E76: Thrive Capital's Bold Bets on Category-Defining Companies with Kareem Zaki

23:03And so it's not like we're looking to sell. It's the opposite of that. There's also times though in the moment of journey and we are a fund where a company's kind of IPO'd, it's scaled, it's sometimes the founder moves on and there's a new CEO in the business and sometimes those are appropriate times for us to start to transition and sell a bit in those opportunities and that's something that we've done selectively in the past especially I think in 2021 when we felt like so these companies and even the founders might be valued three or four years ahead and it was a responsible thing to kind of distribute to LPs even though a lot of us held those shares personally because we believe in these companies over the really long term but we actually evaluate each one of these companies on a one-by-one basis.

23:43We don't just wait for the end of the lockup and then distribute. I think in all cases, we kind of waited and kind of evaluated throughout that journey. And our view is that you should have an opinion on everything and that you shouldn't have some default thing, even though it feels comfortable. At the end of the day, you should be willing to face the uncomfortable question, make the decision. And for us, I think partly because it's not unfamiliar for us to be investing at the growth stages. And so the fact that this company IPOs. We view that as a moment in the journey and not necessarily the last thing, but an important financing, obviously, in that journey.

24:16And we're not unfamiliar with thinking about these things at the later stages. And so I think we're more comfortable kind of sitting in that. I think if you spend all your time in the early stages, I can understand why it's kind of hard to have an opinion. And so who am I to say that the public markets are right or wrong on this valuation as soon as my lockups on it? And I'm totally sympathetic to that view as well. Yeah. I want to segue into talking about the history of the firm or the evolution of the firm. And what are kind of the different forks in the road that you've had along the way? You can imagine a different universe where sort of you chose a different path and thrive as a different structure.

24:50one thing for example you guys had to think about was fund size and you know what is the right fund size at the right time and how you guys approach that what are the different like phases of thrive over the past 12 years or the the different forks in the road that you've that you've taken definitely so i think from the start just from the lens we want to be opportunistic we want to be a part of these companies but our first institutional fund was 40 million dollars and so it wasn't necessarily that we were set up to do a lot of these big opportunities but with that said, we did invest in Instagram in a growth round out of that$40 million fund and concentrated into that and incubated companies out of that first fund with Oscar Health Insurance and invested in Series A's like Warby Parker on that journey.

25:30And so I think a lot of that thread stayed through. And I think we did fortunate that we had the support of a lot of long-term LPs from the early days, large endowments who really believed in us, who understood that journey, even though it might've sounded crazy at the size of our fund that we'd be able to kind of step into these things. And I think the fact that the trust that we kind of communicated what we wanted to do, that we were consistent in it, and that we were seemingly doing a good job at it, built more and more confidence to help us to kind of scale and do that at bigger and bigger scales to support our companies.

26:00I think the second thing is that we didn't have a number in mind for what funds size we wanted to raise. But part of that was we responded to the market and the growth in the space. We want the fund size to be an output of our strategy, an output from what we're seeing in the market and the opportunities and not the other way around where you raise a fund and then you figure out, hey, how am I going to deploy this in a way that's successful? And so I'd say that we scaled with the industry, but I don't know if we were the first always to raise the largest fund. I think a lot of it was we were responding to the opportunities we saw at hand.

26:32And, you know, consistently we found more opportunities than, you know, our fund size would necessarily support. And so we'd be fundraising a little bit earlier. And so we'd raise a little bit larger and then And it turns out the opportunities continue to scale. And that's the path that we've been on. And so I can't say intentionally that our fund size kind of scaled through that. But I think a couple realizations and forks in the road. I think as the funds grew, it was controversial to keep it as one team. And we've even split the funds between growth and early. But that's more of a mechanism for discussion internally.

27:02And we want to have clarity around discussion. Our lens is we want to intersect these companies as early as possible. And so it was really important to us that we gave as much intention as focus to the seed stage company that we're talking about than we would kind of leading a growth stage opportunity. And so we wanted to separate the funds and make sure we were concentrated in each because I think concentration leads to conviction and conviction leads to us making kind of the best investments in outcomes. And so actually, if you look at a lot of our funds, we're probably twice as concentrated on both the early and the growth side relative to other funds.

27:35And we think that leads to better outcomes, better decision-making, but also we think it leads to better alignment with the founder. For the founder and for the early employees, this is the most meaningful commitment they've ever made in their entire career, and they're all in on it. And I don't think it's fair for the investor to approach it as one of 50 investments that maybe they made in that fund. And if it works, that's awesome. And if it doesn't work, I can kind of step away from it in a way. And we want to be financially bound to it, but we also think it makes us emotionally bound to these companies as well because we're not investing in that many.

28:06We're concentrated in it. And the higher bar for concentration creates more conviction, which I think leads to better discussions internally when we're trying to drive that forward versus, oh, this could work, so let's write a check. When we write a seed stage check, we're writing with conviction that we think this is going to be an enduring company over a long period of time, not that we think this company can get to a series A, and then we're going to figure it out from there. And I think that's been an important strategic decision that as one team, but separate funds to kind of keep the focus on early stage, the intention around early stage and not let that get lost in some of the larger checks we're doing and have that be the anchoring point for how we think about investing at Thrive was an important one.

28:45I think the next big decision that we made was we've invested a lot in building a portfolio impact team and how do we support our companies along that journey? and I think that came from two realizations. One is that these companies are going to be built over a longer period of time. They're going to be bigger, which means they're going to be more complex. I think the idea that an investor can be all things to the company is kind of outdated. Maybe 30 or 40 years ago when these companies were being built for three or four years or maybe they get flipped to an acquisition at Cisco or find a quick pack to exit, you could seemingly as the investing board member know everything or be a really good thought partner on some of those journeys.

29:25But now as a founder starting a company inspired by a lot of the iconic companies that have come before them, like when they start that journey, they want to build a company for 10 years, which means even in year one and two, they're thinking about how do I build that infrastructure? How do I build an executive team? How do I build a product? How do I build a go-to-market motion that's going to really help scale and drive that through? And so can I help you think about your go-to-market motion and how to break out territories or pricing or incentives or help you hire a CFO? I'm probably okay at it, but am I the best at the world?

29:54Definitely not. And so we've really built an impact team that has world-class leaders leading across pillars and dimensions to kind of support our companies. And I know that's an insight that I think a lot of firms have had and started to build some services, but we were intentional about calling an impact team because I think how we approach that's a little bit different. But it all stemmed from the place that these companies should be built for longer. We're going to be concentrating these journeys and we will support and drive that along the way. And what you've had to come to terms with in your concentration strategy is that there's going to be just a lot of companies you're going to miss and not be a part of and not have a small stake in.

30:30But it's in service of this brand that you're building, which is when you're in, you're not hedging, you're all in, you're leading, you're taking a big chunk of it. And that's kind of the Thrive brand promise. Definitely. And I think you look at that and say, well, you may miss some deals because you're focused on trying to be concentrated. And I think our view actually found is that the best founders want their investors to be all in on that. And we're not in there and we're not going to be like, we're going to walk away from this deal over a half a percent or something like that. If we have that conviction and we see it with the founder, we can be flexible in some of these conversations.

31:03What we're not flexible on is lack of conviction. And we want to founders excited to be on that journey with us. And we found they found it refreshing that we want to be concentrated, that we want to be along the journey, that we want to invest throughout. And that comes from a deep place of conviction because we've gotten to know them and we've got to know their market and opportunity. And so you could argue that there's a disadvantage. I think we found that it's put us much more at an advantage. But I think you said another important thing, which is back to this clarifying thing about opportunistic.

31:31We just want to be in the category defining companies with long-term tailwinds. That is very clarifying in that we're really looking for these excellent breakout companies. And I think so much energy can be spent at an investment fund thinking about, this is a good company. This is a great company. Is this a 2.8X return? Is this a 3.2X return? and you might spend so much energy around that, that you're distracted from actually looking at the things that are real breakout. And so we pass on a lot of companies that are good and great. We know they are. But because we're in search of just trying to be focused around the excellent companies around it.

32:09And there's a lot of companies that turn out to be excellent that, you know, we were just uncertain of at that moment. And we're willing to trade off not being a part of every great company if the companies we are a part of are great. And hopefully increasing the time, we're better and better at not missing those excellent companies that came our way and we just happened not to invest at that moment. Yeah, and I bet there's companies in your portfolio who you missed early, but you got later when it became more obvious and the value prop that you've cultivated has allowed you to. And we're very thankful to all those founders who were gracious enough to let us into the opportunity after passing a career.

32:44Yes. On the impact team, what have you found founders care the most about that's guided you in terms of where have you invested? Is it recruiting? Is it customers? What is your thinking for what do founders want and how have you cultivated the impact team around that? So just to highlight why we call it maybe the impact team and not the portfolio services team that I think sometimes they get referred to and it feels like a small thing, but sometimes these small things become big things in guiding lights and how we operate is we really wanted it to drive impact. And so to your point, it's really centered around our founders and how we deliver value to our founders versus potentially another trap we were trying to avoid was we have a set of services and founders can come to it and hopefully it's helpful, but we're pushing out a set of services to the market and we hope that it adds value.

33:32And it's a different lens, which is like, what are our biggest problems that our founders have and how do we kind of jump in and solve it? And so I can talk about the range of services, but maybe I'll talk about one service that I know a lot of firms have and maybe how our approach is to market, which is talent. I think a lot of people support their companies around talent. An example could be a founder had a company that grew 10x in a year and their business is scaling and it got way more financially complex than they thought. And they quickly need to hire a new VP of finance or CFO. And they're kind of freaking out because this is way more intense than they thought in an area that they probably should have paid more attention to sooner.

34:09And I think the typical journey would be you have a network of CFOs or VP of finances, you send them their way, you maybe connect them to a recruiter. I think, and I've seen this lots of time with our team, and I think the reaction from Thrive is, we're in your office meeting with you that night. Katie leads our talent team. We have Olivia and Alexia who embed and kind of work closely with these companies. They probably already know the culture and history and DNA of your company because they helped you scale from 30 to 150 employees, which was part of this hyper growth ramp. They're obviously connecting to a recruiter and helping you calibrate, but they're probably out cold sourcing the next two weeks because they don't want to wait till that recruiter gets set up and starting to get you in front of as many people as possible because we know this is urgent.

34:50And in the meantime, obviously, we're trying to figure this out. Your finances are totally in disarray. And Yashoda, who leads our finance pillar at Thrive, is going to embed at your company a CFO for the next couple of months and really kind of support you through this critical journey. And so one, you have the time, but two, the headspace to kind of figure these things out. And hopefully in the meantime, your business feels stabilized and avoids kind of a negative loop that can get created in some of these really crucial moments. And that's a narrative I've seen happen at least three or four times off the top of my head, kind of supporting companies and similar stories across go-to-market and brand and communication, as well as data and analytics kind of across our companies, which each one of those.

35:33You have executives who have, you know, almost decorative experience kind of leading functions. But the goal here is, again, not that here's my services, here's what I know. It's what's your problem? How do we do everything we can to support and drive that? And that's, I think, a lot of the intentionality around the impact team, which Nabil's kind of had division for, led and stewarded through a bunch of these changes. I want to segue into incubations, because that's something that you guys invested in since the very beginning. Why don't you talk about how you think about incubations where's your sort of unfair advantage relative to incubations and how you've kind of refined it over the years in terms of what's worth incubating what's not etc how you built your practice first of all incubation wasn't intentional for us i think we're even a little sensitive around the name incubation because uh other people do it i think we take it more as co-founding we don't want to be seen as we're building the company and then hiring a ceo and it's the opposite these are founder-led companies these are amazing founders that we get to work with.

36:29And we like to feel like we're an important part of that journey, but we are still a part of it and we're not the ones kind of running that show and they control the companies and drive it forward. It really stemmed from Thrive having a proactive mentality and a builder's mindset. And we felt entrepreneurial. We were building Thrive, the firm, so that in one hand was some of the things that kind of drove the early DNA of the team, which we've continued to maintain. As I said, like our first value is we are builders. It's a really important mentality. And everyone at the firm is touching kind of our incubations and building in a certain way.

37:04But also they're touching how we build the firm and thrive. And we don't want Thrive to be a static entity. We want to be an evolving organism. And everyone's really contributing to that across all different functions. So we've always had kind of that entrepreneurial mindset. And I think maybe part of being in New York and having to go to San Francisco and work our way into opportunities, we were also just proactive about what are interesting markets. We knew someone wasn't going to send us the hot deal. We knew someone wasn't going to send them the best company in their seed portfolio. So we had to be thinking, what are these big ways?

37:33What are these big moments? What are these big markets that could yield an exciting company so we could get ahead of it, so we could reach out and get proactive because we knew it wasn't going to come to us. And in that journey, we realized there were some really exciting tailwinds that we got very passionate about, but there were no companies building. And so even early in the founding moments of Thrive. Josh co-founded Oscar. But since then, we've kind of founded a dozen companies that really stems from that moment. And it's been a journey that, one, we really enjoy. Two, I like to think that we're good at.

38:03Four of those companies are worth more than a billion dollars. And a lot of those are still early in their journey. And so hopefully, they'll get there over time. And three, I think it really aligns with our principle of concentration. I mean, there's no more concentration than saying, I'm going to help co-found and build a company. We dedicate a lot of time. Obviously, we put reputational risk around these businesses and what we're kind of committed to. And we put a lot of energy and concentration from the team. And so it's not just the investor who's kind of all in on this, but all the different functions that thrive are in the early days trying to get these businesses out with real velocity.

38:34And I think the things that get me excited about what we're doing here even more than maybe some of the headline valuations of some of our incubations is that, you know, a lot of repeat founders are working with us on these opportunities that even started with the first one, Oscar. You know, Mario was, you know, co-founder of Vostu, and that's how Josh and him got to know each other. but from brandon weber who started nava or florian and cedar or chris from cadence all repeat founders who are excited to kind of partner with us early in that journey which gets me excited that we're offering real value and kind of driving that forward and i have some suspicions as like a co-founder why we're able to kind of help these businesses really succeed but we're just grateful that we have to work with great founders on problems we're super passionate about and is it Fair to say that you guys, you've focused more so on regulated industries or capital intensive industries, or how have you thought about the types of ideas or spaces where you think this is best set up to succeed?

39:30Definitely. I'm going to keep coming back to the annoying line of there's no playbooks, and so it's evolving. But there is some pattern in the history, and I can talk about how it's moving over time. The patterns we did to do a lot of regulated industries in healthcare and financial services, some of the healthcare companies I talked about, you know, we started, Gaurav and our team incubated a co-branded credit card. And I think a big part of why we incubate companies or why we've been good co-founders with founders is a couple things. I think one, it takes a lot of time to start something. So we're only going to start something if it can be a$10 billion plus company, not a billion plus company, because so much more time and energy.

40:10And so we got to believe that there's more output on the other hand. Two, we want to be inspired by the problem in a really big way because we're going to spend a lot of time on it. We better feel it's one of the most meaningful things that we can kind of go spend time on. And so we're really passionate about the companies that we help start and engage. It's not just financial math for us. It's really a passion project. That's the only way to justify the time and also to overcome that initial zero to one moment. Because if you're totally rational about it, you'll never start the company because you have to have like an unrealistic optimism to kind of jump over.

40:42And so you got to be super passionate about it and kind of turn off a little bit of your totally rational mind and really let your optimism and emotion kind of take you forward. And then third, obviously, we've got to work with great founders because ideas only get you so far. And so why has that ended up us kind of going after some of these regulated industries is one of the advantages of having a capital partner that has the conviction of a co-founder is you can take a much more direct path and a much bigger path to some of these problems. And so if you're building like a small tool, you could probably get away with an MVP on like half a million dollars or a million dollars.

41:20You want to build a health insurance company. You want to build a robust enterprise solution for health systems. You want to build a PBM and take on the big three PBM pharmacies in the market. You want to build a co-branded credit card and take on Chase and Amex and all these players and go partner and get a top 20 retailer to be your anchor customer to kind of deliver some of these things, you're going to need money and you're going to need conviction. And you're going to want to be able to take a direct path there and not feel like I have to build a small little MVP, build something else, build, grow and go after it.

41:52You want to be able to take on that, build towards it and be able to capitalize it in a way that's going to kind of drive it forward and feel like you have a real partner on the table that has conviction to do that. And so I think that wasn't by design, but ended up that we were able to help accelerate some of these really bold visions, allow great founders to take a direct path there and take some big swings. And we get a lot of energy from that. Now, I think some of our co-foundings that aren't as public, we're starting to take a different direction on certain things. Because again, it wasn't intentional.

42:21It wasn't like, well, we've been successful in healthcare-ified services. Should we keep doing that? And we're launching a couple of companies in AI now in that space. And we think we have unique insights and ways to kind of catalyze that and a lot of advantage to those founders for us having to have a capital partner as a co-founder, but also someone who has seen the business building journey in a lot of different ways and has had the opportunity to invest in open AI as well as invest in a lot of these leading tech companies and how do we take those insights to kind of build new things to kind of capitalize on this wave.

42:50Let's go deeper on healthcare specifically because you've really flourished in building that practice, you specifically among other things. And when you talk about both on the investing side, how you've approached the space in terms of what types of things have gotten you excited versus not get excited in terms of advice for investing in digital health? And then we'll segue into how are building these types of companies different than building traditional Silicon Valley companies or tech companies in particular? As I said, we're all generalists. We spend a lot of time in a lot of different spaces.

43:24At the same time, we're T-shaped. And so there are certain areas that we might spend a lot of time in kind of drive in because we think there's a space that has long-term tailwinds. And my view is we're one decade of five decades into the digital health transformation. I mean, I can go sum up all the digital health revenue or enterprise value, whatever metric you want to use, and it basically rounds to zero in terms of the impact in the healthcare ecosystem. That's not despite amazing products being built. That's not despite actually great companies being built so far. But it is just a reflection on the fact of how big healthcare is, and it's a$4.5 trillion part of our economy.

43:58It's the fourth largest GDP in the world if you separate its size as Germany. And so I think we're really early in some of these things. But I think what's super promising is that on the ground, there's real innovation. I mean, lots of companies we've been a part of, lots of companies I've just seen that are transforming health outcomes, that are lowering costs dramatically for the system, that are streamlining experiences for consumers and employers and all these different elements. And so that gets me massively optimistic. But then I also look at the hill to climb. There's a lot to do. And so we get excited about being on that journey and helping build and align and drive that forward.

44:32I think to your point on the approach to the market, I think that there are general rules in tech that maybe don't apply to building a health tech company. And that's something we've kind of learned over time and used in the companies we've incubated, but also companies we've invested behind. And I think the first thing is, I think you got to build alongside the system or within where the system is today and not just ignore the system completely and build outside of it. Sometimes there's an instinct to be kind of the outsider in the space and say, I'm just going to build over here. But again, like a$4.5 trillion system, that's not going to move so quickly to your little startup, regardless of how good the idea is.

45:11You got to go meet the system where it is today. And you got to go operate in the existing payment models. You got to go operate where the patients are today. You got to go operate within the dollars and flows that exist in this ecosystem. Now, it's not to say that we're satisfied with the status quo. You should build a company that's much better in a value-based world than is in a fee-for-service world. But if you're holding your breath till the whole market moves to value-based, healthcare is going to be more stubborn than your business has longevity to kind of like stamina to kind of play through it.

45:40And so you got to go meet the system today and kind of go build on those economic rails where the patients are and kind of deliver that, which I think is maybe a little counter to maybe a lot of people's initial starting point where they're like, I'm just gonna build a cash pay business. I don't wanna deal with insurance. I don't wanna deal with health systems. I don't wanna deal with employers. And the reality is you're just gonna be a small part of that market in the best case scenario. And in the worst case scenario, you're just not gonna be able to kind of get it off the ground. I think the second thing is, I think we challenged the concept that like you should start with an MVP in healthcare.

46:10We actually think you should go after big problems, not small problems. And part of it is I think we're early in transforming healthcare. So we should, why not go after the big problems that haven't been solved yet versus settling for something smaller? But two, I don't think the industry set up to take on small parts of solution. And so you run the risk of trying to fix a small part of the system that actually doesn't fix the whole problem. And so you didn't actually drive the impact that you wanted to your end user or end customer at the end of the day. And so why did we build a health insurance company versus just build some software?

46:42For Oscar, it's because there were so many pieces that needed to be integrated, both from tech and operations, to build a better experience for consumers. Why did we help Brightway build a PBM? It's because you couldn't just build an optimizing layer in terms of the structure because the incentives were messed up, the formularies were messed up, and you wanted to integrate a lot of your own services with the infrastructure, with the consumer interface to really transform that. And so if you just, you ran the risk of just changing one piece of that, one, you might not get traction, but two, even if you did, were you really going to move the needle on the outcomes that were going to be created?

47:14And so we've really strived for backing big problems versus small problems in healthcare, which I know runs antithetical to some of this, start with the MVP and scale. And I think the last thing is, I think you have to get quickly out of the mindset of building for your friends and your neighbors. I think a lot of these companies are built in the tech centers like New York and San Francisco, but healthcare is spread across the entire country. And if we're going to start at the first point, which is like, we don't want to just build valuable companies that are worth a couple billion dollars. We want to build companies that actually change the face of healthcare, make a dent in the trajectory of healthcare.

47:49You're going to have to find a way to serve 100 million patients. And you're not going to be able to do that without serving people across the country in Ohio, where I'm from, or in Kansas or in Louisiana, or in all the different places across the country. And so how do you start thinking about how do I build a product that doesn't just can sell to the big tech companies who want to buy fancy digital health things for their employees. Again, that's not bad. It could be a great business. But I think we're more inspired by people who want to build products for 100 million users. And Cedar, the consumer healthcare payments business, that's something that's serving 30 million patients today and confident it's going to serve 100 million patients.

48:24We led the Series A and a company, Headway, in the mental health space. We believed that mental health was going to be a really important thing. The thing that really inspired us at Headway, even when it was at a fraction of the scale that it was today, was that in New York, the most represented employer that they served was the MTA. And that was because the Transportation Authority was the biggest employer in New York. So they were representative of the population. And that gave us a lot of confidence that they were going to kind of scale across the country because we're like, mental health, that's a hundred million person problem.

48:53We got to go find a way to be able to deliver that. And even if there's other ways to build good financial outcomes, we want to be a part of the things that can really actually move the needle in healthcare and hopefully change the trajectory of healthcare, you know, bankrupting our country, uh, being kind of a big financial burden and frustration for consumers, um, being a opaque system for employers, uh, the, the list of healthcare problems are endless. And so hopefully we can obviously build great financial outcomes, but really make a dent in, in how that, in, in the trajectory of, of where it is now.

49:23I want to segue a bit to macro. There's some firms that don't think a ton about macro in the sense of they're just focused on investing in great companies and don't change the pace of deployment or don't change the fund size because they don't see a huge sort of correlation. Companies are built in all great markets. And there are other firms who are very conscious of the macro and it changes what types of companies they invest in or their deployment pacing or their fund size is all founders fund, you know, sort of reduce their fund significantly. how does Thrive think about macro in terms of how it determines their business?

49:59Yeah, I'd say we think a lot and we think a little about it. And so I think we look a lot in that should this change any of our long-term assumptions? Is the trajectory of technology different than we thought? Is the profitability of technology businesses different than we thought? Is the efficiency to kind of get there a lot different than we thought? Are the existing markets more stubborn than we thought? Is capital a lot more expensive than we thought? And in some cases, those change our assumptions. Some cases they don't. I think our belief in technology transforming every industry is still unwavering.

50:34I mean, we still see the bottoms of momentum across our portfolio, across a lot of companies that the industry is changing. I think some of the things that are really changing is the cost of capital is a lot different. And so a strategy that made sense for a company in a zero interest rate world does not make sense in this world. And so to put your head under a rock and say, macro doesn't matter. I'm going to run my company the same way is delusional. And there's a smart way to kind of run your company in this environment. And we spend a lot of time with our companies doing that. Now, what we don't do is overcorrect and tell our companies to give up the long-term prize of what they're going after and to not keep investing in their business.

51:09There's a way to grow your business profitably. And it's not this zero sum, should I grow or should I cut burn? We don't view them as mutually exclusive. We think it's a multi-dimensional question and maybe the way the firm structured we're comfortable playing in multi-dimensional we do it all the time right we build companies invest early we invest growth we invest across categories um being part of a builder means that you have to constantly make these multi-dimensional questions as you grow your company and so we live in that ambiguity and help our companies think about how can they grow profitably i think where that's live from an investing standpoint is that we've made investments we're again not ignoring what we think maybe multiples are going to be.

51:50If I was to, you know, humbly say that, like, I think we maybe didn't believe that 40 times revenue was going to exist forever. So we didn't necessarily underwrite our companies to that. At the same time, like we don't think 5x revenue multiples will exist forever. And so we kind of view that things will kind of revert to kind of where they were long term. I know there's some calculus around kind of how interest rates might change that historically. But I think there's some positive tailwinds that these companies are more dominant, more profitable than we probably thought as well, you know, five or 10 years ago, when you might be anchoring to some of those historical multiples.

52:23And so net net, you know, we think, you know, what is that long term stabilization, and I think we're willing to kind of maintain that horizon, we want to be level headed, we want to be consistent in our approach around it, but also recognizing when kind of things change. So I think that's led to us continuing to invest this year behind companies. And then I think on the early stage side, it doesn't really change it much. I think you probably find a lot of consistency around investors around that, or I hope so, because these companies are going to exit over a five or 10-year time horizon, and what the Nasdaq's trading on a given day shouldn't determine whether you think this company can succeed or not in terms of defying gravity and breaking into a market.

53:01Gearing towards closing, talk about the future of Thrive. Where could your firm go? I know you're going to be concentrating in category-defining companies, but could you see yourselves launching any new fund products, whether it's a hedge fund or other sort of fund products that you think about, like this massive asset management firm beyond venture? We don't think of it necessarily like that. I think, again, being annoying and kind of repeating kind of our firm philosophy, we want to be opportunistic, we want to be stage agnostic, we want to be geographically agnostic, I think we're product agnostic, in a way, maybe it's part of your question.

53:37And again, we just want to be about this category-defined finding companies with long-term tailwinds. And I think one of our firm philosophies and values is focus on the inputs, not the outputs. And so I think we're going to keep focusing on, I think, a more direction on what the inputs that thrive are going to be. And that's really around, obviously, the people we're going to hire. And we want to bring people to the firm that still have that maverick mentality, the redefine an industry or learn about what are the most exciting things and kind of continue to push that forward. We're not insecure about betting on young people that might push our thinking at Thrive.

54:16Sometimes as firms get more successful, they try to overly professionalize and become corporate. We're trying to actively fight that. Josh founded Thrive when he was 26. I joined Thrive when I was 25. A lot of the people at the firm kind of grew up at the firm. We spent a lot of time developing and building talent. And so, you know, we want to bring a new generation of people who are going to help us push our thinking and help the firm evolve. We don't want to lose sight of what we're trying to invest behind. But we don't have a roadmap around, you know, what the exact products that the firm is going to be around.

54:48And as you've seen, our bias has been to concentrate, stay lean, be focused, and have a team that can be flexible to kind of invest across all those dimensions. and so my vision for what thrives going forward is that we still are the most exciting people for young and ambitious talent that wants to take a bet on themselves and build something that they're joining thrive and then we're going to let them help evolve and direct the firm going forward so you mentioned that you you're not afraid to take bets on on young talent and you've cultivated this this amazing talent over there some of which has stayed at thrive and some of which your own thing, whether it's Chris Pike or Miles at Benchmark.

55:28Talk about how you think about talent differently than perhaps the venture industry typically thinks about it. Why you're willing to make bets on these young people and how exactly you cultivate this talent. For us, if talent is the most important thing for your company, how can you outsource it to other people to develop it for you? And so we've taken a much more intentional view from day one that we're going to be less focused on poaching talent and much more on developing talent and growing talent. And so if you look at our team, especially our investment team, most people have zero to four years of experience before they join Thrive.

56:03And we're really looking for a lot of intrinsics to kind of grow into what we're doing. And one is that we want people who have an independent mindset. We do things differently at Thrive as we've kind of talked throughout this conversation. and we want someone who can be flexible and approach that, but be able to kind of push the boundaries of our own thinking and be able to live in a little bit of this ambiguity of, I'm investing early, I'm investing late, I'm building companies. And I think it really takes a curious, independent mind to embrace that. I think the person's also got to be hungry and have a little bit of that maverick intuition.

56:36They can't have been on the default path their whole life. They had to have challenged something on some way to get to a certain point before thrive. And I think that's just important because we want to continue to get better and redefine what we do. But also, we want to be aligned with our founders. I mean, our founders are that DNA. And so it feels antithetical to us to have an investing firm where the DNA of the investors are really different than the DNA of the founders. And I think maybe that's why Thrive blends the lines a lot between founding and investing, both as building Thrive, we build along our founders, we build new companies because we want that DNA.

57:11and hopefully that's why a lot of our founders feel a lot of resonance with the people on our team and our approach to the market. And I think the last thing is that we want a team that embraces collaboration. And so people who are very reflective, who want to engage in conversation, where it's not about winning the discussion, it's about learning from the discussion, there's an uncompromising pursuit of truth in how we do that. and enough self-confidence to be able to raise your hand and say when I'm wrong, but also to stick to your convictions when you're being challenged. And we think that leads to a really collaborative and sharpening environment.

57:53I think it's one of the things we benefit the most of, of kind of having a small team, is that I get to benefit from the wisdom of all my partners and team members as we're kind of pushing these things forward. I've never heard anyone say they've had a productive conversation with 30 people in the room. And so we want to avoid those dynamics where I'm excited to bring an investment forward and talk about it with the team. It's not a hoop to jump through, or I feel like I'm talking to partners who don't understand what I'm doing. And I think it's allowed us to kind of maintain this T-shaped generalist approach.

58:25I think on one hand, you could say, oh, generalist approach must be frustrating because your other partners or investors aren't spending as much time with you in your space. They don't understand. And if you're really large and you guys are out of sync, absolutely, I can imagine someone saying that complaint. But I think being a small team that's very aligned, I find it very good because it keeps me out of the weeds on the things that I get excited about. Because it's not about, is this interesting in the niche I've been exploring over the last six months? It's like, is this interesting globally?

58:54Is this interesting relative to all the companies we're seeing? Does this rise to the standard of some of the iconic companies we've invested before? And not, we're going to give it some kind of handicap or discount because it's in a segment that you spend time in, or maybe you just don't appreciate it. So I have a team that kind of helps pull me out. And I think that magic's able to do it because we have a team that's engaged in that conversation, intellectual honesty, but also kind of the structure of the firm that aligns around it. And then I think at the end of the day, and I think it comes from Josh, even at the early days of founding, is we want to hire exceptional people who are multidimensional and give them a lot of latitude to run because we believe that the firm is shaped in every dimension, not just the investing team, but across every dimension by the individuals who feel empowered to kind of drive that forward.

59:35And we think the most talented people want to be in those environments. They don't want to be restricted. They don't want to be put in a box. They don't want to be siloed. They want to feel like they're part of a team kind of building something alongside each other. Yes, we might have different domains. Yes, we have different things that we spend time on. But I do think we are connected with an ethos of being a builder, wanting to be collaborative, hungry and curious about that journey. Yeah. It's fascinating because typically, you know, early companies or early firms have to take bets on younger people, or that's where the best arbitrage is because they can't necessarily compete with the best companies on the most legible talent.

1:00:09But what's interesting about you guys is as you've become transformed from an early firm to one of the top firms, you can now compete with every other firm for the most obvious, the most already accomplished investors. And yet you still choose to sort of take bets on extremely talented, but perhaps younger or earlier in their career, as you mentioned, zero to four years. That's really interesting. Definitely. It's been an active tension because to your point, the natural pull is that as you become successful, you become more risk averse. And as you become more risk averse, you go for people that you feel like you can assess have done the job before.

1:00:47And by the way, those people are interested. I mean, we talk all the time, you know, Thrive early days, it's self-selected for the people who are interested in it. Like who would leave a big, get a comfortable job at a private equity firm or an investment firm and join Thrive, well, that's self-selected to people who kind of had a lot of those characteristics we're talking about. They want to build something. They have a little bit of edge. They want to get off the default path. I think as we've grown, we've been surprised and humbled by people who have very accomplished resumes who are interested in what we're doing at Thrive.

1:01:17And obviously, you're very flattered by it. And there's a lot of reason and pull to kind of do that. but I think we don't want to abandon what made us successful in the first place and so how do we continue to keep that and how do you fight some of that instinct to kind of become too institutionalized in a way not that it's exactly the same but I'm sure founders you know we see founders go through this journey is you know the early team looks really different and then now you have a scalable company that attracts all these big execs from big name companies and you get the VP from Google or whoever.

1:01:51And some of those people obviously translate, but a lot of times you're almost flattered that someone like this would be interesting, but they change the DNA of the company in a really significant way. And sometimes that's good. And sometimes that's bad. And I think for us, we're just really anchored and make sure we never have the culture of the firm deviate too much from the culture of the founders we want to serve, because I think that we're going to lose sight of the magic around that. And I think one of the things that makes venture hard but exciting is that it's only about the next exciting thing right it's a industry is constantly changing the new spaces that are exciting the new founders are exciting it's constantly recycling going forward and so how do you make sure that you as a firm are aligned with that and don't get left behind from that or get too distant from that because you do the natural thing around, you know, moving as this company grows, maybe becoming a little bit too institutional.

1:02:44Obviously, there's things we got to grow up at and we're better at than we were when Thrive first started. And those are all good. But again, we don't want to lose that initial DNA, that magic, that enthusiasm around something new and new people who are going to challenge and push us and not to try to get too locked into something. That magic is interesting. I sort of see your, you mentioned your your sort of media strategy is to also like your company strategy not not do a ton of stuff um but the stuff that you do do do it really well do it thoughtful the josh interview and invest like the best that was fantastic i think this interview has been fantastic and i i think the it's sort of less is more uh allows you to have some mystique to it um and and if people just if all they think about thrive is just exceptional companies exceptional experiences exceptional insights people may not necessarily know all the partners on a first name basis the way they might at like founders fund because everyone is is you know super out there super on twitter but people actually appreciate this mystique to it has a certain magic to it and and they kind of assume the best because of it that everyone is super brilliant and just heads down and focused and you know founder first too busy do you think the media strategy also contributes to the magic around the firm we're exceptionally kind to say all those things and you're probably giving too much credit around some of the intentionality of these things.

1:04:06I think it really stems from trying to be heads down, trying to be focused. Early days, we were too insecure to say something, to be honest, right? We were trying to figure it out. We were young in the industry and we didn't want to be talking about things that we don't know. And I think, you know, as our experience has grown, not that we figured out everything, not that we deserve to be out there talking all the time. We found that we just enjoy so much more being close to our companies. and again, we just want the firm to be anchored in the assumption that we're here to support our founders, work with our founders.

1:04:36Let's not get confused about what we're spending time on. I think there's a lot of people who put great content on the internet as investors. I think it's wonderful. I benefit a ton from it. I learned a lot of my journey from people who've been out there and sharing. And so I don't think it's a bad thing at all, but it's not the strategy we pursue and we feel fortunate that it hasn't hurt us in the journey. And as you said, maybe it's actually helped us with a lot of founders. Yeah. let's uh let's wrap on that i'm grateful to you for sharing a bit of your journey building thrive with many investors and founders listening in and i know that anytime i want a cap table with with your thrive that uh it's going to be a good situation that you guys are committed to it and i've chosen a good one so so thanks so much for for coming on the podcast you're too kind eric really appreciate times fun conversation turpentine vc is a podcast from turpentine the network behind Moment of Zen and Econ 102.

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