Apr 25, 2023 · 58m · news
AngelList CEO Avlok Kohli: The Funding Market Today; Last-Mile Delivery; Competing w/ Carta | E1005 · 20VC with Harry Stebbings
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this insightful interview, AngelList CEO Avlok Kohli uses proprietary data to analyze the current venture market downturn, shares his uncompromising philosophy on startup execution speed, and details how AngelList leverages AI to automate operations and drive high platform margins.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 18.6% of the talking time here. How this is scored →
Harry as informed peer 4.6 Guest teaching 4.5 Guest disagreement 2.0 Harry pushing back 3.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 19:49 Avlok rejects M&A spree thesis
Avlok explicitly departs from conventional wisdom, firmly rejecting the host's premise that a broad startup acquisition spree is imminent.
Hardest push from Harry ▶ 33:37 Harry presses on pricing vs AI savingsHarry directly puts the guest on the spot, questioning why AngelList raised manager fees while simultaneously cutting operational costs through AI automation.
Biggest teaching moment ▶ 8:31 Avlok details AngelList bear market datasetAvlok walks through proprietary AngelList data tracking positive activity rates, demonstrating that the gap between boom times and the current downturn is the widest in recorded platform history.
Harry holds his own ▶ 12:10 Harry breaks down multi-stage check-writer incentivesHarry showcases deep industry insight by explaining how junior partners at multi-stage funds write price-insensitive seed checks to remain active while senior partners manage portfolio fires.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| How Avlok Became CEO of AngelList | 3 | 2 | 1 | 1 | Harry opens with an easy conversational tone, bringing in context from Gokul Rajaram regarding Avlok's background at Fastbyte. Avlok politely clarifies that average delivery time was actually seven minutes and outlines product utility lessons. | |
| The Myth of Being First to Market | 5 | 3 | 2 | 4 | Harry offers a strong stance calling early-stage defensibility complete bullshit. Avlok introduces the concept of the idea maze and agrees that day-one defensibility does not exist. | |
| The Fate of European 15-Minute Delivery Startups | 4 | 5 | 1 | 2 | Avlok breaks down the capital requirements and J-curve economics of quick commerce. He introduces AngelList proprietary chart measuring market boom times versus bad times. | |
| The Pre-Seed/Seed Resiliency vs. the Series A Crunch | 7 | 4 | 2 | 5 | Harry pushes back on high seed prices and articulates a detailed insight into multi-stage fund principals writing non-price-sensitive seed checks to stay active. Avlok validates the Series A market compression using AngelList deal data. | |
| The Evolution of Seed Round Structures and Party Rounds | 4 | 5 | 1 | 2 | Harry asks about party rounds and timeline changes for seed rounds. Avlok reveals AngelList data showing a 33% drop in expected company raises compared to historical averages since 2015. | |
| The Impending Brick Wall: Pushed-Out Runways and Down Rounds | 4 | 5 | 2 | 3 | Harry inquires about cram downs and repricing activity. Avlok notes 48 pay-to-play rounds in Q1 and explains how startups are pushing out runway before hitting a cash brick wall. | |
| Why the Expected Startup Acquisition Spree Won't Happen | 5 | 5 | 4 | 4 | Avlok explicitly departs from conventional wisdom by arguing that an M&A spree will not happen due to public and private buyer constraints. Harry challenges whether even $0 acqui-hires make sense given headcount costs. | |
| LP Secondaries and the Secondary Market's Health | 6 | 4 | 2 | 4 | Avlok reports 40-50% discounts on LP secondary trades. Harry counters with broader market knowledge, noting that 40-50% discounts are relatively optimistic compared to 60-70% drops seen elsewhere. | |
| The Shift in LP Commitments and the Resilience of Institutional Capital | 5 | 5 | 1 | 2 | Avlok shares data showing institutional LP commitments recovering rapidly. Harry accurately hypothesizes that market certainty and the AI technology wave are driving this shift. | |
| The Fundraising Crunch for First-Time and Emerging Managers | 3 | 5 | 1 | 2 | Harry asks about net new fund formation and fund sizes. Avlok outlines how first-close timelines extended from 3 months to over 6-7 months while emerging manager fund sizes contracted. | |
| How AngelList Integrates LLMs and AI to Automate Operations | 3 | 5 | 1 | 2 | Avlok explains how AngelList uses LLMs to automate back-office operations, such as automatically classifying and processing 15,000 incoming deal and legal emails per week. | |
| The Rationale Behind AngelList's Pricing Adjustments | 6 | 4 | 3 | 7 | Harry directly confronts Avlok on pricing increases for fund managers despite internal efficiency gains from AI. Avlok clarifies that changes reflect removing an outdated cap meant for tiny funds. | |
| Platform Margins and the Failure of Assure | 5 | 6 | 2 | 3 | Harry asks about loss leaders and margins. Avlok reveals 80%+ platform margins, cites strategic lessons from Square, and explains why competitor Assure spectacularly blew up. | |
| Hindsight Mistakes: Startup Incorporation vs. RUVs | 4 | 5 | 2 | 3 | Avlok reflects on product mistakes like startup incorporation and explains why he deliberately shut down AngelList's European presence to focus on dominating the US market. | |
| Defining 'Winning the U.S.' and Current Market Share | 5 | 4 | 3 | 5 | Harry asks directly about competing head-on with Carta on cap tables. Avlok dismisses competitor focus, reiterating that startups die of suicide rather than homicide. | |
| The Secrets to AngelList's Speed of Execution | 3 | 4 | 2 | 2 | Harry asks about AngelList's rapid execution speed. Avlok credits hiring dissatisfied, ambitious team members and aggressively cancelling meetings to crush unnecessary process. | |
| Why the Bear Market Doesn't Hurt AngelList's Business Model | 6 | 5 | 4 | 6 | Harry suggests the macro bear market directly damages AngelList's transaction-based business model, which Avlok firmly refutes. During quick fire, Avlok repeatedly declines Harry's attempts to make him short specific venture funds. |
Statements from this episode (37)
Kohli: A company's sole purpose is building products without process
“The only purpose for a company, it's just a group of individuals that are coming together to build product for your customers. Any process, anything that gets in the way of that, crush it.”
Kohli regularly cancels all his meetings to maintain execution speed
“Like I'll regularly go cancel all my meetings on the calendar because all that really matters is that you're shipping products that your customers love and anything that gets in the way of that and you drag, kill it, crush it, and just focus on Speed.”
Stebbings: Assessing defensibility at pre-seed and seed is complete bullshit
“I find so many investors oscillate on defensibility and I think it's just complete bullshit, especially at pre-seed and seed.”
Avlok Kohli: Early-stage startups have zero defensibility on day one
“Definitionally, you don't have any defensibility on day one because you don't have a business or even day 30, unless you magically get the, you know, pretty large network effects. And even then I would doubt that because that means if you were able to get a la…”
Kohli predicts all 15-minute delivery startups will go bust
“A hundred percent. Because the cost of capital goes up. And when the cost of capital goes up, you can't invest into launching new cities. And you can't invest into what typically ends up being the J curve of this type of a business where you end up losing mone…”
AngelList supports 20,000 funds and manages over 13,000 startups
“Yeah, so for context, AngelList supports 20,000 funds and syndicates now, and we manage a portfolio of more than 13,000 startups across all of these funds and syndicates.”
Venture market activity spread reaches largest distance in AngelList tracking history
“And so we're actually in the depth of the bear market, if you will, for venture right now. And that spread between where it was in the boom times and the bad times is the farthest distance it's ever been on on everything that we track.”
Venture market contraction between 2022 and 2023 is fastest on record
“It's incredibly fast and it's actually incredible. That, that distance is also incredibly large. So typically, when you have these dots that collect and it's reported every quarter, they're all kind of collect, you know, pretty close to each other, right? It's…”
AngelList data: Series B deal volume and valuations fell over 50%
“Deal volume in Series B down more than 50%. Valuations down more than 50%.”
Kohli: Seed valuations will hold up better than late stage
“Pre-seed and seed, they're buoyed and we don't see that changing. We actually still see that staying the same and the valuation staying the same, maybe a little bit of compression, But we're not going to see at the same rate of series A, series B and onwards, …”
Kohli: Party round ratio remains unchanged despite shrinking overall deal volume
“I would say that we are seeing we're seeing the percentage of party round to non-party round actually being the same, but the overall volume has contracted.”
Startups can no longer raise successive leadless seed rounds
“So what you, what was happening in the heyday of 20, 21 and 20, 22 was that companies would just keep raising these successive rounds and we would see it like C, C plus C plus plus, right. It just keep going on and on and on and always just raising a little bi…”
Party rounds remain viable for $2M raises, but fail at $5M
“So two million, you can do a party round five million, it's much harder to do a party round now.”
AngelList data reveals a 33% drop in expected follow-on funding rounds
“And when you just take a look at that sample size of companies from today, sample size of companies in historical average, we're actually seeing a 33% drop in companies in terms of how many companies we expect would have raised by now, right?”
AngelList tracked 48 pay-to-play venture rounds in Q1 2023
“So in Q one so far, we've seen 48. These would be these would be the pay to plays.”
Kohli: Pay-to-play startup rounds will accelerate through late 2023
“And so our view is that these will start ticking up in Q two and then definitely Q three, Q four, because these startups, they have a brick wall, right?”
Kohli: Market conditions do not support a rapid startup acquisition spree
“So I don't think the conditions are there for a rapid acquisition spree. Unless these are, like, rock bottom prices, and it's just like, you know, just, I mean, literally, you're getting an amazing deal, but I don't think that's gonna be good for employees or …”
Secondary VC fund positions are commonly selling at 40-50% discounts
“So one LP will purchase another LP's position and the range of discount that we're seeing actually is anywhere from. But what's more common Is actually 40% or 50% from last round mark. And so you're talking about a pretty significant discount to last round val…”
Kohli: AngelList rolling fund LP commitments dropped only 20% year-over-year
“Both individuals, institutions, commitments aren't actually down by much. It's close to only 20%”
Individual LP commitments to venture funds plummeted 60% year-over-year
“Individuals are actually down 60% from like when we compare it to about a year ago.”
Institutional LP venture fund commitments have fully recovered on AngelList
“Institutions this is actually incredibly interesting, went down and then has in recent in recent weeks, spun right back up and has recovered in our data.”
Kohli: Large language models have automated a good portion of AngelList operations
“A lot of the large language models and their advancements there have had a major impact on AngelList, just our own internal operations, right? It's been huge and we've been tinkering on it for many months now, and it's actually automated a good portion of the …”
Venture fund time to first close has doubled to 6-7 months
“We've definitely seen the time to first close has increased. It was three months in the boom times, and now it is six plus months. And when I say six plus months what I'm referring to is the timeline went from six and right now it's trending towards seven.”
First-time venture fund sizes are shrinking from $5M to $1M-$3M
“Yes, there is a reduction in fund size for, I would say the much smaller funds, right? In terms of if you could raise a five million dollar fund as your first fund, you're not going to raise that anymore. It's going to be closer to a 1,000,002 million or three…”
Kohli: AngelList now serves $50M–$200M funds after previously rejecting them
“And so today we're regularly taking on 50, a 102 hundred million dollar funds. Whereas two years ago, we were saying no to all of them, right?”
AngelList maintains overall platform gross margins above 80%
“Our margins are actually north of 80%.”
Kohli: Funds yield AngelList's highest margins while small SPVs are loss leaders
“I would say funds have the best margins and the smaller SPVs have the worst. And For some of the smaller SPVs, those are a loss leader for us.”
Assure collapsed after spending 6 to 10 years of prepaid SPV fees
“We saw Assure, which was an SPV provider effectively blow up completely. And they blew up in a spectacular fashion. They basically had took money in from all the SPVs that they were supposed to manage over six years or 10 years. And when they blew up, they're …”
Kohli: Fund managers should never select 10-year back-office administration on price
“Hey, these are complex financial instruments that need to be managed for 10 years. And it's not the place you actually want to be optimizing on costs at all, because it's one of those things where when it's just working in the background, you have someone, you…”
Kohli: AngelList would not have built startup incorporation product in hindsight
“In hindsight, I think we would have approached it by asking the question, Is this something unique that AngelList can bring to the world, right? Is there something unique about this problem and unique about our view of how to solve it that we can bring to the …”
Kohli: AngelList shut down European operations to focus on US
“And so I actually made the decision to scale back and shut down Europe. Because it was just splitting our resources.”
Kohli: Rapid startup execution requires hiring chronically dissatisfied, ambitious talent
“I think the most important thing we do is we've hired a group of very ambitious people. A group of ambitious people are very dissatisfied all the time, right? Like all the time. It's like, hey, why aren't we there yet? Like, why aren't we building something ev…”
Kohli: Small startup competitors pose the single greatest external threat to AngelList
“And I would say the biggest external threat would just be anyone that's looking to compete with AngelList. That's a startup, but I've always been like that. I'm pretty paranoid when it comes to with small teams, right?”
Kohli: AngelList operates assuming the next bear market arrives next year
“And AngelList has always run as if the next bear market's around the corner, literally every year.”
Kohli: The venture industry's biggest recent mistake was FOMO-driven lack of diligence
“Oh, that's simple. Lack of diligence in the companies that they're investing in. There was a lot of FOMO investing that happened in the in the in the heydays.”
Kohli: AngelList data shows strong first-time manager returns, personally invests as LP
“When you look at our data, first time fund managers are fantastic, right? Not all of them, but when you think, when you look at some of the returns, they can be great. So if you have a different way of diligence and first time fund managers, I think it's an aw…”
Kohli: Gokul Rajaram is his favorite angel investor due to end-to-end operational experience
“Gokul is actually my favorite angel to work with, and why him I think he's incredibly sharp and understands all of the life cycles of a company from the idea stage down to how do you actually scale it and become one of the enduring companies.”