October 15, 2024 • 41 mins
Sean O'Sullivan shares his entrepreneurial journey, from not being able to afford food to selling his company for $15 Million at 28 years old. He discusses the traits of a great founder and offers advice for young entrepreneurs navigating today's market. Sean reflects on his early programming days and the founding of MapInfo at age 21, detailing the motivations behind the company and the challenges faced in scaling and going public. He explores the role of venture capital and his transition to active investing with SOSV, focusing on deep tech. The conversation delves into risks, the value of investing in first-time founders, and megatrends in manufacturing and climate tech.
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(00:00):
Two and a half years into the business, webecame, like, one of the top 100 software
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companies in the world.
This guy is Sean O'Sullivan.
He runs a $1,500,000,000 investment firm in NewYork City.
Before that, he built a company that wentpublic at just 28 years old.
I wanted to know what his secrets are, so Iinvited him here at our studio in Manhattan to
teach me everything he knows about buildingmulti $1,000,000,000 companies and investing.
(00:24):
At 28 years old, you get $15,000,000 in yourbank account.
How did that feel?
First thing you have to do is pay taxes.
There is actually a great relief.
People that age in in 7th grade didn't have theforesight to think that far ahead.
Why were you so driven to to figure that out?
We didn't have, heat in the winter.
We had to go out and cut wood down, cut treesdown.
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We didn't have a lot of food.
So, like, a lot of things were out of yourcontrol.
What was really great about computers is thatyou could actually tell it what to do, and it
would do exactly what you want it.
So it's one thing you can really control.
If I were to ask you, like, what's the numberone trait that makes a great founder?
What comes to mind?
Sean, your company went public at just 28 yearsold.
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And today, your investment firm, SOSV, has over$1,500,000,000 in assets under management.
But your journey started far from this.
For people who might be in their twentieslooking up to you, trying to figure out what
your secret to success is, What piece of advicewould you give them?
Everybody has a different path.
I came at it, from the viewpoint of being anengineer and a product creator.
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So I I really love creating things andengineering solutions that that are gonna help
scale the success of many people's lives.
I would get some real deep technical expertisein an area that is gonna be important in the
future.
And the market environment today, if you had tomake your first million, would you do it
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differently than how you first made it?
And if so, what what would you do today?
I would have said when I graduated universitythat software and electrical engineering was a
great field to be in.
These days, I look more towards the things thatare impacting the megatrends that are gonna
impact everybody in the future, and I look atsure.
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Software continues to be great, but it'sprobably better for people who want to earn a
good income rather than the real startup valuein the future is gonna be some of these deep
tech areas in biology, chemistry, physics, andthings that can decarbonize the world.
And to understand and truly understand whereyou are today, I think it's important to take a
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step back.
What would be the earliest piece of contextthat I would have to know about you to
understand who you are and all that you'veaccomplished?
I was, 8th of 9 children.
I had a a mom that, fled an abusive father, mymy my biological father, when I was 3.
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So we were on welfare, you know, growing up,and I think that gave me a lot of appreciation
for education and and how you can try to workyour way out of a hole, and we had a big hole.
Those are things that that, you know, weredefining moments for me, not being able to, you
know, be on welfare, for so many years and thenworking my way through, you know, working my
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way through college and getting in debt alongthe way.
You know?
So just just the hardscrabble existence thatactually makes me quite conscious of how
important an appropriate use of funds are.
That's essential for a startup founder to beable to stretch a dollar and be able to
conserve and do more with what they have andcreate something from nothing.
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One of the earliest jobs that that you had totry to pay the bills and and support your
family as well was in high school.
Yeah.
What was that job, and and what's the storybehind that?
Well, I was I I I was a janitor at my highschool, which is actually a very humiliating
and embarrassing job, especially high school.
You wanna be popular with the ladies orwhatever.
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Right.
And, and so I was, you know, not really happywith that.
I was it was, you know, the poorest of the poorin those days were offered something called the
CETA, the Civilian Employment Training Act.
I grew up in a rural area in upstate New York,and, it was a farming community effectively.
And so, you know, said, hey.
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We're gonna train you to be a janitor.
You know?
So I thought, okay.
Well, that's not very exciting.
I don't see how that leads to more than aminimum wage job or or or a a bright future.
And it, it was a rather, you know, soberingthing, but listen, I need we my I needed the
money.
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The family needed the money.
I was happy to do it.
You told me when we we met for coffee, a fewweeks ago that you started to learn how to
program at at just 12 years old.
Now back then, this was before, you know,places like YouTube existed.
How did you start going about learning how toto code especially when you didn't have a lot
of resources growing up as well?
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Yeah.
Actually, back in those days, which was, thelate seventies, even before personal computers
existed, you had to dial in to remote computersusing timeshare computers.
We had one of the systems that would dial intoone of the state's computers.
It was 300 baud, which is an incredibly slowrate.
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I don't know how many, you know, it's like a1000 times lower than broadband.
You know, it was a teletype machine type thingwhere they hammer out character by character,
and you could talk to the computer effectively,line by line.
So, that was how I started to learn to program,and so I would sneak into that in the off off
hours and and try to learn something aboutprogramming.
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Then I leveraged that to get a job in thecounty, and actually that enabled me to when I
got that job as a janitor, actually apply youknow, go speak to the people of the county and
say, hey.
I can get paid from the Civilian EmploymentTraining Act, to just sort of volunteer and do
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work for you, and I'll just go I'll just helpout.
You know, I'll just take your punch cards orwhatever it was in the day or, you know, take
the tax rolls and take the, you know,elections, type of databases and things like
that.
I can work in just in this data processingenvironment, And that's what got me an opening
and entree into, the world of programming.
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Why in 7th grade?
Because I I guess, most people that age in in7th grade didn't have the foresight to think
that far ahead to think, hey, if I startlearning about these skills now, then I could
get these opportunities down the road, maybe inhigh school or early in college.
Why were you so driven to to figure that out?
Well, actually, when you think about thebackground of of someone who is, you know,
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poor, I mean, we we we didn't have heat in thewinter.
We had to go out and cut wood down, cut treesdown.
We didn't have a lot of food.
So, like, a lot of things were out of yourcontrol.
A lot of things were out of your control in inthat kind of environment.
What was really great about computers is thatyou could actually tell it what to do, and it
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would do exactly what you wanted.
So it's one thing you could really control and,get get, get responsiveness from and and do and
and that was, that was attractive to me, and Iknew that there would be jobs in it.
I thought there would be jobs in it.
We were very, very early.
You know, it was very, very early in the scene.
You know, so I was able to leverage that into aa good career.
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As you continue to hone in on on thesecomputer, skills and programming in college at
around 21 years old, you decided to found acompany called MapInfo.
It was pretty revolutionary at the time.
I don't think anybody did it yet.
What was that company, and and what were youbuilding then?
Yeah.
MapInfo is the first company in the world toput street maps onto computers, PCs, and you
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could actually just type an address into thecomputer and you would see a map.
Now people do that these days when they'regetting around the city into their phones, but
it's the same sort of thing.
For the first time, people could do that typeof street address into it a computer.
And we were able to leverage governmentdatabases, which had never been used
effectively for that purpose or at all to tothen have that work across many cities, and
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then we map the whole US, and then from therewe map more of the rest of the world and made
that available to corporates and and to, lessto individuals initially because the corporates
would pay and we had higher prices for thesoftware back then.
But it was the first time that millions ofpeople learned how to use maps and computers,
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to replace the old paper maps.
Why did you want to put maps in on theInternet?
What was the story there?
Well, I actually didn't know what I was goingto do.
I I had what I was working my way throughcollege, and I worked for IBM.
I worked for a think tank outside of WashingtonDC to pay my way, through college.
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What one idea that appeared to me was that, heyif I take technologies that are just at the
cutting edge now that nobody is really usingand I combine these technologies in interesting
ways that nobody is nobody yet has done that Icould by definition be the 1st in the world to
do something.
At the time, the the hard drives were like 5megabytes, so you can't even imagine how small
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that is.
But there is a new technology coming out, CDROMs that allowed for half a megabyte.
2000 times smaller than a gigabyte, and wefigured out a way technically to put all the
maps in the United States on one single CD ROM,and so that made it seem like, hey, you could
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do this.
You could make this available.
You could sell this to businesses for formapping out their databases.
We started with cars in fact, but when wediscovered how long it took the automobile
industry, 7 years, 8 years to implement afeature change, we said, okay.
We have to we have to get to revenue muchfaster.
How are we gonna do that?
And we pivoted to just doing informationsystems, that allowed, people to do it on
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computers.
And I heard a story that although thegovernment was helpful early on, the NSA ended
up quote unquote stealing your source code.
What happened there?
Actually, so, and it was it was I don't thinkit was the NSA.
It was a different three letter acronym, but,what they well, there there were a couple of
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incidents with a Soviet, sort of diplomat cameto visit our offices, and we were told, like,
hours after we were visited by in that case, Ithink it was just an FBI, person.
They, they told us, we wanna know what this guyis doing.
He's a he's one of the diplomats, but he'sactually a spy, and we wanna know if he wants
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to buy this offer or whatever.
So we we kept tabs on that because back inthose days, having a a map of all the streets
in the United States would be considered a bigsecurity risk.
Now everybody just does it, and it's justaccepted.
But back in that that time, it was a verydifferent era.
The various government agencies were trying tofigure out how we did our our maps so
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incredibly fast.
So we had it.
We invented a new type of database, a visualdatabase that could display these maps at that
time probably in about 2 seconds or, you know,a half a second to 2 seconds on a computer.
They couldn't figure out how to do that, andthey said we have to basically figure out how
they they're doing this in order to keep ourdefense apparatus and defense mapping and all
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that sort of thing up the up the par.
So they came and they secretly bought a copy ofthe source code, and they did it, through, at
that time, I was, the president of the company,so but I was considered not.
I didn't need to know.
So so so it was a need to know basis.
And they they paid for the source codehandsomely, and that was that was nice.
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We saw a little revenue, you know, bump.
It was just part of normal business.
We were doing a lot of business across 100 ofcorporations, and we were much, much faster
than anyone else, in the in the market at thetime.
You mentioned you were doing business, across100 of corporations.
What were the growth strategies that that weredifferent when trying to scale the business
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from from 0 to a1000000 and and then 1,000,000to tens of 1,000,000 of dollars in revenue?
Well, actually, a lot of the strategies are thesame strategies you would have today.
You know, we were doing something that wasbrand new that people couldn't do any other
ways.
We were trying to publicize stories and get alot of PR and free free coverage, and we were
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able to do that monthly or quarterly, differentmagazines, PC Magazine, all those places.
We were able to get a lot of coverage back inthe day, and about two two and a half years
into the business, we became like one of thetop 100 software companies in the world.
And then after like 5 years or 6 years, wewere, the 17th or 19th largest software company
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in the world at that time.
So like Microsoft and Nobel and you know,companies some companies that don't exist
today.
WordPerfect, Ashton, Tate.
They were all the leading positions, and wewere down in the less than 20, or so.
It was a exciting time, to to be doing the workthat we were doing, and we would feature user
stories.
So for example, like, city of Syracuse, youknow, they bought our software based off an ad
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they'd seen in Byte Magazine, and they said weneed to map all of the criminal activity that's
happening in the city of Syracuse.
So they mapped all the rape activity, forexample, and then they looked at people,
parolees from prison that had gotten out.
And as you may know, rapists are recidivistslike 90% even after they've been convicted of a
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crime and go into prison.
They come out, and they'll commit the crimeagain.
So that that was an example, and they were ableto catch a lot of people just by mapping where
people were living, where where the crimeshappened, and they reduced the violent crime in
Syracuse by like 40% in 6 months.
They attributed that in a Wall Street Journalcoverage covered the story, and and so a lot
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basically, every police department started toneed the the product, and every fire department
started to need the product for other reasons,and every corporates started to need the
product for sales marketing, and and then thethe parties, the election campaigns, they you
see all these maps a lot of times on, some ofthem are street maps.
Most of them are area maps.
We did all those features too where you cansort of color code the districts based off of
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the data underlying it.
So you see those types of things when when youlook at the election campaigns and whatnot.
All of that kind of things are are producted aswell.
And one of the things that I've noticed afterinterviewing 100 of entrepreneurs is no matter
how successful the company is, it's never justa linear path to success.
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There's always, like, really deep trenches thatyou end up having to go into just to make it
out and and be successful.
What do you think is one of the more memorableor difficult challenges that you face while
building the business, and how did you solveit?
Well, I mean, there's many.
Another pivot that we were forced to make,there were all these graphical user interfaces
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out there.
You know, Macintosh was still on the oldoperating systems, not the not the current OSX,
but Microsoft was trying to catch up.
Sun was out there, you know, as well.
It was a big platform at the time.
And so we said, okay, we're gonna go and we'regonna hardcore pivot to this GUI interface,
graphical user interface.
I don't even know if GUI is used these days.
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That was a major, major thing, and we werestill small enough as a company.
We were, I don't know, 5,000,000 in revenue or10,000,000 in revenue.
We were still small enough of a company.
We could not support 2 different platforms atthe same time, so we had to make a hard pivot.
At that time, you didn't have the PCs that werebundled with the operating system, so we had to
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go talk to Microsoft and say, hey.
Can we bundle your operating system with oursoftware?
And they actually made the decision.
No.
You know what?
We're gonna have it be bundled with
a hardware instead, and,
that did lead to a monopoly in federal instead,and, that did lead to a monopoly in federal
FTC, problems in the future for them.
But it was the right thing to do for theindustry, and we were very early there.
We were a little bit too early, but it it itworked out great because everyone else in the
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industry was caught flat footed.
And we had a 2 or 3 year advantage that gave usa 4 year advantage, 5 year advantage, in in the
market.
So you become one of the largest softwarecompanies in the world.
I think you said 18 or or 19 on that list.
Yeah.
It wasn't that big.
You know, back in the day, you know, you know,that like, just to make the top 100 list, I
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think was 2 and a half 1000000 in revenue.
And then I forget what we're we're, you know,50,000,000 in revenue.
So I I had to look back, you know.
Right.
Back then, the software companies, the PCsoftware companies were were not, not like they
are today.
When did you realize that you wanted to gopublic, and take that next step in the
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business?
Whenever you borrow other people's money to runyour business rather than bootstrapping it.
Now, Seamus, are you bootstrapping yourbusiness?
Yes.
You have control.
You can make the determination, you know, as towhen you want to sell or if you want to sell or
go public or whatever, someday, whatever.
Get to get liquidity for your for yourinvestor, which is you and your partners.
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But in our case, we got family and friends toinvest in the business and then we got 1
venture capitalist.
Even after we were profitable we got a venturecapitalist to invest in our business, Greylock.
And so
Why did you get a VC to invest after you'reprofitable?
Well, just really for their advice, you know,and that I mean, people always think that it's
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about the money, but frankly, it's better justto get your money from your customers.
It's always better to get your money from yourcustomers than this to get from the venture
capitalist.
So we we bank that money.
We were already profitable at that point.
We never spent the money they gave us.
It was only $1,000,000, and they only bought,like, you know, like, 15% of the company, which
still is a pretty, you know, it's like a$6,000,000 post money valuation for a company
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doing up to a 100,000 in profits a month atthat time.
It was still worth it for their experience andtheir help, especially in the later stages
ongoing public.
They knew their ropes there.
They could introduce us to the right people.
It was great to have that external eye on thebusiness as well.
So you get Greylock to invest.
You're doing a 100 plus $1,000 in in profit amonth.
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Later on, you eventually do a lot more anddecide to go public.
At 28 years old, you get $15,000,000 in yourbank account.
How did that feel?
First thing you have to do is pay taxes.
Don't we love the government.
Right?
Which is fine.
That's fine.
You know, I, you know, I I appreciate the factthat somebody needs to pay the roads and
somebody needs to build the schools and youknow generally taxes are going to do that.
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So, as it went public actually I resigned fromthe board and that also enabled me to have the
choice or the option to sell at any time.
I went on to tickle some other fancieseffectively.
So, I went and I became a musician actuallyhere in New York.
Worked out of a studio on eighth Avenue in thenear the Port Authority and which is a bunch of
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bands are in that building, and then we got alot of gigs and we put out an album album or 2,
and it was that was a different chapter of mylife.
One of the most frequent things that I've heardfrom founders that build and sell their
business for for massive exits is that theyfeel this weight come off their shoulders
initially.
Like, they feel on top of the world.
I was speaking with this guy named Jacob Klug.
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He's a 20 year old founder, built this companyquite, to a decent size, but his friend built
and sold an agency, owned a 100% of it for$50,000,000.
And when he wakes up the next day, he justfeels lost.
Like, he's like, what happened?
I don't feel like I have any purpose.
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Yeah.
Why does that happen?
And how can founders still feel driven, Iguess, after an exit?
Is there a way for that to
Yeah.
Well, I mean, there's 2 points or questions inthat question.
And one of them is yeah, I mean, there isactually a great relief because you have a lot
of responsibility running a business.
You have a huge responsibility to your staff,your your your team, and and just having that
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weight be lifted and also in terms of publiccompanies or whatever, you have a lot of
responsibility to shareholders and meeting thequarterly grind and always keeping the stock
price up and all these sorts of things.
I was glad to have those weights off myshoulders.
But so so, yeah, you you you basically, you'reweightless.
You don't have those responsibilities anymore.
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But on the other hand, if you're a drivenperson, you're not gonna feel comfortable in
that in that condition of weightlessness.
It feels like, where do I go?
What do I do?
Imagine somebody drifting in space and that is,you know, everybody needs a purpose and a
mission in life, you know.
I think everybody is searching for that to havea life of significance and a life of meaning
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and so trying to find that next meaningful stepFor me, I just threw myself into music, but
then even that is It's not the same kind ofpressures, it's not the same kind of outcomes
and certainly you can feel like you throwyourself into something and I I purposely chose
a field where I didn't need to really comparemyself with the software industry or making
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products.
I wanted to actually get away from this cycle.
The thing about software is it's a never endingprocess versus I was going into like music and
I actually went into filmmaking after that, butbecause I love the idea of you put out
something and it's finished, right?
You put out a song, you put out an album, it'sdone.
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You don't have to have a version 1.1 of thealbum.
You don't have to have a version 1.2 with newfeatures.
So, that was an interesting path andinteresting channel and it's and I learned a
lot along the way in those in those industriesas well.
Let's fast forward a few years.
So today, you run a fund called SOSV.
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So you invest in a lot of deep tech foundersand and biotech founders.
The size of the fund is around 1,500,000,000like we mentioned earlier in the episode.
Why'd you decide early on when you founded it?
Why'd you decide to, to jump to the dark side?
Well, it was because, actually, you know, oneof the disquieting things when you go public is
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that you could be, you know, your stock isthere.
You look at it.
You're looking at it all the time, you know,and you're looking at it in the morning.
You wake up.
Oh, wow.
It's it's worth $2,000,000 more.
I'm worth $2,000,000 more, and you personalizeit.
Right?
I'm worth $2,000,000 more in the in themorning.
And then in the afternoon, it could go down$4,000,000 or $3,000,000.
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And it's just a whipsaw which is completelyunrelated to anything you have, have control
over or connection with.
So I felt that that was a queasy place to be,and I decided to get out of that sort of very
passive relationship with the wealth that Ibuilt.
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And so I decided, okay.
Well, I'll I'll invest in in things I'minterested in, really interested in.
I invested in a few stocks even some publicstocks and those have done for the most part
pretty well.
Apple, Amazon, Netflix are some of the oneswhere I acquired significant positions.
I was interested in just having my money workactively to build and create.
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So that's why I've devoted, you know, nearlyall of my wealth and the the wealth that I've
accumulated since then into direct investmentsinto startups.
Did it feel risky at first when you'rediverting a lot of your wealth?
It feels it feels really risky.
You know, you you'd and it is really risky.
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People don't realize how long it takes to be adecent investor.
It's not something that happens overnight.
It's something it takes 5 years to discover andmaybe 10 years to really discover if you're any
good at it.
I made a lot of investments into friends thatworked out, and I also made a lot of
investments into people who I didn't evennecessarily know all that well and some friends
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where it didn't work out.
And those didn't work out experiences,especially if you get yourself into a situation
where you're like the sugar daddy, you know,where, like, they come to you, you're the guy
providing the money.
That's the worst, situation to be in, you know,because it's basically some sort of like parent
figure thing or, like, getting your gettingyour allowance or something.
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You really wanna be in as part of a consortiumor as a professional investor rather than, a
and and so that that is something that that wedevelop at SOSV is to help the companies get
funded by multiple sources rather than just onesource.
So it takes a long time to become a goodinvestor.
What if you figured out that others haven't whoare maybe earlier on in their investing career?
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You have to know all of the steps of the game.
I mean, just even the legal terms.
I even have a little, blog called PC lingo.
A video is on YouTube, and it just talks aboutwhat those terms actually means for founders
and funders, but mostly for founders.
Just knowing what it means, liquidationpreferences, you know, you know, knowing what
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pay to play means, knowing what all of thedifferent legal things that go into your
investment documents, what rights they have,and what rights you don't have.
It can, you know, as an early investor, youcould be, you know, wiped out by a clause that
you didn't even understand.
You said, oh, what's that what's that mean?
What's that really mean?
And, we'll see.
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And and then when you see, it's it's basically,you know, a a down perhaps in the midst of a
down round and you're getting completely wipedout and you don't know what to do.
Whereas, you know, you could just simply re upyour pro rata portion and if you have a pro
rata right and then sort of roll the dice againin the in that newly reformed cap table.
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But anyway, like all of this is really hard forpeople to understand.
So it doesn't happen overnight at all, andpeople have to have the real experience and the
the stomach, you know, dropping reality ofputting in a half $1,000,000, $1,000,000,
$2,000,000 into a round, and then 6 monthslater, it's gone.
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You know?
It's all gone, and it was gone for stupidreasons that you should have known about, you
know, and you find it out after the fact.
The other thing is, you know, they say on WallStreet, there's about 10% of the of people that
work on Wall Wall Street are psychopaths.
Yeah.
I
don't think they call them psychopaths.
I think they call them sociopaths.
But, you know, it's just like you're the peoplethat are attracted to money are off often the
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kinds of people that you do not want managingyour money or or good stewards of your money.
So that isn't, I don't think, as high,certainly not in deep tech, but but there is
that element of wannabe founders that thatwill, you know, take your money and just blow
it, you know, or improperly use it or or, youknow, buy things for themselves or, you know,
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we've had people that, buy, like, sailboats.
I you know, this is really Really?
Wow.
You know?
And and it's horrendous, to discover you'vefunded a psychopath, you know, that is lying to
you about everything.
They can lie about the books, you can see theseaccounting statements and they're going more or
less to plan.
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They they could be faking everything, right?
So you definitely This is why the VCs have thecontrols that they do is because they have been
screwed before.
And so people often when they look at theseinvestment documents, it's, oh, what is this?
This is right.
This isn't fair or whatever.
It's because the investors are alsofiduciaries.
(28:50):
They're managing other people's money and theyactually have to make sure that they're not
getting screwed, you know, as part of theprocess whether that's budgetary approvals or,
you know, voting rights on a fundraise orwhatever whatever it may be.
So, it helps to have those experiences happento you even though it's incredibly punishing
(29:11):
and you lose money, you then really learn hownot to lose money.
And through your fund, you've invested in a lotof first time founders as well.
Yeah.
I've heard you talk about on a panel beforethat you think first time founders are
underrated.
Why is that?
The top 10 most valuable companies in theworld, probably 6 of them are first time
(29:32):
founders.
Apple, of course, Amazon, of course, Alibaba,if that's still on the top 10.
I don't know if it is or not.
Google.
You can go on.
There are 2nd time founders that are very, verycan do okay.
Netflix, Reed Hastings, it wasn't his firstrodeo.
Right.
But if you ignore first time founders, you'reignoring most of the performance of the Nasdaq.
(29:55):
I don't I think even Nvidia was a first timefounder.
I think Jason well
Jensen Huang.
Yeah.
I think he was.
Yeah.
Yeah.
So so those are those are all reasons why whywould you not try to be backing first time
founders.
You're gonna miss out on all the returns.
And so getting in early even with a sub 10%position into some of some of these startups
(30:18):
even with dilution and whatnot is likely togive you great returns if you're finding those
gems.
And one of the things that VCs can tend to dopretty well is pattern recognition.
Yes.
It's a whole part of the job.
If I were to ask you, like, what's the numberone trait that makes a great founder?
What comes to mind?
A relentless dedication to the mission of thecompany.
(30:43):
Really knowing what their purpose is in lifefor that the company's life, even more so than
for their own life.
A lot of founders sort of and the wrong kind offounder is gonna be about serving themselves
rather than serving the mission of the company.
And so, the wrong founder is gonna try to bestaying in the CEO even when they really should
(31:06):
move to a CTO position or bring in COOs orbring in the other talent that's needed just
because they're fixated on control.
So people who are too fixated on control in abusiness where you control very little and when
you're trying to create a new industry, youcontrol very little.
You don't control the customers.
You're really being of service as much as youcan to your staff, to the shareholders, you
(31:31):
know, to the professional investors.
So like you're really at the bottom of thestack in some ways.
I we're looking for founders that are thinkingthat way that they have all this weight on
their shoulders, but they're willing to takethat weight.
I think the other thing is, you know, you hadto be unhappy with the status quo.
What could be possible in the future if it wasrun differently?
(31:52):
And that I think for a great founder, those arethose are the things you're looking for.
Someone who can see a new future, is unhappywith the present, and is willing to take a
sacrifice, whatever it takes.
It could be 7 years, you know, for they beforethey see any any liquidity, And they have to be
(32:12):
paying the others that are on their staff morethan they pay themselves, obviously, because
they're stretching every dollar and, you know,they need the talent, and and so they need to
be compensating themselves less than they couldearn in a in a regular job.
So that kind of dedication is what creates thekind of change makers that we all admire.
(32:36):
What is a megatrend, that's founders should bepaying more attention to today that they might
not already be?
Yeah.
Like, I mean, we the the one that we're citingout there is changing the means of
manufacturing.
We're investing as the world's most activeclimate tech investor at SOSV, in companies
that are changing our means of production.
Every human being on the planet consumes about£25,000 of products.
(33:04):
Those £25,000 of products, if there were only2,000,000,000 or 2 and a half 1000000000 people
on the planet, we would not have globalwarming.
So we just crossed 8,000,000,000 in population.
So that just in December, I think.
It's not like we have an overpopulationproblem.
We have 8,000,000,000 people using 25,000pounds of products which are generating all
(33:24):
these greenhouse gases in their production, butwe don't need to make products the way we used
to make products.
We don't have a population problem.
We have a carbon generation problem ordecarbonization problem because the greenhouse
gas is the way we make these products forpeople is wrong.
So using biology as a technology, you canactually improve the the footprint of these
(33:48):
products by 30 times, by 300 times, you know,in some cases using chemistry and enzymes and
things like that.
You can decrease the carbon footprint ofeverything from from these sort of stretchy
fabrics that are all made with, you know, with,plastic.
Yeah.
Polyester.
Yeah.
I mean, I'm sitting on a, you know, on a thisis mostly not a, you know, this is a synthetic
(34:11):
textile, and we're sitting at there's a rughere on the floor.
All of this is petrochemicals.
This is the reason why we are as a planet, andand this is not concrete, you know, this is
just brick walls, but every across the streetand everywhere else, people are building with
concrete which also is producing all thesegreenhouse gases.
We actually have to go through our this is themegatrend that I'm that I'm giving you an
(34:36):
example of.
We have to go through our society, figure outhow we're manufacturing these things in ways
that are creating these greenhouse gases andfigure out how to make them carbon neutral or
carbon negative, and we do that.
And it turns out we could probably support apopulation of 10,000,000,000, 12,000,000,000,
20,000,000,000 people even consuming and havingthe kind of abundance people have gotten used
(34:59):
to in this society, but just by usingelectrification rather than, you know, electric
cars, for example, which help a little.
But everybody thinks, oh, if I get an electriccar, will that solve the problem?
It's actually like
It's time to have the batteries to me, yeah.
Well, yeah, we got the battery issues.
But the real issue is that only takes about 2%of your global warming footprint off by getting
(35:22):
a electric car.
You have to actually change your food supply.
That's about 30% of what's contributing to thatand that's because of the use of fertilizers
and how expensive that process is.
So you adjust fertilizers, you adjust concrete,you adjust energy transmission, you address
storage capabilities and energy generationcapabilities in efficient ways and suddenly we
(35:46):
don't have a global warming problem at all.
So we're working on that.
We think that's a megatrend.
We think that's a 20 year megatrend, 30 yearmegatrend similar to how IT was in the 1980s, a
megatrend which has lasted until almost now,you know, right?
You know, 30, 40 year megatrend.
We think that is a, that's happening right nowand will continue to happen.
(36:08):
Yeah.
Climate's a big one.
I mean, we've seen companies completely sprungup out of nowhere just because people are
willing to pay more for more climate friendlysolutions.
I don't know if you've ever seen Revel, aroundNew York City, but they're like electric cars
that you can get driven around in instead of anUber.
It's a little bit more expensive.
Yeah.
But people are willing to pay for it, becausethey feel like
Yeah.
(36:28):
Well, I think that's great when people arewilling to pay Yeah.
Pay more.
Our our basis of thought is that people are notwilling to pay more.
Yeah.
And so, you have to actually, even though thatit's great and it will give you an accelerant
and some portion of the market maybe 4 or 5%,2, 3% of the market is willing to pay more, but
once you get it to a point using science andusing, you know, engineering capabilities where
(36:53):
it's cheaper for everyone.
Like, for example, if you can make milk whichis 4 times cheaper without using a cow then and
it tastes good and safer for you, then that isa It
becomes a no brainer.
It becomes a no brainer and it just takes over.
I mean, you know, who wants to slaughteranimals for your meat when you can get meat
(37:13):
that is either grown with cellular agricultureor whatever?
You're not gonna pay a premium for it, but ifif it's safer for you, because it doesn't have
all the bacteria in it.
I mean, you leave meat on the counter for anhour or a couple of hours and things start to
grow out of it, you know.
It's really dangerous stuff.
(37:33):
You know, it doesn't have to be that way withcellular agriculture because it doesn't have
all the feces that are in sort of ground beef.
You know, the meat industry is a little grosswhen you actually look at it.
Yeah.
So, like, there you can make things that aresafer and better for you, and and I think
that's an exciting other avenue.
It'll take years to develop and so there's alot of faith and courage that investors have
(37:58):
investing in some of these sectors.
But we also like going for lower hanging fruitas well.
And that's what I would encourage entrepreneursto do not have all the investors spending their
their lives working on solutions for 20 yearsfrom now.
You really need a lot of people to go for thethe markets where they can get their product
out there in the market, get some high value.
(38:19):
And as you say, even companies, companies orconsumers that will pay a slight premium for
it, that will actually be what enables acompany to get to some level of scale and, and
start to make a name for themselves.
Gotcha.
And before we wrap it up here, couple ofclosing questions that I like to ask.
(38:40):
One is, what's the best piece of advice you'veever received?
From my mom, it's finish what you start.
So, but in general, I I find, like, using, apriority system and a day planner kind of thing
helps you do that.
I guess it's Benjamin Franklin's thing issomething along the lines of time is what life
(39:03):
is made of, so manage your time.
And actually there's a there used to be theseold Franklin day planner systems and paper and
whatnot, but just really managing yourpriorities, managing your time, focusing on the
OKRs, objectives and key results, you know,like delivering things and getting them done.
It's about productivity.
(39:26):
With a founder.
They really, really, really need to look at howthey're using their time, how they're
communicating with people, and, and thenkeeping your word on on what you what you say
you're going to do.
And on the contrary, what's the worst piece ofadvice you've ever received?
Oh my God.
You just raised this this big round.
(39:47):
Spend the money freely, because we have to growreally fast.
The the the solution there is to nail it andthen scale it rather than trying to scale what
isn't working.
Yeah.
And so I think it's the worst the a good pieceof advice is nail what you're doing.
Have the first 100 happy customers before youtry to have the first 100,000 happy customers.
(40:08):
If I switch you over a phone and you could callyourself right before or right around the time
when you first started your company, would youcall?
And if so, what would you say?
Some of the things that you learn in life arewe all have character flaws and we all have,
weaknesses.
And I don't know that it's a real weaknessbecause it probably helped me become better,
(40:33):
but very introspective person, but I also beatmyself up a lot.
Right?
Because, oh, I should've done more today.
I should Oh, I should've gotten this thing.
Oh, I didn't do what I said I was gonna do.
I I I think that probably leads towards asuccessful successful entrepreneur.
Doesn't necessarily lead to a happy life, youknow, when you're just beating yourself up all
(40:56):
the time.
I would just sort of, I don't know that I wouldactually call myself and say, hey.
Take it easy.
You're you're doing your best.
Then you might not go as hard.
Yeah.
Yeah.
Yeah.
So so I don't know if I would make that call.
Gotcha.
Awesome.
Well, I think that's a great way to end it.
For any founders in the audience that arebuilding in the areas that SOSV invests in,
feel free to take a look at the link in theepisode description down below.
(41:19):
And thanks, Sean, for taking the time
to join us.
It was a great pleasure chatting with you.
Thanks so much.
Awesome.
This guy is Sean O'Sullivan.
He runs a $1,500,000,000 investment firm in NewYork City.
Before that, he built a company that wentpublic at just 28 years old.
I wanted to know what his secrets are.
So I invited him here at our studio inManhattan to teach me everything he knows about
(41:40):
building multi $1,000,000,000 companies andinvesting.
Two and a half years into the business, webecame, like, one of the top 100 software
(00:04):
companies in the world.
This guy is Sean O'Sullivan.
He runs a $1,500,000,000 investment firm in NewYork City.
Before that, he built a company that wentpublic at just 28 years old.
I wanted to know what his secrets are, so Iinvited him here at our studio in Manhattan to
teach me everything he knows about buildingmulti $1,000,000,000 companies and investing.
(00:24):
At 28 years old, you get $15,000,000 in yourbank account.
How did that feel?
First thing you have to do is pay taxes.
There is actually a great relief.
People that age in in 7th grade didn't have theforesight to think that far ahead.
Why were you so driven to to figure that out?
We didn't have, heat in the winter.
We had to go out and cut wood down, cut treesdown.
(00:47):
We didn't have a lot of food.
So, like, a lot of things were out of yourcontrol.
What was really great about computers is thatyou could actually tell it what to do, and it
would do exactly what you want it.
So it's one thing you can really control.
If I were to ask you, like, what's the numberone trait that makes a great founder?
What comes to mind?
Sean, your company went public at just 28 yearsold.
(01:11):
And today, your investment firm, SOSV, has over$1,500,000,000 in assets under management.
But your journey started far from this.
For people who might be in their twentieslooking up to you, trying to figure out what
your secret to success is, What piece of advicewould you give them?
Everybody has a different path.
I came at it, from the viewpoint of being anengineer and a product creator.
(01:36):
So I I really love creating things andengineering solutions that that are gonna help
scale the success of many people's lives.
I would get some real deep technical expertisein an area that is gonna be important in the
future.
And the market environment today, if you had tomake your first million, would you do it
(01:59):
differently than how you first made it?
And if so, what what would you do today?
I would have said when I graduated universitythat software and electrical engineering was a
great field to be in.
These days, I look more towards the things thatare impacting the megatrends that are gonna
impact everybody in the future, and I look atsure.
(02:19):
Software continues to be great, but it'sprobably better for people who want to earn a
good income rather than the real startup valuein the future is gonna be some of these deep
tech areas in biology, chemistry, physics, andthings that can decarbonize the world.
And to understand and truly understand whereyou are today, I think it's important to take a
(02:43):
step back.
What would be the earliest piece of contextthat I would have to know about you to
understand who you are and all that you'veaccomplished?
I was, 8th of 9 children.
I had a a mom that, fled an abusive father, mymy my biological father, when I was 3.
(03:04):
So we were on welfare, you know, growing up,and I think that gave me a lot of appreciation
for education and and how you can try to workyour way out of a hole, and we had a big hole.
Those are things that that, you know, weredefining moments for me, not being able to, you
know, be on welfare, for so many years and thenworking my way through, you know, working my
(03:27):
way through college and getting in debt alongthe way.
You know?
So just just the hardscrabble existence thatactually makes me quite conscious of how
important an appropriate use of funds are.
That's essential for a startup founder to beable to stretch a dollar and be able to
conserve and do more with what they have andcreate something from nothing.
(03:49):
One of the earliest jobs that that you had totry to pay the bills and and support your
family as well was in high school.
Yeah.
What was that job, and and what's the storybehind that?
Well, I was I I I was a janitor at my highschool, which is actually a very humiliating
and embarrassing job, especially high school.
You wanna be popular with the ladies orwhatever.
(04:13):
Right.
And, and so I was, you know, not really happywith that.
I was it was, you know, the poorest of the poorin those days were offered something called the
CETA, the Civilian Employment Training Act.
I grew up in a rural area in upstate New York,and, it was a farming community effectively.
And so, you know, said, hey.
(04:35):
We're gonna train you to be a janitor.
You know?
So I thought, okay.
Well, that's not very exciting.
I don't see how that leads to more than aminimum wage job or or or a a bright future.
And it, it was a rather, you know, soberingthing, but listen, I need we my I needed the
money.
(04:55):
The family needed the money.
I was happy to do it.
You told me when we we met for coffee, a fewweeks ago that you started to learn how to
program at at just 12 years old.
Now back then, this was before, you know,places like YouTube existed.
How did you start going about learning how toto code especially when you didn't have a lot
of resources growing up as well?
(05:16):
Yeah.
Actually, back in those days, which was, thelate seventies, even before personal computers
existed, you had to dial in to remote computersusing timeshare computers.
We had one of the systems that would dial intoone of the state's computers.
It was 300 baud, which is an incredibly slowrate.
(05:36):
I don't know how many, you know, it's like a1000 times lower than broadband.
You know, it was a teletype machine type thingwhere they hammer out character by character,
and you could talk to the computer effectively,line by line.
So, that was how I started to learn to program,and so I would sneak into that in the off off
hours and and try to learn something aboutprogramming.
(05:58):
Then I leveraged that to get a job in thecounty, and actually that enabled me to when I
got that job as a janitor, actually apply youknow, go speak to the people of the county and
say, hey.
I can get paid from the Civilian EmploymentTraining Act, to just sort of volunteer and do
(06:19):
work for you, and I'll just go I'll just helpout.
You know, I'll just take your punch cards orwhatever it was in the day or, you know, take
the tax rolls and take the, you know,elections, type of databases and things like
that.
I can work in just in this data processingenvironment, And that's what got me an opening
and entree into, the world of programming.
(06:41):
Why in 7th grade?
Because I I guess, most people that age in in7th grade didn't have the foresight to think
that far ahead to think, hey, if I startlearning about these skills now, then I could
get these opportunities down the road, maybe inhigh school or early in college.
Why were you so driven to to figure that out?
Well, actually, when you think about thebackground of of someone who is, you know,
(07:05):
poor, I mean, we we we didn't have heat in thewinter.
We had to go out and cut wood down, cut treesdown.
We didn't have a lot of food.
So, like, a lot of things were out of yourcontrol.
A lot of things were out of your control in inthat kind of environment.
What was really great about computers is thatyou could actually tell it what to do, and it
(07:26):
would do exactly what you wanted.
So it's one thing you could really control and,get get, get responsiveness from and and do and
and that was, that was attractive to me, and Iknew that there would be jobs in it.
I thought there would be jobs in it.
We were very, very early.
You know, it was very, very early in the scene.
You know, so I was able to leverage that into aa good career.
(07:50):
As you continue to hone in on on thesecomputer, skills and programming in college at
around 21 years old, you decided to found acompany called MapInfo.
It was pretty revolutionary at the time.
I don't think anybody did it yet.
What was that company, and and what were youbuilding then?
Yeah.
MapInfo is the first company in the world toput street maps onto computers, PCs, and you
(08:13):
could actually just type an address into thecomputer and you would see a map.
Now people do that these days when they'regetting around the city into their phones, but
it's the same sort of thing.
For the first time, people could do that typeof street address into it a computer.
And we were able to leverage governmentdatabases, which had never been used
effectively for that purpose or at all to tothen have that work across many cities, and
(08:40):
then we map the whole US, and then from therewe map more of the rest of the world and made
that available to corporates and and to, lessto individuals initially because the corporates
would pay and we had higher prices for thesoftware back then.
But it was the first time that millions ofpeople learned how to use maps and computers,
(09:00):
to replace the old paper maps.
Why did you want to put maps in on theInternet?
What was the story there?
Well, I actually didn't know what I was goingto do.
I I had what I was working my way throughcollege, and I worked for IBM.
I worked for a think tank outside of WashingtonDC to pay my way, through college.
(09:20):
What one idea that appeared to me was that, heyif I take technologies that are just at the
cutting edge now that nobody is really usingand I combine these technologies in interesting
ways that nobody is nobody yet has done that Icould by definition be the 1st in the world to
do something.
At the time, the the hard drives were like 5megabytes, so you can't even imagine how small
(09:44):
that is.
But there is a new technology coming out, CDROMs that allowed for half a megabyte.
2000 times smaller than a gigabyte, and wefigured out a way technically to put all the
maps in the United States on one single CD ROM,and so that made it seem like, hey, you could
(10:04):
do this.
You could make this available.
You could sell this to businesses for formapping out their databases.
We started with cars in fact, but when wediscovered how long it took the automobile
industry, 7 years, 8 years to implement afeature change, we said, okay.
We have to we have to get to revenue muchfaster.
How are we gonna do that?
And we pivoted to just doing informationsystems, that allowed, people to do it on
(10:29):
computers.
And I heard a story that although thegovernment was helpful early on, the NSA ended
up quote unquote stealing your source code.
What happened there?
Actually, so, and it was it was I don't thinkit was the NSA.
It was a different three letter acronym, but,what they well, there there were a couple of
(10:50):
incidents with a Soviet, sort of diplomat cameto visit our offices, and we were told, like,
hours after we were visited by in that case, Ithink it was just an FBI, person.
They, they told us, we wanna know what this guyis doing.
He's a he's one of the diplomats, but he'sactually a spy, and we wanna know if he wants
(11:11):
to buy this offer or whatever.
So we we kept tabs on that because back inthose days, having a a map of all the streets
in the United States would be considered a bigsecurity risk.
Now everybody just does it, and it's justaccepted.
But back in that that time, it was a verydifferent era.
The various government agencies were trying tofigure out how we did our our maps so
(11:32):
incredibly fast.
So we had it.
We invented a new type of database, a visualdatabase that could display these maps at that
time probably in about 2 seconds or, you know,a half a second to 2 seconds on a computer.
They couldn't figure out how to do that, andthey said we have to basically figure out how
they they're doing this in order to keep ourdefense apparatus and defense mapping and all
(11:54):
that sort of thing up the up the par.
So they came and they secretly bought a copy ofthe source code, and they did it, through, at
that time, I was, the president of the company,so but I was considered not.
I didn't need to know.
So so so it was a need to know basis.
And they they paid for the source codehandsomely, and that was that was nice.
(12:16):
We saw a little revenue, you know, bump.
It was just part of normal business.
We were doing a lot of business across 100 ofcorporations, and we were much, much faster
than anyone else, in the in the market at thetime.
You mentioned you were doing business, across100 of corporations.
What were the growth strategies that that weredifferent when trying to scale the business
(12:38):
from from 0 to a1000000 and and then 1,000,000to tens of 1,000,000 of dollars in revenue?
Well, actually, a lot of the strategies are thesame strategies you would have today.
You know, we were doing something that wasbrand new that people couldn't do any other
ways.
We were trying to publicize stories and get alot of PR and free free coverage, and we were
(12:59):
able to do that monthly or quarterly, differentmagazines, PC Magazine, all those places.
We were able to get a lot of coverage back inthe day, and about two two and a half years
into the business, we became like one of thetop 100 software companies in the world.
And then after like 5 years or 6 years, wewere, the 17th or 19th largest software company
(13:22):
in the world at that time.
So like Microsoft and Nobel and you know,companies some companies that don't exist
today.
WordPerfect, Ashton, Tate.
They were all the leading positions, and wewere down in the less than 20, or so.
It was a exciting time, to to be doing the workthat we were doing, and we would feature user
stories.
So for example, like, city of Syracuse, youknow, they bought our software based off an ad
(13:48):
they'd seen in Byte Magazine, and they said weneed to map all of the criminal activity that's
happening in the city of Syracuse.
So they mapped all the rape activity, forexample, and then they looked at people,
parolees from prison that had gotten out.
And as you may know, rapists are recidivistslike 90% even after they've been convicted of a
(14:09):
crime and go into prison.
They come out, and they'll commit the crimeagain.
So that that was an example, and they were ableto catch a lot of people just by mapping where
people were living, where where the crimeshappened, and they reduced the violent crime in
Syracuse by like 40% in 6 months.
They attributed that in a Wall Street Journalcoverage covered the story, and and so a lot
(14:33):
basically, every police department started toneed the the product, and every fire department
started to need the product for other reasons,and every corporates started to need the
product for sales marketing, and and then thethe parties, the election campaigns, they you
see all these maps a lot of times on, some ofthem are street maps.
Most of them are area maps.
We did all those features too where you cansort of color code the districts based off of
(14:57):
the data underlying it.
So you see those types of things when when youlook at the election campaigns and whatnot.
All of that kind of things are are producted aswell.
And one of the things that I've noticed afterinterviewing 100 of entrepreneurs is no matter
how successful the company is, it's never justa linear path to success.
(15:18):
There's always, like, really deep trenches thatyou end up having to go into just to make it
out and and be successful.
What do you think is one of the more memorableor difficult challenges that you face while
building the business, and how did you solveit?
Well, I mean, there's many.
Another pivot that we were forced to make,there were all these graphical user interfaces
(15:41):
out there.
You know, Macintosh was still on the oldoperating systems, not the not the current OSX,
but Microsoft was trying to catch up.
Sun was out there, you know, as well.
It was a big platform at the time.
And so we said, okay, we're gonna go and we'regonna hardcore pivot to this GUI interface,
graphical user interface.
I don't even know if GUI is used these days.
(16:01):
That was a major, major thing, and we werestill small enough as a company.
We were, I don't know, 5,000,000 in revenue or10,000,000 in revenue.
We were still small enough of a company.
We could not support 2 different platforms atthe same time, so we had to make a hard pivot.
At that time, you didn't have the PCs that werebundled with the operating system, so we had to
(16:21):
go talk to Microsoft and say, hey.
Can we bundle your operating system with oursoftware?
And they actually made the decision.
No.
You know what?
We're gonna have it be bundled with
a hardware instead, and,
that did lead to a monopoly in federal instead,and, that did lead to a monopoly in federal
FTC, problems in the future for them.
But it was the right thing to do for theindustry, and we were very early there.
We were a little bit too early, but it it itworked out great because everyone else in the
(16:48):
industry was caught flat footed.
And we had a 2 or 3 year advantage that gave usa 4 year advantage, 5 year advantage, in in the
market.
So you become one of the largest softwarecompanies in the world.
I think you said 18 or or 19 on that list.
Yeah.
It wasn't that big.
You know, back in the day, you know, you know,that like, just to make the top 100 list, I
(17:09):
think was 2 and a half 1000000 in revenue.
And then I forget what we're we're, you know,50,000,000 in revenue.
So I I had to look back, you know.
Right.
Back then, the software companies, the PCsoftware companies were were not, not like they
are today.
When did you realize that you wanted to gopublic, and take that next step in the
(17:31):
business?
Whenever you borrow other people's money to runyour business rather than bootstrapping it.
Now, Seamus, are you bootstrapping yourbusiness?
Yes.
You have control.
You can make the determination, you know, as towhen you want to sell or if you want to sell or
go public or whatever, someday, whatever.
Get to get liquidity for your for yourinvestor, which is you and your partners.
(17:55):
But in our case, we got family and friends toinvest in the business and then we got 1
venture capitalist.
Even after we were profitable we got a venturecapitalist to invest in our business, Greylock.
And so
Why did you get a VC to invest after you'reprofitable?
Well, just really for their advice, you know,and that I mean, people always think that it's
(18:19):
about the money, but frankly, it's better justto get your money from your customers.
It's always better to get your money from yourcustomers than this to get from the venture
capitalist.
So we we bank that money.
We were already profitable at that point.
We never spent the money they gave us.
It was only $1,000,000, and they only bought,like, you know, like, 15% of the company, which
still is a pretty, you know, it's like a$6,000,000 post money valuation for a company
(18:42):
doing up to a 100,000 in profits a month atthat time.
It was still worth it for their experience andtheir help, especially in the later stages
ongoing public.
They knew their ropes there.
They could introduce us to the right people.
It was great to have that external eye on thebusiness as well.
So you get Greylock to invest.
You're doing a 100 plus $1,000 in in profit amonth.
(19:03):
Later on, you eventually do a lot more anddecide to go public.
At 28 years old, you get $15,000,000 in yourbank account.
How did that feel?
First thing you have to do is pay taxes.
Don't we love the government.
Right?
Which is fine.
That's fine.
You know, I, you know, I I appreciate the factthat somebody needs to pay the roads and
somebody needs to build the schools and youknow generally taxes are going to do that.
(19:26):
So, as it went public actually I resigned fromthe board and that also enabled me to have the
choice or the option to sell at any time.
I went on to tickle some other fancieseffectively.
So, I went and I became a musician actuallyhere in New York.
Worked out of a studio on eighth Avenue in thenear the Port Authority and which is a bunch of
(19:51):
bands are in that building, and then we got alot of gigs and we put out an album album or 2,
and it was that was a different chapter of mylife.
One of the most frequent things that I've heardfrom founders that build and sell their
business for for massive exits is that theyfeel this weight come off their shoulders
initially.
Like, they feel on top of the world.
I was speaking with this guy named Jacob Klug.
(20:14):
He's a 20 year old founder, built this companyquite, to a decent size, but his friend built
and sold an agency, owned a 100% of it for$50,000,000.
And when he wakes up the next day, he justfeels lost.
Like, he's like, what happened?
I don't feel like I have any purpose.
(20:35):
Yeah.
Why does that happen?
And how can founders still feel driven, Iguess, after an exit?
Is there a way for that to
Yeah.
Well, I mean, there's 2 points or questions inthat question.
And one of them is yeah, I mean, there isactually a great relief because you have a lot
of responsibility running a business.
You have a huge responsibility to your staff,your your your team, and and just having that
(21:01):
weight be lifted and also in terms of publiccompanies or whatever, you have a lot of
responsibility to shareholders and meeting thequarterly grind and always keeping the stock
price up and all these sorts of things.
I was glad to have those weights off myshoulders.
But so so, yeah, you you you basically, you'reweightless.
You don't have those responsibilities anymore.
(21:22):
But on the other hand, if you're a drivenperson, you're not gonna feel comfortable in
that in that condition of weightlessness.
It feels like, where do I go?
What do I do?
Imagine somebody drifting in space and that is,you know, everybody needs a purpose and a
mission in life, you know.
I think everybody is searching for that to havea life of significance and a life of meaning
(21:47):
and so trying to find that next meaningful stepFor me, I just threw myself into music, but
then even that is It's not the same kind ofpressures, it's not the same kind of outcomes
and certainly you can feel like you throwyourself into something and I I purposely chose
a field where I didn't need to really comparemyself with the software industry or making
(22:11):
products.
I wanted to actually get away from this cycle.
The thing about software is it's a never endingprocess versus I was going into like music and
I actually went into filmmaking after that, butbecause I love the idea of you put out
something and it's finished, right?
You put out a song, you put out an album, it'sdone.
(22:34):
You don't have to have a version 1.1 of thealbum.
You don't have to have a version 1.2 with newfeatures.
So, that was an interesting path andinteresting channel and it's and I learned a
lot along the way in those in those industriesas well.
Let's fast forward a few years.
So today, you run a fund called SOSV.
(22:54):
So you invest in a lot of deep tech foundersand and biotech founders.
The size of the fund is around 1,500,000,000like we mentioned earlier in the episode.
Why'd you decide early on when you founded it?
Why'd you decide to, to jump to the dark side?
Well, it was because, actually, you know, oneof the disquieting things when you go public is
(23:16):
that you could be, you know, your stock isthere.
You look at it.
You're looking at it all the time, you know,and you're looking at it in the morning.
You wake up.
Oh, wow.
It's it's worth $2,000,000 more.
I'm worth $2,000,000 more, and you personalizeit.
Right?
I'm worth $2,000,000 more in the in themorning.
And then in the afternoon, it could go down$4,000,000 or $3,000,000.
(23:37):
And it's just a whipsaw which is completelyunrelated to anything you have, have control
over or connection with.
So I felt that that was a queasy place to be,and I decided to get out of that sort of very
passive relationship with the wealth that Ibuilt.
(23:59):
And so I decided, okay.
Well, I'll I'll invest in in things I'minterested in, really interested in.
I invested in a few stocks even some publicstocks and those have done for the most part
pretty well.
Apple, Amazon, Netflix are some of the oneswhere I acquired significant positions.
I was interested in just having my money workactively to build and create.
(24:22):
So that's why I've devoted, you know, nearlyall of my wealth and the the wealth that I've
accumulated since then into direct investmentsinto startups.
Did it feel risky at first when you'rediverting a lot of your wealth?
It feels it feels really risky.
You know, you you'd and it is really risky.
(24:43):
People don't realize how long it takes to be adecent investor.
It's not something that happens overnight.
It's something it takes 5 years to discover andmaybe 10 years to really discover if you're any
good at it.
I made a lot of investments into friends thatworked out, and I also made a lot of
investments into people who I didn't evennecessarily know all that well and some friends
(25:07):
where it didn't work out.
And those didn't work out experiences,especially if you get yourself into a situation
where you're like the sugar daddy, you know,where, like, they come to you, you're the guy
providing the money.
That's the worst, situation to be in, you know,because it's basically some sort of like parent
figure thing or, like, getting your gettingyour allowance or something.
(25:28):
You really wanna be in as part of a consortiumor as a professional investor rather than, a
and and so that that is something that that wedevelop at SOSV is to help the companies get
funded by multiple sources rather than just onesource.
So it takes a long time to become a goodinvestor.
What if you figured out that others haven't whoare maybe earlier on in their investing career?
(25:52):
You have to know all of the steps of the game.
I mean, just even the legal terms.
I even have a little, blog called PC lingo.
A video is on YouTube, and it just talks aboutwhat those terms actually means for founders
and funders, but mostly for founders.
Just knowing what it means, liquidationpreferences, you know, you know, knowing what
(26:12):
pay to play means, knowing what all of thedifferent legal things that go into your
investment documents, what rights they have,and what rights you don't have.
It can, you know, as an early investor, youcould be, you know, wiped out by a clause that
you didn't even understand.
You said, oh, what's that what's that mean?
What's that really mean?
And, we'll see.
(26:34):
And and then when you see, it's it's basically,you know, a a down perhaps in the midst of a
down round and you're getting completely wipedout and you don't know what to do.
Whereas, you know, you could just simply re upyour pro rata portion and if you have a pro
rata right and then sort of roll the dice againin the in that newly reformed cap table.
(26:56):
But anyway, like all of this is really hard forpeople to understand.
So it doesn't happen overnight at all, andpeople have to have the real experience and the
the stomach, you know, dropping reality ofputting in a half $1,000,000, $1,000,000,
$2,000,000 into a round, and then 6 monthslater, it's gone.
(27:20):
You know?
It's all gone, and it was gone for stupidreasons that you should have known about, you
know, and you find it out after the fact.
The other thing is, you know, they say on WallStreet, there's about 10% of the of people that
work on Wall Wall Street are psychopaths.
Yeah.
I
don't think they call them psychopaths.
I think they call them sociopaths.
But, you know, it's just like you're the peoplethat are attracted to money are off often the
(27:44):
kinds of people that you do not want managingyour money or or good stewards of your money.
So that isn't, I don't think, as high,certainly not in deep tech, but but there is
that element of wannabe founders that thatwill, you know, take your money and just blow
it, you know, or improperly use it or or, youknow, buy things for themselves or, you know,
(28:08):
we've had people that, buy, like, sailboats.
I you know, this is really Really?
Wow.
You know?
And and it's horrendous, to discover you'vefunded a psychopath, you know, that is lying to
you about everything.
They can lie about the books, you can see theseaccounting statements and they're going more or
less to plan.
(28:29):
They they could be faking everything, right?
So you definitely This is why the VCs have thecontrols that they do is because they have been
screwed before.
And so people often when they look at theseinvestment documents, it's, oh, what is this?
This is right.
This isn't fair or whatever.
It's because the investors are alsofiduciaries.
(28:50):
They're managing other people's money and theyactually have to make sure that they're not
getting screwed, you know, as part of theprocess whether that's budgetary approvals or,
you know, voting rights on a fundraise orwhatever whatever it may be.
So, it helps to have those experiences happento you even though it's incredibly punishing
(29:11):
and you lose money, you then really learn hownot to lose money.
And through your fund, you've invested in a lotof first time founders as well.
Yeah.
I've heard you talk about on a panel beforethat you think first time founders are
underrated.
Why is that?
The top 10 most valuable companies in theworld, probably 6 of them are first time
(29:32):
founders.
Apple, of course, Amazon, of course, Alibaba,if that's still on the top 10.
I don't know if it is or not.
Google.
You can go on.
There are 2nd time founders that are very, verycan do okay.
Netflix, Reed Hastings, it wasn't his firstrodeo.
Right.
But if you ignore first time founders, you'reignoring most of the performance of the Nasdaq.
(29:55):
I don't I think even Nvidia was a first timefounder.
I think Jason well
Jensen Huang.
Yeah.
I think he was.
Yeah.
Yeah.
So so those are those are all reasons why whywould you not try to be backing first time
founders.
You're gonna miss out on all the returns.
And so getting in early even with a sub 10%position into some of some of these startups
(30:18):
even with dilution and whatnot is likely togive you great returns if you're finding those
gems.
And one of the things that VCs can tend to dopretty well is pattern recognition.
Yes.
It's a whole part of the job.
If I were to ask you, like, what's the numberone trait that makes a great founder?
What comes to mind?
A relentless dedication to the mission of thecompany.
(30:43):
Really knowing what their purpose is in lifefor that the company's life, even more so than
for their own life.
A lot of founders sort of and the wrong kind offounder is gonna be about serving themselves
rather than serving the mission of the company.
And so, the wrong founder is gonna try to bestaying in the CEO even when they really should
(31:06):
move to a CTO position or bring in COOs orbring in the other talent that's needed just
because they're fixated on control.
So people who are too fixated on control in abusiness where you control very little and when
you're trying to create a new industry, youcontrol very little.
You don't control the customers.
You're really being of service as much as youcan to your staff, to the shareholders, you
(31:31):
know, to the professional investors.
So like you're really at the bottom of thestack in some ways.
I we're looking for founders that are thinkingthat way that they have all this weight on
their shoulders, but they're willing to takethat weight.
I think the other thing is, you know, you hadto be unhappy with the status quo.
What could be possible in the future if it wasrun differently?
(31:52):
And that I think for a great founder, those arethose are the things you're looking for.
Someone who can see a new future, is unhappywith the present, and is willing to take a
sacrifice, whatever it takes.
It could be 7 years, you know, for they beforethey see any any liquidity, And they have to be
(32:12):
paying the others that are on their staff morethan they pay themselves, obviously, because
they're stretching every dollar and, you know,they need the talent, and and so they need to
be compensating themselves less than they couldearn in a in a regular job.
So that kind of dedication is what creates thekind of change makers that we all admire.
(32:36):
What is a megatrend, that's founders should bepaying more attention to today that they might
not already be?
Yeah.
Like, I mean, we the the one that we're citingout there is changing the means of
manufacturing.
We're investing as the world's most activeclimate tech investor at SOSV, in companies
that are changing our means of production.
Every human being on the planet consumes about£25,000 of products.
(33:04):
Those £25,000 of products, if there were only2,000,000,000 or 2 and a half 1000000000 people
on the planet, we would not have globalwarming.
So we just crossed 8,000,000,000 in population.
So that just in December, I think.
It's not like we have an overpopulationproblem.
We have 8,000,000,000 people using 25,000pounds of products which are generating all
(33:24):
these greenhouse gases in their production, butwe don't need to make products the way we used
to make products.
We don't have a population problem.
We have a carbon generation problem ordecarbonization problem because the greenhouse
gas is the way we make these products forpeople is wrong.
So using biology as a technology, you canactually improve the the footprint of these
(33:48):
products by 30 times, by 300 times, you know,in some cases using chemistry and enzymes and
things like that.
You can decrease the carbon footprint ofeverything from from these sort of stretchy
fabrics that are all made with, you know, with,plastic.
Yeah.
Polyester.
Yeah.
I mean, I'm sitting on a, you know, on a thisis mostly not a, you know, this is a synthetic
(34:11):
textile, and we're sitting at there's a rughere on the floor.
All of this is petrochemicals.
This is the reason why we are as a planet, andand this is not concrete, you know, this is
just brick walls, but every across the streetand everywhere else, people are building with
concrete which also is producing all thesegreenhouse gases.
We actually have to go through our this is themegatrend that I'm that I'm giving you an
(34:36):
example of.
We have to go through our society, figure outhow we're manufacturing these things in ways
that are creating these greenhouse gases andfigure out how to make them carbon neutral or
carbon negative, and we do that.
And it turns out we could probably support apopulation of 10,000,000,000, 12,000,000,000,
20,000,000,000 people even consuming and havingthe kind of abundance people have gotten used
(34:59):
to in this society, but just by usingelectrification rather than, you know, electric
cars, for example, which help a little.
But everybody thinks, oh, if I get an electriccar, will that solve the problem?
It's actually like
It's time to have the batteries to me, yeah.
Well, yeah, we got the battery issues.
But the real issue is that only takes about 2%of your global warming footprint off by getting
(35:22):
a electric car.
You have to actually change your food supply.
That's about 30% of what's contributing to thatand that's because of the use of fertilizers
and how expensive that process is.
So you adjust fertilizers, you adjust concrete,you adjust energy transmission, you address
storage capabilities and energy generationcapabilities in efficient ways and suddenly we
(35:46):
don't have a global warming problem at all.
So we're working on that.
We think that's a megatrend.
We think that's a 20 year megatrend, 30 yearmegatrend similar to how IT was in the 1980s, a
megatrend which has lasted until almost now,you know, right?
You know, 30, 40 year megatrend.
We think that is a, that's happening right nowand will continue to happen.
(36:08):
Yeah.
Climate's a big one.
I mean, we've seen companies completely sprungup out of nowhere just because people are
willing to pay more for more climate friendlysolutions.
I don't know if you've ever seen Revel, aroundNew York City, but they're like electric cars
that you can get driven around in instead of anUber.
It's a little bit more expensive.
Yeah.
But people are willing to pay for it, becausethey feel like
Yeah.
(36:28):
Well, I think that's great when people arewilling to pay Yeah.
Pay more.
Our our basis of thought is that people are notwilling to pay more.
Yeah.
And so, you have to actually, even though thatit's great and it will give you an accelerant
and some portion of the market maybe 4 or 5%,2, 3% of the market is willing to pay more, but
once you get it to a point using science andusing, you know, engineering capabilities where
(36:53):
it's cheaper for everyone.
Like, for example, if you can make milk whichis 4 times cheaper without using a cow then and
it tastes good and safer for you, then that isa It
becomes a no brainer.
It becomes a no brainer and it just takes over.
I mean, you know, who wants to slaughteranimals for your meat when you can get meat
(37:13):
that is either grown with cellular agricultureor whatever?
You're not gonna pay a premium for it, but ifif it's safer for you, because it doesn't have
all the bacteria in it.
I mean, you leave meat on the counter for anhour or a couple of hours and things start to
grow out of it, you know.
It's really dangerous stuff.
(37:33):
You know, it doesn't have to be that way withcellular agriculture because it doesn't have
all the feces that are in sort of ground beef.
You know, the meat industry is a little grosswhen you actually look at it.
Yeah.
So, like, there you can make things that aresafer and better for you, and and I think
that's an exciting other avenue.
It'll take years to develop and so there's alot of faith and courage that investors have
(37:58):
investing in some of these sectors.
But we also like going for lower hanging fruitas well.
And that's what I would encourage entrepreneursto do not have all the investors spending their
their lives working on solutions for 20 yearsfrom now.
You really need a lot of people to go for thethe markets where they can get their product
out there in the market, get some high value.
(38:19):
And as you say, even companies, companies orconsumers that will pay a slight premium for
it, that will actually be what enables acompany to get to some level of scale and, and
start to make a name for themselves.
Gotcha.
And before we wrap it up here, couple ofclosing questions that I like to ask.
(38:40):
One is, what's the best piece of advice you'veever received?
From my mom, it's finish what you start.
So, but in general, I I find, like, using, apriority system and a day planner kind of thing
helps you do that.
I guess it's Benjamin Franklin's thing issomething along the lines of time is what life
(39:03):
is made of, so manage your time.
And actually there's a there used to be theseold Franklin day planner systems and paper and
whatnot, but just really managing yourpriorities, managing your time, focusing on the
OKRs, objectives and key results, you know,like delivering things and getting them done.
It's about productivity.
(39:26):
With a founder.
They really, really, really need to look at howthey're using their time, how they're
communicating with people, and, and thenkeeping your word on on what you what you say
you're going to do.
And on the contrary, what's the worst piece ofadvice you've ever received?
Oh my God.
You just raised this this big round.
(39:47):
Spend the money freely, because we have to growreally fast.
The the the solution there is to nail it andthen scale it rather than trying to scale what
isn't working.
Yeah.
And so I think it's the worst the a good pieceof advice is nail what you're doing.
Have the first 100 happy customers before youtry to have the first 100,000 happy customers.
(40:08):
If I switch you over a phone and you could callyourself right before or right around the time
when you first started your company, would youcall?
And if so, what would you say?
Some of the things that you learn in life arewe all have character flaws and we all have,
weaknesses.
And I don't know that it's a real weaknessbecause it probably helped me become better,
(40:33):
but very introspective person, but I also beatmyself up a lot.
Right?
Because, oh, I should've done more today.
I should Oh, I should've gotten this thing.
Oh, I didn't do what I said I was gonna do.
I I I think that probably leads towards asuccessful successful entrepreneur.
Doesn't necessarily lead to a happy life, youknow, when you're just beating yourself up all
(40:56):
the time.
I would just sort of, I don't know that I wouldactually call myself and say, hey.
Take it easy.
You're you're doing your best.
Then you might not go as hard.
Yeah.
Yeah.
Yeah.
So so I don't know if I would make that call.
Gotcha.
Awesome.
Well, I think that's a great way to end it.
For any founders in the audience that arebuilding in the areas that SOSV invests in,
feel free to take a look at the link in theepisode description down below.
(41:19):
And thanks, Sean, for taking the time
to join us.
It was a great pleasure chatting with you.
Thanks so much.
Awesome.
This guy is Sean O'Sullivan.
He runs a $1,500,000,000 investment firm in NewYork City.
Before that, he built a company that wentpublic at just 28 years old.
I wanted to know what his secrets are.
So I invited him here at our studio inManhattan to teach me everything he knows about
(41:40):
building multi $1,000,000,000 companies andinvesting.
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