This is episode 11 of The OpenVC Podcast. In this episode, Peter Livingston, founder of Unpopular Ventures, shares how his rolling fund and angel syndicate have invested $70M+ into 430+ startups globally. He dives into startup success, sector-agnostic investing, and the importance of trusting founders.
Harrison Faull (00:00.098)
Peter thank you for coming on the Open VC it's an absolute pleasure to have you on. how are you doing today?
Peter Livingston (00:07.229)
Awesome.
doing great. It's pleasure to be here. Thank you very much for the invitation.
Harrison Faull (00:25.186)
No worries at all. You've been an operator, you've turned founder, turned investor. I'd like to take you back all the way to the beginning, all the way to the beginning, back when you graduated Stanford, and you found yourself joining a really novel, innovative, would you say it's a hard tech, hardware company? Cardiac, aerodynamic? My dream.
Peter Livingston (00:50.236)
Yeah, it's a company called iRhythm. It's a medical device company. We develop devices for diagnosing cardiac arrhythmias. Yeah, it was very random and lucky that I found my way there. I was graduating from college. I really wanted to work for a startup. I asked around. I grew up in the Bay Area and kind of knew some friends and friends of friends that were VCs and said, hey, I'm looking for a startup to join any startup.
I worked at General Motors the summer before, really didn't like the whole corporate thing. And was just saying, hey, I'd like to try a startup, see what that's like. And a VC that I knew responded and said, we just seeded this one company with $3 million. They were looking for their first engineers. In particular, they needed someone who could create 3D renderings of the product that they wanted to make. And I'd been working part time during college as an CAD draft school.
basically creating 3D renderings and I'd gotten pretty good at it. And I created a model of their thing and they're like, wow, this is amazing. And they hired me. And so somehow I ended up being the first employee at this startup. There was a founder, he and this VC, some promise CEO, and I was the first one and, you know, seemed like a cool idea. I didn't know much more than that. And I just got very lucky that they ended up going public in 2016 and are worth
two, three, four billion. It fluctuates. I haven't looked through it recently, but it's a public company worth a billions now So, that one worked out.
Harrison Faull (02:19.93)
You're very humble, but there aren't too many grads that end up picking such a rocket ship that IPO is for several billions of dollars. So I think he kind of gave us a bit of a hint as to how you de -risked it somewhat, which was listening to professional investors and seeing what they thought was hot and where your skillset would actually add significant value. So for graduates, you know, leaving education now, looking for opportunities in the startup world, is that something you'd recommend they do to de -risk it? Because they're probably
inundated with lots of offers, some nice safe offers from big techs with some comfy salaries. How would you go about advising people to pick in where they can learn the most?
Peter Livingston (03:01.588)
You know, mean, thanks for your kind words, but I really truly believe there is so much luck involved in this. You know, sure, I was able to find a start through that VC, but without naming names, that VC's portfolio that this company was in, last I heard was a total disaster, only returned like 0.4x or something like that. you know, it wasn't necessarily, you know, I could have gone to any other company in that portfolio and might not have worked out. Somehow I got lucky with that one.
I've had lots of other startups that I either founded, invested in, or worked with that were complete failures. I think the nature of this is, know, startups are great in that you learn a lot. There is high potential for upside. I think it's really fun to be able to, you know, when you work at a big corporate, you know, you're a small cog in the wheel. You don't own very much. You don't have much of an impact. And the cool thing about startups is that everyone really has to go above and beyond and you end up
kind owning and doing a lot more than you would be able to do in that bigger company. So I would say do startups for that reason, the ownership, the learning, and the potential that if you stick with it over time and expect that there will be failures, you will also sometimes get lucky. And so I got lucky with that one, but I'm not always so lucky.
Harrison Faull (04:22.737)
Understood, okay. But on this show, I'm quite careful to not just glorify successes. So I'm sure there must have been some tough days at iRhythm that you saw the team overcome some incredible hurdles. Is there anything in particular that sticks out in your memory of a tough day that the team overcame or just something you're incredibly proud of, of your time there?
Peter Livingston (04:47.092)
Well, I think I'll share one of my biggest learnings from both having been through that and also being in a failed startup. When they're going, the successful startups and the failed startups do not look very different on the inside. They both look like total shit shows. And what I distinctly remember from iRhythm is it constantly felt like things were going wrong. The products weren't working, we were getting delayed.
Peter Livingston (05:15.29)
we're almost running out of money. There was huge team turnover. know, people getting fired, the CEO getting replaced, the founder kind of getting sort of pushed out for a while, coming back and getting pushed out again. Not fully out, but sort of pushed to the side. And there's just always this internal like fighting and politicking. And yeah, at multiple points, I remember talking to friends of my parents, I was like, gosh, I'm not sure this company is going to work out. Like everything's going wrong. And I recall
talking to another VC in the company after it was successful. And I remember her telling me like, yeah, we thought that company was toast multiple times and we didn't think were gonna be able to raise my money to stay alive and somehow they did. So yeah, my big takeaway from that successful one is really you never know until it's over, in a sense. It's such a roller coaster. And even in the companies that are ultimately successful, there are multiple points along the way where
Maybe they stumble, maybe the growth is slow, things don't happen as fast as you'd expect, and maybe you think it's even gonna die. Many still do, many do, but somehow some them end up being successful even though you can't really tell along the way. So that was my biggest learning from that. And I see it now with our investing. We're investing in so many companies where it's very rare for things to just go up and to the right.
In a lot of our most successful companies, we weren't sure at various points along the way. Or there's ones where I basically thought, you know, this is not going to work out. I kind of mentally wrote it off to zero. And then I get an update three or six months later and it's like, whoa, all of sudden they got the customers or raised the money or all of a sudden it's like, wow, now they're doing great. And so you really never know on the way. It's just managed through chaos, through the roller coaster of ups and downs. And sometimes it works out.
Harrison Faull (07:08.371)
I think that's a really good insight. Thank you for sharing that. Outsiders might look at the startups that are having great successes, but actually they're just overcoming as many failures as everyone else in the same space is facing. It's just resilience and well, a lot of innovation that help people get to the finish line in a hyper uncertain environment. So after the success iRhythm, you went back to business school, back to Stanford and
Harrison Faull (07:35.729)
I just wanted to know what kind of things were you looking for, what kind of things did business school teach you? Because you were already an operator by that time and you'd been through the ups and downs. Why do think that position drew well for your future career? Why was it an attractive path for you?
Peter Livingston (07:51.336)
Well, so I had long known I wanted to do business school. I'd done engineering for undergrad. I felt like, you okay, I can build. I wanna kind of understand that the business side of all this, the finance, the sales, the marketing and all that. And I felt that if I got both of those things, then there's a lot that I can do. Pretty much everybody I respect who knows something about business school says the same thing. You don't go to business school for the learning. You can learn the content anywhere. You go for the credential, kind of the branding.
Sorry, have about people walking behind me. I'm sitting at a Starbucks outside. So you go for the brand and you go for the network. And that is what I got out of it. yeah, mean, obviously you go to great business school. People, you know, maybe it's not warranted, maybe it is, but kind people take you a little bit more seriously. They think you know something. But, you know, that's part of it. I didn't feel like I needed that so much. But the really awesome part of it for me was just all the amazing people I met.
There's people that were incredibly smart and thoughtful and talented from both what they had done before business school. Most people work in some career before going to business school, but then also in what everybody did after. And I'm still friends with so many of these people. And in fact, I've invested in lot of my classmates and a lot of our classmates are investors in us. And I really think that that's the most valuable thing I got out of it, connecting with all these people that went out to be movers and shakers.
in business all around the world.
Harrison Faull (09:23.721)
No, I hope there's not a sore point, but I want to move away from the order to schedule that I shared and tuck into some of the network that you've built at Stanford. And it plays into some of your perhaps most exciting anti -portfolio companies with some close connections to Instagram and DoorDash. Would you be able to tell us a little bit of how close you were to those and why they weren't good investments at the time?
that you...
Peter Livingston (09:54.92)
no, they were great investments, but I was just not smart enough to see it. So I can actually talk about three huge anti -portfolio misses. So Instagram, DoorDash, and Nubank. So the first, was Instagram. So the founder of Instagram, Kevin Systrom, was a fraternity brother of mine in Stanford undergrad. I was friends with him after college. He and I actually worked in the same building and I was at iRhythm. And I got lunch a couple of times. And I...
He had kind gone through these startups, worked at Google in an impressive role for his age, and then was starting this startup called Bourbon. And I remember hearing that he was starting this thing and was trying to raise some money. And I kind of heard through another fraternity brother who was thinking about investing or not. And I could have easily reached out to him and said, hey, can I put in like 5K or something like that? But I wasn't investing at that time. And I thought, you know, I downloaded the app. was like, hmm, this seems kind of stupid.
you know, okay, whatever. And then a few months later, they pivoted from bourbon into Instagram, changed the product a little bit. And then within 18 months, they got bought for a billion dollars by Facebook. And that was my first big wake up call where I was like, wait a second, I do know these smart people that are starting these companies, I need to start investing small amounts of money. And so that was actually the main inspiration that led me to start angel investing little bit. So that was the first anti -proferred. But yeah, I wouldn't have invested because I wasn't
even investing, I didn't even know how think about it. So yeah, realized. All right, go ahead, go ahead.
Harrison Faull (11:25.898)
But plenty of, yeah, sorry to cut you off, but plenty of investors passed at the stage that it was at Bourbon. And actually, I believe the people that led the first round in Bourbon, they actually passed on the second opportunity to invest because the pivot resulted in it clashing with another portfolio company. And he was actually the second mover into that space. I think that was A16Z. I might have had that wrong, but.
Peter Livingston (11:40.947)
and a great.
Peter Livingston (11:49.844)
I think you may be right about that. Yeah, that's crazy. The other big learning from just that is most startups actually pivot. So I both saw it there, but then I've also read from smart people that about 95 % of companies that are ultimately successful are successful with a different idea than the startup. And so if that's the case and you're investing early, you can't judge ideas too much. You really just have to bet on people that have maybe a track record of success or maybe can't know the space they're operating in, have an insight about a market.
and just assume that they're gonna go out there and change what they're doing multiple times. so, yeah, at the early stage, all you can bet on is the people.
Harrison Faull (12:24.284)
makes a lot of sense. So that was Instagram. How do I that?
Peter Livingston (12:27.316)
So that was Instagram. So then the next two misses were DoorDash and Nubank, which were both very good friends of mine from two different years of business school. So I had gone to the first year of business school, was class of 2012. David Velez, who founded Nubank which is now worth like $70 billion, was a very good friend. We hung out a lot, partied together. And I was investing at that time.
I said when I was doing LifeSquare and I was inside of Kleiner Perkins and he was a partner at Sequoia, and I would get lunch every now and then and talk startups. And then I just heard that he was going to do something in Brazil with like a credit card. And I was like, Brazil, that sounds like sketchy and risky. And again, I could have easily reached out, but it sounded like a bad idea to me. And it sounded very risky. was like, worth it. I heard that he actually didn't let friends invest. So maybe I still wouldn't have been able to, but maybe if I had tried, maybe I could have
I don't know, but still it was a case where it was like, again, just bet on smart people. He was a very smart guy, had a great track record. He was a partner at Sequoia focusing on Latin America. like, God, I should have just reached out and said, let me put in a little bit of money betting on him. So another huge miss for me. And then the other one. So I had left business school for a year to do the Startup Life Square. Didn't work out, came back and finished. So was then in class of 2013. I was a co -president of the Venture Capital Club.
with the two founders who went on to do DoorDash. And in that case, once again, I was talking with my good friend Evan Moore. He said he was doing a startup in food delivery. I thought, food delivery, that's not very sexy. It's a low margin business. I shouldn't even check it out. And once again, I knew he was a really smart guy. And he and Tony Hsu, I should have just bet on the people. But again, I judged the idea and I was like, that doesn't sound that great.
and I didn't investigate it further and man, those three together, I realized, you know what, I need to stop trying to overthink this and just invest in every smart person that I know. So that was it.
Harrison Faull (14:32.152)
Well, hindsight's a wonderful thing. I mean, you're here today because I found you from your great successes that you've had at Unpopular Ventures, which is both an angel syndicate and a rolling fund. To date, you've invested over $70 million into 400 plus startups. And it's been phenomenal. I think your 2019 and 2020 funds are worth five times and seven and half times.
in the invested capital already, which is just outrageous.
Peter Livingston (15:07.667)
It has come down a little bit, but it's now like 4.7 and I think like 6 and change now. With the downturns, we've had some work done, so it's a little bit done, but we're very fortunate to be doing well.
Harrison Faull (15:18.583)
even with a little bit of a haircut that puts you well into the top, probably 1 % of all venture returns for that era. Could you tell the audience a little bit more about your thesis at Unpopular and what keeps you different from the rest of venture capital?
Peter Livingston (15:36.665)
Yeah, so, you know,
It comes from a lot of different experiences I've had. So I talked already about, you know what, just invest in good people, regardless of what they're doing. And in fact, a lot of the best ventures sound like dumb ideas in the beginning or seem risky. One of my successes as an angel, so I kind of worked as a professional angel for about five years. I started angel investing in 2012, really the end of 2014 to 2018. Invested a lot of different things. And one of my insights from that time is that
the best investments I did were the ones that I would share with other people and I couldn't get them to do it. Once again, these things that seemed like really non -consensus or risky or out there to most people ended up being the best ones. And a big one from that was just crypto in 2015. I went down that rabbit hole, did a lot of research, felt very high conviction, put a big chunk of my fund into the main things at that time, ended up with an extremely high multiple fund that was liquid also. And so,
I realized from that that many of the best investments are very unpopular in the beginning. And I realized also it's not just investing and it's not just startups, it's really all life decisions. If you do what everybody else does, you get what everybody else gets. And so based on those insights, I've also made some kind of unconventional decisions in my lifestyle, in my choice of life partner, my wife. And I just really found that
all the decisions in my life that I've been most happy with were often the least consensus. so anyway, we named our firm Unpopular Ventures. And the intent was to go invest in really good people, and particularly when they're doing things that are a little bit non -consensus or off the beaten path, a little bit unpopular. And we are often wrong, but when we're right, we're very right. And so that's been working well for us so far in terms of we've been able to invest in some really fantastic founders, building really important startups, and many are well on their way to being
Peter Livingston (17:38.364)
and very successful.
Harrison Faull (17:40.761)
Yeah, so of the $70 million, that's roughly three and a half times what you currently invested now in terms of value that's been gained. How do you go about making these investment decisions? So you're inundated with DealFlow, you source it from all corners of the world. What are you really looking for in a deck that comes through, that stands out to you, which probably wouldn't stand out for the next VC fund?
Peter Livingston (18:11.912)
It depends on the stage. So we invest in a few different stages. We invest very early at kind of the founder and an idea stage. We often invest later where maybe they've made some progress and some traction. And kind of way we, so it's me and one partner who's been with me since almost the beginning, Thibaut Reichelt, who's been fantastic. And he and I have slightly different approaches and we invest in slightly different things. It's very complimentary. So I'll talk kind of, I can either talk about,
me or make it kind of generally what we do together. I guess I'll focus on sort of what we do together. We index very heavily on founders backgrounds. In general, we want to see a tracker record of success. And that can be defined in many ways. know, on the one hand, you know, yeah, we do end up investing a lot of Stanford people. I mean, that's just kind of where I come from. I know a lot of people there, but it's an indication that, you maybe these people are pretty smart or we're able to accomplish some good things.
But we don't only invest in that. We're also, there are many other markers of success. Maybe they led a team and launched an important product at a big company, or maybe they played a critical role in a startup that did well, or maybe they founded something themselves before and had some good achievements there. But in general, this is an insight I took from those three anti -profile companies I shared. And also looking at a lot of other startups.
almost nobody goes out and founds a $10 billion company out of nowhere. You know, a lot of people want to think, people like to think that if, if anyone can build a billion dollar company, if they just have the right idea. And an unfortunate, like an unfortunate truth that I'll share is I don't think that's actually true. In every single case of someone found one of these multi -billion dollar companies really digging into the funders background, they had some sort of track record of
amazing things that they did with that. There were hints that they were actually very smart and were going to go on to do great things. An example there I'd like to share is people think Mark Zuckerberg founded Facebook when he was in college. Clearly he came from almost nothing and he built this massively successful company. But no, there were actually signals that he was really exceptional from very early on. He had been launching various projects when he was at Harvard. There was this Hot or Not thing that he created that went super viral.
Peter Livingston (20:32.872)
Clearly he knew how to build things on his own and he knew how to make them go viral. And I think now if I were to see a kid like that building these things and actually launching them pretty successfully, I'd be like, that guy's probably going to be successful later. And so that's kind what I look for. It's like hints or signals from the person's background that they're sort of destined for success. And it's not that they can't have ever failed. I've failed many times. I know many investors. They're the best investors that have failed on their way.
But I do want to see that kind of aspiration for greatness and try to make over and over again and sometimes getting lucky or making it work. So that's number one on team. I'll pause there. Any questions before I talk about maybe other things that we look for?
Harrison Faull (21:18.844)
Well, what I was going to say is you seem to be able to build extremely high conviction on founders, especially at the early stage, because you were the first fund to invest external capital into an Algerian startup, which is quite risky in terms of what the legal landscape might be, how it was received, what kind of shell the powers you might have if things were to go wrong. And also you put money into startups that are in Afghanistan. So you're not really held, you know.
Peter Livingston (21:47.112)
We actually don't have Afghanistan. Sorry about that. I should have corrected that in your notes. We don't have Afghanistan, but we do have a lot of other places all over Latin America, Africa. We are in Nigeria, India, Pakistan. Maybe Pakistan is what you're thinking of. I'm sure. But I'm sorry, we don't actually have any Afghanistan.
Harrison Faull (22:01.328)
Yeah, it was the guy that ran Uber, I think, Uber Eats or something, before he built his own Pakistan.
Peter Livingston (22:05.735)
That was Pakistan.
Harrison Faull (22:09.66)
How do you get, how are you able to invest into these regions that might put off or deter other VC funds? What makes, how have you managed to position the fund in a way that makes you that nimble?
Peter Livingston (22:23.656)
Yeah, so once again, we index very heavily on the founders. And again, we don't go find a random guy in Algeria who has an idea and gave him money. We look for a track record of success. And so in the case of the Algerian company, we can call it Yassir Here, they started as kind of the Uber of Algeria and now expanded to be like kind of a super app for all of Francophone Africa, for just making more for you.
And the founder was just extremely impressive. So actually my partner, Thibaut, brought this in and it was the first investment he led for us here at Unpopular Ventures. And so the founder was a Stanford PhD, had been an executive at Intel for several years in Silicon Valley, and then put a million dollars of his own money into this to get it off the ground. And then with that million dollars, he was able to achieve extraordinary traction in the business. had something like 20 million of annual sales.
growing very quickly and they were raising on a $15 million pre -money valuation. Because nobody would give them money. And this is the funny thing about VC. Most VCs draw these very strict boundaries about what they will or will not invest in. Most would say, okay, we're only going to invest in the US or within 20 minutes of home, or we're only going to invest in biotech or in SaaS companies. So it's like they create these boundaries. And then even if a really compelling founder or opportunity comes along,
If it's outside those boundaries, just instantly say no. And that's kind of what we want to break. it seems like it's raining a little bit. me try to back up under this umbrella.
Harrison Faull (23:59.165)
It looks like a nice blue sky behind you, but I'm used to weather in England being all over the place.
Peter Livingston (24:01.78)
This is Miami, Miami here. So the insight that we kind of had is like, VCs put these arbitrary boundaries up, which leads them to not invest in compelling opportunities if they're kind of outside the bounds of what most people have decided they're going to invest in. And so this is the case, where there's an exceptional opportunity, exceptional founder, exceptional traction, high market potential, but it was out of bounds for most. And so because of that, we're able to invest in what we thought was a great opportunity.
turns out so far it has been and almost nobody else is willing to invest in it.
Harrison Faull (24:36.914)
And was it a case that it was too good an opportunity to pass up that all the risks that came with investing in Algeria, putting money out there, the legal potential downfalls just didn't matter? It was just the upside was so great that it was risk adjusted, it still made sense. Or did you do things to mitigate what could have gone wrong?
Peter Livingston (24:55.623)
Well, it's...
Yeah, it's a great question. So this is another thing that we really think about. So the size of your portfolio has a big impact on how much risk you can take. So a lot of VCs will make one or two investments per year. And when that's the case, they really want to make sure most of their investments work out. They're not willing to take very much risk. So at that time, we did about 24 investments that year and now scaled it up to about 150 investments per year. And when you do that many investments,
the risk calculus really changes. So for example, if you see a company where you think maybe there's a 1 % chance it could return 1000x and a 99 % chance of zero, that's your one investment of the year, or maybe even you're going to do 10 investments out here, you're probably still not going to do it even though the expected value of that is 10x. That's a great expected value even though you're going to be wrong 99 % of the time.
If you have a portfolio of 100 companies or 150 companies, then, whoa, I would love to make 100 investments where each one has a 1 % chance of making 1000X and 99 % chance of zero. And that would produce amazing portfolios over and over again. And so we take more risk than most VCs, and we are wrong a lot. We're wrong more often than most VCs, I think. But I think we have bigger outliers.
So we get into these extreme outliers more often. Just because we accept these higher beta, higher risk dynamics.
Harrison Faull (26:35.264)
That makes a lot of sense. You understand all the returns are generated by the outliers, so you've got to buy a lottery ticket and give those guys a chance. So spreading bets by making 100, 150 a year, you are reasonably increasing your chances of building a portfolio that generate healthy returns. But how do you handle being sector agnostic over being a sector specialist? Because a lot of VCs talk about
We build great portfolios because we add so much value, we know all the connections in the space, we can help introduce you to X, Y and Z. But if you're being sector agnostic and you're investing all over the globe, I imagine that's quite a hard thing to do.
Peter Livingston (27:17.436)
Yeah, so there's a couple things about this. So the first is it ties back to we don't really bet on ideas very much. We bet on people. And it's relatively easy to assess people based on kind of the track record of what they've done. And yeah, it's funny. I personally believe even if we were experts in some area, I don't know if that expertise really helps you.
judge what the next great startup in that area is going to be. In fact, it can often be blinded. You kind of know what has worked and you're kind of not as open to alternative ways of doing things. So I don't actually believe that sort of the expertise in a space helps to make better investments in that space. So that's the first thing. Then on value add, we actually are pretty helpful. We, you know, we have a big network of other VCs, so we're actually pretty helpful for introducing.
companies to other investors across different stages. But the reality also is that most of what we're investing in is actually pretty unpopular and they're just really happy to get money from anybody and we don't work to that. We're just trying to invest in great people, building high potential businesses at ideally pretty good valuations that we have outside and we do not lose deals very often. You know there are some investments we do that are more competitive than others.
we didn't get to invest as much in Zepto as we would have liked. It's a company in India that's now worth five billion during the first round, but only got to invest 25K. We got pushed out maybe because we didn't have as big of a brand as the others in our own. But aside from that, for the most part, we can invest almost as much as we want. So, mean, 80 % of our funding is going to be what we want to invest in.
Harrison Faull (29:00.513)
For the fans listening, what kind of ticket sizes do you do and does it differ between the rolling fund and the syndicate?
Peter Livingston (29:08.531)
Yeah, so we have both this rolling fund. It's about five, five and a half million a year. We make a lot of investments from that. Most of them are 25 to 50K, sometimes 100K. And then we also leave one of the biggest in to get some angel list. We have about 5 ,000 LPs who follow us there. When we engage that big kind of group of investors that we have, then we can write much bigger checks, almost always at least 100K, sometimes as much as half a million. And occasionally we get even a million dollars from them.
who these two vehicles, both our fund and our syndicate, kind of our check size rate is 25 ,000.
Harrison Faull (29:43.158)
Awesome, awesome. I'd love to hear about some of the biggest wins you've had in the portfolio to date. I've heard you talk about Jeeves before and the story behind that's really interesting. Would you be willing to share that with us?
Peter Livingston (29:57.019)
Yeah, happy to share. So, yeah, we're very lucky to already have a few unicorns, as they're called. So Jeeves is one. It's built kind of a global business bank focused on fast growing companies that operate across borders. That has historically been very challenging. you have bank accounts and expenses and income in all these different countries and managing the different currencies and the banking regulations and how you account for that and how you're money between them. And they've created basically infrastructure.
that makes that all easy and they've really well. So the last round valued them at 2.1 billion. They've got a fantastic team. They've got a lot of revenue and are growing. So we continue to be very bullish on them. So we were actually their first investor besides Y Combinator and the biggest investor in the first two rounds. That one I found, fortunately, is a good friend of mine, classmate from business school.
I did not have expertise, I actually did have a little bit of expertise, but not a ton. But after having missed so many friends and classmates, I was in a mode of kind of always investing in my friends and classmates that I thought were smart. And that's why we did it, we did it so much. And we very lucky. So that was a big one. Yassir we mentioned that's also a big one. We led their seed round, the first outside investor. And they have...
a ton of revenue. I can't disclose, there's a big new round in the works that will... Actually, I can't comment too much, but anyway, they've raised a lot of money. doing extremely well. And then... Yeah, we see it as one of our biggest wins. And then another one is Zepto. It's an instant grocery delivery company in India. We ran their first round. We just raised out a $5 billion valuation. A tremendous amount of revenue, growing like crazy.
Harrison Faull (31:33.494)
It's all good news.
Peter Livingston (31:51.879)
We really think they could end up being one of the most valuable companies in India over the coming years. So, that's fair. And we have a lot of others that are doing great, but a lot of them are being very stealthy. actually, probably our single best investment. I'm not allowed to talk about public buildings.
Harrison Faull (31:57.975)
Wow, that's...
Harrison Faull (32:09.16)
Maybe next year if we could have you back on and you know, get out of stealth mode
Okay, she some big wins, big bets. I was gonna follow along with something before going into when it goes wrong.
Harrison Faull (32:27.491)
Okay, so we touched on the successes. Are there any examples of when making these contrarian outlier bets abroad in particular, where they have gone slightly wrong? I think I remember hearing about QICAP and your experience with the Colombian government with that one. Would you mind sharing a little bit of what happened there?
Peter Livingston (32:56.38)
That's actually a funny one that they're doing great now actually. So it's a yet another piece of the roller coaster. These companies go through ups and downs and even to dead and then somehow they miraculously emerge again. so PCAP is actually doing great. They're they have multiple businesses. main one is motorcycle ride hailing in Colombia and they have a delivery business in Mexico. anyway, they've done great. To answer the bigger question, you know, do we have ones that things have gone wrong? Absolutely. I mean, the default
outcome for most startups is they don't work out. So we have lots that haven't worked out. And it really, it's very sad. It sucks. I wish that all of our founders could be really successful and make tons of money, but that's the nature of this. And I guess financially for us, we expect that most of them aren't going to work out and going to lose money or get a tiny return back. And really the way we invest is we expect one or two per year, maybe three will drive almost all the returns.
And out of everything we do over a five or 10 year period, it's probably going be like five companies, and maybe even less that drive the return to the whole portfolio. An example here that I love sharing is in Chris Saka's lowercase capital fund one, which is widely considered the best performing venture fund of all time. They returned 250x net to their LPs. They had a lot of big wins. They had Uber and Instagram and think Docker. Twitter might've even been in there.
Anyway, he has like all these really successful investments in that fund. But despite having all those big winners, there's still only one investment that is worth more than everything else combined, and it's Uber. And it's just the nature of this where it's called the power law nature of kind of venture outcomes where, you know, success can be a 10X, it can be a 100X, can be 1000X, it can even be a 10 ,000X. And you don't really like...
you know, 100x or even 500x sounds great, but then if you have another company that did 10 ,000x, like that's the only one in the portfolio that actually really even matters, even if the other ones are very successful. And we're already starting to see that in our portfolio as well. We have companies in each of our vintages that are like, you know, already starting to be worth more than everything else combined or close to it. And we'll probably end up away before it's all over. And so it's just, yeah, go ahead.
Harrison Faull (35:15.685)
So once you've bought this ticket on a rocket ship and it's growing phenomenally well and you could post the whole fund returns just through that one investment, how do you start thinking about an exit strategy, the holding periods and future fundraising rounds?
Peter Livingston (35:35.379)
So I'm a big believer in the power of compound interest over a long period of time. Or not necessarily interest, but kind of compounding growth. And it's extremely rare, or maybe even impossible, for you to create this super important, super valuable company in only a couple years, or even five years. Everything great takes at least 10 years, or really probably more like 20 years. And so the math example that I like to give is,
Let's say you're lucky enough to get in on an investment that doubles in value net to you every year. So, you it doubles. So in year one, you're at a 2x, then 4x. At year five, you're at 32x, which sounds amazing. So if you were given a buyout opportunity at year five to make 32x, most people would say, wow, that's a great win. They take it. I got a 32x on this investment. You feel great. But what if that company keeps doubling for another five years?
If it does, you end up with 1024 X. So by selling at year five instead of year 10, you literally left 97 % of the returns on the All those returns, like even the difference between year nine and year 10 is 50%. So the most value in kind of a compounding growth curve comes in the latest years. And so...
When that's the case, really want to try to these things as long as you possibly can. I remember reading about how in the case of Nvidia, two of the Sequoia partners who led the company Seaground back in like, think it was like the 1980s or even, it either 80s or 90s, are still major holders of their stock to this day. Like each of them sold like a few million dollars and have held the rest for over 30 years. And now their positions are worth like either high hundreds of millions or billions.
Somehow they held onto these shares for a really long time and now it's one of the most valuable companies in the world. And I remember reading that thing, I'm like, wow, that's what I want to do in my life. I want to find a couple of great investments and just hold them forever. the rain is coming down again.
Harrison Faull (37:46.727)
Thank you. This is great. I really appreciate how candid you're being with all the stories and it's great insights. It's going to be a great episode. I'm not having to do very much yet. So coming back.
Peter Livingston (38:00.091)
No, to finish, sorry, sorry, just to finish that thought. same thing for Warren Buffett. Like Warren Buffett is considered the best investor of all time. But if you actually look at it, pretty much all of his returns came from like five investments he did or something like that. And that's how investing works. You're really good ones, compound and compound and compound. You don't really know which ones they're going to be upfront. But the way to do really well as investor is to just hang on to your winners for as long as you possibly can. That's how you make a big money.
So yeah, to tie that up for us, for me personally, I want to actually hold our investments as long as I can. At some point I'll need more liquidity, I'll probably have to sell parts of them, but I want to hold some as I can. Our investors obviously will want liquidity at some point. So at the point that either the company's IPO or when we get some other liquidity event, obviously we're going to distribute to them. But in that process, they get their shares or their cash.
I'll earn carried interest on that. I intend to take that as shares and continue holding them as long as I can. I'm really a buy and hold type investor.
Harrison Faull (39:01.754)
Awesome. Yeah, you believe in them on day one, your conviction stayed there. Once they've proven that they're going to be a rocket ship and keep compounding, it becomes quite expensive to take money off the table. But some LPs will want that liquidity. So what kind of holding period do you currently have people in the rolling fund?
Peter Livingston (39:25.043)
So we tell them it's probably gonna be 10 years till you get a big amount of liquidity. Shoot, sorry, the rain or something keeps like changing. Harrison Faull (41:30.431)
Yeah. Okay. Perfect. Thank you. So you developed high conviction on founders and you believe that exceptional founders, the ones that are going to unicorn companies in the future have been showing signs of genius or product development and innovation before they actually go and create that final product that becomes a home run. What kind of things are you doing to find these founders or are they finding you?
Peter Livingston (42:00.019)
Yeah, the kind of thing that we innovated on a little bit in our model is that we made it known to all of our LPs and portfolio founders that if they send us an investment that we do, we give them a big chunk of the carry in that investment. And with the nature of AngelList where, and we have a syndicate with 5 ,000 LPs who follow us there, that creates a lot of potential scouts for lack of a better term. Sequoia created, invented the scout program idea where they kind of bring in people.
Give them some money to invest and they get some economics in it. But they can only have like 100 or maybe 200 scouts. And we realized, well, why can't we just open that up to anybody? Why can't we have 5 ,000 scouts, but we only pay them when they actually send us a deal that we like? And so that's what we did. And so through that, we're able to see stuff from, know, our LPs are all over the world. And now we also have 440 portfolio founders all over the world. And they too know that if they send us something we do, they get effectively an angel investment in that company.
So that's been really helpful for expanding our reach, allowing just me and my partner, only two of us, to see a lot of really high quality companies all the way. And it's just kind of a screening element to it, too, where these people are only going to send us something that, know, it's either a friend that they know really well or something that they think really smart. And it's basically vetted to some degree before we even reach the rest.
Harrison Faull (43:19.19)
Do pay that referral commission in cash straight up upon making the investment or are they forced to ride the investment with you?
Peter Livingston (43:29.079)
It's carried interest and so that further aligns incentives. So they have to think it's a good investment to send it to us because they're only going make money if it turns out to be a good investment.
Harrison Faull (43:40.971)
makes complete sense. I'm trying to do a similar thing for our UK syndicate. A lot of people want that initial cash upfront and that says a lot when if you don't believe in it enough or you don't think that initial referral fee could 10x, why would you not want the carried interest instead? How many, in terms of deal flow, how many deals do think you screen annually in terms of getting to the 150 investments that you make?
Peter Livingston (44:09.524)
So, fewer than other VCs, I think. So, a lot of VCs like to put up these numbers and say, we read 10 ,000 decks and we then talked to this many and then we met with this many again and then like we did the bills and this many and then we invested in this number. We actually think that sort of those are vanity metrics. Like they really like to say, we're so selective, we saw so many things. The reality is the vast majority of the companies they're probably looking at are not, you know, not good investments.
I really want to count all that. I probably get like 20 or 30 cold emails a day from founders. And I used to try to read those and try to invest in them. And I quickly realized it wasn't worth my time. And so instead, we've kind of used this model of both referrals. And then we actually do some outbound like with Y Combinator, we reach out to those companies to find good investments that way. But because of how filtered our
the deal flow is that we actually look at, we probably don't actually consider that many relative time in investing. I would guess that, like of the good referrals that I receive, I probably invest in about a quarter of them.
Harrison Faull (45:14.443)
quality.
Harrison Faull (45:22.007)
Wow, so definitely quality over quantity here. As you're going through, as you're trying to pick out which investments that you're developing, which investments that you want to invest in, what kind of things do do now in terms of due diligence and checks that you didn't initially do? So how can we learn from your experience?
Peter Livingston (45:45.138)
Well, due diligence is important. You want to make sure that you're not encountering fraud, stuff like that. But I'm also a big believer that you can't due diligence a bad investment into a good investment. And so no amount of due diligence is gonna make you successful. And with kind of the way that we invest, we can see what we like.
on the surface pretty quickly. And then it's also pretty quick to kind of verify that what we see is actually true. And so the truth is we don't actually spend that much time in the kind of extensive due diligence. You know, we have certain things that we... No. No. Trusting founders. Yep. Trusting founders, kind of looking at the network that they came from, who their referrer was, cross -referencing kind of digitally on lot of these things. So if they're claiming traction, usually they're kind of...
Harrison Faull (46:26.519)
Do you make client calls, things like that? Or it's more trusting the founders, being honest with the questions and the answers? Okay.
Peter Livingston (46:44.083)
digital footprints that sort of support that traction. there isn't, then we'll ask for more.
And in terms of background, given that lot of these are coming in as referrals, it's usually somebody that works with them where it's like, their work experience is real or they actually did do the things that they claimed they did.
Harrison Faull (47:01.079)
Have you created a formal sort of waiting structure of things you look for in founders? Are there certain attributes that you think are really, really important that maybe if one founder doesn't have, they have to make up for by being exceptional in other areas?
Peter Livingston (47:16.699)
No, no, we don't have any sort of formula.
Harrison Faull (47:19.967)
Awesome. Your partner, Tiibo, who's based in Dubai, think, how did you guys meet and how do you guys manage the fund together being thousands of miles apart in totally different time zones?
Peter Livingston (47:28.787)
Mm
Peter Livingston (47:37.106)
Yeah, we work really well together. We met through AngelList originally. So he works for a family office in Kuwait where they wanted to get some more venture capital exposure. So he invested for them across AngelList in basically syndicate deals. And he just has incredible judgment. So he was able to pick out many of my best investments. So I was first syndicating deals on AngelList. He was able to pick out some of my best ones that I did through there.
And then he sent me Yassir. He sent that to me. said, I'm going to invest in this personally. Do you want to try to syndicate it together? Yeah, that worked out really well. And then we just started doing more deals together. yeah, I mean, it's funny. We like a lot of the same things. have a very similar mindset. He has some attributes that are really complementary to mine. He's very good at processing huge amounts of data. So one thing he
does is he goes through the Y Combinator list of companies every year that has like three or four hundred companies and is able to go through every single one, read the pages, cross -reference LinkedIn, and form like a really astute judgment about every single one and then reach out to the ones he likes, talk to all of them, and then make like really good decisions about which ones to invest in. And it's funny, I try to do that. I try to go through these Y Combinator lists. I get through about 10 companies and it's just like my eyes glaze over. I can't do it anymore. And so he's just so good at sort of like looking at a lot of stuff.
not zoning out and keeping a sharp judgment. so anyway, he was able to pick out really fantastic companies. He's done really well. Out of our three unicorns, two of them are his. So anyway, he's been just a fantastic partner to work with. He's a gradual process to work together, and now we're full partners. And how we manage the distance. So it's funny, we communicate async almost all the time. We text on WhatsApp, email.
communicate several times a day but it's funny we actually don't talk live very often it's probably like once every few months maybe maybe once every six months we talk live it's just we don't need to we're able to communicate so well async and talk about different companies and I think part of it is we both really trust each other's judgment we both have full autonomy to kind of make investment decisions we talk about it afterwards and kind of share share insights and thoughts but we're both kind of very autonomous and fast and we work really well today.
Harrison Faull (49:59.745)
Well, you've been doing this for a few years, so you found a way to optimize the process. And you just hit on my next question, which was going to be, how quickly can you move? And does one of you have a veto over an investment that the other partner wants to make?
Peter Livingston (50:15.155)
No, no veto. Part of why that works really well is we do have this big portfolio and a lot of them are small checks. So, you know, oftentimes if we're thinking about doing a bigger investment, we'll talk about it some more, kind of express concerns. But for the most part, you know, we both recognize that most of what we're investing in is very risky. It's kind of what I said, it's like, yeah, we think maybe for lot of the investments we do, it's like a one or 10 % chance of a huge return. Most likely it won't work out.
We're both wrong on both sides all the time. And so we've really taken the approach of, let's build a big portfolio of the best companies we can find. A lot of them may work out, and that's fine. But the way we've been doing it, we keep getting lucky enough every year with enough good companies that our returns are good. And so that autonomous decision making where he is full freedom of judgment, I do too, is good for building these super diversified, super high data portfolios.
that we're really going for, if that makes sense. I think if we were doing just two or three investments a year, we'd be very fearful of getting something wrong. We'd probably argue a lot, be like, no, you can't make that investment, too risky. Because we're embracing the risk and really just want exposure to as many of these super, super high potential, but very high beta investments as possible. We're both happy to just run and get as many of these as we can.
Harrison Faull (51:39.981)
It's really a hyper differentiated strategy compared to most VC funds that are becoming more insular, it seems the trend is going from being sector and stage agnostic to becoming a real sector specialist and relying on deep technical knowledge to invest only in a certain area, which is also what LPs seem to prefer to manage their overall risk to the asset class in general.
Where do you think unpopular might be within five years? Do you have any goals to build the roaring fund into a more formal entity or is it working so well that you wouldn't change anything? You want to keep doing what you're doing.
Peter Livingston (52:21.949)
Well, it's funny. So we're really happy with what we're doing and how it's working. I like we're getting enough money to make all the investments we want to do. We're very happy with our economics. A few bigger LPs had in the past expressed interest investing in a conventional fund if we raise a bigger one. And in the past we had said to them, well, we have a rolling fund. Why don't you invest in that? And the response was always kind of like, that's cute. Let us know when you have a real fund.
And so earlier this year, we decided to go out and test the waters. We created a deck, said, okay, we'll raise this conventional fund, 50 million, approach those LPs. And we said, hey, okay, we're going to do this real fun. Do you want to do it? Do you want to be in on it now? And we got just a ton of pushback. A lot of them really don't like our strategy. They don't like how many investments we do. A ton of them either don't like that we invest internationally or actually borrowed from investing in VCs that invest in the outside US, which is a huge surprise to me.
Like, that was one of California's biggest pension plans. Told me flat out, they're like, sorry, we can't invest in you because you invested in us. Or a lot. It's okay if you do one or two, can't do so much.
why would that be the case? The endowment stipulations or tax reasons or it's just someone somewhere in an office somewhere has decided that that's the rule that they should follow.
Peter Livingston (53:40.051)
It kind of goes back to what I sharing earlier, how a lot of VCs... So at the VC level, the VCs kind of create these arbitrary boundaries about what they are allowed to invest in or not. But it's also heavily dictated by the LPs. So the LPs will say, okay, we're going invest in VCs that maybe have a concentrated portfolio strategy of 20 to 40 investments. All the GPs are in the US. They mostly invest in the US. They mostly invest in tech. They create these rules and then...
cascades down to where the VCs were investing. And so anyway, we found we're very unpopular with the big LPs. And I was taking meeting after meeting and they kept kind of having these like, really silly reasons to invest. And it was crazy too, because every single one acknowledged like, they're like, wow, your investment, your returns are amazing. They're the best, they're among the best we've seen. That looks great. But wait, what's your...
you can do a hundred something investments a year. no, no, we can't invest in that. Or, like, wait, why are you investing in outside the US? Like, you know, the best companies are in the US and it's like, we don't think so. And so anyway, they had all these reasons to say no. And it just got to this point where we're like, you know what? We have our system that's working. We're investing 10 to 20 million a year with what we do. Why would we bend over backwards to get this LP money? And then the funniest insight at the end of all this is that
The actual returns of the overall VC industry are really not very good. It seems that these boundaries that LPs have decided are kind of the right ways to do VC and what they're going to allocate to produce really pretty abysmal returns. There are all these different charts in statistics, but it's like in conventional VC it's very, very rare to have even a 3X. Which isn't even that good, but it's something like between, I think, 5 and 12%.
VC funds produce that through us, to the LPs, which is surprisingly bad. And we just, what we realized is we have a strategy that we think is working really well, it makes a lot of money for us, and our LPs who want to invest in us. Why would we change that? And the decision is kind of like, okay, we can either do what we think is right, and make great returns, or change it to fit inside the box of these LPs, and end up
Peter Livingston (56:01.937)
with worse returns, but kind of get that money and have the management fees. And if that's the choice we need to make, do we want to get the fat management fees or do we want to actually make good investments and earn our money through the performance fees? Of course we'd choose the latter. So we basically abandoned the bigger fund. It was like, we're just going to be doing what we think is best. And if LPs don't like that, they don't have to be with us. But we're very fortunate and very grateful to the LPs that we do have.
believe in us and believe in the strategy that we're pursuing and those are the people that we want to work with.
Harrison Faull (56:36.476)
Well, I mean, I think it's actually a strength at the end of the day to limit your competition. You've built a huge rolling fund and syndicate for others to try and replicate that success. Now it's much harder and you're playing in a field that other people can't compete. So you've mentioned a few times on the call that you're very rarely priced out of a deal. In fact, valuations are more attractive than they would be in other places because there aren't too many investors competing on the deals, which is exactly what you want in a venture space.
and to create outsized returns. This has been an incredible episode, I appreciate you running out of time. Thank you so much for sharing all these insights and stories with us. Wow, you've had an incredible career. I wish you the best of luck at Unpopular. For everyone that wants to get involved, I'll drop the links in the description below to the Rolling Fund and the Syndicate.
