E275: Does Grit Actually Matter in a GP — or Is It Just a Good Story?

0:00Larsen, I've been very excited to chat. Welcome to the Highland S podcast. Super excited to be here. Thanks for having me, David. So Larsen, you're the founding GP of Harpoon Ventures, which is in its third fund with stake by both A16Z and Lightspeed. And I want to get into this. But before we get into that, you won an Olympic medal as a swimmer in both 2004 and 2008. You're also a US Navy SEAL. And when we last chatted, you talked about embracing things that are hard. What is the benefit of embracing things, Sour Hard? It's one of the most important things I think I've taken with me through those different career fields and now bring with me into the world of venture capital.

0:38As I look at the founders that we've had the opportunity to back, the founders that I admire the most, whether it be Elon Musk and others, they're taking on these challenges that are somewhat irrational, it seems like, at first glance. Like building a whole new OEM company, electrifying the car industry, bringing us to Mars, literally replacing NASA, it seems like, in many cases, with some of Elon's pursuits. And if I look back at my prior career in swimming, I signed up for the most difficult races that I could, the distance freestyle races. I'm sure other listeners who maybe are breaststrokeers or backstrokeers would disagree with me.

1:10But I think the things that are most difficult in life are the ones where you feel the most fulfillment. You get to grow as a person. You get to bring the people around you with that growth as well. And I had that opportunity in the SEAL teams. It's notorious for being the hardest military training in the entire world. And so when I look at the people that I admire the most in my life, professionally or personally, they sign up for these really difficult things. And that's something that I tried to embody through my career, because I think that's where you get the most personal fulfillment and where you can actually make your dent on this world in the short time that we have.

1:39And perhaps I said somewhere in the middle, I don't try to live an easy life, but I also don't pursue things that are hard necessarily. I see that almost as a side effect to doing the things that I want to do and where I want to get to. Why is pursuing things have intrinsic value in and of itself, pursuing hard things? I think that there's a stealing of your resolve. So even if you're going through hard things where the end state may not be obvious and it may not be clear to you what the benefit is, I think by training yourself to know that you can overcome life's adversities that come your way is something that has a benefit in and of itself.

2:14and I've been fortunate to be coached by people in my swimming career that didn't give me an easy way out who would recommend that I do 10, 1500 meter repeats in a practice and I would up the ante to do two. Arguably, maybe not the most intelligent thing to do from a recovery standpoint in swimming, but I think from a mentality standpoint so that when the race comes and I have that quit, give up or push on through something that's truly arduous, I will have conditioned myself to know what my limit could be and to push through those things that are difficult. I think we all go through that in our day-to-day life.

2:47But many of us, I think, haven't really tested ourselves to the extent that we should. There's other people I admire from the SEAL community, people out there like David Gockins, who's now an influencer who just embraces the suck for embracing the suck's sake seemingly. And I think that there's something that we can learn from that. I think that if we train ourselves for these things that are really difficult, we can push ourselves a lot further. The second order part of that question is, are we choosing a pursuit that's just hard without sort of like a higher purpose or a reason to do it? You and I probably all see this with entrepreneurs out there.

3:18They're very hard working, but have sort of like a limit to what they're going to achieve because maybe they're in a shrinking market. And so I would suggest in those situations, channeling that mental fortitude towards something where you can see a higher and better payoff, not necessarily just financially, but in terms of impact that you have on an industry is really the nuance. So doing things for hard sake, I think there is merit to it in many ways, but I think from a business standpoint, you don't want to go into a money losing proposition, a time wasting proposition, just because it's a hard thing, because you get some pride in that.

3:46I think being intelligent about what you're pursuing, but with that same degree of vigor is really important. And that's where the best I think shine. It's funny, because it's such an obvious kind of point to think why, why raise your kids in such a way that they're resilient, and they're able to do difficult things. But when you apply it to yourself, it somehow loses the frame and why you do things that are hard, but you would want your kids to do it. So obviously it benefits you. Totally. The best advice in life that I've ever gotten, and maybe this is going to psychoanalyze on myself, is just treat yourself as you would treat your kids and sort of like coach yourself as you would coach your kids.

4:20For some of us that are very lucky, I consider myself one of them to have three young kids, very healthy, very happy. But parenting is very challenging in and of itself. But it forces you as an adult to distill things down. I think we're saying first principles, maybe it's overplay, but in very, very simplistic terms that are easy to communicate to a five or a 10-year-old? What are those principles and what are the things that we're trying to convey? And I think resilience is a core piece of that, whether that's somebody that's disagreeable on the playground or the fact that you don't want to do your homework, but it's hard that you have to step up and actually do that.

4:50And perhaps you'll miss out on playdates and things of that nature and teaching our kids that only through some amount of sacrifice, and in certain cases, extreme sacrifice, can you accomplish something truly special in your life. And that's something that I think all of us as adults should consider as well. But I also think that we should have grace with ourselves. And very rarely do I have grace with myself. Probably all adults are the same way. There's been some days where I wake up and I feel so down on myself with how I'm doing that I would never in a million years want my kids to feel that same way.

5:22And so why am I sort of like reinforcing that negative behavior on myself, thinking maybe I'm a failure, or I'm not living up to the task, or I had a company that's not doing too well, or I made a wrong business decision, and I dwell on that. well, what would I teach my kids? How would I teach them to be sort of like professional, you know, business or personal athletes in that same sense, where if you miss a shot, you can't be afraid to step up and take the next one. You can't dwell on that. But psychologically, like it's harder for us to internalize our own advice versus giving it. You think of all behavior change as something happens and there's a behavior in that new environment.

6:00Is that what you're really trying to do with your brain where it's like your 50th lap and it just seems impossible? You're in the state of impossibility and you push through it so that when you have that pursuit in the Navy SEALs or later on your business career, you're able to have the same exact environment and take that next action? I think so. I mean, in my swimming days, there is numerous days, weeks, months where I thought that I was a total failure and I didn't know how I was going to get through to that next sort of like unlock a performance. But ultimately through, you know, just overcoming adversity and sticking with it and not giving up, it might sound cliche, but some of the best advice in life sort of is pretty simple.

6:40I think it's sort of remarkable what happens if you just see it through same thing in the SEAL community and going through hell week. It gets pretty bleak when you're, when you're running on four days with zero hours of sleep, but you know, you're sort of like around the corner, or at least you, you, you sort of have that faith. I think the same thing is sort of in company building and investing in many ways. It takes a long time for many successful companies to reach product market fit and ultimately to scale their growth. Having that patience to sort of see it through is something that I've learned in my investing career.

7:10And I'm glad that I have now more than I did earlier in my career, certainly, because there's very few overnight successes in life. What most people don't see is the hard work that's happened behind the scenes, the failures that have happened behind the scenes, you sort of see the publicly announced successes. But I think I've been fortunate to sort of see in multiple careers, the undercurrents of what it takes to get there. And that's what we look for, you know, at our at our venture firm here. There's something about these realms of excellence. So it might have been impossible for you to do what you did in the swimming arena, or as the US Navy SEAL, if you were there solo, but seeing other people in that cohort, I'll also add investment banking, starting startups, anything that seems impossible, investment banking, I always think is such interesting training grounds where you're working 100, 110 hours a week.

7:56You just have to respect it regardless of whether you think they're providing value or not. I totally agree. I had the lucky ability to be an intern on the investment banking desk in New York City. And I was like, there's no way the rumors are true. And they are true. Let's put it that way. That's post-SEAL teams. And so it's something that I think is a crucible. And I think that you could argue, is there a lot of value that's being created at midnight or two o 'clock in the morning when people haven't gained much sleep, potentially not. But I think that sort of like test to yourself. And I think that all people, and I think especially young men benefit from going through this sort of like ascension past something that's really, really difficult.

8:31And I think that's why a lot of folks are drawn towards the warrior ethos of the SEAL community. And I think from a professional world, I think that's why some people are drawn towards investment banking. They want to test themselves. They want to prove to themselves that they have what it takes. I think there's something to that just, you know, internally. I have this whole theory that there's a sixth gear that gets unlocked in people when they're pursuing something bigger than themselves. Some, some mission, like you mentioned, Elon, Glenn, Mars. Is this also like a sixth gear where you now have it for the rest of your life after you've gone through something like the Olympics or the seals where you could go into that gear whenever you need?

9:09I think I do, but life becomes more and more complicated. You mentioned, you know, married, have three kids. And so your time has spread really, really widely. And I have some founder friends that, you know, one in particular, that's a close friend of mine. I've known him for a long time. You know, he's been building his business for coming up 15 years and he's making that conscientious decision that he's going to sort of take a step back. It's a very successful company, nearly a deck of corn. And because he realizes the trade-off that it has sort of on the home front. And so he understands that direction.

9:36I think it's just really difficult if you are trying to be great at multiple things, how many can you truly be great at? There's not many people that can be great at half a dozen things at the same point in time. So for me, I feel like I have that in me. I feel confident I can bring it out from me, but I think that would have sort of the equal and opposite reaction on the home front with kids that I'm trying to raise to follow in the good lessons that I've set and to avoid the bad ones that I've set as well. How do you maintain mental toughness as a VC? It's certainly not the SEALs. It's not the Olympics.

10:06How do you maintain that edge? I think it depends on what type of firm that you're at. For me, I think it's much more translatable to the entrepreneur community, and I think they deserve all the credit. So I never want to suggest that we're in the same ilk as the founders that we invest in. But we're having to raise money. We're having to sell ourselves. We're an emerging brand. This is not a firm that has been around for decades where they get to plug into the infrastructure that's in place and exclusively focus on deals and don't really need to worry about fundraising. So from that camp, I, you know, for any venture investor, I think it's having the resilience to understand that things are rarely as good as you think and rarely as bad as you think, you know, regardless of the situation.

10:46And that's some advice that I got from Peter Levine, who's like really a true statesman in the venture capital industry. When I was wrestling through some of these things that were going on in the portfolio, both very good and some that were very bad. He's like, Larson, I will let you in on a little secret here. Things are never as good as you think, and they're never as bad as you think either. And so I think blazing that sort of like level azimuth is really, really important for any investor and how that results in resilience. I don't think that mental toughness can be built in good times and in easy situations.

11:16I think it's sort of an oxymoron in many, many ways. I think you can only build mental toughness and resilience by going through difficult times. So from an investor standpoint, that could be losing deals that you're competing for, never seeing them in the first place, and having sins of omission where you're missing deals, you're saying no to things that you should have said yes to, sins of commission, investing in deals that you arguably should not have done in the first place. So there's many, many, many ways to make mistakes. And ultimately, if you treat each of those as a building block on yourself and on your own career, I think you become more resilient as an investor by focusing on those inputs and build that mental toughness and sort of some of those calluses in a good way to help you become sharper for the next time around.

11:58I think where people oftentimes miss the mark, myself included, is where you get complacent, where you think that the thing that was working at one point in your career will always work. And I think that's a little bit missing the mark because the markets are dynamic. As we see sort of like in the venture landscape in the past 10 years since I've been doing it, it's changed a lot. There's some household names that are still household names. There's some that aren't anymore. And there's new ones that have really broken up onto the scene. And the technology landscape has evolved as well. So I think if you're overly wedded to just doing things one way, regardless of what the market's giving you, and you don't have that resilience and that creativity like our founders have to sort of maneuver with the market, I think that's where you can get into trouble.

12:38Let's talk about Harpoon, your fund. What is your right to win as a VC fund? Very concretely, our right to win is the value that we provide our portfolio companies post-investment, which for us, we're a venture firm that invests in the national interests of the United States and our allies. So critical technologies that we think can reshape not only the economy and businesses, but also geopolitics. In modern times and what's happening right now, we think that the market is essentially going through a technology cold war akin to the same thing that we had against the Soviet Union decades ago. I think we're going through that with a near peer competitor in many domains with China.

13:13And so I think our strategy is built around that. So our right to win is helping companies, would be cybersecurity companies, AI companies, rare earth companies, energy companies break into the government market. And we've helped our founders close over a billion dollars in total contracts with Uncle Sam since we started about eight years ago. And so when we think about why a founder would pick us versus somebody else out there, it's that level of differentiation that we're proud to have our founders reference us against. And do you compete to collaborate with the mega funds and how do they fit into the ecosystem?

13:45It's a great question. And it's evolved over time. When we started, we were very much collaborative because nobody really cared about the thesis that we did. So we were sort of like a natural bolt on a strategic investor in many cases where a name brand multistage firm would be doing this deal. And we'd sort of see around the corner to say, hey, there's a large scale geopolitical imperative to this capability. Let's help unlock this new line of business for this company. And so when we started, that's how the majority of the deals that we did got consummated. Nowadays, we do many of those like that, but probably only about a quarter of the deals that we do, maybe a little bit more are of that same ilk.

14:21The majority of the other ones we're looking for are being those like first check early stage, whether that be a pre-seed or a seed stage investment, where the founders are not looking for a 10 or 20, a$50 million initial funding tranche. They only need 500K to get up and off the ground. They only need maybe a million and a half, 2 million bucks to get up and off the ground or to hit that next milestone to unlock value for the company, for the market and for their investors. And so that's really what we're increasingly looking for. And I think given what's happening in venture capital these days and the intersection of our strategy with geopolitics, I think that's a nice place for us to fit.

14:53But we certainly don't turn our nose up at great opportunities at a Series A where a name brand multi-stage firm is involved and we can be strategically valuable and we have the conviction to back the company. We'll play there too as well. I'm sure a lot of people would love to get a check from A16Z or Lightspeed as a fund. Tell me about how that came about and tell me about how that relationship has evolved now that you're on your third fund. I mean, at the end of the day, this is a situation where I think I was very lucky. You know, I think in my earlier career, certainly luck is part of all of this and hard work is certainly part of it as well.

15:22But I was fortunate to work with some of the best over at Andreessen and then subsequently over at Lightspeed to really be mentored by the best in the world of venture capital and some of the most relevant funds, if not the most relevant funds that are out there right now on a multi-stage basis. And so ultimately I had this concept of creating effectively a private sector In-Q-Tel for lack of a better term. You know, given my time, you know, representing our country in multiple different domains, I looked at very high esteem for what In-Q-Tel had done in terms of the mission orientation that they have, but they are not a for-profit enterprise.

15:53They're not a purely private enterprise where people can invest in that fund. I said, what if we created something that was like an In-Q-Tel, a very similar mission? We still collaborated with those folks, but we completely privatized that sort of operating procedure into a traditional fund model. And so went to the folks at Andreessen and Lightspeed and brought up that that's what I wanted to start. And it was very fortunate that they wrote the first checks into Harpoon for us to get up and off the ground. Subsequently, that's evolved. We still have some of the GPs there as investors and us who have invested in every single one of our funds, but the first fund is the only one that they actually committed to out of their core vehicles.

16:30you know you mentioned this you've been very lucky to be mentored i actually think it's a skill to be mentored and i believe that the best leaders also know how to be led how do you balance that idea with the idea that some people are just unemployable and sometimes the best thing is also unemployable that's a tough one uh but i i totally agree with you and i think it goes back to the concept of servant leadership that i learned in the military really hard to learn that on you know in any other situation, but ultimately having this total, um, it's not just respect. It's like, it's really a love for your colleagues and wanting for them to be successful and knowing that you'll be successful if they are.

17:08And we had a concept of where you eat leaders eat last. And so literally in the chow hall in the military, the leaders would be the last people to eat. And oftentimes during training, that would mean that the leadership of, of the class sometimes wouldn't get any food or maybe we'll just get the scraps. And, but you, you sort of like got that respect by letting your people get and take, become taken care of before you are. And so I think that's something that I think every leader embodies, whether they sort of like every good leader, whether they know it or not, they embody that, that sentiment because ultimately it's the people that are going to make the organization successful.

17:40And it's a leader that it's their job to actually sort of create that environment for that success to occur. But I think that you're right. Some, some people are unemployable in other organizations. Many of the founders that I, that we invest in, I think are probably not great employees at large scale companies because they're so passionate about what they're doing and putting guardrails on sort of their vision is limiting. And I think at some point creates a combustion chamber in a bad way at large scale organizations. And so you have to have that sort of like be freed to have this opportunity to make something more from their lives and from their pursuits.

18:17And so it's interesting, but they still embody those characteristics of taking care of their people, making sure that their employees are well provided for economically in terms of their their vesting schedules, in terms of like what they're getting paid from a salary standpoint. And I think probably most importantly, setting the vision so that everybody knows what they're there for and setting the vision really high so that people can feel like they're actually contributing to something of value beyond themselves, as you mentioned a little bit ago. Keith Raboy has this concept of barrels and bullets, which is barrels are these mini CEOs that basically define problems, solve them, and they could be at any part of the organization.

18:54Bullets are people that are really good that you tell them to do something, they go and do it, but they don't basically iterate on themselves. They're not entrepreneurial. And my belief is actually that you could train people. Certainly there's people that have a proclivity to be self-sustaining. There's people that have no ingenuity or just like to follow orders, but there's people in the middle. And I think you could actually empower them to do that. I do that for the producer of the podcast. Walrose always it's both a joke and also true I have for her I'm the face on air talent she makes sure the podcast runs she makes sure that everything's going and it's both because I want her to come to me when she needs something from me and also I want to make sure there's no barriers in her way and that's kind of how I look at how you could empower employees or anyone lower in the organization to start thinking like a barrel I that's I love that anecdote and I think that's dead on.

19:48I think the worst leaders that I've ever worked for or ever have seen are the ones who don't take any critical input whatsoever. And I think we can debate, the best leaders sort of set the example of where we're going. It's very, very wide in terms of where that is. But I don't think that they say, this is exactly how we're going to do it, get out of the way. I think that's sort of a recipe for disaster because it's very rare, if not impossible, for a singular person to have every single aspect of a company's success sort of like in their head in terms of exactly what's going to happen. They solicit the input from the experts in every single line of their business.

20:22And I think the best leaders on the battlefield aren't necessarily the experts at any dimension of what they're doing. They solicit the input and actually synthesize the information to make the best decision possible. And so I think that's extremely difficult to do because a lot of the leaders, as I mentioned, may not want the input from other superiors. They may not want to be told from a top-down standpoint, But having the humility to be told from a bottoms-up standpoint, I think makes all the difference in the world. Whether you're getting feedback from your superior or from who you're commanding, the consistent thing there is that you're focused on the mission.

21:00It's not actually the process. It's do exactly the mission more important than your own ego? And is it more important for you to go with what you want to do or to win the battle? Totally. And that is one of the hardest things that I've had to overcome. And I know many people have a hard time overcoming. Everybody's in love with their own idea. I don't care who you are. Everyone thinks their own ideas are the best ideas. But if you just take a second to recognize that and realize you're going into a conversation, I don't care if it's with a superior or a subordinate, just recognizing sort of like that framework that I'm going to think I have the best ideas and putting that aside so that you can hear other people's ideas in a more level-headed, clear way, I think you'd be surprised with what you can accomplish.

21:43I've been working on this concept that some people have high beta ideas and some people have low beta ideas. In other words, some people have a very high hit rate on their ideas and some people have a crazy low hit rate. Maybe it's 30 or 40 percent, but have these 10, 100x ideas that move the field. You specifically invest in some of the most innovative companies in defense and it's not just a SaaS startup. Do you see that to be the case? When you want more, you start your business with Northwest Registered Agent. They give you access to thousands of free guides, tools, and legal forms to help you launch and protect your business all in one place.

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