Foundation Capital: Reinventing a 27 Year Old Venture Capital Firm | Steve Vassallo, General Partner

**Daniel Scrivner** (0:07)
Hello, and welcome to another episode of our Outlier Investors series, where we dig into the ideas, frameworks, and strategies used by world-renowned investors across public and private markets. I'm Daniel Scrivner, and on the show today, I'm joined by Steve Vassallo, general partner at Foundation Capital and author of The Way to Design. In this episode, we explore what it's like to reinvent a venture capital firm. Foundation Capital was founded in 1995, 27 years ago by Bill Elmore, Catherine Gold, and Jim Anderson. One of Foundation's early claims to fame was that it was one of the first investors in Netflix back in the early 2000s. If you've read The Power Law, which is an incredible historical overview of venture capital by Sebastian Malaby, you'll know that Silicon Valley is littered with venture capital firms whose fates have risen and fallen over the years. Very few venture firms survive a single decade, let alone multiple decades, and those that do survive for decades have to reinvent themselves time and time again. Which is exactly why I wanted to interview Steve Vassallo. Over the last 15 years, he's helped reinvent Foundation Capital, turning around lagging performance, investing in entirely new types of businesses and companies, and in the process he's helped usher in an incredible new era at Foundation Capital. This episode is our definitive guide to reinventing a venture capital firm. In it, we cover Steve's early years bringing design, product and engineering together at IDEO, and what that taught him about building successful products and companies. The early warning signs he saw that made it clear Foundation Capital needed to be reinvented. How Foundation rediscovered who they were and who they wanted to be as a team. How they changed the way they operated and made investment decisions to give in partners more latitude to invest in the ideas they thought could be massive companies in the years to come. How they began making crypto investments, which led to massive wins in Solana and Brave, by making small bets and winning over LP support as the wins added up. And Steve shares how he makes investment decisions, why he thinks you have to balance a prepared mind with an open mind, and he shares his advice for anyone interested in becoming a venture capitalist. This is an incredible episode. You can find the show notes and text transcript at outlieracademy.com/120.
That's 120 And you can learn more about Foundation Capital at foundationcapital.com or by following Foundation Cap on Twitter. Please enjoy my conversation with Steve Vassallo of Foundation Capital. Steve Vassallo, welcome to Outlier Academy. This has been a long time coming and I'm so thrilled to have you on. So thanks for joining me.

**Steve Vassallo** (2:39)
Thanks for having me, Daniel. Great to be here.

**Daniel Scrivner** (2:41)
We've known each other quite a while. I've been super fortunate to have you as someone I can learn from as an investor, as a builder. So I want to start by just sharing your background with everyone listening. And I thought an interesting place to start. Part of this conversation is going to be transitioning from being a builder to a venture investor. So to start, can you just share kind of a sketch of your background and your early years at IDEO and some of where your love of design and product comes from?

**Steve Vassallo** (3:08)
Yeah, you bet. The quick bounce on me and my background. So I grew up just outside of Boston. I was a ninth kid out of 10 in a big family, Irish Catholic, no TV. Went to undergrad back East, spent a year in Switzerland, and then came to California to get my master's degree in electromechanical engineering. And I thought I was going to be an university prof just like my mom. And then my very first Friday at Stanford, I met David Kelley, the founder of IDEO. And I think I assumed up to that point that products just fell out of the sky or something, that there was no degree in product design that I knew of anyway. And so when I discovered this, I was just completely taken. And then a couple of months later, David actually, after seeing my final project for this ME 101 class, which is sort of like the design division first capstone course, or I should say sort of introductory course, told me, he's like, well, you need to work at IDEO this summer. And so I didn't spend that summer and then the next five years really designing a whole bunch of things, products across lots of different sectors, everything from hard products to software, interfaces, a whole bunch of things, furniture, Nikes for sunglasses, Cisco's first voiceover IP phones, anesthesia delivery devices, McDonald's bun toasters. I mean, it was everything. And was really imprinted like a baby duck on how you go from a concept to a product that in many ways could be sort of category-defining. So that was for me a seminal experience. After that, then went on to about four years at my first startup, which was in the field of haptics or force feedback interfaces for consumer devices, and then went back to Stanford and did a bunch of things afterwards. But no, IDEO was just one of those just really extraordinary kind of bubbling cauldron of creativity places that I still look back on with just incredibly fond memories.