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In this insightful interview, David Frankel, a renowned tech entrepreneur and managing partner of Founder Collective, delves into his journey from the early days of his career to his pivotal role in propelling companies like Uber to global fame. Frankel shares valuable lessons on entrepreneurship, the importance of timing, and the challenges of navigating a capital-scarce environment. He offers a candid perspective on the ups and downs of investing, reflecting on both successes and failures, while also touching on broader issues such as wealth disparity and political polarization in the U.S. This conversation provides a rare glimpse into the mindset of a visionary who has significantly shaped the tech landscape.
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Highlights from the interview
In this interview, David Frankel, a prominent tech entrepreneur and managing partner of Founder Collective, shares his journey in the tech industry, offering valuable insights into the world of venture capital and entrepreneurship. Frankel discusses the early challenges of his career, emphasizing the importance of timing and capital efficiency in building successful startups. He reflects on the significant impact of investing in Uber, crediting his partner, Eric Paley, for identifying the opportunity during a capital-scarce period post-financial crisis. Frankel also touches on the difficulties entrepreneurs face, noting that while some ventures may fail, the experience and resilience gained are invaluable.
Frankel stresses the importance of surrounding oneself with a strong, complementary team, highlighting that the right partnerships can be more crucial than the business idea itself. He also discusses the dangers of raising excessive capital, which can lead to poor decision-making and ultimately harm a startup’s chances of success. The interview concludes with Frankel’s thoughts on the U.S. political climate, where he expresses concern over polarization, wealth disparity, and the potential impact of globalization trends. Overall, Frankel’s insights provide a deep understanding of the complexities and rewards of the entrepreneurial journey.
Edited transcript of the interview ___STEADY_PAYWALL___
00:00:13:22 – 00:00:34:06
Bronwyn Nielsen:
Well, it’s not every day that you get to sit down with one of South Africa’s top tech entrepreneurs and find out what’s top of mind. So, with that very, very big question, David, from an investment-themed perspective, what is keeping you awake at the moment?
00:00:34:08 – 00:00:58:18
David Frankel:
Well, it’s lovely to see you, and those are such kind words. I haven’t been an entrepreneur for a very long time, but I’ve been investing in entrepreneurs for a while now. We are quite deliberately anti-thematic. We tend to feel that once a theme has been declared, it’s too late. So, we’ve thankfully been involved in some fantastic AI startups.
00:00:58:19 – 00:01:21:01
David Frankel:
Shield, which is an autonomous drone company, was a much more recent investment we made nearly two years ago. So, who knows? Probably the most interesting audio or music play, certainly on the East Coast, maybe in the world. And it’s been fascinating to watch that. So, certainly, you cannot ignore AI. That being said, I’m not running around chasing AI.
00:01:21:03 – 00:01:52:10
David Frankel:
I think there are some massive thematic changes in tech globally, and I think one of those is globalization. You’re seeing billions of dollars being given now to subsidize re-centering chip manufacturing in the US. So, I think that if you’re in the chip space, the amount of non-dilutive funding that the government is providing to companies like Micron and Intel, etc., you simply cannot ignore TSMC opening plants.
00:01:52:10 – 00:02:19:23
David Frankel:
I think that will be a very, very long-term play. My difficulty is that I’m not really macro; I tend to be much more micro. But some of my macro commentary, and treat it as from a non-expert, is that I’ve seen some of the capital spend that the hyperscalers are putting out there for an AI future. I think that’s a very exciting part of it.
00:02:19:23 – 00:02:45:00
David Frankel:
But if I look at the corporate and enterprise take-up, even in listed companies that I’m on the boards of, it seems to be much smaller. So, I tend to look at the multiples of those hyperscalers and kind of ask myself, how long can this go on for? But certainly, they are large customers of the companies that we tend to back, and they are very large spenders.
00:02:45:00 – 00:02:48:15
David Frankel:
So, we can’t ignore them—and large acquirers as well.
00:02:48:17 – 00:03:00:21
Bronwyn Nielsen:
I want to stay with the AI theme for a little longer. And perhaps just a simple question: does it excite you or terrify you in terms of how it is altering our reality?
00:03:00:23 – 00:03:23:01
David Frankel:
I have to say, it hasn’t terrified me yet. There are clearly lots of papers and lots of smart people talking about this future. And I think, in every wave, that is the case. I think AI could well disappoint in the short term. It’s reminiscent of autonomous driving—there’s a lot of hype in the short term.
00:03:23:03 – 00:03:42:06
David Frankel:
I’m more excited by it. I’ve certainly been using the tools personally for a long time now, and I feel very augmented by the tools. Even if I’m in a new place and I want the top three restaurants, I do trivial things to a lot of diligence, where I’ll try to train the models and I’m playing with different models.
00:03:42:06 – 00:04:24:12
David Frankel:
And I think one of the very interesting opportunities coming up is what is called tiny models. These models live on your device, and your device can be offline. For applications like scanning, translation, or all of those applications that didn’t quite get there, we’re definitely seeing tremendous progress. If you look at Apple, they’ve been using your phone overnight with smaller-scale models to do inference, for instance, on your photos for a very long time, and you’re seeing some plays over there.
00:04:24:12 – 00:04:40:17
David Frankel:
So, that’s an area I’m seeing more in, and I’m interested in. But I think that, long term, AI is going to be an incredibly important wave. I just think it could disappoint LPs and macro investors in the short term.
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00:04:40:19 – 00:05:09:22
Bronwyn Nielsen:
So, David, you make the point in terms of my introduction when I say that you are one of South Africa’s most famous tech entrepreneurs. Your legacy in this country is very strong as the CEO and co-founder of Internet Solutions. And of course, you’ve been in Boston now for around about 16 years—I may be slightly off, but it would be really interesting to get your view on South Africa as it stands today.
00:05:10:00 – 00:05:19:12
Bronwyn Nielsen:
With 2025 on the horizon, I’m sure that you keenly follow the South African political and economic environment, David.
00:05:19:14 – 00:05:39:17
David Frankel:
Well, firstly, I have to just say that Internet Solutions was a partnership through and through, and I owe so much to Ronnie and Alan Aptaker and other amazing folks who went on to have incredible entrepreneurial journeys—people like Lee or at Sucky Saki Cycles. So, it really was a team effort, and thank you for that. I’ll take that for the whole team.
00:05:39:19 – 00:06:09:22
David Frankel:
Look, I think South Africa has a lot of work to do and very little time to waste. I get a lot of this insight, frankly, through some portfolio companies that I was involved in many years ago, but also through the nonprofit sector. Recently, with our foundation Next Up, which focuses on education and teen unemployment, Supertree Naidu is running that. We see exceptional people, even from government.
00:06:09:22 – 00:06:33:10
David Frankel:
I sometimes wish these people were running the country. We see, at grassroots level, in places like hotspots, very committed principals and teachers, and you just look and think, “Wow, South Africans are just amazing.” But, you know, I think it’s fair to say that, up to now, leadership feels like it’s failed us for the last 30 years, and we’ve got to get our act together.
00:06:33:12 – 00:07:07:22
David Frankel:
The problem is, when you look at the scope of educating people and then they come out and there’s not enough employment, South Africa really needs to create opportunities. I would say that we’ve got to be asking our leadership, first and foremost, to create an entrepreneurial-friendly environment. I’m not sure that when we started Internet Solutions, it was entrepreneurship-friendly enough with all the checks and balances you can copy. You’ve got to let these young, innovative, well-educated people, who are also working in the nonprofit sector, be free. There’s so much red tape, so much friction—it can be very, very frustrating.
00:07:14:19 – 00:07:20:16
Bronwyn Nielsen:
Your appeal to our leadership, does that mean you still regard South Africa as home?
00:07:20:18 – 00:07:40:06
David Frankel:
You know, I’ve been in Boston for a very long time now. My younger kids were born here, and they are in school here. So it’s hard not to think of Brookline, where I’m speaking to you from, as home. But South Africa will always be home—it really will. The people, the community, the country have so much to offer. And Bronwyn, I cannot tell you—I think I’m understating it when I say there are at least 50 families, couples, and individuals who I have helped plan trips to South Africa over many years now. People leave the country raving, and they don’t just rave about the game reserves and Cape Town—they rave about their visit to Johannesburg and what a rich, solid African country it feels like.
00:08:03:14 – 00:08:07:01
David Frankel:
So, I think there is so much potential in South Africa.
00:08:07:01 – 00:08:28:19
Bronwyn Nielsen:
Still, what about the potential for technology to solve many of our problems here in South Africa? Have you given any thought to how we could potentially leapfrog some of our structural and societal inequalities with technology, given that this was obviously your focal space?
00:08:28:21 – 00:09:01:23
David Frankel:
So, technology is a tool, and people use technology, but the people have to be unshackled. There’s a degree of education that is still required, I think. But technology has always had leapfrog opportunities. If you think back to some of our telecommunications and banking infrastructure, because we were not shackled by past technologies, we could deploy the latest. South Africa, in terms of fiber and general reticulation for communications, is pretty great.
00:09:02:00 – 00:09:26:14
David Frankel:
If you look at South Africa’s banking sector, it’s still pretty great. I think software does have the opportunity, just in terms of development. You don’t have to learn computer languages anymore. And I think that, in a way, you hit on something very interesting—creativity is perhaps the most important skill or endowment. So, I hope that can be the case for South Africa. But I still think there’s a basic level of education that we have to give our young people.
00:09:26:14 – 00:09:33:06
Bronwyn Nielsen:
Our last conversation was just as COVID had hit, and David, if I remember correctly, tech in agriculture was something that you were focusing on at that juncture. Has that yielded results? I remember something about farmers in the ocean.
00:09:54:20 – 00:10:19:17
David Frankel:
Sadly not. You’ve got a great memory. We did start a company that did large-scale farming and ag in the ocean, but that didn’t work out. That company actually changed its course to carbon sequestration in the ocean. The problem is that the market for carbon credits in the US has changed dramatically.
00:10:19:19 – 00:10:43:04
David Frankel:
Ironically, we had some of the biggest tech companies—Microsoft, Spotify, etc.—as clients, but we didn’t have some of the biggest polluters as clients, which we should have. But because that market’s changed, unfortunately, that company has not worked out. And Bronwyn, therein lies what I do—we can be very excited, and generally we are excited, first and foremost, about the teams and then what they’re doing. I was very excited about that team and the application. The company was called Running Tide, very, very well-funded. Unfortunately, quite recently, we’ve called it a day.
00:10:59:02 – 00:11:30:11
Bronwyn Nielsen:
So many entrepreneurs will be watching this interview, and their dream would be to have Founder Collective agree to work with them as a partnership to grow their businesses. What is your advice? And you must get asked this all the time, so I’m sorry if you’ve heard it ad nauseam, but I have to capitalize on the opportunity and ask you for your advice to entrepreneurs.
00:11:30:13 – 00:11:53:06
David Frankel:
It’s a long journey. Really think through whether this is for you. I think it’s important to have something that you’re good at, something where you have an edge. I sometimes hear this advice about following your passion, and I’m not sure that’s always fair advice. I think having an endpoint that galvanizes you and pulls you along when it gets tough helps a lot.
00:11:53:08 – 00:12:21:05
David Frankel:
But try to think about something that you’re good at, or make sure you have a team around you that you resonate with. I gravitate towards partnerships and always feel that the partners around me, particularly right now at Founder Collective, have skills and qualities that I lack, and we complement each other. So I would say having people around you who energize you makes such a difference.
00:12:21:10 – 00:12:47:12
David Frankel:
Sometimes the “who” is more important than the “what,” even in terms of what you’re doing and what uniquely brought you to this idea. I was looking at a VC yesterday who read Moneyball and decided to go into baseball as a career, then came back to VC. If there’s something that galvanizes you, don’t ignore it. I think we all have these little nudges that we tend to ignore on a day-to-day basis, and sometimes if you latch onto that, it can pull you along.
00:12:47:12 – 00:13:14:14
David Frankel:
Then think through your resources. We have preached capital efficiency from day one. My partners and I at Founder Collective all grew companies with very little capital, and we tend to think of capital as a bit of a curse. Companies that get too much capital early on—it’s a bit like, as Scott Belsky coined the term, “capital is like carbohydrates, and resourcefulness is protein.” So think of how resourceful you can be. That being said, try to understand what capital you may need to launch an endeavor.
00:13:14:14 – 00:13:42:19
Bronwyn Nielsen:
I did spend a little time just refreshing my memory, and when I googled you, not only did you come up as one of South Africa’s most famous and successful tech entrepreneurs, but Uber is the brand that is repeatedly associated with David Frankel. Perhaps if you look back on what you’ve achieved to this point, obviously with your founders and your co-founders, does Uber resonate as one of the biggest success stories from a brand perspective?
00:14:13:07 – 00:14:38:21
David Frankel:
Well, firstly, we owe Uber entirely to my partner Eric Paley, who saw the opportunity and was, you know, lucky or smart enough to be in with the first check. Eric is so humble. I recall one of our investors at an annual dinner leaning over the table and saying to Eric, “How did you know? How did you know?” And instead of retrofitting that answer or strategy, Eric looked him in the eye and said, “I didn’t know. The company I funded before and the company I funded after—I had just as much hope for them.”
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00:14:38:21 – 00:15:01:00
David Frankel:
You know, Founder Collective was never designed for these outrageous, outrageous wins. Uber has certainly been an incredible win for us. Eric has had one win that is, for us and for our investors, even more monumental than Uber, and that is The Trade Desk, which today is probably the biggest company in ad tech in the world. It’s public. We owned about 12.5% of that company at IPO.
00:15:01:02 – 00:15:22:08
David Frankel:
That company has gone on to 30x its IPO price. I would say so much of what we do, by the way, is timing. So we didn’t stay in until that 30x. We distributed shares to our investors, and some may have stuck around. I’m lucky to still own some Trade Desk shares, but I don’t own my entire position from that distribution.
00:15:44:01 – 00:16:10:11
David Frankel:
But, you know, there’s a lot of timing here. I would say that 2010, when Eric invested in Uber, was an incredible, incredible time. It was a capital-scarce environment. It was just post the real nub of the financial crisis, which was still ongoing. Over my career, I can look at vintage years like 2003 and 2004, which were amazing, amazing years.
00:16:10:11 – 00:16:23:01
David Frankel:
It’s actually when I first got involved with my two partners, Eric and Mike, in their company. But Uber, in terms of branding and being able to be associated with that, was pretty extraordinary for us.
00:16:23:03 – 00:16:43:12
Bronwyn Nielsen:
On this, something that has crept into regular engagements from my side, certainly, is that often people disappoint you. How often does that happen from your perspective? You get excited, you fall in love with the team, so to speak, but actually, they end up disappointing.
00:16:43:14 – 00:17:14:05
David Frankel:
We end up not getting the success that we could have hoped for. Plenty. I would say people disappoint me very few times when I reflect on that. I think that if people try something out, put their heart and soul into it, and hire reasonably good or very good people, and it just doesn’t work out, but you look back and you see that they tried absolutely everything—they were smart, they were thoughtful—I wouldn’t consider that a disappointment.
00:17:14:05 – 00:17:41:17
David Frankel:
Sometimes the disappointment comes from having raised way too much capital and then being under pressure to use that capital, leading to easier decisions that didn’t keep the company strong and fit for the next chapter. You look back on that and go, that’s disappointing. And, you know, capital really can be a drag. But I look at some of our losses, and I look back even at a company like Running Tide, and I think Marty did absolutely everything he could. He may not have cut his burn fast enough, but he also had a situation where customers were asking for more and more, requiring him to hire more experts and pay them more.
00:17:41:17 – 00:18:08:09
David Frankel:
And, you know, the customers were always moving the goalposts. I think of a guy, Bertrand Bodson—we started a company called Dragster, this was even before Founder Collective. He was a classmate of mine. I gave him about $2 million, and Intel Capital gave him $10 million. We lost everything. Bertrand went on to become the Chief Digital Officer of Novartis and one of Novartis’s top six people.
00:18:08:11 – 00:18:33:23
David Frankel:
He then went on to have a huge career as CEO of a large supermarket chain in the UK. I look back and think, Bertrand never disappointed me. He did everything he could. The context was tough. Five years later, he would have been great. I did a biotech startup pre-Founder Collective in the neurodegenerative disease space, funding a guy, Peter Lansbury, who had a very important lab at Harvard.
00:18:34:01 – 00:18:59:11
David Frankel:
Everybody lost their money. We sold it to AstraZeneca on a milestone workout. Everybody lost their money. But you look at those teams and realize that entrepreneurship is really hard. And it actually goes back to what I was saying before: why I think I will disappoint. It’s a bit like Hollywood—there will be that one blockbuster, maybe 1 in 100 blockbusters, and a lot of people will lose their money and their human capital in the meantime.
00:18:59:11 – 00:19:34:07
David Frankel:
That’s the territory of entrepreneurship.
00:19:34:09 – 00:19:54:03
Bronwyn Nielsen:
One final question. The US political environment—I wouldn’t be worth my salt if I didn’t get a view from you, given your position in the US and what is unfolding. Any insights from your perspective on what you see happening on the ground?
00:19:54:05 – 00:20:17:06
David Frankel:
Look, I wish I was personally really galvanized in one direction or another. I have to say, I’m not. I think there is a tough backdrop in terms of polarization in the US and in the world. I certainly don’t think social media has helped that at all. So I think there’s the real world, and then there’s the Twittersphere, which always feels hysterical.
00:20:17:11 – 00:20:42:18
David Frankel:
And sometimes I have to remind myself just to really pull out of it. This is one of those times. It doesn’t in any way affect my day job. I don’t think of politics much. I think of the big middle of this country, and I think of still underserved consumers. And I think it’s a mistake to look at the US only as big cities and the coasts.
00:20:42:18 – 00:21:03:21
David Frankel:
The US has tremendous work to do in terms of providing better services for its people. You’re at one of these moments where the Gini coefficient, or the wealth disparity in the US, is at an all-time high. And I think that needs to be addressed. So I hope that whoever wins the next administration really thinks carefully about that. I also worry about globalization and decoupling from the world. I really hope that does not happen.
00:21:03:23 – 00:21:22:06
Bronwyn Nielsen:
David, I feel super privileged to be able to sit down with you every now and again and delve into your insights, and I’m sure that the business community is going to feel equally privileged too. David Frankel is the managing partner and co-founder of the Founder Collective.
00:21:22:08 – 00:21:47:06
David Frankel:
Bronwyn, thank you so much for being so kind and for giving me this opportunity. Have a wonderful day.
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