"Turpentine VC" | Venture Capital and Investing

E54: Trae Stephens on Founders Fund

Sep 3, 2024

Trae Stephens, General Partner at Founders Fund and co-founder of Anduril, shares insights into the firm's unique investment culture. He discusses how open debate drives effective decision-making and the value of a concentrated portfolio strategy. Trae emphasizes the importance of empowering founders and fostering honest discussions during pitches. He also explores Founders Fund's unconventional governance model and its focus on transformative investments in sectors like defense technology, highlighting the blend of investment and operational roles.

55:53

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Episode guests

Trae Stephens

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Quick takeaways

Founders Fund fosters a culture of open debate, empowering team members to develop strong convictions for better decision-making in venture capital.

The firm's investment strategy focuses on concentrated portfolios, enabling higher ownership in high-potential companies like SpaceX and Airbnb to maximize returns.

Adopting a hands-off approach, Founders Fund allows founders the autonomy to lead, positioning itself as a supportive and founder-friendly investor.

Deep dives

Culture of Debate and Conviction

The internal culture at Founders Fund prioritizes open debate and the development of conviction among team members. Trey Stevens highlights that the ability to engage in constructive conflicts and conversations, rather than having a formal background in finance, is crucial for success in venture capital. This debate-centric environment allows team members to cultivate strong convictions and defend them in front of their peers, enabling better decision-making. This focus on discussion and conviction building is perceived as more important than formal investing processes, fostering a unique approach to venture capital that sets Founders Fund apart.

Intro

2min

Unconventional Wisdom in Venture Capital

10min

Exploring the Chaotic Yet Authentic Investment Culture of Founders Fund

4min

Navigating Governance in Venture Capital

9min

Innovative Approaches to Venture Capital and Incubation

4min

Philosophy of Investment: Beyond Competition

6min

Navigating Venture Capital Challenges

17min

Insights on Founders Fund and Exploring Economics

2min

In this episode of Turpentine VC, we revisit one of our most referenced interviews with Trae Stephens, General Partner at Founders Fund and co-founder of Anduril.

Trae discusses the unique DNA of Founders Fund, emphasizing the firm's culture of open debate and high conviction in investments. He highlights the importance of concentrated portfolios, and how Founders Fund's no-process approach differentiates them from other VC firms. They also discuss Founders Fund decision-making, governance, and incubation practices.

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LINKS:

Founders Fund: https://foundersfund.com/

Anduril Industries: https://www.anduril.com/

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FOLLOW ON X:

@eriktorenberg (Erik)

@traestephens (Trae)

@turpentinemedia (Turpentine)

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TIMESTAMPS:

(00:00) Intro

(00:49) Debate culture and why that's key to Founders Funds success

(03:39) How Founders Fund's pitch is different from a16z's

(06:34) FF's unique market position

(08:51) How FF recruits their partners

(12:48) Sponsors: WorkOS and NetSuite

(14:31) The deal-making process, or lack thereof

(16:42) Governance at Founders Fund

(19:55) Comparing the YC approach

(22:09) How they measure success against other funds

(23:18) Trae's journey at Founders Fund

(25:21) Sponsor: Squad

(26:31) On incubating Anduril

(29:03) Why having no process forces partners to be higher conviction

(31:50) Core debates at Founders Fund

(33:58) The key to Founders Fund's current approach

(35:56) Trae's request for startups in gov tech

(37:12) The importance of team and talent

(39:33) What does the future look like for Founders Fund?

(41:22) What gets misunderstood about the firm

(45:42) On Mike Solana

(48:36) The three eras of Founders Fund summarized

(52:09) Wrap

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