20VC: Founders Fund's Trae Stephens on Why The Most Competitive Deals are the Worst, Why No Company is Successful Because of their VC, Why We are Making ZIRP Mistakes Again Today, Why Loss Ratio is BS and Upside Maximisation is Everything
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC
4.4 • 637 Ratings
🗓️ 3 April 2024
⏱️ 73 minutes
🧾️ Download transcript
Summary
Trae Stephens is a Partner at Founders Fund, one of the world's leading funds where he has worked with some of the best and backed the likes of Palmer Luckey with Oculus and Ryan Peterson @ Flexport since the very early days. Trae is also Co-founder and Executive Chairman of Anduril Industries, a defense technology company focused on autonomous systems, and Co-founder of Sol, a next-generation wearable e-reader. Previously, Trae was an early employee at Palantir Technologies, where he was also an integral part of the product team, leading the design and strategy for new product offerings.
In Today's Episode with Trae Stephens We Discuss:
1. From Hustling into Georgetown to Peter Thiel Ushering You into VC:
- What is Trae's story of how he got into Georgetown University, despite being rejected the first time?
- How did Trae make his way into the world of VC? How did Peter Thiel recruit him to Founders Fund?
- What advice did Brian Singerman give Trae in his first week in VC? Why is it so important?
2. How the Best Venture Firm in the World Invests:
- Decision-Making Process: Why do Founders Fund not have partner meetings? What is the investment decision-making process? Why does more process lead to mediocre outcomes?
- Competitive Deals: Why does Trae believe the most competitive deals are always the worst? What do Founders Fund do to specifically avoid the "herd mentality"?
- Upside Maximisation: Why does no one at Founders Fund care about "downside protection"? How do the team approach scenario planning and upside maximisation?
3. Do VCs Really Add Value:
- Why does Trae think putting VCs on a board for "value add" is total BS?
- Are there any cases in which Trae believes the VC can really move the needle for a company?
- Why does Trae believe venture would be better if it were just operator investors?
- Why does Trae believe platform approaches to VC value add is BS?
4. The Future of VC: Who and How to Win:
- How did being an operator at the same time as investing, make Trae a better investor?
- Why does Trae believe that vertical investing is BS and generalised is better?
- How does Trae favour; market, product and people? Will Trae back a founder when he hates the idea?
- What have been Trae's biggest lessons from his biggest hits and biggest misses in 10 years?
Transcript
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| 0:00.0 | We don't have Monday partner meetings. |
| 0:02.0 | Everything is super difficult to get through the investment team. |
| 0:05.5 | And this is on purpose. |
| 0:06.8 | The more process you have, the easier that it is to game the process to get to some mediocre outcome. |
| 0:12.6 | The worst deals are the most competitive deals. |
| 0:15.9 | They're the ones that are super consensus. |
| 0:18.5 | It's very easy in retrospect to say, wow, we really let that get out of |
| 0:22.7 | hand. But we're doing the same stupid stuff all over again. For large funds, the economics only |
| 0:28.4 | really work if you have a 10 plus billion dollar winner in every fund. This is 20 VC with me, |
| 0:34.6 | Harry Stebbings. Now, today we have one of the most incredible, but I think modest and under the radar people in startups on the show. |
| 0:40.6 | He's one of the best early stage investors in the business as a partner at Founders Fund, where he's led deals in incredible businesses, like Flexport and Oculus, to name a few. |
| 0:49.4 | And if that wasn't enough, he's also the co-founder of one of the fastest growing companies in technology, |
| 0:54.9 | Andrewil, most recently valued at $8.5 billion. |
| 0:58.4 | Andrewill is a defense technology company focused on autonomous systems. |
| 1:02.2 | But before we dive into the show today, we're all trying to grow our businesses here. |
| 1:06.1 | So let's be real for a second. We all know that your website shouldn't be this static asset. It should be |
| 1:11.7 | a dynamic part of your strategy that really drives conversions. That's marketing 101. But here's |
| 1:17.6 | a number for you. 54% of leaders say web updates take too long. That's over half of you listening |
| 1:24.4 | right now. And that's where WebFlow comes in. Their visual first platform |
| 1:28.3 | allows you to build, launch and manage web experiences fast. That means you can set ambitious |
| 1:34.0 | marketing goals and your site can rise to the challenge. Plus, Webflow allows your marketing |
| 1:39.4 | team to scale without relying on engineering, freeing your dev team to focus on more fulfilling |
... |
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