#KochDisrupt Fireside Chat: Joe Lonsdale

May 11, 2018

On Friday, May 11, Koch Disruptive Technologies hosted Joe Lonsdale in Wichita for a fireside chat. Joe is a founding partner of 8VC, a leading venture capital fund in the Bay Area. Over the course of his career, Joe has founded, invested in or worked with several significant technology companies such as PayPal, Palantir, Oculus and Wish.

Joe spoke with Chase Koch regarding the speed and degree of industry and societal changes driven by technology. During the discussion Joe and Chase shared perspectives on transformations happening in the market, as well as insights on how to think about driving continuous transformation.


What was one of your very early “ah ha” moments from working in the start-up tech culture?

One revelation to me in my early years at PayPal was that we could just get together with friends who are smart people and iterate and work hard and then all the sudden you create something that’s state-of-the-art. It’s still true today, and it turns out it’s possible in almost every industry.

I love this saying in Silicon Valley – “being in the tornado.” It’s when you’re growing at 100 percent or more. It’s a very difficult time, because in order to scale that fast, you have to focus on the most important problems. But you also have to be tolerant of the fact that some things are totally broken. It’s a funny way to run things and difficult to get right. You want excellence everywhere, but you have to accept that certain things won’t be done as well as they could be. You have to focus your best efforts on those things that are actually going to matter to the business. 

Tell me about what you learned from the tech bubble explosion in 2000?

The epiphany I took away was that technology drives paradigm shifts and changes, but you still need actual business discipline. It’s not the technology that changes the world, it’s the innovation driven by good business practices. It’s a really important distinction in my opinion.

A lot of people think of technology as this thing that comes into existence, and all of a sudden everything changes. But our society is prosperous and wealthy because we have markets and we have businesses that work within the context of markets to create shared value. Fast-forward nearly 20 years, and you discover that almost everything people were working on in the bubble is coming to fruition now.

Where do you see the greatest opportunities for innovation happening today?

I think the greatest renaissance in science right now is in the area of biology. A lot of things that used to be pure-science problems have now become information problems. Understanding of trends like synthetic biology, gene editing, and costs for things like DNA sequencing have come down drastically. For example, one of our companies synthetically creates spider silk by putting spider DNA into yeast, brewing it, and then fine tuning its properties genetically. The result is cheaper, higher-quality silk than traditional methods. That’s just one of many, many examples of what’s becoming possible.

What are the internal things about a company that can really bring about meaningful transformation?

It’s really important to have a culture of iteration. To do that effectively, you must have strong engineers and technologists. The very best ones will try things and iterate so much faster. We encourage this by regularly holding hackathons. We set aside two or three days and have competing teams prototype something that would be valuable for the business, offering up great prizes for the best ideas. It might be a new feature, a function or way to save time or money. Each team then builds their version of the solution or proof of concept. It’s valuable for the culture because it’s cool and exciting but, more importantly, we’re creating mindsets, influencing and incentivizing everyone to think like owners.

From a venture capital funding standpoint, how many companies would you say 8VC looks at a year? And how do you screen those opportunities to get to the best of the best?

We probably screen about 2,000 opportunities each year. It’s critical that we’re able to do that, so we’ve developed rules that allow us to say “no” really quickly to the majority of them. The most important indicator, frankly, is who sends us the deal. We don’t take unsolicited deals anymore. We have a network of “preferred referrers,” most of which are CEOs of our companies or their advisors or company founders. Those networks really matter, especially in Silicon Valley. From that point, we evaluate talent, as well as the projected trajectory of the company over the next few years in our best estimation.

The big headline on the 8VC website is “The world is broken. Let’s fix it.” What do you mean by this? How has does this mindset inform what you’re up to?

At 8VC we spend a lot of our time looking at different industries and saying “how would this work if they were using technology effectively?” For example, how could health care be better designed? Health care is so broken, and there are so many ways you could use technology and incentives to fix it. We’re investing in and partnering with a lot of companies in logistics and Bio-IT as well as other health care industry areas. There are so many things that could either create value or prevent waste that just aren’t being done.

On a more personal level, one of the companies we invested in was growing so fast, it was incredible. One of their objectives was to get back to customers within a day of being contacted. But the CEO asked, “what if we got back to our customers in one hour?” So for their 3,000 highest priority customers the new rule was to get back to them within one hour. Over the next six weeks, they discovered that those customers purchased, on average, 43 percent more. That was just one tweak to one process in one of their many departments. It made me realize, this company was doing so well and creating so much value, but has all these opportunities to do better, and it’s probably true in our other businesses as well. They just don’t know it. If there’s one thing I’ve learned from management, it’s that there’s always something you can fix and always so much you can make better.