Michael Monaghan

No, that's great. We're going to talk a lot about that today and get deep into the fun. But I always like to ask, what do you like to do for fun when you're not working, when you're not trying to be an entrepreneur? I know you are skiing today, but any other hobbies?

Yeah. So I've got my life pretty simple at this point. So work, I like to run a lot. So I've completed a dozen plus marathons, including a few barefoot. I spend a fair amount of time if I'm on the West Coast surfing early in the morning. And then, yes, you're correct. And my final hobby is skiing. So really those three things. So it's work, running, surfing, or skiing.

Love it. So you touched on Beartooth a little bit, but really the question I wanted to get to is you have lived the Founders life firsthand, right? You've co-invented this technology, you've raised capital, you've built a team. How much of that experience kind of directly shaped what you're

Doing now with the Founders ETF? I think it was absolutely imperative. I think it inspired both the inspiration, which is being part of the founder community and working with other great founders and understanding the mindset of these people that build these founder-led companies is just different. And so I think it was important to do that. And I think it was also important to understand how to construct the business. I think had I just stayed as an employee of a well-run Wall Street organization for 25 years, I don't think I would have built the skill set and understanding of how to create my own organization. So there was a lot of – we ultimately shipped some very good products with Beartooth. But over the 12 to 14 years that I worked on it, we certainly made a lot

Good reward to risk profile. Yeah. And so as we get into the fun here a little bit, I want to just kind of ask, the core thesis really is this founder factor. So can you walk us through what that actually means? How are you defining founder-led and why do you believe it works as an investable characteristic?

Yeah. So I think there's three pieces in there is how we're defining a founder, what does that factor look like, and why do we think it works? So how we define a founder is the original creator of the company, the person that started it, right? So if it's a Dell computer, it's Michael Dell. If it's Capital One, it's Rich Fairbank. If it's NVIDIA, it's Jensen. And so it's the original company founders still running it. So we talk about, again, we own Dell because Michael's still running it. We don't own Apple because Steve's no longer running it. When we were originally building the portfolio last year, we had Berkshire Hathaway in, but obviously Warren retired, so we don't own a Berkshire. So that's how we define a founder run is that the original founder is the executive running the company.

Yeah, I would agree with both of those things. And I was going to go into the question, like, what specifically is it about founders that kind of drives that outperformance? I've solved both studies, right? I saw a quantitative analysis study that says, they return about four and a half percent more return. I read your Bain study at 3.1 X over 15 years. But really, it's ingrained, I think, in a founder, is it, the skin in the game, the long term thinking, the willingness to take bigger swings? Like, what do you think is that core mechanism that really allows these founder led companies to find, some of this excess alpha over companies that, have no longer been utilizing their founder as their head and running the company? I think it's all of the

Above that you've named. It's they've set the original vision. They know where that vision needs to go. They know how to make the changes. So I'll give two examples. So a meta is one of our top holdings. As you recall, a few years ago, Mark was investing aggressively in the metaverse. Wall Street didn't like it, the stock got hammered, it wasn't working. And, he instantly pivoted and went a new direction, and has created a ton of value since then. A couple weeks ago, I was asked to weigh in on Elon merging SpaceX and XAI. And again, it's that vision to understand the constraints in a system, understanding that in artificial intelligence, you have compute constraints, you have cooling constraints. And as wild as it sounds to put

The founder fund specifically, the ticker is FFF. And I'm gonna, I'm gonna put on the hat because, I've done probably 100 of these episodes, and I'm a swag guy. So if you give me swag, I'm gonna wear it. I pass out anything with Thor on it. So let's talk about the ticker FFF. You launched it in 2025, actively managed, what are the actual mechanics of this fund do?

Awesome. So you're exactly right. Let's talk about how we manage the fund. And then let's talk about why we chose FFF. So the way we manage the fund is very straightforward. And it's an interesting intersection of fundamental and quantitative, which is how we've combined them, I think, is a bit unique. So we start with the 200 largest founder led publicly traded companies. That's our starting universe with which we analyze. And we actually run in a separate index that you can look at under Bloomberg trades under founders, F-O-U-N-D-E-R-S. And that's the 200 largest founder led companies. Within that, we pick the what we believe to be the 100 best by running a factor model. So anyone who's familiar with, again, Bernstein research, my partner and I both came

It says like 80% of it is rules-based, up to 20% is discretionary. So that's an interesting split to me. Like why not go full systematic? Kind of what is the discretionary sleeve actually doing? Is that your weighting mechanism or can you talk about what, other than your factor, which is rules-based, what is that discretionary piece actually doing and are you utilizing it at all?

Great question. So effectively it's all rules-based. I'll get into why the 80-20 is written that way. So I think this is something that's really important to point out because it's rules-based, there's no emotion in this portfolio, right? So it's just the computer model picking the stocks each quarter. The reason we voted 80-20 primarily was the ability to put in IPOs that meet our fundamental, that are founder-led and meet our criteria.

And so will you, you just mentioned something there, a quarterly, so you're doing the factor analysis on a quarterly basis. Let's say an IPO, releases, SpaceX does its IPO, right? And you want to get it in the portfolio. Do you wait till next quarterly rebalance or is that that discretionary piece that says, Hey, we want to get this SpaceX in here, let's just put it in the

Portfolio. That's the discretionary that we could buy on the IPO. Got it. For companies that meet all the other requirements.

Yep. So you've got some big mega cap tech names in here, like you mentioned, you got the NVIDIAs in there, but you've also got names further down the list. You've got Robinhood, Carvana, Viking Holdings, Roblox. How important is that long tail of smaller and mid-cap founder-led companies to the overall

Thesis and I guess performance of the fund? Yeah, that's a, that's a, a great question. And we, we looked at, um, a fund size everywhere from 15 names to 200 names. And we really found a hundred was sort of the sweet spot. And yes, some of those, uh, tail names are actually growing very fast. And so when we're cycling that excess capital back into them, it's providing performance to the fund. One of the things that we looked at was over that 30 year history of these types of names, where did the performance come from? And about 50% of the performance came from about 500 names, meaning the performance is not just coming from the mega caps and the top holdings. The performance is coming all across the investment portfolio.

So I'm, I also took a look at the holdings like 10% or their top 10 holdings are about 53% of the portfolio. Is that a concentration feature by design you want, or is that, um, I don't view it as a risk, but is that by design, is that a, a conviction bet in some way, shape or form?

I think that's, uh, driven by the, the market cap, uh, weightings. Um, that's really what's driving it there. And yes, you're correct. We have about 50% of the portfolio in the top 10, 10 or 12 names. And then the other 50% of the portfolio and the other 90 names.

So the fund is about two months or, two months old. I think you're in the very early innings. Um, it's, um, it's very, it's a very crowded space. So what's the distribution, not for founder led ETFs, but the, the number of ETFs that have been launched over the last couple of years, I call it the ETF thunderdome. I think that's the term everybody's using now. Um, you have past experience as a founder, what's the distribution strategy? How are you going to try to get in front of advisors? How are you going to try and, um, and make some noise in a very

Loud room? Yeah. So I think, the first one is the, I think it was Paul Graham says things that don't scale, right? So a lot of it is personal outreach from, uh, my partner and I. Um, and then there's the systematic things using some of the tools, uh, in an automated way to get in front of advisors, especially, uh, some of the smaller advisors that are looking for exciting new product to talk to their customers about. And what I would highlight is even though the ETF space is very noisy. I think the statistics are 10 a week launch. Uh, last time I talked to one of the, the, uh, the exchanges, as someone else who's built a really high quality, long-term compoundable

Yeah. So you brought up, um, advisor discussions, like how would you, if you're sitting down with an advisor, he's got a, diversified model portfolio suite that he's delivering to clients. Like what is the recommendation here on how they should be viewing FFF? Uh, where does it fit? Um, we've talked, at length about why it makes sense, but if you're looking at a diversified portfolio, I'm assuming somewhere in the large and mid cap equity is where you're going to try to pull some weighting from and add it to your product. Absolutely. One of the things that we

Like about this product is we believe it's a core equity holding on the growthier side. So we think that we fit in that core growth sleeve, um, given it's a broad market portfolio and in our sector weightings, um, are relatively diverse, um, lining up relatively well with the S&P 500. There's a few places we're slightly overweight, a few places we're slightly underweight. Uh, we don't own any utilities, although I suspect we're going to see a cycle of founder led utilities to power this AI boom. So we, we believe we can sit down with an advisor and show them this is a one for one replacement for some of their core growth holdings. Um, for example, um, and, and we, we didn't talk about FFF,

Well, Michael, you, it seems like you have your, your thumb on the pulse of, uh, a lot of these founder led companies and maybe future IPOs. What do you want to own that you can't own yet that you're hoping you get a chance, uh, to get your investors invested in it through FFF?

So we try to be agnostic to names, right? Since we've built a model portfolio, we like the model just to pick them. Uh, I'm going to answer your question, by the way, I'm going to get there.

Um, but I would have given the same answer as a, as a systematic manager. I would have said the same thing as the, as the clause, but you got to have it a little bit of opinion on something you want in

There. Yeah. So, so I'll, I'll close it out and then I'll give you the answer. we love the, my favorite comment is the Jim Simmons comment. He says that Renaissance, you could do anything you want except for override the computer. So we're a big believer in the system. That being said, of course, I'm excited to, to own when we're going to be able to own some SpaceX. I think that, Elon without restating the obvious as a, is a generational entrepreneur and ability to create new things and, and, and see around corners and execute around those corners. Um, the Collison brothers, um, I was an early user of Stripe at my, my old company, we were so early. I used to get to talk to them. Okay. Uh, that's how long I've been using

Will be interesting. That's great. So I was, I was curious to ask you because I I've been an entrepreneur and a founder for 15 years. Uh, you had a 15 year stint as, as a technology, running a technology company and doing cool things. What is it about, um, the ETF industry and launching your own product here and trying to grow this business, uh, that are similar to maybe some of your prior entrepreneurship journeys? Like is it's kind of the same playbook, but, uh, a different game, but I think you need all the same characteristics. So what have you brought from your past into this business, uh, that might be a little bit unique and, um, how is the, how is running an ETF company similar or very different than maybe running, a,

Yeah. So I think I'm still learning a lot about running an ETF as, as I, as I tell people really early on, I said, look, before January 6th of last year, I really knew nothing about an ETF other than owning some. And we really dug in and had to learn about how to execute it and build it and work with the right partners. So I think we're still learning every day. Um, but there's some similarities that, um, I think, uh, um, really designing the product with the customer in mind, right? So it's not about creating a solution and finding a problem. It's understanding a problem and bringing that to the customer. Um, my viewpoint is I like to have 30 year vision goals, but execute

Sentiment and feeling with, uh, AI, I think even in the last three weeks, um, it's made a major jump to allow, allow us to do some other things, but I find it interesting. You and I are very similar. It's that longer term vision. Where do we want to go? Um, I might not say every 30 seconds, but that, that every week being able to figure out what you want to get accomplished, run after it, but I find it's, I find it very interesting. Um, and I want to expand on it just a hair is that ability to pivot, right? Especially when you're building a new business. Um, there's things that you learn. We always, my partners and I always say, none of us have a monopoly of the best

Yeah. I try to borrow a little bit from, from Jeff Bezos on the one way door and two way door. If something is quickly reversible, i.e. just spending a little bit of money, we obviously want to be effective with our capital and have high returns on the ways we invest. But if it's a one way door, we spend some money, it works. It doesn't work. Like we try to move quickly on, on those types of things. And if it's a two way door, um, we might want to be a little bit more deliberate. So an example would be a one way door. We might hire, uh, um, uh, prospecting database or an outreach company. That's a one way door. We spend the money. It

Today. As you can tell, I, I, I do, uh, I like the, the story of, of the founders. I love the story of the fund. I wish you a ton of success before I let you go. Where can people, uh, learn more information about the founders fund and get everything they need to know about FFF?

Yeah. So the best place to learn about FFF is that founder ETFs, founder ETFs.com. Michael at founder ETFs.com will go directly to me. I love talking to people. If you want to reach out, uh, and learn more about the fund and in the website there, we have, a lot of materials we've written, whether it's be content on the website, a one pager, or, or links to our SEC filings and prospectus. And the fund can be bought at any of your favorite brokers. So, uh, Charles Schwab, Fidelity, Vanguard, interactive brokers, public.com, uh, all easy places to go buy the fund. Well, again, Michael, thanks for hanging out with me today. Fantastic. We really appreciate being on and, and, and think that hat looks great on you. All right, man. We'll talk to

You soon. Bye. See ya.

Bye.