Kent Lindstrom 0:00
The path to becoming a venture capitalist. Often sounds like this, hi. I went to Stanford, or hang on. Sometimes like this, hi. I went to Harvard. Sometimes like this. Not as much, but Hi, I went to Princeton, followed by and I worked at take your pick, Facebook, Google, Bain, capital, McKinsey, and then I fell into being a venture capitalist. Oh, and my dad was a venture capitalist. Well, folks, that is not the story of my two guests today. I’m Kent Lindstrom. I am a venture capitalist at the firm eight bit capital in San Francisco, California, where we invest in seed stage software companies. And my guests today are Danielle Strachan and Michael Gibson of 1517 fund. Danielle and Michael do not subscribe to the idea that you need to be highly credentialed to build a company in Silicon Valley. They don’t subscribe to the idea that you need to be really at all credentialed because their 1517 fund got started famously. When you might remember, Peter Thiel was suggesting that people should, who were building companies, should just drop out of college. That’s right, drop out of college and get going. Well, this, this episode, has everything. Peter Thiel, like I said, the concept of burning the paper belt. What the heck is that you’re gonna just stick around and find out? And 1517 has been sticking there in your head, hasn’t it? Well, if you’re like me, went to a public high school, you had to go look it up. You’re gonna like this one. Folks, my guest today, Danielle Strachan and Michael Gibson, a 1517 fund. Welcome back. All right.
Kent Lindstrom 1:48
Welcome back. This is the something about your podcast. I am Kent Lindstrom. I am your host. My guests today are Daniel Strachan and Michael Gibson of 1517 fund, how are you guys doing?
Danielle Strachman 1:58
Doing great today. Kent, yeah, great. Thanks for
Speaker 1 2:01
having us on. This is
Kent Lindstrom 2:02
great. My ongoing experiment with having two people on it had the Homebrew guys, that was great. Saga guys, that was great. So this is gonna be great,
Danielle Strachman 2:09
hopefully we don’t ruin it for future guests.
Kent Lindstrom 2:12
Now, you know, the Homebrew guys use the same microphone, which was kind of interesting, so it worked out fine, but it’s just like, No, we want to be in the same room. So there you go. I don’t know what that means, but it’s kind of Yeah. So this is the part of the podcast where I say, hey, my guest, you know, went to Stanford and then Harvard, and then they fell into venture capital. How you doing? That’s not how you guys did it, though. So if it’s okay, I’m gonna unspool this, because it’s really interesting. I think the background maybe I’ll start with Daniel. I’ve Cyan Banister on too. So I’ve heard interesting backgrounds. But I just want to unspool a little bit about, let’s just go back to kind of how you got here. But what you were doing before, sure, being a venture capitalist, because it’s kind of, it’s, it’s not just going to Harvard, Stanford, working at Google, is it
Danielle Strachman 2:56
didn’t do any of those things, exactly. Um, so for myself, gosh, where to start. I’ve worked in an alternative education for over 20 years at this point, and I got very involved with homeschooling communities about 20 years ago when I started a company I had called heightened learning, which was a tutoring company. And those people really, really changed my life and my Outlook when people use the phrase lifelong learning they usually mean for children. And what I learned being with these homeschoolers was that it was everybody. Everybody was like, developing and changing over time. And I really loved that. And especially these homeschooling parents really showed me what it looked like to be child led and like, be respectful of the individual. And yeah, it was a very impactful crew for me to start rolling with, which very much had an impact on everything moving forward, from working with these homeschooling communities that led to starting innovations Academy, which is a charter school in San Diego that has think we’re going into our 17th year now, which is just to me, it’s amazing when you found something. I was on the founding team and then operated the school for the first two years there, and I’m still on the board. I have a board meeting tonight. It’s amazing when something grows, like way past you, and like remains on and that legacy is there, and we serve 400 children a year, that school is based on homeschooling principles.
Kent Lindstrom 4:26
And so just for a second here, I am not an expert on homeschooling. Well, I’m a venture capitalist, so I guess I’m an expert on everything, right? Of course, that I have a friend who homeschooled their kids, and is it’s very different if you just explain, then what you think. Because what you imagine is you imagine some like Amish person, the dad goes off to farm, and the wife, the wife stays home, and, you know, the kids are all lined up in the thing, and they don’t interact with other kids. And it’s very weird, yeah, and my friend was my friend. Was like, no, like, they, first of all, they’re each learning at their whatever pace they’re learning, which is way faster than school. And then they go socialize with kids at the end of the day, they go play sports and all this stuff. And that’s just, it’s not some creepy thing where they’re sitting at home.
Danielle Strachman 5:13
And in fact, homeschoolers have a term for this. They call it school at Homers. And that is more of the like, yeah, we’re doing school at home. We get a textbook out. We’re not necessarily going out into communities. And the beautiful thing about homeschooling is there are all kinds of different ways to do it. You know, a lot of the people that I worked with in the past and know now, when they’re homeschooling, they’re doing it as part of a community, often doing homeschool co ops, where different parents are taking on a facilitator role for different subjects. Children are becoming experts in areas very, very quickly these days. And so some of them might be presenting about, like, okay, hey, here’s like, the history buff lesson this week kind of thing. So a lot of it is done in community. In the Bay. There’s the, I think it’s the gifted Bay Area, gifted homeschooler community. They get together, they do Park days, they do field trips. We’ve actually invested in a company called moonrise that is very much taking this model of a children’s third space, where children can go and get dropped off and do a podcast, or hang out in the library or use all the materials they have there for any amount of time. They can be there for two hours. They can be there until it closes. They do field trips, things like this, and this is a much more common way of homeschooling now, yeah,
Kent Lindstrom 6:37
don’t encourage the kids to do podcasts. There’s too many podcasts, I know for God’s sake, go do something else. Write a song. The it is kind of, by the way, buried news story in the last couple days, the Department of Education, such as it is, came out with their how kids are doing learning thing. Oh, interesting, terrible. Like, worst at math, like in the United States, like worst at math since 92 worst at reading.
Speaker 1 7:01
But whatever headline that was
Kent Lindstrom 7:05
ridiculous,
Speaker 1 7:07
it speaks to like, it’s everyone’s like, Oh, if you change the school system, how will kids learn? I’m like, they’re not learning now. Like, how do you accept this?
Kent Lindstrom 7:16
Yeah, I don’t. I feel like we had it after Sputnik for a little while. We’re learning something. Something’s gone wrong. What? So, how do you Okay, so now, now we are well into our not this is a venture capital.
Michael Gibson 7:25
Oh no. We love, we love. How do you
Kent Lindstrom 7:29
take we’ll get to 1517, together. How do you get from here, just to the threshold of of being a venture capitalist?
Danielle Strachman 7:37
I mean, for us, a lot of it was being at the teal Foundation, and both Mike and I wound up at the Thiel Foundation, kind of Wiley ways, but it was running that program, working with the Thiel fellows, seeing some of the outcomes over time. That in year five of running the program, we said, hey, we could scale what we’re doing. Sometimes we call 1517, fellowship, 2.0 yeah. And what we noticed, and things are changing over time, I think venture capitalists are more open to young founders that said, I think it’s they’re less open to non pedigreed folks. And we’ll talk to anybody. But what we saw was that, especially 10 years ago, it was very hard to to even get a meeting for even fellows. And looking back, I mean, it’s pretty absurd some of the intros we tried to make to, you know, some of the like known quantity companies of the world groups like, you know, figma and oil rooms and things like that. And what we saw was that those venture capitalists weren’t taking our young people seriously. So Michael and I said, Well, I guess maybe we could become venture capitalists, like maybe we could just flip this on its head and start our firm right?
Kent Lindstrom 8:50
Okay, so you’re at the teal teal foundation is what it’s called, right? Yeah, all right. So Michael, how do you come here? You went to Stanford, you went to Harvard. You worked at Google.
Danielle Strachman 9:00
Michael, dad of Google,
Kent Lindstrom 9:02
real fast, by the way. You think I make that joke sometimes with venture capitalists, who they’re like now, I went to Princeton, then Stanford, then worked at Google. So how do you come to the Yeah,
Speaker 1 9:14
well, I mean, funny enough, I did get pulled into this because I was Stanford related, actually. Oh, boy. So yeah, Danielle, maybe I don’t know more background for your listeners, Danielle and I were on the founding team at the teal Fellowship, which is Peter thiel’s philanthropic effort. You know, it became famous because we were it sounded like we were paying people to drop out of school. 100k grant to 20 people a year had to be 19 and under to apply, yeah, but, but, you know, I that was not why I was hired. I was I met Peter, you know, maybe a month and a half before that, and this is the Stanford connection. He was set to teach a class at Stanford Law School on philosophy and technology. G in politics, and I My background is, I thought I was going to be an academic philosopher. I spent a lot of time in grad school. I’ve been to the inner temple of academia, and I had seen it was empty on my own, and so I did not finish my doctorate. I dropped out. I was a journalist for a time for MIT’s Technology Review, and I came into Peter’s orbit through the Seasteading Institute. And so we just talked, and he’s like, Hey, I’m teaching this class. Could you help me do that? And I was like, Well, that sounds cool. So I took that job, and then I showed up to work the first day. And this is I could tell because it was my first day. It was, I could tell you what day it was. It was September 27 2010 which is like 15 years ago, will be this coming September 27 and and I arrive at work, and I guess on a plane ride the night before Peter Jim O’Neill, who’s now head of the CDC, which is kind of crazy, he came to my desk and he and he said, you know, we had this idea on the plane that, you know, maybe we want to do an anti Rhodes scholarship. That’s what they called it first. Yeah, we’re going to give out these grants so, but we got to announce this thing at TechCrunch Disrupt, and come with me. So I get in this car with him and Peter, and Peter, and we’re like, talking about what this thing is, how much money. So anyway, just got sucked into this on the on day one, and it wasn’t planned at all. And then Danielle, through connections, you know, mutual friends that she had with people at the Thiel Foundation, was brought on to bring order to this chaos. We had nothing later, Danielle joins.
Kent Lindstrom 11:44
So you decided to forego the sweet philosophy money that you were going to be making. So you guys are together. So you guys have been together as partners for 15 years, right? Yeah, that’s the thing
Danielle Strachman 11:58
at an old seasteading event that started a seasteading event called ephemeral, and we have our meat aversary on the calendar, which even proceeds working together by a few months. And so, yeah, it’s wild of like, wow, we’ve
Kent Lindstrom 12:12
worked together. It’s a thing. I’ve talked to a few people about this adventure capital. You know, the Homer guys have been partners forever, and they have a new they have a new fund that has no LPs, which, oh, wow, tells you
Danielle Strachman 12:25
that’s amazing. So they’ve just, they’re just self funding it, yeah, I
Kent Lindstrom 12:29
think I mean the baller, the implication is, I did so well somewhere along the line. They don’t need LPs, but they love working together so much that they’re doing another fund, which, which is interesting, because there’s been another way inside baseball, but there were a lot of venture capital funds lately that have come together, people who hadn’t worked together before and came apart. Yeah? So 50 year relationship is
Speaker 1 12:54
pretty amazing, right? Yeah. I’ve wondered about like these big funds, Sequoia benchmark they have. They figured out succession in a way that works, I guess, for them. But when I think about smaller funds like ours and what we do, it feels less like this company that will continue to exist even if we step down, and more and more like a rock band where, you know, we’re going to put out like, five, six albums, yeah, if the Beatles, you know, John and Paul, if they retire, it’s not like the Beatles keep going, because it’s like, you know, specific sound, a specific way of doing things, yeah. And so I wonder what the fund, and maybe that’s related to the structure of a partnership and so on, where I think there is something to like, really gelling as a band,
Danielle Strachman 13:43
right? Well, yeah, I’ll go ahead. One thing I was going to jump in with is one, you know, one question we get asked a lot, you know, we’re in our fourth fund, we’re in our 10th year, is like, where do you guys see things in like, 1520, years from now? And it, I can’t really imagine a life where Michael and I aren’t working together, and I think one instantiation of what 1517 looks like, and I like kind of joke, but it’s not really a joke. It’s like, maybe we come 1517 familia to the point of like, we become a family office. We just keep the people we love, working with the most honest Capital Partners, and then we’ve got our, you know, where it’s like, we’re becoming producers, instead of the band, where it’s like, okay, cool, we’ve got some funds. We’re backing, we’ve got some culture, art, music projects on nonprofit arm, like, we’re doing all these different things under a larger umbrella,
Kent Lindstrom 14:32
right? By the way, it’s a ridiculous question, like LPS ask people like, like, I want to invest in multiple funds. It’s like, why?
Danielle Strachman 14:42
Like? Just invest in the best.
Kent Lindstrom 14:45
What is that? What concept is that like you like? It makes no sense. It’s like, I’m investing in Google today, and I want to just make sure I never have to buy another stock. It’s just a weird concept. Yeah, think of all the funds that have blown up. I won’t name them, but a bunch of them have blown up. Yeah? Every one of those told their LPs we’re going to be around forever.
Danielle Strachman 15:04
Oh yeah, right. You mean blown up in a bad way, not in the good way.
Kent Lindstrom 15:08
Well, they’ve gone their own ways, and so whatever, whatever the I don’t think it’s that terrible, but LPS might imagine that that’s not a great thing. It happens a lot. So nobody knows what’s going to happen tomorrow. Like, I know, invest in this fund. Enjoy your returns, and you know, talk, whatever happens will happen. Man, that’s not the answer, no, either Jesus is in your heart or he is.
Danielle Strachman 15:32
I already want you part of 1517, oh, you get this exactly.
Kent Lindstrom 15:38
You can only be what you can be. So, okay, so you guys, you guys are at the teal foundation. Explain to people, because this was a really big deal at the time, what the idea was of the college students dropping out.
Speaker 1 15:51
And, yeah, that whole thing, oh yeah, there was a confluence of things and, and some of it has been lost to time where things became so big that it’s hard to remember where things were in 2010 like one thing we’ve noticed is that just the phrase higher education bubble, there’s a bubble in higher ed. There’s a journalist named Glenn Reynolds who, I think, coined that term. But it hadn’t really become popular until Peter Thiel started saying that in 2010 and using that term. So if you look at the use of that term after the start of our program really takes off. So I think in Peter’s mind, there are a couple trends. One was the just extremely skyrocketing high cost of tuition and the debt that people were taking on in order to pay it. And he worried that that people who had great ideas, they might not be able to pursue these things, because they got to get a safe but well paying job after they graduate. So the idea was, if we get someone before they’ve accumulated that debt, that’s you know, why we decided on 19, and also because Peter was the first investor in Facebook. I leave Zuckerberg was 19 when he pitched Peter, if not 19, then just barely 20.
Kent Lindstrom 17:07
So how’d that work out?
Speaker 1 17:10
So, so, and then if you look at PayPal as well, right? You know the company was comprised of a lot of people from Stanford, but also University of Illinois, Luke Nozick in that crowd, and a lot of there were a number of people there who had no college or who didn’t finish college. They had left. So I think in Peter’s mind, he had seen just like the productive capacity that or the creativity of some of these younger people, yeah, so that with this larger trend of higher ed, was like, Okay, what if we what if we tell someone, Hey, you don’t have to do this. You can do something else.
Kent Lindstrom 17:43
By the way. It’s funny. At University of Illinois, did you receive risky business? Yes. Movie, you know, that was the loser school. Oh, was it like in that movie, he’s like, he was trying to get the Princeton. He wants to get into Princeton, right? But if it doesn’t work out, and he’s like, a screw up, the line is like, oh, it looks like U of I when everything’s going bad, which is ironic, because this is before Mark Andreessen and Max Lindstrom went there, showing us that it’s one of the great institutions that go into U of I is not a loser school at all.
Speaker 1 18:13
I know that. I mean in terms of overlooked talent. We meet a lot of people at great schools like that, these great state universities where, you know, for maybe they want to pay in state tuition instead of some private tuition on the East Coast.
Kent Lindstrom 18:27
And, you know, it’s an interesting I’ve had a number of black venture capitalists on and one of them was talking about, you know, why aren’t there more black entrepreneurs? And one of the things he posited was that, if you’ve been through whatever you’ve been through because you’re, you know, black guy, you got to Stanford. When you get the offer from Goldman Sachs for $900,000 a year, you kind of take it because you’re like, I’ve seen enough. And where, if your person who just hasn’t ever had a problem, but by you’re like, I’ll just drop out. And so he posited that it wasn’t that they couldn’t do the entrepreneurial thing as much. It’s that they take the Goldman Sachs job and get really rich that way instead, because
Speaker 1 19:04
I think that’s true of immigrants as well. We mean we’re the children of immigrants, I think the well respected professions, right, but also just the stability and reliability of a big paycheck from
Danielle Strachman 19:18
the phrase that we hear a lot is sort of the sense of like, hey, my parents did what they could for me so I could have this opportunity. The opportunity is here, I’m going to take it. And often what what we talk with people about is that those opportunities change over time, and like, doing a startup is another opportunity. But I think it totally makes sense. Like every like, our whole thing is about making conscious decisions for oneself. Is not. I would hate it if someone came to me and was like, Oh, I heard you guys banging the drum on being a dropout or not going to Goldman. And so I’m going to do that instead. It’s like, it’s got to be your own individual will and choice, yeah,
Kent Lindstrom 19:55
well, and part of it, I mean, for me to, like, have a little fun here, is that it’s you. I think the thing that maybe got to people about it was the encouraging people to drop out. Because when people come to me, I’ve said this a number of times, and say, you know, I want to start a company, I’m like, You should not start a company. That’s a really bad idea. It’s terrible. You’re going to fail. 90% of them fail. Don’t do it right. And then if they’re like, Well, I don’t care if you say I’m still going to start a company, you’re like, Okay, now it’s, now, I want to talk to you, yeah, but I’m not gonna encourage you to start a company. It’s a terrible idea. And so I, like, was that this thing encouraging people to drop out? Was the dropping out real? Like, you can always go back, right? And is it about this, is it particular schools? Because a lot of people say, well, Harvard, you don’t learn anything, no offense, but you don’t learn anything at Harvard. The whole reason Goldman Sachs takes people from Harvard is so they just screened all the high school kids in the country and picked the best one. So aren’t you just getting the the elite kids?
Danielle Strachman 20:57
Anyway? Yep. You know, I think back, going back to 2010 when this was all starting, and when we launched the first set of fellows in 2011 I remember we worked with a media team, and they told us, you know, in media, you get two weeks and that’s about it, and then everything dies down and is quiet. What was fascinating was that we were just blitzed for eight weeks on higher education bubble. And it was this sense of that it was absolute blasphemy for a young person to even talk about taking time off school. There was no such thing as the American gap year. There was, like the European gap year, maybe in between high school and college. But there really it did not exist. And so I think for a lot of young people, they had had some sense of something’s not right. I don’t know what it is. I’m being driven onto this escalator, but I don’t even know how to articulate it. So when Peter came out and said, Hey, this is all potentially bullshit for you, it kind of gave them the AHA. Of like, Wait, this is kind of what I’ve been feeling and sensing. I haven’t had the words for it, like, and maybe not going is okay and make it maybe taking a gap year or gap semester is okay. And now what’s interesting is it’s totally normal. Like, even on college applications, I talked to a young man who deferred his acceptance to Duke. And and I don’t know if this was on the application to Duke or if it was only after he was accepted, there’s a literal checkbox for are you going to take a gap year? And I think that’s that did not exist before. And so I think there’s this real cultural moment. And that was really one of the big aims of the fellowship, was to get this meme out there that like, Hey, you could potentially do something else. You don’t have to sit in school for four years. I also think, as an educator and someone who thinks about the future a lot, I think a lot, like with transportation, it’s, it’s, it’s literal time travel when you can take an airplane, or soon a supersonic jet somewhere like, Okay, why would you take a car across the US? And I feel like it’s the same with education. There’s no reason that the degree still needs to be four years, right? It’s completely ludicrous. Which means four years is it is like it like it feels longer than it used to, because there’s more opportunity cost at this point. And so the fact that universities haven’t iterated on just being like, Hey, we’re now a two year program. We’re a one year program like and these things, to me, is absolutely ludicrous that they’re so stuck in the past. And more and more young people are not only like doing these gap years and things, but even parents are saying, like, Hey, have you thought about a gap year? And like, hey, thought about this, and now this is a normal part of conversation between parents and teens now, and that was just not true, yeah, at all, 16 years ago.
Kent Lindstrom 23:51
Yeah. Well, it’s kind of funny when you’re in college too, you’re like, I get done in four years, and then take one of the three jobs that exists in the world, which, when I went, was management consulting, investment banking, and then you get out and you’re like, wait, I know of like, 50 years to do this. By taking one year to go to Europe, still
Danielle Strachman 24:12
have 50 years. It’s a blip in the radar
Kent Lindstrom 24:16
the time. You’re like, gotta go. Gotta get into that banking job. Because you know,
Danielle Strachman 24:20
well, and the world of work has really changed a lot. The idea that you would be at one institution for your entire career is very long gone. And when I hear about young people like Gen Z, who are at, you know, who are hired somewhere for more than two years, I’m like, Oh, they’re, you know, they’ve done a little bit of a 10 year and like that was not true before. So this idea that you would do the same skill for a long time, not be upskilling all the time, the fact that you’re not going to be at the same institution if you get a job, there also isn’t that loyalty, like, you know, pensions and things like that, like are just very few and far between. So So much has changed that university is. Not caught up with well,
Kent Lindstrom 25:01
boy, were you guys on on trend with this one. I mean, what do you make of the past couple years, when Mark Andreessen has said, this is said publicly, the quality of students have started coming out of ivy leagues. I’m pretty sure I got this right. In the last 10 years is terrible. They can’t do anything. They’re in HR in week two, as you know, Mark Andreessen would say, and we advise our companies not to hire a lot of these people go to,
Speaker 1 25:26
yeah, I think what we saw, we mentioned, like the financial effects on people’s life choices, like, okay, they have this debt. They have to take a safe job. What I came to see with the fellowship and what we do now is that there are much more sort of insidious character deforming aspects of the whole educational experience, from K through 12 through college, where it’s become this tournament where you’re competing against all these people for exclusive spots, and you’re competing by trying To appear wonderful to an admissions committee. So it’s like you start to choose to do things, the vacations you take, which preschool you go to, which philanthropic activities you undertake, all of this to impress some committee. And then it sort of carries on beyond that, into the professions and so on. So that by the time you come out of that, you’ve actually stripped yourself of all of everything that makes you unique, and maybe you’ve lost your curiosity because you’re no longer choosing to learn things for their own sake. Instead, you’re doing it as a means to some other leg up into one of these established institutions. And what I hate about the whole thing is that, yeah, I think it means we’re less creative as a society. I think people are just more and more homogenous coming out of this beast of a thing. I mean, that’s probably why I’m a little more harsh on on higher ed than Danielle. Is life choices. I’m like, No, you’re by entering this tournament. You will, you will suffer in some ways that maybe you didn’t anticipate
Danielle Strachman 26:55
well, and it will shape you, but in very unanticipated ways.
Kent Lindstrom 27:01
Yeah, what I tell you, people don’t believe me. When I grew up San Diego, California, came to be summertime. It’s like summertime, see ya be owned by dark, yeah? Get some books at the library. I’m gonna sit here read Lord of the Rings under a tree. Gonna go play pickup baseball, do nothing for a whole summer. No, you know
Danielle Strachman 27:24
exactly, right? You weren’t thinking about what hot internship should
Kent Lindstrom 27:27
you have? Nope, you want to find the other kids all their bikes are in front of somebody’s house. That’s right, not locked up, by the way. So okay,
Speaker 1 27:35
we use this term unstructured time that we and that’s what’s missing, that’s what you’re describing. But we like try to build this into what we do now. We’re just
Kent Lindstrom 27:43
rebranded summer, yeah,
Danielle Strachman 27:46
well, it’s funny, because we have a team camp that we run, because at one point few years ago, we were like, All right, we got to go younger, like, we got to reach more into high school and younger High School. And so we started this camp. We call to E from the education literature on twice exceptionalism, and 30 teens that were running it our third time in October. And what’s fascinating is some of these effects that we’re talking about. And one of the things at Camp is that we do a zoom call beforehand to orient everybody. And one of the first questions we have we get it every single time we do an orientation, is what time is curfew? And I was like, there, wait, what? Like, I was shocked the first time they asked this. And I was like, curfew. I was like, there is no curfew. I was like, your butt needs to be in the minivan on Friday morning at 8am to, like, go to stuff, right? You can stay up till 759 Yeah, but your butt better be in the minivan. But, like, you know? And then it was funny, even though we set that expectation even the first night of camp, hey, what time this curfew? It’s like, no curfew. And I remember the, I think there’s a first year, maybe it was the second year, you know, we’re on site, on the campsite, and it must have been like two ish in the morning, and I heard a loud scream and then lots of laughter. And I was like, they’re fine. I don’t need on anything. And we got so much feedback from that first year, wow. Like, not only did I meet great people and get to go see tech companies and deep tech stuff and all this, but I got to make my own decisions as a teenager, and I never get to do that, and I never thought that that would be a transformational piece of our camp, just letting people know you choose your bedtime.
Kent Lindstrom 29:27
Yeah, it’s weird. It’ll never happen again, that there’ll be a pre internet because, right, a pre Internet Society where you’re like, you explain it to people and like, What do you mean? It’s like, yeah, we just, like, read a book for like, four hours, and you’re like, I’m gonna meet my friend. You know, in real world, because there’s the only place you can meet a friend, like, there’s no just talking the phone, I guess. And then the Internet came and you learned how to use it and existed. And there’s only, like, a small group of people in history that will ever kind of have crossed that boundary, right? Yeah, this is fun, but you guys. Started 1517 he started at venture capital firm. We come to that when I went to a public high school. 1517 Do you want to look Oh, yes, yeah.
Speaker 1 30:11
It’s on this theme about about higher ed and maybe how it’s not cracked up to all. It’s, you know, advertised. So 1517 is the Protestant Reformation. It’s when Martin Luther nails his 95 theses to a church door, and what he was Protestant, what they’re protesting at that initially was the sale of indulgences. So the Catholic Church was selling this piece of paper it would help you or your loved ones get out of purgatory.
Kent Lindstrom 30:38
Great Business, by the way. Really
Speaker 1 30:41
great business. So we decided that the diploma, the college diploma, is the modern indulgence. So by, by using the number, yeah, people would ask about it if we had it on a t shirt and and we wanted to take a stand against that idea, the indulgence.
Kent Lindstrom 30:58
And now you have the nuts and bolts though a venture firm, you’ve got to raise money invest in some things. How’d that? How’d it go?
Danielle Strachman 31:06
Yeah, let’s see. We’ve been doing this for 10 years, and I think my personal biggest learning is that the market you’re in is really everything. And we raised our first fund, start to finish in eight months. We raised a $20 million fund. What we didn’t know was that that was fast. People kept telling us it was fast. And I was like, we’re just good at what we do. Like, no, but we were hitting at the right time. You know, there were plenty of people who were very skeptical about our thesis and what we were doing in this fellowship, 2.0 model, but for the people who got it, they were quick yeses into the fund, you know, and we write very early stage checks, Angel and pre seed. But it’s been interesting because we’re on our fourth fund now, very different market, you know, then, then all the funds that we’ve raised. And so the learning is always to kind of stay humble based on like, you’re like, the thing that also surprised me early on is that I thought, because we were a small fund, that it meant we were sort of like in safe harbor from the world of global macro. I was like, Oh, we’re a little $20 million fund. We’re like, way off to the side over here. And what I learned over time is, no, you’re just in the middle of the ocean with a dinghy, and you’re getting sloshed around. And, you know, sometimes I joke and say, like, a 16 z is a aircraft carrier. Maybe now we’re a speedboat at $100 million fund. And I always tell our founders, you’re out there in the water in floaties like so you’re just trying to survive everything that’s happening. And some of it’s your will, and some of it’s a miracle, and some of it’s market change. And you know, you just got to be humble about that.
Kent Lindstrom 32:40
Yeah, and how has it worst podcast question ever, but I’ll land this here. How has it evolved you? Because a lot of times people start a fun you go back and you look, or you have to keep the websites, and it’s like, oh, we’re the it’s all about the future of aging or something, sure. And then they just invest in whatever they want, and all that this is lost to history. And they’re like, we invested in zoom, so in that context, yeah. How has it evolved? Have you stuck with what you were doing, or is it like, wow, now we just kind of invest in SpaceX secondary.
Danielle Strachman 33:13
You know, it’s funny, because we had never started or worked at any other venture fund. We sometimes say we do things the 1517, way. And I remember meeting with a fund, multiple funds, and asking them about their thesis, and then it was very clear they were off thesis all the time. In fact, when I think we were raising our second fund, we had an LP ask us, like, what percentage of your founders fit your non degree thesis? We’re like, oh, I don’t know, 85 90% and he was like, Oh, wow, you’re actually doing what you say. And I didn’t realize that would be a
Kent Lindstrom 33:42
surprise. We get that that is funny. You did what you said. We’re like, right?
Danielle Strachman 33:47
Yeah. Had no idea that was an outlier thing, yeah? But Michael, you want to pontificate a little bit about some of the I mean, we’ve, we’ve stuck very much to what we do, yeah?
Speaker 1 33:59
So yeah, we still invest in people who don’t have college degrees. That’s the vast majority. We will break that from time to time if we meet a mad scientist and he has five PhDs, but convinces us he’s working on the frontier. Something cool. What has evolved is the size of checks that we’re writing. When we started, we mainly do like a 250k pre seed check. Now we’ll do up to a million in the pre seed right? We’ve also branched out to and we have like 100k check summer program. We do little things like that, but by and large that the strategy is the same. We love being the first money in. We love helping people get started, and then we’ll follow on out of that fund in the seed and possibly series A what we also do are SPBs beyond that. So that’s another thing that’s evolved, where it’s like as our outlier companies have have gone on to do amazing. Things, it’s been interesting to see that there’s appetite for our investors. We’re mainly like, you know, Silicon Valley type people to family offices. It’s like, they want access to those, those deals as they mature through mid to late stage. So, so now we’re like, this multi stage fund, in a way, where our primary activity is talent sourcing and a little development, but like, we’re making investments across the life of a company from all the way to IPO.
Kent Lindstrom 35:29
And what have been your hits? Or, what was your first hit? Like, what was the first time you’re like, Oh, we got one like that worked.
Danielle Strachman 35:36
Yeah. Our first hit is a company called Luminar. They make the sensors for autonomous driving. They’re in the most recent Volvo, and they ipoed In December of 2020, and just really extraordinary to watch, like the tech and the company be built there. And we have another company now, lambda labs, that we were one of the very first investors. And they started as a photo sharing app, actually, and now everybody uses them for GPUs in the cloud. And you know, we anticipate some big news for them in q1 they just closed their Series E,
Kent Lindstrom 36:18
was there a moment for you guys? I asked, this is a early, far earlier in the process of you having a fund where you’re, where you go, Okay, this thing has raised, like, it’s different now, like, now instead of like, well, here’s our idea. In 1517, you’re like, we invested in this thing, and this thing means there’s an 80% chance this fund is going to return five times your capital. Is there a different I’m asking you about the feeling is like, a different feeling when
Speaker 1 36:46
that happens, like in the evaluation of a founder,
Kent Lindstrom 36:51
no, no. Like, when you’re you as a fund manager, you tell a story. You got a bunch of companies. They’re promising, they’re neat. It’s cool that that that. And then one day, you’re like, it’s not a story anymore. Luminar has done a round of 300 million. It’s a relief. Is it a
Danielle Strachman 37:08
what we’re noticing right now is we’re at the 10th year of fund one, and we have two one year extensions. And what we’re noticing is that, yeah, they’re really, we’ve actually already returned four and a half x to our investors in actual dpi, but the really big return multiple is still here to come. And I would say it is. For me personally, it’s like an awe and shock kind of thing, because when we’re looking at the multiples, not only on the fund of like, okay, like, we’re going to be over a 10x multiple here on the whole fund. And then when we look at some of our SPVs, one of our SPVs is sitting at a 24x right now, pre IPO of this company. For me, it’s very humbling. Personally, I’m just like, holy moly, and we’ve been battering around a rather large number that we, you know, once, holy crap, it’s working, that we might actually return to people I like, can’t
Speaker 1 38:10
even say, But all that said, it’s interesting is, like we, so our first fund was 20 million, initial deployment three years. So it’s like 20, 1819, we start to raise fund too, and we have Luminar is tracking well. We had a company called loom was doing really well, and we’re pitching our fund too. And these potential LPs are just like, well, these are unrealized gains. This isn’t real.
Danielle Strachman 38:34
And we’re like, Yeah, but we’re in year three fund.
Speaker 1 38:38
I always remember that, and I was a little angry. So I said to this person, I was like, Lindstrom, oh. She said, come back to us when you have some realized.
Danielle Strachman 38:46
Game, no, no. She said, come back to us when we have an IPO. Yeah.
Speaker 1 38:50
So I said, I said to this person, I said, when we have an IPO, I’m going to send you, I’m going to clip out the story in The Wall Street Journal and send it to you, and I’m going to leave a note that says I don’t need your money anymore.
Kent Lindstrom 39:02
That would be so sad. That’s like the venture capital
Speaker 1 39:05
went public street journal in 2020 I did it. I was a little but I sent her the note that’s so petty, so good. You know, she’s kind of right. It’s like, unreal. Is gains. I heard some, yeah, yeah. It’s like, you can’t get your chickens before they hatch. But still, it’s it is really tantalizing when that inflection point hits. And sometimes it happens really quick. We have a company in our third fund called positron. They make chips for inference, which is like not training these AI models, but actually deploying them. So they’re competing with Nvidia, the small team teal fellow from 2013 and it’s incredibly to me to see how fast they’ve grown in just two Oh, my God, they’re already about to raise a series B, and that’s and. At very high valuations, given the industry they’re in. And so it’s like, Geez, that is incredible. Well.
Danielle Strachman 40:05
And lastly, I’ll add one more thing, which is that, you know, for a long time, like our sense of what we were doing is like, okay, we’re, we, you know, we’re, we’re looking for things that could become potentially unicorns. And what’s interesting in this market is that, like, the deck accord, is not so far off. We have multiple companies in our fund, three, you know, and soon, with our fund four companies is those matriculate that we’re like, oh yeah, actually, a lot of these could be decacorns. And that 100k Angel check we put in as the very first investor, that one check alone is going to have a ridiculous return if these things come to pass.
Kent Lindstrom 40:44
Yeah, and how so, 10 years now, how do you, how are you feeling about it? Like, are you, man, this is like, a thing you should do for 10 years and no more. Are you guys still getting along? Oh, yeah, if you’re not, but yeah, like, how do you, how do you look back? That’s a, that’s a solid I mean, I’ve had a number of people on who lived their careers. I said Frank Rotman on, and they’ve had multiple phases. You know, he found, basically founded Capital One, and he did QED, any one of which would be a whole career for anybody else. And now he’s doing a new thing. Is this it where you’re like, this relationship is great. On we go, or I’m going to go back and start another school. Or how are you guys feeling?
Danielle Strachman 41:27
Oh, my God, I’d have to be a glutton for punishment to want to go start I know too much now I’ve been to the inner temple. I mean, for me, I’ll just speak for myself here. Maybe Michael throw some strange curveball, but we love working together, not only that, like the team that we’ve built is really incredible. And when we first started 1517, what kept me up at night was, how on earth are we going to find other people who are going to treat young people with respect, not talk down to them, Be excellent mentors? Like, what is that going to look like? And in hindsight, everything is always much clearer, but it’s like, okay, people we worked with at the Thiel Foundation, like Nick Arnett, people who are at partner organizations, like Zach slayback, though, you know, they came on actually, like eight years ago at this point, and then other people we’ve built on the team have been previous founders or people who worked with other partner organizations of ours over time, and so I just feel really amazing that like we’ve assembled this team that can do more for more people, and I feel really good about those conversations that are happening. I don’t feel like, oh, gosh, I’ve got to monitor how this person’s talking to a young founder or train them, because they all used to be young founders. And so for me, it just feels really, really good. And actually, I really feel like with our fourth fund now, we’re catching this super interesting stride in period of time where, in the last two years, young people working on harder and harder problems, the barriers are becoming lower, and so we’re funding younger people working on harder tech problems. And that, to me, is like the sweet spot of just people working on crazy inventions and getting them started, you know, at 18 or sometimes even when they’re in high school with a venture.
Speaker 1 43:15
Check, yeah, yeah. I would, I would double down on that. I think in a sense, we joke sometimes that we’re, we are a school, because it’s, you know, we’re a little bit like the X Men Professor X, he has this school that he runs for mutants, and it looks different from other schools. But, you know, the students are quite extraordinary, and and I find because we’re working with younger people, because they’re working on the frontiers of science and tech, it very much feels like this alternative university that we we’ve got going. It’s really self directed. It’s a little bit like homeschooling CEO slash scientist, so different in that way, but it is very much like resembles that, because it is an education for them and for us. And so I get a thrill out of learning about all these different things that people are working on. So I love that thrill. You know, your last question before about the feeling, I guess you do get used to things where, when the fellowship started, it was like, blew my mind when someone raised a series B, and the company was, you know, on paper, worth $80 million like, wow, that’s a lot. And now it’s kind of crazy. It’s kind of like big wave surfing or something. You get used to the six footers now you’re out there trying to get 100 foot wave.
Kent Lindstrom 44:37
You’re just doing it. That’s a little addictive. Yeah, it comes through that you guys get along like, you can just kind of tell from talking guys we’ve had, we had to
Danielle Strachman 44:45
learn to, you know, not to keep everything, like, super rosy, as if we’ve not been through hard times. But, you know, we’ve also learned to, like, fight well and fight right, like it’s important to be able to do that. And I think it was during fund two, we’re really feeling. Pressure of like, okay, we’ve got to raise this fund. It’s taking longer. Things are harder to do. People don’t believe that we do what we do, which is, like, psychically frustrating. And so then, you know, Michael, Michael and I will joke that it’s then, like, the little things that drive you crazy, like, I don’t like the way you wrote that subject on that email, like, okay. And usually what we found is that when one or the other is frustrated with each other, for us, our our like, under the skin, problem tends to be that one or the other isn’t feeling appreciated enough. Yeah, so usually when something comes up, it’s like, okay, hold on, where Aren’t you feeling appreciated? Like, let’s talk about that. And like, being able to have that conversation and then sort of right the ship, yeah.
Kent Lindstrom 45:45
And you guys know it too. Like my partner and I have been together, working together for like, 15 or 20 years. And like, we know all the stuff. Like, you’re not going to be surprised, like, oh crap, he’s got that characteristic. Like, the good stuff, the bad stuff, you know, you kind of know all of it. And we’ve actually had LPs. I’ve done a podcast with my partner, Jonathan Abrams, and there’s your guest selection process, and he and we’ve had LPS say, you know, one of the things I did is I went back and listened to how you guys got along, and that’s what, that’s kind of what convinced me that totally, this made sense. I’ll take this home with, like, kind of a couple last things now that. But Michael, you wrote a book. I did, yeah,
Danielle Strachman 46:25
Michael’s a great writer too. Like, Oh,
Speaker 1 46:29
see, this is why we’re great teammates here, yeah.
Kent Lindstrom 46:33
Person too. So and tell us about the book title and what it means.
Speaker 1 46:39
Yeah, I called it paper belts on fire because there’s this growing distrust or lack of faith,
Kent Lindstrom 46:44
and that could be a sci fi book, yeah? Like Volume One of the trilogy, right?
Speaker 1 46:51
What’s that? Fahrenheit 450 Yeah, exactly, yeah. And, you know, I’m not like it, because I thought the universities is one of the major institutions in our country, were like but one example of institutional failure, and because we saw, you know, people working on the edge of of some of these other failing institutions are struggling, and that could be everything from the Federal Reserve and banks to the media. You know, I thought, I thought, I thought I’d take the broader perspective. And so I called it the paper belt, because a buddy of mine biology, Srinivasa, and we talk. And this term came to mean for us, this this area from Washington, DC to Boston, that runs on paper. It’s like they print money on paper in DC, laws, media in New York is printed on paper, and diplomas or paper. And for me, that stood out because paper requires authentication. This is like so we worked with Vitalik, Buterin helped him launch Ethereum 2014 so really started to grok this understanding of why someone would want to create a blockchain. It’s because there’s this institution, and there could be something like a piece of paper, and that institution is supposed to authenticate that this thing is valuable, like Harvard saying, hey, that diploma is real, and it signals something of value. But you know, the overall commentary is that, well, that’s not true. We can’t trust these people anymore to tell us that because there are so many different ways they’ve failed or have performed poorly. So to me, that’s why I named it paper belt on fire. I mean, maybe I could have focused that more. It’s interesting. There’s a publisher that bought the rights to the book, Jim Shaughnessy. He started a publishing house called infinite books, and they’re going to release a paperback version in the months ahead. And I think they’re going to change the title, because they think that, you know, maybe the paper belt as a concept was a little too amorphous, but, but the story is about, you know, some of the things we’ve touched on, which is just like the failure of higher ed and what it was like to work behind the scenes at the teal
Kent Lindstrom 49:02
fellowship. Has the credential just changed? Is it now? Like Y Combinator, you get into Y Combinator and you’re really not trying to start a company. You’re really just trying to get a job at another company, or put Y Combinator on your LinkedIn. Like, do people just need a credential?
Speaker 1 49:18
There is the signaling problem in the labor market. So the it’s like, it is tough for employers or investors or anyone to figure out, Is this, is this the real deal, or is this a lemon? And so I think they’ve come to rely on these other institutions to try to sort the labor market for them. Why? How that sorting occurs? That’s like a deeper critique. It’s like, not actually the education. It’s like just the ability to get in these things and finish the assignments so on. But, but, yeah, I think that signaling problem is really tough to solve. I don’t know how to solve that in so maybe you’re right. It’s like these credentials do act as some way for for someone to signal something about them.
Kent Lindstrom 50:00
Self, you know, we now come to this, this point, I’ll kind of end here, but I feel like, throughout my career, or just being a kid, and then whatever, there have been these shifts in technology over time, the internet emerged, the PC emerged, the internet emerged, mobile emerged. In the next few years, amazing businesses are created. Right? The Internet, you get Amazon and digital photography, probably you get Facebook, you know, mobile, you get Uber. And now comes something that feels to me like a real thing, which is the AI wave. Been around forever, but here we are with people using it. And by the way, I’ve had from Richard Socher to Eric Ries, a lot of people on this podcast, I’ve asked them if we’re gonna have to blow up the data centers. And none of them say no. They all kind of say, I don’t think so in that kind of voice. But anyway, here’s AI, what do you guys make of this?
Danielle Strachman 51:00
We’re really excited about with the AI wave is younger and younger people getting to the frontiers of knowledge when we have this camp that we’ve hosted. Now, you know, this will be our third time. It’s just pretty incredible, like the depth of knowledge they have. In fact, the first camp we had in the very early AI days, I remember going around to our deep tech companies with these 14 to 18 year olds, and leaning over to Michael and saying, we need to get these teenagers on our diligence calls. They are asking questions that are ridiculously advanced. And so we started doing that some. But for me as an educator, I think the AI revolution really opens up a lot for autodidacts, and seeing that younger people are going to get to the frontier so much faster, and there’s so many advantages of what’s coming, but that’s the one that excites me most.
Kent Lindstrom 51:59
That’s cool, Michael.
Speaker 1 52:02
I don’t have any I think that I would, yeah. To emphasize what Danielle’s saying, it’s incredible for the autodidacts out there, how fast they can move now, and the end of range across different things, is impressive, but I think we still have some ways to go. It feels another term bologies putting out there is like an AI is great for middle to middle, not end to end. So it’s like we, the way we use it in our company, or we’ve seen out is like you’ve got to start whatever you’re doing. Maybe AI can take you from, you know, the first quarter to the third, end of the third quarter, but you better be at the end to verify everything in it and edit it and so on. And that’s with writing with code. So I don’t know. Maybe it seems like it’s plateauing a little bit right now, but maybe it takes off again at the same rate of improvement. Are we
Kent Lindstrom 52:54
going to have to blow up the data centers? No, wow, that’s the first No.
Danielle Strachman 52:59
I’m like a very firm no on that. These people who are
Kent Lindstrom 53:04
like, Oh, weird, yeah. Well, they’re worried about the paper clip, right? You tell it to make a trillion paper right, instead of a million, and it just destroys humanity to get the resources. But in any
Speaker 1 53:14
case, that’s a deeper philosophical question about the nature of consciousness and agency and so on. We don’t have to go that far.
Kent Lindstrom 53:21
By the way, an AI told me that I founded LinkedIn, which I did, so maybe we shouldn’t worry too much.
Speaker 1 53:28
Yeah, yeah, far away from that. But my model I lived in a ski I’ve been in a ski town, living there most of the time over the last few years. And so my model now for thinking about risk is is actually a skier trap in an avalanche, where the avalanche behind us is death by asteroid, death by climate, death by stagnation, where, you know, maybe limited resources lead to catastrophes like war. So we have to make progress, meaning we have to move, otherwise, we’re toast. On the other hand, if we go too fast, if we are moving so fast, we can’t avoid obstacles like stones and bet, you know, tough turns then, then we’ll also die, because we’ll fall. So there’s, like, some optimal Golden Mean of pro the rate of progress that we have to make where either we have to avoid the the threats behind us, and we have to avoid the threats of moving too fast, but what we can’t do is move still. We can’t stand still. Whereas, I think, and I like that model, because a lot of the rhetoric on one side or the other is like not acknowledging that there are these two, two sided dangers going on.
Kent Lindstrom 54:40
That’s fantastic. Well, this has been great. How do people find you like find you, your writing, your thoughts, your fund.
Speaker 1 54:48
We’re both on X, you know, we post things from time to time, but they’re also welcome to reach out to us at our website. We have a contact form that we receive an answer maybe the other funds. Don’t do that. They’re tough, they’re a little inaccessible, but we love meeting people over the forms.
Danielle Strachman 55:05
We write on sub stack. We have a lot of old posts on medium. We’ll be working in our next website iteration to kind of centralize some of those writings a bit more. But yeah, there’s lots of places to find
Kent Lindstrom 55:17
us. All right. Well, thanks so much. This has been great, yeah, really fun conversation. All right, this has been the something ventured podcast my guests, Daniel Strachan, Michael Gibson, of the 15 Oh, it’s 1517 fund, not the 1517 fund, right?