Jul 7, 2020 · 38m · 20vc
20VC: 8VC's Joe Lonsdale on How To Foster Contrarian Thinking Within Venture Partnerships, Why The Best VCs Are Company Builders & Why It Is Not Possible To Build Multi-Billion Dollar Companies and Have Worklife Balance
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In this episode of The 20 Minute VC, host Harry Stebbings interviews Joe Lonsdale, General Partner at 8VC and co-founder of Palantir and Addepar. Lonsdale shares his perspectives on venture capital strategy, firm governance, incubating breakthroughs, macro historical trends, and the relentless operational dedication required from modern founders.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 30.7% of the talking time here. How this is scored →
Harry as informed peer 4.2 Guest teaching 4.7 Guest disagreement 3.1 Harry pushing back 2.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 14:45 Dismissing Lean Startup as bullshit
Joe aggressively rejects mainstream tech wisdom, calling the lean startup framework bullshit for deep technology, bio, and government platforms.
Hardest push from Harry ▶ 12:58 Challenging firm incubations via LP concernsHarry directly confronts Joe with LP criticism that incubating internal companies acts as a distraction from core direct venture investing.
Biggest teaching moment ▶ 10:25 Correcting Harry on e-commerce logistics metricsJoe quizzes Harry on non-Amazon shipping distances and corrects Harry's guess of 15 days, reframing the actual distance gap to explain virtual warehouse networks.
Harry holds his own ▶ 19:59 Contrasting Elad Gil's thesis with decentralizationHarry demonstrates strong market awareness by contrasting Elad Gil's defense of Silicon Valley's tribal knowledge against remote work decentralization.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Joe Lonsdale's Path to Venture Capital | 1 | 3 | 1 | 0 | Harry opens with warm introductory questions regarding Joe's early career at PayPal and Palantir. Joe shares his origin story and explains how historical evolution frameworks inform his tech macro investing. | |
| Market Timing and Later-Stage Capital Dynamics | 5 | 5 | 2 | 2 | Harry steers the conversation off-schedule by asking about market timing and citing Bill Gurley's quote on late-stage capital. Joe outlines IRR targets and details how late-stage growth firms price out series B deals. | |
| The Builder Mentality in Venture Capital | 3 | 7 | 3 | 1 | Joe quizzes Harry on e-commerce shipping distance statistics and reframes Harry's incorrect guess to explain logistics gaps. He illustrates how thinking like a builder unlocks proprietary series A deal flow. | |
| Eight VC's Incubation Model and LP Concerns | 6 | 4 | 4 | 6 | Harry plays devil's advocate, challenging Joe with LP concerns that firm incubations distract VCs from direct investing. Joe defends the model with an example of how their incubation capability retained crucial talent for a portfolio company. | |
| Contrarian Thinking and Investment Decision Structures | 4 | 5 | 5 | 3 | Joe forcefully rejects mainstream orthodoxy, calling the lean startup movement bullshit for deep tech and bio. Harry probes Joe on 8VC's internal governance and voting supermajority requirements. | |
| Conceptual Gaps and Building Better Cities | 2 | 4 | 2 | 0 | Prompted by a question from Founders Fund's Trey, Joe outlines how conceptual gaps in government, finance, and urban design create massive economic inefficiencies in modern cities. | |
| Silicon Valley's Dominance and Housing Constraints | 6 | 4 | 4 | 5 | Harry challenges Silicon Valley's monopoly by contrasting Elad Gil's thesis on tribal knowledge against remote work decentralization. Joe criticizes Bay Area cattle zoning and predicts Silicon Valley's market share of top tech companies will drop to 40-50%. | |
| Free Speech, Cancel Culture, and Political Discourse | 7 | 5 | 4 | 7 | Harry asserts a strong personal opinion that free speech restrictions mean citizens no longer live in a democracy. Joe nuances Harry's point by distinguishing legal freedoms in the US from UK speech laws while condemning cancel culture. | |
| Managing Time, Responsiveness, and Operational Execution | 2 | 4 | 1 | 0 | Joe candidly admits to responding to text messages during the interview while describing his intense responsiveness habits. He then uses a story about his three-year-old daughter to explain how he identifies and nurtures talent. | |
| Cash Burn, Runway, and Startup Survival Strategies | 5 | 5 | 3 | 3 | Harry asks a probing follow-up about the long-term consequences for startups that cut growth marketing for gross margin efficiency. Joe sets strict runway rules and explains that burn cuts often reveal non-essential headcount. | |
| Knowing When to Pivot vs. Obsessive Focus | 5 | 6 | 5 | 4 | Joe rejects work-life balance for founders aiming to build multi-billion dollar companies, comparing the pursuit to Olympic training. In the quickfire round, Harry jokingly calls Joe out for delivering a woke answer on VC diversity. |
Statements from this episode (25)
Lonsdale: Historical frameworks are essential for understanding tech industry evolution
“And if you want to think like a great tech investor over time, you'd understand the forces that are shaping companies and how companies evolve and how industries evolve. And so for me, the frameworks you use for understanding history Are very analogous to the …”
Lonsdale: General Atlantic targets an IRR closer to 20 percent
“Their IRR targets are closer to 20%.”
Lonsdale: Winning mid-stage venture rounds requires insider leverage or esoteric focus
“For series B's and C's and D's, you have to have some really special unfair insider advantage where they're just willing to give you a much better deal or willing to work with you before going to market if you're going to be doing those types of investments. O…”
Lonsdale: 80% to 90% of top VCs are former founders
“The key in our generation, you've seen 80, 90% of the best ones have this background.”
Lonsdale: 8VC will allocate roughly 20% of capital to incubations
“So probably on the order of really only like a fifth of our capital will go towards it this time, give or take, and that's a very high IRR area.”
Lonsdale: 8VC direct venture and incubation IRRs are around 30%
“It's hard to say whether or not it's outperforming the rest of it. It seems both sides look like they're in the thirties right now.”
Lonsdale: Equal VC partnerships struggle with startup incubation due to politics
“And I think it'd be harder to do this in a partnership because, you know, people do get upside on things they help build. So if it was a pure partnership where there was no one at all in charge, there'd probably be more politics. My guess is probably why a lot…”
Lonsdale: Venture theses are inadequate if McKinsey would publish them
“One of my rules is if McKinsey could have written this, that might be B or B plus work. It's not good enough for APC. It has to be something that's out there enough that McKinsey would have been maybe uncomfortable publishing it or writing about it.”
Lonsdale: Lean startup methodology is useless for complex enterprise companies
“The whole lean startup movement I thought was bullshit when it was happening in terms of the things I wanted to do. There definitely was a lean startup movement. Didn't make sense at all for the areas I wanted to work on and focus on. You couldn't have done a …”
Lonsdale: Overruling his negative vote at 8VC requires a supermajority
“On the investment side, I am not the single decision maker. We have a full investment committee. We vote. The only rule there is that if I vote against something, it requires like a super majority to overrule me. But in general, we go by majority vote.”
Lonsdale: Venture returns stem from exploiting technological conceptual gaps
“Both our investing and our entrepreneurship, we're looking for conceptual gaps in the world, right? We're looking for areas where here's what it is now, and here's what it could be. And then very often times these gaps, you can think of them as opening up as n…”
Lonsdale: The giant investment gap in ride sharing is mostly closed
“If you want to invest in ride sharing now, the gap's mostly closed. There's not, at least maybe as far as I can see, there's not giant gaps versus how ride sharing works now and how it could be working.”
Lonsdale: 40% of Bay Area land is zoned for cattle
“40% of the land around the San Francisco Bay Area is zoned for cattle use right now”
Lonsdale: 8VC's Bay Area investing share will drop to 40-50%
“I think when I first started the firm almost a decade ago, we were like 90% investing around here. I think the number is somewhere around 60% now around here, maybe, maybe kind of mid, maybe 60 to mid-sixties, and I could very easily see it going down to 40 or…”
Lonsdale: Bay Area biotech ecosystem will dominate for 10 years
“The renaissance in biology, probably the most important trend going on in our space right now, and UCSF, Berkeley, Stanford, and the ecosystem around here is just probably going to be really strong there for the next 10 years.”
Lonsdale: Silicon Valley cancel culture resembles 1970s Maoist struggle sessions
“What's really happened here is there's like five or 10% of people who are on one political extreme who've really hijacked the conversation and who've kind of pushed forward this kind of cancel culture, who have kind of pushed forward stuff that really resemble…”
Stebbings: Fear of public backlash prevents free expression in democracy
“I actually don't believe we live in a democracy anymore. I was actually just talking to my mother about it, because I don't feel available and free to say at all what I think, 90% of the time, because of the public reaction that might ensue.”
Lonsdale: UK laws policing offensive online speech are a huge mistake
“First of all, I think the UK does have, like, strange online speech laws where, like, the police will visit you for saying things that if they find offensive, which I think is just absolutely unacceptable. I think you guys have been a huge mistake there.”
Lonsdale: Overemphasize employees' uniqueness to cultivate great talent
“Where the best way to interact with them is to help them discover their true skills and then calculate their true skills and to make them very proud of them to the point where they do see themselves as unique. And of course they are unique, but it's fine to ov…”
Lonsdale: 9 to 12 months cash runway is yellow alert, 6 months red
“And I generally say nine to 12 months is yellow alert and six months is red alert. And if you're a three months cash, you have to start exploring other alternatives. That's my general framework on these things.”
Lonsdale: 8VC advised portfolio founders to secure 18 to 24 months cash
“We've told people, as much as you can, get 18 to 24 months of cash. As much as you can, just your business is slow. This is all about survival. Assume the worst and do your best to survive in twenty-twenty.”
Lonsdale: Founders are too hesitant and casual about cutting burn rate
“So I think a lot of founders are a little too hesitant and blasÉ versus what they should be in this environment.”
Lonsdale: Building a multi-billion-dollar company precludes healthy work-life balance
“You cannot have healthy worth life balance and build a multi-billion dollar company.”
Lonsdale: Venture firms cannot scale beyond core partner bandwidth
“Well, these things don't really scale that much because the whole point of them is the core set of partners are what you're betting on. And so if you just hire lots and lots of more people, eventually you're doing things that are not with the core and then I'm…”