Kevin Hartz | Backing Teen Founders, Lessons from the PayPal Mafia
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode of The P.E.L., Turner Novak speaks with Kevin Hartz, co-founder of A*, Eventbrite, Xoom, and Sauron. Kevin has been building and investing in technology companies for over 30 years, offering unique insights into how the industry has evolved. (09:07) He describes AI as "the mother of all bubbles" while arguing we're still in the very early stages. The conversation covers Kevin's journey from putting 100% of his first startup's proceeds into PayPal's seed round to his current focus at A* investing significantly in teenage founders. (54:59) They also discuss the fascinating origins of Palantir from PayPal's fraud detection systems, the changing power dynamics in venture capital, and Kevin's recent experience having two babies five months apart using genome screening and surrogates.
- Main themes: Evolution of the tech industry over 30 years, AI as a transformative but early-stage opportunity, identifying exceptional founders regardless of age, lessons from the PayPal Mafia, and innovative approaches to family building through technology.
Speakers
Kevin Hartz
Kevin Hartz is a serial entrepreneur and investor who has been building and investing in technology companies for over 30 years. He is the co-founder of A*, a $300 million seed-stage venture fund, and previously co-founded Eventbrite (acquired by Bending Spoons), Xoom (sold to PayPal in 2015), and is currently incubating Sauron, a home security company. Kevin was an early seed investor in PayPal, putting 100% of his first startup's proceeds into the round, and later worked at Founders Fund where he witnessed the creation of companies like Anduril.
Turner Novak
Turner Novak is the founder of Banana Capital and host of The P.E.L. podcast. He explores the world's greatest startup stories through conversations with founders and investors, having published over 100 episodes covering the evolution of technology companies and venture capital.
Key Takeaways
Invest in Extraordinary People Above All Else
Kevin emphasizes that at the seed stage, betting on exceptional founders is paramount since products and working models often don't exist yet. (15:01) His track record with Pinterest, Airbnb, and PayPal demonstrates this approach. He learned early from Peter Thiel at PayPal that extraordinary people create extraordinary outcomes. Kevin looks for founders with "grit, resilience" and the ability to "outsmart everyone on every plane" when faced with challenges. The key is identifying people who have that unique combination of talent, drive, and vision that separates them from merely smart individuals.
Look for "End of One" Companies in Weird, Contrarian Spaces
Kevin learned from Founders Fund to seek companies doing something that seems "pretty far field and really weird" where they are the only one pursuing that direction. (27:00) He notes that when Sequoia makes an investment, people say "that's so smart," but when Founders Fund invests, people say "what are they doing? That's so weird." Three years later, it becomes obvious why it was brilliant. Examples include Palantir serving the military when Google employees were protesting military contracts, or Anduril entering defense technology when it was considered contrarian. The best investments often come from areas others avoid or don't understand.
Timing Matters More Than Being First to Market
Kevin draws parallels between today's AI landscape and the search engine wars of the 1990s, where Google was "almost last to market" but became the dominant player. (25:04) In competitive categories, there's typically an enormous number one player and a significantly smaller number two, with little room for others. The lesson is that being the best product and gaining market leadership matters more than being first. Kevin applies this thinking when evaluating investments, always asking whether a company can become the number one player in their category rather than just being early to market.
Counterintuitive Timing: Build During Downturns
Kevin advocates for being "counterintuitively greedy" during terrible economic periods, noting that you "can't fall off the floor" during downturns. (43:43) He launched Xoom shortly after 9/11 during the dot-com crash, viewing downturns as opportunities to build "great bones to a company" and learn scrappy execution. These periods serve as warm-ups for the next accelerated growth phase. He points to great companies that emerged from the 2001, 2008, and 2022-23 downturns as evidence that challenging times create optimal conditions for building resilient, well-structured businesses.
Age Is Irrelevant When Identifying Outlier Talent
A* has invested about 20% of their fund in teenage founders, not as a deliberate strategy but because exceptional talent increasingly appears at younger ages. (54:59) Kevin notes that teenagers can "see around corners" and understand how the world will look in 5-10 years better than older professionals. He compares young founders to marines who "charge into battle" with fearlessness and energy. However, he emphasizes this works best for consumer-facing products or emerging technologies where fresh perspectives matter more than enterprise experience. The key is recognizing that extraordinary capability can emerge at any age.
Statistics & Facts
- Kevin invested 100% of his first startup's exit proceeds into PayPal's seed round, demonstrating extreme conviction in exceptional teams. (18:20)
- A* is a $300 million fund that has invested approximately 20% in teenage founders, representing a significant shift toward backing younger entrepreneurs. (54:59)
- One of Kevin's teenage founder investments created a calorie counting app that generated $30 million in net revenue without raising any external capital. (56:37)
