20VC: Spotify Founder Daniel Ek on Optimising Decision-Making, Structuring Effective Learning Processes, The Trials and Tribulations in The Transition From Founder To CEO & The Future of Building Prima Materia with Shakil Khan

Daniel Ek is the founder, Chief Executive Officer, and Chairman of the board of directors of Spotify, the world’s most popular audio streaming subscription service with 345m users, including 155m subscribers, across 170 markets. In Today’s Episode With Daniel Ek You Will Learn: 1.) How Daniel made his way into the world of startups and came to found the most popular audio streaming subscription service in the world in the form of Spotify? 2.) How does Daniel approach effective decision-making today? What is his core process? How does Daniel determine between reversible and irreversible decisions? What does Daniel's learning process look like for new topics and material? How does this differ from topic to topic? What does Daniel mean when he says "I look to become the Chief of X Officer" for a time? 3.) How does Daniel think about the transition from Founder to CEO? Why is the topic not discussed enough? Where does Daniel see many founders struggle to make the transition? Which elements did Daniel find the most challenging? How has he scaled into them over time? Is it possible to change who you are as a person with this transition? 4.) How does Daniel think about what it takes to create an environment of safety where everybody can feel free to express their ideas, thoughts and concerns? What sort of failure does Daniel accept? What sort of failure does Daniel not accept? How does good news flow through an organisation differently to bad news? How does Daniel determine when to quit a project vs when to persist and stick to it? 5.) Prima Materia: Why is Prima not just another fund? How is Prima fundamentally different? What does Daniel believe Shak is world-class at? A walkthrough of Shak and Daniel's decision-making process for choosing to partner with each other on Prima? What has been their first investment? Why gave them the conviction to write this check as their first? Item’s Mentioned In Today’s Episode with Daniel Ek Daniel’s Favourite Book: Shantaram As always you can follow Harry and The Twenty Minute VC on Twitter here! Likewise, you can follow Harry on Instagram here.

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

• 0:00Harry Stebbings?

  This is 20 VC with me, Harry Stebbings, and this individual is probably gonna hate me for shining a spotlight on him in this way, but he's played the most instrumental role in my journey and this episode simply would not have happened without him. Shaq, I thank you for your friendship and I thank you for this episode. And so with that, I could not be prouder to release today's episode with one of the great entrepreneurs of our time, an individual who's revolutionized his industry. And with that, I'm so thrilled to welcome Daniel Eck. Daniel is the founder, chief executive officer and chairman of the board of directors of Spotify, the world's most popular audio streaming subscription service with 345 million users, including 155 million subscribers across 170 markets. And the schedule today was a huge team effort.

• 0:39Harry Stebbings?

  Woody at TCV, Christina Stenbeck, Shaq, Shashir at Coda, Bill Gurley, Alex Nordstrom and Gustav Soderstrom at Spotify. I so appreciate all you did to make this schedule so special. It really does mean a lot. But before we move into the show today, I have to say I just love using Angel List's fund admin platform to manage my investments. The team and platform at Angel List takes care of all my back office needs so that I can focus on working with great founders. Leading fund managers have made over 10,000 investments into 6,000 startups via Angel List, all online and all in one place. And with recently announced Rolling Funds, you can easily find and invest in these top fund managers on angellist.com/rolling. And speaking of amazing products there with Angel List, last month I had Jeff Sibert and Wayne Chang on the show from Digits.

• 1:22Harry Stebbings?

  Simply put, they're two of the best founders I've met and they're creating the most intuitive financial software you've ever used, automatically analyzing your company's spend and visualizing it for you as it happens. Hone in on recent activities, trends, anomalies, or any question you have in just a few clicks. And unlike every other financial software, their integration is not weeks, it is just a few clicks. I have to say the product is just beautiful and you have to check it out and so you can do that on digits.com. And finally, I've always been a big history man and so I want to talk about Cooley, the global law firm built around startups and venture capital. Since forming the first venture fund in Silicon Valley, Cooley's formed more venture capital funds than any other law firm in the world, with 50-plus years working with VCs.

• 2:03Harry Stebbings?

  They help VCs form and manage funds, make investments and handle the myriad of issues that arise throughout a fund's lifetime. So to learn more about the number one most active law firm representing VC-backed companies going public, head over to Cooley.com, check out Cooleygo.com also. But without further ado, it is a huge, huge honour to introduce Daniel Eck, founder and CEO at Spotify.

• 2:29Speaker 01

  You have now arrived at your destination.

• 2:32Harry Stebbings?

  Daniel, my word, this has been such a long time in the making. I do wanna pay a huge sense of gratitude to Shaq for making this happen. Wouldn't have happened without Shaq, but thank you so much for joining me today, Daniel.

• 2:42Speaker 02

  Well, thank you for having me.

• 2:44Harry Stebbings?

  I've wanted to do this one for such a long time, so really is a pleasure for me. I do wanna start there, Daniel. You've listened to, you know, many shows before. You know the drill here. How did you make your way into the world of startups? And what was the founding moment for you with Spotify?

• 2:57Speaker 02

  Yeah, I didn't think about entrepreneurship a whole lot, I have to say. I'm brought up in a suburb in Stockholm with a mom who worked as a daycare teacher and a dad who was a car mechanic. No one around me was an entrepreneur and no one I knew was an entrepreneur, so that was not part of my dreams at all. In fact, I only had two hobbies growing up, music and technology. Started playing music when I was four, come from a family that loves music, cares about music deeply, and ended up getting a computer at a very early age. And I just loved tinkering with either my guitar or tinkering with computers. And really, all throughout my sort of upbringing, playing around with both and sort of accidentally came into it

• 3:39Speaker 02

  in this sort of late 90s when people wanted webpages and people were trying to, I think a webpage at the time was costing like $50,000 or something equivalent by these big firm consultancy companies, but everyone thought they needed a webpage. And so here's this kid who knows how to program and knows computers, so surely he should be able to figure it out. And I didn't wanna do it. I didn't think it sounded technically enough interesting. So I kind of turned them down at first, said no, and they kept asking and I didn't know what to say. So I figured I'd just say an absurd high amount that I would do it for. And little did I know, I kind of said, hey, $5,000, and the other person said, done. And I was like, oh shit, now I gotta learn how to actually do this.

• 4:21Speaker 02

  So I taught myself Photoshop. I learned more than the basics in HTML and like how to do this. And kind of built it from there and fast forward, I had like basically an illegal sweatshop in school with all the kids who were good at math. I taught HTML and all. The kids that were good at art, I taught how to run Photoshop and do webpages. And from there on, things were kind of piling on, still not thinking I was an entrepreneur. I mostly thought about me running projects, but sort of slowly and gradually realizing after the dot com bubble burst and I had to fire a lot of people that there was a lot of gravity. And you know, that this was a big responsibility that I'd taken on. And that's when I realized that I truly was set on the path of becoming an entrepreneur.

• 5:03Harry Stebbings?

  You mentioned the element of like, you know, saying the absurdly high price and then going, oh, wow. I actually have to kind of learn how to do this now. I've had that before and I I struggle often with self doubt in terms of knowing whether I can actually do something and fulfill that. How do you deal with self doubt and how, I guess, for you, having been through so many incredible experiences? How would you advise me to deal with that self doubt when you don't know that you can do something?

• 5:25Speaker 02

  I don't think I necessarily ever knew that I couldn't do it. I think that's the naivety part of me is I just look at it as a challenge. And you know how you talk about the journey, it's not the destination that matters. That's very true for me. I've always been more focused on the journey itself and liking the pressure of having a lot of people that expect you to come through, that expect you to pull a rabbit out of a hat. And so for me, knowing that and the reward when you're learning those things and coming through, it's really for me, one of the driving forces of even taking on new things at this stage. So I would just encourage you to go back and try to enjoy the process more than the outcome. I think that's the most important thing.

• 6:05Harry Stebbings?

  I mean, all cases seek Shaq's advice. That's the wisdom that I've learned. You mentioned the journey there and I do want to divide this show up into kind of two distinct parts, really. One is really your leadership style with Spotify and how you think of yourself as a leader. And then the second is with the extremely exciting new project, Prima Materia. So if we start on the element of, you know, your leadership style, I spoke to many, many people that we both know. But in particular, it was Gustav in particular, who said that when it comes to delegation, there's something really interesting in that you'd like to become a chief of X officer for a time. And so I'd love to ask, like, how do you determine what to delegate versus what to control? And what's that decision making framework like for you?

• 6:43Speaker 02

  I don't think it's necessarily one framework. Mark, I think there's a multitude of them, but if we start at the very, very top, my way of approaching a problem is to try to understand if we're dealing with a high variance or a low variance problem. A high variance problem is a problem where it has both lots of upside and lots of downside. And a low variance problem is one in which you have a lot of potential downside if you can't figure it out, but the upside is limited. And it's important to understand which is which. And so I'll take an example of a high variance problem would be if you design a product, you can either achieve a tremendous lot with this product or you could go bust if you design it the wrong way, right? That's a typical high variance problem. A low variance problem would be paying salaries.

• 7:27Speaker 02

  So unless your business is about paying salaries, you don't necessarily have to be the best in the world at it. But trust me, if it comes a point where you're supposed to pay your salaries and you're not, and you're delayed for a week with that, you're going to pay a very, very high price for it. So you want to make sure that you don't do that. And that's a typical sort of low variance problem. So you better understand first and foremost, if you're dealing with one of those high versus low variance. The second good framework I think is worth understanding is, is this a one-way door or is it a two-way door? Knowing if the decision is easily reversible or not also forces you to kind of think more about how much time you should allocate upfront on the decision versus not. So those are typically pretty good frameworks you can use when you're thinking about a

• 8:11Speaker 02

  problem and how much you should delegate in that process versus not. I try to approach it from the standpoint that most things, it's really about finding leverage in the organization at the most amount of points. And my job is to try to go in, figure out what needs to get done and have a good grasp of that. And then the second that's done, kind of move away and actually put myself continuously out of a job. And so I look for all of those types of traits in the organizations all the time.

• 8:36Harry Stebbings?

  You said kind of look to put yourself out of a job there and you kind of look to put yourself out of a job, but also in the same kind of theme as like Gustav said in terms of becoming a chief of ex-officer for something new. And it was actually when I spoke to Christina Stenbeck, she said, and I quote her here, "Daniel has more hunger to learn than anyone I've ever worked with." And so when you think about like that transition to becoming a chief of ex-officer in a new field, I guess if we've touched on your like decision-making framework around delegation, how do you think about your learning process for when you choose to adopt a new of X?

• 9:07Speaker 02

  Well, first off, I think that's all too kind of Christina, but yeah, I mean, it kind of relates back to the point we made earlier. It's about enjoying the process. And what I like to think about is I like to constrain a problem by better understanding its outer edges. The perfect point to which I feel like I understand the problem well enough would be when I can argue the counterpoint to why something works and why something doesn't work. When you can argue both sides of the argument you're trying to make, then you're at the point where you truly understand the problem. So I always get to that point and the outcome would be when I can argue both sides of it and I have a strong point of view that still this is more right than wrong. And then I like the visual analogy of you're kind of in an airplane and you're looking down

• 9:51Speaker 02

  and you're seeing the contour of a city, but you don't see all the aspects of that city. So you're just slowly, slowly going to move down in altitude. And as you're moving down in altitude, you increase the resolution and you see more and more things. But even if you think about that visual metaphor, you're starting to see that there are blocks of the city. So you start seeing the elements that make up that city. You start to see the nuances much, much further. But if you can truly start grasping and try to get to the part where you start seeing the core infrastructure of something, you start then being able to figure out what the edges are much faster. And then you start getting down to the point where you can see all the nuance as well. And I wish I could say that there's a particular path of doing that in all fields. I find that it's quite often not the obvious path.

• 10:36Speaker 02

  So it's a combination of reading and talking to people, et cetera. So I wish I could have said I use the same process every single time. I don't. But I over-index on reading and talking to a Ton of people who are formative in the field, not necessarily the people who are the sort of best known expert about it, but actually more people that are doing things at the current moment. And at first, I have to say, most of what they talk about seem like completely alien language even to me. And it's very daunting because it's pure sort of imposter syndrome because you can't figure out what you're doing in the room because you feel like the dumbest person in the room. But gradually, the coolest thing happened is that you start grasping things. You start grasping, again, seeing this sort of trunks on the tree.

• 11:17Speaker 02

  You start seeing the branches, you start seeing how it all kind of relates back to this point. And you get to a point where you're starting to understand a topic at the point where you're conversational in it. And yeah, I wish I could say how I do it, but it's just very uncomfortable for a long period of time until it ain't.

• 11:36Harry Stebbings?

  Totally with you in terms of kind of that transition from discomfort to comfort. It actually goes to something which a lot of founders feel, which is like, how do I hire incredible people in roles where I don't know what incredible looks like? How do you think about that? Is it the same process?

• 11:49Speaker 02

  Yeah, very much. In fact, I think this is one of the hardest things for a founder, which is how do you know how to hire world-class people if you have never seen world-class? And the truth of the matter is, sure, you can read yourself to a certain amount about the subjects, but I don't find that that's a good distinctive skill that you then would know what someone who's pretty good versus world-class looks like. There might be personality traits you might optimize for, that the person is curious, et cetera, as well. But I think the very, very key is, a lot of people just don't spend enough time trying to understand what the role that they're asking the person to fulfill. They think about the function, but not the actual task at hand that the person's supposed to fill.

• 12:31Speaker 02

  Then trying to figure out what world-class looks like for that function might be totally different than something else. So take the role of the CFO. Are you looking for an operational CFO? Are you looking for a financial-driven CFO? Are you looking for a strategic-level CFO? The truth of the matter is, we're going to say all of it, of course, but it's not necessarily what's important in your organization at that particular moment. And if you're thinking about the difference between Between an operational CFO and a financial strategic type CFO, they couldn't be further apart. And so what's work class, even in those two different roles, is completely different. And I think founders need to think more about what success looks like for the candidate after a year or two

• 13:13Speaker 02

  and be able to articulate that and then learn, go backwards to then saying, okay, well, what kind of skills does that mean that person needs to have? What kind of experience would probably prime the candidate for having those types of things and then getting into the depth of trying to see if the candidate truly had that type of experience and learnings.

• 13:30Harry Stebbings?

  I like that in terms of working your way back from a year or, you know, eighteen months out. I do, before we move off to the theme that we touched on earlier, which is delegation. To delegate effectively, you have to create this kind of environment of safety where people can take risks, where they can be ambitious, but it's really hard to do. How do you think about creating that environment of safety, especially at the scale that, say, Spotify is, where people can be free to do their very best work without the fear or the insane levels of pressure and accountability?

• 13:56Speaker 02

  Yeah, so we're touching now on culture and I think that there's a couple of subcomponents. Like if you want to be a delegating CEO, you have to have, in my opinion, a very trusting culture like you talk about, but also a culture of transparency. Because ultimately, if you're moving more and more of your decisions to the edges, having the edges know as much as possible about all of the things that are going on will make them be able to make much better decisions than if they're somehow scrambling to figure out what's important and what's not. So you have to actually spend a lot of time educating the organization even before you're getting to a point where you can delegate things to them. And that's educating how decisions get made, what good decision-making process looks like,

• 14:40Speaker 02

  what bad decision-making process looks like. And you can actually, to that point, then qualify that. And so rather than looking at outputs, which a lot of people end up doing, like if something went wrong or didn't go wrong, it's way better to think about the input and the process of how that person made the decision and then kind of do post-mortems if the process screwed up rather than if the outcome screwed up. So those are the kind of mechanics. And then the culture in itself is you have to decide what kind of culture you want. Spotify's case, I like to believe that smart people will make mistakes. And if you're pushing the envelope, that's going to happen and I will tolerate that. What I don't tolerate, however, and that's very clear from everyone who works with me are two things. One is I don't accept that you fail and I'm the one who finds out about it.

• 15:24Speaker 02

  So you need to be able to find out yourself that you're about to fail if you committed something to me. And you need to tell me in advance of it happening. That's okay. Failing and not telling me about it is not okay under any circumstance. And the second thing you have to do is at the point when you're telling me, you need to have a plan for how you're going to find out what we can learn from that failure. And sharing that widely with the team and being vulnerable with the team and doing that. And that I think is essential if you want to have a delegating culture where a lot of people make decisions. Cause then you can actually institutionalize it and truly get it to a point where organization just continuously gets better and better and better.

• 16:01Harry Stebbings?

  Can I ask, I had Dev, the CEO of MongoDB on the show recently. And he said, the trouble with bad news is it travels so much slower than good news. And it's always worse than it actually is. And the trouble with good news is it travels so fast and it's always better. Is that something that you can relate to and that you've experienced?

• 16:17Speaker 02

  Yeah, for sure. I think the natural instinct in people are obvious to try to not talk about the bad things, but to promote the good things. So that's true. And that's true in Spotify too. I just think it's the natural instinct. But you need to create an environment where not only should you feel safe to do that, but where you know that everyone's got your best interests at heart when we're looking at these things. It's not about gotcha, kind of pointing fingers. It is about how can we actually become better? And by becoming better, we as a team are all becoming better. And we're all helping and supporting each other in a much better way. So it's about how you actually form those kind of team dynamics for enabling that kind of trust between team members. But I'm not going to say we're perfect at it. We're far from.

• 17:01Speaker 02

  And in fact, I feel like it's almost a reprogramming for every person that we bring into the company. Because they sort of intuitively struggle with this kind of notion about being open with failure and being open with mistakes too. So it's definitely something that we're trying to learn and iterate on as well.

• 17:17Harry Stebbings?

  You mentioned the team dynamics there and also kind of the element of knowing when something's not working. I spoke to Gustav before the show and he said that another of your kind of incredible traits is your patience. And he asked in particular, when you think about kind of your patience, how do you think about the question of do I give something more time? Or do I cut it and intervene? How do you distinguish between that? Let it run or stop it now?

• 17:39Speaker 02

  Like many CEOs, I would say that my worst mistakes were usually around letting things linger for way too long. And I was dragging the decision forward before acting on it. So it's definitely something that I've been trying to improve from a scale perspective in the last few years. Just being able to make the tough decisions faster. Cause I've noticed every single time when I've done that, you know, I've never actually encountered any fallback. I've never once regretted it because you're usually at the point where you've already kind of made up your mind, but you're just dragging it out with a stretch of time. So it's definitely one of the things that I tend to spend time on. But I think what Gustav was talking about is the inverse, where I actually probably give things more time than most people do and it actually works. So in that instance, one should ask, okay, well, what are the things that are worth having patience over?

• 18:24Speaker 02

  Rather than what are the things we should kind of intervene? Because I think it's easier to figure out the things you should intervene and just say, this isn't working anymore. But I usually find with people is most people think they're static. And my experience is that's not the case. And so someone that used to be a talent may not be a talent today. And someone who for whatever reason wasn't acing their previous job may be acing that job today too. And so in my point of view, it's the rate of growth that you're trying to measure and to get a sense for. And it's not a linear curve. It's very much kind of up and kind of then to the sideways and then up maybe a little bit more and then to the sideways. But you're trying to extrapolate between very few data points about that sort of linearity to growth.

• 19:05Speaker 02

  But in my experience, the alternative for not betting on a talent and not trying to develop a talent. And I've learned this the hard way is like you have to do a mix of both. But if you can bet on the talent and have that talent prove themselves out, you're going to get a super loyal person who's in the best case scenario going to be with you for a very, very long period of time and will act as an Inspiration for tens of, if not hundreds or thousands of other people in the organization. So for me, I think the bet to make on talent is an important one to make. And I would say that it's not about sort of making the decisions fast or not. I think you can kind of figure that out. But I think we're generally speaking with some of the junior talent, we're not giving it enough time. And we should spend a lot more time just betting on them.

• 19:50Harry Stebbings?

  You said about kind of the rate of growth in particular within individuals. I think one transition within individuals, which is really hard, and we've actually touched on it before, is that transition from founder to CEO. And it's not always the most obvious or natural transitions for anyone to make. I'd love to hear, how do you think about this fundamental transition from founder to CEO?

• 20:09Speaker 02

  Yeah, I think it's one that we should actually pay a lot more attention to first and foremost, because I think the the common belief at the moment in especially Silicon Valley lore is that the founder should always be the CEO. And I don't agree with that at all. I don't think that that should be the case. When it works, it's incredibly powerful for sure. So don't get me wrong on that. But in more cases than not, it doesn't actually work. And instead, we have a lot of founders who are hanging on to be CEOs because they think that's what's expected of them. And you have a lot of VCs who kind of pump them up and try to say, you can do it because you should do it because that's the right thing to do. Instead of realizing that there's a lot of people who are good maybe at the zero to one,

• 20:52Speaker 02

  but not in the one to many or in the more mature stage when you're actually trying to build out a serious business. So I think it's something we should pay more attention to. And I think generally as a sort of tech landscape, we pattern matched on way too few samples and thought that's the way it should be looking. I don't think that necessarily has to be the case. So I think that to answer your question, the most important thing, I think, is that you take it seriously because you're actually changing roles. You're going from trying to be a good product market fit to maybe early scaling person, zero to one, to now saying, no, actually, my job isn't anymore to be a founder of something. My job is to be a CEO. And that is now what I'm here to do. And there are other people that are doing that as a career path.

• 21:37Speaker 02

  Those types of skills that those persons have are some of the skills that I will have to make my own and make that journey. And it's incredibly tough, like that journey going from the founder to a CEO, being a manager, a great manager, being a great leader, being someone who understands how to build talent systems, being someone who can get motivated and motivate people in sales and marketing and product and technology, like all of these different disciplines, external stakeholders, internal stakeholders. Those are very, very difficult things that require someone who are passionate about doing it because that's what they want their job to be and not someone who feels like they should do it because they happen to start the company.

• 22:19Harry Stebbings?

  Can I ask, when you review your transition from founder to CEO, it looks like such a natural transition for you bluntly in the way that you carry yourself today as a leader, as a person. When we look back, both on the like pros and the challenges, if we're going to say the pros first, I'm a positive person. What's allowed you to make the transition so effectively, do you think, when you look back where you're like, that was a moment that was really impactful or important?

• 22:42Speaker 02

  First and foremost, I don't think it was ever that smooth, as many could could say that worked with me during that time. But I think the positives of this is I've always been more motivated than anything else by the journey and by learning. And so there's something appealing about trying to learn, going from a founder to a CEO to begin with, a good one, and then trying to go from a good CEO to great CEO, to then going from being a great small company CEO to a slightly larger CEO, to then becoming a public market CEO, which I guess is the sort of pinnacle of the crown of what you should strive to if this was a career path in itself. And so I was motivated by that journey.

• 23:24Speaker 02

  Antonio, who was the CMO of Facebook, said it brilliantly to me. It's like you gotta learn the rules in order to change the rules. And so I think about that quote a lot. So for me, the most important thing was actually to think about this as a job and trying to learn the skill sets of just being a CEO. And I try to model myself not on necessarily other startup CEOs, but actually going to traditional industry. Learning about accounting, learning about P and Ls and how to look at that and what is capital allocation? What is resource allocation? How should one think about strategic planning? How should one think about business planning, like all of those different things? And just to try to understand how they do it to then try to learn first principles, what we need to do,

• 24:07Speaker 02

  what fits our organization at our time, what are the things we probably don't want to adopt at this point of stage? Because it'll slow us down and what things could be good to adopt as well. So these are all a lot of the elements that get encompassed in that sort of founder to CEO journey.

• 24:21Harry Stebbings?

  Can I ask again, so that's the pros and when you think of way you've done well. If there were like a particular segment where you're like, actually, that was a real challenge and got over it. But I did struggle in that phase. Is there a phase which particularly comes to mind?

• 24:34Speaker 02

  Yeah. So first and foremost, I think the hardest thing that founders don't realize about becoming a CEO is that you have to change along the path and it's as much of a journey of learning skills as it is a personal growth journey of becoming a great leader. And I think the scary thing about looking at an organization like Spotify today is that it's my personality in the woven in it. I see it. I see the awkward things about my personality that the organization itself showcases. It's scary. It's like I have my own kids now, but I have this kid too, that's a teenager. And they're kind of awkward because it's doing some of the things that I wanted to do. But then every now and then it's doing things that I don't want it to do. But since it is a teenager at this point, I have to realize that I can no longer dictate what they do.

• 25:17Speaker 02

  Because again, the teenager would have its own will and its own way of doing things. And you can influence it, but you cannot, you know, like you talk to a two year old saying, nope, you're not going to be able to do that. You have to think very differently about your style. So you have to evolve along that journey. And for me specifically, I've had to change so many things about my own personality. I'm not talking about the things that are core, but every single element of my personality has been challenged along the way. I'm a huge introvert as an example. And weirdly enough, I don't have a problem speaking in front of very large audiences. But I do have a problem speaking for people in a small setting, in a small room. And as your company

• 25:57Speaker 02

  grows and all of a sudden you may be walking into room and I remember this like my natural instinct was to gravitate towards the people I knew already because I felt safe there so I would go up to them and I would talk to them. But I didn't realize that the effect it had on all the other people was that they thought I was very arrogant for not seeking them out and they thought that for whatever reason I was favoritizing only the people I already knew. But that was my own insecurity. So I had to start like actually going up to people I don't know, ask them a bunch of questions, which is scary as hell. And those are just some small details about all the changes you have to do as a person.

• 26:32Harry Stebbings?

  Can I ask, last question before we move on to premium material, which I'm super excited to discuss, but it's just, is it okay if in the transition, and it's a little bit deep and personal, but is it okay if you change who you are as a person? If you move from becoming introvert to extrovert and that extends to your private life as well, to your friends and you actually change as a person, is that okay? Or should you still retain the core?

• 26:53Speaker 02

  My view is I don't think you can ultimately change anything about yourself unless you're happy about that change. So I don't think if you are an introvert and you're actually comfortable being an introvert, that you can become an extrovert. I'm not an extrovert by any stretch of the imagination today and every single person that works with me would tell you that. But I've found a way to function where I'm mostly still who I am, an introvert. But I'm a somewhat well-functioning leader in the sense that I can be approachable. I've found ways to share. I am not the one who will kind of stand on the top of the mountain and say, we're going to move the earth over in that direction. That's just not going to be me.

• 27:34Speaker 02

  But I have found as an example that I like writing things. I like talking in podcasts more than I do newspaper interviews. So as an example, I don't really do a lot of interviews anymore for that reason, because I found like this is a much better way to get my entire personality, the good and the bad, across in this type of format than I do in a sort of written word format where someone just throws a single question to me and I can't elaborate the answer because I don't do well in those types of circumstances. So I think it's about like, you need to understand what the needs are of the organization. And not model yourself with someone else, but to think about how you can bring your authentic self to its fullest potential. And there are aspects you will have to tweak about yourself.

• 28:18Speaker 02

  It's not like I ever wanted not to talk to other people, right? I wanted to, but I was just shit scared about it. So I had to work on that element about myself, but I'm happy now that I can do that with strangers. I still don't feel comfortable a hundred percent with it, but I know it's important for them. And I actually have started enjoying it more and more as well.

• 28:37Harry Stebbings?

  Now, in terms of kind of bringing things to their fullest potential, I do want to discuss Prima Materia in this incredibly new, exciting stage project of your life, of Shaq's life. And so I really want to start, you know, it was the thing also that I found it funny because Shaq beforehand was like, you know, I'm kind of in retirement, Harry, I'm doing yoga. And I was like, wow, Shaq's got it figured out. And then you managed to get Shaq out of retirement with Prima Materia. And so I want to start high level and say like, it's not another fund. And so when you think about, you know, Prima today, how do you describe what it is and what makes it fundamentally different?

• 29:11Speaker 02

  Yeah, so technically it's a holding company, not a fund. And what we're trying to do is we're trying to really find some of the hardest and most difficult problems that society is facing today. And find technical solutions that we can hopefully accelerate those technical solutions and bring into the world to make society better. It's as simple as it sounds, but as difficult as it is, of course, knowing all the intricate details on all the things you have to do in the end to get there. But I think for the listeners who probably know VC and that industry, I would say the primary difference is essentially that there is no timeline here. We're trying to do things that can impact not in the next five or 10 years, but has a major impact in 20 or 30 years.

• 29:53Speaker 02

  And so normal kind of, you know, hey, is this a viable solution in the next two or three years? Because I need to raise my second round of funding or minimum viable product. Like all of those things are thrown out the window. And instead we're saying, well, are we truly solving the right problem? Like, is this a big and large enough problem that if you do solve this problem, it's going to be a worthwhile problem for society to be solved? Then secondly is, is there a technology today that we with a very high degree of certainty could say it will actually work, but we just don't know when. And if those two things are true, it's a prima materia type problem that we would apply ourselves in doing.

• 30:32Speaker 02

  And so we try to do that and we try to spend an enormous amount of time understanding problems, understanding technology. And very little time actually investing in or raising capital or doing any of that stuff.

• 30:45Harry Stebbings?

  Can I ask, how do you think fundamentally removing the constraint of timeline? And that, as you said, the VC treadmill of eighteen months runway, which means you're raising again in twelve months, possibly nine months, actually. How do you think removing that timeline constraint changes the mindset for the entrepreneur?

• 31:00Speaker 02

  I would say generally speaking, I think where the industry has netted out has been good, right? Because if you had unlimited amounts of funding and a limited amount of timeline, it's very likely that you would just pivot, pivot, pivot. And actually never ship anything, never get any feedback. So let's just acknowledge that it mostly works at what's there today. But there are certain types of problems where the foundations doesn't exist to to allow you to get a product to market quickly. Where you have to actually solve not one science problem in order to get it to market, but you may have to solve two or three. So a good analogy would probably be a company like Tesla. Tesla still managed to ship a product relatively quickly, a few years in it, but it's very unconventional. I'm not sure anyone else would have funded other than Elon Musk.

• 31:45Speaker 02

  And even if you look at it, even in its early days, he was very active, even if he wasn't sort of on the management team, et cetera. He was kind of one of very, very few things he did. So I think that's kind of a good analogy point of a large enough problem that doesn't follow the normal sort of path. It wasn't an industry most people have written off. It had a set of technologies that most people didn't think all too much about. But theoretically Elon saw and the founders of Tesla saw, you know, hey, this should work with a high degree of certainty. No one had actually done it before and that was the challenge, but this should work. This is definitely a sci fact problem and not a sci fi problem.

• 32:23Harry Stebbings?

  Totally with you in terms of that kind of problem solving and the orientation there. And I think it's a really good analogy. I do have to ask, when we think about Prima and we think about the partnership and the team that you've assembled. I wanted to ask this one for a long time, actually. I don't know why I haven't before, but like when I think about Shaq, you know, obviously mentor of mine for like five or six years now. He knew me back when I was young, I say. But I want to ask you, I always think he's world class at like detecting incredible talent and then nurturing it. And Nick at some is an example of that and many others. But like for you, having known him so long and so well, what do you think Shaq is world class at?

• 32:55Speaker 02

  So I think definitely primarily what you said. He has an insane ability to find talent and to help nurture that talent. And see things in others that they may not even themselves realize yet exist. And that's an incredibly rare set of skills. The other thing, as I'm sure you know by now, is like his network is insane. I usually say, um, you know, the six degree of separation. I say I've got two, I've got Shaq and then the rest of the world that I need to know. And one of my favorite stories is I landed in Dubai a few years ago. This is well before Spotify was a big thing and it literally took 10, 15 minutes. I don't know how we came about it. But he was like, so do you know Shaq? And this is a random cab driver that picked me up in Dubai.

• 33:37Speaker 02

  And then talking to Shaq about it is like, yeah, yeah, you know, I met him maybe nine years ago. And this is a guy that like then immediately knows Shaq's name and are able to pick it up. And in the end of the things, I'm a very logical person. I like to draw things down to the frameworks, the principles, you know, argue the things. And Shaq is, I guess, the complete opposite. He's more art than science to it. He's more relationships than hard facts about it. And for me, I've seen it firsthand so many times, the value add he brings, just amazing people network. They're all kind of helping each other and everyone's kind of helping out to just whatever the situation or company needs.

• 34:15Speaker 02

  And yeah, so it was kind of a no brainer for me. Plus I trust him as I trust very, very few people in this world. So it was kind of a no brainer.

• 34:23Harry Stebbings?

  Yeah, I totally agree with you in terms of that. Many, many of Shaq's skills, and I didn't know that in terms of Dubai. Can I ask what did that like early conversations look like in terms of you and Shaq and Prima and how you came to the decision to partner together on it?

• 34:35Speaker 02

  Yeah, so I've been trying to convince him to come out of retirement for about five or six years. And I've been trying various different constellations of trying to get him to do it. Everything from rejoining me at Spotify to doing all of those things. And not much had actually had an impact on him. He was kind of content sitting there on the sidelines. And then as my own ideas around prima and what it could be started materializing, I started bouncing those ideas off of Shaq as I've done many times before. And I think part in his own journey, he was starting to kind of open up. He had started getting bored, doing nothing. And then part, I think, the ambition of these things. It's not about making more money. This is about impact, like can we move Europe forward from where it is now?

• 35:19Speaker 02

  Can we, in our way, have a small dent on the European ecosystem? And hopefully create an ecosystem of many more companies around these types of companies that we're going after that advances Europe's position and gives Europe a shot, I think, to compete on the world stage. And I think that's the thing. I don't think Shaq thought anything else was sort of Super Bowl worthy until this, because the ambition is truly insane when you think about it.

• 35:45Harry Stebbings?

  I mean, this is Super Bowl worthy for sure. You mentioned Europe there and kind of reaching its kind of potential and that realization of it. Often there's the feeling that Europe's been left behind. European founders don't have the grit and they sell too early. How do you feel when you hear these statements, I guess? And what do you think fundamentally needs to change?

• 36:02Speaker 02

  I think all of that was true. I'm not so sure it is true anymore. I started talking more to founders maybe two years ago again. And I thought I would have to convince them to stay with their companies and take it all the way. And what I found in many cases was that there was actually a huge willingness to go all the way. Some of them cited Spotify, which was incredibly honoring, as one of the reasons for thinking that they could go all the way. Some of them just in and on themselves realized that, no, I don't necessarily know that I think Silicon Valley is all that much better from the European ecosystem that we have. We can build something on our own. So I think everyone has started gravitating towards that. So I do think we're actually heading in the right direction from a European standpoint, like in Europe.

• 36:45Speaker 02

  Field capital now is more and more readily available in Europe. There's still a gap compared to the US for sure. But I have no doubt that if you fast forward five years, there won't be much of a delta between the two. So that's not going to be the problem. The raw talent is not going to be the problem either. We have it in Europe in spades. So that's not the issue. And the ambition you talked about, that was a problem a while ago. But you have a lot of companies now coming through that are showing that you can do this. You have UiPath, you have Farfetch, you have Klarna, Adyen, Spotify, Supercell, like there's a ton of them now that are doing really, really inspirational stuff. So I think that exists too. What I don't think necessarily exists is the cluster of the ecosystem to the same degree that Silicon Valley and Seattle in particular have.

• 37:29Speaker 02

  I think many people forget, but if you take the US, we talk about the US as one thing. But if you take Silicon Valley and Seattle out of it, the US actually would be worse than Europe if you took those two out of it. And so it is important to realize that it's a small cluster of an ecosystem that is world, world-class because they've been building on it for decades, many, many decades, even from the first kind of silicon companies and all the way up to now. That's what Europe doesn't have. So the question is, can you accelerate that somehow? And my view is the best way to accelerate that is by infusing some of that world-class talent in directed rather than what we're doing now, sort of spread it out. A thousand flowers bloom. Also trying to see if you can almost from the sideline come in and say,

• 38:12Speaker 02

  maybe there should be five or 10 really strategic initiatives where you just stack it full of talent, like insane talent, like next level talent, the types of people that have been there, done that before. What happens if you get them involved at a much earlier stage than you would normally get at a startup? Because you just couldn't do that. I think you de-risk it. And I think you just give it so much more opportunity to grow faster and bigger. And that's the kind of hope and potential with Prima too, is that we find some of those super large problems that people are gravitating towards. You fund it with a capital source that is incredibly long-term and patient. And you inject it with some of the best talent in the world and try to convince some of those Europeans who are now in Silicon Valley to move back home and do it again.

• 38:57Harry Stebbings?

  I mean, speaking of doing that and engaging with these projects, super exciting to hear about the first investment, which I've been told that I can ask about. So I have to ask, in terms of like the projects that you've engaged with, talk to me about this first investment, how it came about and why you got so excited.

• 39:11Speaker 02

  Yeah, so this company is called Green Steel. It's a very, very cool project. The essence, I think, came much earlier because I was also involved in a small way in a company called North Vault that manufactures batteries for the electric car industry. And the genesis and realization was if you think about a car, like I think car will have a huge inflection point in probably twenty twenty five and onwards, where most, if not all, cars will be completely electric, right? My view is that that will cause a much faster upgrade cycle than probably we've seen in the better part of fifty years in the car industry. So a lot of things will happen, a lot of things will move. And we first started focusing then on the batteries, which North Vault solves, which is fantastic. It's great.

• 39:55Speaker 02

  So now the second biggest component in the car besides the battery, and actually the biggest is, of course, the construction itself, the steel construction. And if you can get the car to be environmentally friendly because it's electric and you have renewable batteries, why shouldn't you be able to have renewable steel construction as well around it? And the more I've started learning about this problem, you start realizing that steel in itself is about five to six percent of all emissions in the world. This is a fairly large problem to tackle. Similar again, the technology has been available for decades. No one's really done it this type of scale that we're talking about before. And the just super fascinating thing here is like this thing has the potential of really changing the whole car.

• 40:38Speaker 02

  So you'll be able to maybe in twenty twenty five and onwards be able to say that we have the first carbon neutral car that we're creating. And that would have been unthinkable even ten years ago. And I think now it's totally doable. And the scale and ambition of Green Steel is just off the chart. So it was kind of a natural thing for us to try to get behind and try to enable as well. And this is a full-on factory with like building ports, railways, hydro energy, like multi-billion euro.

• 41:07Speaker 02

  Investments over a very long period of time. So not a typical, normal VC type project. And with lots of different kind of moving positions in it too. So very, very proud of that one.

• 41:18Harry Stebbings?

  I think the thing for me is that like, if this works and if one of these works, it fundamentally changes so much about society and how billions of people live. Like for me, it's like, if it works, we change like employee engagement across large enterprises in a lot of cases. Like, I'm more envious now not to be doing what you're doing. But I do wanna move into my favorite and thank you so much for sharing that. That's incredible. But I do wanna move into my favorite, which is a quick fire round. So I say a short statement and then you give me your immediate thoughts. So you ready to roll?

• 41:45Speaker 02

  Sure, ready.

• 41:46Harry Stebbings?

  Okay, so your favorite book and why?

• 41:48Speaker 02

  It's actually easy for me. My absolute favorite one is Shantaram. And mostly because like Hunter S. Thompson said, you don't know whether you lived until you sort of stare at your own habits. And said you had a good ride. And so I look at the Shantaram journey and just say, what a life that person must have lived. I can't imagine all the things that person went through, but it is better than any fictional story that anyone could have just made up. And I still have serious doubts if all those things really happened to him. But even if half of the things are true, it's just still an extraordinary, well-lived life. And so for that reason, it's my favorite.

• 42:24Harry Stebbings?

  What's the hardest element of your role with Spotify today?

• 42:27Speaker 02

  I think the hardest element is it's easy to think about Spotify as one thing. But it's at this point, thousands of people who are all coming from all walks of life. And how do I tell a story that touches them in a way where they are inspired to do the best work in their career? And how do I do that without sort of sounding like it's all platitudes, but reach out to each and every one of them? So distill the story, connect with them, despite them being from all walks of life, all different types of backgrounds, different types of skill sets, et cetera. Because if you can harness that energy of all of your employees and get them to feel that this is the most important mission in the world to try to solve, get them to feel that they can contribute in a major way to that, you will see mountains being moved.

• 43:11Speaker 02

  And that is the hardest thing to try to do that every single day with all of the staff that I have.

• 43:17Harry Stebbings?

  Why was the direct listing an important route for you?

• 43:20Speaker 02

  So first off, I think the person who deserves the most amount of credit for it is not me. It's Barry McCarthy, my former CFO. It's really his brainchild, so I don't want to take credit. But as I heard about the idea compared to the normal process, it just resonated with me from a sort of core values perspective. Because the direct listing, if you really think about it, it's all about fairness and transparency. It's fairness in the sense that the old process favored the existing investors and favored the institutional buyers that the banks had relationships with. And the direct listing basically enables everyone to find their own role. The equilibrium let the market speak. And then besides that, I may want to add to that, I do believe in the market.

• 44:03Speaker 02

  I don't believe that the average person is stupid. I do believe that they're very smart if you give them the right type of information. So being able to share broadly to all the investors in the world what our vision was, instead of just to a few people in the room, was important to me. It was also important to me to not have any lockups, but actually let my employees have the same ability to trade their shares that any other investor would have, because that felt like the right thing to do.

• 44:27Harry Stebbings?

  You know me, Daniel, and I'm a big family man. Love this question. What three traits would you most like your children to adopt?

• 44:33Speaker 02

  Oh, it's a big one for sure. I would pick probably most importantly empathy for other people, other people's situations. Everyone's going through their own situation in life, right? Courage would be the other. Not to be too afraid of going against the wisdom of crowd, finding their own path in life. Don't care too much about what other people care. So have that inner courage. And then thirdly, grit or perseverance, just being able to endure. I find most things in life take way longer than you want them to take, but it's so enjoyable being on that journey and just having that kind of long-term perspective. So empathy, courage, perseverance, grits.

• 45:12Harry Stebbings?

  On empathy, it's always Shaq who tells me, everyone's fighting a battle you know nothing about. And I always think about that, like pretty much every day, actually. We spoke about the elements of children there. How did having kids change your operating mentality?

• 45:23Speaker 02

  I think in two distinct ways. First and foremost, I think it really contributed more empathy for me. Because before having children, I honestly didn't understand all too much about why people walked from work at five P M. I thought they were kind of lazy in just all honesty. And having children yourself, you realize that all of a sudden, that's the most important thing in your life. And the second skill I learned was becoming even better at prioritizing. And this seems maybe counterintuitive for those that don't have kids. But I reflect back now to my life before having kids, and I don't know what I did with all those hours. So when you have a priority that's now your number one in life, ahead of even your own company and your startup and the success of that,

• 46:06Speaker 02

  you're going to prioritize so that you no matter what, in my case, I will never ever miss one of their birthdays. I will never ever miss anything that's truly important in their life. There are lots of sort of ordinary day moments where I'm not going to be as present as a father, but I will never ever sacrifice those things. And so you're forced to prioritize and plan very differently than I did before. So that's certainly a skill set that I've learned.

• 46:30Harry Stebbings?

  It's pretty incredible to hear. So love hearing that. But an ultimate one for you, Daniel. Which leader do you look up to and why?

• 46:35Speaker 02

  I probably look up more to leaders that are very far from me in my own sort of mentality and my own skill set. You know, if I just pick a sort of outside of business, I would probably pick the Dalai Lama as a leader. Just such a fascinating character, such a fascinating sense of wisdom and super inspirational. And if I pick business, my all time hero is Charlie Munger. So that's an easy one.

• 47:02Harry Stebbings?

  We shared Charlie Munger as a hero there. I do want to finish, so on probably the most exciting, which is the forward looking. And it's like, what do you think the next, not five, I normally ask five. I didn't forget that, given our long stance that we have. Like, what are the next fifteen, twenty years hold for you? And I guess really also, what does success really look like for you with Prima?

• 47:19Speaker 02

  So first and foremost, I'm still very much occupied with Spotify's mission. And I think the most important part of that mission is to try to see if we can have so that a million creative artists can live off of their art. That is a pretty ambitious target. I'm seriously set on trying to achieve that. And I think if we can create that environment, you can just imagine what the world would look like. If we had a million artists that can live off of their art, you're going to see some amazing things in the world. And I like to believe that that will bring even more greater moments, greater music, greater parties, greater movies, greater, all of these things that will become just greater with a great soundtrack to it. So that's still very much my day job.

• 47:59Speaker 02

  And then on Prima, which is almost better to imagine it as kind of my way of trying to give back to the community. I think the most important thing we can accomplish in the next 10 or 15 years is if we can have some sort of impact in solving some of those really, really large problems that society is battling, such as with climate change, such as with health. I don't have a distinct sort of way of measuring it yet because we're sorely on our journey. But I would feel very pleased if one of these things had the impact of something that was really material to society. That's the most important thing.

• 48:32Harry Stebbings?

  Well, I think I'm forever indebted to Shaq for making this episode happen. But Daniel, thank you so much for agreeing to do this. You know, I've wanted it for a long time, so a real pleasure and I so appreciate it.

• 48:42Speaker 02

  Well, thank you, Harry.

• 48:45Harry Stebbings?

  I mean, it really is episodes like that with Daniel, which just make me feel incredibly grateful to do what I do. Huge thank you to Daniel for giving up his time today to come on the show. And again, a big, big hand to Shaq. This episode would not have been possible without him. So Shaq, I really am so grateful for that. If you'd like to see more from us behind the scenes, you can on Instagram at H Stabbings 1996 with two Bs. I always love to see you there. But before we leave you today, I have to say I just love using Angel List's fund admin platform to manage my investments. The team and platform at Angel List takes care of all my back office needs so that I can focus on working with great founders. Leading fund managers have made over 10,000 investments into 6,000 startups via Angel List, all online and all in one place. And with recently announced rolling funds, you can easily find and invest in these top fund managers.

• 49:29Harry Stebbings?

  On angellist.com/rolling and speaking of amazing products there with Angel List, last month I had Jeff Sibert and Wayne Chang on the show from Digits. Simply put, they're two of the best founders I've met and they're creating the most intuitive financial software you've ever used, automatically analysing your company's spend and visualising it for you as it happens, honing in on recent activities, trends, anomalies, or any question you have in just a few clicks. And unlike every other financial software, their integration is not weeks, it is just a few clicks. I have to say the product is just beautiful and you have to check it out and so you can do that on digits.com. And finally, I've always been a big history man and so I want to talk about Cooley, the global law firm built around startups and venture capital. Since forming the first venture fund in Silicon Valley, Cooley's formed more venture capital

• 50:13Harry Stebbings?

  funds than any other law firm in the world, with 50-plus years working with VCs. They help VCs form and manage funds, make investments, and handle the myriad of issues that arise throughout a fund's lifetime. So to learn more about the number one most active law firm representing VC-backed companies going public, head over to cooley.com, check out cooleygo.com also. As always, I so appreciate all your support and I can't wait to bring you an incredible episode this coming Thursday with Scott Sandell at NEA.