Uncapped #2 | Keith Rabois from Khosla Ventures

This week I enjoyed speaking quickly with Keith Rabois, a Managing Director at Khosla Ventures and the CEO of OpenStore. At Khosla, Keith led the first institutional investments in DoorDash, Affirm, and Faire, invested early in Stripe, and co-founded Opendoor. While a General Partner at Founders Fund, he led investments in Ramp, Trade Republic, and Aven, and before that made early personal investments in YouTube, Airbnb, Palantir, Lyft, Udemy, and Eventbrite. Keith started his career in leadership roles at PayPal and LinkedIn before becoming COO of Square. --- We covered: (0:00) Competing where there isn’t competition (2:29) Traits of top decile founders (7:16) Picking people (9:57) Being a consigliere (13:54) Decision making (21:51) Acting when confident (26:43) Advantages of a large fund (31:06) Raising in a frothy market (35:47) Tech and the government (43:21) Being vocal on politics (46:47) Valuing board members (52:24) Former operators vs career investors --- Linktree: https://linktr.ee/uncappedpod Twitter: https://x.com/jaltma Email: [email protected]

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

• 0:01Jack Altman?

  All right, Keith, thanks much for doing this. I appreciate you making time.

• 0:03Speaker 01

  Pleasure to be with you.

• 0:04Jack Altman?

  Know you're busy. I know there's a lot of flying going on and I'm committed to talking fast to keep up with you during this podcast.

• 0:09Speaker 01

  Ask the questions as slowly as you like.

• 0:11Jack Altman?

  I will. Very fast, though. Okay, so the first thing I want to talk to you about is the whole idea of investing in outliers. And I saw you recently talk about something that resonated with me where you're like, you know, the top 15 basis points of people. Those are the founders that like make the companies that matter both to the world, probably also like to venture returns. The question I have is how do you marry that with being like a very early-stage, pre-product market fit investor? And maybe to put a little bit more context around it, we all kind of know what like great looks like when you meet like a fully-developed founder like the Collisons or Brian Chesky like today. Like, I think anybody could walk into the room with them and be like, this person's amazing. But you operate, for the most part, at the very early stages. And so just talk to me about like, what makes great? Like, how do you know what great is at those early stages?

• 0:53Jack Altman?

  Like, what's inside your brain as you're like saying that, talking about pre-product market investing?

• 0:57Speaker 01

  Well, the reason why I think it's wonderful to be a pre-product market investor is very few people can do it. So like, as you point out, as companies grow up, as founders mature, many, many investors can figure out that these people are excellent, this company's excellent, the P and L's amazing, et cetera. So in venture, the returns are mediocre across the venture industry. So the only way to produce great returns that are impressive to LP is, is you have to have an alpha. You have to have a comparative advantage, competitive advantage of some sort. And so mine is to find founders when they have nothing but a keynote deck, because there is nothing else for people to go on. There's no other, there's not maybe even a product. They can't even look at the product. There's almost surely not product metrics and absolutely not financial metrics. So I think this is

• 1:41Speaker 01

  the most amazing thing for me, because what do other investors do except throw up their hands and kind of barf? So you want to compete, like, you know, kind of a Peter Thielism, compete where there's no competition. Truthfully, there's virtually no competition on a keynote deck in founders for undiscovered founders. Once you've created, you know, X billion-dollar company, you're gonna start your next company? Sure, there's competition. You're gonna start another company. I'm sure there'll be competition to invest in around. But you're talking about people starting their first company from scratch, and they just have a keynote deck and a co-founder? That's Awesome, because almost nobody else wants to do what I do. So then the question is, can you do it well? Like, it's kind of like you have to be contrarian to right, not just bet on people, like, but you also have to be right. And, you know, a reasonable fraction in an early stage of investing call forty percent. Yep.

• 2:23Speaker 01

  Forty percent is pretty much Hall of Fame, you know, Ted Williams kind of stuff, if you can be that accurate. So then the question is, what are you looking for? And to me, the best I can describe it is every founder that really succeeds has a superpower. And that superpower is something like they're in the top one to 10 basis points in the world on some trait. So they're the most tenacious person you've ever met in your life. They're the most disciplined person you've ever met. They're the smartest person. They're the greatest salesperson. It can be anyone. Yep. But they have to have a trait. And it has to match the company. It ideally matches the company. If you can match it to the company, then it's like so set up for success. That's like, please take my money right now, you know, do not pass go, don't meet with my partners, here's the check. Yeah.

• 3:07Speaker 01

  If it's just the trait without necessarily directly matching the company, it's still probably a pretty good investment, actually. It's like, how many dollars at what price? But if it absolutely matches hundred percent, like lean in, lean in, lean in. The other possible alternative is a Venn diagram overlap that you never see. I'll give you a couple of examples, two traits that don't usually go together in people. So I remember when I first started working with Max Levchin in late 2000. Reid Hoffman said to me, to prepare me for my first one-on-one meeting with Max, that Max is a world-class technologist and a world-class strategy, business strategist. And he's like, there's five of those people who are lasting all of Silicon Valley. And this is amazing. This is December of 2000. So before Max is famous, before PayPal was successful, we were a complete mess.

• 3:52Speaker 01

  But Reid exactly nailed Max's combination of superpowers is those two traits don't go together. Jack Dorsey, another very successful founder, Jack actually can do three. He's actually a pretty good technologist. He's a world-class design and has world-class design taste. And he's a very strong business strategist. So you marry three traits that don't go together, that's another reason to invest. But those are the only two in my experience is like, you have to have that. If you think about it, it's even globalized this. It's not about founders. It's about anybody. Who succeeds in a competitive industry. You're a professional athlete. You want to be the best NBA player of all time? You almost surely have some abilities, some traits, some body composition that's very different. Or you want to be a world-class DJ. There's a reason why, or in politics.

• 4:33Speaker 01

  There's a reason why Donald Trump has been elected President of the United States twice despite a lot of people hating him. Because he has superpowers and you can actually, I've spent the last couple of years trying to isolate his superpowers. Because I was like, I want to understand, like, why does he keep winning? What are they? Despite the world. So I think there's two. One is he understands marketing and that's easy to say, but very rare. And I'll give you an illustration, a very specific illustration. Trump actually cares about what his supporters look like. Now that sounds crazy if you think about politics, you're like, wait, why do I care what my supporters look like? But then if you turn, turn both our brains on our marketing. We're going to cut a commercial for any one of our companies. If Nike was going to cut a commercial for some new, you know, product. Would they care what the athletes in the commercial look like? Of course they would. Yep.

• 5:16Speaker 01

  So Trump has instincts about what central casting looks like and how that becomes aspirational for other people. And he just applies that to politics and no other politician I've ever met has been that strong and that instinctive. And it pays dividends. Is it instincts or do you think he could articulate? No, he can definitely articulate. Okay. When he first met me, he was very specific about, oh, you need to, you know. You look great. Do this, this, any more supporters that look like you. But when you think about it, like, of course, if we were launching a consumer product, that's the first thing we would think. Like, if we were going to have a product hero shop, like, let's, this is promoting this sweater. If I was like promoting my Jack Archer brand pants, of course I would care. What's the model? What ages the model? You know, even sometimes nationality and race.

• 5:59Speaker 01

  Like, all these things go into any marketing campaign that any company in Silicon Valley uses. He just applies to politics. The second thing, and this explains some of his partnership with Elon. Is he just asks a lot of why questions. Why, why, why? And most people in politics don't. There's a consensus in politics that this is the way you do things. This is the way you set a budget. This is the way you do it. And he just doesn't accept that. So he like keeps probing, like, why? Well, why do we have this deal? You know, why do we pay this money to these people? Why, why, why, why, why? And usually the answers aren't that great. That's like a key hallmark of like a beginner's mind, I feel like.

• 6:30Jack Altman?

  The people who just keep asking.

• 6:31Speaker 01

  And they ask it six times. So what makes Elon exceptional is it's not the one or two levels of why. It's like, why, why, why, why, why? Until you get deep to the quote unquote metal. And usually, as you do, you find out that there's some mistakes or some things that can be better. And not always, sometimes there's a Darwinistic evolution of really good ideas and they're sound. But I bet you in politics, that's less than half the time. And so what Trump's very good at is, and this is unsettling to a lot of people who've made their career in politics, is unsettling the people who've built this consensus. And as he probes, he's like, you know what? This makes no sense. And then, then of course you have to find a better solution and Elon's, you know, been phenomenal over 25, 30 years at finding better solutions. But the first thing is to find out what's wrong, what's broken, what can be better and why? And then try to build the solution.

• 7:16Jack Altman?

  It's sort of interesting because I, I always felt like during Lattice, I was like, it's weird how we're like pretty mechanical and we try to really inspect all these other things. But then when it comes to hiring, it's just like people take this past like, I like the guy, you know, this felt good. And I think the same is true in venture where people are like, this founder's spiky, you know, like I like their vibe. Like I feel good about them. And it's sort of like, most people think they're a better than average driver. I would think most people think they're a better than average picker of people.

• 7:40Speaker 01

  Yeah, most people are much worse.

• 7:42Jack Altman?

  Right.

• 7:43Speaker 01

  Most people are much worse. Your brother happens to be really good at it, right? But there's very few people, I actually think about, I've thought about, you know, I've been in venture and in tech, I guess, combined for 25 years now. And so I've met a lot of people because when I started my career, a lot of people who built Silicon Valley were kind of at the end of their career. So I have like a long, you know, perspective of like 50 years combined of like people at the end of their career. And now the people in the beginning of theirs. I can count on like one hand, the number of people who consistently can identify founder talent from the very beginning.

• 8:13Jack Altman?

  Yep.

• 8:13Speaker 01

  And your brother's one of them.

• 8:14Jack Altman?

  He definitely is. And I feel like, well, and you, you are too. I mean, you've done it many times and I feel like so often the lack of willingness or ability to get specific with understanding this thing that is like, sort of like the center of the venture craft. And it's just like, I'm going to go off my feelings. And so I guess one of the things I'm trying to learn as I like start now doing this, you know, more and more professionally, obviously, is how do you go from this feels good, I'm trusting my instincts to being really Excellent. You kind of talked about like, are they really world-class and excellent at something? But maybe to like, make it concrete, you and Vinod obviously have both, you know, this is two people who really know what they're doing on this. When you guys both meet a founder and, you know, you're trying to decide if this person was good or great, like, what is some of the language you use to sort of like, what is your discussion?

• 8:57Jack Altman?

  Like, how do you talk about, is this person 99, 99.5, 99.9, 999?

• 9:03Speaker 01

  Like, how do you talk about? Yeah, it's a great question, because Vinod is actually two things. And one of the reasons why he's been so extraordinary. He's a technology investor and a people founder investor, and that's rare. So he understands the implications of new technologies better than most. And so he can make technology-driven investments, too. I can't do that. I don't wake up in the morning and read about some new technology and say, oh, my God.

• 9:23Jack Altman?

  So you don't even try that?

• 9:24Speaker 01

  No, no, no, because there's so many people that are better than me at seeing a new technology and figuring out all the implications to it. There's people like, I'd say Vinod is extraordinary at that. Someone like Marc Andreessen is probably pretty good at that. That can be a great way to be an investor if you're better than other people at understanding technology breakthroughs and what the implications are.

• 9:41Jack Altman?

  Can I ask one more quick question? Do you need to be afraid of not understanding a market then? Or do you, are you just like, I'm just going to be horse blinders. If this person's amazing, I don't care what this market is.

• 9:50Speaker 01

  Yeah, I will learn, learn along the way.

• 9:54Speaker 01

  You know, I think it's kind of interesting, at least let's divide venture investing into three components. There's meeting the right people, sourcing sort of thing. There's definitely the assessment of evaluating. There's the winning, because some things are competitive, some things aren't actually. And then there's the, can you increase the probabilities of success or the amplitude of success by being like a consigliere?

• 10:14Jack Altman?

  Yep.

• 10:15Speaker 01

  I think in areas I know better, I actually can probably help more on the consigliere piece, like financial services, payments, whatever. I can probably be more useful to a founder after I start working with them, because I've seen where a lot of bodies are buried. I've tried a lot of things by hand.

• 10:29Jack Altman?

  You just mentioned the only thing to help. You just said by being a consigliere. Is there not, do you think that's basically all that matters from a VC to help a company? Or do you believe in some of the other stuff, too?

• 10:37Speaker 01

  I think for the best founders, being a consigliere is like 99% of the value. So when I pitch a really world-class founder, I'm like, why take my money?

• 10:44Jack Altman?

  It's me as a partner.

• 10:45Speaker 01

  It's like, yeah, I'm going to, I'm going to be someone when everything's a mess, who can give you feedback that occasionally is useful. And the really best founders actually ask for conceptual frameworks, not answers. So like, for example, my friend Max Rhodes at FAIR will always start the question with, I'm debating X versus Y. Do you have a conceptual framework for navigating that? And you know, the answer is sometimes yes. Or like someone I remember when I first started working with Patrick Carlson in 2013 or so, we would sit down for brunch on a Sunday and he'd come with a list of five to 10 questions. And I would go to bed really early the night before to make sure I was very well rested. I'd be like in bed by nine o'clock because I knew he's going to only ask the questions that he was like debating or struggling with because if they're easy answers, he would have already executed them and they would never reason.

• 11:29Speaker 01

  And then if he's going through the five or six, I would start laughing and like hysterically because I'd be like, oh my God, I can't wait to see what's next because they're increasingly the level of difficulty. But on the five or six, if I could make his eyes light up twice.

• 11:41Jack Altman?

  Yeah.

• 11:41Speaker 01

  It'd be like the most home run meeting ever. Because it's like coaching Steph Curry.

• 11:45Jack Altman?

  Right.

• 11:45Speaker 01

  You know, like Steph Curry knows what he's doing. He's very good at what he does.

• 11:47Jack Altman?

  But a coach can still help.

• 11:48Speaker 01

  A coach can occasionally, you know, light up and allow the person to reflect on it.

• 11:53Jack Altman?

  That's good.

• 11:53Speaker 01

  So I think that's what the real goal is, is to be a good consigliere. And sometimes I describe it by metaphor as like a cartoon mirror in a haunted house. So sometimes what you're doing is exaggerating the positives or the negatives and playing it back because like the forest and trees kind of thing. So I'm exaggerating what I see and saying, is this really what you want?

• 12:13Jack Altman?

  I'm sorry to stay in this little Eddie of the conversation, but do you think that your experience as a COO where you did that kind of work with founders was actually more aligned to being a VC in some ways than being a CEO?

• 12:24Speaker 01

  Yes, I think so. I think because I never really want to be the visionary and for the most part. And I'm mostly trying to help someone execute their vision. So you don't have this proverbial conflict. Like when I first entered venture, people like had this, you know, kind of concern that people talk about when successful, you know, executives become VCs that they're going to try to control. And it's like, if you're a COO, you've never really been in control. You never wanted to be in control. Like I partnered with someone like Jack Dorsey or I partnered with someone like Reid Hoffman or partnered someone like Max Levchin or Peter Thiel. They had very strong will and very strong vision.

• 12:57Jack Altman?

  It's closer to being a board member.

• 12:58Speaker 01

  Yes. It actually is a good proxy. And you know, I hadn't really double clicked on this, but as you think about hiring for here, if we do hire X execs, I think it's better to possibly better to hire the number twos than the number ones.

• 13:11Jack Altman?

  Yeah.

• 13:11Speaker 01

  Because you don't really want to ever get The way of a founder's vision, at least in my view, like when I choose to invest in a founder, it's because I believe this person is compelling, has these traits and will be the CEO forever. Or, you know, as long as they, their health, their family, whatever, their obligations will allow for, or I won't invest personally. As a fund, other partners here may invest where they think we're going to change the CEO at some point. We do a lot of deep tech investing. Some of the deep tech emerges from universities. Not all of those professors want to be a CEO of a large organization forever. So we do have, you know, a reasonable number of our portfolio companies where we do change and add a CEO. But that's not for me. It won't be my investment. I will not be the cheerleader, the point person for those kind of investments.

• 13:54Speaker 01

  Back to where you started though, actually, interestingly enough, Vinod and I have worked together as VCs for seven years now, just over seven, and he was also on my board at Square. Interestingly enough, I don't know if we've ever, ever really disagreed about a founder's ability. Maybe shades of grades between like, maybe I'd grade A plus and he'd say A.

• 14:14Jack Altman?

  And is that because you both read it the same at the, at the outset? Or do you talk, do you talk it through? Do you still, even when you're similar, do you talk about it?

• 14:22Speaker 01

  We do, we do discuss it, but it's interesting. Just generally what happens on like a partner presentation level is a company will come in, present, and there'll be, you know, the five MDs here plus the rest of the investment team. And then after the, you know, founder finishes, we'll discuss like, should we invest? Why? Vinod and I have very different opinions on whether we should invest at what terms and what price, you know, and which companies. But I can't recall a specific founder where we didn't have the same reaction, which is really fascinating because like seven years times, partner meetings, 50 weeks a year, hundreds. Whereas like, I definitely can remember very specific illustrations with some of my partners like Samir, who's a very good investor, or David Wyden is a very good investor, where we did grade very differently. And, you know, one of us might've been right, the other one might've been right.

• 15:06Speaker 01

  But interestingly enough, Vinod and I like seem to have the same constellation of assessment.

• 15:13Jack Altman?

  I guess maybe the last thing I'm just would be interested to tease apart is, besides this concept of we got to find the thing they're world class at, is there any other? Is there anything else that's happening concluding at the same read as Vinod?

• 15:27Speaker 01

  On the founder level, no, but then we may discuss like the market opportunity, the business opportunity, the angle, the initial entry point. Cause like usually inertia is the worst thing for a startup early stage. Right. The world doesn't like you, doesn't think it needs you, and you've got to invert that. Like you remember this at Lattice, like you have to create momentum from scratch. And that's the most important thing by an order of magnitude a founder does is invert inertia. Literally in a physical sense, like the world, you know, it's rest stays around, body rest stays around. You've got to create the momentum and you have limited time, limited energy, capital, people to do that. Those kinds of discussions, Vinod and I certainly can have different views about, like, oh, this market makes a lot of sense. Or he may see an angle to enter a market that's better than what I would do or more insightful,

• 16:11Speaker 01

  or where I'm actually struggling with an answer or vice versa. Or I may believe in this current founder, their approach actually will pay dividends and he might not see it. But if you believe in the founder for a reasonable sized investment, that can still make sense. So let's say I brought in a founder tomorrow that Vinod thought was stellar, but he thought the market was stupid or the approach was dumb. For $2 million, we would probably almost surely still invest.

• 16:37Jack Altman?

  Yep.

• 16:37Speaker 01

  For 10 million, we might not.

• 16:38Jack Altman?

  Right.

• 16:39Speaker 01

  And for 20 million, we almost surely wouldn't.

• 16:41Jack Altman?

  Yep.

• 16:41Speaker 01

  So it depends on the size of investment, how much you can just go with like the founders, right? They're great. They're going to figure this out.

• 16:50Jack Altman?

  Yep.

• 16:51Speaker 01

  Versus like there's line of sight to something that seems interesting.

• 16:54Jack Altman?

  I want to talk about decision making now sort of more generally, um, which is like, you know, on some level, like a VC firm is sort of just like a, you know, the, the whole product is decision making on some level. You know, at Founder's Fund, I've seen people talk about how, you know, decisions kind of often will get bubbled up from junior people or how you have to like, like a $1 million check, a 5 million, a 10, et cetera, you know? And, and whatever it is, there's, there's a way that decisions happen there. There's, you know, some way it happens at COSLA. First, I'm curious about like, you know, if you could talk about a little bit of those differences, but then maybe at a more fundamental level, like how important is the way venture funds make decisions? Like, is that a very important part of, you know, a venture capital firm's activities? Or is it just sort of like a? An auxiliary thing, but it's not really like the main show.

• 17:36Speaker 01

  Well, I think the biggest difference between like, let's call it sales is just sales to some extent, you want all your customers. Right. Like in a target market, you want as many customers as possible. Assessing or decision making in venture is the key ingredient for for a fund that has a brand.

• 17:50Jack Altman?

  For a fund that can win enough good opportunities.

• 17:51Speaker 01

  Has like a good deal for it. Let's just eliminate the sourcing.

• 17:54Jack Altman?

  Assuming you see and assuming you see and can win things, then it's about decision.

• 17:58Speaker 01

  Then then it's like about decision making and like, let's put it this way, when I have sleepless nights, they're 90% about work and 10% everything else in my life. They're mostly about making the wrong call. Like may, and I've talked about a few of them publicly on podcasts where, you know, X versus Y, and then I could lose sleep for a decade.

• 18:16Jack Altman?

  And you worry more about pass, bad passes?

• 18:18Speaker 01

  Well, you try to um figure out why, so you don't replicate the mistakes. Let me give you a tangible example, talk about publicly, because it is one where rarely I made a mistake and was able to learn from the mistake and then apply it to a second company. I've talked about this previously. I had basically a signed term sheet to lead the seed round for Robinhood. And then they came back to me after we had like at least a handshake, maybe a signed term sheet, and said, would you, we want you to join the board. And this is like about my first year as a VC, so I didn't have like as much authority myself. So I went back to my partnership and we had a discussion about, you know, should I join the board? And the answer was no internally, which makes sense. You literally add a VC like KB or any competitor of ours. You can't join the board for every seed company.

• 19:03Speaker 01

  So I went back and said, you know, I can't do this. I'm sorry. And they're like, well, we really want to make other choices then. Cause you know, you won't be as involved in whether or not good decision. Anyway, so run up not investing.

• 19:13Jack Altman?

  Dang.

• 19:14Speaker 01

  Three years ago, and obviously probably has run an early well.

• 19:17Jack Altman?

  That's tough.

• 19:17Speaker 01

  Um, so all I would have done is mess it up probably, but in any event, you know, with hindsight, like an insanely stupid decision. Two million and 20 posts or something. Okay. So, yeah, like.

• 19:26Jack Altman?

  We don't have to.

• 19:27Speaker 01

  You could lose a lot of this late sleep. My age sleep has a Robinhood setting.

• 19:30Jack Altman?

  We can look it up after that.

• 19:31Speaker 01

  Yeah. In any event, two, two or three years goes by and my friends at Fair are raising a seed round. Um, Jeff and Max had worked for me uh at Square. You know, they were entering Y C, so they were getting some attention. They obviously was set up for me to lead the seed round, but they came back with the same condition. You must join the board. And I'm like, hmm.

• 19:52Jack Altman?

  Yeah, I'm not messing up.

• 19:52Speaker 01

  I've got burned this one before. So what I did is, and now the statute of limitations has passed. I said, yes, without consulting my partners. I was just like, I'm not going to tell anybody. I'm just going to join the board. And so it turns out to have been a very wise decision. And like the rationale for actually not telling my partners was obviously I got burned before, but like, you know, like I try to be intellectually honest with my partners here. That's why we have a great like relationship and we all work well together. And it's based upon trust is Max and Jeff were close friends of mine. We were soccer buddies before Square worked at Square. I was like, they're going to text me 24/7 whenever they want. I'm going to meet with them whenever they want. So the incremental joining the board for them is like meaningless. And so I really felt that intellectually, honestly, that, you know, I'm going to meet. If Max asks for a meeting on Sunday, I'm going to meet with him on Sunday.

• 20:36Speaker 01

  If he calls me Monday night at 10:00 PM, I'm definitely going to, you know, talk to him. So there was no real drag coefficient in terms of effort. Where typically a board member, there is more. So I felt like, you know, I'm just going to do this. And then of course it's worked out well. The company's great, you know, very happy and everybody here is very happy. But it was, it's rare when you could take the very specific lesson and apply it and not make the same mistake.

• 20:58Jack Altman?

  But so basically your kind of view is once you get past, you know, a threshold where relative to your fund size, you see enough, you can win enough. Decision making really is like the main thing to get better at.

• 21:07Speaker 01

  Oh yeah. Like, so for example, um, there's one that we should have done here. It's a very well regarded private company called three to five billion on paper. Where we had a relationship with the founder from his prior life. And we collectively decided not to, not to invest. And then we recently, and it's about five years ago, I was here at the time. And we were recently talking about how do we miss this? Cause they came in and presented and for whatever sort of reasons, we didn't, we didn't invest. So we actually pulled up our partner meeting notes from like 2018 and read them to see like, what did we do wrong? Like, why do we miss this? And, you know, so we, we tried to learn from poor decisions if we can.

• 21:51Jack Altman?

  When you're meeting some of these early stage things, like a lot of times you like, you know, there, on one end of the spectrum, there's what you just described at Fair. Like these are your friends, you like, you're sure they're good. There's a lot of other situations where you just like, don't have the time where like a deal's moving quickly. It like looked pretty good, but you're not a hundred percent sure. In my head, what I assume is you must have some gradient where you've got some deals where, you know, whether it's ramp or fair, the day you do it, you're like, I know this is good. And then you must have some deals where the day you do it, you're like, I'm actually like, just genuinely not sure. You know, you mentioned before that like 40% is like a stellar hit rate. Do you think of your job basically as a function of, I need to do a certain cross section of these very sure and not so sure things, no matter what? Or if you had a smaller fund, would you only do

• 22:35Jack Altman?

  the things you were very sure about? And then you kind of have to like move down the stack as a result of like the situation you're in? Like, how do you think about this?

• 22:42Speaker 01

  I think it's a fascinating question. 90% of the best stuff I've ever invested in as an angel, or as we say, I was dead sure of. So I think the implication to that is if the fund were smaller, if you had less money or less time.

• 22:54Jack Altman?

  If you ran a $100 million seed fund.

• 22:55Speaker 01

  I would probably only go for the, I'm pretty damn sure. So like, for example, when I think Lonsdale has told this story publicly that when they started Palantir, I was the only person who thought it was a good idea. Literally other than the four co-founders. I was like, this is so smart. Like boom, Airbnb, like instantly, Brian will tell you like I, three minutes after his monologue, three minutes in, I was like, this is the coolest thing since YouTube.

• 23:18Jack Altman?

  Which by the way, that's a good example of a hard one that a lot of really smart people passed on.

• 23:20Speaker 01

  Everybody else like was totally wrong. There are people who thought they were cool, interesting founders, like Paul Graham talks about this publicly, but nobody else thought it was a good idea. I was like, no, literally this is the coolest thing since YouTube. And I was like, three minutes after, I was like, we need to, I need, we, Kevin Hart, Javon and I need to invest now. So I knew it right away. YouTube literally took like less, less than the barbecue where I found out about it. Like Javon actually literally walked me into his bedroom to show me every video at the time, literally every video that was uploaded to YouTube. And I was like, I want to invest right now. Like, period. So like usually like I've had that instinct of like, wow, at the time for the really, really best stuff.

• 23:56Jack Altman?

  Have you ever gotten shocked by something that you weren't good?

• 23:58Speaker 01

  Yeah, okay.

• 23:58Jack Altman?

  That turned out to be amazing?

• 24:00Speaker 01

  Occasionally, but then obviously didn't think it was that not good because I wouldn't have invested.

• 24:03Jack Altman?

  Maybe asked differently. If you looked at your whole, if every day that you invested, if you said, okay, put the, the day you wired the money, put this in a quartile for yourself. Do you think that you would accurately predict how good each basket was?

• 24:14Speaker 01

  Mostly yes, or at least barbell wise, like the top stuff, yes. And then would there be some stuff actually, maybe at the tail that would surprise you? So that would be a little bit interesting to actually study.

• 24:26Jack Altman?

  Yep.

• 24:26Speaker 01

  Like actually force the discipline of ranking one to 10. Like, how good is this on day one? And then, you know, five or 10 years later, looking at the stuff that really had high conviction ramp was a very high conviction instant. Like they started projecting their notes and you have DAC just notes in like a couple of minutes. And I was like in total sales mode, like instantly like boom. Same thing, I'll tell you a funny story about this company. Most people don't know, but it's really phenomenal in Europe called Trade Republic. It's like a better version of Robin Hood, but for Europe and it's phenomenally great company. But I didn't even want to take the meeting. I was like Europe, Robin Hood for Europe, blah, blah, blah, blah, blah. So my colleague at Founders Fund, Matthias, found this company in Berlin. And he's like, you need to meet them.

• 25:11Speaker 01

  And I kept trying to avoid it, like literally, do I really have to do this to you? Really, you know, kind of thing. And anyway, we sit down in this conference room in Founders Fund in February or March 2019. And founder Christian sits over there and three slides in. I was like, oh my God, this is the coolest thing ever. And so I went the rest of the meeting in full sales mode, like full, like, yeah, you know, I can help with this and this and this and this. Yeah, I can act the dots. I walk out of the meeting and so I'd only been at Founders Fund for about a month. I walk out of the meeting and like Matthias kind of taps me on the shoulder. He's like, what happened to you? And I'm like, what are you talking about? He's like, you didn't even want to take this meeting and like you're in love with this thing. I was like, you just found the best founder in the history of Europe.

• 25:51Jack Altman?

  Wow.

• 25:52Speaker 01

  And I knew like three slides in and he will be the best founder in the history of Europe.

• 25:55Jack Altman?

  Wow, that's crazy. Yeah, I mean, as I'm listening to this, I'm think what was going through my head was connecting back to, um, you know, as an, as an individual investor, you have some comparative advantage and you just need to like get yourself into that zone of genius as often as possible. And what I was thinking about is like, as a fund shape, you also have comparative advantages. And so like, you know, as I, as we were talking about that, I was thinking, well, it's actually in some ways a comparative, there, there's a disadvantage. Advantage that comes from being large, which is that like, you know, you just, you've got some constraints. And so like, you know, that would say maybe to me as a smaller fund manager, I should, you know, what I would take away from this conversation is just like act when you have more confidence. You must have some huge advantages from being like being a big fun too.

• 26:36Jack Altman?

  I'm curious what you experiences, like the comparative advantages, not from you as an investor, but from COSLA as an entity and the size.

• 26:42Speaker 01

  So let's talk about, I'll give you a really concrete one, which is related to AI, which is very, you know, important topic. I am certainly not a master of AI, um, not an AI investor per se. Since I've come back to KV, I've made two and a half like significant AI based investments. And the only reason I had conviction and confidence to pull the trigger on two of them was we at KV are very expert at AI. My, I have like these three partners here who know AI really cold, Vinod, Sven and John Chu. And so what I feel I can do is if I find a founder who's in the AI space, I can run my normal Keith algorithm through the founder.

• 27:19Jack Altman?

  Yep.

• 27:19Speaker 01

  But I can then get air cover from my technical colleagues, Vinod, Sven and John, who know AI. And can ensure that this, this product is differentiated, that this is the best approach to solving this product space through AI. And that there's nothing better out there. Two of the companies I invested in, I never would have been able to with high conviction, lead a meaningful round. Like I might've led a seed round, but I definitely would have led a series A or B, uh, without, without John's, Sven and Vinod's involvement. So I get the leverage. Same thing in health, like we, we have some people here really understand digital pharmaceutical and, you know, actual all versions of healthcare. And so if I find something interesting in health, I run it by one or two of my colleagues.

• 28:02Speaker 01

  And then I can still apply my normal Keith, is this founder amazing? But I also know I'm not making a mistake.

• 28:07Jack Altman?

  Sean Maguire, when we just did a podcast the other day, just said something that really resonated with me on this, which was basically the analogy was that, you know, in math or chess, if you're, you know, 98th percentile, you can't tell the difference between 99 and 99.5. You can't tell the difference between people above you, but if you're 99.9, you can tell the difference in people below you. And I thought that was really interesting. And this would be the equivalent of like, you would know like a, you know, in AI, you might Know like a charlatan from a reasonable person when you see it, but you wouldn't know world class.

• 28:34Speaker 01

  Right.

• 28:34Jack Altman?

  Nearly very good.

• 28:35Speaker 01

  So even when we post investment, one of the areas we do have value at KV on AI companies is people are building out AI teams. They need their first leader of a true AI leader to build out, you know, an AI function. I can't do that. Like, I don't know how to assess, like, is this really the right person? I can look at, you know, some credentials and things like that and triangulate, seems directionally right, directionally wrong. But if this is a really important company for us, I will have either Sven or John over node interview the candidate. And then therefore I get the benefits of both because they can grade 99.9, 99.5, 99, 98, where I can't.

• 29:11Jack Altman?

  Are you able to use the fund size itself to your advantage too? In any cases, like the best example to me right now at the moment is like the way thrive is using their fund size to your advantage in a very effective way. There's other things where some funds are, you know, not doing these sort of like, we do premium assets and that's the end of the story. I've seen others using, you know, their fund size to do like new products and offerings and things like that. But I'm curious if you experienced that relatively larger fund is an advantage directly.

• 29:35Speaker 01

  Yeah, the way we think about it at KV where there is a real advantage is because we like to back bold investments, bold ideas, ambitious founders, and really early is not all the things we invest in are going to move to consent, being appreciated by the consensus.

• 29:54Jack Altman?

  So you can take it through multiple rounds?

• 29:56Speaker 01

  We can take it through multiple rounds until you want to have a deflection. Like this is a good Peter Kiel point is you don't want to stay contrarian forever. Like to be really successful, eventually you need consensus that this is a good product, good, you know, good thing to adopt, good thing to pay for. So you want to convert contrarian to consensus and then take advantage of that momentum. That in between step, there may not be investors that really appreciate you until you get, you know, somewhere down that curve. So having a lot of, you know, a fair amount of capital, if we have conviction about the opportunity that's better or as good as when we first led, we have conviction about the founder and the team that's as good or better than when we first made an investment, we can double down, triple down. Now, at some point, we're going to want you to prove that there's a real there there that the world wants this. Like eventually you have to get to the world.

• 30:40Speaker 01

  Definitely will want this and appreciate it. And then other people's money is great, but we can definitely do that and we do it frequently.

• 30:47Jack Altman?

  Which I guess also aligns to you guys doing more sort of hard tech.

• 30:50Speaker 01

  Yeah, deep tech, like the milestones are different. The milestones that other people not that financial investors can appreciate are going to be further out. So you need to be able to fund or be able to partner with people that have the same criteria, which is a skill in and of itself, like knowing, knowing who to partner with to finance a certain type of round.

• 31:07Jack Altman?

  Totally, yeah. Do you worry just broadly speaking about like the like venture as an ecosystem or asset class as like things have gotten so? Like there's so much money now, you know, when I was, you know, running Lattice during like Zerp times, like we had all these crossover funds. They kind of went away, but now it's like now like the the sort of blue chip funds are big. And like, there's like, I think like more dollars coming in than out of venture for like a while now, like, are you? Do you, does this give you any anxiety? Do you think this is like a problem or?

• 31:34Speaker 01

  Well, it could be a problem. I think there is a scarce number of founders who have the traits that can build an iconic company. That's the scariest.

• 31:40Jack Altman?

  Founders is the scarce.

• 31:41Speaker 01

  Scarcity. Now, what's interesting in AI world is for any given company, they may be more capital intensive. So you could say there's still going to be 15 companies and 15 founders in any given timeframe that have high potential. But the consumption of capital at OpenAI.

• 31:57Jack Altman?

  Yeah.

• 31:58Speaker 01

  Is off the charts.

• 31:59Jack Altman?

  Definitely.

• 32:00Speaker 01

  And doesn't, it doesn't mean it's bad, but if AI companies have that pattern, then a lot of venture capital can still funnel into the barrels, the proverbial barrels as founders.

• 32:11Jack Altman?

  Do you think that the like application layer where a lot of this investing is happening now outside of the models? Do you think that the, uh, do you think the capital consumption is going to be high or low?

• 32:19Speaker 01

  It should be moderately low.

• 32:21Jack Altman?

  Yeah.

• 32:21Speaker 01

  In theory.

• 32:22Jack Altman?

  That's what it seems like it should be. And I often will meet these companies that like raised a seed and now they're profitable and like everything's fine. But then I'll see a lot of the like, the current sort of leading app layer companies have all actually raised like quite a lot of money. And so I'm not sure what's going to end up happening because like they will have more competition from each other. So I can't quite tell how it's going to play out.

• 32:39Speaker 01

  Yeah, I think at the application layer, it's dangerous to raise too much capital. I think there's reasons why at the foundation level, model innovation or things that are closer to that infrastructure layer. There's real good reasons. Like founders walk in and ask us for thirty, fifty million dollars. And you know, before AI, we would say, you know, no. And we'd say that's totally unreasonable. But then the AI founders at the foundational level like have really good reasons why it's like, I actually need to spend thirty million dollars or I can't get to this milestone. And so we definitely have to think about it. And therefore, we have written a lot of those checks in AI. But then what happens, I think there's a distortion at the application layer is they read about their colleagues, you know, their competitors or colleagues or whatever friends. Running these AI companies are like, I should get that valuation too.

• 33:20Speaker 01

  And so they walk in like, I want fifty million dollars because someone's over here, but they're very different businesses, even though they both have the label AI on them.

• 33:26Jack Altman?

  I mean, one of the interesting things, this connects to, um, you know, we talked about you need to be contrarian and right. It's obviously sort of like how money is typically made. I think there is sort of an unspoken prevailing wisdom right now, or prevailing thought right now, I should say. That we might be in a moment where you can be consensus and right in a lot of areas. And a lot of people are behaving as though that's true. And so like, the way that I see that expressed is there's a lot of ideas that make a lot of sense. You take AI times whatever industry, times pick a vertical, pick like a department in a company horizontally, whatever. There should be something in X. And so I'm gonna like bet on one. And a lot of people that make the bet, a lot of companies are now competing for, you know, those verticals. I think that's part of probably why people end up raising a lot of money is because they're in this like, you know, eleven horse race for something that seems consensus and right.

• 34:11Jack Altman?

  Do you think that it's possible to have moments in time where there's a lot of money to be made in consensus right things? Or is that a mirage?

• 34:18Speaker 01

  In history of venture capital, there's usually these three year windows where that's true. Like the first three years of the internet, there are, there are windows where that's true. But over fifty, sixty years, that's usually not true. So then the art is knowing the valuation, your entry price really matters. So you need to be right, but you also need to get paid correctly for the risk you're taking on. And so the problem is if you treat all AI companies like they're foundational model companies or robotics or something, even if you pick a really good company in a vertical.

• 34:46Jack Altman?

  It might not be a ten billion dollar company.

• 34:48Speaker 01

  Yeah, you may not make that much money. Like you enter at four hundred million, it's a two billion dollar company. You know, it's not terrible, but it's not gonna return, it's not gonna return a meaning, it's not gonna really return a fund.

• 34:56Jack Altman?

  Yeah.

• 34:57Speaker 01

  And so you have to be disciplined about. The price to especially a series B and up, maybe an A plus or minus, you get it right. It's probably good enough. See, definitely make the right call. Companies epic, you know, it's not, it's not going to really matter. But I, I do think that the discipline about we'll pay a hundred million post or whatever versus 200 million does matter in the consensus right world.

• 35:21Jack Altman?

  Is your instinct that we are in one of those three year windows right now?

• 35:23Speaker 01

  Like, I think the vertical, I think you can apply AI successfully to a lot of verticals. And, you know, whether it's hardcore AI, there's like versions of AI, like how innovative is it? But the demand for intelligent acts that replaces human errors or human costs or human scalability issues. Those are the three biggest ones is very real because humans do make mistakes. They are expensive and they're hard to scale.

• 35:47Jack Altman?

  Okay, I want to go over to tech and the government and politics and sort of like this sort of new moment in time we're in that I think is extremely interesting. I would say outside of AI, the other place that has a lot of like heat and excitement is like deep tech, which is great, I think. A lot of this probably is related to the fact that, you know, tech and the government are involved. Some of it, the causality arrow goes both ways here, of course. And as these companies have gotten more important, the government's taking more notice. So maybe before we get into some of the specific questions, tech and the government are like friends all of a sudden. And there's like a relationship now. What's most surprising to me in some ways is that like that didn't exist over the last 10 years. It's not like tech was some underdog for the last 10 years. So I guess what is, why has this shift happened so dramatically?

• 36:30Jack Altman?

  Like, you know, you could say it's new administration, whatever, but like, why are we in this situation now? Where like tech, all of a sudden has this like, not just like a voice, but like a loud voice.

• 36:38Speaker 01

  Well, I think there's two reasons. One of them may be less negative than the other. The first one is at the end of the day, the Democratic Party of the United States for the last 15 years basically has penalized and stigmatized successful people. Just read your average Bernie Sanders speech. That's the representative voice of the Democrats is if you're successful, you've stolen money from someone. Like Robert, Robert Reich, who used to be labor secretary, uh, you know, posted like basically a simplified version of this last week. He's like, basically the only way to be a billionaire is to steal money from people. Insider trading or inherited, which is obviously completely false. But that's the prevailing view in the Democratic Party.

• 37:14Jack Altman?

  Paul Graham wrote that essay that was like how people get rich. And it's like, that's not how any of.

• 37:17Speaker 01

  No, of course, like none of the people we, none of the people we know, like literally none of the people we know.

• 37:21Jack Altman?

  None.

• 37:22Speaker 01

  Like Vinod came over here with like $40, like from India. Like literally, he couldn't afford to eat anything except McDonald's. You know, so like, that's how people get rich in the United States more often than not. In Europe, you still have to like follow one of these formulas, actually, interestingly enough. But in any event, there's a lot of excitement in tech because no longer are people who are building stuff and creating value for the world and transforming the world in positive directions being.

• 37:44Jack Altman?

  Demonized.

• 37:44Speaker 01

  Demonized. And so I think that is a very refreshing, you know, change. And so that's, that's positive. Second thing is like, the reality is the tech world was very skewed and biased against, let's say conservatives and conservative ideas and spending a lot of time, money, demonizing conservatives and conservative ideas and Trump particularly. And so I think a lot of people are on their apology tour. Like, you know, Mark Zuckerberg spent $400 million promoting Biden. Arguably, it was more important in electing Biden than any other person. Reid Hoffman, it's not even public, like how much money. So there's a lot of people who have business interests that you just can't be that one side into politics. Like no Fortune 500 company in history has ever been that biased. Google, like 98%, I think of all employees gave money to Democrats.

• 38:27Speaker 01

  So a lot of this is like, oh, we need to get back to closer to equilibrium because it's just not going to work out well for us to be so partisan. So that dialing back is definitely driving a lot of this too.

• 38:38Jack Altman?

  So now that the relationship is closer, what's going to like change for tech companies? Like, there's so many of these companies, some of them are the most important companies we've talked about. But, you know, like Anduril, SpaceX, OpenAI, like Airbnb, to some extent, like a lot of these most very important companies, like the government matters. I mean Uber too, like, you know, sometimes it's local, state, federal. But like, kind of the more important the company is, the more the government seems to matter.

• 39:01Speaker 01

  Well, what's happened in the last 30, maybe 50 years in the United States is more of what you do in your life is dictated or. constrained by law, regulation. It's just like over the last hundred years, it's hard to do a lot of things. You know, you're basically suffocated by law and regulation. So any company needs to navigate that. And sometimes you're right, it's much more local than federal, and sometimes it's much more federal than local. But you're going to see tech companies having to, you know, sort of navigate a world that is just more constrained. And navigating through a constrained world actually can be very opportunistic. One of the reasons why I actually like investing in heavily regulated spaces is having been a lawyer, I feel like I can kind of in my own brain, do the probabilistic assessment

• 39:46Speaker 01

  of risk reward. And most other VCs kind of have to outsource it to like some lawyers. And so I like heavily regulated spaces. But I think the world, it's interesting enough. I know, you know, you've been talking publicly about having kids and stuff. It's about the only thing you can do in the United States without like the government's permission is have a kid. Like, there's literally almost nothing else you're allowed to do. It's actually shocking when you have your kids. Like, it's like, oh, I didn't even need permission.

• 40:07Jack Altman?

  In some ways, the situation that we have now with the government is like, almost all positive for tech. I wonder, are there risks to being this close? Like, in some ways, we were kind of just like la di da, we're over here in Silicon Valley, or, you know, wherever we are, we're doing our thing. The government's just like not thinking about us. And now it's extremely spotlighted. You know, it's like at the inauguration, it's like, whoa.

• 40:27Speaker 01

  Yeah, everybody's there. Trump's talking about it.

• 40:29Jack Altman?

  Is this perilous in any way?

• 40:30Speaker 01

  Oh, I, I think it is, actually. I think it's not accidental that, you know, Silicon Valley is about as geographically distanced from DC as possible. And, you know, it's like a feature, not a bug.

• 40:39Jack Altman?

  Yeah.

• 40:40Speaker 01

  So I think innovation and cleverness and disruptive thought in some contrarian, you know, ideas are better and more fertile in areas that are not touched by the government or not interacting with government.

• 40:53Jack Altman?

  It's like the government wouldn't know how to regulate like crypto or AI, like in the nascent days. And the closer you are, the, I would imagine, it's like, the sooner they're going to want to be involved with a lot of these things. And I worry that that kind of regulation early is very stifling.

• 41:06Speaker 01

  It's very, it's very stifling. And also, you know, there's things like you study in political science about regulatory capture. Incumbents can use the government more easily than a startup can. So if you have a disruptive technology, just some incumbent, it's more Likely the the larger institutions are going to take advantage of government access to curtail your opportunity. So it's very, I think it is very dangerous.

• 41:25Jack Altman?

  A lot of these VC firms now, it's not just like, you know, there's like some like middle person like a lot of the it's not like a consigliere in the middle. There's like the VC firm now has people in DC that are powerful. And at the same time, a lot of these, these, you know, same VC firms have gotten very large, gotten very influential. Do you think that this leads to these firms transforming or playing a different looking role? Or will they still just be VC firms that like have a deep connection to the government, the way that like JP Morgan always has or something like that?

• 41:55Speaker 01

  Well, I think, you know, Goldman Sachs always has like as a classic example. And so I think maybe VCs or some VCs, you know, adopt that as a differentiation or point of differentiation. Or, you know, a feature, part of their features, that sort of thing. We'll see how that plays out because again, I don't know if it's the best thing for early stage companies. So for example, yeah, some like the next and rolls were your target customer. Is the federal government like you're by far, then sure, like early investment in politics, what politics makes sense. For most companies, it's probably not great. So for example, you know, when I'm in DC, people always ask me what it, what do you think about DC? And I actually like DC. I used to live there as a lawyer. It's one of my favorite US cities.

• 42:35Speaker 01

  But it's kind of like junk food for me because the next early stage 19 year old undiscovered talent is not hanging out in DC. The people that are hanging out in DC is, you know, I talked about at a conference recently is you run into Mark Zuckerberg or Jensen.

• 42:47Jack Altman?

  Yeah.

• 42:47Speaker 01

  Like, that's not useful for me as an early stage investor. It's interesting and fascinating, you know, and like maybe if I want to have an A one day, like a company company.

• 42:56Jack Altman?

  Yeah, but it probably doesn't really help that much.

• 42:58Speaker 01

  I'm not finding some undiscovered talent like in DC. So like you can get distracted with this junk food where I have to eat real meals, which, you know, great founders are probably everywhere else.

• 43:08Jack Altman?

  Yeah, it's funny that like hanging out with Jensen or Zuck would be junk food for you. But when you say it in that light, I guess it really doesn't help you much.

• 43:14Speaker 01

  No, I need to find somebody who's never built anything before and has an idea about how to actually disrupt Nvidia or Meta.

• 43:21Jack Altman?

  I also feel like there's been this transition where investors have been much more comfortable speaking about. What they think about politics, where they're much more comfortable just sort of saying what they want to anyway. Like, I feel like there was a, there was like a guardedness, like even 10 years ago, when I was like starting Lattice, I didn't feel like investors were like expressing their thoughts. And now I think a lot more investors and firms and people in general are willing online to just like say what they think kind of fearlessly. You say what you think kind of fearlessly and like-

• 43:50Speaker 01

  Even before it was cool.

• 43:51Jack Altman?

  You did it before it was cool. Yeah, totally. But you definitely still do it now. You say a lot about politi- I mean, you definitely were always willing to like, you know, get at it with people online fearlessly. And maybe you were talking about politics for a long time too.

• 44:02Speaker 01

  Not as much.

• 44:03Jack Altman?

  But I feel like lately, you're really willing to like, you don't seem afraid to say what you think ever.

• 44:07Speaker 01

  I think as a VC, it's a little bit easier for one structural reason to remember from that. When you run a large organization, you represent a huge constellation of people. So I don't think a CEO should really be engaged in politics unless it affects the company. I'm kind of pretty strict about that. But as a VC, you don't represent a large constellation of people. Uh, you may only represent yourself or small partnership. Yeah, you know, I have four MDs here, you know, four colleagues who are MDs. So it's a very small insular group. So I think it's easier to express your voices. And then I think the culture has changed though. You just watch Elon, you know, like, but I think he has the best founder, you know, of the last hundred years. I think now it's like not debatable, but like, as the most successful founder of the last hundred years, as he's engaging in, you know, intellectual-

• 44:51Jack Altman?

  It lets everybody do it.

• 44:52Speaker 01

  Right. Yeah. It's such an example. Like, we're just like Mark Zuckerberg sets an example for founders in some ways. Steve Jobs set an example. Everybody, Brian Chesky sets examples.

• 45:00Jack Altman?

  I mean, Elon even said an example, not that he's, you know, better or anything like that, but he set an example for Zuck in some ways, it looks like to me.

• 45:05Speaker 01

  I think people like, you know, like emulating successful people in your field is a very common thing. Like if you're a great athlete, you look at like, if you know, you want to be, if you want to be the next great basketball player, of course you'd watch like Michael Jordan or Kobe Bryant, you know, et cetera. Or if you're, you know, seven foot, you'd watch like Shaq or Patrick Ewing and stuff like that. So I think it's very normal to emulate people who are successful. And so as successful founders are more engaged in politics for their own reasons, I think that does create either, you know, a copycat mentality or a license to engage.

• 45:38Speaker 01

  But I don't, I don't think typically it's great for a founder of a large organization to be taking views on issues that do not directly affect their company.

• 45:46Jack Altman?

  Do you think it helps VCs?

• 45:47Speaker 01

  It can. I mean, I think VC is interesting because it's a matchmaking exercise. From my point of view, a consigliere, like I am not the right partner for every founder. Even internally, like sometimes someone will come to me. Like that happened actually this morning. I met a founder. I think it's a good investment, actually. I'm not sure I'm the best partner for him, but I think it's a good investment. So what I'm going to try to do is pair him with a different one of my partners, who I think would be probably better for him. And so there's always this matchmaking exercise. So I think it's fair for founders to know.

• 46:14Jack Altman?

  Yeah.

• 46:15Speaker 01

  You know, who are you partnering with? You're partnering for a very long time, decade, et cetera. And does this person share either values or an approach to life or way of thinking? That's either complimentary or suitable for me and my company. And so it does create like an alignment. There are founders who reach out to me very specifically because of, you know, my views on certain things and they want to work with me more than other people. And if they don't, great, there's other partners here.

• 46:40Jack Altman?

  Yeah.

• 46:40Speaker 01

  Vinod included, who have very different views on sometime, you know, sometimes publicly. Um, that they can pair with, that might be a better fit.

• 46:46Jack Altman?

  I'm actually also on that front. I'm just like, I'm happy that the language is now just in the ecosystem is very much back to, and I feel as with founders, but like founders want partners. And I felt this during, like, I really valued my board members, like, and I got lucky. I had very good board members, but I really valued them. And there was that weird period where it became this sort of like feature to sort of invest without being a board member and that like companies don't need boards and all that stuff. And there's some exceptional founders who are like at a point in their career where like, you're like Parker Conrad can kind of like get away with it because he's.

• 47:16Speaker 01

  Sure. You know, but like. People want like building companies are always a roller coaster ride. And having someone who's long for the journey, like just like it's a lonely job. Being a founder is very lonely.

• 47:25Jack Altman?

  Yeah, totally.

• 47:26Speaker 01

  You know, the more you're friends with and know founders really well, you actually feel that. Yeah, I mean, I'm very close to a lot of founders I work with and I know them very well and have worked with them for years and sometimes known them for like someone like Max Levchin for 20 plus years. And so you can actually tell their emotional state pretty well. And so having. People that understand what you're going through.

• 47:47Jack Altman?

  Yeah.

• 47:48Speaker 01

  And occasionally can give you like feedback, like sometimes actually it's counterintuitive feedback. Like when things are tough, encouragement might be the right answer.

• 47:55Jack Altman?

  Yeah.

• 47:56Speaker 01

  Not criticism. And then actually, the best time to be critical is actually when things are going really well. So like, understanding that dynamic with the founders you work with and board members are typically really good at that. The people who are, say you can get the proxy for having other founders you talk to or stuff like that is, they often lack context, like context about like how the company's really doing. Who are these people that, you know, this founder's working with? You know, what's going right or wrong? And like, a board member has to have like some level of visibility, sometimes really good visibility. So you kind of, I can project, you know, sort of your emotional state and why it is what it is.

• 48:30Jack Altman?

  Yeah. I mean, I think a lot of times there's, you know, there's a, uh, there's a misconception that like, oh, once you have a board, you have to be like buttoned up and you have to like share stuff in these calculated ways. And they're going to kind of be evaluated. And it's like, it's the opposite. Like you can be much more real with your board members sometimes than with your execs.

• 48:45Speaker 01

  With your, with your execs.

• 48:46Jack Altman?

  Like that's sometimes where you can be the safest.

• 48:48Speaker 01

  Because once you talk to some things about with an exec, a hell breaks loose.

• 48:52Jack Altman?

  Yeah.

• 48:52Speaker 01

  Like you can't ever show any doubt to an exec without like people like suddenly catastrophically moving in a different direction. And a really good, a really good board member, you can have a conversation with, you know, I'm not sure this part of our strategy is right, or this part of the team, or maybe we don't need this, maybe we don't need this team, et cetera. All of those conversations are really helpful to have someone to talk to. Some people are lucky and they have a great co-founder, but not all founders either have a great, have a co-founder at all.

• 49:15Jack Altman?

  Yeah.

• 49:15Speaker 01

  Or a great one that's on, you know, same plane.

• 49:17Jack Altman?

  There's just something structurally nice though, about somebody who is in it with you, but also has like a lot of other things they care about too.

• 49:23Speaker 01

  Detachment's useful sometimes.

• 49:24Jack Altman?

  Like if something really bad's happening, even with your exec or your co-founder, it's like, if you're like, oh my God, the sky is falling. And then you tell somebody else who's under the same building, they're like, oh no, this guy's falling on me too.

• 49:32Speaker 01

  It's just going to amplify the problem.

• 49:33Jack Altman?

  It's just amplified.

• 49:34Speaker 01

  Right. Like we're actually, I, I think this is one of the reasons why I don't always recommend people pairing with younger investors. Because young investors sometimes panic too. Like right now, like

• 49:44Jack Altman?

  They're closer to being under the same sky.

• 49:46Speaker 01

  Well, yeah, they are because their careers at stake, right? Like, so imagine, imagine one of my companies that we're counting on being successful has a really severe problem. Nobody here is going to fire me if something goes wrong. So when you call me up and say, hey, I've got this really severe problem. What do you think I should do? Like, I don't react emotionally because I know I'm just like

• 50:05Jack Altman?

  You're not worried about your job.

• 50:06Speaker 01

  I'm in like immediate problem solving mode. And if you call any of the founders I work with, that's like, like immediately, okay, like what, what can we do about this? What are the options? What, who should we talk to? You know, et cetera, et cetera. Versus like, oh shit, like my partners are going to be really mad at me. Like, and I get in a defensive mode or self preservation mode, which is very natural. Like I, I saw this play out during COVID as an illustration. I mean, I already had this view, um, just having been an executive and having worked with people in their, you know, sort of own career paths intersection as VCs, but during COVID, you know, most founders were under severe stress right away. Like, what do I do? What does it mean? How long is this going to last? Blah, blah, blah, like, like burns out of control. If you just took the same company with senior partners at the successful in VCs and non-successful yet VCs.

• 50:50Speaker 01

  I think the quality of thinking and the ability to be like a smoothing function, like a cushion was just highly correlated with how successful is the VC?

• 50:59Jack Altman?

  Right. Versus if they were just getting started or if they were unsure.

• 51:01Speaker 01

  Like, look, I don't want any of my companies to fail. And I don't want any of our high profile companies to suddenly start, you know, underperforming.

• 51:08Jack Altman?

  But if they do, you'll be okay.

• 51:09Speaker 01

  But if I, but if I do, all I'm going to do is try to figure out like, is there a solution to this? Like, what can we do about it?

• 51:15Jack Altman?

  I think this is very important.

• 51:15Speaker 01

  Versus like worrying about like having to communicate at my Monday partner meeting, like, oh my God. Cause if actually if I did communicate at my partner meeting and I would, the, the natural reaction by my partners here will be like, well, what else can we do to help? Like, you know, Keith, have you thought about this or that or talked to this person? Or I saw this 20 years ago and here's a possible answer versus like, oh, let's, you know, point fingers at Keith.

• 51:38Jack Altman?

  There's nothing worse than if you're anxious as a founder, your investors getting even more anxious about the same thing is like a nightmare.

• 51:44Speaker 01

  No, and I hate, you know, sometimes on boards with VCs who do it, and I'll actually try to occasionally, I'll run like kind of interference for the founder, like of like, you know, I'll try to, you know, like send, send, send, put like a protective envelope around the founder, but sometimes they just ask for like a lot of data, even that's distracting. It's like, oh my God, like my partner's just asking me all these questions, like what's going wrong, blah, blah. I'm like, the last thing you want to do is distract the founder with a bunch of data requests when they're trying to solve a key problem. But it's, it's a natural evolution. And that said, of course, you know, every VC is a young VC at some point. And so this isn't a one size fits all, but I think you have to be judicious about board members that do amplify your own emotional state, which is not what you really want.

• 52:24Jack Altman?

  Maybe a final topic that's, um, you know, somewhat tangential to this. Yourself, you were an operator for a long time, very successful, you know, obviously been known like as a founder of some microsystems, same at Founder's Fund, like they're rooted around foundership. Also, you've built companies as you've been a VC, you know, you've opened door, opened store, you know, the same thing happened with like Trey and Delia. Like it's like, both of these places, like entrepreneurial investing is like sort of in the DNA, but you've also obviously worked with a lot of investors who are career investors and you've been on boards with people who are both types. Like now that you've been doing this for like more than a decade on lots of companies, many of which are very important, like what are your reflections about this difference and how it shows up?

• 53:02Speaker 01

  Well, I think it's most better, much better if you've built things or, you know, aspire to build things to be a VC. First of all, you just understand things at a different level, tactically, emotionally, you've just encountered problems and it's pretty native. Secondly, it gives you credibility too, which is useful. Like, why should I believe you sort of, which is important. So you're right, at KV, you know, many people here have built companies and want to build companies, et cetera. And we encourage it, Founder's Fund, you know, think about the brand, you know, et cetera. And so I think that's better. Are there exceptions? There's not that many. If I think about like when I'm raising capital

• 53:43Speaker 01

  for my companies, like ones I've built, and or our highest performing companies are asking for advice on subsequent rounds of financing, who do I naturally send them to? It's almost always people who started their career building stuff like, you know, we compete, but also are friends with Roloff and Alfred. They both

• 54:02Jack Altman?

  Yeah.

• 54:02Speaker 01

  They both had real jobs.

• 54:04Jack Altman?

  Yeah.

• 54:05Speaker 01

  And they remember like what it's like to have a real job, you know, and so they're top of my list often. And so I think that is pretty critical. Are there exceptions? You know, honestly, since 2005, I think there was an era where you could be a professional finance person and be a successful VC. Think Fred Wilson, Peter Fenton.

• 54:23Jack Altman?

  Yeah.

• 54:23Speaker 01

  Kind of era. Since 2005, I can only name, I think, one good investor. Who started their career after 2005, who didn't actually, you know, work as an entrepreneur at some point.

• 54:35Jack Altman?

  Who's that?

• 54:36Speaker 01

  Mamoon.

• 54:36Jack Altman?

  Oh, yeah. Yeah.

• 54:38Speaker 01

  I think his track works great, but I don't know of anybody else that I think is exceptional that started their career after 2005. Jeremy Levine would be in the first category. He was also a great investor. He did do a startup, but like, not like a high profile one.

• 54:49Jack Altman?

  What do you think for the people? And, you know, maybe there would be some set of people who are eight or 10 or 12 years into their career, who you wouldn't yet say they're Mamoon, but you know, if you spend time with them, you'd be like, okay, they're, they could be on track. When you think about what makes a Mamoon situation work, how do those people, because there's like a lot of, you know, I think, well, and, you know, very, very capable people doing VC and who never sort of built a company or whatever, like, what does it take for those people to get there? How does that happen?

• 55:15Speaker 01

  Well, I think you need to compare, ultimately venture comes down to, and this is maybe summing up everything we've discussed, you have to have a comparative advantage. Like, why me? Or why us? Or some combination? Why take my money? Or why take our money? And usually it's a mix of like the overall brand and the individual and to match make exercise too. So one way or the other, if you're going to be a non-founder, non-previously executive, you have to have a really compelling answer to that. So one of the ways some people solved it, including Mamoon, is going after a vertical first that's not super popular. Like SaaS and stuff, when he did Box and stuff, very non-consensus. And so you can create credibility, domain expertise, et cetera. That way, so you have a really good why. Like, okay, this is why you should partner with me.

• 55:59Jack Altman?

  Yeah.

• 56:00Speaker 01

  And so if you can develop that, that's hard to do. And it's almost impossible to do in hot spaces because of that. But that's about the only formula I know is you bite off a vertical. You become like a true expert. You have success in that.

• 56:15Jack Altman?

  And you build on that.

• 56:16Speaker 01

  That vertical has like, let's say legs. There's a wave there and you can ride that wave for a long time. And then you can parlay that into maybe a broad, you know, investor.

• 56:23Jack Altman?

  Awesome. All right, I'm gonna let you go. Thank you for being time for this.

• 56:26Speaker 01

  Pleasure.

• 56:26Jack Altman?

  This was awesome.

• 56:26Speaker 01

  Yeah.

• 56:27Jack Altman?

  Cool.

• 56:27Speaker 01

  Awesome.