The Exchanges

Q And then what are the most common misconceptions you find about AngelList?

A Probably the most common is people think it's a crowdfunding platform. It's not. We only deal with sophisticated accredited investors, although You can do crowdfunding through an offshoot that we have called Republic. Another common misconception is people think that, you know, you can just take any idea, post it up there, and then how come I'm not getting funded? The reality is it's still hard. We've made it easier. We allow people to get you money online, but it's still not like instant or trivia. It's not like Kickstarter. So it's still a more complicated, sophisticated thing. And then I think the final one is, which came out a little bit in some of your questions, is that Angelus is mainly about fundraising, but the reality is that our talent platform is probably the biggest piece of what we do today.

AI assessment note: “Probably the most common is people think it's a crowdfunding platform.”

Q Absolutely. Talking of kind of the picking element there, one of the many factors for some can be valuation, as we've discussed. Jonathan Abrahams at Nuzzle asks, what is your opinion on the bundling of capital and advice, and how you think valuation is temporary and control is forever?

A Yeah, these are catchphrases that we came up with at Venture Hacks over the years. One of those is that venture is a bundle of advice, control, and money, and good entrepreneurs unbundle those things and kind of purchase what they need at market rates. Sometimes you'll, especially in the later stages where the quality of the investor matters less because they don't have control, uh, you go for the best source of capital possible, the cheapest source of capital. So for example, like an Uber doesn't care about board value add. They care about how much capital they're getting at what valuation. In the earlier stages, you may kind of care more about advice, but you may choose to unbundle that. You may choose to raise money for one person, but have a different one on your board, although very often they're the same. And then control is something that at the seed level that nobody wants to give away. And in fact, the smart investors don't even want to buy either because they don't want that level of oversight over a tiny company. So I think venture used to be this bundle of advice, control, and money, but increasingly the market is unbundling it. Now, the control element is the most tricky one. The prevailing wisdom has always been raise money from these five or 10 great firms because we know that they're going to be good to you when they have control. Set aside whether that's true o…

AI assessment note: “Whoever has control eventually gets the valuation that they want”

Q And then what are the most common misconceptions you find about AngelList?

A Probably the most common is people think it's a crowdfunding platform. It's not. We only deal with sophisticated accredited investors, although You can do crowdfunding through an offshoot that we have called Republic. Another common misconception is people think that, you know, you can just take any idea, post it up there, and then how come I'm not getting funded? The reality is it's still hard. We've made it easier. We allow people to get you money online, but it's still not like instant or trivia. It's not like Kickstarter. So it's still a more complicated, sophisticated thing. And then I think the final one is, which came out a little bit in some of your questions, is that Angelus is mainly about fundraising, but the reality is that our talent platform is probably the biggest piece of what we do today.

AI assessment note: “Probably the most common is people think it's a crowdfunding platform.”

Q Absolutely. Talking of kind of the picking element there, one of the many factors for some can be valuation, as we've discussed. Jonathan Abrahams at Nuzzle asks, what is your opinion on the bundling of capital and advice, and how you think valuation is temporary and control is forever?

A Yeah, these are catchphrases that we came up with at Venture Hacks over the years. One of those is that venture is a bundle of advice, control, and money, and good entrepreneurs unbundle those things and kind of purchase what they need at market rates. Sometimes you'll, especially in the later stages where the quality of the investor matters less because they don't have control, uh, you go for the best source of capital possible, the cheapest source of capital. So for example, like an Uber doesn't care about board value add. They care about how much capital they're getting at what valuation. In the earlier stages, you may kind of care more about advice, but you may choose to unbundle that. You may choose to raise money for one person, but have a different one on your board, although very often they're the same. And then control is something that at the seed level that nobody wants to give away. And in fact, the smart investors don't even want to buy either because they don't want that level of oversight over a tiny company. So I think venture used to be this bundle of advice, control, and money, but increasingly the market is unbundling it. Now, the control element is the most tricky one. The prevailing wisdom has always been raise money from these five or 10 great firms because we know that they're going to be good to you when they have control. Set aside whether that's true o…

AI assessment note: “I would rather take a low valuation and keep control in terms of board control”

Q I'm intrigued. You said that about the angel element. And Parker Thompson at AngelList with you says you're the best person for internalizing the power law math and behaving rationally. With that in mind, he asks, how do you look to pick at seed at such early stages?

A Yeah, I think it's extremely difficult. You're not predicting what the winner is going to be. There's so many nonlinearities that try to predict the winner at such an early stage is an almost impossible task. What you're rather doing is eliminating the things that you don't want to invest in, the things that will cause you to lose your money. Some of those factors are economic. So, for example, some entrepreneurs have gotten very good at raising uncapped notes, but you can't make money on that. You also have to keep valuations in check. Some of those factors are Sector based. You might decide that a certain sector is already over or, you know, no, no longer fit for investment. Like for example, some people decided a while back this social media was done. Some people decided that when my space was dominant, some people decided that when Facebook was dominant, now people will decide that when Snapchat is dominant. Uh, so your timing is, it could be off there. You have to basically have a broad enough portfolio that you can have a breakout hit. And if you have a breakout hit, you need pro rata rights. So I actually think of the whole seed investing category early on as not so much as picking winners, as eliminating losers, and assembling a portfolio of good founders, good projects, good spaces, with potential breakout opportunities if one of them works. The real money in a seed po…

AI assessment note: “not so much as picking winners, as eliminating losers, and assembling a portfolio”

Q And, and moving from, uh, the destructing mitochondria to the natural transition to the vision ahead for AngelList, that's such a swift transition to make. I do want to discuss the vision ahead for the AngelList platform. And again, a question from Jonathan Abrahams at Nuzzle in asking what, what is the next thing for the AngelList platform and how far up the funding chain can AngelList go?

A Yeah, so AngelList gets attacked as just purely about funding, but we're doing a lot more than that. Fundraising, especially the seed side, is a small market. It takes a long time to play out. We have now run about 1200 deals through the AngelList platform, raised hundreds upon hundreds of millions of dollars for entrepreneurs, but obviously there are still some in the VC community who don't want to admit that it's real or here to last. So we have to show the returns for investors, and we have to show the results of good companies coming out of it, and then it'll sort of take a natural attack Towards raising more capital and doing more later stage rounds. In the meantime, we also operated the single largest site for recruiting for tech companies and startups in the world. And our Angelless talent platform has on the order of 25,000 companies and a million candidates using it. So it's very, very, very popular, the most popular of its kind. So I think there's a lot to be done there. And then we recently acquired Product Hunt, which is the number one place where companies go to launch their products online. So really what we're doing this year is Putting all the pieces together so that we're the best place to raise money, to hire talent, and to launch your product. And on the flip side, we're the best place to invest money in startups, and to find a job at a startup, and to, of co…

AI assessment note: “what we're doing this year is Putting all the pieces together so that we're”

Q and you stated about kind of the possibility of a journalist building a brand and building a unique, um, portfolio of work through their brand over the next 20 years. How important do you think investor brand is? We've seen the rise of the likes of Tim Ferriss, et cetera, building their brand. What's your take on the rise of these VC or investor brands and how important they are?

A I think they're really important because at the end of the day, venture capitalists are selling money and money is the ultimate commodity. You know, money is money. As long as the federal reserve signature is on there, it's a federal reserve note. It doesn't matter who it comes from. And generally, if you look in sales, the better paid the salesperson, the more of a commodity they're selling. So for example, uh, people who are selling real estate or a million dollar contracts, you know, into enterprise software, those salespeople get paid a lot more. I'm going to pay your commission to sell Apple products. That's not a commodity. Apple products are unique and branded within the product. So you don't need a salesperson to sell them and you would pay that salesperson a tiny commission. So VCs get paid really well because they're selling a commodity at its core, and that commodity is money. So they have to add on advice and brand, and those advice and brand become really important. So because everyone in the VC business selling commodity, ironically, brand ends up being really important. But what I would argue is the kind of brand that is losing value is the firm brand. So just because you're at, you know, Spruce Capital, and Spruce Capital has been around like a rock for 50 years, doesn't mean as much anymore. What matters is who is the individual, what have they done, what do en…

AI assessment note: “I think they're really important because at the end of the day, venture capitalists are selling money”

Q I'm, I'm, I'm intrigued. I had Charlie O'Donnell from Brooklyn Bridge Ventures on the show recently. And he said that most seed funds aren't actually seed funds. They're Series A funds with a small allocation of capital for the seed financing to give them the optionality to do follow-on funding. Would you agree with that assessment?

A I think, like, one of those new things, you can define it however which way you want. I do think there are plenty of actual seed funds out there that are taking seed-level risk. They may not be the better-known ones. A lot of it is determined by sides. The moment a fund is managing more than 10 or twenty million dollars in capital, it's unlikely that it's purely in the seed business. It's at least bleeding into the series A business. But I don't think this is an opportunity to necessarily point fingers or call names or say my model is better than your model. It's really just a way of saying that, look, there's always going to be a need for people to go to write small checks before a lot of the risk has been removed. And traditionally that used to be done by angel investors, but now the market has gotten too big. So when those angel investors get backed up by additional capital, whether it's through syndicates or seed funds or what have you, they're going to play in this market. The need for that is just increasing and increasing. I don't see that category getting smaller.

AI assessment note: “I do think there are plenty of actual seed funds out there taking seed-level risk.”

Q What would you most like to see change in the world of VC?

A I don't know how realistic this is, But I would love to see these venture capitalists behave a lot more like entrepreneurs. Entrepreneurs are very transparent with their product and pricing and what you get. I'd love to see venture capitalists provide an SLA, a service level agreement, put their principles and values directly online, concretely, talk about control versus not control, what valuations that they offer, et cetera, et cetera. I'd like them to sell and price their product very much as an enterprise software product is. If I go to the homepage of a startup company and they're selling a product, I can usually very quickly find out what exactly is the product? How is it differentiated? Who is it good for? How much do they charge? And you know, what's the money back guarantee or policy if I don't like the product? Uh, on a venture capitalist page, all I find is feel good text. I don't find anything concrete.

AI assessment note: “I would love to see these venture capitalists behave a lot more like entrepreneurs.”

Q I'm intrigued. You said that about the angel element. And Parker Thompson at AngelList with you says you're the best person for internalizing the power law math and behaving rationally. With that in mind, he asks, how do you look to pick at seed at such early stages?

A Yeah, I think it's extremely difficult. You're not predicting what the winner is going to be. There's so many nonlinearities that try to predict the winner at such an early stage is an almost impossible task. What you're rather doing is eliminating the things that you don't want to invest in, the things that will cause you to lose your money. Some of those factors are economic. So, for example, some entrepreneurs have gotten very good at raising uncapped notes, but you can't make money on that. You also have to keep valuations in check. Some of those factors are Sector based. You might decide that a certain sector is already over or, you know, no, no longer fit for investment. Like for example, some people decided a while back this social media was done. Some people decided that when my space was dominant, some people decided that when Facebook was dominant, now people will decide that when Snapchat is dominant. Uh, so your timing is, it could be off there. You have to basically have a broad enough portfolio that you can have a breakout hit. And if you have a breakout hit, you need pro rata rights. So I actually think of the whole seed investing category early on as not so much as picking winners, as eliminating losers, and assembling a portfolio of good founders, good projects, good spaces, with potential breakout opportunities if one of them works. The real money in a seed po…

AI assessment note: “not so much as picking winners, as eliminating losers”

Q generate the returns. I do want to move into an element that Parker told me you had some contrarian views on, on social organization and politics. So I'm intrigued. How do you see the technology itself and the techies who've generated the wealth affecting how we live over the next, say, 50 years? And which do you think will be more impactful, the technology itself or the money that's generated?

A Definitely the technology. I think the history of the human race is actually the history of technology. So if you go back to, you know, what we really are, we're basically chattering monkeys, and you and I should be sitting in the woods right now trying to figure out how to start a fire and how to get shelter and how to get food, but the only thing that allows us to be talking on these wonderful devices and wearing clothes and living in comfort is technology, and society follows technology. What happens is technology creates abundance or wealth in certain areas. That wealth has to be both protected and spread and created, And the structure of society sort of falls out of that. So I think technology changes society, whereas we like to think that the technology is a subset of society. I would argue that it is the fundamental thing that differentiates the human species from every other animal and puts us at the top of the food chain. So I think the repercussions of technology are almost unimaginable, and it's sort of a fool's errand to try, but I can try. I mean, to give you an example, I think drones are going to replace every single weapon system on the planet. They're going to replace Everything from aircraft carriers to, to airplanes, to infantrymen, soldiers. Once drones get small enough and effective enough, no other form of character will be able to survive or compete on th…

AI assessment note: “Definitely the technology. I think the history of the human race is actually the history”

Q And, and moving from, uh, the destructing mitochondria to the natural transition to the vision ahead for AngelList, that's such a swift transition to make. I do want to discuss the vision ahead for the AngelList platform. And again, a question from Jonathan Abrahams at Nuzzle in asking what, what is the next thing for the AngelList platform and how far up the funding chain can AngelList go?

A Yeah, so AngelList gets attacked as just purely about funding, but we're doing a lot more than that. Fundraising, especially the seed side, is a small market. It takes a long time to play out. We have now run about 1200 deals through the AngelList platform, raised hundreds upon hundreds of millions of dollars for entrepreneurs, but obviously there are still some in the VC community who don't want to admit that it's real or here to last. So we have to show the returns for investors, and we have to show the results of good companies coming out of it, and then it'll sort of take a natural attack Towards raising more capital and doing more later stage rounds. In the meantime, we also operated the single largest site for recruiting for tech companies and startups in the world. And our Angelless talent platform has on the order of 25,000 companies and a million candidates using it. So it's very, very, very popular, the most popular of its kind. So I think there's a lot to be done there. And then we recently acquired Product Hunt, which is the number one place where companies go to launch their products online. So really what we're doing this year is Putting all the pieces together so that we're the best place to raise money, to hire talent, and to launch your product. And on the flip side, we're the best place to invest money in startups, and to find a job at a startup, and to, of co…

AI assessment note: “take a natural attack Towards raising more capital and doing more later stage rounds.”

Q And then what drives you personally? I get this one a lot. And what's the core driver behind all that you really do? It's a very hard question in 60 seconds.

A Yeah. No, it used to be about making money at the intersection of science and technology because I like science, I like technology, and I feel like it fundamentally moves the ball forward. And so making money at it was a goal for a while. These days, I think it's much more about learning. I think the, and learning meaning finding actual truth, not social truth. I think a lot of the truths that we're taught in life for in schools and for friends are just social truths that feel good for crowds, but not necessarily the correct answer. So I'm looking to learn as much as I can. I love the aha moment when, uh, two different concepts connect together in your head in a new way and you, and you see something in a way that you cannot unsee. Um, so I'm mainly about learning truth in the aha moment. I would say that's the main driver, at least intellectually.

AI assessment note: “I'm mainly about learning truth in the aha moment.”

Q generate the returns. I do want to move into an element that Parker told me you had some contrarian views on, on social organization and politics. So I'm intrigued. How do you see the technology itself and the techies who've generated the wealth affecting how we live over the next, say, 50 years? And which do you think will be more impactful, the technology itself or the money that's generated?

A Definitely the technology. I think the history of the human race is actually the history of technology. So if you go back to, you know, what we really are, we're basically chattering monkeys, and you and I should be sitting in the woods right now trying to figure out how to start a fire and how to get shelter and how to get food, but the only thing that allows us to be talking on these wonderful devices and wearing clothes and living in comfort is technology, and society follows technology. What happens is technology creates abundance or wealth in certain areas. That wealth has to be both protected and spread and created, And the structure of society sort of falls out of that. So I think technology changes society, whereas we like to think that the technology is a subset of society. I would argue that it is the fundamental thing that differentiates the human species from every other animal and puts us at the top of the food chain. So I think the repercussions of technology are almost unimaginable, and it's sort of a fool's errand to try, but I can try. I mean, to give you an example, I think drones are going to replace every single weapon system on the planet. They're going to replace Everything from aircraft carriers to, to airplanes, to infantrymen, soldiers. Once drones get small enough and effective enough, no other form of character will be able to survive or compete on th…

AI assessment note: “Definitely the technology. I think the history of the human race is actually the history”

Q So a question from Dave McClure. Funnily enough, Dave asks, very similar to that, uh, broad portfolio approach. Do you very much advocate for the much broader, wider portfolio of catching the unicorn, or do you prefer the doubling down in the successful companies and placing much larger bets?

A I think that's a debate you could have all day long. I think it's more important that it lines up with how you do your own investing, what your best style is, and where your area of expertise is. Uh, that said, I think naturally going to gravitate toward later stage, because for one thing, you're going to write larger, larger checks and want more ownership. Uh, and secondly, uh, you're going to spend a lot more time diligence in the company. So there has to be something there to diligence. Uh, it's very unlikely that someone who's only making 10 or 20 investments over the course of their fund is going to invest it all in tiny little startup teams that only need a half a million dollars each and have shown nothing to date. Those kinds of investments, those very, very early investments are going to be the bulk of a seed portfolio that may be spread across the You're a hundred bets. So I think basically you go wherever your style is, and then the style and the amount of capital that you have will dictate what stage you're at. So I don't think it's an either or. The industry absolutely needs both. If you look at the, probably the single most successful venture investor in on the planet right now is Y Combinator, and they have an incredibly broad portfolio, thousands upon thousands of companies, but they're very, very early. They get a very low valuation, and they're willing to inve…

AI assessment note: “So I don't think it's an either or. The industry absolutely needs both.”

Q and you stated about kind of the possibility of a journalist building a brand and building a unique, um, portfolio of work through their brand over the next 20 years. How important do you think investor brand is? We've seen the rise of the likes of Tim Ferriss, et cetera, building their brand. What's your take on the rise of these VC or investor brands and how important they are?

A I think they're really important because at the end of the day, venture capitalists are selling money and money is the ultimate commodity. You know, money is money. As long as the federal reserve signature is on there, it's a federal reserve note. It doesn't matter who it comes from. And generally, if you look in sales, the better paid the salesperson, the more of a commodity they're selling. So for example, uh, people who are selling real estate or a million dollar contracts, you know, into enterprise software, those salespeople get paid a lot more. I'm going to pay your commission to sell Apple products. That's not a commodity. Apple products are unique and branded within the product. So you don't need a salesperson to sell them and you would pay that salesperson a tiny commission. So VCs get paid really well because they're selling a commodity at its core, and that commodity is money. So they have to add on advice and brand, and those advice and brand become really important. So because everyone in the VC business selling commodity, ironically, brand ends up being really important. But what I would argue is the kind of brand that is losing value is the firm brand. So just because you're at, you know, Spruce Capital, and Spruce Capital has been around like a rock for 50 years, doesn't mean as much anymore. What matters is who is the individual, what have they done, what do en…

AI assessment note: “I think they're really important because at the end of the day, venture capitalists are selling money”

Q I'm, I'm, I'm intrigued. I had Charlie O'Donnell from Brooklyn Bridge Ventures on the show recently. And he said that most seed funds aren't actually seed funds. They're Series A funds with a small allocation of capital for the seed financing to give them the optionality to do follow-on funding. Would you agree with that assessment?

A I think, like, one of those new things, you can define it however which way you want. I do think there are plenty of actual seed funds out there that are taking seed-level risk. They may not be the better-known ones. A lot of it is determined by sides. The moment a fund is managing more than 10 or twenty million dollars in capital, it's unlikely that it's purely in the seed business. It's at least bleeding into the series A business. But I don't think this is an opportunity to necessarily point fingers or call names or say my model is better than your model. It's really just a way of saying that, look, there's always going to be a need for people to go to write small checks before a lot of the risk has been removed. And traditionally that used to be done by angel investors, but now the market has gotten too big. So when those angel investors get backed up by additional capital, whether it's through syndicates or seed funds or what have you, they're going to play in this market. The need for that is just increasing and increasing. I don't see that category getting smaller.

AI assessment note: “The moment a fund is managing more than 10 or twenty million dollars in capital”

Q You mentioned some elements of automation there and universal basic income. Are there any elements of such a swift transition in terms of adoption rate that's probably never seen before in terms of technological adoption that concern you with the likes of automation and autonomous cars replacing four million truck drivers What elements concern you?

A I mean, I think there'll be a lot of, it'll be tumultuous, but it doesn't concern me. I mean, fundamentally, I, I'm a scientist by training. I love technology, and I think it's, uh, it's good for the human species overall. Probably the, you know, the one part that's disconcerting is that technology doesn't make it easy to destroy, so the destructive power of a single human being continues to go up throughout human history. You know, starting with an individual with his fists can't do too much damage, Individual with a knife can do more damage. Individual with a gun can do a lot more damage. Eventually, in a long enough timeline, someone can three-D print a nuclear weapon, right? So where does it stop? So our level of consciousness and sophistication, you know, we almost have to start thinking of humanity as a multicellular organism, as opposed to a collection of unicellular organisms, because, like, I don't destroy my own body, even though at some point my body used to consist of lots of separate creatures. And even though they compete internally at some level, maybe there are bacteria inside of me that are competing with each other, but mainly, like, if you look at the mitochondria, they actually have a, they have, there's a hypothesis that mitochondria used to be separate creatures, now they're inside our cells, and, and we have a highly symbiotic relationship that allows us …

AI assessment note: “I think there'll be a lot of, it'll be tumultuous, but it doesn't concern me.”

Q So a question from Dave McClure. Funnily enough, Dave asks, very similar to that, uh, broad portfolio approach. Do you very much advocate for the much broader, wider portfolio of catching the unicorn, or do you prefer the doubling down in the successful companies and placing much larger bets?

A I think that's a debate you could have all day long. I think it's more important that it lines up with how you do your own investing, what your best style is, and where your area of expertise is. Uh, that said, I think naturally going to gravitate toward later stage, because for one thing, you're going to write larger, larger checks and want more ownership. Uh, and secondly, uh, you're going to spend a lot more time diligence in the company. So there has to be something there to diligence. Uh, it's very unlikely that someone who's only making 10 or 20 investments over the course of their fund is going to invest it all in tiny little startup teams that only need a half a million dollars each and have shown nothing to date. Those kinds of investments, those very, very early investments are going to be the bulk of a seed portfolio that may be spread across the You're a hundred bets. So I think basically you go wherever your style is, and then the style and the amount of capital that you have will dictate what stage you're at. So I don't think it's an either or. The industry absolutely needs both. If you look at the, probably the single most successful venture investor in on the planet right now is Y Combinator, and they have an incredibly broad portfolio, thousands upon thousands of companies, but they're very, very early. They get a very low valuation, and they're willing to inve…

AI assessment note: “I don't think it's an either or. The industry absolutely needs both.”

Q You mentioned some elements of automation there and universal basic income. Are there any elements of such a swift transition in terms of adoption rate that's probably never seen before in terms of technological adoption that concern you with the likes of automation and autonomous cars replacing four million truck drivers What elements concern you?

A I mean, I think there'll be a lot of, it'll be tumultuous, but it doesn't concern me. I mean, fundamentally, I, I'm a scientist by training. I love technology, and I think it's, uh, it's good for the human species overall. Probably the, you know, the one part that's disconcerting is that technology doesn't make it easy to destroy, so the destructive power of a single human being continues to go up throughout human history. You know, starting with an individual with his fists can't do too much damage, Individual with a knife can do more damage. Individual with a gun can do a lot more damage. Eventually, in a long enough timeline, someone can three-D print a nuclear weapon, right? So where does it stop? So our level of consciousness and sophistication, you know, we almost have to start thinking of humanity as a multicellular organism, as opposed to a collection of unicellular organisms, because, like, I don't destroy my own body, even though at some point my body used to consist of lots of separate creatures. And even though they compete internally at some level, maybe there are bacteria inside of me that are competing with each other, but mainly, like, if you look at the mitochondria, they actually have a, they have, there's a hypothesis that mitochondria used to be separate creatures, now they're inside our cells, and, and we have a highly symbiotic relationship that allows us …

AI assessment note: “it'll be tumultuous, but it doesn't concern me.”

Q And then what's the most recent investment you've made, publicly announced that is, and why you said yes?

A Yeah, I make a lot of investments, so I won't fix it on any one small investment. I think what's more interesting is it's a class of investments that I've gotten into recently in the last few years that I think most venture capitalists are either missing or cannot participate in. And that's the cryptocurrency investments, things like Bitcoin, Ethereum, Zcash, Monero, et cetera. I think a lot of the protocol level innovation is moving away from venture backed startups and moving into blockchain based protocols. So also there's Filecoin and Blockstack and others there. And that category, a lot of VC firms can invest in because if you buy the coin, they're not structured to do that. But what's interesting, they're truly democratized investments. Anyone in the world can invest in those. I think a lot of future returns and innovation technology are moving into that class of investments. So I think that class of investments is really interesting.

AI assessment note: “I won't fix it on any one small investment. I think what's more interesting”