INSANE: Space Factories Are Coming! | Delian Asparouhov

Delian Osperohav is a principal at Founders Fund and the co founder of Varda Space Industries. In this conversation, we talk about building space factories, we talk about what's going on in the venture investing community, and also why Delian believes more people should be creating companies, especially tech startups. I always enjoy talking to Delian, and this conversation was no different. It was filmed live at Lyceum Miami, which is a conference that I hosted earlier this year. Here is my conversation with Delian Osperoha. I think a great place to start is that you have tons of hot takes on Twitter, but really the hot takes come directly from a degree of independent thinking that is hard to keep something like that, no matter how much people kind of keep hitting on you. Every time. Every time that we talk, I think that there's some new idea that we debate that we're considering. There's somebody that we know that said something that sounds insane, but like, it's actually interesting. How do you think about the ability to think independently in a world where that is becoming more and more rare, but also there's more pressure not to do that?

It's a good question. I mean, I think definitely there's a part of it that helps knowing that there's very limited professional threat to me thinking through crazy ideas and expressing opinions. Like, a lot of times when I am debating or chewing on a particular idea, I'm typically doing it with somebody else that is helping me think it through. But they may or may not be able to actually go out and talk about it, explore it, because, like, they actually will like literally have their job taken away if they do it versus, you know, working for, you know, Peter Founders Fund and starting your own company. It's like real tough to find the line at which one would get fired. And so I think there's definitely a part of it that is like, you know, having that type of, I don't know, professional financial security. I think another part of it is, you know, I was born into, and your wife as well, into a very, you know, sort of different culture than what the United States has. Right. You know, I was originally born in Sofia, Bulgaria. And when I try to describe to friends what the culture of Bulgaria is like, I always try and tell them, imagine yourself kind of Transported to like 1960s US but obviously like Sovietify it. Everything from the gender norms to the way that people communicate to one another, it is just like so far off kilter in a way that actually I do think changes how you think. And then being aware and Present of this completely different culture that I grew up in also in the United States makes you start to realize that there are these just like almost like walls that you build up based off of where you're embedded into and where you spend all day with. And having these viewpoints makes you realize that all the walls are actually kind of fake and allows you, I think, to traverse much more easily than if you're born and raised into a single individual culture. And so I think those are the two things that probably influenced me the most as an investor.

A lot of the investment returns over the years have come from either ideas that seem stupid in the beginning they seemed impossible or they seem kind of like it's not stupid, it's not impossible, but it's not worth working on. Maybe it is kind of the way to think about it. Does that create this economic incentive to basically have to think independently and have to go outside of the consensus because there's not really returns in the consensus thinking?

Yeah, I mean Peter always gives this really great framework where we repeat on a regular basis at Founders Fund, which is if you take a two by two grid and you have non consensus and consensus and you have right and wrong. Ultimately there are a variety of different ways of making returns. Consensus and right is a place where actually there's a decent amount of returns to be made. Take companies like, you know, Uber for example, relatively quickly in Silicon Valley very rapidly became consensus. And so it's actually like in some ways quite difficult to make returns. If you look at it from like series C onwards, those investors actually had pretty shitty irr. And so that's one way to make returns. You can be consistent and wrong and you just look like an idiot. And the only real place to make massive concerns returns is non consensus. And right now ultimately for a company to like succeed at the grand scales, it eventually has to shift from non consensus to consensus. So like SpaceX, which we founders one was a very early investor in, is a great example of this of like super non consensus even up until like 2012, 13 and then very rapidly shifted on a dime and then nowadays it's basically the hottest brand name on the planet. But like when Founders Fund originally invested in 2009 was definitely not. And so I think about that with like, if I look at, you know, in the past, I've been a venture capitalist now for about you know, six years or so. My two best performing investments were extremely non consensus at the beginning and they actually had some interesting parallels to one another where basically both companies, one was ramp Financial this corporate card competitor, corporate card competitor to Brex and then Sword Health, which is this digital physical therapist. Both companies when they were founded effectively at their seed series A, had an incumbent tech company that had over a billion dollar market cap, had massive investors around the cap table that were all tier one and had a ton of momentum. And so every single time, any time that I brought either of those investments to committee, both times my sort of colleagues were like, what are you doing? Like, why would you go after this behemoth that is clearly doing super well? And it's like, it's not like a behemoth, that's like Amex that is like super antiquated and there's clearly angles of attack going after like a tech enabled behemoth that has a ton of momentum, talent, funding, et cetera. And in both cases identified that I thought there was something basically fundamentally wrong with the product and that ultimately the founders that I was betting on had better engineering and product discipline and that would ultimately play out over the course of the following five, six years that would lead them to have differentiated sort of performance. And so if you look at it, both, you know, Ramp and Sword Health, I think are truly out competing the like incumbent tech competitors, Brex and then Sword Health, Brex and Hinge Health. Now it's not the most interesting form of contrarian thinking, but it was one of these things where it's just like I approached a set of investments that just other people were deeply uncomfortable with because it was sort of thought of the consensus view was oh, those markets are already fully tapped out, there's no more alpha to be had there. So if I look at my career, a lot of them are either like going to areas that nobody's fucking comfortable with. I like space manufacturing. So there's clearly no incumbent or going to areas where the incumbent is proving that there is a market there but are clearly not going after it in the appropriate pattern.

When you see those companies kind of grow so quickly, even though there is the tech incumbent, who to a non tech incumbent looks like the challenger. Right. How, how much does that reinforce the idea that like it's all about the execution and the idea doesn't nearly matter as much versus like no, the idea really did matter, but the execution is, you know, as important, if not more important.

Yeah, if there's one thing that I feel like I've learned over the last decade is like all that matters is that early team and DNA that you put together. Like take the company that I started, Varna Space Industries. The idea of microgravity manufacturing. The particular materials that we're going after has been discussed and thought about every single decade basically since the 1970s. And a significant sort of financial pursuit was gone after it. So like the 1970s we funded Skylab. Senator Bill Nelson, the current NASA administrator, was literally up there doing a protein crystallization experiment, trying to figure out whether or not that would be something that could be brought to market. In the 80s and 90s you had nonstop basically projects going on in the ISS. In the 2000s and 2010s, there was an early set of venture backed companies made in space, a few others that basically got started. And so it's not as if the idea is particularly different that we're pursuing, it's just the fact that we're pursuing it maybe at a time that is different. But I think in particular the reason that we're able to recruit the team that we're able to is because the time is different. But then ultimately that team is what makes it absolutely out execute. And it's one of these things where it's like when you put that initial sort of group of 10 people together, it ends up self replicating and it's almost impossible to steer it sort of off course even if you wanted to. And so if there's another thing that I've learned is like once a startup has passed 10 people or so, this sort of like, you know, end outcome is effectively baked in like there's limited amounts that you can do either as a founder or as an investor to really influence it at that point. If you haven't made that right call in the first time.

Yeah, I'm an investor in Varda.

You are.

You guys continue to do a great job. But talk a little bit about time as an important part as well, because one of the things that is interesting about this business specifically there are certain technologies that are available now that previously weren't. There's also this like sexiness around working on space related technologies because of a SpaceX. There's also what I would consider like fertile recruiting grounds where like maybe somebody went to work at SpaceX or another space company for three, four or five years. Now they're like, hey, I want to go earlier. And so you're able to kind of capitalize on that. Like how do you think about time? And do you think maybe Varda wouldn't be nearly as successful as it has been already and hopefully will become if you started maybe even just like two or three years before you actually did it?

No, I think the timing is critical on this stuff. Like if you look at the early teams that started the most influential aerospace companies in like 2008 through 11, they basically had no what I would call traditional like Silicon Valley DNA, except for maybe like one founder effectively that was like, you know, like Elon bringing the capital to the table. But if you look at the broader team that like, you know, Elon basically recruited, none of them had worked at like Silicon Valley companies. They'd all been at like NASA, you know, Aerojet, Rocketdyne, basically like working at like, you know, defense contractors. And he was the first one to like sort of put them together. Same thing with Planet Labs is effectively a bunch of like basically ex NASA, you know, engineers that put it together and got venture capital. But like they themselves had no, you know, sort of Silicon Valley DNA. And a part of it was at the time it was not thought that sort of Silicon Valley, you know, sort of venture funding was at a scale where you could pursue these types of super ambitious projects. Compare that to, you know, even 2017, you still kind of had that be the case. Like the next set of startups that got started are like, Relativity is probably, you know, the most interesting one from that era. Astronomers, those were founded by people that okay, maybe had worked at like SpaceX for two or three years. But again, like, you know, they didn't have like Silicon Valley, you know, type DNA. It's only in like 2019, 2020, where I really started to notice two things happening. One was you actually started to have people that were like, you know, sort of top tier Silicon Valley operators going and joining SpaceX, which I'd never seen before. So like, the example that I like to pick is one of my friends was one of the very early employees at Opendoor, I think, like number six or seven or something like that went and basically was like, head of all international business development for starlink. I was like, whoa, the like DNA is starting to cross. And then when starting, Barda, my two co founders, very much so aerospace, but like basically our very first hire, who's now our chief business officer, he was straight and narrow, like, you know, basically Silicon Valley. He was like, you know, first 1525 employees at Stripe, led business development there. Then he joined Zipline, another Silicon Valley company. Like his entire DNA was basically Silicon Valley. And I think a lot of what ultimately makes Varda successful is the fact that we started the company in 2020. We built that company in the early team in 2020, and now is the very first time where like Silicon Valley and Aerospace were intersecting that makes it so we can tackle a more complex problem that does actually require skills that aren't just strictly basically aerospace skills. Right. You do need to build the satellite, the factory, et cetera. But there's a lot of other things that involve traditional sort of business development, growth, et cetera, that are much more applicable to like Silicon Valley type companies than they ever were to SpaceX. Because SpaceX ultimately really only like sold to the government for a very long time.

Explain what you guys are trying to do with Varda and kind of when successful, not if, when, what the ramifications of that are.

Yeah, so Varda was predicated off a very simple thesis that I can't even take sort of full credit myself for. I give a lot of credit to probably Robert Zubrini, where he wrote this book originally that actually inspired Elon way back in the day, the Case for Mars, which is basically like how do we get to Mars? Elon read the book, interview. Zubrini got really excited. I think he even had some early SpaceX shares. Zubrini followed that up. That book was basically published in 1998. I want to say he followed it up basically 20 years later with this book called the Case for space in 2018. Highly recommend reading it. But he basically goes through what does he think the future of space looking like? And in it he actually does specifically talk about this business model around in space manufacturing for goods that you don't necessarily use up there, but actually bring back down to earth. So this isn't like build space hotels or infrastructure like a lunar base. This is, hey, there's these set of materials and analyzes three different use cases, fiber optic, semiconductors and biopharmaceuticals. They might wonder why the hell would you go through the expense and the pain of like sending a biopharmaceutical up to space and then bringing back down. Well, it comes down to this very simple sort of reason due to physics, which is in microgravity, when you're. Sorry, in space, when you're up there, you're experiencing what's known as microgravity. What that means is you're basically orbiting the earth fast enough that you basically have a centrifugal force that is perfectly equaling out the gravitational force on literally like an atom by atom basis. And that actually changes a lot of how sort of chemical reactions and a variety of different sort of transport and convective mechanisms basically work in space. The simplest analogy that you can use is if I lit a candle here in front of us on the Table you're taught as a kid, when you put your hand above it, the hot air rises. Now why does that happen? You basically have a combustion reaction that is transferring thermal energy into the atmosphere around it. That atmosphere is then gaining kinetic energy. It then becomes less dense. And what happens when you're in a gravity field where we're sitting today, the less dense gas basically rises to the top of the room and then the more dense gas basically shuffles in basically to replace due to the negative air pressure. And so what happens is as a candle, you basically have what's known as convective currents, right? And that's why when you put your hand above a candle, the hot air rises. You can feel that heat. Take that same experiment and do it in basically microgravity. What happens? You still have the combustion, you have the thermal energy, but there's no up, there's no down. So that less dense gas that forms around it basically actually just slowly dissipates the energy into the rest of the room. And so if you put your hand above a candle in space, you don't feel any heat, at least not for a very long time until it very slowly dissipates away. Interestingly enough, the candle actually in space will go out after a couple seconds, because on Earth, the candle actually relies on those convective currents to bring it net new oxygen to keep the reaction going. So if you take that sort of macroscopic analogy of a candle and take it to the microscopic level of like a particular atom that you're trying to place onto a semiconductor wafer, or into a fiber optic or a molecule they're trying to fabricate in a particular way in a biopharmaceutical reaction. In all those cases, you typically are applying some level of heat into that reaction. You're trying to place a molecule. And when you do that on Earth, there's basically constantly these convective currents that are moving the molecule around, that affected in a sort of chaotic, unpredictable way that basically lower the quality of the good versus if you do that same thing in space, you actually very precisely basically arrange and place the molecules. And that allows you to create super high performance semiconductors, fiber optics, and basically versions of drugs we can't actually make down here on Earth. And so I think in some ways, the way that I like to say, if Varda is successful, ideally call it no later than five to six years from now, there will be a life that we can point to that was saved due to a drug that was only possible to be manufactured on Earth. So as you guys, as you guys.

Build this, you have a very specific mission. You have a very good idea today as to what you think is possible once you get there, once you kind of do all this. One of the things that's interesting about SpaceX is I was at Facebook in 2014, Internet.org was a huge effort. And at the same time there was Project Loon and a bunch of stuff at Google there they were trying drones, they were trying hot air balloons, literally, should we drive trucks out into like some African nation and like put up like a mobile, like a receiver, all kinds of things like get Internet to people somewhere on Earth. The critics would say that's because they were running out of people to sign up and so they needed more people to have Internet. They would say, hey, we're trying to bring Internet, cause it has all this like economic value. They both were unsuccessful for the most part in doing this. And so I look at that as like one company was very focused on accomplishing this for business reasons. The other one kind of seems, at least from afar, like they just backed into it and it ends up being this big multibillion dollar opportunity. Is that how you evaluate that playing out? And then are there things with Varda.

That maybe you guys have thought about.

Where you're like, we'd have to get up there and see if it's viable?

Yeah, I think ultimately if you look, we are doing this purely for economic reasons and trying to make it so that there is economic activity outside of space. The upside of that and the economic implications of that I think are very interesting to humanity, where I actually tend to believe, you know, sort of shooting a large rocket towards like Mars, the moon is unlikely to make it. So we have a multi planetary presence, then bigger factories, then eventually we're consuming so much water that we're like, hey, we'd actually make like a lunar ice mine and start to get the water from there. And then once you're starting to expand that, then you can eventually start to think about, okay, what are the economic incentives and why go pursue Mars, Jupiter, etc. The rest of the solar system.

One of the things I think I appreciated as you guys started the company was this idea that you're mentioning around. Google almost had like they were choking on money, right? Like there was so much money that Google was generating that they started thinking to themselves, like, where can we stuff it? What can we do? That may be something else that's interesting. SpaceX on the other hand, you call it economic starvation, right? Like they literally were Starved of resources and they had to figure it out. And so it was kind of innovation came out of this need. Startups for the most part are usually starved of resources. The last two or three years, not so much. And you, and kind of the way that you built the business where you work on the venture side, the network that you have, you could have raised a hell of a lot of money for this thing. You didn't do that. And so talk through a little bit as to like the discipline of really embracing like the milestone based funding of venture capital. And like, why kind of not just go raise $100 million and say, hey, fuck it, let's see what happens.

You know, I will say in the grand scheme of things, we did raise a boatload of money, but you know, mostly put it aside in fixed income interest accounts that basically cover a decent amount of our burn. And I think it took some discipline. And I even credit my co founder. It's funny, we were going through this interesting argument over the past two or three days about what ultimately amounts to a 30k per year expense. But the fact that we actually debated it back and forth was so interesting to me because I relayed this anecdote to him. I was meeting with this investor in Miami. I won't name them by name, but they are a very solid space tech investor. They had some pretty great performance. And he was, you know, catching up with me about Varda. And at one point I was talking about, you know, I was in D.C. last week meeting with, you know, some, you know, Space Force, Air Force generals. My like flight got delayed on the way back. And he was like, oh, like why, why didn't you just like fly private? That way you don't have to deal with like commercial delays. And I was like, like, bro, like I, you know, I want liquidity. Like, he's like, well like, but like Varda, you guys have raised enough. Like why doesn't Varda pay for the private jet? And my jaw like literally just completely dropped. And I was like, is this guy fucking serious and he wants to invest in Varda? Like, like we are see, clearly. And I think he started that. I was so deeply uncomfortable that I froze for so long. And so I was joking with my co founder. I was like, bro, somebody asked me if we were going to take a private plane to Washington. We're debating this 30k a year investment for over an hour. Just completely different world. And in some ways, honestly credit to my co founder. I think he's done a great job of, I think I've generally been economically disciplined, but he, even more so than I, is extremely, extremely scrappy. Now with something like Varda, SpaceX, etc. There's no way to do it with true scrappiness, bootstrap, etc. You know, the equivalent of like what people have done, you know, in software ultimately in order to build a satellite, in order to fly it, in order to get onto a SpaceX rocket. You're talking about millions of dollars by default. There's no way to do it without those millions of dollars. And so I think we take a prudent approach of like we did raise a boatload of cash at a time where like the interest rates were super low. I talk about this sometimes. Part of why I started Varda was in like May, June 2020. I started with my partner and you know, sort of mentor, Keith Raboy, about how frustrated I was that we weren't investing that much and have that much money hands. And he was like, well you should think about what you could do in this period of time, maybe start a company. And I literally tweeted this idea where I was like, hey, in a low interest rate environment, this is probably one of the best times to start hyper capital intensive businesses that maybe would be viable in a couple of years, but sort of low interest rate environment is actually bringing that sort of future forward. And literally I tweeted that out and then I thought about it for like 24 hours and I was like, fuck, I've got to start this space manufacturing company. I'm so screwed.

Talk about attracting your co founder and kind of building up that initial team. You said earlier that the first 10 employees basically are the death sentence or ultimately will be the tailwind. Where do you find those 10 people? How do you vet them? What do you look for when you go after talent?

Yeah, starting Barda, I was sort of very nervous going into it. There's even a period of time where with some pillow talk with my then fiance, I was almost about to back out. And she even encouraged me. She's like, darling, this is going to be your life's work. You really got to stick with this. And the reason that I was so nervous was I started my first company maybe about basically four, six years prior to starting Varda is when I started my first company and it effectively failed miserably in the grand scheme of things. We got to ramen profitability type revenue, went through recombinator, raise a small seed round, but return no capital back to investors, no major outcome for anyone. We ended up just selling the software to one of our customers at the end. And so when I was starting it, I was like, man, I've got this really great gig where I'm investing. There's a huge opportunity cost to starting a company. Especially since as an investor, if I really wanted to start something, I should really make sure that there isn't something else out there that I can just invest in. Because you kind of get the same economic upside as starting it and you don't have to spend as much time on it. But when I was starting it, I was like, man, I've got this really great gig where I'm investing. There's a huge opportunity cost to starting a company. Especially since as an investor, if I really wanted to start something, I should really make sure that there isn't something else out there that I can just invest in because you get the same economic upside as starting it and you don't have to spend as much time on it. But ultimately couldn't find anything. And so I was like, okay, if I'm going to do this. And that was like a big if for me at the time. I was really reticent. I was like, I need to find the perfect team. And there's sort of two pieces of DNA that I was looking for. One, somebody that was like a scientist that had done microgravity manufacturing before, but like, wasn't so deep in academia that their like mind was corrupted by like just wanting to publish papers but like really wanted to bring a product to market. And so thankfully, actually that one, you know, in some ways, like found relatively quickly. But the other one was even more critical because I realized a lot of the company ultimately, while it was this like microgravity, you know, pharma, semiconductor, etc. You couldn't do that unless you built a good spacecraft to like do the whole manufacturing portion of it. And so I realized it was like the most critical component that a lot of my engineering friends told me was actually that re entry vehicle. Basically if you do you know, anything in space today, especially on the iss, like microgravity manufacturing, you kind of get a free ride down from the government. They take you down on the crew or the cargo Dragon, the Soyuz, the Cygnus, there's a couple of vehicles. If you're off and on your own doing your own independent microgravity manufacturing, you got to bring those materials down. That means you got to build your own small scale reentry vehicle. So I was like, I need specifically somebody who is an engineer that has worked on a reentry Vehicle has like leadership experience. So a bunch of people follow him because a lot of the first 10 people are going to need to be people that have also worked on the reentry vehicle with him in those other sort of domains of engineering and ideally has entrepreneurial spirit because like this person probably needs to be the CEO ultimately of a largely spacecraft company. You need a spacecraft CEO. And so thankfully I had a couple buddies from MIT that went to SpaceX after college, basically like mined through their networks, gave them my list of criteria and thankfully after about two months or so of interviewing various candidates, came across my now co founder, Will Brewie. And he literally, if you look at it, matches the exact set of criteria that I had. He basically worked at SpaceX for seven and a half years. He was in mission control flying several of the Dragon missions, the iss. He had worked on the avionics team there, building out the early avionics. And ultimately the number one thing that I did in that first year of 2020 was like convincing him that he should join me and start the company and incubate it within Founders fund. So beyond those initial three co founders, there was then the first set of the broader team credit mostly to my co founder for call it 8 out of those next 10 were basically all his recruiting and largely honestly just the network of people that he worked with at SpaceX which has made it to that. That risk of that first 10 being a sort of killer outcome versus death note was a lot easier because he'd worked. If you look on average the first 10 employees at Varda, they had probably worked with our CEO for five and a half years or something like that, on average, which is very difficult to do if you're fresh grad, out of school or if you've been hopping job to job. But he had this extremely deep network and there's basically one BD person and one OPS person I basically helped bring in in the very early days. And so I think that's what really set it up for success, was like aiming for a co founder that I knew specifically. Both had a skill set, but then also a network to then build out that first 10.

Getting the right people there is important, but the culture that you build, the actions of what you do early on is really important. I know one thing that I think you've borrowed from the Ramp guys is counting the days since founding the business and I love that. I try to tell every single company I'm like, dude, I don't understand why. Just put this on and count and like it will make you do shit. And so like, are there other things like that that you guys have done to either reinforce culture or like specific actions that you're like, again, maybe you understand why it works or maybe not. But like if people do this, it seems to have this kind of push to actually be more productive or get more done.

Yeah. One of the things that I really like that in some ways is a corollary to counting days thing. So this habit that Pomp is talking about is the very first ramp board meeting that I went to. They basically put day 33 of the business and then every single board meeting after that they would talk about it in relation to the days and the average progress they'd made per day. And so definitely took that. At Varda, one of the ways that it plays into something like an aerospace company versus a corporate card company is how you think about launch schedule and how to track things. And me and my co founder really talked about this extensively when we were first starting the company about, you know, he'd obviously been at SpaceX for an extended period of time. That was basically largely his only professional experience. I've been in a couple different companies, but largely an investor. So obviously most of the corporate culture was going to come from SpaceX, especially since we were bringing eight of the first 10 were also going to be SpaceX. So we talked about, okay, like what parts of SpaceX culture do we want to have and what do we not? The first that we like quickly agreed on was like, look, SpaceX works very hard, but they sometimes go to the level of like kind of being an asshole. So let's get the like hard work ethic of like SpaceX without the asshole side of it. And the second was how do we think about and communicate launch schedules? And at SpaceX there's actually sort of two launch schedules that people maintain at any time. There's one, the Elon prettified launch schedule which they're never going to hit, but they just upward manage and make sure that Elon sees something pretty. And then there's like the real launch schedule that everybody manages day to day. And our whole thing was like we are only going to maintain that real launch schedule and it comes with trade offs of not having any super aggressive sort of fake schedule or being willing to push things back. So if you think about it, for our first mission, one thing that I think my co founder has really instilled into the team is like the trains take off time. We basically committed to our investors when we started the company we were going to be launching two years and a quarter from the founding date. Our very first mission, we're basically roughly there now. We're actually launching in about two and a half months from today. And ultimately it did come with trade offs where as we started to approach like a year out from the sort of mission, we had a set of engineers that wanted to work on a project to sort of like think of it as like increase the feature set and the capabilities of the vehicle. But it came with some associated risk of potentially not being able to hit the launch deadline. And ultimately we made the call like, look, while our customers might value that a lot, while we might be able to make more money on mission one, if we did include these features, we are not going to do it. Because ultimately, look, the trains take off in time, the trains take off on time. There's a train that hits three months from today, and then there'll be another mission that launches six months later. We'll make that one the more fully featured one. But the important organizational habit to build is not building the most fully featured sort of version of the spacecraft on day one, but instead just making sure that it launches on time. And building that muscle of launching on time will make it so that over time your spacecraft is much more capable because you're just launching it every six months super consistently. And that type of iterative design culture ultimately actually stems way back to like the Apollo days. And you know, I think SpaceX has done a great job of sort of, you know, reinvigorating that and bringing it back to aerospace after aerospace kind of lost its way for a couple of decades there. So I think the corollary to the day's thing around like maintaining launch schedule and that being sort of the ground truth and sacrificing. And ultimately I think any sort of principle needs to have the counter principle of like, what are you sacrificing? If you prioritize, let's say peer to peer kindness at a company, it comes with the trade off of, well then maybe people don't get the feedback that they need to grow. Or if you prioritize like hours in the office, it comes with a trade off of potentially people burnout at certain times. Right. And so I think it's really important when thinking about sort of the principles of your company practically thinking about, I think too many times people be like, I want my company to be like hard work ethic and integrity and et cetera and this. And it's like all these positive things, but it's like, okay, of course everybody wants to be the most perfect, positive version of themselves. But you need to think through what are the principles that actually do come with realistic trade offs, that when it comes down to a particular decision, the employees have thought about it, they know about that fundamental principle and are making that trade off because ultimately my co founder can communicate it. But if there's three engineers in a room that are debating about a particular technical problem and there is that tension of hey, should we build this feature or should we make sure that anything ships on time? He's not going to be there in the room every time. But making sure that people know that that is the trade off that we make, that we say, hey, we ship on time and we'll deal with the extra features later, I think is really important.

How have you changed your investing style based on things you're learning as you're operating a business, Especially one that is, I mean, pretty dead on.

Right?

It's a tech startup with venture capital funding that you're seeing a lot of success with. It's growing at a very fast rate. Like all the things that you'd want to see in the companies you're investing in. Has it made you a better investor? Has it made you make less investments but more concentrated? Like what's changed?

Yeah, it's ebbed and flowed obviously of the six year career in venture, two and a half are Varda. So a significant portion of it sort of has been Varda. The very first year, interestingly enough, was like my highest volume year. And I think it was a combination of obviously both. It was the 2021 financing environment. So you know, there was a lot of deployment happening across the board. And then also is the fact that like, you know, especially in the early days of Arda, there was a lot of attention and a lot of founders that were super intrigued by it and wanted to work with me on it, with me because of it. It's, there's a huge increase in sort of top of funnel and conversion rate in the investments that I wanted to make. You know, there's some things that I think have stayed roughly, you know, the same in that as I assess founders and think through them. I don't think it's actually changed, you know, that much with, you know, you know, starting Varda in that like, you know, I assessed my co founder in Varda and I'm very happy with that. But it's not like it's given me like an infinite number of reps. The one area that I think it has is like I do really obsess now this doesn't really work for a pre seed or seed company where it's just the founders. But now anytime that it's a series A company, I was never as diligent about this before, but now I literally go through the LinkedIn of every single employee and you can't perfectly gauge somebody off of their resume, but you have a decent sense on average of what is the quality of people that this founder is able to attract to their company. And generally if I know their prior backgrounds, the companies that they work at, I can even go start to reference. I never did this before. I'm now starting to reference like random engineers basically at a series A company and use that to basically gauge like what is that bar that that founder is recruiting towards. And so I think that's one tactical thing that has really changed. And the second is in the world of, let's say like more strategic bd and especially with the dod, I have a much more intimate sense of, you know, what those deals take to get across the line. We have a big one that we'll be announcing March 15, so look out for that in Bloomberg. But you know, it was supposed to happen two days ago, so I was hoping to talk about it today, but unfortunately I'm still whatever on the exclusive. So anyways, coming soon. But I have a much more accurate ability to assess what is that contracting process looking like and how is that company going. And then there's also some amount of tactical, like I know a lot more about spacecraft than I did three years ago. I'm not a spacecraft engineer myself at any point, but we have this habit of at the company, everybody sends a sort of roughly call it two paragraph long weekly update of major accomplishments, et cetera. And I am religious about, even though we're now at like whatever, 65 employees. So it takes me a solid like two and a half, three hours to read every single week. I do go through and I read through and I really try and understand exactly the engineering problem that every single employee is working on. Partially just for making sure that I feel like I have a really good sense of the business. But also it's like one of the best ways to learn about aerospace is like how are these engineers thinking through the very problem that my company is trying to solve.

When you think about the economic environment, 2021 is all you had to say on the way up now a little bit different. You all seem to be very methodical and kind of the bar maybe has risen in terms of what you guys want to fund and what you don't at Founders Fund talk a little bit about how you're thinking?

Yeah, I mean I think, you know, honestly credit to our GPS, you know, Peter, Keith, Brian, etc. I think for being very, you know, it's always difficult with these things to perfectly, let's say, you know, call it and you know, can you actually predict it? Maybe, maybe not. But you know, ultimately I think Founders Fund did a great job of you know, Q4, Q3 of 2021. We end up distributing more capital than the total amount of capital that the fund had raised since lifetime, which I think is very rare for venture capital firm especially as you're growing because you're talking about like the funds that are returning all that capital were like much smaller than the funds that were raising today. And even then the rough math is like the firm has probably raised 13 or 14 billion or something like that. And we basically like returned that amount of capital to LPs just in those two quarters. After that we quickly realized that the markets were deteriorating and at the end of the day, while we are very long term thinkers and still aren't letting short term market dynamics affect how we invest, ultimately there is this downstream financing risk that any company takes on. And while we are multi stage and can't take people all the way, we do need to underwrite what are the potential downstream risks for these types of companies. So we've definitely slowed down our pace and have been much more judicious. But at the same time it's not like it's stopping us from tackling capital intensive companies. Like just last week we co led the seed round for a highly capital intensive, risky, basically aerospace defense company that's basically building long range. Think of it as a competitor to Predator drone type things. And so we definitely have slowed down and we're more deliberate but it's not as if we've totally stopped and I think will start to pick back up again. Especially now that like I think the bid ask spread in the market is really compressed. If you look at like the Q2, Q3, Q4 22, I still think there were a lot of founders that both had this capital overhang so they didn't have like a need to raise for their business and maybe some rosy eyed hope that like, you know, things would, you know, quickly return and bounce back. Now as I think founders are starting to get into desperation mode where there's just much lower runways, people are starting to realize that the markets aren't necessarily bouncing back. There's a willingness to sort of accept term sheets at pretty reasonable prices. And I think we're very optimistic that this is going to be one of the best vintages of all time, where I think there's such a broad swath of industries that tech startups are now tackling. Right in the dot com bust, tech companies were basically just like LinkedIn. Tackling social media against SpaceX was still a couple of years later. Maybe Tesla was around then, but it's a pretty narrow set of problems that they were tackling now. The startup world is basically tackling every single problem on earth. Everything from logistics, space, enterprise, infrastructure, just everything is being touched by software startups. And so I think it's a really attractive time to be investing.

There's two other areas I want to talk about. The first is bitcoin crypto. You are one of the only people I know who was, I don't want to say critical, but, like, you definitely weren't super excited about it. And I remember you went, and I won't say who it is, but you went and met with someone and then you started tweeting and you were like, hey, I'm trying to do this. It's broken. Who can fix this? And then, like, it was like, literally watching you debug problems problems live on Twitter. And what I took away from it was like, oh, like, whether you come out of this optimistic or not, like, you did the work, which is a lot more than I think people who just kind of talk on the Internet do. Where do you stand now on, like, are there areas of that that are exciting to you, not exciting to you? If people read your Twitter, they know that, like, the really speculative crypto shit is probably not your favorite, but, like, where do you lay?

Yeah. I don't know if you noticed, but on Twitter, somebody tagged the two of us, I think, like, 48 hours ago or something. Oh, I did not see a screenshot of an old tweet of mine which was, you know, I'll try and roughly paraphrase it, but it was like, I'm glad the world is finally realizing that the future is basically American dynamism and, like, you know, reshoring, you know, manufacturing, you know, bringing America to the frontier and, you know, keeping our national security and that all of crypto is basically a scam. They're like, I look forward to pomp and dummy and chatting.

I mean, are you wrong?

I don't think I'm too wrong. Yeah, I. You know, the weakness weekend that you're talking about where I played around with crypto, basically I had a friend talking to me about DEFI specifically, and my mom's actually an economics professor, so I spent a lot of time. She actually is in this world of what's called experimental microeconomics. So what she does is she actually sets up fake market environments, pays basically undergraduate and graduate students actually trade in that market and actually gives them financial incentives of ultimately, if they do make the most money off of their trades in this artificial stock market where she controls the interest rates, the inflation, the news that comes out, what earnings reports are, then ultimately the students actually do make, you know, sort of real call dart cash. So I thought a lot about, like, we, like, I literally helped my mom sort of build this like, software interface that actually helped like liquidity and make trades. And so the concept of DeFi and actually being able to do this sort of like, yeah, decentralized liquidity pools that allow you to trade any two asset classes I did find extremely intriguing, like, theoretically over lunch. And then, yeah, I spent a full weekend and I was like, okay, like, you know, I have a Coinbase account. Like, you know, it shouldn't take me like too, too long to figure this out. And literally spent like eight hours going from that to, I think, contributing to a liquidity pool to getting this weird fucking QR code that I was like, I don't know what to do. If I scan it, it just takes me back to the QR code and ultimately figuring out how that actually gave me some sort of yield. And it was just an impossibly difficult user interface. And it was one of these moments where I was like, in theory, this stuff could have some potential practical applications. We're so, so far from it. And it's one of these things that is like, it's so hard to, as I'm sure as a crypto founder, not get caught up in the speculation use case because that's the thing that makes the most money and it's the thing that the users are most interested in. And so actually trying to build something legitimate seems like almost like an impossible task. And like, all these, like, crypto investors that are still talking about this stuff and they're talking about like, oh, like, gaming is like the future of like, you to bring crypto the real world. I'm like, bro, I fucking game like way too much. I'm addicted to video games. There's no chance that crypto is going to be like, integrated in these video games. And that's all an interesting use case. And that's what, like, you're betting the hope of like the future of crypto on. It's just like store of value and speculation. Great use case. Let's just like stick to that. Everybody should like quick their crypto jobs and just, just like hold bitcoin or whatever for like the next decade. And it's probably going to be priced out at like, you know, 50k a year or like the price cap of bitcoin is probably 50k and it's never going to get above that. It's never going to like, you know, shift massively, you know, below 25k.

You think 50k is the top?

I think 50k is basically the top. Dude, we hit 69k and never again maybe.

All right, AI is all the rage now. All the crypto bros have run over to AI. I saw Elon Tweet recently. He said, I found this new AI thing after I left my crypto thing or whatever. He said, what is, what is the general sense around AI and kind of what you find interesting there?

You know, before we touch on that, I always think it's funny to, you know, I've now been in Silicon Valley or like the tech world, which at this point is like an abstract concept. I feel like, you know, we're at Silicon Valley.

It's Miami Valley.

Yeah, Miami Valley, you know, wherever. But, you know, I've been in, let's say like the tech industry now for like 13 years. And it's so fascinating to see that like there are just like the exact same set of people over the course of 13 years that every two years are working in like, whatever is like the hot new trend. And the problem is you never capture any value doing that if it has become the hot new trend. You by default are just like the grifter that is coming in way too late into the game. And like, you're not going to make any money off of it, which is fine. But like, it's. It's amazing to see if these people really think that maybe like the sixth time around it'll finally work and they'll, you know, find a way to capture value. And I think it's this commentary that I think is important for people's careers. I actually admire a lot what you've done over the past couple of years, which is, I think, called pre2019. I think there were a couple different projects and things you're working on. And I think ultimately sometime in the COVID era, I feel like you started to recognize, look, media interviewing providing these conferences. Like, this is ultimately my core skill set that I'm differentiated ability at than anybody else in the world. And I'm going to lean into it. And as I was driving over here towards Miami Beach, I'm a big kite surfer. And right now there's about 20 knots wind coming straight from the south. And there was these huge eagles that looked so majestic. They were trying to sort of feed on these fish that were in the Miami ocean and they were just staying afloat, completely effortless. And it made me think about that is what a ideal career should look like, in that you should identify what is the thing that you are differentiated at better than anybody else in the world. That sort of comes very naturally to you, right? That bird that's floating in the air, it's not thinking about it at all. It literally just sits there in the 20 knot of wind, opens it's, you know, basically wings and it sits there until a fish basically comes and then dive down, dives down immediately. If I try to do that, I'm basically like exerting all this effort on my kite and like, takes me like five years of practice to be able to do the shit that he's doing when he's born. And so I think that's what you need to do when you're doing a career is like, really focus on what is the thing that you're truly differentiated at that comes at naturally and just focus on that. And sometimes that means, look, you know, maybe you're not an AI engineer. Maybe just like stick to the thing that you're good at and then someday, hopefully it'll be the thing that is hot in the world and that's when you'll capture all the value. Right? Sam Allman was not working on AI when it was hot. He was working on it in like 2014. But he's been working on it super consistently since then. And it's been his like, life passion. And now that it's hot, he's basically getting to capture all the value you've been working on. Showing that you have a voice and are able to interview. And maybe that wasn't like the hottest thing or whatever in 2019, but dedicating towards that and finding that and making that your life's work, I think is what allows you to capture the value. So on the AI stuff, it's like, I think it's a very interesting field. I think all the people that are going to be capturing the value, the people that already started companies way before, you know, ChatGPT came out. One of my best friends, this guy, Connor Zwick, he runs his company Speak which is like this like sort of AI tutor for language learning. And effectively what it does is both, you know, recognizes super accented speech so that if you're like a Korean that's basically trying to learn English, it can actually understand you if it's super broken. And it basically gives you a sort of like, you know, choose your own adventure. You play like Hermione at Hogwarts and you basically talk to the thing and it both in real time gives you feedback on how you're talking and also, you know, guides you along through various subjects as you learn. He started the company in 2015 and it turns out he's been grinding, building a great user experience as AI has advanced the tools that he has access to. The infrastructure that he has is improved. And of course this year as ChatGPT is going to the world, Whisper just came out their new speech recognition API by OpenAI. OpenAI leads the largest funding round that it's ever had into his company. It's a series B, $20 million round, biggest check for OpenAI and he's the hottest thing on the planet. The company's revenue is exploding and growing like crazy. But it's like, it's not something where he's like retrofitted and like come into the market super, super late and just decided, hey, I'm going to build like a super thin layer and chat cbt. It's like, no, he has like distribution, a brand, a set of like product content technology, a team that's been working on this for like five and a half years and now is getting the acceleration of it. And I think a lot of like capturing value in a career is like sticking to your thing and then making sure that you understand what those underlying trends are. I started working on aerospace semi full time in some ways in like 2017. At the time to me it felt super obvious that there's going to be this massive wave that was, was coming. If you just looked at how often SpaceX was launching, it was basically a perfect exponential curve. The likelihood that like something was going to knock them off that track felt very, very low. If you look at it today, in 2023, they're launching a rocket on average largely from Florida on every four hours, four days and six hours, which is like, I mean, it's just, it's incomprehensible. We've launched more rockets in 2023 than like in, in the Apollo era peak rocketry that we would do over the course of like a full year and not just in the first, basically like two and a half months of the year. And so now is just, like, a phenomenal time to be working on aerospace. And so I think the AI Stuff is, like, very interesting. But, like, dear God, if you're in this room and you're thinking about pivoting your career to AI, do not do it. You're too late.

Ladies and gentlemen, Delian.

Good to see you, brother. Of course. Thank you for coming.