Invest Like the Best with Patrick O'Shaughnessy
Josh Kushner - Building Thrive Capital - [Invest Like the Best, CLASSICS]
Fri, 28 Mar 2025
Welcome to this classic episode. Classics are my favorite episodes from the past 10 years published once a month. These are N of one conversations with N of one people. This is a rare opportunity to hear from one of the best investors of the past decade—Josh Kushner, founder and managing partner of venture firm, Thrive Capital. Josh started Thrive in 2010 and launched its first institutional fund in 2011. That first institutional fund was $40 million and, in it, Thrive led Warby Parker’s Series A, invested in Instagram, and incubated a business, which Josh co-founded, called Oscar. Their portfolio is stage agnostic and their track record includes many of the best known businesses from the past decade, including Spotify, Unity, Stripe, and Twitch among many more. Please enjoy my great conversation with Josh Kushner. Subscribe to Colossus Review. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by WorkOS. WorkOS is a developer platform that enables SaaS companies to quickly add enterprise features to their applications. With a single API, developers can implement essential enterprise capabilities that typically require months of engineering work. By handling the complex infrastructure of enterprise features, WorkOS allows developers to focus on their core product while meeting the security and compliance requirements of Fortune 500 companies. Visit WorkOS.com to Transform your application into an enterprise-ready solution in minutes, not months. ----- This episode is brought to you by Passthrough. Passthrough streamlines subscription documents, KYC, and AML compliance, so you can focus on running your fund, not managing paperwork. New SEC Update 31 CFR hits investment firms in under a year, and managers are getting ready for it now. If you think basic OFAC screening is enough, think again. You'll need continuous monitoring of your investors and all their beneficial owners across multiple watchlists, plus a comprehensive anti money laundering program. Passthrough has already processed 50,000 LPs and built the complete solution. Don't risk SEC deficiency letters, fines, or regulatory enforcement. Visit passthrough.com to get compliant now. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes. Follow us on Twitter: @patrick_oshag | @JoinColossus Show Notes (00:00:00) Welcome to Invest Like the Best (00:05:14) Why do this podcast (00:08:14) The development of taste and quality (00:12:20) CS Lewis tweet; The Inner Ring (00:18:14) Overview the founding story of Oscar Health (00:25:18) Learning to identify good problems and creating a business to solve it (00:27:43) The birth story of Thrive Capital (00:32:14) Lessons learned from creating the first three Thrive funds (00:39:44) Talent, recruiting and seeing potential in younger generations of people (00:47:40) Investments he made during the early foundation of Thrive that had significant impact (00:51:12) His analogy for investing in early versus late stage and styles of real estate investing (00:56:22) The current macro environment (01:00:57) Why he sold small stakes of Thrive (01:05:10) His philosophy on what makes a good product (01:10:10) His absence from crypto and why he refrained during the boom in 2021 (01:12:33) Thoughts about the opportunity set in FinTech today writ large (01:15:39) Lessons learned from his time spent with Marc Andreessen (01:17:43) Lessons learned from Stan Druckenmiller, Henry Kravis, and David Geffen (01:22:09) Firm values he thinks are very important (01:31:15) Vision as a key ingredient for founders (01:34:19) His view of the investment industry in the world today writ large (01:44:48) The kindest thing anyone has ever done for him
Chapter 1: Who is Josh Kushner and what is Thrive Capital?
I've talked to you about it a bunch, and I think you literally at one point wrote a note to yourself about why you might do this. And when, and if we publish this, I think it will represent probably 80% of the total minutes of you being recorded in a conversation. And I'm just curious about that.
Everything else we'll talk about, I think, is somewhat downstream of some very deliberate choices you've made, your style, your personal style. I've really enjoyed getting to understand. And so I'm just curious, in that note, what were you saying to yourself?
Well, I think as a firm, we've always taken a very different approach with regards to how we present ourselves to the world. And I think that has come from a couple of different frameworks. The first is, and most important, our belief that the founders are heroes and the idea of taking credit for their success is not something that we've ever wanted to do.
I think personally, the construct of seeking validation from others is not something that we've ever believed would lead to us getting to the right conclusions on things that we do. We've always been different in that we don't apply to the Midas list or things like that, just because even internally, forget about how we would want to be perceived externally.
Every single win that we have is the entire firm's win. And every single loss that we have is the entire firm's loss. I know you've had Shane Battier on the show before, and we all quote the no stat all-star often. Such an incredible piece. Yeah. There's a great story that we remind the entire organization about often, which is I led investment in Slack. I sourced the deal. I underwrote the deal.
I joined the board. I was the person who ultimately decided when we should exit the company. But as we were talking about it as a team, I was extremely nervous about the price that we were about to pay. And my partner, Kareem, who was not involved in the underwriting process, who had never met Stuart, who did not join the board, was the one who actually convinced me that we should do the deal.
So who gets credit? Is it me? Is it him? No, it's the team. I think if you have that mindset, the idea of being out there in the ways in which others are in our industry is something that we've always gravitated away from. Why do this? I think in many respects, there are negative aspects of the fact that we're not out there and that some people don't really know what we do.
Some people think that we just incubate companies. Some people think that we just make early stage investments. Some people think that we only make later stage investments. A mentor of mine said to me recently, if you don't tell your story, someone else will tell it for you.
I feel grateful to have the opportunity to do it with you, but having the ability to articulate to the world what we do and how we do it and why we do it is something that I'm excited to do.
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Chapter 2: What lessons did Josh learn from early investments?
Yeah, one of the values of Thrive is to focus on the inputs, not the outputs. I think if you're chasing success, then you're unlikely to realize it. And if you are focused on a problem that needs to be solved, you will likely achieve success. So I think the people that we view as the most driven are the ones that are entirely focused on improving themselves constantly.
It's this level of self-motivation and self-awareness that is entirely a competition between them and themselves. And I think that is the thing that I've seen from the best founders that I've ever worked with. Those that are motivated by how the world will ultimately perceive them will likely make bad decisions.
Those that are motivated by a mission or a cause or the ambition to solve a problem are the ones that will ultimately achieve it. In many respects, having the firm based in New York City has been very much driven by the idea of us, I would say, being out of an echo chamber or an ecosystem so that we can actually have true independent thought.
And I think these are human emotions that you feel when you're in the middle of something. When I was in college, I had the opportunity to go to a Knicks game with someone who worked in finance in New York City. And he took me courtside. The seats were amazing. I was in heaven and he looked over five seats to his right and he said, my seats are good, but this guy's seats are better.
And that was... Inner rings. That was a really important moment for me because it made me realize that the way to ultimately do my job really well is to create the right boundaries for me to actually be on the outside and have true independent thought. A large portion of our investments are out West there every month.
But I think in some respects, the idea of not being there every day has enabled me to focus on just be a lot more clear in my thinking.
Talk about the relationship between starting and investing in companies for Thrive, which, as I understand it, is deep in the DNA. We were talking at lunch about this idea that excellence is the capacity to take pain and that the experience of pain as an entrepreneur is probably a huge competitive advantage as an investor.
And I think you started Oscar Health the same year as you started Thrive or very close. So you were dual tracking this investor. Obviously, you're an entrepreneur having started Thrive too, but dual tracking the investor entrepreneur styles at the same time and have ever since. What has that interplay meant to you and to the firm?
What that experience taught me is that being a founder is incredibly romanticized and the pain that is taken in order to ultimately achieve success is just extraordinary. I feel like the ability to do both is something that I just feel so fortunate to do because I feel like being a founder has enabled me to appreciate all of those that Thrive is fortunate enough to invest in.
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Chapter 3: How does Thrive Capital identify and support founders?
In this story, the why now is unbelievably clear, both in terms of your experience, but even bigger picture in terms of the Affordable Care Act. Under what conditions does the why now matter to less or more to you in investing and around incubations? Does there always need to be some galvanizing change like that that enables the new opportunity?
The why now is always fundamentally important because irrespective of people and capital, you always need tailwinds. So I think it's always a fundamental part of our conversation. The why now in Oscar was so extreme. But I also think the interesting part about Oscar was...
a recognition entering the founding of a company that it would be something that we would do for decades because we knew how fundamentally difficult it would be. And what's the scale of Oscar now? So we're 10 years into the company. Oscar has a million members, six and a half billion of revenue. But... The first decade, in our opinion, is only a couple chapters through what the ultimate story is.
Oscar has been an incredible journey in terms of, we call it, the 10 plagues of Oscar. Affordable Care Act was extremely volatile. I think there were 33 new insurance companies that were created as a part of the Affordable Care Act, and only two are remaining. There was obviously a new administration that was very opposed to the Affordable Care Act, which led to increased volatility.
There was the global pandemic. When we started Oscar, I think one of the core insights that we had as we think about the next decade is if you were to start an e-commerce business today, You can launch on Shopify, you can plug in Stripe, you can plug in any basic data analytics service, and you're ready to go.
If you were to start a health insurance company 10 years ago or even today, there is very limited technology that you can utilize. So our idea was not only should we build a health insurance company that consumers loved, we also had this vision of what would it look like to actually create the operating system that would enable us to run a health insurance company end-to-end.
And as we actually think about the next decade, we are the only people that have created this end-to-end system that enables you to operate a health insurance company and have a longitudinal view of a member from end-to-end. And as we think about deploying LLMs across this product, we get extremely excited about the transformations that are going to come.
Do the pleasures and the pain of running and helping run a mature platform like Oscar, Are those pleasures and pains very different from the pleasures and pains of the really early stages of businesses?
If there's one takeaway from founding businesses over my career, it's just as hard to start a small business as it is to start a large business. And it only gets harder the larger the business gets. It only gets more complex. I remember, it was probably six or seven years ago, we had made an offer to a CTO. And I remember having dinner with Carly.
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Chapter 4: What is the story behind Oscar Health?
Yeah. So the idea of actually having a fund that actually could build companies, invest in companies early and invest in companies late was so deeply unconventional. I feel really lucky that he saw it and he understood it. But what has enabled us to do is do the exact same thing from when we started the fund till today. Our first institutional fund was $40 million.
Our last institutional fund that we raised was about $3 billion. But the strategies have been exactly the same. The only things that have changed are the team, the scale of the brands, the knowledge and insights of the people within the organizations.
I'd love to talk a little bit about a history lesson using the funds themselves as the timeline mileposts, if you will. Tell us a little bit about the significance to you and to Thrive of funds one, two, three, and four. And then I want to pause on four and talk. I know that was a really important fund for the firm. So I guess start with one, two, and three.
If you had to sort of top line what was happening, why it was important, and what you learned from the first three funds, could you do that for us?
The opportunistic strategy that we've laid out to our limited partners was seen as unconventional. So the sequencing of making sure that every fund had essentially the right ingredients to the cocktail that we ultimately wanted to create took time. Thrive 2 was our first institutional fund. It was $40 million. But in that fund, we had our first incubation at Oscar.
We led the Series A of Warby Parker. And we invested in Instagram. That was fund two. Fund two. Yeah. At a half a billion dollar valuation. Fund three had multiple incubations as well. Quite a few early stage investments. But we also invested in Twitch and Spotify at the later stages as well.
I think fund four was the first time where we not only did everything that we did, but we started to develop our frameworks for concentration. So in that fund, we had about a 15% position in GitHub. about a 10% position in Slack, 10% in Stripe, 10% in Unity. And then we invested in BenchLink and Lattice at the seeds, but we ultimately built those up into about 10% positions over time.
And then we also incubated Cedar in that fund as well. So I think that was the first time that we weren't only doing everything, but we started to develop clarity that it's not only about investing at every stage and in every geography and in every sector, but also being extremely disciplined investors.
around almost doing a lot, but not doing a lot, and making sure that ultimately the things that we wanted in the portfolio were ones that we were extremely concentrated in, that we wanted to hold for a very long period of time.
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Chapter 5: Why is the concept of 'Why Now' important in investing?
We have specific points of views on this, but I think it would be unfair to say that the other views that others have are incorrect. What works well for us might not work well for other people. I think the most important framing that we have internally, as I expressed earlier, is Thrive is a company. We have a product.
Our product is our strategy and our investment process, but also our ambition to be the most meaningful partner to our founders. And we let our founders determine what meaningful is to them. The market is constantly changing. And the idea that people in our industry can have the perspective
That the market can change, but the ways in which they do their jobs doesn't change has never necessarily resonated. And I actually think the ways in which we approach Thrive is no different than how a lot of our founders approach their businesses. Our best companies ship weekly or monthly.
And our view is we need to be shipping weekly or monthly in terms of the ways in which we are making decisions or serving our founders. But we are a company. We are building a company. We are founders. We just happen to be founders of an investment firm. And I think a lot of people don't think about investors as founders. They don't think of them as builders. We think of ourselves as builders.
We're just building thrive. We do have strong opinions on the ways in which we do things, which is we believe in the generalist model. We've always shied away from sector-specific funds. And I think if you have these funds that are so focused... On a specific sector, the argument that you can make is that you see everything and that you have the prepared mind to make the right decisions.
The counter argument is you feel the pressure to deploy capital into a sector as a result of the fact that you have a sector-specific fund. So we really believe that the best ideas are the ones that we should invest in. Thrive started by primarily investing in consumer-oriented businesses.
Our first funds had, as I mentioned before, Warby and Harry's and Twitch and Instagram and Spotify and many others. If we had stayed focused entirely on on being consumer-oriented, then I think the returns that we would have created would look very differently. You can apply the frameworks that you have from one opportunity or one sector to another.
You've asked me a lot about how we actually identify companies. I actually think we, in many respects, apply a consumer lens to every single deal that we're doing, whether or not it's a payments business or an enterprise software business. At the end of the day, each product has a consumer. It has an enterprise.
Understanding kind of the nuance of that product, understanding how special that product is, whether or not it's a feature or something that is truly fundamentally important to someone and why it's important to someone. is something that we constantly go back to.
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Chapter 6: How does Thrive view talent and motivation?
I think from an investor's perspective, and as we're thinking about building companies in the space as well, I think one of the trickiest things is not whether or not value will be created, but where will value ultimately accrue to.
And obviously, we made an extremely large investment in OpenAI as a result of the fact that we think a lot of value and a lot of impact as a result of the fact that we think that they have an extraordinary product, but also... A very high density of talent building in the space will accrue to them, but where it ultimately falls elsewhere is something that we're still spending time on.
I think the insights that exist today and as to whether or not these insights will be relevant in a couple of years from now is one, this feels like the first paradigm shift that I've been exposed to in my career where the incumbent has the first right of refusal.
As a result of the fact that this is an API-based paradigm shift as opposed to an operating system-based paradigm shift, the ability for every company to access the same technology at the exact same time puts people in a position in which they can utilize this technology to improve their businesses.
So as on-prem moved to cloud or desktop moved to mobile or other things have transformed over time, I think the ability, analog moved to digital, like the ability for every company to just implement this technology very seamlessly is something that we're seeing at a pretty rapid pace.
I think the other thing that we at least have a point of view and perspective on is that this is going to be both top line and bottom line of creative writing. The ability to transform enterprise or consumer experience and potentially increase ARPU or in addition to that, automate a lot of processes is likely as well.
I'd love to do the same in just a couple other categories. So just go down to the weeds of what you've learned in a category building and investing in companies. The first of which is crypto. You've really been notable in your absence from that space. We've talked about extensively, like you guys can go anywhere, you can do anything. You could have done a lot of crypto. You didn't. Why not?
What was less exciting about that? What answer would you have given in early 2021 when... Everyone was investing lots of money in crypto. What was it about that space? What was your model of that space at the time?
We have a core belief that there's an important place in the world for crypto. I think the technology that has been created and will continue to be created can be extremely meaningful. I think the reasons why we struggled over the last years has been primarily oriented towards the fact that it has felt like there's been solutions in search of problems.
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