The Exchanges

Q What if you're not the best for, but you know it is incredible? Like, are you not gonna do that deal?

A Great question. I think at a fund, the first instinct is, do I have a partner? Who would be a really good pairing? And at KV, we did do this. Um, I would consciously think, like, oh, David Wyden may be a really good partner for this specific, uh, you know, both market and founder, or Samir might be. There are times when Samir would be a much better partner, for example, than I would be to the, to a specific founder, depends again, or Vinod, Vinod can be, or Sven, it really depends what the company's doing and the founder's skill set. So the first instinct would be, okay, I don't really feel I have a comparative advantage, but our fund may, or someone else at the fund may be, let's introduce them and see if that, you know, kind of partnership can work really well. Um, so this does work. Now, the answer may be within our fund, whether it's founders fund.

AI assessment note: “the first instinct is, do I have a partner? Who would be a really good pairing?”

Q You said there about kind of the things that you missed that were in inherent in KV for KV five and KV six, and then the personal, if we just take those two, what was it that you missed that was kind of central to the success of those funds?

A So we had very extensive partner meetings every Monday for hours at a time, and we vigorously debated new investments as well as the Impact and a potential upside of the current portfolio. These were very unstructured and very vigorous debates, particularly with Vinod and Samir, David, and sometimes Sven. And I felt that they made me a sharper investor, a smarter investor, even though it was ultimately my decision on what to do with the companies that I was championing or the companies that I was on the board of. They made my brain work better by listening to them. And occasionally I made the mistake of over listening, but it was always my mistake, and I felt like I was doing my job better listening to the stereo surround, uh, you know, Vino's perspective, Samir's perspective, David's perspective. I even carried it with me to FF in my brain for the first year, where I can hear their voices every time I hear an investment, I hear David whispering about the financials and the calculation of the contribution margin, and I hear Samir talking about certain things about the founder, and I would definitely think about Vino talking about the option value upside, and et cetera. And the team, and we need to get more data science talents in the company. So I was like wandering around with their voices in my head. But I actually think that made me a better investor, and so I missed that. A…

AI assessment note: “So we had very extensive partner meetings every Monday for hours at a time”

Q Do you think FF and KV have the same type of founder? When I look at like Mike, he fits the founder mold for what I think a founder's fund founder would be. Run through walls, very opinionated, very kind of hard, and shares a lot of traits with a lot of other FF founders I know. Do you think KV has an archetype like that?

A Yeah, I actually do. I mean, I think one of the reasons why you see such a high portfolio overlap is like the proof's kind of the point. Um, so, you know, obviously, KV and FF have almost exactly the same ownership in Chamba. Um, I believe in OpenStore, we have the same preferred ownership, KV and FF. I think in, um, Avon, um, FF and KV have very similar ownerships. So we all, and, well, and a lot of people at KV are founder-driven. I wouldn't say that's the only Criteria at KB, sometimes KB can be technology-driven, innovation-driven, whereas FF is mostly founder-driven, but the Venn diagram overlap of a successful founder is pretty high, which is why the portfolio overlap, Hsleep, you know, more portfolio overlap, Varda, more portfolio overlap, Ultima Bio, as we talked about, more fair, high portfolio overlap. So obviously the criteria, you know, Is clearly similar, because you're seeing the manifestation of that in the portfolios.

AI assessment note: “Yeah, I actually do. I mean, I think one of the reasons”

Q I spoke to Mike, but you're like, how the fuck did you speak to so many people before this show, Harry? We agreed it last night, but I also spoke to Mike at, um, Traba, and he asked the question, why would founders prefer working with one firm versus another? And I never wanted this to be like a trash talking. It's not at all. It's just different styles.

A It's a matchmaking exercise at the end of the day. The right founder paired with the right investor increases the probabilities of success for the company in my view. And so every founder who's successful, every founder who has a shot of being really successful is different. Like Mike is definitely different than other founders. Mike and Jack Dorsey, for example, very, very different. Both extreme, going to be extremely successful. The, the correct pairing for different founders is who's complimentary to you, who, who can you Work with and add value, but be on the same page with. And I think like, so for example, Mike has very strong views on culture, how to run a company, how to build a company. Being in line with his views allows me to be more effective, because when I'm channeling feedback, we're not debating first principles ever. But once in a while, I may see something, or, you know, in this cartoonish mirror, I can play back to him his decisions, or what I see, and say, hey, just applying your own principles, your own philosophy, does this make sense? Versus debating whether his philosophy is correct. He would, he would be a horrible pairing with someone who doesn't agree with his philosophy. They would just, Have, like, constant thrash. It would be useless. Or so, let's take another example. Jack. Jack is very design-driven, and he wanted to build Square in a design-dri…

AI assessment note: “It's a matchmaking exercise at the end of the day.”

Q You don't have kids, but okay. Well then Keith, this might be more directed at you, but it's just like, when you think about the work culture and the commitment required for working at trouble or working in this environment, can you do that and be a parent?

A Yeah. I mean, I think you can. So I remember when I was a lawyer, the last month I was a litigator at Sullivan and Commonwealth in New York. I billed 360 hours. I bet you almost nobody works in the startups, works 300 or 60 hours. That's billed, by the way, not worked. And many of the people I competed with in my class of associates actually had kids. One of the women, Sharon, who is like a classmate of mine, who's now a partner, she's a very successful partner, had kids. So you can be very successful if you have kids. Um, you know, there's touring artists and music that have kids. Um, it requires you to be more disciplined, like about your time allocation. It tends to amplify things if you're really disciplined, maybe even do better with kids. Um, you know, Delian's about to have a kid. I'm sure he's going to become just as good or better investor, you know, with a kid than he was before.

AI assessment note: “Yeah. I mean, I think you can. So I remember when I was a lawyer”

Q Why is Silicon Valley at a disadvantage now? Is it pure? It's because I just look at it for, sorry, I'm naive. I look at it from the outside. I see Chesa. I see the, you know, justice system, but then I also see things like YC now being fully remote. I see all VCs leaving. Is it political? Is it economic? Is it societal?

A Like, well, it's a bit about, I think many of the most ambitious, talented people, whether they're entrepreneurs or VCs have left. So I think the network effect has been eroded. Secondly, it's very hard to concentrate on your job when When you're confronted by safety issues, like actually at the end of the day, if you get assaulted, it really just, it disrupts your week. I can tell you, I had my, I had my home burglarized when I lived in the Bay area twice, but the last time was pretty terrifying. And I got no work done the next week. Like this guy broke into my house, got all the way to my bedroom. There was no way I was sleeping the next week comfortably. And therefore I wasn't thinking clearly and I wasn't really executing very well. So if you're, if you're constantly on guard defensive or Or, or actually assaulted, you're not going to be very productive. So all of these things have come together. Um, I think capital does matter, meaning concentration of capital. Most of the, well, actually I know of only now one VC of all the top VCs that still has their partnership based in the Bay Area completely. Sequoia? No, Sequoia now is opening a New York office. I hope I didn't ruin their PR announcement there. I think Coastal is the only one that still has all the GPs living in the Bay Area with the expectation they're going to be in person every day. Sequoia also has a partner, I …

AI assessment note: “many of the most ambitious, talented people, whether they're entrepreneurs or VCs have left.”

Q How was that first meeting? Take me to it.

A It was actually pretty amazing. So they actually flew out, uh, to SF, like almost like the next day and presented off notes. So it was really like on the fly, but. Three minutes in, I was like staring at Delian because I was like, oh my God, he's actually right. He found the perfect founders because as Eric was walking through the vision and how they were going to approach the market, it was dead on target of everything we believed. So like those notes actually still exist. I've actually, um, I think you had an intern taking notes. I've actually seen the notes from the meeting. And if you read the notes today, it is literally just like the board meeting we just finished with the exception of AI. We didn't really talk about it at AI, but everything else in the board meeting today is like, Right on target from this first note in maybe May of 2018.

AI assessment note: “It was actually pretty amazing. So they actually flew out”

Q Can I ask, when you look forward today at like the next, I don't know, six to 12 months, and you think about the hurdles that one has to overcome, and the challenges that you face in this next stage of growth, both Keith and you, how do you think about what those one or two biggest challenges are that you have to see, identify, and then overcome?

A So typically in organizations, this size with this growth potential, it usually becomes organizational design. It's just like, how do you simplify decision-making? How do you, where are the seams in the organization? Like, how do you, how do you adjust that? That is very, very complicated because what worked historically sometimes often doesn't work when you multiply the number of people by three, four or five, and it definitely doesn't work when you multiply the number of people by 10. So even though the organization has led you to your success, the way you divide Responsibilities. The way you make decisions is why you're here at some point that will break. And so you have to really think about that. The people, the people side gets increasingly more difficult actually.

AI assessment note: “it usually becomes organizational design. It's just like, how do you simplify decision-making?”

Q Keith, you don't know this. I had drinks with Eric in New York just after Paribus, before he started RAMP, and all I can think is, fuck, I should have asked if he was doing something great next. But that's on me. How did the latest deal come to be with Kostler?

A Well, for a variety of reasons, um, we were interested, um, at, uh, Kostler Ventures In RAMP. I mean, obviously it's a high profile company, but my involvement, you know, definitely perked people's interest, but because of the possible intersection of AI and finance, my colleagues are very interested in AI. As you know, Vinod is like a pioneer in AI thinking. They understood immediately why RAMP had a lot of the secret sauce to be successful in using AI in finance and that nobody else on the planet does. And so they were really excited to meet with actually Eric and Kareem, Almost independent of investing. It was more just like this is the company that's going to be successful in AI as the future of finance.

AI assessment note: “because of the possible intersection of AI and finance, my colleagues are very interested”

Q Can I ask, when you look forward today at like the next, I don't know, six to 12 months, and you think about the hurdles that one has to overcome, and the challenges that you face in this next stage of growth, both Keith and you, how do you think about what those one or two biggest challenges are that you have to see, identify, and then overcome?

A So typically in organizations, this size with this growth potential, it usually becomes organizational design. It's just like, how do you simplify decision-making? How do you, where are the seams in the organization? Like, how do you, how do you adjust that? That is very, very complicated because what worked historically sometimes often doesn't work when you multiply the number of people by three, four or five, and it definitely doesn't work when you multiply the number of people by 10. So even though the organization has led you to your success, the way you divide Responsibilities. The way you make decisions is why you're here at some point that will break. And so you have to really think about that. The people, the people side gets increasingly more difficult actually.

AI assessment note: “it usually becomes organizational design. It's just like, how do you simplify decision-making?”

Q separate structures. I, I don't like reserves though, Keith, and I don't like reserves, and please educate me, because it's trash and investing. If I had done reserves, I would have put money into Hopin, Clubhouse, and be real. That would not have been a good set of events. So, How do you think about that? And bluntly, proactively allocating ahead of time, especially when you don't know what's coming.

A Yeah, this is another one of those, there's like three or four things in venture that nobody knew, nobody does super well, honestly. Um, it's much more art than science. How to do reserves is one of those topics. At KUD, there is a more discipline, let's say, approach to reserves. That doesn't mean better, by the way, just, it is more top down, like, what are our reserves? How much are we going to allocate to company X, Y, and Z? You know, how much do we, how much do, how much total allocations do we have? Should we shave this one, increase this one, et cetera? Whereas the Founders Fund, there's no explicitly a policy of not reserving, and every investment decision is on an ad hoc case-by-case basis, and there's strong merits to that, actually, even though most of my investment style may be closer to KV, I think, Um, closer to the founder's fund style of you're probably better off not reserving, and then making ad hoc decisions, uh, based upon the quality of that particular opportunity, which includes who's the investor, what's the traction of the company, what do we believe about the founder, what have we learned about the founder's abilities and traits, and then what's the valuation?

AI assessment note: “you're probably better off not reserving, and then making ad hoc decisions”

Q Yeah, because this was another question that I had, which is, I had in my notes, uh, you know, you have more cash than Rockefeller, so like, what's, what motivates you today?

A Um, so, I have a pretty pithy answer now, so I was out, one of my good friends, uh, who I work with, had his 30th birthday recently, and, you know, at the dinner for his 30th birthday, the question, the question at the table is, what do you want people to kind of say in your eulogy? You know, eulogy, somewhat morbid, but whatever. Um, and I thought about it, and it occurred to me, what I want to say, what I want people to say is, I can't imagine my life without Keith in it. Uh, you know, like I had that much impact in some ways and there's different ways you have impact, obviously, but I was like, fundamentally, I really want to have impact in people's lives and that they really think about it. That is that impactful that their life would have been completely different. And so this is a business version of that, you know, the entrepreneur's version of that.

AI assessment note: “fundamentally, I really want to have impact in people's lives”

Q I want to unpack a couple of elements that you said about price sensitivity, especially with Rippling, 35 versus 25. Which firm would you say is more price sensitive? KV or Founders Fund? And just pause, is it even good to be price sensitive in the way that if you're- That's the big art, you know, art, the whole art.

A All right, so, um, Historically, I'd say KB has been more price disciplined than Founders Fund, but I think Founders Fund is actually more price sensitive and more disciplined than most people give them credit for. Like, I actually noticed this when I joined. The discipline internally was much stronger than I thought from afar, you know, watching the firm. Um, so, and I think they're closer. KB has historically been maybe the most price disciplined of any large institutional fund. I think they have At KB, we maybe now, uh, have relaxed down a bit. I've seen, when I was at Founders Fund, I actually saw some term sheets that KB extended, and I was looking back and saying, wow, where are they from? Like, that's how weird it would have happened in my day. Um, but, uh, so, but I think of the major firms, uh, maybe KB and Founders Fund may be the two most disciplined. I think Sequoia has also historically been very price disciplined, uh, to their credit. They've also relaxed that a bit, um, but they're, I think, very top down and consciously, but I think historically, those three might be the most price disciplined. Now, interestingly enough, the more important topic is what, you know, should you be, should you care, how much should you care, et cetera, and I still remember this episode you recorded with Peter Fenton, When Peter said, Christ is always a trap. And, you know, this was …

AI assessment note: “Historically, I'd say KB has been more price disciplined than Founders Fund”

Q Yeah, because this was another question that I had, which is, I had in my notes, uh, you know, you have more cash than Rockefeller, so like, what's, what motivates you today?

A Um, so, I have a pretty pithy answer now, so I was out, one of my good friends, uh, who I work with, had his 30th birthday recently, and, you know, at the dinner for his 30th birthday, the question, the question at the table is, what do you want people to kind of say in your eulogy? You know, eulogy, somewhat morbid, but whatever. Um, and I thought about it, and it occurred to me, what I want to say, what I want people to say is, I can't imagine my life without Keith in it. Uh, you know, like I had that much impact in some ways and there's different ways you have impact, obviously, but I was like, fundamentally, I really want to have impact in people's lives and that they really think about it. That is that impactful that their life would have been completely different. And so this is a business version of that, you know, the entrepreneur's version of that.

AI assessment note: “fundamentally, I really want to have impact in people's lives”

Q Where would you, could you get better as an investor, Keith?

A Oh, so my biggest flaw And, you know, if you have any solutions, I'm all ears because it's still, it's very persistent, is the hardest part for me is deciding which first meetings to take. And, you know, you get a large amount of inbound interest, introductions, et cetera, and deciding of that pool, you can't take them all. It's like not possible in like C to literally meet every company, whereas the growth people can meet every company that's ready for a growth round. You have to decide, and I have made several bad mistakes historically as an angel master, as a professional, be seen declining some meetings. Once you get me in the room with founders, I've made those calls really, really well. Like I was mentioning the other day that I'm not sure I've ever passed on somebody that's turned out to be building a multi-billion dollar company, but I have definitely declined meetings for companies that turned out to be good. You can try, like, take more meanings, but then is your brain really sharp? You can try to delegate it, but if your founder taste is off, like, the person you delegate to isn't really helping?

AI assessment note: “the hardest part for me is deciding which first meetings to take.”

Q Can I ask, I spoke to Samir, uh, before, and he said, what does it take for an investor and a firm to win? Today, after 10 years of bull run.

A So I, I think the most important thing is, first of all, and I said this several years ago on your 20 Minute DC, you have to have a compared advantage. Period. And you need to isolate it for you and your fund. Like, why me? And why us? So for example, like, our mutual friend, Mike, when he meets a new investor, he always asks him this question. He loves doing this. He's great at it. He always says to that point, like, why should I talk to your founder, like me, take your money? And you need to have a sharp, differentiated answer to be successful. And the more differentiated, the more true that is, the better. And I think most investors either don't have that answer or forget. And so you don't want to be a commodity. You need to be special, and you need to be treated special. You need to have, you know, either difference, like, compared to the advantage somewhere. I remember I posted publicly my investment criteria, uh, probably in And, you know, on Twitter, and it was like, you know, kind of a note that published. And the last one that confused a lot of people was, the last question was, do I have a comparative advantage? And I take that pretty damn seriously, like, why me? Why am I investing in this company? Because the general returns in venture are not strong at all. The general returns in 7580, and if you normalize against, like, the two hot periods of the last 50 years, li…

AI assessment note: “you have to have a compared advantage. Period. And you need to isolate it”

Q And my, my question to you is how do you think about whether operators will make good investors? How you don't become a magnet for, oh, they need me and so I want to help.

A Well, I'm not worried about investing in companies that need me. Um, I actually don't buy that, but the art is knowing why they need me and how to be helpful in not crowd out muscle building that the company needs to do. Every great company builds its own muscle. It's its own cult. It's your unique cult. And it needs to be great at lots of things. Customer acquisition, recruiting, you know, later, it may be comms, you know, et cetera, et cetera. Uh, finance. All these things are really important fundamental building blocks that you do not want to cut out. However, I think there are advantages that you can provide as someone who's built companies before and sees a breadth of companies being built, and you can borrow ideas or connect ideas or remix ideas that might be insightful to a founder. And so that's what I tried to do is provide either a conceptual framework. So like Max, for example, at FAIR, He never asked me what the right answer is. Like, he'll pose, like, here's what's top of mind. Here's the three things top of mind for me in, you know, this one-on-one. The question is never, what's the right answer? The question is always phrased in terms of, do you have a useful conceptual framework for thinking through what to do here? Because the only reason he's raising a topic is there sharp trade-offs. And then the question is, is there a unifying framework that you can applau…

AI assessment note: “the art is knowing why they need me and how to be helpful”

Q Okay, so, one from Samir. What do you think about Bitcoin going forward?

A Major question. Um, honestly, I don't know. I've been of multiple kind of minds on this. I think I've had a unifying theme, and then I guess you can apply this, uh, theory and then make a projection for yourself. So my theory was always from 2013 or 14 that adoption of Bitcoin would globally be inversely correlated to the rule of law in a specific market or specific country. And I think that's proven to be true. And in fact, I think even in the United States, Bitcoin really took off in terms of valuation, uh, market cap, et cetera, after the election of Trump. And that was perceived by the market as instability or less real law in debate whether that's true or false, but there was a perception. And so I think what happens is in 2024 is somewhat Dictates the answer. If people believe the world is more stable, the rule of law is likely to be more robust, Bitcoin doesn't appreciate. But if the world is more tumultuous, the rule of law takes steps back in major markets, then I think Bitcoin appreciates.

AI assessment note: “if the world is more tumultuous... then I think Bitcoin appreciates.”

Q Can I ask, what do you think of the frameworks which are malleable to companies across stage or sector or space? Like, what are the frameworks which do apply across and you should take? And learn from.

A Like, let's, let me give you an extreme example from the kind of public domain. Most people say you should build a company that's transparent, right? Like you hear us all the time, transparent, blah, blah, blah, blah. Apple, which is the most valuable tech company in the planet, is completely non-transparent in every possible way. Employees are not allowed to go to the wrong buildings. They have separate badges. They're not allowed to know what other employees are working on, et cetera, et cetera, et cetera. Obviously, the mainstream advice clearly doesn't work to build the most successful company in the history of the planet. To some extent, you know, that's, that's the point, is like, there isn't a right way to do things. You have to figure out why what you're building is special and differentiated. You know, if you read Zero and One, Peter talks about both cultural secrets. So you have secrets about the world that you believe that other people don't subscribe to, and that's what powers your competitive advantage, and that's what you're doubling down on. Apple has lots of beliefs about the world that most people don't believe in, but that's why they're very successful. And you can't, like, apply that. Like, nothing that works at Apple would work at Google. Like, everything Google does is completely antithesis of Apple, and so that's why you have to have, like, a philosophy th…

AI assessment note: “there isn't a right way to do things. You have to figure out”

Q you here. You've backed astonishing. You've either founded or invested in, I heard this the other day, a unicorn a year for something like 20 years, um, a ridiculous stat. Um, but my question to you is, like, when you look back at those that you have founded or invested in with similar trajectories, was this Olympian work ethic the same across all of them? Like, is this anything new?

A I wouldn't say it's necessarily all of them universally, but more than 80%. It's a very Common characteristic of successful companies. I actually feel this is successful, or I observed that successful characteristic of almost anybody successful in any field. I think, like, effort and input is what dictates results, and I think there's never been a substitute for, you know, effort and dedication to your craft if you want to be top one percent in any field, and if you interview people in athletics, like, as Mike pointed out, will be in work ethic. You interview people in music that succeed. If you interview people in technology that have been successful, it's in law, management consulting, investment banking, politics. It's always the people that work the hardest, that have the most opportunities, and if you have the most opportunities, you tend to have the opportunity to thrive. And so, this is kind of basically how every technology company was built for decades. Um, only heroic people, really, who had incredible ambition And almost irrational ambition entered the field of starting a company with their friends. Like it was basically borderline irrational to say, I'm going to reinvent the world and society or industry from scratch with my best friend from college. And the only people who did that had traits that were unique and had a work ethic that was unique because that's how …

AI assessment note: “I wouldn't say it's necessarily all of them universally, but more than 80%.”

Q here, but I don't like them because I feel that there's so many mistakes one makes in their first company that you would never make in a second or third. And if runway in time is the killer of progress, you waste so much time hiring the senior execs. Before you should, finding PMF, customer discovery, all of these things. Why am I wrong to not like first time founders?

A I think first time founders are actually better on average. Um, most of the best companies I've invested in are first time founders, not all. Um, but, and I think part of it is ambition. Uh, part of it is you don't know what you don't know, which means you don't accept any rules. Like once you learn too much, even as an entrepreneurial person, you're taking You know, taking some of those, and they're not always right. I think the best thing you can do though, and we had this side conversation at Twitter thread about this is, Pair yourself very well with either investors or board members who can help identify some blind spots, sometimes when the grass isn't quite greener, so that you can take advantage of those lessons while you're a first-time founder with all the positive energy and all the positive, no excuses, kind of a certain mentality than most second-time founders have. I mean, you know, obviously I think I've learned some things, and I have avoided some mistakes at OpenStore, but in some ways, I wish I had done some things naively.

AI assessment note: “I think first time founders are actually better on average.”

Q Why is it the best network effect business you've ever seen?

A Well, cause you have a network effect across markets. So like, you know, for example, um, typically you have a local network effect. So like Trava, Trava has some cross market actually network events too, but Airbnb is great because you have travelers, let's say going from China to New York and vice versa. And that's pretty rare when you could actually literally spread across markets. You have a local network effect, like the more posts you have, the more matchmaking you can do. So like there's the more supply you have, the more likely I can find what I want, the price point I want in the neighborhood I want with the layout I want. But then also once I've been to New York, then I can take it back with me to Miami. And so that's extraordinarily rare.

AI assessment note: “Well, cause you have a network effect across markets.”

Q I, I incredibly regretted my tweet, but my tweet, and we're starting straight off, this is exciting, we don't have to do the normal BS intro. My tweet was simple, buy low, sell high, be greedy when others are fearful, and fearful when others are greedy, and your response, it doesn't work in venture. So you're wiser than me, Keith. Why does buy low, sell high, not work in venture?

A Well, let's start with definitionally what we mean by venture. If one is talking about seed investing and potentially a series A investing, by definition you're buying low, and if you have any liquidity, you're going to be selling high. When you invest in a seed company or a series A, the startup is a mass It's not really even a company. Usually it barely has financials, probably has maybe some user metrics or product metrics, may only have a team and a slide. So there is no company and there's no sort of value. It's all art. If you're right and the company works out and turns into a company that produces financials with revenue and ideally with contribution dollars and maybe even one day profits, then by definition, that company is going to be worth more than what any price you Pay the seed round would be, or almost surely any price. So you are effectively buying low and selling high, but it's more, you're just doing any version of make sure there's no such strategy down. Um, I think it's very difficult though in later stages to pursue anything like that kind of strategy, because ultimately that's a greater fool's theory. Basically it means that. 90% of the time you're betting that someone else will pay a higher price than what you perceive. Now, If you have asymmetric information, that strategy could be a coherent one. Like I have asymmetric information about this market, thi…

AI assessment note: “I think it's very difficult though in later stages to pursue anything like that”

Q Keith, what's your biggest insecurity as an investor today? I always, I always see your tweets and I'm like, you have, you have it all sorted.

A The biggest insecurities, I think you do not age gracefully as an investor. I think you get, age is not your friend as an investor for lots of reasons, but, and so, and complacency is never your friend as a successful person at anything. The combination of aging in venture plus complacency is a really bad, lethal product. Uh, uh, combination. So I fear that I'm going to lose the ability to spot High potential founders that are not from central casting at the earliest possible stages of their company that I need to meet them. So I need to have a network that identifies them. I need to meet them. I still need to fight, uh, find that signal. And every time I do find one, I see a smile. My friends and colleagues see a smile on my face. I'm like, uh, you know, the, and the reason why I react that way is just like, Affirmation. I can still do this job, but at some point, I was just mentioning to one of my favorite proteges ever at dinner recently, that if I ever lose that ability, as soon as I feel I've lost that ability, I'm gonna have to quit.

AI assessment note: “So I fear that I'm going to lose the ability to spot High potential founders”

Q How do you advise me Keith for the companies that aren't performing? How do you kind of delicately say, Hey, super appreciate it, but like, it's not going to be a fun impact for us. And actually I have to be conscious of my time.

A It's very, very, very complicated. Uh, I think the most important thing you can do is agree upon with a founder what the best destination is. Meaning given what we know about the company, founder team metrics, product market fit, Where's the best place this company can go? What's the probabilities of getting there? And then I'd ask the question, okay, let's agree on this destination. What do you think you want to shoot for, given the constraints? And then what I can do is help you get there. So I think therefore it structures the conversation around what are we trying to accomplish collectively and I'll do whatever I can within my power and time to get you to that destination if I can increase the probabilities. And then that way when we get there, the founder and team is thrilled if we can get there and it doesn't have this infinite sort of mission creep. And then I do filter by impact. There are companies That, for a variety of reasons, I can impact a lot, and for other reasons, I can't. It's not totally correlated with success or failure, but if I'm going to allocate a scarce hour at the end of the day, I'd rather allocate it to an hour that's going to create high leverage for somebody.

AI assessment note: “agree upon with a founder what the best destination is”

Q Why is Silicon Valley at a disadvantage now? Is it pure? It's because I just look at it for, sorry, I'm naive. I look at it from the outside. I see Chesa. I see the, you know, justice system, but then I also see things like YC now being fully remote. I see all VCs leaving. Is it political? Is it economic? Is it societal?

A Like, well, it's a bit about, I think many of the most ambitious, talented people, whether they're entrepreneurs or VCs have left. So I think the network effect has been eroded. Secondly, it's very hard to concentrate on your job when When you're confronted by safety issues, like actually at the end of the day, if you get assaulted, it really just, it disrupts your week. I can tell you, I had my, I had my home burglarized when I lived in the Bay area twice, but the last time was pretty terrifying. And I got no work done the next week. Like this guy broke into my house, got all the way to my bedroom. There was no way I was sleeping the next week comfortably. And therefore I wasn't thinking clearly and I wasn't really executing very well. So if you're, if you're constantly on guard defensive or Or, or actually assaulted, you're not going to be very productive. So all of these things have come together. Um, I think capital does matter, meaning concentration of capital. Most of the, well, actually I know of only now one VC of all the top VCs that still has their partnership based in the Bay Area completely. Sequoia? No, Sequoia now is opening a New York office. I hope I didn't ruin their PR announcement there. I think Coastal is the only one that still has all the GPs living in the Bay Area with the expectation they're going to be in person every day. Sequoia also has a partner, I …

AI assessment note: “I think many of the most ambitious, talented people, whether they're entrepreneurs or VCs have left.”

Q I do have to ask, though, before we discuss some of the incredible companies you've worked at, often I'm told, you know, you can't really be considered a, you know, a domain investor, Harry, until you've seen multiple hype cycles and experienced the downturn. What did experiencing the downturn there, as you said, how did that affect your evaluation of startups and of people moving forward?

A I think it's a good point, which is sometimes when everything's going really well, either at a macro or micro level with, with respect to a specific company, you forget how fragile the ecosystem is and that not everything is just up and to the right. And I think having grown up in an environment that was quite difficult, um, and quite painful gives you an appreciation for that, maybe searing appreciation for that in your brain. And maybe it makes you a little bit too cautious sometimes because you remember what can go wrong and maybe the people who do the best try to forget that. But it also makes you a little bit more sensitive to understanding the degrees of freedom and levers that you want to have under your control when either the micro or macro metrics start shifting so that you don't get caught in a way where you have no degrees to maneuver so that you have a burn rate situation, for example, or a lease situation or an employee headcount situation where you have much more flexibility to Because you've seen sort of what can happen and what can happen rather rapidly and how the cost of capital or the availability of capital can change quite quickly so that you want to have control of your destiny. And I think having gone through different cycles up and down leaves you with more, uh, you'd wind up spending more attention devising control of your destiny and so that you alway…

AI assessment note: “makes you a little bit more sensitive to understanding the degrees of freedom”

Q Can I ask what are the most common, um, suppressors of growth that can take down the rocket ship or the rockets that have been launched in the early days of kind of product market fit signs?

A Yeah, that's a good question. It does vary by market. I think that there are a lot of things that you tend to throw humans at, for example, like, so for example, you don't have time to build tools and software, so you throw humans at it. Eventually those humans don't scale. Where you run out of humans or they become so expensive. So that's one sort of simple example, but fairly universal. Um, another one is that your customers are not having great experiences. So you have a high churn rate or a poor NPS score. So you're growing rather fast in terms of onboarding. You have a magnet for onboarding new users, but you don't actually have the ability to deliver a delightful experience that you promised these users. So that would be very painful. And, you know, it could be also catastrophic. In the more complicated businesses, where there's a business equation, and every variable needs to be aligned to yield success, sometimes you tend to break one of those variables. So two of the three variables look pretty strong, but the third one starts breaking really fast, and you don't know what to do about it.

AI assessment note: “Eventually those humans don't scale... another one is that your customers are not having great experiences.”

Q But have you missed Keith? Like, I love you dearly. Like, it doesn't seem that you have really.

A Um, not someone I've met in person. I've, as I talked about, I've screened out people I definitely should have met and absolutely would have been. Um, but like in person, I've always made an offer to someone who's done super well. You know, we talked about the biggest mistake ever was not raising the valuation on rippling. Um, you know, Parker was nice enough to tweet our episode afterwards. It's really helpful in my sleep, but, but like, you're going to miss an investor. Like, look, let's put it this way. I'm playing baseball. You hit 400, you're Ted Williams to go to the Hall of Fame. Early stage investing, you're going to miss more than you hit, like period. Like, and you just should admit that. As executive, you cannot be right 40% of the time and miss 60%. Imagine hiring, for example. Imagine if 40% of your hires were good and 60% were terrible. Like, you'd fire that person as a leader. Like, you'd have to. Like, you can't have an organization with that ratio.

AI assessment note: “not someone I've met in person. I've, as I talked about, I've screened out”

Q Is there an example, sorry to ask this, is there an example where they persuaded you not to, and you regret it?

A I knew that I was on the edge of consensus, and I was going to burn a lot of social capital, mostly on, should I increase the valuation of a particular offer? So it wasn't like, should we proceed or not? It was like, these terms feel rich, you know, and make sure the risk rewards there. So for example, Um, I can think of two or three where I knew that I was at the edge of the valuation range of what Coastal Ventures would typically accept, and there was enough criticism and concerns about the company that really was taking a lot of liberties to go further, and once in a while I did. Decided to pay, you know, whatever the valuation was required. And once in a while, I went out. Um, I've told the story publicly before. One of the examples, and probably, you know, the one I lose most sleep about, you know, after almost 11 years of being a VC is Rickling. So Rickling came in, Parker came in, um, and we gave a term sheet. It was, you know, obviously controversial at the time, for the seed, and Gary Tan, initialized, also gave a term sheet. And at the time, there was about a ten million dollar gap. I probably offered five at 25, plus or minus from memory, and I think Gary was at like 35, and Parker really wanted me to increase the offer. And I felt like there was just enough consensus to get the offer out, um, that if I really moved the needle that I, I might be burning a lot more ca…

AI assessment note: “One of the examples, and probably, you know, the one I lose most sleep about”