No wonder at the Founders Fund 13 years ago was still a very young company that was brought on board as the first director Justin Fishner-Wolfson. After earning two computer science degrees from Stanford and serving two years as CEO of an organization providing asset management services to the school's student organizations, Fishner-Wolfson was not shy about voicing his views on the Venture Fund. In fact, he says, the start-up fund made a much bigger bet on SpaceX than originally planned because it pushed for it.
He stayed for three years before spying, which he thought was an even better opportunity thanks to friends who had worked on Facebook before going public in 2012. They started looking for ways to liquidate their stocks, and while they had options, in his opinion they weren't great. More so, Fishner-Wolfson said he foresaw more companies like Facebook to stay private longer. He said goodbye to the start-up fund and formed 137 ventures to acquire secondary shares from founders, investors and employees.
That was 10 years ago and the company seems to be doing well. Last year the company closed its fourth fund with capital commitments of $ 210 million and had over $ 1 billion in assets under management. The approach of focusing on around 10 to 12 companies per fund also seems to be paying off. As of late September, it has seen three of its portfolio companies – Palantir, Airbnb, and desire – come on the public market.
We spoke extensively with Fishner-Wolfson this week to learn more about how 137 Ventures This works from company review to the impact of companies giving their employees extended periods of time to keep their vested stock options. ("It has certainly stopped the desperate calls from people who have a tremendous amount of equity that is about to expire. I am totally glad not to receive these calls because I care for people in this situation, He said.) We also talked about this early deal in SpaceX which is also in the portfolio of 137 Ventures.
You can listen to this longer conversation here. In the meantime, we're pulling back part of our conversation that focused on Wish, the discount e-commerce company whose IPO was dubbed Dud this week.
TC: Two of your portfolio companies have done very well in entering the public market – Palantir and Airbnb. wish was another story that fell on her debut. What do you think of his IPO? Do you think investors get this company wrong?
JFW: I think it takes the investment community a long time to understand a newly listed company. At the end of the day, going public is just a day, right? What really matters is how companies will perform over the next 10 or 20 years.
I would look at Microsoft or Amazon, or more recently Facebook, which (stock price) fell 50% in the week or two after it was offered, and Facebook has grown into an incredible business. I have no idea what the market will do tomorrow (or the day after). But over a decade if you can really build a great sustainable business put together, it all comes out in the wash.
Wish has scaled the business incredibly. I think (Co-Founder and CEO) Peter (Szulczewski) is one of the best operators I have met in this industry. And they did a lot of innovative things about mobile devices. There are many more discoveries to be made on the Wish platform. The entire in-store pickup was really innovative. They help consumers get products quickly and easily without having to buy millions and millions of square feet of warehouse.
TC: You speak of these partnerships that Wish would like to start with corner shops in the US and Europe, where those with extra storage space can now get Wish goods, which in turn gives them a little more pedestrian traffic, when people come in to pick up their things. This is a big change from the way Wish has worked so far, where things were shipped very cheaply from China via a USPS deal whose economy has changed since then. Is that correct?
JFW: Right. They are helping small and medium-sized businesses promote pedestrian traffic, which has always been valuable but is becoming even more important in the current environment for these types of businesses. You are (also) helping these companies leverage the data they have across their platform as Wish understands what consumers in that region are looking for and they can help these companies sell better. And then, as they ship products to one place, they aggregate orders from a whole range of people who don't know each other. This reduces the time and cost of logistics and shipping. So they send the stuff in, and it's easier for the consumer to walk or drive five to 15 minutes to pick it up. This allows Wish to focus on the value-conscious consumer who is willing to spend a little time trading for a much cheaper price.
TC: Wunsch is known as a place to get tchotchkes from China. Now, with attempts to sell more mainstream goods, how is the perception of the market changed?
JFW: I'm not sure there is a whole lot you need to do to change that perception as I still think they haven't invaded the entire market. There are a lot of people who don't even know about them openly. And as (I) watched the market evolve, you saw more and more dealers and more and more data from customers about the dealers and the quality of the goods, and all of these things flow into that very issue of a Powerful System where they can use the data to improve product quality and make sure they are selling what people want.
TC: Do you think that uneven quality explains the company's uneven revenue? It grew 57% in 2018, 10% in 2019, and picked up again in the first nine months of this year. Why do you think it was turned upside down?
JFW: All companies go through these growth cycles and then focus on efficiency. If you are only focused on growth, you tend to grow and then break things and then do things in relatively inefficient ways. And ultimately, you need to turn around and focus on how to increase operational efficiency. So I think the cycles you are describing, if you look at the underlying metrics, work to improve operational efficiency.
TC: Wish's shares have not "burst". On the flip side, former Snap executive Imran Khan told CNBC on Tuesday that the recent post-IPO share pops, including those of Airbnb and Doordash, represent an "epic level of incompetence" by the bankers who subscribed to the shares . Do you think it was the bankers' incompetence or just market volatility that caused these stocks to burst as badly as they did?
JFW: I don't think anyone knows the answer to that question. I think it makes for a good sound. Ultimately, I don't think price is a meaningful indicator of anything on the first day.
TC: Will the feverish embrace of these companies raise prices in the secondary market? What do you see?
It really matters how high the public prices are (because) that ultimately end up in the private markets and vice versa. At some point, things cannot have massive differences in value between their private market valuations and their public market valuations. So you definitely see how the multiples shift when the market shifts. But these things are often averages. People focus on one company or example of these things without necessarily looking at all of the companies as it would be quite difficult to do.
But there are always examples of things that are overpriced. There are also examples of things that are below the price. As an investor, you want to try and put more of your money into the good companies, which are certainly on the lower end of that spectrum. But the focus is always on good companies. If you can find companies that will sit together over long periods of time, as long as you're not too crazy about multipliers or reviews, you are in a good place in the end.
TC: Who are you following right now? What is an investment that is not yet available on your website?
JFW: Snapdocs (a company that helps real estate professionals digitally manage the mortgage process and other documentation and that just closed a $ 60 million financing in October).
Aaron (King), the company's founder and CEO, has done a really fantastic job creating a product that people are looking to adopt and this is the time to really accelerate that growth. You've had a good year.
Pictured above: The team at 137 Ventures with Wolfson Center (in glasses).