title: 20VC: Keith Rabois and Mike Shebat on Creating an Olympian Mindset to Work Ethic, Why First-Time Founders are Better Than Serial Entrepreneurs, Why Remote Work Does Not Work, Why the Best Founders Always Start in their Teens & Why Companies are…
author: The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
contenttype: podcast
publication: The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
published: 2023-11-27T04:14:27-05:00
sourceurl: https://traffic.libsyn.com/secure/thetwentyminutevc/20VC__KeithRaboisandMikeShebat.mp3?dest-id=240976
word_count: 12098
I think, first of all, the technology, the opportunity costing your 20s is very high. If you look at a lot of people who've been most successful, the foundations of their career are in their 20s. Most of the best people I've ever worked with in my career were actually interns. I think first-time founders are actually better. Every company that success was like a cult, and every cult that works is unique. We at Founders Fund have pretty much put a line in the sand that we want to invest in remote companies. It's very obvious why it doesn't work. I am so excited for this show's day. As you heard in that interview, this episode has more bangers than a Taylor Swift concert. Joining us in the hot seat today is Keith Roboi, general partner at Founders Fund, one of the best venture firms of the last decade. And then joining him is one of his latest investments, Mike Shabbat, Founder and CEO at Traba. It's an incredible discussion. I really like to innovate on formats. So obviously we do round tables. I'd love to hear your thoughts on this style of show. You can let me know on Twitter at Harry Stebbings, but it is incredible. So let me know what you think and would love to hear your thoughts. But before we move into the show's day, did you know that every 20 VC episode you listen to is recorded with Riverside. Riverside is insanely good. Like I would pay $1,000 per month for Riverside. It's that good. Why? Well, first off, ease. Your guests do not need an account. One click and they're in the recording room with you. It is fantastic, especially for high profile guests. Second, they record your video and audio chat separately and in the background. So they're not only higher quality, but the guest does not need to record their end and then send after which is a total nightmare. But for me, honestly, what I love so much is how much thought they put into the product. Like when the internet quality is low, they will disable the video for the cool. But for the recording, it works seamlessly. It records perfectly. It's so thoughtfully done and it makes such a difference. Use my coupon code 20VC. That's 20VC and get a 15% discount. It is the tool I could not run my business without. Again, you can check it out at riverside.ethm and use my code 20VC. That's 20VC. And speaking of game changes for businesses, as a VCO come across many businesses that have potential and offer a great product or service, but they run into issues. And that's why I love the team at a rising vanishes. They're a holding company that requires tech startups that are facing setbacks and helps get them back on track success. They've helped companies like UpCouncil, which they took from burning $1 million a month and shrinking to profitable and growing jive where they launched a shutdown company and went from north to a million AIR in just five months. They want to reveal your great business underneath the broken incentives. Whether it's a broken cap table, co-founded disputes, underwater common stock, the team behind a rising vanishes are career long tech founders, which is so important, they're not bankers and they know even the greatest businesses have tough times. Learn how a rising vanishes can be the one to help give your company new life by visiting a rising vanishes.com forward slash to zero VC. Go to a rising vanishes.com slash to zero VC. And finally, secure frame is the leading all in one platform for automated security and privacy compliance. Secure frame simplifies and streamlines the process of getting and staying compliant to the most rigorous global privacy and security standards. Secure frame's industry leading compliance automation platform paired with their in-house compliance experts and former auditors helps you get audit ready in weeks, not months, so you can close more deals faster. Secure frame uses over 150 integrations, built in security training, vendor and risk management and more to make compliance uncomplicated. Secure frame makes it fast and easy to achieve and maintain compliance, so you can focus on serving your customers, automate your security and privacy compliance with secure frame. Schedule a demo, stay at secureframe.com. You have now arrived at your destination. I am excited for this, my word. I mean, I saw this email where you outlined the culture at Traba before, and I thought this was going to be a really special show. So first off, I want to say thank you both for coming. Now, second, I want to start with some intros. Let's start with you, Keith, for those that don't know, which I think at this point is probably no one. Who are you? And what do you do? So I'm primarily a general partner. I've found this fun a bit of DC for about 10 years after being fairly entrepreneurial executive at companies like PayPal, LinkedIn, Square, co-founded a company called Open Door, as a side project. Also CEO of 130 person company based at Miami. Love that side project. Mike, same for you, what do you do? What does the company do? And then additional one there, but how did you get to know Keith and what's the relationship? Yeah, so I'm Mike. This you have a company called Traba and we're a labor marketplace that connects workers with open shifts in the light industrial industry. And our mission is to empower both businesses and workers to reach their full productivity and potential. So what that looks like at scale is the AWS of labor across the global supply chain. Things are moving faster. People are finding the right jobs at the right time. They're upscaling. And everything is just getting better around the world and the global economy. I did actually have like quite a neatly defined schedule and then you sent over the culture document sort of. This is going to be so much better if we have an honest conversation. So can you talk to me about the culture doc that you sent over to me and start with what you expect in your approach, Mike? And Keith, I'd love for you to chime in with lessons that you have, observations that you have from seeing this from the slightly afar. Yeah, so when my co-founder, Akshay and I started the company, we were thinking big just like how I mentioned to you, we plan on having a global impact, building a once in a generation company. And when you go back and you look at any of those once in a generation companies, Microsoft, Amazon, Apple, it was a group of people that were committed and they were working really hard, doing something that is very, very hard to make work. So our first value dream big, that correlates very closely to our second value which is Olympian's work ethic. We were just like what we're going to do is we're going to work really hard together towards a common goal. We only hire and promote people that are bought into that mission. Can you expand on that? What does the Olympian's work ethic mean in terms of expectations? In office, in hours, in attitude, what does that mean? Yeah, so it's a mindset. If you were to be in high school and telling everybody around you, I want to go to the Olympics, there is a certain commitment with that. You're waking up early, you're going to practice, you're showing up with other people that are also trying to buy to go to the Olympics together. So what it means in practice at Traba is we're all committed to at least 12 hour days, Monday through Thursday, Friday, we're working late, but people do tend to go out on Friday night. But it's an in-office culture just like how you could technically become an amazing baseball player by hitting balls in the batting cage alone. But the real magic happens is when you're practicing with the other teammates to prepare for the big game. Keith, I have to turn to you here. You've backed. It's astonishing. You've either founded or invested. I heard this the other day. Like a unicorn a year for something like 20 years. But my question to you is, when you look back at those that you have founded or invested in with similar trajectories, was this a limpium work? I think the same across all of them. Is this anything new? I wouldn't say it's necessarily all of them universally, but more than 80%. It's a very common characteristic of successful companies. I actually feel that it's a successful or an observed that successful characteristic of almost anybody's successful on any field. Effort and input is what dictates results. I think there's never been a substitute for effort and dedication to your craft. If you want to be top 1% in any field. And if you interview people in athletics, as Mike pointed out, will it be an work ethic? You interview people in music that succeed. If you interview people in technology that have been successful, it's always the people that work the hardest that have the most opportunities. And if you have the most opportunities, you tend to have the opportunity to thrive. This is kind of basically how every technology company was built for decades. Only heroic people really, who had almost irrational ambition entered the field of starting a company with their friends. Like it was basically borderline irrational to say I'm gonna reinvent the world and society or an industry from scratch, with my best friend from college. And the only people who did that had traits that were unique and they had a work ethic that was unique. Because that's how you shift the probabilities from literally zero to something that approaches a couple of digit percentage points. You know, when we worked at PayPal, I actually joke with Mike all the time that he's actually top 1 basis point in work ethic. And I was probably only top 10 basis points, but my absolute number of work hours probably higher because the standards were so much higher. At PayPal, like the idea of like having a day off was like inconceivable, literally inconceivable. Like there was three people out of 254 people in the company that when we sold the company that could live in San Francisco because the company was based in Palo Alto. There was no extra time to commute between Palo Alto and San Francisco. So it was like an insane idea to try to live in San Francisco even though we were all in our 20s and early 30s because you just didn't have an extra 20 minutes to commute. And so this is how we built companies. And Mike is really refreshing because it's kind of like the traditional way of building a company which has been proven to work. One of the reasons why I introduced him to one and to his board member as Senior Coal from Coast of Ventures is Samira was attending a board meeting with me about OpenStore and he was complaining about the new generation of entrepreneurs that none of them want to work that hard. They're all entitled blah, blah, blah. I was thinking to back in my mind, oh my God, I've got the perfect entrepreneur for you because Mike has none of those traits. He's not entitled. He sweats the inputs and he's built a very intentional culture with his co-founder. That really does replicate the best of let's say PayPal or how our Apple or Amazon were actually built. I work seven days, we have the funds and the shows and everyone says to me and it fucks me off so much. That's not sustainable. Not, I mean, it's good for now, Harry, but you can't sustain it. I mean, look, we're 2,700 shows in and nine years in. So I'm still here. But my point to you is how do you respond and this is to both of you? Anyone who will say it, how do you respond to those who go, that's not sustainable and you can't keep doing that? I think it's just simply not true. Even like a traditional, say like a normal nine to five. Usually the hardest working people, they, if they do actually leave at five, they go home and they work on something else that's their craft. They say they want to be the best piano player in the world. They're playing piano when they get home and no one's saying like, they don't even think about that as work. So when you're with a group of like-minded people that are working towards making the world a better place at scale and trying to build something incredible, it doesn't feel like work. Yeah, to amplify that, it's momentum that matters. It's like progress that matters. That's what fuels you. When you know you're getting better, when the company's getting better, when the customers are happier, more delighted, et cetera, workers are making more money. That's what fuels you. But if you think about the back to a little bit of work ethic, like the people who become Olympians, they don't stop until their body basically can no longer compete with elite people. You know, if you look at the basketball players, the Michael Jordan's and the Kobe Bryant's, they're still outworking everybody who's 16, 15, 14, 13 with 500 to 5,000 shots a day, notoriously after-play-off games, still taking more shots, making the staff keep up with them, waking up at 5am for more practice. That's what makes you successful in any field. People think DJs are at least creative people that don't do any work. Most of the successful DJs I know play like 300 shows a year across the world until they make it. And when they get, they still play 150 shows a year, traveling all around the globe. So like there is no substitute for success. It's like you have to decide when you wake up, what is my life about? And if it's about transforming the world, you have to take energy from somewhere and apply it. And it becomes self-fulfilling. Like at the end of the day, you really do have this ambition to get better every day. And he doesn't even feel like work. I used to joke with people that if you have to look at the clock in the middle of the day, you have the wrong job. And if you even just think about most people in a high school in the US, if they're trying to go to the best college, you just think about their schedule. They're waking up at 6, going to school, doing their classes. They may do athletics after class and then they do their homework and then they go to bed and they repeat. We still, a tribe of people still go to the gym. People still take care of themselves. But it's just shifting a mindset of like, this is going to be my craft. We're going to build something together. So people are showing up to work. They're working together. They're collaborating. They're solving problems. They have full context because they're in the room. They're visiting customers. Then people do, like, go to the gym, get a mental reset and then back to it with their colleagues. I feel like a lot of high performers even across corporate America have felt this where they're like, wow, I'm putting in so much effort, but 80% of the people in this company, they're just not pulling their way. Like, why do I have to apologize for reaching out to someone at like 6 p.m., whereas like early stage startups are very hard. Most of them don't work. So we want to self-veh and only have people that are opted in and excited about that. And it unlocks, like, a level of velocity and intensity that just doesn't happen at most places. And Harry, one of the most unique things about trauma is the consistency. So Michael Luda too, if it's worth like putting a very fine point on, everybody at trauma is up to the same standards. I've seen a lot of companies where the top 10% are, the top 20%, the top 30, top 40, but literally everybody at trauma is, as committed as everybody else. And that's extraordinarily rare. And I think that's why the company's succeeding. We're going to dig into that in terms of the depths of talent matter in that mindset. I do just have to ask that we mentioned the parallels to athletes several times. There is a moment in athletes training programs workout routines where rest is embedded in an extra hour in the gym, won't enable them to actually be better. Is there ever a moment in work where an additional hour of input isn't actually worth the output? I think the right question is to ask, like, okay, for a certain number of input, what is your leverage on that time? But it's a shift of mindset. Okay, if we're all committed to at least 60 hours a week of work, how are we leveraging that 60 hours of week to be the most high impact on the business and moving things along even faster? So the reason why I wanted to change the mindset is because if you know that not only you, but all your colleagues are also going to be there at 8 p.m., you're not even thinking about pushing it out the next day, you're doing it that night. At scale, like, over time, compounded across a lot of decisions, the whole engine, the whole company moves so much faster. They answer your question more directly. People do rest. They also need to know that like, they should be pushing themselves into hypertrophy, which is you're not actually going to get bigger unless you feel like, oh, actually now, this is where it's going to get hard. You're doing 20 sets of bench press. Like, you're just doing that with very low weight. You're not actually making a difference. It's the same thing with work. People should be pushing themselves more and more. And that's how you know that you're actually moving fast enough. Let me just apply the athletic metaphor too. It's not as if, like, let's say your football player, you don't just go to the field and practice all day 24, seven. You might study film. You might go home and spend four hours watching video of your opponent. And that makes you more successful. So your body is recovering, but your brain is training, but you're spending every incremental moment watching that film. And that's what leads to what looks to be, you know, this heroic interception, but it's all based upon preparation. So I said, I love that. I had this kind of spa on the show the other day. And he said, I encourage people to have side projects. And I said, why? That's ridiculous. I personally would like you to go home. And if you're a sales rep, read about the latest sales tools, the latest sales techniques, perspective clients, we could be going after. You don't have to be in the office working at 9 p.m. But improving what you do in the day, like you said, they're about watching tapes, improving your day-to-day process. Do you want your people to also have side projects? Do you agree with me or? So you want to hire people where it's like, we are all committed to making a once-in-a-generation company. This should be everyone's top priority. That's the type of people we want to hire. Now, people can go off and do something in their careers later, having looked back and then like, I learned so much by giving my all to that one thing. You need to develop your comparative advantage in life. And when you identify what that is, you want to double triple quadruple down on that and leverage that all day every day. I do believe that there are things you can do that are maybe closer to what Jack was thinking, which is what I'll sometimes do is I'll read books. Like, I have a gracious appetite for reading. And the idea of reading the books is to spark ideas that I can later leverage. And so sometimes there's different time horizons of investing in yourself. Like, I read a book. It's probably not that practical for tomorrow. I'm not going to come up with something from this book and you know, send it to Mike. And he's not going to apply it in a trumpet borrow. But years and years of reading, quality stuff does occasionally lead to a piphany or spark or an interesting idea that other people miss. And then I can leverage that. So it's like an investment. It's just with a different time horizon. Keith, can I be direct? You're an investor and a founder at the same time is one not a side project. No, you know, there is some tension. On the investor side, I don't think there's much tension. Like, I actually don't feel like for the most part, I'm cooperizing my ability to invest. So though, in theory, I can meet more companies. In theory, I can meet every, you know, early stage start up and that would probably be good. But I'd probably be tired anyway. And wouldn't be as sharp as possible if I tried to do 24 hours of meetings with entrepreneurs every day. Where the consequence is running a company. There are real trade-offs. And Mike reminds me of this every day. It not literally reminds me just watching Mike. I am reminded of what I can be doing with the incremental time when I'm serving on boards, when I'm meeting with founders from colleagues, when I'm taking new pitches. And there's real trade-off to my company that to create alternative leverage for and find other ways of adding value to offset some of the disadvantages. So there are real, real trade-offs in company building. I would not recommend that. As a VC, I think it's neck very positive. There are things I remember and I've been able to remember by having to work with my hands again. That makes me hopefully more useful to entrepreneurs like Mike. There are things like a brown recruiting. You know, there's things around like actually growth funnels that when you have to do it for yourself, you remember some details that occasionally you can pass on. But I feel the stress every day at work in the company office. The decay rate on operating experience has never been greater. And so if you did something five years ago, pre-COVID, pre-open AI and pre-challenge, it doesn't happen. It's terrible. Like I took eight years between Square and taking you over, you know, CEO of OpenStore and it's like Boston Latrophy. And it took me the first year at least to get back to be decent as a CEO. I think the second year started coming back and the muscle memory started recovering. And you know, maybe now I'm actually doing it in my district rather than just Mike. Can I ask you, you know, we hear that culture and honestly, I think a lot of people listen and will be quite shocked and will go, well, who would sign up for that? How do people respond when you illustrate that culture and how do you think about their response? That's a really good question because to be honest, I look at their eyes when I interview people, you have to correlate the hard work culture to the dreaming big, which is the reality of the matter. Like if I'm going to tell somebody, let's get together and try our best to build a trillion dollar business. And then I say, that of course takes a lot of work and we want to hire people that are committed to that. And I'm going to be honest with you that this is what the company's committed to. Look at their eyes and if they are smiling and they say, actually, like, I already work those hours or that sounds awesome that everyone else around me will also work that work that much. That's the right type of person. If it's somebody that's trying to justify or change something, you already know that they're probably not going to be a good fit. So we want to find the people that actually are excited by that. Harry, a good illustration, and Mike, you know, can amplify this, is Mike hired a wonderful head of finance in Jessica. She actually proactively reached out to the company because she read about trauma's culture and the dedication, the 996. She had worked in Asia and had watched and observed how all the successful companies in Asia have this work ethic and culture. And when she was moving back to the United States, she only wanted to work with a company that was just dedicated to winning and being successful. She proactively reached out to Mike. So it actually becomes a magnet for talent. But how many people are there like that? Maybe I sit in Europe and so I see a different view, you know? That's why there's no European successful companies. As you know, I mean, like, if it's not accidental, there hasn't been a $100 billion European company created since 1990. Miami's great. Well, how'd you hear it? Miami, you can move. We'll set up a studio for you. But my question to you is I might ask you, on most people quite shocked by it and you just get used to that. And do you care? Do you care about the people on Twitter that go, ugh? I don't care because in reality, if you want top of the bell curve results, if you just think about a distribution, most people are in the middle, but you want outcomes that are on the far right, like basically top 1% outcomes. So it's actually better for me to be upfront that this is what we do. And like Keith mentioned, we have enough people that are tired of being around middle of the bell curve results and want to actually, if they're going to give their all to a startup, they want to pull every lever that makes the probability of success as high as possible and joining a team of like-minded individuals that can withstand any challenge that comes our way, like very low ego, high work ethic, understanding that startups are difficult. So it's actually completely fine with me if people misunderstand or don't want to do that. The outcomes are just going to be different. Do you ever get people who think they want it and then join and go too much? Yeah, we do. We actually get people that think that we're kidding. Like people will be like, oh yeah, I'm going to say the right things in the interview process and then we have had people join and then they're like, oh my gosh, these people are actually working past 9, 10 p.m. like every night. And by the way, people are happy. It feels like we're all in like a college working on a very hard project like that to do the next day. Like, oh yes, we do. We get people that I've had people that have joined to said the right things in the interview process and then we basically are like, okay, this isn't for either of us after like the first week. Yeah, the heritage is to reinforce that. I've been in Mike's office, you know, 10 p.m. or very unusual times weekends. And the energy at 10 p.m. is better than 90% of companies at 2 p.m. But without fail, by the way. Well, we're all totally aligned. The one thing I do say is I will expect more than any other employer from you but I will pay you more as a result. Well, I know what you're giving up. Do you pay people more because you expect more? Yeah, we do pay people well. There is a dynamic of being a series A startup where part of our success is to also manage our cash effectively, especially in this market. Part of what I get asked is, okay, you grew this much. This is your revenue growth rate but how much capital did it take to do that? So it's part of all of our collective success to also manage cash effectively. So what I would say is people do get paid well on cash. They get paid more than the average job but the real unlock for people to unlock generational wealth is the equity. And that's actually why it's an interesting dynamic because the more that you hire people that are too cash-obsessed, the less likelihood that your equity, that everyone's equity will be actually worth a lot too. As we continue to grow and as the equity upside starts to not be as high of a multiple, it's naturally you continue to pay higher cash but we do pay well above market, especially on the equity side and then with hiring the best people with the commitment, cash is also good. I'm intrigued when you look at, and this is for both of you, when you look at cash discussions and title discussions in the hiring process, are there any lessons from how people respond and how that will correlate to success or lack of success in a role? 100%. So if they're way too focused on title, it's an immediate red flag. Part of what unlocks the greatness in a startup is people basically thinking of their career as a rock climbing wall. Like I'm gonna go over here, solve this challenge, go over here, solve this challenge, what's better for the overall company startup is a team sport. We have this tenant, which is one of our values, which is playing for the front of the jersey. So it's not about you as an individual, it is actually about solving problems and when the company's growing, when you're hiring a lot of people, when you're onboarding a lot of customers, things are starting to break because of your growth rate. You need people that are putting down the hat of like this is my title and just solving whatever problem is there. It doesn't matter what your title is, so that's the number one red flag. People that are way too focused on cash versus the equity, I do think that's more of a yellow flag. Like some people have things in their life that they have to pertain to whether it's like student debt or families or things like that. But I do question if you're joining a Series A startup, you should be thinking about the equity value unlock more so than the cash. So I don't compete on cash with large mature companies where their equity is only gonna go up like at the rate of the S&P 500 or anything like that. Does the culture scale with time? When we think about, you said you're a Series A company. When you're a Series D company, does that culture look the same then or do we regress to a mean that it's sadly we have to regress to? Well, we're gonna try our best never to regress to a mean. But what I would say is the culture does adapt based on the risk profile that everybody takes on. So when we first started the company, we were actually in office at least six days a week, 12 hour days. We were basically up against the clock to get to a Series A funding. You need that level of commitment, you need that level of being all in and dedicating everything to it. And that unlocked actually like an amazing Series A. We have pulled that back a little bit to be more flexible as we hire different types of people, different roles that we need to fulfill. But as we become a 1,000 person company, we will modify what is the commitment together but we will never sacrifice the high velocity, high performance culture. I do believe strongly that everyone should be joining a company, more like Olympic sports team. It's not a family, it's Olympic sports team. And like when you're an athlete, that's not pulling your way, you get pushed off the team. I think you definitely do past X,000 employees see some regression to the mean. And the art is constructing some accumulating advantages, let's say a network effect before that happens because the momentum of a network effect can offset some of the slippage in the quality. Although that said, both Amazon and Apple were able to scale to call at least 10,000 employees without regressing, so it's possible. I think other company culture start regressing past 500. Some retain 510,000, you see some decay. But if you establish the correct network effect, that cannot set. I mean, there's the other word of profit code about building a business that's so powerful that even idiots can rob it. So at some point, you do want to erect something that's a true machine that you're constructing a machine through human labor, effort, energies, sacrifice. And at some point, you want the machine to be running, and the machine can run for a while before it decays. Keith, having seen many different scale-ups in different situations, if you would advise Mike proactively on when culture starts to break and how, what would you say the most pressing points? You know, triply, the biggest mistake is usually hiring a young person. Yeah, everybody you hire, if you don't correct that person who's off on your culture and your values will hire like 10 more people like that. And all of a sudden, you've got a real problem. Mike is triply maybe the best I've ever worked with. I think maybe the best of this trait is he realizes the person's side to be off. He's going to fix that person right away. What does fix that person mean? First, initially give him strong feedback on why you're off, what's not acceptable. Here's how you have to correct it. And if not, you know, edit the team appropriately. Almost every other CEO I know, including ones who've been incredibly successful, probably procrastinate some that conversational little to you out. I do look for something called a force multiplier at the company and the people that I just want to promote, give them more equity, give them more responsibility. And the reason for that is because at scale, you're building an engine. And I want to basically when I do find somebody that is not only thinking about, okay, this is my job, how are they actually amplifying the cultural values that are important for success at our company? I do tell my entire management team that it's not your job is not about you. It's actually about the fact that you also have on other people. So if you think about any like micro behavior, like for example, let's say you're late to a meeting. If one person is late to a meeting, like three minutes late, that may not be that big of a deal if it's just one on one. But now you actually have a leader that's late, three minutes to meeting. Everyone now thinks it's appropriate to do that. Now everything is slower by three minutes, multiplied by the number of people that we're in that meeting. If it's an all hands, even worse. The way that I scale the culture, is I culture, like basically being a force multiplier is actually a component in all the promotions, performance reviews. How are you actually embodying the behaviors that we know that at scale, I say it's 500 people. What you're doing actually would be what we want to see across 500 people. Harry, if you read high up the management, you know, by Andy Grove written in 33, it's basically the same philosophy and like translated it to trauma. Which is basically everything's about what is the high leverage activity? High leverage activities can be high up side and they connect down side. And you need to stop the downside ones, like the three minutes late to the meeting, because it multiplies. And then you need to amplify the positive ones and you want to filter people and your own calendar by whether something is a high leverage activity or not. Mind, do you celebrate wins? We do celebrate wins when we hit a very big milestone. I had given an all hands to the company and I was like, here's what we have to be proud of. Like this is our unit economics. This is our growth rate. We actually doubted we could do it and we actually far surpassed it. Everyone clapped. Before people could stop clapping, I switched to the next slide, which is basically like why most, why combinators start up the graduate, why combinator end up not making it. And it's because they get complacent and they lose momentum. One thing that keeps me up at night is it's always this balance of guys, we are genuinely crushing it. We should be very, very appreciative of this. And all this hard work is translating into actual results. But then in the same way, you don't wanna have a feeling that we already made it is we definitely have not already made it. You don't make it until we end up IPO-ing and actually I don't think we'll ever feel like we've made it. It's always day one. We just raised an incredible round of financing based on real results and great people. But I also know that like if we just all get complacent and comfortable, which happens to a lot of companies, next quarter is not guaranteed to be as good as this past quarter. So we're always thinking like, okay, what's next? How can we increase velocity and work even harder? Like you said, for example, let's apply this to a startup. I linked in by any measure was pretty successful. Certainly impact opposition 24 billion or so. Truthfully, probably hit somewhere between five and 20% of its potential because it didn't do some of these things. Like in my mind, it still could fall, you know, it still drives me crazy that LinkedIn wasn't more valuable than Facebook. It should have been. Can you unpack that for me, Keith? Yeah, we didn't have an Olympic work ethic. We had a bunch of French engineers that I wanted to work 35 hours a week. At the time in 2003 to five, when the company was really founded, most people thought the internet was dead. So we didn't read Hoffman who founded the company really couldn't get the stellar quality of talent that makes me able to tap it into. And it started propagating and those people hire 10 people like them. And then all of a sudden you have a mediocre culture with a brilliant idea and a great viral distribution. So again, 24 billion for most people is acceptable. Michael be disappointed in himself. It stops at 24. Keith, this might be more directs at you, but it's just like when you think about the work culture and the commitment required for working at trouble or working in this environment, can you do that and be a parent? Yeah, I mean, I think you can. So I remember when I was a lawyer, the last month I was a litigator at Solving a Comma in New York, I built 360 hours. I bet you almost nobody works in the startups, works for 360 hours, that's built by the way, not worked. Many of the people I competed with in my class of associates actually had kids. One of the women, one woman Sharon, who is like a classmate of mine, who's now a partner, had kids. So you can be very successful if you have kids. It requires you to be more disciplined like about your time allocation. It tends to amplify things. If you're really disciplined, maybe you can do better with kids. Delay is about to have a kid. I'm sure he's going to become just as good or better investor with a kid than he was before. I do have to ask, I had a guest on the show the other day and they said that you can be so productive in your 20s that not being your fullest work self in those years is one of the biggest opportunity costs you will make or decision opportunity costs you will make in your career. Others say that you need to experience life, travel. How do you feel about that and which side of the fence do you sit on? I can amplify that. I think first of all, the technology, the opportunity cost in your 20s is very high. If you look at a lot of people who've been most successful, the foundations of their career are in their 20s. It's a little bit like sports. If you're going to be an NFL player and be a basketball player and a major league baseball pitcher, the idea of taking time off in your 20s will be literally insane. Technology has some of that. Step Cohen, who co-founded volunteer and Sean, these CTO have both written blogs and Twitter threads about how you're committing like professional suicide by investing your time with distractions in your 20s. I think there's something to sampling, sampling different things in life like I sampled being a lawyer and then figured out what I really should be doing is building technology companies. There's something that you do need to sample to figure out where your comparative advantage is or where you're double bound. But that's an investment. It's a conscious decision. It's not like, hey, I'm going to go see the world and I'm going to sit back and watch Netflix. That's why joining Traba in your 20s, like a company like Traba is actually by far the right move because if you are in your 20s, you have all this energy you actually want to reach your full productivity and potential in this life. Why would you go work at a company where you could actually put like 50% effort in, be on Zoom, but like actually be going to doing something else. And you're never worried about, oh, am I actually going to get laid off? Like you're basically wasting a whole decade of time in an area that's actually not pushing you. It goes back to what I talked about earlier with hypertrophy. You should actually be putting yourself in situations to grow from and actually surprising yourself in being like, wow, I actually am capable of doing this. Like you actually see people that accomplish great things very, very young. And it's because they're putting themselves in this situation to actually challenge them. That's some specific examples. Why do you think that Teo Fellowes have been so successful? Or why is he founders? Why have they been so successful compared to normal distributions? It's because they invest their time early in their careers and doing things that are challenging and they stress themselves. They challenge themselves through the hypertrophy model. Those paid dividends and they may have luxuries later in life because they invested. Most of the best people I've ever worked with in my career were actually interns. And they took advantage of being an intern. You know, we talked about Delia and Tonya Thordash, Taylor Francis, these people invested very consciously early in their career, putting themselves in a position to be challenged to learn as much as possible and then double down and leverage that as fast as possible. And that's how you generally break through in any field. I got two questions that I have to ask on the back of them. I kind of bold statements, but I do believe them. One, I find that all the greatest entrepreneurs that I see, I invest in, I work with whatever that is, but the greatest entrepreneurs start some form of entrepreneurial project early. They're 13, 14 building websites. They could be selling cookies at their school, but they start entrepreneurship in some way early. Do you both agree with that? I think that developing the skill of resourcefulness and basically being like, here's where I want to go. And I'm not going to just take like these arbitrary rules or this system around me as an answer for that. I think developing that at a young age is very important. There's actually a general partner of founders fund named Tray. We were just at his 40th birthday party. One thing that was mentioned was that he didn't get into Georgetown the first time and he literally went and like set up a 10 in front of the admissions office and was like, I need to get into this school and ended up getting in. Like I think that you need to develop whatever it is. I think you need to develop that mindset at a young age that whatever gets told to you isn't actually the answer right off the back because he was just generated by a system and people that are probably actually optimizing for the middle of the bell curve and like the mean. I think that whether it's building websites or other entrepreneurial endeavors or trying to find your way into like some system, I think that that type of mentality is very important as a young. Yeah. I'll grab a list of a blog post called Relentlessly Resourceful, which is I think the trade that Mike's are looting to and I think to be successful with a lot of work you need that trade on steroids. Almost every trade that's important you develop early in your life and there's evidence of it. So like work ethic, intensity, resilience, resourcefulness, it shows up very, very early. As Mike alluded to in a trade when they were roasting trade, they gave examples as early as high school of like you know ways he was revitalized the resourceful that shows up later when you're building companies, when he's co-founding companies. And I think everything that leads to success is actually shaped much earlier than people realize. Pretty important about children. I do have you know kids that are two and a half years old and I was already trying to incocate all of these values like and I'm not accepting any excuses. Other parents are like you're crazy. I'm like no these kids are gonna have these traits now. If you put 20 VC on and then three is it actually just subtly? We'll test it out, really test it out. Yeah, yeah. Jacob will come home and be like Keith. No, he doesn't have any way. Don't worry, he already takes some crazy. The question I have to ask and I want to learn. I use the show as a learning mechanism. I always have done. I don't like first-time founders and I want to be learned from you guys here. But I don't mind them because I feel that there's so many mistakes one makes in their first company that you would never make in a second or third. And if runway and time is the killer of progress, you waste so much time hiring the senior executives before you should, finding PMF, customer discovery, all of these things. Why am I wrong to not like first-time founders? I think first-time founders are actually better on average. Most of the best companies I've invested in are first-time founders, not all. Part of it is ambition. Part of it is you don't know what you don't know which means you don't accept any rules. Once you learn too much, even as an entrepreneurial person, taking some of those and they're not always right. I think the best thing you can do though when we have this side conversation at the Twitter thread about this is care yourself very well with either investors or board members who can help identify some blind spots, sometimes with the grass isn't quite greener so that you can take advantage of those lessons while you're a first-time founder with all the positive energy and all the positive no excuses sort of mentality than most second-time founders have. I think I've learned some things and I have avoided some mistakes at Open Store but in some ways I wish I had done some things naively. What are the biggest mistakes Keith that you most often correct first-time founder? The biggest mistake was not being as intentional as Mike and Akshay about the culture at the very, very beginning. Culture is like concrete in liquid form. Coalcreate's really malleable but once it solidifies, it takes like a jackhammer which is incredibly disruptive, painful, expensive to break. I was a little too, I was a lot too passive and laying in the culture for a really and I really have struggled to fix that. Can I ask you, Mike, when you think back on the decisions you've made that you've been a mistake and you wish you'd done differently, what do you think those have been? If Keith's there was the culture and he should have been more intentional from day one, what would you be? I think when I was first starting the company, you think everything has an equal way of importance when in reality you want to spend your time as you're scaling on the most high leverage activities that are actually going to tend next to business. It's that balance of sweating the details where every detail does matter but then when there's only a finite number of hours in a day and how much energy you can apply towards something, I've grown as a founder where I'm like, okay, here's like, as I'm starting my day today, what's like the most important thing that is critical to the company and I should be like putting my time towards that and learning the skill of like delegating the other things and then while still pressure testing. But I think when I first started every single detail had an equal amount of importance and actually Keith being around the table for the whole journey. He actually did give him a metaphor of like, I'm operating more like the army where the army is like very much like operational efficient across everything, no mistakes. Whereas what I should be doing is a founder is being more like a Navy SEAL going all in and like really applying myself into like the highest leverage activities. I'm gonna go there on something but why not? Founders, funds, mortars like don't fire the founder. Keith, you must have invested in people where they're not as good as you think they are and they don't live up to expectation and actually they don't listen to you for whatever reason. What do you do then? Ventures a lot like baseball in the United States. If you're world classed, you're right 40% of the time. And I define venture as seed stage investing, series A investing. 40% qualify in 10 Williams category. So my definition 40% right is gonna lead to 60% not getting your right. Personally because it's such a big challenge like reinventing an industry is like this heroic effort. Our partner Trace Steven says, building companies talking hard, like direct quote, you know, and it really is, we're using it worth using a direct quote because it signifies how challenging it is. So being 40% right and 60% wrong is what you're kind of signing up for. What I care most about is that people leverage their ambition, their talents, their skills to the highest potential. Not everybody is gonna be a majorly baseball pitcher even a lot of people start in college and try. And if you have that potential, you want to fulfill it. And so that's most exciting. Like I don't expect founders to listen to me by the way, just to be clear. I almost never tell a founder what to do. I do have feedback and hopefully insightful feedback about my kind of spidey sense of what's working and what's not. Almost like a cartoonish mirror at a haunted house. Try to exaggerate the positives and exaggerate intentionally the negatives and play it back to the founder and say is this what you really you think you want to be doing? It's worth emphasizing that a lot. Every company that success was like a cult and every cult that works is unique. And so if you just take general feedback and apply it to a unique situation, it can often be backed, like really bad. So I think that is exactly the role of the founder is, what am I building, what's special, what's unique, what's differentiated about what we do are a company culture. And then how do I apply general frameworks to my specific talent pool, my specific market, my specific culture? This is actually like specifically, like I'll give you another illustration of another fountain of your things that Mike does. So Max Rhodes, you worked with me at Square and now RunSphere. When he asked me difficult questions, he actually starts the question with what's the right framework to think through this problem? It's never what's the right answer. It's like do you have a conceptual framework that I can apply to my company? What do you think of the frameworks which are malleable to companies across stage or sector or space? Like what are the frameworks which do apply across and you should take and learn from? Let me give you an extreme example from that kind of public domain. Most people say you should build a company that's transparent, right? Like you hear this all the time, transparent, blah, blah, blah, blah, blah. Apple, which is the most valuable tech company in the planet, is completely non-transparent in every possible way. Employees are not allowed to go to the wrong buildings, they have separate badges, they're not allowed to know what other employees are working on, et cetera, et cetera, et cetera. Obviously, the mainstream advice clearly doesn't work to build the most successful company in the history of the planet. To some extent, you know, that's the point, is like there isn't a right way to do things. You have to figure out why would you building a special and differentiated, you know, if you read zero to one, Peter talks about both cults and secrets. So you have secrets about the world that you believe that other people don't subscribe to, and that's what powers your competitive advantage and that's what you're doubling down on. Apple has lots of beliefs about the world that most people don't believe in, but that's why they're very successful. And you can't like apply that, like nothing that works in Apple would work at Google. Like everything Google does is completely the antithesis of Apple. And so that's why you have to have a philosophy that accommodates successful examples, and then you apply that philosophy to what you're trying to do. If you have a monopoly, for example, Google has this 20% side project bullshit or they used to. If you have a monopoly business, with 99% gross margins or 90% margins, maybe letting your employees waste time once a while, maybe isn't catastrophic. Most of us do not run pure monopoly businesses with 90% margins. So that would be catastrophic to our businesses. That would be catastrophic to do it out. So you'd be possibly catastrophic to trauma. It would definitely be catastrophic to open store. I always say to founders, don't try and educate investors. If you need to educate them, it's just too hard. Well, I think I agree with you, Harry, that once you're having that conversation and trying to educate investors, they either notice that and they spot it and they're like, oh my god, this amazing. Where they don't and just avoid them. Well, when it's like taught to me about clown and you're like, we're gone. From where out like this is just not gonna work. Well, this is why to give advice to our entrepreneurs who are listening. Actually, I don't think you should practice your pitch with mediocre investors, even though lots of people give that advice because really good investors are gonna ask completely different questions. And you're gonna just mislead yourself by practicing with mediocre investors and then you're gonna get a really good investor and they're gonna ask completely different questions because you're gonna dial into what actually matters. And you can almost tell like, I get to work on both sides of the table because I'm raising money from investors, pitching them and then obviously hear a lot of pitches and watch our portfolio raise money. There's usually two or three things that matter. And when you talk to a really good investor, it's so consistent how they dial into the same two or three things. I agree, I think the hard thing is that honestly, most people don't meet the good investors. My question to you was actually, could Traba or could any of the companies that you've worked with key be built outside of the ecosystems they were in? We joke about Europe, but could they have been built in Europe? Like how important is that local maximum of talent that you have Mike in Traba that it's in person in office? Well, personally, I believe you need to be in person. So when Mike started the company, he and Okshay were courageous because at the time, there was this consensus for you that people could work remotely and distribute ways and blah, blah, blah, blah, blah, blah, blah, blah. And they were like, we're doing an in-company and in-person company only period like six days a week. Now more people realize that that is the correct way to build a startup. The three years ago, that was incredibly contrary. And you know, we at Founders Fund have pretty much put a line in the sand that we want to invest in remote companies because we've just watched 50 years that there's almost no examples of people building companies that way. And there's lots of, if you've actually been a founder, if you've been a CEO, Peter has, if you've been a CEO and founder like Abvin, if you've been a co-founder like Trey, you just know why. It's very obvious why it doesn't work. And so we immediately filter that way. But it happened to get Mike a lot of credit because that was not almost like an acceptable view to have during COVID or the end of COVID. I think you can do this in Europe. You'd have to be careful because obviously European countries have all these regulations about people working. But we have a great company, Trade Republic in Berlin, run by actually a founder who's very similar to Mike in terms of D&A, Christian. And it's doing very, very well. We have a board meeting actually later today. So it's possible. But I think it takes the courageous, confident, no excuses to nace this founder to pull it off. Mike, how do you feel? Could you have built trouble somewhere else? Starting in Miami was definitely the right move. I do think that being different than most, I mean, we were working six days a week, 12-hour days in Miami, Florida, where people do like, there's beautiful beaches there. There's like a lot of things to do. People would be like, okay, I'll move to Miami, work at Traba, dedicate everything to actually making this company work, building relationships that will last a lifetime, go through a lot of challenges together in Miami. I do think that and I did work with Uber in a lot of countries that like France, like Netherlands, Egypt, and even though most of the population may have a certain culture, I do think that being very unapologetic and saying, this is what we are, and you can opt into it. I do think you can still find the top 1% or people in those communities that will opt into that. The risk is when you are too open and aren't upfront with what actually you want to commit to. And that's when you hire people that are all like, all over the place in terms of what their commitment level will be. Final one for a quick fly, Keith, you just said about kind of, you know, remote, not generating great companies. You have your Git labs and your zappers. And I've seen like a lot of people on Twitter be like, oh, Keith, you're so wrong on this one. And so I'm gonna get in trouble if I don't ask it. Well, okay, let's talk about it. So I actually source Git lab for KV. We are this seed investor and I met them at YC office hours and I knew they were special. I think you build an open source company, predicated an open source software in an distributed way because you have thousands of contributors or hundreds of contributors all around the globe to open source software and you're managing and corralling the contributors. It's a very special exception, but I knew it. And I knew it right away. So I'm not gonna accept like Twitter people like who have never found a successful company criticizing it when I knew that found the exception in the last decade. You know, I last thing I don't think was actually built the way people remember. I don't know all the details, but as I've probed a bit, I don't think it's quite as clearly true that it was built that way. That it was built remotely. Maybe when you have a network of facts, maybe when things are going perfectly, you could build a remote company. Like for example, Airbnb is a microlead of two, I invested in the beginning with Airbnb. You know, obviously they've gone to a remote culture but they have the best network of five business I've ever seen. And if you ask Brian or Joe, would you start a company from scratch today as a new founder, I can guarantee what that answer is. It's not gonna be doing remotely. Why is it the best network of five businesses you've ever seen? Well, because you have a network of fact across markets, typically you have a local network of facts but Airbnb is great because you have travelers that say going from China to New York and vice versa. And that's pretty rare when you can actually literally spread across markets. You have a local network of fact like the more host you have, the more matchmaking you can do. So like there's the more supply you have, the more likely I can find what I want, the price point I want, the neighborhood I want, with the layout I want. But then also once I've been to New York, then I can take it back with me to Miami. And so that's extraordinarily rare. Okay, listen, I want to do a quick fire answer. I say a short statement. You give me your immediate thoughts. I'm gonna direct them. So don't mind, it's not gonna be a free for all. Mike, you can be CEO of any other company for a day, which would it be? If only for a day, I think it would be interesting to be the CEO of the New York Times. That's great. Keith, where do interest rates go from here? They're not going much down. I mean, I think where he has to stay in inflation for structural reasons for a decade. Yeah, plus or minus they might be slightly alleviated, but there's a lot of very strong reasons why the zero interest rate, or low interest rate environment was a one time history kind of world. Mike, what's the right way to view competition? Be aware of competitors, but not to obsess over them. Keith, 2024, are we more optimistic or less optimistic than 2023? Well, I'm optimistic. I just don't believe there's a lot of great startups to invest in as we see. There's a two different thing. It's like I generally have to be a technology optimist as, you know, Mark and Jason pointed out to be a successful investor. You always have to meet a founder and say, what can go right? What is the potential of this company? And what is the potential of this person? But I think there's going to be rare examples of when things can go right on a probabilistic basis. Mike, what's the best piece of advice you've been given in the trauma journey? Be on apologetic of what you stand for. It actually creates the right effects downstream. Keith, final one for you. If you could change one thing about founders fund, what would it be? I think we need to be younger and cultivate up and coming talent for investing because it's a decades-long business. Peter's been around for a while. Brian's been around for a while. Trages turn 40. The problem is, and the challenge is projecting who's likely to be a great investor is even harder than figuring out who's going to be a world-class founder. What are the biggest signs that someone is a great investor earlier? You were talking about Daly and beforehand. I think investing is a little bit like playing the guitar. And you can't really tell someone can play the guitar until they pick up the guitar. And so you can't read a book about playing the guitar and know whether you can play the guitar or something. And so I think the only way to tell is you need to get some reps. You need to try to invest. You need to watch, can this person identify who tastes who's a world-class founder? Can they close an interesting investment? Do those companies show signs of light? I've yet to find a really strong proxy for that, where I know how to find a world-class founder. I know how to evaluate a world-class founder. To actually, I usually know how to interview an executive, et cetera. Try to identify who's going to be a world-class founder. And so you see them actually try to do it. It's really, really, really difficult. And you don't get real returns for six, eight, 10 years. Whereas like an executive, I always know in 30 days whether they're really going to work. Jeff had said you need 10 to 20 million to learn. Yeah, there's that famous fighter, Jeff thing, from John Doerr, about you like you crashed an F-15, a million, a meal from Greylock used to talk about that. I don't know if you really need to lose that much money. I think a year in you know what you have, like we knew Trabu was working pretty damn quickly. Kelly knew fair, was working at the second board meeting. He pushed me out of ramp even before launch to double down. I actually think within 12 months, 90%, 99% of the time, you know whether you've made a good investment, even if the external world doesn't know. My final one for you, where are you and Wes Trabber in 10 years' time? We'll be a publicly traded company and working for that trillion dollar goal we have. We have improved millions and millions of people's lives, upskilling them, connecting them to the right jobs at the right time. And we've unlocked a new level of productivity in the supply chain. So people are getting food faster at a better price. Buildings are getting put up with a better cost, getting put up faster. There's not this constraint of labor across the supply chain. Guys, I've loved doing this. This is why I didn't really like the schedule because I thought the conversation was so much better without it. Thank you both so much for joining me and this has been fantastic. Absolutely. I have some pleasure to be with you. Yeah, thanks for having us. I just love doing that. You can tell in my tone how much fun I had there. If you want to see the full video of that discussion, you can check it out on YouTube by searching for 2.0 VC, that's 20 VC. But before we leave you today, did you know that every 20 VC episode you listen to is recorded with Riverside? Riverside is insanely good. Like, I would pay $1,000 per month for Riverside. It's that good. Why? Well, first off, ease. Your guests do not need an account. One click and they're in the recording room with you. It is fantastic, especially for high profile guests. Second, they record your video and audio separately and in the background. So they're not only higher quality, but the guest does not need to record their end and then send after which is a total nightmare. But for me, honestly, what I love so much is how much thought they put into the product. Like, when the internet quality is low, they will disable the video for the cool, but for the recording, it works seamlessly. It records perfectly. It's so thoughtfully done and it makes such a difference. Use my coupon code 20 VC, that's 20 VC. And get a 15% discount. It is the tool I could not run my business without. Again, you can check it out at riverside.fm and use my code 20 VC, that's 20 VC. And speaking of game changes for businesses, as a VC, I come across many businesses that have potential and offer a great product or service. But they run into issues. And that's why I love the team at arising ventures. They're a holding company that requires tech startups that are facing setbacks and helps get them back on track success. They've helped companies like UpCouncil, which they took from burning $1 million a month and shrinking to profitable and growing jive where they launched a shutdown company and went from north to a million AIR in just five months. They want to reveal your great business underneath the broken incentives. Whether it's a broken camp table, co-founded this abuse, Underwater Common Stock, the team behind arising ventures are career long tech founders, which is so important, they're not bankers and they know even the greatest businesses have tough times. Learn how arising ventures can be the one to help give your company new life by visiting arisingventures.com forward slash 20 VC. Go to arisingventures.com slash 20 VC. And finally, secure frame is the leading all in one platform for automated security and privacy compliance. Secure frame simplifies and streamlines the process of getting and staying compliant to the most rigorous global privacy and security standards. Secure frame's industry leading compliance automation platform paired with their in-house compliance experts and former auditors helps you get audit ready in weeks, not months, so you can close more deals faster. Secure frame uses over 150 integrations, built in security training, vendor and risk management and more to make compliance uncomplicated. Secure frame makes it fast and easy to achieve and maintain compliance, so you can focus on serving your customers, automate your security and privacy compliance with secure frame. Schedule a demo, stay at secureframe.com. As always, I so appreciate all your support and stay tuned for an incredible 20 growth episode this coming Wednesday with Guillaume Cabine.