The Exchanges

Q of seven deadly sins or seven core motivators, and just to retrofit it to the real world so we get it, you obviously worked on Twitch at Thrive. It was one of your great investments. Uh, well, I want to understand, how would you bucket that in terms of where it sits in the seven deadly sins or seven great motivators, and how would you retrofit Twitch to that model?

A Sure. Um, I would say Twitch, Twitch is In the bucket of a lot of other user-generated content networks where on the consumption side, it's Entertainment, right? It's like some form of sloth and envy and pride. Um, on the content creation side, it's some form of pride and greed. And I don't think that, like, describing it that way is actually bad. I think that, again, I think the seven deadly sins suffer from a branding problem. Um, but like most user-generated content networks, uh, it is incentivizing content creation By offering distribution and also economic return because Twitch, like YouTube, pays their content creators. And on a consumption side, it's just competing the same way that YouTube and Twitch, YouTube and Twitter and TikTok and Instagram, Snapchat, all compete for entertainment.

AI assessment note: “on the consumption side, it's... sloth and envy and pride. Um, on the content creation”

Q I mean, I think I love with venture is you can get 99 wrong and if there's only one right and it's right enough, then we're all in good shape. So I, I totally agree with you that. Listen, I want to talk about pace and I want to start just setting the foundations. Why did you choose the name Pace?

A Pace, aside from the fact that it was available, um, there were a handful of things that really resonated about the word. I would say two, two, two distinct things. One is, Pace is not, um, necessarily a fetishization of speed. Uh, it is a, a very intentional rate of resource expenditure. To achieve a distinct goal, right? You have to plan. It's like, okay, what is, where are we trying to go? What do we have at hand? How do we get there? Um, so it's more about the. Intentionality behind it, rather than just like raw speed. Sometimes you have to go slow to go fast and vice versa. The other thing that we really liked about it is if you ever watch it, like a competitive race, Tour de France, marathon, you'll have the people that are winning the race right out in front. Um, and if the camera zooms out at all, there's either like, you know, the Tour de France, you have like the pace car or. There's a runner right next to the lead person. That's the pace setter. And those people are really, really, really important to helping keep the people running the race in the right mindset. But those people are not running the race. They're strictly on the sidelines. Their job is to make sure that when The environment changes when things happen spur of the moment that the people that are competing are staying focused and keeping their heads in the game. And we think that that in many ways is th…

AI assessment note: “there were a handful of things that really resonated about the word.”

Q Is that truly scalable? You think about it. If you add another 20 companies, you'll soon be at 20 each with board seats. Like, is that scalable?

A Yeah. Um, so I think the short answer is yes. The longer answer is, you know, Jordan and I don't view ourselves as the only investors at Pace. Um, we have ambitions of growing the firm. Considerably. Um, I would love nothing more than my last day at Pace to be, you know, Pace's best day ever. And so I think the, one of the answers is, we would love, like, we're interested in, in more GPs being at the firm, more equal GPs being at the firm, right? So like, it's not, you know, Jordan and I have kind of eschewed terms like co-founder, because we think That that actually kind of robs future. Partners of the firm from agency and ownership. So we're an equal partnership. We want to grow the firm. That's one saw for the bandwidth thing. The other saw for the bandwidth thing that isn't that common across the industry is we take our time. You know, the, the investment period for fund one was three and a half years. I know funds, I know firms that have raised funds and deployed them and that raised another fund in the same calendar year. And so I think we're happy to take our time and be patient and wait for our shots and swing when we want, you know, be patient for, for the right pitch. And that helps alleviate that bandwidth issue because companies become successful, they get acquired, you know, your bandwidth constraints roll off or the companies go under.

AI assessment note: “I think the short answer is yes... we're interested in more GPs being at the firm”

Q Ok, I'm gonna kind of borrow from someone else and pay a toll for that usage. I totally get you there, and I think that's super interesting. It makes me think of something that your partner said. Your partner, Jordan, said, you're world class when it comes to isolating companies and businesses down to their core atomic value swaps. Now this sounds incredibly intelligent. What does he mean by this?

A Uh, it probably, it probably sounds more heady than it actually is. It's, it's really like the essential value exchange between a company or product and counterparty, the other, whoever is on the other side. So for example, let's say you walk into a convenience store and you buy a candy bar, buy a candy bar for a dollar. That atomic value swap is you are exchanging a dollar for a candy bar, which is presumably giving you one dollar or more of Value. And that's a sustainable swap. That's a sustainable value exchange. And so when you apply that to interactions at a company or product level, that's what I'm, that's what the concept of an atomic value swap is. It's like, how do you describe what is being offered, the perception of value of what is being offered, And then how fairly compensated the party is that's offering the value for the value that's being delivered. Um, I think of a, a good example. So, um, One of the challenges with, um, one of the challenges that has like historically plagued online dating, for example, is, uh, how do you appropriately price helping somebody find their life's partner? There's, there's virtually no amount of compensation. Like if you actually find your life partner on a online platform, there's no way that that platform is Being appropriately compensated for the value that is delivered to you. That's crazy. On the, on the flip side of that, the…

AI assessment note: “It's, it's really like the essential value exchange between a company or product and counterparty”

Q Sorry, help me understand why. Because the opportunity cost of that, like, virtue value creation then detracts from the enterprise value creation? Do you know what I mean? I'm just thinking back to, like, Benioff's like, hey, you can do good and make a lot of money in the same vein, and so I'm just trying to compare this.

A Yes. So I think you, so what is this not saying? I'm not saying that companies that are successful can't do good. That's not what I'm saying. I am saying that, um, there is this inverse relationship that, particularly under capitalism, where, let me take a step back. I think one of the, one of the things that I wanted to define is I think society perceives virtue as when somebody is not acting economically, right? Like if I were to, for example, give away money, giving away money, that's something that is not economically rational. No person. Like homo economicus would not give away money, but society would view that as virtuous and would say like, oh, what a good person. Um, so if you kind of describe virtue as an individual or a company acting kind of Not rationally, economically, or not doing something that homo economicus would do, then like you, it, it, the logical conclusion is that there, that behavior does not lead to structurally better enterprise value creation. Um, it can be effective in marketing. It can be effective in recruiting. But at like a, from a core business model perspective, or you distill down the atomic value swap of a company, there isn't a ton of room. There is perhaps no room to internalize virtue into that core atomic value swap as a company.

AI assessment note: “that behavior does not lead to structurally better enterprise value creation”

Q Can I ask you, you guys really scaled the firm so incredibly. Um, why did you decide to leave Thrive to found Pace? What was that catalyst moment?

A Yeah, uh, I would say it's a confluence of a, a handful of things. First, I mean, Thrive, rightfully so, is gonna be Josh's life's work. I, I think he, it's amazing to see what he has built with it, and I somewhat selfishly was interested in, you know, what, what is gonna be my, you know, hopefully my and other people's professional life's work, and so I think that was a, a large input. Um, there are other smaller inputs, like, I really like early stage investing, and as we grew in fund size at Thrive, it felt like I wasn't sure if I could write the kind of size checks that would make sense for those larger fund sizes. Mostly, I think I was curious, I was interested in understanding what would be my long-term professional life's work.

AI assessment note: “interested in understanding what would be my long-term professional life's work.”

Q I mean, I think I love with venture is you can get 99 wrong and if there's only one right and it's right enough, then we're all in good shape. So I, I totally agree with you that. Listen, I want to talk about pace and I want to start just setting the foundations. Why did you choose the name Pace?

A Pace, aside from the fact that it was available, um, there were a handful of things that really resonated about the word. I would say two, two, two distinct things. One is, Pace is not, um, necessarily a fetishization of speed. Uh, it is a, a very intentional rate of resource expenditure. To achieve a distinct goal, right? You have to plan. It's like, okay, what is, where are we trying to go? What do we have at hand? How do we get there? Um, so it's more about the. Intentionality behind it, rather than just like raw speed. Sometimes you have to go slow to go fast and vice versa. The other thing that we really liked about it is if you ever watch it, like a competitive race, Tour de France, marathon, you'll have the people that are winning the race right out in front. Um, and if the camera zooms out at all, there's either like, you know, the Tour de France, you have like the pace car or. There's a runner right next to the lead person. That's the pace setter. And those people are really, really, really important to helping keep the people running the race in the right mindset. But those people are not running the race. They're strictly on the sidelines. Their job is to make sure that when The environment changes when things happen spur of the moment that the people that are competing are staying focused and keeping their heads in the game. And we think that that in many ways is th…

AI assessment note: “Pace, aside from the fact that it was available, um, there were a handful”

Q you've got brownie points forever from your wife now for that one. Uh, but I, I do want to ask, you also chose a very deliberate decision not to have portfolio added support, which in this world of venture value admin services, again, goes against the grain quite in a way. Uh, why did you decide not to have the portfolio added support Services model of venture. Why was that?

A So I think it can best be summed up, uh, maybe with a line of like, you can't pay someone else to go to your kid's soccer games for you. And like, and maybe that's too, like, too paternalistic of a view, but when we, when, when a founder chooses to work with us, and we kind of shake hands, the implicit social contract, the, the, the implicit contract is that we show up, like they are, the person that they're talking to, that they want to join their board is the person that is going to be spending time with them. That means we're not just like tagging somebody in and sending, you know, Hey, like, we, we signed up to, to help this company out, and then all of a sudden they're interfacing with somebody they've never met before. I forget who said it, but, um, Aurora's first suggested, but there's this sort of like litmus test, which is, in a venture capital firm, there are things that are meant to scale the GP, like the investor, and those are sort of questionable, um, because Really, they're not necessarily, uh, directly helping the companies. They're helping the investor primarily, not really helping the companies. We think that venture isn't an asset that is meant to scale. It's, uh, pretty hands-on. You roll up your sleeves. You, you know, you choose a handful of relationships and companies and, um, Uh, we believe in a fewer, deeper relationship approach. And on the back of tha…

AI assessment note: “we believe in a fewer, deeper relationship approach”

Q about us moving away from the social graph and moving towards content discovery engines. Social graphs, actually, we were wrong. They don't signal What we want to see in terms of content, and algorithms do a much better job. Do you agree that we've left the era of social graphs, and actually they don't hold value, and that we have moved to content discovery engines and ML recommendations for content?

A Probably. I think about it a lot through the lens of how do you solve the merchandising problem with Infinitely long tails of supply and demand. And you can approach it with these like rough heuristic cuts that are chunkier. And the social graph is the social graph. Works and worked because of the idea that who people select for in their social graph is a proxy for their interest. And so in some ways you are using somebody's social graph as spark notes for the integral, the, the, the fully like, you know, my new integral of all of their interests. And that's That's a cut at it. But if you were to like zoom in at a minute level, it's probably not capturing the full fidelity of that person's interests. And so it was at one point good. Uh, but when there is something that gives us a higher fidelity view of the kind of primary information, then becomes no longer as relevant.

AI assessment note: “when there is something that gives us a higher fidelity view”

Q Is that truly scalable? You think about it. If you add another 20 companies, you'll soon be at 20 each with board seats. Like, is that scalable?

A Yeah. Um, so I think the short answer is yes. The longer answer is, you know, Jordan and I don't view ourselves as the only investors at Pace. Um, we have ambitions of growing the firm. Considerably. Um, I would love nothing more than my last day at Pace to be, you know, Pace's best day ever. And so I think the, one of the answers is, we would love, like, we're interested in, in more GPs being at the firm, more equal GPs being at the firm, right? So like, it's not, you know, Jordan and I have kind of eschewed terms like co-founder, because we think That that actually kind of robs future. Partners of the firm from agency and ownership. So we're an equal partnership. We want to grow the firm. That's one saw for the bandwidth thing. The other saw for the bandwidth thing that isn't that common across the industry is we take our time. You know, the, the investment period for fund one was three and a half years. I know funds, I know firms that have raised funds and deployed them and that raised another fund in the same calendar year. And so I think we're happy to take our time and be patient and wait for our shots and swing when we want, you know, be patient for, for the right pitch. And that helps alleviate that bandwidth issue because companies become successful, they get acquired, you know, your bandwidth constraints roll off or the companies go under.

AI assessment note: “so I think the short answer is yes. The longer answer is”

Q of seven deadly sins or seven core motivators, and just to retrofit it to the real world so we get it, you obviously worked on Twitch at Thrive. It was one of your great investments. Uh, well, I want to understand, how would you bucket that in terms of where it sits in the seven deadly sins or seven great motivators, and how would you retrofit Twitch to that model?

A Sure. Um, I would say Twitch, Twitch is In the bucket of a lot of other user-generated content networks where on the consumption side, it's Entertainment, right? It's like some form of sloth and envy and pride. Um, on the content creation side, it's some form of pride and greed. And I don't think that, like, describing it that way is actually bad. I think that, again, I think the seven deadly sins suffer from a branding problem. Um, but like most user-generated content networks, uh, it is incentivizing content creation By offering distribution and also economic return because Twitch, like YouTube, pays their content creators. And on a consumption side, it's just competing the same way that YouTube and Twitch, YouTube and Twitter and TikTok and Instagram, Snapchat, all compete for entertainment.

AI assessment note: “sloth and envy and pride... content creation side, it's some form of pride and greed”

Q that you think is important to highlight? Or any misalignments between founders and investors? I think this is a really important one for founders also to hear, is like, where are founders and investors misaligned? An example would be liquidity. Um, sometimes it is in the interest of the investor to sell, when it may not be in the interest of the founder for them to sell at that time.

A One of the biggest areas of misalignment between founders and investors is probably management incentive in an acquisition. So management incentive in acquisition is basically when the acquiring company says you, the management team will have this compensation package here when you join. None of that is going to, is going economically to your cap table. And so as an acquirer, you can be like, Hey, company X, Y, and Z. We actually want to give you a massive management incentive to join for us to acquire a company. And like, let's say in this hypothetical situation, we're going to give zero dollars to your cap table. That's a huge misalignment of incentives between founders and investors, where the founders are like, awesome. This is going to be great for me. And then investors are like, I'm stuck holding the bag because we helped build this business or get it here. And then there's like, no, no, So I think there, there are significant, there are, there are opportunities, there are always opportunities for misalignment. That is a very large example. To your point, like, driving the prioritization of liquidity, particularly from an investor perspective, is another area of misalignment.

AI assessment note: “One of the biggest areas of misalignment between founders and investors is probably management incentive”

Q Can I ask you, you guys really scaled the firm so incredibly. Um, why did you decide to leave Thrive to found Pace? What was that catalyst moment?

A Yeah, uh, I would say it's a confluence of a, a handful of things. First, I mean, Thrive, rightfully so, is gonna be Josh's life's work. I, I think he, it's amazing to see what he has built with it, and I somewhat selfishly was interested in, you know, what, what is gonna be my, you know, hopefully my and other people's professional life's work, and so I think that was a, a large input. Um, there are other smaller inputs, like, I really like early stage investing, and as we grew in fund size at Thrive, it felt like I wasn't sure if I could write the kind of size checks that would make sense for those larger fund sizes. Mostly, I think I was curious, I was interested in understanding what would be my long-term professional life's work.

AI assessment note: “I somewhat selfishly was interested in, you know, what, what is gonna be my... professional life's work”

Q you've got brownie points forever from your wife now for that one. Uh, but I, I do want to ask, you also chose a very deliberate decision not to have portfolio added support, which in this world of venture value admin services, again, goes against the grain quite in a way. Uh, why did you decide not to have the portfolio added support Services model of venture. Why was that?

A So I think it can best be summed up, uh, maybe with a line of like, you can't pay someone else to go to your kid's soccer games for you. And like, and maybe that's too, like, too paternalistic of a view, but when we, when, when a founder chooses to work with us, and we kind of shake hands, the implicit social contract, the, the, the implicit contract is that we show up, like they are, the person that they're talking to, that they want to join their board is the person that is going to be spending time with them. That means we're not just like tagging somebody in and sending, you know, Hey, like, we, we signed up to, to help this company out, and then all of a sudden they're interfacing with somebody they've never met before. I forget who said it, but, um, Aurora's first suggested, but there's this sort of like litmus test, which is, in a venture capital firm, there are things that are meant to scale the GP, like the investor, and those are sort of questionable, um, because Really, they're not necessarily, uh, directly helping the companies. They're helping the investor primarily, not really helping the companies. We think that venture isn't an asset that is meant to scale. It's, uh, pretty hands-on. You roll up your sleeves. You, you know, you choose a handful of relationships and companies and, um, Uh, we believe in a fewer, deeper relationship approach. And on the back of tha…

AI assessment note: “we believe in a fewer, deeper relationship approach”

Q about us moving away from the social graph and moving towards content discovery engines. Social graphs, actually, we were wrong. They don't signal What we want to see in terms of content, and algorithms do a much better job. Do you agree that we've left the era of social graphs, and actually they don't hold value, and that we have moved to content discovery engines and ML recommendations for content?

A Probably. I think about it a lot through the lens of how do you solve the merchandising problem with Infinitely long tails of supply and demand. And you can approach it with these like rough heuristic cuts that are chunkier. And the social graph is the social graph. Works and worked because of the idea that who people select for in their social graph is a proxy for their interest. And so in some ways you are using somebody's social graph as spark notes for the integral, the, the, the fully like, you know, my new integral of all of their interests. And that's That's a cut at it. But if you were to like zoom in at a minute level, it's probably not capturing the full fidelity of that person's interests. And so it was at one point good. Uh, but when there is something that gives us a higher fidelity view of the kind of primary information, then becomes no longer as relevant.

AI assessment note: “Probably. I think about it a lot through the lens of”

Q Sorry, help me understand why. Because the opportunity cost of that, like, virtue value creation then detracts from the enterprise value creation? Do you know what I mean? I'm just thinking back to, like, Benioff's like, hey, you can do good and make a lot of money in the same vein, and so I'm just trying to compare this.

A Yes. So I think you, so what is this not saying? I'm not saying that companies that are successful can't do good. That's not what I'm saying. I am saying that, um, there is this inverse relationship that, particularly under capitalism, where, let me take a step back. I think one of the, one of the things that I wanted to define is I think society perceives virtue as when somebody is not acting economically, right? Like if I were to, for example, give away money, giving away money, that's something that is not economically rational. No person. Like homo economicus would not give away money, but society would view that as virtuous and would say like, oh, what a good person. Um, so if you kind of describe virtue as an individual or a company acting kind of Not rationally, economically, or not doing something that homo economicus would do, then like you, it, it, the logical conclusion is that there, that behavior does not lead to structurally better enterprise value creation. Um, it can be effective in marketing. It can be effective in recruiting. But at like a, from a core business model perspective, or you distill down the atomic value swap of a company, there isn't a ton of room. There is perhaps no room to internalize virtue into that core atomic value swap as a company.

AI assessment note: “that behavior does not lead to structurally better enterprise value creation”

Q you there in terms of the, uh, Encouragement or inspiration to a previously disenfranchised group. I think there's another important factor, which is the market timing itself, though, and being right on market timing. How do you feel about the importance of why now? A lot of people are like, well, great founders, they can, they can kind of win it into existence. How do you feel about why now?

A I think the best analogy I can come up with for success in startups and great founders is You're surfing a wave and half the battle is making sure you're in the water when the wave comes, right? That is really important because like, if you see the wave coming, you're still on the beach. There's, there's no way that you're going to get out there in time to be able to surf it. And so I think that goes into the importance of timing, but at the other thing is no surfer really can make waves. You don't have the power to change the actual tide. And so I think that great founders are incredible at putting themselves in the position to surf waves and then also are able to navigate and surf waves very, very, very well. They're great at recruiting. They're great at this money. They're great at, you know, managing. But I don't think anybody can make waves themselves. You can just surf them. Maybe you're really good at identifying them.

AI assessment note: “no surfer really can make waves. You don't have the power to change”

Q you, I used to be in the camp of it's all about the founder, it's all about the founder. Now, honestly, I'm not at all. I'm actually, I would much rather a really, really great market, um, and I take a much more market-centric approach because I've seen how difficult it can be when you're great in a shit market. How do you feel about market versus founder centrality, honestly?

A I, I think I probably tend to agree with you. I, I, I tend to agree with that sentiment more, and I'll, I'll sort of, uh, there are a couple adages. One is, I feel like it's Warren Buffett. Warren Buffett has this line of, I like investing in businesses that can be run by a ham sandwich, um, which suggests the durability of businesses themselves. Businesses get up and running. If businesses are at scale, like, there's a lot of momentum and inertia in, in companies, and particularly if they have moats and they're taking advantage of moats, Sometimes companies can just be successful, period, and it doesn't even matter, like, who's running them. Um, the other thing, the other kind of cut of it that may be elucidating is if you have, like, the world's greatest founder and you put them in a market that doesn't have any demand, right? Where it's like, okay, I, you know, I don't know what some, like, you, you ask the world's greatest founder to, like, make

AI assessment note: “I think I probably tend to agree with you. I tend to agree with that sentiment”

Q So how did you then deliberately, I'm fascinated here, love that, how did you then deliberately optimize for alignment over outcomes?

A We were, we were as transparent as possible with every single investor that we spoke with. And we, in our fund one fundraising presentation, we had a slide that says, this is what we think fund one will look like. This is what we think funds five and beyond will look like. And so You, as an investor, are, yes, assessing what we are trying to do in this moment in time, but we are also very intentional, and we're, we're trying to give you as much forward information as possible about where it is that we want to go, what we want to build, and we want to make sure that you're also aligned with this future of the firm, because the relationships that we're establishing are not one to two year relationships. You know, our goal is for future GPs of Pace to have as good of relationships with the investment professionals at our LPs as we do. Decades in the future. And so if that is the goal, you have to be able to find institutions that are aligned with the future strategy of the firm.

AI assessment note: “We were as transparent as possible with every single investor that we spoke with.”

Q Ok, I'm gonna kind of borrow from someone else and pay a toll for that usage. I totally get you there, and I think that's super interesting. It makes me think of something that your partner said. Your partner, Jordan, said, you're world class when it comes to isolating companies and businesses down to their core atomic value swaps. Now this sounds incredibly intelligent. What does he mean by this?

A Uh, it probably, it probably sounds more heady than it actually is. It's, it's really like the essential value exchange between a company or product and counterparty, the other, whoever is on the other side. So for example, let's say you walk into a convenience store and you buy a candy bar, buy a candy bar for a dollar. That atomic value swap is you are exchanging a dollar for a candy bar, which is presumably giving you one dollar or more of Value. And that's a sustainable swap. That's a sustainable value exchange. And so when you apply that to interactions at a company or product level, that's what I'm, that's what the concept of an atomic value swap is. It's like, how do you describe what is being offered, the perception of value of what is being offered, And then how fairly compensated the party is that's offering the value for the value that's being delivered. Um, I think of a, a good example. So, um, One of the challenges with, um, one of the challenges that has like historically plagued online dating, for example, is, uh, how do you appropriately price helping somebody find their life's partner? There's, there's virtually no amount of compensation. Like if you actually find your life partner on a online platform, there's no way that that platform is Being appropriately compensated for the value that is delivered to you. That's crazy. On the, on the flip side of that, the…

AI assessment note: “It's really like the essential value exchange between a company or product and counterparty”

Q I, I loved something in the frameworks, which I always think back to when I'm investing in consumers today, uh, and it's the seven deadly sins. You said the seven deadly sins are actually the seven core motivators. What are the seven deadly sins, just to get a framework, and how do they apply to the world of consumer for anyone thinking that we've taken a very dodgy religious turn?

A Sure, um, the seven deadly sins, I mean, this isn't new, it's been, I feel like it's an original thought, and a lot of people have, have Like, much more than me have also said it. Um, seven deadly sins are pride, envy, lust, gluttony, greed, sloth, and, I always forget the seventh one, um, wrath. Interestingly enough, these have not changed over millennia, right? These have Withstood the test of time. So we're talking about survivor bias. The seven deadly sins, proven. Darwinistically proven. And the reason why I call them the seven core motivator, I actually think maybe the seven deadly sins have been, been poorly branded. Um, I actually think the seven deadly sins are really core motivators. They describe why people do things. And I would go far as far to say, like, honestly, They're the only reasons why people do things. I think it's possible to distill down any individual behavior that anyone takes and bucket it into one or more of these seven deadly sins. Even like, you know, people say, hey, but like, what about like nonprofit work or altruism or, you know, some of these more virtuous things? I kind of subscribe to the Kantian school of thought that altruism or, you know, When we do things that are perceived as virtuous by society, in many ways, it's things to serve our own ego. It's things to fuel our own tons of pride and create a form of ourselves that we think more fa…

AI assessment note: “seven deadly sins are pride, envy, lust, gluttony, greed, sloth, and, I always forget the seventh one, um, wrath.”

Q you, I used to be in the camp of it's all about the founder, it's all about the founder. Now, honestly, I'm not at all. I'm actually, I would much rather a really, really great market, um, and I take a much more market-centric approach because I've seen how difficult it can be when you're great in a shit market. How do you feel about market versus founder centrality, honestly?

A I, I think I probably tend to agree with you. I, I, I tend to agree with that sentiment more, and I'll, I'll sort of, uh, there are a couple adages. One is, I feel like it's Warren Buffett. Warren Buffett has this line of, I like investing in businesses that can be run by a ham sandwich, um, which suggests the durability of businesses themselves. Businesses get up and running. If businesses are at scale, like, there's a lot of momentum and inertia in, in companies, and particularly if they have moats and they're taking advantage of moats, Sometimes companies can just be successful, period, and it doesn't even matter, like, who's running them. Um, the other thing, the other kind of cut of it that may be elucidating is if you have, like, the world's greatest founder and you put them in a market that doesn't have any demand, right? Where it's like, okay, I, you know, I don't know what some, like, you, you ask the world's greatest founder to, like, make

AI assessment note: “I think I probably tend to agree with you. I, I, I tend to agree”

Q I agree. Uh, tell me my friend, what's the biggest investing miss, uh, or mistake? And what did you learn?

A I think one of the things that I have learned about myself as an investor, and it's pretty idiosyncratic, is I make the best decisions Without like leverage or help. So as an investor, I don't work with an associate. Like I don't, I don't have an associate at our principal. I don't have an analyst. Um, and I think it's because in the past I have made, I've been in a position where I didn't do the customer calls. I didn't do, I didn't myself do all of the diligence and it was synthesized into Information that was digestible and presentable to make an investment decision, but I hadn't done the work myself. And through that, I've learned that I can make, I should not be in those positions. I should force myself to do the work myself. And if I don't want to do the work, that is a really strong input into my inherent level of conviction.

AI assessment note: “in the past I have been in a position where I didn't do the customer calls”

Q Okay, so we understand that this is a professionalized work. We want to take lessons from that incredible experience with Thrive to this new endeavor being Pace. What do you think are one or two things that you really took from your experience building and scaling Thrive with Josh and co that really impacted how you build Pace?

A Yeah, um, I think the, one of the things that Thrive does really, really, really well, um, In my opinion, maybe even better than anyone else in the industry is it leans into people's potential, uh, regardless of their age, regardless of their credentials. Um, you know, when I reflect on the kind of responsibility that I was able to have at Thrive with, with no justification, um, I, you know, the first board I ever sat on was Twitch. I was 2005 or 26. I had no business doing that, uh, sort of like from a traditional sense. And I think in an industry where Firms, a lot of venture capital firms, understandably compensate on the basis of like performance rather than potential. And, uh, you know, people, junior investor, you know, junior investors in venture kind of constantly struggling and fighting for the ability to lead deals and spread their wings and, you know, Try their hand at investing. I think one of the things that we did really well at Thrive and mostly Josh is identify people who are young, hungry, and ambitious, and just like really lean into them and not, not need to rely on a Sort of check the box, cast and call situation where this person has XYZ credentials.

AI assessment note: “one of the things that Thrive does really, really, really well... leans into people's potential”

Q Chris, do you get that? I mean, do you get that? Because I, I target Mila Kunis as my girlfriend, and I'm still single, ok? So, like, my question is, when do you get 20%? Like, honestly, I never see that.

A I would say we, we've been successful at hitting our ownership target in 70% of the companies we invested in. Rubrics are meant to kind of be broken. Um, it's funny, in venture, I feel like everyone says, oh, like my best performing companies I own the least of, or my best performing companies I pay the highest price for. Um, yes, and if you have a really high bar of conviction, necessarily Um, the highest conviction things that you get comfort with are the ones that you break the most number of rules on. So the ones that you pay the highest price for, you own the least of, but that doesn't mean they're inputs into it, right? It's not like, okay, well, if you pay a really high price for a company, like high price companies are good or low ownership is good. Um, it's really like you shoot for the stars and even if you miss, you know, you land on the moon. Um, I don't think anybody Will exceed anything in their, like, highest expectations, and so that is our, that, that, that's our framework of approach. You established your rules to know what your exceptions are, um, but we, it's, it's not just kind of lip service, we actually do really focus on it.

AI assessment note: “we've been successful at hitting our ownership target in 70% of the companies”

Q What was the most common reason they said no?

A Um, so interestingly enough, I think the, and it's totally understandable, LPs have really hard jobs, right? When we invest, we at least get to invest in assets. We're like, okay, well, I think this is a good business, and regardless of the management team, I think it's a good business. LPs have to invest behind judgment, right? So they're trying to extrapolate out, they're trying to fit a curve to a single data point if it's the first time that they're meeting you. And that is an impossible task to ask somebody to do. Like, how do you extrapolate a curve from a single data point? That's impossible. Most of our LPs for fund one were people that we have longitudinal relationships with that were able to fit that curve over a much longer set of data. And so there, you know, it, it wasn't, um, actually, I don't think, I don't know if we got to a yes For any of our LPs in Fund One, where we met them in the process.

AI assessment note: “they're trying to fit a curve to a single data point”

Q that you think is important to highlight? Or any misalignments between founders and investors? I think this is a really important one for founders also to hear, is like, where are founders and investors misaligned? An example would be liquidity. Um, sometimes it is in the interest of the investor to sell, when it may not be in the interest of the founder for them to sell at that time.

A One of the biggest areas of misalignment between founders and investors is probably management incentive in an acquisition. So management incentive in acquisition is basically when the acquiring company says you, the management team will have this compensation package here when you join. None of that is going to, is going economically to your cap table. And so as an acquirer, you can be like, Hey, company X, Y, and Z. We actually want to give you a massive management incentive to join for us to acquire a company. And like, let's say in this hypothetical situation, we're going to give zero dollars to your cap table. That's a huge misalignment of incentives between founders and investors, where the founders are like, awesome. This is going to be great for me. And then investors are like, I'm stuck holding the bag because we helped build this business or get it here. And then there's like, no, no, So I think there, there are significant, there are, there are opportunities, there are always opportunities for misalignment. That is a very large example. To your point, like, driving the prioritization of liquidity, particularly from an investor perspective, is another area of misalignment.

AI assessment note: “One of the biggest areas of misalignment between founders and investors is probably management incentive”

Q How do you do that with reliability? I do the same, but bluntly, often I miss, they're not as good as I thought, they're not as smart as I thought, they're not as ambitious as I thought. You've done it with reliability. How have you been able to pick those people reliably?

A My short answer is, honestly, it was mostly Josh at Thrive. And so, I would defer all of like, That special sauce to him. I think if I were to try to distill it down a little bit, it's evaluating people from a first principles approach of how high quality is their thought. Do they have all of the raw frameworks, um, or raw materials to build frameworks of think of, of, of thought and, and how to think, um, and not over index on pedigree. Um, just because somebody went to X, Y, and Z, or said A, B, and C, or did, you know, whatever, doesn't mean that they, doesn't really have an indication of where they're going to go. And then also, like, you, you're not going to get everything right. It's, it's, it's, you're not going to get it right every single time. And so accepting that, you know, I, I feel like in startups, right, like senior hires at best, Is a coin toss of whether or not it works out and that's okay. Um, fortunately we live in a world of survivor bias. So like things that work out, work out and things that don't work out, nobody remembers.

AI assessment note: “evaluating people from a first principles approach of how high quality is their thought.”

Q Now we're gonna have a great discussion today. I always love a little bit of background, a little bit of context setting. So how did you make your way into the world of venture first? And let's start there.

A Yeah. Uh, I wish I could say it was, uh, intentional and not accidental, but it was more accidental. Um, truth be told, I didn't even know that venture capital was a thing when I was, uh, growing up in college. Um, I actually maybe thought it was, I probably as a kind of bleeding heart liberal college student lumped it in and maligned it with all the finance of like, oh, like this isn't that actually interesting. Um, it wasn't until I graduated. Um, I graduated. I didn't have a job. I wasn't sure what I wanted to do. Um, I stumbled basically backwards into Like, the tech meetup scene in New York. I remember going to a meetup at Shake Shack back when there's just one Shake Shack, and it's like a couple dozen people, this meetup called Hackers and Founders, and I just became enamored by the idea of a tech ecosystem in, uh, in the non, that's not Silicon Valley. I grew up In Burlingame, uh, which is like halfway in between San Francisco and Palo Alto on the peninsula.

AI assessment note: “I wish I could say it was, uh, intentional and not accidental”

Q I love that in terms of the pacemaker, and you're absolutely right in terms of that analogy. The most important thing is the partnership behind any fund. Ah, you chose an equal partnership, which is a very deliberate decision. Why did you choose an equal partnership, and why was that the right decision for you?

A Sure. Um, I'll say a few things. One, I, I think I read E-Boys pretty early on in my career. This, E-Boys is like the edutainment chronicling of the foundation, like founding of Benchmark, and even though it was the first time that the concept of an equal partnership, like, wormed its way into my brain, so I think I had, like, an academic appreciation for it. And then I got married, and that was the first time that I've ever been, like, legally equal to somebody, and it's awesome. It's amazing. It's so great. It's So incredible. Everything from, yes, like non-zero-sum framework. Um, but the construct, both in practice and philosophically, it resonated just so much with me in practice that I felt like, I don't think it's too selfish or too high of a bar to want this in a professional context, the same way that I have in a personal context. And so, um, Pace is an equal partnership for, I would say, two primary reasons. One is, I'm sure you've heard the line, show me the incentives, I'll show you the outcome.

AI assessment note: “resonated just so much with me in practice that I felt like”