20VC Lessons from Alfred Lin and Ron Conway Why the World Does Not Want Your Startup To Exist and How the Best Founders Fight It How To Build Moats and Defensibility Against Large Incumbents with Tarek Mansour, Founder & CEO @ Kalshi

Summary Notes


In a candid conversation on "20 VC" with Harry Stebings, Tariq Mansour, founder and CEO of Kalshi, shares his journey from a math nerd in Lebanon to spearheading the first regulated exchange for trading on event outcomes. Tariq reflects on his time at Goldman Sachs and the realization that led him to create Kalshi. He discusses the importance of being both respected and liked as a leader, the challenge of balancing company and product building, and the role of naivety and intellect in founding startups. Tariq also touches on the pitfalls of fundraising and the shift towards a more financially-driven startup culture. With insights from working with industry giants like Alfred Lynn and Henry Kravis, Tariq envisions Kalshi evolving into a mainstream platform for event contracts, akin to the New York Stock Exchange.

Summary Notes

Introduction to Tarek Mansour and Kalshi

  • Tarek Mansour is the founder and CEO of Kalshi, the first regulated exchange for trading on event outcomes.
  • Tarek has an impressive background with experience at Citadel, Palantir, and Goldman Sachs.
  • Kalshi has attracted funding from notable investors including Alfred Lin at Sequoia, Ali Partovi at Neo, Ron Conway, Charles Schwab, and Henry Kravis.

"Now this is a fantastic discussion between two friends. It's a lot more conversational and natural than most of our shows. But Tariq, for context, is the founder and CEO at Kalshi, the first regulated exchange where you can trade directly on the outcome of events."

This quote provides context on Tarek Mansour's current role and the unique nature of his company, Kalshi, in the financial exchange space.

Harry Stebbings' Personal Endorsements

  • Harry Stebbings uses Notion for project management and company information organization.
  • He notes that Notion can replace multiple tools and save money.
  • Harry also praises AngelList for simplifying fund management and highlights their new product, AngelList Stack, for founders.
  • He endorses Squarespace for its mobile optimization, email campaigns, and SEO tools, encouraging the use of a promotional code for discounts.

"Notion has a worldwide network of millions of users creating templates, tutorials and new inspiration."

This quote emphasizes the widespread adoption and community engagement surrounding the Notion platform, which Harry personally endorses.

Tarek Mansour's Background and Motivation

  • Tarek is originally from Lebanon and attended MIT, where he realized the need to work hard to stand out.
  • His experience at Goldman Sachs led him to question the traditional methods of trading and the absence of a direct event-trading exchange.
  • Tarek's curiosity about why certain financial products were traded led to the founding of Kalshi.

"I was like, why on earth are we even trading these things?"

Tarek's questioning of traditional trading practices at Goldman Sachs sparked the idea for Kalshi, demonstrating his innovative mindset.

Personal History's Influence on Tarek's Drive

  • Tarek's drive for excellence is attributed to his mother's strict focus on achieving the best possible results.
  • His upbringing instilled a constant pursuit of going beyond the expected 100% effort.
  • Tarek connects his personal history to his current drive and work ethic.

"I think that drive and that sort of need for 120%, that doesn't leave you."

Tarek reflects on how his mother's emphasis on striving for excellence has had a lasting impact on his drive and ambition.

Parenting and Leadership

  • Tarek believes that achieving exceptional results often requires some form of imbalance or unusual aspect in one's history.
  • He suggests that there is a strong correlation between outlier results and having an outlier personal history or attribute.

"Honestly, I think if you want to achieve outlier results, you need some sort of outlier, I'm going to call it imbalance."

Tarek's perspective on the relationship between personal history and professional success suggests that exceptional achievements often come from unique personal experiences.

Founders' Attributes and Startup Success

  • Tarek discusses the idea that successful founders often have one exceptional attribute and many other average ones.
  • He explains that startups are inherently entities that the world resists, either due to competition or market issues.
  • Tarek believes that founders who can leverage their unique strengths to overcome these challenges can achieve outlier success.

"Founders that basically find that something to build or something to do that really heavily uses that attribute where they spike, end up achieving these outlier results."

This quote captures Tarek's belief in the importance of a founder's unique strengths in driving the success of a startup amidst market resistance.

Work-Life Balance

  • Tarek challenges the notion of work-life balance, emphasizing the need to work hard and smart.
  • He discusses the law of equal exchange and suggests that one must work hard before they can work smart.

"I think, sure, you should work smart, but that's conditioned on you working hard first."

Tarek expresses skepticism about the concept of work-life balance, emphasizing the prerequisite of hard work before one can effectively work smart.

Initial Approach to Work and Smart Working

  • Hard work is essential before optimizing for smarter work to achieve results.
  • There is no alternative to hard work in the pursuit of success.

how up and start working smart. You need to work very hard first, and then you can figure out how to optimize, maybe your workday and work smarter, but you just need to work very hard to achieve a lot of results. I mean, I just don't see any way around it.

The quote emphasizes the necessity of hard work as a precursor to working smart and achieving significant outcomes.

Evolution of Work Style

  • Work style evolves over time, from brute force to more delegation and prioritization.
  • Initially, there may be no processes or systems, leading to a physically taxing work environment.
  • As a company grows, roles and strategies must adapt to new demands and limitations.

Yeah, I think so. When I first started Kaushi, it was fully brute force. No process, no system, nothing... But right now, it's like if you don't actually pause first, you can just throw yourself into work and then do it. Now, at the very least, I pause and I prioritize before.

This quote describes the shift from a brute force approach to one that incorporates pausing and prioritizing tasks as a company matures.

Prioritization Strategies

  • Prioritization involves determining the impact of actions on the company's broader goals.
  • Factors considered include expanding the category, contributing to the ecosystem, and the potential for regulatory advantages.

Is this next step basically helping us bring more people into the ecosystem or expand the ecosystem, bring in a new market, bringing something else?

The quote details the criteria for prioritization, focusing on expanding the user ecosystem and market reach.

Naivety vs. Experience

  • Naivety can be a superpower or a disaster depending on its nature.
  • A combination of intelligence and naivety due to lack of experience can be advantageous.
  • Experience can be learned, while naivety can bring a fresh perspective without the baggage of past failures.

It's a very interesting story. Sometimes being naive can just lead you to disasters... But lack of experience tends to be very good because experience, what it does is like you can learn it.

The quote discusses the potential benefits and pitfalls of naivety in business, particularly when combined with intelligence and a lack of experience.

Hiring Philosophy

  • Hiring experienced individuals with a childlike fascination for new things can be beneficial.
  • Overvaluing raw intellect in hiring can lead to mistakes, especially when it comes at the expense of self-awareness.

I really mean this in a good way, that still have a little bit of childish fascination aspect... I think the ones that tend to be difficult are the ones where I basically overindex them.

The quote reflects on the importance of maintaining curiosity and the dangers of placing too much emphasis on raw intellect alone in hiring decisions.

Leadership Insecurities

  • Leaders may struggle with the balance between being respected and liked.
  • Adjusting communication styles and softening one's approach can mitigate some of the harshness without reducing intensity.

I'm more respected than liked... But at the same time, I think there are some things that can be mitigated and easily managed by becoming softer or becoming kind of more intentional about communication.

This quote speaks to the insecurity of being more respected than liked and the desire to improve communication to address this issue.

Hiring Engineers and Building Teams

  • A compelling vision and a fun, relevant interview process attract top engineering talent.
  • The compounding effect of having a strong team attracts more talent.
  • The interview process should be intriguing and directly related to real problems faced by the company.

I just think we're building something pretty cool... Once you have an amazing engineering team of really smart people that also attracts more.

The quote highlights the importance of having a strong vision and an engaging interview process in building a successful engineering team.

B2B SaaS Industry Critique

  • The speaker expresses skepticism about the B2B SaaS model, hinting at potential issues in the industry.

When we spoke before, you said, b two b is a Ponzi scheme.

The quote suggests a critical view of the B2B SaaS industry without providing full context or explanation.

Venture Capital Funding Cycle

  • VC funding can create a cycle of growth fueled by capital injections.
  • Companies may not be solving real needs but rather participating in a closed ecosystem of selling to each other.
  • This cycle can continue through various funding rounds until an IPO or until the cycle is disrupted, leaving investors holding the bag.

And I think that's the first thing that a lot of companies are going to cut. And I think that's going to be really difficult. But at a high level, let's assume the whole ecosystem is two B, two B SaaS companies and one VC with a bunch of lps.

This quote highlights the potential vulnerability of companies not addressing real needs and the risky nature of the VC funding ecosystem that can lead to difficult situations for companies when priorities shift.

Market Size and Real Needs

  • Tarek Mansour believes in the growth of companies that serve real needs in the national economy, separate from the VC-fueled ecosystem.
  • Companies serving industries like plumbing or cleaning, or having large customers like Ford Motor Company, are seen as true winners.

But do you not believe in the explosion of market size? And what I mean by that is, I am in SMB, CRM providers that sell to plumbers and sell to cleaning companies.

Tarek Mansour is challenging the idea that all startups are part of a circular VC economy, asserting that companies serving fundamental needs for small businesses are genuinely expanding the market size.

Venture Capital Ecosystem Critique

  • The current venture ecosystem is compared to a Ponzi scheme, with hyper-inflated valuations fueled by venture capital.
  • The ecosystem is criticized for being startup-heavy and focused on selling within its own closed loop.

The ecosystem is very hyper over inflated through a mechanism that is not too dissimilar to Ponzi's games.

The speaker is criticizing the venture capital ecosystem for inflating company values artificially, drawing a parallel to Ponzi schemes, indicating an unsustainable growth pattern.

Investor-Founder Relationship

  • The ideal investor-founder relationship is built on trust and the ability to turn to investors in times of crisis.
  • This relationship should go beyond financials to a personal level, akin to family.

Thing I would say, and this is going to sound cliche, but I truly feel like framework is like, can this person be my first call when shit hits the fan?

The quote emphasizes the importance of a strong, trust-based relationship between investors and founders, suggesting that investors should be the first call in a crisis, indicating a deep level of support and commitment.

Fundraising Mistakes

  • Startups may raise too much money too early, leading to unnecessary dilution.
  • Founders often seek high-profile 'super angels' who may not provide the hands-on support needed.
  • It's suggested that founders should focus on meaningful angels who are committed to the company's vision.

Raise too much, too early, unnecessarily. I see these seed rounds where like, oh, we can raise two, but we can raise four.

The speaker is advising against raising more funds than necessary in early rounds to avoid excessive dilution and to maintain focus on the company's core needs.

Perspectives on Raise Size

  • There are differing opinions on the ideal amount of money to raise, with some favoring raising more for flexibility and others advocating for less to maintain urgency and focus.
  • The "gun to a founder's head" metaphor is used to describe the pressure to succeed, which can be beneficial if it drives urgency and action.

Fundamentally, if you operate like you have 2 million, but have 4 million, yes, you'll be more dilution heavy, which sucks from a founding perspective. But the leverage that you get going into future fundraises and the mental luxury that you have in terms of knowing if it doesn't hit the first time, you can have a second go.

This quote represents the viewpoint that having extra capital provides a safety net and leverage for future fundraising efforts, despite the downside of increased founder dilution.

The Crucible Moment

  • Companies may face crucible moments that force them to act decisively or face failure.
  • These moments can drive companies to peak performance and efficiency.
  • An example is Airbnb's response to the COVID-19 crisis, which led to a more efficient company.

Those are the moments where oftentimes when you go back to stories about how companies were built and how their legacies were built are like, those are times where people went into their a game and they've just fueled the business to greater heights.

The speaker is highlighting the importance of critical moments in a company's history that can define its success, suggesting that adversity can lead to significant improvements and achievements.

Maintaining Financial Discipline

  • Founders should maintain a scarcity mindset and frugality, even when significant capital is available.
  • This mentality can help avoid overspending and maintain focus on the company's goals.
  • Pressure from investors and team members to spend more can be a challenge.

We just don't really consider that we raise that much in our mind. We basically raised much less.

The speaker is discussing their approach to capital management by mentally accounting for less than what was raised to maintain financial discipline and a lean operation.

Founder Motivation and Urgency

  • Founders need high motivation and a sense of imminent danger to act with urgency.
  • This combination can be intrinsic or created by external circumstances.
  • The metaphor of "gun to a head" is used to describe the intense pressure to succeed.

The gun to a founder's head thing is actually, I think, a pretty understated force.

This quote reflects the belief that intense pressure, whether internal or external, is a powerful motivator for founders, driving them to act with urgency and focus on success.

Learning from Experienced Investors

  • Working with experienced investors can push a founder's thinking and challenge their reasoning.
  • Each investor can provide unique insights and learning experiences.

Alfred just basically pushes back why he can even go all the way to say, this does not make much sense, even if he thinks it's the right decision.

The speaker shares how an experienced investor, Alfred, challenges their decisions to ensure that their reasoning is sound, illustrating the value of critical feedback from seasoned investors.

Critical Thinking and Decision Making

  • Emphasis on critical thinking and decision clarity in decision-making processes.
  • The importance of examining decisions critically and with clear thought.

Am I really thinking about this extremely critically? Am I thinking about decision as crystal clearly as I can?

This quote highlights the speaker's focus on ensuring that their thought process is extremely critical and clear when making decisions.

Long-Term Perspective in Difficult Times

  • Adopting a long-term view during challenging periods.
  • The practice of zooming out to gain perspective on current hardships.

Imagine yourself five years into the future looking back at this, and you're like, this is just like a tiny blip and a tiny challenge.

The speaker suggests using the technique of visualizing oneself in the future looking back on current challenges to gain perspective and minimize their perceived impact.

The Value of Mentorship

  • The role of mentors in providing perspective.
  • Mentor's advice on assessing the long-term significance of current problems.

Mentor Shaq told me to extrapolate yourself out when things seem bad and ask yourself, will I remember this in ten years time?

This quote conveys the mentor's guidance on evaluating the long-term importance of present difficulties by considering their future impact.

Quick Fire Segment: Personal Insights

  • The segment involves rapid-fire questions to gain personal insights from the interviewee.

Favorite Book and Negotiation

  • Discussion of a favorite book on negotiation.

I really like Never Split the Difference.

The speaker expresses a preference for the book "Never Split the Difference," indicating its value in their perspective on negotiation.

Strengths and Weaknesses

  • Self-assessment of strengths and weaknesses.

Biggest strength is I can get compulsively obsessed about anything... Biggest weakness? I tend to have a little bit more trouble with organization across different threads.

The speaker identifies their ability to become highly focused as a strength and acknowledges difficulties with organization as a weakness.

Balancing Company and Product Building

  • The challenge of balancing the development of the company with product innovation.
  • The importance of staying close to customers while also establishing company systems and culture.

The constant balance between company building and product building is probably one of the hardest.

This quote highlights the difficulty in maintaining a balance between focusing on product development and company growth.

Aspiration to Lead a Different Industry

  • Interest in leading a company in a heavily regulated and challenging industry.
  • The appeal of innovating within constraints.

I'd like to be CEO of an airline... Innovation is really hard because of how regulated it is.

The speaker expresses a desire to lead an airline due to the complex challenges and regulatory constraints present in the industry.

Impactful Angel Investors

  • Recognition of the most valuable angel investors.
  • The qualities that make certain investors stand out.

Ron Conway, just outlier. Incredible. Henry Gravit, super helpful. Justin Mateen.

The speaker names several angel investors who have been particularly helpful, singling out Ron Conway for his exceptional support.

Realizations and Industry Insights

  • Reflections on the difficulty of navigating regulatory paths and dealing with industry challenges.
  • Insights into the fallibility and commonality of authority figures.

Wished I knew how difficult that whole regulatory path... They don't have it as figured out as you think.

The speaker shares their wish to have known about the complexities of regulatory challenges earlier and dispels the notion that authority figures have everything figured out.

Startup Ecosystem Shifts

  • Observation of a shift in the startup ecosystem towards financial motivations.
  • The desire to see a return to passion-driven entrepreneurship.

I just feel like the ecosystem has turned a bit too financial.

The speaker laments the perceived shift in the startup ecosystem away from passion and towards financial incentives.

Future of Kaushi

  • Vision for Kaushi's future as a mainstream platform for event contract trading.
  • The anticipated integration and accessibility of the platform for various users.

So I think we look a little. A bit like the New York Stock Exchange, where you think about trading on events who come to Kalshi.

The speaker outlines their vision for Kaushi in five years, comparing its potential ubiquity and functionality to that of the New York Stock Exchange.

Gratitude and Conversational Tone

  • Expression of thanks for the interview and its conversational nature.
  • Anticipation of exciting developments for Kaushi.

Thanks for having me. This was awesome.

The speaker expresses gratitude for the interview experience, indicating a positive and engaging conversation.

Tool Recommendations and Endorsements

  • Personal recommendations for productivity and business management tools.
  • Mention of Notion, Angellist, and Squarespace as useful platforms for different business needs.

I use every single day notion... Angellist has been a key partner for me... Squarespace is the all in one platform.

The host endorses several tools, highlighting their daily usage of Notion, the benefits of Angellist for investment management, and the versatility of Squarespace for online presence and business operations.

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