Dialogue with Founders Fund Partners: Common Mistakes Entrepreneurs Make and Lessons Learned
Timing is very important.Host: Imran Khan, Co-founder of Alliance
Guest: Delian Asparouhov, Partner at Founders Fund
In the field of venture capital, Founders Fund is an absolute legend.
In 2002, Peter Thiel, known as the "Godfather of Silicon Valley," sold the PayPal he co-founded to eBay for $1.5 billion and established Founders Fund in 2005, primarily investing in consumer internet companies. Its successful investments include Silicon Valley stars like Facebook, SpaceX, Palantir, LinkedIn, and Spotify. Currently, Founders Fund manages assets exceeding $12 billion.
In April 2024, Alliance, the largest accelerator in the crypto world, announced a strategic long-term investment from Founders Fund, with the investment amount undisclosed. As part of the investment, Founders Fund will provide support for Alliance's portfolio companies.
As a "bonus" for this investment, Imran Khan, co-founder of Alliance, engaged in conversations with several partners and marketing executives from Founders Fund, most of whom have direct entrepreneurial experience. They discussed how founders drive sales and growth for startups, how to build cryptocurrency brands, how to find suitable partners, and condensed various entrepreneurial insights.
Deep Tide TechFlow has compiled this dialogue collection in Chinese to share with everyone.
Introduction
In this interview, Delian Asparouhov and Imran Khan delve into several key topics related to entrepreneurship.
Delian's Background: Delian focuses on seed and Series A investments at Founders Fund, particularly in areas involving hardware-software integration or highly regulated fields. He also shares his unique experience of transitioning from founder to investor and back to founder, discussing his passion for the space manufacturing sector.
The Right Timing for Entrepreneurship: Delian discusses the importance of starting a business at the right time, especially how the maturity of technology cost curves and market demand impacts entrepreneurial success. He emphasizes that as a founder, one must ensure the uniqueness of the idea and accurately grasp the timing.
Finding the Right Partners: Regarding partner selection, Delian believes it is crucial to find partners with complementary skills who share the same vision and goals. He adopts a precise screening approach, listing the desired traits and searching globally for candidates who meet these standards, ensuring that each team member is the right fit.
Equity Distribution Strategies: Delian emphasizes the importance of developing a strategy that satisfies everyone in the present and future. He explains that in Varda, non-full-time team members receive less equity compared to full-time employees, as full-time employees contribute more to the company.
Key Lessons Learned from Entrepreneurship: Delian summarizes three key lessons learned from his entrepreneurial experiences: 1) the importance of talent; 2) the importance of extreme focus; 3) the importance of product-market fit.
Continuous Learning: Delian believes that continuous learning is crucial for entrepreneurs and shares two experiences that profoundly impacted him. The first was a coffee meeting with Sam Altman, and the second was his collaboration with Venod Khosla, which further reinforced his understanding of continuous learning. By constantly exploring new fields and challenging his comfort zone, he achieved personal growth and success.
Adjusting Entrepreneurial Direction: Delian discusses the importance of making strategic adjustments during the entrepreneurial process, using Slack's founding story and his company's market positioning adjustments as examples. He emphasizes that flexibly adjusting business strategies to adapt to market and technological changes is vital. This way, companies can find new growth opportunities and maximize their potential for success. Delian's experience underscores the adaptability and foresight founders need to identify and seize new opportunities in a rapidly changing market environment.
Framework for Evaluating Startup Investments: Delian describes two criteria he uses to evaluate startup investment opportunities: first, the connection between the founder and the business; second, identifying the "spark" in the founder, highlighting the importance of finding founders deeply aligned with the entrepreneurial mission.
Unconventional Views on Entrepreneurship: Delian discusses the current entrepreneurial and investment landscape and the perspectives of venture capitalists. He believes that the companies likely to yield the highest returns over the next decade will be those that are capital-intensive and integrate hardware and software. Delian challenges the common view of software investments, emphasizing the importance of physical products and solving real-world problems.
Guidance for Founders: Delian shares his experiences mentoring other founders at YC, from which he derived two important insights. First, he realized that this assistance is not merely a charitable act. Second, he discovered that he genuinely enjoys mentoring and believes these experiences have profoundly impacted his career.
The Compound Effect in Life: Delian emphasizes the role of the compound effect in personal and professional life, highlighting the significance of a long-term perspective and persistence. Many seemingly overnight successes are, in fact, the result of years of continuous effort. However, many people fail to fully leverage the compound effect in various aspects of life due to a lack of sustained and persistent investment.
Here are the main points from this dialogue:
Delian's Background
Imran: Delian, can you briefly introduce your work at Founders Fund and your professional background?
Delian:
Of course, I am an early-stage partner at Founders Fund, primarily focusing on seed and Series A investments, especially in areas involving hardware-software integration or highly regulated fields.
I co-founded Varda Space Industries about three years ago. Transitioning from founder to investor and then back to founder is quite rare. To be honest, a twisted obsession with pain brought me back to entrepreneurship. My passion for the space manufacturing sector made me eager to see it realized. I initially hoped to approach it as an investment and seriously explored the field as an investment thesis, meeting many founders working in this area, but I felt I couldn't find the right team. Ultimately, I decided to start the company myself.
The Right Timing for Entrepreneurship
Imran: How important do you think the right timing is for starting an entrepreneurial project? For ordinary people looking to start a business, how should they assess market timing? What signals should they look for as entry points?
Delian:
Timing is extremely important. For example, regarding the history of technological development, there are many instances where the right idea emerges at completely the wrong time. Varda is a good example. In the 1990s, 2000s, and 2010s, there were attempts to start businesses in the space manufacturing field, but they all chose the wrong timing. As a founder, you need to ensure your idea is correct while also starting at the right time. You can predict future conditions by analyzing factors like launch costs, battery energy density, and solar energy costs, which almost perfectly follow mathematical curves, to determine when your business model will be viable.
Even in other industries, startups have clear timing. Take Uber, for example; everyone had a device that could connect to the internet and had GPS functionality, fundamentally changing how people think about urban transportation and allowing them to actually summon a car. So, you need to have a very suitable timing to start a business like this. The mobile revolution sparked a wave of startups, the launch of AWS eliminated the need to build data centers, blockchain technology enabled a series of companies and decentralization, and AI and GPT better assist existing companies. But I believe that part of being a founder is seeking that inspiration; when you can truly ride the wave rather than paddle against the current, starting a company becomes much easier.
Finding the Right Partners
Imran: The second point you raised in this blog is finding partners, which is indeed challenging, especially in the crypto space. How did you find your partners? How do you ensure everyone meets your requirements?
Delian:
Finding the right partners is crucial. I typically look for people with complementary skills who share the same vision and are committed to the same goals. Especially when I decided to start again, I was looking not just for collaborators but for people who could excel in highly technical fields. We carefully select team members to ensure everyone is the best fit. I list the 30 traits I want in a partner and then search globally for candidates who meet these criteria. This approach is very much like a sniper's method—very precise. We have a clear list of skill requirements for each role, ensuring that every team member can make a critical contribution to the company's success.
Equity Distribution Strategies
Imran: How do you handle difficult situations like equity distribution?
Delian:
Regarding equity distribution, I believe two things are necessary: first, find an agreement that satisfies everyone in the present; second, ensure that this agreement will also be satisfactory in the coming years. You need to assess who the key people in the company are, how future decisions will be made, whether all partners are completely equal, or if one person will bear the ultimate decision-making responsibility. Varda's equity distribution strategy is relatively simple because it is not purely an equal distribution of equity. I am a non-full-time working chairman, and compared to those who work full-time in the company, they receive more equity because they will recruit many core team members and, in some respects, they know more than I do. Only a few companies can adopt an equal equity distribution model; perhaps Airbnb is a good example, where all three co-founders are actively involved in the company's operations, which is quite rare.
Key Lessons Learned from Entrepreneurship
Imran: As an entrepreneur, what important lessons have you learned over the past few years?
Delian:
First is the importance of talent. In my first company, perhaps because I was young, I lacked the ability to recruit top talent. But now, when I face problems, my first reaction is to find the best person in the world to solve that problem and try to bring them on as an advisor or full-time employee. Second is the importance of extreme focus. In my first company, I often focused on urgent but unimportant matters. In my current company, I can identify the most important issues, even if they are not immediately pressing. For example, in the summer of 2022, I realized we needed an experienced business development leader to handle contracts with pharmaceutical companies, even though it wasn't an urgent issue at the time. Finally, product-market fit is forged, not discovered. We should take a more proactive approach to understand the market, assess whether our value proposition resonates with customer needs, what the market trends are, and what the priorities of the Department of Defense and commercial clients are, to create a value proposition we know will resonate strongly with them.
Continuous Learning
Imran: You mentioned continuous learning in a recent article, which I believe is very important for founders as they need to keep learning and mastering new knowledge and information.
Delian:
In the early stages of my career, two things related to ensuring continued learning left a deep impression on me and ultimately motivated me. Early in my career, I was inspired during a coffee meeting with Sam Altman. At that time, he was preparing to become the president of YC while also working on a nuclear energy company. He was involved in many cutting-edge technology fields, which made me realize I was falling behind. Although I understood computer science, I needed to learn more about different fields to have a broader impact. This feeling prompted me to start continuously learning and trying new areas. A few years later, while working at Coast Ventures, I had the opportunity to work with Venod Khosla, who excels in over 20 different fields, and he made me realize the importance of continuous learning. I began actively learning about aerospace, even though it was a field I had not directly worked in before. I started reading all the press releases about aerospace, attending aerospace conferences, and meeting founders in the aerospace industry. Although I initially felt overwhelmed, it ultimately helped me accumulate valuable knowledge that profoundly impacted my later founding of Varda and my investments related to aerospace.
Adjusting Entrepreneurial Direction
Imran: In terms of investment, you have six years of experience. What is the most significant entrepreneurial direction shift you have witnessed? Perhaps you could describe some important lessons for founders?
Delian:
An obvious example in Silicon Valley's history is Stewart Butterfield and Slack, which initially started as a game studio developing an internal chat tool, ultimately transforming into Slack. For me, this is a prime example of a pivot. What my company does is more akin to geographic market expansion or the release of small product features, while Stewart had the determination to leverage the venture capital he raised and the team he assembled to make a real pivot from gaming to enterprise communication. Varda also experienced a pivot to some extent; in the early stages of the company, we had a very strong initial belief that the primary market would revolve around manufacturing fiber optic cables in low Earth orbit, but that turned out not to be the case. As the company evolved over the past three years, partly due to China’s first operational launch of a hypersonic missile in the summer of 2021, hypersonics transitioned from an academic exercise to a tangible need, allowing us to generate sufficient revenue and scale to truly address a larger market—pharmaceutical manufacturing in space. So in some ways, Varda's core idea remains unchanged, but the core market segment has clearly undergone a significant shift.
Framework for Evaluating Startup Investments
Imran: When founders pitch projects to you, do you have a fixed evaluation framework?
Delian:
I usually have two criteria, while others depend on the specifics of each company. First, why is this founder the superhero of this story? Why is this their life's work? I would give a rather special analogy, comparing Elon Musk and Mark Zuckerberg, two extraordinary, world-class founders. They are both clearly very capable, but if you put Mark Zuckerberg in charge of a rocket company, you would end up with a bunch of engineers wandering around who might never succeed in launching a rocket. If you put Elon Musk in charge of a social media company, it would be a complete disaster. The second point is that I look for some degree of "spark" in them. This spark may come from some non-professional fields. One example is that I find myself very inclined to invest in former D1 athletes or professional athletes; if you can manage the academic load of a top university while also being a D1 athlete, the discipline you develop is likely to translate into extraordinary success in entrepreneurship. Therefore, it is crucial to find individuals who demonstrate top 0.1% capabilities in some field.
Unconventional Views on Entrepreneurship
Imran: I believe Founders Fund had a very clear stance on physical offices versus remote work in 2020, but at that time, this view was not mainstream. What do you think are the consensus views on how to build a startup that most venture capitalists share?
Delian:
In this high-interest, high-capital-cost environment, the venture capital market has indeed shrunk compared to 2021, but I still believe that if you look at companies starting in 2024, those that are likely to yield the highest returns over the next decade will be capital-intensive companies that integrate hardware and software, solving real-world problems rather than merely providing a software layer to help employees process documents faster. I believe that fundamentally, the job of a venture capitalist is to focus on long-term results. If you look at the four highest-valued companies on NASDAQ, three of them—Nvidia, Apple, and Tesla—are deeply involved in hardware in the U.S., which is precisely the goal you should pursue as an investor. Therefore, I still think that people's views on software's zero marginal distribution and high gross margins are misguided.
Guidance for Founders
Imran: What was your experience at YC, and how did you mentor founders? Why did you do this, and why do you think it is important?
Delian:
At that time, I wanted to give back to my mentors who had helped me. I felt like I was doing charity work. I indeed took it to an extreme, conducting about 100 of these interviews within a week or two. I would line them up one after another, basically three sessions an hour, each lasting 20 minutes, and then I would do interviews for four or five hours straight.
At that time, I wasn't a particularly capable founder, but I did get into YC. So I felt I had some value to offer to future founders. Looking back now, I derived two main conclusions from this. First, this help is not charity. By assisting these founders, many of whom eventually became future investors and colleagues, you give, and your contributions ultimately pay off. Second, I should have realized earlier that I genuinely enjoy mentoring and working with other founders. A few years later, when I was considering whether to fully transition into the venture capital industry, I reflected on this. I really enjoyed doing all those mock YC interviews, and I loved helping my friends solve the problems they were facing. If you choose to do something you love as your career, you are more likely to become part of the top 0.1% because it won't feel like work.
The Compound Effect in Life
Imran: Among the five lessons you mentioned, one is that everything in life is compounded. I feel that people often forget this. In a world full of distractions and thousands of ideas, the ability to focus on one thing seems to have been lost. What have you learned from this, and why do you think all founders should consider this?
Delian:
I have been in Silicon Valley for nearly 12 years. Looking back, I see some friends jumping from one market hotspot to another without ever giving the compound growth curve time to work. They rise at the beginning of their careers, then feel frustrated with their progress, and turn to the next project. They fail to realize that those seemingly overnight successes are actually the result of people allowing that curve to work over a decade.
I think this also affects many other aspects of life, such as personal financial investments. Investing $25,000 in a company and watching it grow all the way to IPO. The same goes for my career; like what I did in aerospace, I attended aerospace conferences without knowing anyone and found the meetings not particularly fruitful, but I didn't feel overwhelmed. I was willing to focus on things that not many people truly cared about and continuously work to keep that curve moving upward. I think it's the same in personal relationships; many people tend to frequently change friends or try to find those who can truly help them in their careers.
I believe I have done well in cultivating very close friendships; these friends have been good friends for over a decade since I arrived in Silicon Valley, regardless of their professions, I have maintained these friendships. On a personal level, I have been with my wife for four and a half years. I believe that in some ways, the depth of this relationship only increases over time, bringing me joy and stability, and knowing I have someone who understands me so well is invaluable. At the last moment of deciding whether to launch Varda, I did feel a fear—my investment career was going well; why would I take such a big risk to do this, especially when investing is hard? My wife's feedback was very firm: this is your life's work; you must do this. So imagine if I hadn't maintained that relationship, if I hadn't had those late-night talks, but instead fell into panic and gave up on founding Varda, it simply wouldn't exist.
So I think people invest too little in the compound curve; the compound curve is not spontaneous; you need to keep compounding it by continuously investing small amounts of effort year after year.
