Force of Will Creates Success: John Frankel’s Path to Venture Capital Mastery | Venture Capital Series

Anthony Codispoti : Welcome to another edition of the Inspired Stories podcast where leaders share their experiences so we can learn from their successes and be inspired by how they’ve overcome adversity. My name is Anthony Codispoti  and today’s guest is John Frankel. He is a founding partner at FF Venture Capital, a firm that invests across emerging industries such as AI, manufacturing, energy, robotics, and security. They are recognized as one of the best performing seed and early stage venture capital firms. They have helped launch numerous early stage companies by offering hands-on support and resources. Under John’s leadership, the firm has invested in over 150 startups and he has personally served on the boards of more than 60 companies.

He founded FF in 2008 after an impressive career at Goldman Sachs where he spent over two decades working in capital markets and technology development. John holds an MA in mathematics, philosophy, and logic and is recognized for his focus on applied artificial intelligence. He has also gained recognition for investing in groundbreaking AI, drone, and robotics solutions.

His passion for supporting innovative founders has had a lasting impact on the New York tech community. Now, before we get into all that good stuff, today’s episode is brought to you by my company, Add Back Benefits Agency, where we offer very specific and unique employee benefits that are both great for your team and fiscally optimized for your bottom line. One recent client was able to add over $900 per employee per year in extra cash flow by implementing one of our innovative programs. Results vary for each company and some organizations may not be eligible.

To find out if your company qualifies, contact us today at addbackbenefits.com. All right, back to our guest today, the founding partner of FF Venture Capital, John Frankel. I appreciate you making the time to share your story today.

John  Frankel: No, let’s talk. Thank you for having me on your podcast.

Anthony Codispoti : So, John, usually when I’m talking to somebody, especially somebody in the VC world, I look at their LinkedIn page, maybe they’ve got 15, 25 different stops in their career path. When I look at yours, I see three, which is highly unusual. You started out as a chartered accountant at Arthur Anderson for a few years and then spent 21 years at Goldman Sachs before founding your own firm. I guess starting first, it suggests a couple of things to me, but certainly the longevity of your stays at these organizations, I think, is impressive. But let’s start first with Arthur Anderson before we kind of get into what you guys are doing at FF. What first drew you to this place and what was the biggest lesson that you learned here which became helpful to you later with FF?

John  Frankel: So, I was fortunate to go to New College Oxford where I read mathematics and philosophy and logic and towards the end of my time there, I went to the careers office and I sat down with a careers advisor and he gave me what seemed like very personal advice, which was the next natural step would be to become a chartered accountant.

Little did I know for a few years later, this was what 80% of people were told. But the logic behind it was in the UK at the time, half of the boards were run by engineers and half were run by chartered accounts. In the US, it’s half by engineers and half by MBAs. So, it was the MBA part at the time. So, I went and interviewed with a number of firms and Arthur Anderson appealed to me and they offered me a job and the money was very decent.

I think it was £4,800 a year. So, you have to remember when you study as an accountant in the UK, it’s called taking articles and only a few years previously people had to pay to take articles and then it switched around and people actually got paid to do this. And people equate chartered accounts to being a to the CPA program in the US. I’ve not taken the CPA program, but the nature of the role for someone who wants to take articles to become a charter accountant is that you have three years of exams. Each year takes about the equivalent of three months worth of work to study for them on top of a full-time job. You’re working incredibly hard and 80% of people aren’t able to pass the exams first time. It’s a heavy filter. I fortunately…

It’s a program. I thought she was able to. But I felt a little bit about a square peg and around the whole there. I spent the next six months learning deferred tax accounting, which is a fascinating topic and taught it to the management consultants of the firm and then the last six months in the insolvency division. And it became clear to me that whereas my objective of becoming an accountant was a fullback role, so I could take more risk in my career, being an accountant was not what I really wanted to do. I had a lot of respect for the managers and the partners at Arthur Anderson.

Anthony Codispoti : What did you feel called towards?

John  Frankel: Well, I just looked up and said, these folks, they’re relatively boring people doing relatively boring jobs. And if I stay here, that’s my future. And that didn’t entice me. But I had no idea what to do. I had ordered financial service companies. I found a recruiter who helps candidates. I applied to six jobs. I had four job offers. And the least known firm that was paying the least compensation was this American investment bank called Goldman Sachs. And I was clueless as to who they were.

And I spoke to one of my colleagues at Arthur Anderson who was American. He goes, that’s the one you want. I go, really?

He goes, yeah. I said, but they’re paying the least compensation. He goes, they have the capacity to pay a lot more. That’s the one where you want the next step of your career.

Anthony Codispoti : So he understood enough of who they were and where they were going and what your opportunities could be there that you could have really nice career trajectory. Correct.

John  Frankel: And so after an excruciating couple of weeks of making a decision, I decided to join Goldman. And that was the next 21 years. So to be clear, I did about a dozen different jobs in Goldman. And I worked in three different divisions of a firm.

Anthony Codispoti : Let’s pick one of those 12 jobs that was sort of the most exciting or at least the most formative for you. What were you working on?

John  Frankel: I would say 10 of the 12 jobs were great jobs, two less so. But the last one was really intriguing. It was 11 years of my career. I was on the sales and trading floor as an equity research salesperson in New York covering hedge funds.

I don’t think that job exists today. But the idea was Goldman produced a lot of research. And clients of the firm, including hedge funds, would pay commissions based on how much they valued the research. So my job was to be a connector to absorb every single piece of research the firm produced, summarize it.

And then I had 20 clients, so it’s probably 60 different people, before the open, before 9am, speak to those 60 different people and give each their tailored story about what was going on.

Anthony Codispoti : On a daily basis. Every day. So you were up all night?

John  Frankel: No, I’d get up at 5, I’d be in the office by 7. And then listen to the morning call. I mean, you’d read all the research on the way in, read the newspapers, etc.

And then break it down into very digestible pieces. And to be clear, you had to understand every single industry, the Goldman covered in the US. You had to understand the steel industry and retail, insurance, banking, brokerage, credit cards, healthcare, and understand how each of the business models worked, understand what the drivers were, the significance of information, how it might move stocks. And then you’re talking, you know, I covered folks like Stanley, Sharpecorn, Sandy Drucker Miller, and you call up Druck in the morning, he doesn’t have to pick up your call. So, you know, each call you wanted to make to him needs to be impactful and meaningful, or he wouldn’t pick up your call in the future, or he asks for different coverage. So it was a fantastic job for me because I learned so much. And I got exposed to just so much information in a short period of time over a number of years, it was a great job.

Anthony Codispoti : Yeah, what you’re describing there is incredible, having to understand all these different business models from all these different industries, and then being able to synthesize, you know, the new information coming out every day to deliver to each of your, what did you say, 60 different clients?

John  Frankel: Well, there are probably 20 different firms, but there were multiple people at the firm.

Anthony Codispoti : So, you know, if you’re talking to a PM, it’s what’s relevant to that PM based on everything you know about them. If you’re talking to their technology analysts, it’s just, if you’re talking to their steel analysts, it’s just that, etc. So yeah, back when you were doing this, takes a special brain to be able to sort of see the full scope and be able to analyze, understand, and then to synthesize this information, simplify it in a way that each of these, you know, 60 different folks can find good use in. And now I understand why you said the position probably doesn’t exist anymore, because now there are AI models that can do that pretty easily.

John  Frankel: No, I think the business has moved on somewhat, but now it’s multi-product. And so at some level, it’s a larger far hoes, some level, it’s narrow. But what was interesting to me was when I moved up to the trading floor, I felt I had no short-term memory. And clearly, the job required and forced the development of short-term memory.

Because, you know, you hear the earnings numbers recall, you can’t keep referring to your notes, you have to synthesize everything and put it in your head and dial not knowing what you’re going to say, because there isn’t enough time to prepare each call. And, you know, it was a great job. One, you know, one lesson from that, which I think is very true, is I think pretty much, there’s always exceptions to this, but pretty much every human is capable of doing any given thing if they set their mind to it. If you say, I want to learn how to do handstands, and you set your mind and energy to it, you can do that. If you say, you know, I want to break the world record in pull-ups, it’d be really tough, because I think it’s like 10,000 and 24 hours. But I truly believe that 80, 90% of doing that is just setting your mind to do it.

I think the human body is very plastic, the human mind is very plastic, and people have way more potential than they’ll give themselves. And it’s a matter of application and consistency.

Anthony Codispoti : So there are some folks who are going to hear you say that, and they’ll say, well, that’s easy for you to say, John, you’re brilliant. You’ve got a special brain, things are just coming easy to you. But I’m just a regular person. I don’t have that kind of brain.

I don’t have that skill set. What evidence or what can you point to that would sort of convince somebody of the point that you’re trying to make? What have you seen in other folks, not just yourself, that has you believing that what you’re saying is true, that anybody can achieve anything they put their hands in? I

John  Frankel: think it’s a statement based on lots of experience, not just mine. By the way, I can’t do handstands. I certainly can do 10,000 pull-ups. I find it difficult to get to 50 or 60. But it’s like, I truly believe, having observed people, that those who put their mind to it achieve things. And they achieve things which are within their control, and sometimes they achieve things outside of their control. I think there is a huge benefit in just pure force of will to make things happen. And I think that a lot of the difference in success in life, I think when I was younger, I used to think it was just confidence. But I think it’s confidence combined with a force of will.

Anthony Codispoti : How does one find within themselves or develop those two elements, the confidence and the force of will, as you put it? Confidence is very difficult.

John  Frankel: I was always the bottom of the class in school. And I always did well in exams. And no one understood why, including me. I mean, I heard the time. And so it wasn’t until I got to Oxford that I really had a sense of recuperating and building some confidence. Because Oxford’s a pretty good university. And if I could get in there and survive there, then probably I was shooting above average.

Anthony Codispoti : So for you, there was a little bit of external validation that happened there.

John  Frankel: There was some external validation. So confidence is very difficult. I used to think that the British education system, the differences between the people who succeed and those who didn’t, was literally a matter of confidence, to have the willingness and the ability to ask. And I think the flip side of confidence is the acceptance of failure and embarrassment. And so it takes a certain risk profile. But the delta between two people is putting yourself out there asking, taking the risk.

Anthony Codispoti : Do you think some people are just born with it?

John  Frankel: I developed it. I was incredibly insecure as a kid.

Anthony Codispoti : Yeah. How? What were the steps that helped you develop that?

John  Frankel: Help me develop confidence or made me insecure?

Anthony Codispoti : No, definitely the former. Everybody has familiarity with being insecure. What people want to understand is how can I be more confident? What’s the path? What’s what potential path looked like? What did your path look like?

John  Frankel: So I’m severely right-brained and I was in a left-brained education system. So what that means is I was the kind of person who would intuit the math answers and couldn’t show workings because there were no workings. Because the answer is six, isn’t it obvious?

Or whatever it might be. And that did not go down well in the school system I was in. And so that’s why I was predominantly bottom of the class.

Also struggled with languages and pronunciation precision. Just not my thing. Again, not well liked in the UK system. And I’ll give you two quick stories about Oxford that really gave me confidence. So I got my A-levels out, so like your SATs, the ones you take to qualify where you go for university.

And mine were Beth and I expected. And I was going to go to Manchester University. Very good school. Probably second best in the UK for the subjects I want to study. But Oxford was the first.

And I was like, well, I did Beth and I expected. How do I get into Oxford? So the standard path, while at that stage was to take a year off of education, take the first trimester and take an Oxford entrance exam. At that stage they called that seventh term because there’s two years for A-levels. So that’s six terms. This would be seventh term. And then take the rest of the time off traveling the world or doing whatever.

Anthony Codispoti : And you either get in or you don’t get in. And it’s like, I don’t like that.

John  Frankel: So I looked up in the phone book. This was, this is pre-internet. I looked up in the phone book and I saw there was someone who had the title. So Oxford’s a, I think it was a federated system. So there’s, I think 45 colleges and halls. And then there’s a central bureaucracy. And there was someone in that central bureaucracy whose job title was the matriculator for the joint on the subject of mathematics and philosophy.

Now to be clear, only six people took mathematics and philosophy when I went there. So anyway, thinking he had a, that was his title. So I picked up phone and called him. So can I come and talk to you guys?

Yeah, why not? So when I spoke to him and told him, you know, a young man in a hurry, I don’t want to do seventh term. I might want to take an MBA at some point. And could I get in this year? And he laughed a little and said, well, you know, not really my job, but, you know, each college has admissions tutors.

And, you know, it’s the summer, everyone’s on vacation, but I guess we could call up and see if any admission tutors here, say rings and no answer and rings and no answer. I think on the sixth or seventh call, as he’s about to hang up, a squeaky voice, then the phone goes, Wilson Sutherland here. Wilson was the admissions tutor for new colleges that send him over.

So I wandered over and knocked on his door and he said, come in and we talked and I told him my story, young man in the hurry. And he said, well, look, you know, we have six places in that this year. And they can be joined. Four of which have accepted. One, we’re wavering on. And one, they’re wavering on us. Because if place opens up, I’ll give you a call. And that’s what happened. A week later, I got a call coming up.

Anthony Codispoti : So what I get from this story is sort of the, I don’t know, the proactiveness that you showed that other people may not have.

John  Frankel: They get their results. I think there’s a bit of naivety on my behalf. So I go up, I get interviewed. A week later, I get a call, you’re in. My school couldn’t believe it. They thought some uncle had donated some money somewhere or something. You know, again, I was bottom of all the class. You know, undeservingly got into Oxford. And then Oxford had a blast. It’s a strange place. Now, it may well be different now. But if you managed to not commit suicide or go insane, you would qualify with a degree.

Okay. And, you know, if you’re very studious, you get a thirst. And less studious, you get a second.

And that’s 95% of people. And then there were thirds and fourths and, you know, passes and that kind of stuff. But, you know, it was like once you’re in, you’re in.

Anthony Codispoti : Now you’re part of the club and membership has its privileges. You’ve got that, that diploma that means a lot. Yeah.

John  Frankel: And so, so, you know, I, I had a lot of fun there. So that was the first story, big confidence booster of getting into Oxford. And then the second one was, there was a professor called Michael Dummond. He was the Wickham Professor of Logic, HAA have been the previous Wickham Professor of Logic and so one of the foremost logisticians in the country. And I was like, well, it’d be great to spend a trimester studying under him, but he doesn’t do anything with undergrads.

So I went and read the rulebook and found that you could create your own course if it was approved. And he had done a lot of work on Frager and you know, Russell and that kind of stuff. So there was a book from Frager to Goethe, which was a really great history book on and I said, well, let’s make that the syllabus.

Be great if Michael would do it. So I asked and he did and, you know, for a trimester for eight weeks, I got to write eight essays and spend eight hours with one of the greatest philosophers in the country, which was, it was just a blast. And I remember four or five weeks in he had set a problem on Russell and some form of paradox. I got sort of partway through it and I just hit this roadblock. So I give him my essay and I’m sitting down and he’s reading it. And I said to him, I said, yeah, I had a real problem on this one. I only got this far. You know, like, oh, great one. What’s the answer? And he looked at me and he said, yes, I’ve often wondered about that myself.

Anthony Codispoti : So that was, that was, You got to the same place that the great one had gotten to.

John  Frankel: Exactly. Yeah. So that was, that was, that was the intellectual highlight of my time.

Anthony Codispoti : So I love those stories. I think you put it as a little bit of naivete. What I see is a guy who’s just said, Hey, let’s just go for it. Let me pick up the phone. Let me go take the meeting.

Let me ask, let me raise my hand. You know, because you don’t know unless you put yourself out there. And it doesn’t always come from a place of initial confidence. It just comes from a place of why the heck not being curious, give something a try, but doesn’t work out. You’re in the same place that you were to start with.

John  Frankel: Yeah, I often just, I often describe successful entrepreneurs as being delusionally optimistic. Yeah, which doesn’t mean that everyone who’s delusionally optimistic is a successful entrepreneur. But I, but I think it’s, it’s an important part of it, a belief that you can change behavior of millions of people that you’re right and others are wrong, you know, whatever, whatever it may be. And if you look at successful companies have really changed the world, it started with someone with this, you know, crazy idea that became less crazy over time.

Anthony Codispoti : Yeah, because starting a new business, especially something that’s super innovative is really hard. There’s a lot of headwinds there. And so yeah, I see what you’re saying. You kind of have to have a little bit of delusion going into it to push you through all the really hard stuff. So let’s talk about FF. Why start this? Where did the idea come from? And why started in 2008 in the midst of the Great Recession?

John  Frankel: Well, you can’t have everything. So I left Goldman in 08. And the precursor to that was I was pretty facile in the public markets. I was so into very smart people. I was coming up with decent investment ideas. 99 was an unusual year in the market where multiple stocks could be up 10% a day throughout the year. You know, people refer to as a bubble, and I think there were elements that for sure. But you know, stocks were, stocks could move if you caught the right wave.

And I pretty much caught every wave I hit right during that year. Now Goldman had a 30 day holding period. You can be randomly restricted when you buy a stock or when you sell a stock, you had to hold it 30 days. They tried to discourage active trading.

And my average holding period for the year was 31 days. But to me, I’m covering hedge funds. I’m pitching someone an idea. If I didn’t go and buy 10 shares of that company, a week later when they said to me, what’s happened with that company, which company? Whereas if I actually bought the stock after telling them, then that would encourage me to stay current and wash the stock.

So to me, it was an essential part of my sales technique. Any case, I was up 10 fold in 99, and I started to accumulate capital. And I just didn’t want to it was too high beta, too much market risk, less specific risk or alpha. And I looked around and said, where’s the alpha? And angel investing appealed to me because there was no market to market.

So it wouldn’t distract me on a daily basis if it moved. And it was all alpha and no beta is how particular company performed. By the time I left Goldman in 08, I’d actually made more money on a realized basis than angel. I had worked in Goldman for 21 years. And so maybe I shouldn’t be spending 2% of my time doing this.

Maybe I should take a professional. But Goldman was an intense place. Our friends was intense place. And I’ve been working weekend, sat days, and holidays since about the age of 12. So I decided to take six months off trying to do nothing to decompress. Just review that when you come off something intense, your knee jerk reaction is to pick up something of a similar character, which may or may not be the right decision. So I want to see what spoke to me. And after five months, I found myself in a law’s office drafting up documents set up a French capital firm.

And you’re right. Initial close was two months after Lehman blew up. It was a tough time to ask for 10 year of liquid when everyone was rushing to money markets. We raised enough, hung a shingle, and got started with the firm.

Anthony Codispoti : And so what was the idea behind it? Sort of the investment thesis? Like what was your driving objective?

John  Frankel: So the sense was that angel investing has a trade off of liquidity, which is higher returns when structured right, that in the average portfolio, a third of your companies go to 10% of your portfolio would generate 85% of your returns. That’s an equal weighted portfolio.

And the sense was, were there things you could do? And that’s a power curve distribution. So if you think about it, if there’s 100 companies that raise what today we call precede, 30 raised an A, 10 raised a B, one goes public. That’s kind of like this. It’s a similar power curve.

And that one that goes public generates so much return that helps pay for a lot of the losses. So the question was, can you take that power curve and shift the curve a little? You don’t have to shift it a lot. Can you shift a little?

Can you move percentages around? And the belief going in was if you do diligence and the research to support this, you have high returns if you don’t. If you help your companies, you have high returns and if you don’t. And then the last one was, if you follow on invest into the ones that are succeeding correctly, i.e. they don’t subsequently fail, then you have high returns.

done. And so we build a model around deeper reserves, high diligence, and really helping companies. And that’s, you know, the FF in FF venture capital stands for founder friendly. It was this belief that if we could really help entrepreneurs be successful, we’re sometimes delivering a hard message, but if you can help them be successful, then you should, through the cycle, generate higher returns.

Anthony Codispoti : So that help, does that mean getting involved from an operational aspect?

John  Frankel: Well, if we own 51% of a company would be a private equity firm and you get very involved operationally. So no, it’s really advice. It’s based on experience. It’s based on understanding the business models.

And so it’s really, you know, talking about product and pricing and positioning. And, you know, there’s 10,000, 100,000 decisions an entrepreneur needs to make and help, you know, being there to help them think through, you know, the difficult issues. And then, you know, there’s just the nature of having been on so many boards and involved with so many companies now. The experience you bring to the table, I’m sure, but no, is, you know, it’s a compounding benefit.

Anthony Codispoti : What is it that you’re looking for in an investment opportunity?

John  Frankel: You know, the natural answer to this is a list. And I will tell you, let’s say the list has 12 items. Every company we invest in fails on three or four items. It’s just a different three or four.

And if I give you the list, I’m not sure it’s that distinguished from what anyone else would say. But, you know, the probably the most differentiated things are we look to invest in what we call businesses. So we want something where we think as a business model, where the lifetime value could be higher than the cost acquisition, where they can get to a business model early. We want an entrepreneur that will listen, listen to the market as much as, you know, outside advice. We’ve seen entrepreneurs who know the answers and just build and build and build and never get to revenue. We think early revenue is very informative. Because it really gives you a sense of true feedback.

You know, half dozen bright people around the table can debate whether the font color should be blue or green or black. But the market will tell you pretty fast. So big believes in A, B testing and checking things out. We want businesses we believe can build barriers to entry. And we want businesses where we think we can be helpful and additive. Because if we’re not, then we’re not changing the shape of the outcome of a curve for the company. We’re just, you know, passive passengers. Now, at some point, we become passive passengers because we’re early stage investors and late stage investors take over.

But you have to get there in the first place. And what we found, so let me give you some stats, because we’ve got 17 years of data now. We found that the average precede to series B is about 10% accompanist. This is based on data from prequel.

Anthony Codispoti : Folks who are in precede that get the series B, it’s only 10% of the company.

John  Frankel: So long the way others never make it. As some become zombie, whatever it is, only 10% of precede, you know, that sort of sub $10 million price round get on to raise the series B. In our portfolio is 50%. So we’re running five times. That means that by year five or six, about three quads of our portfolio is live, whereas for the average BC, it’s about a quarter.

So we have a lot more at bats. Now, companies can hit their stride in their first year, but they also hit their stride in their sixth year. It varies. So the longer the company is live, the higher the chance of a good outcome. We found that 11% of our companies become what are called centaurs or get to 100 million revenue run rate. Now, we don’t have good data on that. We suspect the average in the industry is sub 1%. Mark Andreessen a few years ago said that only 15 companies in a given year or vintage get to 100 million revenue run rate. So we’re hitting about one a year.

So, you know, we look at that and we go, you know, that’s a pretty high hit rate. Now, a lot of firms later stage, your series B firm or a series C firm at entry point, you should have a lot of your companies hitting 100 million revenue run rate because you’re investing when they’re at 50 million. And, you know, if they don’t hit 100 million, then something is probably wrong. But we’re investing when there’s no revenue. Yeah, if the last quarter we have numbers for our companies were still in the portfolio, we’re putting up about a billion and a half in revenue and that was growing at 29% year over year.

Anthony Codispoti : So, John, do you think what you guys are doing so much better is identifying the ideas and the founders that have the most potential early on? Or are you do you think that what you’re really great at is helping after they get launched?

John  Frankel: Is it fair for me to say I have no idea. If I knew exactly what it was, we’d do just that. And we’ve experimented over years. It’s taken, you know, a dozen plus years to test out our hypothesis.

So, one other thing we do, which I think is different. If you remember, the standard VC math is only 10% of your companies are winners and you’re busy as a VC. So, a company calls your offices, hey, we’re having trouble making payroll. A lot of VCs will say, well, that’s a pity. And they’ll say, you know, it’s not my 10%. Our view is, well, let’s listen and let’s understand.

And if you just tripped over your shoelaces, maybe we should find a way to really help you. And we’ve done that a number of times. And sometimes you’ve done it, the companies have gone on to become, you know, very successful companies. So, you know, but it takes a long time to play that out. You know, I know another firm who will never participate in the pay to play. They just see this negative signal in the high ROI to put capital to work there.

I still don’t know. You know, I think about that as a standard and whether that’s right or not. Sometimes we have, sometimes we haven’t, but I’m not sure I have enough broad data yet to know whether participating in pay to play is a winning strategy or not a winning strategy. So it’s, it’s, you know, early stage venture takes forever to exit, which means it takes forever to work out the right strategies. We’re one of the few firms that have been doing it for 17 years, as opposed to starting at seed, then moving to series A and then bigger fund, the moving to series B, etc. So we just have a ton more data and even some things are not clear to us.

Anthony Codispoti : Are you industry agnostic or are there particular verticals that you like to stick to?

John  Frankel: So for our seventh fund, we are very focused on the rejuvenation of the US energy and manufacturing sectors. We’ve been this huge secular drivers there, and which I’m happy to dig into. But I think we’re in absolute renaissance with regard to both, driven by necessity, irrespective of administration. And, and so that, that, that’s where our focus is today, very similar to what our folks have been the last few years, but, but it’s really refined around that.

Anthony Codispoti : So you’re bullish on energy, US energy and manufacturing. And this has nothing to do with recording this in May of 2025 with the tariffs that are going on in an attempt to do, no, because you said it’s irrespective of administration.

John  Frankel: I mean, remember the time horizon we’re investing over, there’s going to be three or four administrations, there’s going to be a couple of recessions, there may be another major war, who knows what happens. So we have to find drivers are so powerful. Let’s talk about energy for a second. US energy demand has grown 50 base points or half a percent a year for the last 20, 30 years. And so every energy project that’s streamed come online, comes online with that and go on their long tail projects. You can’t just spin up energy tomorrow. It’s going to take five, 10 plus years.

And so this is very slow cadence. Demand last year was up 4%. It’s projected and whatever the projections mean between 2.7 and 4.3%. Now there’s a cushion that’s getting smaller. So that’s one data point. So, so what’s driving all this energy? Well, we’ll come back to this, but US manufacturing is a big user of energy, electrification of transportation. I don’t think that’s going to stop.

I’ve been necessarily going to grow. And then data centers, half of data in the world are in the US and that number probably wants to go to three quarters. It certainly doesn’t want to go to a quarter. So these are huge demands on energy. Next data point, if you look at energy production and energy utilization, only about two thirds gets used, a third gets lost along the way. So there’s a lot of energy efficiency. Maybe your next four or five percent comes from, is going to be cheaper to come from efficiency than generation.

And then, you know, so think of it this way. Space exploration and getting payloads of space has been what NASA’s been about. And it’s literally full of rocket scientists.

They’re not dumb people. Elon Musk comes along and says, we need to think about this so far. We need to think about this differently. How do we get the cost of payloads of space down by two, three orders of magnitude? He’s been pretty successful. I think he posted, I hope I’m not getting the ratio wrong, that Starship three is the same cost as Raptor one, but gets 40 times as much payload to space for the same price. So even, you know, he’s pulling these economies of scale through his own.

But I think 90 percent of payload space is SpaceX. So it wasn’t that his team was brighter. They were just solving different problems.

Those different problems, people were blocked out because of their mindset. So when I think about energy, I think there are lots of places where we can just do stuff a little differently and bring a different mindset to it. Now we have to have a will to do that.

But there’s a demand and there’s a necessity to do this. If you look at energy generation in China, they have massive generation growth versus us. And they have cheap electricity. With all the green initiatives, we made electricity expensive, all the regulation we’ve made energy expensive. And so how can we need to fix this to be a really successful country? And I think we will.

Anthony Codispoti : So can you give an example of maybe something you’ve invested in or a technology that’s here or on its way?

John  Frankel: I think small nuclear power stations are on the way. I think forum reactors are fascinating. I believe that I mean, clearly it was regulation has shut down nuclear power. It is one of the cleanest, most environmentally friendly, most capable technologies. And I think there are advances that have been made in theory that need to be put into practice. But I believe nuclear will be a fascinating calm.

Anthony Codispoti : And with these smaller facilities now, there’s been a big addressing of the safety question that I think kind of pushed everybody away from this in the past.

John  Frankel: Right. But new technology have different safety parameters. But in reality, it’s still relatively safe. Now, what this does, think of our grid system in the US today and around the world. It’s a broadcast system, centralized generation, electricity is put through transmission to the nodes in this concern. Go forward a number of decades and you’re going to have multiple points of generation at given points in time, they will have surpluses.

Those surpluses can be stored locally on battery and used to smooth out locally, or they can be sold back into the system. So now you move more to a multi-generation, multi-point generation space where you need to start trading electricity and transmission has to work multiple ways. So there’s a whole new concept that needs to be worked out. And how we get from here to there is fascinating. It’s going to involve a lot of AI. It’s going to involve trading systems set up around energy. Ironically, that was something Emmeram wanted to do 25 years ago.

It’s a complete change. And so we think this is a really fascinating space where no one’s focused. There’s a lot of real estate opportunities, a lot of debt opportunities, a lot of private equity opportunities, but there’s also a lot of venture opportunities. And those are the ones we’re going after in energy.

Anthony Codispoti : And let’s talk about US manufacturing. Why are you so excited about US manufacturing? Because it’s going to happen. Why? Why are you so confident in that? It’s hard to move supply chains, right?

John  Frankel: If it was easy, everybody would be doing it. It does the national security dynamic, which means there’ll be economic intense again. Don’t really care about which administration like. But I think, and this is a bigger question, we have a certain workforce and we’ve built that workforce to focus around services type businesses. It is a couple of years ago when we checked GPT first came on the scene and we saw these LLMs, LLM, solutions. To me, it was the first time that you actually had computational help for the non-STEM sciences. So all the STEM things were helped by computers.

Now you have things to help people write stuff and research stuff, etc. Our estimate is 10 to 40% of jobs could be taken out today by the application of LLMs. We’re seeing that in our portfolio companies. We think that happened in large companies. We think it’d take longer.

We think the larger the company, the longer it will take to happen, which actually gets a lot of advantage start-ups today. You’ve had this huge influx of employees into government who are being released. And so now you have all of these talented people who want to work. And my belief is we’re going to see an absolute renaissance in a Cambrian explosion as it were, in new business start-ups, tackling problems that are non-service economy related, manufacturing for want of a better term. And I think they’re enabled because of AI, enabled because of the advancing robotics, which is just an application of AI, such that it will be easier to set up a factory to make screws or factory to make this or whatever, that then can lead to the tooling, then can lead to the manufacturing and build all the way up to doing more and more of a production within this country.

And I think there’s a lot of advancements. There’s a new US toy company and they have built small little plastic toys with movable pieces that are 3D printed. So there’s no molds and then 3D printed in the US and they’re collectibles and there’s over 160 of them and they sell for $2 each. You go, how can you have a US plastic toy sell for $2 each? It’s just 3D printed.

Well, the cost of building molds for 160 different items that have movable pieces is impossible, but 3D printing, you can do it. There’s no packaging for items. They’re delivered to the toy store in a big bucket for want of a better term. The kids pick out what they want. Highly innovative.

Anthony Codispoti : And so you think the US is well positioned for this renaissance in manufacturing because there’s innovative minds here and they’re increasingly combining AI and robotics to be able to produce things in efficient ways that didn’t exist before or that existed, but they were too expensive to do more manually. Yes.

John  Frankel: And when 3D printing first came out, it was exciting. We didn’t invest in any of them. Lots of people did. We said, you know, to us, it’s like having your own pottery studio at home. Okay, I can print out a plate or, you know, I can do this, but it’s a hobbyist tool. We think it’s coming to the point of being able to be used for real manufacture. The technology is being developed, the materials are being used, and the like.

And so I just think there’s a confluence of technologies and will power that will do this. It’ll take a long time and not all the content today will be American in a given item, but that will go up over time. This is a massive country. We have enormous amounts of resources. We’re going to rebuild the mining capabilities we shut down decades ago to get our own rare earth minerals where we need them. I mean, they’re in this country and we’ve got massive lithium deposits in Nevada and elsewhere.

I think they’ve just got enough one in the Salton Sea in California. All of this is going to be slowly turned on as more and more people are convinced that local sourcing is the way to do it.

Anthony Codispoti : What do you think the timeline is for this?

John  Frankel: Some parts of it, two, three decades, other parts, two, three years. Okay.

Anthony Codispoti : What do you think we see in the next two to three years? What sectors of manufacture do you think are well positioned to be domesticated? Simple things.

John  Frankel: In the next two, three years, it’s going to be items that require some skill, but not massive skill, that can leverage some robotics and automation and what they do. The complex electronics will take longer, but you’re turning around as a super tanker. The idea that was born picadate, I’m going to say 30 years ago, probably longer, that the average good had labor cost was 60% and the cost differential between here and China was a factor of 10 plus, so you take a big chunk of costs out. Today, the labor costs are 20% and labor differential is much less, maybe a factor of two, but then you’ve got shipping and natural security and other dynamics.

We’re just going to shift. It’s a shifting of mindset that then creates opportunities and then the administrations that lead into that and where that then becomes the default, how do I do this as opposed to the default 30 years ago was how do I take this off-shore? I think it does create a lot of opportunities for people to have high-paying skilled jobs in this country. Again, it takes time. In the interim, when we import stuff, tariffs will generate revenues that can help subsidizers.

Anthony Codispoti : Do you think that’s how they’ll be redirected, the tariffs?

John  Frankel: I don’t know. I don’t know. What the administration wants to do, no one believes. No one believes that you can get an incremental trillion dollars from tariffs. You can save a trillion dollars from wasting government and with that eliminate taxes on people up to 150 or 200,000.

I’ll tell you this. If they were able to do that, entrepreneurship, it’s like fuel on the fire to being an entrepreneur in the US because you can basically keep much more of your income whilst you’re being an entrepreneur. Obviously, taxes move from income taxes to consumption taxes.

You probably need a 10% national sales tax or VAT to supplement state sales taxes to balance the books. If you did that, you can be an entrepreneur in Europe and pay half your income to the government. Some countries more than half. You come into work in the States and you pay nothing to the government. By the way, VAT in Europe is 20 %ish.

If you have national sales tax of 10% and you have a state sales tax of 5% to 10%, it’s probably equivalent. The great sucking sound would be all the entrepreneurs trying to work out how to get into the US without having to pay $5 million. No one believes that’s going to happen. My job is to think about strange things and if they happen. What if everyone took delivery of food by drone or whatever it is the company were backing. I know enough about public markets that if we ever hit the point where people started to believe that could happen. Again, I don’t know if it can or can’t. But if we ever hit the point people believed it could happen, there’d be a seismic change in the value of reflecting the US company through.

Anthony Codispoti : Yeah, you’re paying an interesting picture for sure. John, I’ve just got one more question for you today. But before I ask it, I want to do two things. I’m going to let everyone go ahead and pause for a moment and hit the follow button on their favorite podcast app so you can continue to get more great interviews like we’ve had today with John Frankel of FF Venture Capital. Also going to let you know the best way to get in touch with John, which is his Twitter handle, which is John underscore Frankel and Frankel Sparrow.

F-R-A-N-K-E-L. Is that right, John? That’s the best place for people to connect with you? Absolutely. Okay.

And then the last question I have for you tends to be my favorite question. I’d like to hear about a serious challenge that you’ve overcome, whether it’s personal or professional. What was it? How did you get through it? What did you learn?

John  Frankel: So my father passed away 25 years ago and he was a young 74-year-old and it shouldn’t happen, but it did. This mortality thing sucks, by the way. Um, and I had noticed that a lot of men, when they lose their father, become just bitter people. And I’m not a psychologist.

I don’t know why I’m sure there are many people on this podcast more qualified to articulate the whys or whatever, but I decided that was not what I wanted to do. And so I felt there were three things that I would do to try and counter that. Um, and sort of honor my father. And one was to have more children. So we had five children at the time. I had a vasectomy.

I went in for a reversal. Unfortunately, it didn’t take, but otherwise we’d have a couple more kids. Our second one was to get a fast convertible.

So, you know, that, that, you know, that was fun for like three years. And then the third one was at some point, I’ll set up a business around my own business. He ran his own business.

He was an entrepreneur. And so I got two of the three. But the, but the, the, the other thing that I will tell people that really helped me was, and people should think about this when they have a loss in their life, it unfortunately happens, is when people would say, you know, how you do, you know, your father passed away, how you’re dealing with it, I would tell them. So I use that as my sort of talk therapist. It was, and I tell them, you know, who he was and what he meant to me. And I, and I, that, that really helped me as well.

And for those people who might be listening who suffered from me, tell them how it was doing when they were asking, I want to thank them because it was, it was very helpful. But, you know, one of the things I tell people is if you want a long life, you’re going to attend a lot of funerals. And just as there’ll be a lot of happiness, there’ll be a lot of misery. And, you know, we’re blessed with a large family.

We currently have about 14 grandkids. And I know that’s a lot of surface area, a lot of surface area for joy. And, you know, I can’t ignore the fact that there can be a misery that comes from that. None to date. But, you know, one has to be realistic in life that stuff happens.

Anthony Codispoti : And so when it sounds like one of the things that really helped you through the initial period of losing your father was the opportunity to talk about him, who he was and what he meant to you.

John  Frankel: Yes. And look, what I think one important life lesson that I’ve lived with is you can never control the hand you’re dealt in life. But you can control how you play it.

And so by being self-aware and by being cognizant that, you know, bad things happen to a lot of people, you how you how you respond and deal with it is really important, not just for you, but if you have children or others who depend on you, how they see you react, is in itself an important lesson. John, what was your father’s first name? I’m sorry, I didn’t hear what you said.

Anthony Codispoti : What was your father’s name, his first name? Leslie. Leslie. With your permission, we’ll dedicate this episode to Leslie.

John  Frankel: Well, thank you. Absolutely. He would appreciate that.

Anthony Codispoti : John, I want to be the first one to thank you for sharing both your time and your story with us today. I really enjoyed it and very much appreciate it.

John  Frankel: No, thanks. Thanks for having me on. I, you know, this is a great podcast and I really am honored to be a guest.

Anthony Codispoti : Folks, that’s a wrap on another episode of the Inspired Stories Podcast. Thanks for learning with us today.