Why Being a Generalist VC Is a Competitive Advantage (Aydin Senkut, Founder & Managing Partner at Felicis Ventures)

[00:00] The history of Felicis suggests that even in these hot markets, when other folks have leaned in and gotten burned, you've managed to be strong enough on the selection that those vintages still look good. There has been many instances where we picked the company just right and we were off by a 10x on the entry valuation. So everybody looked at only that side and said there is no way it's going to work. But what they missed is the revenue growth that materialized after was 30x, 50x, 100x. So [00:30] the entry price, we were absolutely underestimating the revenue growth by even a much, much larger factor.

One of the investments that you've made is in skilled AI. How have you thought about the way AI begins to enter the physical world more? We're going to have a ton more robots in the next 10 to 20 years. I doubt it's going to take jobs away. It's just going to do jobs that people are not meant to do, but they're doing it because there is no other way of doing it. I do think it's going to be happy coexistence. We're going to have a lot of robots and they're going to take more drudgery [01:04] When Aydin Senkut started as a solo GP in 2006, most LPs rejected him, giving him little chance of succeeding as an investor.

[01:13] Nearly two decades later, [01:14] and Aiden has transformed Felicis into a Silicon Valley franchise. [01:18] now on its 10th fund, a $900 million vehicle. [01:22] While many VCs insist on the importance of specialization, [01:26] Aiden has kept Felicis genuinely generalist. [01:29] From Shopify to Adyen to Canva to Crusoe, [01:34] The firm has found billion dollar outcomes across nearly every imaginable category. [01:38] including in companies that many others overlooked. [01:42] In today's episode, Aydan and I discuss how he scaled Felicis from a one-man operation [01:47] into a well-oiled machine. [01:50] His framework for evaluating opportunities across wildly different sectors [01:54] and why he's betting aggressively on AI, despite the sky-high valuations.

[01:59] We also cover his approach to portfolio construction, [02:03] and what he learned from working with Google founders Larry Page and Sergey Brin. [02:07] I'm Mario. [02:08] And this is The Generalist. [02:11] Every revolution in AI creates one question that never changes: Can you trust the output? [02:17] AI for work is incredible, but without trust, it's just leading to faster mistakes. [02:22] The challenge isn't building an AI that can answer questions. It's making sure those answers are right. [02:28] That's where Guru comes in. [02:30] It's the AI source of truth that connects everything your company knows.

[02:34] So every insight, every answer, every recommendation [02:38] is grounded in verified knowledge, not outdated information or hallucinations. [02:43] When your teams and your AIs share one trusted foundation, [02:47] everything moves faster. [02:48] with fewer redos, fewer blind spots, [02:51] and more confidence in every decision. [02:53] Because in the age of AI, truth isn't just power, it's protection. [02:57] See what Guru is doing for thousands of companies like Spotify, DHL, and Stripe at com. [03:04] That's com. [03:07] Well, Aydin, I'm super excited to have you here. I've admired your career for a long time.

And I remember the last conversation we had very well and really enjoyed it. So lots to get into today. [03:21] Looking forward to it. [03:22] I'd love to start a little bit with your origins because... [03:26] You started Felicis as a solo capitalist. The language of that term hadn't come to the fore yet, but you were a solo GP running a [03:36] a strategy that really was your own, [03:38] And, [03:40] That has evolved into a real franchise over the past 16 years, such that [03:45] You know, you guys recently announced a 10th fund, 900 million.

[03:49] And so I'd love to sort of, [03:51] begin this conversation maybe by closing the gap between where you are today and how you started out. How did a boy from Istanbul wind up in Silicon Valley? I kind of feel like a [04:03] I lived... [04:04] in five, six different lives. You know, when I was a kid, [04:08] I couldn't be farther from the truth of today here. [04:12] But it was really interesting. My dream as a kid when I was seven, eight years old was always to travel around the world, meet people.

[04:19] do something and whatever it is, [04:21] is to learn languages, to learn other cultures, [04:24] to discover other countries. I was very lucky that I was able to get into actually a German school in Turkey. [04:31] And that allowed me [04:34] to then use the language. Afterwards, I came to the US for college and then ended up working in countries like Morocco, Switzerland, Germany, Brazil. And then, [04:47] came back to the S. for grad school, [04:50] And all of those things, I think, just gave me like a little different flavor, which then allowed me to make the jump to Silicon Valley.

And that was a crazy story, too, because I was not really an engineer. So I had to really push to get my first chance as an intern. And I ended up coming here about 30 years ago. [05:09] And the languages and the experience of having lived abroad has always served me well. It's actually what differentiated me at Google and it allowed me my first product job there. And then I did international sales and that allowed me to get this. [05:25] um ability to wherever i am relate to people and i think this is interesting because it's one of the most underrated aspects of venture capital everybody thinks about the numbers [05:35] but it's really about people.

And what's really interesting is even today, [05:40] One of the things that makes releases different is a lot of our most successful companies tend to be global and international. So in some ways... [05:49] I am living the dream, the crazy imagination I had as a little kid. And that's what I feel like. I'm working and loving what I do. And I have that enthusiasm of an eight-year-old. [06:01] Hmm. Amazing. Well, I think we're going to go. [06:05] you know go into a lot of those different uh pieces of the story but [06:09] You know, one of the things that struck me when [06:11] I was researching you a little bit was that your parents were entrepreneurs.

So you must have grown up with, you know, seeing what it really took from a from a very early age. [06:22] Yes, indeed. I'm an only child. Both my parents were entrepreneurs, different paths and different learnings. My mom started as a VP of HR. [06:32] And that was really interesting because whenever I went to visit her at work, I was fascinated by how she did what she did. You know, she had this elaborate system of like really getting to know people and what made them tick. And what was really great about what she did is it was very much skill based.

And then later on, she joined a recruiter and then she just wanted to do it in her own way. And then she had her own recruiting firm. And what was really cool is she worked until... [07:00] She was 81. And foreign firms employed her all the way from Denmark to Israel, to Bulgaria and like crazy countries where she had no background. And they're like, look, you're so good at what you do. We want you to go to these countries and still do what you do in Turkey for us. And she would take my dad with her.

My dad, on the other hand, you know, I came in, they met in college. They were college sweethearts. I came pretty early. So he had to kind of pick something very quickly. [07:30] business was textiles, which was a big industry in Turkey. And the big difference there is, [07:35] that was good as it lasted, but it was a commodity business. And as long [07:40] or as soon as kind of cheaper textiles came to Turkey from Asia, his business was pretty much done. [07:47] And so it was a very important lesson that stayed with me that [07:51] It wasn't just important to be an entrepreneur, but what you did really mattered.

[07:55] And I kind of realized that strategically, you know, like being in a, [08:00] line like I am now, it's very much like skill and capital base. [08:05] It's very asset light. Also, it's kind of like very much adapting to the times. In fact, it's ahead of times. So the likelihood to get disrupted is a lot lower versus if you're in a traditional industry, you know, you have a factory, you have like a whole team of people. [08:20] you know, like you have very like thin margin for error and you're at the mercy of what's happening in the markets in the world.

[08:26] So that's something that really stayed with me. On the other hand, I also have to say, [08:30] that, [08:31] For those that are brave enough and lucky enough to be an entrepreneur, I think this is the best thing in the world. [08:36] You know, like some people have the personality, they're not really made to be employees. They're made to be like, you know, like do crazy things, like take some chances and risk, do original things. And sometimes the best way to do that isn't as an entrepreneur, as a founder, which I'm sure you would appreciate.

[08:53] Yes, definitely. You were employee, I think, 63 at Google. And I imagine that was a very special group of people at the time that you joined. I imagine the talent density must have been pretty remarkable. I wonder what you remember of those early people in that early company. I remember a lot of stuff. And here's a crazy story. The reason why I was 63 and not 30, actually, my offer came in when there were 30 employees, but it took over three months for my [09:23] have these nightmares that I think if we were in today's climate I don't even know if I would have made it.

[09:28] So I'm very grateful for those early days. [09:30] Coming back to Google, look, the one thing that starkly stood out for me, [09:34] is how smart the people were. [09:37] Everybody around me I felt was super smart. Not only were they super smart, they were super talented. And one thing that stood out for me is how unique and individual each one of them were and how a different take they had on everything. [09:51] If you were to ask me one thing that stayed with me for my Google days, where I was for six years, [09:57] through its IPO is that [09:59] Whenever we face the big problem or whenever we had something big to do, we never took a standard.

[10:04] Way to do it. [10:05] We never went the orthodox way. We were always very creative. We always did something very unique and unusual and something that I never thought would work. Or I'm like, oh my God, this is crazy. Like, wow, this is a totally different way of tackling it. And lo and behold, not only did we do it, but it also turned out to be, wow, that's a great way or best way to do it. And I think that training was really important because in essence, what we do, if you're like, hey, what is the venture capital business?

It's a business about outliers. [10:35] Thank you. [10:36] The only way you can be successful is to be an outlier yourself, to identify other outliers and appreciate them before it's obvious. Hopefully have a chance to partner, to invest with them. And so the best way to train for that [10:50] is to be in an outlier company, see how it operates, how it does things, just to kind of get that DNA. [10:56] And I thought it was fantastic training in that way. [10:59] To what extent did... [11:01] you know, seeing Larry and Sergey and Eric Schmidt sort of operate that business and, you know, the extreme level of growth.

[11:11] that that company went through sort of impact what you started to look for in entrepreneurs? Like, did you find yourself almost trying to pattern match against, you know, these three very remarkable people? [11:23] Was it perhaps, you know, more abstract than that? [11:26] No, I mean, definitely. Whatever you learn and your experiences really stay with you. And it wasn't just the three of them. Like we had a person who ran like data centers and infrastructure for Google. We used to joke that he was like Darth Vader. He would negotiate with data centers and like, I don't know, a couple of them went bankrupt after that.

And like, I never, ever want to negotiate against that guy. [11:56] friend. Everybody was unique and individual and super strong in some way. And [12:02] super smart but something's really stuck with me at the end [12:06] For instance, like everything that I did with Larry, every single thing he asked, [12:10] Nothing... [12:12] less than 10x would be acceptable to him. So every time he asked us to do something, it had to be 10x better, 10x faster, or 10x cheaper. [12:20] And, [12:21] His concept was very simple. [12:23] If. [12:24] Somebody just asks you to do something better say 20% better 30% better on surface.

It looks like yeah, but it's great But the thing is you can do that with a marginal improvement but if somebody asks you a 10x [12:37] change. [12:38] you have to completely change the way you think. You have to completely rethink the way you do things. So that really stayed with me. The other interesting thing, [12:47] was, for instance, like Larry basically said no all the time. [12:51] I mean, I think like his vocabulary was no 99% of time. And then maybe like, yes, every now and then, and then some other words.

And... [13:02] I mean, I'm dramatizing a little bit, but the whole point of that is he was very razor sharp focused and very much of the mind that do very, very few things well, but make sure that those things are things that matter. The other thing that I observe, especially like Sergey, it was so fun to work with him. Even though both Larry and Sergey were only PhD students, they were never in a corporation or worked a single day in their lives. [13:24] They had an amazing business instinct as well.

[13:27] So they were special that there are a lot of people that are academically smart. [13:31] But to combine that with a commercial instinct is pretty rare. [13:35] And when Eric Schmidt joined, all he did was kind of button things up. It was really funny. We were 500 people. And he's like, what? Like, you guys are still running this on QuickBooks? You know, we made a NetSuite implementation and so on and so forth. So it was a really great combination and a really great kind of distillation of duties. [14:05] and basically configure or create servers.

And I'm like, Larry, why are you doing that? Can we not buy servers? He's like, why would we buy servers? Like, they're not really done for the way that we want them to work. And CPUs are so cheap. Storage is so cheap. I would be pretty good at configuring it myself. And not only will it be cheaper, but it will be the exact machines as we need. Like, yeah. [14:29] He could have easily taken an easy way out and say, why am I doing this at 10 m.? We can just buy servers.

But even there, like every single thing he did was very much perfectionist, is very much down to the smallest details. Gosh, I love stories like this so much to really see what obsessiveness and perfectionism looks like in action. And also that extreme focus. I mean, it's funny, it rhymes so directly with one of those famous Steve Jobs quote about [14:54] Focus isn't saying no to things that aren't a good idea. It's saying no to something that you know is a great idea, but doing it anyway because there's something even more important.

When did the idea of investing sort of come into your mind as something that you were interested in and that you maybe thought you would be good at? Honestly, it also started when I was a kid. [15:14] You know, [15:15] I don't think about it as much, but again, when I was seven, eight years old, I joke like only Turks and Brazilians. We were two countries that had 100% inflation for 20 years. [15:25] And what ended up happening is when I was seven, eight years old, you know, families have different dinner conversations.

Our dinner conversation every night. Are we going to buy German marks, French francs, Swiss francs? Are we going to buy real estate? Because you couldn't keep it. [15:39] in the local currency. I mean, 100% means every year, whatever you have, like, is essentially lost most of its value, or at least half of its value. So that meant that from the very early age, regardless of math, regardless of finance, everything I was doing was around, how can I think about like compounding returns and where would money appreciate the most? [16:01] So it kind of become...

[16:02] a second nature. It was great training. The other thing was I used to read all my parents like Fortune and Business Week magazines and I used to see like these incredible companies and CEOs and the stocks and I'm like, wow, like it would be amazing to be able to buy and sell this or maybe become a CEO one day. And, you know, you have to start with a dream and [16:24] Little did I know that there was this really interesting part of finance called venture capital. And when I left Google and I wanted to tackle this, I went through a bunch of other ideas, but realized that those sounded great as hobbies, but as a business, [16:39] Again, I went back to my parents' beginnings and I didn't want to, [16:43] you know, tackle anything where there was, you know, anything that could be disrupted by the markets or was not asset light and all of that.

And when it came to, [16:53] to... [16:54] the idea of venture capital, I'm like, this is great because honestly, like all you need is capital, a great strategy and execution. So from an entrepreneurship point of view, it, [17:05] Felt like the best opportunity. But the other scary thing about it is I've never done it. I didn't have a network. I didn't have a team. All I had was some capital and a crazy idea. But that's what the founders and entrepreneurs need sometimes and go all in. So I did and I went all in.

[17:23] Had you made a few angel investments during your time at Google that had sort of given you a flavor of it? [17:30] I did not. [17:31] I don't know. It was... [17:32] complete cold turkey, cold start. And what was really interesting is the beginning was even crazier. I actually was a little bit afraid in the beginning. I'm like, wow, maybe I should really be more conservative. It was also crazy in the sense that I was expecting my first child. My first son was on the way. And when you're expecting a child, the dad's become very conservative as well.

So my initial reaction is maybe this is really crazy. I'm going to fail my [18:02] Like, let me go get a job, maybe learn the ropes before I tackle this crazy thing. But the people that I interviewed basically said I wasn't an engineer. I wasn't senior enough at Google. I mean, I told this story many times, but the reality is, look, everybody goes through setbacks and disappointments and what seemed like, you know, initial failure or something like that. And to me, everything that happened in my life, like every single good thing happened on the back of some disappointment or failure.

[18:32] rejections became rocket fuel. And we always talk about like starting a company and why did you do that? But I think the motivation and, you know, the fire and the impetus to succeed is equally important, if not more important. So for me, [18:46] That was really like the big catalyst. It's not that just I wanted to do it, but I also really now needed to do it and not only do it, but be so good at it to prove all the naysayers wrong that said, like, I could not do this thing.

I was not fit to be a VC. That's it. I mean, honestly, this is one of the reasons why I relate to our founders that we work with so much, because a lot of them early on are told the idea is terrible. It won't work. You know, like, [19:13] What they are thinking about is crazy or they are thinking about it the wrong way. I've been in their shoes and there is nothing like being in someone's shoes to feel like you're one of them and they feel like they're one of you.

It all worked out. It all worked out, but it was a crazy beginning. [19:27] When you fast or you rewind to that first fund, [19:32] which I think it ended up being a $41 million fund, if I'm remembering correctly. Yeah. [19:37] what was the sort of strategy that you were going into it with? Like, you know, did you have really specific ideas about, you know, this is the number of positions I really care about? And these are the, you know, the parts of the ecosystem where I think I can be most effective.

I think, you know, [19:52] about a lot of the newer solo capitalists now and being able to sort of understand how someone who's really grown from that position so much sort of seeing where it starts is so valuable. I mean, look, there was a lot of strategy and design, surprisingly, nothing was really left to chance. [20:07] Honestly, one of the great things about [20:09] getting the opportunity to do this for four years, [20:12] with my own capital as a solo GP is that I made 100 investments. [20:17] It was one of the best times to invest.

Even in four years, I already had 12 exits. Wow. By the time we were doing our first fundraise. So... [20:26] I think it's a little bit different than today. There are a lot of great people on the scene, but not as many that can say, hey, not only did I have one, but I had a dozen exits. It's a really great validation that the strategy is working. The other interesting thing was, look, [20:42] Venture fundraising is much more difficult and different than people think. [20:47] Limited partners have a very traditional way of thinking about things and they want you to do what traditionally work So if you have an idea that's really different, it's very very difficult to get limited partners to buy it on the other hand if [21:02] It was also interesting that you're basically telling them this is an original.

[21:06] If you were to follow the other ideas, you're going to keep investing in the exact same funds. Then what's the impetus to invest in a new fund? And so for me, it was really simple. I did quite a bit of... [21:16] benchmarking and analysis and realized that there were two or three things [21:21] that was very difficult for the incumbent VC firms in Silicon Valley to do. Number one, they had this [21:28] sense that if you're gonna do venture it needs to be local because you need to keep a close eye on the companies.

[21:34] Also, [21:35] They wanted to have control of the company in case something wrong, you replace the founder. So they were very inflexible and wanted to have high ownership. And they also had this attitude that in order to do venture capital investing, you need to be expert in an area. [21:51] Which meant that as an investor, you would always be in a narrow field. Yes. And I know one of the topics we're going to chat a little bit later on is to be a generalist. [21:59] I had a completely different strategy.

I thought, listen, [22:02] If I try to be very good at those things that the other firms are already excellent at, [22:07] that is not a very high probability way of making my way to the top. So I had to do something completely different. [22:15] Not only would I be really good at that, but that also had to be something where the existing firms would be very hard pressed to do well. So I basically said, you do not need to have offices internationally and you do not need to be next to the companies you invest.

[22:31] Not coincidentally, a lot of our great successes have been international. Because I lived in these countries, I knew the cultures. That's where my inherent advantage was, right? So I did not feel like I need to go to that country, have an office. The other thing is, look, I felt that if you were intellectually curious, you did not need to be a subject expert. If you understand what's really important about an area, you can still make the investment. Like, I can make a biotech investment. [23:01] investments. In fact, in some crazy way, it's better that you're not an expert because if a crazy father comes and say, you know what, we're going to do some things in a very different way.

You're the expert. Your first reaction is I've been doing this for [redacted address] to do that is the standard way. And this probably has less chance of succeeding. In some ways, the only way you can be like more imaginative, a little bit bolder is to be in this situation where like, wow, you know, like just maybe this can work. [23:29] And then the last thing is... [23:32] So much of traditional venture was concentrate capital, few number of companies, [23:37] And that never really made sense to me. I mean, I had a different thinking on it.

And this is where, again, my, you know, four years of solo investing, 100 companies, I felt that then like the traditional venture model is about 20 companies per fund. And I always felt like, [23:53] 50 to 100 companies, roughly 50 to 70 companies per fund is the right size. And what I basically like found, and maybe one day I will be able to bring a mathematical model in front of you, [24:03] the odds of improving the returns and reducing the risk drastically goes up until about you have 50 to 70 companies in a fund.

[24:11] How do I know this? Because we have 10 funds and we had situations where we had about 80 companies per fund and my first fund, 100 companies. So I could totally see how the end of, [24:23] made a huge contribution in terms of how many more unexpected winners the portfolio had. And because the portfolio size was really small, small ownership did not matter as much. [24:32] So there's all these things that everybody's like, well, that's never going to work. That's never going to work. But in some ways, it's a little bit lazy because they're also not trying to understand your reasoning.

They're not saying, well, maybe it could work. Can you help explain to me? I'm like, yes, it actually works. If it's $5 million of investment and you own 1% of the company, for that to be a fund driver is not a huge push in probability, even at $41 million. [25:02] was in Angry Birds, and the whole run was bigger than our font. [25:06] And what people didn't understand why we did that is because I realized that all my peers were going to continue investing in the exact same seed companies, continue to go to demo day and all of that.

And I'm like, I'm going to do something that nobody probably is going to do or nobody even expects. What was really great is like the international background and the comfort of having like lived in four continents and haven't been in 50 countries. [25:32] I felt like I could be home anywhere and like come up to speed in an instant and convinced as founders that we would be a great partner for them. [25:39] Wow, so interesting. So many threads there that I'm excited to dig into. One that I hadn't fully appreciated and I really should have is the way in which your [25:48] international background does map to so many of these winners.

I mean, Angry Birds, the company's Rovio, maybe you'll have to. That's it. Scandinavian company. [25:58] It is, Finnish company. Finnish company, right? Adyen, Netherlands. Canva, Australia. You know... [26:04] Shopify, I guess, Canada. But so many of these really do map in that way. I wonder which other ones maybe come to mind for you that you think, only because I'm sort of a man of the world, was I able to catch this before the folks that were still on Sand Hill Road? [26:19] 100%. I mean, even some of the more recent investments like N8N, [26:24] in Berlin, Germany, or Thames.

[26:27] in Dublin, Ireland, Dublin, Ireland. Again, the funny thing is we did not invest in those companies. [26:33] because of the country they were located in. Sure. We just were enamored with those founders, and we were enamored with the markets they were in. [26:42] And it just so happened that they were not in Silicon Valley. [26:45] So I think the adage was Silicon Valley is so strong and has such incredible talent density. Don't get me wrong. We have a lot of amazing companies ourselves in Silicon Valley. That's where we're based.

[26:55] But I always had this sense that, [26:58] "Hey, there is all this incredible talent around the world, and just because they're not in Silicon Valley doesn't mean that they can't build and scale a company." [27:07] the likes of which that we've seen in Silicon Valley. It's a lot more common here, but that doesn't mean that it can't happen anywhere else. And lo and behold, we kept doing that company after company, country after country. And again, it's just one of those really cool things because one of the things that people don't appreciate as much about venture is not only do you have to be right,

[27:28] But you have to be right before it's obvious to anybody else. So this is something that I think we truly owned. [27:34] in terms of, hey, talent is truly global, opportunity is truly global. And I'm really happy that we kind of were the vanguard. And now if you look at some of the traditional VCs, like Sequoia has many more offices and, you know, is much more international. And even many funds that said they would never invest internationally or would require a local office or would not invest like across sectors have now started doing that.

And I'd like to think that we were there first, [28:03] essentially like shown people that that idea can work. The other piece that I really wanted to dig into was, you know, the extent of the diversification that you practiced, because I'm a much, much, much earlier investor in my career, have, you know, much less successful than you have. [28:21] than the track record you've pulled together. But I've always felt that [28:24] It must be so hard to create the level of outlier returns with such a diffuse portfolio. [28:31] at scale.

Like maybe you can do it on an earlier fund. But from what you were saying, it sounds like you've managed to still with quite large portfolio size, [28:40] you know, maintain that level of performance. Am I sort of understanding that right? That you're still having sort of 70 companies per vintage? [28:47] Look, I think we have about 35 to 60 companies per vintage. [28:52] Maybe... [28:53] Maybe for ease, let's just say that [28:56] If the traditional size is 20, 25, we have doubled it. Let's call it 50, right? Because we have some funds where we had a little bit less, some funds we had a little bit more.

[29:06] The reality is the following: when you have too small of a font size, [29:10] What ends up happening is first of all, you don't have enough N. [29:14] Right? Like, [29:14] the chances that you're going to have great winners from 20 companies versus 50, there's a statistical difference that 30 more shots on goal definitely makes a big difference. [29:24] The second thing is when you have a small portfolio and all of them are high ownership and something goes wrong. Now, like it essentially jeopardizes the rest of the portfolio. What was really great about having at least like about 50 companies is that we did not put the same size check and own the same in every company.

[29:43] it was always a little bit asymmetric in the sense that, I mean, this is the thing about venture capital. Sometimes like not only is everything so obvious and clear, [29:51] you can back up the truck. And sometimes it's like, wow, like I must be literally insane to be doing this. And you just do not want to like write a big check. And so the way that we have managed risk is to never treat everything as binary. [30:05] Like, yes or no, we kind of treat it as a spectrum. So all of these things helped us.

And then the other thing that I was obsessed with, the concept is a little bit talk in this book called Anti-Fragile by Nicholas Nassim Taleb. But, you know, I'm a very deep student of finance. I was obsessed with investing. And one of the things that I really wanted to show is, [30:26] This business is all about risk and LPs and like, [30:29] you know, venture capitalists like, well, like we have this one fund that's 10X, but then sometimes there are bad vintages. And to me, that was not acceptable. I wanted every fund, every one of our funds to be successful.

And one of the ways I wanted to balance risk with the returns is I thought if you have a higher end, [30:48] And let's say that you have a view of the world that you kind of have a feeling that there are maybe five or 10 areas where there are going to be great companies. Instead of only choosing one, if you did all of them, and we can talk more about this in generalist versus specialist battle. But I thought, hey, wouldn't it be great if we had a portfolio size and a strategy that allowed us to be in all of the sectors that we believed in?

[31:11] So then what's really great is a lot of these sectors are not correlated to each other. [31:16] So depending on what happens in the world, [31:19] Maybe not all of them will succeed, but they will succeed in different ways, in which case, like some of the great ones, you know, can make up for the other ones that did not work out really well versus in a much more concentrated portfolio, in a much narrower focus, if something goes wrong or if the world changes, now you're stuck with a strategy that's, [31:39] Completely out of fashion.

It's useless. Similarly like the portfolio has too much exposure to one area and there is nothing else to make up for it. So I [31:48] Again, having grown up with a lot of risk and haven't seen a lot of like crises or companies that went out, I wanted to have a strategy that was just not great for returns, but also equally resilient. And I thought this strategy can really work. And luckily for us, it really did work in this way. [32:18] very aggressively in the ones as they grow that you feel like have the most upside?

Is that sort of the way that the pieces come together? That's absolutely the concept. And I think I also need to be humble is that, look, we've done really well with company picking. [32:32] And concentration of capital is not easy, and that's one of the reasons why we went from $41 million fund, [32:38] to like $925 million fund today, not to mention like, [32:43] The real inflation, like, I feel like we've got at least 4x. You look at the price of gold, you know, like 900 million of today is like, [32:51] to 25 of 10, 15 years ago.

[32:55] But... [32:55] You know, the company is also like, [32:57] need a lot more money today. And so you kind of need a fund size to not just be able to make enough bets, but to have enough capital and reserve that you still have some capital left over to concentrate into the winners. Yep. That totally makes sense. Thanks for walking me through that. We did talk a little bit about this sort of generalist approach. And for very obvious reasons, I love that this is the way that you see the world and it makes [33:21] instinctive sense to me.

Why do you think it's still so common in Silicon Valley that so many people find it hard to imagine that someone could be effective across so many sectors? It is probably one of the hardest things to do in venture. [33:34] Honestly, if you ask me, [33:37] The one thing that I'm most proud of is that we have literally touched virtually every area of technology and we have succeeded, even though we have zero background. [33:47] Like we've done, well, [33:49] Consumer, you can argue, I was at Google, so I did have a little bit of a background.

But the companies we invested were maybe not related to what Google was doing. So whether it's consumer or e-commerce or fintech, later on, AI, security, infrastructure, developer tools, [34:06] I mean, we tackled areas like hardware, literally like we had no background in. [34:11] And so I think like, [34:12] I want to come back to this generalist approach versus specialist approach. [34:16] The way that I think about them is a very first principles way. So I think most people misunderstand journalists. Journalists is not about, hey, we have this big area. We're going to spray and pray and we get lucky.

And after we get lucky, we can say, well, of course, we were right. That is not the point. [34:32] I think the way that I see generalness is different. [34:34] The way that I think about it is, generalists, you start from a much larger universe. So imagine you and I are both investors. [34:42] And there are two different ways we can go about the world, which is, hey, here is the universe of all great companies. [34:48] The generalist approach says we're going to start with all of them. [34:51] And then based on what we think has the highest potential of growth and what's happening in the markets, we're going to hone in on the ones that are best risk reward.

[35:02] I think what people misunderstand about generalists is because you're starting with the top of funnel that is so large does not mean you're trying to boil the ocean. It means that you have a much larger universe to pick from. And the conventional wisdom says, well, you are not qualified to pick the best ones from a large universe because you're not specialists. And I think that wisdom is. [35:23] is not right, and we have practiced it now, like we're on our 10th fund, and I think we have great data to show that you do not have to be an expert to make good picks.

The specialist instead says, hey, you know what? The specialist approach will save you because you know the sector so well that you're gonna pick the best companies. [35:41] I think a nuance that it misses, it means that now you're starting with a very small group to begin with. [35:47] Right? Like let's say that, hey, it's only like enterprise. It's only this. Well, in a large universe of companies, that's a small percentage. So first of all, you're starting with a much smaller base. [35:58] And then on top of it, you're looking for outlier companies.

Well, in the general universe, you're going to have tons more outliers. In a specialist area, mostly what's going to happen is, well, we kind of ran out of outliers, but we basically said we are going to specialize. Now you're going to find more and more niches that go into smaller and smaller parts of the market. [36:28] Like, why would you like, I want to invest in Stripe or Adyen. I don't want to invest in Stripe or Adyen of Indonesia or Malaysia. That is not what gets me up in the morning.

I want to find like companies that completely dominate the sectors around the world. So that's the concept behind generalist versus specialist. The other interesting thing that most people never talk about or think about is that it's also very risky to be specialists. [36:55] Right? Like imagine if you were a consumer person, there was a quite a long time where consumer produced a few good companies, but the rest of the companies did not do well. Or enterprise was really, really hot. [37:06] I mean, 10 years ago, SaaS, it was all about SaaS.

Today, I mean... [37:11] It's kind of like a death sentence to be in SaaS. AI is disrupting every area of SaaS. And if you basically stuck to that and you were a SaaS fund, you're going to have a very hard time. [37:21] So this is the curse of being a very narrow specialist that not only does it limit your options, [37:28] but it is also always at the mercy of the markets. And if something happens, it does not give you a lot of options. So now you have to go back to your LPs like, actually, I was wrong to be a specialist in this.

Now I'm gonna go to this new area. And they're like, how are you gonna go do this new area? Do you see how it works? Versus we always said, [37:45] We're a generalist, so we were always true to our world. We always said we're going to pick from a large universe. But if you look at all of our 10 funds, the mix of each, every single one of them is different. And we perfectly picked... [37:58] all the interesting markets that we thought were poised for great growth [38:03] basically five to 10 years before that growth actually happened.

[38:07] Yes, the specialist is able to do what is locally the best deal versus the generalist can do what is absolutely the best deal. Perhaps there's a tradeoff in some level of precision between the two, you could argue, but. [38:19] but I'm not even convinced that's always the case. I wonder what this approach sort of says about [38:26] your investing lens as you might... [38:28] define it? Do you find yourself, you know, [38:31] much more founder driven. [38:33] than your peers, for example, because I think that's one of the ways that generalist strategies can work is if you're able to almost, you know, [38:40] pierce through the really thorny and complex details of a certain sector, which, you know, it's impossible for you to gain the amount of industry knowledge as someone who spent 20 years in, you know, two hours with a founder.

But if you're able to analyze this person in a certain way, maybe it doesn't matter as much. And so I'm, yeah, I wonder how you've sort of, [39:00] find those shortcuts or those efficiencies? Look, my personal take on that is people are lazy. So they just want to look at success and say, oh, all this success, it was because of this one factor. [39:12] It's so much easier to say it was all only the founders. [39:16] Now, having said that, let me tell you that the most important ingredient in all of that is the founders.

[39:22] In fact, going back to what you asked me about Larry and Sergey, is that the other cool thing about Larry and Sergey were not just that they spent tens of thousands of hours and they were really good at what they did, but they could explain to you the most complex things. [39:37] in less than a minute and make you feel smart. [39:40] What I want to say is, look, [39:42] Let's just put something to rest. I think without exceptional founders, it's very, very difficult to succeed. [39:48] So founders definitely is the foundation that we look for, but [39:53] I'm going to say yes, but.

[39:56] And add that [39:57] Even some of the very best founders, sometimes when they face a very difficult market or at a really bad time, [40:04] Things have not worked out really well. [40:07] Right. I mean, we can always find a few things where like, oh, yeah, but like the best founders pivot and find a way. Yes. But statistically speaking, you're looking at one or five percent or 10 percent of the cases. Nobody ever talks about the 90 percent of the cases where the pivot didn't work. [40:22] Now, we're always here to make it happen and to support the founders.

All I'm going to say is that, [40:29] It's kind of like you look at a championship team and yeah, it was all the quarterback or it was only the coach. [40:34] The reality is, yes, it was the quarterback. It was the coach. It's the 100,000 hours that they trained. It's the fact that they picked different strategies. It's the fact that they took the right risk at like 15 different games. We really want to simplify things and say, okay, that's it. Like we found the secret. The reality is there is like 20 secrets.

There is so much more nuance that goes into it. And again, like not to take it away from the founders. I mean, I have so many great examples of, [41:02] founders where like when there is nothing, they will something to existence. And it's just incredible how they're able to do that. A good example of that is Scott Morton at Revel. I mean, he was the top engineer at SpaceX, wrote all the software for fucking records. And then one day he's like, you know what? There is no definitive infrastructure company for critical hardware, including space and other industries like utilities, dams, all of that.

And literally, [41:32] Like he's able to attract incredible talent. And next thing we know in like 12 to 18 months, he has his first prototypes already working. I mean, I've never seen a founder like be able to do that. It's a little bit of the equivalent of like Moses went to Egypt and parted the sea. [41:48] We literally are working with founders like that today and I will never take that away from them but [41:54] what market they tackle and at what time they tackle is also equally important. For instance, I think, [42:00] we are essentially in the beginning years of a huge space age.

We're going to have tons more satellites, we're going to have a lot more things happening in space. So this is actually very timely because SpaceX had to do everything they did from scratch. [42:15] And interestingly, like at Google, we did a lot of things custom for which there is like now platforms today. [42:21] We, for instance, build our own thing, which Amazon with AWS turned into a huge cloud business. [42:27] We literally had our internal AWS cloud 25 years ago. We build it. We build everything from scratch. Now you don't have to do everything from scratch.

So it's just to say that, yes, everything starts with amazing founders, but there is also a lot more nuance to it. [42:42] Yes, absolutely. To push on that question maybe a little more, [42:47] Have you ever seen a situation in which you... [42:50] Felt it was a truly top basis point founder. [42:54] who didn't find a way to succeed [42:57] Maybe not even that company, but the next one, [43:00] My feeling is that if you find someone that good, [43:02] Ultimately, they almost always figure it out. [43:05] somewhere along the line.

[43:06] I think one of the things is, yes, they do figure it out, and I will not take it away from them. [43:12] And I think some of the things that happens is like, look, I mean... [43:16] Everybody's dream is like, we're going to be great and take the company public. But the reality is sometimes, you know, you're part of an acquisition and your product is still serving. [43:26] you know, hundreds of millions, if not billions of people. [43:29] So you have succeeded. Maybe the company didn't go public, but it still succeeded in the way you originally dreamed of.

So I guess the thing is, look, the very best founders do figure it out and do make it work. [43:41] But it might not be in the way that people have expected. Yes. Yes. [43:45] I imagine you've had to... [43:47] reinvent Felicis a lot over the years, you know, as as the founder of it, as you look back on [43:53] you know, the decade and a half plus now, [43:57] what have been the different sort of form factors and maybe what have been the hardest transition points along that journey? I, you know, frankly, imagine that one of [44:05] the first transition points of going from a solo GP to entrusting other people to make investments and to share this sort of mental space with you must have been a really significant one.

Definitely. It was a very steep and also very gratifying learning experience. But [44:22] I think that needs to take us back to our origins. [44:27] And what was really interesting is [44:29] You and I just talked a little while ago about strategy and how we try to be different than standard VCs. So now I'm going to go to the heart of it, and it is... [44:38] I looked at all the other VCs and I really tried to think, like, what is one thing that all of these incredible VCs, [44:46] that came before my time, not good at, [44:49] And what is one single thing that could be my true north?

[44:52] and define our franchise for decades to come. [44:55] And what I basically ended up at is traditional VC, at the moment they succeed, they become very rigid and stagnant. [45:03] all of them had some kind of a turning point. [45:06] All of them started with a dream, and then they have some really great bets, like incredible returns. And right at that point, [45:13] They are like, don't change anything. [45:15] you know what, I was walking my dog and, you know, whatever, like it was the morning and we were based in like, and then, okay, great.

[45:22] This works, so absolutely keep it. Don't change anything. Our P's really like it because clearly something works. [45:29] And what people don't understand and what I observe at Google with super high growth is that that's actually when you're most vulnerable. [45:36] Actually, that's the point at which you should be willing to question everything. [45:41] and figure out like anything that can be improved and changed. Because if you don't do that, somebody else will, and you will get disrupted. So that's both the blessing and the curse of Silicon Valley and technology.

[45:54] is that it's always like crazy, it's always a battlefield. You think you won the battle and then somebody braver and somebody crazier comes along. And if you haven't adapted, like all of a sudden, you're a dinosaur and then you get crushed or killed in the battlefield. So I basically said, [46:10] I can fail at everything. [46:12] But one thing that will define this franchise that we will never ever fail or cannot fail [46:17] is learning and adapting rapidly. I literally said that's our constitution. [46:21] If our firm is a constitution, that is our constitution.

But by the way, [46:26] This means that learning and adapting rapidly doesn't mean that your strategy changes all the time. It doesn't mean that you're flailing and spraying and praying. It just means that it's the same strategy, but you can... [46:38] you know, applied in different ways. And do you see like how it's perfect with the generalist approach? Because that essentially gave us the flexibility of when we saw opportunities in the market. And I'll give you an interesting example where there was like a really interesting turning point in the history of Felices, where we did an analysis of all the successes and realized we had nothing in AI or very few things in AI and security and infrastructure.

So we made a hard pivot into those areas. [47:04] I feel like the defining aspect of what we do is our strategies always remain the same. Our, you know, differentiator or being the trusted brand by founders and doing right by founders always stayed the same. And we scaled it. But all other aspects we learned and adapted. Right. Like we started as a solo firm. Then we were three people. Now we have research. We're doing research. [47:26] 20 different things that I would have never even imagined that we would be doing today.

Yes. Same strategy. [47:32] Same journalist approach, but the practice and application and what sector we choose today versus 10 years ago, it's so different. The team is very different. What I love about that is. [47:43] The thing that kills civilizations and cultures is the inability to adapt. [47:48] Like, why did the Roman Empire die? Like, why did all of these great civilization, like, go become extinct? It's because they could not keep up with the time. [47:55] And so that to me was the thing that if we are the fastest adapting, fastest learning, you know, team, culture in venture, we will always have a place in the upper echelon of venture as long as we are able to make it there.

[48:09] Amazing. I love that theory, this willingness to rethink things and sort of prevent against that stagnation that. [48:15] As you say, success often breeds... [48:18] On the subject of... [48:21] you know, avoiding stagnation. You guys have [48:23] been, I think, very aggressive in investing in AI and doing it, you know, at, [48:29] almost every altitude it feels like. You have Crusoe at the energy layer, you have [48:34] you know, sort of some orchestration plays with N8N and, you know, infrastructure, Supabase, [48:39] And some of these sort of, [48:40] bespoke model companies.

How have you thought about [48:44] the right way for Felicis to be involved in this? And why have you been willing to sort of [48:48] lean in so aggressively such that, you know, it seems like that is, I would imagine, the majority of the firm's activity at this point. [48:57] 100%. This is a really great thread because [49:01] I think about it a lot. And I was just talking to a VC club at a really well-known university. And I told the students the following. Venture business is very simple. [49:11] There is only one thing you need to do, which is you need to find companies that have hockey stick,

[49:17] revenue inflection curves. [49:19] and be in these companies before the steep part of the inflection happens. [49:23] That's it. That's venture. I did it in less than a minute. [49:26] You do that right and consistently, no matter what you do, you're going to succeed. [49:31] Notice I did not talk anything about sectors. I did not say anything about stages. I did not say anything about the economy or markets, nothing else. I did not say anything about valuations. All of these things are excuses. Like sometimes like it's a great analogy in F1.

Like, you know what? Like they complain, you know what? Oh, it's like terrible. Like it's rain. And like the best drivers, like when, whether it's dry, whether it's rain, whether it's a challenging circuit, whether it's night, whether it's day, whether it's street, whether it's like whatever. [50:01] that comes to my mind is that, you know, people complain about the markets. Oh, AI is a bubble. No, valuations were really high. And we can find companies not only across all the sectors and all the geos, but also when the markets are up, when the markets are down, when it's really expensive, when people think there is a bubble, because what they're not doing is they're basically looking at things that they can't control, but that has no impact in how they choose companies.

[50:24] The only thing that matters for the companies is whether you can find that hockey stick curve. So now how does this translate into AI? In my 20 years of doing this, AI age is the first one where I have seen these growth curves, the hockey stick growth curves, happen at the most insane velocity and the sharpest steepness. [50:46] To give you an example, even like the Google age, Google went public in six years.