Interview with Alexandru Chitea - Managing Partner at Funston Capital
Last week I had the pleasure of interviewing Alexandru Chitea for the “Connecting the Dots with Sebastian Cochinescu” podcast.
A passionate technologist at heart and by training, Alex has been building his career at the intersection of innovation, technology, and business. Alex is the founder and Managing Partner of Funston Capital, a private investment firm looking to acquire and grow a single business over the long term. Funston Capital is backed by a strong team of institutional and individual investors and partners, including current/former CEOs, board members, and experienced SME investors. Before Funston, Alex was a Principal with Orange, a global telecommunications company, where he focused on investment and research activities in cybersecurity.
Alex graduated from The University of Chicago Booth’s MBA program, where he was a recipient of the Dean’s Award, and completed Stanford’s Innovation and Entrepreneurship Certificate. Prior to his MBA, he was a software engineer at Google in San Francisco, during which time he completed the CFA charter holder program. Alex also holds both Bachelor’s and Master’s degrees in Computer Science.
Below you will find the main points that were extracted from the podcast transcript using ChatGPT.
Alex starts by discussing his life journey, starting from being born and raised in Romania to studying computer science in Germany and then getting drafted by Google in 2007 as a software engineer, mostly working on the search engine. However, the 2008 financial crisis sparked his interest in finance and global macro, leading him to study economics and finance in New York, before eventually returning to Silicon Valley in 2016.
In the podcast, Alex reveals that he has a range of passions that span both personal and professional interests. He is particularly passionate about music and the creative arts, technology, and economics. He shares his personal experience of how his music studio was impacted by the recent semiconductor chip shortage, which highlights the intersection of these passions. Alex also touches on the importance of engaging all our senses and how he likes to study and learn independently.
Sebastian and Alex discuss their latest interests and how they can consume both time and money. Alex has recently been into music but has also gone down the rabbit hole of Bitcoin in 2015–2016 and the technology behind blockchain. He has solid knowledge on blockchain but is still trying to fully understand it. He mentions supporting Ethereum financially due to Vitalik’s involvement, and his investment philosophy is to invest in things with the assumption that he doesn’t understand certain aspects. He also discusses the potential pushback from governments and companies in the decentralization thesis of blockchain.
Alex avoids talking about the political views (libertarianism) related to cryptocurrencies and says that the current political atmosphere is too divided to have a productive dialogue. He prefers to steer clear of the topic.
Sebastian and Alex are discussing what to look for in a startup when investing. Alex says it depends on factors such as the stage of the company, industry, business model, etc. He then discusses the two schools of thought in startup investing: market first and team first. Alex mentions Don Valentine, who believed in focusing on the market first and then the team, and Warren Buffett’s quote that a company with a bad economics can still keep its reputation intact. Sebastian mentions the debate between building what people want vs creating a market for them. Alex comments that there’s a tendency of mimicry, with people trying to emulate successful individuals but it’s difficult to recreate someone like Steve Jobs.
Sebastian asks what is the most important factor in startup investing. Alex answers that building a great product is the most important factor. He explains that a product needs to meet a real need in the market and people should be willing to spend money on it. When investing in B series companies with $15 million or more, Alex focuses on cybersecurity and matches the company’s needs to that of a chief security officer in the company. He says the game in cybersecurity is ever-changing and decisions are made by understanding what the company is doing and what is required in the market. He also mentions that cybersecurity is important due to the constant threats to a company’s security.
Tech diplomacy is important in the context of tech companies having become influential in global politics. The idea behind it is for a country to have a representative to discuss directly with the CEOs of tech companies that have become like heads of state. Tech diplomacy should go both ways from countries to companies and from companies to countries. There are ethical and moral questions that arise with these companies promoting American values and projecting democracies. These companies also face challenges when certain foreign interests are applied to the U.S. or when they have a strenuous relationship with a country like Google in China.
Sebastian and Alex are discussing the concept of a “post-truth era”. Alex thinks we are currently living in a post-truth era, with social media amplifying people’s confirmation biases and leading to everyone having his own version of the truth. Sebastian mentions the issue of misinformation and disinformation becoming more prevalent, with the use of technology like AI and bots making it harder to distinguish the truth.
Sebastian is asking about the role of late-stage investors in a company’s growth. Alex explains that there are different schools of thought among venture capitalists (VCs), with some focusing on helping underperforming companies and others focusing on maximizing performance of performing companies. He cites the formation of Andreessen Horowitz, which was inspired by the Hollywood Talent Agency model and hired a large number of employees to be experts in different fields, allowing companies he invested in to plug into his network and have access to larger buyers. Alex notes that this model has been successful for some firms and that the VC asset class is still evolving.
Alex is talking about the role of late stage investors in the growth of a company. He discusses how there are different schools of thought on how to approach this, but there has been a paradigm shift with the formation of Andreessen Horowitz, which adapted the Hollywood talent agency model and became a venture capital firm with a large network of experts and relationships with big companies. This model has been successful, but there are other firms that have chosen to maintain a smaller group of partners. Alex’s firm, Funston Capital, has a fund of private equity.
Alex is explaining the difference between venture capital (VC) and private equity. VC invests in early-stage companies that may not yet have a clear product market fit. Private equity is more focused on established companies that have a clear product market fit, healthy margins, and are profitable. Private equity firms aim to improve these companies and increase his value, while VCs focus on backing startups that have high growth potential. Private equity firms have also been acquiring companies funded by VCs, especially in the cybersecurity space. Recently, some private equity firms have been moving into the public equities market as well.
Alex is discussing current investment trends and mentions three main trends at the macro level: the deep globalization decoupling of the east and west, the slowdown in growth and inflation, and the readjustment in the tech sector. Alex mentions that the decoupling between the east and west has been accelerated by the pandemic and the U.S. trade war with China. The slowdown in the economy, coupled with inflation, has led to mild recessions and the potential for stagflation. Alex also mentions green inflation as a result of investments in renewable energy. In the tech sector, Alex notes the era of free money is over and valuations are coming down, evidenced by recent layoffs at large tech companies.
Alex mentions the difficulty in predicting the outcome of these trends, as the central banks may not have control over certain factors such as the war and disruptions in supply chains. He also mentions a spectrum of opinions ranging from stagflation to a soft landing in the economy. Alex expresses a cautious outlook, as the U.S. has not reached a soft landing since 1994. He concludes by stating that the situation with these macro trends is not in the control of monetary institutions and the outcome will have to be seen.
Alex, who has lived in San Francisco for the last two decades, thinks that the rumors of everyone moving to Texas or Austin are a cycle that has repeated historically. He says that when things are good in San Francisco, people flock there, but when things are not going well, people leave. He believes that the Bay Area has a fundamental knowledge that is hard to find elsewhere and that it is hard to predict the future.
The previous cycle of cloud and mobile technologies had a side effect of enabling technology and that cities like LA and New York had expertise in media, entertainment and financial services that he could bundle into this tech paradigm. However, he is not seeing any fundamental mental research coming out of these cities like he is in Silicon Valley. He says that Silicon Valley is still producing fundamental technologies like CRISPR, quantum computing and self-driving cars. The future of tech depends on the fundamental technologies that are being developed and it is hard to say where the new companies will be based.
As his closing remarks, Alex provided valuable insights on advice for young tech entrepreneurs and emphasized the importance of balancing inner and outer development. He recommended reading Rick Rubin’s “The Creative Act: A Way of Being” as well as the Showtime documentary about him as a great source of inspiration. He thinkgs the lessons shared in this book can be applied not only to the tech industry but also to other aspects of life.
If you found this interview valuable, you may watch other episodes below:
Youtube Channel: https://youtube.com/@SebastianCochinescu
Podcast Page: https://podcast.cochinescu.com
Medium: https://blog.cochinescu.com
Newsletter: https://www.cochinescu.com
