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
Trae Stephens, Partner at Founders Fund and co-founder of defense tech company Anduril Industries, shares his unique journey into venture capital. He discusses why competitive deals can be detrimental and emphasizes the importance of avoiding herd mentality in investments. Trae critiques common VC practices, arguing that true success comes from upside maximization rather than downside protection. He also highlights the critical role of innovative strategies and exceptional founding teams in navigating the tech landscape.
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question_answer ANECDOTE
Persistence Pays Off
Trae Stephens got rejected from Georgetown, flew there, and demanded admission.
He ended up working for the university president after this bold move.
volunteer_activism ADVICE
Volume Over Selectivity
Take as many pitch meetings as possible, especially when starting in VC.
Discernment comes with volume; aim for 500+ meetings in the first year.
insights INSIGHT
Conviction-Based Investing
Founders Fund avoids traditional partner meetings and encourages individual partner conviction.
This approach makes getting deals through harder, requiring genuine enthusiasm and avoiding mediocre consensus.
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In 'Zero to One,' Peter Thiel argues that true innovation comes from creating something entirely new, going from 'zero to one,' rather than incrementally improving existing ideas. He emphasizes the importance of vertical progress through technology and the benefits of monopoly in driving innovation. Thiel also discusses the need for long-term planning, the importance of finding the right co-founders, and the power law in startup success. The book challenges conventional wisdom and encourages readers to think critically and aim big to build the future[2][3][5].
Hillbilly Elegy
A Memoir of a Family and Culture in Crisis
JD Vance
In 'Hillbilly Elegy,' J.D. Vance recounts his life growing up in a dysfunctional family in Middletown, Ohio, with roots in Kentucky's Appalachia. The book details his experiences with poverty, addiction, and family violence, as well as his journey to joining the marines and eventually graduating from Yale Law School. Vance provides a personal and insightful look into the decline of the white working class in America, exploring themes of family, culture, and the loss of the American dream. The memoir also touches on the political swing of the region, particularly in relation to the 2016 presidential election and the appeal of Donald Trump to this demographic.
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?
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 
