The Exchanges

Q Avlock, I'm so excited for this, my friend. It's been a while since we last had you on the show, but I want to start today with a little bit of context. So how did you come to be CEO of AngelList, and what was that entry to the role for you?

A Yeah, so the background is Naval, who's one of the founders of AngelList, had been an investor in all three of the companies I'd started. Uh, so I'd started one company in 2011, then another in 2014, and then another in 2017. And Naval was an investor in all three, and when I wrapped up the acquisition of the last company, uh, I stepped back and was effectively going to just focus on investing. Uh, so semi-retired life at that point for me, uh, since I wasn't building anything new. Um, and Naval approached me to consider stepping in at Angelus as CEO, uh, as he'd already stepped back, I believe in late, 2018, if I remember correctly. And it was, uh, you know, originally it was a hard, hard decision, but I was like, Hey, it's probably not the right fit. I was just coming off of the last startup. And as you know, startups are a marathon and it gets quite intense. Uh, but the idea of AngelList and the concept of AngelList just stuck with me. And we kept talking every week, every other week. And six months into it, I fell in love with the opportunity and Officially accepted in mid July. And, uh, Naval said, can you start tomorrow? And that was it. And it's been crazy ever since.

AI assessment note: “Naval approached me to consider stepping in at Angelus as CEO”

Q That is very kind of you, but I do want to start with a little bit on you. So tell me, how did you make your way into the world of startups, and how did you come to be CEO of AngelList Venture today?

A Yeah, so my journey into startups was predictable, but into venture, it wasn't. I grew up in different parts of the world. My early childhood was spent in the Middle East. In India, and high school and university was spent in Canada. I'm Indian by background, and so the usual influences were doctor or engineer, but I get squeamish about blood, so engineering was a, it was an easy choice. I studied software engineering at the University of Waterloo, and then moved to San Francisco on a whim in, uh, in 2008. Unfortunately, I got here at the height of the financial crisis. I still remember Sequoia's infamous memo, RIP good times, but didn't quite register for me at the I spent the first few years working across different companies as an engineer. Most of these companies achieved some level of success. One was bought by StubHub. Another is actually the world's largest doctor's network, Doximity. It's doing really well. And then between 2011 and 2019, I started and sold multiple companies. The most notable one was an acquisition of a food delivery company, Fastbyte, which was bought by Square in 2015. And I was there pre-IPO for two and a half years. And that experience really left a strong impression on me, and a lot of the lessons I learned that I carry with me to this day. I wrapped up the acquisition of my last company in January of 2019, and then joined the acquiring company th…

AI assessment note: “Naval, who'd been an investor in a bunch of my prior companies, asked me”

Q Is the time to raise a pre-seed or a seed round, is that increasing or is it the same?

A So time to raise a pre-seed and seed is definitely increasing. Also the time to markups, uh, is also increasing. And, uh, what we actually looked at this in our data, where we looked at a sample size of the investments over the last 18 months, and we compared it to sample size of the investments, uh, over time since 2015. Uh, so, and what we were looking at was Let's not compare it to the heyday of twenty-twenty-one and early twenty-twenty-two. Let's actually take a look at historical averages. So how are we doing today relative to historical averages? 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? And so that's a pretty significant drop, like 33% is high. And what that's telling us is there is a Uh, there definitely is a freeze in the market relative to historical averages. And there's a lot of, uh, repricing happening. And there's a lot of, um, still founders coming to terms with the new norm, the new normal, right? I mean, if you're going to raise on 200 X, uh, ARR and now all of a sudden, uh, you're being told, Hey, it's actually like maybe 20, maybe 10. I mean, that's, that's, you're coming to terms with brutal reality at that point. And so, uh, We, we still think we're in the thi…

AI assessment note: “So time to raise a pre-seed and seed is definitely increasing.”

Q Not only that, in terms of kind of, you know, venture being a risk asset class and kind of the interest rate environment associated, but there's also this real illiquidity challenge within the venture model. What are you seeing in terms of fund secondary positions? People wanting to get out of fund positions, people wanting to sell fund positions, defaulting. What are you seeing there?

A When it comes to LPs within funds, we've definitely seen an increase in appetite to sell positions. And also sometimes sell positions and name brand, you know, name brand companies that are actually just great companies. And the reason to sell, uh, can range from either the investment that their own investment ratios are off, right? They were just caught on the wrong side of like illiquid to liquid, or they actually just have a serious liquidity crunch and are just looking to sell. And so we have seen an increase in it. The key question really comes down to Who's the buyer and what's the clearing price? There are deals that are getting done and there are deals that are getting done, not just in small funds, but also very large funds. And typically these deals happen, uh, more in the background. Um, and typically it's around the LP base shifting, right? So one LP will purchase another LP's position and the range of discount that we're seeing actually is anywhere from. Um, 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 valuation, uh, as the clearing price for some of these deals.

AI assessment note: “we've definitely seen an increase in appetite to sell positions”

Q But people still say prices remain the same, especially at pre-seed and seed. And honestly, I think they, they are staying the same. So help me understand this because to me as an investor day to day, they are still really high prices, but you were telling me that actually it's never been a greater chasm. Where's the disconnect here?

A So the disconnect would be in the, uh, pre-seed and seed market. Versus the Series A, Series B, Series C market. So as we look at follow on rounds and the, uh, up rounds or down rounds, those typically happen at the Series A, B, C onwards. And that market is absolutely compressed pretty significantly. I mean, you're talking about deal volume in Series B down more than 50%, valuations down more than 50%, uh, Series A is also down, uh, Series C is basically Gone, right? Like, I mean, you don't really hear of many late stage deals getting done anymore. It's, it's very, it's rare. Um, and what's happened actually at the pre-seed and seed stage is all of the different investors that were investing later stage, some of them have started moving earlier and earlier. And so you just have a larger number of investors who have a lot of capital to deploy. Well, where are you going to go? You're going to go to pre-seed and seed. And so what you have is you have pre-seed and seed, they're buoyed. And we don't see that changing. We actually, uh, 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 it the same rate of series A, series B and onwards, which I know is in good news for, you know, for, for you where, uh, you know, it would be great, uh, for, uh, for precedency valuations to compress a little bit, but I don…

AI assessment note: “all of the different investors that were investing later stage, some of them have started moving earlier”

Q Is the structure of seed rounds and pre-seed rounds in terms of the investor types, is it changing? Is there more party rounds because traditional institutional investors are, you know, more quiet? Are there less party rounds because the tourists have gone? What are we seeing in terms of the structure of those rounds?

A Let's define party round. If we're talking about party round as no investor is writing more than 40% of the check, so there's no lead, I would say that, uh, we are seeing, um, we're, we're seeing the percentage of party round to non-party round actually being the same, but the overall volume has contracted. Now, the set of companies that could have raised on just a party round, uh, in terms of, uh, raising a little bit of capital and not hitting their target, those are gone. Right. So what you, what was happening in the, uh, 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. They just keep going on and on and on and always just raising a little bit of capital from like these small set of like party round investors. That's gone. We do not see that anymore. Those, those companies literally cannot raise anything at this point. Um, but we are seeing companies still being able to raise Uh, from investors where there is no lead because you do have, uh, several investors that will come together to kind of create the round. So we're not seeing that lead investors are absolutely necessary for a round to get closed, especially at the pre-seed and seed stage, right? You're, you don't need a lot of capital to get started and to close a round. Um, but if you're getting to a larger seed rou…

AI assessment note: “we're seeing the percentage of party round to non-party round actually being the same”

Q I find so many investors oscillate on defensibility, um, and I think it's just complete bullshit, especially at pre-seed and seed. Do you agree with me in finding it completely useless at pre-seed and seed, or do you think there is inherent defensibility within companies?

A So let's define defensibility as the cost to replicate your business as time goes on, right? When we say defensibility, when we talk about moats, what we're really saying is how easy is it or how costly would it be For someone to replicate your business and compete with you. So 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, I would doubt that because that means if you were able to get a large network within a few days, I mean, someone else can do it as well. So I agree with you. I don't think there is any defensibility on day one.

AI assessment note: “So I agree with you. I don't think there is any defensibility on day one.”

Q I'm not going to let you just like glaze over that, but I do want to just finish on this thread because otherwise I get too distracted. Are we seeing the number of net new funds raising go down significantly or is the number of net new funds same? Where are we at there?

A Good question. Net new funds is definitely down. And so the way you reconcile this with the capital flows is the funds that are raising are raising more because they're a little bit more experienced and they have more, more of a track record. The other interesting data point is looking at when does the fund raise the first dollar of capital and when does the fund conduct their first close, right? And first close is typically when you've raised enough and you have confidence that you're going to hit your fundraising target, right? And, uh, we've definitely seen the time to first close has increased. It was three months, uh, in the boom times, and now it is six plus months. And when I say six plus months, um, what I'm referring to is the, uh, timeline went from six and right now it's trending towards seven. And what this means is even the, uh, even for the net new GPs or funds that are raising one, we've seen an overall drop, right? In terms of like how many GPs even get to the point where they're like, you know what? I can raise this fund. Let's do it.

AI assessment note: “Net new funds is definitely down.”

Q wonderful customer and user of AngelList, and it's amazing, but I look at them and I go, they cannot be making money. And I mean it nicely, but it's a great service, and it's not that expensive when I, so like, for those small funds, is that a loss leader? When you look at the 25 K's a year and all that you're doing, what are the margins on that?

A Yeah, it's, it's not a loss leader. A lot of the automation that we've built in, And that's also, also continuing to come in, keeps expanding those margins. And so anything around funds is definitely not a loss leader for us. And, uh, we're, we continue to see the margins around that increase. And the other, the other way we actually think about it is we think about the entire business as a whole, not just, not necessarily on a specific product, because when we think about a GP or we think about an LP, we think about it as Hey, you should just come to Angelus and we'll handle everything, all of your needs around venture going forward. So for a GP, it's all of their funds, all of their SPVs. Okay, great. They're going to go raise Angelus Capital. Great. We have a business model around Angelus Capital. And when you're a financial platform, there are all of these other different ways of, uh, capturing more and more value as you scale. And so the way we look at margins are actually more holistically over, uh, for the entire product experience. Uh, so all the products GPs would use, all the products LPs would use versus on any single product. And so our margins are actually, uh, north of 80%. When you actually took a look at the overall experience, uh, and you take a look at overall products that customers are using. And so again, this is the, this is the key around a platform play,…

AI assessment note: “our margins are actually, uh, north of 80%.”

Q Gokul made a special note of saying that it was really the first in market to do this. How important do you think is being the first?

A I don't think being first in market matters all that much, and before I get into the answer for that question, I'll introduce the idea of the concept of idea maze, which I believe Balaji had coined, and I think there's a post on A-sixteen Z's website on it, and the idea maze Basically talks about how every entrepreneur has to go through this journey of looking at an entire industry and looking at all the twists and turns and they base their business idea and their strategy accordingly. And if you're first to market, you're effectively building the idea maze for all the other entrepreneurs that'll come after you, unless you navigate that idea maze yourself successfully. And we've seen a ton of examples where Sometimes first to market isn't the company that wins the market. Uh, Google, uh, I believe was a 17 search engine. iPhone was not the first smartphone. And so, uh, the way I think about first to market is it doesn't guarantee success. And you should probably assume you're building out the idea maze for all the future founders that will benefit from, uh, from your work.

AI assessment note: “I don't think being first in market matters all that much”

Q I find so many investors oscillate on defensibility, um, and I think it's just complete bullshit, especially at pre-seed and seed. Do you agree with me in finding it completely useless at pre-seed and seed, or do you think there is inherent defensibility within companies?

A So let's define defensibility as the cost to replicate your business as time goes on, right? When we say defensibility, when we talk about moats, what we're really saying is how easy is it or how costly would it be For someone to replicate your business and compete with you. So 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, I would doubt that because that means if you were able to get a large network within a few days, I mean, someone else can do it as well. So I agree with you. I don't think there is any defensibility on day one.

AI assessment note: “So I agree with you. I don't think there is any defensibility on day one.”

Q Not only that, in terms of kind of, you know, venture being a risk asset class and kind of the interest rate environment associated, but there's also this real illiquidity challenge within the venture model. What are you seeing in terms of fund secondary positions? People wanting to get out of fund positions, people wanting to sell fund positions, defaulting. What are you seeing there?

A When it comes to LPs within funds, we've definitely seen an increase in appetite to sell positions. And also sometimes sell positions in name brand, you know, name brand companies that are actually just great companies. And the reason to sell, uh, can range from either the investment that their own investment ratios are off, right? They were just caught on the wrong side of like illiquid to liquid, or they actually just have a serious liquidity crunch and are just looking to sell. And so we have seen an increase in it. The key question really comes down to Who's the buyer and what's the clearing price? There are deals that are getting done and there are deals that are getting done, not just in small funds, but also very large funds. And typically these deals happen, uh, more in the background. Um, and typically it's around the LP base shifting, right? So one LP will purchase another LP's position and the range of discount that we're seeing actually is anywhere from. Um, 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 valuation, uh, as the clearing price for some of these deals.

AI assessment note: “we've definitely seen an increase in appetite to sell positions.”

Q Man, I'm loving this. What AngelList product has the best margin today and what has the worst?

A 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. And this shouldn't be a surprise for anyone paying attention. 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, uh, when they blew up, they're like, Hey, we don't actually have any of the money left. And so all the GPs were now left to fend for themselves in terms of, well, how are you going to get the money to manage all the SPVs for all the out years? And the, the, the, the key, um, learning there, and we already knew this, but the key learning there for other folks in the industry is that SPVs and managing these SPVs and especially the smaller ones, it looks easy at the outset. It looks easy to set up. It's like, oh, how hard is it to accept LP capital? How hard is it to close this SPV and invest in the company? That's great. But what they're missing, um, is that a lot of the surprises actually happen in the out years, right? It's one of those like tail issues. And it's not that, uh, the SPVs, then the tail issues are going to be SPVs is like, you know, uh, only a small percentage. It's more about what could, what could happen that could be really costly…

AI assessment note: “funds have the best margins and the smaller SPVs have the worst”

Q Why not Europe? Europe seems to be a kind of shadow region for AngelList, and there's so much demand for it in Europe. What's AngelList's thoughts around Europe?

A So when I came in, AngelList was in Europe, right? We actually had a few funds, uh, that were there. And after I sat with the Europe business for a few quarters, the observation I had was we hadn't won U.S. yet and we weren't at scale in the U.S. But we were in Europe and the regulatory structures in Europe that we need to solve were not as standardized as they would be in the US. And so it was the combination of, look, we need to, let's win the US first. US is also just the largest market for venture. And, and then let's make sure we have a clear view of how we can standardize a structure in Europe, and then we can go there. And so I actually made the decision to scale back and shut down Europe. Um, because it was just splitting our resources. And the one thing I deeply believe is you should always, always look at how do you, how do you sunset things? Like you, you, I think, I think it makes sense for a company to explore new products and new expansion, but if it's not working at the rate you expect it to, let's sunset. We've got to, uh, focus back on the core. And so that move was more about us focusing back on the core around winning U S scaling U S because the ambition of the team Is very large, and we didn't want to get distracted by these, you know, by trying to solve for the regulatory structure there when we hadn't won the U.S. yet. I think now we're actually in a very …

AI assessment note: “I actually made the decision to scale back and shut down Europe.”

Q That is very kind of you, but I do want to start with a little bit on you. So tell me, how did you make your way into the world of startups, and how did you come to be CEO of AngelList Venture today?

A Yeah, so my journey into startups was predictable, but into venture, it wasn't. I grew up in different parts of the world. My early childhood was spent in the Middle East. In India, and high school and university was spent in Canada. I'm Indian by background, and so the usual influences were doctor or engineer, but I get squeamish about blood, so engineering was a, it was an easy choice. I studied software engineering at the University of Waterloo, and then moved to San Francisco on a whim in, uh, in 2008. Unfortunately, I got here at the height of the financial crisis. I still remember Sequoia's infamous memo, RIP good times, but didn't quite register for me at the I spent the first few years working across different companies as an engineer. Most of these companies achieved some level of success. One was bought by StubHub. Another is actually the world's largest doctor's network, Doximity. It's doing really well. And then between 2011 and 2019, I started and sold multiple companies. The most notable one was an acquisition of a food delivery company, Fastbyte, which was bought by Square in 2015. And I was there pre-IPO for two and a half years. And that experience really left a strong impression on me, and a lot of the lessons I learned that I carry with me to this day. I wrapped up the acquisition of my last company in January of 2019, and then joined the acquiring company th…

AI assessment note: “Naval, who'd been an investor in a bunch of my prior companies, asked me to consider stepping in as CEO”

Q Is the structure of seed rounds and pre-seed rounds in terms of the investor types, is it changing? Is there more party rounds because traditional institutional investors are, you know, more quiet? Are there less party rounds because the tourists have gone? What are we seeing in terms of the structure of those rounds?

A Let's define party round. If we're talking about party round as no investor is writing more than 40% of the check, so there's no lead, I would say that, uh, we are seeing, um, we're, we're seeing the percentage of party round to non-party round actually being the same, but the overall volume has contracted. Now, the set of companies that could have raised on just a party round, uh, in terms of, uh, raising a little bit of capital and not hitting their target, those are gone. Right. So what you, what was happening in the, uh, 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. They just keep going on and on and on and always just raising a little bit of capital from like these small set of like party round investors. That's gone. We do not see that anymore. Those, those companies literally cannot raise anything at this point. Um, but we are seeing companies still being able to raise Uh, from investors where there is no lead because you do have, uh, several investors that will come together to kind of create the round. So we're not seeing that lead investors are absolutely necessary for a round to get closed, especially at the pre-seed and seed stage, right? You're, you don't need a lot of capital to get started and to close a round. Um, but if you're getting to a larger seed rou…

AI assessment note: “percentage of party round to non-party round actually being the same, but the overall volume has contracted”

Q But people still say prices remain the same, especially at pre-seed and seed. And honestly, I think they, they are staying the same. So help me understand this because to me as an investor day to day, they are still really high prices, but you were telling me that actually it's never been a greater chasm. Where's the disconnect here?

A So the disconnect would be in the, uh, pre-seed and seed market. Versus the Series A, Series B, Series C market. So as we look at follow on rounds and the, uh, up rounds or down rounds, those typically happen at the Series A, B, C onwards. And that market is absolutely compressed pretty significantly. I mean, you're talking about deal volume in Series B down more than 50%, valuations down more than 50%, uh, Series A is also down, uh, Series C is basically Gone, right? Like, I mean, you don't really hear of many late stage deals getting done anymore. It's, it's very, it's rare. Um, and what's happened actually at the pre-seed and seed stage is all of the different investors that were investing later stage, some of them have started moving earlier and earlier. And so you just have a larger number of investors who have a lot of capital to deploy. Well, where are you going to go? You're going to go to pre-seed and seed. And so what you have is you have pre-seed and seed, they're buoyed. And we don't see that changing. We actually, uh, 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 it the same rate of series A, series B and onwards, which I know is in good news for, you know, for, for you where, uh, you know, it would be great, uh, for, uh, for precedency valuations to compress a little bit, but I don…

AI assessment note: “all of the different investors that were investing later stage, some of them have started moving earlier”

Q is Or where they are, which I think is, is really telling. Can I ask, do you not think that Series A is just a shit market to be investing in right now too, as well? Reason being, any good companies have had everything preempted by existing, and anything not good is out in market, and so there's this real adverse selection. Are you seeing that too in your data?

A What we're seeing in our data is that only the companies that Actually have credible traction are raising now. So even if you put aside adverse selection, meaning, uh, the set of companies are raising from insiders and insiders are leading the rounds that we're, we're definitely seeing a set of companies who just can't raise at all. They cannot raise a series. They cannot raise a series B. And for them, the capital marks are all but shut down. Then you have to look at the set of companies where they're, they're raising from insiders or they have a new outside lead. Um, I would say that we're not seeing anything in our data that distinguishes between the quality of either of those companies now. Definitionally, if you have an insider that's going to lead your company, like, like a true lead, I'm not talking about an extension, right? Of like, hey, let's give you a little bit more runway. No, it's, hey, we're gonna, we're gonna, we're gonna invest a significant amount of capital for a little bit more ownership in your company. That, that's a real lead, uh, insider lead. Um, we're not seeing as many of those relative to just the total number of series A deals that are getting done. Um, so I can't comment on the, uh, uh, distinction between the quality of those companies since we don't see that.

AI assessment note: “we're not seeing anything in our data that distinguishes between the quality”

Q How do you think that will continue or change over the next six to 18 months?

A I think it will likely stay the same. Our view is actually a little bit more pessimistic, uh, in terms of just the broader market. Uh, so if you, if we look at the next six months, I suspect it'll be the same because the current macro sentiment is higher interest rates for longer. So that's a lot of downward pressure On venture as a whole, because venture is a risk asset. Uh, now it's, it's, you know, for some investments, it's a great risk profile, right? You invest and you get 10,000 X. That's awesome. At the same time, um, as a broader, uh, bucket, uh, of capital allocation, it is not, it's getting compared to earning five percent risk free. And all of a sudden, a lot of people who typically would invest in venture are saying, Maybe I'll just put in U.S. pressuries. So I think there's a lot of downward pressure on venture, and so we just, we don't think it's going to change in the next six months. Next 18 months, maybe, um, but you would need to see, uh, in the interest rates starting to come down and starting to see some signs of recovery in the broader market inflation subsiding. So I would say the summary of what I'm saying is, uh, it all depends on the macro at this point.

AI assessment note: “I think it will likely stay the same. Our view is actually a little bit more pessimistic”

Q Not only that, in terms of kind of, you know, venture being a risk asset class and kind of the interest rate environment associated, but there's also this real illiquidity challenge within the venture model. What are you seeing in terms of fund secondary positions? People wanting to get out of fund positions, people wanting to sell fund positions, defaulting. What are you seeing there?

A When it comes to LPs within funds, we've definitely seen an increase in appetite to sell positions. And also sometimes sell positions and name brand, you know, name brand companies that are actually just great companies. And the reason to sell, uh, can range from either the investment that their own investment ratios are off, right? They were just caught on the wrong side of like illiquid to liquid, or they actually just have a serious liquidity crunch and are just looking to sell. And so we have seen an increase in it. The key question really comes down to Who's the buyer and what's the clearing price? There are deals that are getting done and there are deals that are getting done, not just in small funds, but also very large funds. And typically these deals happen, uh, more in the background. Um, and typically it's around the LP base shifting, right? So one LP will purchase another LP's position and the range of discount that we're seeing actually is anywhere from. Um, 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 valuation, uh, as the clearing price for some of these deals.

AI assessment note: “we've definitely seen an increase in appetite to sell positions”

Q What would you most like to change about the world of LPs?

A I think with LPs, there is a lot of focus, and especially larger LPs, there's a lot of focus on name brand, and the key thing I would change is, uh, breaking out of that cycle of only name brand, and actually looking at Other signals. And it reminds me a lot of what we do as a society. And when we look at someone graduate from Harvard or Stanford, right? There's a lot of brain signaling. And I think that has a place. But when we 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 awesome way to invest. In fact, ILP into first time fund managers all the time. I'm like, yep, you're Going to be super hungry, and you're going to fucking crush it, so let's, let's, let's do it.

AI assessment note: “the key thing I would change is, uh, breaking out of that cycle”

Q But people still say prices remain the same, especially at pre-seed and seed. And honestly, I think they, they are staying the same. So, Help me understand this because to me as an investor day to day, they are still really high prices, but you're telling me that actually it's never been a greater chasm. Where's the disconnect here?

A So the disconnect would be in the pre-seed and seed market versus the series A, series B, series C market. So as we look at follow on rounds and the, uh, up rounds or down rounds, Those typically happen at the Series A, B, C onwards. And that market is absolutely compressed pretty significantly. I mean, you're talking about deal volume in Series B down more than 50%. Valuations down more than 50%. Series A is also down. Series C is basically gone, right? Like, I mean, you don't really hear of many late stage deals getting done anymore. It's, it's very, it's rare. Um, and what's happened actually at the pre-seed and seed stage is All of the different investors that were investing later stage, some of them have started moving earlier and earlier. And so you just have a larger number of investors who have a lot of capital to deploy. Well, where are you going to go? You're going to go to pre-seed and seed. And so what you have is you have pre-seed and seed, they're buoyed and we don't see that changing. We actually, uh, 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, which I know is in good news for, you know, for, for you where, uh, you know, it would be great, uh, for, uh, for precedency valuations to compress a little bit, but I don't think it'll …

AI assessment note: “the disconnect would be in the pre-seed and seed market versus the series A”

Q Is the time to raise a pre-seed or a seed round, is that increasing or is it the same?

A So time to raise a pre-seed and seed is definitely increasing. Also the time to markups, uh, is also increasing. And, uh, what we actually looked at this in our data, where we looked at a sample size of the investments over the last 18 months, and we compared it to sample size of the investments, uh, over time since 2015. Uh, so, and what we were looking at was Let's not compare it to the heyday of twenty-twenty-one and early twenty-twenty-two. Let's actually take a look at historical averages. So how are we doing today relative to historical averages? 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? And so that's a pretty significant drop, like 33% is high. And what that's telling us is there is a Uh, there definitely is a freeze in the market relative to historical averages. And there's a lot of, uh, repricing happening. And there's a lot of, um, still founders coming to terms with the new norm, the new normal, right? I mean, if you're going to raise on 200 X, uh, ARR, and now all of a sudden, uh, you're being told, hey, it's actually like maybe 20, maybe 10. I mean, that's, that's, you're coming to terms with brutal reality at that point. And so, uh, We, we still think we're in the th…

AI assessment note: “time to raise a pre-seed and seed is definitely increasing.”

Q What do you think that is? Do you think that's just like a stabilization of certainty? Knowing where we are, being aware that actually rates will likely go up a little bit more. We're all kind of aligned on where we think it will go now. The certainty is more there.

A I think so. I think one part is certainty. The other part is the technology cycle we're in. Which is one of the biggest technology cycles with AI and all of the possibilities of what it can do in terms of net new opportunity and rewriting industries. And, uh, 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 work that we do. And so We think it's the capital from institutions we're covering is a function of one more, a little bit more certainty of what could be happening in the macro market. And then also just the fact that we're in the middle of one of the biggest technology cycles, uh, since the internet or mobile phone, and that's our hypothesis around it.

AI assessment note: “I think one part is certainty. The other part is the technology cycle we're in.”

Q Why not Europe? Europe seems to be a kind of shadow region for AngelList, and there's so much demand for it in Europe. What's AngelList's thoughts around Europe?

A So when I came in, AngelList was in Europe, right? We actually had a few funds, uh, that were there. And after I sat with the Europe business for a few quarters, the observation I had was we hadn't won U.S. yet and we weren't at scale in the U.S. But we were in Europe and the regulatory structures in Europe that we need to solve were not as standardized as they would be in the US. And so it was the combination of, look, we need to, let's win the US first. US is also just the largest market for venture. And, and then let's make sure we have a clear view of how we can standardize a structure in Europe, and then we can go there. And so I actually made the decision to scale back and shut down Europe. Um, because it was just splitting our resources. And the one thing I deeply believe is you should always, always look at how do you, how do you sunset things? Like you, you, I think, I think it makes sense for a company to explore new products and new expansion, but if it's not working at the rate you expect it to, let's sunset. We've got to, uh, focus back on the core. And so that move was more about us focusing back on the core around winning U S scaling U S because the ambition of the team Is very large, and we didn't want to get distracted by these, you know, by trying to solve for the regulatory structure there when we hadn't won the U.S. yet. I think now we're actually in a very …

AI assessment note: “I actually made the decision to scale back and shut down Europe.”

Q I mean, I have so many. What products have you done that, with the benefit of hindsight, you shouldn't have done?

A We got into incorporation for startups, and that's one, we ran that for a while, and in hindsight, and we fixed it. We actually just partnered with Stripe Atlas, and that's been great. 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 world and bring to the table? And if not, then it doesn't make sense for us to be doing it. Why do another product where we can't contribute something new and novel that people are going to find really useful? And I wouldn't have, in hindsight, I wouldn't have tackled that if we'd asked that question. Uh, now something like RUVs, which have obviously been a huge success, uh, was something where we had a very unique view of the world that, yes, RUVs should exist. AngelList is very uniquely suited to do it. Uh, we're very good at the overlap of legal innovation, product experience, um, founder tools, and so we did it, and it's been great.

AI assessment note: “We got into incorporation for startups, and that's one”

Q Is the time to raise a pre-seed or a seed round, is that increasing or is it the same?

A So time to raise a pre-seed and seed is definitely increasing. Also the time to markups, uh, is also increasing. And, uh, what we actually looked at this in our data, where we looked at a sample size of the investments over the last 18 months, and we compared it to sample size of the investments, uh, over time since 2015. Uh, so, and what we were looking at was Let's not compare it to the heyday of twenty-twenty-one and early twenty-twenty-two. Let's actually take a look at historical averages. So how are we doing today relative to historical averages? 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? And so that's a pretty significant drop, like 33% is high. And what that's telling us is there is a Uh, there definitely is a freeze in the market relative to historical averages. And there's a lot of, uh, repricing happening. And there's a lot of, um, still founders coming to terms with the new norm, the new normal, right? I mean, if you're going to raise on 200 X, uh, ARR, and now all of a sudden, uh, you're being told, hey, it's actually like maybe 20, maybe 10. I mean, that's, that's, you're coming to terms with brutal reality at that point. And so, uh, We, we still think we're in the th…

AI assessment note: “time to raise a pre-seed and seed is definitely increasing”

Q What do you think that is? Do you think that's just like a stabilization of certainty? Knowing where we are, being aware that actually rates will likely go up a little bit more. We're all kind of aligned on where we think it will go now. The certainty is more there.

A I think so. I think one part is certainty. The other part is the technology cycle we're in. Which is one of the biggest technology cycles with AI and all of the possibilities of what it can do in terms of net new opportunity and rewriting industries. And, uh, 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 work that we do. And so We think it's the capital from institutions we're covering is a function of one more, a little bit more certainty of what could be happening in the macro market. And then also just the fact that we're in the middle of one of the biggest technology cycles, uh, since the internet or mobile phone, and that's our hypothesis around it.

AI assessment note: “I think so. I think one part is certainty. The other part is the technology cycle”

Q Such a cheery topic, isn't it? Chris, you dangled it in front of me there in terms of bluntly how you're leveraging AI and LLMs to be more efficient and better as an institution. Too interested, man. What have you done and what's been the effect?

A So a lot of what AngelList does in the background is we manage everything about fund, right? We manage from the initial legal docs or sometimes we'll work with the external law firm. Down to the fund setup, down to, uh, regular, the filings, ADV filings, uh, and then managing the portfolio for 10 years, right? And all the distributions that come after that. And along the way, uh, when you think about all of the different workflows, it requires judgment, right? There's human judgment. And so it requires humans. Well, with a lot of the work, uh, and the advancements on large language models, uh, we can start replacing, right? What we assume needed human judgment to do something. Uh, you can actually now replace with code. And, uh, we've taken a subset of things that typically required human judgment, and we've started replacing it with code. And what, one example for, uh, to just to put a finer point on it is we receive, um, I think it's something like 15,000 emails a week, right? On behalf of all the funds. And, and these are not emails you can just ignore. These are not emails that are like, Hey, you know, we'll get back to you in a week. No, no, these are emails where it's, Hey, there's this deal getting done. Here's the capital is your legal docs like review. So just a simple, um, process of how do you route? How do you make sure that the email gets into the right place for t…

AI assessment note: “we've taken a subset of things that typically required human judgment, and we've started replacing”

Q wonderful customer and user of AngelList, and it's amazing, but I look at them and I go, they cannot be making money. And I mean it nicely, but it's a great service, and it's not that expensive when I, so like, for those small funds, is that a loss leader? When you look at the 25 K's a year and all that you're doing, what are the margins on that?

A Yeah, it's, it's not a loss leader. A lot of the automation that we've built in, And that's also, also continuing to come in, keeps expanding those margins. And so anything around funds is definitely not a loss leader for us. And, uh, we're, we continue to see the margins around that increase. And the other, the other way we actually think about it is we think about the entire business as a whole, not just, not necessarily on a specific product, because when we think about a GP or we think about an LP, we think about it as Hey, you should just come to Angelus and we'll handle everything, all of your needs around venture going forward. So for a GP, it's all of their funds, all of their SPVs. Okay, great. They're going to go raise Angelus Capital. Great. We have a business model around Angelus Capital. And when you're a financial platform, there are all of these other different ways of, uh, capturing more and more value as you scale. And so the way we look at margins are actually more holistically over, uh, for the entire product experience. Uh, so all the products GPs would use, all the products LPs would use versus on any single product. And so our margins are actually, uh, north of 80%. When you actually took a look at the overall experience, uh, and you take a look at overall products that customers are using. And so again, this is the, this is the key around a platform play,…

AI assessment note: “Yeah, it's, it's not a loss leader.”