The fund has gotten a lot of money from investors and has returned a bit of capital.
There has been a lot of action recently. The outfit took the wraps off more than $5 billion in fresh capital commitments across two new funds, which brings its total assets under management to $11 billion. That's a lot of money. Over the last two years alone, the San Francisco-based outfit has returned $10 billion worth of shares to investors after its portfolio companies have hit the public markets.
We talked to Lauren Gross and Brian Singerman earlier today to learn more about how the new funds will be invested. They answered questions about how the firm is structured these days, how often investing decisions involve the firm's famous co-founder, Peter Thiel, and whether the firm plans to incubate more companies. Our chat is edited lightly.
About a third of your staff is made up of investors. How many are in Miami compared to San Francisco?
The general partner of the office in Miami is FF. One of our principals is there, as is Matias, who was recently promoted to partner.
Who is more focused on earlier-stage deals and who is more focused on growth-stage deals?
All of our team members are considered to be generalists. People are expected to be able to work across sectors and stages. We have an entirely different approach. That has served us best from returns perspective. We encourage people to find their own competitive advantage, but it is not mandated by the firm.
How are decisions made?
As you scale up in check size, we have different degrees of required votes.
There is a threshold above which Peter Thiel is always involved according to the former partner of the Founders Fund. Is that still the case?
All of our doctors weigh in when we write a larger check.
There is a lot of capital at your disposal. Do you invest in the public market?
We have the ability to do some, but most of our public positions come from the private side.
If it wasn't in your portfolio, you wouldn't invest in a company whose shares are on sale.
Our comparative advantages and strengths are private.
Are you a registered investment advisor?
We are not registered. We have had the discussion for a long time, but no current plans to make this change.
Which themes are most interesting to the team right now?
We are non-thematic. It isn't as if we predicted social media and found Facebook, or that there was something interesting in the space industry, as the Founders Fund has invested in numerous times over the years. Listening to big, bold ideas across sectors has driven our best returns.
How many startups do you usually invest in?
Typically you expect a few dozen investments, with a few where we double, triple, and quadruple down, which can cost hundreds of millions of dollars. That concentrated piece is what makes the portfolio unique and what drives the returns more than anything else.
Who is your biggest investor?
The general partner is the largest investor in the new funds. That has always been true for us and it is definitely a differentiating factor within a market that tends to be less aligned from a capital perspective. Some team members might have a bigger stake in the early stage fund, but we think of it as one team across both sides.
What size checks does the firm write?
The largest was $300 million. I wouldn't say we wouldn't write a check larger than $300 million, but we have gone smaller than $1 million.
What is your strategy?
The two things the team really got right is that they wrote their first investment into Bitcoin and built a position over time, and that the rest of the holdings are in cryptocurrencies.
Do you own any equity or token in the startup?
We have done equity and token.
Are members of your team focused on these types of investments?
The full partnership is involved in conversations that involve Brian, or that involve Peter, when we decide on a core position for the fund. Napolean, who joined the firm in 2012 as a principal, is the partner who is most focused on web3 type bets. It is a team effort.
What challenges and opportunities are present for later-stage companies?
Private market valuations are slowly catching up to public market multiples. If we wait for prices to come down, we can get those same companies for cheaper, because with venture capital, you can invest in any macro cycle. There are still many great companies to invest in. Growth players sitting out is better for us. We can wait until we get a great company at a great price.
Over the last six months to a year, valuations have soared as fast as they have in the past. Is the firm's view that these valuations are reasonable?
The people who came into late stage were not irrational. There was some work that needed to be done, but now there is more work that needs to be done.
Some well-known companies have been helped by the Founders Fund. Is it becoming a bigger part of your strategy?
What is your competitive advantage? A decade and a half ago, Peter had a big thesis about organized data and was one of the co-founders of Palantir, which became a huge, multimillion-dollar success. Trae Stephens had a huge thesis on defense and government, and Anduril came out of it. It's still early days, but we have a working OpenStore. We are open to it, but we have to understand what the person who will cofound this company is thinking. Why is this person well-suited for this?
You have told me that you have delivered $10 billion in returns to your investors over the last couple of years. Is it in shares or cash?
We default to distribute shares in kind after lockup versus a lot of other firms that hold on to increase multiples. There is nothing wrong with that, but our advantage is on the private side.
Where have you seen the biggest exits recently?
The names Wish, Oscar, Affirm, Asana and Postmates have returned hundreds of million of dollars or more.
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