What's up, everyone? This is Anthony promptly on. Oh, many of, you know, me as Pop. You're listening to the pump podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So, it would mean the world to me. If you would subscribe to the show on your favorite audio platform, watch episodes on YouTube and tell your friends and family about the podcast. My goal is to help Millions learn from the world's most interesting people. So let's get into today's episode.
The Following episode is a conversation with a block Coley, the CEO of AngelList. This conversation was recorded as part of build Summit where 700 Founders came together in New York City. A few weeks ago to talk about the Tactical ways to build a company scale and ultimately exit in this conversation, a block and I talked about the culture of shipping speed at AngelList what the current fundraising environment is like how cap tables are usually wrong. How you can think about treasury management today in a world where Banks
Teenager be under stress what hiring is like in the current environment, how Angeles is expanding into private equity and a number of different industry, Trends related to artificial intelligence, Bitcoin, and cryptocurrencies and many other. I always enjoy talking to a block and this conversation was no different. So, here is my conversation with a block Coley Anthony Pompeo. No runs pomp Investments, all views of him and the guests on his podcast are sholay, their opinions and do not reflect the opinions of pomp Investments. You should not treat any
pinion expressed by pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy. But only, as an expression of his personal opinion, this podcast is for informational purposes. Only today's episode is brought to you by trust and will, I've gone through a number of different changes in my life. Over the last few years, I got married, I had a kid and I had to start thinking about. How can I ensure that my wife and my child would be okay if anything ever happened to me? That's where trust wills and estate planning come into play now.
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Having a trust Endora will can literally be the difference between someone being taken care of, and someone not go check them out today at Trustin will.com. Pump, before we get into this episode, I also want to tell you about a brand new product called V. Lo V Lo is faster easier crypto data everyone in the industry is always looking for what's the price. What's going on on the exchanges where our assets flowing or not flowing? How is things like open interest and derivatives actually playing out?
In the market. Well that's where V Lo comes in. It's faster and easier crypto data. You can go to V low-weight list.com today, myself and a couple of friends we invested in the business. We're advising the founder and we think it's pretty cool. This one is something that keeps me informed on a daily basis so you should check them out at V, low-weight list.com, that's V ELO waitlist.com. So a block is the CEO of AngelList. Many of you have probably heard of angels before
You all help companies in a variety of different ways but I thought a great place to start is rather than how you all help other companies, talk about Angeles itself. One of the things I've noticed
from the outside
is how fast you guys ship product and it seems like there's almost Rogue employees internally who kind of see a problem. Go write some code and like on the way out the door, they're like, hey, by the way, this is getting published right? Talk about where's that culture of shipping fast and kind of just a bias
for Action come from. Yeah. And can everyone hear me? Yeah, we're good.
Yeah, it's funny. You say Rogue employees. I mean the number of debates that we have internally is quite high. I would say the culture shipping, this comes from a pure founder mentality. I mean the entire existence evangelist is to make sure that we're here to serve the founder and that bleeds into everything. We do all the products who pursue the way we build teams, and at the very beginning, or the top of it, it starts with engineers and designers at the top of the totem pole. So a
They're at the very top. And then when we think about resourcing projects products, it's typically a very small team with a single leader. That's typically an engineer or a designer. So it's actually pretty rare that it's a product manager, we do have that to are exceptions but typically it's an engineer or designer that leads and then it's just an insane sense of urgency just to push push push. Because when you think about a technology company, the entire purpose of it is to grow and to serve your mission and typically your
that product, if you're a Google will become massive and you can just basically continue to scale off of that. But for most companies do both one product. But then they have to be a multi-product company. And the thing about being a multi-product companies, you can't skip steps just because one product, we just scale, does it mean that the second product with their product that you build is going to naturally reach scale? So you're going to have is zero to one moment multiple times in a company and so the only way to do that is to make sure you have a team that's tightly aligned that understands how
To launch new products. Also how to just take failure, right? Like it's not that every product we launched succeeds but you can't skip step. So for us, we have a sole focus on being a multi-part company and making sure that we're taking enough at-bats to build an enduring company.
Now, one of the key themes across many businesses so Amazon Jeff Bezos would say never have a meeting where two pizzas can't cover it. If you read the book, The Outsiders, they talk a lot about decentralization and kind of pushing.
Asian making as far down in the organization as possible. Hearing you talk about the setup of Angel is how do you make sure that you continue to create a culture of speed, right? So there's a bias of action in kind of shipping and you're doing that by pushing some decision-making down, but what about motivating employees, especially when we have removed work. Now, we have, you know, kind of all of these things that could serve as distractions. How do you keep people kind of on edge and really wanting to build these products?
Yeah, honestly, just start stop them in terms of applying a strong sense of
Urgency and making sure that folks understand that look if you're going to naturally be faulted next week. Two weeks from now. Why not tomorrow? Why not, you know, the day after that I really pulled out from Frank's ludemann and actually now I'm also reading you on the biography. So if if you all haven't picked it up, definitely pick it up. You'll put it this way, my sense of urgency is going to increase after reading that biography, but it starts at the top, you have to set the pace. You have to set the tempo and then you have to expect, folks.
Folks are going to rise to that Tempo and then you have to have other folks in the company, there would be the culture barriers. They're going to call out when we're not being as fast as we could be. It's interesting. You bring up the remote and in person, I think it's really hard to do this. Remote, you have to have folks coming in person. I don't know if five days a week is gonna be the new Norm or two days a week. It really depends on the company. But for AngelList, we are coming back in the office. And we are there because you have to build that in person.
Asian, or if you are already remote, one of the things that could be useful is just fly somewhere, just jam on a product launch and just don't fucking leave the place until it's out there. So again, it starts at the top, you got to set the tempo, you got to bring people together and you just got to push, push, push push. And it will be uncomfortable because it's the default for most people. And the default for any group of humans is slowness, it's it's yeah, let's take another few weeks to get it right.
I get it perfect. But in reality just have to push hard and you have to treat the urgency as a core principle in the
company or dislike about some tactical things that service faces problems. In some of these cases, you guys have built products because you solve the problem in the market and said, hey, we need to solve this for Founder's one of them, which is somewhat nuanced. But actually is a huge almost pandemic and serves as the cap tables are almost always wrong. Yeah. And talk a little bit about why the cap tables are wrong. And then how you guys thought about we can just solve this with
software and kind of
A solution. Yeah, it's super interesting actually. So if you think about cap tables about a decade ago, capitals were all managed in spreadsheets, right? And you would effectively update the cap table every financing round, like the lawyers and manage it and the big innovation back then was okay, let's take it from spreadsheets and let's move it online. But since then, there's been zero Innovation and cap tables and the issues that we saw with cap tables. Was that you would
Have capitals, I'll just be completely wrong. So what happens is between a financing round in the next financing around a bunch of Agreements are made you hire employees. You may bring on advisors and then when it's recorded in the cap, table it, departs from the underlying legal docs and when a department under on legal docs, it's now a, it's just a thing that lawyers do in the next Manson round called tie-ups. Be your Sky everything out. I mean, Angeles went through herself recently where it was last year tied out, our legal docs to
Cap table, make sure everything's updated, but the root of the problem is that Capital to just hard to use. You talk to any founder today. None of them use it even though it's experience. Founders, do not touch it. I have a close friend. Who's thinking third time? Founder pretty sophisticated. Just like, I literally can't touch capital software, because I'm worried. I'm going to mess something up. So what does he do? Pays for the subscription and pays for lawyer who goes and manages it? And so, the root issue that we saw was people like Founders can't use the cap.
Table as what we think of as currency, right? You think about cash, you raise cash, you pay people in cash and they can do great work. When it comes to equity. It's really hard to use equity in the same way. Now to be clear. I'm not saying go out and get back with everyone, right? But it's an irreversible decision, you want to manage your Capital well, but if you can make it easy to manage the captive like almost a simple as setting even more transaction. So the founder of can use it, they meet the meet someone who can help them with a customer introduction, to meet someone, who can help them with a higher. They should
Able to just send that equity and know that it's correct. And everything is perfect. And that's actually, if you look at the sort of Innovations, we've had or on cap. Tables are uv's, we have Equity blocks, even we just launched a co-pilot and cap table so you can actually talk to it. And you can say, hey, Gran tax might have a career, this person and everything is managed perfectly, it's coming from that place of put it back in the hands of Founders to of AngelList executive hires actually came from me pinpointing.
Someone who I thought can help with that higher. I gave them equity and they made amazing referrals and they actually one of them became our CFO. Leo, one became our head of design and head of marketing that actually changed the trajectory of the company. So, again, I think a really great Equity Capital solution can give a superpower to the founders, and it's just doesn't exist. It's just completely broken.
Let's talk fundraising. Obviously, Angeles is known for helping companies fundraise. A lot of investors also look for access to start.
Spea AngelList talk. What you're seeing in the environment today. Given that interest rates are high tech, funding has slowed. But then also how maybe people are using the product different. You know, our you've he's making something with that is and kind of are you seeing smaller checks and people rounding up rounds or excuse on Buster, still coming in and just talk a little with you're saying,
yeah. So when it comes to fundraising every time I talk to a Founder, I try to Anchor them back in 2019 and 2020, not 20 21 and 22. So when you actually just have him news,
Europe for the past couple of years and you just can't go back on 2019 and 2020. What you'll see is that precede to create so, precede medium valuation, increase evening evaluation today. So 2019 to today, actually is up same thing with seed its up series. A is like slightly up and series, B is black. And seriously is flat. And so, and for context we see this across 20,000 funds, and syndicates, and 13,000 star. So we are pretty much have a very, very broad view from our
This point. And so, from a fundraising perspective, it actually is, you know, when you anchor it back on 2019 2020, it's fairly healthy. Yes, deal count is down, it is harder. But again humans just anchor on like the highest possible thing and then now we're like oh no fundraising is down completely. It's actually a pretty healthy Market out there in terms of what we're seeing around. How rounds are getting done outside. The earliest stages proceed in. See, there are the party rounds where they're coming.
Together. We are seeing more more leads relative of the past but there's still a pretty healthy set of activity around like a bunch of investors coming in. No single lead for presidency series, a series B series. C has always been you should get an anchor and go from there just because the dollar is a much larger. So we're not really seeing any departure in that behavior. We are seeing actually. One thing I will add, we are seeing I would say the later stages. Again, this is a reflection of our to 2021 2022. Where companies are
Certain hit that brick wall for those companies. We are seeing additional terms coming in around the additional. You know, 2x 3x liquidation, preference pay to plays so that is happening but that's healthy. That's a very unique moment for startups that raised then and there are now basic kind of deal with that situation. But in general, if you're starting off today by the fundraising markets, fairly
healthy, one of the things I've seen some of its rolling funds, some of its are UVS some of its
its founders of just been at this. Now, kind of through as you're going to trade environment over the last decade or so and people have forgotten the quiddity. More Founders are saying, hey I'm going to run my business but I also want to become an angel investor. So they're starting to invest what are you you either seeing there or what is some of the advice that you would give to Founders that are focused 99.9 percent of their time on their company? But they also want to begin to invest and kind of dabble in that
side of the market. Yeah, this is the heavy debate typically, um,
So I would say what we're seeing is, for anyone, whose post product Market fit, and they end up raising a small fund and deploying it, it's actually similar to them investing their personal Capital. Anyways, they do, they typically do pretty well mainly because when you post Park marketed as a Founder, you also just have deal flow that comes in naturally. I think if you pre product Market fit and you don't have a brain, it is because it is tougher. You kind of have to focus on your company. You have to focus on building your company because when you product Market fit,
But the only thing that matters is get to product Market, fit, and nothing else matters. So typically we see folks are postpartum Market fit Founders. Raising a fine because it's just an extension of their personal investing anyways and that those do pretty well. And every now and then we'll see someone who was a founder of the exit and now they decide to go into investing full-time. The one thing, I rolling funds that does make it interesting is rolling funds. Just for context, it's something Angeles invented.
In 2019 2020 and it basically reduces the friction for fundraising into a venture fund. So typical Venture fund for contacts. Someone will say okay great. I want to go invest in startups, let's say I want to raise ten million dollars. I'm going to now go out and fundraise. You find an anchor and then you fill up the rest of the fund and then you start investing then every two years, we just totally deployment period of three years. You then have to go. Raise another fun start from scratch rolling funds. Basically took that and said, what if you could make the
Using a subscription so we just keeps flowing forward. So you can invest every quarter or every year and the subscription just reviews. It's like your Netflix subscription so you can invest 100 K 500k a year but it just really use instantly. So actually reduces the friction for someone coming into your fun and because of that that ends up being actually really good product for Founders that want to have fun because they don't need to worry about the additional fundraising and the fun ones continue growing and they can just continue deploying it.
It. So we do naturally, see Founders, gravitating to that product. Like I'm personally honored as well. I rolled my personal investing into it and then you'll see folks who are looking for the more like a investors, do the traditional Venture fund. Now, the one thing just to Anchor back on like why AngelList does all of this. We originally started in, I can mention the sort of the founder and we exist to accelerate the rate of innovation in the world of startups. Founders are really dry driving force in that. And what?
What we did was we actually focus on the beginning of the earliest stage of fundraising precede and c. And we built a product that effectively allowed a lot more people who get into Venture race, Capital deploy Capital so precede founder. See, Founders can actually have additional investors to raise from because at the earliest stages it's more of an art than a science. You need someone to believe in you to write that first check so that you can get going. And Angel has basically created the market because we reduce the cost got more people in. So any any fun?
Less than 50 million b.c., if it's not bucket investing in the preseason seed stage. And so for, you know for us it's a positive benefit to the ecosystem where Founders have a lot more investors to raise
one. Let's talk about the change. May be in strategy to startups have had over the last 18, 24 months growth at all cost. Now, maybe there's even better over-rotation to, like, have cash, but I got to get some sort of cash flow and not grow at all cost that then lends more of itself to private equity. And then you guys have done some expansion, your private equity.
Just talk about like, where's the balance between spending Venture dollars to grow versus trying to operate your business to actually drive
cash? Yeah, the way I think about this and the way we think about it internally is you have your core business and especially in this environment. If you're, if you're not operating towards getting to break, even and being default alive, like strong recommendation, do that there are exceptions. Of course, if you're growing tuna % %, 400% Breakneck pace and you think it will
Continue to grow in this environment go for it. But generally you want to operate so that your default life now as your core business continues to grow and you make new product, that's the way that we approach. It is all the products are very tightly constrained. It's a small team and we're watching how that particular Park is growing. And then based off of that we actually moved from a phase of like 0 to 1 which is you can think of this bastard like okay this is an early stage startup and then we move it to one to n dot. That's what we call it internally which
Right, this is ready for scale and now we can drive more dollars to it. So we actually have that discipline in the company. Every quarter, we have an off-site where we basically broken the entire company down by objects. Who are the people, what products are they actually working on? So you can just literally think there's a spreadsheet names of all everyone in the company as a row. And then we have products that were working on as a columns and we have people that are allocated to each one and then we're able to understand, okay, how much have we spent in this particular product line and then what's the
What's the momentum? They have What's the progress they've made and then we're able to assess and go. Okay. Do you want to continue investing here or not? And to be clear. It's not always a like scientific calculation of like, nope. This much burn. They having a revenue. It's a little bit more. Again, it goes back to, like, early-stage Investments more art than science, but at least gives us the natural constraints to understand. How are we spending our dollars? Where do we need to invest more versus less and it also gives everyone in the company?
Common framework for how we make decisions.
Now, when you think about metrics inside of the business, how do you actually put this into practice, right? You kind of have new products and there's things that you hope to trying to figure out that old products that you know, work and have found a product Market fit, what is the process for identifying, what metrics are going to use for these new products? And then how do you track them? Is this a hourly process a daily or weekly just talk a little bit as to call like measuring you know we're launching something new, is it working?
Yeah, I would say.
Zero to one product. And this is the case for any startup, that's that's just launching a product. What you're really looking for is product Market, fit, and typically product Market, fit, the best way to measure it, is just two people love it. Honestly like this. Even one person love your product into people love it, to buy people love it. Most of times, no one loves it. You know, you're essentially fighting apathy and so for us. That's what we look at, we're just asking. Hey, do people love this product like what we've built? Do they love it? Or we seeing signs of of
Just call it an engagement. It really, it's functional product like that. You can definitely measure some Metric that some sign of Engagement where people are just pulling it out of even and you know if there's one if there's one thing I could somehow I made with your link we will be able to just explain to Founders like what product Market fit feels like is that you know most people think that Brock Market they don't like rock Market. Just feels like the parts getting pulled out of you that you just you can't hang on but there's just so many things that are breaking because
Summers are banging down the door. When lunch rolling funds. We literally had people pinging my like, friends on LinkedIn to try and get access to, like rolling funds. It was absolutely distant saying, like it was just old like it was overflowing with with demand. And so, that's what we look for with these other one products. It's more around engagement, like, customer love, and all of that. Then for something that starts to scale, now it looks a little bit more.
Like a traditional focus of Revenue. It looks like what is the pipeline help? Look like. So if it's more of an Enterprise each product and what is top in front of pipeline look like would close race look like so 110, it's a little bit more systematic and you can, you can effectively look at other methods. You can Benchmark yourself against other companies but 0 to 1 is just, does anyone bother?
Let's talk Talent into hiring and that you guys had kind of a talent part of the business. You spun that out into a separate company, but you're obviously hiring yourselves.
What are you seeing there in terms of compensation packages of you haven't put together that maybe toy 1921 and today and then also the quality of the town, you know, when markets draw down sometimes people want to run into the fire. Other people say, hey I'm going to go back and take my job at Facebook or Google and you know, just chill for 23 years and take the easy life. What, what are you saying?
Yeah, we've I would say what we're seeing there is folks, who are interested in working at startups, there are definitely starting to take the jump.
We're not actually seeing too much of a drag there. I will say though that the general rate of turnover has slowed down right relative to 2021 2022. So what this means is folks are generally staying put but you also have a positive selection bias of people who want to go take a chance on a start-up and release your startup or Jumping Ship. Some of that could just be the overhang of look for a right on their company. Some of it could be like hey there's no better time as well. Just do it now. But we are generally
But broadly speaking, we're seeing people stay put, but then you have positive selection bias of folks. You want to jump in the suburbs, there are making a jump, I would say in terms of our, like, recruiting at AngelList. It's actually really, really strong. And and we also looked higher X Founders and we're seeing that being pretty healthy and some of its just because again, we're kind of going through the cycle where a lot of companies are starts, are shutting down and folks are getting back in it in the market. So from that perspective, it's actually pretty great.
Heard of all I've heard Nitti. I've heard, you heard other Executives. At Angel has continued to say we hire X Founders describe a little less. Like, why is that such an important part of where you guys go look for talent and then once they're inside the organization? What benefits. Do you see from her?
Yeah, I mean, I mentioned this earlier, right? The unique culture carriers. So if you're going to serve Founders, like overall as a mission for the company and you're going to build products very quickly. You need Founders who understand that
That you can move quickly, right? Because if you worked at a larger organization where there's a bunch of process flow and it takes longer to get something out the door. And you only hire from there, then you have to bring people in the organization. I think that's how products get built, but that's not how products get built. That's actually how products go to die. And so Founders, when you bring them in, they can inject that source of energy into the company because they do understand that you can move really fucking fast, right? You don't need to, you don't need to
Wait, like weeks months at all. You know what? When my second company was bought by square. So I spent about two and a half years when the acquisition from its where. And when we came in, we actually take what we build and we launched it within the within the product there. And it was pretty clear that within the broader processes in the take months and so what we did was just like fuck it. Let's just go to like one of the top floors. No one was there. Locked ourselves in a conference rooms. Every day. Go
I was working on the project just came up, went there and we just got it done in a couple of weeks and launch the thing. And so again, you just hot, you need founder, energy and founder mentality to break through the process, break through any other drag. So that you can just focus on shipping great product and focusing on what matters and the reason Founders are very good at this is because if you start a company, you have to go through a range of things. You've got to raise money, you got to build a national product. You gotta motivate the team, you have to launch, you have listening to feedback and because you
You that range you just have a broader experience to pull from and so for us we just find that very valuable
talk about the engineering Talent. Obviously now with this move to remote you're talking about people being in person. Think the argument for remote is that you can get to anywhere in the world right and you do cheaper better etcetera. Is that true in terms of what you guys are seeing and how do you think about the balance between you talked earlier about people in person? And I'm kind of the culture versus amazing Engineers somewhere else in the world and the ability to work with them.
M.
What have you met out? Yeah, I'm gonna cancel this one. So don't worry me too. Okay, so I think, if you're hiring a very senior engineer, I think it can work remotely. But I'm talking to senior Engineers or designers like a soap on, right? We actually have someone like that. That worked at Angeles actually even before the pandemic in 2019, and he's just a soupçon. Like, I mean just everything you build is pure. Art, is Superfast very
But I think for most people and especially someone just coming out of school, they crave being in person they have to learn from others. And what were actually seeing actually going back to recruiting is that people who are just coming out of school and especially the ambitious ones. The ones who want to become Founders are saying, I'm actually rejecting offers where companies remote I want to be in person. We actually had this happen in Northern pipeline to it's like hey if this was like a while ago before we serve a bring back to coming back in off.
It's like, hey because to me remote it's not going to be a bit. And so again if you want to hire the best young talent you have to be in person, just very very hard to pretend to learn by osmosis so that's one piece. I think the second piece is you're just able to communicate a lot more when you're in person and so when you're in the early stages of building a product and your product Market fit, there's just a lot of information. You're not optimizing for efficiency. You're actually optimizing for
TV. And when you optimize for creativity, you have to be in person, you're typically janicoo, different ideas, you building something, you're launching it. But then when your remote, especially time zones, like a time, zones are so far apart, guess what? You have some idea today, you send it out. Now, you wait for, I don't know, 24 hours until someone responds back. Well, you just lost your flow. Your flow is gone, or if you have to wait to schedule a zoom meeting and hop on the zoom meeting it again. It just breaks the entire
higher flow. So what we just found is when folks are in person and you can optimize for that, create a flow, you just get a lot more creative ideas out of it. Now, it is a little bit tougher as you scale. Like, for example, Angeles has we have three offices, simple disco, New York and Seattle? But then what ideas do is going, I just say, look, we're going to solve some hard problem, fuck it. Like fly out here later this week or next week and we're all meeting in person. We're not leaving the room until we solve this problem. We build this thing and
That's the way you'll solve for n. He's just fly people out get this shit done in person because you can't solve hard problems in my view. Removing
so want to talk about Frontier Technologies are opportunity and ambition. One of the benefits of the position that you have is you got a hard day job, we got to build the product and head of a company, but you also get to talk to some of the best doctors in the world, right? And so you're seeing a lot of where Talent is Flowing, where its capital flowing but also what's working and what's not working. Yeah, there's a number of different sectors that I think you were very interested in. So,
So there's kind of Bitcoin cryptocurrency. Artificial intelligence space, the whole Renaissance and energy. These are things that are not kind of your traditional B2B, SAS type business. What are you seeing? That is actually working and then maybe or the areas where you're like, yeah, I know a lot of people are talking about that but it's probably more, you know, kind of smoked an actual
fire. Yeah, I mean, it's always really tough to the smoking actual fire like, early on right. It's because again, it's part of the 021, your, your kind of build something. And you don't quite know where the world's going.
I think I'll kind of talk I'll start with office with the AIP because AI is actually not really a category on its own. It's actually seeping into everything every single industry I think on the AI side the one thing we are seeing is that you have companies that are starting. Founders are starting in actually pivoting pretty quickly because the underlying infrastructure is just changing really really fast. So when your underlying infrastructure is changing fast, you don't know whether world is going to settle in and so we are seeing Founders pivoting a lot more because what
They thought could be a great business. Now just got to monetize or just got folded into open it. I like maybe an open and I release, you know, open are releasing new feature and all the sons commoditized. So I think generally, we're seeing a lot of call it change just within a. I and like all the companies are building up in and around it. We I would say by funding just by dollars overall, of course, a lot of dollars just by Nature goes to some of the, you know, maybe one called space-time just because it needs a lot more go.
First, we are seeing a lot of dollars go there but not seeing as much interest from Founders like relatively speaking, right? Relatively speaking, if you're a Founder, that starting a new company, you're probably going to start a new company in something. That's more software-based because you just you getting going. You don't quite know enough about space technology. You don't know enough about making sometimes but they're right because in
so this is interesting, right? You doing Yvonne maybe the core essential example? Like, he kind of got a single or a double inning with a home run, right?
We've seen this over and over again in history. How important is it to almost like kind of get your legs under you get some confidence. If I poke, you know, I know how to build a business and then go for the really hard thing versus how do you know, I think Palmer
Luckey, right. Like,
he kind of went for it, right out of the gate and it was this weird thing there was like, you know, he's putting a box on his face is going to work. Like, how do you think about those two strategies of if you're 20 to 25 years old? Do you just go for the big thing or do the odds tell you know, go build something, make it work, get some money and then go shot for the big thing.
I think you just need to follow.
Whatever unique Insight unique Viewpoint, you have of the world because ultimately a like, any company building your product, you build your, your imprinting, some view you have of the world, some opinion of how the world should exist, and that's what you're doing. And you're building a product around that. And so if you have a view of the world that is goes directly to something around space or something. Around cars, even go do it, right? So I don't think there's any like recipe for start here then go.
Here then go here. But ultimately comes down to, like, do you have enough experience to have it any Viewpoint, or not? And if you do, go for it. Because again, I would say, the fundraising Market is actually quite healthy for taking those types of pick shocks. But again, it comes from like, what's your unique for you and are you drawing from some pool of experience or you start from scratch? And I was loved. The idea of a dir, the concept of the idea. Maze. I think quality first talked about it and then it was closed.
On a 16, GB quad. And the idea is that, basically, if you look at any founder to start a successful company and you trace that, you know, if you trace their interest in the company back, they've been thinking about it for a long time. They've been sitting in that idea maze for a long time, connecting all the dots and by the time they start the company and they go to scale the company it's like four years in. Anyways, so that's another in post-conflict. So all come down about like how long have been thinking about of? Do you have a unique Insight unique Viewpoint?
Now, one of the
Key themes, I see over and over again, is many of the biggest companies in the world start out as science projects for almost a joke and so Google obviously they want to sell for a million bucks. They're just like, oh this is cool paper. Let's get it. You know, let's take a million dollars to buy a nice car and leave Uber, literally, Travis didn't even run the company at first, like he was kind of like, oh this would be cool to get, you know, ball or saying when I press a button, the car shows up, even if you look at Bordeaux Delian basically tweeted it was like, oh, interest rates are low. I should just go raise a bunch of free money and then, like, try to go
Things in space and then he was going like, oh my fuck around and find out how this works, right? But copy this now, worth hundreds of dollars. And so how do you think about the intentionality of like I am starting a company. Let me go. Do you know customer research and really kind of understand what the problem is versus some of these really large companies. People come back their way into and it almost sounds like a toy or a
joke. Yeah, I see more of like the toy or a joke as in. You're experimenting. You put something out there and then if it works, you can go the company around it.
This actually might pick up from Nepal, a few years ago where we do you think about early stage companies. It's actually about a small team, a Founder made the founding team sitting crafting creating something and then, you know, they're like, kind of in there like live, and then they put it out in the world and they're like, hey, do you like this? And then most of the time the world is just like, no. Like I don't give a shit, right. Go back. And then you go back, you know, you have crawl back in your like, okay, back to work again and you're going to crafting and you come back out me like hey, do you?
That's the, I think notion famously, I think notion the product that work think was like, virgin to of hurting 3, which was sacked, bunch of flag, which came out a full rebuild again, kind of similar Concepts. So when you look at that across all of these different companies, you actually see a period in time where they're just sitting there just rafting a product they think could work in the world and then they're putting it out there and so I think a lot of the times it's comes from the founders, not knowing because you don't know you actually you can
Can't you can't know ahead of time whether the products going to work and you can only know when you actually put out in the world and and people are saying yep. I love it and then it pull it out of you. And then when they pull it out of you, then the question is, can this be a big company? Like Kendall's growth, sustainable? Maybe look what if it tapers out and but that's actually an easier question to answer. Then, like the early stage, you'll like, will this work? You just don't know, simply, you know, go back to Uber, who knows? Like I mean, it was just a block Mercer.
Guess who need like how could you have predicted that? Yep, you can actually bring the cost down. You can bring you actually bring a lot more people into the supply side of the market to start driving their cars. So I would actually say more often than not. It's it's it's not perfectly planned. You can't quite predict it,
take that same idea. Now bring it inside of a couple of like AngelList. Yeah, you all don't have the Good Fortune of hiding, right? I think a lot about use Bitcoin as an example like
Probably some of that success was just like no one's paying attention and so it could kind of flourish without critiques and critics and also stuff evangelist does anything. If you guys breathe on the internet, somebody notices and there's an article written. Yeah. How do you test ideas? How do you know this is worth potential? A hit to the brand or you know kind of failure being in public and taking these ideas. Like it almost has to start us a toy or something you're playing with what you're doing is had this company where you don't get credit for hey we're just, you know, we're in the arena, testing
things.
You
are, yeah, I just tweet them in the arena, so honestly, I don't care. Like, I actually and I said that in the most positive way possible, I don't care in the sense that when you it's okay, if you actually study, if you study history of ownership and you actually study the greats and build companies from like hundreds of years ago, like I'm talking the Polaroid founder talking about, you know, talking about even like Bill Gates Building Microsoft,
Like, if you start studying all these Founders, you'll notice that there's just so much tinkering that happened. There's so much experimentation that happens, and there will be false start, but when you look at it through the, you know, when you look at it across time it just doesn't matter. These are like little flecks. So even if Angel as launch launch is something that doesn't work, it's a black. Yeah. Maybe there's an article written. Maybe there's some opinion piece or some blog posts, but it honestly doesn't matter because all we're really here to do is just
Build an enduring company and building an enduring company. Takes a lot of app that takes a lot of experimentation. And I think the second you start looking at what others are saying about you, you're not building what customers actually want from you. And the only thing that matters is what customers want from. You not what others are saying about you because who cares? Now, of course, it doesn't mean that, you know, we're making a lot of egregious, like decisions because Angeles, we are in a
Late space and you know, we have actually kind of sitting across different pieces of Regulation because we are not just under the Venture exemption were also we have a riaa and so we do we do have to be careful about that but generally we lean more towards taking more at-bats, more experiments and not really caring about what others.
Let's talk about Capital allocation, you know, when you have multiple bets kind of going on at the same time some are mature. Some are not mature. How do you think about one?
The new beds is there a dollar amount is their head count but like how do you say like hey these are the resources were basically willing to like lose over whether this works or not. And how do you think about feeding the machine? You know, the thing that's already working and kind of, is there a framework or is it a case-by-case decision?
Yeah, I mean the framework I lightly mentioned earlier which is, will will generally have a good idea of what products people are working on with or business or a new product and then anything that's a new product like a 0 to 1 will effectively treated as a priest.
Company and will say, alright, you generally have this much an allocation this much Capital to go with and there's a product lead. There's a product lead where we actually frame it as look. This is your startup and here are the, you know, the team, the team members you have and you can also say, you don't want this person to work with you and that's okay. Because you want to keep it very tight team and then we'll actually see the progress, they're making a cross multiple quarters or even sometimes mid-quarter. We'll just do a check in on it and so we're pretty.
To be scoped based off of that. And then for the poor business, it really depends on the stage and it depends on the scale of the business, and we really think about it as will more Capital accelerate it or not, and more often than not more comical, do some not accelerate, but I think the one of the things that got lost in 2021 and 2022. The beginning part of 2022 is this assumption that? Hey, raise more Capital, you can go faster. But in reality most
companies cannot go faster. When you raise more Capital, there are exceptions. Like, if you're in the, I've spent a lot of time in the logistic space where you do need more Capital, you have to launch multiple cities, you literally have to pay out for every city launched, but for vast majority of companies like software companies, you don't need more Capital to scale or at least that is not the that's not what's on critical path. So it's actually very rare. That more Capital means you grow faster so you have to kind of break down in the core business is more Capital the issue or is there some other issue that's
Preventing you from scaling and so or can you actually just take the cash UPS coming off, getting generated from the company and invest that and then keep the money raised separately. So that's the way I we think about on the poor business side is like his Capital really the issue or not and in general we actually need two words, not burning cash for the sake of it. I'm not sounds obvious but you know I think a lot of people just literally just like hey the next round is on the around the corner. We don't think that way and
In fact, if you take a look at Angeles history before the round that we raised in beginning of last year, we had to raise capital in, I don't know 45 years it was just a long time so we haven't actually like, for being actually for for being the bottom. For a lot of venture funds. You know, we have a pretty large percent of the market for Venture funds. We don't raise a lot of cash, but we haven't gone back out to the market often though.
He let me invest. I appreciate you. Thank you. Another part of capital. Allocation is protecting a catch.
You do have it treasury management. I think that a lot of tech startups, really, just have the idea of like, I put in the bank and I'm good and the crypto world I think they took over the last couple of years realized, like, that's not good, right? I like they're doing some problems. And they actually were the ones who avoided kind of the bank run. The fastest, because I've seen this play before, but the people who hadn't had that experience Silicon Valley Bank signature, these different organizations, first part of the cetera, how do you all think about it now and you guys to pull some products here that kind of help people with treasury management. So like what are they?
Either best practices or what are you guys doing to kind of think about the cash you do have on the balance
sheet? Yeah. Yeah. It's funny because before us to be be everyone's like this, keep it us to be and that's perfect within my bingo cards that that was going to happen. Um, the way that we do treasury management is and this what argument for all starts is you typically want to take the cash you have in, you want to make sure that you're putting it in a place where it either is in US treasury bills or you actually have a process multiple
Banks or you have a one of the big, big, big Banks. The problem with one of the big, big, big Banks is, they just don't want to work with you, right? I mean, I JP Morgan or, you know, Bank of America. Well, one some of their UI is just terrible but in general, they don't typically like working with small early-stage startup. So, what I would recommend is actually, you know, putting your money into into a banking solution where the money actually gets spread out across multiple Banks. So you actually have 100% FDIC insurance.
And take anything you want to earn yield and just putting US Treasury. So typically have, you know, three months, six months of Runway, that's in a bank account. So you can just pay the bills, make sure everything's running smoothly and then take the rest in your current US. Treasuries, what Angel is does like what we do ourselves as we actually have it, we actually have it spread across some of the big big things and then we have money that goes into a sweep account that goes into u.s. countries.
One of the topics that Founders have to face when they go from a very early stage company, to some degree of success. This could be, they raised a series a or series B. It could be product Market, fit, whatever kind of Milestone that brings up the conversation to CEO compensation. And it's always this weird thing where every time I've had the conversation with him on the board or I'm just an investor, the CEO is like, hey, I'm used to thinking of the compensation decisions for everyone else. I want the company to succeed. I know we're trying to keep costs down but also
Like I have a family, you are, I want to live my life or you know, whatever how have you both that angel is but also in other places seeing CEOs kind of navigate this correctly. And are there any best practices that you think? Other Founders take away?
Yeah, it's a tough one. I would say it depends by stage, right? If your precede see, you could theoretically try and get, you know, some Market comms and find said it that way, but in reality, the presidency you're just looking to preserve as much cash as possible, right? You're getting paid.
Paid handsomely and Equity, as a founder. And what you wanted. It's actually in your incentive to keep your burn for the company as low as possible, and also for diverse Learners, as well as possible. And so, my advice for presidency Founders is take as little as you need because you actually want the company to have as little work as possible because you need to make progress to get to the next stage. And the next stage after that, I think once you get past series a again, little bit post product Market fit series a series B. Seriousiy
Then it's actually more of a science. There's a lot of competition out there to the way that Angeles does it we have a comp Committee of course if it's you know discussing my pay then I've recused myself and but we have a comp committee there's one a couple of folks on there that are also sitting on other boards and they have a lot of this data. So it is actually more of a science as you get to later and later stage and I would actually look to the to the VC as well as someone external someone who's actually an
Sitting on committees, I may be a public company and you can have someone, you can have someone else to lean on. So, that's why I would do it for like series, a series being
seriously. So another piece of this again, which is kind of like a tough conversation. I think for both under and also the investors is secondaries for the founder. In on one hand, Founders have ninety-nine point, nine percent of their net worth tied up in a company especially with their first one that's really successful and I think from an investor standpoint they don't want the founder to be worried and stressed out about shit. They should be
It's not about. Yeah, on the other hand the greatest you know kind of risk is the founder takes a multimillion-dollar secondary even if it's a small percentage of ownership and then they've got a Ferrari and you know it kind of get distracted. Yeah. What have you seen there? That's worked or kind of if you were sitting on the border and investor in a company you would kind of guide the founder to think
about yeah.
II kind of anchor back to 2018 2019 and what the norm was then and outside the norm then was, if you're getting 2 Series a series B, there it was not common practice but it was, it was fine for a Founder to take a couple million off the table and the incentives are actually very much aligned with the investors and the shareholders. Because by doing that, you actually take a little bit about pressure off the table for the founder. And again, everyone's situation is different, it depends on if the powders already have liquidity.
Passive listening doesn't matter or if they haven't and they spending five years, six years on it and they have specific personal financial needs. So it's really an honest conversation that has to happen but generally you know taking a couple million off the table to relieve some of that pressure does. Align you with all the shareholders and the investors because it means you're going to be more likely to go for the big home run, the big Grand Slam versus looking to sell the company. And, you know, once you get to
That post product Market fit moment in the company scaling, and if it's a healthy company, you will get acquisition offers. It will be tempting. It's like, oh wow. It's life-changing money for the founder and interestingly know about City incentives. Do skew what? When you have a when you actually get bought that, what when you come to get spot and it's not a massive outcome, the incentives are skewed because of the founder. It's like, changing money. But for the investor, it doesn't matter because the way Venture works is when you invest in
Portfolio companies, you're hoping for one or two or three of them to become massive companies, grand, slams, and IT company that ends up 2X and 3X and 4x saying is, is just it surrounding area, doesn't matter. And it was actually the most perplexing things for me as a Founder. But now that I'm running a celestite fully understand, it was like, oh, why does not care about the to X if we act psycho right? It literally surrounding air, it doesn't even matter. It's in the Venture math. It just it's not where all the returns are made.
Describe this little bit more because I think people who have experience investing will understanding it, but from an investor standpoint, maybe just described that. What is the investor thinking in that scenario as to why 223 ice doesn't matter?
Yeah, so the way to think about it is when you go to raise a venture fund, so every investor is typically not investing on personal capital and colder. Unless they're Angel Investing, but by and large, it should assume they're actually investing other people's Capital. So when you start a venture fund, you go race from other people just like a Founder. Co-founder is from investors and and a VC arises from their own.
And what they do is they raises capital and they have a specific strategy and they're going to invest in. Let's say 20 companies are 25 companies. Now it's in the Venture math that by investing the 20 or 25 companies, probably two, maybe three if you're good are going to be massive like, you know, massive home runs and the rest of them will kind of be like a 1x or will just be a complete write-off. Because again, you're investing in early-stage companies, the survival rate of companies
a venture backed companies is like two and a half percent or 102 percent. And then, oh, those the ones that actually becoming Buren companies, like the large sustainable companies is like point one percent. So when you do that is literally the Venture map. So when you take that back into a venture fund and you look at it for fully, let's say 20 companies, when only two or three companies are the ones that are going to be massive fund returners and actually return a lot of capital, that's where the investor actually makes what's called our carrier, which is, they get a profit off of, or they get a cut of the profits off.
Venture fund. So the incentives are aligned with the companies that will be grand slams. It's not aligned with companies. That will be the 1X or 2x or 3x. But for the founder, if you owned 40% 50% 60% and the outcome is 30 million 40 million. That's pretty good about that is life-changing money. So again going back to the question earlier of. Does it make sense for Founder's? Stick a secondary. I would say, yes within reason and this was some part of the practice and
2018, 2019, because it'll allow them to go for the grand slam. It allow them to like relieve that pressure. So that when there is an acquisition offer, they're just more likely to say, hey not a right fit. I think this company can be can continue to scale
now as part of building these companies and kind of talk about taking secondaries paying yourself etcetera, there's some things that you can do at the beginning of the company to set yourself up as a Founder. Some people in this room is going to be too late, right? The kind of heard it best about but there's things like USBS etcetera. Like if you were to go back in,
Company today. What are, like, the one or two big decisions that you would really try to get, right? So that if the company ended up being a big success, you would be thankful. You did that the start of the setup of the company.
Yeah, I think one of the biggest decisions is actually the distribution of equity among the founders. So I would really ask you need equal co-founders or do you need a late co-founder? And the reason I frame it this way is because typically companies,
Venture-backed companies and really every company is authoritative right? You have a single, a leader, a single CEO who's going to lead the company and a lot of like a lot of the success of pain failure, companies can write on that one person and you should really ask like can you start the company yourself and you basically get more Equity if you're going to see over company and then are you looking to bring in a lake co-founder? And it's not to say that the distribution of equity needs to be like, 95 percent 5 percent. I think generally making sure that
Out the gate is at the right stage in terms of allocation solves for a lot of the potential founder breakup issues that come up in the future because if you're equal co-founders, but one person is actually taking on a lot of the leadership risk than in if their decision that need to be made decisions. Don't get made by consensus and startups at all, it has to be authoritative and has to be a singular person that's accountable to it and if you have an equal co-founder relationship, it can cause a lot of tension. So I think that's one of the most important things. Now it's a structurally. There are
Things that you can optimize for sure every startup of qualifies what's called Q SB, SB, SB s basically means for any, you know, Bernie, if you have a liquidity event for any outcome that which is up to 10 million, it's basically tax-free at the federal level I believe I can remember, California has that or not and you qualify for ksps. You could do some other optimizations that I think someone made some glucose may be closing out here. There's the like you take some of the equity and you put it into like different cross, right? And then you have to go
Yes. On like every single one as a Founder, you could do it but I just don't know if it's worth the trouble. I would just focus on just get your product Market, fit your other things you could do, like founder preferred stock though. I think, in this market, it'll be a little bit harder. Some of these things. Get real in negotiated out, anyways, and later rounds. So my advice actually is the number one thing is the is the equity split between the founders and look if you really want vehicle co-founders, go for it. But generally
I think having a step down in equity piss off the second found out their founder works well because then you can actually can be clear who's actually running the
business.
5149 or like 70/30 when you talk about not having equal like
how
egregious is two groups and does it actually matter? Or is it more of just literally your, the authoritative decision-maker. And someone else is kind of like the second, you know, authority of decision
maker, it could be that. But sometimes, you know, goes back to you. Just take a look at the incentives, right? How personally, again, this is just my opinion, I would say more like 70/30 60/40 then like 49 50 foot in 51 just looks cute, right?
It's like kind of a cute thing to do, but 60/40 70/30 is it can work. And then I would say, if you actually have a late co-founder meaning, they join later on, they're taking a lot less risk. Then it could be like, 10%, 15% and your 85%. 90%, And that actually does work pretty well. Like I'm sorry. Company were brought in late. Co-founder was an awesome, sometimes it can work you bring on a key higher later on, right? The company's been around for a year. I'm posted one company, you know, it's been operating for years.
A half brought in a cro, gave that person, I think five percent, which is very healthy, and ended up being game-changing for the company. So, again, in every situation is different. But generally I'm seeing the step-down, equity works pretty well.
What are they going to talk about is technology? Companies are usually pretty good at Building Products. They're almost always horrible at sales and marketing and there's like this big difference. One of the things when I went to Facebook, that was always so funny to me is like there's no customer service number and when you first get to you're like, hey should we
You have a customer sir. No, we shouldn't hear Sound Logic, why then? It makes sense. Yeah, talk a little bit as to like, how much of it is just like the product itself. And as you said, you know, people are like, literally finding your LinkedIn connections, like begging for the product versus being able to really go out there. Explain to people what those this do have a sales team and kind of build. What I think most people would consider more traditional type of company.
Yeah, I don't think of it as like an either or I think it all starts with a great product. So, you know, forced to choose
choose where you allocate your dollars. We allocated towards product versus allocating into our sales and marketing and you will sometimes. I mean, you can basically look at the income statement of any company and basically tell like, hey, are their product like company or the sales and marketing web company and typically sales and marketing like companies, lot more. The dollars going to sales and marketing smm versus Rd like design engineering product. So generally my take is that you want to be a product like company. Because by being a product company, you can actually focus on
Real Innovation. One of the things that we think about it AngelList is, we should, we don't want to build a better version of the past. Most products are just building a better version of the past. And the reason that's a problem is when you're building a better version of the path to building a commodity product. When you build a commodity product, it goes back to like you fighting, have to be right? No one cares. They're like, well, why not? Just use this thing that's already there. It's good enough and hearing that from a customer is like oh there's this other thing I use is good. Enough is the worst and so you
And a focus on building something that's insanely great that is just so much better than past, right? Imagine the dependent how old folks are here. But first time you become an iPhone from going from a Blackberry right? Just absolutely insane. It's just insanely better person wrote or Tesla relative to any other car. It's just insanely better and so the only way you do that is be having a ruthless focus on building a great product. Now for sales and marketing I will say that depending on the type of
You're building and selling, if you're selling the Enterprises and your size of the contract is 25,000, 30,000 50,000 or requires coordination across multiple teams. Personally, I've never seen that work, pure product LED growth. I think that's when you do need a sales team and you do because again, you have to talk to a human. Once you get past 25k, and average contract value goes approval processes that happen internally. They have to justify it. So that's what we see. So, going back to what you mentioned with rolling funds are
Like for majority of the history of AngelList, we had like one salesperson and we had no marketing team, like it was just pure product like Road as we entered and entered larger larger. Fun sizes. All of a sudden. Now we do have a sales motion because the AC me goes up, the average contract value goes up and you need more of a, you know, a kind of tackling motion to make sure that we're getting in front of the right people. And then we're selling the product there. But it still starts with having a great product to get in the door. But then when you
Larger a CBS. You just need, you need a sales team.
Sure my last question for you is ambition and the importance of it for startups. Kind of you know it's Friday night. 2:00 in the morning. This shit sucks. I'm eating glass. I've been doing it for you know, six months. Six years six months, whatever it is. How important is the ambition in the motivation to kind of people
go. Oh, I mean, it's fucking everybody. It's look, it's, it's not easy at all my, you know, first startup.
You know, we go fire the company, we built like 20 companies or 20 products before we actually even laying around, something to raise money, and it was just like soul-sucking and then we finally build something and we figure out how to scale it, and then we not do not have brought my plate, we've got distribution. We didn't have any product Market fit and then I ran that thing for another two-and-a-half years and soul-sucking. Right? And you know, coming out of it, you're just like, nope, got to keep going and it just came from a sense of. No, I actually I just I'm viewing this on the stuffing so I'm here.
That's something that I'm learning from. So I can go build something even better. And then that led to the second company that actually aren't getting fired and like, very quickly like six months, which then was a complete step function change. So, what I'm trying to say here is that startups are a step function. Change it will never ever, ever, ever feel linear ever, it's always a step function change. You start off with your building a product, your crafting, in the lab and then you're putting out in the world and then people SWAT it. Most of the time you're like, ah, crap.
To go back, write your back. You feel like you're back to zero because you are, you know, in a way. But in some ways you've already learned something and now you can hear it. The next thing so it's not linear and you do another Triad. Another pride in you, you share it with the world and then people like it and they pull it out of you. You've just made a step function change. So the way to think about startups is it's all about the stuff function change and ambition is what gives you the motivation to keep going. And you know, I mean, I've been I've been in San Francisco.
In Silicon Valley since 2008. So, I've seen multiple Cycles. Now, I've seen friends, you know, actually go from failure. After failure to building large companies, and I'll tell you every single time. It looked Bleak, it looked like everything was just shit and then it was just that one in sight at one iteration that just changed everything and it just like it's really just a massive sub function, change up. And then you just go from there. I think we're like, you know, launching a rocket. That's all it is about ambition. You're launching a rocket.
And just keep going at it. You know, how many, how many feelings are you on? Have. Yeah. There you go. Just think about it like
that. Thank you so much for doing this. I really appreciate it. Everyone
Angela CEO.
