AvichalGarg

LubaAvichal, thank you so much for being here. It's good to see you. Thank you for taking the time. So I noticed that you have a really cool watch on your wrist. Maybe you can show. Are you into watches?Link

AvichalI am. It's sort of as a side effect. A friend of mine years ago was telling me about how watches have appreciated. And there are certain kinds of watches that have actually done really well relative to stocks. And I was like, oh, I wonder why. And I kind of went down that rabbit hole. And it turns out it's very similar to a lot of other markets, like gold or Bitcoin or fine art, where there are all these sort of underlying properties that drive the market. And once you sort of understand that they're all kind of the same, you know, it's like, can you assess that it's real? Is it fixed supply or some limited, it's hard to make more of? It's portable. It's easy to transfer. It's a global liquid market. It doesn't corrode. It's durable. Like, all these sort of properties. You realize that all these sort of markets are driven by the same underlying principles. And so I was like, oh, that's very interesting.Link

And then the other sort of dimension, which is a little different than, like, you know, investing in companies, is you can have some form of self-expression. So what I like about this watch is it has what's called a GMT complication, and that was created because humans could fly. And so we could get on a plane in Europe and go to the United States or vice versa, and pilots had to start tracking two different time zones. And as a result, people sort of needed this. We had to create a tool to solve the problem. So to me, I like that aspect of the fact that humans had to create, you know, this is a tool, that humans through technology sort of solve problems.Link

And so a lot of the watches I like, it's not just the store-of-value piece, but there's sort of something symbolic about it. Like, one of my other favorite ones is when the astronauts went to the moon. NASA commissioned, hey, we need a watch that would work in space. And so Omega created this watch.Link

LubaWhich one was it?Link

AvichalIt was the Speedmaster. And it has a certain set of properties, like the way the glass, you know, it's not sapphire. Sapphire can shatter and it can get into the parts on the space shuttle or on the module. And so they picked a different material for that. And so, you know, you look at that thing, if you sort of understand the history of it, and you're like, oh, wow, this is not just a watch, but it represents, like, humans going to space. And we needed to create a watch that could hold time and be super accurate, and you could do things with it while the astronauts were, like, you know, going to the moon.Link

So I think stories like that are super cool, beyond the store-of-value piece of it, that you don't get in a lot of other things. I think art's like that too, where, yes, you can have the investment aspect of it, but the art represents something. So there's a little bit of self-expression in there too, I think.Link

LubaThat's really cool. So does this mean that now that we have so many technological advancements when it comes to time tracking, watches are more of this old-school industry where it's not going to be as representative of technological advancements? Or do you think there are going to be digital analogs of watches that will continue?Link

AvichalWell, it's really interesting, actually. I hadn't thought of this until you asked. And this is not on the original sort of set of things to talk about. It's really interesting because there's a parallel here to all the AI stuff that's happening.Link

So what happened in the 70s in the watch market was, these things used to be like tool watches, and then they started becoming more and more luxury. So they're expensive. And there used to be these competitions where, like, how accurate is your watch? And certain brands, you know, the Swiss watchmaking industry has been doing this for decades, centuries. And they used to win. And the Japanese invented the quartz movement. And so the quartz movement came in and was more accurate than the mechanical watches. And so it basically killed that industry. So basically they stopped doing the competitions because the quartz movement was better and more accurate and way cheaper. And so from, like, the 70s to, like, the 90s, that industry basically imploded, because, well, who's going to pay all this money for what is a tool? And now you have, like, a better electronic tool. So why would you pay 100 times the money for something you can buy for ten bucks?Link

And so the industry actually, like, recast itself, and it became sort of a luxury good. It became a symbol of what can humans produce that machines can't produce. Because it turns out a lot of these timepieces, like, robots can't mass-manufacture the degree of precision that you need. Like, you need a human hand, at least for now. You need a human hand to make these things. And the fact that it takes, you know, X hundred hours or whatever for a master craftsman who's trained for 25 years to do these things, it's sort of like proof of work in crypto. So what you're really wearing on your wrist is, like, proof that some human who is exceptional at their craft put 100 hours of their effort into the thing. And that's why the thing has value. And so what ended up happening, especially in the last, I would say, 15 years, is that the industry is bigger than it ever was. It actually, like, rebounded and is now enormous. It's huge.Link

And so I think there's actually, like, a funny, interesting lesson in there on the AI stuff, which is, like, in the short term, you think of these things as utilitarian. And so a lot of the work that humans do that is very utilitarian, like, these things will eat up, and you'll say, like, why am I going to pay a human to do it if the AI can do this faster and cheaper? But I think what you might get is, like, an echo boom, which is, well, what are the things that humans can uniquely do that the AI can't do? And those things that provably a human could do, or only a human could do, actually end up being more valuable. And so you might get this sort of secondary effect where things that, you know, a human had to put 100 hours into or 1,000 hours into to create that thing are even more valuable on the other side of sort of the commodification of the utility.Link

So it's kind of an interesting parallel. So if you sort of understand that, you might think about, like, from a career perspective, what are the things that uniquely humans can do? Those actually are probably more valuable on the other side of AI, rather than, like, everything just going to zero.Link

LubaTwo thoughts. One, I think that already happens with the fashion industry too. Obviously, things that are produced by human craftsmanship, like, look at the luxury bags or luxury clothes, they cost a lot more than things that are produced by machines. Another parallel is music. There is a lot of conversation around AI music. You know, what's going to be the purpose of human musicians if you can just go and generate whatever's going to tickle your emotions or your brain? But actually, musicians who are going to be amazing live will probably be a lot more valuable and better. And so that's just a thought. And a question is, so what do you think are going to be those industries, for someone listening and thinking where to go?Link

AvichalYeah. I think there's one way to ask that question is, like, what are the moats on the other side of AI being smarter than us? I think for some time, like, atoms, physical-world stuff will be a moat, because AI is mostly digital. Maybe robots sort of overtake us in ten years or something, but there are constraints there. So I think anything around, like, physics and biology. So, like, you know, fundamental energy, or how do these biological systems work, where at least today you can't simulate them. Maybe in ten years that changes. And so you just have to run the experiments. And so I think those things are real defensible things and probably become more valuable.Link

So for example, if you look at health, you know, where do people spend money? Like, once they have enough money, once they have enough surplus, a lot of them spend it towards health, because they're like, well, what's the one thing I can't buy, or, you know, that I'm willing to spend a lot of money on, is being healthier and living longer so I can, you know, be with my family or do the work that I want to do. So those probably do really well.Link

I think anything that has an artificial regulatory moat or constraint becomes a real thing. So anything that you have to get licensing for, or the government sort of controls the supply and demand of for some strategic reason, probably is still very defensible.Link

And then, sort of in keeping with this, like, what is fundamentally human, I think there are going to be lots of things that are still mediated through humans, where it's a human on the other side making a decision. Those things actually probably become more valuable. So for example, I don't think the government anytime soon is going to outsource procurement decisions around defense or war to an AI. So what that means is there's some person at the Department of War, formerly Department of Defense. And that person has to make a lot of decisions about who gets contracts, or which weapons we purchase, or which defense technologies or drones or whatever. And that person probably came up through the military in some form. So maybe they went to West Point or they went to the Naval Academy, and they're 25 or 30 years into their career. So if you're somebody who has a 25-year relationship with that person, you went to the same school as them, or you worked with them, and you know, you were deployed to Iraq together or something, there's no substitute for that, right? And so strategically, you're actually in a really good position.Link

And so if you look at, like, defense contractors, for example, not investment advice, obviously, but, you know, take, like, some small business that works with the government. Those things don't trade at huge multiples to revenue, because they're very sort of people-heavy businesses. But you might argue that those things become kind of like the luxury watch industry. Because the real asset that they have is these human relationships, and a lot of the work that they need to do that the humans had to do, now the AI can do. And so what you actually have is, like, a critical asset in the relationship. And actually AI is going to make your business way, way more efficient. And so actually the margins of a lot of these businesses go up. And so you might argue that there's this entire category of businesses that on the other side of AI is, like, way more valuable. And you can sort of poke through and, I think, identify a lot of those in a bunch of industries. But those are three examples, I think.Link

LubaYeah, it makes sense. I think human relationships, anything that has to do with it, unless it's replaceable by AI, is going to be really valuable. And this reminds me of this tweet that I saw the other week from DHH on hard work, because there's, you know, a lot of narrative in the Valley about grinding and working really hard, which has always been the case. And, like, living in your office and sleeping very little. And he was like, well, success is actually three things. It's hard work, sure. It's luck. And then your ability to work with people, and human relationships. So I just generally agree with that advice.Link

AvichalWell, you know, the other thing I was thinking, sort of selfishly, which is why we're in the business that we're in, is I think in the earliest stages of starting a company, from a founder perspective, so much of it is who you surround yourself with. And so that sort of, like, seed or Series A decision, where you're first taking money to start building the company, even before you have product-market fit, even before you know if it's going to work, that's a very human decision. And so I suspect, actually, our business in venture capital, where we're working with founders so early, actually becomesLink

LubaMore valuable.Link

AvichalMore valuable, because there's still a founder who's going to make those decisions. Like, I think at some point we'll have AI-started companies, and, you know, they'll raise money on the internet through crowdsourcing or whatever. But even in that world, we'll have a lot of human founders. And so I think our business will sort of similarly be defensible for that reason, because that human relationship, I think, is really important.Link

LubaSo I definitely want to spend time talking about your decision of starting Electric and VC, et cetera, but I want to dive more into where you come from, your background. So first of all, you have a really amazing career. You know, from starting your own company to running important projects at Google and Facebook to then running Electric and being a partner at YC as well. In my research, I found this article where you were 24 years old and it was you and your co-founder being interviewed. And in there you said that your guiding principle in life is "opportunity is a luxury." So I'm curious where it comes from. And is that still your guiding principle?Link

AvichalThere are many guiding principles. That's definitely one of them, I think. Yeah. We're just so fortunate to be here in Silicon Valley. You know, we're just surrounded by amazing people and amazing opportunities, and you can get capital. And most of the world doesn't work that way. And so, yeah, I think, you know, people talk about privilege. And I think too often people conflate, like, money and privilege. And I think money obviously is a form of privilege, but I think an even greater privilege, which money can buy you, is these opportunities and this sort of access, which you don't necessarily need money to have access to if you're in this place.Link

And it's because if you have those opportunities, then what you can really do, which I think is really the best part about our job, is taking the uniqueness of an individual human and turning it into a product, and then getting that out to everybody. Because, you know, all the best products that people build are really sort of like an extension of who they are, and their sort of values or beliefs or what they want to say into the world.Link

It's really like, kind of like one of the things I've come to believe over the last, I would say, 5 to 10 years in particular, is, I used to, I think most people still do, think of startups through the business lens, through, like, a utilitarian, solve-a-problem kind of lens. And I think that's certainly an aspect of it. But the thing I've really come to appreciate is, I think the right way to think about these entities is actually more as an artistic endeavor. And the person who's starting these things is much more like a painter or a musician, more of an artist. And the reason is because the ones that are really, really successful and have durability, the person is really trying to express a worldview. They're trying to say something into the world, and it resonates.Link

So I'll give you an example. Like, if you look at Ivan from Notion, he's just got a really opinionated perspective about the way software should be. And he spent his entire career building content creation tools. So he started at Apple. He worked at a Sequoia-backed startup called Inkling, and he was always just building content creation tools. And that's because he comes from this mindset of, if you give humans a bunch of tools, they'll create really great things. And he's very opinionated about the way that should be, but I think that's why Notion is successful. He's very opinionated about what it means to create good software that allows other people to create great things, and I think that's why the company is so successful, and that's why I think it will continue to be successful, because he has sort of a philosophical perspective on what he's trying to do. And I think all the great founders are like that.Link

And then what that does for us is it's sort of recast my job. I think of my job much closer to, like, Rick Rubin and less close to, like, Warren Buffett. Because really what we're trying to do is we're trying to find these people who have something interesting to say in the world. It just happens to be that the medium that they're expressing themselves through is code. And that is an artistic endeavor, in my opinion.Link

And so, you know, I think if you understand all of these things, you start to understand, kind of back to this idea of, like, the human relationship piece of it. Like, actually, I think the people who understand founders as artists, like, I think Marc Andreessen has done a great job of this. I mean, people may not realize this, but I think you can see the impression that Mike Ovitz and CAA had on Andreessen Horowitz. Like, he sort of realized the same thing and built Andreessen in that way. And I think that's why they're successful. At their core, they sort of understand that founders are artists, and, like, you know, just the way CAA takes care of everything else around the talent, Andreessen sort of takes care of everything around you. And I think that's exactly the right model.Link

You know, all of these things, to your original point, it all comes back to the sort of opportunity as a luxury. Like, the opportunity to have all these experiences and, like, learn all these things is, like, the real luxury, that, you know, even money would not buy you these insights. It's like those opportunities are really unlocked.Link

LubaSo many bookmarks. Do you think that founders who are artists, or not necessarily founders, people who are expressing a strong point of view in the world, have to oftentimes go against what the feedback from the world is? And the reason why I'm asking that is because Rick Rubin famously says that you've got to really listen to your own intuition and kind of block out everything that your audience seemingly wants, because you've got to show them what they might actually want, and stay committed to your point of view. What do you think about that?Link

AvichalYeah, I generally agree. Another way to put it is you have to do both, right? You have to listen to the market. You have to understand your users. You have to have empathy for those people in solving their problems. All of those things are true. But I think, doing a startup that's actually going to be a durable thing and an interesting and new thing in the world, how do you cut through all that noise, right? So there's just so many companies getting created. There's so many people in the world that could create companies. How do you cut through the noise?Link

I think the way you cut through the noise is authenticity. And you have to say something into the world where people are like, oh, yeah, that person's actually just being themselves. So, like, right now Hunter Biden is just going viral on Twitter, right? And it's just because he's being himself, right? And it's great.Link

LubaYeah.Link

AvichalIt's amazing, right? He's phenomenal. He's so good at Twitter. And this is why Donald Trump is president, right? He just is who he is. And he's authentic.Link

And I think that humans, like, we have this capacity to understand authenticity. And the reason we have that is, if you go back to, you know, like, I think a lot of things you can understand from the primal human brain, if you just sort of think about how society worked. So humans, when we were in small tribes, we had to be really, really good at understanding what's real and what's not real from an information flow perspective. Is this person signaling something to me, or are they telling me something that I should be listening to? If I meet somebody from another tribe, can I trust them? There's all these signals. And so our brains are really good at understanding when somebody is lying to us. We can kind of feel it. And that authenticity, I think, we kind of have a sixth sense for it. And it sort of, like, hits a part of your primal brain where it lets you relax and say, like, okay, this person is actually what they say, they're not a threat in some sense. Like, I know what I'm getting.Link

And if you think about a market, a market is just a collection of humans making decisions. And so actually markets are really good at sussing out authenticity. And so if you're really authentic and you say things into the world that you authentically believe, somehow the market can pick up on that, and a collection of humans will see it and say, like, oh, yeah, this person's actually telling me the truth. Maybe I should listen. And so you really have a shot. Now, your product has to be good. You have to solve a problem. You have to make money. Like, all those things have to be true. But you don't get a shot unless you're authentic.Link

And so that authenticity, then the question is, well, like, how do you become authentic? And I think that is actually the intrinsic exercise, right? That's, like, the Rick Rubin exercise. It's like, well, what are you trying to say? What is it that you can say that nobody else can say? Can you say a thing that when people hear it, they're like, oh, yeah, that had to be that person, right? And if you get that right, then people might actually give you a shot.Link

So there's all this extrinsic stuff, like pick a big market, you know, like, what's your CAC, what's your GTM? There's all these things. Those are extrinsic. But I think it's just as much an intrinsic exercise, right? It's like, it had to be Zuck that created Facebook. It had to be Larry that created Google. It had to be Ivan that created Notion. And it had to be Dylan that created Figma. Like, when you start looking at these companies, you're like, oh yeah, this is just an extension of this person.Link

LubaIt's like founder-market fit.Link

AvichalIt's founder-market fit, founder-company fit, founder-product fit, founder-culture fit. You know, like Google's culture is so good at allowing people to have space to go solve hard problems. And so they operate like a research lab, because Larry came out of these PhD programs. And so what that means is they're terrible at firing people. They just don't know how to do it. But it's because you don't fire people from a PhD program. Like, maybe that thing that you're working on off in the corner actually ends up being a giant breakthrough. So I'll leave you alone for three years.Link

But that means that they are really not that strong at solving commodity technology, network-effect business problems, like payments or social networks. They really struggle with those kinds of businesses. Because, you know, the Google approach of solving, let's say, social networking or messaging was like, hey, let me build Circles, let me build this, like, better way to do social networking, or with something like Google Me, or, you know, the 18 communication products they've had. It's like, hey, let me do, like, real-time facial detection in the browser to put a hat on your head in the browser, and you're like, wow, that's amazing technology, but I just want to send an emoji, right? And so you look at, oh, and they built the operating system, Android, but they didn't get WhatsApp on top of it. They just missed that opportunity altogether. And it's because it's a commodity technology, right?Link

So that culture is an embodiment of the founder and their beliefs. And then it leads the company to be successful in certain places. And so if you understand all of that, then you can sort of say, like, yeah, there are going to be certain things that my company is really good at, or that my startup is really good at, that we should pursue. And there are actually sets of things that we're not gonna be good at that we shouldn't pursue. But all of that is actually intrinsic, right? You really have to understand yourself and what you're good at and what your company is and all of these things. Which, too often, I think founders are so focused on the extrinsic that they don't spend time thinking about the intrinsic. Like, well, why are you the right person to solve this problem, and why are you the right person to pursue this opportunity?Link

LubaYeah. Yesterday I had a conversation with Qasar from Applied Intuition.Link

AvichalYeah, he's amazing.Link

LubaAnd he was saying that historically, Peter and him have been building Applied Intuition in a way that can, you know, run without them, quote unquote. But at the end of the day, the company absorbs founders' quirks, the modes of operation. And the reality is that you can't really run a company without the founders being who they are, because everything is an extension of them.Link

AvichalYeah. That's right. I think there's a lot of truth to that.Link

LubaI'm curious, what point of view have you been trying to express throughout your life and career?Link

AvichalIt's an interesting question. I think the thing I realized, the through line in a lot of these things, I was really fortunate that the commencement address I had was the famous Steve Jobs commencement.Link

LubaOkay, cool. Nice. Was in the audience for that. That is very awesome.Link

AvichalAnd he had this line about how you can always sort of connect the dots looking back. And so when we were starting Electric, sort of the through line that I realized was that the thing that I'm most drawn to is systems and tools and technologies that allow people to take the things that they're uniquely gifted at and actually succeed, and accelerate all of those things.Link

And the fundamental root philosophy of that is, I think that we make progress, like, at the species level, we make progress because you have relatively small numbers of outliers that find new ways to push things forward. You can't really know who those people are at scale. It's just, we're lucky that we have a lot. And so that might be something like, you know, Einstein in, you know, physics and science, or it might be, you know, on the company level, like an Elon, or, you know, at a country level, like a Lee Kuan Yew. Like, these sort of individuals can emerge and really catalyze a lot of change in a good and positive way.Link

And that's actually, if you think about it, a pretty philosophically opinionated view, that we should identify those people and we should give them disproportionate resources, because that's how you effect change and make things better for everybody. For example, interestingly, arguably the entire country of Singapore may disagree with that premise. Look at how their economy is set up, if you look at how their education systems are set up. The Nordic countries would disagree with that. But I think that's actually what things like capitalism or startups or gifted education or arts schools do. What they do is they find those people and then they give them disproportionate resources.Link

And I have to be clear, I don't just mean this in a, like, utilitarian scientific sense. Like, this is how societies make progress. Like, you have to find people who make us think about what society should be, or what culture should be, or how we should treat each other, all of these things, fundamentally differently. And so that's why, for example, I think dedicated art schools are really important. But that's a pretty opinionated view, to say, like, actually, we should just be giving, like, 10 to 100x more resources to the outliers. And like I said, I think entire countries would disagree with that.Link

So once I realized that, I realized that, like, the through line in, like, the education company that I'd done, or, like, the investing that I was doing, or, like, the philanthropic work that I was doing, it was all sort of that. I was like, oh, what it's all about for me is finding those people and then giving them disproportionate resources, because you have so much leverage. If you had, like, you know, again, setting aside the politics of it, if you had 100 Elons, you'd probably get to space way faster. And if you think humans should be spacefaring, then that's a good thing. And you could pick your favorite person, right? There should just be 100 more of them, 100x that number. And I think today we probably haven't identified more than maybe 10% of those people.Link

And just by the raw numbers of it, right? It's like, there's 7 billion people. How many of those people even have access to the basics? But how many of those people, just by the numbers, I mean, the United States is like 400 million people, how many of those people live in parts of the world where they are potentially, like, genetic outliers, but we have no system to identify those people and get them those resources? And so that, to me, seems like a civilization-level thing that you should try to crack. Like, if you could just find those people and then give them resources, then everything else would sort of take care of itself.Link

And I think historically, the institutions in society that did that the best were the great universities in the world. So, like, Stanford or Harvard or Oxford. And the setup was, we're going to create a system that has a great brand. And so people will find us, and we'll give those people access to ground truth. We'll get them connected to professors or graduate students or the cutting-edge research, or the best ways to think about these problems. We'll give them access to a network of peers who can accelerate everything they do, and alumni. Often there's some sort of scholarship involved. And so, you know, a little bit of money, a fellowship of some sort, so you can afford to come here. And we'll sprinkle in a little bit of, like, hey, you deserve to be here. Like, you're great. Like, we're actually great at picking people who do amazing things, and you deserve to be here. And that magic formula is extremely, extremely successful. And those universities have served, I think, a really good purpose in society, setting aside kind of how they operate today, because I think some of those places have lost sight of that core mission.Link

What's also really interesting about that as, like, a societal construct is it's really, really defensible. It's a very durable thing. So, for example, Oxford is actually older than the Magna Carta. It's just, like, crazy to think about that. This thing has existed for a thousand years.Link

LubaWow.Link

AvichalRight. Like, Harvard is, you know, as you know, 400 years old. These are remarkably durable institutions. Arguably, like, right up there in terms of durable entities with, like, the church, right? Like, religion is perhaps the only thing more durable than these institutions that serve this purpose in society of finding the outliers and empowering them. And so I think even kind of from a market perspective, that's telling you something. That's telling you that fulfilling that purpose in society is something that is actually really important. And if you get it right, you can actually build something that actually lasts.Link

And so when I think about our business, that's actually basically what we do, right? We have the same basic formula as Stanford or Harvard or MIT, which is we're trying to build a brand so the best people in the world will find us. We give them access to ground truth, because we happen to know a bunch of what's happening in certain domains, and a bunch of those things are counterintuitive. We give them access to peers that can accelerate everything they do, because who you know matters as much as what you know. In the grand scheme of things, we're seed and Series A investors. We give people, you know, $2, $5 million. Like, in the grand scheme of things, not that much money, especially these days. Like, you know, that won't even buy you a GPU rack, right? And we sprinkle on this little, like, hey, we've worked with great founders. We've been fortunate to work in many of these places and invest in these companies at the earliest stages. And, you know, Mark Zuckerberg or Elon Musk, you know, today did not look that way when they were 22 or 25. Like, we know what that looks like. And you're in that same category. Like, you're capable of that. Sometimes that's what you need.Link

LubaWhat does that look like?Link

AvichalI think it's a little bit of an X factor. I wish I had a better articulation for it, other than, like, when you meet somebody, you kind of know. You're just like, I think this person has that, like, raw ability to do that. You need to be smart enough, obviously. You need to sort of have a clarity of thought, clarity of purpose. But there's something about the ability for these people to catalyze things around them and just get them done, that you're like, wow, that's remarkable that you just managed to do that.Link

LubaDid you get better at spotting that talent with time and with your own experience, or do you think you always had the ability to discern?Link

AvichalYeah, a little bit of both, which is why I think we ended up in this business. It's kind of like, actually, I mean, I've certainly gotten better at it, and it's just more data points into the machine learning system in the brain, right? You just get better. But, you know, I think for whatever reason, I happen to be pretty well wired at identifying those people. I have theories on why, but, you know, like, I think I started angel investing in 2012.Link

LubaAccording to your LinkedIn.Link

AvichalYeah. Well, I was investing in a couple of friends' companies. But I would say seriously, maybe, like, 2014-ish, I started, like, actually pursuing it. And I'd have to go back and do the numbers, I haven't looked in a long time, but I think of, like, the first 30 or so companies I invested in, something like ten ended up being worth more than $1 billion, and, like, you know, several of them ended up being worth more than 10 billion. And so I looked at that sort of return profile and had this sort of realization. I was like, wow, maybe I'm actually way better at finding entrepreneurs than I am actually at being an entrepreneur. And so maybe I should just do that.Link

And I had a bunch of people who were looking at this when I was doing this back in, like, '16, '17, who were like, hey, your track record here is really good. Like, you know, this is pretty remarkable. And so sort of a little light bulb went off. I was like, oh, I think I just have this little ability to spot these people and sense it. I don't know why, but I can. And so maybe that should actually be my startup. Maybe that should actually be my company, finding those people and figuring out how to get them the resources that they need. But I've certainly gotten better at it. But I think I was just sort of blessed in some way to be able to spot those people.Link

LubaWhen did you realize that spotting outliers was the point of view that you wanted to express in the world?Link

AvichalI think it's probably about 2017, 2018.Link

LubaOkay, so it wasn't reflecting back on your portfolio and how people are doing.Link

AvichalYeah. It was a little bit on the other side of that. I mean, some of those things started to work early. And so it was like, oh, these things are working. And so Curtis, my co-founder at Electric, he and I, you know, I left Facebook at the end of 2016. He left in 2017. And so we'd just hang out in 2017, when I was a visiting partner at Y Combinator. And Curtis and I would hang out a bunch, just have long lunches and talks and conversations, and it's sort of through that. That's like an intrinsic exercise, right? It's a little bit of, like, co-founder therapy. You know, so, like, talk through stuff in life.Link

LubaAnd what was Curtis doing at the time?Link

AvichalSo Curtis was my co-founder at the company that was sold to Facebook, and he was a very senior engineer at Facebook and had built a lot of infrastructure and tooling and some products there. But at that point in 2017, we were both free. And so we were trying to think about what our next company would be. And so we were sort of angel investing and poking around with ideas and trying to figure out where the world was going to go, what we wanted to do. So a lot of it was, we would literally have, you know, one-, two-, three-hour lunches and just, like, sit and talk and try to figure out what we wanted to do. So a lot of those insights sort of came out of conversations. It's kind of like therapy. Just talking, you sort of say something and you're like, oh, okay, that makes sense, right? Sort of like talking.Link

LubaYeah. Do you process the world more through talking?Link

AvichalI think I do, yeah. It helps to structure my thoughts. Talking and writing, I think, really help me. There's, like, an intuition in here. This is my process. I know everybody's different. Like, you can look at how, there's some great videos you can find on YouTube about, like, how different artists write lyrics, and some people will, like, scribble it. And I'm likeLink

LubaYeah, yeah. Eminem writes everything.Link

AvichalYeah. And Jay-Z doesn't, like, write anything down. He just sort of, like, thinks about it, or, like, Lil Wayne. But, like, you know, it's just sort of in there, and it comes out, and he can forget that he even said it, right? There's interviews of him getting, like, stuff he's written down, and he's like, oh my God, this is amazing, who said this? And it's like, you, dude.Link

So everybody's different. At least for me, the process is, like, I have an intuition. There's something that's in there. I can kind of feel it and I can kind of believe it. And then I talk it through with somebody, or I write it down, and that helps me crystallize the right way to express it. And so that's just sort of, like, what I think the process is as well. It's a combination of talking and writing.Link

LubaHow do you pick the person that you talk to about different things?Link

AvichalThat's a really interesting question. I don't think I'm that deliberate about it, but I think what's happened over time, you know, a lot of the people that we've worked with at Electric today are people that we've worked with for, you know, ten-plus years. In the case of Curtis, Curtis and I went to college together. So I've known him 20-plus years. He was in my freshman dorm. So, you know, I think it's sort of almost like survival of the fittest.Link

LubaYeah.Link

AvichalIt's like, whoever manages to be my friend for 20 years is a good person to just talk through stuff with. So a lot of it is quite organic. There's, like, a small number of people where if I just sort of talk through it with them, it makes sense. I'm very fortunate to have some very, very smart people who are themselves very thoughtful and accomplished. And so they have really good perspective, and they can push back in the right ways, which then helps sharpen the idea.Link

LubaI want to come back to why and how you decided to start Electric, but I want to first ask about, again, your 24-year-old self wanted to meet Elie Wiesel. That's the person that you wanted to meet the most?Link

AvichalYeah.Link

LubaWhy him?Link

AvichalWell, it goes back to this, like we were talking about this too, is, like, what books are really impactful. And I think he has such a phenomenal story, and is such a phenomenal storyteller. And I think that's why, like, the Bible is a book that everybody should read in the West. And I think that's why the Gita is a book that everyone should read if you want to interface with India. Because I think with humans, there's, like, the abstract things that we should believe, and then there's the stories we tell ourselves, and the stories are much easier to remember. So our brains are just wired that way, probably because even before we had writing, we had oral tradition, right? So our brains are wired to absorb and remember stories and remember the lessons from them. That's why you tell little kids stories, and that's how they learn.Link

And so, you know, I think people who have had unique life experiences and are able to convey those in a story that people will remember, that's a superpower. I think that's a really, really important thing. And I think, again, at the society level, I think that's how we make progress. Like, we can tell those stories and remember those stories, and then we can actually transmit knowledge.Link

I think it's also really important because if you understand the structure of these stories, then I think you better understand how to communicate with people, where you can understand the perspective that they're coming from. And so you can understand their frame of reference. Like, in the West, I think if you have deeply internalized the stories in the Bible, you can have a conversation with somebody and understand why they believe what they believe and the structure of the framework of that, or how to communicate with them in a way that they'll understand. And so I think people who are uniquely gifted at telling stories, I think that's sort of a superpower that I aspire to have, that I wish I had.Link

LubaDo you feel like you've gotten better at telling stories?Link

AvichalYeah. I mean, it's just a part of the job. You know, I think it's not just, you know, like, as a startup founder, you have to tell the story of how you get funded. Then you have to tell the story to your first few people that you bring on your team, of why this is the place they should be. And then as the company gets bigger, you have to tell different stories, and you have to tell the story of why you got started. You have to tell the story at different levels. You've got to tell the story to the people who are just coming out of school, and this is their first job. And you have to tell the story to Wall Street. You have to tell the story to your board members. And so you're sort of chief storyteller, right, in addition to being CEO. So the executive part of it is, like, making the decisions, but so much of the job is telling the stories.Link

And so I think for anybody who was successful, you know, at a certain point it's like, you can be smart, you can have the technical skills, you can have whatever insight, but more likely, over time, the cap is not those things. The cap is actually the ability to tell stories.Link

LubaHow do you get better at telling stories?Link

AvichalYeah, well, I think you're basically limited by the stories that you read. Like, I think you can only be as good as the inputs, right? If you think of these as, like, machine learning systems. And so the more good inputs that you can get, then your brain can sort of transform those. And some people's brains are better at transforming those things into, you know, unique output. And so there's some natural abilities there, and then there's some abilities that you can hone. But I think it starts with, like, the more inputs that you can get, the better.Link

LubaWhat are your favorite recent stories that you have consumed?Link

AvichalOh, you know, a lot of it for me is, it's actually, I spend so much of my time in this one world now that it's usually personal stories, more so than, like, sort of grandiose stories. And so a lot of it for me is in the one-on-one conversations that we have with founders. It's, like, well, why are you doing this thing? Like, where do you come from, or why? And so those stories to me, I think, are actually the most interesting now.Link

And kind of, like, in some sense, in an AI context, it's like the unique data is the interesting data. And so, like, anybody can go read a published book.Link

LubaMhm.Link

AvichalNot everybody can go talk to a successful but relatively unknown founder and understand their story and get them to tell that story. So to me, those, like, sort of unpublished, word-of-mouth, you sit at the dinner table with somebody and have a conversation with them, those are actually the really interesting stories.Link

LubaThat's the real alpha.Link

AvichalThat's the real place. Yeah.Link

LubaOkay. Well, let's go back to your background and career. So when you went from starting your own company to Google to Facebook to YC, before you realized that you actually wanted to find outliers and explicitly bet on them, what were you looking for in all of these transitions?Link

AvichalIt was different at different stages. You know, I think early in my career, a lot of it was just about learning and being surrounded by the right people. And so going to Google at that time, it was such a special place to be. It's probably what Anthropic and OpenAI, you know, a couple of those places, are right now. It was just like the density of talent was just so remarkable at the time. And this was, like, the mid-2000s. And so, you know, there was no Android, Google had not acquired YouTube yet. Like, it was a crazy time to be there, to go through all of that. And so a lot of it was just being around the smartest people and learning as much as I could.Link

And then I think, you know, by the first startup, it was really to solve a problem we cared about. We were building essentially machine learning plus education and trying to personalize content delivery in that domain. In the second startup, we sort of realized we made just a bunch of first-time founder mistakes. We picked a bad market and we didn't execute well. And so we wanted to do something where we were much more strategic about it.Link

LubaAnd you had a different co-founder, right?Link

AvichalYeah. And Curtis had had a previous startup too, which was also sort of, like, a small exit. And so we both sort of realized all the same sort of insights. And so for the second one, the way we thought about it was, the realization was that if you really do want to effect change and do good things in the world, the business has to work and the business has to scale. And so you need to have certain properties, like being in the right market. And so we were very deliberate about how we did it.Link

And then we ended up in a situation where the product was kind of working. You know, at the time, this was early Android, like 2011. You know, we had hundreds of thousands of downloads, and probably, I'd have to go back and look, probably approaching a million. Which was real at the time, like, in 2011. But the economics and business didn't make sense for what we were doing. And so we had to basically get acquired, and that was the right, rational thing to do. And again, we sort of optimized for just being around the right people, and Facebook, you know, in early 2012, before the IPO, the talent density just reminded us of Google in the early days. We were like, oh, this is going to be an important company in the world, which obviously it turned out to be. And so we were sort of motivated by that again.Link

And so, you know, after that, I think things changed, and they changed a little bit because we were so fortunate to be there at a time where the stock did really, really well. And the acquisition set us up. And so we ended up being financially successful enough that we could then sort of enter this "what do I really want to do" phase, in addition to being surrounded by smart people and how we can do anything. And so that forced a lot of that introspection.Link

This is actually a perfect example of what we were talking about before with storytelling, right? It's like that arc that we had, I think, is an arc that a lot of people go through, which is, like, early on, you're just trying to learn. But a lot of what your sort of orientation is, as a founder, is scarcity mindset, which is you're hungry for every single opportunity. It's not just that opportunity is a luxury, but it's like you're worried that any given opportunityLink

LubaWill go away.Link

AvichalYeah. And so you're sort of, like, frenetic. You're trying to, like, pursue every single opportunity that you can. And it's a luxury to end up in a situation where you don't have to do that, or you can be really deliberate about the opportunities that you pursue. But I think that has to come with some degree of success that you've already achieved. Because that allows you to be patient, and it allows you to think about what you really want, because even the opportunities that you pursue have a cost. There's an opportunity cost in your time and your attention and your focus. And so you can be much more deliberate about these things.Link

And that's kind of, I think, what that acquisition gave us. It gave us the opportunity and the luxury to be deliberate about what we want to do next. So we take our time and really pick the right thing and be deliberate about how to go about achieving that. But, you know, it was certainly downstream of having enough, you know, financial success, which is, in the grand scheme of things, a relatively low bar. Like, you don't need to be a billionaire. But I think having enough in the bank that you'reLink

LubaLike, having savings.Link

AvichalYou're like, okay, I'm not going to starve. I can afford health care, you know. Like, there's some base level there that a lot of founders don't have. You're just sort of, like, always in that mode of, like, we're running out of money. We're going to, you know, this thing's going to burn to the ground. How do we succeed?Link

But back to this, like, sort of story idea. I think it's like, you can tell people that. You can say, like, hey, look, you want to be really deliberate about the things you pick. You don't want to run after every opportunity. You don't want to just, like, fast-track your way to $1 million, because you might leave, like, a generational opportunity, like your life's work, on the table. But that's easy to say. It's hard to, like, live through it, for a founder.Link

And so, like, I talk about this with our founders sometimes, but it's sort of like, if you look at the life story of the Buddha. And again, I think these, like, religious stories, like, you know, the Buddha or the Gita, or, you know, my, like, favorite parable in the Bible is Matthew 25, the parable of the sheep and the goats. And I think these stories are, like, really powerful. And so if you look at the life of the Buddha, he had to be a prince before he could go on the journey that he went on, right? Because the sort of, like, hey, look, money doesn't matterLink

LubaYeah. He's like, been there, done that.Link

AvichalYeah. It's like, if it's a poor person telling you that, it doesn't have the same credibility, in some sense, as the person who has the thing. And so that's why even if you look at, like, a lot of the most famous self-help people, they sort of follow that pattern, right? They had to be successful first, and then, like, every rich person tells you money doesn't matter, right? And so there's, like, this weird double-edged sword to it, right? But I think that's part of the journey.Link

And so for, like, a lot of founders, it's actually, even back to this idea of, like, the intrinsic motivation. I think for a lot of founders, there's a really deep tension between what they want to do and the reality that they're faced with in front of them. And actually, if they had $5 million in the bank, they might actually do a different thing. But they realize that, like, the path to getting $5 million in the bank is to do a certain set of things. So that's what we're going to do. And people can tell that. Back to this idea of authenticity, like, you can kind of tellLink

LubaWhy are they doing that?Link

AvichalWhy are they doing it? And so as an investor, like, we really want to be working with people that are like, I'm doing it for these sets of reasons. And that's not to say that this set of people is misguided or anything. I actually think people should do that so that they can go over here. But you have to be honest with yourself about motivations for it.Link

So I think probably for the first two startups, we were as motivated by, like, hey, it'd be really nice to exit a company and have some liquidity, as we were about the thing that we were doing. And now we're just motivated by the thing that we're doing. And so it's just compounded in a different way. It's just, like, the world can somehow tell that we're not trying to do it because there's money involved. We're doing it because there's a set of things we want to say and do in the world, and somehow people can tell. And so those are also the types of people that we then try to work with.Link

LubaSo for a founder who is doing a startup because of the scarcity, they want to exit, they want to make some money, maybe there is another set of reasons that's not just intrinsically driven, where should they go as far as pitching to investors, if a lot of investors, you know, are looking for people with that intrinsic motivation and story?Link

AvichalYeah. Well, I think you'd still do the pitches to VCs, and you can raise money and you can sell a company for $100 million and walk away making a bunch of money. So I don't think there's anything wrong with that. You just have to be really smart about making sure that the fund math makes sense. And that the math for your business, the industry that you're in, and how much money you're going to raise, all of that somehow lines up, so you can still be rational about it.Link

And so, you know, I think the mistake would be taking a bunch of money from somebody that wants you to pursue a generational opportunity. You see that happen. There's this tension with a lot of founders, and they're like, you know, the board's not going to let me sell the company. And it's because, well, what you did was you signed up for an opportunity where somebody's saying, no, no, no, like, the only way this makes sense for the type of investing that I do is if this is a $10 billion company. And what you're presented with is the opportunity to sell your company for 500 million. That's a misalignment. So as long as you're aligned with the style of investor, what their fund strategy is and so on and so on, that can totally make sense. And so a small, $25 million seed fund, if they give you $500,000 or $1 million and you sell for $500 million, that might return the fund for that fund. And so that's totally great. So you just have to be really smart about who you take money from and make sure that's fine.Link

The second thing I'll note is, I think the markets have changed a lot in the last 20 years, which is there are now opportunities for people to use secondary opportunities and go from this, like, scarcity mindset into this generational mindset. And I think that's actually really good, really healthy. And there are a lot of investors that would disagree with me, but I think founders, you know, if your company is worth 200 million, 300 million, 400 million, I think getting, like, 2 million out changes the math. All of a sudden you're like, oh, okay. Like, I can buy a condo in SF and, like, pay for health care, and, like, my future kids will be okay. And nobody's going to be on the street. And it just removes a lot of that stress. And now you sort of shift into this other mode.Link

So the market has, in some sense, solved this problem by letting people do secondaries. And so I'm a huge fan of, like, founders actually relatively quickly in the journey doing a secondary, because what it's really doing is aligning incentives with the investors long term.Link

LubaYeah.Link

AvichalWhich is, now if you've gotten two out, why would you sell the company right now? Like, let's go make something big.Link

LubaYou've written that compound interest applies to people, that the quality of people around you compounds exponentially. I'm curious who compounded your trajectory.Link

AvichalFar too many people to count is the short answer. You know, I think these things sort of build on each other. So it's just, I feel very fortunate to have, I was born in this country. So I feel very fortunate to have been able to come here, you know, go to great public schools. And we talked about this before. It's just like, you know, it's not uniformly available in all public schools, but I was really fortunate, for the places that I went to, that there were teachers that sort of said, oh, you seem to be able to do certain things, like, maybe we should get you tested and see if there's actually opportunities that you should be taking advantage of.Link

And so, you know, everything from the teacher in elementary school that said, hey, let's figure out what you're good at, and got me tested. And then it turns out I was really good at math and some other things. And so she worked to get a special bus where I could go to the high school in the morning. There would be a bus waiting for me, and then the bus would bring me back to the elementary school.Link

LubaMidday bus. You were taking high school classes while you were still in elementary?Link

AvichalYeah, but it's just, you know, like a random teacher that was like, hey, we should do something with this kid. To, you know, Curtis, my friend since I was 18, who taught me so much, just as a technologist, obviously a phenomenal, phenomenal engineer, but also as a human. To, you know, the early lessons from Google, and having access to Larry and Sergey and Eric and Marissa Mayer and, you know, all the, you know, there's names that people know now. But, you know, back then, Sundar and Brad, Nick Fox, and all these people that I got to learn from were just people who worked at the company. And same thing with Facebook, it's just the talent concentration is so ridiculous. And so all these great people to learn from.Link

And all the way to, you know, when we started our investing, just being able to have access to people like Elad Gil, who, you could walk through Silicon Valley and there's hundreds of people that would tell you stories about how he's changed their trajectory. But he's taught us so, so much. You know, we wouldn't have gotten off the ground if it weren't for his help.Link

LubaWhat did he do specifically?Link

AvichalOh, he helped us co-create this. I mean, he actually owned the domain. He'd been thinking about, you know, back in, like, '17, there were a bunch of people trying to figure out Bitcoin and Ethereum and what's going to happen on chain. And so he had spotted this opportunity, and he knew Curtis and I had sort of poked around with this stuff from, like, the cryptography side and the distributed systems side and privacy technology, because those are all things we care about. And so he approached us and said, hey, have you guys thought about putting some structure around all the stuff that you're doing? The angel investing and the cryptography work and the privacy work. And you guys know how to build software. It seems like there's an opportunity here.Link

And so he catalyzed it all. And then he was instrumental in us actually raising that first fund we did in 2018. Like, literally, he flew to New York with me to go pitch LPs, and, like, gave us feedback on the pitch and helped us iterate on the deck. Like, instrumental. We wouldn't have gotten off the ground if it weren't for his help. But, you know, he's done that for hundreds of people.Link

LubaThat's amazing.Link

AvichalYeah. That's what I mean. That's why people love him. And, you know, all the way to, I was very fortunate to be at YC. I never went through as a founder, but I was fortunate to go through as a visiting partner, in '16-'17, '17-'18. And that was a phenomenal experience, right? Like, getting to interact with Daniel Gross and Sam Altman and Michael Seibel, and seeing Paul Graham and Jessica Livingston come back and how they interact with founders.Link

And, you know, a lot of these things, there's some explicit nature to the compounding, where somebody like Elad comes in and takes you under their wing and just teaches you directly and is, you know, a great friend and a mentor. And then some of it is just back to this idea of, like, opportunity is a luxury. It's just being able to be in the same room as some of these people and see how they work and how they operate and how they think. Sometimes that's enough, right? Sometimes all of a sudden it sort of, like, makes that thing click in your head.Link

I'll give you an example. Like, you know, when I went to Demo Day, the thing I didn't, I think, fully appreciate until I saw it was how Paul and Jessica at YC interact with the founders.Link

LubaHow do they interact with founders?Link

AvichalWell, they just have such a deep reverence for what it means to be a founder, and, like, a genuine love for these people. And so, you know, it's like Jessica will stand offstage, and, like, when you come off, she's just, like, beaming. And you're like, she just makes you feel so good that you did it, right? Like, it's such a stressful thing, and she gives you a big hug. And yeah, I don't know how to describe it other than just sort of, like, they have a deep reverence and love for these people, and it just comes across. It's, like, this intangible thing that you kind of just, like, feel.Link

LubaDo you know who's doing that now at YC?Link

AvichalWell, I think it's partly that, but I think Garry has that too. Like, having been a founder. And I think most of the partners, there are now, like, former YC founders. So they have a deep empathy for that. And I think that was really smart on their part to sort of enforce that. I mean, we're the same way. I think about 40% of Electric is former founders, and it's by design.Link

But that, like, little bit of insight of, like, oh, I get why this place took off the way that it did. You needed the product-market fit. You needed all that. But it's like, it's just an embodiment of who they are. They're not thinking of this, obviously, they want to make a ton of money, and they're business people. They're venture capitalists, right?Link

LubaBut, well, it goes back to your point about authenticity and expressing yourself in the world.Link

Avichal100%. It's just so authentic for them. They just, like, have a genuine love for these people and a genuine curiosity. You know, it's like, I have this really striking memory of, you know, like, these weekly dinners with former founders that have been successful. So Brian Chesky or Brian Armstrong will come in, or whoever. And, you know, Paul and Jessica are extremely successful. They're literal billionaires. They could be, you know, off on a beach somewhere. But they're, like, sitting in the middle of the room, like, listening to this talk from this person that, effectively, it's like a teacher-student kind of relationship is how it starts. But then these founders go off to be very, very successful. And then they come back, and Paul and Jessica will be sitting in the middle of the room, like, intently listening to the lessons from this founder, and will ask a question, and you're like, wow, they're just, like, genuinely curious. This is just who they are.Link

And so kind of, like, seeing that, the light bulb went off. It's just like, I kind of see why this thing works. And I think so much of it just comes down, in so many of these products, I think in some of these companies, it's just like they just care so much. I don't know who said it, but it's that story of, like, the furniture maker that sands the, like, inside back of the drawer.Link

LubaThat no one technically cares about.Link

AvichalYeah, you can't see it, but, like, they can see it, and it's just like that little extra bit of care where you just care enough, but you care so much more than everybody else. But you have to care that much. When you see it, you're like, oh, I get it, right?Link

So, you know, that's a form of compounding, where you sort of have this little light bulb go off when you see these people and you have access to them, and you can see how they operate, even if they don't realize it. And then that just builds, right? And so every time that happens, it just sort of compounds and compounds.Link

And then I think what's great about Silicon Valley is this place is a tight, small group of people in the grand scheme of things. And so information flows very quickly about who's real and who's creating value. And one of the really interesting properties about technology, I think, is that the time from being a nobody to being somebody is very short. Like, in four years, you can go from, you know, Anthropic not being able to raise a round to, you know, oh my gosh, this is going to be a $1 trillion company. And so what that means is, practically speaking, any person you meet at a house party might be the next Dario. And that enforces good behavior in a certain way.Link

But that also means that if you actually genuinely create value for people, odds are you've created value for people who will go off and do interesting things in the world. And so it has this way of coming back to you in compounding. And so it sort of enforces really good behavior. And so, you know, the compounding, I think, is sort of, like, inward, in terms of, like, these people make you better. But what's really great about the structure of how Silicon Valley works is, like, the way you really compound it is you sort of pay it forward, and it has a way of kind of coming back to you, because the community is so small and the networks are so tight.Link

LubaWhat were the specific things that you learned from your time as a visiting partner, from other partners or Paul and Jessica, that you really wanted to make sure you model after at Electric?Link

AvichalYeah, there are a couple. I mean, the reverence for founders thing, I think, is a really big one. I mean, our first value, everyone here will tell you, is founders come first. Because I think if you basically just do the right thing for the founders, everything else takes care of itself.Link

LubaCan you give me some examples of how that specifically could show up or has shown up?Link

AvichalYeah. I think it's, you know, like, we are strong advocates of founders retaining control of the company, because I think in the long term, founders running things is better, because they have moral authority. And so they can make very hard decisions. You can even go into a local maximum and you can break out of that, because the founder says break out of it. I'm a huge fan of founders getting liquidity.Link

LubaSo, like, secondaries, what we talked about.Link

AvichalAnd uncomfortably early in a lot of cases, I think.Link

LubaHow early?Link

AvichalLike Series B. You know, you have to have something. But I think, like, unlocking the thing that's working, and the founder being a big unlock, I think is important.Link

LubaI feel like Series B is not that contrarian-early, because in the last few years, there's been a lot of Series A secondaries.Link

AvichalI think, yeah, it's a big change from, like, 15 years ago. Series A, I think it can work if it's the right person, and it's case by case. The problem is you can create perverse incentives. So you have to be a little careful in how you do it.Link

But, you know, I think that's sort of that realization that, like, the whole thing works if you have a deep reverence for the founder. Like, that's your customer. That's the person that you optimize for. And these things are not one-shot, right? It's, you know, anybody can go look up the history of, like, Parker and Zenefits and Rippling, and Rippling is a $20 billion company in its own right, right? And YC understands that. And so they backed Parker unconditionally, right? And that was the right call, including the sort of specific circumstances of that particular case. But intuitively, they understand that backing the founder is the thing that you're doing. And so it may not even be the first company. It may be the second company, the second time around, that it happens.Link

And all these things, you know, there's sort of, hey, it's good to be good, you know. That's sort of intuitive and makes sense. But I think people don't fully appreciate that the reason these things persist, the reason why YC is successful, is because there are real market forces at work here. So, like, why is that the right thing to do? Well, one is that the timeline from being a nobody to being somebody is very short. And so that's a thing. There's the power-law nature of venture, which is that one company, if it's worth $100 billion, that's the only thing that matters, right? Like, nothing else mattered, because your return on that pays tenfold what you put in for everything else. And so if you think that somebody is capable of doing that, then, like, you should just give them more money.Link

LubaDouble down.Link

AvichalDouble down, right. You know, if you think that the only things that matter are the things that can be worth more than 50 or $100 billion, and in those cases, it's that much more important that the founder retains control of the thing for the long term, then, of course, you would do certain things. So you can actually, from, like, the properties of how startups work, back into, oh, these are actually the right principles. Which is why I think over time you've seen venture capital move in that direction. Like, VCs 20 years ago were very different than early-stage VCs have to be today. But it's because the reality of the market has sort of pushed in a certain direction.Link

LubaSo, 2017, 2018, you were a visiting partner at YC. Seems like it was amazing. People were incredible. You learned a lot. Why not stay there longer, or get a full-time role to be a partner at YC, versus start your own thing?Link

AvichalYeah, well, first of all, it's unclear that they would hire me, because I didn't go through YC, right? And so, you know, maybe it made sense, maybe it doesn't. I'm very fond of that place. My wife has been through three times.Link

LubaThree times. Wow. Is that how you guys met?Link

AvichalNo. We met through Stanford friends, but, so we have, yeah, we have tremendous fondness for that whole ecosystem. And Paul and Jessica have been very, very good to my wife. So, you know, we have a deep sort of fondness for that.Link

But I think also, at the end of the day, I think I have the desire to create my own thing and create my own space. And so it probably wouldn't have been the right fit for me, again, setting aside whether or not they would have had me. But for me, it's just, I think for me, the act of creating something from scratch, there's something gratifying about that.Link

And I think it makes me a better investor, too, because for the person on the other side of it, they know that the person that they're interacting with is themselves a founder. So, like, a lot of the people we've invested in over the last five years have seen us grow up as a startup. So we're kind of, I would say, we're kind of like a Series B company.Link

LubaMhm.Link

AvichalWhich is, like, we have a thing that's working and we're trying to figure out how to scale it. That's kind of where we are in our evolution.Link

LubaWhich is something that we'll talk about.Link

AvichalSo, you know, I think for a lot of founders, they can kind of tell that the people on the other side are also building something. And that's very deliberate. But I think that actually makes us better investors.Link

LubaSo Curtis and you have these friend therapy sessions, and you introspect, and you're trying to figure out what you love and what you're good at. You figure out that through all your angel investing, there is this great track record. And it sounded like the track record is in a bunch of industries, across the board. It wasn't necessarily just crypto. Why did you decide to start, back then, a crypto fund?Link

AvichalYeah, the observation was, it was just startup thinking. It was, okay, you knowLink

LubaLike an inflection point.Link

AvichalYeah. So, how do startups generally have to start in order to be successful? What you have to do is you have to pick a beachhead. You have to pick a thing incumbents, for some reason, are not capable of doing, and land there. And the bet that you're taking is that that market is going to be enormous, that people are underestimating how big that market is going to be, and that the advantages that you accrue in that beachhead market will allow you to then go compete against the incumbents, and you'll back into the incumbents' market. This is sort of the classic adage of, you know, startups are trying to figure out distribution while the incumbents are trying to figure out innovation, and that's the race that you're in.Link

And so our bet was this as a beachhead market would be the thing that the legacy firms, other than basically Andreessen, would not pursue, but it would be a huge market. And so if we could land there, we could build the business, we could build access, we could build tooling. Then we would have a shot at backing into all frontier investments over time. But, you know, just showing up and saying, hey, I'm yet another one of a thousand seed investors, it's a very, very crowded space. It's a difficult thing to break through. This was a beachhead that we could do that with.Link

The other sort of belief that we had specifically about that market, because we spent a lot of time thinking about privacy technologies or cryptography, was that what had happened circa 2016 with Ethereum was a new platform had been created, and that all of fintech and financial services would move to this new platform.Link

LubaAnd you'd been a beneficiary of new platform creations over the years by then.Link

AvichalYeah. Social and mobile. Yeah. The internet. And so we said, I think this is a new platform, and anytime there's a new platform, you see a new generation of companies come in. And our belief was that these crypto technologies, really what they were was software eating money, to use an interesting turn of phrase. And so if this was really programmable money, that was the thesis that we wrote in 2017. We called it programmable money. That you have these stores of value that were emerging, these digital stores of value. On top of that, you get stablecoins, and that was a way for money to flow around. But if you got the stablecoins on these things, then you would have capital markets that came on here. And so, you know, stocks and bonds and private credit, all of these things would move on chain. But venture capital would have to as well. And there's no reason that venture capital, from an operational perspective, it's just capital deployment. So there's no reason that couldn't also move on chain.Link

And anytime you see a platform where software is then eating that industry, there's this corollary that happens, which is that the companies that win tend to be run by software engineers. And it's because all of your critical levers in running the business become software-enabled, right? So let's take an example. Let's take something like Amazon versus Walmart. E-commerce: all of the critical levers in e-commerce have to be run by software. Like, how you acquire your customers, how you track the funnel, how you, like, track where the packages are. Like, everything becomes digitized. And so what you have to do is empower the software engineers to make all those decisions. You have to create an A/B testing framework on your website. You have to create an automated advertising funnel to buy ads and track all of these things.Link

And what that does to the organization is that you have to set up an organization where, well, the people who are making critical decisions in your company have to be the ones that have all the power and make all the money. So at Amazon, software engineers make all the decisions and they make all the money. The partnerships people don't. That's basically the inverse of what happens at Walmart. Like, you know, in a legacy retail business, you know, the person who has a deep understanding of in-store shelf pricing and how the stores are laid out, and, you know, the relationship with Procter & Gamble, like, these things are all the points of leverage, right? And so Walmart, for years and years, it's a little different today, but for years and years, always just had tier-two engineers, and they were just never going to be able to hire those people. And so Amazon wins. Walmart, 25 years later, is still trying to figure it out. Now they're making a lot of headway, but it took them 25 years, right? The writing's been on the wall for a long time.Link

And so why weren't they able to do it? The reason they weren't able to do it is because what you really have to have, back to this idea of founders having moral authority, like, Sam Walton would have made it happen. He would have blown up the organization and made it happen. But what you have to do if you're a professional CEO is you actually have to go into the organization and say, all right, all of you people over here, you're now fired. All of you people over here, you make half the money. All of you people, you make twice the money. And by the way, you might not be the right people to do this, or we might replace you. But now we're gonna pay all the engineers twice as much so we can get good engineers.Link

And if you look at, like, the org chart, right, somebody like Sheryl Sandberg reports to Mark Zuckerberg at Facebook. In most companies, Sheryl would have been the CEO and Mark would have been, like, the chief product officer, right? So literally, like, the org chart, you have to, like, bend the org chart tree and put a different person in as CEO. And so is the CEO of Walmart going to go ahead and say, like, no, I'm demoting myself to COO, and, like, that person is now my boss? That's, like, weird, right? So, like, all of those human things end up being the hard part, not the software. Like, Walmart can put up a website. They've had a website for a long time. They've actually had an amazing logistics network. So, like, the software part of it is easy. The technology part of it is easy relative to the human part.Link

And you see the same thing with, like, Tesla. You see the same thing with the media companies. It's like Facebook or YouTube versus the legacy media companies. And even if you look in media, you see, for example, The New York Times manages to pull that off and survive and is now thriving. It's because it's effectively founder-owned, right? So the same family has run it, and so they can blow it up and reboot for the modern world. Whereas, like, the Chicago Tribune or the LA Times or the Seattle Times or whatever, they're gone. That's not going to happen.Link

LubaDo you think that power dynamic will shift now, though? Coming back to the beginning of our conversation, where we identified that human relationships will be at the core of things in the world of AI. Or will it stay the same, where software engineers will be in power, people who build will be more in power?Link

AvichalI think they'll be more empowered. And I think the role of the founder becomes even more important. Because who you're working with and who you're working for and what you're working on start to matter even more when software becomes commoditized. Like, those things matter more. I'll give you an example. I think a lot of software businesses, not all, a lot of software businesses start to look a lot more like direct-to-consumer businesses. And so the branding and the marketing and what are you trying to say in the world, the culture of the place, all of these human things start to matter a lot more, which I think actually empowers the founder even more, because that's what founders tend to be good at. And at scale, like, you're not writing the code anyway. It's not like the founder's writing the code. What is the founder doing? They're dictating culture, and they're dictating what the hiring processes are and what the brand is and how you say what you're trying to say and how you reach customers, and coordinating all of this. And so I think it actually empowers certain kinds of people even more.Link

Now, historically, if you look at any time there's been breakthroughs or improvements in technology, there's a pattern that you tend to see, which is that people who can go one or two levels deeper in the stack tend to have all the advantages. And so what does that mean? Let's say you're a designer, like a product designer. A lot of the best designers have a very good understanding of how front-end engineering works. Like, they have an intuition for JavaScript and CSS, and they probably write those things, or React. And the really, really good ones also often understand how the API layer between the front end and the back end interfaces. And so they can optimize the front end with those constraints, or they understand why certain things are possible, or they understand how to architect the front end and do certain things. And you see that pattern over and over, right? Like, the best back-end engineers understand how the APIs are set up and how the infrastructure is set up and how, like, data centers are built. Or, like, the data center engineers understand how the chips are built and, like, you know, all the way down, how cooling works, right?Link

And so, like, the ability to go deeper in the stack and understand how these things fit and what the constraints are that you're working under, or when a new technology comes in, how to adopt that, all of those things are what give you leverage and insight in what to do with the tooling. So I actually think understanding computer science and software and being able to write good code doesn't mean that you're now writing the code, but it gives you a deeper understanding of what's happening below you in the stack. And then a different set of skills starts mattering, right? So it's sort of, you knowLink

LubaLike design is different than orchestration.Link

AvichalExactly. So it's like, can you communicate? Can you orchestrate? Can you, like, define the problem in the right way? Do you know how to do the right prompts? Do you know how to, like, you know, break things into subagent tasks? Like, all of these other skills start to matter. But it doesn't mean that computer science mattered less. It just means that the point of leverage changed. But actually, the computer science is still a critical point of understanding and leverage.Link

LubaSo now, coming back to Electric and the founding story. So you're saying that crypto was the wedge.Link

AvichalYeah.Link

LubaHas that always been the case, like, you started with crypto because you always knew that you were going to expand to other industries, or has that shifted over the last few years?Link

AvichalYeah, that was always the plan. That's why we named it Electric instead ofLink

LubaYeah. Who came up with the name? Was it Elad Gil, because he had the domain?Link

AvichalWell, he had the domain. But that was sort of happening in parallel. We were brainstorming a bunch of names.Link

LubaWhy did he have the domain?Link

AvichalHe's actually, so Elad is actually surprisingly good at branding. He also named Color, Color Genomics, and he's actually very good at naming. And so he had, like, 5 or 6 names he was kicking around. We had some things we were kicking around, and we sort of intersected. And then he went and checked the domain and it was actually available, so he bought it.Link

LubaOh. Got it.Link

AvichalButLink

LubaHe's not, like, a domain hoarder? You know, he has 500 domains.Link

AvichalHe might. But he's very good at branding. You know, we were having these conversations about names, and there were 5 or 6 we were considering. I don't even remember most of them, but the Electric one, sort of as we were brainstorming, came out and stuck with us for a couple of reasons.Link

One, we thought this technology, the programmable money stack, it was kind of like electricity. It would just power everything. And it would just disappear one day, where you wouldn't notice it. Two, it was a nod to Electrum. Electrum was the first coined money, in the Lydian Empire. So it was a coinage of silver and gold in alloy. And the reason that's important as a technology was, before that, you had to weigh your gold. So you'd, like, you know, take a chunk of it and, like, have a scale and stuff. So having standard denominated coinage was a technical breakthrough. And that's what we thought. This is, like, a money technology. So it's a nod to Electrum, the first technology.Link

And then we thought it was sufficiently brandable, like it was an open, generic name, that one day when we were doing all these other things, it would work. So it wasn't, like, Block-something or Coin-something, where we would sort of be narrowly in that lane forever and have to rebrand at some point. And so, yeah, we were pretty deliberate about that from the very beginning.Link

LubaOur mutual friend Haseeb told me that you have this feeling of inevitability about crypto, that every time the market is down, he's like, oh, the market's down. And then you were like, great, buy more.Link

AvichalThat's right. Yeah. I think it's like, I get nervous in bull markets. Like, AI stuff is in this bull market right now, and it makes me nervous. Because it's too easy to get over your skis. It's too easy to drink the Kool-Aid. It's too easy to, like, believe your own hype. And that just makes investing harder, right?Link

And so it's a little bit of laziness, which is, like, if you have some fundamental view and the technology, you know, shows that it's the case, it's almost like theoretical physics or something. It's like, you can look at these things and you can, like, run a model, and you're like, hey, look, the math kind of works out. And it might take 20 years, but, like, the math eventually points you to a conclusion, and you're like, yeah, there's a Higgs, right? We understand it. And I kind of think a lot of technologies and markets are like that. That's not to say they're inevitable the way physics models are. But you can develop enough conviction that you can say, I think eventually this is what happens. And once you find one of those things, like, actually the best thing to do is just, like, buy.Link

And this goes back to other sort of biases I think humans have, which is, like, we don't really understand, like, we don't really understand. So back to the idea of human brains. We have these goofy biases. We don't understand large numbers. Like, if I show you this, you're like, oh, that's five. If I show you a pile of bananas, you're like, I don't know. Is that 30? Is that 40? Is that 50? And if I show you a really big pile of bananas, you know, is it 100 or 200? So our brains are not set up for millions and billions.Link

We don't really understand exponential growth, right? So it's not like you go to sleep one day, and then you wake up and outside your window, there's a giant tree that wasn't there before. That doesn't happen in macrobiology. It happens in microbiology, but it doesn't happen in macro. Which is why, like, most humans didn't understand what was happening with COVID, because it was an exponential curve.Link

And we don't understand low-probability events. So people are scared of getting struck by lightning or dying in a plane crash, and they're not scared of riding in a car.Link

LubaRiding in a car?Link

AvichalYeah. And you're like, if you just look at the numbers, you're like, this is totally backwards, right? But our intuitions about how likely things are, especially with very small-probability events, are totally wrong.Link

So you take these three thingswe don't understand large numbers, we don't understand exponential growth, and we don't understand low-probability events. And that's startups, right? And so our intuitions about startups are totally, totally messed up. Like, it's very hard to intuit these things. But one of those things that you sort of learn, which doesn't match intuition, is that if one thing works, it likely continues to work. And so if, like, 50 million people do a thing, probably a billion people are going to do that thing. If there's a, you know, what you've really got from those people is that there's some signal there, there's some problem solved. And so, you know, by the time Facebook had 50 million or 100 million people, there's a very reasonableLink

LubaIt was inevitable.Link

AvichalIt's going to have a billion people. And even if you don't think it's a particular product, probably that category. By the time it was 50 or 100 million people doing social networking between Myspace and Facebook, you're like, this is a thing, and probably a billion people are going to do it. Same with mobile, same with PCs, and same with the internet.Link

And so now people have started to learn that you can make these projections going forward, and the projections really should be exponential. Which, again, breaks your intuition, right? Because when you say these things, it sounds ridiculous. And if you look at the history of technology, you could stand in, like, 1985. You could stand in 1990 and 1995, 2000, pick, like, any date, and imagine you're standing on a curve, right? The growth of whatever that industry is. And if you sort of, like, looked behind you, you would see that it was exponential. You'd be like, oh yeah, for the last ten years, it's basically been exponential. And if you looked forward, you don't know what the curve is yet. And if you extrapolate exponentially, you just sound like a crazy person, right? You're like, really? Like, we're just gonna, like, 100% of cars are going to be electric, and we're just gonna have solar panels everywhere? And, you know, there's that infamous, there's, like, a McKinsey report that predicted how many, like, Teslas would get sold, and they were just off by 100x. You know, and it's because, like, you can't make projections, because you make these projections going forward, you sound like a crazy person, exponentially, right? Really? Like, OpenAI is going to be a $1 trillion company, you know?Link

LubaYeah. Who would have thought?Link

AvichalYeah. You know, these things sound crazy, but it's turned out that those are usually right in technology. And so, you know, I think I look at market corrections in practically any industry as an opportunity, because what the market feels versus what's real are disconnected. And so if you can find those things that are, like, you know, Facebook in 2008, and the market is crashing and everything's going to hell, but the thing is really working, and you have amazing people behind it, and there's a real problem being solved, that's the thing that you go put a bunch of money into and just hang on for ten years. And I think every industry has those.Link

And so, yeah, I mean, I look at something like Bitcoin or Ethereum, and I'm like, it's sort of crossed that point. It's just sort of inevitable. And maybe it takes ten years instead of seven. And that impacts your, you know, you have to be smart about rates of return and opportunity cost of capital and all that kind of stuff. But the lower prices go, the easier that is to make work, right? It's like, the easier it is that you're actually going to get the compounding that you need to make the returns work. So I actually prefer it when that happens.Link

LubaHave you had, do you have any examples when you had super strong conviction and you were wrong?Link

AvichalYeah, I mean, short answer is yes, many. And a lot of it has been sort of two categories, I think. One is where the technology is basically correct and inevitable, but it takes the market a while to realize that. So you're sort of patiently waiting for that to happen. Another is thatLink

LubaWhat's an example?Link

AvichalSelf-driving cars is a good example.Link

LubaBut you weren't necessarily wrong here, because clearly we're rolling out more of them.Link

AvichalYeah, we were investors in Cruise, and that was acquired by GM, was very successful before it was shut down. But, you know, I think we sort of misjudged the regulatory pushback that you would get and how hard it would be to roll these things out, you know, across the country, and the complexities there. So, you know, being too early is the same as being wrong, as they say.Link

I think another category of failure is where the technology, and even the technologists that are making it, are basically correct. But the set of skills that you need to really break through, to make that thing work at scale with the markets, require a different set of skills. And so the founder is not able to make that transition into that other role that is necessary for them. So they're phenomenal technologists, but they're not necessarily a great CEO.Link

LubaWhat's an example?Link

AvichalI don't want to throw anybody under the bus, but that happens a lot. There are a lot of things where the technologist is not able to make that happen.Link

LubaOr they may be too academic.Link

AvichalCorrect. Yeah. And so then it's like, the technology has progressed. At a certain point, somebody else can pick up the technology and run with it. And the person who picks up the technology after it's been progressed to a certain stage is the one who can take it to market.Link

And so it's sort of like, I kind of feel like a lot of stuff, directionally, if you're close to the information flow, if you're close to really good people, you can sort of call. And then it's like, well, are you correct on the timing, and are the specific bets that you're taking the right ones? And that's much harder. But yeah, it happens all the time. I mean, most startups fail, and most startups inside a portfolio even don't work to the degree that you want them to work, for various reasons. So, yeah, I mean, as a VC, you get used to being specifically wrong all the time. So you're generally correct and specifically wrong.Link

LubaHow do you check your own convictions?Link

AvichalYou have to have really good people around you. You have to have, you know, I think one of the things that we've done a good job of is a lot of the people that we work with are people that we've worked with for a long time. And soLink

LubaLike a lot of people internally, or a lot of people externally, or both? Okay.Link

AvichalYeah. And so what that does is it creates an environment where there's a lot of trust that's been built up over a long time, like five, ten, 15, 20 years in some cases. And so that makes it really easy to disagree, because you know that the person is not doing it for their own ego, for their own sake or whatever. They genuinely are trying to be helpful.Link

And so I think the best hack I've found is find people that are willing to disagree with you and very smart and first-principles thinkers, and then just surround yourself with as many of them as you can, and then stay friendly with them and close with them for as long as you can. Because actually, the ability to disagree with you is also a function of the familiarity of the person with you. But most people, I mean, set aside, like, Peter Thiel or something, most people are not going to just disagree with you outright. There's sort of, like, a human dance that has to happen there. And the way that you get through that is you actually develop friendships with people and they trust you. And then, you know, they don't mind disagreeing with you, because then you're, like, actually trying to help each other, trying to figure out what's real.Link

Like, you mentioned Haseeb. He's a great example of this, right? Like, Haseeb and I can disagree about all sorts of stuff. And I actually, like, I like disagreeing with him. He's opinionated, he's thoughtful, and we can kind of, like, hash it out, right? And so you just have to surround yourself with a bunch of people like that. But I think the secret unlock is actually, like, a group of people that have spent enough time together to feel comfortable disagreeing with each other.Link

LubaYeah. The other day I was interviewing Toly from Solana, and he was like, him and his co-founder just disagree until they hash every single possibility out, and then they come to a decision and a conclusion of how they should actually act. And that trust in disagreeing is a very special thing that you can have with someone.Link

AvichalYeah. Curtis and I like that too. Like, LPs often ask us, like, how do you guys figure it out if you, like, don't agree? I'm like, well, we just, like, talk about it untilLink

LubaWe just disagree until we agree?Link

AvichalUntil it sounds like somebody is right. And it's because if you're rational and you're smart and thoughtful, you can have that, and you're like, wait, why do we disagree? There's either some assumption that's different, there's some data that we have that's different, or there's some reasoning that we're doing. So let's talk through that. And you're like, oh yeah, you're totally right. That's not the right way to think about it. And then you don't disagree anymore.Link

But I think having those kinds of people around you is a real benefit. But I don't think there's any way to fake it, other than, like, you just have to do that with people for a while, and then you figure out who you do that best with. I think it's one of the really good things also about founders and Silicon Valley, is, like, there's a lot of people looking for that, right? So it's not like Haseeb and I have known each other for 20 years and we grew up together or something. But when you find somebody like that, you're like, oh, we're the same type of person, right? And so then that's sort of like, you click with that person, and thenLink

LubaYou have an opportunity to disagree more.Link

AvichalCompounds. Yeah. Like, literally in, like, a couple of conversations, you're like, oh, you're one of my people, right? You get it really fast. But I think this ecosystem is full of those kinds of people, which is really awesome.Link

LubaSo when you were starting Electric with Curtis, who were the firms and people that you were trying to model after and you really looked up to? Outside, I guess, of Elad Gil, because he was already at the beginning of that journey with you.Link

AvichalYeah. Elad's a unicorn. He's a one-of-one. But yeah, definitely. Yeah, there were actually four that we've thought about very specifically. One was Y Combinator, so Paul Graham and Jessica. One was Peter Thiel, the Founders Fund. One was Marc Andreessen and Andreessen Horowitz. And then one was Reid Hoffman.Link

And what we liked about Reid, we thought was really interesting, is he didn't put himself in a box. So he didn't say, hey, I'm a founder here, I'm an investor. He just sort of says, I have access to people. I have access to capital. I have access to information. Let me blend these together in some way to create value. And he's very good at that.Link

What we really liked about Peter was, Peter also does that. He just sort of doesn't exist in a box. He's down to do whatever. Very creative. But he's willing to be misunderstood for long periods of time and be okay with it. And I really respect that. He's not chasing anybody's approval.Link

What I think Marc and Ben got right at Andreessen was the recognition that founders are artists, and what we need to do is build a framework around that. And what I think Paul and Jessica got right is that sort of, like, primacy and fundamental reverence for the founder, and everything else flowing from that. And soLink

LubaAnd what about Elad?Link

AvichalYeah, I think Elad does a lot of things right. The two or three that I think I've learned the most from him. One, he's phenomenal at selecting markets. So his intuition and his reasoning around, this thing is going to tip at the right time, phenomenal. Two is, I think he is just the most helpful. And so he has an intuition for, this is what this company needs, this is what this founder needs, and I'm going to come in and get it done for them. And so his ability to actually deliver value is unlike anybody else, which is why he's so successful. And those two things I think I've sort of learned from him and modeled a lot of what we do on. So yeah, it's basically these five groups. And so what we aspire to be is sort of somewhere in the middle.Link

Now, there's a separate one, which, you know, I usually don't say, and I don't like to say it, because it's sort of like a cheap one, because I think the other ones are, maybe people may not think about. And it's hard to model yourself on it. But I think Sequoia, obviously, in venture capital. And so, you know, I've read everything Don Valentine's ever done, or, you know, the interviews or videos he's done. And they also really nail markets, obviously, in picking markets, and that sort of, like, strive for excellence, and good is not good enough. And the durability of what they built is remarkable. But it's hard to model yourself on that, in the sense of, there's a bunch of things that they do. But really, it's the thing that they built that is the admirable thing, and sort of the brand that they built around that. I think it's a remarkable thing. But it's hard to copy that exactly.Link

So there's a bunch of the ones we talk about, but there's a bunch of others. I mean, you know, like I said, there's artists and musicians and Rick Rubin. You know, I think, like, yeah, there's a lot. You know, Vinod Khosla is a really interesting one. Vinod has a lot of these properties too.Link

Yeah. Like, when I was doing the YC thing, we'd be at Demo Day, and it used to be at the Computer History Museum. And after Demo Day happened, there's sort of this, like, reception after all the pitches were done. And you'd have cocktails, you'd have some snacks in this room. And I think I remember it started, like, around five. And basically everybody would clear out except for me and Vinod and this, like, group of founders that wanted to talk to him, at, like, 8:00, 9:00. And literally the janitorial staff would, like, clean everything up, like, vacuum, and be shutting off the lights and being like, hey, you guys need to leave. Like, we're closing doors. And Vinod would still be there, right? And he didn't have to be. He's a multi-billionaire. He just loves hanging out with founders. That's just what he loves to do. And that's a very, like, Paul-and-Jessica type of thing. It's just like he's just doing it for the love of the game, right? And he just loves it. He just loves being around people building cool stuff.Link

So, you know, all these other sort of one-off influences as well. But sort of from a, like, deep relationship, connectivity, direct-access kind of perspective, I think it's those handful of people I mentioned.Link

LubaSo from the things that you've mentioned, there were six or seven: reverence for the founder, excellence, durability, not putting yourself in a box, being okay with people disagreeing with you, being incredibly valuable. What are the things, or qualities, characteristics, that you think you're still struggling with, if any?Link

AvichalWell, you know, one way I would sort of talk about not being put in a box, or some of the other things, actually, the way we talk about it internally is honesty. Which is, you really, really, really have to learn to be honest. And you have to learn to be honest with yourself. You have to learn to be honest with people. And you have to also understand that most of the world is not honest. Most of the world is actually dishonest.Link

LubaOh, you actually think so? Why do you think that?Link

AvichalBecause I don't thinkLink

LubaDo you think that's the same as thinking that people are fundamentally good or bad, or is it a completely different property?Link

AvichalIt's a different thing. Yeah. It's not a moral assertion. It's sort of an observation, which is downstream of, it's just human psychology, right? So most people don't want to say the uncomfortable truth. Many people are put into situations where if they say the true thing, it has negative blowback on them.Link

LubaOr they think it has negative blowback, but in reality it probably doesn't as much.Link

AvichalSometimes. I'll give you a really concrete example, right? If you have a business, a small business or a startup or whatever, you might have to work with an outside tax and accounting firm. And the person who is on the sales team has an incentive to try and convince you to work with them. And so they'll commit. They'll be like, oh, yeah, we can totally do this. Like, we're going to do a better job. Here's the rate, whatever. And then the person who's actually doing the accounting work, the actual accountant, the company that they work for may have booked too many clients. And the reality is they're just not going to do it. But now they're a hard-working person. They're willing to work weekends. They're willing to work nights. And if they acknowledge to you too early in the process that there's no way they're going to get your taxes doneLink

LubaYeah, they might lose you.Link

AvichalA, they're going to lose you. But B, they just made it appear that the salesperson lied to you, right? Like, why did you tell me you could do it, if, like, the person who's doing the work is telling me you can't do it? So now they're in a tough spot, but they can't actually tell you the truth. And so what they're going to do is tell you sort of half-truths, and you have to learn to read those half-truths to say, oh, what's happening here is you can't tell me the truth. And the reality is we're not going to hit the deadline. There's no way you can get my taxes done on time. But they can't say that, right?Link

And so actually, this is hard, I think, especially for honest people, because honest people assume that other people are honest. And it turns out most people aren't. And it's not because they're bad people. It's because admitting the truth is painful, right? It makes you look bad. It makes somebody else look bad. It makes your company look bad, it makes your family look bad, whatever it is. And so they'll hide the truth, but they'll give you a signal that they're not 100% telling the truth. And this goes back to this idea of human authenticity. Our brains are wired for this. And so if you can hone that skill, you can tell when people are actually telling you the truth.Link

So a lot of these things actually, I think, come down to, like, whether you call it first-principles thinking, or, you know, being contrarian, or being willing to be misunderstood, or whatever, a lot of that just comes down to honesty. If you're just honest, and 100% honest, all of those things sort of naturally flow from that.Link

LubaSo is that the thing that you mentioned, that not putting yourself in a box is the thing that you guys might still be struggling with?Link

AvichalNo, actually, I don't think we struggle with any of those inputs. I think where we struggle, one of the properties of our culture, actually, is we tend to hire engineers. And it's because, back to this idea of, I think when your business evolves, and I think venture capital is evolving, you need to acquire your customers in a different way. You need to build brand in a different way. You need to run your business in different ways. So we built a lot of tooling internally, for example, which is using agents to do things that historically humans would have done.Link

LubaWhat are some examples?Link

AvichalOh, we have Ken on our team, who's built an entire system called Quest, which has access to our CRM, which has access to, you know, our accounting and our foundry data. And so we can just ask it questions. We can have it double-check finances, we can have it draft documents. And it has all of that context inside the company. And so now we don't really, like, we don't hire analysts, we don't hire a juniorLink

LubaAnd have you started building those tools since the AI inflection point, or was thatLink

AvichalYeah, it's mostly in the last, like, two, two and a half years. But yeah, now we don't need to hire a 22-, 24-year-old, like, junior analyst to do reports. Like, we have all the context, we have the history, we have the emails, we have the Slack conversations. And so we can write a memo about a thing in, like, 20 minutes with deep research plus, like, this internal tooling that we have.Link

And so, you know, we don't really struggle with most of the things we talked about. The side effect, though, of sort of having people who think in that way, really, really honest people, who tend to focus on creating value for other people, who, you know, will do the right thing, all those things, is they tend to not be good at talking about the work. They tend to be really good at doing the work, right? So we're really good at finding founders. We're really good at working with those people. We've, like, spent all this time and money and energy helping them. And we're generally pretty bad at talking.Link

LubaBrand and marketing.Link

AvichalYeah. We're just bad at that. And so that's a skill that we're still, I think, learning to develop. But, you know, the way I think about it is, like, really, brands are a proxy for trust. And there are two ways to go about building that brand, especially if you take sort of a direct-to-consumer lens on this. One is you can make a lot of noise, and then hopefully the value proposition that you have in your productLink

LubaMatches the noise.Link

AvichalIs matched up. Yeah. Or you can just create a really awesome product, and then figure out how to sort of get the world to understand. But if it's genuinely an awesome product, then the customers of that product will just start telling people. And that, I think, is the right and durable way to build brand. And that compounds over time. So that's the approach that we've taken. But that does require figuring out how to talk about your brand and build your brand and do all those things, which is a different thing than building the product.Link

LubaWhat makes Electric Capital awesome? What are the specific things that you guys do when it comes to the product, that the founders are excited to work with you?Link

AvichalYeah, well, I think, I mean, the first and most important thing is ultimately just this idea that the founders know we're just going to do the right thing for them. And we do look at it as a very long-term relationship, even across companies. So it's not that, like, this company needs to work, necessarily. It's like there's a journey that we're on now for ten years with these people, and they'll figure it out. And we would love to be a part of that journey. And then the way we sort of demonstrate that is just by over-committing resources. And so weLink

LubaLike, in what way are you guys over-committing resources?Link

AvichalOh, we just spend way more time and energy and dollars with our investments than pretty much anybody else that I know at our size.Link

LubaCan you give me an example, maybe, of a company and what you did for it?Link

AvichalYeah. Well, the founders should really speak to this, but, you know, like, for exampleLink

LubaWe will invite the founder next time.Link

AvichalYeah. But it's sort of, like, a do-whatever-it-takes mentality. And so whether that's, like, fundraising, whether that's customer calls, whether that's helping literally, like, edit the deck to do the next round. Or, you know, on staff we have, like, five former executives from Fortune 500 companies that we just have on our payroll. And we can drop them into companies and they'll just go help.Link

LubaLike, they're still working at those Fortune 500 companies?Link

AvichalYeah, they're full-time with us. We just pay them, and then they just go into the companies to help.Link

LubaOh, wow. That's cool.Link

AvichalAnd so, yeah, there's this wonderful woman, Bas, and she used to run HR at WhatsApp, and all of the people at WhatsApp, and before that she did Instagram, and before that she was doing the ads group at Facebook. And so Mark would drop her into these places where you had a special, unique thing, a culture. You didn't want to blow up the culture, but you needed to get recruiting and hiring and HR practices, and make the organization work. And so she was a phenomenal partner to a bunch of executives.Link

And she's worked with several very, very well-known, like, pre-IPO companies as an advisor, because the people that used to report to her are now running HR and people at a bunch of these, like, you know, future $100 billion companies. And so she's gone into two or three. I'm purposely being vague on the names for the companies she's worked with and the companies she's working with now, because that's their call if they want to disclose that. But she's working with two breakout companies right now. And literally yesterday, the CEO and founder of one of those companies just texted me, Bas is amazing.Link

LubaOh, that's awesome.Link

AvichalBut she's basically going in, and she's worked with, in the last six months, she's worked with three different companies, and basically gone in and either been their head of people for a few months and helped them hire the person, or worked with that person really closely. And essentially she's literally at a company three days a week, and she just goes into their office and does whatever they need.Link

And so if you look at, like, us as a business, I think most people may not realize this, but Curtis and I are the lowest-paid people at Electric. We make less in cash comp than everybody else. And it's because we take all the dollars that typically, like, a general partner would make in, like, you know, cash flowLink

LubaPut it into the founders.Link

AvichalYeah. We just turn around and, like, go hire people like Bas or Eric or Elizabeth. And we just think that's, from, like, an investment perspective, that's the right long-term thing to do, because we're gonna make all the money on the long carry and the way the firm sort of grows and evolves. But yeah, I think that's an example of a thing.Link

You know, we do founder summits, and we have dinners, and we have all these things that, you know, a lot of VC firms do. But it kind of goes back to this idea of, like, some of these things I think you could systematize, but a lot of it is just, you just have to care more than anybody else. And if it turns out you just care more than anybody else, the person on the other side can kind of sense that, and it just comes out. I think that's, like, the beauty of creating something. Like, that's what you're trying to convey to the customer, if you're trying to build that kind of a product.Link

Now, there's other kinds of products that you can, you know, like mass market, mass production. Like, there are different ways to build products. But for the type of product that we're trying to create here, what the customer, in this case the founder, should feel when interacting with that product is this sense of, oh, the people that created this product just cared more than makes sense to care, right? They just cared so much more than anybody else has chosen to care. If you get that right, then there's this sort of, like, immediate affiliation and brand love, and that just happens naturally. But I think it has to come from the person.Link

LubaFrom within.Link

AvichalIt has to. They have to feel it. They have to sort of, like, understand that the people who created this product just cared. And they cared so much more than anybody else has ever cared.Link

LubaDo you think there's two buckets of people, people who care and people who don't care? Or can you learn how to care?Link

AvichalI don't think you can learn how to care about a specific thing. Like, I think everybody cares about something.Link

LubaMhm. So just finding the thing that you're uniquely positioned to care about.Link

AvichalThat's right. Which, I mean, that is, like, the founder exercise, right? It's like, that's one of the questions we ask founders, is, like, well, why are youLink

LubaWhy do you care about it?Link

AvichalYeah. Like, why, of all the things, you're clearly a talented person. Like, of all of the things you could do in the world, why are you choosing to do this? And there needs to be a reason. Because if it's a rational thing, then when things get hard, you'll stop, right? Because the ROI calculation in your head kicks in and you're like, oh, this just isn't worth the pain. If you care about something more than it rationally makes sense to care about a thing, then when it doesn't make sense, you will keep going. And a lot of times, that's what you actually have to push through to get to the other side. That's where real value gets created, if you just cared more than anybody else and you're willing to suffer through those periods of, actually, rationally, it does not make sense to do this. But I think that's, like, what, and I think that's not just a startup thing, right? That's likeLink

LubaYeah, that's an anything thing. You can be, you know, you can be making shoes.Link

AvichalAnd it's shoes. It's art. But it's even, like, you know, you go to some of these neighborhoods, and you drive through a neighborhood. Like, I was driving through the Peninsula the other day, and there were these old neighborhoods, where they were probably made in, like, the 50s, like post-World War II. And when you drive into the street, there's, like, a brick gate.Link

LubaMhm.Link

AvichalRight. And they have, like, the name of the neighborhood in the thing, and you're like, somebody cared, right? Like, somebody, like, sat there and was like, we're going to name this neighborhood and we're gonna, like, make it awesome. And they thought about it, right? Or, like, the park that's near you, or, you know, like, the garden of the person that lives next to you. Like, you know, they go out every day and they, like, put their heart and soul into it.Link

Like, the place that we live now, our home, it was a husband and wife. And the husband passed away. They didn't have any kids, because they were in their 80s. And so, you know, back in the 70s, there was no IVF, so they couldn't have kids. And I didn't realize this for the first year that we lived there, but the woman poured basically her heart and soul into the garden. And what she did was that she timed it so that basically once a month, something else blooms.Link

LubaOh, wow. Yeah. That's beautiful. Which is amazing.Link

AvichalSo, like, I didn't realize it until we'd basically been through one whole cycle. I was like, wait a second. Like, literally there's, likeLink

LubaYeah.Link

AvichalAnd you're like, wow. Like, the degree of thoughtfulness that that took, to make that happen, so that she understood which things to put. And they're all beautiful things. And so you could just tell she cared, and you're like, does anybody need to do that? No. But she just cared more than it, like, makes sense to care. But as a result of that, she created something beautiful.Link

LubaYeah.Link

AvichalAnd I think we're, like, wired for that too, right? That's just sort of, like, what does it mean to see something beautiful? It's like you can kind of intuitively sense that somebody put their heart and soul into something, and they just cared more than it made sense to care. And then, like, somehow you can, like, feel that somebody just cared. And I think our brains are kind of, like, wired for beauty in that way.Link

And so that's, I think, you know, for any brand, for any passion project, anything in the world, like a, you know, a church or a park, or, like, that entrance to your community, or, like, the front yard that you have, like, there's something people care about, and you can tell when they care. So that's why I think this question of, like, can you teach people to care, it's not exactly the right question. The question is, like, what do you care about?Link

LubaHow do you discern fake authenticity and storytelling from the real one, though? Because it makes me think of you guys passing on SBF and saying that there were some yellow flags when you were doing the due diligence process. Or maybe you met him.Link

AvichalYeah, yeah.Link

LubaHow can you tell? Because so many people can't tell.Link

AvichalIt's hard. And, I mean, some people are really good at storytelling. I mean, this is why you can have, like, serial killers, and this is why you can have Jeffrey Epstein, right? It's just like, some people are gifted and can tell these stories in a way that people can't tell if they're being authentic or not. So nobody's going to bat a thousand. Yeah, we sort of dodged SBF for a whole host of reasons.Link

LubaWhat were some of the reasons?Link

AvichalWell, there were, like, two. And again, we could have been wrong on that. You know, like, if CZ had not sort of kicked that hornet's nest and caused FTT to collapse and that whole cascade, you know, SBF was a seed investor in Anthropic, and that'd be worth, like, $50 billion. And there would be no hole. Like, nobody would know about it.Link

LubaRight.Link

AvichalRight. Because he was also a phenomenal investor. And so we may never have found out. And for all intents and purposes, we would have made a huge mistake.Link

But, you know, there were weird signals around sort of the way that he was conducting some of his fundraising things, the way that he was interacting with the investors. Sort of, some of the language didn't match some of the behavior, in our opinion. And so that was sort of strange. And then, for us, I think some of the math didn't add up. We weren't able to quite figure out where the money was coming from, exactly. And so there was just a rational question for us of, like, well, is FTX the business, and Alameda is supporting FTX? Or is Alameda the business, the hedge fund that they ran, and FTX is the venue? And we're like, wellLink

LubaSo you were just thinking for yourself, ultimately.Link

AvichalIn that case as well. But there were, like, I'll spare people the stories, and that's sort of, you know, water under the bridge in a lot of senses. But there were a lot of little things that they did in the fundraising process that signaled to us that maybe they were notLink

LubaHonest.Link

AvichalYeah, that there was, like, a little bit of saying one thing and doing another. And that's really tough for us. That's sort of, like, a bright line for us. And so we just kind of cut it pretty early. And then, understandably, from his perspective, again, we could have been wrong on this, right? We've made plenty of other mistakes. But, you know, after we sort of passed twice, then, like, there wasn't really, you know, like, if a VC passes on you twice, you're not really gonna have a relationship.Link

LubaSo, what have you learned from the worst founders you've met?Link

AvichalHmm. How do you define worst?Link

LubaI don't know, however you want to define it.Link

AvichalI mean, it's a lot of these things. It's just, like, honesty. I think, for example, the best founders are just ridiculously honest. And there's no hiding. There's nothing to hide. It just sort of is what it is. And the best founders are storytellers. I think it's all of these things that we've talked about. You know, the best founders, you can't put them in a box. You know, the best founders have sort of intrinsic motivation as much as they have the extrinsic. So all of those things, I think, are actually hard-learned lessons from founders.Link

LubaWhat do you feel like you're still learning as an investor?Link

AvichalOh, I mean, so many things. A lot of it, basically everything. Every single thing we talked about, we're still learning. How to pick the right markets and think about timing, how to think about which technologies really matter, how to pick great founders. There's, you know, we run a process where we look at the things that we said no to, that we were wrong about, and try to learn lessons from that. And that's a continuous process. How to build brand. Yeah. It's never done.Link

And I think, at least for me, I feel like I found a thing I can do for the next 40 years. And it's that sort of ever-improving thing, right? Just hopefully I'm much better at this in ten years and 20 years and 30 years or 40 years than I am today. And so it's sort of the answer to all the above. Yeah.Link

LubaYou mentioned that "opportunity is a luxury" is one of your guiding principles for life. What are some other ones?Link

AvichalYeah, it's basically the Electric ones. It's, you know, it sort of all stems from this.Link

LubaSo honesty is one.Link

AvichalYeah. So first is founders come first. Honesty. And they all sort of stem from this observation that, like, the outliers in society are who you need to find and enable. That's sort of the guiding framework. And the properties of that market, and those people, then dictate all these other things. And so put those people first. You know, just be so, so honest about everything, with yourself and markets. You know, do things at a ridiculously high bar. So, you know, good is not good enough. You have to have conviction. And a lot of times, if you can develop that conviction, then it's easier to have it, right? It's like, why conviction matters. And a lot of times, I think believing in something and somebody, even when they don't believe in themselves, is actually the secret. And if you have reason to do it, then it's actually easy to do it.Link

And then moving very, very quickly. I think you have to have a sense of urgency around these things. Like, you can't sit around and wait. You have to be high-agency and high-urgency to get stuff done. And that's pretty much it. You know, I think if you find your people, if you are honest, if you work really hard and hold yourself to an extremely high quality bar, I think if you have conviction and actually believe in something, and I think if you work hard and work fast, the urgency, then, like, all the good stuff kind of happens.Link

LubaIt's funny, because I think one or two of the principles map to my next question, which is founders come first, and conviction. You're married to another founder?Link

AvichalYeah.Link

LubaWhat is it like to have two founders in the house?Link

AvichalI think it works. I mean, we're lucky. We work a lot, but it works because we have flexibility. You know, founders get flexibility. I think it's also, for us, you know, some people, you know, want their work life and their home life to be separate, because they're like, oh, I don't want to talk about this kind of stuff at home. And we've just taken the approach that there isn't really work-life separation. It's just, we're doing the things that we do for fun anyway, and we just happen to have those be our careers. And so why wouldn't you want to integrate them?Link

And so, you know, a lot of our friends are founders. A lot of people we hang out with are founders and doing interesting things and building stuff, and engineers and researchers. So for us, the career stuff is kind of secondary. It's just sort of, we found our place in the world and we're doing the thing we want to do as humans, and self-expressing, and it just happens to be the case that it all sort of just meshes together.Link

LubaFor anyone listening, any tips for finding your life partner and developing that type of connection?Link

AvichalI have no advice on that. We've been together a long time now, like 16 years. So I think we were just lucky, frankly. It was likeLink

LubaYou didn't have any sort of methodology, framework, things that you were looking for?Link

AvichalMet through friends and hit it off. And here we are, 15, 16 years later. So, yeah. I don't have any advice. It's one of those things. It's just like, I don't know, there's no process that we went through or anything. It's just sort of, okay, maybe that's the advice. It was just, like, it was so easy for us.Link

LubaMaybe it should be easy.Link

AvichalThat it should kind of be easy. We've talked about that. Like, when we, yeah. I don't even feel qualified to give advice on that, because it's just sort of, like, worked out. It's sort of like if you had a startup and you had product-market fit out of the gate.Link

LubaWhat advice do youLink

AvichalYeah. Yeah. It's just like, hey, it just kind of worked. I don't know. We, like, built a thing, and it worked. But I guess in some sense that is the advice, is, like, you know, product-market fit trumps everything.Link

LubaThat is true. Most of the startups are really wellLink

AvichalYeah. So, you know, it's like, if you find your person and you kind of click and it's kind of obvious, then, like, run with it, you know? It's like, don't overthink it.Link

LubaI want to wrap up with two questions. First of all, what's the thing you're most proud of outside of your career?Link

AvichalHmm. That's an interesting question. I think it's probably the, well, there's two or three answers. And "proud" is, like, a weird word, because that implies, like, accomplishment or something. I tend to think of it slightly differently, which is more, like, what am I most grateful for?Link

LubaHmm.Link

AvichalAnd I think I'm just very grateful that I have managed to find groups of people who have supported and helped me along the way at exactly the right times. And I'm proud, maybe proud is the right thing here. It's like, I'm proud that I've been able to create value for those people. And so in some sense, it's like a pay-back, but it's also like a pay-forward. And I think that's probably the main one. It's like, I'm most grateful for all those people that have helped me along the way. And I'm proud to say that I think that in all of those cases, I've actually managed to make good on that.Link

LubaAnd what's your life philosophy in one sentence?Link

AvichalThat's a tough one. Yeah, that's a really tough one. I think it may very well just be, like, the sort of belief that, like, everybody really, really, really cares about something, and everybody is an outlier at something. And what you need to do is find that thing. And then what we should be doing as a society is finding those people and giving them disproportionate resources to pursue exactly those things that they're outliers in and that they just care the most about. And so systems should be set up to enable those types of people and those sorts of behaviors.Link

LubaI love it. Avichal, thank you so much for your time.Link