Elad Gil: How to Spot a Billion-Dollar Startup Before the Rest of the World

**Shane Parrish** (0:01)
You're one of the most successful investors that a lot of people have probably never heard of.

**Elad Gil** (0:06)
AI is the only market where the more I learn, the less I know. And in every other market, the more I learn, the more I know. The more I'm able to predict things, and I can't predict anything anymore. What scares you with the future? That's a big question. I think in a couple of years, we'll start thinking about it as we're selling units of cognition. AI is dramatically underhyped because most enterprises have not done anything in it, and that's where all the money is, all the changes, all the impact is, all the jobs, everything. The people that I know who have been very successful or driven solely by money end up miserable, because they have money and then what? It's just what do you do? What fulfills you?

**Shane Parrish** (0:41)
What are the most common self-inflicted wounds that kill companies?

**Elad Gil** (0:46)
I think that...

**Shane Parrish** (0:47)
What do you think is the next wave?

**Elad Gil** (0:49)
I think it's going to be an ongoing wave of... Yeah, that's coming. And that hasn't even hit yet.

**Shane Parrish** (1:16)
Welcome to The Knowledge Project podcast. I'm your host, Shane Parrish. In a world where knowledge is power, this podcast is your toolkit for mastering the best of what other people have already figured out. My guest today is Elad Gil, who has had a front row seat to some of the most important technology companies started in the past two decades. He invested early in Stripe, Airbnb, Notion, Coinbase, Anduril and so many others. He's also authored an incredible book on scaling startups called High Growth Handbook. In my opinion, he's one of the most underrated figures in Silicon Valley. In this episode, we explore how he thinks about startups, talent, decision-making, AI, and most importantly, the future of all of these things. We talk about the importance of clusters, why most companies die from self-inflicted wounds, and what it really means to scale a company, and importantly, what it means to scale yourself. It's time to listen and learn.
You've had a front-row seat at some of the biggest, I would say, surprises in a way, like Stripe, Coinbase, Airbnb, when they were just ideas. What was the moment where you recognized these were going to be outliers?

**Elad Gil** (2:26)
So all three of those are very different examples, to your point. I invested in Airbnb when it was probably around eight people. Stripe was probably around the same size. And then Coinbase only got involved with much later, when it was a billion-dollar-plus company. And even then, I thought there was enormous upside on it, which luckily has turned out to be the case. I think really the way I think about investing in general is that there's two dimensions that really matter. The first dimension is what people call product-market fit, or is there a strong demand for whatever it is you're building? And then, secondarily, I look at the team. And I think most early stage people flip it. They look at the team first and how good is a founder. And obviously, I've started two companies myself. I think the founder side is incredibly important and the talent side is incredibly important. But I've seen amazing people get crushed by terrible markets and I've seen reasonably mediocre teams do extremely well in what are very good markets. And so in general, I first ask, do I think there's a real need here? How's it differentiated? What's different about it? And then I dig into like, are these people exceptional? How will they grow over time? You know, what are some of the characteristics of how they do things?

**Shane Parrish** (3:25)
Let's go into people second, but how do you determine product market fit in a world where a lot of people are buying product market fit almost through brute force or giving away product?

**Elad Gil** (3:36)
Yeah, there's a lot of signals you can look at, and I think it's kind of varied by type of business. Is it a consumer business versus enterprise versus whatever? For things like consumer businesses, you're just looking at organic growth rate and retention, are people using it a lot? Are they living in it every day? That sort of thing. That'd be early Facebook, right? The usage metrics were insane. And then for certain B2B products, it could be rate of growth and adoption. It could be metrics people call like NDR and a dollar retention or other things like that. Honestly, if you're investing before the thing even exists in the market, then you have to really dig into how much do I believe there's a need here, right? Or how much is our customer needs? So I invested in Rippling and other related companies before there's anything built, right? Under the premise that this is something that a lot of people want. And Notion is the same thing. Actually, Notion was a rare example where I did it as a person investment. I met Ivan, who's a CEO over there. And everything about him was so aesthetically cohesive in a very odd way. The way he dressed, his hairstyle, the color scheme of his clothes, the color scheme of the app and the pitch deck. The only other person I've seen that with is Jack Dorsey, who started Square and Twitter. And there was this odd, almost pure embodiment of aesthetic. And I just thought it was so intriguing and so cool. And I've only seen two people like that before that I had to invest. And it was just this immense consistency. It was very weird. And you see that like you go to his house and it's like, it feels like him, you know, everything, the company feels like him. Everything feels like him.