Episode 51: Fabrice Grinda - Founding Partner of FJ Labs

0:00Fabrice Grinda:This week on Generating Alpha, I sat down with Fabrice Grinda, serial entrepreneur, prolific angel investor, and founding partner of FJ Labs, one of the most active venture funds in the world. Fabrice Grinda in France studied at Ecole Polytechnique in Princeton and launched his first startup in 1998 at the age of 23. He went on to build and sell multiple companies, most notably OLX, the classified ads platform that reached 300 million users across 40 countries before pivoting full-time to investing. FJ Labs has now backed over 1 ,100 startups across six continents, including Alibaba, Coupang, Delivery Hero, and Rappi, with a portfolio valued at several billion dollars.

0:41Fabrice Grinda:Beyond his track record as an operator and an investor, Fabrice is one of the most unconventional figures in tech and finance, known for his ruthless prioritization of life design, his quantitative approach to evaluating marketplaces, and his willingness to share his frameworks with total transparency. In our conversation, we talked about growing up in France and catching the entrepreneurship bug, what he learned building and losing companies in the early internet era, why he became so obsessed with marketplaces, the specific metrics he uses to evaluate marketplace businesses, how FJ Labs decides whether to invest or not in under 60 minutes, the difference between being an operator and an investor, how he thinks about life design and optimizing for happiness, and much more.

1:21Fabrice Grinda:If you enjoyed this episode, please follow the podcast and rate it five stars on Spotify, subscribe on YouTube, and share it to anyone who you think might find it valuable. I really enjoy recording this episode with Fabrice, and I hope you guys enjoy listening. Thank you. Thanks, Fabrice, for coming on. I really appreciate it. Thank you for having me. Well, I want to start where I always do, the beginning. If I'm correct, you grew up in Nice. But at the age of 22, you were already running a startup out of Princeton. Tell me about young Fabrice, what your childhood looked like, and where you think your drive came from.

1:53I'm not sure where ambition comes from. I was five and I was already like, you know, wanted to make a ripple on the fabric of the universe. I was ambitious, right? Like my role models growing up were like Augustus and actually Genghis Khan and Alexander Hamilton and thought long and hard about the role I wanted to play in the world. And yeah, actually consider going down the political path. But then pretty rapidly, I mean, early teens realized that that felt corrupt, corrupting, limited to your nationality, right? Like for a niece, you're not going to become president of the US. And at the age of 10, I fell in love with computers.

2:30I got my first PC. And it was love at first click. And I knew that immediately we were meant to be together. And it was going to be the form of my both artistic expression and to have impact on the world. And at that time, my role models were Bill Gates and Steve Jobs. And clearly, I could see that their vision, and Bill Gates at the time used to say, you know, computer in every home, was democratizing and providing access to information, information technology, was a means to touch billions of people absent borders and limitations. And so it just so happened my hobby became a ginormous industry that could actually influence the world.

3:07Fabrice Grinda:And if I'm correct, you went off to Princeton and eventually graduated with a degree in economics. But while you were a student, you were running this company called Princeton International Computers. That's correct. Exported hardware to Europe. So tell me a bit about that. And then ultimately, after that, you, instead of going to Golden River McKinsey, like your average Ivy League student, you went to McKinsey for a bit and then went off to start your own company. And so tell me about like that experience in college and why you went off to the races in the startup world so quickly. Well, as a computer nerd, I was already building computers from spare parts, you know, like age 10 or whatever, 17.

3:41And so I was always like taking them apart, building them, et cetera. I built a BBS for people to connect. So kind of the ancestry of the internet. And when I got to the US, I realized that retail prices in the US were lower than wholesale prices in Europe. And so it wasn't all that hard to imagine. And also at the time, companies like Intel were not really global companies that would release in the US first. And things would get to Europe like six months or 12 months later. So there was an opportunity for gray market exports where you could buy in the US from wholesale and sell to retailers in Europe who were basically my customers.

4:16And so it worked for a high value, low weight, low volume items like hard drives, motherboards, processors, memory that you could basically FedEx from the US to Europe. And did that with no capital because I would get paid up front. I would pay my wholesalers like at a net 30 basis. And so I had a cash flow profitable business from day one and created whatever 50K a year in net profits net of paying for college. So that was pretty good. I left college with no debt. But I also knew I wanted to be a tech founder. And the thing is, it was pretty obvious there was a tech bubble. It was sort of an inflate.

5:00I mean, Netscape went public in 95. Amazon already come to the fore. And so I graduated in 96. And I wanted to be a tech founder. But I'm like, you know what? I'm 21. I'm shy. I'm introverted. I'm like really Sheldon Cooper-esque. And I worry that if I build a company, I'm going to fail. If I join a startup, they're not going to take me seriously. So why don't I go to McKinsey's business school, except they pay you, where I can learn oral written communication skills. I could learn how to work in teams and public speaking, and then I can go build my startup. In hindsight, not sure that was the best choice.

5:31Probably you learn just as much on your own than you learn at another place. So building a company, I probably would have failed actually, but it would have been an amazing learning experience. If I joined a startup, probably the same thing. I would have learned a lot. So I think all three were partly viable. And after years at McKinsey, I'd learned what I needed to learn and I was ready to go and build startups, which frankly, I knew I wanted to do even before entering Princeton.

5:53Fabrice Grinda:And tell me about that first startup. I'm correct. It was called Auckland. It was kind of an eBay competitor in France. What was walking through that kind of founding moment, how it developed and ultimately what you learned from that? So I was looking for ideas. And the problem is back in 98, when you're starting to build tech companies, it took a lot more capital. You needed like Oracle database licenses and Microsoft web servers. You need to build your own data center. There was definitely no cloud, but there's not even a Rackspace, like a data center. So it was much more capital intensive. And most of the ideas that were interesting to people, like from E-Trade, you need a banking license.

6:31Amazon, you need inventory and supply chain management. And like all these things are not appropriate for a 23-year-old with no money. And so, but I studied market design in college. I was an economics major and loved the way, you know, markets were at large. And so when I randomly encountered the site of eBay, realized that while eBay has a chicken deck problem of, you know, do you get supply or demand first? It was a problem I was pretty well suited to address, knowing, understanding market dynamics and understanding liquidity and elasticity of supply and demand and thinking through how to build supply and match it with demand, et cetera.

7:12And it didn't require all these other specialized skill sets that these other ideas required. And so another love at first click moment, I saw eBay and I'm like, oh, it brings transparency and liquidity and otherwise opaque and fragmented markets of like these garage sales that, you know, as a seller, you're unlikely to find a buyer, as a buyer, I'm actually going to find what you're looking for. In every other category vertical, I know how to do this. Now, at the time, they were really a U.S. company. They're not yet internationalized. And so I'm like, you know, maybe the easiest thing to do, lacking other better ideas for my skill set is, why don't I take this idea and bring it to Europe?

7:50And yeah, that thesis worked. The ideas that worked in one country work in other countries. And I had the skill set to build what turned out to be one of the top three auction sites in Europe. Wow.

8:04Fabrice Grinda:And after that, you start a company which is a mobile media company in a totally different kind of sector. Scaled it to ultimately$200 million in revenue, and I think in four years, that business had nothing to do with the business you had before. What was the insight there, and why do you think you were able to replicate kind of the success across the sectors? Yeah, so people like to pigeonhole you in, oh, you're a mobile media founder. you're an auction founder, whatever. The reality is the skill sets are transferable. The ability to think through business models and to write a deck and raise capital and hire a team and do business development deals, they're all the same.

8:40And it doesn't matter what you're building, you can figure it out. I mean, Elon is a great example of that if you look at the breadth of companies that he's building. And the reason I chose that is frankly much more tactical, gold meaning that bubble had burst i'd gone from zero to hero back to zero again the company i'd i'd built um uh was acquired by another company whose stock fell from 10 billion market cap to 30 million you know 99 decrease i'd lost everything so i felt that i i'd missed the biggest opportunity of my life to be i was at the right time the right place with the right skills at a moment where you was valued which was not the case before and i failed to to capture in that opportunity.

9:23But I've had log in hard, like, do I go back to McKinsey? Do I go to business school? Do I go to whatever Goldman? Do I go to P? And I'm like, you know what? I didn't do any of this for the money. I'd like creating something out of nothing. I want to be a tech founder. Now, it seems that this tech thing is going to be a tiny niche. There's no money in it. It doesn't matter. I'd rather be there than not. But in a world where there's no third-party capital, VC is dead, I need to find an idea that I can make profitable pretty quickly. And so the way I did a reverse arbitrage. I saw that ringtones were popular and successful and profitable, more importantly, in Europe and Asia.

9:58And in the US market, it was completely backwards. There was no SMS, there was no text messaging, but it was bound to happen. I'm like, you know what, why don't I bring the idea of ringtones and then, of course, mobile games, wallpapers, etc., to the US market. And I kind of timed it right. I mean, the first two years were a slog. I borrowed 100 ,000 on my credit cards. I missed payroll 27 times. I lived in New York for 18 months and like $2 a day sleeping in the couch at the office. Couldn't even afford coffee. It was like four cups of ramen noodles per day. That's it. But managed to grab victory from the jaws of defeat, to your point.

10:32Grew revenues from$1 ,000 ,000 in 02 to$5 ,000 ,000 in 03 to$1 ,000 ,000 in 04 to$200 ,000 in 05.000. Profitable. Sold the company and did very well. Now, the thing is, I didn't love the idea I was selling. I want to make a positive impact in the lives of people. Ringtones provides social currency to teenagers. It's okay. But it wasn't like my core mission, but it's okay. I was willing to compromise on the idea in order to be a tech founder. Now, it turns out I was wrong. The internet wasn't dead. It wasn't this niche little thing. It was actually bigger than I thought. And so once I sold the company, and I did say after I sold it for 18 months because it was interesting to scale it and be part of a publicly traded company, I'm like, you know what?

11:10Now the capital to fulfill my dreams and ambition, let's go build what I really want to build.

11:16Fabrice Grinda:Tell me about that moment where like, if you kind of maxed out your credit lines, you missed payroll, if I'm correct, you said 26 or 27 times. You were living on like a few dollars a day. Tell me about that moment. Like, what were you thinking through? How did you get out of it? Yeah. So first of all, there's a saying in French, which is you can't shave an egg. You have nothing to lose. You know, I had nothing to begin with. So, you know, declaring bankruptcy when you have zero doesn't cost you anything. It's still zero. And I find that most people in the world are more risk-reverse than they should be.

11:51And they're like, oh, what if I go bankrupt? What if I fail? But the reality is people in our position, we have really nothing to lose. What's the worst that could really happen? Oh, I go live with my parents for a few months or my friends' couches. I'm not going to be in the streets. And I have the skill set that I can get a job. I can go and work in BD or go to McKinsey or go to Goldman or whatever. Like, that's the backup, right? Like, it's not as though we're going to be under a bridge. The problem is people's egos are too tied to never having failed, and they're not willing to fail. But in order to succeed, you need to be willing to fail.

12:28And, you know, I think – and I see it in the fundraising basis. Like, in order to get one VC to say, yes, you have to get, like, 99 no's. And 99 might – you know, it might not even be 99. It might be 299 or whatever. and most people are not willing to put those out there and face failure but like the costs of failure are very low the worst that you maybe you lost one or two years in your rat race alternative but who cares about the rat race anyway like you should live the life that you want to live

12:59Fabrice Grinda:Before we go back to the episode I want to take a short break to talk about my sponsor Rowe The Generating Alpha podcast is presented by Rowe, the all-in-one banking platform for startups. Thousands of startups like Perplexity, Product Hunt, and more use Rho. You get everything you need to manage your startup's cash. Fast banking setup, cards with a 2 % cash back, and yield that turns company cash into extra runway. All super important in the early days of launching. But the thing founders really love about Rho is their team. They're obsessed with helping founders disrupt the status quo and will go to the end of the earth to help them to do so.

13:34Fabrice Grinda:And exclusively for generating Alpha podcast listeners and viewers, you'll get a$1 ,500 statement credit, plus a ton of exclusive perks when you manage your company cash with Rho. Terms and conditions apply. To learn more, visit rho.co slash generating alpha. Rho is a fintech, not a bank. Checking and card services provided by Webster Bank, member FDIC. See reward terms for details. Thank you. And back to the episode. And super interested in that company that you built after the ringtone company, what you said was like the real thing you're passionate about. And if I'm correct, fun little anecdote, it was like in 2006, you reached out to the founders of Craigslist, I think, and offered to run it for free or to buy it.

14:16Fabrice Grinda:Ultimately, they didn't let you. So you started OLX. And so like, what was Craigslist living on the table? Why did you want to take it over and have that lead to you starting OLX? Well, the observation was like, Craigslist was providing a valuable public service to humanity, right? Like they're mostly free and they were letting people find roommates and apartments to rent and cars and jobs and buying and selling all these and creating massive liquidity. So it's doing an amazing job for a lot of people. But because of the stance they take, where they're not moderating, they're letting the community moderate, it's full of scam, it's full of phishing, it's full of prostitution.

14:55It's like a dangerous place, frankly, for women to be. And people forget, women are the primary decision makers in all household purchases. You know, the car you buy, the house you live in, the babysitter you hire, like the couch you're buying, everything. And this is literally the least female-friendly site in the world. And I'm like, you know what? What you're doing is amazing. I understand you don't have necessarily the work ethic or desire to actually go and fix the problems there because you probably do need to hire like 1 ,000 people to moderate the site at the time where there's no AI. But it's okay.

15:30I'll do it for free. I don't even want to be paid for this. I think as a public service to humanity, let's use this as a platform. Let's also improve the UX UI. Let's do moderation. Let's go mobile. Let's integrate payments and shipping and optional and keep the site free. But that vision wasn't compelling to Craig and Jim Buckmaster, I guess it was CEO. They were like, you know, we like it the way it is. If someone beats us or kills us, it's fine. And also, we're only in the US. And I'm like, okay, let's do this better. and for the world.

16:04Fabrice Grinda:I'm correct. At some point, OLX was like one of the largest websites in the world, 350 million users a month. It still is actually. It's not just it was. 30 countries, still is. And at some point, you launched in over 100 countries simultaneously. Tell me a bit about the thinking behind that. Why even do that?

16:25There's levels of serendipity in these marketplaces and these sites. you never know when you hit lighting in a bottle. And obviously you want to get supply in order to then get demand and match it, et cetera. And we had a strategy for doing it. But what we realized, we weren't even aware of who were the competitors in different countries, how much liquidity there was. And it was kind of like throwing spaghetti in the wall. And we opened these hundred countries and it really took off in four. And so, and we would not have known that these would have been the four ahead of time. And the four ended up being Brazil, Portugal, India, and Pakistan.

17:02And like Portugal and Pakistan, within a few months, we were in like top 10 site in the country. Like in Portugal, we ended up being like the largest car site, job site, auction site, for sale site. Like, I mean, we were like massive. I never even set foot in the country, you know, at that time. Just because somehow the right users were using it, we had like the zeitgeist. So there's an element of serendipity in these things that is such that you want to give yourself at-bats. Now, the approach to work, we did actually happen to work there. So we went from 100 countries to four. So focused on there, became big, became profitable, and then used that to, A, expand to other categories.

17:45After we had the for sale, we did cars, after cars, real estate, et cetera, and then to go back to more countries. And so we ended up winning in about 30 countries. So a big chunk of Latin America, most of Eastern Europe, like Poland, Romania, Ukraine, Russia, the Middle East and the UAE, and then a big chunk of Southeast Asia, like India, Pakistan, et cetera. And so grew it to 11 ,000 employees, over 30 countries, leader in all these countries, 300 million uniques.

18:12Fabrice Grinda:And what do you think motivates all this? Is it legacy? Is it money? Like, what is it? Why do you want to keep building? the so if you take a step back like the the a i'm good and i love it it's like it's a game like life is a game uh and and the i get purpose from from fulfilling my mission on day day day day and day i basis it and i'm i can use technology to create solutions at scale and the reason i like technology is this deflationary right like if you think of the problems we're facing the 21st century we have inequality of opportunity we have a mental and physical well-being crisis and we have climate change.

18:47And you can use technology to make things cheaper, better, faster for everyone. And I also think you could use technology to basically decarbonify your grid and everything else. And so I like building and we're investing in things that solve the world's problems, basically.

19:04Fabrice Grinda:And if I'm afraid at some point, you tried to buy the Alibaba.com domain from a then unknown Jack Ma and said you ended up an early investor in Alibaba. What did you see in Jack Ma that no one else saw? Tell me about the early days there. I'm fascinated. I know. So I probably sat back. While I was in Princeton, I was fascinated by the economic reforms Deng Xiaoping was making in China. And it was clear that at the time it was becoming the next capitalist nation and like there was a revolution happening and Deng Xiaoping, another one of my all-time heroes, role models, whose legacy is sadly being tarnished by Xi Jinping, but that's a topic for another day.

19:52And so I actually went to study at Beijing Normal University in 94 to learn Mandarin and to frankly live it, to see the economic reforms as they were happening. So in Beijing 94, I mean, the three ring highways weren't built, everyone was still on bicycles. It was still extraordinarily poor. In 98, when I got the idea to go and build an eBay of Europe, I thought the perfect name for it was Alibaba. And so obviously, I looked at whoownedalibaba.com and saw this guy in China owned it. And so benefit of speaking Mandarin, I sent him an email and reached out and offered him$10 ,000 in the domain, which he declined, which led me to like look for another name which led to auction land.

20:40But at the time I didn't invest in Alibaba. What happened is in China there was a dominant player called Echnet. They ended up with 95 % market share in the Chinese market. And then eBay bought them and completely screwed it up. They put in massive fees, et cetera. And so Alibaba little by little started gaining share with a product called Taobao. And as the other started gaining scale I started getting interested in investing and turns out that Tiger had invested in the early days in 98 or 99 and their LPs were you know after 10 years or 12 years retired and so they organized a tender to sell their shares at the whatever four dollars a share I think it was like 15 billion valuation and I'm like okay I know Jack we've and then I started talking to Jack again I love what they're doing obviously I've been building marketplaces and auction sites forever They're now at a position where they're monetizing.

21:33They're early in everything from AntPyne or the Alipay product, et cetera. Now is the time to enter. And so I wrote a big check in Alibaba back then, which is like maybe, I don't know, 2010.

21:43Fabrice Grinda:Wow. And since then, you've been quite a prolific angel investor. Forbes may be the number one angel investor in the world. You've made 1 ,000 plus investments, 300 plus exits. But the unique thing about you is you don't lead. You don't take board seats and you decide and think two calls. what's the kind of logic behind making decisions like that? How do you think about your own investing? Why do it? Yeah, look, it's a reflection of my personality. Like I find that both board meetings are boring and all the best conversations I've ever had with people from strategic conversations with my own company were never at board meetings, which I felt were like admin overhead.

22:21They were always like with other founders or the VCs, but like in informal chats. And so do I want to allocate my time to being on boards, which I find like bureaucratic and admini and slow and boring. And no. And why do I invest in a lot of startups? Because it suits my intellectual curiosity, right? I read a hundred books a year. I'm interested in so many different topics. And when I described the problems earlier, like climate change or inequality of opportunity, it's not one problem. It's thousands of sub problems. And when I meet founders passionate about fixing them, I just want to help them.