Uncapped #2 | Keith Rabois from Khosla Ventures

21:58Like these are your friends, You're sure they're good. There's a lot of other situations where you just don't have the time where a deal is moving quickly. It looks pretty good, but you're not 100 % sure. In my head, what I assume is you must have some gradient where you've got some deals where whether it's ramp or fair, the day you do it, you're like, I know this is good. And then you must have some deals where the day you do it, you're like, I'm actually just genuinely not sure. You mentioned before that 40 % is a stellar hit, right? Do you think of your job basically as a function of, I need to do a certain cross section of these very sure and not so sure things no matter what.

22:33Or if you had a smaller fund, would you only do the things you were very sure about and then you kind of have to like move down the stack as a result of like the situation you're in like I think it's a fascinating question. 90 % of the best stuff I've ever invested in as an angel or as we see I was dead sure of. So I think the implication to that is if the fund were smaller if you had if you had that money or if you ran a 100 million dollar seed fund, I would probably only go for the I'm pretty damn sure. So like for example, when I think Lon Stale has told this story publicly that When they started Palantir, I was the only person who thought it was a good idea.

23:06Literally other than the four co -founders I was like this is so smart like boom Airbnb like instantly Yeah, and I'll tell you like I have three minute after his monologue three minutes in. I was like This is the coolest things which you two that's a good example of a hard one that a lot of really spent Everybody else like just totally wrong. There are people who thought they were cool interesting founders like call Graham I'm talking about this publicly, but nobody else thought it was a good idea. I was like, no, literally this is the coolest things in YouTube. And I was like, three minutes after, I was like, we need to, we can have a heart's job and I need to invest now.

23:34So I knew it right away. YouTube literally took like less than the barbecue where I found out about it. Like, Java'd actually literally walked me into his bedroom to show me every video at the time, literally every video that was uploaded to YouTube. And I was like, I wanna invest right now, like, period. So like usually, like I've had that instinct of like, like wow, at the time for the really, really best stuff. Have you ever gotten shocked by something that you would? Yeah, I can. That turned out to be amazing. Occasionally, but then obviously you didn't think it was that not good because I wouldn't have invested.

24:03Maybe ask differently if you looked at your whole, if every day that you invested, if you said, okay, put the day you wired the money, put this in a quartile for yourself, do you think that you would accurately predict how good each basket was? Mostly yes or these barbell wise, like the top stuff you asked. And then would there be some stuff actually maybe at the tail that would surprise you so that would be a little bit Interesting to actually study. Yeah, like actually force the discipline of ranking one to 10 like how good is this on day one and then You have five and ten years later looking out the stuff that really had high conviction ramp was a very high conviction Instant like they started projecting their notes and you know, DAC just notes in like a couple of minutes and I was like in total sales mode like instantly like boom same thing.

24:49I'll tell you a funny story about this company most people don't know but it's really phenomenal in Europe called Trade Republic. It's like a better version of Robinhood but for Europe and phenomenally great company. But I need more I take the meat in. I'm like Europe Robinhood for Europe blah blah blah blah. So my colleague at Founders Fund Matthias found this company in Berlin and he's like you need to meet them and I kept trying to avoid it. Like literally, do I really have to do this to you? You know, kind of thing. And anyway, we sit down with this conference room and Founders Fund in February or March 2019.

25:22And Founder Christian sits over there and three slides in. I was like, oh my God, this is the coolest thing ever. And so I went to the rest of the meeting and full salesman. Like full like, yeah, you know, I can help with this and this and this and this. You know, I'll check the dots. I walk out of the meeting and so I'd only been a Founders Fund for a bout of month. We've all got the meeting and like Matthias kind of tats me on the shoulder. He's like, what happened to you? I don't know what he talked about. He's like, you need more to take this meeting. And like, you're in love with this thing.

25:49I was like, you just found the best founder in the history of Europe. And I knew like three slides in. And he will be the best founder in the history of Europe. Wow, that's crazy. Yeah, I mean, as I'm listening to this, I'm thinking what was going through my head was connecting back to, you know, as an individual investor, you have some comparative advantage and you just need to like, get yourself into that zone of geniuses often as possible. And what I was thinking about is like, as a fund shape, you also have comparative advantages. And so, as we were talking about that, I was thinking, well, it's actually, in some ways, there's a disadvantage that comes from being large, which is that, you've got some constraints.

26:25And so, that would say, maybe to me, as a smaller fund manager, I should, what I would take away from this conversation is just act when you have more confidence. You must have some huge advantages from being a big fund, too. I'm curious what you experience is the comparative advantages, not from you as an investor, but from Kostla as an entity and the size. I'll give you a really concrete one, which is related to AI, which is a very important topic. I am certainly not a master of AI, not an AI investor per se. Since I've come back to KV, I've made two and a half significant AI based investments.

26:58The only reason I had conviction and confidence to pull the trigger on two of them was re -accav or very expert at AI. I have like these three partners here who know AI really called the nodes fan and John Chu. And so what I feel I can do is if I find a founder who's in the AI space, I can run my normal Keith algorithm through the founder. But I can then get air cover from my technical colleagues, the nodes fan and John who know AI, and can ensure that this product is differentiated, that this is the best approach to solving this product's space through AI, and that there's nothing better out there.

27:35Two of the companies I invested in, I never would have been able to with high conviction lead a meaningful round, like I might have let a seed round, but definitely would have let a series A or B without John's fan and the nodes involvement. So I get the leverage. Same thing in health, like we have some people here who really understand digital pharmaceutical and actual all versions of healthcare. And so if I find something interesting in health, I run it by one or two of my colleagues, and then I can still apply my normal Keith is just found or amazing, but I also know I'm not making a mistake.

28:07Shawn McGuire, when we just did a podcast the other day just said something that really resonated with me on this, which was basically the analogy was that, in math or chess, if you're 98th percentile, you can't tell the difference between 99 and 99 .5. You can't tell the difference to people above you, but if you're 99 .9, you can tell the difference to people below you. And I thought that was really interesting. And this would be the equivalent. It was like, you would know like a, you know, In AI, you might know like a Charlotte 10 from a reasonable person when you see it, but you wouldn't know world class.

28:34Right. Exactly. Very good. So even when we post investment, one of the areas we do add value at KV on AI companies is people are building out AI teams. Here, well, they need their first meter of a true AI meter to build out in an AI function. I can't do that. Like, I don't know how to assess like, is this really the right person? I can look at, you know, some credentials and things like that and try and galaate seems directly right, directly gone. But if this is a really important company for us, I will have either Sven or John over node interview the candidate. And then therefore I get the benefits of both because they can grade 99 .9, 99 .5, 99 .98 where I can't.

29:11Are you able to use the fun size itself to your advantage too? In any case, the best example to me right now at the moment is the way thrive is using their fun size to advantage in a very effective way. There's other things where some funds are not doing these sort of like we do premium assets. that's the end of the story. I've seen others using their fun size to do like new products and offerings and things like that, but I'm curious if you experienced that relatively larger fund is an advantage directly. Yeah. The way we think about it at KB, where there is a real advantage is because we like to back bold investments, bold ideas and vicious founders, and really early is not all the things we invest in are gonna move to consent, being appreciated by the consensus.

29:54So you can take it through multiple rounds. So you can take it through multiple rounds and toll. You want to have a deflection. Like this is a good Peter Tillpoint is you don't want to stay contrarian forever. Like to be really successful, eventually you need consensus that this is a good product, good thing to adopt, good thing to pay for. So you want to convert contrarian to consensus and then take advantage of that momentum. That in between step, there may not be investors that really appreciate you until you get somewhere down that curve. So having a lot of you know fair amount of capital if we have conviction about the opportunity that better For as good as when we first led we have conviction about the founder and the team That's as good or better than when we first made an investment we can double down triple down now at some point We're gonna want you to prove that there's a real there there that the world wants this like eventually You have to get to the world definitely will want this appreciated and then other people's money's great But we can definitely do that and we do it frequently which I guess also aligns to you guys doing more sort of hard -tech and get deep -talked.

30:51Like the milestones are different. The milestones that other people, that financial investors can appreciate are gonna be further out. So you need to be able to fund or be able to partner with people that have the same criteria, which is a skill in and of itself. Like knowing who to partner with to finance is a certain type around. Totally, yeah. Do you worry just broadly speaking about like the venture as an ecosystem asset class as like things have gotten so that like there's so much money now, you know when I was, you know, running lattice during like Zerp times like we had all these crossover funds they kind of went away, but now it's like now with like the sort of blue chip funds Or big and like there's like I think like more dollars coming in than out of venture for like a while now like are you Do you there's just giving you any anxiety?

31:32Do you think this is like a problem or what could be a problem? I think there are easy scarce number of founders who have the traits that can build iconic company Founders just scarsers founders is the scarce interest scarcity now. What's interesting in AI world is For any given company. They may be more cowl -pornable intensive So you could say there's still going to be 15 companies and 15 founders in any given timeframe that have high potential But the consumption of capital at open AI. Yeah is off the charts Definitely and doesn't it doesn't mean it's bad But if the AI companies have that pattern then a lot of venture capital can still funnel into the barrels The proverbial barrels as founders.

32:11Do you think at the like application layer where a lot of this investing is happening now outside of the models? Do you think that the capital consumption is going to be higher low? It should be moderately low in theory. That's what it seems like it should be. I often will meet these companies that raised a seed and now they're profitable and everything's fine. But then I'll see a lot of the current leading app layer companies have all actually raised quite a lot of money. I'm not sure what's going to end up happening because they will have more competition from each other. I can't quite tell what's going to play out.

32:39I think at the application layer, it's dangerous for a huge capital. Well, I think there's reasons why at the foundation level model innovation or things that are closer to that infrastructure layer There's real good reasons like founders walk in and ask us for 30 -50 million dollars and you know before AI We would say you know no and say that's totally unreasonable But then the AI founders at the foundation level like how really good reasons why it's like I actually need to spend 30 million dollars Or I can't get to this milestone and so we definitely have to think about it and therefore we have written a lot of those checks in AI But then what happens, I think there's a distortion at the application layer is they read about their call, you know, their competitors or colleagues or whatever friends running these AI companies.

33:18They're like, I should get that valuation too. And today, walking like, I want $50 million because someone's over here, but they're very different businesses, even though they both have the label AI on them. I mean, one of the interesting things that this connects to, you know, we talked about, you need to be contrained and right. It's obviously sort of like how money's typically made. I think there is sort of an unspoken prevailing wisdom right now or prevailing thought right now I should say that we might be in a moment where you can be consensus in right in a lot of areas. And a lot of people are behaving as though that's true.

33:45And so the way that I see that expressed is there's a lot of ideas that make a lot of sense. You take AI times whatever industry times pick a vertical pick like a department at a company horizontally, whatever. There should be something in X. And so I'm going to like bet on one. And a lot of people that make the bet a lot of companies are now competing for, you know, those verticals. I think that's part of probably why people end up raising a lot of money is because they're in this like, 11 horse race for something that seems consensus and right. Do you think that it's possible to have moments in time where there's a lot of money to be made and consensus right things or is that a mirage?

34:18In the history of venture capital, there's usually these three year windows where that's true. Like the first three years of the internet, there are windows where that's true, but over 50, 60 years, that's usually not true. So then the art is knowing the valuation or entry price really matters. So you need to be right, but you also need to get paid correctly for the risk you're taking on. And so the problem is if you treat all AI companies like their financial model companies or robotics or something, even if you pick a really good company in a vertical, you might not be a 10 billion dollar company.

34:48Yeah, you may not make that much money. Like you enter at 400 million, it's a two billion dollar company. Yeah, it's not terrible, but it's not going to return, it's not going to return a meaning. It's not going to really return a fund. And so you have to be disciplined about the price to, especially in a series being up, Maybe in a plus or minus, you get it right. It's probably good enough to see definitely make the right call. Companies Epic, you know, it's not going to really matter. But I do think that the discipline about will pay 100 million post or whatever, first 200 million does matter in the consensus right world.

35:21Is your instinct that we are in one of those three or windows right now? Like I think the vertical, I think you can apply AI successfully to a lot of verticals. And whether it's hardcore AI, there's versions of AI, like how innovative it isn't, but the demand for intelligent acts that replaces human errors or human cost or human scalability issues, those are the three biggest ones, is very real, because humans do make mistakes, they are expensive and they're hard to scale. Okay, I wanna go over to tech and the government and politics and sort of like this sort of new moment and time wherein that I think is extremely interesting.

35:55I would say outside of AI, the other place that has a lot of heat and excitement is deep tech, which is great, I think. A lot of this probably is related to the fact that tech and the government are involved. Some of it, the causality arrow goes both ways here, of course, and as these companies have got more important, the government's taking more notice. So maybe before we get into some of the specific questions, tech and the government are friends all of a sudden. And there's a relationship now. What's most surprising to me in some ways is that that didn't exist over the last 10 years. It's not like tech was some underdog for the last 10 years.

36:27So I guess what is why has this shift happened so dramatically? Like you know, you could say it's a new administration or whatever, but like why are we in this situation now where like tech all of a sudden has this like not Just like a voice, but like a loud voice. I think there's two reasons one of them maybe lost negative than the other. The first one is at the end of the day The Democratic Party the United States for the last 15 years basically has penalized and signatized successful people. Just read your average Bernie Sanders speech. That's the representative voice of the Democrats. If you're successful, you've stolen money from someone.

36:59Like Robert Reich, he used to be a labor secretary, posted, basically a simplified version of this last week. It's basically the only way to be a billionaire is to steal money from people inside of trading or inherited, which is obviously completely false. But that's the prevailing view in the Democratic Party. Paul Graham wrote that essay that was like how people get rich and it's like, that's not how any of the people get paid. No, of course, none of the people we know, like literally none of the people we know, like the note came over here were like $40, like from India, like literally he couldn't afford to eat anything except McDonald's.

37:28So that's how people get rich in the United States, more often than not. In Europe, you still have to like follow one of these formulas, actually, interesting enough. But in any event, there's a lot of excitement and attack because no longer are people who are building stuff and creating value for the world and transforming the world in positive directions being demonized. And so I think that is a very refreshing change. And so that's positive. Second thing is like the reality is the tech world was very skewed and biased against, let's say conservatives and conservative ideas and spending a lot of time money demonizing conservatives and conservative ideas and Trump particularly.

38:04And so I think a lot of people are on their apology tour. Like Mark Zuckerberg spent $400 million promoting Biden. Arguably it was more important in electing Biden than any other person. Read Hoffman, it's not even public like how much money. So there's a lot of people who have business interests that you just can't be that one side in politics. Like no Fortune 500 company in history has ever been that biased. Google, like 98 % I think of all employees gave money to Democrats. So a lot of this is like, oh, we need to get back to closer to equilibrium because it's just not going to work out well for us to be so partisan.

38:35So that that dialing back is definitely driving a lot of this too. So now that the relationship is closer, what's kind of like change for tech companies? There's so many of these companies, some of them, the most important companies we've talked about, but like, Andrew Rills, SpaceX, OpenAI, like Airbnb, to some extent, like a lot of these very important companies, like the government matters. I mean, Uber too, like sometimes it's local, state, federal, but like, kind of the more important company is the more the government seems to matter. Well, what's happened in the last 30, maybe 50 years in the United States is more of what you're doing your life is dictated or constrained by law regulation.

39:10It's just like over the last 100 years, is hard to do a lot of things. You're basically suffocated by law and regulation. So any company needs to navigate that. And sometimes you're right, it's much more local than federal. And sometimes it's much more federal than local. But you're going to see tech companies having to navigate a world that is just more constrained. And navigating through a constrained world actually can be very opportunistic. One of the reasons why I actually like investing and have the regulated spaces is having been a lawyer. I feel like I can kind of in my own brain do the probabilistic assessment of risk reward and most other VCs kind of have to outsource it to like some lawyers And so I like heavily regulated spaces, but I think the world it's interesting enough I know you know you've been talking publicly about having kids and stuff It's about the only thing you can do in the United States without like the government's permission is have a kid Yeah, like there's literally almost nothing else you're allowed to do It's actually shocking when to have your kids like it's like oh, I didn't even need permission in some ways is the situation that we have now with the government is almost all positive for tech.

40:13I wonder are there risks to being this close? In some ways, we were just like Laddida we're over here in Silicon Valley or wherever we are, we're doing our thing. The government's just not thinking about us and now it's extremely spotlighted. It's like at the inauguration, it's like whoa. Everybody's there, I'm just talking about it. Is this perilous in any way? Oh, I think it is actually, I think it's not accidental that Silicon Valley is about as geographically distant from GC as possible and you know, it's like a feature not a bug. Yeah. So I think innovation and a cleverness and disruptive thought in some country and you know, ideas are better and more fertile in areas that are not caused by the government or not.

40:53But it's like the government wouldn't know how to regulate like crypto or AI like in the nascent days and the closer you are that I would imagine it's like the sooner they're going to want to be involved with a lot of these things. And I worry that that kind of regulation early is very stifling. It's very stifling and also, you know, there's things like you study in flow cosites about regulatory capture and comments can use the government more easily than a startup can. So if you have a disruptive technology to some incumbent, it's more likely the larger institutions are going to take advantage of government access to curtail your opportunity.

41:23So it's very, I think it is very dangerous. A lot of these VC firms now, it's not just like, you know, there's like some like middle person, like a lot of the V's, it's not like a conspicuous area in the middle, there's like the VC firm now has people in DC that are powerful. And at the same time, a lot of these, you know, same VC firms have gotten very large, gotten very influential. Do you think that this leads to these firms transforming or playing a different looking role, or will they still just be VC firms that like have a deep connection with government the way that like JP Morgan always has or something like that?

41:55I think, you know, Goldman Sachs always has like a classic example. And so I think maybe VCs or some VCs adopt as a differentiation or point of differentiation or you know a feature part of their features that sort of thing. We'll see how that plays out because again I don't know if it's the best thing for early stage companies. So for example, yeah, some like the next and roles where your target customer is the federal government like you're by far than sure. Like early investment in politics, what politics makes sense. For most companies it's probably not great. So for example, when I'm in DC, people always ask me, what do you think about DC?

42:31And I actually like DC, I used to live there as a lawyer. It's one of my favorite cities. But it's kind of like junk food for me. Because the next early stage, 19 -year -old, Uniscover Talent, is not hanging out in DC. The people that are hanging out in DC, and I talked about it, a confrontation, a lay, is you run into Mark Zuckerberg or Jensen. Like that's not useful for me. It's not really a stage for me to be an investor. It's interesting and fascinating, and maybe if I want to have an A one day, like a help a company. Yeah, but that's not funny. I'm not finding some undiscovered talent like in DC.

43:01So like you can get distracted with this junk food where I have to eat real meals, which you know, great founders are probably everywhere else. Yeah, it's funny that like hanging out with Jensen or Zach would be junk food for you, but when you stay in that light, I guess it really doesn't help you much. No, I need to find somebody who's never built anything before and has an idea about how to actually disrupt and video or matter. I also feel like there's been this transition and where investors have been much more comfortable speaking about what they think about politics, where they're much more comfortable just sort of saying what they want to anyway.

43:32Like I feel like there was a, there was like a guardedness. Like even 10 years ago when I was like starting lattice, I didn't feel like investors were like expressing their thoughts. And now I think a lot more investors and firms and people in general are willing online to just like say what they think kind of fearlessly. You say what you think kind of fearlessly. And like - Even before it's cool. You did it before it was cool, yeah, totally. But you definitely still do it now. You say a lot about politics. I mean, you definitely were always willing to like, you know, get at it with people online fearlessly.

44:00And maybe you were talking about politics for a long time too. Not as much. But I think lately, you're really willing to like, you don't seem afraid to say what you think ever. I think as a VC, it's a little bit easier for one structural reason, and to remember from lies. When you run a large organization, you represent a huge constellation of people. So I don't think a CEO should really be engaged in politics unless it affects the company. I'm kind of pretty strict about that. But as if you see you don't represent a large constellation of people You may only represent yourself or small partnership.

44:25Yeah, you know, I have four MDs here. You know four colleagues who are MDs So it's a very small insular group So I think it's easier to express your voices and then I think the culture has changed though You just watch Elon you know like but I think he as the best founder You know of the last hundred years. I think now it's like not debatable but like As the most successful founder of the last hundred years as as he's engaging in, you know, intellectual, it lets everybody do it. Yeah, it sets an example. Like, right, just like Mark Zuckerberg sets an example for founders in some ways, Steve Jobs said an example.

44:58Everybody, Brian Chupski sets an example. I mean, Elon even said an example, not that he's, you know, better or anything like that, but he's done an example for Zach in some ways it looks like to me. I think people like, you know, like emulating successful people in your field is a very common thing. Like if you're a great athlete, you look at like, if you know, you want to be the next great basketball player, of course you'd watch like Michael Jordan, or in a Kobe Bryant, et cetera, or if you're seven foot, you'd watch like Shaq or Patrick viewing and stuff like that. So I think it's very normal to emulate people who are successful.

45:25And so as successful founders are more engaged in politics for their own reasons, I think that does create either copycat mentality or a license to engage. But I don't think typically it's great for a founder of a large organization to be taking views on issues that do not directly affect their company. Do you think it helps VCs? It can. I mean, I think VCs is interesting because it's a matchmaking exercise. From my point of view, I'm a consignary. Like, I am not the right partner for every founder. Even internally, like sometimes someone will come to me. Like, I've been actually a smart amateur founder.

45:59I think it's a good investment, actually. I'm not sure I'm the best partner for him, but I think it's a good investment. So what I'm gonna try to do is pair him with a different one of my partners, who I think would be probably better for him. And so there's always this matchmaking exercise. So I think it's fair for founders to know, you know, who are you partnering with? You're partnering for a very long time, decade, et cetera. And does this person share either values or an approach to life or way of thinking that's either complimentary or suitable for me and my company? And so it does create like an alignment.

46:31There are founders who reach out to me very specifically because of my views on certain things. And they want to work with me more than other people. And if they don't, great, there's other partners here. Yeah. If you know it included, who have very different views on sometimes, you know, sometimes publicly, that they can pair with, that might be a better fit. I'm actually also on that front. I'm just like, I'm happy that the language is now just in the ecosystem is very much back to it. And I feel so the founders, but like founders want partners. And I felt this during that, like I really valued my board members.

46:59Like, and I got lucky, I had very good board members, but I really valued them. And there was that weird period where it became this sort of like feature to sort of invest without being a board member and that companies don't need boards and all that stuff. And either some exceptional founders who are like, at a point in their career, were like, you like Parker Conrad, can kind of like get away with it. Cause he's no less than that. You know, like people want, like building a company is always a roller coaster ride and having someone who's long for the journey, like just like it's the only job.

47:24Being a founder is very low in this. Yeah, totally. You know, the more your friends with and no founders really, well, you actually feel that, I mean, like I'm very close to a lot of founders I work with and I know that very well and have worked with them for years and sometimes knowing them for like someone like Max loves you for 20 plus years. And so you can actually tell their emotional state pretty well. And so how many people that understand what you're going through and occasionally can give you like feedback, like sometimes actually it's counter -intuitive feedback like when things are tough, encouragement might be the right answer, not criticism.

47:57And then actually the best time to be critical is actually when things are going really well. So like understanding that dynamic with the founders you work with, and board members are typically really good at that. The people who say you can get the proxy for having other founders you talk to or it's still like that is they often like context, like context about like how the company's really doing. Who are these people that, you know, this founder's working with? You know, what's going right or wrong? And like board member has to have like some level of visibility, sometimes really good visibility.

48:25So kind of I can project, you know, sort of your emotional state and why it is what it is. But yeah, I mean, I think a lot of times there's, you know, there's a, there's a misconception that like, oh, once you have a board, you have to be like buttoned up and you have to like share stuff in these calculated ways and they're going to kind of be a value. And it's like, it's the opposite. Like you can be much more real with your board members sometimes than with your exact. But you're actually like that's something to be almost half the because once you talk to some things about with a new Zach, I'll help break loose.

48:52Yeah. But you can't ever show any doubt to an exact without like people like suddenly kind of st offically moving in a different and a really good board member, you can have a conversation with, you know, I'm not sure this part of our strategy is right, or this part of the team, or maybe we don't need this, maybe we don't need this team, et cetera. All those conversations are really helpful to have someone to talk to. Some people are lucky, they have a great co -founder. But not all founders either have a great co -founder at all, or a great one that's on, you know, same plane. There's just something structurally nice, though, about somebody who is in it with you, but also has like a lot of other things they care about, too.

49:23Do you touch me in two useful songs? It's like a something really bad happening, Even with your executive co -founder, it's like, if you're like, oh my god, this guy is falling. And then you tell somebody else who's under the same building, they're like, oh no, this guy is falling on me too. You're just gonna amplify the problem. It's just amplify. Right, like we're actually, I think this is one of the reasons why I don't always recommend people pairing with younger investors because young investors sometimes panic too. Like right now, like they're closer to being under the same sky. Well, yeah, they are because their careers at stake, right?

49:48Like so, imagine one of my companies that we're counting on being successful has a really severe problem. nobody here's going to fire me if something goes wrong. So when you call me up and say, hey, I've got this really severe problem. What do you think I should do? Like, I don't react emotionally because I know I'm just like, you're not worried about your job. I mean, like immediate problem solving mode. And if you call it, the founders are working with that. So like, like immediately, okay, like what can we do about this? What are the options? Which we talk to, you know, et cetera, et cetera.

50:15Versus like, oh, shit, like, my partners are going to be really mad at me. Like, man, I get a defensive mode or self -preservation mode, which is very natural. I saw this play out during COVID as an illustration. I mean, I already had this view just having a bit of executive and having worked with people in their own career paths. Intersection as VCs, but during COVID, most founders were under severe stress right away. Like, what do I do? What does it mean? How long is it going to last? But we'll all burn it out of control. If you just took the same company with senior partners at successful NVCs and non -successful yet VCs, I think the quality of thinking and the ability to be like a smoothing function like a Christian Was just highly correlated with how successful is the VC right versus if they were just getting started if they were unsure You're like I don't want any of my companies to fail They don't want any of our high profile companies to suddenly start, you know under performing But if they do you'll be okay, but if I but if I do all I'm gonna do is try to figure out like is there a solution to this Like what can we do about it is very important like worrying about like having to communicate at my Monday partner meetings like, oh my god, because if I did communicate in my partner meeting and I would, the natural reaction by my partners here will be like, what else can we do to help?

51:28Like, you know, Keith, have you thought about this or that or talk to this person or I saw this 20 years ago and here's a possible answer versus like, oh, let's, you know, point fingers at Keith. There's nothing worse than if you're anxious as a founder, your investor is getting even more anxious about the same thing as like a nightmare. No, and I hate, you know, sometimes on boards with these things who do it. And I'll actually try to occasionally all run like kind of interference for the founder. Like I've like, you know, I'll try to send some, put it like a protective envelope around the founder.

51:57But sometimes they just ask for like a lot of data even as distracting. It's like, oh my god, like my partner should ask me all this question. It's like, let's go on wrong. I'm like, the last thing you want to do is to shock the founder with a bunch of data request when they're trying to solve a key problem. But it's a natural evolution. And that said, of course, you know, every VC is a young VC at some point. And so this isn't one size fits all, but I think we have to be judicious about board members that do amplify your own emotional state, which is not what you really want. Maybe a final topic that's somewhat tangential to this.

52:28Yourself you were an operator for a long time, very successful. Obviously, the node was a founder of Sun Microsystems. Same at Founders fund, like they're rooted around Foundership. Also, you've built companies as you've been a VC, you know, you've opened door, open store, you know, the same thing happened with like Trey and Dellian. Like it's like both of these places like entrepreneurial investing is like sort of in the DNA, but you've also obviously worked with a lot of investors who are career investors and you've been on board with people who are both types. Like now that you've been doing this for like more than a decade on lots of companies, many of which are very important.

52:58Like what are your reflections about this difference and how it shows up? And I think it's much better if you've built things or you know, to build things to be a VC. Firstly, just understand things at a different level, tactically, emotionally, you just encounter problems and it's pretty native. Secondly, it gives you credibility to, which is useful, like why should I believe you sort of, which is important? So you're right at KV, many people here have built companies and want to build companies, et cetera. And we encourage it, founders fund, think about the brand, et cetera. And so I think that's better.

53:38Are there exceptions? There's not that many. If I think about like when I'm raising capital for my companies, like runs out of built and or highest performing companies are asking for advice on subsequent rounds of financing, who do I naturally send them to? It's almost always people who started their career building stuff like, you know, we compete but also our friends with Rolloff and Alfred. They both had real jobs. Yeah, and they remember like what it's like to have a real job, you know, and so they're top of my list often And so I think that is pretty critical are there exceptions? You know honestly since 2005 I think there was an error where you could be a professional Finance person be a successful VC think Fred Wilson Peter Fetton kind of error since 2005 I can only name I think one Good investor who started their career after 2005, who didn't actually, you know, work as an entrepreneur at some point.

54:35Who's that? Moon. Oh, yeah. Yeah. His track works great. But I don't know of anybody else that I think is exceptional that started the career after 2005. Jeremy Levine would be in the first category. He was also a great investor. He did do a startup, but like not like a high profile one. What do you think for the people? And, you know, maybe there would be some set of people who are eight or ten or twelve years to their career who you wouldn't get, say, they're my moon, but if you spend time with them, you'd be like, okay, they could be on track. When you think about what makes a my moon situation work, how do those people, because there's like a lot of, I think, well, and very, very capable people doing VC and who never sort of built a company and whatever, what does it take for those people to get there?

55:14How does that happen? Well, I think you need to compare it. Ultimately, venture comes down to, and this is maybe summing up everything we've discussed. You have to have a comparative advantage like why me or why us or some combination like why take my money or why take our money and Usually it's a mix of like the overall brand and the individual and to match make exercise to so One way the other if you're gonna be a non Founder or non -previous executive you have to have a really compelling answer to that So one of the ways some people solve it include my moon is going after a vertical first. That's not super popular like sass and stuff when he did box and stuff, very non -consensus.

55:52And so you can create credibility, domain expertise, et cetera. That way, so you have a really good why. Like, okay, this is why you should partner with me. And so if you can develop that, that's hard to do. And it's always impossible to do in hot spaces because of that. But that's the belt the only formula I know is, you bite off a vertical. You become like a true expert. You have success in that vertical. like let's say lags, there's a wave there, and you can ride that wave for a long time. And then you can probably add that into maybe a broad, you know, investor. Awesome. All right, I'm going to let you go.

56:25Thank you for being time. Pleasure. This was awesome. Yeah. Awesome.