A look inside Founders Fund, as it closes on $5 billion across two new funds

Founders Fund has garnered a lot of money from investors; it has also returned quite a bit of capital.

A lot of the action on both fronts has happened very recently. Yesterday, the 17-year-old outfit took the wraps off more than $5 billion in fresh capital commitments across two new funds — a $1.9 billion early-stage and a $3.4 billion growth-stage vehicle — that brings its total assets under management to roughly $11 billion. That’s a lot of moolah. But as the San Francisco-based outfit, which more recently opened an office in Miami, told us earlier today, over the last two years alone, it has returned $10 billion worth of shares to investors after its portfolio companies have hit the public markets.

To learn more about how its new funds are likely to be invested, we talked earlier today with both Lauren Gross and Brian Singerman, longtime partners of the 35-person outfit. They also 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 Founders Fund plans to incubate more companies (it’s how Anduril and Palantir got their start). Our chat follows, edited lightly for length.

TC: About a third of your overall staff is made up investors. How many of them are now in Miami, versus San Francisco?

FF: We have five team members in Miami, including Keith Rabois [who opened the office], who is the [general partner] there. We also have Matias [Van Thienen] who was recently promoted to partner and Delian [Asparouhov], one of our principals, is there.

Who on the team is more focused on earlier-stage, and who is focused on growth-stage deals?

All of our team members are considered consider generalists. We expect people to be able to work across sectors and across stages. We have an entirely opportunistic approach. That’s what has served us best from a returns perspective. We encourage people to find their own competitive advantage and pursue either sectors or stages of particular interest, but it’s not mandated by the firm.

How are decisions made then? 

We have varying degrees of required votes as you scale up in check size.

I interviewed [former Founders Fund partner] Cyan Banister a few years ago and she mentioned that there’s a certain threshold above which Peter Thiel is always involved. Is that still the case?

Yes, all of our GPs weigh in when we’re writing a larger check.

You have a lot of capital at your disposal. Are you doing any public market investing?

We certainly have the ability to do some, but generally our public positions come from the private side.

Meaning you wouldn’t invest in a company whose shares are “on sale” if it wasn’t in your portfolio as a private company?

Idiosyncratically it could happen, but our comparative advantages and strengths are on the private side.

Are you structured as a registered investment advisor?

We aren’t registered. We’ve had the discussion for many years, but we have no current plans [to make this change].

Do you see the world thematically and, if so, which themes are most interesting to the team right now?

We’re non-thematic. It’s not as if we predicted social media and found Facebook [into which Thiel wrote one of the very first checks] or determined that there was something interesting in aerospace and found SpaceX [which Founders Fund has invested in numerous times over the years, dating back to 2008]. It’s more that listening to big, bold ideas, across sectors, has unequivocally driven our best returns.

How many startups do you tend to invest in with each fund?

Typically you expect a few dozen investments, with a handful where we double, triple, quadruple down, which generally means putting in $100 million, $200 million, $300 million at cost for several billion in exposure. That concentrated piece is what’s more unique to the portfolio and what’s driven the returns more than anything else.

Who is your biggest investor?

Founders Fund is the largest investor in both [new funds], the general partner is. That’s always been true for us and it’s definitely a differentiator within a market that tends to be less aligned from a capital perspective. Some team members might have [a bigger stake in the growth or early stage fund], but we think of it as one team across both sides.

What size checks does the firm write, smallest to largest?

The smallest and largest has been $1 million to $300 million. I’d never say we wouldn’t write a check larger than [$300 million] and we have idiosyncratically gone smaller than [$1 million].

What’s your ‘crypto’ strategy?

The two things the team really got right on crypto [include that] our team wrote its first investment into Bitcoin in 2014 and built a position over time and I’d say [of our cryptocurrency holdings today] two-thirds is in Bitcoin with the rest in crypto surrounding.

Do you own many tokens or equity in blockchain and other related startups?

We’ve done equities, we’ve done tokens.

And are there members of your team who are explicitly focused on these types of investments?

Like all things Founders Fund, whenever we’re [deciding on] a core position for the fund, the full partnership is involved, especially in conversations that involve Brian, or that involve Peter. Today, I’d say the partner who is most focused on [web3 type bets] is Napolean [Ta, who joined the firm in 2012 as a principal after working in the equity research division for Horizon Capital Group’s brokerage business in Vietnam]. But like all positions, it’s a team effort.

Stepping back a bit, any thoughts on the market softening for later-stage companies and what challenges and opportunities this presents?

We’re definitely seeing private market valuations slowly catch up to public market multiples, and that’s fine. With venture capital, you can invest in any macro cycle, and when prices come down — if we’re disciplined enough to wait for prices to come down, and we are — it just means we get those same companies for cheaper. And there are still plenty of amazing companies to invest in. Growth players that are sitting it out is better for us. We can just wait until we get a phenomenal company at a phenomenal price.

I’ve never seen valuations soar as fast as they have over the last six months to a year. Is the firm’s view that these valuations are rational?

I don’t think the people who came into late stage were irrational. There was some correcting upwards that needed to happen; now, there’s some correcting downwards that needs to happen.

Founders Fund has helped incubate some very well-known companies. Is that becoming a bigger part of your strategy?

We have to understand 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, multibillion-dollar success. [Founders Fund partner] Trae [Stephens] had a huge thesis on defense and government and how broken it was, and Anduril came out of that. Keith [Rabois] is working on OpenStore right now, which is still pretty early days. So we’re open to it, but we have to understand, what does this person [who will cofound this company] understand that others don’t? Why is this person particularly well-suited for this?

You’ve told me you’ve delivered $10 billion in returns to your investors over the last couple of years. In shares or cash?

We have generally defaulted to distribute shares in kind post lockup versus a lot of other firms that sort of hold on to continue to increase multiples. There’s nothing really wrong with that, but our advantage, again, is on the private side.

Where have you seen the biggest exits in recent years?

Drivers have included Palantir and Airbnb, [both of which delivered] several billion [dollars in value] each, then Wish, Oscar, Affirm, Asana and Postmates are all names where we’ve returned several hundred million [dollars] or more.