Early Robinhood Investor on the Bet that turned $250k into $400M (Chad Byers, Co-Founder of Susa Ventures)

And they showed me a test flight of their app. You couldn't trade a stock, and it was the most beautiful thing I'd ever seen in mobile app development. If you zoomed out a chart of an up-and-to-the-right company, it would be like, oh shit, oh fuck, oh shit, oh fuck, and the general trend line would be like up and to the right. Listening to one's conviction, when you have it, it's so rare, you should just do it. Yeah. Right?

Super excited to have Chad here, co-founder of Sousa Ventures, powerhouse seed fund. 10% unicorn hit rate, early investors in Robinhood and Flexport, and pioneers of the data moat thesis that has become kind of mainstream and obvious these days. So let's talk about the famous Robinhood investment. You invested $250K when 100 investors had passed, and it turned into $400 million and more. What did you see that other people missed?

So, 20— Early 2014, the iPhone was what, 5, 6, 7 years old. iPhone apps are quite ugly. If you go think back to some of what the apps looked like, design has come a long way. So I meet Vlad and Baiju at the Rosewood on Sand Hill in the South Bay, and they showed me a test flight of their app. You couldn't trade a stock, but you could click through the beta, and it was the most beautiful thing I'd ever seen in mobile app development, and that told me a lot about them as people, like their tastes as product, as designers, their vision. I think at the time I was 26, what probably helped is I was the demographic that they were trying to sell to, and so I kind of believed that our generation wasn't going to use E-Trade or Interactive Brokers, and like they were going to usher in a new era. And so, I didn't know a bunch of people had passed, but what's like an interesting anecdote is I talked to two people who I consider to be experts in that field, and they said, "Oh, this has been tried before in the 2000s. This will never work." And we ended up obviously making the investment, and I'll tell a lot more of that story, but it was an important lesson for me as an investor, and I think this might carry on to any, whatever field you're in. Like, sometimes experts know too much, and you have to take their wisdom with a grain of salt. And so we ended up making that investment, and it's been obviously an important one for us.

Yeah, and the "this will never work," is there ever a time where you actually do listen to the experts?

I listened to an expert on Plaid, and we didn't make the investment.

So the moral of the story is you shouldn't.

So my A/B testing so far has been experts can be useful to teach you about the end thing, but broadly not useful particularly as applied to early-stage investing, which is such an outlier business.

Your thesis when you started the fund was around data moats, and was that a framework that you used to evaluate whether or not to invest in Robinhood? Is that like the main thing or, wow, these founders are great, they have great taste, it's fine?

So I think data was a thesis we had broadly back then. Particularly to Robinhood, I think it was slightly less useful as a thesis for it. That one was far more a prepared mind around how I thought an entire new generation would interact with equities and the financial stack broadly. The data thesis, it's funny 'cause I just tweeted a slide from our first pitch deck yesterday. It was interesting how early we were to that statement. Our statement was essentially like, data is the new oil.

And in ML land, that was true, and now it's like 10x more true in AI land.

And so I'd say you have to have, you know, data as a thesis for us was a very broad perspective. But each individual investment had unique things about it on why we might have said yes or no, if that makes sense. And so for Hood, it was not specifically applicable, but even to give some credit to Vlad and Baiju, any great company starts with an initial idea, and the initial idea for them was equities. Robinhood today has 12 products doing over $100 million in revenue, right? I couldn't have foreseen that. We weren't talking about that stuff back then. And so this is where you, like, back to the point on people and really good entrepreneurs figure out what act 2, 3, 4 looks like and kind of make the things larger than you even thought possible.

Since 2013, there have only been 4 public companies valued over $100 billion, and one of them is Robinhood.

So we got so lucky, right place, right time, and right people with those two.

Enjoying the conversation? Got a question? You can ask Chad's digital mind. Just check the link in the comments or description. So, at Sousa, each partner backs around 6 to 8 companies, which is not a lot.

Concentrated.

There are people— there are more people starting companies than ever. What is a trait in your most successful companies that in hindsight was indicative of success, and then how do you evaluate for that trait, maybe through like a question?

So we have a thesis on people we call spiky. I define it loosely as this person's a couple standard deviations away from kind of normal on some set of degrees. That could be intelligence, drive, ambition, or some combination of all of those. There isn't a question. That's a silver bullet. So this is something I've come to believe. You almost have to get there through a series of conversation. If all of you were to think about someone truly exceptional, truly outlier, maybe it's, you know, you in this case, there's too much depth to a human to be solved with a single question, which I really firmly believe. And so probably in all of my best decisions, it was through a series of conversations of getting to know that person at their true core, that led me to make an investment decision that was a good decision. And so it actually makes this particular market very challenging for me because we live in a very kind of transactional, fast-moving time. I struggle with 24-hour, 48-hour investment decisions. Like, call me old school, but I actually like getting to know people and really understand who you're going into business with. These are decade-long relationships often. I actually think it's crazy for both directions, for the CEOs to be making these decisions in a couple days, and yet kind of the market in a lot of ways has kind of forced that behavior upon everyone. And so for me, yeah, it's— I'm a bit more old school, and like, it's really this deep partnership. Stord, the company we just talked about, Sean was 20 years old when I backed him. I led the seed and joined the board. We now, as I mentioned, kind of the scale, but he was based in Atlanta, knew no one, helped him meet Kleiner for the Series A, Founders Fund for the Series B, Kleiner again did the Series C with Bond. That relationship to me means so much in my life, and it was just through getting to know him as a person, because on paper, he was 20 who had done absolutely nothing. He had no real track record that one could point to to say this person's exceptional.

Yeah.

But it was just in getting to know him as a human, his level of drive, his insight on what he wanted to build in supply chain, that got me excited. And then you still uncover things about people many years later. So I've been worked with him now for, 8 or so years, and it dawned on me that I'd never seen him stressed.

And I was like, why have I never seen you stressed?

I mean, we went through periods where like the business went flat, we had to fire the entire GTM team, we fired 50 to 75 people, you kind of went like founder mode, whatever that means. And he's like, well, I grew up in a house of 6 siblings and I was the youngest, and so there was just like turmoil and hectic shit going on all the time growing up that like nothing really fazes me.

And so it's so fun that like many years into the relationship, I'm still like learning little bits about him that I find fascinating, that kind of like show themselves in the business building aspect, which is kinda cool.

I resonate with that a lot. We have a wedding test for which VCs we decide to work with. Would we invite them to our wedding?

Ooh, I like that.

And that's a long-term game. So have you had to adapt to the faster-paced nature of deals, or have you trained your impulses and remained grounded in this philosophy that you have? Because there's a lot of hot deals going on, and so there's a bit of FOMO.

I think, yeah, we have made fast decisions, And most of the time, they were the wrong ones. And so, despite the market pushing me there, I kind of remain steadfast in reminding myself that this business is a very long-term oriented business. You guys might all feel this as well. I feel this, like when you read Twitter, you get FOMO that the world's moving so fast, and this person's raising this much, and this person's raising this much money, and I always remind myself that like that shit doesn't matter. And if you look at the vast majority of company history, which I still think will be true in the AI era, the vast majority of value creation happens in the outer years of compounding. Like, Robinhood's a really good example. We created technically $9 billion in enterprise value in roughly 9 years, or as marked by VCs, but $9 billion. In the next 2.5 years, we went from $9 billion to $110 billion. $100 billion of value roughly created in the last 2.5 years. So, I take a lot of peace in like while the market can be hot and fast moving, you can stay grounded in like what you believe, your principles of like what creates enduring value long term, thinking about moats, thinking about defensibility, and I just, that creates calmness for me in my investing and with the CEOs I work with of reminding them that fact, right? Because it's easy for us all to get caught up in all that hype.

Yeah, every week there's a new thing.

Yeah. Every time our work thread, someone posts an article about what another VC is doing or some round, I just get really upset because it just feels so unimportant relative to the thing we're trying to do every day.

So how do you— what is your framework for hype to I should take this seriously? I don't know, the thing on Twitter yesterday was this AI agent that has to work its way for its existence. Did you see this?

No.

Okay, well, that was the thing. Let's say you see this, how do you determine hype? —something you should take seriously?

There's two ways to think about the world, I think. You have to have a perspective on where we're all going, and then you get to apply your framework to whatever field you're in. So you guys are at a company you're building into the future. You have to have a perpignan of where tech is going and make sure that you fit into that view. I think about it in my investing view, so I have to have an opinion of the world. When I find companies, I have a prepared mind of how that company's gonna fit into the future world. And then the second thing you have to be is dynamic enough to understand when to change your opinion. So like, I have set opinions, so when I see something that's hot, I know if it fits into my mental model of where I think the world's going, and do I think value accrues to this place? But I have to be nimble enough to like challenge my own belief and say, hey, something has fundamentally changed where that old belief is, it should be swapped out. Do you have an example of that recently? I think a big one of the past was 2 years ago, there was a lot of talk of the defensibility in enterprise software of things that were system of records. And I was a staunch believer in that. I was a big believer in proprietary data. If you were in the workflow that generated net new data or you were a place where valuable information was stored in enterprise, you would be safe. I think I still roughly believe that, but for the first time my opinion is being challenged by if these future models are good at actually helping transferring data out of a system of record into something new.

Like maybe the reason system of records were actually defensible might not actually be fully true or at least challenged. Like that is a prior I'm trying to figure out if I'm gonna update or not. And so this SaaS-pocalypse that you've probably seen in the public markets and more broadly, like how real is that? Is that an overreaction by the market or is that actually an enduring risk of software businesses? I think one counter to it, risk being a risk, is like Anthropic still pays for Workday. They haven't like vibe-coded their own Workday internally. I still think we'll see big enterprise software monoliths still be valuable, but it's certainly something like worth challenging your own opinion on.

Yeah.

And on— I'm curious how your thesis on the original data moats has evolved now too, because, you know, there's synthetic data. Are there data moats? How has that evolved now with AI?

I mean, I think the value of data has gone up, if anything. And so data moats absolutely still exist.

The term mode is the interesting part here.

So we know data is valuable. It's not created equal. We know it's the lifeblood of these really important models in the world. We also know back to the system of record point, if you are a software or a company that can generate or store information that the world doesn't have access to, that is very valuable. What's a good example? The data that's sitting in electronic medical records is not in foundation models, right? So Epic is a company that runs the vast majority of hospitals in the US. It's one of the best businesses very few people know about.

It's definitely the most successful female entrepreneur ever, and Judy, she still runs the business. It's high single-digit billions of revenue.

It's a really, really important company. That data is proprietary. That company is very durable, very sticky, and so like defensibility still exists at the extreme. I think the erosion of moats is happening, and you just have to be increasingly thoughtful about where that actually still persists.

Are there new moats that have come up in your eyes?

This is maybe like a bit of a cheesy answer, but I believe it to be true. A lot of founders will say that like speed of an execution is a moat, and I actually do believe that. It feels like the pace of innovation has just like accelerated every year that I've been doing this business for 13 years, and I'm sure you all probably feel the same in whatever role you're in. And so it does feel like pace of execution truly is a moat, and we've seen it in our portfolio. There are two ways to run a company. You make long-term decisions about product or architecture that you think can build enduring moats and defensibility, and then the other one is just speed of executing your competitors. And I don't think they're mutually exclusive. I think you can do both, and you have to do both. But certainly speed is an element for sure.

And do you have two companies that you've invested in that have taken the opposite approach? Speed versus slow, thoughtful building?

I don't think anyone's slow to be slow, but I certainly think there is a trade-off to be made on thoughtfulness, as you say, although I do have a bias for action broadly. I think action generates data, and data allows you to iterate. I think it gets back to just the being grounded in what you believe and not being caught in the pace of the market. I think that's my interpretation of slow. So we have companies who are just so steadfast in their belief of what they're building and the value that that will create in the world that they aren't getting caught up. And so I'll give you an example, a company called Firefly. If you're familiar with Verkada that builds security cameras or Flock Safety that uses that for towns, this is like the third pillar of a hardware plus software business. They sell to like a university campus where they put a bunch of hardware on the university campus including like panic buttons to teachers., and they built a software suite that wraps that whole physical building in safety, a safety protocol and software. I think they're gonna be the third big pillar of this hardware plus software safety play. They're in the early innings. They're gonna take longer to grow 'cause they have to go install hardware, but we're not getting caught up in the fact that our revenue isn't gonna 1,000x in one year. That's fine.

We know we're building a great business.

This thing is gonna be an enduring great company. We're okay with that, so that's what we mean by slow sometimes.

They have a long game in playing. We're playing the long game there, and like, we know it'll be valuable.

Yeah. What's the most, what has been the most challenging moment of your career, and how did you deal with it? This is something we ask everyone who comes here, and every person who interviews for our company.

I think the most challenging thing, I mean, I'm human, like rejection. There have been many companies I wanted to partner with and lost those rounds. You can't help but feel that every rejection is a personal attack. It's certainly a motivating force to be better the next time, and that's definitely how we use it. But I would say, like, the, the biggest challenge I personally and mentally have with our business is it is so competitive. Not only do you have to be right on your decision, then you also have to win that investment, and it's an incredibly competitive market. So I'd say like that has been, you know, tough broadly on myself. I kind of am a bit stumped on it because in a way, like, we all are part— you guys are part of a company. We have ups and downs every single day in our company and in our portfolio every single time. One thing I always laugh about is every super successful company, people are like, oh, it must have been up and to the right. Like, no, they're never up and to the right. If you zoomed out a chart of an up and to the right company, it would be like, oh shit, oh fuck, oh shit, oh fuck, and the general trend line would be like up and to the right. And so, every day, there's huge highs and huge lows within our portfolio and within our company, and so when you say like what's been the most challenging or whatever, you know, in a lot of ways, like, I've gotten used to that volatility, and maybe the largest challenge is just like, The consistent level of effort and excitement I've put into this business for 13 years now has been the vast majority of my life. It's been almost my entire professional career. It's probably just the consistency of, like, doing this every day with a lot of energy, hoping that that, like, compounding leads somewhere, is probably the thing that's been the most challenging.

Well, moving from my first raise to your first raise, you raised Soos' first fund with no track record. A team that was across many different cities. Tell me about your first big LP rejection and why you kept going.

Yeah, so this is 2013. We were kind of a sort of random group at the time that came together to start Sousa, and we started pitching everyone we possibly could. I would ask you if you had a friend, I'd pitch them too. I figured any lead was worth following up on. The vast majority were nos, and for good reason. We had no track record. We were in different cities. I thought we had a good thesis, but back then, you know, a random LP didn't really have any insight around the data stuff we were talking about. And so most conversations were frankly nos. Um, the conversations that were yeses were always interesting because they happened in random ways. I remember taking a train from New York City up to Connecticut, and I'm pitching this hedge fund guy, and he's doing email the entire time I'm pitching. So I'm literally sitting across the table telling him the story, and he's just doing email, like barely looking at me. And he's like, where did you go to school? And I was like, I went to Boulder. I usually don't love admitting that because it's not an Ivy League. And he just stops his email and he goes, I also went there.

There's not many of us who have made it. 'How much are you raising?' And I was like, '25 million.' He's like, 'I'll do 250K.' I'm like, 'You didn't listen to a single thing I said this last hour, and that is the singular thing you said yes to?' Which in a way was both helpful and not helpful.

It was helpful in realizing how random the world is, and the reason people say yes or no to things is sometimes out of your control. And then the unhelpful thing is, was like, was, is the pitch really so unimportant I have to find these commonalities with people. In a way, it taught me a lot about sales broadly, but also our fundraise. And it took us about 11 months to raise the first fund, which at the time felt normal, and in today's era kind of feels long, but it was a grind. And I think that grind, like, taught us a lot about what we were trying to do, how to articulate our story. Those nos, every single no was helpful. The most useful no was actually a fund of funds, an institution. And what I so appreciated is they said, "You're a pass," like, based on my email and the deck, "but I'll meet you anyway." And it was so clear and upfront and transparent on why they weren't gonna invest. Fast forward to fund 2, they were our anchor. So they passed on us, but genuinely got to know us, got to track us as a line, not a dot. And that was like the second big lesson for me, which was, every person you meet might come back around in your life at some point, and this could be an LP, it could be a founder, it could be a teammate, it could be anyone in your life, it could be a life partner, and just make sure you're investing in every relationship, leave every experience as positive as you can from a time permitting standpoint. And that was like really important, that fund of funds is a very respected fund of funds in venture, and really like kicked off the rest of our firm history in terms of fundraising. So it's funny how like all these nos at the start kind of taught a couple lessons going forward. It always does.

I know now you are a lot more intentional about who you bring on as an LP. Were you that intentional your first time, or was it just—

No, no, no, we were passing the hat around. Maybe a little bit of context. So venture funds raise money from all sorts of capital bases in the world, individuals, family offices, foundations, endowments, et cetera, et cetera. When you're first starting out, you raise from anyone you possibly can. At this point, we've asked ourselves, like, who do we really wanna work for? And the causes I care and our team cares most deeply about are usually nonprofits and specifically in the healthcare world. So a couple of our largest LPs are children's hospitals, which I can't think of a better pitch.. If you have two people trying to get into your fund and one is a rich individual who says, "I don't know, if you make me $10 million more, my life won't change at all." The children's hospital says, "For every $250K you return to us, we treat a child of cancer." You're like, "Well, this is like a pretty obvious decision." So our capital base is now vast majority nonprofit, almost 90% plus is nonprofit organizations. Some of those are universities that we deeply believe in and are aligned with their missions, and then a lot of healthcare institutions, children's hospitals, research organizations, and so That's like the kicker on top for me, and perhaps we should even communicate it more to the founders we partner with, but like, we wake up every day, and I truly think we work for these institutions, but quite literally, and so it's extremely motivating for both myself and the team.

You should definitely pitch that to founders. Yeah, probably should. It's a good thing. And on the rejections for— a lot of VCs talk about the art of evaluating a deal. Not many people talk about the art of winning a deal. Are there any specific rejections that kind of taught you about that art?

Well, those are two, like, there's winning and then— so let me just touch on rejections for a second and the learning. A lot of the times we've, like, lost or we walked away was price. If I go back and I review all the times we walked away on price, it's a basket of companies you would absolutely love to own at the price we walked away at. And so my big learning, and this broadly applies to everybody, is, and for me it's investing, but for you it's whatever part of your life. I just feel like humans, when you have extreme conviction in something, and in my business that would be choosing to invest, you should just act on it. And in my world, it's like, regardless of price, act on it. Maybe in your world it's like extreme conviction in some job, you should just act on it. Whatever it is, maybe it's like a life partner, act on it if you have extreme conviction. So it's like listening to one's conviction, When you have it, it's so rare, you should just do it. So for me, you know, that was my big learning on— Be price insensitive. Price insensitive, and just like, if you believe, just do it, right? On winning, like, there's two reasons an entrepreneur chooses to work with an investor. There's the firm's brand, and then there's the partner at that firm. The way I always describe the firm brand is like, I have to be realistic. I think we're one of the best early-stage firms, but we live in a world of gigantic behemoth businesses now. Thrive Capital announced $10 billion yesterday, right? Like, I feel like I'm the two-story building on Madison Avenue that just like begrudgingly did not sell, and then like all these skyscrapers were built around me, and I'm just like still in my little building. We have to be aware that we're small relative to this world. However, what I always tell our team is our brand is good enough to be in the room on the deals we wanna be in, right? So we're good enough to be in the room. Then it comes down to the individual to win the company. And the thing about an individual winning a company is, As much as AI is taking over the world, our business is still a human business, and at the end of the day, it's the founder's gonna pick to work with an investor, and they're gonna either really vibe and get along and wanna build a partnership together or not. The cases where I lose a deal because I felt like the founder and I didn't have a chance to get to know each other, I'm actually kind of okay with, because in that case, I'm not sure it was the right decision. You know, they didn't have all the data to make a decision on myself, In the cases where I really get to know someone, I win the vast majority of those, 'cause I feel like we've gotten to a level of we kind of understand what the next decade working together will feel like, and those are the ones for me that are gonna be the most important anyway, at this, like, phase of my career, and so, when it comes to winning, I really just try to show who I am and how I'm gonna show up every day, and usually that is the best approach I can have with a founder. Yeah, playing the long game, as always.

Who is one mentor in your life that has completely changed your mind about something?

Um, I'll use my brother. So I have one sibling, uh, he's 2 years older than me. We're very, very close, best friends. We travel everywhere together. We just spent a month under one roof, both babies, both wives, all under one house for a full month. So we're like extremely close. He and I were very different growing up, and then as we got older, our lives have kind of merged into the same fields and we do the same stuff. Um, the thing that he changed my opinion on broadly is what exceptional people look like. So he had a better filter for exceptional than I did growing up. And the reason that's so important is until you know what exceptional looks like, you can't set your own bar. And so he— when we were in our early 20s, we actually lived together with a bunch of other hackers and builders and CEOs. We were in our early 20s. Of the 4 people he invited into the house to live with us, one sold their business for $1.1 billion, two became the co-founders of Neuralink with Elon Musk, and the other built like a $500 billion or $500 million business. And I didn't know who these people were. I thought 3 of them were kind of weird when they first moved in the house. I was like, these people are kind of strange. I don't really like their personalities. And he was way earlier to me to understanding what makes exceptional people. And I think through him, I have just been exposed to, through his friends, through his, you know, unintentional teaching and learning of what really great people look like. And for that, like, I, you know, I'll be grateful forever.

And is that, we talked about there not being a question that can really evaluate people, is that just intuition that you build over time?

I think he's less judgy than I am. So he, you know. More open-minded? He's probably more open-minded. Really spiky people, really outlier people tend to have really like lumpy personalities. Maybe they can be extreme in some ways. From like a housemate, you know, sometimes that's not always like the great vibe. So he was probably more open-minded. Like, you know, I can be a little judgy. I think he was less judgy. And I've just learned so much about all of that from him and seeing the world a bit more through his eyes.

Sam, one of the things that you were thinking about in 2014 was data is the new oil, kind of thinking about what are the things beyond what people are currently looking looking at to invest in, and right now everyone's constantly talking about AI, AI, AI. What are the things you think people are missing that are coming after, like maybe biotech or robotics, things like that?

Yeah, there's a lot we could talk about here that I think are interesting. So one thing my brother's working on I think is a really interesting concept. So he's running a company called New Limit, which is working on longevity drugs. But I think he's hitting on a broader concept, which is we often thought of, you know, drugs or what the pharma industry produced as medicine for sick people. I think it's fascinating to think about what would it look like if we flipped the concept to what if we just make medicine for healthy people? What is— and this kind of gets at preventative medicine, but it goes a step beyond that, which is why can't we take baseline and actually improve baseline? Like, why can't we make tons of drugs that make all of us super, superpower, superhuman. Oftentimes some of the largest, most blockbuster drugs were actually made for a different indication, and it turns out they were actually useful for something else. GLP-1 being an interesting example of that. But I think that's going to be like a really interesting, especially as we get AI working on drug discovery and development, that's going to be a huge, interesting category to me, right? I think One thing the whole world talks a lot about here, which is the lower levels of the tech stack of AI, 'cause that's where a lot of the big dollars innovation is happening. I personally get more excited about let's bake in default, like intelligence of these models going on an exponential curve. What does that mean for every end industry in the world that actually touches human life at a close level?

And then what you should go do with that level of intelligence.

That to me, I get even more excited about. I think the diffusion of AI into the real economy, it doesn't perfectly answer your question because it's not like no one's talking about that, but I feel like it's the part that I get the most excited about. When entrepreneurs are coming to talk to us where their thesis is, hey, bake into the fact that I get to use any endpoint API of these great models for the next 10 years and they're just going to get super smart, here's how I'm going to go like impact the real world, real economy in like a very real way, impacting GDP over the next couple of years. Like, that's what I get so excited about.

Awesome. Thank you so much, Chad.

Yeah, thanks for having me.

Thanks for tuning in. If you enjoyed today's episode and want personalized advice from Chad, head to the link in the comments or description to ask his digital mind on Delphi.