20VC Founders Fund's Kevin Hartz on Why Investing In Silicon Valley Is Broken & Why Fearlessness Is What Makes The Truly Great Investors

In an episode of "20 minutes VC," host Harry Stebbings interviews Kevin Hartz, a partner at Founders Fund and former CEO of Eventbrite, discussing the qualities of successful venture capitalists and entrepreneurs. Hartz emphasizes the importance of humility, graciousness, and a sharp intellect, and shares his journey from founding companies like Zoom Corporation to angel investing in giants like Airbnb and Uber. The conversation delves into his transition to institutional investing, the value of operational experience in venture capital, and his approach to supporting entrepreneurs. Hartz criticizes the segmented focus of many VC funds and advocates for risk-taking in uncharted sectors, recalling the origins of venture capital. He also highlights the learning opportunities from interacting with founders and the need for more investment in groundbreaking areas like biotech.

• Harry Stebbings introduces the special episode of 20 minutes VC.
• Harry expresses his appreciation for the opportunity to host the show.
• Harry is known for his presence on Snapchat under the handle 'H stepbings' with two b's.

"Hello and welcome back to the 20 minutes VC with your host Harry Stebings at H stepbings with two b's on Snapchat and my word, do we have a special show in store for you today."

This quote opens the podcast episode and introduces Harry Stebbings as the host.

• Harry Stebbings discusses the qualities of the best venture capitalists (VCs).
• The top VCs are described as humble, gracious, and possess a combination of serenity with razor-sharp intellect.

"The very best are the most humble, gracious, and have this fantastic combination of serenity with Razorsharp Inter."

Harry summarizes the common traits he observes in successful VCs, emphasizing humility, graciousness, and sharp intellect.

• Kevin Hartz is introduced as a partner at Founders Fund, a prestigious VC firm.
• Founders Fund's notable investments include Facebook, Airbnb, SpaceX, and Spotify.
• Kevin's background includes founding and leading Eventbrite and Zoom Corporation.
• He is also recognized for his successful personal angel investment portfolio.
• Special thanks are given to Jeff Lewis and Brian Singerman for introducing Kevin to the show.

"So joining me in the hot seat today, I'm thrilled to welcome Kevin Hartz."

Harry introduces Kevin Hartz as the episode's guest, highlighting his significant contributions to the tech and investment world.

• Kevin Hartz's career has been primarily on the operating side as a founder and company operator.
• Despite being a VC, he identifies more as an entrepreneur.
• He has been with Founders Fund for six months at the time of the interview.

"I really have spent most of my career on the operating side, having founded a couple companies and actually recoil when I hear the term venture capitalist or being called a venture capitalist."

Kevin explains his preference for being seen as an entrepreneur rather than a venture capitalist, emphasizing his operational background.

• Kevin Hartz's early angel investments were based on the people behind the companies.
• He values extraordinary individuals who can create new market segments.
• His approach aligns with Founders Fund's emphasis on the founders themselves.

"In the early days, it was always based on people."

Kevin describes his angel investing strategy, which prioritizes the founders and teams behind startups.

• The decision to join Founders Fund was influenced by Kevin's desire to institutionalize his angel investing.
• Founders Fund offered a platform to scale his investment approach.

"Can I ask, with such a fantastic angel portfolio, what was behind the decision to institutionalize your angel investing with the move to Founders Fund, what was the catalyst for that decision?"

The host inquires about Kevin's motivation to transition from angel investing to a more formal role at Founders Fund.

• Harry Stebbings thanks Kevin Hartz for joining the episode.
• A nod is given to Brian Singerman for introducing Kevin to the podcast.

"Kevin, it's such a pleasure to have you on the show. Stay. A huge thanks to your partner Brian for the intro, but thank you so much for taking the time out to join me today."

Harry closes the introduction by expressing gratitude to Kevin for participating in the podcast and to Brian for facilitating the connection.

• The transition from operating to investing involves a shift in perspective, from being involved in the day-to-day management of a company to supporting and mentoring founders.
• Operating experience can provide valuable insights and empathy for founders, aiding in the investment process.
• There is a debate on the value of operating experience in investing, with some suggesting that its relevance is decaying due to rapid changes in technology.
• Operating experience is particularly useful in the early stages of a company's growth, offering practical advice and guidance.

"But on the other hand, the investing side is really this wonderful position to really go out there and find and help founders get their companies off the ground and really look for that next great company."

This quote emphasizes the fulfilling aspect of investing, which allows individuals to support founders and search for promising new companies.

"I think that it certainly helps to have that operating background. I mean, I have a great deal of empathy for the founders and don't feel like I'm on the other side of the table."

Kevin Hartz highlights the advantage of having an operating background in investing, as it fosters empathy and a sense of partnership with founders.

• Successful investing requires a strong sense of curiosity and a willingness to explore uncharted territories.
• Intellectual curiosity and fearlessness can lead to investments in unconventional and innovative areas.
• Being part of a team with diverse interests and expertise can facilitate a broad approach to finding investment opportunities.

"I think that in investing, it's really how inquisitive you are."

Kevin Hartz suggests that the key to successful investing lies in one's inquisitiveness and desire to learn and discover.

"I think that intellectual curiosity, intrigue, and also kind of the fearlessness to go into segments that other investors tend not to go into has made it really exciting for me."

Kevin Hartz credits his intellectual curiosity and fearlessness as factors that have made his transition to investing exciting and have allowed him to look at a wide range of opportunities.

• Transitioning from the fast-paced startup environment to the slower cycle of venture capital can be challenging.
• In venture capital, decisions must be made more prudently, requiring a more cautious approach compared to the rapid decision-making of startups.
• Mentors can be helpful in guiding new investors through this adjustment, emphasizing the importance of patience.

"And on the investing side, you really need to kind of tap the brakes or really be prudent about what you jump into."

Kevin Hartz acknowledges the need for a more measured approach in investing compared to the fast pace of startup operations.

• Surrounding oneself with knowledgeable colleagues can facilitate the transition to venture capital.
• A successful transition is also supported by maintaining intellectual curiosity and venturing into less popular investment segments.
• Unexpected areas of investment, such as anti-freeze synthetic peptides, can be part of the learning process in venture capital.

"Well, I think one, it helps to be just surrounded by some really great colleagues here at Founders Fund."

Kevin Hartz attributes part of his successful transition to the support and knowledge of his colleagues at Founders Fund.

• Founders Fund operates with a less regimented structure compared to other venture funds, avoiding strict processes and traditional meeting schedules.
• Autonomy among team members is valued, with investment decisions often based on individual conviction.
• The investment process at Founders Fund can be swift, ranging from small angel investments to larger multimillion-dollar deals.

"And then over at Founders Fund, it's just the anti process and it's really this perfectly organized chaos in a sense."

Kevin Hartz describes Founders Fund's unconventional approach to venture capital, which is less structured and more chaotic compared to his previous experience at Eventbrite.

"But I've been pleasantly surprised if a team member has strong conviction. Whether it's a quarter million dollar ff angel, that's the minimum amount that generally we invest in this kind of angel vehicle of ours, all the way up to 50 million, we can move quite quickly and deploy that capital."

Kevin Hartz explains that at Founders Fund, the level of conviction a team member has in a founding team can lead to quick and decisive investment actions, regardless of the investment size.

• Founders Fund lacks a traditional bureaucratic structure, contributing to its success.
• A non-bureaucratic structure allows for more flexibility and innovation in investment strategies.

al. I think part of the success of Founders Fund is not having a kind of traditional bureaucratic structure.

The quote highlights a belief that the success of Founders Fund is partly due to its avoidance of a conventional hierarchical structure typically found in organizations.

• Investing in Silicon Valley is perceived as broken due to an overly segmented focus on specific verticals.
• Early venture capitalists took risks in undefined industries, exemplified by the semiconductor industry from the defense sector.
• Founders Fund remains sector agnostic, focusing on individual founders rather than specific industries.
• This approach has allowed Founders Fund to invest early in significant companies like SpaceX and DeepMind before their respective industries became mainstream.

I think what's happened today is there's been this overly segmented, kind of focused investing in areas that in many ways are just afterthoughts.

Kevin Hartz criticizes the current investment strategy in Silicon Valley as being too narrow and specialized, losing the essence of venture capital which is about taking risks in new and undefined sectors.

• Kevin Hartz advocates for more "frontier investing" to fund emerging and undefined industries.
• He appreciates the historical risk-taking aspect of venture capital, which is lacking in the current segmented investment approach.
• Founders Fund's past investments in companies like SpaceX and DeepMind before their industries were recognized highlight the potential of this approach.

I wish there was more of an effort to seed all these very exciting new areas that are happening here today.

Kevin Hartz expresses a desire for more venture capitalists to invest in groundbreaking and nascent industries, reflecting the traditional spirit of venture capital.

• There is concern about software venture capitalists moving into biotech with limited domain expertise.
• Kevin Hartz welcomes this transition, believing that the biotech industry is underinvested and could benefit from more venture capital.
• He cites Brian Singerman's successful transition from a computer science background to leading a biotech investment as an example of why this cross-industry investment can be beneficial.

Well, I actually welcome it. I think that the area is underinvested and traditionally it takes some time and some mistakes happen as those moves occur.

Kevin Hartz responds positively to the concern about software VCs moving into biotech, suggesting that while there may be a learning curve, the investment is needed and can lead to significant advancements.

• Founders Fund goes the extra mile to support and provide unique advice to entrepreneurs.
• Kevin Hartz uses his experience and empathy to help founders navigate early-stage challenges.
• His approach includes offering advice on financing strategies, hiring, and learning from the founders he invests in.
• Hartz's personal investments have allowed him to be close to founders, benefiting from their insights and applying them in his work at Eventbrite.

Well, Harry, there's absolutely a lot of pattern matching at the early stages. So having been through those stages, I can have a lot of empathy for the extreme challenges that founders have.

Kevin Hartz discusses the common challenges faced by founders and how his experiences enable him to provide empathetic and practical support to help them through the early stages of their ventures.

• Kevin Hartz expresses a mutual admiration in his transition from Eventbrite to Founders Fund.
• He implies that the lessons learned at Eventbrite are transferable and valuable in his new role.

"and be able to apply that to eventbrite. So there's this real mutual kind of reverence, I would say there, but I."

This quote suggests an appreciation for past experiences and their applicability to future endeavors, highlighting the value of transferable skills and knowledge.

• Kevin Hartz's favorite book is "Zero to One" by Peter Thiel.
• He emphasizes the book's strong, succinct lessons for founders which he finds worth rereading.

"Zero to one now? I'm not required. I'm not being held at gunpoint to say that, but I actually reread that book by Peter Thiel recently, and it really has succinct, great, strong lessons for founders that every founder should read."

The quote reveals Kevin's genuine endorsement of "Zero to One" as a valuable resource for founders, independent of any obligation to promote it.

• Kevin Hartz is motivated by having a positive impact, changing the world with technology, and the success of founders.
• He enjoys playing a role in the growth and achievements of others, as experienced at Eventbrite.

"Really having a positive impact, trying to change the world, trying to use technology in a positive manner. And then secondly, is really seeing the success of founders, helping them, having some small role to play in seeing their success."

This quote captures the dual aspects of Kevin's motivation: societal impact through technology and personal fulfillment through the success of others.

• The lesson Kevin Hartz has learned since joining Founders Fund is the breadth of innovation worldwide.
• He expresses excitement for the future based on the diversity of innovation.

"Just how exciting and wide the world of innovation is. It's in many different corners of the world and so many different segments, and I'm extremely delighted and excited for a wonderful future."

The quote reflects Kevin's realization of the extensive scope of innovation and his optimistic outlook on the future contributions of diverse global innovators.

• Kevin Hartz has had many mentors, including Pierre le Monde, co-founder of National Semiconductor.
• The lessons from his mentors continue to influence him significantly.

"I've had many mentors through different time periods. I mean, I think of when I was starting zoom out and Sequoia invested. Pierre le Monde was one of my first mentors."

Kevin's quote acknowledges the importance of mentorship in his career and the lasting impact of early guidance from seasoned industry figures.

• Kevin Hartz prefers direct human interaction over reading blogs or newsletters for information and learning.
• He values asking questions directly, similar to the podcast's interview format.

"I just think that you can't find everything in a blog. And I just like human interaction and going straight to the source and asking questions myself, much like you're doing here."

The quote emphasizes the importance Kevin places on personal engagement and direct inquiry as methods for gaining knowledge and understanding.

• Kevin Hartz's recent investment through FF Angel Fund is in a company called Hypertrack.
• Hypertrack is appealing to him because it offers location-based services as a service, enabling new applications and services.

"Well, I wrote a check out of our FF angel fund in a company called Hypertrack. And Hypertrack is exciting because it's location based services as a service."

The quote provides insight into Kevin's investment strategy and interest in companies like Hypertrack that have the potential to innovate and enable new functionalities in technology.

• Kevin Hartz expresses gratitude for being on the podcast and acknowledges the introduction made by Brian Singerman and Jeff Lewis at Founders Fund.

"Harry, the pleasure's all mine. Thank you so much."

The quote shows Kevin's appreciation for the opportunity to share his insights on the podcast and the connections that facilitated his appearance.

• Harry Stebbings endorses Zoom as a comprehensive video and web conferencing service.
• Vidyard is recommended for engaging leads with video content and converting them into customers.

"Zoom, the number one video and web conferencing service... Vidyard, the video management platform that powers the video enabled business."

The quotes from Harry serve as endorsements for Zoom and Vidyard, highlighting their respective roles in facilitating communication and marketing in business.

• Harry Stebbings expresses gratitude for support and teases an upcoming episode with Mar Hershensen from pair VC.

"And again, it was such an honor to have Kevin on the show today... I cannot wait to bring you Wednesday's episode with Mar Hershensen, founding managing partner at pair VC."

Harry's quote thanks listeners for their support and builds anticipation for future content, demonstrating the ongoing engagement with the audience and the podcast's commitment to delivering valuable insights.