Joe Lonsdale, co-founder of Palantir, founding partner of 8VC, being interviewed by Cat Cheng, due diligence lead at the Genesis Program, at an event at UT Austin.

Don’t start a company, Joe Lonsdale, co-founder of Palantir Technologies and 8VC, told a couple hundred University of Texas at Austin students.

“I think in general it is very rare students end up founding very big companies, there are some exceptions,” Lonsdale said in a response to a question about how to support student founders.

Instead, join a startup and learn from people smarter than you, Lonsdale told them.

That’s what he did.

“I was exposed to a few well-run hyper-growth startups before I built it myself,” Lonsdale said at the event, which took place Tuesday evening at the UT Recreational Sports Center.

Cat Cheng, due diligence lead at the Genesis Program, interviewed Lonsdale, followed by questions from the audience. The Genesis Program, a student and alumni fund aimed at fostering startups at UT, hosted the event.

As a freshman studying computer science at Stanford University, Lonsdale sought out Peter Thiel, co-founder of PayPal, and convinced him to give him an internship. He got rejected at first. But he persisted. He ended up getting in a year later. He worked as an intern for a couple of years with Thiel, Elon Musk, Max Levchin, and others. From there, he went to work for Thiel in a hedge fund.

“By seeking out where a lot of smart people are going you kind of put yourself in a position to be exposed to a lot of great things,” Lonsdale.

Lonsdale said he probably wouldn’t have been able to build Palantir without first being exposed to other ventures like PayPal first. In 2003, Lonsdale founded Palantir with Thiel, Nathan Gettings, Stephen Cohen, and Alex Karp. The privately-held software company, based in Palo Alto with 2,000 employees, specializes in big data analytics. Its a highly secretive organization that works closely with law enforcement, intelligence agencies, and others at data mining and predictive analytics.

Lonsdale, 36, was interested in entrepreneurship from an early age. He grew up in the Silicon Valley area in the East Bay and he got to be part of the first Internet bubble and learned how to code early on. He also saw a lot of cool things he worked on blew up when the Internet bubble burst in 2001.

The technology worked but the business models didn’t in the dot-com bust, which was primarily focused on consumer Internet business, Lonsdale said. But a lot of things that people tried back then are now working because the economics make sense, Lonsdale said. People learned a lot from those failures and moved forward with better business models, he said.

Cheng asked Lonsdale about how to go about finding mentors to help a young entrepreneur with a venture.
“Not everyone who is talented is going to want to help you do these things,” Lonsdale said.

Lonsdale once asked one of the PayPal co-founders, who he declined to name, for help build a company and advice. The guy told him “Sorry, you either have it or you don’t.”

In other cases, there are people who help and follow up, he said.

At 21, Lonsdale started Palantir and no one would take them seriously at first. Its first customers were agencies with the U.S. Intelligence Community. But because they were so persistence they got the agencies to try some software.

“Persistence was really important, but we also had these adults around us that were connecting us in the right ways,” Lonsdale said. Peter Thiel was a co-founder and he was well connected and able to connect with George Tenet, former director of the Central Intelligence Agency.

When it comes to investing, the number one criteria Lonsdale looks for in a startup is the team and the talent behind that team. Number two is working on a mission that is going to change how an industry works, he said. Number three is a way to capture data to enable the platform to work better. Lonsdale is the founding partner of 8VC, a technology investment fund, based in San Francisco with 34 employees. In 2018, Forbes ranked him Number 22 on its Midas List of the most successful investors.

Red flags he looks out for when deciding to make an investment are people who don’t understand their business, industry and business model and their budget, he said.

“Most people shouldn’t be entrepreneurs and there are various reasons why one of the main reasons people shouldn’t be entrepreneurs is very few people have their own personal opinion where they believe this is how things should look, and why everyone else in the industry is wrong,” Lonsdale said.

“If you’re not a disagreeable person, you probably shouldn’t be starting something,” he said. “When you are starting something, you are building something different and changing how things should work.”

One of the areas he is particularly interested in right now is the bio-information technology wave that is going on, Lonsdale said. Startups in genomics and liquid biopsies.

“The fun thing about being an investor is you get to learn about new things,” he said.