When Founders Fund was a relatively new venture firm, it quickly recognized the potential in Justin Fishner-Wolfson, bringing him on board as its inaugural principal. Equipped with two degrees from Stanford University and a background as CEO of an organization managing assets for the school’s student groups, Fishner-Wolfson readily shared his perspectives within the venture fund. He asserts that Founders Fund ultimately invested more significantly in SpaceX than initially considered, a result of his strong advocacy.

He dedicated three years to the firm before identifying what he believed to be an even more promising opportunity, spurred by connections who had worked at Facebook prior to the company’s 2012 IPO. These individuals were exploring avenues to sell their shares, and Fishner-Wolfson felt their existing options were suboptimal. Furthermore, he anticipated a trend of companies like Facebook remaining private for extended periods. Consequently, he departed from Founders Fund and established 137 Ventures to facilitate the acquisition of secondary shares from founders, investors, and employees.

This venture began a decade ago, and the firm has since experienced considerable success. Last year, it finalized its fourth fund, securing $250 million in capital commitments and increasing its assets under management to over $1 billion. Its strategy of concentrating on approximately 10 to 12 companies per fund appears to be yielding positive results, as three of its portfolio companies – Palantir, Airbnb, and Wish – have recently entered the public market since late September.

This week, a detailed conversation with Fishner-Wolfson provided insights into the operations of 137 Ventures, covering its company screening processes and the observed effects of companies extending the vesting periods for employee stock options. (“It has definitely alleviated the urgent requests from individuals facing the imminent expiration of substantial equity holdings, a situation I’m relieved to avoid, as I empathize with those facing such challenges,” he explained.)

The discussion also encompassed the firm’s initial investment in SpaceX, which remains a part of 137 Ventures’s portfolio.

A recording of the complete conversation is available here. Meanwhile, excerpts from the discussion focusing on Wish, the discount e-commerce company whose recent IPO has been described as underwhelming, are presented below.

TC: Two of your portfolio companies, Palantir and Airbnb, performed exceptionally well upon entering the public market. Wish, however, experienced a different outcome, with its stock price declining on its debut. What is your assessment of its IPO? Do you believe investors are misinterpreting the company?

JFW: It typically takes the investment community a considerable amount of time to fully grasp a newly public company. Ultimately, the IPO represents just a single day; the long-term performance of the company over the next 10 to 20 years is what truly matters.

Consider Microsoft, Amazon, or, more recently, Facebook, whose share price decreased by 50% in the weeks following its initial offering, yet Facebook ultimately became a highly successful business. I have no way of predicting market behavior tomorrow or the day after. However, if a company can consistently build a strong, sustainable business that generates compounding growth, the results will ultimately balance out.

Wish has demonstrated remarkable success in scaling its operations. I consider [co-founder and CEO] Peter [Szulczewski] to be one of the most effective leaders in the industry. They have also pioneered several innovative approaches in the mobile space. The Wish platform offers a unique discovery experience. Their implementation of in-store pickup has been particularly innovative, enabling consumers to quickly access products in a cost-effective manner without requiring massive warehouse investments.

TC: You mentioned the partnerships Wish has been forging with small businesses in the U.S. and Europe, allowing them to utilize extra storage space to receive Wish goods, thereby increasing foot traffic. This represents a significant departure from Wish’s previous model of shipping products cheaply from China through a USPS agreement that has since become less favorable. Is that an accurate assessment?

JFW: Precisely. They are assisting small and medium-sized businesses in attracting customers, which has always been valuable but is becoming increasingly crucial in the current economic climate. They are also enabling these businesses to leverage the data they possess across their entire platform, as Wish understands consumer preferences within specific geographic areas and can help them optimize their merchandising strategies. Furthermore, by consolidating shipments to a single location, they are aggregating orders from numerous individuals, reducing logistics and shipping costs and times. This allows Wish to cater to value-conscious consumers who are willing to exchange a small amount of time for significantly lower prices.

TC: Wish has a reputation for offering a wide variety of inexpensive goods from China. As it attempts to expand its product offerings to include more mainstream items, how does it intend to alter the public’s perception of the company?

JFW: I’m not certain that a substantial change in perception is even necessary, as I believe they haven’t yet fully penetrated the overall market. There are still many individuals who are unfamiliar with the platform. Moreover, as the marketplace evolves, there is an increasing number of merchants and a growing volume of customer data regarding both merchants and product quality, all of which contribute to a powerful system that allows them to leverage data to enhance product quality and ensure they are offering products that consumers desire.

TC: Does inconsistent product quality account for the fluctuations in the company’s revenue? It experienced growth of approximately 57% in 2018, followed by 10% in 2019, and a resurgence in the first nine months of this year. What factors do you attribute to this variability?

JFW: All businesses experience cycles of growth and periods of focusing on efficiency. An exclusive emphasis on growth can lead to expansion and subsequent operational inefficiencies. Ultimately, a shift in focus towards driving operational efficiencies becomes necessary. Therefore, the cycles you’ve described, when examined alongside underlying metrics, reveal improvements in operating efficiency.

TC: Wish’s shares did not experience a significant increase in value upon their IPO. Conversely, Imran Khan, a former Snap executive, stated to CNBC on Tuesday that the recent post-IPO stock surges, including those of Airbnb and DoorDash, represent “an epic level of incompetency” on the part of the underwriting bankers. Do you attribute this to banker incompetence or simply market volatility?

JFW: I believe the answer to that question remains unknown. It does, however, make for a compelling statement. Ultimately, I don’t believe the price on the first day of trading is a meaningful indicator of anything.

TC: Is the strong interest in these companies driving up prices in the secondary market? What trends are you observing?

The public offering prices do have an impact, as they eventually influence valuations in the private markets, and vice versa. Eventually, significant discrepancies between private and public market valuations become unsustainable. Consequently, multiples do shift in response to market changes. However, these figures are often averages. People tend to focus on individual companies or isolated examples without considering the broader landscape, which would be a complex undertaking.

There will always be instances of overvalued and undervalued assets. As an investor, the goal is to allocate more capital to promising companies that are trading at the lower end of the valuation spectrum. However, the primary focus remains on identifying strong companies. If you can invest in companies poised for long-term compounding growth, without being overly concerned about multiples or valuations, you are likely to achieve favorable outcomes.

TC: Which companies are currently on your radar? Is there an investment that hasn’t yet been featured on your website?

JFW: Snapdocs [a company that streamlines the digital management of mortgage processes and related paperwork, recently securing $60 million in funding in October].

Aaron [King], the founder and CEO, has done an exceptional job developing a product that users are eager to adopt, and the timing is ideal for accelerated growth. They are experiencing a successful year.

Pictured above: The 137 Ventures team, with Fishner-Wolfson in the center (wearing glasses).