Builders as Venture Capitalists: The Paypal Mafia leading the Charge (as Always!)
Technology and platforms are shifting so fast these days that it is very hard to keep up. More so if you used to be an operator and become an investor. This is why it’s important that everyone, especially Investors should make or build something.
The biggest reason is you get far more insights from the frontline. You also gain a practical edge of understanding the process of creating (or where there are gaps). Sahil, founder of Gumroad & angel investor is an example of this. He built his startup on top of Stripe and this was what allowed him to get early insight into Stripe and how fast they were growing. Or the founders of Shippo or Klaviyo who had early insight into the Shopify ecosystem and how much business they were getting from Shopify stores. They saw the monster growth happening at Shopify back in 2015. I really wish I bought Shopify stock back then.
And no surprise the Paypal mafia is very far ahead on this. Looking at recent examples:
- Max Levchin’s Sci-Fi VC (formerly HVF) started Glow and Affirm.
- Joe Lonsdales 8VC incubated Quaestor among others
- Khosla Ventures when Keith Rabois was there, started the now publicly traded Open Door
- Peter Thiel’s Founders Fund helped start Anduril Industries and Varda Space.
You use your skills as an investor to be a talent scout and conductor for building a company.
Thinking like a builder, you can go look at spaces and find conceptual gaps which helps you as an investor evaluating deals. Building in a sector or space, leads to all the dealflow coming to you and your firm. Additionally, the more you are a builder, the more respected you are by founders.
Despite the risks of and accusations of lack of focus when both building and investing at the same time. There are now some clear albeit exceptional cases where the skills and insight do compound and become a virtuous cycle. Watch this development closely!
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