Transcript – #123 Steve Vassallo of Foundation Capital: My Favorite Books, Tools, Habits and More | 20 Minute Playbook

Please enjoy this transcript of my conversation with Steve Vassallo, General Partner of Foundation Capital. We cover translating non-human languages, enlightened procrastination, and his insatiable curiosity.
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Steve has helped fund the Earth Species Project, which works to decode non-human language, such as that of Gelada monkeys.
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Please enjoy this transcript of my conversation with Steve Vassallo, General Partner of Foundation Capital. We cover translating non-human languages, enlightened procrastination, and his insatiable curiosity. Transcripts for other episodes can be found here

“Go deep, go early, go big.” – Steve Vassallo

Steve Vassallo has been a general partner at Foundation Capital for the last 15 years. At Foundation, he's led the firm's investments in Stripe, Cerebra, Sunrun, Loft Orbital, Solana, and many other incredible firms. Steve is also the author of The Way to Design, which is a guide to how companies of all sizes should approach design. The book is a compendium of interviews with more than 50 designers, design scholars and tech founders who have gotten design right from day one.

Steve began his career at IDEO where he worked closely with IDEO's founder, David Kelly, to research design and deliver innovative products and services across industries. Because of Steve's early experiences at IDEO he's drawn to product-centric founders and has a wonderful knack for bringing design and engineering together to create incredible products.

In this episode, we cover why Steve has been fascinated with the wicked problems that exist in Crypto and why he thinks we're still in the earliest innings there. He talks about his work with the earth species project, whose goal is to decode non-human language in mammals of all sizes from whales to monkeys. Talks about how he combines insatiable curiosity and a deep love of building hard things in his investing work. He shares his advice for founders and investors, and he shares his favorite books, including why he loves Thinking Fast and Slow and Poor Charlie's Almanack.



Transcript – #123 Steve Vassallo of Foundation Capital: My Favorite Books, Tools, Habits and More | 20 Minute Playbook

Daniel Scrivner (00:06):

Hello, and welcome to another episode of our 20 minute playbook series, where each week I sit down with an elite performer from iconic founders to world renowned investors and best selling authors to dive into the ideas, frameworks, and strategies that got them to the top of their field. All in less than 20 minutes. I'm Daniel Scrivner and on the show today, I'm joined by Steve Vassallo. Steve has been a general partner at Foundation Capital for the last 15 years. At Foundation he's led the firm's investments in Stripe, Cerebra, Sunrun, Loft Orbital, Solana, and many other incredible firms. Steve is also the author of The Way to Design, which is a guide to how companies of all sizes should approach design. The book is a compendium of interviews with more than 50 designers, design scholars and tech founders who have gotten design right from day one.

Daniel Scrivner (00:51):

Steve began his career at IDEO where he worked closely with IDEO's founder, David Kelly, to research design and deliver innovative products and services across industries. Because of Steve's early experiences at IDEO he's drawn to product-centric founders and has a wonderful knack for bringing design and engineering together to create incredible products.

Daniel Scrivner (01:10):

In this episode, we cover why Steve has been fascinated with the wicked problems that exist in Crypto and why he thinks we're still in the earliest innings there. He talks about his work with the earth species project, whose goal is to decode non-human language in mammals of all sizes from whales to monkeys. Talks about how he combines insatiable curiosity and a deep love of building hard things in his investing work. He shares his advice for founders and investors, and he shares his favorite books, including why he loves Thinking Fast and Slow and Poor Charlie's Almanack. You can find the show notes and text transcript for this episode@outlieracademy.com/123 that's 1, 2, 3. You can also follow Steve on Twitter @Vassallo V-A-S-S-A-L-L-O. And you can learn more about Foundation Capital at foundationcapital.com. With that let's dive into Steve Vassallo's playbook.

Daniel Scrivner (02:03):

Steve, welcome back to Outlier Academy this time for 20 minute playbook, really excited to have you back on.

Steve Vassallo (02:08):

Thanks Daniel. So great to be here.

Daniel Scrivner (02:10):

So I always start by just having you give a quick sketch of your background for anyone that's listening for the first time, hearing your name for the first time, that doesn't know who you are. Can you just quickly share a quick sketch of your background and then talk a little bit about what you do today at Foundation Capital?

Steve Vassallo (02:23):

Yeah, so I am a general partner at Foundation Capital. We're a 27 year old venture firm based in Palo Alto and San Francisco with partners all over the world. I started my career as a product designer. I'm trained as a electromechanical engineer and roboticist, but started my career at a company called IDEO designing products for a broad array of clients and applications across everything from medical devices to furniture and sunglasses phones for Cisco a whole wide range of things.

Steve Vassallo (02:53):

Then was an entrepreneur and worked as a head of engineering at two startups, one company, which we took public in 1999 and is still a public company today. Which invented much of the area of consumer level haptics or forced feedback technology. And then started a company in collaboration with Gina Bianchini and Marc Andreessen back in 2004. I was their sort of first Head of Product and Engineering, and then found my way to Foundation Capital as an entrepreneur in residence on the path to starting my next company and got tricked into joining as an investor in 2007. And at Foundation, I have invested across everything we do. So I work in enterprise mostly, in some areas related to infrastructure, data infrastructure, analytics, cloud computing, and our FinTech practice. I've done some neat projects and investments in companies like Sunrun and Stripe. And then I've been working in and around our Crypto practice really since 2017 and been very active there particularly recent.

Daniel Scrivner (03:52):

Yeah. And have just a couple successful investments among them Solana now Grand. Many, many others. I always start by asking if you can share a recent fascination. What have you been thinking about recently and what can't you stop thinking about?

Steve Vassallo (04:06):

Yeah, so in Crypto land and we were talking about this in your full episode I mentioned, I just love focusing on what I think about as wicked problems and Crypto has a lot of these. Whether it's elliptical curve cryptography or zero knowledge proofs. And so those have been colonizing my mind for some time. And we talked about those a little bit I think. So maybe I'll think about something different from that. And fascination for me is actually a pretty big word. It's a high bar to be fascinated. And so I think that probably the project, I would probably highlight more than any other one relates to actually a nonprofit that I helped back. That's focused on using very large language models to translate non-human languages. So it's kind of a crazy idea.

Steve Vassallo (05:00):

In fact, the idea sprang from this nature article that I read, I don't know, five or six years ago, it might have been longer than that. And it turned me onto gelada monkeys. These are, these monkeys that live in the Simian mountains of Ethiopia. I mean, who doesn't love monkeys, but these are really special monkeys in that gelada monkeys have the most complex vocalizations of all primates. And in fact, the researchers that chose these monkeys hypothesize that they're wobbles as they're called, these sort of rhythmic sounds, are actually the precursors to syllables and human speech. And anyway, so I was reading this article, went for a walk with my friend Nazar Askin, who's this crazy mathematician, dark matter physicist friend. And he also loved gelada monkeys. I think he read the same nature article and that walk turned into a dinner.

Steve Vassallo (05:50):

And that dinner turned into me writing the first check into this project, which is now called the Earth Species Project. Which is, as I mentioned, trying to sort of decode animal communications and translate them. And in many ways it's a sort of very cool technical project, but it actually has a more meaningful connection to this belief that I think if we actually knew that those monkeys or the crows or the lowland gorillas or the humpback whales, were actually talking to each other, we'd probably respect them more. We'd probably want to conserve them more and we'd probably behave a little differently. And so anyway, that's probably a true fascination of mine beyond some of the day job stuff that I do in Crypto or enterprise infrastructure.

Daniel Scrivner (06:35):

That is fascinating. And it definitely meets my bar. I can't wait to look at it. We'll link to it in the show notes. It sounds absolutely fascinating. One of the questions I always ask is around your superpower. So clearly, you've been an investor now for 15 plus years at Foundation, you invest across enterprise and FinTech and in SureTech and then also in Web3, so pretty broad, I think most people would say. What do you think of as your superpowers? And I'm sure that's a similarly high bar for a superpower, but what I mean by that is everybody on a team shows up with these different innate capabilities. Just the way they're wired, the way that they see the world. What is unique about the way you see the world? And what do you think of as some of your superpowers when it comes to investing?

Steve Vassallo (07:16):

Yeah, it's a good question. And I think when I peel it all back for me and why I get excited about a project or a founder gets excited about working with me, I think it really is a combination of insatiable curiosity and a deep love of building hard things that matter. That make a difference. And I think that really is a function of having thrown myself into hard problems early in my career. Whether it was robotics or electromechanical engineering or applied physics and then designing deeply technical products. But I think then the next linkage, which I think matters to founders is I'm not happy or satisfied with something that's just a hard problem, a cool R&D product. You've got to reduce it to solving a real need and translating into consumer or business value. And so I think it's that appreciating how hard it is to build something deeply technical, but then really thirsting for what's the use case. How does this thing land with consumers? How does it become sort of a beloved product or service? So I think it's that it's that sort of range.

Daniel Scrivner (08:27):

Yeah. It's how do you actually make an impact? How do you actually move the needle? 'Cause I think you find that as a venture investor over time you see a lot of wonderful, amazing, fascinating ideas or fascinating problems or fascinating solutions, but I think if you were to ask that tough question of which of these could truly move the needle could truly impact the world. It is a relatively small number of them. Related to that and this is a difficult question. So I'm going to admit that before asking it, but one of the things I'm always curious about is your philosophy when it comes to investing and that is probably difficult to distill. But if you had to try to distill down your philosophy into just a couple of words, and I might just be reiterating what you just said, what would be that philosophy of what you invest in and why?

Steve Vassallo (09:16):

We often distill it down to a single word, and that is conviction. And I think if I had to maybe take six more words, if that's okay? It would be go deep, go early, and go big. And the deepest focus around these practice areas where we spike really hard enterprise, FinTech, Crypto go early. Two-thirds of the time we were the first institutional investor, 80% of the time these companies are pre-revenue and then go big is when you've worked with a startup from its earliest days, you have a really good sense of what the opportunity is. And when you've got a great company like a Solana or a Cerebras one of our kind of very strong enterprise companies, Eightfold, you want to continue backing those companies with every financing that they've got. And so I think it really is go deep, go early, go big.

Daniel Scrivner (10:21):

Yeah. So well said. I want to ask your advice for two different subsets. One is for founders and one's for investors and the way I'm going to ask this is, so you're an early stage investor, but you've worked with companies over very long time horizon. So you've worked with founders at very different stages. It truly spans a full spectrum. So the question, I guess I would ask is, if you had to think about the piece of advice that you gave to founders most often, or that you feel like you most need to give, and it could be at any stage, stage agnostic could be at a particular stage. What would that be? Is there a piece of advice you give most often to founders?

Steve Vassallo (10:58):

Oh boy, it's hard to generalize. And maybe this piece attempts to take things I learned in my operating career, as well as in my investing career. But I would say it's the sense that you can always find a way to build something you've already sold, but you can't always sell something you've already built. I remember when David Kelly would go close a new client at IDEO they'd be like, "Well, we want this and this crazy other thing and it's got to do these eight things and cost less than this much and be done in six weeks." And he'd say, "We can make that happen." And of course he'd come back and we'd all be like, "What did you commit to?" But when I see the opposite, when I see people build something that they think is going to transform the world, and then they got to sell this piece of technology or research project, and they haven't done the hard work of figuring out whether anyone wants it. I see more failures in that direction.

Steve Vassallo (12:03):

So I'd say, yeah, you can always build something you've already sold, but you can't always sell something you've already built.

Daniel Scrivner (12:08):

Yeah. So similarly on the flip side of the coin for investors and the way I'm going to ask this question, just to not ask the same question around philosophy of investing is, you have new partners that are joining your firm all the time. We just had a long conversation around reinventing Foundation Capital over the last 10, 15 years. And part of that's been bringing in new, incredibly talented partners and investors that see the world differently. When you bring on a new team member as an investor, is there any advice that you give them and what advice would you give to someone that's just starting say next week at Foundation Capital, if you had a new team member joining?

Steve Vassallo (12:46):

Yeah. This piece of advice. I actually absorbed from one of my mentors here at Foundation, Bill, who's one of the co-founders of the firm. He didn't call it this. I came up with the name for it later, but I call it Bills Enlightened Procrastination. And what I mean by this is as product people in particular and certainly former operators. I think we are rewarded for being quick to make decisions, to judge, to decide whether something works or doesn't, and that serves many positive processes in a startup environment. But I think in the venture ecosystem, oftentimes it's in your best interest to not snap to a judgment, particularly to the negative side of the spectrum. Because things change, founders find their way through the fog the market shifts in a little way.

Steve Vassallo (13:39):

And so it really, I think, does pay you to be a little bit more flexible in your thinking. And for those of us who are in the J end of the Myers Briggs spectrum, I have to force myself to not rush to the J but be a little bit more P, perceiving and that's advice. And then I think the only other piece that I think is true in our business is don't fear the partner that makes a bad investment decision. In other words, a decision that doesn't work out, but you really need to fear the partner that keeps you from investing in the ones that turn out to be huge winners. Because I think, we all have seen this and startup ecosystem like there's a lot of things that don't work out, but the ones that do are the ones that turn into the 100X or 1000X winners. And so it really hurts to have one of those 1000X winners in your not portfolio. And so I think you'll make mistakes. Don't worry about the mistakes. Just keep looking for those extraordinary founders who are going to create generationally important companies.

Daniel Scrivner (14:44):

Yeah. That's wonderful advice. I would love to talk about books for a second. You have written your own book, The Way to Design. You talked about before you read a regular Forbes column. I imagine you probably read plenty of books. When it comes to either design investing, entrepreneurship, books for founders, what books do you find yourself, either one going back to thinking about referring back to, or two giving to people or recommending to people?

Steve Vassallo (15:13):

Yeah, I'd say giving books is a love language of mine, t-shirts and books. I think the two books that I've given away more than any other are one, I think about as sort of it's ow people work and that is Danny Kahneman's, Thinking, Fast and Slow. And the second one is I think, How Businesses Work and that's Poor Charlie's Almanack. And I think they both have really interesting lessons for founders, for investors. What I love about Kahneman's work is just boy, it forces you to really be much more aware of your biases of all the ways in which your mind, particularly the fast part of your mind can get you into trouble and trying to let system two do its work and be more thoughtful and more engaged and more intentional.

Steve Vassallo (16:12):

And then Poor Charlie's Almanack is just such a treasure for me, it's this giant blue almost like case study book. Exactly. But there are some vignettes in that. And there are many of his sort of speeches, Charlie Munger speeches that he then deconstructs and sort of talks through. And in some cases sort of is like, this wasn't as good as it could have been and, or nobody understood what I meant here, but there's just so many gems of business wisdom around distribution around... He's also understands human behavior around the concept of not just thinking forwards, but thinking backwards and this concept of inversion and really understanding an idea from every angle to me is such a gift of that book. So those are probably the two that I've given away more than any other, including to my kids.

Daniel Scrivner (17:04):

I can't imagine them receiving this 400 page Poor Charlie's Almanack that they're like, "Dad, I'm never going to read this."

Steve Vassallo (17:10):

Yeah, exactly.

Daniel Scrivner (17:10):

I'm never going to read this. Okay. Two closing questions. The first one that I wanted to ask was one that I actually had intended to ask in the last interview and it's around investing and there's many very tricky, difficult nuanced problems in venture that are thought problems or how you approach it. 'Cause it's very difficult. As you said before, I think even just in the little insight you shared of in venture, it's easy to dismiss. So you want to resist that ability of snapping to a negative judgment too soon and allow yourself to explore it a little bit more deeply. Related to that maybe one of the questions I want ask is as venture, I feel like one of the other things that's difficult is to determine, or sort out the signal from the noise. And what I mean by that is either one, what things to follow or what things that maybe seem small today that you think are going to get much bigger?

Daniel Scrivner (18:04):

And then similarly to that signal from noise, when it comes to meeting companies, meeting founders, trying to just sort out the fluff from the heart of what a company's really about difficult question. Do you have any advice or just being introspective about how you think about separating signal from noise?

Steve Vassallo (18:23):

Yeah, it's a good one. And I'd say what I've learned in our business is, beauty is in the eye of the beholder, for so much of investing in early stage, particularly the earliest stages as we do. And when you're getting to a decision, there could be 52 reasons to do it 48 not, and someone else would have it flipped around. And so I do think ultimately as we were talking about earlier, that conviction mindset, when you've gone deep. You have a better sense as to what you're looking for, but then the humility to be willing to learn new things and adapt as you meet with founders. And as they sort of paint the canvas of what they're trying to build. I do think in one area in particular, and I think this has come up perhaps more than others and maybe is helpful to your audience, but I think the emphasis on people, matters to me more than perhaps anything else.

Steve Vassallo (19:18):

And part of it is I think that extraordinary founders are the basis to substrate of building extraordinary companies. But I've also decided at this point in my career, 15 years in, I just want to work with exceptional people. And I think if you look back Crypto fell prey to this in the early days. Where there are a lot of speculators or a lot of mercenaries looking to make a quick buck. Willing to do anything, including defrauding retail investors to do so. And if the last couple of months have taught us anything, these folks are still in our midst. And I think we've been fortunate to not have been fooled by any of them, but when I think back on why that is, and what we're looking for in Crypto founders is we really, really like these deeply technical founders with a very strong reputation to uphold.

Steve Vassallo (20:13):

They're not here to do one thing. They are thinking about the full arc of their career. In many cases, they're thinking 20 years out. I remember Lynn Jurich, founder of Sunrun, she would talk on the earnings calls as a public company. It's the company where I invested them when they were four people and hearing her on earnings calls, talk about the 20 year focal length of what they were building was just so satisfying. So I think this emphasis on why you're here, what you're building, what fills your tank as a founder, I think matters a lot to us. And we do everything we can to learn about that before we invest, so that we have a real sense of conviction around those founders to live through the hard times and still be excited to build something of import.

Daniel Scrivner (21:01):

Last question. If you could go back to the start of your career and whisper some advice in your ear, what advice would you give your younger self?

Steve Vassallo (21:09):

Well, we talked about distribution, I think this is less about product, person, or investor. More just the sort of human advice is, really take stock at what you're granting your attention to. I have to remind myself every time I open my inbox that this is really somebody else's to-do list, not mine. And I have to choose what really matters to me. And so I think the temptation to react to everything that gets sent to you, [inaudible 00:21:51] to take a meeting, perhaps that might be interesting, but probably isn't a great use of time. And instead flip it around and think about what is it that you are most curious about? What are the things that you want to learn more about? Where do you want to get smart and begin to be able to give yourself a space to do that and to not be a victim to your calendar, but rather take control of it. I think is probably the thing that I've learned more than anything over the last handful of years.

Steve Vassallo (22:17):

And that I think matters at every point in your career.

Daniel Scrivner (22:20):

No, it's so well said. It's almost like you need to invest in the frame that you bring. To be able to wait and sort opportunities and things that come across your desk or your email inbox. So you make sure they actually line up with where you want to go and where you want to spend your time. This has been an incredible conversation. Thank you so much for coming back on Steve. This has been wonderful.

Steve Vassallo (22:36):

Thanks Daniel. It's so great to join you for this and excited by what you're building at Outlier Academy.

Daniel Scrivner (22:42):

Thank you.

Daniel Scrivner (22:44):

Thank you so much for listening. You can find the show notes and text transcript for this episode at outlieracademy.com/123, that's 1, 2, 3. For more for Steve Vassallo listen to episode 120, where he joins me on our Outlier investor series to break down how he helped reinvent the 27-year-old venture capital firm, Foundation Capital. Foundation Capital was founded in 1995, 27 years ago by Bill Elmore, Kathryn Gould, and Jim Anderson. One of Foundations early claims to fame was that it was one of the first investors in Netflix. If you've read the Power Law, which is an incredible historical overview of venture capital by Sebastian Malibu you'll know that Silicon valley has littered with venture capital firms whose fate have risen and fallen over the years. Very few venture firms survive a single decade, let alone multiple decades. And those that do survive for decades have to reinvent themselves time and time again. Which is exactly why I wanted to interview Steve Vassallo over the last 15 years, he's helped reinvent Foundation Capital turning around lagging performance, investing in entirely new types of businesses and companies.

Daniel Scrivner (23:48):

And in the process, he's helped usher in an incredible new era at Foundation Capital. That episode, episode 120 is our definitive guide to reinventing a venture capital firm to listen to that visit outlieracademy.com/120, it's 120. You can find videos of all of our interviews on YouTube, youtube.com/outlieracademy. On our channel you'll find all of our full length interviews as well as our favorite short clips from every single episode, so make sure to subscribe. We post new videos and clips every single week. And if you haven't already follow us on Twitter and LinkedIn under the handle Outlier Academy. Thank you so much for listening. We'll see you right here with a brand new episode next Friday.



On Outlier Academy, Daniel Scrivner explores the tactics, routines, and habits of world-class performers working at the edge—in business, investing, entertainment, and more. In each episode, he decodes what they've mastered and what they've learned along the way. Start learning from the world’s best today. 

Explore all episodes of Outlier Academy, be the first to hear about new episodes, and subscribe on your favorite podcast platform.

Daniel Scrivner and Mighty Publishing LLC own the copyright in and to all content in and transcripts of the Outlier Academy podcast, with all rights reserved, including Daniel’s right of publicity.

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