BONUS: Trae Stephens- Venture Capital

Trae Stephens is a partner at Founders Fund, a San Francisco-based venture capital firm with a portfolio that includes Airbnb, SpaceX, and Palantir. Trae is also the chairman and co-founder of Anduril Industries, a rapidly growing US defense technology company with over 350 employees, and a valuation of $1.9 billion.

In this bonus content, Trae opens up on how he met his wife Michelle, how he learnt about stock options when he moved to big data start-up Palantir after working for the US intelligence, how he had to solidify his faith at Georgetown and how faith continues to impact the way he believes we should be working to make this world a better place.

 

Full transcript of the interview story:

Trae Stephens: There are a lot of ways that a person can be unusual and contrary. I think my faith is one of those things for me, it makes me very different than other people in the room when we’re having conversations about ethics in an investing context or when we’re talking about privacy and civil liberties in the Palantir context. All of these opinions that I hold are colored by my faith.

[music]

Grace: Hey, guys, it’s Grace. You’re listening to bonus content on Trae Stephens, who is now a partner at Founders Fund, a premier venture capital fund, and the chairman of Anduril Industries, a US Defense tech company. The story of how Trae got to where he is is incredible. You might want to check out the previous episode to know more. In this bonus content, we get into some more interesting topics of why Trae made his career transitions to how he got into Palantir as one of its early employees, to the deeper things about his faith, and how it was refined in college, and is really what sets him apart from others at work.

While you might remember the crazy story of how he got into Georgetown, and how he didn’t waste any time to be in the best position to get a job, to work for the intelligence community right out of college, there was one other important thing that happened when he was in college that we didn’t get into, and that was meeting his future wife, Michelle. We’re going to kick it off with this story.

Trae: This would have been 2004. It’s January of my sophomore year. I not only worked for the President’s Office, I also worked for hotels as the front desk agent to make cash to support my university experience. There was a regular guest at the hotel that checked in almost every Sunday night like clockwork. Over time, I got to know him, and he’s a huge football fan, and I’m a huge football fan.

He would sit in the lobby and watch Sunday Night Football. I would plop down on the couch and talk to this guy and debate with him about which teams are going to make it in the NFL or whatever. He was from Philadelphia, the Eagles were in the playoffs. He called me from his room and, “Come up to the room. My whole family’s here, we’re hanging out, we got some pizza and wings.”

During my break, I go up and I knock on the door. Lo and behold, his oldest daughter is literally my year at Georgetown. He knew that I was that year at Georgetown, but he had never mentioned to me that he had a daughter that was my year. That night, she and I established that we had a mutual friend who I actually lived right next door to. That night, I went back and asked the guy, “What do you think about this Michelle Jacoco gal? She seems pretty cool.” He was like, “Not your type, don’t even bother, it’s not worth it.” That was the illustrious start to my now 12-year marriage. It was a mutual friend telling us that we had nothing in common and that it would never work.

Grace: You’ve known Michelle for a few years already when you got this opportunity at Palantir. How did she take that?

Trae: She’s always been the type of person that has pushed me to take a risk. She’s far more risk minded than I am in a lot of ways. I think that she was probably pretty tired of me coming home every day and being like, “I just hate this. It is just killing me inside.”

Grace: You left in 2008, that was when things were starting to go downhill in America or I don’t know if you felt that yet with the recession happening at that time.

Trae: The recession didn’t really feel real to me. I think as someone that was very new to the marketplace that didn’t own a home and was working for the government, which is like the most recession-proof industry. To me, it was just the needs of the national security mission are no different today than they were in 2007. Maybe they’ve changed in certain ways, but the mission is still as critical as it was before, and Palantir was growing rapidly.

Grace: How did you get that connection to start? Did you end up approaching someone from the company?

Trae: I’d been exposed to the company. I met up with one of the engineers really at a conference and had expressed to him my frustrations for how I was banging the table. He handed me his business card and he said, “Let’s have coffee. Let’s talk” and ended up just hanging out with some of the people on the team. They were just getting their feet under them with early work that they had established in the central.

It proactively helped push me out the door of government life and bring me into the startup. The timing was definitely weird. April 2008 is when I got married and then I joined the company in July. It was like this thing that I had– “This is going to be our life, Michelle.” Three months later, I was like, “Just kidding. Now I work for a company based in Palo Alto. We have these things called stock options, I don’t actually know what they are, I don’t really know how they work.” It’s like, “Wow,” suddenly, this is not at all what we thought it was going to be.

Grace: Your transition into this company wasn’t such a huge difference, it was mainly going from the public to the private sector, but, essentially, you’re doing a lot of the same type of work because Business Insider calls it the secretive data analytics startup, which counts the US government as a client. How accurate would you say that was when you joined?

Trae: The funny thing is that, certainly, I wasn’t trying to be secretive about it. I don’t think anyone else in leadership was trying to be secretive about it. I think it is a really fun narrative for the media to pull on because it’s like if you just assume that anything that you don’t understand is secretive, then, gosh, there are a lot of things in my life that I can put that label on.

There’s nothing super spooky about what we were doing. I think we were very straightforward in saying like, “We take data, and we enable people to search and interact with that data in super-efficient ways.” The initial missions that made a lot of things for the intelligence community, the 911 Commission Report had come out when the company was founded. Basically, the 911 Commission Report said, “Actually, the intelligence community had all the data they needed, they just had it in silos, in different places, and no one connected the dots.”

The original idea for the company is like, how do we do a better job computationally empowering our talented humans throughout the intelligence community to connect the dots, so that these things don’t happen again? This was like the tech answer to that. We certainly were never trying to be secretive.

Grace: As a startup, would you say you made a lot more working for the private sector than how much you were making for the government?

Trae: There’s two answers on that. From a pure salary basis, it’s more but it wasn’t at that point in my life that the difference between taking a job or not taking a job, I probably could have gone on Wall Street out of college and made a lot more. That wasn’t the thing, it was really about the mission that was important. I think this is like a story that the government likes to tell, they like to say, “We can’t compete with the private sector because they just pay people better.”

It’s like, “No, the mission is super compelling, you could recruit and retain people if you just made the culture more acceptable to what people want to experience.” That said, the second part of this is, as I said before, stock options. As a government person, I have never been exposed to this idea, but basically, the stock options are equity in the company.

It’s like the right to buy equity in the company at the price that you entered at. For me, entering as one of the first employees, that’s price was incredibly, incredibly low. It’s high risk because if the company doesn’t work, then your equity is not worth anything, your compensation has been just your salary. If the company does work, then actually your salary becomes almost meaningless. And Palantir worked out really well. [laughs]

Grace: Another thing about stock options is that you actually felt you had ownership of this company.

Trae: One of the reasons that work culture was what it was at Palantir is that they pool your network inward. It’s like they take your family and integrate them, and they make your friends your colleagues. You’re really like recruiting your childhood friends to come work there or you’re becoming close friends with the people that already work there. What this translates into is that it looks like a perk, it’s like,

“We’re going to give you haircuts at the office.  We’re going to give you massages at the office. We’re going to provide breakfast, lunch, and dinner at the office. We’re going to do your dry cleaning.” As the middle 20s person, I was like, “Wow, this is great. They’re just going to do all this stuff.” But what that means is that you show up before breakfast, your wife comes and joins you for dinner, and then at 8:30, you drag your lifeless body back to bed to repeat it again the next day.

Literally, there are books about this, where it’s like, what is the economic value of providing dinner at a startup? It turns out, that it’s seeking out additional hours of labor, out of the workforce, and it totally works.

Grace: Now, I want to get into that time when you said you and Michelle had your first baby when you were at Palantir. What was it like for you to think about your work and how sustainable the 80 plus hours a week of work would be for your family?

Trae: There’s a bunch of different cuts that you can take on this question. There’s a question around fatherhood and coming to terms with who I wanted to be as a father. Do I want to be an absent father, or do I want to be there and be part of their life and their development?

Grace: Because you had a father, that wasn’t your biological one, that was there for you?

Trae: That’s right. Yes.

Grace: Did that have an impact?

Trae: I think so. There’s this really cheesy, I think it’s Brad Paisley song that says, “I hope that I’ll at least be half the dad that you didn’t have to be.” That stuck with me where it’s like, look, this stranger came in and raised me as his own blood. The least that I could probably do is be there for my own children. I think that definitely impacted me also because my dad passed away six months before our first child was born. There’s that component, the fatherhood component. There’s also just the honestly like physical-biological component, which is that having a newborn in your house is very hard. [laughs]

There was no question that I was going to be going to work exhausted and struggle through the day. Recognizing that something had to give was a frequent conversation that my wife and I had during that time period, there were questions about what my role was going to be at Palantir. Does that scale up or does that scale back?

Grace: You were a senior forward deployed engineer and so it wasn’t very clear of what you would do after?

Trae: One of the tricky things about Palantir is that like 800 people have the same title, this forward-deployed engineer title, but it’s not descriptive of their role at all. For the time period that we’re talking about, my functional role at the company was essentially like running sales, like an internal sales team. I had revenue responsibilities and there were a lot of questions about what that would look like going forward as the company scaled.

Historically, we had avoided having commissioned sales, but there were questions about, will it help us to scale this up? Will it help us to be way more active in government affairs with lobbying on Capitol Hill? There was definitely a chance that I could throw myself into that fully and build myself another two or three full-time jobs working concurrently with what I was currently doing.

Grace: Now when you were at Palantir, you started to experience this startup culture and you had described how they tactically give you perks that would make you work more, and that you’d be able to recruit your friends. It was a tight-knit circle of friends. Can you tell me about the relationships you had with your friends there in terms of being able to talk to them about the deeper things like faith?

Trae: I have always been terrible at hiding my religious convictions. [laughs] My closest friends at Palantir all knew where I stood and whether we were having joking conversations where they’re rubbing me a little bit for my views, or they were trying to engage in a serious conversation about them. It came up often. I think it has always been a pretty frequent topic of conversation with the people that I care most about.

A lot of those people happen to be coworkers of mine at Palantir. A lot of those coworkers of mine at Palantir are now with me at Anduril as well. I think that obviously, you’d have to ask my closest friends who are not Christian, what their perspective is directly actually to get a real answer. I think seeing the level of passion and intensity that I bring to my faith.

It’s consistent with my personality for the way that I bring myself into the workplace as well. There’s not a world in which they would ever discourage for being passionate about my religious convictions. I think that it’s part of what makes me who I am. Who I am is someone that my friends obviously care about deeply. I think there’s a tremendous amount of respect there.

Grace: Now I’d want to go into more questions that will help me cover more on the faith element in your life.

Trae: Sure, perfect.

Grace: You grew up with a grandfather who was a pastor of your church and your parents were strong Christians, you went on international missions, but when would you say you started to question the things in your faith, and how did you deal with it?

Trae: During high school, we had a really active youth group at my church and part of that youth group experience was sitting in a loft in the church building. We would go through really complex issues. We would talk about Revelation; how do we interpret Revelation? It was a Southern Baptist church. We talked about alcohol. We talked about sexual ethics. We talked about all these things that I think maybe the church historically has not done a great job of raising kids up in this critical period of their time to have good answers to these things. I think that I realized that I had maybe slightly different views than a lot of people did.

It led me to rather than just say, I’m going to sit here and listen to what the teacher has to say, and say I either agree or disagree, but really want to dig in and understand why we believe the things that we believed. I think across every set of issues realized that there’s just an enormous quantity of data and theology and history and context behind each of these things. It’s just a world that I was really excited to dig into. That’s not necessarily always encouraged, I would say.

Grace: Because you could go Google online and there’s so many different things you could find. How were you able to be at church and in this insular culture that only told you these limited things, and then you were also at the same time exposed to the Internet, and in your room, type in whatever you want it and there’s a plethora of ideas. How did you find a balance that would still allow you to grow in your faith?

Trae: To be honest, living in rural America, I didn’t have great internet access until college. We had a 56K modem that had dial-up connection. There wasn’t really like a great option for saying, I’m interested in this topic. I’m going to spend the next two hours on the internet because you’ve locked up the phone line. Nobody else could use it. It was super slow. It was really unwieldy. I think for me, it was mostly just exploration through the scripture and through conversations.

Grace: That was a blessing in disguise? [chuckles]

Trae: Yes. I think so, so like avoiding the perils of the Internet from an early age. It really wasn’t until college that having the entire Corpus of human knowledge at my fingertips was a thing that was really possible.

Grace: How would you say you were able to pull stronger in your faith? A lot of people in college, they could wander away.

Trae: I think it was a pretty unique perspective actually, given that I went to Georgetown, which is a Roman Catholic institution. One of the oldest colleges in the United States founded by a Jesuit priest. Over the years, obviously, Georgetown is known a lot more for their education and they’re known for the rootedness and their religious tradition. It was interesting in so far as I came in as a Christian, but as a minority Christian and then the only Protestant service they had was Episcopal.  And so there wasn’t even an option for me to go to an evangelical Christian Church on campus. I think I was always in this position in conversations, whether it was Catholic conversations or inter-religious dialogue conversations, which were incredibly common in my field of study, I was an outsider in many ways and that meant that I needed to have a perspective. [laughs] I was always like, I’ve got to come to my own conclusion about whatever the specific question was.

Grace: Would you say you came out of it more of a Christian believer?

Trae: Yes, for sure. I remember the class at Georgetown that every freshman was required to take. It seemed like the purpose of the class was to dismantle the way that you think about the world. It was commonly known as the class that basically took all of these cultural Catholic kids and challenged all the beliefs that they had and forced them to reconcile with who they are as people.

I think what ended up happening over time is that you go to a school where the real focus is on inter-religious dialogue and international affairs and a lot of other culturally progressive ideas that kids came in as Catholic and then they came out as something else entirely. I think that it was really important for me to be authentic, and to be true to my identity, and also be true to my convictions and being surrounded by people and educators and fellow students that were constantly challenging that paradigm. It forced me to either get very serious or lose my faith. I chose to get very serious.

Grace: Trae Stephens is someone who’s been able to climb the corporate ladder pivot into the highly sought-after venture capital industry and start the next big unicorn in defense technology. At the same time, he’s grappled with his faith and kept it pivotal to who he is and what he does. I had to ask Trae what encouragement he could give to those struggling with their faith in the midst of figuring out their career. This is what he had to say.

Trae: I think Martin Luther does a really good job talking about this actually. He says even the milk man has a vocation. The people who are benefiting from putting that glass of milk on the table. We’re all connected in this world. That means that your vocation, whether you are a computer scientist working at Anduril, or a farmer, or a dentist, it doesn’t matter. That vocation is sacred, and God means that. People will say that God put us in the Garden and then He sinned, and then work was our punishment. That’s actually not the order– like the chronology of that is not sound. God put us in the Garden and he said, “Go to work.” Work the Garden, and then sin happened.

Like his intention for humanity was for us always to work, and to create. God is the creator. And in being called into His image, we are called into co-creation. He’s saying, “If you want to be like me, if you’re imitating me, the way to imitate me is building, by making things with your hands, with your brains, or whatever. So I think that’s what the call is.

Rather than getting obsessed with am I performing, am I achieving whatever it is that I want to achieve that my mission tells me that I should achieve? We should just be realizing that it doesn’t matter what we’re doing, we are participating in God’s call, and He wants us to do it well. It doesn’t matter what we’re doing. We are going to be noticed through the quality and the ethical way we go about it. And so find your passions, absolutely. That is important. It’s important to your happiness, but as far as contributing to God’s kingdom, we can do that in whatever it is that we’re doing.

I would just encourage you to have an eschatological, a forward-looking theology rather than a chronological or backwards looking theology. We can make this world a better place. In fact, I would say that we’re called to make this world a better place.