Cursor + Kalshi Seed Investor on Spotting Outlier Talent | Ali Partovi, Neo

**Turner Novak** (0:02)
ALI, HOW'S IT GOING? WELCOME TO THE SHOW.

**Ali Partovi** (0:05)
Thank you so much. Great to be here, Turner.

**Turner Novak** (0:07)
I'm excited you're here. I just read there's an article in The Wall Street Journal talking about Neo. I think it said you turned a hundred and twenty, a hundred and fifty million into 1.4 billion. Is that the number that I saw?

**Ali Partovi** (0:22)
The headline there would have been 1.2. That's net and that's the end of year number. It's higher because one of the biggest drivers of that is Cursor, which has had a big step up since then.

**Turner Novak** (0:38)
I think there's a couple other, Kalshi was in that one too.

**Ali Partovi** (0:41)
No, Kalshi is in our previous fund. So our first fund and our second fund are both on track to be 10x or more.

**Turner Novak** (0:50)
That's pretty good. Very hard to do, especially two times.

**Ali Partovi** (0:54)
Especially the second one was 2021, which is one of the toughest vintages.

**Turner Novak** (1:00)
That's a brutal vintage. I feel like even hitting 1x DPI on a 21 vintage is going to be top quartile.

**Ali Partovi** (1:08)
This is true. This was actually what led to that Wall Street Journal article because Julia Chernova had written an article about how the 2021 cohort of venture funds are all sucking and barely returning. Like the 90th percentile is 1.5x. We were like, we're doing many multiples above the 90th percentile.
So we decided to share our numbers with her, which is something we generally don't do publicly, but wanted to give her an inside look to tell the story.
And I'm really glad about how she presented what Neo is. I'm much more obsessed, though, about what mistakes are we at risk of making looking forward. To me, celebrating returns from 2021 is obviously a nice pat on the back, but I care more about what are we doing right now to add value.

**Turner Novak** (2:09)
Can you repeat it? And obviously, you can't really go back and change 2021 It's already there.
So the genesis of Neo, you like to back people based on talent, not necessarily the idea or the market. I think there's an interesting story. You didn't invest in PayPal, and this was one of the things that kicked off this whole thesis that you have. What happened with Max and PayPal?

**Ali Partovi** (2:37)
Yeah, Turner, I have so many stories of what an idiot I was before fully appreciating this lesson. But I'll start by saying just as a founder, when I was in my early 20s, I realized how important people were. I realized that, oh my gosh, the traditional wisdom for starting a business, if you were going to start a bookstore or a retail business, the lesson was location, location, location. I realized for tech, with the internet, there is no location.

**Turner Novak** (3:13)
Maybe the domain or something?

**Ali Partovi** (3:14)
It's people, people, people. I realized from seeing my own company grow, that you could predict, just if you could see the first 10 people at a startup, you could predict the trajectory of that startup. I was obsessed with trying to hire people smarter than myself to build that company. We had some unbelievable people at that company. Ironically, I didn't realize the obvious extrapolation is that the best way to predict who the first 10 people at a startup is who the first person is. One of the contractors at Link Exchange, we had just sold the company, I was 26, Max was 22 at that time. He was probably our best or certainly top three or four best engineers.
I mean, he was not always there because he was a contractor, but when he came to the office, people would speak in hushed tones, oh my gosh, it's Max Lefchin. This is as like a 19 or 20 year old.
He is brilliant. When he left to start PayPal, all of us looked at the surface idea of PayPal, which was not even called PayPal, it was Confinity, and the business idea was a fucking joke. I mean, literally it could be a great skit or episode of HBO Silicon Valley.
Yeah, the business idea was. And besides myself, Alfred Lin and my co-founder, Tony, had left to start their own fund, they passed on investing in PayPal. I'd say all of us, a whole bunch of us co-founders from that company knew Max was a genius, but also thought this concept is stupid. The concept was stupid, frankly, but it wasn't PayPal. No, it was an app for the PalmPilot long defunct device. But at the time, the PalmPilot was a promising new handheld device. And if I owned a PalmPilot and you owned a PalmPilot, and if I had the PayPal app, and you had the PayPal app, and I had linked my PayPal app to my bank account, and you had linked your, sorry, Confinity, it wasn't even called PayPal, you had linked yours to your bank account, then I could send you money as long as we were no more than two meters apart with nothing obstructing it, because it used the infrared port to zap the money across with an infrared beam. So it's just like really great novelty for nerds. I mean, this would be like a cool hackathon project, but nobody even owned a Palm Pilot at that time, you know, like the total number of devices.