Alex Mittal – Early Stage Investing - [Invest Like the Best, EP.119]

Episode Summary

Executive Summary: Patrick O’Shaughnessy interviews Funders Club co-founder Alex Mittal on building a venture firm that blends a large investor/founder network with centralized diligence. Mittal explains how Funders Club uses data, trust, and contrarian thinking to find early-stage outliers across software, crypto, logistics, and hard science.

Main Topics: Funders Club’s hybrid venture model (Priority: 10/5): A network-powered VC with centralized standards rather than pure crowd consensus. Why venture rewards outliers (Priority: 10/5): Mittal argues venture returns come from a tiny handful of companies, so firms must find non-obvious winners. Data, trust, and repeatable metrics (Priority: 9/5): They use portfolio data to benchmark SaaS and marketplaces while preserving founder trust. Bad ideas that become great companies (Priority: 10/5): He favors ideas that look wrong at inception but map to future breakthroughs. Boring industries with huge upside (Priority: 8/5): Logistics, retail infrastructure, trucking, and robotics can create large venture-scale businesses. Blockchain and crypto timing (Priority: 9/5): Mittal remains bullish on blockchain utility but is cautious when speculation overheats. Founder traits and market fit (Priority: 8/5): Relentlessness, curiosity, and the right market matter more than a perfect team alone.

Key Arguments: Venture is a power-law game; a few outliers drive most returns. Scale plus trust lets Funders Club turn portfolio data into useful investor/founder benchmarks. Some startup models repeat enough to model metrics like retention, CAC, and ACV. The best early ideas often look like bad ideas before the market catches up. Boring sectors can be compelling because inefficiencies create real value. Blockchain’s real promise is trustless computation and transactions, not price action. Founder quality matters, but market timing can overwhelm even a strong team.

Data Points: Investments backed: about 300 startups - Funders Club portfolio since Q4 2012 Investor network size: over 20,000 accredited investors - Funders Club network Entrepreneur network size: several hundred entrepreneurs - Funders Club network Countries represented by portfolio HQs: over 20 countries - Global distribution of portfolio companies Follow-on stage reached: series D round or actually the series E round - Funders Club has followed companies this far Blockchain peak investing year: 2016 - Peak period for Funders Club’s blockchain investments New blockchain investments last year: zero - Mittal says they paused amid speculation New blockchain investments this year: zero - Mittal says they paused amid speculation Follow-on blockchain investments last year: one - A co-investment with Benchmark in Chainalysis Bitcoin price at Coinbase investment time: $6 - Illustrates how early and non-obvious Coinbase was Google sale offer: $750,000 - One cited early offer for Google’s technology Google sale offer (founders’ recollection): $1.6 million - Alternative recollection of the same early offer Vitalik Ethereum sale price: $10 per Ether - Mittal cites early sale to illustrate mispricing Ethereum upside example: 30 times more of value - If sold 18 months later instead of early Neurable speed gain: 20 fold faster speed or like 20 fold lower latency - Brain-computer interface performance claim DNA overlap: 90, 95% - Used to explain shared human brain patterns Growth example: 5xed - Gollum usage increased despite price decline Food delivery lesson: 90% - Crypto winter style price collapse referenced in blockchain context

Pivotal Quotes: "the best things do not at all look like the very best things in the very early days" — Alex Mittal: Explaining the contrarian early-stage Venn diagram "we live in a society where your brain is just hardwired to assume that like consensus is good" — Alex Mittal: Why venture investors must resist consensus thinking "the future is already here. It's just not evenly distributed" — Alex Mittal: Describing how frontier technologies appear before mass adoption

Implications: Listeners should expect venture advantage to come from disciplined dissent, not popularity; the open question is which experimental technologies will survive market hype and prove durable utility.