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Follow me @samirkaji for my thoughts on the venture market, with a focus on the continued evolution of the VC landscape.Today we’re thrilled to bring you my conversation with Delian Asparouhov of Founders Fund, a Silicon Valley and now Miami based firm that has long been known for backing some of the most category defining companies in the world including SpaceX, Palantir, Facebook, AirBnB, and Stripe. While at Founders Fund, Delian also co-founded Varda Space Industries, and previously worked at Khosla Ventures.A message from our sponsor:Pacific Western Bank is a full service commercial bank with over $34 billion in assets. The venture banking team specializes in financial products and services for startups, venture-backed businesses, and their venture capital and private equity investors.The experienced team is committed to the space and dedicated to delivering high-touch, tailored solutions, helping innovators take their business to the next level.In the first half of the year, the venture banking team has booked over $800 million in new loan commitments to help support the community. No matter the size or stage of your business, you can expect guidance, resources and flexibility, making them the perfect team to support your evolving needs.Turn your vision into reality with PWB. For more information, visit www.pacwest.com/lending-solutions, or follow us on LinkedIn and Twitter.*Equal Housing Lender & FDIC insured*Total assets & loans booked are as of June 30, 2021.In this episode we discuss:01:43 Delian’s journey to becoming an investor05:24 Why he felt VC was a better path for him than operating roles 11:52 Why he chose to go from Khosla Ventures (& now Founders Fund) instead of starting his own firm14:24 The decision to co-found Varda while being a full time investor17:38 How Delian attracted co-founders for Varda.21:31 Why there are a relative lack of investment dollars into areas like space. 25:22 How Founders Fund looks at the risk in investing in areas such as space.28:07 The catalyzing events in tech that will help drive exponential innovation. 31:27 Ingredients Miami has that will help it build a significant presence in tech, and why is talent going there?38:47 The most counterintuitive lesson Delian has learned as an investor40:56 Delian’s prediction for the venture market for the next few years43:47 The legendary investor that has most inspired himMentioned in this episode:Founders FundVarda Space IndustriesKhosla VenturesI’d love to know what you took away from this conversation with Delian. Follow me @SamirKaji and give me your insights and questions with the hashtag #ventureunlocked. If you’d like to be considered as a guest or have someone you’d like to hear from (GP or LP), drop me a direct message on Twitter.Transcript:Samir Kaji:Hi, I'm Samir Kaji, host of Venture Unlocked, the podcast that takes you behind the scenes of the business of venture capital. Today, I'm thrilled to bring you my conversation with Delian Asparouhov who's a Principal at Founders Fund. Based in Miami and Silicon Valley, the firm has long been known for backing some of the most category-defining companies in the world, including SpaceX, Palantir, Facebook, Airbnb, and Stripe. While at Founders Fund, Delian also co-founded Varda Space Industries and then previously worked at Khosla Ventures. I had a lot of fun in this week's show as we talked about a number of things, including incubations within larger firms, the arc of where he sees technology, and what's going to drive innovation in the coming years, and why regional hubs like Miami will be major forces and drivers of innovation. Now let's get into the episode to hear all of that and more.Samir Kaji:Today's episode is sponsored by Pacific Western Bank, a full service commercial bank with over 34 billion in assets. The venture banking team of PacWest specializes in financial products and services for both startups and the venture and private equity funds that back them. I've worked with many of their team members over the last few decades, and I can attest with their commitment to bringing a high touch and personalized experience for every startup and fund manager client they have. So whether you're a founder or a fund manager at any stage of development, and you want to find out more, check them out at www.pacwest.com.Samir Kaji:Delian, great to see you, and thanks for joining us.Delian Asparouhov:Thanks so much for having me. Excited to be on today.Samir Kaji:Well, this is going to be a really fun conversation given how multifaceted your background is. And actually going from a waffle boy to becoming an entrepreneur and getting into tech, to now being a full-time investor at Founders Fund. Tell us how you got interested in tech in the first place and what led you to investing.Delian Asparouhov:Yeah, I had always been a computer scientist. My dad studied computer science and statistics and was a software engineer for basically his entire career. And so I think my first website I put up, I think summer between eighth and ninth grade, I had my first paid software gig summer between ninth and 10th grade, and so, the waffle boy experience was actually like, "I can tell where this life is headed and it's unlikely to have a service job in its life unless I intentionally do it now, and I think it's an important skillset to have, because I can't wait of just get paid for just working with your hands."Delian Asparouhov:And so, I actually had a much higher paying job the prior summer, where again, I was a software engineer and then I was like, "I'm gonna be a waffle boy this summer. I'm not going to do any software engineering." I did a some of that and I was like, "This it for me. I'm not a very good waffle boy." I basically quit at the end of the summer to go back to high school, but I think I got fired too. I think they were at their wit's end with me of, I really just like overselling the waffles more so than I like making them.Delian Asparouhov:And so yeah, I basically had this software engineering background, thought that I was headed into the world of academia. I really liked software robotic space, and so the plan was, both of my parents are PhD academic types, my mom's a professor, my dad's basically a professor, and so I was like, "Okay, my path in life is going to be academic robotic space." That points me towards undergrad at MIT, grad school at Caltech and then basically working at JPL/NASA on robotic space missions.Delian Asparouhov:And basically in freshman year at MIT, I had a couple of chance encounters with the most maybe influential, being with this guy, Bilal Zuberi, who's actually now a partner at Lux Capital, basically met me on I think fourth or fifth day of undergrad, and just introduced me to the world of venture capital startups, just like a potentially alternative path that had a much near term and faster path, should we say, impact on the world.Delian Asparouhov:And so I got hooked on that. I started going to these weekly dinners at MIT. They were these entrepreneurship dinners hosted and funded by the entrepreneurship center. And then just very quickly got obsessed, started reading about all these things, reading Hacker News, and had this idea stuck in my head where I was like, "Man, Jack Dorsey, he seems like he's the best entrepreneur right now. I got to figure out how to go work for him." And so that basically spring of my freshman year, I hustled my way into getting a summer internship with Square.Delian Asparouhov:And so moved out to Silicon valley in whatever, late May of 2012, fell in love over the course of that summer, had a really awesome experience in the summer of 2012 working for Square. I think I interviewed when the company was a 100, 120 people. By the time I joined, it was 150 and then by the time I left, it was 300. So, I remember when I left the Android engineering team at the end of the summer, one of the other engineers was like, "Oh, f**k, you're an intern? You're not a full-time really? You've been here longer than the rest of us." And I was like, "Yeah, but I'm actually just an intern and I guess I'm going to head back to school/head back to school with the intention of figuring how to drop out and get back here as soon as possible." Because I was like Square is awesome, but I'm young enough that, the risk reward curve, I should probably go start my own thing rather than working at a bigger company.Delian Asparouhov:And so I was lucky enough to be roommates with a guy who was friends with a Thiel Fellow and I learned about that program, applied, and then managed to make it out full-time to Silicon Valley in May of 2013. So yeah, thank you Bilal for teaching me about startups and eventually leading me out to Silicon Valley.Samir Kaji:It's a really interesting story. You think about 2013. You drop out of MIT to pursue being a startup entrepreneur, which comes with a lot of risks. And then ultimately you did that for four years and then took on a jump eventually with Keith Rabois at Khosla Ventures. And I always think about, as you go through your career, you're always making decisions that have opportunity costs. Why did you decide to go into venture versus staying within the operating role, either running a startup or actually working for a startup in some of the spaces that you really enjoyed?Delian Asparouhov:Yeah, so the original role at Khosla Ventures was actually due to me wanting to actually start another startup. I had this idea around cybersecurity insurance that I've been towing around with Keith for a while, and didn't feel like I had the right founding team yet to pull the trigger, but I really did want to figure start working on it. I had actually been having dinner with Keith talking about this, but then also happened to be talking about a friend that had dropped out of Harvard, but had gone back and finished school, and was graduating that was looking for what his first gig was going to be.Delian Asparouhov:And Keith was like, "Hey, I really like your friend, maybe I should hire him as my chief of staff." And so we talked about what the chief of staff role would entail, how it would work, et cetera. And I remember calling my friend literally right after that dinner and being like, "Hey, Keith wants to me to pitch you on this role." I literally got halfway through the pitch and had this set of an aha moment where I was like, "Oh f**k, I think I want to do this. And then I'm going to work on the cybersecurity insurance idea on the side while doing it."Delian Asparouhov:And so literally I was doing this call outside Keith's house after this dinner, and I knocked on his door after I was done with the call. And he's like, "What the f**k are you still doing here? We finished dinner like an hour ago." And I was like, "I've been outside on this call, but by the way, I think I just want the job. What do you think about me being your chief of staff? And then I'm going to work on this cybersecurity insurance idea and just use Khosla Ventures and this role as the platform to find these potential ideal co-founders, and in parallel, just learn a lot from you."Delian Asparouhov:And he was like, "That sounds great." We came to an agreement that I would do it for at least minimum of a year. So even if I did find the exact team, I would still keep doing the chief of staff role for at least a year since he was going to have to train me up on it. And I was like, "Great, I'm happy to do it for a year, and then I'll go back and operate this company."Delian Asparouhov:About, let's say six or seven months in, I had a couple of different realizations that hit me all at once that convinced me that I should potentially take the idea of staying in venture capital for the longer term actually made sense. Because nowadays I think people think like venture is cool, blah, blah, blah, but how? When I was growing up in Silicon Valley, 2014, '15 and '16, venture capital is where you went to retire. Nobody cool was doing venture capital. All the cool people were starting companies. And I think that's still honestly mostly the case.Delian Asparouhov:But I had a sudden realization that hit me about six months in where two things, the first was that my personality and skillsets were much more likely to make me a highly effective venture capitalist than they were to make me a highly effective founding CEO. I am super ADD. I'm super intellectually curious. I like to speak my mind even when it's relatively controversial and out there takes, and I don't particularly love managing other people's emotion ends or acting as a therapist. All those things are huge cons to be a founder, right? The ideal founders are monomaniacal, very perfect in their storytelling and are careful not to step over any bounds, are very good at being a therapist and managing people underneath them, and if anything, dislike contact switching.Delian Asparouhov:I realized, I was like, "Huh, these things are all huge cons to the founder, and yet they're all huge pros as an investor, right?" The best investors are intellectually curious and context switching and don't necessarily need to manage people. And so I'd always given other friends the advice of, when considering various career paths, you should generally likely lean into your strengths rather than try to mitigate your weaknesses, because by leaning into your strengths, you're much more likely to be top 1% and top 0.1 top 0.01% of the people in that particular category.Delian Asparouhov:And so I was like, "I think if I really, really worked hard, I could make be a top 10 or top 5% CEO," but it would take like a lot of work. Or I could do the thing that clearly comes much more naturally to my skillset and personality and just do that. And I can probably work less "hard," and I'll actually be top 0.1 or 0.01%. And then I had this sudden aha moment where I can't describe to you, up until then I'd had this obsessive, since that day with Bilal and then reading about Silicon Valley, I was like, "Oh, okay. To be one of the greats, you have to be a founding CEO." And so like, "I'm going to be a CEO. I'm going to be a CEO." And it was literally obsessive in my mind. And every day I was like, "In some ways, I don't care about the idea, I don't care what I'm working on, but I have to be the CEO."Delian Asparouhov:And then it was just this first crack where I was like, "Hmm, seems like I can be one of the greats and have a really great impact on the world without necessarily being a CEO. And then who knows maybe one day I'll figure how to do the job half, half and co-found something again one day," which eventually does happen four years later. And so yeah, maybe a month, six or seven or so, realized that.Delian Asparouhov:And then the second thing was, I actually happened to basically stumble across and source an aerospace company that Khosla Ventures ended up investing into at roughly month six or seven. And so the second aha moment that I had was, I'd always really wanted to work in aerospace, but the only models that I had for how to do that were either you went and worked at SpaceX as an engineer, which I had friends that did that, and I didn't really love the day to day life of just being an engineer. And then I had the second type of model, which was the Chamath, Elon, et cetera, which is basically, "You got to get rich in normal tech and then you get to go do space tech."Delian Asparouhov:And so I was like, "Okay, I'm going to do path two. I'm going to try and get rich in normal tech, and then I'm going to go do space tech." And then instead, all of a sudden option three opened itself up to me where it was like, "Whoa, I get to do aerospace today as a broke 22-year-old, by basically 23-year-old, I think, by finding these companies that are really great space companies and then convincing investment firms to invest in them, and then I really actually get exposure to the world of the commercial space industry and operating within that."Delian Asparouhov:And so I had those two aha and I was like, "Oh s**t, I got to lean into this hard. And I'm going to show that I'm a very good normal investor, but I'm going to make sure that on the side I'm constantly building up this space expertise." And so very intentionally I started going to space conferences and meeting every space CEO, and thinking about what ideas would I want to fund? What opportunities were there out there? I started very proactively with my friends that were SpaceX engineers grabbing dinner with them and being like, "let me know anytime that you're interested in leaving and wanting to start a company. I want to work on something with you." And so those early bets were obviously what eventually led to what I'm working on today.Samir Kaji:Going back in a second, you were at Khosla making the determination that being a VC is probably better aligned with your skillset. You still have to do the normal tech, you have this affinity for space, and I think that goes back a long time, well before even being part of the tech world. But there's a couple options that people have when they're thinking about being an investor and starting off in the early days. In today's world, that means either joining a firm, like you ultimately went from Khosla to Founders with Keith, or actually start your own firm where you get a taste of actually running a company, but in the context of an investment firm. Why did you decide to go to Founders versus just start your own tech or space tech type of firm?Delian Asparouhov:I do think that fundamentally venture investing is an apprenticeship-based industry where I think it's far easier to learn from other really great people than try to re-engineer from scratch. And then honestly, most things in life are easiest learned being in apprenticeship. And that was incredibly clear to me if I looked at, let's say peers that started around the same timeframe that I did in venture four and a quarter years ago, those that had very type mentorships and apprenticeship opportunities, have definitely far outperformed the ones that were out on an island and expected to learn and operate entirely on their own.Delian Asparouhov:Founding a firm can make a lot more sense once you've had that apprenticeship experience. I think early on in a career, it's not like it's impossible to succeed that way, but you're really in it for the grind. And in some ways I would much prefer to spend ideally the majority or 99% of my time doing the things that I really love and things that I'm good at. I think I'm pretty good at, for having been a former founder, I'm pretty good at advising other founders, finding very interesting ideas to invest in, figuring out how to convince those founders to take our capital, those things I'm quite good at and enjoy doing.Delian Asparouhov:Do I love pitching to limited partners to invest into a fund? Not particularly, and so this was a have to. Yeah, maybe it constrains the upside or maybe you don't get as much ownership, et cetera, but I find that I didn't really want to apply my "entrepreneurial independent energies" towards actually making an investment firm. I was much more interested in, and this is definitely an explicit part of the conversation when I joined Founders Fund, I was interested in, at some point, incubating something and applying the entrepreneurial spirit towards that.Delian Asparouhov:And so yeah, I think there are plenty of investment firms in the world. Are you really going to create the next greatest hot new thing? Maybe. But I think that isn't bringing that much innovation and interesting things to the world versus applying that same entrepreneurial energy to company building. To me, it's much more exciting. But obviously, I've had friends and peers that have done phenomenally well taking this purely independent approach, but this wasn't something that I was super interested in.Samir Kaji:So given all that, let's talk about your work at Founders Fund. And one of the things that struck me as unique was, you starting a company or at least co-founding a company in Varda while you are a full-time investor. And we're starting to see those type of models emerge, and certainly in the past we've seen things like EIR models, incubations with firms like Sutter Hill and then now studio models. But maybe you can walk us through a little bit about how does that work for you? And within Founders Fund, what does it actually mean to co-found a company while you're a full-time investor?Delian Asparouhov:Yeah, there's definitely a couple different models, most of which I'm typically not very interested in. Let's call the first most common just being the EIR model. Typically, for sure there's some success with EIR models, but I don't typically love them because they tend to create a relatively artificial constraint on, you come in basically without an idea and the firm tells you, "you've got to start something within a year, either we'll fund it at the end of the year or you're out of here at the end of the year." And so it creates this artificial time constraint that I don't think is the healthiest way to start a company. I think you should start a company when you have an idea that's really itching at you and you just can't get out of your head, and need to build as opposed to try to force yourself into a company. And so I don't necessarily love the EIR model.Delian Asparouhov:The second model, which I'd call venture studio model, people that only focus on incubations. And so maybe the best example of this being Sutter Hill Ventures. They basically only do incubations. Snowflake obviously being their best example, but they have many more coming down the pipe that are quite, quite good. And that model not necessarily mean anything to me because it's only incubations typically. And those do tend to have more success, but you do need to do a lot of them. And so you can't spend as much time on any individual one. And so it feels like in some ways, you have all the downs of investing, your time is very split amongst all your companies. And yes, you're more involved at each individual one and you help kick it off the round, but there's no one that you can feel true, true ownership over. But without all the upsides investing, I can invest in any company and whatever any founding team builds. So, I wasn't super interested in the venture studio model.Delian Asparouhov:And then third model being the relatively unique model that so far, at least I think only, let's say Founders Fund and a very small handful of others have truly succeeded at and scale at, which is, you still keep investing in a variety of different external companies at an aggressive pace, but then you choose one, and exactly basically one company, to really focus as your external incubation. And so you get that real sense of ownership, control something that you're truly proud of, but while not being constrained to only investing in the ideas that you come up with, but being able to invest in, I do really like the process of, a founder comes and pitches me on something that maybe a lot of other investors think is crazy, wouldn't succeed unless we funded it, and then getting to fund those companies, those are in some ways the most emotionally rewarding investments, because you're getting to enable somebody else's dream.Delian Asparouhov:And that doesn't always happen right. For sure a lot of the companies that we fund, a million other people would have also may be funded, but there's this occasional exceptions where we're truly out on an island in comparison to all the other venture investors. That's kind of the model that Founders Fund takes, and so it's like, I'm definitely not starting any other incubations anytime soon, but I really like that model, both getting to aggressively invest at a top-tier level while also running one and exactly one incubation, which we've done with, first Trae Stephens doing Anduril and Peter back in 2004 doing Palantir.Samir Kaji:So you started Varda at I think it was mid last year, so 2020, and I think this was a few months before you ultimately recruited Will over to become CEO, and I know Will came over from SpaceX, but are there any challenges in terms of when you do start a company and incubate it to actually bring in talent when the person that you're bringing in wasn't part of the co-founding team?Delian Asparouhov:Yeah, I do think this is the trickiest part of incubations. And what I'd say is, the idea and the potential for Varda wasn't real until after I decided on Will and the founding team. It definitely felt like Will was there basically since day one, because there was just no way it was going to happen without Will. And then by the way, he has a lot of, this is not, unlike the venture studio model where they really do take a lot of the company up front, they get it up to a significant level and then they sometimes will recruit CEO, this was very different.Delian Asparouhov:And I'd say Anduril and Palantir were similar to this where it's just like their incubations didn't exist until after we had found the founding team. And so that was most of the focus was, I've been thinking about the idea that Varda's working on micro gravity factories or micro gravity manufacturing for almost a decade. I've been pondering it for quite some time, studying all the companies that were working on it. Earlier in 2020, I actually considered a variety of companies that were working on it as investments from Founders Fund, and for a variety of reasons, decided they weren't a fit. And so in late July or early August of last year, I was like, "Okay, well, I've got some time right now where we're not investing a ton, let me think about what would the ideal archetype for founding team be, and let's go and try and find those and convince them."Delian Asparouhov:And so I basically articulated and listed a set of things that basically Will Bruey perfectly has, which is I wanted somebody from the Dragon Project with entrepreneurial experience and ideally had done annual investing on the side. So I'm not teaching them about fundraising and safes all from scratch. And then ideally a chief scientist that has done micro gravity manufacturing before.Delian Asparouhov:And so, the early days of the idea, weren't like, for sure there's some amount of, I was starting to do really early exploration of business model and customers and things like that, but it was super light. 95% of my focus was, I need to find this co-founding team that makes it feel real such that, this is sort of day one. And yeah, I think it was like third week of August, I'd need to double check the Varda Twitter, but somewhere around third week of August or maybe first week of September, the three co-founders myself, Will and Daniel had dinner down in, I think Manhattan Beach or something like that in LA. And that was day one. And then I was like, "Okay, I think we're doing this. Let's start to go through the motions of, let's talk about equity splits and let's start to work on the pitch deck and things like that. And it took a couple more months until we were really ready to go out and fundraise.Delian Asparouhov:But yeah, it's definitely not like, I was working on it for months and months and months, and had all these things, and I recruited in Will, and it was artificially he was coming in to run something that wasn't really his idea. It was more like, "Yo Will, here's an idea that I've been towing for awhile, I think you would be a really great CEO for it. And then I think it's in your best interest to have it be in incubation with me rather than doing it on your own. Because this is a capital intense idea and I can just help speed this up, where on your own," I'm sure he would have been able to like raise a seed, and then an A blah, blah, "But I can help you skip a couple of steps. And then by the way, the net dilution impact is going to be roughly equivalent," where rather than selling a bunch of the equity to a bunch of external investors over the course of several rounds, just give me some equity and then we'll just skip basically to a nine million dollar seed." Basically a series A.Samir Kaji:Right. Okay, so that makes a ton of sense. And you look at the space and pun intended, I guess, that you ultimately started this company, and what we've seen at least, at least in my view, we've seen a lot of investors focus on traditional technologies, many of which are just incremental in nature. And you talked about Bilal being at Lux Capital, and Lux does a lot of stuff that I'd consider true moonshots that are looking at hard technical problems that are in things like, whether it's bio, space or other, why are we not seeing more funding going into companies that are within spaces like the space sector? Is it because there's not enough entrepreneurs that are looking to solve those problems, or is it something unique about the capital requirements for the companies that get VCs not comfortable with it?Delian Asparouhov:Yeah, a couple different subpoints within here. The first I'd say is, I actually do think if you study it across biotech, aerospace, et cetera, the number of venture dollars going to these ecosystems is actually increasing quite a bit. Could it be increasing even faster? Potentially. So I do think it's actually headed in a positive direction. On, let's say second point, what is the limiting factor here? I think one of the things that is actually counterintuitive, and I spun this out into a pithy tweet. And this is somebody else's idea so I apologize that I'm not crediting them here. But the idea that I heard at a dinner party that I really enjoyed that stuck with me is that, the best social media app founders are actually PhDs in mathematics and the best deep tech founders are actually party promoters.Delian Asparouhov:And it sounds like a little bit pithy, but the reason being that, social apps, they don't need any marketing. What they need is deep mathematics around how do you architect these viral loops and behaviors such that people will actually use it and cross to create a viral growth. You don't actually need a marketer. And then for deep tech things, the limiting reagent almost always actually being, can you convince investors that this could potentially return their capital over the course of much longer timeframes than what's simply necessary? And so what you actually need is the best storytellers.Delian Asparouhov:And so the other way that, Peter at least has drilled this into our heads at Founders Fund is that, the bar for ability to fundraise, actually for deep tech counterintuitively needs to be even higher than for traditional tech, because you're not going to be able to raise on metrics or customers or things like that, you're going to raise off of technical progress in a story. And so, you need to be able to tell that quite, quite well.Delian Asparouhov:In terms of big shot or big swing companies like Varda getting founded, the limiting reagent there, I would say is people like me, technical enough that you know where to take a big swing. I had been thinking about micro gravity manufacturing for a decade, but then once I started really digging into it, I realized like, "I've been thinking about it lightly for a decade." It is very different to be thinking it to now a year and having worked on the company on it, lordy lordy, did I not know what I was getting myself into. It is a very different beast than what I expected. But that's part of it. It's like, I'm technical enough to now figure out how to navigate all of the challenges that have come through this, and technical enough to figure out that, Will's a very good CEO for this. Am I a very good space engineer? No, but I'm technical enough to assess who is a good space engineer and who isn't, and Will is definitely a very good space engineer.Delian Asparouhov:And so the combination of that plus concise, succinct, and let's say compelling storytelling, that's probably the limiting reagent to starting companies this, because the limiting factor for starting a company like this is convincing investors to fund it, right? There are a variety of people that have thought, "I'm not the first person to think about space manufacturing. I can list a 100 or a 1,000 researchers that have thought about this. Hell, even people that have tried to go out and raise from the venture capital ecosystem before that have thought about this idea." But none of them were able to articulate it in a simple and compelling way that got investors on board, and this is a particular idea that it's like, it's tough to bootstrap this one. It requires capital markets to fund for the first couple years so you get over the hump of the R&D and unit economics curve.Samir Kaji:What type of DNA then do you need from an investing standpoint? Because we talk about Founders Fund trying even from the very beginning investing in companies that, and I think Fund One had a lot of capital in one single company that obviously now has done extremely well, but it was a big risk. And taking big swings or things that you think investors would do, but the counterintuitive lessons is, or people are actually doing risk mitigation, and so when they look at these actors, that involves because it could be three, four, or five years before there's something, and it could take hundreds of millions of dollars in certain cases. What type of DNA as an investor, do you need to get comfortable with those type of investments? How do you guys talk about it within Founders Fund?Delian Asparouhov:Yeah, I do think similar to what you're actually looking for in the founders in the companies, you do need the same thing as an investor. Take, Josh Wolfe, probably one of the best deep tech investors right now, he is an incredible storyteller. He's both technical enough to actually understand what is the background across both the biotech, space, hardware, et cetera, companies he's investing, but then most importantly, he can also help translate that story to the future investors. Because a lot of what you need to do in deep tech is convince future investors to also invest in it while the unit economics, et cetera, don't pencil out. And people need to be able to trust your judgment so that in the future, let's say, hedge funds are like, "Oh yes, Josh Wolfe of Lux is very good at choosing great deep tech companies. Therefore, if we fund this, it is likely to turn out well."Delian Asparouhov:And so there is that recursive positive signaling that takes some time to build up. But I think the necessary components of that are in deep tech investor signaling in some ways matters even more so than normal tech. If you're a killer growth SaaS company, nobody cares what your cap table is, anybody will invest. In deep tech, people definitely want Lux, Founders Fund, et cetera on the cap table, feeling comfortable that, "okay, these people have clearly assessed this, know that this is a viable technology, legitimate team," et cetera, and feel much more comfortable then investing more capital later on.Delian Asparouhov:And so yeah, I think similarly it's definitely a very limited set of people in the venture capital ecosystem that are technical enough to actually understand the underlying technologies. Because you also can't look like a buffoon and accidentally keep funding Theranoses where it's like, the technology clearly it doesn't work, or ultrasound wireless power. We can argue, is it a great company? Is it a great investment? Was it the right approach? At the end of the day, that is a fundamental law of physics that is quite difficult to overcome. Energy loss from ultrasound, speakers shooting towards one area in air, R3 is difficult to deal with. And you need to be able to assess that and not just fall for just great storytelling as well.Samir Kaji:It's exciting for me personally, to see some of these companies that are attacking really big issues, whether it be healthcare, or things like space, or climate. But as you look at history within tech and life sciences, there's usually been catalyzing events that have either been platforms or things that have really driven waves of innovation. That could be the internet, it could be things like AWS that made building a software company much cheaper. Within the type of companies that you're looking at, which often are a little bit different than your traditional enterprise software company, are there any catalyzing events or platforms that you believe will drive the next generation of innovation within that space?Delian Asparouhov:Yeah, I think just as AWS created the infrastructure that allowed for digital innovation to happen very quickly, I think you're seeing the same thing happening in physical innovation. The pithy one liner that I like to give is, in the 2010s returns were largely defined by the world of bits, and then in 2020s, the returns will largely defined by the world of atoms. And the reason being that just as AWS allowed us to control bits very cheaply and precisely and much more easily with outsourced companies, the same thing is happening with the world of atoms, whether it's in biotech, you can remotely run an experiment now without actually having to open your own wet lab to outsource metal 3D printing, where if you want a very complex metal park, you no longer need to build a manufacturing facility in house.Delian Asparouhov:Outsource analysis, design, et cetera, everything that you need to, let's take Varda as an example. A decade ago, Varda would have had to be 1,000 to 3,000 person company that raised on the order of two or three billion dollars, maybe at minimum, to actually get over the line and come to fruition. Instead, today, I can buy a rocket off the shelf from SpaceX, Rocket Lab, Relativity, on down. I can buy a satellite off the shelf from Blue Canyon, Tyvak, Rocket Lab, tons of companies that now offer that off the shelf and let alone all the other components, the radios, the batteries, the solar panels.Delian Asparouhov:And so, I think what has changed a lot in the world of atoms is, in order to have significant influence in the world of atoms, you no longer need to have nearly as many of the core competencies entirely in house, just as it happened in the world of bits, right? Uber no longer needed to have expertise in building data centers. The same thing is happening in the world of atoms across a multitude of industries. And so, I think it's a really exciting time. Is it going to be as clear like a single platform like AWS? I don't think so as much. There might be one for biotech and one for aerospace and one for materials manufacturing and things like that. But I think it would be much more interesting area where there's a lot more alpha over the next decade is definitely from this world atoms.Samir Kaji:This continues that trend of reducing the amount of friction and cost of starting companies within whatever sector. And we've seen that even in things like semiconductor. I remember, in the 2000s, how much time and cost it took to get a chip to tape out, and now you look at it's a completely different world. It's really interesting to think about where that goes.Samir Kaji:The other thing that I always think about is, the world has also changed from a regional standpoint. I remember 10, 15 years ago, Silicon Valley was the only place where you would start a company. And over the years, it changed to Silicon Valley to global places like Israel, within the US places like New York and LA, and now we're seeing more regional hubs be created. You're sitting in one right now in Miami, which I think you're going to be the mayor of Miami pretty soon.Samir Kaji:But tell us a little bit about why places like Miami? For example, when Keith moved from San Francisco to Miami, he could have gone to a place that was already built out a little bit more like Austin or somewhere else that had similar tax benefits. He decided Miami, you decided Miami, you spent a lot of time there. Tell us what's unique about Miami, what ingredients do you need to have in a regional hub for it to be durable?Delian Asparouhov:Yeah, the reason that I got excited about moving to San Francisco originally was, that was where I thought the really exciting ambitious misfits were, and that was why I wanted to go work for Jack Dorsey. That guy was f*****g weird. He's still f*****g weird, but he clearly was going to do some really great things and I wanted to make sure that I was along for that ride. And unfortunately, just as at the time when I was deciding when to move, South Bay felt like this fossil embedded inside of amber and frozen in time, it felt like the same thing happened to San Francisco over the course of the roughly decade that I was there. The city's local politics and liberalism was completely unwilling to grow, expand, build new buildings. And that simple fundamental constraint caused it to freeze into an amber like state, because unfortunately startups grow exponentially.Delian Asparouhov:And so as they expanded and as they competed they took up more and more of the commercial office space, more and more of the residential space for their employees to live in. And so at some point, it started to break at the seams where in 2012 as a college dropout, I could definitely afford to live in San Francisco. In 2019, '20, '21 in San Francisco, no way. The rent prices got totally insane. And so the reason that we decided Miami over anywhere else was, Austin feels like its starting to have those exact same problems. And it's extremely politically a homogeneous city. They're already starting to see signs of breakage and unwillingness to build. I fear that it's where San Francisco was in 2015 and '16, and it's also just not an international metropolis.Delian Asparouhov:The thing that I think has been really missing in the United States is, if you look at other countries, let's say like Japan, Hong Kong, Singapore, they all have capitals that are these just equatorial, international, true metropolises that have also been very pro-growth and very pro-tech and that's what allows them to thrive. And we haven't had that in the United States. New York, yes, very international and a metropolis, not very pro-tech, not super pro-growth. San Francisco, yes, extreme tech, but again, not an international metropolis.Delian Asparouhov:If you talk to people that have lived in Dubai or London or Hong Kong, they're interest in moving to San Francisco, quite limited. Versus it felt like Miami have this opportunity to one, be a very high quality of life, low cost of living, low taxes, but then two, also evolve over time into this, ideally, my goal is, I think we can make Miami the largest tech ecosystem, not only in the United States, but the entire world within a decade. Because it turns out exponential curves grow quite quickly and when the city doesn't try to artificially dampen those exponential curves, that can be quite attractive. And so I love that Miami has more cranes per block, per a three block radius here than all of San Francisco combined.Delian Asparouhov:And in terms of the ingredients that you need in some ways, Miami is just getting such a crazy kick-start. If you look at ecosystems like New York and Austin, it started off with like a onesie, twosie, one founder, maybe one investor, et cetera. And so you had to grow entirely organically and very slowly, versus here, you're just getting this sudden rush of incredible investors like Dan Sundheim, and Keith Rabois, Antonio Gracias from Valor, these are all three completely different architects.Delian Asparouhov:Antonio on the board of Tesla and SpaceX, one of the best deep tech investors over time. Keith, one of the best FinTech investors and broadly generalist investors of all time. Dan Sundheim, one of the best crossover hedge funds of all time. All completely different genres of investing, but all focused on technology. And what it allows is that Miami gets this jumpstart where maybe in New York it took a decade to go from scratch to having five, six, seven IPOs of multi-billion dollar companies. I think Miami can do it much more quickly because you're getting this jumpstart on day one. And the Keith's and the Antonio's and the Dan Sundheim's of the world are much more able to both import entire companies, but the top executive talent, the engineers, et cetera, that you need. And then it's a much heavier draw.Delian Asparouhov:And so if you look at that both where the exponential curve is starting, but then also the exponential rate of that curve, Miami's in a very great spot. Is it going to happen overnight? No, but I wouldn't be surprised that a decade from now, if you're looking at tech IPOs, the amount that Miami's producing is on the order of, or equivalent to San Francisco. Maybe it's not quite the majority because things will be so distributed, and then within 15 years Miami actually being the largest ecosystem, not only in the world, but in the United States as well.Samir Kaji:Yeah, and it's a pretty ambitious vision. And you think about some of the regions that have done well, and it's really a combination in my mind of culture and particularly a government that supports a pro-tech type of environment. The second is, there's local capital that is funding startups. And the third, there is talent. You spoke about the first two a little bit, but tell us a little bit about talent. Why is talent going to places like Miami? And where are we in the curve within the Miami ecosystem for founders?Delian Asparouhov:I don't have a perfect statistical data set, let's say on this, but we recently funded a Miami-based born and raised company series A. It's actually going to be announced tomorrow morning at 11:00 AM. So by the time it gets published this will probably be live, so I'll just say it, the company's called Lula, it's an insured tech company. 17 million dollar round co-led by Founders Fund and Khosla Ventures.Delian Asparouhov:A year and a half ago, no way could this company get the attention of Silicon Valley VCs and say that they're going to be building the company in Miami, and no way could it attract top tier talent to move there. Since COVID, and since this whole Francis Suarez thing, a 100% flipped. They're pulling directors of engineering from Twitch and from Google and et cetera, really great companies from ecosystems like San Francisco, Seattle, New York, that previously these candidates would have never considered Miami, but now are going through the exact same trade off that the rest of us are going through, which is like, "I paid a lot of money for my rent and a lot of money in my taxes, and I don't know if I get much benefit, and this Miami thing seem pretty damn interesting." And so, their ability to import raw local talent, raw talent from abroad has significantly improved due to all of these, let's say high-level changes and then investors now being here.Delian Asparouhov:And again, is this going to happen overnight? No, but I'm really excited for the metric that I've been watching is, I'd probably say that, today there's probably three Founders Fund portfolio companies that have more than 10 employees in Miami. I'd say by the end of the year, I think that number will be closer to 10 companies. A year from today, I think that number will be close to 20, 25. And that's where I get really excited because a lot of the top-tier founders, if you look at in San Francisco, they come from employees of other venture backed companies.Delian Asparouhov:And so right now, is there a thriving ecosystem of lots of lots of founders that are like "born and raised Miami?" Not yet, but as these companies start to scale and as these local talents are to work at these companies, see how these venture back companies operate, they will be the pool of the future talent that I'm really looking forward to funding in Miami. And so I think we'll have a much richer and deeper pool, let's say, two years from today as the OpenStore's, the Lulu's, et cetera of the world really starting to scale up.Samir Kaji:Yeah, and without a doubt, the growth rate has been tremendous. And I know Twitter is not a necessarily a very great proxy always for reality, but even the folks that I know that have gone there even for a week or so have seen the energy Miami has. And it is going to be exciting to see how it grows. So I want to end a little bit with our heat check segment where I ask you three questions. I'm going to switch one up actually. But the first question I have for you is, now you've been investing for a few years, what's the most counterintuitive lesson you've learned about being an investor?Delian Asparouhov:Maybe it sounds like somewhat I tried, one of the things that I feel like Keith taught me that's really nailed into my head is, when considering any investment, the first question that should be on your mind or one of the primary ones is, why am I the right investor for this company? From afar, I would've thought like, "Oh, there's clearly like hot assets and your job as an investor is to just invest in the hottest assets or the things that are most likely to generate the most returns. And that's what you should focus on."Delian Asparouhov:And I feel like it actually flipped it on its head and has been a very useful favorite for me where, it might a somewhat similar outcome of, yes, you're still generating the greatest returns, but the way to just generate the greatest returns isn't to start with, how do I generate the greatest returns? The question asked is what is my differentiated advantage approach and why am I the right investor for this particular company? And that is much more likely to lead you to the best possible returns. Otherwise you'll revert towards the mean of what everyone else is doing. And then it turns out the mean in venture capital is not quite good, not very good.Delian Asparouhov:And so, I guess that's one of those counterintuitive things is that, rather than analyzing why is this company a great company to invest in? It's actually more like analyze yourself and why are you a great investor that this company should want to have on the cap table? And then if you don't have a good answer for that question, it's not clear that you necessarily should be investing.Samir Kaji:Yeah, and I think the other side of the coin there, if you are aligning yourself to the type of companies and entrepreneurs that best fit you, you're also going to provide a better experience for those founders in helping them build their companies. And over the long term, all that really matters from a branded reputation standpoint is, what are you actually doing with founders and what did they say about you? And so, totally get that.Samir Kaji:You're always pretty open out there ether in terms of your opinions and what your vision of the future is, thinking about bold predictions. And if we love look at past 2021, we are in, I would say, an insane environment right now with so much capital flowing around, valuations have obviously gone way up there, exit values of companies are also way up there, what's your bold prediction for 2022?Delian Asparouhov:I think the train is only going to continue on. If you have this ecosystem where companies are figuring out how to allocate capital productively and actually generate incredible innovations, maybe an artificial government version of this being the Warp Speed Program, basically enabling like mRNA technologies to exist, the macro capital environment is effectively doing the same thing where we're just willing to throw far more capital at problems that previously felt impossible. And it's fine if a series of them fail. If you take the Tiger approach of, "Let's throw a hundred million at every single Silicon Valley company," it's like, two or three years ago people would've critiqued that approach and be like, "Actually that doesn't work."You know SoftBank’s returns actually don't look that bad now that you've got DoorDash and a couple of other companies going public. And I think that's endemic of the ecosystem as a whole, which is like, I think it will only continue where the number of net new venture capital firms, the number of unicorns being produced, the number of really core innovations that are progressing is only going to continue to accelerate.Delian Asparouhov:I think humans are just really bad at predicting and understanding exponential curves. I've been watching the space industry now for a decade and I think because of that, I can understand the exponential curve that space has been on, and is perfectly tracking towards, when I started paying attention to it in 2012, this exponential pace that leads me to say statements that other people say is particularly crazy, but it's like, "I believe that 2030, we will not only 100, but 100s of people living in low earth orbit and operating there for not just research reasons, but there for actual commercial reasons being up there." And I'm sure people that are more sophisticated in the world of either Bio materials, et cetera, can also make just as wild predictions about these other areas.Delian Asparouhov:And so that's maybe obviously a further out prediction, but it is the best time to be starting deep tech companies, especially if you have a clear swing and story to tell. And I think it's only going to get better and better and better, and that the pace of innovation is only going to continue to increase. And so when people complain about is progress slowing down or speeding up? I'm definitely on the side of, I love your progress, studies institute, but progress is definitely speeding up.Samir Kaji:And it ties to everything you've been talking about how we've reduced the cost of infrastructure to allow these things to happen. And so it sounds like your prediction in 2022, the train continues to go. We continue to see funding at a high level, we continue to see these outcomes, but we also see these companies that will build multi, multi-billion dollar outcomes that are focused on things that are really hard, things like space.Samir Kaji:And I don't want to be presumptive in this last question, but you've worked with a lot of different investors, both at Founders and Khosla and probably even before that as an entrepreneur. But is there an investor out there that particularly inspires you, that you study and you believe has the type of framework that best resonates with you? Who is that and what is it about them that really resonates with you?Delian Asparouhov:Yeah, I obviously work with a variety of investors and there's a ton of things that inspire me about all of them. But if there were one investor that could point to of, this is the archetype that I would like to aim for and what I really aspire to in my career, it probably is actually Vinod Khosla. I think he does an incredible job of being extremely deep across so many different types of technologies, everything from semiconductors, to biotechnology, to space, all these different types of things, and is willing to invest in the very early stages and back up the truck into companies. Hell, take a look at QuantumScape. Khosla just funded that company, I think originally like 2011 or something like that, and they've continually backed the truck over the course of a decade now leading to this spec.Delian Asparouhov:I think there are very few investors that have that level of conviction in these types of deep technology companies that can also marry it with both a philanthropic side and a sort of story telling side, that I think Vinod is actually quite good at. And so yeah, I definitely admire his breath and I think I've done a great job of learning a lot about material science, about fiber optics, about space, about home construction. And I've got some core areas of expertise that I feel like I'm at the tip of the field of, and I hope to be able to expand that over time. And I think that definitely takes decades of reading various research papers, but it's impressive. Vinod literally wakes up every day and he's got like, whatever five nature articles on his desk every day that he chows through and make sure to stay up to speed. And I aspire to be able to do that as well.Samir Kaji:Do you agree with his statement that 90% of VCs actually destroy value?Delian Asparouhov:I don't know if it's quite that extreme, but definitely, most are not super helpful. The one code of his that I really believe in the most and think about all the time is, "The team you build is the company you build." And so, definitely, take that to heart across both with the investments that I consider, a lot of the time, it's mostly just analyzing the broader team more so than studying the strategy or the metrics. And then similarly with Varda, we probably spend in our exec team meetings, 80 or 90% of the time just talking about recruiting, team building, who are we bringing on? That's almost where we put all of our efforts.Samir Kaji:Well, this has been a lot of fun, man. I really appreciate you being on, look forward to seeing you in person, and again, congrats on getting Varda off the ground and doing all the great stuff you're doing at Founders.Delian Asparouhov:Sweet. Well, thanks so much for having me on.Samir Kaji:Thanks so much for listening to another episode of Venture Unlocked. We really hope you enjoyed our conversation with Delian. To learn more about him and Founders Fund, be sure to get at ventureunlocked.substack.com for detailed notes on the show and my ongoing commentary about the world of venture capital. Venture Unlocked is also available on iTunes or Spotify for download. And while you're there, please leave us a rating and a review as it really helps us out, and hit the subscribe button in order to get each and every Venture Unlocked episode as soon as it's released.Podcast Production support provided by Agent Bee Agency This is a public episode. 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