20VC Founders Fund's Brian Singerman on Why VC Is About Upside Maximisation Not Downside Minimisation, Why There Is No Right Way To Do Venture and Why They Do Not Have Monday Morning Partner Meetings At Founders Fund

In an insightful conversation on "20 minutes VC," host Harry Stebbings interviews Brian Singerman, a partner at Founders Fund, renowned for investments in transformative companies like Facebook and SpaceX. Singerman, a former Google engineer and the founder of iGoogle, delves into his venture capital journey, emphasizing the importance of backing exceptional founders and the power of sector-agnostic investing. He shares insights on his transition from angel investing to managing his own fund, XGYC Fund, and the significance of early-stage investments in building long-term relationships with founders. Singerman also discusses his approach to investment, focusing on companies with complex coordination that are hard to replicate, like Oscar and SpaceX, and his conviction-driven strategy that prioritizes upside maximization. He challenges the one-size-fits-all mindset in VC and underscores the need for a fresh, differentiated deal flow network.

• Harry Stebbings introduces the episode of "20 Minute VC" and invites listeners to connect on Snapchat.
• Brian Singerman, a partner at Founders Fund, is introduced as a significant influence on Harry's thinking.
• Founders Fund's prestigious investment history is highlighted, including Facebook, Airbnb, SpaceX, and Spotify.
• Brian Singerman's background includes working at Google, founding iGoogle, and starting his own angel fund, XGYC Fund.
• Brian is acknowledged for his success, being named number five on Forbes Midas list for America's top VCs.
• Thanks are given to Kevin Hartz and Eric Tornberg for introducing Brian to the show.

Harry Stebbings introduces the episode of "20 Minute VC" and invites listeners to connect on Snapchat.

Harry Stebbings is the host of the "20 Minute VC" podcast and invites listeners to engage with him on social media.

Brian Singerman, a partner at Founders Fund, is introduced as a significant influence on Harry's thinking.

Brian Singerman is recognized as an influential figure in venture capital and a guest on the podcast.

• Harry Stebbings discusses his use of Zoom for calls and interviews, emphasizing its ease of use and scalability.
• Zoom's partnership with Sequoia and a recent funding round are mentioned as indicators of its success.
• Viewed.it is introduced as a free video recording tool beneficial for personalized communication in sales and customer support.
• The tracking feature of Viewed.it, powered by the Vidyard platform, is highlighted for its ability to provide feedback on video engagement.

Harry Stebbings discusses his use of Zoom for calls and interviews, emphasizing its ease of use and scalability.

Harry Stebbings provides a personal endorsement for Zoom, a video and web conferencing service.

Viewed.it is introduced as a free video recording tool beneficial for personalized communication in sales and customer support.

Viewed.it is recommended for its video recording capabilities and integration into professional communication.

• Brian Singerman shares his transition from engineering at Google to angel investing and venture capital.
• His angel investments began in 2005, focusing on friends' companies.
• In 2007, he raised his first fund, XGYC, which invested in early Y Combinator companies.
• The impetus for moving from angel investing to a formal fund was the desire to write larger checks.

Brian Singerman shares his transition from engineering at Google to angel investing and venture capital.

Brian Singerman describes his career path from Google to creating his angel fund and becoming a venture capitalist.

In 2007, he raised his first fund, XGYC, which invested in early Y Combinator companies.

Brian Singerman explains the early days of his venture capital experience, investing in Y Combinator startups.

• Brian acknowledges the constant evolution of his investment strategy and mindset.
• He notes the importance of adapting and avoiding stale strategies.
• Brian reflects on past investment rules, such as avoiding consumer Internet companies, and how he has moved beyond such dogmas to sector agnosticism.

Brian acknowledges the constant evolution of his investment strategy and mindset.

The quote highlights the dynamic nature of venture capital and the need for flexibility in investment approaches.

Brian reflects on past investment rules, such as avoiding consumer Internet companies, and how he has moved beyond such dogmas to sector agnosticism.

Brian Singerman discusses his past investment biases and his current open-minded approach to investing without strict sector preferences.

• Brian observes the trend towards specialization in venture capital firms.
• The rise of data-driven venture capital is noted as a significant trend in the industry.
• Brian emphasizes that there is no single correct way to do venture capital, and each person or firm must find their own approach.

Brian observes the trend towards specialization in venture capital firms.

The quote points out the increasing focus on specialization within the venture capital industry.

The rise of data-driven venture capital is noted as a significant trend in the industry.

Brian Singerman comments on the growing trend of using data analytics in venture capital decision-making processes.

• Brian Singerman emphasizes the importance of investing in the world's most important companies to generate massive returns.
• He acknowledges the unpredictability of where the next important company will emerge, citing various sectors like consumer internet, self-driving cars, and cancer cure companies.
• Brian maintains a sector-agnostic approach due to the uncertainty of the origin of the next important company.

"For my job at this fund is to generate massive returns. And for our fund, you simply have to invest in the world's most important companies in order to generate those returns."

This quote highlights Brian's primary goal of generating massive returns by investing in companies that have the potential to be globally influential, regardless of their industry sector.

"And I'm not smart enough to know where that is going to come from. You do not know where the next world's most important company is going to come from."

Brian admits the difficulty in predicting the sector from which the next significant company will arise, which justifies his generalist investing strategy.

• Brian acknowledges that maximizing returns could benefit from longer than the typical ten-year fund cycle.
• He mentions that there are compromises and the possibility of extending funds with limited partners' collaboration to accommodate longer return cycles.

"Yeah, I mean that's a great question. I think if we're going to maximize returns, it would be over an even longer period of time."

Brian agrees that longer periods could lead to maximized returns, suggesting that the current ten-year cycle may not always align with the time it takes for investments to mature.

• Brian focuses on evaluating the quality of founders rather than gaining domain expertise in specific sectors.
• He has developed expertise in identifying companies with existing moats and exceptional founders capable of executing strategies that exploit those moats.
• Brian believes that his approach to evaluating founders and their execution strategies is applicable across all sectors.

"My expertise is in the founders, the execution of founders, the strategy and the moats that these companies have. And I think that that just scales across all sectors."

This quote underlines Brian's belief that his skills in assessing founders and their strategic execution are universally applicable, allowing him to invest across various sectors without needing specialized knowledge in each.

• Brian has never relied on a spreadsheet model for founder evaluation.
• His approach to evaluating founders has evolved to be more open and agnostic, relying on a gut feel.
• He recognizes the difficulty in defining the types of founders he looks for and admits that his criteria have changed over time.

"It's honestly probably evolved into a more open and agnostic way as well. But there's a certain gut feel."

Brian explains that his method of evaluating founders has become more inclusive and intuitive, emphasizing the importance of his instinct in the decision-making process.

• Brian views venture capital as a game of upside maximization and considers downside minimization to be of little importance.
• He prioritizes getting a good price on investments as it relates to maximizing upside potential.
• Brian avoids terms that are restrictive to founders, as he sees them as a means of downside minimization which is not his focus.

"Venture capital to me is purely a game of upside maximization. And while this may get me in trouble, I actually don't. Downside minimization is completely unimportant to me."

Brian's philosophy in venture capital is to focus on the potential for high returns, indicating that he does not prioritize protecting against losses as much as seeking substantial gains.

• The investment decision-making process at Founder's Fund involves a combination of gut feeling and thorough business analysis by the team.
• Brian values the input of his partners, especially in later-stage investments where business analysis is crucial.
• The team strives for a reasonable price during negotiations, and large discrepancies between expected and offered prices can be a deal-breaker.

"So especially at the later stage, even if, let's say, somebody like me has a great gut feel, if the business side doesn't also check out, we're probably not making that investment."

This quote demonstrates the collaborative nature of the investment process at Founder's Fund, where both intuitive and analytical assessments are necessary for a decision to be made, particularly in later stages of investment.

• Founders Fund operates without Monday morning partner meetings, a unique approach in the VC industry.
• Investment decisions are organic and adapt to the size of the investment.
• Larger checks require more team members to have conviction, while smaller investments are streamlined.
• The team is encouraged to be self-starters and to back their convictions with investments.

"Somebody who sees the deal, somebody who brings in the deal has to have enough conviction to at least get the rest of the team to take a look and then get other members of the team to have also conviction, and then it kind of snowballs from there."

This quote explains the initial step in Founders Fund's investment process, where the person who identifies a deal must inspire enough interest among other team members to consider the opportunity.

• Early-stage investments are considered just as important as later-stage ones due to the relationship-building aspect with entrepreneurs.
• Founders appreciate early investments, which can lead to strong future networks and referrals.
• Best investments often start with smaller checks and grow over time.
• Early investments can yield high returns and are essential for building a positive reputation among entrepreneurs.

"The seed, the early stage investing is absolutely as important. Entrepreneurs love when an investor is willing to take an early bet on them and be right."

Brian Singerman emphasizes the importance of early-stage investments, highlighting the positive impact these can have on relationships with entrepreneurs and future returns.

• Founders Fund is aware of the signaling risk when investing early and communicates this to entrepreneurs.
• Transparency with entrepreneurs is key, informing them about potential risks upfront.
• Performance of the company will mitigate signaling risk concerns.

"We always, when we're making a small investment, always tell the entrepreneur up front, like, hey, this is a potential signaling risk."

Brian Singerman stresses the importance of being upfront with entrepreneurs about the implications of early investment and signaling risk.

• Founders Fund has abandoned Monday partner meetings, preferring a more flexible and dynamic approach.
• The team focuses on individual strategies, traveling, and meeting with entrepreneurs on their own schedule.
• Deal discussions happen off-cycle, allowing for quicker actions and decisions.
• Communication is maintained through a combination of email, Slack, and direct calls.

"We've tried to have Monday partner meetings...it just doesn't work for us."

Brian Singerman explains the rationale behind Founders Fund's decision to forgo traditional Monday partner meetings, highlighting their preference for a more fluid and responsive structure.

• Brian Singerman advocates for a sector-agnostic approach, finding value in teams across all sectors.
• VCs should be willing to learn or seek expertise in unfamiliar sectors rather than avoiding them.
• He welcomes other VCs' reluctance to invest in complex fields like biotech as it reduces competition.

"I don't understand that criticism at all...You're going to find fantastic teams in any sector."

Brian Singerman dismisses criticism of VCs moving into complex sectors, emphasizing the opportunity to discover great teams regardless of the industry.

• Complex coordination companies are those that manage all aspects of their operations in-house.
• These companies are difficult to replicate, offering a competitive edge.
• Founders Fund is drawn to such companies due to their uniqueness and the barriers to entry they present.

"Complex coordination companies are kind of...very vertically oriented. They do it all in house, right?"

Brian Singerman defines complex coordination companies and explains their appeal due to the difficulty in cloning such businesses.

• Companies with complex coordination are difficult to clone.
• Examples include Old School running their own primary schools and SpaceX with its integration of rocket science and manufacturing.
• This complexity creates a substantial barrier to entry for competitors.

Old school runs their own primary schools, right? This is not something that's easy to clone. SpaceX, complex coordination between rocket science, manufacturing, it's fucking space.

This quote highlights the uniqueness and non-replicability of businesses that have developed a complex operational model, which in turn acts as a significant competitive advantage or 'moat'.

• Companies like Oscar and Old School have advanced to a point where it's not just cloning that is difficult, but even reaching their level of progress is challenging.
• Starting a business in a field with such established players is recognized as extremely difficult.

And then I guess when you look at the likes of Oscar and old school, they're so far ahead now that not even cloning is difficult, but just even reaching them is too difficult.

This quote emphasizes the considerable lead that certain companies have in their respective industries, making it nearly impossible for new entrants to catch up.

• Brian Singerman's favorite book is "Snow Crash" by Neal Stephenson.
• The book is significant to him because it inspired his first company and his interest in virtual reality, leading to an investment in Oculus.

And why snow Crash? My first company, right outside of college, was a company called there, and we were trying to build the metaverse.

The quote explains the personal and professional impact of "Snow Crash" on Brian Singerman, connecting his entrepreneurial journey with his literary interests.

• Brian Singerman avoids echo chambers and does not attend big tech parties, allowing him to maintain a contrarian mindset.

I usually don't listen to the echo chamber. I don't like big tech parties, and I tend to not go.

The quote indicates Singerman's deliberate effort to avoid environments that might reinforce prevailing industry opinions, which helps him think independently.

• The primary challenge in venture capital is deal flow, which includes seeing, picking, getting into, and helping companies post-investment.
• Singerman is particularly focused on ensuring that they see the right deals by keeping a fresh and differentiated network.

Deal flow. I think venture capital comes down to, do you see the right deals? Can you pick the right deals? Can you get into the right deals?

This quote summarizes the multifaceted nature of venture capital success, highlighting the importance of deal flow in the industry.

• Brian Singerman enjoys sports content like Nate Duncan's Dunked On basketball podcast and tech publications such as The Information and Dan's Pro Rata newsletter.

I listen to my good friend Nate Duncan dunked on basketball podcast quite often for NBA fans.

The quote reveals Singerman's personal interests and sources of information outside the typical tech industry circles.

• Singerman would like to change the mindset that there is one right way to do things in startups and venture capital.
• He strongly disagrees with the notion of a singular "Silicon Valley way" to success.

The mindset that there is one right way to do this, the mindset that there is a Silicon Valley way, the mindset that there is one voice that is Silicon Valley.

The quote reflects Singerman's belief in diversity of thought and approach within the startup and VC ecosystem, opposing the concept of a monolithic success formula.

• Singerman's most recent investments include Affirm and Postmates, chosen for their difficulty, leadership, and scaling potential.

Affirm? It's either a firm or postmates. I don't know, which was publicly announced sooner, so you'll have to check on that affirm because it's ridiculously hard run by one of the best founders in history with Max Levchin or postmates.

This quote provides insight into Singerman's investment strategy, focusing on companies with strong leadership and growth trajectories.

• Gratitude is expressed for the introductions by Jeff, Eric, and Kevin, which made the episode possible.
• Promotion of Harry Stebbings' social media and Brian Singerman's Twitter for additional content and insights.

Really such a brilliant guest and a big hand to Eric Tornberg, Jeff Lewis and Kevin Hartz for the intros to Brian today, without which this episode would not have been possible.

The quote acknowledges the contributions of individuals who facilitated the interview, highlighting the importance of community and networking in the podcast industry.