E436: Nnamdi Okike on Billionaires, Founder Psychology & the Venture Capital Bubble

25:47there's something to that. The way I think about that is like, the higher the wall that somebody's climbing, the more confidence you need just to have somebody to try to get up that mountain, right? Or get up that wall. And so I try to match the industry. The tougher the industry, the more ruthless and cutthroat the industry, the more difficult the industry, the more you need a founder with personality to be able to navigate that. if you take somebody like travis kalanick with uber right like why did he succeed there well that's a really tough industry right and yeah there's a lot of things they did that weren't the best in terms of how they operated the company but they won that market in the u.s and there were some reasons that were traced back to like who he was as a person and as a founder what we think a lot about is like it may be cliche to say founder market fit but we do think a lot about the taller the mountain, the more you want founders that have the gumption to attack it, right?

26:47And to attack it without fear. And that isn't necessarily per se, like some of the superficial things. It's more like looking under the hood and understanding like what drives that person, right? Is there something that's going to drive them to do this for 15 years when everybody's telling them no, and they're trying to crack an industry where there's huge competitors battling them or oligopolies or regulatory challenges and things like that it's a taller order right so like in i would say the average founder is not going to do that you know so you probably need some outlier extreme qualities which unfortunately can sometimes manifest themselves into it's not like it's all rosy right like um you know sometimes there are negative traits that come along with those things too so another way ambition in and of itself is not differentiated how many people want to be billionaires probably at least 50 of the population it's not something unique what's unique is what are you willing to do to accomplish the mission i'm thinking about mike maple's previous guest airbnb he met them when they were selling cereal boxes they had made cereal boxes and sold cereal boxes in order to survive obviously that had nothing to do with airbnb and the business but it's predictive of how dedicated they were to the business when i meet new podcasters and they're like i want to become a podcaster i always tell them one piece of advice because i want to see how they react which is wear makeup i've never had anyone say yeah that's a great idea and then wear makeup because they're not willing to do something that's humiliating or that's difficult or that hurts their ego so these are the factors that really predict the thing not saying i think this is going to be a 10 trillion dollar business who doesn't want to start a trillion dollar business but how many people want to go through what i just went through with uber with the taxi lobby very few death threats and all these things that's the rare it's a really rare set of qualities like people can talk about that but like to really do that and stick with it it's very rare i'll give you one example from our portfolio that really struck me so we're investors in a company called uptick uptick is a set of agentic technologies for banks they're founded by a second time founder named snahal fuzeli snahal is a repeat founder he sold his first company called cloud lending to q2 which is a big banking technology company for over 100 million dollars so he's a repeat founder building this company uptick and so we co-led the seat of uptick and i've been working with sahal for probably three four years and i'd known him probably for five six years and i remember doing a call with him and toward the end of the call i just asked him hey it's not like what motivates you to build this company right you've been successful you made a bunch of money your first company what is it that's driving you right i'd known him for a while but i didn't know his personal story super well and what he told me was he said i grew up as if you're in india there's a caste system right and his family was in the untouchable caste and so you know like really challenging upbringing like came from poverty like really tough like he's the first one in his family to go to school and went to cardigan and like overcame a lot of obstacles to get to where he is and that those experiences that he had as a member of this untouchable cast that's going to drive him for his life right his desire to be successful not just for him but for his family for all the folks he knows like to be an example you can't replicate that right that's what's driving him now second time founder with a lot of success but he's going to keep doing this now his goal with this company is to build a multi-billion dollar business and he's going to go after that right there's no question like that he's going to keep doing it and that comes from his personal experience and you can't it's a really unique thing right it's a unique thing in his upbringing and background that kind of drives it so those are unique examples i think there's a lot of examples like that where it gives you a sense of the why like why is the founder doing what they're doing in many ways as we gain more and more abundance these become so much more important because now you have all these things that before you had to struggle for food shelter or all these things.

30:49So you didn't need this missionary dream. You just wanted to survive and get enough for your family. But in order to really get these large outcomes in the venture portfolio, you now need a 10 billion, a hundred billion dollar outcome. Yeah, no. Billions and billions of dollars above and beyond what you would ever be able to spend in your life reasonably. So you need these kind of external motivations. It can't just be about comfort or getting to some kind of financial goal. It's one of the results of this power life in venture. it's become more and more extreme, right? With bigger funds and all the factors to your point are just driving toward the need for larger and larger outcomes, which I think has pros and cons.

31:29The cons are a huge amount of capital investing in companies, you know, like there's a bunch of them, right? Also just, if you're a founder building a first company, like the probability of you building the$10 billion company is like really, it's like a fraction of a fraction. but if you have funds that are driving you toward that right like there's a lot of collateral damage along the way for companies that don't get there but raise a bunch of money and don't get anywhere near there so like there's pros and cons of it but you're right i mean i think the reality is given where we are in the tech market in our industry and like there's more and more of an incentive to build a huge massive company when i started in venture people were like a billion dollar exit was great right now people talk about trillion dollar exits i never would have thought you'd be talking about like a trillion dollar outcome in tech like within anthropic will probably be that within like i don't know less than a decade seven eight years this was only three years ago when i started the podcast he's would always ask me about well do you think founders fund could have a hundred billion dollar eggs in every vintage because this was their pitch they're saying we need to have at our fund size we need to have a hundred billion dollar exit and everyone's like that's crazy what do you think and it was this question now it's a trillion dollar company and then yesterday i was listening to gavin baker he was saying now everyone's wondering what's the next$10 trillion business.

32:44So the numbers keep on increasing. The numbers keep going up. I actually think this is a huge feature. Obviously, we have politicians out there like Elizabeth Warren and Bernie Sanders saying billionaires. But without this almost irrational drive, just be bigger and be better than the other person because of your upbringing and because of your insecurity, we wouldn't have all the great things. No, you're right. Look around this room. Almost everything was built through powerful force of capitalism in society. I agree with you. I think no economic system is perfect, but in terms of creating abundance for society, I think capitalism is the best system we've devised.

33:21And it's obviously not a perfect system. It does create wealth inequality. We see it in the U.S. But the reality is you need to create incentives for folks to do these things that we're describing. The best founders aren't doing it primarily for economic incentive, but it's kind of a way that a lot of folks keep score, not to mention it's a way to create jobs and create abundance in industries and make everybody's lives better. So I think it's the best system we have, and not to go into regulation and politics, but there are ways to kind of curb the excesses a little bit. But if you take away the fundamental elements of it, yeah, like you have much less abundance and everybody suffers as a result.

33:57Speaking of abundance, you focus at 645 Ventures on fintech. What's going on in fintech today? fintech is a fascinating category if i were to sum it up what you have is transformative technologies that actually are democratizing the financial system both for consumers and for businesses and let me unpack that a little bit so for consumers what you're starting to see is many of the benefits that we've had in the u.s and folks might gripe about our financial system and there's not perfect it's not a perfect system if you think about the things we have in the u.s whether it be access to mobile banking, ability to manage your money in terms of wealth, ability to save your money and not worry about the money being devalued tremendously.

34:44We have a lot of conveniences in the developed world that the developing world does not have. But what you're seeing is things like stable coins, new ways of payments and infrastructure, not to mention mobile, is really democratizing and improving the lives of individuals around the world. So I spend a lot of time looking at new emerging market opportunities. Stablecoins is the biggest driver. It's primarily being applied toward international payments or payments across borders. But you're also seeing it as a mechanism for folks in countries where their currency will devalue typically a lot in a given year.

35:18Because it's back to the US dollar. Yeah. So they can hold stablecoins and so they don't suffer that. Is that the main early adoption of stablecoin? That's one of the biggest ones is international market applications, sending money to one of those countries, but also enabling folks to hold their money in stablecoins and not being impacted by their currency devaluation, not to mention much cheaper transfers. My dad, for example, grew up in Nigeria, and he, for many years, has sent money back to his family relatives there. And if he's using Western Union, for example, paying relatively high fees, 5 % to 10%, not to mention there's a big delay in the money getting there.

35:55I'm trying to convince him to use more modern stablecoin technologies, which is much faster, much cheaper, much more convenient, not to mention the person receiving can hold it in a stable coin and not suffer the devaluation of the Naira, for example. That's one application that I'm spending a lot of time in, but there are others here in the US. It's very early days, but this whole idea of agentic commerce and payments, this idea that a lot of what we do today that's very manual, whether it be searching for a product to buy online or searching for a financial advisor, wealth advisor, or a lot of the manual things we do and whether it's commerce banking will be automated through agents to kind of make that happen you need a bunch of infrastructure to do that so as an example we made a recent investment a company called sponge it's a couple of really smart guys that came out of stripe that are basically building infrastructure for agentic payments you know a wallet to enable you to kind of send money using agents to different places or to pay or to transact so that's an area They were spending a lot of time in FinTech.

36:57I mentioned banking technology, five companies that have been around for 40 to 50 years that own most of the market. These are companies like Fiserv, Jack Henry, FIS. It's basically this oligopoly of banking technology companies that I think together have$200 to$300 million market cap, average age is 40 years. They're very entrenched. And so we're investing in companies that are kind of really attacking that oligopoly and providing, in our view, much better technology for banks. So Uptick is an example of a company we did in that. we've made a few investments in different parts of that stack that's an area so there's a few areas that we're spending time but i think it all comes down to this idea of inflections and one of these change events that are happening that kind of these newer startups can capitalize on to kind of improve the financial lives of consumers but also businesses speaking of inflection points right now clarity act probably the biggest potential inflection point how do you explain the Clarity Act and the different players.

37:53The biggest thing is creating more transparency around adoption of stable coins, adoption of kind of these crypto-based technologies, enabling kind of more clarity around who can issue those, who can transact with those, what licenses do you need. One of the benefits of the Trump administration, especially when it comes to things like cryptocurrencies, stablecoins, has been not taking an adversarial approach to the actors in that market and not assuming folks are just trying to either maximize profit or do things that are not positive. The overall regulatory bent of the administration is a pretty positive thing in terms of providing more transparency, enabling folks to understand how fast can they get a license, enabling incumbents to understand what business models can these new companies execute on and what they can't.

38:50So those are some of the impacts. And you have an interesting vantage point because you invest in fintech, not just in crypto. Crypto is just one aspect of fintech. There's a lot of people that think crypto is basically just going to be Bitcoin and it's never going to evolve past crypto. Do you agree with that? I don't know. I don't agree with that at all actually crypto is so interesting there's different waves what's interesting is the first wave and i think maybe the public perception of crypto has been this idea of speculation this idea that you can make a bunch of money on it but like it's just kind of like not quite a casino but just purely like maybe a greater fool theory right like the main lines like a lot of these alt coins that were produced even something like bitcoin like i'm at the end of the day a value investor.

39:38I'm a Warren Buffett, you know, fan. And I like this idea of intrinsic value, right? And if you think about cryptocurrency, at least it being used like a store of value, there's no intrinsic value. There's no way to value it. There's no cash flows around it. It's more like what somebody is going to perceive it to be worth, right? There's some scarcity in Bitcoin, but at the end of the day, like it's a commodity. So that's the first wave, right? And I think largely not to generalize but largely was based on this idea of like speculation and the companies that benefited companies like coinbase or others were conduits toward that the next wave is much more interesting is this idea of what are the concrete problems that crypto and blockchain technologies can solve so stable coins being the first area where it's like look there's some big problems that especially developing markets have in terms of access to currency, stability of currency, the fees that they're paying.

40:38There's a whole set of things that impact their economies dramatically that digital currency can address and solve that we might not even conceive of being here in the US where we don't experience those things, right? If you think about like a lot of our financial services industry is kind of based upon this idea of toll gates, right? When you send money, you could be even like sending a wire to make an investment or what have you. Like there's all these toll gates that kind of sit there, right? These different banks that are taking pieces of that, right? I mean, it's really inefficient. Like at the end of the day, like there's no reason it should, that should happen, right?

41:11There's no reason why it's just ones and zeros, just bits. So the interesting thing about blockchain and stable coin technology is that like it starts to erode some of those toll gates and it starts to basically reduce the fees and the inefficiency of these markets, which I think is fascinating. There's some smart founders building things around that. And then you start to get to this idea of this confluence of AI and digital currency. Jeremy Allaire, founder of Circle, wrote a great treatise recently on this, and he kind of described this idea of these waves coming together. The only way you can have truly agentic commerce and smart money is you have to be able to have programmable money, which is where digital currency comes in.

41:52It's actually really interesting that those two technologies evolve together where the substrate of agentic commerce is basically being able to program money to do certain things and that's really the basis for a digital currency so i think it's interesting to kind of see the evolution of this but i think the biggest thing for us that we're excited about is this idea that like there's much more practical applications that will create value for people above and beyond speculative aspects the general population i think rightly so kind of perceives it to be one thing because that's what it's been in its first kind of decade or so 15 years but i think that's changing pretty fast such a good point it's just basic product market fit and solving customers problems i invest in circle back in 2019 i sold a very small portion of my shares today i'm a big believer in the company and one of the reasons i invested into it is because i understood it and everybody was pitching me other cryptocurrencies and i just couldn't understand it and i knew that either i was the dumbest person in the room or just being potentially scammed and yeah and it was really scamming but a lot of people within crypto certainly not the sophisticated people but a lot of basic people don't ask the fundamental question which is why does this need to be crypto yeah i remember um we you know back probably in like 2018 and 2021 we heard a lot of pitches and we didn't really do anything at the time because when you went under the hood you're just like well there's a bunch of problems here one there's no real need no problem you're solving but also like it was kind of like this idea of magical i remember like the ico craze and all these things it was just like there's nothing under the hood there's no like the emperor has no clothes right but i think now it is very different and i think also you have founders that have been in the game long enough where they have the battle scars and they're kind of trying to build real companies now we did do a few things that were more like infrastructure so i'll mention one that i'm very excited about called solidus lab so solidus lab started off as basically a technology to prevent kind of bad actors on crypto exchanges it's a couple of really talented founders that came out of goldman where they were building advanced technology and the first iteration was basically enabling say a crypto exchange to prevent bad trading technology something called wash trainings all these different scams that happen on exchanges and their goal was basically to kind of like enable those companies to prevent that and also enable regulators to better get ahead of that and so they started in the kind of crypto world but over time they've kind of branched out so they apply their technology to prediction markets to prevent bad activity there cal she's a big customer to traditional stocks and bonds now it's a broadly applied technology but they started in a really complicated area of crypto which actually requires is a bunch of advanced elements to kind of do that well.

44:42And so they could kind of take that and apply it much more broadly. So we did that very early and we're very excited about them. And they kind of grew up in that world and applied their knowledge across different areas of financial services now. So we did a few things like that, but we largely stayed away from many of the applications. I just saw that George Santos just got a ban from CalShare. I think he made$17 ,000 on predicting that he would be at the state of the union. Man, that's crazy. Yeah, those are the type of things that give prediction markets a bad name, right? People debate about the value of prediction markets.

45:14And there's an argument to be made for this idea of folks that have knowledge, being able to trade on that, this idea of kind of making certain markets more efficient. But the example you raised, I think there's too many examples of folks that are really doing what I would describe as insider trading or doing things that where they themselves influence the result. Right. And I think that's not a great thing. I think it kind of erodes confidence. Not to mention, like, if you're a person who's who assumes that, like, there's some level of transparency and democratization of in a prediction market, like I think those things kind of erode trust.

45:50So I do personally feel that they need to be much better regulated. Companies like Solidus can play a role in it, but also So government regulation plays a role too. The best idea that I've heard around prediction markets is around policy. So you have a bill in Congress. So now you could bet on whether the billionaire tax in California will pass. But a much better application, I think, would be what is going to be the effect of 2028 revenue, 2029 revenue. Oh, yeah. And if you could use real life dollars, even potentially subsidized from a public policy standpoint, maybe you have no trading fees or you have a premium, you could have people bet on it with real dollars.

46:28And you can get to ground truth and pass this kind of politicking that a politician does. That's really interesting. I hadn't even thought about that. I like that because it's kind of getting to the end result. It's removing the subjectivity and removing the politics of it. I like that. That's great. I think there should be more of those types of things. You're going into your fifth fund, which many emerging managers would love to raise their second fund. What have been the biggest lessons that you've gotten from your first four funds that you bring to your fifth fund? There's so many lessons that we have had over the years.

46:56If I were to distill them down, one is you always want to know where you are in a market cycle. And you always want to be really thoughtful and objective about what's coming in the world. So I'll give a few examples, right? So you want to sit here with yourself and understand like what's going on around you that might influence success or failure. so let's go back to 2021 as a period of time right so in 2021 we were just closed our third fund and at the time there were some signals that the market was peaking right if you think to that back to that time like by all accounts like there was exuberance happening right in terms of valuations and there was like a rush to invest at that time right and and sas was in vogue and it was pre-AI and we were pretty smart about like being disciplined and thoughtful and gradual about putting money out but even so that we did some series a deals that we would probably not want to have done again like given where we are in the market right and so coming off that obviously valuations went down there was a bit of a correction and AI started right which was like a whole new set of companies a whole new set of business models a whole new set of like capital needs right and so and then that kind of like animated the next wave of companies that were very different, right?

48:17Like in some cases required a lot more money and more capital. So we think a lot about now is just like stepping back and thinking about like, where are you in the market cycle? So if you think about where we are today, there are some elements of peak activity. If you think about buy any proxy, valuations of companies, sizes of rounds, multiples we're seeing, multiples of revenue, even at the growth stage. You know, there's elements of exuberance in the market. And so as we approach fund five, we're being very, very thoughtful about one, the pace of investing in fund four, where we're investing, looking at new categories that might be coming versus kind of investing in what's in vogue at the time.

48:54We're also being very thoughtful about the capital needs of companies in the future. I think this is really important. Like one thing I found over the time we've been in business 12 years is there's been a big change in terms of the needs of companies, even at seed. And that's really driven by the technologies. So you think about the early days of seed, Mike Maples used had this term 500k is the new 5 million this idea of like the reason that the early seed guys were successful is they were doing these small checks that the bigger firms didn't want to do because these were companies like web 2.0 companies that only need 500k to get started like because of democratization of things like before you would have to raise five million dollars by a server yeah exactly that was your series a and unless you could raise that five million dollars you couldn't even start your company exactly so like the shift of things like aws app store the whole set of things, drove down the cost of starting a company.

49:44And that enabled seed funds to kind of come in and win and kind of like raise these smaller funds and do really well, right? The pendulum has like swung dramatically, right? If you think about the size of rounds that companies are raising now, right? It's kind of amazing. Like we'll see folks raising seed rounds of 50 million bucks in some cases, right? And now they're building, you know, foundational models or what have you. Now you question that a little bit in terms of like, okay, what's the quality of the business model? Do you really need that much money? Are there ways to do this more efficiently?

50:16So we think a lot about like, what are going to be the capital needs of the best companies that are coming? And then also, where has the market gotten ahead of itself? Where the market gets ahead of itself, that influences the returns of the vintage, right? Like that creates a bad vintage or bad kind of like period in the market is where like the core assumptions around capital need, valuation, kind of like entry points, like kind of go astray. And that happens a lot in our markets. Like our markets are, they get very extreme, right? So the biggest, one of the biggest learnings is like, understand where you are in the cycle, where you are in the market, and don't get ahead of yourself and be really thoughtful about that.

50:55That's a big one. Our firm has grown a lot over overtime in terms of AUM, fund-sized team. We have a lot more resources than we did when we started the first 12 years ago. It was Aaron and I. We were in a tiny WeWork office. We had an$8 million fund. It was our first fund. We were super scrappy. We were doing 100K or 200K checks. Now our main fund is 200 million. So we write bigger checks. We're typically leading. We have 20 plus people on the team so the operation has changed but we still try to stick to like the foundational values like we have our core values and we try to stick to what are those values patience is a big one this idea like we talk about this idea of kind of slow and precise versus fast and lucky so being patient and thoughtful and getting to know founders and that might mean we do less deals and pass on things, but we have a lower failure rate.

51:50Our capital loss ratio is like four or 5%, but also we can get to know founders for a longer period of time and build a relationship. So patience is a big one. We have this idea of truth-seeking, this idea that it's not who's right, but it's more what's right. And like in our conversations, like really diving into what's true and not having an ego around that, that's a big one. Is that downstream of a cultural value of just hiring? Hiring is super important. Like we've gotten reasonably good at understanding what makes folks tick. We hire in our investment team at junior level. So we'll hire like folks that are mid twenties coming out of working for startup or coming out of business school.

52:29We hired our first partner this year, Parle Singh in San Francisco. She's a very seasoned investor who worked at Founder Collective and Initialize. So very experienced, but very humble, very thoughtful, very founder centric like has a great set of qualities that really fit really well in our culture regardless like we do think a lot about what makes an investor tick and will they fit and do they have some of these things like that are maybe a little bit hard to teach right this idea of patience like there's a lot of ways to succeed in venture right like there are folks that are impatient that do really well right like especially if you're doing a huge number of deals per fund and there are ways to do that so we're not saying our way is the best way even it's just the way that works for us.

53:08But we have a set of these values that definitely kind of drive who we bring into the firm and how people behave and what we're looking for from them over time. Play devil's advocate on this idea of patience and understanding the macroeconomic backdrop. My view is a lot of this comes down to portfolio construction, vintage diversification. But once you have that, you need to play the game on the field. You need to get the deployment out there and get your LP's exposure to those specific vintages. It's like the economist that it's called 50 of the last two market downturns. The last bull market started in 2008.

53:47I remember as early as 2015, people are like, well, this has to be the top of the market. And if you had gone out from 2015 to 2022, you would have probably lost another 10X. And a lot of this is not even driven by economics and driven by psychology my question for you you've been investing in back to 2002 you've seen so many of these things play out is that really the learning is to be conscious or is it just a portfolio construction and a cadence man that's a really great question and let's dive into the different elements of it so i think the first thing that i start with is this idea that like a venture fund lifetime is quite long, right?

54:27So typical duration, at least in the LPAs of funds is our funds, for example, 10 year funds, we can extend it for two years, 12 years. But practically speaking, if you look at the life of the portfolio, it could be 15 years, even 20 years, right? Historically. So when you say the game on the field, the reality is it's a really long game, right? If venture funds were investing all their capital in a year or what have you, would be different, right? But the reality is you have a choice as a fund manager and those choices are really important if you actually break them down. We've seen this in our funds, right?

55:02What you have to be really thoughtful of is when you describe the game on the field, there are better games to, like the game can be better or worse, right? It's not uniform. It's just the reality that there are certain times when the game is worse, right? And it's worse either because valuations are really high or, The quality of companies being created at that time is not as good for different reasons. The prevailing technologies have run their course. Like I mentioned, 2021, where SaaS was running its course. AI showed up later, which catalyzed the most innovation. But if you were a SaaS investor at the growth stage, putting all your money to work in 21 and 22, that's a bad game to play.

55:42You shouldn't be playing that game. It's just a reality, right? That is not a recipe for success. so the way we think about it is every fund in itself is a long game it's a long game in terms of when you invest what deals you do portfolio construction is really important right so we go in with a game plan in terms of number of deals and ownership but that is also a dynamic game the reality is it's like even within a fund valuations change and usually they go up sometimes they come down but usually they go up so you have to kind of be dynamic around thinking about that so there's a set of things you can control and so we think about it both in terms of the initial investment period so there are certain times where we're more investing more slowly we're doing less deals in a given year um and there's a bunch of reasons for that that i described but then it also gets into things like your follow-on strategy right like how you think about reinvesting and when in which companies it gets into your harvesting strategy that's super important you take some chips off the table chips off the table like in we that can actually have a huge impact on your returns like huge like in our first fund for example we sold a position that we were debating about selling and i won't name the company but long story short we returned about 35 of our first fund selling half of our position in this company which is a good company right but it was valued at way in excess of like what it should have been valued at based on on performance, right?

57:07Company ended up getting acquired by a good company, but it was at a fraction of that price we sold at. Now we only sold half the position. If we sold the whole thing, we would return close to 70 % of that fund. That was the decision we made. So we were like half right, but not completely right. And that's a big choice, right? So I get back to this idea that like, yes, you're playing the game on the field, but it's a very long game. It's a very dynamic game. and it is the case that like if you make the wrong choices it can have a dramatic impact on your fund returns it's just the reality right if you're putting all your money out in a year or two and you're putting all these logos together in heightened valuation environment in categories where everybody's competing like that's a tough recipe for success and i actually think that's like the playbook that a lot of funds are applying now in ai that i don't think is a smart playbook to be honest.

57:57So another way, the field is static. The field is what it is, but you could play different games on this field. Yes. You could play an early stage game. You could play a momentum game. Like I'm a big sports fan. And if you think about like the nature of a sports game, say a soccer game, right? There are ebbs and flows, right? Like there's strategy, there's tactics, right? You're not going to throw everybody at the goal at the beginning, right? You're going to be thoughtful around like how you play and what's the other team giving you. And so the analogy is pretty apt for being a fund manager. And I think that thoughtfulness is something we've just learned over time through trial and error.

58:30And it's guided us. We can always be better. We always try to be and aim to be better. But some of it is like kind of looking forward and just trying to have a better sense of what's coming. And to your point, like what you can't do is say like, look, I think we're at the peak. We're not going to invest for five years. I mean, that's extreme, but you can slow down your pace in terms of how many deals you do. You can try to create more discipline around ownership. Like there's a set of things you can do. I think the biggest thing is to understand the game on the field in terms of the technologies and the capital needs of the companies.

59:01That for us is what we're still learning, right? I'm curious on that. You said$50 million seed round. There's some, we don't really do that. I've seen a bunch of those as well. Founders always say, we'll take the$50 million and we'll put it into the bank account. How often do founders actually end up not spending that money? So we don't do a lot of$50 million seed rounds, but generally speaking, it's pretty rare that a founder, some founders are very disciplined and they'll raise a big round and not put it to work. But I'd rather see it at the growth stage than the early stage. Why? Because at the early stage, there's this tenet.

59:37First of all, you don't know what you don't know. Right? I love the quote, scarcity is a mother of invention. When you're in the phase of doing experiments, scarcity is actually something you want to have because you want to have a way to decide which experiments to do. You don't want to be doing every experiment. You don't want to be spending a lot of money on each one. Like that's a failure mode in itself. And when you raise a really big round of the gate, especially when you don't have product market fit, when you're still trying to figure out what's going to work, the tendency is to spend much more money than you need to.

1:00:09Do a lot of experiments you shouldn't be doing. And not to mention, you create a culture within a company that is the wrong culture. I personally believe that you want, in the early years, a culture of scarcity. It creates a certain level of discipline outside of the founders, in the early team members. You want that DNA. You want people to be joining you, not because you raised this massive round and they can get a big salary. It's because they really believe in the mission and they'll do it even if they're not getting paid a lot and they want the equity to be valuable. It's a whole set of things.

1:00:37So I actually think massive rounds are really bad for companies. They're bad in terms of the processes that get established. They're bad in terms of culture. There's a whole set of things that I think it's, it creates a lot of negative results. Manifest in so many ways, because where does this$50 million go? It goes towards hiring people. And now you have two layers between you and the customer. And so the founder leading the product target fit. Exactly. It's another thing. You have these things that the founder should be doing. And sometimes the founder only does out of necessity because they don't have enough money to hire someone else and the learnings that come from underselling a product are super important like you wouldn't want the founder not to have those and you have a bunch of sales people learning that stuff and the founders like that's bad so like there's a whole set of things now the one thing i would say is and this gets into like we do defense tech and deep tech right to build some of those companies there's just sometimes an absolute amount of money you need to actually build the product right if you're building a you know space security company we have a company a true anomaly that does space technology like you have to build the satellites to be able to set up to orbit like there's certain things you have to do and there's underlying capital needs there's no vibe coding in there you're not going to vibe code something like that so like the nature of the business should dictate the capital raise but what i find super interesting is that oftentimes not the case right like not to pick on yc but like you'll see this thing with yc is there will be a defining uh valuation size in round size amount right and you'll have conversation with 10 yc or 15 yc founders and they're all raising at a pretty similar price and they're all raising a similar size round and you're like that should not be the case right because these companies are all very different right if you're like a emerging markets fintech platform serving africa and you're a nuclear deep tech nuclear company in the u.s building a nuclear reactor they're very different like you shouldn't be raising the same round same valuation they have nothing to do with each other right so like i find it kind of comical and humorous sometimes when you see things like that but at the end of day what we look for is founders that have a real understanding of the capital needs of the company and they're raising rounds that are really targeted toward those and the rounds are small enough where there's a scarcity mindset and they know they have a certain amount of time to execute on these things, get to the next hurdle, right?

1:02:55And the next set of milestones to raise more money. And like, they're really focused on doing that. We love that mentality. You've been venture capital since 2002. If you could go back to right before you started at Insight and you could give yourself one timeless piece of advice that would have either helped accelerate your career, helped you avoid costly mistakes, what would that be? One of the biggest ones would be having courage of conviction and having a bit of a balance between knowing that there are certain things you don't know, but also understanding the superpowers that you have at each stage of your career.

1:03:30right now being kind of mid-career i would say right like i have wisdom 20 years of experience i know a lot of the failure modes right but what i don't have that maybe our youngest investor has is a deep understanding of like what folks are using especially younger people right like i remember when i first started insight it was like early days of social media early days of internet like there were certain things that i was using right that the guys that i was working for that I was pitching deals toward, like they didn't know or understand, right? That was a superpower that I had, right? So, and there were some learnings in terms of deals that we didn't do and that I would have loved to have done back then.

1:04:09But understanding like where you are in every step and then what are your superpowers? And then also one thing is that you don't do as well that you don't know. And I think especially for young investors, young fund managers, you want to have like an objective understanding of that right for example one thing i find if you ask the average uh vc like how good is your network right everybody's like i got an amazing network i know all these great founders but like there's different levels to that right and i think a lot of times people over sell or overestimate like the quality of their ability to get to exceptional founders, right?

1:04:48So one of the most important rules to understand is this idea of power law and how rare it is to invest in companies that get to massive size and to be really objective about that and to understand like what might be getting you closer or further away to those things and to be like transparent and thoughtful around like, are you getting closer or further away to that? Right. I think that would be another learning. There's a whole set of things at the end of the day it's like understanding i guess i would maybe narrow it down to it still down to like understanding your innate ability to get to power lock companies and understanding that like that evolves over time right and some things may evolve positively or negatively like one thing i think a lot about in venture is there's like a shelf life to the quality of your network meaning at the end of the day like people are always starting new companies but it's the reality that as you get older in the industry, like that erodes a bit.

1:05:42And you have to think about how do you refresh that? How do you build it? Or in the case of our firm, we have young people that can kind of rebuild it. You insource that, right? But you have to be really objective about that. You have to be very thoughtful about kind of where you were, where are you in this game? And like, if you do that, you can kind of understand like what you need to work on, what you need to build, what you do really well. But I think a lot of people like never even think about that. They just either assume they're great and or vice versa. They assume like, hey, I'm not as good and I can't do this.

1:06:09And I just think like, it's better to be objective and thoughtful and then kind of try to build on your weaknesses. Your ego can't handle it. Yeah. That's the other thing with VC is like, the reality is like, we fail a lot more than we succeed, right? And I think that's a psychological thing more than anything, especially for high achievers. You're used to being successful, right? You go to a good school and you get great grades and you're told you're awesome, right? And I think in most jobs, especially jobs that folks that do well in school do, failure isn't like, staring you in the face every day, right?

1:06:40In adventure, it is. The reality is most things you do are going to fail or not do as well. And you have to be able to mentally get accustomed to that, but it's a balance, right? You have to always be looking for dramatic, crazy success, but you have to also balance this idea of it's going to make you fail a lot. And that's a mental, psychological thing. It takes a while to adapt, especially if you're a high achiever. So I think that's another thing that over time you can learn. well Namdi this has been an absolute masterclass thanks so much I enjoyed it it was really a lot of fun