very good at fast following, like once they see like either investors with very high signal or companies with very high signal, they double down.

• 19:12Speaker 02

  The earlier you get, it becomes really difficult and the numbers game can backfire on you when you have higher casualties. It's hard to say exactly what they're gonna do, but I think, look, everybody's trying to find a place in the market where they have edge. Where the crossover and hedge funds are coming, they have so much capital, they can spend money on consultants and research and people. And I think our advantage is you can have an original strategy. All of those things are not a panacea for seeing world is gonna go and make bets before it's obvious to everybody else. I think that has been one of the main factors that contributed to our success is that we as a team have always thought about where the world is gonna go, pick the markets and sectors right. That has been a really, really core component of our success.

• 19:56Speaker 02

  And I have to say, I don't think there are that many people or firms that have really excelled at that.

• 20:01Harry Stebbings?

  So anything more worries me is like, I think where cash goes to die today. Is your two fifty to billion dollar rounds with minimal revenue where it's just completely out of whack. And I think the trouble is, I didn't, I think they're seeing that too. And so what happens then, I think, is they move earlier into the A and the early B, but the A. And suddenly they jack up the prices there because you've suddenly got this access demand for the constrained supply of great companies. And I think we're going to see this real push on the series A firms now from the crossovers who are coming earlier and earlier. And I actually, I didn't, the data that they have, it's impressive. And so I, I guess my question is just like, I don't know how it impacts us on the early.

• 20:44Harry Stebbings?

  But I think suddenly we're going to see a lot more price inflation early because of their entry. Do you agree or do you think I'm negative?

• 20:51Speaker 02

  I think, look, I know where you're coming from. We're all in the same market. We're all seeing the same things. I think for each one of these things, you can also make a counterpoint. You can also say, listen, all these people have been ninety nine percent focused on enterprise software. Any other vertical, you don't have as much impact because they're not investing in everything. They're primarily investing in enterprise software and it, it might grow from there. They're also gonna only invest in things where they have data. So I think the earlier you go, again, it's very hard to find that data. I mean, how do you track when it's just two founders like starting a stealth company? What I'm gonna come back down to like, listen, all these people are friends and everybody has some strengths and everybody has some weakness. And I think original thinking and knowing where the market's gonna go and what markets are really important, it's still an art.

• 21:36Speaker 02

  And I don't think data is necessarily gonna tell you that. There is some like creative liberty that you need to take of where the world is gonna go. And I think that's just priceless, number one. Number two, you can always throw high valuation at founders and win deals. But the founders are now also realizing that it's kind of a double edged sword. Because you take that valuation and all of a sudden now you have to grow into it. And obviously it's very friendly to work with these firms, but early on you need more coaching, more strategy, more help of people helping you see around the corners. Larger funds and tons of data doesn't necessarily get you that. Like early on, like one of the things I wanted to mention is like, hey, I had an amazing experience at. Google and seen one of the world's most valuable companies getting built.

• 22:18Speaker 02

  But I've also seen terrible things at Silicon Graphics where I've seen one of the world's greatest companies crash and disappear out of history. That kind of experience is invaluable and unfortunately it's not something you can buy with mega fun size. All I'm trying to say here is that it's not simple to build a great company and scale it. And there's so many moving pieces. I think founders also sometimes say, listen, I don't necessarily need the highest valuation, but I need the firm that I'm going to partner with, even if it's not the highest price, where they can see me around the corners. They can really help me with strategy and all that. So I don't think the battle is lost yet. And I think there is chances actually to win the battle if you're playing at our scale and more boutique and more nimble and more niche players.

• 22:59Harry Stebbings?

  Oh, no, I totally agree with you. So absolutely still have confidence in what we do. Don't worry. I do want to ask the incredible time that you've had now building Felicis over the last thirteen, fourteen years. What do you know now that you wish you'd known at the beginning?

• 23:12Speaker 02

  Yeah, I mean, I think if you ask me, actually, I hope this is applicable to all founders. So I feel like there are three main stages in the history or in the life cycle of a venture firm or probably like any company. Like you go from basically a solo operator. So I feel like first is just you, right? Like I think one of the things that helped me as an angel investor is actually I had twelve exits. So I knew that my strategy wasn't just pipe smoke. When you see the money return, that you know that it's real. And I think that validation is something that's lacking. Luckily in my time, it was happening really fast. So then you go from solo operator to a team, not obvious. And then you go from team to a team of teams. That's literally the most important stages, I think. When you're creating a team, there are some things that are not obvious to me.

• 23:56Speaker 02

  Listen, that was probably where most of my learning has happened is that you look at people and like, wow, these people are really smart. They're incredibly talented, incredible experience. For sure, it's going to work out great. And now like I realized that culture and cultural fit is equally important. Mindset is very important. I mean, my religion is growth mindset. I realize that I can only really work with people that have an extreme growth mindset. You can be extremely talented, extremely high potential, but if you don't have growth mindset, I think. It's gonna be very tough to be successful at Felicis or for me to work with that person. So I think those nuances were not necessarily obvious to me. And to be honest with you, like, we think that picking companies is hard. I think picking people is like a hundred times harder. You do need those people to be really successful.

• 24:40Speaker 02

  And I have to say today, I really lucked out with the amazing people we have. But by no means that the people that I see today that are heroes at Felicis was obvious. All it came down to is like the same way, like being brave, picking companies when nobody believes that they can be great. I think you also need to take chance with people when it's not obvious. Their backgrounds are not screaming like this person is gonna be amazing venture investor or amazing contributor. I did the same thing I did on myself and took chances on people that I thought that had raw talent and this extreme growth mindset and were incredible cultural fit. And what they were able to do was even like wild beyond my dreams. That's the thing that I didn't realize I was gonna get into like, and it took me 10 years to get there.

• 25:23Speaker 02

  But now, when I look back, I'm really extremely proud of it because it's not just me. It's this amazing team that we have built.

• 25:28Harry Stebbings?

  Doug Leone said on the show, Sequoia are not a family, we are a team and performance is number one. If you were to have a guiding principle like that about Felicis, what would you say it is?

• 25:40Speaker 02

  Our guiding principle is success with empathy. Now empathy doesn't mean that it's all kumbaya, but I think like I had this theory when I wanted to start Felicis is that when I looked around, basically it was an environment where everything else was sacrificed to performance. And I'm like, listen, can't there be a world where you have great performance, but you can do it with empathy? Maybe you don't have the largest fund in the world. Maybe you don't have the largest team in the world. Maybe you don't do every deal in the world, but you can still be successful. And I think that experiment is still running today. Luckily, we are doing well in performance, LPs continue supporting us. That's the real answer, right? So I can be telling you anything, but unless LPs come and say, listen, you're doing something great. We're gonna give you money, it doesn't matter, has zero meaning whatsoever.

• 26:24Speaker 02

  And I think that was really important for me because I feel like in every strategy, there is something you sacrifice. And what I saw in the performance at all cost strategy is that things are lost in internal dynamics. People fight each other and energy is dissipated. I want all the energy to go into finding great companies for better or worse. In our strategy, maybe it's closer to a family, but I'm seeing that you can still be successful with empathy. And that's probably the most rewarding thing is because when you try to do something that nobody thought like was possible or could be done, like those two things can't coexist. Law and behold, some crazy outsider founder comes and says, no, actually it can and goes ahead to do it.

• 27:01Harry Stebbings?

  You mentioned the challenge expanding to team of teams being a big one. I haven't actually thought about that as kind of the next kind of vertical to expand to. But I did think a lot about your product expansion because you've expanded kind of the product suite that you have, so to speak. How do you think about new products? What are the considerations? And when you're sitting at the table with Sandeep and the team that you have, what does that discussion look like on new products and whether to do them?

• 27:24Speaker 02

  I think, Harry, I understand where you're coming. I think for me, because our strategy has always been global, like it's never been limited by stage. It's never been limited by geo. It's just access to great companies. I don't really see it as product expansion, as product scaling. When I was an angel investor, I had such limited funds, I could only really do seed deals, maybe a lucky A if it worked. And then I realized that, listen, it essentially limited shots on goal I could take. Let's say that we're like in Liverpool Stadium or Arsenal or something and there is a soccer game. And somebody tells like, this is the only place in this stadium you can take a shot from. Even if you're talented, it's gonna suck. And you're like, listen, I wanna take the shot wherever I care to take it from, right? Like, how different is that? So that's exactly how I'm thinking is that, listen, with fund size and team,

• 28:09Speaker 02

  what we gain is essentially to be able to take the shot from wherever we want on the playing field and honestly, like to take more shots. That's basically what it comes down to. I think the one area of the firm expansion that was really great for us was kind of the fund of funds effort and what I realized, two things. Number one, if we wanna get into more companies, we can't consistently manage all of them. So we'd love to like work with people. At some point, like if you look at our plans, like wow, like you can hire a hundred people. And I'm like, it's not gonna be the same firm. So what we realize is, listen, like we just wanna support our friends where like we have complimentary. Strategies, complementary activities, and they have networks that they're gonna have. We just cannot buy that, but we can certainly help them.

• 28:52Speaker 02

  And the other thing is like coming to mentorship, I'm gonna be honest, like I had like zero mentorship other than our board that I think guided us well. So what I wanted to do was something that I didn't have, maybe like an orphan, like I wanted to pay it forward. Like there are other people out there, if I can be helpful to them, if I can support them and make their lives a little bit easier, maybe share some of the few things that I learned that was really hard and very costly for me will make a difference.

• 29:15Harry Stebbings?

  Can I also, I always like, think you learn a lot from mistakes that have been made. When you think about mistakes that you've made in building Felicis and like mentoring me, building a firm many chapters before you, what mistakes did you make and what were some big lessons from them?

• 29:29Speaker 02

  Let me maybe start with this, it's easy to look at only the successes and the highlights. Nobody really likes to talk about it, but the mistakes and the side terms we took were just as much part of it. So for instance, my personal biggest exit was Adyen. And I remember like I found Adyen because I was just so frustrated, having missed Airbnb and Uber. I mean, I still have an email from two thousand eight from Brian Chesky, Iden, we really like you. You sure you don't wanna invest at like two point five million dollar cap? I just overthought the risk. And look, every investor has these, I don't wanna spend too much time on it, but then what's really curious is what you do after. Like I would say at least half the investments of Felicis either came back from the dead or we lost a deal in one round, did the next round and it's always came from difficulty, from nothing.

• 30:13Speaker 02

  We had like one percent odds, like people are like, no way you can invest in Rovio, no way you can invest in Shopify. It's in Ottawa, I flew to Ottawa, I flew to Helsinki in the middle of winter, like convince founders, they're like, how big is your fund size? Like what investments have you made? Like I'm like, oh my God, they're totally gonna shoot us down. But they saw something of like this spark, like listen, these people will hustle and help us with anything. And somehow we made it to the syndicate. So what I wanted to say is, I'm really glad that we made some mistakes because it pushed us on some extremes, right? Like when I missed Airbnb and Uber, I'm like, there is still a way to play that. And that is, hey, there has to be like maybe something like an international payments company and that's how I found Adyen. Besides that, I think my biggest regret That is not obvious in this business.

• 30:57Speaker 02

  Everybody thinks it's all about the companies you say yes, but it's really about the companies you say no. You cannot build a great franchise just turning down companies. You have to say yes to some great companies. Otherwise, there is no way. Everybody talks about, we're so selective. We meet thousand companies and we only say to ten. Absolutely doesn't matter at all. The only thing that matters is whether that ten or whatever companies you invested has some great ones in it. And so what I have seen time and time again, and maybe this comes back a little bit to Joshua's point, is that with LPs, sometimes we do get conservative and we want to be right and we want to be responsible, but this is a positive outlier business. The biggest mistakes are the ones that you should have said yes, but you didn't.

• 31:37Speaker 02

  So I'm always like, how can we do fund construction where we can say yes to like five more companies, six more companies? Because you never know that those companies where things are a little bit more uncertain or unusual also tend to be the ones that surprise you the most later in the future.

• 31:51Harry Stebbings?

  I'm totally with you there. So in terms of like getting five or six more, the ones when you look back in hindsight, the ones that I've missed that are big have been me being like, hell no, I would never do that. Do you find the same where it's like they were never close? Or are the misses the ones that were so close to being done and you were on the edge?

• 32:09Speaker 02

  Let me answer it in a different way, so it's not repetitive, because it's very important that hopefully like some of the things we cover in this podcast are vastly different than any of the others that you've done. I think people in this business think a little bit too much about market prices and the yeses and nos. At the end, it comes down to process and it comes down to process at the time you make the decision. You can always say in hindsight, oh, that was obvious, it should have been a yes or no. If you ask me, everybody who's spending too much time on the market and those other things, they're playing the C game or the B game. The A game is like, what are you going to do about it and how are you going to differentiate? And honestly, the one thing that we can manage hundred percent is portfolio strategy and construction and then your process.

• 32:51Speaker 02

  So every time I look at, I'm like, even when we have losses or we regret things, the first thing I do is listen, is there something we could have done different in our network? Is there somebody we should have known, but we didn't know? Is there some factor we overlooked? Is there some? Some factor we overestimated, like Airbnb is a good example. Even though I came from one of the highest scaling companies, I think we never truly faced existential legal risk. And I thought Airbnb had like big legal risk and little did I know that community was gonna help manage it. Now, those things did indeed happen, but Airbnb was at such a large scale that they could weather it. These things in hindsight like could have been different, but listen, it's also like, at that point, there was like nothing to prove that it's gonna take off. But what I'm realizing is sometimes you have to make the bet of,

• 33:35Speaker 02

  how big can this company get if things go right? Very few people do that. It's very like, it might be like literally one in a million, one in ten thousand scenario, but it's literally those scenarios that end up making you a great investor. Because if you don't get that hundred X or thousand X type of bets, this is not a business that's gonna scale with like just two, three X type of investments, if you know what I mean.

• 33:57Harry Stebbings?

  Totally, I get you that upside maximization thinking. My question to you is, you know, your Shopify's, your Adyen's, there's many great public companies that you have. When we think about taking positions off the table, providing cash back to LPs, is there any advice that you give to me, any lessons that you have from your time, about when the right time to sell is, when the right time is to take cash off the table, how much to take off the table?

• 34:20Speaker 02

  What I'm gonna tell you is just as applicable when you're making investments. I think we basically do a probabilistic analysis of risk reward. First of all, is there any chance that if everything goes right, this company could be very big? Right? Like, so there is a reason why there are certain markets we don't touch. There are certain like areas where it's niche, even though we like it personally, we don't invest in them. So first of all, there has to be a high upside scenario. I think the second thing is managing probabilities. Like, one of the biggest things that I learned from a stock like Fitbit and a stock like Shopify, one of the things we mentioned, in a recurring revenue, you basically next year are guaranteed to make this year's revenue, assuming churn is very low. So you just have to build on top of it, so growth is a little bit easier. When you're in different markets, let's say Fitbit,

• 35:04Speaker 02

  you're essentially selling this beautiful like quantified fitness tracker. And to double sales next year, you literally have to find twice the number of new people that are gonna buy your watch. Have a new watch, so the ones that bought the old one like is going to go back and like start buying a new one again. And you realize like how difficult it is. So like huge respect for Apple, like I don't know how they keep scaling. They have to introduce new products. It's much, much harder to do so. And that's why everybody is going. Hey, software is a lot easier. You don't have inventory, like recurring revenue. That's why there is a religious focus on that area. So what I would say is when you're looking at public stocks, you look at how predictable is the future revenue growth? And that is a great factor. The second thing is sometimes when you're really torn, you can just distribute the stock.

• 35:48Speaker 02

  Right? Some people wanna sell the stock right away and some people wanna keep the stock. You can't make everybody happy. Instead of distributing cash, you can just give back the stock. I'm not saying that, hey, this is the answer and be all. And it's very tough. Let me tell you, like, there's been times when we like distributed stock and I go back and I'm like, why did we do that? If we waited a couple more years on it, the stock would have doubled or tripled. Then I realized that our responsibility to our LPs is not managing their public stock. It's to be in great companies and that's why we like to give him the stock. Because listen, maybe for some, the right context is to sell the stock right then and there and that return is good enough. Cause maybe they have scholarships to sponsor or other things they have to do charitable causes. I can't be the arbiter of that. So there has to be the right balance.

• 36:31Speaker 02

  I know that we hear from Sequoia and even myself, like I think about the very first house that I bought, oh my God. What would that Google stock be valued at today? And it's an insane number. But when I look at the first home that I bought, that's where I got married. That's where my kids were born. And some of these things are priceless. Just keep that in mind. So don't like kill yourself, but just be pragmatic about how you make that decision.

• 36:51Harry Stebbings?

  But I do wanna move to my favorite, which is a quick fire round. So you know, I say a short statement, you give me your immediate thoughts. Are you ready to rock and roll?

• 36:57Speaker 02

  Let's rock and roll.

• 36:58Harry Stebbings?

  Okay. So what's your favorite book and why?

• 37:00Speaker 02

  All time favorite book was Anti-Fragile and maybe that book is worth rereading again now. Because it was all about the black swans and how there are all these things we're not thinking about. And I think all the things that are happening in the world right now, I don't know if people were thinking US is gonna go back to a high inflation country. We're gonna have war in Europe as unfortunate and awful it is to watch. A lot of the things that is happening in the world today, a lot of people thought some of the climate change things is just like hockey. And we are seeing that some of the stuff is real.

• 37:29Harry Stebbings?

  What have you recently changed your mind on, Aiden?

• 37:31Speaker 02

  Early on, I thought validation from other people was something that was really important to me, like when we were making investments. But then I realised that you need to make your decisions independently. If even hundred people are screaming at your face, that's terrible, it's absolutely wrong. Being an independent thinker is really, really difficult. One of the things that I am really fortunate is, hey, with experience and track record, I think you can be much more of an independent thinker.

• 37:56Harry Stebbings?

  What's the most overlooked quality for success in venture?

• 37:59Speaker 02

  Everybody thinks, hey, like making a great investment is really important in venture, but listen, if there are like hundred other investors and tens of rounds, your returns get diluted. So not only do you have to be right, but you have to be right in like the absolute minority. It's very difficult and people still think that it's a math game, it's a numbers game. They don't understand that it's as much of an EQ game. I think one of the biggest things that I learned is that, hey, being able to relate people, having very strong EQs is as much of a strong factor as IQ. So I would say that's often overlooked and maybe that's why people looked at me and like they didn't really figure out that I could be a great investor.

• 38:35Harry Stebbings?

  You mentioned earlier being a mentor to many. You've been a fantastic advisor to me in many ways. Who's your mentor, Aiden, and what have you taken from them?

• 38:42Speaker 02

  I didn't have a mentor, as I mentioned, but we did benefit a lot from our first LP board that taught us a lot about like, hey, how should we think about reserves, recycling, vintage diversification, what we talked about. I think one of the things that we did that was really different, because I didn't have any mentors, we didn't construct a board with all the LPs that were just like in our favour and just kept telling us, we're doing a good job. We put the most sceptical ones on our board, the toughest ones. Imagine you're at the uni and you're saying, hey, I'm gonna take the classes with only like the toughest professors. Because I'm like, listen, the whole point of this is we wanna learn, we wanna grow and we wanna be the best. And that was really helpful. I think there is a lot of our aspect and operations, they helped us improve and gave us kind of their perspective of having seen firms being built over decades.

• 39:27Harry Stebbings?

  What's your most memorable first founder meeting?

• 39:29Speaker 02

  I think the one with Shopify really stood out because when I started talking to Toby and Harley, I literally thought they must be related to Larry and Sergey something because the way they like thought about the company and the future and how many things they said no and what unique things they were doing, it reminded me very much of that phase at Google when we had like less than fifty people and we made some very unobvious and hard decisions and strategy moves. And it was literally seeing a glimpse of that. And I'm like, I am pretty confident this company is gonna go to places. And luckily, that is what exactly what happened.

• 40:02Harry Stebbings?

  Final one, the most recent publicly announced investment and why you said yes and got so excited.

• 40:06Speaker 02

  Yeah, so one of the latest investments that just got public is this company called Living Carbon. So I think this area is gonna be increasingly more interesting. And we said yes because this is an amazing company that managed to biologically enhance trees to capture more carbon from the atmosphere. And they also changed the chemistry of the tree bark. So the trees become more resilient to things like fire and other external circumstances. So when I saw this, I can't believe somebody figured out how to do it. We have to support this company and Matty, the CEO, is amazing. So it was a very excited yes.

• 40:39Harry Stebbings?

  Aiden, as I said, I so appreciate all you've done for me. It's been fantastic to have you on. So thank you so much for joining me today.

• 40:46Speaker 02

  Thanks again for the opportunity, Harry. It's really great chatting with you.

• 40:50Harry Stebbings?

  Again, what an incredible sixteen year journey it's been for Aiden and Felicis. So I want to say huge thank you to him for all his support over the years with me. He's been an incredible advisor to me. If you'd like to see more from us behind the scenes, of course, you can on two zero V C dot com. We always love to see you there. But before we leave you today. A Harvard management company is constantly seeking out the next generation of great investors and entrepreneurs. H M C has managed Harvard University's endowment for nearly fifty years and was one of the first institutional investors in venture capital. Their experience and long term investment horizon makes them ideal partners to get world changing ideas on a path to viability and success. They work as a true partner, providing insightful perspectives to help managers succeed. I personally have had the pleasure of working with the H M C team and can say that they're

• 41:35Harry Stebbings?

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