E436: Nnamdi Okike on Billionaires, Founder Psychology & the Venture Capital Bubble

Can venture capital really be turned from instinct into science? Nnamdi Okike is Co-Founder and Managing Partner of 645 Ventures, where he leads Seed and Series A investments in software and software-enabled companies. We discuss why Nnamdi believes venture investing is driven by the totality of an investor’s experiences rather than pure instinct, how 645 quantifies founder qualities, and why missionary and “non-central casting” founders can become exceptional investments. We also explore why startups need the right market inflections, how stablecoins and agentic commerce are reshaping fintech, what Nnamdi has learned across five fund vintages, and why raising too much capital at Seed can actually hurt a company.

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

• 0:00David Weisburd?

  Most venture capitalists believe that comes down to instincts, good investing. You disagree. Why?

• 0:06Speaker 01

  Our belief is that it's really not instinct. It's more the totality of experiences that inform how somebody invests. And so our belief, that's really science at the end of the day. There's information that's going into that. The reason that it's been hard to quantify that is one, there's a lot of data points that can be subjective. When you're thinking about a founder and a founder's ability, it's harder to say this person is great or not great. You have to kind of go a level deeper. And so our belief is that there is real science behind it, but you need to really unpack the elements and understand the key drivers. And there's a lot of nuance too. It's not purely a ones and zeros game.

• 0:42David Weisburd?

  And before founding six, four, five churches, which is five vintages. And you built out this data insights team at.

• 0:50Speaker 01

  Yeah.

• 0:51David Weisburd?

  Tell me about that.

• 0:51Speaker 01

  Insight Partners was one of the pioneering firms to kind of build this data-driven sourcing approach. Insight was started back in the mid 90s, so a long time ago now. And Insight was one of the first firms to say, we can use a outbound sourcing, meaning going to the founders rather than waiting for a referral or inbound deal to come in. And we could use data to inform where we look. Now Insight was looking at companies that were post-launch with some revenues, right? So my first job out of college, I kind of called it a glorified telemarketer job. It was basically calling up founders every day. I'd call up 15, 20 founders every day and I'd say, I'd pick up the phone and a founder might pick up and I'd say, hey, how many employees do you have and how much revenue and how fast are you growing? And kind of tell me about the product.

• 1:36Speaker 01

  And some founders would not answer, they'd hang up the phone and not want to talk. But some would say, hey, like, let me tell you about my business. And that those data points inform the quality of the company. We had metrics we would use around customer adoption, kind of how quickly were customers buying the product? What was the ACV, the average customer contract value? How fast was revenue growing? And those data points really informed where we looked and it enabled us to find deals that nobody else was seeing, right? Most of Insight's best deals in their first decade were deals that were like far off the beaten path. I'll give you one example. So one of the first deals I worked on was a company coming out of Indiana called Exact Target.

• 2:15Speaker 01

  Exact Target was a founding team that had been working in traditional mail marketing, literally sending out mailers. And they found that email, which at the time was like a new medium for marketing, could be used to market more effectively. And so when we came upon Exact Target, that company, I think, had probably five million of revenues. It was just growing to 10. It was bootstrapped, never raised venture, never even heard about, you know, kind of what venture was. But they had a really good business, right? In Indianapolis, where nobody was looking. And so we ended up investing in that company. And that company ended up getting acquired for almost $2 billion by Salesforce and went public.

• 2:53David Weisburd?

  Back when $2 billion.

• 2:54Speaker 01

  It was a lot. Now, it's not as much, but at the time it was a lot of money. And that was an example of a company that nobody was looking at at the time. It was in a smaller city, way off the beaten path, hadn't raised money, it was bootstrapped. But it had these early metrics to kind of qualify the business as interesting, right? And so that was Insight's DNA and bread and butter for many years. And so when we started our firm, we thought, we started thinking a lot about, okay, how could you take that model and apply it to earlier stage companies? So companies that may not have five million of revenues, maybe they had a couple hundred K revenues. But there were early signs that there was really something there. And we learned this over time as we built the firm. They had qualities as founders that were predictive of success, which is a more complicated.

• 3:37David Weisburd?

  You take a quantitative approach to the very early stage. What exactly are you looking for?

• 3:42Speaker 01

  It's an interesting question. As our firm has grown and evolved, we've gotten a lot more precise around that. So when we started the firm, we were taking really a page from the Insight playbook. So we were looking at things like, you know, this is back when mobile apps were big. We were looking at things like mobile app downloads and early adoption of those apps or rate of growth of web traffic, very traction driven.

• 4:07Speaker 01

  To your point, what we really learned was what was most important were founder qualities, team qualities. Qualities that really got to the ability of a founding team to build and scale a company. And so as we grew the firm, we became much more focused on those elements. Things like if it's a repeat founder, what business they built before and the result of that. Or if it's a first time founder, where they worked before and, you know, kind of the insights they developed from those previous experiences. Also, what was motivating the founders? And we have different archetypes that we use. We have something we call purity motivation, which basically describes the why that kind of animated.

• 4:46David Weisburd?

  Mercenary versus missionary.

• 4:48Speaker 01

  Exactly. We probably tend to like the missionaries a bit more in terms of like having a deep motivation to build something and change. We found that tends to be a more lasting motivation, especially in markets where things don't go right at the beginning or it takes a long time. We find that the purity motivation is something that kind of makes you stick with it. I think one of the biggest failure modes in tech is just like the founders give up. They don't care enough about the problem. What's interesting is like, that applies across talent levels. So you see very talented founders who could do anything that sometimes have trouble doing one thing. Either because they don't care about it enough, there's not a natural fit to the market, they're more opportunistic.

• 5:33Speaker 01

  Maybe they're more missionary, I want to make a bunch of money versus like, I really care about solving this problem. So we find that the more missionary approach can create a longer founder market fit that's more lasting.

• 5:43David Weisburd?

  I found this, I've now interviewed 14 billionaires and there's very few similarities between them. Billionaires, a lot of times are extremely eccentric, have very different styles. But the one thing that you find in common with them is that oftentimes they have a very different view of the world. They're going in the opposite direction of the world. But perhaps even more shockingly is that they're running in the opposite direction. So they're investing billions of dollars in a contrarian thesis that nobody else believes. And what's underpinning that is oftentimes this missionary view. It's not purely economic because if it was purely economic, they wouldn't be the only ones doing it.

• 6:19Speaker 01

  It's a really fascinating kind of how you describe that. I think it takes some time to develop that muscle. And if you look at those billionaires, when they were younger, they were doing it with smaller dollars, right? But the kind of the conviction was there. So maybe they're doing it bigger dollars now because they can offend, they can afford to spend it. But at the end of the day, like you have to kind of build that muscle. And I find that it's partly just how somebody is wired. But I do think if you do that enough and you see the results of it, it can kind of make it more deep seated, right? So we love to find founders that have really strong convictions and beliefs. They're oftentimes non-consensus. They're not going after the market that's really hot. They're going after a market that a lot of VCs might not even like. They might think it's too small, they might think it's too hard to build a company and that.

• 7:03Speaker 01

  And they're willing to persist over time, even when people, they tend to get no's. And in these companies, oftentimes they don't look great at the beginning. They're not like the first round draft pick. I have this concept of central casting and non-central casting. Central casting is like, today, it's like the AI founder in Palo Alto who went to Stanford and studied some element of AI and now is building a.

• 7:26David Weisburd?

  Ideally dropped out.

• 7:27Speaker 01

  Yes, didn't graduate, dropped out. But like, was smart enough to get in, right? That's like a central casting pattern or the repeat founder who's in the valid, everybody knows and wants to put money in their next company, grows what they're doing. The non-central casting founder is somebody like Scott Dorsey from Exact Target many years ago, who's in a smaller city. Nobody knows who they are, is building a company in a market that a lot of folks don't care about, but has a real deep seated conviction. Usually that hopefully comes from experience and some insights that over time will just kind of compound.

• 7:57David Weisburd?

  This episode is presented by Juniper Square, the operations partner for private markets. Do you know the story of how Scott Dorsey raised capital for Exact Target? This just is a perfect example of going into non-sexy business. So in the beginning, Exact Target was a software for laundromats. And he couldn't raise money from any venture capitalists.

• 8:18Speaker 01

  Interesting.

• 8:19David Weisburd?

  Being in the Midwest, also just being in this marketing tech, I don't even think it was a space at that point. So he went around his neighborhood, door to door, literally door to door sales and raised 5K, 10K from his entire neighborhood. And now, when you go into his neighborhood in Indianapolis, you'll see that a lot of the homes now have pools. They all made $10 million, a lot of them stayed in the neighborhood. Disolation of how contrarian and how unsexy of a space you have to be in order to have these power.

• 8:49Speaker 01

  Yeah.

• 8:50David Weisburd?

  So much so that smart VCs that are paid to really find contrarian bets still can't see it. It has to literally be.

• 8:56Speaker 01

  That's a great point. So we love those kind of stories and it gets us excited to kind of partner with those founders and be a part of their journeys.

• 9:03David Weisburd?

  One of the tricky things about the early stage, we were talking about before we started recording is you're really underwriting the team's ability to go fast and iterate. It's not necessarily where they are today. It's about their speed of implementation, their speed of iteration. How do you quantify that?

• 9:21Speaker 01

  If we've gotten better at one thing over time, in the 12 years we've been in business, it's getting a lot better at understanding what makes founders tick. And understanding qualities that are very separate from what you see from the outside looking in, right? I'll describe how we think about founders. So we have analytics that we use to flag or surface founders. We call this candidates and we can do it for a bunch of different types of companies. But it will flag founders for specific reasons. It could be, again, where they worked before, what companies they've worked at. It could be specific experiences they've had, skill sets, their title, things like that, right?

• 10:02Speaker 01

  That gives you a sense of what the founder might be doing, but you have to actually sit down with the founding team and really go very deep to understand why they're doing it. And then to understand some of the more subjective qualities that you're describing, right? Like, how are they going to deal with adversity if something doesn't go well? Do they have insights into how their market's evolving? And to your point, will they have ability to pivot? Do they have this balance of maybe deep-seated conviction in a category, but a flexible enough mindset to understand that, hey, like, my first business model might have been wrong, or maybe my conception of who the customer, the best customer is, might have been off, right? Do they have the ability to intelligently shift and evolve? I think you

• 10:46Speaker 01

  can only really learn those things after you speak with a founder. But after we have a conversation with a founder, we're trying to quantify those elements, right? So we're not saying, what we're trying to do is say, look, like, those aren't purely subjective, right? You can get a better sense of somebody's tendencies through multiple conversations, right? After you've had four or five conversations with a founder, you have a reasonable sense of, like, what they might do and what they might not do, right? And those are personality traits. Those are kind of qualities that they develop over a long period of time. And that's, but that's really getting into like, their life background, what makes them tick, things they've gone through in their, just family, like their upbringing, all those elements, like, those give you a better sense of like, what somebody's going to do. You're not going to know for sure, but you're going to have a much better sense of what they're going to end up doing. And I think

• 11:31Speaker 01

  that oftentimes informs our first investment. We typically start with early stage. So we're doing seed series A typically at seed, right? But when we're following on after, say, two years, like, now you have a whole body of information. You work with those founders, you fend in the trenches with them, and you have a much better sense of what they're going to do. And you have a sense of if you're right or not. So that's how we do it. And I do think it reduces the failure rate. The biggest thing is, we've had a much lower rate of companies, either just kind of giving up, not wanting to do it, not persisting. And so that approach can kind of improve that. But this is, our game, our business is all about the exceptional company. So the biggest question is, like, does it improve the ability to find outliers?

• 12:12David Weisburd?

  There's a view among many venture capitalists that somebody needs to have trauma in their childhood in order to be a truly great entrepreneur. Do you subscribe to that?

• 12:20Speaker 01

  I don't subscribe to that in the sense of you have to have had that. There are examples of founders who are outlier founders who have had maybe really challenging lives that creates that drive and the willingness to like, never give up. But I wouldn't say, like, in my experience, the best founders that I've worked with necessarily had that trait. They definitely had developed extremely strong drive and a desire to build a business for the long term. But I think that can come from a lot of things. I think that can come from, you know, being underestimated in some sense. That could be

• 12:56David Weisburd?

  Chip on the shoulder.

• 12:57Speaker 01

  Chip on the shoulder, right? And that could be, I mean, there's all kinds of things, right? I was an athlete in college and just, everybody has their own biases. I tend to like folks that were competitive, right? Especially in sports where they had to suffer adversity. Say you're a swimmer, or you're a boxer, or name that sport, where like, or tennis player, right? Where like, you're kind of on the court and like, you're winning or losing, it's all up to you. And you're oftentimes, when you're losing, it's like, that's tough. Those experiences develop skills and kind of gives you that. So I wouldn't say it's childhood trauma, but I think it is through a set of life experiences, you develop certain traits that are going to kind of drive you forward in a compelling way.

• 13:35David Weisburd?

  I mentioned on the top of the podcast, you've been working on quantifying this lack of magic known as venture capital since 2002.

• 13:43Speaker 01

  I'm telling you, it makes me feel old, yeah.

• 13:46David Weisburd?

  How has that evolved? And what variables today have proven to be effective that you never imagined from the very beginning?

• 13:52Speaker 01

  That's a great question. So at six for five, we're continually learning and we'd like to take learnings from a lot of different places. Founders, when we're sitting down with them, other investors, um, you know, there's a whole set of folks that inform our learnings. I would say, one of the most impactful set of learnings came from a friend of mine, Mike Maples, who wrote a great book called Pattern Breakers. So when we first started the firm, I'd heard about Mike and Floodgate and what they built there. And some of the great companies they are part of, Twitter and Lyft. So I remember in the first year, I sent a cold email to Mike and I said, hey, like, I'd love to sit down with you and learn from your experiences. He was like, sure, I'm Palo Alto. So I was like, okay, I'll just meet you, right? So I booked a flight out there,

• 14:37Speaker 01

  really just to meet him and had other meetings. It was really just to sit down with Mike. So I went to his office. And this is back in 2014. And I sat down with him and I said, look, Mike, like, I just love to learn about how you think about investing. And what are some of your approaches to kind of defining? Because Mike's always, even at that time, he wrote a book later, kind of to really define like his frameworks. He's always been framework driven. And so he talked a lot about this idea of exceptional founders, and what makes them tick, what drives them, but also the external events happening that inform the success. And he codified that in Pattern Breakers, where he talked about this idea of inflections. So an inflection is basically

• 15:21Speaker 01

  a major change event happening. It could be a technological change, it could be a regulatory change, it could be a behavioral change happening, societal change, that is really like the tailwind or the wave that drives the startup and gives it the momentum that it needs to.

• 15:36David Weisburd?

  Independent of the founding team.

• 15:38Speaker 01

  Yes. So what you find is, and we've codified this at six for five in terms of how we think about inflections, but basically, you need momentum. You can be an exceptional founding team. The analogy that Mike uses, which is a good one, is surfing. You can be the best surfer in the world, but if you're surfing at a beach with tiny waves, you're not going to surf very well, right? Like, you need the waves, right? And what defines a great surfer is their ability to surf these amazing waves, right? The analogy is a really good one for founders. So you can be a really good founder, but you need these inflections, the change events that are going to drive customers to want to buy your product. If you don't have those, there's no reason why

• 16:20Speaker 01

  a customer would want to buy your product versus the incumbents, right? Like, when you're a startup, you start off with very small amount of resources, you have no brand, you're basically battling uphill constantly, right? So the inflection is basically the change event that drives the need from the customer, which enables you to be in the game. So we look for first inflections, and we kind of, we use that concept from Mike, we define it, we codify that, we try to understand the depth of the inflection, how long it's going to take for that to manifest itself, how difficult it is to capitalize on it, whether a founder has insights into those inflections. So do they have a deeper understanding of those? So that gives you the potential energy

• 17:03Speaker 01

  of the startup. But then there are other questions, right? Later on, you try to figure out, like, can you build a business model off this? Like, is this a sustainable business model? Can this actually make money? There's a set of things. But the first thing is really the quality of the inflections, and then the founder's insights into the inflections. And a lot of that came from Mike and his thinking. And what we've done is really try to codify that, codify that and quantify that. So when we're looking at a company in a new category, we're starting off with the quality of the inflections, the size of those, like, how early is this market? You know, how long is it going to take to materialize? And that gives us like, a sense of like, what could, the possibilities of the market. And that's really important.

• 17:39David Weisburd?

  You mentioned business model as a failure mode. If you just invest at the early stage into products you love, or services that you like to use, with no business model, how often does that fail?

• 17:49Speaker 01

  So I think it's not a bad starting point, but there's a few really important questions around that. One failure mode is VCs believing that they're the market. Meaning, VCs are a small subset of our population. And we're very different, right? Like,

• 18:08David Weisburd?

  I'm shocked to hear that.

• 18:09Speaker 01

  The average VC does not represent, especially when it comes to consumer, the mass market customer, right? So one failure mode is like, you think there is 10 million of you, or 50 million of you, where there's maybe a few thousand or tens of thousands, right? That's a failure mode. You like the product, most people are not going to like it, right? Like, that's one failure mode. But then above and beyond that, even if you like a product that many people might like, business model is interesting, right?

• 18:35David Weisburd?

  So that's a TAM question, not necessarily a business model, where you like it, intuitively works for you, but it's not a big enough market. And then you go to the business model.

• 18:45Speaker 01

  So business model, I would say in the early days and years is, they're a wedge. What you oftentimes find, especially in consumer, but even in B2B, is like, the company needs a wedge to get it, right? And another failure mode sometimes is the belief that the business model that exists today is going to be what's existing in the future. And we have debates about this oftentimes in our investment meetings at six for five, where we're debating about what the company is today versus what it can be. And I really always try to step back and say, all right, like, are these founders smart enough and thoughtful enough and strategic enough to figure out, like, where the puck is going and to evolve the business model? And in a lot of our best deals, the business models evolve like, pretty materially, right? I'll give you

• 19:30Speaker 01

  a few examples. We're investors in a company called Squire. Squire is a, they're the biggest provider of software for barber shops, which, when we first looked at it, was a TAM problem because of the business model. So when we first looked at it, they were charging a small amount of revenue per haircut. And they, there was no SaaS software, it was like, small, kind of, per booking charge. And Aaron, my co-founder, and I said, well, this seems like we calculated the number of barber shops that existed. And we looked at the TAM, we're like, wow, this is like, not that interesting, right? We liked the founders a lot, the great founders, really smart, Song and Dave, like, really exceptional folks. But when we first looked at it at seed, we said, and this is a failure mode for us, like, we don't think this market is big enough because of the early quality business model. But what we didn't fully understand is the intelligence

• 20:15Speaker 01

  of these founders to be able to evolve the business, right? So when we looked at it again at series A, now it had a much broader business model, right? There was still the per booking fee, but then they had a SaaS product they were selling to barber shops. They're expanding from haircuts to the supply chain of a barber shop, and sourcing, and all these things. And so, over time, the ACV was growing and growing for these shops, right? And that was really the intelligence of the founders and understanding the market, and also like, understanding that, hey, like, you can't start at the beginning with that, right? Like, a barber shop's not going to, they're not going to sign on to that. But if you start off with an early wedge, where you can solve one problem for them, you can kind of get in and start to work with them, right? So what we find now is that, what we think mostly at the seed especially is, we start off with the

• 20:57Speaker 01

  founders and the founder's vision and their view. And we're asking questions, right? Like, okay, you're starting off with this pricing model, how does that change over time? Or what's the next product you want to roll out? Or do you think this pricing is sustainable? But we really try to defer to the founder's insights more than anything, because I think that reduces some of those failure modes and screening out companies unnecessarily.

• 21:18David Weisburd?

  What you're talking about is the founder's ability to evolve. The only way that I've found to really suss that out is to challenge the founder directly in the meeting and see how they, is there a better way to do that?

• 21:31Speaker 01

  So we do a lot of that, right? So we have, we invite founders to join us in our IC meetings. And part of it is them pitching the company, but it's a dialogue. It's, we're having a conversation with them. And the conversation is a bit of, it's like a ping pong match where we're going back and forth and we're discussing and we're asking questions and we're assuming we have a lot less knowledge than they have. And we want that to be the case, right? We want them to say, hey, you're wrong. Like your perception of this is wrong, or kind of like, this was what you might think, but like, we've been in this category for a bunch of years and we have much deeper insights.

• 22:03David Weisburd?

  When you're challenging founders at the IC, what pattern have you seen in how founders react?

• 22:09Speaker 01

  So I find most founders, they like to engage and they're humble enough to know that these are things that can make them better, right? So what we like is where a founder says, look, I've done my homework and this is my belief, but these are the tests that I'm going to do to validate that versus just believe it when I say it. And there's not a lot of backup and support for that. So there's a whole set of reactions that founders have, but what we love is where there is a certain amount of thoughtfulness and follow through. But founders come in all different sizes. And one thing we found over time is that outlier founders can sometimes be disagreeable. They can sometimes be, I wouldn't say arrogant, but they can sometimes have an

• 22:51Speaker 01

  approach that might come off as a little bit arrogant. Sometimes you have to kind of like see through that and understand kind of what's driving.

• 22:56David Weisburd?

  See what's underpinning there.

• 22:57Speaker 01

  Yeah. What's underpinning it? Like, is it all just a show or can they back that up? I always like this idea of like, don't judge a book by its cover. Like, understand what's driving somebody. And then like, it's fine to be confident or even borderline arrogant if you can back it up.

• 23:12David Weisburd?

  One thing I've learned from talking to hundreds of investors is that great investment firms aren't built on investment returns alone. The firms under are great at the things most people don't see, their operations, their relationship with LPs, and the quality of information they use to make decisions. And here's what AI has changed. Every firm now has access to the very same models. So the intelligence isn't the edge anymore. The edge is what you could feed it. A firm with its fund operations and data in one connected record can actually put AI to work. A firm running on disconnected systems simply can't. That's why thousands of GPs run their funds on Juniper Square. Juniper Square puts your fund operations, data, and administration together in one connected record. That means less time managing disconnected systems and

• 23:56David Weisburd?

  more time investing, working with LPs and building your firm. This episode is brought to you by Juniper Square, the operations partner for private market GPs. Learn more at junipersquare.com/HowIInvest. That's junipersquare.com/HowIInvest. The best conferences do two things well. The content challenges how you think and the people in the seats are the ones whose opinions actually move markets. Alpha Summit is AlphaSense's annual user conference, and it's built around both. Join me at the Glass House in New York City, October 5th through 7th, for sessions going deep on where AI, data, and human expertise converge. The room will bring together over a thousand institutional investors, corporate

• 24:38David Weisburd?

  decision makers, and capital markets professionals from firms like Goldman Sachs, JP Morgan, and the top PE and hedge funds. If you listen to the show, you're already asking the right questions. Alpha Summit is where you go to stress test your thinking with the people working through the same problems at the highest level. Register at alphasummit.ai to secure your seat. And as a How I Invest listener, you will get 50% off. Check the show notes for your exclusive discount code. I look forward to seeing you there. Tying this into the beginning of the interview, we talked about mercenaries versus missionaries. Part of why missionaries or arrogant founders could do really well, extremely high beta move.

• 25:18David Weisburd?

  So if you ask me, an Bitcoin, 100% is likely to 10x. I just dedicate everybody's life and I sell everybody on it. Maybe 50% of the time it goes to zero, 50% of the time the fund will return at 2030x. And that's in theory, where you're really looking to build as a venture capitalist is this portfolio of very spiky, almost overly confident entrepreneurs that still know how to execute. There's certainly limits to confidence and arrogance, but you almost want these people to be so sure that it's a binary outcome.

• 25:47Speaker 01

  There's something to that. The way I think about that is like, the higher the wall that somebody's climbing, the more confidence you need just to have somebody to try to get up that mountain, right? Or get up that wall. And so I try to match it to industry. The tougher the industry, the more ruthless and cutthroat the industry, the more difficult the industry, the more you need a founder with personality to be able to navigate that. If you take somebody like Travis Kalanick with Uber, right? Like, why did he succeed there? Well, that's a really tough industry, right? And yeah, there's a lot of things they did that weren't the best in terms of how they operated the company, but they won that market in the US. And there were some reasons

• 26:29Speaker 01

  that were traced back to like, who he was as a person and as a founder. What we think a lot about is like, it may be cliche to say founder market fit, but we do think a lot about the taller the mountain, the more you want founders that have the gumption to attack it, right? And to attack it without fear. And that isn't necessarily per se, like some of the superficial things. It's more like looking under the hood and understanding like what drives that person, right? Is there something that's going to drive them to do this for 15 years when everybody's telling them no? And they're trying to crack an industry where there's huge competitors battling them or oligopolies or regulatory challenges and things like that. It's a taller order,

• 27:12Speaker 01

  right? So like, in, I would say, the average founder's not going to do that, you know? So you probably need some outlier extreme qualities, which unfortunately can sometimes manifest themselves into, it's not like it's all rosy, right? Like, um, you know, sometimes there are negative traits that come along with those things, too.

• 27:29David Weisburd?

  So another way, ambition in and of itself is not differentiated. How many people want to be billionaires? Probably at least 50% of the population. It's not something unique. What's unique is what are you willing to do to accomplish the mission? I'm just thinking about Mike Maples, previous guest, Airbnb. He met them when they were selling cereal boxes. They had made cereal boxes and sold cereal boxes in order to survive. Obviously, that had nothing to do with Airbnb and the business, but it was predictive of how dedicated they were to the business. When I meet new podcasters and they're like, I want to become a podcaster, I always tell them one piece of advice because I want to see how they react, which is wear makeup. I've never had anyone say, yeah, that's a great idea. And then wear makeup because they're not willing to do something that's humiliating, or that's difficult, or that hurts their ego.

• 28:14David Weisburd?

  So these are the factors that really predict the thing, not saying, I think this is going to be a $10 trillion business. Who doesn't want to start a $10 billion business? But how many people want to go through what Travis went through with Uber, with the taxi lobbies, with death threats and all these things? That's the rare thing.

• 28:29Speaker 01

  It's a really rare set of qualities. Like, people can talk about that, but like, to really do that and stick with it, it's very rare. I'll give you one example from our portfolio that really struck me. So we're investors in a company called Uptick. Uptick is a set of agentic technologies for banks. They're founded by a second time founder named Sinhal Fuzelli. Sinhal is a repeat founder. He sold his first company called Cloud Lending to Q2, which is a big banking technology company for over $100 million. So he's a repeat founder, building this company, Uptick. And so we co-led the seed of Uptick. And I'd been working with Sinhal for probably three, four years, and I'd known him probably for five, six years.

• 29:11Speaker 01

  And I remember doing a call with him and toward the end of the call, I just asked him, hey, Sinhal, like, what motivates you to build this company, right? You've been successful. You made a bunch of money in your first company. What is it that's driving you? Right? And I'd known him for a while, but I didn't know his personal story super well. And what he told me was, he said, I grew up as, in any other difference, as a caste system, right? And his family was in the untouchable caste. And so, you know, like, really challenging upbringing, like, came from poverty, like, really tough. Like, he's the first one in his family to go to school and went to Carnegie Mellon, like, overcame a lot of obstacles to get to where he is. And that, those experiences that he had as a member of this untouchable caste, that's going to drive

• 29:55Speaker 01

  him for his life, right? His desire to be successful, not just for him, but for his family, for all the folks he knows, like, to be an example, you can't replicate that, right? That's what's driving him now. Second time founder with a lot of success, but he's going to keep doing this. And now his goal with this company is to build a multi-billion dollar business. And he's going to go after that, right? There's no question, like, that he's going to keep doing it. And that comes from his personal experience. And you can't, it's a really unique thing, right? It's a unique thing in his upbringing and background that kind of drives it. So those are unique examples. But I think there's a lot of examples like that, where it gives you a sense of the why. Like, why is a founder doing what they're doing?

• 30:38David Weisburd?

  In many ways, as we gain more and more abundance, these become so much more important. Because now you have all these things that before, you had to struggle for food, shelter, all these things. So you didn't need this missionary dream. You just wanted to survive and be enough for your family. But in order to really get these large outcomes in the venture portfolio, you now need a $10 billion, $100 billion outcome. Billions and billions of dollars above and beyond what you would ever be able to spend in your life reasonably. So you need these kind of external motivations. It can't just be about comfort or getting to some kind of financial goal.

• 31:14Speaker 01

  It's one of the results of this power law adventure. It's become more and more extreme, right? With bigger funds and all the factors to your point are just driving toward the need for larger and larger outcomes, which I think has pros and cons. The cons are a huge amount of capital investment in companies, you know, like, There's a bunch of them, right? Also, just if you're a founder, building a first company, like the probability of you building the 10 billion dollar company is like really, it's like a fraction of a fraction. But if you have funds that are driving you toward that, right? Like, there's a lot of collateral damage along the way for companies that don't get there, but raise a bunch of money and don't get anywhere near there. So

• 31:56David Weisburd?

  One thing that I've learned from talking to hundreds of investors, founders and business leaders is that planning for the future isn't just about growing assets. It's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying a home, starting a family, planning for college, or simply thinking more intentionally about your financial future. As those responsibilities grow, it's worth making sure you protect those you love. Not sure what kind of life insurance you may need? Concerned about how much it may cost? Think life insurance is too complicated? Your local State Farm agent can help answer those questions. They can help you explore your options for life insurance and choose coverage that you can adjust as your family's needs change over time. Financial protection for your loved ones when it matters most. Learn more about life insurance at statefarm.com. Like a good neighbor,

• 32:40David Weisburd?

  State Farm is there. One thing that I've learned from talking to hundreds of investors, founders and business leaders is that planning for the future isn't just about growing assets. It's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying a home, starting a family, planning for college, or simply thinking more intentionally about your financial future. As those responsibilities grow, it's worth making sure you protect those you love. Not sure what kind of life insurance you may need? Concerned about how much it may cost? Think life insurance is too complicated? Your local State Farm agent can help answer those questions. They can help you explore your options for life insurance and choose coverage that you can adjust as your family's needs change over time. Financial protection for your loved ones when it matters most. Learn more about life insurance at statefarm.com. Like a good neighbor, State Farm is there. One thing that I've learned

• 33:25David Weisburd?

  from talking to hundreds of investors, founders and business leaders is that planning for the future isn't just about growing assets. It's also about protecting the people who matter most. Life comes with a lot of important milestones. Maybe you're buying a home, starting a family, planning for college, or simply thinking more intentionally about your financial future. As those responsibilities grow, it's worth making sure you protect those you love. Not sure what kind of life insurance you may need? Concerned about how much it may cost? Think life insurance is too complicated? Your local State Farm agent can help answer those questions. They can help you explore your options for life insurance and choose coverage that you can adjust as your family's needs change over time. Financial protection for your loved ones when it matters most. Learn more about life insurance at statefarm.com. Like a good neighbor, State Farm is there.

• 34:08Speaker 01

  Like, there's pros and cons of it, but you're right. I mean, I think the reality is, given where we are in the tech market in our industry, and like, there's more and more of an incentive to build a huge, massive company. When I started a venture, people were like, a billion dollar exit was great, right? Now, people talk about trillion dollar exits. I never would have thought you'd be talking about like, a trillion dollar outcome in tech, like, within, Anthropic will probably be that, within like, I don't know, less than a decade, seven, eight years?

• 34:34David Weisburd?

  This was only three years ago when I started the podcast. These would always ask me about, well, do you think Founder's Fund could have a hundred billion dollar exit in every vintage? Because this was their pitch. They were saying, we need to have, at our fund size, we need to have a hundred billion dollar exit. And everyone's like, that's crazy. What do you think? And it was this question. Now, it's a trillion dollar company. And then yesterday, I was listening to Gavin Baker, he was saying, now, everyone's wondering, what's the next 10 trillion dollar business? So, the numbers keep on increasing.

• 34:59Speaker 01

  The numbers keep going up.

• 35:00David Weisburd?

  I actually think this is a huge feature. Obviously, we have politicians out there like Elizabeth Warren and Bernie Sanders, saying billionaires. But without this almost irrational drive, just be bigger and be better than the other person because of your upbringing and because of your insecurity, we wouldn't have all the great things.

• 35:17Speaker 01

  No, you're right.

• 35:17David Weisburd?

  Look around this room, almost everything was built through powerful force of capitalism.

• 35:22Speaker 01

  Capitalism.

• 35:22David Weisburd?

  Society.

• 35:23Speaker 01

  I agree with you. I think no economic system is perfect, but in terms of creating abundance for society, I think capitalism is the best system we have devised. And it's obviously not a perfect system. It does create wealth inequality, we see in the US. But the reality is, like, you need to create incentives for folks to do these things that we're describing. The best founders aren't doing it primarily for economic incentive. But it's kind of a way that a lot of folks keep score, not to mention, it's a way to create jobs and create abundance in industries and make everybody's lives better. So, I think it's the best system we have, and like, not to go into regulation and politics, but there are ways to kind of curb the excesses a little bit. But if you take away the fundamental elements of it, yeah, like, you have much less

• 36:06Speaker 01

  abundance and everybody suffers as a result.

• 36:09David Weisburd?

  Speaking of abundance, you focused at six or five ventures on fintech. What's gone on in fintech today?

• 36:15Speaker 01

  Fintech is a fascinating category. If I were to sum it up, what you have is transformative technologies that actually are democratizing the financial system, both for consumers and for businesses. And let me unpack that a little bit. So, for consumers, what you're starting to see is many of the benefits that we've had in the US, and folks might gripe about our financial system, and there's not a perfect, it's not a perfect system. If you think about the things we have in the US, whether it be access to mobile banking, ability to manage your money in terms of wealth, ability to save your money and not worry about kind of the money being devalued tremendously.

• 36:56Speaker 01

  We have a lot of conveniences in the developed world that the developing world does not have. What you're seeing is things like stable coins, new ways of payments and infrastructure, not to mention mobile, is really democratizing and improving the lives of individuals around the world. So, I spend a lot of time looking at new emerging market opportunities. Stable coins is the biggest driver. It's primarily being applied toward international payments, or payments across borders. But you're also seeing it as a mechanism for folks in countries where their currency will devalue typically a lot in a given year.

• 37:30David Weisburd?

  Because it's back to the US dollar.

• 37:31Speaker 01

  Yeah. So, they can hold stable coins, and so they don't suffer that.

• 37:33David Weisburd?

  Is that the main early adoption of stable coins?

• 37:36Speaker 01

  That's one of the biggest ones, is international market applications, sending money to one of those countries, but also enabling folks to hold their money in stable coins and not being impacted by their currency devaluation, not to mention, much cheaper transfers. My dad, for example, grew up in Nigeria, and he, for many years, has sent money back to his family relatives there. And if he's using Western Union, for example, paying relatively high fees, 5% to 10%, not to mention there's a big delay in the money getting there. I'm trying to convince him to use more modern, you know, stable coin technologies, which is much faster, much cheaper, much more convenient, not to mention the person receiving it can hold it in a stable coin and not suffer the devaluation of the Naira, for example. So, that's one

• 38:21Speaker 01

  application that I'm spending a lot of time in. But there are others. Here in the US, it's very early days, but this whole idea of agentic commerce and payments, this idea that a lot of what we do today, that's very manual, whether it be searching for a product to buy online, or searching for a financial advisor, a wealth advisor, or a lot of the manual things we do, and whether it's commerce, banking, will be automated through agents. To kind of make that happen, you need a bunch of infrastructure to do that. So, as an example, we made a recent investment in a company called Sponge. It's a couple of really smart guys that came out of Stripe, that are basically building infrastructure for agentic payments. You know, a wallet to enable you to kind of send money using agents to different places, or to pay, or to transact.

• 39:06Speaker 01

  So, that's an area we're spending a lot of time in, in fintech. I mentioned banking technology, five companies that have been around for 40 to 50 years that own most of the market. These are companies like Fiserv, Jack Henry, FIS. It's basically this oligopoly of banking technology companies that I think, together have 200 to 300 billion dollar market cap, average age is 40 years. They're very entrenched. And so, we're investing in companies that are kind of really attacking that oligopoly and providing, in our view, much better technology for banks. So, Uptick is an example of a company we did in that. We've made a few investments in different parts of that stack. That's an area. So, there's a few areas that we're spending time in. But I think it all comes down to this idea of inflections and what are these change events that are

• 39:47Speaker 01

  happening that kind of, these newer startups can capitalize on to kind of improve the financial lives of consumers, but also businesses.

• 39:55David Weisburd?

  Speaking of inflection points, right now, Clarity Act, probably the biggest potential inflection point. How do you explain the Clarity Act and the different players?

• 40:04Speaker 01

  The biggest thing is creating more transparency around adoption of stable coins, adoption of kind of these crypto-based technologies, enabling kind of more clarity around who can issue those, who can transact with those, what licenses do you need? One of the benefits of the Trump administration, especially when it comes to things like cryptocurrencies, stable coins, has been not taking like, an adversarial approach to the actors in that market, and not assuming folks are just trying to either maximize profit, or do things that are not positive. So, the overall

• 40:45Speaker 01

  kind of regulatory bent of the administration is a pretty positive thing, in terms of providing more transparency, like, enabling folks to understand, like, how fast can they get a license, enabling incumbents to understand what business models can these new companies execute on and what they can't. So, those are some of the impacts.

• 41:03David Weisburd?

  And you have an interesting vantage point, because you invest in fintech, not just in crypto. Crypto is just one aspect of fintech. There's a lot of people that think crypto is basically just going to be Bitcoin, and it's never going to evolve past crypto. Do you agree with that?

• 41:18Speaker 01

  I don't know. I don't agree with that at all, actually. Crypto is so interesting. There's different waves. What's interesting is the first wave, and I think maybe the public perception of crypto, has been this idea of speculation, this idea that you can make a bunch of money on it, but like, it's just kind of like, not quite a casino, but just purely like, maybe a greater fool theory, right? Like,

• 41:41David Weisburd?

  The meme coins.

• 41:42Speaker 01

  Like, a lot of these altcoins that were produced, even something like Bitcoin. Like, I'm, at the end of the day, a value investor. I'm a Warren Buffett, you know, fan, and I like this idea of intrinsic value, right? And if you think about cryptocurrency, at least it being used like a store of value, there's no intrinsic value. There's no way to value it. There's no cash flows around it. It's more like, what somebody's going to perceive it to be worth, right? There's some scarcity in Bitcoin, but at the end of the day, like,

• 42:11David Weisburd?

  It's a commodity.

• 42:11Speaker 01

  So, that's the first wave, right? And I think largely, not to generalize, but largely was based on this idea of like, speculation. And the companies that benefited, companies like Coinbase or others, were conduits toward that. The next wave is much more interesting, is this idea of, what are the concrete problems that

• 42:35Speaker 01

  Crypto and blockchain technologies can solve. So, stable coins being the first area where it's like, "Look, there are some big problems that especially developing markets have in terms of access to currency, stability of currency, the fees that they're paying. There's a whole set of things that impact their economies dramatically that a digital currency can address and solve that we might not even conceive of being here in the US, where we don't experience those things, right? If you think about like, a lot of our financial services industry is kind of based upon this idea of tollgates, right? When you send money, you could be even like sending a wire to make an investment or what have you. Like, there's all these tollgates that kind of sit there, right? These different banks that are taking pieces of that, right?

• 43:19Speaker 01

  It's really inefficient. Like, at the end of the day, like, there's no reason that should happen, right? There's no reason why. It's just ones and zeros, just bits. So, the interesting thing about blockchain and stablecoin technology is that like, it starts to erode some of those tollgates and it starts to basically reduce the fees and the inefficiency of these markets, which I think is fascinating. There's some smart founders building things around that. And then you start to get to this idea of this confluence of AI and digital currency. Jeremy LaRue, founder of Circle, wrote a great treatise recently on this and he kind of described this idea of these waves coming together. The only way you can have truly agentic commerce and smart money is you have to be able to have programmable money,

• 44:02Speaker 01

  which is where digital currency comes in. It's actually really interesting that those two technologies evolved together, where the substrate of agentic commerce is basically being able to program money to do certain things. And that's really the basis for a digital currency. So, I think it's interesting to just kind of see the evolution of this, but I think the biggest thing for us that we're excited about is this idea that like, there's much more practical applications that will create value for people above and beyond speculative aspects. The general population, I think rightly so, kind of perceives it to be one thing, because that's what it's been in its first kind of decade or so, 15 years, but I think that's changing pretty fast.

• 44:41David Weisburd?

  Such a good point. It's just basic product market fit and solving customers' problems. I invested in Circle back in 2019. I sold a very small portion of my shares today. I'm a big believer in the company. And one of the reasons I invested into it is because I understood it. And everybody was pitching me other cryptocurrencies and I just couldn't understand it. And I knew that either I was the dumbest person in the room or just being potentially scammed.

• 45:06Speaker 01

  Yeah, and it was, you're right.

• 45:07David Weisburd?

  Really scamming, but a lot of people within crypto, certainly not the sophisticated people, but a lot of basic people don't ask the fundamental question, which is, "Why does this need to be crypto?"

• 45:17Speaker 01

  Yeah. I remember, um, we, you know, back probably in like 2018 to 2021, we heard a lot of pitches and we didn't really do anything at the time. Because when you went under the hood, you're just like, "Well, there's a bunch of problems here." One, there's no real need, no problem you're solving, but also like, it was kind of like this idea of magical. I remember like the ICO craze and all these things. It was just like, there's nothing under the hood. There's no like, the emperor has no clothes, right? But I think now it is very different. And I think also you have founders that have been in the game long enough where they have the battle scars and they're kind of trying to build real companies now. We did do a few things that were more like infrastructure. So, I'll mention one that I'm very excited about called Solidus Labs.

• 46:01Speaker 01

  So, Solidus Labs started off as basically a technology to prevent kind of bad actors on crypto exchanges. It's a couple of really talented founders that came out of Goldman, where they were building advanced technology. And the first iteration was basically enabling, say, a crypto exchange to prevent bad trading technologies, something called wash trainings, all these different scams that happen on exchanges. And their goal was basically to kind of like enable those companies to prevent that and also enable regulators to better get ahead of that. And so, they started in the kind of crypto world, but over time, they've kind of branched out. So, they apply their technology to prediction markets to prevent bad activity there. CalShea is a big customer, to traditional stocks and bonds.

• 46:45Speaker 01

  Now, it's a broadly applied technology, but they started in a really complicated area of crypto, which actually requires a bunch of advanced elements to kind of do that well. And so, they could kind of take that and apply it much more broadly. So, we did that very early and we're very excited about them. And they kind of grew up in that world and applied their knowledge across different areas of financial services now. So, we did a few things like that, but we largely stayed away from many of the applications.

• 47:10David Weisburd?

  I just saw that George Santos just got a ban from CalShea. I think he made $17,000 on predicting that he would be at the State of the Union.

• 47:18Speaker 01

  Man, that's crazy. Yeah, those are the type of things that give prediction markets a bad name, right? People debate about the value of prediction markets and there's an argument to be made for this idea of folks that have knowledge, being able to trade on that, this idea of kind of making certain markets more efficient. But the example you raised, I think there's too many examples of folks that are really doing what I would describe as insider trading or doing things that where they themselves influenced the result, right? And I think that's not a great thing. I think it kind of erodes confidence. Not to mention like, if you're a person who assumes that like, there's some level of transparency and democratization of, in a prediction market, like, I think those things kind of erode trust.

• 48:02Speaker 01

  So, I do personally feel that they need to be much better regulated. Companies like Solidus can play a role in it, but also government regulation plays a role too.

• 48:12David Weisburd?

  The best idea that I've heard around prediction markets is around policy. So, you have a bill in Congress. So, now you could bet on whether the billionaire tax in California will pass. But a much better application, I think, would be what is going to be the effect of 2028 revenue, 2029 revenue?

• 48:27Speaker 01

  Oh, yeah.

• 48:28David Weisburd?

  And if you could use real life dollars, even potentially subsidized from a public policy standpoint, maybe you have no trading fees or you have a premium, you can have people bet on it with real dollars. Then you could get to ground truth and pass this kind of politicking that a politician does.

• 48:44Speaker 01

  That's really interesting. I hadn't even thought about that. I like that because it's kind of getting to the end result.

• 48:49David Weisburd?

  It's removing the subjectivity and removing the politics of it.

• 48:52Speaker 01

  I like that. That's great. I think there should be more of those types of things.

• 48:55David Weisburd?

  You're going into your fifth fund, which many emerging managers would love to raise their second fund.

• 49:00Speaker 01

  Yeah.

• 49:00David Weisburd?

  Would have been the biggest lessons that you've gotten from your first four funds that you bring to your fifth fund.

• 49:04Speaker 01

  There's so many lessons that we have had over the years. If I were to distill them down, one is you always want to know where you are in a market cycle. And you always want to be really thoughtful and objective about what's coming in the world. So, I'll give a few examples, right? So, you want to situate yourself and understand like, what's going on around you that might influence success or failure? So, let's go back to 2021 as a period of time, right? So, in 2021, we were, just closed our third fund. And at the time, there were some signals that the market was peaking, right?

• 49:47Speaker 01

  If you think to that, if you go back to that time, like, by all accounts, like, there was exuberance happening, right? In terms of valuations and there was like a rush to invest at that time, right? And SaaS was in vogue and it was pre-AI. And we were pretty smart about like being disciplined and thoughtful and gradual about putting money out. But even so, we did some Series A deals that we would probably not want to have done again, like, given where we are in the market, right? And so, coming off that, obviously, valuations went down. There was a bit of a correction and AI started, right? Which was like, a whole new set of companies, a whole new set of business models, a whole new set of like, capital needs, right? And so, and then that kind of like animated the next wave of companies that were very different, right? Like, in some cases, required a lot more money and more capital.

• 50:31Speaker 01

  So, we think a lot about now is just like stepping back and thinking about like, where are you in the market cycle? So, if you think about where we are today, there are some elements of peak activity. If you think about, buy any proxy, valuations of companies, sizes of rounds, multiples, we're seeing multiples of revenue even at the growth stage. You know, there's elements of exuberance in the market. And so, as we approach Fund Five, we're being very, very thoughtful about, one, the pace of investing in Fund Four, where we're investing, looking at new categories that might be coming versus kind of investing in what's in vogue at the time. We're also being very thoughtful about the capital needs of companies in the future. I think this is really important. Like, one thing I found over the time we've been in business 12 years is

• 51:14Speaker 01

  there's been a big change in terms of the needs of companies even at seed, and that's really driven by the technologies. So, you think about the early days of seed, Mike Maples used, had this term, 500K is the new 5 million. This idea of like, the reason that the early seed guys were successful is they were doing these small checks that the bigger firms didn't want to do, because these were companies like Web 2.0 companies that only need 500K to get started, like, because of democratization of things like.

• 51:41David Weisburd?

  Before you would have to raise $5 million by a server.

• 51:44Speaker 01

  Yeah, exactly.

• 51:44David Weisburd?

  That was your Series A. And unless you could raise that $5 million, you couldn't even start your company.

• 51:49Speaker 01

  Exactly. So, like, the shift of things like AWS, App Store, the whole set of things drove down the cost of starting a company. And that enabled seed funds to kind of come in and win and kind of like raise these smaller funds and do really well, right? The pendulum has like swung dramatically, right? If you think about the size of rounds that companies are raising now, right? It's kind of amazing. Like, we'll see folks raising seed rounds of 50 million bucks in some cases, right? And now they're building, you know, foundational models or what have you. Now, you question that a little bit in terms of like, "Okay, what's the quality of the business model? Do you really need that much money? Are there ways to do this more efficiently?" So, we think a lot about like, what are going to be the capital needs of the best companies that are coming?

• 52:34Speaker 01

  And then also, where has the market gotten ahead of itself? Where the market gets ahead of itself, that influences the returns of the vintage, right? Like, that creates a bad vintage or bad kind of like period in the market is where like, the core assumptions around capital need, valuation, kind of like entry points, like, kind of go astray. And that happens a lot in our markets. Like, our markets are, they get very extreme, right? So, the biggest, one of the biggest learnings is like, understand where you are in the cycle, where you are in the market, and don't get ahead of yourself and be really thoughtful about that. That's a big one. Our firm has grown a lot over time in terms of AUM, fund size, team. Like, we have a lot more resources than we did when we started the firm 12 years ago.

• 53:17Speaker 01

  It was Aaron and I, you know, we had, we were in a tiny WeWork office. We had an $8 million fund, you know, was our first fund. We were super scrappy. We were doing like 100K or 200K checks. You know, now our main fund is 200 million. So, we write bigger checks. We're typically leading. We have 20 plus people on the team. So, the operation has changed, but we still try to stick to like the foundational values, like, we have our core values that we try to stick to.

• 53:44David Weisburd?

  What are those values?

• 53:45Speaker 01

  Patience is a big one. This idea, like, we talk about this idea of kind of slow and precise versus fast and lucky. So, being patient and thoughtful and getting to know founders and that might mean we do less deals and pass on things, but. We have a lower failure rate. Our capital loss ratio is like four or 5%, but also we can get to know founders for a longer period of time and build a relationship. So patience is a big one. We have this idea of truth seeking, this idea that it's not who's right, but it's more what's right in like in our conversations, like really diving into what's true and not having ego around that. That's a big one.

• 54:20David Weisburd?

  Set downstream of a cultural value of just hiring?

• 54:23Speaker 01

  Hiring is super important. Like we've gotten reasonably good at understanding what makes folks tick. We hire in our investment team at junior levels. So we'll hire like folks that are mid twenties, coming out of working for startup or coming out of business school. We hired our first partner this year, Pearl Singh in San Francisco. She's a very seasoned investor who worked at Founder Collective and initialized. So very experienced, but she's very humble, very thoughtful, very founder centric, like has a great set of qualities that really fit really well in our culture. Regardless, like we do think a lot about

• 55:00Speaker 01

  what makes an investor tick and will they fit? And do they have some of these things like that are maybe a little bit hard to teach, right? This idea of patience, like there's a lot of ways to succeed in venture, right? Like there are folks that are impatient that do really well, right? Like especially if you're doing a huge number of deals per fund and there are ways to do that. So we're not saying our way is the best way, even it's just the way that works for us. But

• 55:21Speaker 01

  we have a set of these values that definitely kind of drive who we bring into the firm and how people behave and what we're looking for from them over time.

• 55:30David Weisburd?

  Play devil's advocate on this idea of patience and understanding the macroeconomic backdrop.

• 55:37David Weisburd?

  My view is a lot of this comes down to portfolio construction, vintage diversification. But once you have that, you need to play the game on the field. You need to get the deployment out there and get your LP's exposure to those specific vintages. It's like the economist that's called 50 of the last two market downturns. The last bull markets are in 2008. I remember as early as 2015, people are like, well, this has to be the top of the market. And if you had gone out from 2015 to 2022, you would have probably lost another 10x. And a lot of this is not even driven by economics and driven by psychology. My question for you, you've been investing in 2002. You've seen so many of these things play out.

• 56:20David Weisburd?

  Is that really the learning is to be conscious or is it just a portfolio construction and a cadence?

• 56:25Speaker 01

  Man, that's a really great question. And let's dive into the different elements of it.

• 56:31Speaker 01

  So I think the first thing that I start with is this idea that like a venture fund lifetime is quite long, right? So typical duration, at least in the LPAs of funds is our funds, for example, 10 year funds, we can extend it for two years, 12 years. But practically speaking, if you look at the life of the portfolio, it could be 15 years, even 20 years, right?

• 56:51David Weisburd?

  Historically.

• 56:52Speaker 01

  So when you say the game on the field, the reality is it's a really long game, right? If venture funds were investing all their capital in a year or what have you, it'd be different, right? But the reality is you have a choice as a fund manager.

• 57:09Speaker 01

  And those choices are really important. If you actually break them down, we've seen this in our funds, right? What you have to be really thoughtful of is when you describe the game on the field, there are better games to like, the game can be better or worse, right? It's not uniform. It's just the reality that there are certain times when the game is worse, right? And it's worse either because evaluations are really high. The quality of companies being created at that time is not as good for different reasons. The prevailing technologies have run their course. Like I mentioned, 2021, where SaaS was running its course, AI showed up later, which catalyzed so much innovation. But like, if you were a SaaS investor at the growth stage, putting all your money to work in 21 and 22, that's a bad game to play.

• 57:54Speaker 01

  You shouldn't be playing that game. It's just a reality, right? Like that is not a recipe for success. So the way we think about it is every fund in itself was a long game. It's a long game in terms of when you invest, what deals you do. Portfolio construction is really important, right? So we go in with a game plan in terms of number of deals and ownership, but that is also a dynamic game. The reality is it's like even within a fund, valuations change. And usually they go up, sometimes they come down, but usually they go up. So you have to kind of be dynamic around thinking about that. So there's a set of things you can control. And so we think about it both in terms of the initial investment period. So there are certain times where we're more investing more slowly. We're doing less deals in a given year.

• 58:39Speaker 01

  I mean, there's a bunch of reasons for that that I described, but then it also gets into things like your follow on strategy, right? Like how are you thinking about reinvesting and when, in which companies? It gets into your harvesting strategy. That's super important.

• 58:52David Weisburd?

  You take some chips off the table.

• 58:53Speaker 01

  Chips off the table, like in we, that can actually have a huge impact on your returns, like huge. Like in our first fund, for example, we sold a position that we were debating about selling. It's, I won't name the company, but long story short, we returned about 35% of our first fund, selling half of our position in this company, which is a good company, right? But it was valued at way in excess of like what it should have been valued at based on our performance, right? Company ended up getting acquired by a good company, but it was at a fraction of that price we sold at. Now we only sold half the position. If we sold the whole thing, we would return close to 70% of that fund. That was a decision we made. So we were like half right, but not completely right. And that's a big choice, right? So I get back to this idea that like,

• 59:38Speaker 01

  yes, you're playing the game on the field, but it's a very long game. It's a very dynamic game. And it is the case that like, if you make the wrong choices, it can have a dramatic impact on your fund returns. It's just the reality, right? If you're putting all your money out in a year or two, and you're putting all these logos together in a heightened valuation environment, in categories where everybody's competing, like that's a tough recipe for success. And I actually think that's like the playbook that a lot of funds are applying now in AI that I don't think is a smart playbook, to be honest.

• 1:00:09David Weisburd?

  So another way, the field is static. The field is what it is, but you could play different games on this field.

• 1:00:15Speaker 01

  Yes.

• 1:00:15David Weisburd?

  You could play an early stage game. You could play a momentum game.

• 1:00:18Speaker 01

  Like I'm a big sports fan. And if you think about like the nature of a sports game, say it's a soccer game, right? There are ebbs and flows, right? Like there's strategy, there's tactics, right? You're not going to throw everybody at the goal at the beginning, right? You're going to be thoughtful around like how you play and what's the other team giving you. And so the analogy is pretty apt for being a fund manager. And I think that thoughtfulness is something we've just learned over time through trial and error. And it's guided us. We can always be better. We always try to be and aim to be better, but some of it is like kind of looking forward and just trying to have a better sense of what's coming. And to your point, like what you can't do is say like, look, I think we're at the peak. We're not going to invest for five years. I mean, that's extreme, but you can slow down your pace in terms of how many deals you do.

• 1:01:03Speaker 01

  You can try to create more discipline around ownership. Like there's a set of things you can do. I think the biggest thing is to understand the game on the field in terms of the technologies and the capital needs of the companies. That for us is what we're still learning, right?

• 1:01:15David Weisburd?

  I'm curious on that. You said $50 million seed round.

• 1:01:18Speaker 01

  There's some, we don't really do those.

• 1:01:19David Weisburd?

  I've seen, I've seen a bunch of those as well. Founders always say, we'll take the $50 million and we'll put it into the bank account. How often do founders actually end up not spending that money?

• 1:01:31Speaker 01

  So we don't do a lot of $50 million seed rounds, but generally speaking,

• 1:01:36Speaker 01

  it's pretty rare that a founder, some founders are very disciplined and they'll raise a big round and not put it to work, but I'd rather see it at the growth stage than the early stage. Why? Because

• 1:01:47Speaker 01

  at the early stage, there's this tendency, first of all, you don't know what you don't know, right? I love the quote scarcity is a mother of invention. When you're in the phase of doing experiments, scarcity is actually something you want to have. Because you want to have a way to decide which experiments to do. You don't want to be doing every experiment. You don't want to be spending a lot of money on each one. Like that's the failure mode in itself. And when you raise a really big round out of the gate, especially when you don't have product market fit, when you're still trying to figure out what's going to work. The tendency is to spend much more money than you need to do a lot of experiments you shouldn't be doing. And not to mention, you create a culture within a company that is the wrong culture.

• 1:02:29Speaker 01

  I personally believe that you want in the early years, a culture of scarcity. It creates a certain level of discipline outside of the founders in the early team members. You want that DNA. You want people to be joining you, not because you raised this massive round and they can get a big salary. It's because like they really believe in the mission and they'll do it even if they're not getting paid a lot and they want the equity to be valued. It's a whole set of things. So I actually think massive rounds are really bad for companies. They're bad in terms of the processes that get established. They're bad in terms of culture. There's a whole set of things that I think it's, that creates a lot of negative results.

• 1:03:00David Weisburd?

  And that's in so many ways, because where does this $50 million go? It goes towards hiring people. And now you have two layers between you and the customer instead of founder leading the product market fit.

• 1:03:10Speaker 01

  Exactly. It's another thing.

• 1:03:11David Weisburd?

  You have these things that the founder should be doing. And sometimes the founder only does out of necessity because they don't have enough money to hire someone else.

• 1:03:18Speaker 01

  And the learnings that come from a product are super important. Like you wouldn't want the founder not to have those. And you have a bunch of salespeople learning that stuff and the founders like, that's bad. So like, there's a whole set of things. Now, the one thing I would say is, and this gets into like, we do defense tech and deep tech, right?

• 1:03:35Speaker 01

  To build some of those companies, there's just sometimes an absolute amount of money you need to actually build the product, right? If you're building a, you know, space security company, we have a company, a true anomaly that does space technology, like you have to build the satellites to be able to set up to orbit. Like there's certain things you have to do and there's underlying capital needs.

• 1:03:52David Weisburd?

  There's no vibe coding in there.

• 1:03:53Speaker 01

  You're not going to vibe code something like that. So like the nature of the business should dictate the capital rates. But what I find super interesting is that

• 1:04:04Speaker 01

  oftentimes not the case, right? Like not to pick on YC, but like you'll see this thing with YC is there will be a defining valuation size in round size amount, right? And you'll have conversation with 10 YC or 15 YC founders and they're all raising at a pretty similar price and they're all raising a similar sized round. And you're like, that should not be the case, right? Because these companies are all very different, right? If you're like a emerging markets fintech platform serving Africa and you're a nuclear, deep tech, nuclear company in the US, building a nuclear reactor, they're very different. Like you shouldn't be raising the same round, same valuation. They have nothing to do with each other, right? So like, I find it kind of comical and humorous sometimes when you see things like that. But at the end of the day,

• 1:04:49Speaker 01

  what we look for is founders that have a real understanding of the capital needs of the company. And they're raising rounds that are really targeted toward those. And the rounds are small enough where there's a scarcity mindset and they know they have a certain amount of time to execute on these things, get to the next hurdle, right? And the next set of milestones to raise more money. And like, they're really focused on doing that. We love that mentality.

• 1:05:11David Weisburd?

  You've been venture capital since 2002. If you could go back to right before you started at insight and you could give yourself one timeless piece of advice that would have either helped accelerate your career, helped you avoid costly mistakes, what would that be?

• 1:05:25Speaker 01

  One of the biggest ones would be.

• 1:05:28Speaker 01

  Having courage of conviction and having a bit of a balance between knowing like that you there are certain things you don't know, but also understanding the superpowers that you have at each stage of your career, right? Now being kind of mid-career, I would say, right? Like I have wisdom, 20 years of experience. I know a lot of the failure modes, right? But what I don't have that maybe our youngest investor has is a deep understanding of like what folks are using, especially younger people, right? Like I remember when I first started insight, it was like early days of social media, early days of internet, like there were certain things that I was using, right? That the guys that I was working for, that I was pitching deals toward, like they didn't know or understand, right?

• 1:06:13Speaker 01

  That was a superpower that I had, right? So, and there were some learnings in terms of deals that we didn't do and that I would have loved to have done back then. But understanding like where you are in every step and then what are your superpowers? And then also, what are the things that you don't do as well, that you don't know? And I think especially for young investors, young fund managers, you want to have like an objective understanding of that, right? For example, one thing I find, if you ask the average VC, like, how good is your network, right? Everybody's like, I got an amazing network. I know all these great founders, but like there is different levels to that, right? And I think a lot of times people oversell or overestimate like the quality of their ability to get to exceptional founders, right?

• 1:07:00Speaker 01

  So one of the most

• 1:07:03Speaker 01

  important rules to understand is this idea of power law and how rare it is to invest in companies that get to massive size and to be really objective about that. And to understand like what might be getting you closer or further away to those things and to be like transparent and thoughtful around like, are you getting closer or further away to that, right? I think that would be another learning. There's a whole set of things, but at the end of the day, it's like understanding, I guess I would maybe narrow it down to, or just drill it down to like understanding your innate ability to get to power law companies and understanding that like that evolves over time, right? And some things may evolve positively or negatively. Like one thing I think a lot about in venture is there's like a shelf life to the quality of your network.

• 1:07:47Speaker 01

  Meaning at the end of the day, like people are always starting new companies, but it's the reality that as you get older in the industry, like that erodes a bit and you have to think about how do you refresh that? How do you build it? Or in the case of our firm, we have young people that can kind of rebuild it and refresh it, right? You can source that, right? But you have to be really objective about that. You have to be very thoughtful about kind of where you were, are you in this game? And in like, if you do that, you can kind of understand like what you need to work on, what you need to build, what you do really well. But I think a lot of people like never even think about that. They just either assume they're great and or vice versa, they assume like, hey, I'm not as good and I can't do this. And I just think like, it's better to be objective and thoughtful and then kind of try to build on your weaknesses.

• 1:08:26David Weisburd?

  Your ego can't handle it.

• 1:08:27Speaker 01

  Yeah, that's the other thing with VC is like the reality is like, we fail a lot more than we succeed, right? And I think that's a psychological thing more than anything, especially for high achievers. You're used to being successful, right? You go to a good school and you get great grades and you're told you're awesome, right? And I think in most jobs, especially jobs that folks that do well in school do, failure isn't like staring you in the face every day, right? In venture, it is like, the reality is like, most things you do are going to fail or not do as well. And you have to be able to mentally get accustomed to that, but not it's a balance, right? Like you have to always be looking for dramatic, crazy success, but you have to also balance this idea of like, it's going to get you fail a lot. And that's like a mental, psychological thing.

• 1:09:12Speaker 01

  It takes a while to adapt, especially if you're a high achiever. So I think that's another thing that over time you can learn.

• 1:09:18David Weisburd?

  Well, Nnamdi, this has been an absolute masterclass. Thanks so much.

• 1:09:20Speaker 01

  I enjoyed it. It was really a lot of fun.