Delian Asparouhov: Inside the Walls of Founders Fund: What the World Does Not See | E1183

Intro (0s)

• The chapter begins with a discussion about the differences between the United States and Western Europe, suggesting that the US has a stronger multigenerational aristocracy.
• The conversation then shifts to the topic of extraordinary careers, highlighting the importance of venturing beyond the confines of an office setting.
• The chapter concludes with an introduction of the guest, Delian Asparouhov, who expresses his excitement for the conversation and his admiration for the host's work.

Background Experiences (1m6s)

• Delian Asparouhov describes his experience growing up with a split identity, feeling neither fully American nor fully Bulgarian. He attributes this to his Bulgarian heritage and the time he spent in both countries. He realized the impact of this mixed identity on his interactions and relationships in both cultures.
• Asparouhov believes that the United States is the greatest country on Earth and that people should learn from its success. He also sees potential in Bulgaria, believing it could become one of the best European nations due to its strong belief in capitalism, engineering, and mathematics. He contrasts this with Western Europe, which he sees as falling into societal collapse due to socialism and a lack of nationalism.
• Asparouhov agrees with Larry Selma's assessment of Japan, China, and Europe, but believes Eastern Europe, particularly Bulgaria, offers hope. He highlights the success of Endurosat, a Bulgarian company building nanosatellites, as an example of the country's potential. He sees Bulgaria as a place where talented individuals from Western Europe are escaping to find a more capitalist environment. He believes that Eastern Europe may eventually leave the European Union as Western Europe becomes more of a burden than a benefit.

The Value of Europe's Culture & Heritage in Today's Economy (5m58s)

• Europe's cultural and historical heritage is a valuable asset. The speaker argues that Europe's rich culture, heritage, and hospitality are major draws for tourists and contribute significantly to its economy. He believes that these aspects are irreplaceable and cannot be taken away, even if Europe faces economic challenges.
• The speaker believes that Europe's decline is linked to its rejection of aristocracy. He argues that the "great man theory" and the "great family theory" are essential for building great societies and that Europe's rejection of these principles has led to its decline. He contrasts this with the United States, where he believes a strong multigenerational aristocracy continues to contribute to its success.
• The speaker acknowledges the challenges facing the United States, but argues that its system allows for both extremes. He acknowledges issues like homelessness, gun violence, and infrastructure problems, but also points to the success of American entrepreneurs and innovators like Elon Musk, who are able to thrive in a system that allows for both risk and reward. He suggests that the United States' success is linked to its acceptance of both the positive and negative aspects of its society.

Meeting with Keith Rabois (11m9s)

• Delian Asparouhov's pivotal meeting with Keith Rabois: Asparouhov, a software engineer, met Keith Rabois, then COO of Square, during his internship at the company in 2012. This encounter significantly impacted his career trajectory.
• Rabois's statistical analysis and its impact on Asparouhov: Rabois presented a cohort analysis to the company, demonstrating how statistical data could be used to predict business growth. This presentation inspired Asparouhov, who realized he wanted to pursue a career in business rather than software engineering.
• Rabois's unique approach to assessing talent: Rabois's willingness to meet with Asparouhov, despite being a random intern, stemmed from his observation of Asparouhov's disruptive but well-tolerated behavior at Square. Rabois believed that Asparouhov's ability to navigate the company's culture while maintaining his engineering skills was a sign of his potential.

Key Lessons from Keith (16m42s)

• Keith's Approach to Operating: Delian Asparouhov learned from Keith Rabois that building a company is like making a Hollywood film. You need a strong vision, a well-defined script, and the right cast (co-founders) to execute it. This approach emphasizes a clear vision and a commitment to building the company, rather than relying heavily on customer feedback in the early stages.
• Identifying Great Founders: Asparouhov emphasizes the importance of identifying a "spark" in founders, a unique attribute that sets them apart. This spark can manifest in various ways, such as exceptional skills in a specific field, a strong entrepreneurial drive, or a history of success in previous ventures.
• Success as a Junior VC: Asparouhov believes that junior VCs need to be willing to go above and beyond what senior VCs are willing to do. This includes being proactive, conducting deep diligence, and being willing to travel to meet founders in person. He emphasizes that extraordinary careers in venture capital are built by being hands-on and engaging with founders directly.

Advice for Aspiring VCs: Deal Volume vs. Selectivity (25m34s)

• Delian Asparouhov advises aspiring VCs to initially focus on building a broad data set of founders by meeting with as many as possible, even if they don't seem like the ideal candidate. This helps develop an understanding of what "greatness" looks like in a founder.
• Asparouhov suggests that after meeting with a significant number of founders, VCs should become more selective and only invest in those who align with their developed understanding of "greatness."
• He highlights the importance of staying relevant and identifying the best founders, as mentioned by Keith Rabois, and acknowledges the difference in experience between Peter Thiel and Vinod Khosla, suggesting they shouldn't be compared directly.

Common Mistakes Young VCs Make Today (26m45s)

• Young VCs often make the mistake of trying to be good at all aspects of venture capital generically, rather than focusing on a specific area of expertise. This can lead to them being less competitive and less memorable to founders and other VCs.
• It's important for young VCs to differentiate themselves by focusing on a specific sector or area of expertise. This allows them to become a go-to resource for that area and build a strong reputation.
• Young VCs should prioritize building relationships with founders and providing value to their portfolio companies. This can lead to strong referrals and help them secure deals in the future.

Deals That Didn't Cross the Line (29m48s)

• Delian Asparouhov discusses a missed investment opportunity in Sword, a company he wanted to double down on in 2019. He believes he didn't build enough internal consensus before approaching Peter Thiel, the founder of Founders Fund. He learned that the best way to get a deal approved at Founders Fund is to build consensus from the bottom up, starting with junior members of the team.
• Asparouhov reflects on the importance of building internal conviction for a deal. He believes that going directly to the most senior person without first gaining support from others can lead to missed opportunities. He emphasizes the importance of "going for the path of most resistance" and ensuring that even the most critical members of the investment team are convinced of the deal's merit.
• Asparouhov believes that Founders Fund's decision-making process has led to superior returns and fewer gaffes compared to other top-tier firms. He highlights the importance of fostering a culture of internal development, where junior members can rise through the ranks and become future general partners. He believes that Founders Fund should focus on attracting and developing young talent to ensure the firm's continued success in the future.

The Unique Elements That Make Founders Fund Special (34m17s)

• Founders Fund's small team size fosters strong personal relationships and collaboration. The limited number of investment team members (around 11-12) allows for a high level of connection and collaboration, which is difficult to maintain in larger teams. This collaborative environment encourages multiple team members to work together on deals, leading to more informed and robust investment decisions.
• Founders Fund's decision-making process is structured but not overly formal. While there are tiers of check sizes and a voting system, the firm emphasizes consensus-building and collaboration over rigid voting structures. This allows for individual investors to champion deals even if other partners are initially hesitant, fostering a more open and dynamic investment process.
• Founders Fund's culture is transparent and values character. The firm openly discusses its investment decisions, including deals that were passed on, and encourages founders to understand the nuances of venture capital decision-making. This transparency allows founders to make informed choices about which firms they want to work with, based on the firm's values and decision-making processes.

Balancing Investor Interests & Founder Alignment (42m43s)

• Balancing Investor Interests and Founder Alignment: The text discusses the tension between the fiduciary responsibility of investors to maximize returns and the importance of founder-led companies for achieving high-growth outcomes. The author argues that while investors have a right to liquidity and potentially removing a founder if performance is lacking, this can be detrimental to the company's long-term success.
• Founder-Led Companies and High-Growth Outcomes: The author emphasizes that the highest-performing companies are typically founder-led, suggesting that founders possess a unique ability to take risks and drive innovation. Removing a founder, even if it seems financially beneficial in the short term, could ultimately hinder the company's potential for achieving generational returns.
• The Importance of Founder Authority: The author argues that founders have a level of moral authority and risk-taking capability that professional CEOs often lack. This is crucial for achieving the kind of disruptive innovation that leads to significant returns for investors. While professional CEOs can deliver strong results, they may be more constrained by market pressures and less willing to take bold bets.

Contrasting Opinions with Founders Fund (46m55s)

• Founders Fund's Emphasis on Founders: The speaker acknowledges Founders Fund's strong belief in the importance of founders and their companies, emphasizing that they always prioritize working with founders. They also highlight Peter Thiel's ability to structure arguments in a way that makes opposing viewpoints seem less valid.
• Challenging Peter Thiel's Influence: The speaker discusses how, despite Peter Thiel's significant influence, a culture of open disagreement exists within Founders Fund. They share a personal anecdote about challenging Thiel's opinion on a potential investment, demonstrating that dissent is encouraged and valued.
• The Importance of Hands-On Investing: The speaker expresses their belief that venture capitalists should be actively involved in their portfolio companies, going beyond simply writing checks. They advocate for regular meetings, board participation, and providing guidance to founders. They also criticize venture capitalists who prioritize short-term gains or lack operational experience, arguing that these practices can be detrimental to companies.
• The Benefits of Running a Company: The speaker explains how running their own company, Varda Space Industries, has made them a better investor. They highlight the increased visibility and network access, the ability to conduct more thorough due diligence, and the improved closing rate they have experienced since becoming a founder.

The Impact of Deal Heat on Company Performance (54m32s)

• Deal heat, or the level of competition for an investment, does not necessarily correlate with a company's future success. Delian Asparouhov, a venture capitalist at Founders Fund, believes that while deal heat can influence pricing, it doesn't guarantee a company's success. He cites examples of both hot and cold deals that have yielded significant returns.
• Founders Fund prioritizes long-term success over immediate returns, even if it means passing on the highest-priced offer. Asparouhov emphasizes that Founders Fund aims to set companies up for long-term success by investing at a reasonable price, even if it means missing out on a "hot" deal. He believes that a company's future success is more dependent on the quality of the founders and their vision than on the initial investment price.
• The venture capital landscape is shifting towards a focus on "defense" and building moats around businesses. Asparouhov acknowledges that the traditional focus on software-as-a-service (SaaS) companies with low marginal distribution costs is changing. He argues that the marginal returns in SaaS are also low due to the lack of moats, as AI can easily replicate many SaaS products. He believes that companies need to focus on building defensible businesses with strong brands and distribution networks, similar to luxury brands like LVMH.

Adapting to a New Investment Landscape (59m53s)

• The current investment landscape is drastically different from the past, with a shift away from high-margin SaaS and consumer investments towards a more diverse range of asset classes, including deep tech and industries like biotech, materials science, and aerospace.
• This shift requires investors to adapt their mindset and skillsets, moving away from purely financial analysis and software expertise towards a broader understanding of various technical fields.
• The future of venture capital will likely see a change in the profile of successful investors, with a greater emphasis on polymaths who can navigate diverse industries and technologies, rather than solely focusing on specific sectors like SaaS.

The Top 3 VC Firms in 10 Years (1h1m29s)

• The top three venture capital (VC) firms in 10 years will likely resemble the top three firms of today, suggesting that the current leaders will maintain their positions.
• There is a growing trend of VC firms like Sequoia and Andreessen Horowitz (a16z) expanding their operations, potentially becoming more similar to large asset management companies like BlackRock.
• The most successful seed and Series A technology VC firms in the future will likely adopt a model similar to Founders Fund, focusing on smaller teams dedicated to specific asset classes rather than being a part of a larger, more diversified organization.

Biggest Losers in 10 Years of Venture (1h2m17s)

• Delian Asparouhov believes that specialized venture capital funds will struggle in the next 10 years. He argues that these funds, focused on specific sectors like financial services or SaaS, may have ridden a wave of success in the past, but that wave is unlikely to repeat. He contrasts this with Founders Fund, which takes a more flexible approach and invests in a wider range of companies, allowing them to capitalize on emerging trends.
• Asparouhov believes that long-term thinking is crucial for success in the tech industry. He argues that individuals who are married with children are more likely to have this long-term perspective, as they are invested in the future of the next generation. He acknowledges that there are exceptions to this rule, but he believes that it is a general trend.
• Asparouhov believes that Americans are becoming too soft. He argues that they take for granted the benefits of the American economic and political system and are not as resilient as people in other parts of the world. He uses the example of protesters who advocate for "gays for Gaza" to illustrate his point, arguing that they are not aware of the dangers of such a stance in other countries.
• Asparouhov believes that while the average work hours have decreased, the most productive individuals will become even more productive in the future. He attributes this to the increasing availability of tools and technology, which will allow them to work more efficiently. He believes that this will lead to a bifurcation in society, with some people working less and others working more intensely.

Advice on Marrying Up & Finding a Life Partner (1h7m49s)

• Delan advises against entering the search for a life partner with pre-conceived notions of what the ideal partner should be. He emphasizes the importance of being open to possibilities and recognizing that your ideal partner might not fit your initial list of criteria. He uses his own experience with skiing as an example, realizing that his wife, whom he considers a "marriage up," was not a good skier, but that didn't prevent them from building a strong relationship.
• Delan stresses the importance of finding someone who allows you to be your authentic self. He believes that a successful relationship is built on mutual acceptance and love for all aspects of a person, even the "volatile" or "crazy" parts. He emphasizes that his wife's acceptance of his whole self was a key factor in their relationship.
• Delan ranks honesty, sex, laughter, and respect in terms of importance in a relationship. He places honesty as the most important, believing that without it, the other aspects lose their significance. He then ranks sex as second, emphasizing the importance of physical connection and its role in a relationship. Laughter comes in third, highlighting its importance in navigating life's challenges. Finally, he places respect as fourth, acknowledging its importance but suggesting that it might be less crucial compared to the other three elements.

Fatherhood (1h11m27s)

• Delian Asparouhov, a father, shares that becoming a father has unexpectedly improved his overall mood.
• He explains that the simple act of picking up his child in the morning releases endorphins, bringing him joy and a sense of childlike wonder.
• Asparouhov believes that this positive energy helps him overcome stress and professional challenges, creating a sense of renewal and joy each day.

Delian’s Most Radical Untweeted Thought (1h12m25s)

• Delian Asparouhov believes that humanity is on the verge of a significant geopolitical and moral crisis, potentially lasting for the next 100 to 200 years.
• This crisis will stem from the speciation of humans, driven by both artificial selection (like genetic engineering) and natural selection (due to humans inhabiting different environments like the Moon, Mars, and space stations).
• Asparouhov fears that this speciation will lead to increased division and conflict, potentially even threatening humanity's survival, as different human groups may no longer be able to interbreed. He draws a parallel to the current threat of nuclear war, suggesting that the situation could worsen significantly if humans are no longer considered a single species.

Quick-Fire Round (1h14m7s)

• Best Board Member: Delian Asparouhov believes Seth Bannon from 50 Years is the best board member he's worked with, praising his deep dives into companies and insightful questions.
• Ideal Board Member: Asparouhov admires Alfred Lynn from Truework and would love to collaborate with him on a board, despite their potentially non-overlapping interests.
• Biggest Change in Perspective: Asparouhov has become more mindful of attacking ideas rather than individuals on Twitter, recognizing the potential for unintended harm to people he respects.
• Transparency and Honesty: Asparouhov believes in transparency and honesty, even if it means facing criticism, as it allows founders to understand the character of those they work with.
• Twitter Criticism: Asparouhov has been pulled aside multiple times for his Twitter activity, but he believes he has improved over time and is now less frequently reprimanded.
• Character Flaw and Success: Asparouhov acknowledges his struggle with existential stress, which impacts his sleep and well-being. He compensates by surrounding himself with people who can handle high-pressure situations better.
• Unasked Question: Asparouhov believes he should be asked more often why he chose not to be the CEO of Vaa. He believes he's not yet ready for that role, but his co-founder is, and he prefers to focus on areas where he excels.