Cold open
Western Europe is gonna look like a third world. I think The United States now has a sort of stronger multigenerational aristocracy than Europe has. Extraordinary careers, when you’re a junior inventor, do not get built sitting behind a desk in an office. Travis committed no crime. They just cornered him in a hotel room, you know, two days after his mother had passed away and convince him to sign papers that he, you know, shouldn’t have. I wish that, you know, Bill Gurley’s, you know, firing of Travis, you know, was, you know, sort of talked about more publicly about how morally depraved that entire basically situation was. Service Titan is actually closer to LVMH than it is to Tesla. The one liner that I sometimes like to use is people love software because, you know, sort of the marginal distribution costs are zero. Perhaps what people need to realize is also that the marginal returns are zero as well because there is no moat.
I mean, wow. Listening to that intro, I am like, this show is not one that lacks bangers. I mean, my word, I cannot wait for this one with the most controversial VC on Twitter on 20 VC today, Delian Asparouhov. Now Delian is a partner at Founders Fund and co founder and president of Varda Space Industries, which is building the world’s first space factories. At Founders Fund, Delian has led deals in the likes of Ramp, most recently valued at $7,000,000,000 plus, and Sword Health at $3,000,000,000 plus, among others. Before joining Founders Fund, Delian was a principal at Khosla Ventures. But before we dive in, when a promising startup files for an IPO or a venture capital firm loses its marquee partner, being the first to know gives you an advantage and time to plan your strategic response. Chances are the information reported it first. The information is the trusted source for that important first look at actionable news across technology and finance, driving decisions with breaking stories, proprietary data tools, and a spotlight on industry trends. With a subscription, you will join an elite community that includes leaders from the top VC firms, CEOs from Fortune 500 companies, and esteemed banking and investment professionals. In addition to must read journalism in your inbox every day, you’ll engage with fellow leaders in the active discussions or in person at exclusive events. Learn more and access a special offer for 20 VC’s listeners at www.theinformation.com/deals/20vc. And speaking of incredible products that allows your team to do more, we need to talk about Secure Frame. Secure Frame provides incredible levels of trust to your customers through automation. Secure Frame empowers businesses to build trust with customers by simplifying information security and compliance through AI and automation. Thousands of fast growing businesses including Nasdaq, AngelList, Doodle, and Coda trust Secure Frame to expedite their compliance journey for global security and privacy standards such as SOC two, ISO 2,701, HIPAA, GDPR, and more. Backed by top tier investors and corporations such as Google, Kleiner Perkins, the company is among the Forbes list of top a 100 startup employers for 2023 and Business Insider’s list of the 34 most promising AI startups of 2023. Learn more today at secureframe.com. It really is a must. And finally, a company is nothing without its people. And so I want to talk about Cooley, the global law firm built around startups and capital. Since forming the first venture fund in Silicon Valley, Cooley has formed more venture capital funds than any other law firm in the world with sixty plus years working with VCs. They help VCs form and manage funds, make investments, and handle the myriad issues that arise through a fund’s lifetime. We use them at 20 VC and have loved working with their teams in The US, London, and Asia over the last few years. So to learn more about the number one most active law firm representing VC backed companies going public, Head over to cooley.com and also cooleygo.com, Cooley’s award winning free legal resource for entrepreneurs. You have now arrived at your destination. Delian, dude, I’ve been so looking forward to this one. I’ve been a fan of Tweets for a long time. Obviously, we met at Founders Fund many years ago, but thank you so much for doing this, man.
Of course. Yeah. Thanks so much for, you know, having me. Been looking forward to the conversation as well.
Now, listen, I always like to start with, like, a really soft easy one. I think we’re shaped by our past. When you reflect back on yours, what was the most maybe challenging element of your past in growing up that shaped you and how you think today most, do you think?
I never felt like a true American when I was in The United States because of the Bulgarian heritage. And when I would go to Bulgaria, I would never feel truly Bulgarian because of the, you know, sort of time I spent in America. I remember one of the moments that I felt like I really realized this was, in some ways, the fundamental cause of some of the challenges I had in both countries was I went back to Bulgaria. I I used to go, basically, every summer as a kid until I was about, like, 13 or so. And then for the next couple years as a teenager, I had, like, internships or, you know, math camps, etcetera, just, things that kept me in The States. And then I went back when I was, I wanna say, like, 19 years old for, you know, maybe a month, month and a half. And I remember interacting with my cousin who’s basically, like, you know, sort of my same age, very similar personalities, backgrounds, like so many. We both like computer science, etcetera. In some ways, if you, like, squint, it’s just kind of like what I would have looked like if I grew up basically, you know, sort of in Bulgaria. And I had this realization after, like, spending, you know, a couple weeks with him where I was like, oh, all these things that, like, made it very difficult for me to both date in The States, interact in The States, things that people would get mad at me about. It’s not that I’m, like, some special unique snowflake that, like, you know, has these quirky personality traits. It’s like I’m I’m just Bulgarian. Like, I just I look at my cousin, and I just I I do the things that he does. And in Bulgaria, those are, like, totally acceptable and normal. And when you do those same things in The States, it’s, like, you know, totally, you know, sort of weird, and you get, you know, sort of bashed for it. And so sort of having that, like, mixed identity always made me feel like I didn’t really properly, you know, sort of have a have a home.
Do you consider yourself a Bulgarian or an American today if you have to choose between the two?
You know, I think it either should have flipped where post college, falling in love with Silicon Valley, getting into the the technology sphere, recognizing that a lot of the people that were super successful in Silicon Valley sort of had backgrounds like mine. I think in my, you know, sort of heart of hearts at the end of day, just like this is the greatest country on earth. People should learn from, you know, sort of this country. This is a danger. But I actually think, you know, Bulgaria also has an opportunity to be like one of the, know, sort of best European nations where when you look at United Kingdom, France, Spain, Germany, etcetera, they’re all just like completely, you know, sort of falling into societal collapse all for, you know, sort of slightly different reasons, but it comes down to a complete lack of, you know, sort of nationalism falling into basically, like, you know, sort of socialist states, constant, you know, sort of regulation versus if you look at sort of the Bulgaria, Romania, Poland sort of corridor, all those countries still believe in capitalism because they, you know, still feel the, you know, dreads of the fall of the Soviet Union. They all believe in, like, engineering and mathematics as the, you know, sort of way to develop society. And so if you look at the GDP growth of Eastern Europe relative to Western, Eastern is completely rocking, has way more interesting startups, is on a much more interesting trajectory. And so I think if you extrapolate this progress out for another decade, Western Europe is gonna look like a third world, you know, sort of country. Eastern Europe is going to be, you know, sort of rivaling a lot of the first world, you know, sort of countries.
Larry Summers said on the show that Japan is a nursing home, China is a jail, and Europe is a museum. Would you agree with him?
Yes. Other than the caveat of, I think, Eastern Europe is maybe, you know, sort of the only hope where, you know, if you look at, you know, Bulgaria in particular, one of the now largest nanosatellite integrators, Endurosat, is this company that basically builds, like, think, like, sub 30 kilogram type satellites, is based in Sofia. They have now built out this, like, 15 story skyscraper that has as nice facilities as we have here. You can just feel the energy when you walk in. And by the way, the people that are working there, it’s like a fourth or maybe a half of the team is like Italian, French, German, English that have escaped the, like, you know, sort of socialist, like, you know, communist regimes of Western Europe to try and basically, know, work in a country that still believes in, you know, sort of capitalism. And so I very much feel like I’m in the, like, Ayn Rand, you know, where is John Galt, you know, sort of version of the world when I walk there where it’s like, these are the brightest and best people, they’re clearly, you know, sort of escaping the museums of Western Europe. Will they want to stay in the EU? How is that going to work over the next years or decade? I think what will probably happen is, like, you see some of these countries actually start to leave the EU as Western Europe becomes more and more
of a drag rather than a producer. The show has become more and more successful because instead of being a sick, a frantic child, I’ve actually stood up for what I believe in. I I agree with you partly and I disagree with you. You cannot take away the culture, the heritage, and the hospitality of Europe. My dear American friends love nothing more than to come to London, to come to Paris, to come to Milan. We do culture. We do heritage like no one else in the world. My objection to you would be, that is something you can’t take away and Americans love to spend money here. That’s a great thing. We can build fucking huge economies on top of that. Does that not go against your statement of kind of Europe being a or Western Europe being a third world country?
The moment that Europe decided to shut down and deny its aristocracy is when it started to, you know, sort of decline. I believe in sort of the great man theory and the great, you know, sort of family theories and Unpack that.
What is what is the great man theory and the great family theories, and how does that work?
It’s sort of the opposite of the, you know, sort of Chinese philosophies of, you know, sort of the the individual, you know, does not matter. All that matters is the sort of society, the state, and the, you know, sort of collective. The history of Europe is, you know, sort of great men. And in some ways, you know, one could argue that perhaps one of the last, you know, few great men of Europe was, you know, Napoleon. And, you know, since then, it’s been a, you know, sort of strict decline post Napoleonic, you know, sort of wars. And family theory in some ways is a subsidiary of that, which is that the great cathedrals, great monuments, great movements only get built over, you know, sort of a multitude of generations. And the best way to, you know, sort of maintain that effort towards multigenerational, you know, sort of effort comes from the, you know, sort of fundamental bloodlines. I think in some ways, I would actually argue that I think The United States now has a sort of stronger multigenerational aristocracy than Europe has, and I think that’s a contributor to some of the success we have. I think what The United States does really well is you still have the, like, Vanderbilt, Rockefeller, etcetera, families creating culture, creating institutions while you also enable the next generation sort of, you know, up and comers that disrupt the wealth systems, the elite, etcetera, you know, part of, I think, lot of our, you know, sort of societal divisiveness right now in The United States mostly has to do with the elite transfer of power from the, like, sort of Davos elite that, you know, in some ways began in the ’19, you know, sort of twenties to now the, you know, sort of technological elite. But you’ll almost certainly similar you know, see some more trends there. If you don’t think that, like, the Vanderbilt, Rockefeller, etcetera, analogy is not going to be the Musks, Zuckerbergs, the, you know, sort of Bezos, that almost certainly, you know, sort of will be, you know, the case over the course of the next, you know, sort of hundred years where these, you know, sort of family lines are going to have a significant impact on the shaping of our, you know, sort of future in The United States. But I think, you know, sort of Europe has completely, you know, sort of discarded that and is so vehemently against, you know, sort of that aristocratic elite in some ways from a broad political level, but not from, a societal wealth level. Right? So if you look at, like, the best companies in Europe, LVMH is the epitome of aristocracy and is the biggest, in some ways, company in Europe. And yet Europe hates aristocracy at political level versus at least in The United States, we will admit that we are okay with having, you know, an aristocracy. We don’t try to pass a, you know, 90%, you know, inheritance tax.
I mean, this nicely. My mother always told me, you know, people in glass houses shouldn’t throw stones. I look to your wonderful nation, and I see a country with a terrible, woeful healthcare system. I see incredible levels of homelessness, which are just devastating. I see gun crime that’s out of control where people don’t wanna send their kids to school, and going to a mall is dangerous. I see an infrastructure which is just ripe for civil unrest with this election and with latest political things that we’ve seen. I’m kind of going respectfully, who the fuck are you to judge us?
You know, at the same time, in the first six months of 2024, Europe did not launch a single orbital rocket. You guys did not send a single kilogram of matter from the surface of the earth into space. The United States, I would probably, you know, roughly estimate a hundred and eighty days. We’ve been launching roughly every, call day and a half on average. We’ve probably done a 130 launches in the first six months of 2024. And the American system, what it enables is both ends of the risk curve. We both have the downside sort of part of the risk curve where you have the homeless, the gun violence, etcetera. But we will also enable the opposite end of the risk curve, the Musks, the Vanderbilts, the Rockefellers. In some ways, you can’t get one without the other. If you want an Elon Musk type figure that can do sort of crazy things, you also have to be somewhat allowing of the other side of the crazy, which is, you know, sort of the drug addicts on the, you know, sort of streets of San Francisco. Perhaps we should get a bit better at that and not only clean it up when Xi Jinping comes and visits, but, you know, in some ways, maybe you don’t have the Elon Musks without the drug addicts. And maybe they’re both drug addicts.
No comment. In case I ever wanna get either of them on the show, I’m saying nothing. I love a show where you can just freewheel. Listen, I do wanna revert to some form of schedule. You mentioned in terms of feeling Bulgaria and feeling American, like, getting into the Silicon Valley scene. One of the most pivotal moments was, I think, probably meeting Keith, one of the most important people in your early career and your career. I spoke to him before the show and he said, dude, you’ve got to ask, like, how did we meet and just get that story first?
In summer of two thousand twelve, I ended up being an intern at Square. I was actually, no, 18 at the time. And at the time, Keith was the COO of Square, and the company was just on this, like, explosive growth trajectory. I think when I interviewed, the company was, at a 100, you know, person head count. When I joined, a 120. By the end of the summer, it was, like, over 300. However, it was also one of the first times that the, you know, sort of company had a bit of a, you know, sort of hiccup. And so, like, late July two thousand twelve, the company basically didn’t experience a natural 10 to 15% growth month over month. And up until then, the company, without really spending much on marketing, much on distribution had been growing effectively through this like feedback loop that I think a multitude of people have talked about online. Basically, they would sell these little square card readers and people would go into a coffee shop and one out of every 100 people that went to the coffee shop happened to be another local business owner saw the physical reader, and then would sign up basically online. And so you had this basically natural viral loop where the company never basically had to spend on marketing for the first year, sort of five plus years of its life. And then all of sudden, July hits and the company doesn’t grow. And there was sort of this like existential dread and panic at the company where it’s like, oh god. We in some ways have not been in control of our growth. What if it is suddenly the magic, sort of the golden goose has stopped laying eggs? And Keith at the time was COO and he did this phenomenal all hands presentation. I want say it was August fifth, eighth, sort of 2012, where at the time to me as a sort of lowly software engineer that had grown up around a family of economist statisticians, I saw it as just like statistical wizardry being applied to business, now obviously being a bit more sophisticated. It was a cohort analysis. But still, if you’ve never seen anything like that and you think about the world of business as this thing where it’s like backroom deals, it’s madmen and they’re like sort of marketing stunts, etcetera, nowhere in the world of business movies do you ever see statistics applied to business. And so we run through this cohort analysis in front of the whole company and basically the net of the analysis is, look, actually every year for the past few years, we’ve always seen a dip of our cohorts in terms of activity in July because we operate in local SMBs and local SMBs in The United States, a lot of them go on vacation, etcetera, during July. And so there is just lower volume. And historically, our new cohorts were large enough to mitigate the effects of the historical ones. But now we’re at such a large book of business that our new July cohort could not mitigate basically the, you know, sort of decrease of growth from the former July ones. And so he basically showed statistically that he could predict that even though we had basically no growth in July, that we were going to experience 20 plus percent growth in August because all of the cohorts were going to come back and we were going to add a new one. Lo and behold, in August, the early data showed that we were growing basically like crazy. And I just remember this moment being in the crowd of whatever 140 people that were there. I was like, wow. I had no idea math was involved in running businesses. I thought math was only used to build products, solve problems, etcetera. And I remember just thinking, was like whatever I do later in life, don’t want to be doing this software engineering coding thing. It’s fine, I’m a pretty solid engineer, but it’s not what I see myself doing for the next year, twenty, forty years of my career. I want to do what that guy’s doing, and I need to figure out, you know, basically how to get to know him. And so we didn’t, you know, sort of speak or anything while I was at Square. But then about, you know, sort of seven or eight months later, I pinged him because I was about to sort of move out to Silicon Valley full time dropping out of MIT, and I’d just been sort of awarded the you know, sort of was in the process of applying for the Thiel fellowship. And I pinged him and I was like, you know, hey. Gonna be moving out. You know, you’re now a VC. I would love to just, like, you know, grab lunch once a month. You know, you may remember me as an intern basically at Square. And I sent him this cold email and he replied within, you know, I think on the order of, like, five or six hours and hopped on the phone with me the next day, which I just assumed was, you know, sort of his standard response rate. You know, that was how he liked to, you know, sort of manage his inbox and, you know, calendar. But, you know, sort of five or six years later, once I had gotten to know him, I did ask him. I was like, you know, you do not normally respond to cold emails from, a random intern and hop on the phone the next day. You know, sort of why were you willing to do that with me? And he was like, well, I was the COO of Square, you know, while you were there that summer. And Square is a very finicky culture. It’s a bunch of designers that all like their, you know, desks being prim and proper. And if they’re like smoothies in the morning, have too much banana content, I get like five emails, you know, sort of about it. And yet you would arrive into the office every single day wearing like short shorts and a tank top. You would like climb on the AC ducts. You would be loud. You’d be quite disruptive to the office, but I never got a single complaint from anybody on your team, anybody that sat next to you. And so just my conclusion was this guy must be a really good engineer for everybody to be willing to tolerate his ridiculous behavior, so I should, you know, figure out what this guy, you know, sort of is up to. But, yeah, we started grabbing lunch, you know, once a month in Silicon Valley and, you know, had me join his, you know, soccer team, and that’s how we really got to
know one It’s so funny you said about the smoothie there. I always remember him telling me about the smoothie test where you start with obviously a very simple task, and then you expand and expand the complexity of it kind of over time to to get harder and see someone’s capabilities. I do have to ask you, speaking of kind of lessons from Keith there, kind of a quick fire on Keith, but so many people have so many questions. When you think about three different components, operating, what to look for in founders, and what to look for in companies. First, what did Keith teach you about operating most significantly?
A ton of lessons there, but when I think about the one that has been sort of the most strategic leadership impact, let’s say, my life in particular in terms of how basically Varda came together was sort of what I what he calls his, like, sort of Hollywood, you know, sort of analogy of, you know, sort of building companies where, you know, if you look at the best studios, they don’t AB test their way into building a film. The script writers write a script and they have a story that they really strongly believe in. Once they’ve written that story, they think through who should be the major cast for each one. So when they’re making the Mission Impossible films, they don’t go and interview 30 people on do they debate should they have Tom Hanks or Tom Cruise? It’s like, no. It’s it’s an action movie. It’s going to be Tom Cruise, he’s gonna do these basically crazy stunts. And then they might put out a sort of short preview, but they go and spend a 100,000,000, 200,000,000 and go fully produce the film and then put it out, you know, in the public sort of fully produced versus, in some ways, the 2,000 tens, you know, sort of false or, you know, antithesis of this mentality was the whole sort of lean startup of approach of like, a b, test your way towards your sort of your grand vision. And in some ways, this was how he, you know, sort of built, you know, the early days of Open Door was he thought through what were gonna be the sort of major risks, how should the company be built, and then in some ways went out and hunted down the individual cofounders that were the sort of best suited for the role. They were the Tom Cruise for the, you know, sort of Mission Impossible. And so as I was thinking about sort of the thesis around, you know, sort of Varda, I I took the same approach where I like, okay. What are the sort of fundamental core risks of this type of business? And in some ways, the ideal casting and went through basically castings effectively to find what those ideal cofounders were. And then we just went and raised the money and built the thing and it wasn’t like we waited on customer feedback, etcetera. People ask me, did you get LOI, etcetera? Was like, no. We just had a strong vision for the future of the world, went and built the team and raised the money to go do it, and then went and did it. In some ways, now obviously have many customers, but, you know, didn’t rely on, you know, sort of the quote unquote customer feedback in the early days of putting together that vision.
So interesting because it goes against everything that everyone I was ever told and everything that we’re taught as investors, is, you know, customer feedback, close proximity to customers, really listening, qualification processes. It just got flies in the face of that, does it not?
Yeah. I mean, I think it works in the world of, like, small SaaS businesses where you’re trying to make a marginal improvement on a small industry, if you’re doing workflow software for plumbers, I’m sure that is a reasonable approach. I don’t think that Elon Musk went around interviewing consumers about whether or not they wanted electric vehicles when he decided to go build Tesla or asked NASA whether they want cheaper and better rockets when he went to go build SpaceX. It works for, for sure, a subset of companies. But if you look at the top 10 companies on the Nasdaq, Steve Jobs did not ask people for their feedback when building the iPhone. Jensen Huang did not ask people whether they, you know, sort of wanted parallel compute, you know, sort of GPUs. They just had strong visions of what they thought the future of
technology looked like and went and, you know, sort of built that. You mentioned some of those incredible kind of category defining founders. What did Keith teach you about the founders that you wanna get behind and invest in?
Probably the sort of singular, you know, sort of lesson is what he calls sort of the the spark where, you know, there there is no one archetype of great founder. Right? If you look at Zuckerberg, if you look at Steve Jobs, if you look at Elon Musk, if you look at Yen Sen Huang, completely different personalities, personal stories, the way they like to run their companies. Right? But I think what they all have is this just unique thing that they either sort of excel in the ninety ninth sort of percentile on that may not always necessarily have to be either specifically related to the company that they’re working on. The way this sometimes shows up practically is a lot of times we’ll end up getting really excited at Founders Fund to back a particular founder because they happen to be world class in some super esoteric field, whether that’s the cognition AI founders that crushed it at IOI to people that did really well in, you know, sort of college athletics to Ryan Peterson, you know, sort of running his, you know, sort of freight forwarding, you know, sort of company from whatever he was like, you know, whatever, 18 years old and looking for and identifying that spark and seeing how does that spark translate to the thing that they’re, you know, sort of working on, you know, very obviously sort of being their, you know, sort of life’s work.
I agree. I get, like, literally very uncomfortable in the light. For my next thing, I’m gonna do this. And I’m like, oh. Like, for me, I I I there’s only one thing I’m doing is 20 VC.
Intro
I started when I was 18. I will die doing 20 VC, and I’ll be very happy if that’s the case, if they keep me here long enough. But I also find, one, immigrant founders outperform, and then two, the time with which you do your first entrepreneurial endeavor generally correlates to success. No one comes out of MIT and is like, I’ll start a business for the first time. You always did something first. Started phone repairs, or whatever it is when you were a teenager. So I totally agree with you there.
Dude, when you were at Khosla with Keith, you were a junior VC, you don’t mind me saying it. What are you and you crushed. Like, the track we mentioned before is phenomenal. What are your single biggest lessons on how to succeed in the world of junior VC?
You know, if I if I were to, you know, sort of boil down, I think, what the success ultimately, you know, came down to, it was just a willingness to do things that the GPs weren’t willing to do and using that as the sort of differentiating sort of trait. In particular, the Sword Health example is, you know, an obvious one where the idea of this type of digitized AI musculoskeletal, you know, sort of therapy was one that had been debated, you know, sort of internally within the walls of KV.
But once, you know, sort of Vergilio, the CEO of Sword, you know, sort of reached out to me and, you know, said, yeah. I’d love to, you know, sort of chat with you. I was just immediately willing to dive incredibly deep into the company, reading their scientific papers, which no other investor was willing to do because, again, most more senior VCs have boards. They have a ton of things on their plate. I mean, I feel this very much so, you know, sort of today, my ability to we can talk about the, you know, sort of Brian related questions on how does, you know, Varda make me a worse VC.
One of the examples is, like, I’m not willing to do the things that I was willing to do back in the Sword Health, you know, sort of diligence process, which was go incredibly deep on, like, the, you know, sort of science and tech of the company. But then also within a week of, like, a cold email, I hopped on a flight, you know, and took a red eye out to Portugal to go through a new very extensive, exhaustive use of diligence with the company. And then also, you know, sort of manage to convince the KB partnership that the following week, we should have them basically present to the whole firm.
No matter how compelling, you know, sort of the opportunity is, the GP of, you know, Khosla Ventures, Vinod, Sameer, David Wy and Keith, Sven, No matter how compelling, there’s just no way that they’re hopping on a one week turnaround to a, you know, red eye to Europe to go meet a random founder. And you have to be willing to do those types of things as a junior VC and gamble on this sort of top of funnel aperture, you know, on opportunities in a way that the GPs are not.
Know, I always say Can I interrupt you and be awful? I don’t know the others, but I love Vinod and I love Keith. But, like, to the best not? Example, I sent Tom Tungus a deal on a Thursday. He flew to London on a Friday. He won the deal on a Saturday. He beat out everyone in London. The guys at IVP fly to Romania to do UiPath. They they fly to, you know, Germany to do deep hell, to the best not get on planes.
They do, but again, there’s, you know, some level of turnaround of, like, you know, Keith’s schedule, an example, is booked like a full three, four weeks in advance. The idea that it’s going to be a week long turnaround is impossible. For his activation energy, has to be that junior investors have gone and done some level of diligence, built conviction, and for sure, it’s to say he will do it at some point. But I was just willing to do it faster, quicker turnaround, and dive much, much deeper than what they would be capable of doing.
That was the value that I provided to the table where I came back within two weeks and said, Hey, I’ve gone and visited the management team in person. I’ve run through the list of a 100 questions that Vinod basically wanted me to make sure that I did while I was in Portugal. And I feel high conviction that we should invite these founders in The United States, pay for their flights to basically, you know, sort of come, you know, sort of pitch the, you know, sort of partnership.
So it’s not to say that like, elite GPs don’t go and do it, but, it’s just a different, you know, sort of turnaround time, etcetera. The analogy that I like to or, like, the the one line mantra is just extraordinary careers when you’re a junior in venture do not get built sitting behind a desk in an office and, you know, behind a laptop. You have to be willing to go meet with founders in person, figure out how to, you know, sort of understand their businesses and how to convince them to even spend time with you, when you’re not, you know, one of the big general partners.
I’m sure you have a lot of people ask you for advice on entering venture. I have a lot of people ask me and they’re like, should I try and do as many deals as possible? Should I try and do a few? What’s your advice on do many do few?
I think in your first year VC, you do want to just open your aperture and build your sort of like dataset on, you know, sort of founders where, you know, again, that first year, think I was effectively willing to meet almost any, you know, sort of founder that was willing to, you sort of meet with me and vice versa. Once you’ve met, call it on the order of a thousand founders and especially if in that sort of thousand and you are fortunate enough to have a dataset of founders that look like Parker Conrad, Eric Kleinman, Alex Wang, etcetera, you start to have an understanding of what does greatness look like.
I think you should be very judicious on waiting to pull the trigger until you feel like you have identified the taste, you know, for what that greatness looks like.
I I thought it was fascinating when I spoke to Keith, he said, actually, relevance is my biggest challenge, actually, and making sure that we stay at the forefront of the best founders. I I appreciate his honesty, but I also thought it was fascinating. I do also think for poor Peter’s sake, there is a little bit of a difference in age between Peter and Vinod, as wonderful as Vinod is. I didn’t wanna lump them in necessarily the same bucket. And I do have to ask you, what are the biggest fuck ups you see young VCs make today in career planning and venture?
Ultimately, you need to recognize that, you know, venture is the most, you know, sort of commoditized, let’s say, you know, industry within, you know, sort of tech. You have no moat other than your brand. The product that you deliver at the end of the day is US dollars just like anybody else can deliver that fundamental product. People don’t focus enough on differentiation. They come in and they try to do all aspects of VC generically well and focus on a multitude of sectors generically well. You know, I think it was Sarah Toddl.
Yeah. Benchmark may not, you know, sort of love me for various comments that I make, but I do like Sarah’s, you sort of framework and I use it all the time, which is there’s sort of, you know, four or five aspects to, you know, sort of VC and late staging career. You do kind of need to be world class at least, like, three of those. But early on, you need to focus on one. And, you know, so the five that she breaks down is, one, you basically need a, you know, sort of top of funnel, you know, way to, you know, basically source whether that’s more marketing or sales driven.
You then need to, you know, sort of develop a nose for what are the deals that you yourself like and want to champion. You then need to, you know, develop a skill set for championing those, you know, investments that you like within the firm. So, basically, like, the internal, basically, selling. You then need to also do the external selling of convincing, basically, the founders that they should take, you know, your capital relative to anybody else’s. And then post investment, you need to help that founder basically manage the business and, you know, exit.
Trying to be great at all five is a completely, you know, sort of impossible, you know, sort of task. Obviously, there are people within Founders Fund that explicitly choose to not work on the fifth one, you know, sort of whatsoever. Right? You know, Brian and Trae’s, you know, sort of strategy is we believe the best founders, you know, sort of need no help, and we are not going to try to differentiate on, you know, sort of helping founders. I, you know, thankfully love to work at a place where we can agree to disagree on investment strategies, and I enjoy differentiating myself on the fifth, and I think it helps with other, you know, sort of categories.
But I think junior VCs make the mistake of let me try to do all of these and across a multitude of sectors versus I think I just, yeah, early on, decided I’m going to focus on two core things that I’m going to differentiate myself on. I’m going to spend a lot of time in frontier tech and in particular in aerospace and understand that entire industry extremely well so that anytime somebody thinks about a space deal, they immediately, you know, think of me top of mind. Whereas if you don’t have that type of defining trait, you’re just not going be top of mind when people are thinking about co investors and that’s the ultimate, you know, sort of failure case.
And out of all of those five things, I’m actually going to focus on that fifth one first. So rather than even trying to source and understand my taste, etcetera, I’m actually going to make myself extremely useful to Keith’s preexisting portfolio of founders so that when one day I need to have a you know, try to attempt a deal, Max Rhodes, the CEO of Fair, will be willing to hop on the phone and say, look, Delian was obviously not the person that sourced or led our deal, but ultimately was very valuable to the company in like x y z ways.
You should take his capital. And so when you look at it, I believe it was True Work. Was It literally the, like, know, sort of found a reference of Max that ultimately, you know, sort of helped me, you know, sort of get that, you know, sort of deal across the line, which obviously then may be better at, you know, sort of part four of the job. You
mentioned getting deals across the line internally there. Can I ask you, have you had a deal where you wanted desperately to get it over the line and it didn’t go over the line?
Yeah. My biggest, you know, sort of miss investment and, you know, one that I, you know, sort of think about a lot was in December 2019. I had the opportunity to double down on Sword and invest in the company, basically, you know, 10 on a 100,000,000 post. And we had previously actually done a, you know, sort of smaller check-in the Sword. Basically, as soon as I joined Founders Fund from KV, I really wanted to you know, I really believe in the company and wanted to double down.
And I was still pretty new to f f, and I don’t think I just set up the argument for why we should do it correctly or built enough basically internal consensus in some ways before, you know, sort of going to Peter at f f. You know, I think counterintuitively, I think your best way to get a deal across the line at f f is actually to probably go to the most junior person at f f and have them start to build, you know, sort of consensus amongst a, you sort of wider group.
Like, if you look at f f, I feel like a lot of the deals percolate from below. And as they build a set of people, it doesn’t have to be the entire firm, but let’s say a subset of two or three people that are really high conviction. And then even if it’s a later stage check that requires basically Peter’s approval, it’s with that broader conviction that it’s brought to the GP of the firm. Those tend to be actually how a lot of our later stage deals get across the line.
I think there I critique myself for being so high conviction in myself that I just tried to go straight to Peter rather than working within the broader set of the firm, including people that actually had been part of the consensus in earlier checks that we had done at Sword at Founders Fund. But yeah, that one is a painful one given that that would be $10,000,000 that would be a $300 position, you know, today, and I definitely lose sleep over that.
And so I think about that a lot, you know, today where one way that we like to, you know, sort of say it internally is you should always go for the path of most resistance when, you know, trying to work on a deal at f f. Work and make sure to loop people in from the investment team that are going to be the most critical of the company given that one if you’re able to get those people to conviction, then bringing it to the sort of, you know, sort of GP shows that you’ve really you know, sort of doing your homework internally versus, I think, that 10 on a $100,000,000 post when I I didn’t do my homework.
What is the biggest floor of the f f investment decision making process today, do you think?
Let’s see. I mean, you’re sort of relative to, you know, sort of other, let’s say, tier one elite firms over the past five years in some ways.
Can I just put some names around this, Delian? It’s really unfair of me, but tier one elite firms, which reads you most respect?
Sequoia, Andreessen, probably more historical benchmark than modern benchmark, but I still think there’s lessons to be had, you know, sort of there. And, you know, if I were to look over the past sort of five years, generally, the Founders Fund decision making has led to generally superior returns and also less gaffes in various ways, whether it’s the, you know, sort of FTX type, you know, sort of fraud debacles, whether it’s the holding publics beyond when you should on behalf of your LPs. Is there any is there
any change about it then?
If anything, the biggest change is I would double down on what we’ve done sort of best historically, which is if you look at the general partners today at Founders Fund beyond Peter, which is either Brian Singerman, Trae Stephens, Napoleon, all three of them began as either interns or relatively junior investors Founders Fund over a decade ago. The best thing that we could be doing today is ensuring that we have people on the team today that in a decade are going to be the future Brian Napoleon’s sort of trays.
Right now, technically, you know, sort of full time at Founders Fund, there is only one person that is under the age of 20, you know, sort of seven that is probably not a, you know, sort of sufficient class of, you know, sort of future up and coming investors that would, you know, sort of be those future general partners in ten, fifteen, sort of 20. That would I I would say probably the biggest change would be double down on what we’ve done best in the past and do it again.
You mentioned Brian many times there. I love Brian. I had him on the show a couple of times. Wonderful dude. Spoke to him beforehand. He said you have to ask him, what makes Founders Fund so special with the addendum that very few people do not know or consider? So not the, like, contrarian mind. Yeah. We like big plans and big ideas. Everyone knows that. What that not many people see makes them so special?
The thing that is probably most underappreciated, the fact that the team is very small allows for there to be very strong sort of personal relationships where, obviously, in any network, the number of, you know, certain network connections grows by n squared. And to the fact that, you know, I probably won’t do the, you know, sort of counting perfectly, but I think there’s, you know, call it eleven, twelve of us on the investment team today on the order of n squared, a 130 basically permutations of, you know, sort of connections, that’s actually, you know, sort of relatively, you know, sort of possible to maintain quite strongly.
Once you actually go to even, you know, sort of 20, at that point, you’re talking about 400, which then basically becomes impossible to maintain. And what that allows us to do and the way that we sort of do our economics, which is there’s no sort of deal by deal sort of basis, makes it so that the firm is far more collaborative than I think people expect in terms of many of the even intro calls that we take. We’ll have multiple people on the firm, and there’s not jockeying around who was the most point person and who gets to claim the most basic, you know, sort of credit for an individual investment.
That type of politicking sort of doesn’t really exist because I think a combination of the team size being small and the personal connections being strong and the way the economics are structured. And so so much of what we do, it’s not to the level of like benchmarks, like full sort of consensus, everybody needs to vote on it culture, but by far, if you look at the best, best investments, it’s when three or four sort of investors collaborated significantly to get to conviction on a particular investment, but also that the rest of the firm didn’t like the investment.
I think it’s only possible to both collaborate to that depth and also get deals across this sort of line even if the rest of the firm doesn’t like it when you have that very small collaborative and, you know, basically, you know, very personally close structure.
One, you know, sort of anecdote that I’d use that maybe reflects this is, Brian, when we do our sort of, you know, once every, you know, year or two year, basically, like annual retreat with the whole team, one of the core things that we, like, you know, basically go through and that is, like, speech that he gives is both, like, who has joined, you know, the firm since then, but also what children have been born into the sort of, like, Founders Fund, you know, sort of family since the last time, you know, we all got together.
And in some ways, maybe that anecdote is reflective of that, you know, sort of collaborative familial culture.
There’s also winning the deal once they submit the term sheet. Have you lost a deal, Delian?
It’s funny because actually, like, recently, you know, sort of came back up because one of the founders that I lost the deal on, for some reason, brought up the, you know, sort of thread where I, you know, sort of mentioned him not directly, but, you know, somebody asked me what deals have you lost, and I you mentioned him sort of vaguely. He replied to that tweet and was like, the biggest mistake of my company building was actually turning down Delian’s term sheet. So that was a very flattering thing to hear.
What what was the
company, and what did you take from it?
It was this guy, Nathaniel. I guess since he’s now sort of publicly confirmed himself, I think it’s fine to say. This guy, Nathaniel Manning, at this company that was doing wildfire sort of insurance, tech enabled using satellite data, etcetera. And I think ultimately that, you know, sort of failure point came down to just, yeah, COVID era. I think the company or the founders were not based in the Eastern Bay Area where I was at the time. We just weren’t quite able to meet in person even though I was willing to, you know, sort of fly, etcetera, just in the time frame that he wanted to ultimately, you know, sort of come to a decision.
That’s interesting. Is that because you were older and you weren’t willing to get on a plane so quickly?
So I think there, was just like, didn’t, you know, get to it, you know, in terms of top of funnel quickly enough relative to the round dynamics. But, yeah, it was, you know, sort of that one. And then in that thread, mentioned a second that it was a, you know, sort of double down on a, you know, sort of portfolio company where I think if I were to critique myself there, probably, you know, sort of felt entitled to the ability to double down. You know, I’ve been on the other side of the table, many times and investor entitled ness can really rub you the wrong way.
Nobody’s entitled to their pro rata. That’s
interesting because it is a legal right.
Yes. But things in Silicon Valley don’t always operate according to legality. They do sometimes operate according to a little bit of the character, reputation, you know, sort of etcetera. Obviously, we’re seeing this kind of play out in the drama sphere of Twitter over the past twenty four, forty eight hours with Parker Conrad, Vinod, Mike Solana, David Sachs.
Do you think this is good for our ecosystem where it makes us seem like rich brats who need to get on with the real world, get on with our jobs, managing money for some of the biggest institutions in the world who we’re lucky to manage money for.
I think that for the future generation of founders, I think that it is valuable that people’s characters are laid on display. It’s not to say that anyone comes off unscathed in any of these things. Whether you’re on the Parker versus David Zack side of it, both sides have shown pros and both sides have shown cons. I think that’s valuable because then you as a founder can self select into it where I think one of the questions you sort of threw in the agenda was, has your divisiveness on Twitter lost you or won you a deal?
I’m sure that it has. I’m sure that there is a set of founders that have chosen to just not reach out to me whatsoever because of my philosophy. But there’s also a set of founders that have self selected into proactively wanting to, you know, sort of work with me. Eric and Kareem of Ramp, you know, maybe being a perfect example of this, of really wanting to, you know, opt into the immigrant, you know, anti woke, etcetera mentality and have that be a, you know, sort of core part of the sort of early culture.
And so I wish that, you know, Bill Guril’s, you know, firing of Travis, you know, was, you know, sort of talked about more publicly about how morally depraved that entire basically situation was so that people can choose to opt into is that, you know, a firm that you want to work with. Maybe it is, maybe it isn’t. But I think that stuff should be, you know, sort of more on display than not. More for sake of not the, like, you know, VCs winning a point on one another publicly and getting attention for it, but more for the founders to understand how this shit actually happens behind the scenes.
How do you think about a challenging situation? You mentioned Bill and Uber there. I’m I’m not directly addressing that. I’m just saying when the fiduciary responsibility that you have to your investors, which is to return the most amount of money possible, is no longer aligned to the best interest of the founder. A great example of this is when you wanna sell your position, you may need the liquidity then, your LPs may want the liquidity then, but as a lead investor, that looks bad for the founder and for the company.
There’s now a misalignment between the two. What wins?
Part of why I I really enjoy working at Founders Fund is because of the sort of fundamental, you know, sort of mantra of the firm and why it was started in, you know, sort of 2004. The idea of sort of founder friendly VCs and not firing founders was, you know, extremely contrarian. Obviously, it’s become somewhat consents consensus, not entirely. There are, you know, firms, tier ones that I mentioned, Benchmark, a sixteen z, Sequoia, etcetera, all have examples of sort of founder as oustings, you know, in the past, you know, sort of decade.
And so in some ways, it continues to actually be at least somewhat, you know, sort of contrarian. Do you agree? Do you do
you re sorry. I’m sorry. Do you really agree with that? That is like saying, will enter into a marriage and we will never get divorced. That’s moronic. Of course, you should have the option to get divorced. You you should never have the divine right to be an investor at Founders Fund. If you don’t perform, you know, you won’t you won’t be there.
Yes. But I think if you just you know, if you look at the fundamental job of venture capitalists, it should provide basically, you know, sort of high beta strategy. And if you look at the highest, you know, sort of beta outcomes in the world, they are all founder led companies. And so, ultimately, even if you disagree with the approach, even if you think that, you know, perhaps the, you know, sort of company could provide some liquidity if you get rid of the founder, I think, you know, in some ways, obviously, you know, sort of Benchmark LPs made a lot of money by, you know, sort of Dara becoming the CEO, taking the company public, and today it’s cash flow profitability.
But perhaps those Benchmark LPs would have made even more money if Travis was still CEO and the future of self driving cars lived within Uber rather than living within Google. And maybe Uber becomes a $1,000,000,000,000 company over the course of the twenty twenties if, you know, Travis is at the helm rather than Dara. And so I think in some ways, you shouldn’t overly rely on history. However, Darwinistically, founder led companies are the only ones that generate the, you know, sort of returns that matter, you know, for VC.
Totally. I’m 100% with you. I hate it when founders I meet and say, oh, I’m a zero to one person. I’m like, great. I’m an out person. Like, that’s not what we’re here for. But like, do you agree with what I’m saying? Like, no one has a divine right to that position. As an investor, you also have an obligation to the employees within a company. And if someone is not doing the work, lazy, lying, they don’t have a divine right to the position to be there.
Travis committed no crime and they, you know, sort of ousted him despite the fact that, you know, they actually didn’t necessarily, you know, have the legal control to do so. They just cornered him in a hotel room, you know, two days after his mother had passed away and convince him to sign papers that he, you know, shouldn’t have. And so
I’m just intrigued. If you weren’t good enough as the founder of Varda, say in three years time, whatever, you didn’t scale into it, do you not think Founders Fund or Khosla should be able to remove you?
No. Because I think ultimately, in order to deliver generational returns, there’s no way for that to happen other than the founder still being at the helm. The moment that you install a professional CEO, that person doesn’t have the same level of moral authority or capability to sort of take risks that require you the risks that are required to take in order to, you know, sort of generate those types of, you know,
true true entail Do you not think Satya Nadella disproves that? Very bold risk, writing a billion dollar check to OpenAI, completely transforming a business that Steve Ballmer had let plateau. And, you know,
yet, Zach releases, you know, whatever llama, you know, three or four, you know, and releases it completely free in open source and it is beating all the benchmarks of anything that OpenAI and Microsoft have ever done, perhaps that actually doesn’t matter. It turns out Zuckerberg is going to be the massive AI platform and it’s because he’s willing to take risks and invest into a level of h one hundreds that, you know, Satya was not willing to do because Satya had to ultimately, you know, serve the, you know, sort of public markets versus Zuckerberg still has pent ultimate control over everything that sort of Facebook does.
And so it’s not to say that professional CEOs can’t take it, you know, sort of some amount of the way. And, obviously, Satya has, you know, delivered phenomenal returns to investors, but I still think at the end of the day, those entail outcomes aren’t possible without founder led companies.
This is very clever positioning from you. Okay? Because you look like a great guy, and I look like an evil old VC. To be clear, I completely agree with the founder led companies being the most important and valuable for anyone thinking that I’m a dick listening. So I totally understand and agree. I do have to ask, like, that is a very strong statement from Founders Fund on the, founder like companies and always always taking the founders. When you think about something that you believe I like this question from Twitter.
What do you believe that the Founders Fund partnership will heavily disagree with you on?
I want to because this is you sort of brought up a point, you know, if if there’s a thing that I’ve learned from Peter the most, it is there is always a way to structure your arguments such that you are on the winning side no matter what and look the best. And I think he does a phenomenal job of that, of structuring his sort of logagic arguments and frameworks in a way where if you disagree with him, you by default just look like a buffoon because of the fundamental way that the argument is basically sort of structured.
So that’s probably the number one thing that I’ve learned from Peter is being very diligent in how I structure my logic.
Before we dive into what you believe that found this one is screwed with you on. Peter is such a large presence, important person. When he’s in a room, how do you prevent the weight of his words being the only words that matter?
I actually think it it goes back again to that sort of familial nature at Founders Fund. I think because he maintained such closeness to everyone on the team, and obviously it’s, you know, when you’re in your first year there, probably more difficult, but once you’re five years in, at that point you’ve spent so much time with him that star power or weight of words, etcetera, goes away when you get to know the individual behind the star. And so if anything, he values people that are willing to actually disagree and stand up to him so much so that I think it incentivizes behavior internally where people proactively want to disagree with him more than others.
So actually, if anything, the reverse happens. I remember I just there was this particular moment right after the Keith departure, and I was obviously feeling in some ways very emotionally raw. We were having this team meeting where there was this discussion about candidates and who we wanted to bring onto the team. There’s this person that Peter was particularly excited by. I remember I just practically jumped in, I I don’t want to go into the details partially because it’ll probably reveal who the person is and it’s a little confidential.
But anyways, I just practically just jumped in and I was like, Peter, I think that is probably the worst candidate idea that anybody has brought up to the firm in the last six months. I feel about this so strongly that we just discussed this framework of path of most resistance. We should have x, y, z GP meet this person as a part of the interview process. Peter goes, Well, why should that person meet? This person would be a venture candidate. This GP may not be the right person to assess.
I was like, because I know that this GP will hate this person, and that will absolutely guarantee that we do not, you know, sort of hire this person. So, anyways, point big, I think, you know, even on a tactical day to day level, I actually don’t think, you know, sort of this happens. If anything, the, you know, sort of reverse
effect actually sometimes happens. Tell me, what do you believe that the majority of the partnership will disagree with you on?
I think it’s that, you know, sort of fifth part of the venture job. Trae and Brian are more than welcome to take their approach of, you know, sort of write a check to a founder, but then largely, you know, sort of be hands off from there because the best founders don’t ask for help. The best founders in my portfolio have looked to people that they value their opinion of and want those people, you know, sort of around the table. And so I do spend you know, every single time I invest in a company, I try to meet with them on a monthly basis.
I go to the board meetings. Try to be very thoughtful about how I, you know, should engage in those sort of board meetings.
Vinod Khosla says, I can’t remember the exact number. So if Vinod’s listening, don’t kill me or sue me if I get it wrong. 18 to 90%, I’m just giving a range of VCs actually detract value. Do you agree with that?
Yeah. I mean, when I look at the set of, you know, sort of co investments, you know, board meetings, you know, board rooms that I’ve had to be a part of, I think that’s a accurate, you know, sort of percentage, I think.
People chat shit about venture investors like detracting value. How? How do they?
I think there’s a couple of different causes. One of the worst outcomes is when a venture investor feels pressure from the firm, whether it’s in the like, you know, Uber case of we need liquidity or one of the most, you know, worst cases that I’ve seen is when it’s your first sort of like quote unquote big deal, big investments. It’s like the thing you feel like is defining your next three, four, five years at the firm. That anxiety then creeps in where you’re trying to force the founder into like, hey, need a quick markup or x y z sort of short term progress.
It’s like not quite to the public markets quarterly of hamster wheel, but it starts to approximate to that where you start to be really, really sort of short term thinking focused, and impose that anxiety upon the founder. Probably the second is people that are just so decayed on operational skill sets but still feel like they have really strong opinions on, here’s how you should do x y z marketing, this candidate, etcetera. I just think that unless you’ve been in a true operational day to day role in the last three to five years in some ways, your ability to significantly provide high quality advice really degrades.
And the only way to keep it at a top level is, I think, sort of how Keith does it where he just gets so involved in each of the companies where, irrespective in theory, he had not done Open Door, Open Store, etcetera, I still think he actually is able to maintain a, you know, sort of significant operational sense because he goes so deep and transitioned directly from operator, you know, sort of to to investor.
Speaking of that kind of operational now, so obviously, you run Varda today. There’s pros and cons. How does running Varda make you a better investor?
You know, a multitude if you we go back to that sort of five point, you know, sort of framework. There’s a multitude that have been significantly positively impacted due to Varda. The first, just top of funnel. There’s just a set of founders that did not know me when I was just the founder of Sun Investor versus now because the company is, you know, an intriguing company, have heard of me sort of through that. Second, my ability to decide on what I would like to invest in significantly improved.
In particular, I’d like to go back to this example of there’s this company that I led the seed round in, Cerebras Systems. The founder practically chose to come meet me in Miami even though he was based in Los Angeles because of, you know, sort of the Varda connection. And then I was able to run extremely extensive diligence over the following, basically, thirty six hours after my initial meeting with him because I was able to call people at Varda that had been his former manager, direct report, had worked with him as a peer.
The level of sort of depth of network that I have into this field allowed me to do, even for other really top tier aerospace investors, that type of diligence would have taken them probably weeks to mine into that network versus being so practically so close bear to the metal. You just have a much more extensive understanding of, you know, sort of the the people that day to day work in this, you know, sort of field. The third is, obviously, you know, sort of close rate. You know, I I mentioned, obviously, this, you know, sort of recent.
It’s not to say that I love investing in these, like, super, you know, sort of hot competitive deals. But since Varda, I have not, you know, sort of lost an opportunity where I’ve wanted to invest even in situations where there have been phenomenal partners, general partners on the other side of the table offering competing, you know, sort of term sheets.
Have you found a correlation between deal heat and success of company when you look back at your portfolio?
No. It’s not to say that deal heat means it will not be successful, but if you look at the returns, some were hot deals and some were not. And so, you know, it’s sort of like a wash and I shouldn’t really focus on it. Right? Sword Health was like the epitome of not hot deal, random Portuguese company. There was nobody on the other side of the table. We, you know, sort of set terms. The Ramp seed round had, you know, five or six other offers and obviously was sort of super hot.
Those are basically the two biggest outcomes and on opposite sides of that, you know, sort of spectrum. And so I think it’s actually just, like, uncorrelated. You know, I think, obviously, at Founders Fund, we definitely have a bias towards seeing it as a negative, you know, sort of factor, partially because it does typically end up affecting pricing. But I do think there’s a set of, like, you know, sort of hyper competent founders. I think in some ways, at Varda, we take this strategy, which is even in a competitive situation, we don’t necessarily, you know, sort of take the highest priced offer that we have.
In every Varda round, we’ve actually not taken the highest priced, you know, sort of offer. We’ve, you know, done what we thought was in the, you know, sort of appropriate reasonable range that sets the company up for, you know, sort of long term success. And so there are hot rounds where the founders are not, you know, sort of irrational, and we do like to invest in those if Founders Fund.
You mentioned Ramp’s round being a hot one. I remember Keith saying his biggest regret or the thing that keeps him up most at night is not paying 35 for rippling. You mentioned Parker earlier. When Gary Town and Initialized did, Ramp was an expensive ish seed round. I think it was, like, 25 or 30, whatever it was. Do you care about price or do you align to Founders Fund’s mentality of if it’s gonna be a generational defining company, shut up and pay.
You know, sort of closer to the latter, but I do think it still needs to be sort of in family with what is reasonable for the status of the company, I guess, where, you know, I think if you’re just like, you know, sort of two, three x, you know, sort of beyond, even if other investors are willing to offer it, It just means that you’re going make future decisions that are also similarly, you know, sort of low quality. I think it’s in some ways reflective of the quality of the, you know, sort of founder.
And so I think, you know, sort of ramp in some ways, it’s not particularly unreasonable for a second time exited founder that, you know, made money for investors for a seed round to be at, you know, sort of 30 post. Right? I I think that’s, like, not a particularly unreasonable pricing. In some ways, Parker obviously was, you know, a similar, you know, sort of situation. If you’re, like, a first time founder and, you know, demanding 25 posts, I have a little bit of a harder time getting excited even if in theory, your vision is super compelling, your team is super compelling.
It just shows a willingness to, you know, sort of submit to the market instincts of venture capital rather than having your own, you know, sort of defined viewpoint on where you should you sort of land. And so yeah. But I I I think generally, you know, I’m in the latter camp and especially because most of the investing that I do is, like, below a 150 post. So, you know, sort of there, pricing is not as significant of a factor relative to growth stage, especially for a multistage firm where we can continue to double down and build our position.
How do you think about how your job has changed with the memetic nature of Silicon Valley now realizing that the future is defense and we have to be in defense? My
partner Trae Stephens was obviously extremely, you know, sort of early to this trend. I’d like to say, you know, in summer seventeen when I decided this was what I wanted to focus on, it was, you know, not the, you know, sort of typical path the junior VCs were obviously taking in the valley, but I think has led to a lot of the success that I’ve had to date.
And so it’s been interesting to see that sort of flip on its head where, you know, I had a former colleague, you know, sort of Everett Randall, who’s now a partner at KPCB, who would always critique me and say, you know, oh, Delian just loves these, you know, sort of low margin CapEx intensive businesses that are, like, highly, you know, sort of dilutive. This is in the, like, 2019, 2020 time frame where, you know, sort of SaaS still felt like it was the sort of number one thing in the valley.
And in some ways, you know, sort of those critiques, you know, have gone away even though the fundamental nature of the critique is still true, which is that these things are low margin, CapEx intensive. But, ultimately, that is where you build your, you know, sort of moat. The one liner that I sometimes like to use is people love software because, you know, sort of the marginal distribution costs are zero. But perhaps what people need to realize is also that the marginal returns are zero as well because there is no moat because two stand for kids, especially with today’s AI, can replicate your, you know, sort of SaaS for plumbers, you know, effectively in a weekend.
And
so Can I be blunt? Do you not see the glib nature of that being, you know, service titan? Literally exactly that SaaS for plumbers cannot be replicated in a weekend with AI. There are intense workflows, deep functionality, a lot of brand credibility, trust, love. It’s just not true.
Product, you know, sort of statement, I would probably disagree with where I think that, like, deep workflows, etcetera, if you’re having to invent them for the first time by determining what your customers’ workflows are versus, you know, just replicating off of a, you know, sort of known outcome, I think the ability to replicate that with, again, a team of 10 killer software engineers in AI just feels incredibly sort of quick today. I do think that sort of distribution point and branding point is real, but then that’s what people need to recognize is like you know, service titan is actually closer to LVMH than it is to Tesla.
And that’s fine. People should, you know, sort of invest in, you know, sort of brands that have, you know, sort of great distribution. Clearly, returns can be made there. But let’s, know, sort of fundamentally recognize that these are, you know, sort of not true technology companies.
How does the investor mind need to change with the transition to this very different world of investing that we now face? Like, many investors are high margin SaaS investors or consumer investors. This is a fundamentally entirely different asset class. It’s not even comparable. How does the investor mind need to change to embrace this, and is the current generation of investors equipped?
What’s funny is, like, this is actually what historical Silicon Valley was known for. Right? Obviously, we, you know, became what we are because of the word silicon. We were a chips industry where you had to do extremely deep technical diligence. Things required quite a bit of CapEx to basically scale up. The fact that we had this sort of like low marginal cost, free distribution, very simple business model is sort of like a freak sort of outcome of the like mid two thousands to the like sort of late two thousand tens.
And I think in some ways, we’re sort of reverting to the mean where, you know, if you look at the most successful investors from the eighties, nineties, etcetera, they look closer to, you know, sort of Vinod Khosla than a, you know, sort of pure SaaS investor, you know, sort of Jason, you know, sort of Lemkin. And so I think what you will see is the, you know, sort of profile of investors start to change. You need these very broad polymaths that can, you know, sort of get up to speed across biotech, material science, aerospace, etcetera, more so than people whose, you know, sort of skill set purely sits in the world of, financial analysis and software, you know, engineering and product.
And so there does need to be adaptation. I think what you’ll realistically see is just the, like, you know, sort of ranks of VCs will fundamentally change. I’m not sure that everyone is going to be capable of sort of reinventing themselves in this way. I just think the up and coming classes will look very different.
In ten years, who will the top three VC firms be?
The, you know, sort of top three VCs a decade ago kind of look like the top three VCs today, and there’s almost certainly basically be the top three VCs, you know, a decade from now. Are starting to see, obviously, people shift in fundamentally different directions like Sequoia and a sixteen z becoming RIAs, maybe points towards a world where they’re going to be scaling headcount, asset classes, etcetera, to the point where they start to resemble something more like BlackRock versus, you know, sort of the homegrown, you know, sort of VCs of the historical Silicon Valley arc.
And I do generally believe that at least within the world of, like, seed, Series A, technology companies, the most successful ones are gonna look more like the Founders Fund model of small teams focused specifically on that asset class versus just being a subset within a larger BlackRock looking like behemoth.
Who will be the biggest losers in the next ten years of venture?
I think the sort of sector specific specialized funds are going to, you know, sort of have a very tough time where, you know, if you were a financial services or SaaS focused fund, you for sure, you know, sort of had a wave that you could ride for a certain period of time, and it’s not obvious that there will be that same wave again. Like, Founders Fund is not a aerospace defense focused investor. It happens to be that, you know, we picked up on that trend and saw that there was going to be upcoming tailwinds far ahead of anybody else, but we also invested in Airbnb, Affirm, etcetera.
And so in some ways, the firms that will struggle the most over the next ten years are the ones that, you know, sort of have these artificial constraints on the types of investments that they’re going to make that don’t allow them to optimize for the reality of where is being disrupted and where are there going to be, you know, sort of generational returns to, again, go back to one of Brian’s, you know, classic isms internally is, you know, the only rule of Founders Fund is that there are no rules.
If we establish any type of arbitrary rule, it almost certainly will basically decrease our use of IRR. And so a lot of these, like, sort of specialist firms, I think, are gonna have a really tough time when their sector sort of falls out of favor.
Do you mind if we talk about your Twitter? Sure. Go for it. One of your tweets got me in particular. It and I think you know where I’m going with this. It was where you said you can’t take people seriously who are over 35 and straight and who don’t have children or are married. Can you just talk to me about the thinking behind that tweet?
I just think in the technology industry, great, you know, sort of companies, movements, comp you know, technologies only get implemented with people that have extreme long term thinking. To me, the epitome of long term thinking is recognizing that your time on this planet is very short and what you’re here ultimately to do is set it up well for the next generation. In some ways, epitome of that is recognizing there needs to be a next generation and we have to be the ones to make them. Babies don’t come from storks.
They come from people ideally being married and having children. Obviously, unfortunately, there’s a lot more being born out of wedlock today than not.
Do you know this is going to piss people off when you do it?
I think this goes back to maybe the beginning of the podcast where I think in Bulgaria, the default is just say what you think and it doesn’t really matter that much how society sort of reacts to it. And I used to feel very guilty when I was first moving to San Francisco and I would say offensive things at the office that people found distasteful or, you know, in my early days of Twitter. And then I think at some point, I’ve recognized I mean, this is what I’m thinking and it’s what I would say in private conversation.
I might as well, you know, sort of be myself and say it out loud. It may sort of frustrate some people, but hopefully, it helps some people either think different ways or become more attracted to, you know, working with someone like me. So I’d prefer to just be my honest and true self. And so I sometimes am quite surprised that people are so, you know, sort of put off by some of the things that I put out there. They just feel like very obvious thoughts to me.
Do you think people are too soft today?
Born and bred, you know, sort of Americans that grow up within, you know, sort of this, you know, economy, culture, climate, etcetera, don’t they take for granted, you know, sort of what how special The United States is, our economic system, our political system, and don’t recognize how existential it can be if we sort of lose the current system and how bad the rest of the world is. So I do think that obviously makes people extraordinarily soft. I’ll maybe use this sort of Netanyahu quote from the congressional speech that he gave yesterday, which is, you know, there are protesters outside of, you know, Capitol Hill that had signs that, you know, said, you know, sort of gaze for Gaza.
And he was like, you might as well be saying that, you know, we’re chickens for, you know, sort of KFC. You know, they would eat you alive there. And I think that’s like a perfect example of just like the softness of the, you know, sort of next generation because they they take for granted that you can even be gay in this country. Do you think we work as hard as
we used to?
You know, no. I think if you look at the, obviously, you know, average working hours, you know, sort of today relative to, obviously, factory labor and the industrial revolution in the nineteen twenties, the objective answer is no. Magnitude of effort is always an important thing to compete on, so is direction. And I think the important thing about society becoming more and more wealthy is that for the people that choose to work very, very hard, you know, we continue to allow them to be rewarded. We’re not Europe where we try to either sort of steal the wealth of the most successful, you know, sort of away from them.
And we, in some ways, you know, enable them to have even more, you know, sort of infrastructure to be as productive as they would like to be. If you look at the tools available to me in order to be productive relative to even John Rockefeller in the 1920s, the amount of work that I can put in and the preciseness of the direction is far more direct. There are so many things in Rockefeller’s life. There were sort of inefficiencies, whether it was communication, transportation, etcetera.
So I think what you’re going to see is this bifurcation where almost certainly there will be more and more people that work less, but there will also be these hyper efficient people that are augmented by AI, have more wealth, have more people around them that actually become even more productive and efficient. And so the answer in some ways is like yes and no. The average yes has gone down, but the, like, you know, sort of tail extremes, I think, are only going to go up even further.
And for everyone listening, Delian is wrong. Europe do not tax and take away all of your wealth if you make money. I know I pay the tax. I pay the highest tax bracket. Some countries do take more, but sadly, no. Anyway, I I do have to ask, dude. I was chatting to Sean McGuire before this, and he was like, gotta talk to him about marrying up. I did it. What is your biggest advice on marrying up and finding your life partner?
The the biggest mistake that I see people go into sort of the stage of life where they’re prioritizing finding their lifelong partner is they come into that process with a pre prescribed notion of what they think their ideal partner looks like, whether that be a set of attributes, a list, particular family archetype, etcetera. They come in with these very strong pre exposed notions. I came into that process sort of with that similar sort of list myself, arbitrarily, one of the things on that list in some ways was I really believe that my wife needed to be a really good skier.
Skiing was an incredibly important or it still is an incredibly important sport in my life. It’s how my family hangs out, you know, together all on Christmas Day. And so I felt that how would somebody possibly integrate into my familial life basically without that? And then it turns out my wife, who I very much so married up for, it was a, you know, sort of god awful skier and, you know, bless her heart, at least allowed me to, you know, sort of teach her some of that to, you know, get her to mediocrity rather than being god awful.
But I think it’s recognizing that you probably don’t even realize, you know, sort of what that ideal person looks like. Use the instincts of what you’ve built, you know, and what worked well in sort of, you know, sort of prior relationships and try to find the person where you can most be yourself, and they just by default love that. In my early dating life, I always felt like there was something wrong and something that I needed to edit out of myself and that was going to make me the better boyfriend, better potential husband.
And I would get critiques from girlfriends at the time. Were like, I like a lot of you, but there’s this 10% that, you know, is maybe the more volatile or the crazier or the thing that, know, post the bombastic things on Twitter that I would love you to edit. I think ultimately the, you know, sort of thing that made me realize that my wife was, you know, the one was where I could just be a 100% of myself, and she actually loved, you know, sort of all all aspects of it.
And so then rather than not being myself, I could actually just even more be myself, she’d love that, you know, basically even more.
Delian, sex, laughter, honesty, and respect, rank them one through four in importance.
Probably honesty first because I feel like in some ways the rest of that, you know, doesn’t matter unless you have that. Then, you know, maybe controversially, I’d put user of sex second. I think, like, you know, being truthful. You know, I think Zuckerberg actually had an interesting, you know, sort of quote yesterday in his, like, Emily Chang interview where he talked about how much he just does not believe in the idea of, like, plug yourself into a computer and upload your consciousness. We’re so much more than just our brains.
We are the bodies, the sensations, etcetera. So in some ways, you know, sort of sex in a relationship is the sort of epitome of that and needs to be, you know, sort of second. Then it’s probably sort of laughter in that I think life is a difficult thing. The fact that it’s so short is a difficult thing. You have to deal with many hardships and if you don’t have laughter, you may not be able to get through that. Probably fourth is respect where do think it’s important, but when I think about it in the, you know, sort of ranking of all those, it is probably, you know, sort of fourth most important.
If you’ve got, you know, sort of honesty, laughter honesty, sex, and laughter, in some ways, respect probably falls out of that.
You have children, and you are a father now. My question to you is, in what ways have you changed most unexpectedly since becoming a father?
Probably didn’t expect how much my sort of default mood would improve by having a child. Know, it was definitely something that I felt very ready for. I was excited by. I knew that it would bring me sort of a lot of joy, but there is just this, like, very base level of, you know, the fact that you get all these endorphins released every single morning when you pick up this just, you know, beautiful, happy child that just like screams and giggles and plays, etcetera, and just like evokes your inner child.
Even when you’re in the midst of like what feel like the most existential, stressful, etcetera situations and you’re, you know, going through, you know, these professional crises, in some ways, I feel like all that washes away when you have just, like, this, like, joyous, you know, you know, sort of child to sort of begin every single day. And that just erases, I don’t know, anything that you could have in terms of, you know, sort of stress, you know, depression, mood dampener.
What is your most radical thought that you have not tweeted yet that you would like to?
You know, I’ve sort of, you know, hinted at this some amount, you know, in in in various tweets, but maybe, you know, sort of not said it super explicitly.
But I I do think the sort of biggest geopolitical and moral crisis that humanity will have over the course of the next minimum one hundred, but maybe it is closer to one hundred and fifty to two hundred years, fundamentally that humanity is almost certainly going to be speciating where both with artificial selection pressures from things like polygenic risk scoring of embryos to eventual, you know, sort of CRISPRing of, you know, sort of embryos where you’re changing DNA to natural selection pressures of either people being on, you know, sort of moon, Mars, and, you know, lower Earth orbit stations will fundamentally, you know, sort of create a new dynamic that we have not had, you know, in the last effectively, you know, sort of fifteen, sort of twenty thousand years where people don’t appreciate that we all happen to be sort of homo sapiens.
Like, the only, you know, sort of intelligent conscious beings on the planet happen to be homo sapiens, almost certainly, you know, we will have homo Luna, homo Marsha, you know, homo Cosma, and homo Neanderthal and Erectus, you know, sort of may come back as people decide to, you know, sort of optimize or, you know, sort of bring back some of those genomes. And if we think we have sort of divisiveness today where at least everybody on the planet can mate with one another, produce children, in the future that will not be the case.
And I fear for humanity’s survival in that, you know, sort of outcome given, you know, sort of how close we feel to the brink of nuclear war constantly when we’re all at least the same species and, you know, sort of how much worse that, you know, sort of maybe when we feel like we’re, you know, not necessarily all the same species.
Delian, listen. I wanna move into a quick fire round. So I say a short statement. You give me your immediate thoughts. Does that sound okay? Sounds great. Okay. So who is the single best board member you sit on a board with? It
would probably have to be Seth Bannon from fifty years. I think he dives, you know, sort of deep into the companies that he’s involved in and you should ask some you know, some pretty great pointed questions.
Which board member have you not sat on a board with but would most like to? Or which VC would have you not sat on a board with but would most like to?
I’ve gotten to observe at True Work, Alfred Lin, and, you know, would love to, you know, sort of one day find something where we’re actually both the, you know, sort of board members. I imagine though that given our, you know, sort of not super overlapping interests that may or may not happen, but that would be one that I would love to experience.
What have you changed your mind on most in the last twelve months?
I have tried to tone down how much on Twitter I sort of attack the individual versus, you know, sort of attack the idea. Obviously, I’ve made, you know, plenty of enemies in Silicon Valley and some of them I’m, you know, sort of, comfortable with. Some I’ve done somewhat either sort of unintentionally where I was, know, sort of more meaning to attack the idea and the principle than the actual person, and I actually quite enjoyed the person. And so probably have changed my mind on how okay it is to attack the person, let’s say.
Do you give a shit when PG fights back? Do you get worried?
I think at the end of the day, it’s better to and I think this goes back to one of my early answers. It’s better for people, at least the founders, that have to choose who they work with to understand the character of the people that they’re going to be working with. And so I generally prefer for more transparency and honesty with how people truly, you know, sort of think about, you know, sort of one another and their preferences than not. And so, yeah, I’m generally pro, I think, you know, him him, you know, sort of fighting back.
Have you ever been pulled aside and found as fun for your Twitter?
Oh, multitude of times. I mean, I I I probably had at least, you know, sort of six, you know, Singerman, you know, sort of one on ones where he has to be like, Delian, what the fuck? Yeah. Thankfully, those have generally decreased in frequency. You know, I think, you know, especially in the early days, it was like, sorry, I’m such an idiot. I will try to do better in the future. And then I think, thankfully, I did generally do better in the future. So, thankfully, I think, you know, Brian has not had to do one of those now sit down one on ones in, I think, two years in a month.
So of my five years at Founders Fund, I think we’re at least getting to the point where now I’ll be past, you know, 50% of the time, Brian having to sit me down versus not.
What character trait are you slightly ashamed of, but also has contributed to your success?
Probably the one that I’m, you know, sort of most ashamed of is I am not somebody who always handles existential sort of stress and threat well in that it really does impact sort of my, you know, sort of quality of sleep, physical, mental health in a, you know, sort of significant way such that I do require sort of more unplugging than is ideal. Like, when I look at some of the true sort of greatest entrepreneurs and founders, right, if you read about Elon, Steve, etcetera, they’re clearly able to, even in most stressful moments of their company’s lives, grind through the twelve to fourteen hour days, pull all nighters, etcetera, and be sort of fresh and ready sort of the following day.
And that’s just like not something that I’m capable of. If I have to pull an all nighter, I’m like wrecked not for like a single day, but like for like a week afterwards in terms of being sort of fully productive. And so what that has led me to doing is making sure to surround myself with people that are like that. So my cofounder, Bruey, is very much so one of those types where rallies the team, grinds through, can, you know, operate on four hours of sleep and still be high energy, high functioning, etcetera.
Obviously, he doesn’t wanna necessarily do that for months at a time. And so in some ways, even though it’s been my greatest flaw, I think because I’ve recognized it as my flaw, it has forced me to spend far more energy on finding people that can basically, you know, sort of mitigate that flaw. Final one for you.
What question are you never asked that you should be asked, you think?
You know, funny when I saw this, you know, on the agenda, one of the, you know, sort of things that I was gonna say is, you know, people sometimes, you know, don’t ask enough why did you decide to, you know, sort of not be sort of founder CEO of Varda? It does basically come down to, you know, sort of this where I actually, you know, sort of think that and and this may, you know, sort of trend over time, maybe over the course of the next decade or two as I continue to gain experience, become hopefully more emotionally and mentally, you know, sort of mature.
I’m able to do that CEO job. But I do think that, you know, the question I’m not asking enough is, you know, why do you why didn’t you do the CEO job? And it’s because I’m not a 100% convinced that I could be in the, you know, sort of top, you know, sort of point 1% of CEOs versus I am very convinced that my cofounder is able to. And so I need to focus on the thing that I can, I think, be point 1% in, and that is a bit more of the sort of president chairman role?
Delian, listen. I’ve absolutely loved having you on. As I said, I’ve wanted to see this for a while. Thank you so much for putting up with my meandering across different questions. You’ve been fantastic.
Thanks so much for having me on, Harry. Was really pleasant.
But before we leave you today,
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