A look at the Founders Fund, as it closes on $5 billion across two new funds – TechCrunch
Founders Fund raised a lot of money from investors; it also brought in quite a bit of capital.
Much of the action on both fronts has happened very recently. Yesterday, the 17-year-old outfit lifted the veils more than $5 billion in fresh capital commitments in two new funds – a $1.9 billion start-up vehicle and a $3.4 billion growth vehicle – which brings its total assets under management around $11 billion. That’s a lot of moolah. But as the San Francisco-based firm, which recently opened an office in Miami, told us earlier today, in the past two years alone it has returned $10 billion in stock to investors.
To learn more about how this new capital is likely to be invested, we spoke earlier today with Lauren Gross and Brian Singerman, longtime partners in the 35-person firm. They also answered questions about how the company is structured these days; how often investment decisions involve the company’s famous co-founder, Peter Thiel; and if Founders Fund plans to incubate more companies (this is how Anduril and Palantize started). This quick conversation follows, slightly edited for length.
TC: About a third of your staff are investors. How many of them are now in Miami, compared to San Francisco?
FF: We have five team members in Miami, including Keith Rabois [who opened the office]who is the [general partner] the. We also have Matias [Van Thienen] who was recently promoted to partner and Delian [Asparouhov]one of our principals, is there.
Who on the team is more focused on the early stages and who is focused on growth-stage deals?
All members of our team are considered generalists. We expect people to be able to work across all sectors and at all stages. We have an entirely opportunistic approach. This has served us best from a yield standpoint. We encourage people to find their own competitive edge and pursue areas or milestones of particular interest, but it’s not company mandated.
How are decisions then made?
We have different degrees of votes required as you increase the size of the checks.
I’ve interviewed [former Founders Fund partner] Cyan Banister a few years ago and she mentioned that there is a certain threshold above which Peter Thiel is always involved. Is this still the case?
Yes, all of our GPs step in when we write a larger cheque.
You have a lot of capital at your disposal. Do you invest in public markets?
We certainly have the ability to do somebut generally our public positions come from the private side.
Does that mean you wouldn’t invest in a company whose shares are “for sale” if it wasn’t part of your portfolio as a private company?
Idiosyncratically, it could happen, but where the comparative advantages and strengths are on the private side.
Are you structured as a Registered Investment Advisor?
We are not registered. We have had the discussion for many years, but we have no current plans [to make this change].
Do you see the world thematically and, if so, what themes are the team most interested in right now?
We are non-thematic. It’s not like we predicted social media and found Facebook [into which Thiel wrote one of the very first checks] or determined there was something interesting in aerospace and found SpaceX (which Founders Fund has invested in many times over the years, dating back to 2008]. It’s more than listening to big, bold ideas, across all sectors, has unequivocally generated our best returns.
How many startups do you tend to invest in with each fund?
Typically you expect a few dozen investments, with a handful where we double, triple, quadruple, which usually means investing $100 million, $200 million, $300 million at a cost of several billion dollars. ‘exposure. This concentrated coin is what is most unique to the portfolio and what has boosted returns more than anything else.
Who is your biggest investor?
Founders Fund is the largest investor in both [new funds], the general partner is. This has always been true for us and is certainly a differentiator within a market that tends to be less aligned from a capital perspective. Some team members may have [a bigger stake in the growth or early stage fund]but we believe it is one team on both sides.
What size checks does the company write, from smallest to largest?
The smallest and largest was $1-300 million. I never said we wouldn’t write a check bigger than [$300 million] and we are idiosyncratically smaller than [$1 million].
What is your “crypto” strategy?
The two things the team really got right about crypto [include that] our team wrote their first bitcoin investment in 2014 and built a position over time and i would say [of our cryptocurrency holdings today] two-thirds are in Bitcoin with the rest in surrounding crypto.
Do you own many tokens or shares in blockchain and other related startups?
We did actions, we did tokens.
And are there members of your team who explicitly focus on these types of investments?
Like all things Founders Fund, whenever we are [deciding on] a central position for the fund, the whole partnership is involved, especially in conversations that involve Brian, or that involve Peter. Today, I would say that the partner who focuses the most on [web3 type bets] is Napoleonic [Ta, who joined the firm in 2012 as a principal after working in the equity research division for Horizon Capital Group’s brokerage business in Ho Chi Minh City, Vietnam]. But like all jobs, it’s a team effort.
Taking a step back, do you have any thoughts on the easing of the market for start-ups and what challenges and opportunities does that present?
We’re certainly seeing private market valuations slowly catching up to public market multiples, and that’s great. With venture capital, you can invest in any macroeconomic cycle, and when prices go down – if we’re disciplined enough to wait for prices to go down, and we are – that just means we get those same businesses for less. And there are still plenty of amazing companies to invest in. Growth players who stay on the sidelines are better for us. We can just expect to have a phenomenal company at a phenomenal price.
I have never seen valuations climb as fast as they have in the last six months to a year. Does the company believe that these valuations are rational?
I don’t think the people who got to the last stage were irrational. There was an upward correction that needed to happen; now there is a downward correction that needs to happen.
Founders Fund has helped incubate well-known companies. Is it becoming a bigger part of your strategy?
We need to understand what your competitive advantage is. A decade and a half ago, Peter had a big thesis on organized data and was one of the co-founders of Palantir that didn’t come out of, you know, a huge, multi-billion dollar success. [Founders Fund partner] Drawn [Stephens] had a huge thesis on defense and government and how broken it was and Anduril came out of it. Keith [Rabois] East work on OpenStore right now, which is still quite early. So we are open to that, but we have to understand, what is this person [who will cofound this company] understand that others do not? Why is this person particularly well suited for this?
You told me that you have generated $10 billion in returns for your investors over the past two years. In shares or in cash?
We have generally failed to distribute in-kind shares post-lockup, unlike many other companies that cling to keep increasing multiples. There’s nothing really wrong with that, but our advantage, again, is on the privacy side.
And where have you seen the biggest releases in recent years?
Drivers have included Palantir and Airbnb [both of which delivered] several billion [dollars in value] each, then Wish, Oscar, Affirm, Asana and Postmates are all names for which we have returned several hundred million [dollars] or more.