Ross Fubini on Finding the Wave Behind Breakout Startups

Ross Fubini (0:00)

When you start a new fund, the thing you have to be showing people is that you are accessing a new network.

Peter High (0:09)

Welcome to Technoventure. I'm Peter High, president of Metis Strategy. My guest today is Ross Fubini. Ross is the founder and managing partner of XYZ Venture Capital, a firm he founded a decade ago. XYZ focuses on backing entrepreneurs at the earliest stages of company building, particularly across enterprise technology, fintech, and industries that have historically been underserved by technology. The firm has grown substantially since its founding, and today manages nearly $2 billion in assets. Prior to becoming a full-time investor, Ross was an engineer and an entrepreneur, co-founding the enterprise collaboration company Qtree, which was acquired by success factors in 2010

Ross and XYZ wrote the first check into Anduril, now one of the world's most prominent defense technology companies, and he predicted as early as 2017 that Palantir would produce the next great Silicon Valley mafia. That thesis has proven remarkably prescient, and XYZ has gone on to back numerous companies founded by Palantir alumni, among many other companies, of course. Ross has been on the Forbes Midas list multiple times, clocking in at number 78 this year.

In today's conversation, we'll discuss what Ross has learned about identifying exceptional founders before their potential becomes obvious, the rise of defense technology, what the Palantir network taught him about the power of talent ecosystems and how AI is changing both company building and venture investing, among other topics. Ross, welcome to Technoventure. It's great to speak with you today.

Ross Fubini (1:30)

Peter, it's great to be here.

Peter High (1:32)

Ross, I want to begin, I mentioned in the introduction, your entrepreneurial and engineering background, co-founding CubeTree, among other experiences, of course, prior to getting into investing.

Talk a bit about the role that having been in entrepreneur plays now investing in entrepreneur. You've walked in their shoes at different times perhaps, but I'm sure there's a lot that rhymes between your own experience and how you evaluate companies that wish to follow in your footsteps as a successful entrepreneur. Talk a bit about how that experience colors your lenses as an investor.

Ross Fubini (2:06)

Yeah, it's really interesting because there's a bunch of things that are both tactical, and then I think that show up as deep empathy for the founding experience. As you said, so I started my whole experience as an engineer, and it's because I want to build things, and that was software, and then becoming a founder was because I was passionate about building companies. I want to be on that journey. And what was really interesting to me and very naive when I started Qtree, I basically, I thought other people had the answers, and they were just going to tell me them. And I want to tell you, I thought this when I was in my late 20s, early 30s, and I, so I'm not a kid, I don't really know anything.

And I started this company, and I was in an enterprise collaboration space. And what we were doing, we were basically building Facebook for businesses, and this was before Facebook had really taken off. Maybe we had like a few million users.

Peter High (3:15)

Maybe you said the MySpace of Business at that point, Stephen.

Ross Fubini (3:19)

Yeah, I think we were- You could tell Facebook was working. I just can't remember exactly where it was.

But it's notably my mother's also like, why don't you just go to Facebook? Like, thanks, mom. And which were definitively better on many directions. The one direction it was not helpful on, that ended up being valuable later, is going through the founding process. And so when I built this business, one of the things that we were doing at the time is we're trying to figure out, should we go bottoms up, should we adopt through organizations, the way now Dropbox, Atlassian, folks have done, or tops down, sell your CIO or the vast majority of software, then, and arguably now is sold, sold and then delivered through. These ideas were new, I'll tell you that. And we're trying to figure it out. I remember going to the first board meeting, the second board meeting, and Gus Tye, who's a legend out here in Venture, was on our board, and by telling Gus, here's the problem, here's how to figure out, what do we do, what strategy, how do we take this whole thing to market? And Gus was like, yeah, I don't know, you got to figure that out. And I really thought he was just going to tell us the answer. And so the empathy and then the learning is yesterday, we're talking to a company, a very late stage company, we're going to raise another half a billion dollars. So it's well into its journey of building. That said, we're having the exact same boardroom conversation. There are more people and so there are more voices. But it's basically like, here's a bunch of facts, here's what we could do, and should we raise money and how do we think about this valuation? And I was like, huh, yeah, you should figure that out. And I was like, the empathy is nobody knows. Nobody knows what you should do except the founder. And then there, all you have is you have all the information you're gathering and little tidbits and little experiences. And as a venture capitalist, the big lesson was that it's all on the founders, all on the founder journey.