• 10 min read

Notes on Brian Singerman

Framer's Component Picker

Brian Singerman, one of my favorite Silicon Valley figures alongside Sean Parker, a former partner at Founders Fund, is among the few venture capitalists in Silicon Valley’s history capable of making bold bets while achieving massive returns. He has just announced that he is stepping back from investing at Founders Fund(as partner emeritus, Singerman can still bring in new deals but will take fewer pitches day to day).

About Founders Fund: Founders Fund is no stranger to controversy. Early on, it declared itself the VC firm for entrepreneurs who didn’t like other VCs. Known for being willing to write huge checks into unpopular startups. Founders Fund built a portfolio that’s in another orbit from that of most VC firms.

Brian was recruited by his good friend Sean in 2007 when they just started Founders Fund. Brain mentioned “…I met up with the Founders Fund guys. They hadn’t made the investment, but were considering this crazy investment in something called SpaceX, and I was like, “Oh I want to be part of stuff like this.” And so I came on board, specifically because SpaceX didn’t need a $50k check, SpaceX needed a real check.

And I wanted to be part of that. That to me was an example of a world-changing company. That is one of the most important companies on the planet. I came on board because I wanted to do stuff like that.”

Singerman has had more exits than any of his colleagues, Thiel included. And it’s Singerman who worked hard to nudge his colleagues into biotech in 2012, an industry they knew little about. His $300 million bet on Stemcentrx paid off when it was acquired by the pharma giant AbbVie in April 2016. The investment has single-handedly delivered a profit of $1.4 billion in 2017.

Famous bets led by Brain

About the SpaceX investment: Founders Fund put $20 million into SpaceX in 2008. “It wasn’t clear to anyone that this was going to work,” one of the partners says. “Every rocket had blown up.” One potential investor walked away. Another accidentally copied the partners on an email that said they’d lost their minds. SpaceX is currently valued at $350 billion, at least 8% of which belongs to Founders Fund.

Style

“Anytime I look at a company, regardless of stage, regardless of sector, regardless of anything else, I have to answer the following three questions.

  1. Is it a big enough market? Is the market actually big enough to support a very large company
  2. Doesn’t have some sort of existing moats (hard to copy)? Not like, “Oh, if they do this and this and this,” but just the company have some sort of existing moats and that can be anything. I’m open to that being all sorts of different things, but it has to have a real existing moat.
  3. Does it have the founder and management team to take it from that current existing moat all the way through the strategic huge market endpoint?

Having any dogmatic blanket rule I think is almost always a mistake.”

How to spot a company that’s starting a new hype cycle instead of chasing an old one:

  1. You wouldn’t describe the company as “the Uber for x” or “the Tinder for y.” A first-of-its-kind company can’t be categorized neatly in comparison to an existing company.
  2. The founder is deeply passionate (even to the point of obsession) and knowledgeable about the sector their company is in. A great example of this is Ryan Petersen, who steeped himself in the world of freight ahead of founding Flexport. “Whiteboard founders,” who toss ideas at the wall until something sticks just because they want to call themselves founders, usually build unimaginative, meme-chasing companies and likely won’t have the dedication to grind through the tough times.
  3. As Peter Thiel likes to say, the founder should have a “secret,” an understanding of a truth about the world that others have yet to recognize. This secret gives the founder a differentiated point of view from the very beginning and allows the company to tackle problems in a distinctive way.
  4. Not everyone would choose to invest. If every single VC is lining up at the company’s door to invest, the company likely isn’t doing anything new. Most VCs are only comfortable investing in companies operating in sectors they already have a thesis for. A company that CREATES a hype cycle requires investors to envision a new world outside of their existing theses.
  5. The company has potential for a monopoly outcome. At the time of its founding, the company won’t have any natural competitors, aside from legacy incumbents that aren’t equipped to compete. Competitors may spring up in the company’s wake as the hype cycle heats up, but the company’s first mover advantage gives it a head start that allows it to dominate the marketplace and escape commodification.

Venture is purely upside game:

Venture capital to me is purely a game of upside maximization. And while this may get me in trouble, I actually don’t. Downside minimization is completely unimportant to me.

Moats that can’t be cloned:

Does it have some sort of existing moats? Not like, “Oh, if they do this and this and this,” but just the company have some sort of existing moats and that can be anything. I’m open to that being all sorts of different things, but it has to have a real existing moat. Does it have the founder and management team to take it from that current existing moat all the way through the strategic huge market endpoint?

Sector agnostic

“Sean Parker is the best pro-active venture capitalist of all time. I am not a proactive venture capitalist. I am a reactive venture capitalist. I think I’m an excellent reactive venture capitalist. And I think in order to be truly, truly, truly sector agnostic, you have to be reactive.”

“I call myself a very reactive venture capitalist. Meaning that I’m open to any ideas and anything that comes in the door, and the reason this is relevant to your question is that I spend less time philosophizing on the macro state of things, because they’re not relevant to finding a good company, right? In order to be truly open to any company that walks in your door, it also means not having any preconceived notions about how the world should look, needs to look, does look or anything like that. So I spend less time focusing on macro questions and philosophical questions that I do about companies.”

Conviction = Invest a lot

“The key to the strategy once we have conviction we are willing to invest a lot. So with Stemcentrx, over the multiple rounds of this company, we invested something like $300 million. It’s not enough to think something is going to be one of the most important companies on the planet you have to back it up. So, to me, venture capital is about having conviction and putting a lot of money behind it. We back the truck up when we have conviction.”

We don’t ever think about co-investors

“We’ve made so many investments where we were the only ones in for a long time, like Palantir and Stemcentrx. People ask “Didn’t you want someone to come in and give validation?” What do I need validation from another VC for? No. If there’s another VC firm that really believes in the company, and they can be helpful, great. But I’m not looking for any validation from them.”

“Best investments are the ones that turn out to be good that other people didn’t think were going to be good. But if everybody thinks that something is amazing and it’s the greatest thing, then that price is going to get bit up like crazy. It’s going to be super competitive. Your returns are not going to come from that. Your returns are going to come almost entirely from the investments that you make where most people do not think it’s a good investment and it turns out to be really good, because that’s where your huge multiples are going to come from in venture.”

“Just because something is contrary and does not make it right, right? The key thing in investing is to be both contrarian and right. I mean, there’re often cases where the echo chamber is going to be right and there’s a lot of cases where the echo chamber is going to be wrong. The goal is not to just always go against the echo chamber. The idea is to just focus on where, “Wow! I just believe this thing is going to work even though it flies in the face of what other people believe,” and that is a hard skill, right? You have to be able to – First of all, you have to be willing to be unpopular, which not everybody is willing to do.”

“In fact, one of the questions that I often ask candidates is like, “Are you willing to do something that you may be – That may put you in an uncomfortable position with your friends because they don’t agree with you on something, and you’ve got to be willing to make those kinds of decisions.” That being said, the most important thing is to be right and venturing it. Whether it’s consensus or contrary, and the most important thing is to be right.”

Gamer

I don’t like board games, unless they’re quick. I don’t like board games with too much luck. So my favorite – If they’re quick, that’s fine. But the board games I find myself playing the most are the ones that have very minimal luck, or luck that can be mitigated to a large extent, or if they have a lot of luck, i.e. dice rolls, if they’re a five-minute game, that’s fine. But the worst games in my mind are the ones that take 10 hours and where dice is deciding those things, because 10 hours is not even necessarily enough for the dice to smooth out, the variance, yet it’s such a long game to have variance be dominant.

Anonymous Founder’s Feedback

They led our (largish) seed round. Had a slightly negative experience with one partner, but the person we worked with beat most firms we talked to in first principles thinking by quite a margin. They were all very bright and had a wide range of knowledge.

They were far less interested in “who else is in” and more interested in your analysis of your business from basic building blocks.

When we were doing due diligence on them, the main “complaint” we heard from people who had raised from them is that it’s hard to read their judgement. They may seem bearish on you then invest last minute or the opposite. Most people had great things to say though.