Joe Lonsdale, the serial entrepreneur behind such firms as Palantir, Addepar and Opto Investments, spoke with Aaron Klein, Nitrogen (formerly Riskalyze) CEO, on Tuesday at the company’s annual conference to discuss a wide range of topics, including Opto, a platform aimed at providing wealth managers access to private market investments.
Back in 2004, Lonsdale co-founded Palantir Technologies. The idea was to create software that found connections, patterns and trends in databases of seemingly unrelated information. The federal government uses Palantir’s technology to sniff out irregularities, fraud and possible criminal activity.
“We had to figure out how to conduct investigations with technology,” he said. “It was a pretty shocking thing to realize how far behind the government was.”
“The thing about selling to government is you have to be 10 times better than the alternative,” he said. “But eventually you can shame them into working with you.”
Lonsdale then founded alternative investments aggregator Addepar in 2009. Lonsdale said as he was building a family office for the first time that everyone he talked to “hated the software” they were already using. He said it took some time before he was able to figure out what worked for each firm.
“RIAs are very different,” he said. “There’s dozens of different approaches.”
Opto Investments was co-founded by Lonsdale and came out of stealth mode in September 2022 when it also announced $145 million in Series A funding. Around 170 RIA firms are currently using the Opto Investments software.
Other alternative investment platforms “treat RIAs like the product,” said Lonsdale.
“Alignment and incentives are really important to me,” he said. “Let’s have an aligned way to access alternative investing.”
Last month, Opto Investments introduced new custom fund capabilities in which RIAs can create white-label fund strategies including private credit, equity, real estate, venture capital and infrastructure investments for high-net-worth and ultra-high-net-worth clients. For its part, Opto is completing due diligence, offering an opinion on the underlying investments, using its capital and balance sheet to back those investments and allowing advisors to provide single private market exposures to their clients. The firm compiles some specialized custom funds with their top picks and charges an additional fee of 5% to 10%, said Lonsdale.
“I like that way of getting paid,” he said. “What that does is it incentivizes Opto to get into the very best stuff.”
Lonsdale said many single-family offices use Opto Investments and that the RIA market made up the greatest part of their business.
“The basic idea is we try to automate it for you and make your lives not miserable,” he said.
On more political topics, Lonsdale said he saw the SEC and other regulatory bodies as being overly aggressive, comparing them to old English “star chambers.”
“It’s our job to stand up to them and push back,” he said. “This is a huge challenge to our country.”
Lonsdale said he saw similar administrative incompetence in the philanthropy world, where he said incentives were not aligned.
“There’s a lot of places in our society where you see incompetence,” he said. “Rather than subsidize a broken system … let’s fix what’s broken in our country.”
Vocational schools should be supported, he said, but only when the donations were tied to performance.
“A lot of us in the technology world have become very cynical,” he said. “I think the way you succeed as an entrepreneur you have to create a picture of what could be.”