[Music] how many VCS act really nice to you but like kind of the second you leave the room we're kind of like like I have to say I was at the lobby couple weeks ago and you know you're not supposed to say what happens in the lobby so I can't divulge details or all that but there was like a whole user generated conversation basically about angel list and like you know there's a lot of angst well I wasn't invited to the lobby and I figured youd give me at least two softballs before we launch right into it uh you know it's funny uh generally I would say most VCS uh who are on angelist and almost every VC firm has a partner who is techsavvy or an associate or two who are on I would hope every BC firm would have a techsavvy partner you'd be surprised there there definitely VCS who are not comfortable using LinkedIn or Twitter and so on and for that crowd you know this is not there are people on Facebook's board who don't really use Facebook yeah I'm not going to name them um but uh generally if they're techsavvy VC firm they'll have one or two people on Angel list um we'll usually have a very good relationship with those people in fact uh we have uh sort of like their embedded journalists who go to war um we have embedded Associates from a bunch of VC firms who drop by every Tuesday morning and help us go through the queue and look at all the deals in the pipeline and so on oh really yeah so and we welcome more of them so it's kind of an open book uh we're not trying to hold anything back for ourselves and uh you know my dream is someday I'll delete my admin account in Angelus and will just work but we're we're a long ways from that so uh generally with most VC it's a very positive relationship I think there's definitely ones who used to be king of the hill in their little niche or their little town or their little venue and by commoditizing and opening up the deal flow and the visibility and making more transparent uh they've lost some of their information Advantage uh but the you know Michael Lewis says the internet Hates middlemen Who rely on proprietary access to information to make a living and so to the extent that they were relying on information advantage that's gone away uh but uh what I find is the top top tier VCS actually like us the best which I was surprised about as much as anyone but if you talk to the gry loocks and seoa of the world their their Viewpoint is well you're creating uh more and more deal flow for us and we're sort of a bottleneck at our part of the chain there's not that many top tier series a series B funds uh and so they get to see even more things um and it helps them more efficiently look at more things so they're pretty happy about it we're going to get more into this in a minute because I I think the whole topic of deal flow and how it's changing in the valley is just fascinating and you know you guys are are a part of that um but I want to talk about your journey and how you got here because I know you know we all know the story of like Mark and dreon met with Mark Zuckerberg and Zuck was like tell me what was Netscape I mean kids who come to the valley are notorious for sort of not having a lot of institutional memory and angelist is such an important thing for entrepreneurs arriving here now but I I doubt they know much of your story at all yeah it's not terribly interesting I mean where do you want me to start I was born yeah yeah were you born something like uh yes there your mother looked like this at one point um how did you wind up in Silicon Valley and did you were you interested in Tech were you interested in not yeah I was a I I fell in love with computers very early on uh actually macintosh's uh far before it was fashionable um I think like most people in the audience who are uh Engineers or hackers I started out trying to crack games um but this is back in the day when you were opening up the back of a magazine and typing in a basic program for most of your games and then in some cases you have a cassette tape or an old floppy dis um and you basically have to break into the game and pirate it you copy it from your friend and so was the hacker mentality that got me into computers and then uh when I was in college I was doing C well I actually started out doing English and history and then IAD ends I I don't want to drive a cab or these daysog or these days will be in Uber and an Uber driver probably makes more than most people in this audience right now but me definitely um but uh then I started studying computer science and physics and econ sort of going more hardcore and I read this great book called the Macintosh way uh which was written by Guy Kawasaki and it was about the secret project inside Apple computer that led to the birth of the Macintosh it was just such an inspirational book so in my mind copertino was this place with like flying castles and unicorns and it was pretty disappointing when I saw the real copertino saw strip malls so I felt the I moved here in 99 which was even more you know and and I flew into San Jose which they were like this is the capital of Silicon Valley and I really was expecting the Jetson and I you know and then they pulled up and like there wasn't even like a ramp like a a jetway to the airport like you had to walk off the steps and like I was like are we in the right San Jose so so I literally showed up in Silicon Valley in '96 wanted to work here I'd actually gone to out of school at the time coming out there weren't many exits uh especially in 1995 so I went to Dartmouth did CS and econ um couldn't hack it in physics too hard um and then um got out of Dartmouth and there were only a few exits there was Investment Banking there was grad school there was Consulting there was no Tech recruiting going at the time uh so I joined a Boston Consulting Group uh quit almost immediately I think it was during associate training that I the first two weeks that I made up my mind to leave what what happened I really wanted in the tech industry and I thought what they were going to do was technology uh but at the time uh they didn't they were Consulting for people like 9x which was a predecessor to uh phone companies and uh uh AT&T as a hardware division which became Loc Technologies uh and so it really wasn't high-tech and I remember having to hijack the fax line to get a dialup connection to the internet and it was just frustrating so I decided I had to come out to Silicon Valley um so I actually ended up Consulting back to BCG as an internet guy uh got a job out here with at home network which became excited home um came out and uh just got into it and Silicon Valley scene was amazing never looked back right I'm surrounded by great people great Tech um did a bunch of companies and effort along the way some successful some failed uh you know one of the things I don't like about this whole culture here is what makes Silicon Valley great is it's a meritocracy and I almost feel like a schmuck sitting up here talking to you because I think you guys have just as many interesting things to say back to me and I've failed more than I've succeeded and uh everyone's journey is unique and interesting and it is a meritocracy and you know there's a lot of luck involved too and some people win and they get to sit up on the stage and talk about how their photo uh uploading app got sold for a billion dollars and yours went out of business right we had that guy yeah and and I he did an amazing job and he did incredibly hard things and not to take away anything from him but there were a dozen guys who came before him who did incredibly hard things in the same space whose timing was just pre iPhone and there are dozen people who come later and do Innovations because they post Instagram they don't they don't get that same outcome um so timing matters an enormous amount who you work with if you were PayPal in the early days and ended up in the PayPal Mafia you did incredibly well um so there's a lot of luck involved in the whole system how do you feel about that whole where luck ends and and begins and where sort of skill ends and begin I mean I think this is something people have a lot of angst over in the valley and I think they they've angst if they've failed but they have more angst if they've succeeded uh success doesn't bring that much angst that sounds like something successful people say to to to make it sound like their lives are hard um yeah there's a lot of come on I mean to be fair you know people have sold their company for a lot of money and then they go into this pit of depression and like look you cannot feel sorry for them all you want but it's a very real thing they need to be slapped upside the head I mean that's that's just idiotic uh there is no question that you are better off than you were before you sold the company for a zillion dollars you are in a Paro optimal situation and if you don't believe that then give your money away fade it off to somebody else I think that's just yeah I I I reject those things that those viewpoints that fly in the face of common sense I um we are we are here to succeed and if you succeed You've Won and it's great and you should enjoy it and if it makes you more miserable then there's something deeply deeply wrong with you so what when you say you're here to succeed what do you mean by that is it about money what is what is the goal for you money for a lot of people ends up being a scorecard yeah um for example you can get into one of these kind kind of gatherings and let's say that I've been at I was at an event before I was speaking at Berkeley and there were about 300 people in the room and a lot of them were mentors and entrepreneurs and investors and um some very successful people and I said you know how many of you in this room have started a company and a lot of hands go up right then how many of you have sold a company and some of the hands go down how many of you had you know sold it and it was a profitable outcome you made some money some more hands go down uh how many of you built a product that was unique and new so you weren't just doing something variation what already existed but it was genuinely new you know more hands go down uh and how many of you managed to actually sell that product to customers to end users and get them to pay for it more hands go down in volume nobody right so the reality is that the history of Silicon Valley is maybe every decade 20 or 30 new great products get created and the rest of us right off their coattails right including me for most of my career and so kind of get lucky and we sell our companies to them or we get unlucky and we don't um or or we invest in them or we get a job those companies or we write their IP or whatever it is but the set of actual things that are truly created is very small and that is the ultimate goal I think that's why people look up to Elon Musk and Steve Jobs and Mark Zuckerberg because they've managed to create something brand new that did not exist before and spread it to the world in volume and get paid for it it's a very very very hard thing is there anyone who who you think is doing that now who doesn't get credit for it if if you had to bet who who's like a year old or so or maybe two years older will be looking back and saying that about uh you know it's a tough one I don't if I knew I'd be out there trying to invest in them because uh I think there's probably a lot of entrepreneurs doing that um the question is just that get paid in volume part um there's no question there are people building amazing amazing things um and and there's some really good Tech techology and good products being built but I don't want to single out particular people that I think are doing incredibly well like you know there's some things that like life changing like uber is a life-changing experience when you try it you're just like holy cow that was so great everything should work like that and in fact I think every vehicle that is a commercial license plate will be uberzone your planes arriving at the gate actually arriving as opposed to when the airline tells you it's arriving um you should know when the fire truck or the ambulance is on its way fire trucks behind you it should show up on your GPS um if you're locked out and you call locksmith you should know how far away that locksmith is if you're uh you should the the idea that you have to sit at home in an 8 Hour window and wait for the cable guy is absurd right it's just nonsense or where is the UPS person who comes and Rings a doorbell while you're in the bathroom ah right that just shouldn't happen so in that sense Uber is a is one of those Technologies because it just shows you what's possible um and I'm a big fan of all the other things around that space that are like that so one that I would point out is uh Postmates but disclaimer I'm an investor um but that's how I know the company um but they're doing the get it now app where they Uber IE couriers so you order from a restaurant or from your or you want flowers picked up or your dry cleaning and uh you'll see The Courier on a map so you'll know when they're going to get pick up the item and come back to you um so I think there thanks to the iPhone there's a lot of that going on now there's a computer in everyone's pocket it's with you all the time you're constantly constantly using it um in fact like you know I it's just insane how much time I spend my iPhone and I'm sure it's probably true for most of you your Android phone or your iPhone and it's just lifechanging the surprise for me with the iPhone is um because yeah I'm still one of those people who I miss the physical keyboard and like I miss the ease of doing emails and you know I I don't think it is the J's phone but the the amazing thing for me is like people people like you are going to die I I have one I'm die of all all the young kids in the audience who just don't care are going to love the touchcreen there was a butt coming there but I have one because I have to like function and use new technology and I'm stunned that you know usually on Saturdays I try to you know mostly not work and it's kind of the one day I try to spend time with my kid and I mean I will be totally informed and actually get quite a bit of work done but like some days not open my laptop for a day or two and for someone who writes for a living like a device without a keyboard like that's pretty stunning yeah I think uh almost all usage is going to go to mobile devices and tablets and the like uh for there are large swads of humanity who are growing up connected to the internet but um have never owned a desktop or laptop computer never will and and nor do they need toh um so it's interesting what you said about Postmates um you know a lot of people see that who were here in the 90s and they're like oh it's just like Cosmo and you know I know Andre and some others have said basically every business idea that came out in the 1990s was totally a viable idea it was just done too early are you a Believer on that there's a lot of Truth to that uh for example I did a business called opinions back in 1999 which did reasonably well and when public as part of shopping.com but it wasn't the gang Buster blowout that Yelp is um but the reason it couldn't have been Yelp is because at the time not enough local businesses were online and there was not enough density of users online that you could get them to review the local businesses so all the pieces were not in place it was just a lot harder to do something back then to give you an idea with the opinions our first round we raised 8 million bucks um it took us 6 months to ship our website we had had to buy our servers there were no data centers those were brand new so we had to host our servers ourselves in our office we had to get a T1 connection which is a very expensive uh internet connection to to host out to the internet we wrote Our Own deployment scripts we had to buy Sun servers we had to buy Oracle databases no MySQL there was no git there none of that so everything was just really really really hard and took a long time and then the addressable user base was a hundredth of what it is today um so just because of network effects and critical mass effects a lot of businesses couldn't work uh even social networking is not a new idea before Facebook of course there was Myspace and before that there was fster but before that you go to Korea and there were like dozens of social networks there including the very famous Sor that predated by years and years but you needed a high enough density of your friends on the internet that when you send out that uh almost sounding I am your friend are you my friend email you know like what playround email yeah exactly the playground emails like you my friend right U before you sent out that email I don't recommend doing that it's a little weird so yeah it's a little creepy uh yeah 1999 just not enough of your friends were online that you would get an answer and get critical mass timing is very important I'm curious your thoughts on path CU I was talking to someone about this the other day I feel like I was one of those people who totally like bought what what path was selling when they first came out and thought you know yes I would love a way I think I I think I was pregnant at the time and it was like you know I I'm not I don't want to be one of those people who like shoves baby pictures all over Facebook but like are people in my life who would want to see every single baby picture and I loved the idea of a really well-designed social network for friends and families in practice path has in no way been that for me it is a smaller subset of the people that I interact with on Twitter and Facebook and Instagram and it basically has no value I'm curious is that an example I mean for me I'm sorry you know is that an example of something that where the that adoption curve isn't quite there yet it's really hard to say I think that goes back to the earlier point about how much of it is timing and luck and uh you may think everything is right at an intellectual level uh but the reality is it just doesn't work in the market yet or it ends up working a different way than you anticipated um I don't think Twitter turned out to be what people thought it would be uh that's uh it certainly didn't TR to be what Evan and Jack no it was it was originally a micro blogging platform and it actually started out more about friends tweeting each other about what they're up to right um and then from there sort of shifted more towards a celebrity driven broadcast mechanism and now I feel like it's at least for me it's replaced television and newspapers um or at least the information news dissemination part of Television newspapers along with some weird friend stuff mixed in but it's his own unique thing yeah I think so it's it's just very hard to tell what these things are going to turn out to be uh it's possible path may turn out to be something completely different what is Four Square today right it seems to be morphing more towards a Yelp type thing where uh you might have originally imagined that it was more about tracking your friends locations mhm yeah it is more about like discovering things around where you are versus where my friends correct now um so let's get back to your story so you brought up opinions which was a very controversial company um I mean okay I was read I was doing like I was looking back through the you know the nval um you know history of of Clips on the internet and you know I there was this massive Scandal about you suing your VCS and I was reading this Wall Street Journal article that said this is going to change Silicon Valley forever cuz everyone's been too scared to sue VCS before and he is he's utterly changed it now everyone's going to go ape suing VCS which didn't exactly happen um but let's I am under non-disclosure as part of the uh finale you're not going to tell us anything about your ballsy suing investors B I mean it's all in the public record so you can go look it up do you are you surprised that people didn't start suing VCS left and right it's a very difficult thing to do and you have to be very certain was there anything let's just say it did lead to the birth of venture hacks which is what led to the birth of angelist because after that I was determined that uh I sort of became the go-to guy in understanding how to negotiate a term sheet because now I was very cognizant of what goes into a term sheet and why and uh back then every term sheet used to be custom and they used to give a lot of power to the investors whereas actually today especially coming out of an incubator lot these convertible notes and so on give a lot of power to the entrepreneur but entrepreneurs take that for granted didn't used to be the case so with Venture hacks we really Blog the game theory of V venture capital and how to negotiate a term sheet um but these days the term sheets are so standardized and they've gotten either more balanced or more entrepreneur friendly um that it's no longer an issue but Angelus probably wouldn't be here today if it weren't for that history H so let's talk about we we talk we don't have to go back to the the birth of epinions and you won't tell us the juicy stuff for people who don't know you can look it up but essentially as I understand it and feel free to jump in um they uh epinions was sold to shopping.com and there was a lawsuit because a lot of the early three of the early Founders said that uh basically they were tricked out of um signing their shares back over to the company and very powerful investors like Benchmark Capital were Sued did that is there still bad blood there is that part of people's hackles about I think there are still people that I would not do business with and wouldn't do business with me but it's a very small set so tell us about Venture hacks how exactly did that did that lead to it was it people coming to you yeah people coming to me and asking for advice on hey what is this term in the term sheet should I care about it or not uh and so much of it was a black art I mean keep in mind a venture investor a venture firm probably puts out 10 or 20 term sheets a year they have institutional memory because they're long-term players for decades in the industry um whereas you're coming in negotiating your first term sheet which is the most important one you don't know anything you can easily get taken advantage of uh especially with an less reputable firm uh and you don't have anyone on your side even your lawyers uh like the usual uh silk and value lawyers get a lot more of their business from the VCS than they do from you yeah um and there's just a standard way of doing things uh and you have to know what's negotiable what's not what's important what's not um and what where you have leverage where you don't so that's why Venture hack was born what were some of the ways people were taking advantage of back then uh well I mean there there are quite a few of them one is the different kinds of liquidation preference so uh liquidation preferences the investors get paid back before you can make any money as a common shareholder uh but there were it was actually not uncommon for term sheets to have multiples or cases where they would get paid back and they would get a piece of The Upside um anti-dilution so how do you handle down rounds board control who who can fire you what happens in you're vesting um all those kinds of things it was very common it still happens unfortunately where uh very often an entrepreneur will get pushed out of their own company the investor will bring in um someone who's like a friendly CEO then next thing you know the company runs out of cash the investors to recap it it's a Down Round And then they own end up owning all the equity MH do you see much risk of that happening today um there's a lot of companies that you know we all in this billion dooll Club fairly recently pre Facebook's IPO um there hasn't yet been a lot of Recaps but a lot of companies are in these interesting positions we saw Spotify this week they' raised at a billion which a lot of people thought was very headyy they've now raised at three billion I mean you know they avoided the down around then that are they going to a lot of concerns with square like a company that still has a lot of execution risk out it can absolutely still happen but I think today it's actually more likely it'll almost happen the other direction where a lot of times Founders have inordinate voting control um or uh if you look at some of these notes that companies uh get their investors sign up to when they come out of incubators some of these notes are are pretty entrepreneur friendly surprisingly so um so now it's just business it's contract negotiations and I think uh you could see either side uh causing trouble but generally terms are much much much more standardized um this is one of the things that allowed us to launch angelist docs where we do the um free series seed and uh and convertible note closings online actually Ben mathys who built it sitting right say hi Ben hi Ben um so yeah so basically term sheets are supposed to be this black art they're supposed to be incredibly complicated no one on earth can figure them out you need expensive lawyers to spend $220,000 per law firm and they have to spend a month negotiating this document this closing but thousands of companies have done it and hundreds do it every month so how can it be something that has not been standardized by now um and uh the good news it is starting to get very standardized so we took the series C docs at Ted Wang had put together and that are used for a large chunk of financings today um and for example I think andri and horo has signed off on him and and is willing to use them um and we basically just built a workflow around those uh you know check boxes electronic signatures Dropbox and fill out the form fields and then we generate the legal Le put out the PDFs follow it with the with Delaware and all that stuff um there's no rocket science or magic to it it's just somebody had to tackle it yeah um so these things are getting more and more standardized and and you think that's a permanent shift it's a permanent shift sh it's a good shift uh when you buy shares in a company on the stock market you don't sweat the details about what the paper is underneath you don't think about all the ways you can get taken advantage of um you do maybe with the pink sheets or somewhere where there's like strange stuff going on um but generally you're assured that if you buy Microsoft stock and you own you know a thousandth of a percent of Microsoft or whatever it is that it has that economic value associated with it and you're not going to wake up tomorrow morning and find out that Steve bomber somehow taking your shares away from you um so you shouldn't have that fear in the private markets either neither side should and it should be well established contracts and norms and uh balanced contract law how much of this was um VC's trying to take advantage of entrepreneurs and how much of this was you know look at some point they're going to have power again in the ecosystem and we got to push back while we have power now and this is just the way the game is played yeah I don't I don't think any VC sits around smoking a cigar saying I got to go grab power in the ecosystem I think uh I wish they did yeah they don't smoke for one thing right um but I think it's just more about uh we're negotiating a deal contracts are negotiated for the worst case not for the best case uh things could go wrong if things go wrong I trust me more than I trust you so let me just make sure that we do it my way I think it's that simple uh and I think the entrepreneurs will do it back to the VCS if they have the opportunity so I don't I don't think it's a fairness thing I think it's at the end of the day it just boils down to unfortunately a power thing uh which is by the way what game theory teaches you most of it boils down to power not there is no concept of fairness um so you just have to make sure that you don't get taken advantage of a situation um where you have some power you exercise it to get a fair outcome or if you don't have power you're at least aware of it so you know what the consequences could be so what do you think about people who feel like entrepreneurs are pushing it too far now I mean even you know Paul Graham did a post essentially saying you know sort of you know remember you're You're Building long-term relationships here yeah I think there are definitely entrepreneurs who do push it too far um there are I I actually think the rise of uncapped notes is one example of that M um I've joked internally with with people that next up is uncap notes into the exit right you get 15% back 15% bonus of the exit and that's it that's your entire return um th largely uncap notes tend to be non-economic for the investors um and similarly I've seen uh situations where an an investor who's sort of trusting an entrepreneur will sign a document that says hey uh you know you're going to convert at a 6 million pre or whatever into the next into the next round 6 million cap but if we sell the company for gazillion dollars uh you just get your money back like you don't so there there's all these little twists and loopholes you got to watch out for which is another reason why it's good just to put these things online standardize them and then have uh one set of docs where you can say I've read this I agree with this okay and I don't have to touch it again I don't have to think about it again and next time the docs show up I know it's the same docs and if there's a change you can call that out but uh you know just make it very standardized right um but what is what would you recommend of young entrepreneurs who are in the room raising money should they if they have a hot company people want to get into should they try to push it as far as they possibly can uh no because money has karma too and uh if you treat it badly it will treat you badly the wheel kind of always comes around I I feel um so I think you have to be balanced about it but if you have a strong hand then you do deserve a strong outcome uh the problem is everything is contextual it's very hard to sit up here and say all this do X right um by the way that's what keeps these interviews interesting if there's a one set of right answers your first guess would answer them all and this place would be a ghost town but every everything is contextual and uh I I do think that you want to leave something on the table uh like a A good rule of thumb in negotiation is you know negotiate hard get what's get what you fairly do and at the end give something back um because you have to work together for the long term uh I I actually now firmly believe that uh everything you do in life uh all the returns in life come from compound interest uh it comes from the length and strength of your relationship look at the PayPal Mafia and how they just keep compounding into new companies that they do together similarly in your marriage or relationship the longer you hold out the better it gets right the better survive uh Warren Buffett is the richest guy on the planet uh or the legally the richest guy on the planet there's a lot of illegal wealth out there too because he never spends a dollar he just reinvests it he just keeps compounding it he holds it um so the same way your best business relationships are going to be with the people that you end up working with for decades um and that is true of your investors too um so if you treat them well and always try and make them money and if you don't make them money at least they don't feel like you overreached um you will keep that relationship for a long long time uh one of the things that I'm now very wary of is people who are over optimizing for the moment because they're signaling they're not a long-term player if they're not a long-term player you don't want to establish a relationship with them mhm do you see a lot of that a ton uh Silicon Valley is now back into the phase it was in 1999 maybe not as frothy but that it is a magnet town so it's pulling a lot of people in from the outside and uh back to game theory for a second uh a lot of virtue comes from the iterated prisoners dilemma if you will which is you're going to be playing that same game with these people over and over and over so it's in your benefit to cooperate because you know you'll play with them again but when a new person comes in and the rewards can be huge you can make 20 million 50 million and win and leave the Temptation is to cheat it's to kind of go for the gold right now or some people would call hack or hack uh but it's not a good kind of hack um and and there's a lot more of those people in the ecosystem right now are they coming in at the entrepreneur level Angel level all of the above every level every level it's just whenever someone comes in as a newcomer what you have to basically decide is is this someone that I'm going to know a decade from now is this someone going to be doing business with a decade from now um and if not uh then you have to be wary of what they're offering M how can you tell if someone is has the wrong motives how do you know if that's someone you don't want to do business with a decade from now uh well a simple one is do you like them if you don't like them as humans you're not going to associate yourself with them decade from now um second one is do you trust them and uh you have to pick that up in little ways because you won't really know until the money hits the table that's when you see what everyone's actually made of um but uh you want to try and assess them in little ways uh references obviously matter uh and you want to see how considered and considerate they are about things uh I've definitely as an investor I've dropped out of Investments because I felt the founder was over optimizing and in the in the grand scheme of things it was not a big deal like the econom ICS were almost the same but the fact that they were fighting for this tiny tiny little piece is tell me that that's they're they're overreaching they're going for too much right now uh-huh how frequently in the valley do you think people with the wrong interests win probably more than half the time and so does that does that bother you are you just if you leave that money on the table fine yeah you can't let it because here's so most of the times that you do good work and you do good things and you do it the right way you will lose so most of the time you you will do good things and you will lose and that's just the nature of the Beast it's a very efficient market there's a lot of luck there's a lot of competition uh and uh you might first time you do your company it'll probably fail and the second time you you do it you'll probably do with the wrong people and the third time you do it you'll probably get taken advantage of so you you go through these learning curves but you only have to get it right once that's the good news the outcome is so usually so good in a binary sense when you get it right that you just have to get it right once and what's the risk I mean these days people are writing checks you're still getting paid you're living in one of the best cities in the world you're drinking great coffee you're you know hanging out of great bars you're going to great restaurants you're uh you know and it's considered glamorous I mean we're no longer in a time where if you are at a cocktail party and someone asks what you do for a living and you say you know oh I don't really work I'm trying to start a company like that's no longer you know this guy is a total weirdo I kind of don't like that actually I wish it was more that Underdog mentality you and me both but you're the one enabling all of it I I don't I don't think so I mean you are enabling more people more people to geted be entrepreneurs so is that in and of itself a good thing I think that is an unequivocally good thing um what I don't think is necessarily good is for more companies to be funded I I I don't want companies that are UNF fundable to get funded I think that is a bad outcome for everyone uh because you there are a lot of great businesses that can be built without funding but the moment you add funding it ruins them because now you have these high expectations and they have can do stupid things to generate return for their investors um so you definitely don't want that but uh I do think that more startups are a good thing to me startups is just small companies and more creativity uh and so you lump into that lifestyle businesses absolutely yeah yeah you know the lifestyle business thing is a it's a little bit of a put down that comes more from the investor side uh but the reality is I think we would all love to have great lifestyle businesses yeah right it's something we're passionate about something we work on we set our own hours we're in control of our own life no one else is no one else is your boss and uh you can keep the profits and you don't have to uh stay up nights and or throw up in the shower cuz you're trying to figure out how to turn into a billion dollar business and youve convinced everyone around you it's going to be a billion dollar business but you yourself are not convinced right so um and then don't tell me you haven't had that moment maybe not throwing up in the shower I was throwing up in the shower a couple months ago I think it was because I'm pregn you're pregnant yeah fair enough but uh but I'm sure you know look you have investors yeah you told the story yep how do you feel about the story at $20 a ticket and I think half of you you're free so Reed Hoffman gets how many pennies back in the dollar the ticket price is we absolutely lose money on this is a longterm bet um no look I I have I have so much appreciation for sort of everything every entrepreneur I've ever written about has gone through after doing this for 10 months and I frankly I'm not one of these people who who will ever go around saying I just love the early days of a company I never want to do this again I hope I am running this company for the rest of my career I never want to do what I did for the last 10 months Angel is my last company partially because I love it so much I want to do it forever and partially because I don't have another one in me I'm burned well thank God for you and everyone else who's disrupted the industry you know the thing that actually disrupted the industry was not uh and uh and I give YC for example a lot of credit for pioneering the the incubator the new incubator uh but it wasn't them either um the thing that disrupted the industry was just the cost of building a business has collapsed and that has changed everything and so uh like I said before we had our sun servers and our Oracle databases and now you have AWS and you want to Market uh you want to acquire customers you use Google you want to do customer service you do that on Twitter you want to Market use Facebook um you want to uh you know host it's on Heroku um you need some part-time labor it's Elance or odesk you need your site cleaned up that's Mechanical Turk um you want money it's Kickstarter or angelist so they're just or or they're Angel Investors so there's just so much embedded leverage in the system now that a single person with a lever can truly move the Earth it was impossible right um I think I think the Venture Community for example likes to treat Instagram as an aberration they like to say oh yeah Instagram well don't worry about that the rest of you are still going to need 100 million bucks from us but I don't think that's true I think we're going to see a lot more Instagrams uh there is actually a specific point of disagreement I have with Mark andreon since you want me to be controversial you know Mark's Counterpoint to this would be that Instagram didn't monetize but I think they could have monetize fine with five people five additional people they don't need and there's nothing about Instagram that needs 200 people um so I I think we're going to see more and more and more great businesses built um that are essentially built entirely through leverage uh that are communicating to the world through apis uh and just have very very very little headcount so they just need very little capital and because they need so little Capital Everything Changes the entire ecosystem changes the entire nature of the Venture industry and the relationship to the entrepreneur changes and it also changes the biggest pain point that entrepreneurs have right now which is Talent that's right Talent is the biggest paino at the moment um it actually makes it a lot harder because people can go start their own company so if you don't have product Market fit also in in Andre's words why should they come work for you why shouldn't they just start their own company or go into an incubator certainly if they have a good idea and they have the risk profile and they feel like they're ready that's that's your opportunity cost um so the days when you could before product Market fit you'd raise a million bucks and you'd hire your first engineer to give him a quarter point that those days are over um if you don't have product Market fit these people are just late Founders um and you have to treat them as such so it makes it a lot lot harder to hire um it also means that the entire Venture Capital Community has gone through a massive shift in the last 3 years which I don't think most of them are aware of um you know I think uh many of them are aware that things are changing but I don't think they understand what a deep level they're changing at um to give you one example San Hill Road became the center of the tech Universe because that is the place you used to go to for your first check um it was the first credible money in uh who took a board seat and had influence over the company um but that position and power moved away from them in 2007 it started moving toward the so-called super Angels the Chris sakas and the Dave mcclures and I was doing it for a while um but now today that first check privilege goes to the incubators so excuse me most companies don't go around calling themselves a sequoia company rather they are uh you know YC back Dropbox or they are uh Tech Stars back torbit right so they're they're marketing themselves in a way um or you know it's Angel pad back mopb so the these companies are taking their brand and their advice and their first check the first people who believe in them are doing it with $255,000 $115,000 not with $3 million and so that puts the Venture Capital industry on a further back section of the feeder chain um which is dangerous because the brands get built by establishing the early relationship with the entrepreneurs um and uh and so I think that's the the the lower amount of money that companies needs changes everything and that lower amount of money it's continuing on I mean yes today most of the seed rounds are 750k or they're a million but there are a lot of companies that can get really far in 250k you have two or three great hackers you can prototype and test something for a couple of 100K I mean heck they do it in incubators for 25k in 3 months that's a competition um so so that lowering cost of building a business is dislocating everything and everyone mhm so let's talk about the role I want to talk about the role of the super angels and I want to talk about the role of uh VC firms who try to compete with them and get lower and lower down because look I think evidence of what you're saying is how much VC firms have reinvented their their model um you know trying to do this um but let's talk about the super Angels first um you know I think a lot of these you know were frankly unsustainable and a lot of them while they all they all announced they've raised a new fund you know if you really talk to the lp Community they've raised it at much lower rates than what they were seeking and now everyone is very panicked about this series a crunch that they see coming and it's interesting the people I hear freaking out about the series a crunch are not the entrepreneurs they're the super angels I disagree I think the super angels have had stupendous returns not all of them really you think an agregate at least the ones that I was investing alongside the Mike Maples the Chris sakas you know Mike m Maples is a dramatic exception for many sure but even even people like uh you don't think it's ratio that it is in in Venture Capital where 95% of the returns are coming from 5% I'm comparing to the class of 20072 2008 when we were out investing in the average pre money was between 1 and 3 million um and VCS wouldn't touch it cuz it was just too early for them and they didn't know how to writeit check for 2300k um the returns from that class are pretty good now if you go into 2010 and you're seeing prices of 6 to 10 million same Quality Companies more competitive your returns have to go down um so I think the Vintage matters a lot and Super Angel is a funny term it's just a most Super Angel had funds uh they just had small VC funds they took the angel branding right um and but they're really funds they're really VC funds um so to me the distinction at the end of the day is not drawn between uh whether you have other people's money or not it comes down to uh are you willing to write a small check are you willing to decide quickly and most importantly are you willing to forgo the normal control terms that a VC would have put on you back in 2007 so you say okay I don't need a board seat I'm in the service business I'm going to help you and you tell me how I can help you um so uh the the super angels as a class I think are almost setting up to be the next generation of the Branded series a firms I mean they're growing into that increasingly these guys in order to avoid the series a crunch are all doing seed extensions which they didn't do before and so if you look at the money they're putting to work in a company it's pretty similar to what series a used to be yeah the series a crunch you could take two points of view on it one is you could say oh there's not enough series a capital uh but the reality is I think it's a little differently I think that a lot of these companies are experiments and that's okay there's nothing wrong with that um they're cheap lowcost experiments and they should be treated as such so if they fail there shouldn't be any egg on your face you just go and start over and try again look at all the YC companies that go back into YC um so there's a there's a recycling here the problem is the prices have to reflect it they have to reflect a hit rate of one out of five or 1 out of 10 instead of the one out of three and I think early investors who may have had the wrong expectation that it's not an experiment will try and push you into raising a seed Prime as we call it insided angelist or raising a series a when it's premature um and all you're doing is you're trapping yourself you're locking yourself in into push like sisifus you're trying to push this rock uphill and there maybe there's no Market there or you missed the market um and or you don't have the right team it's just almost impossible um so you have to treat it like it's an experiment the prices have to reflect that the amounts raay have to reflect that the attitudes have to reflect that in some sense I feel bad for this generation of entrepreneurs because back in my day um if you managed to raise that first few million bucks the odds of you making it to the next round were one out of two or one out of three because there just weren't that many companies that had raised 5 million bucks but today if you raise a seed round the odds of you making it into a series they are closer to 1 and 10 so the odds are against you you just have to be more comfortable with the idea of failure so I think it's better if you're going to fail fail fast face fail early acknowledge reality and then try again and in general I don't think startups do this in the valley I mean you look a lot of people there's an obsession with finding someone a soft Landing which means an aqua hire why is your why is the repercussion of your company did not have that product Market fit there was something you missed now I'm going to go be an indentured service servant to Facebook for the next couple years with you know some members of my team so that we can all sort of save 50 cents on the dollar mean that doesn't seem particularly healthy to me yeah the aqua hires aren't really pushed by the investors the inv I don't think true the investors lose money in most not not in the seed cases listen I have talked to Super angels as we call them who say the bulk of their time is spent calling around trying to get these guys soft Landings right now yeah the they're really hard the set of companies that get soft Landings is very small uh I think it's uh it's overrated in the Press because the pre because if your company dies completely you're not going to talk about it it's you're not going to tell anyone about it um but if you get the aqua hire then you get to save face and you'll trump it up a bit and so will the investor so you'll hear about it so there's just an Evidence bias here which is tically increased uh I think the demand for people trying to sell them is is gone up supply has dramatically increased but the actual Clos transactions I don't think has increased all that much um not most companies do not get soft Landings even the ones who want them um and I don't think it's so bad for the entrepreneurs necessarily because you go hang out at Google for a year or two or three and they pay really well um you know they they'll give you and and the acquirers are getting very smart about separating the investors from the talent um so they'll give a big chunk in retention and earnout to the talent and the investors often lose money yeah so I've heard recently that this is increasingly happening and that a lot of investors are pioneering you know terms to put into the term sheet right so they say guaranteed 2X or whatever right but the reality is they can't force it when it comes time for the actual acquisition the acquirer will say well we're only going to pay 10 cents on the dollar take it or leave it and if you leave it your opportunity cost is zero um so absolutely we are seeing investors put in multiples on Acquisitions um so that they don't so that they make some return in these cases but the reality is they have no negotiating leverage MH let's you brought up y combinator i I'm curious to talk a little bit more about the impact that's had one thing that's fascinated me about the last few years is how many things were sort of pioneered and again you still have the same thing with companies as we just discussed but the Venture level how many things were pioneered in the late 90s as new ways to form companies that did not do well and how many of them have now worked in this in this iteration you know there was when it comes to crowdfunding there's this horrible sort of Draper Fisher fund called MVC that was a huge failure um you know there were definitely incubators that were huge failures um there were a lot of firms who tried to do sort of what andrees and Horwitz has been doing with the agency model there was the ketu model of Kleiner Perkins which now um first round is doing I mean you it's funny how much you see these coming back um I'm curious from your point of view both with you guys and YC and let's take take YC first what why did it work better this time uh YC worked for a number of reasons one is of course Paul himself as incredible reach and you know amazing writer and and adviser um so he just pulled in Talent uh he pulled in talent that was completely out of Market at the time if you were two young kids graduating out of MIT and you had done some great projects you you could not just go start a company it wasn't that easy um so he provided them in a path into Silicon Valley now of of course there are multiple paths but at the time that was the only such path uh and unlike the older models that were tried like the ideal Labs of the world he didn't take 30 or 40% of your company it wasn't his idea um he was taking a much smaller chunk he was basically saying I'm going to be your early advisor SL Angel who will put you in business and really explain to you how things work and give you access and for that I'm going to get in a very low valuation uh but I'm going to take the most important part of the advice that you look for an investor um and then you'll be able to It Up by getting a higher valuation from other people later um so he really organized it uh in in and I I'll give him credit for another thing too which is he modeled it very much after the college model um so the time period that you these are these were mostly for people coming straight out of college so very natural transition and it was like okay uh you're going to have you know a three-month like a semester type period um you're going to have a project that you have to ship and show there's going to be weekly meetings and and reviews it's we're not quite grading you but it's almost at that level we're going to have office hours just like you did with your professor and then finally there'll be a demo day with the graduation and Alumni network so it was a very nice templatized model that's just overlaid uh onto the school model um there YC is a lot like you guys and the fact that it's one of these things that VC's ostensibly say they support and then there's a lot of grousing about the impact on the ecosystem um is do you think one of the issues that VC's have with YC is how much his economics are just completely different I mean he doesn't have to go fundraise every couple years he doesn't have to De he has some LPS but he doesn't have to deal with them in the same way yeah I mean his economics are great if he finds keeps finding an occasional Dropbox uh I mean they're but he doesn't need very many of them yeah that no that's right I would I would guess his economics are probably as good as Mark Andre's uh but without the $3 billion under management and having to deal with all the LPS so in that sense he's really hacked the The Venture model um and and created this incredible uh Niche at the beginning the irony is the rule of thumb in the VC business used to be that the more money you raise and the more money you invest the more money you will make and YC turned that on its head and said with an absolute minimum amount of capital we will have amazing economics uh and it was a startup they took huge risk and now they're getting paid for it they deserve to yeah um what do you think it's sustainable in the same way lot of people feel like there's you know level of arrogance there there people saying it's overfished Pond no I think it's a understandable as long as good companies keep going there and they keep doing a good job with them uh I do think that the other incubators have a lot to offer as well uh so you know if YC is a Harvard uh or the Stanford there will be mits and there will be um you know calex and so on so uh they're starting to uh segregate uh incubators by geography of course accelerate in Chicago mro lab in La uh 500 startups Global uh Tech Stars of course Boston New York but do you think any of these guys are in the same league as YC either in the halo effect it gives you uh not yet in terms of the markup slh halo effect of getting that higher valuation and demo day but in terms of sheer quality I've been very impressed with some of them uh Angel pad which has kind of all the EX googlers um smaller class very high quality um if you look at lemnos and accelerator they're doing the hardware ones they have very high quality and they're uniquely focused in Hardware um Texar New York usually has some very strong companies um and you know the others are more are specialized are up and coming um there's a lot of good ones out there so I don't think it gets to be just one size uh fits all forever the interesting thing to me about incubators is you know to me it's very easy to find Capital and to find mentors in Silicon Valley I mean particularly compared to probably anywhere else in the world um and yet you know why combinators here I mean it would be easy to say why combinator would do a lot more value in places where that wasn't the case do you think in inators work outside of tech hubs that have some sort of critical mass it's much much harder um so uh the problem is that funding markets generally develop backwards uh people think like oh I'm going to create an incubator and then uh when people graduate well who's going to fund them it's got to be the Angels if there's no angel ecosystem those companies fall flat in their face and die and so and then even if you have Angels who invest in them then you need series a VC to pick up the next part and series B to pick next part and so on and soth so what tends to happen is in a first in a country you have the public market get robust and then after that you'll have mezanine investors come along who will just cherry pick deals right before they go public and then you'll have the late stage then the earlier stage and so on so YC had to move here from Cambridge because they couldn't have worked anywhere else it just wasn't enough of an Angel ecosystem now there is an angel and series a ecosystem in at least New York and Boston and one or two other places um London and you know rest the US is a little dodgy um but not a bad way but just you know there's not enough VCS like you go to Austin there's two VCS right I love Austin great place two VCS um and one of them spun out of the other so they all talk right they smoke cigars um so what's happened is some of the newer incubators are actually performing a very important function which is they are moving people around so if you look at startmate for example uh they're an Australian incubator and they have top-notch quality um part because they cream skim the entire country of Australia and they pick a few of the best companies and then they'll uh work with them for a couple of months in Australia but then they'll move them here to the US and spend the last two months here and then take them around for demo day and funding and like founder founder fuel is doing that out of Montreal and so on so they're all they are building the bridge because if you're an entrepreneur in that area you don't have that bridge to the investors um so you have so you rely on the incubator to help you do that um so actually they're they're forming sort of a symbiotic relation with Angel list because uh they will uh train the entrepreneur and help them at the beginning and then to the last piece they'll bring them out here for the demo days and they'll put them on Angel list and we'll help them meet investors as well so I want to exibly talk more about angel list directly um how much you know you guys started really with the funding um you've done some stuff on the talent side you've done stuff with the documents I mean you seem to be sort of like ticking down the list of things that irritate entrepreneurs and you trying to make it at least more open or or easier how much of that was the original vision of the business and how much of that is just well this worked let's try this right yeah you know it's really hard to say you have a plan you have a vision uh but it just evolves every day if you care about your business if you care about your product you're thinking about it for every minute of every hour of every day you know your spouse is talking to you and you're thinking about your business and then you look back and you say that's great honey and you smile and you haven't heard a darn thing she said all over dinner cuz You' been busy thinking about your business and and if you're not in that mode then you're probably not in entrepreneur mode um so given that it's very hard to draw a boundary and say this is what we meant to do and this is what we end up doing because it's a smooth Continuum you're always coming up with ideas uh and some are better than others you try them out against the marketplace so we started with fundraising we wanted to we wanted to make introducing startups to investors easier um and then uh we did some of that and then we said okay we're going to go into series a that turned out to be a lot harder than we thought we've definitely got dozens of series a done but nowhere near as many as we would like cuz it's a higher bar and more of a relationship business um we thought okay we'll go into all small business Equity Capital that sort of failed there are just not that many angels outside of the tech industry we're going to go Global well there's there's only a few towns where it sort of works so we're big there now and China is a black box to to us probably everyone uh who's not Chinese um and then we thought okay what other verticals can we get involved in it is model very much after Craigslist that's not an accident that is called Angel list um and the Craigslist model is help people find the connections for all the services that they need um and charge for very very few of them um and uh make it seamless and quick and easy and and no hassle and so we want to try that and uh so the next thing we did was Talent which we launched a couple of months back um and it's not widely advertised but it's actually quite a bit bigger for us than fundraising uh we do today say about uh probably last week we did 300 introductions between startups and investors so that's Mutual opt-in where the startup is willing to meet the investor the investor sees the company and hits the get an intro button in reality we might have done twice as many because a lot of it routes around angelist they see the company in angelist and they go through Linkedin because they don't want to be tracked or seen um we but we're doing about uh three times that volume right now in Talent where we're connecting a curated group of developers and designers from companies that have failed or maybe they want to leave their current compan um and we're connect them to 2,000 startups um that are fundraising sorry that are that are recruiting um and uh this and we haven't advertised it at all but the set of startups that is recruiting is actually quite the who's who we've got quora and Kickstarter and path and KH Academy and pocket the read it later guys and climate Corp and just all and Yelp and all kinds of great companies that are recruiting um that to me is like the under toold the the the less told story of what's working at angelist uh which is a talent piece charge for that we do not charge for that uh we've actually been using it ourselves it's already paid paid itself back we hired uh Misha through it and he's here somewhere he's he's our uh there is um he's a designer with angelist welcome Misha and we found him through angelist talent and uh we actually made an offer yesterday to a developer that we found through Angeles Talent um and the quality I was going through it today and it was blowing my mind there was some really good people there and I actually almost went to the one guy we have working on it and I almost said hey Keon just close it down I just want to mine it first it's like a big it's like a big Piata don't let them get to it you almost did that or you did that I did not do that um there's no early look um but yeah that's probably a place where we will charge over time um you know we got to pay the bills and why not charge now uh at the end of the day our motto is that we stand for the startups and we want to do what's right for the startups and most startups don't have any money they're broke I mean how many people here on free or discounted tickets right don't don't raise your hand you'll make you'll make make your neighbor feel bad so to whoever paid the full 20 bucks the the huge 20 bucks the 20 bucks okay the pizza and the beer were thrown in subtract that out so whoever lost $5 on this whole thing um yeah so uh there's a t-shirt too no one is losing money off this transac so the truth is a lot of startups can't afford it and uh big companies can afford it big companies will pay to recruit and your could afford it though cor could afford could afford it and your average recruiter uh char is 25 to 30k right now for placing a developer designer I know cuz we paid one right um in fact ironically the guy who built Angela Talent internally was the only guy we ever paid a recruiter for and we paid him 25k and then he came in and he created the system that routes around recruiters well part part of our efficient use of 25 exactly so part of our policy is we don't allow Recruiters on the platform uh we want the talent to see uh everything that an investor would see so they almost see the company's business plan and they see who the investor are and how much cash the company raise and who the founders are and where they come from and we force the company to divulge how much equity and salary at least a range that they were offering and we have thrown companies off that refus to divulge that they got really mad at us um but we said hey you know if I'm looking for a job I want to see this and you should be transparent about it um and so likewise we also promis the talent that we're going to connect you to a Founder um or to the CEO or someone very high ranking the company you're not going to go through the normal HR screen um so given that it limits our ability to put the big companies on there and the big companies are the ones that pay um so it's it's hard to charge so we will charge we'll probably make it in some model where the small companies can pay an equity or convertible note or you know if if it's real hardship call me right um and it'll still be way below Market it'll still be far far cheaper than anything else out there but right now it's an open Open Season so go recruit it's a big pinata how are people finding out about it it's a good question I don't even fully know I think it's Word of Mouth MH uh part of it we did send out one email to our Angeles user base which gave us a little Spike um I think a lot of people come in and they're thinking about creating a company and uh you know they have an aspirational startup and then they see it uh another one could be um that they are researching a particular company and they find the profile on angelist um but right now we're adding about 250 cured and this is vetted so picked out of a bigger pile um startup quality good people every week um so that's just new people entering the system it's certainly more than any one company can keep up with so anyone who says to me that they're having a hard time hiring right now is actually not really looking that hard um I mean I agree it's it's hard to hire it's non-trivial it's but it's not hard to meet good candidates uh that problem is being solved um what is probably hard is to convince them to join you right um what are the other problems that you think entrepreneurs have that are not solved you know big one is customers getting early customers um there's a lot of stuff that you rely on a top tier Venture investor for like uh you know who's a good attorney who's what do I do for my back office uh you know I need a good PR firm uh I need you know two early Enterprise customers contacts I need an acquirer um all of these people are in the angelist ecosystem they all use it in various ways I mean we have reporters um you know Tech crunch you guys whoever who are monitoring B uh beta beat um uh venture um we have uh m&a groups there's more than 30 m&a groups that actively use Angel list you know Square Yahoo Google Groupon um they pay attention to companies on there they use they research them we just don't make it explicit those are very implicit transactions and you're going to see a surfacing more and more of those MH are you going to charge for that probably not I mean what is your if you're Craigslist what is your equivalent of the I guess listing apartments right Craigslist charges for uh jobs and for real so I think our clest and that was the key to LinkedIn as well I mean they hit profitability off the jobs right so jobs is an obvious one uh uh another one might be uh that there are people who want to reach lots of startups so today we have almost 100,000 uh startup profiles 25,000 actively maintained and claimed um and I notice brain Tre is one of your sponsors right they're Payment Processing um they offer developer kit to make it painless and easy for developers to process payments and uh I can say that cuz I'm not in the payroll they didn't pay me anything um so I can advertise your sponsor for you um but I think they would like to be able to reach all the startups on angelist at the point where those startups are just getting funded um so the the good news is we have the companies coming in uh before they're funded through the funding period when they get funded and so at the right time you can offer them more and more things uh but like I said generally the startups don't have big ability of pay um and we we really want to stand for the startups we want to make life easy for them so we got to find somebody else in the ecosystem to pay um another thought is there are a lot of out of Market there's a lot of out of Market Capital sitting out there uh that wants to be in startups but you go to Wall Street there are hedge funds or mutual funds um right now their option is to wait until the company goes public 10 years later um and they're intermediate steps at which they would like to be able to back other good people on the ground invest in startups so I think we can charge for Access there down the road um that starts getting us into broker dealer territory so you also have to be regulatory compliant more complicated um but it's good for the startups because it brings more Capital into the system for the startups gives them more options um so those are other places where we could go are there things that you will never do yeah we'll we'll never charge the startups and the investors from meeting each other I think that's that's just not going to happen uh we don't want adver selection we want everyone to feel comfortable using it we don't want anyone to have a reason not to use it um so that that is a very simple one that we will never do um I ALS so you know like Google has don't be evil uh we will never do anything to screw over your startup knowingly if we do it's an accident I apologize but we're not going to do it um so even the docs that are written that that we use they're they're balanced they're meant to be acceptable to the investors but they're about as friendly of a deal as you're going to get from sophisticated investors for the entrepreneurs so so they're very much um written with the entrepreneurs in mind have you had debates in House of ways that you could be monetizing the Sur and like some people think well this is still this isn't doing something bad and then other people think there are I mean there's got to be some of those gray areas uh yeah you know it's funny the investors always come up with the same one they always come to me and they say why don't you charge every investor who's on angelist like I don't want to do that I don't want to give them a reason to not be on angelist but they say no no one would care you could charge them you know a th000 bucks a year M like well that's not even worth it I might as well sell tickets to Panda month so that's a money loser if I ever heard of one uh so we're not going to do that uh but for some reason the investors always come up with that business model uh but so there's been no debate around that what about like the thing that I always hear that entrepreneurs hate is like when they have a liquidity event and then it's like all the wealth managers just come out of the woodwork and like we'll go through I mean I always call them zombies because it's like they will plow through a barn trying to get to you I mean they'll just like this happened with me with tech I didn't make any money off Tech crun that's always the best part when they show up thinking you're rich and not the worst of this without the money I'm still on two or three email lists about private jets I I have no idea how that happened um I mean what if like wealth managers were like I want to pay you to access people who like like that would piss people off I would yeah I wouldn't do that it's like yeah putting your Doberman in someone it's not nice uh no I don't think we're going to go down that route I think if we make some money it'll be on it'll be basically providing a service that you clearly agree was incredibly useful probably not related to fundraising um and uh where will still charge a below market rate I mean it's just so much more efficient to do everything in the cloud frankly you know to some extent if you look at what a top tier Venture fund does for you one of the things they do is they connect you to their Network right like Fred Wilson was quoted recently saying that he believes his Rolodex is his most powerful asset in the Venture business and uh Andre said in a fortunate an interview he said that um every time we expanded our Network our entrepreneurs said we want more Network more Network more Network well a network is an information good it doesn't cost much to give it away um so I think we're going to basically make the network part very very widely available for everyone it's very low cost for us um and we can charge kind of a Cost Plus and still have it be way way way cheaper than the other rate that you might pay um so I want to get back to deal flow because I think this was something that you know I've covered Venture for a long time and it's the big proprietary thing that you know whoever is the top dog on in Silicon Valley has I mean this is what VCS really worry about with the super angels and this is why they've had you know these sort of stealthy scalp programs and you know tried to invest in the super angels and partner with them and have these accelerator programs they're all worried about not getting in that Center of that deal flow how do how how do you think you have disrupted deal flow so proprietary deal flow is dead and to the extent that proprietary deal flow still exists it's because the entrepreneur is not being smart about it the entrepreneur is basically self-limiting the market for their shares uh and that's just silly uh the good news is there are dozens of great Venture firms not five or 10 there's dozens maybe hund maybe over a hundred um there are hundreds maybe thousands of great Angels who have started their own companies exited them are operators and are very entrepreneur friendly and you're just not going to reach them knocking on doors one by one right so to that extent uh the incubator demo days the conferences uh you know you get up at a launch conference or Tech crunch disrupt um and uh then various networking events and of course angelist commoditized that they open that up and they they allow you to create more of a market for your shares um so generally what I find is the the people who are really proprietary with their companies and only want to show it to a select few investors um and I hate to to insult my own generation but it's it's the older entrepreneurs they're still doing things the oldfashioned way whereas the younger ones checking and tweeting in you know they know that it's an open transparent World um so they're they're more open-minded about who they talk to uh and so I think proprietary deal flow is basically dead uh the the percentage of deal flow that was proprietary enclosed uh in 2007 it was probably you know 90% uh today it's probably less than 50 and it's declining fast M um and it's and it's now going across into other uh other verticals too like Enterprise and biotech and part of what's driving it is that people need less money so they can they can raise it for many more kinds of investors part of it is all the platforms like us and whyc combinator um part of it is that uh because you need less money you can actually launch your product and then go raise money and so you don't have as much to hide the secrecy element has gone away to a large degree uh so I think proprietary deal flow is dead now now what VCS do have is proprietary access access which is their ability to get into a deal um and some and the really hot deals especially the consumer ones are sort of obvious to everyone because they're they're getting crazy numbers so everybody wants to get in so how do you get in that's about your brand and your access and your knowhow your knowledge um but even there I don't think it's all necessarily good news for the investors um it's good news for the top top tier because their brands are so powerful like an Andre or a seoa can outmuscle almost anyone getting into a deal uh but that being said uh there are a lot of emergent Brands the super angels are all emergent Brands Google Ventures you know comes out of nowhere Yuri Milner um so there are a lot of new brands and most of the new brands that have come out in the last few years uh have been built on the notion of being entrepreneur friendly yeah why combinator is built on that notion we're built on that notion uh true Ventures and recent they're all built on the notion of we're going to do what's right for the entrepreneur even if it's economically bad for us um I was a deal as an investor with SV Angel and this was a while back and uh I remember the company was shutting down and it had like 75,000 bucks left in the bank and it was not a large amount of money and uh SV Angel basically just said okay we're just going to let the entrepreneur keep the remainder and use it to you know find his next job and Tide him over I was like wow like that that was mind-blowing and so we all went along we followed that lead but it was a very nice thing of them to do and I think they've also built their brand on being very entrepreneur friendly um so uh I don't know where I was going with this I'm rambling at this point you should probably take I think it was about access access it's about access it is not about deal flow anymore uh and so a lot of the firms that are doing consumer investing are falling all over themselves trying to figure out how do I differentiate myself how do I get access into good companies um and that that is the current name of the game is not about deal flow anymore anyone who does not have great deal flow should get on angelist because we have great deal flow on angelist it's all there right so so what about the role that you sort of the brand that each venture capitalist is building for themselves is playing I mean you know when I first moved here Venture Capital was sort of coming out of the Shadows for the first time and then after the crash there was a real reaction to it and everyone you know your best friends at Benchmark I think were the most extreme because they had a book written about them and they were like we are not ever going to talk to a reporter for five years and you know Sequoya was very famous for this they would for many years just say it's you know it's not about us it's about the companies and whether or not they believe that in the way they acted with a company can be debated but they certainly did not go out there in the press and and brand themselves and you know didn't didn't want to be out there you know I talk to VC's all the time now who feel like in the sort of hybrid Dave McClure Mark andreon era if you don't have a big brand for yourself you know you're you're kind of hosed but at what point does that become you're taking credit for what the entrepreneurs done and kind of come back to bite you yeah brand is a really weird thing personally I just think it's funny how uh they've managed to Brand money and it's the ultimate commodity right it's like branding oil like do you really care about Shell versus Chevron um but it turns out you do and and the reason you do is because the VC brand often reflects how nice they're going to be to you once they have control so it goes back to this entrepreneur friendly thing because if you raise a large amount of money eventually you will lose board control you will have VCS kind of controlling the uh you know your Rel ship in the company and your tenure and supporting you or not supporting you if you ever hit a hiccup you're going to have to get a bridge round from them cuz no one from the outside wants to hit fund you while you're on the decline and those terms matter so to me brand is much less about value ad and it's much more about entrepreneur friendliness so I encourage entrepreneurs go for whoever trusts you likes you and will support you over who you think is going to add value because the add value thing you can now get from many places you could argue that the incubators have taken over lot the early Network and value ad and advice giving uh you know good advisors are cheap if let's say that there's a investor who says they going to be value added but you're going to pay 2 million bucks in your valuation well I guarantee you you can find great equivalent advisors for a lot less than $2 million you can give them stock um so it really boils down to how are they going to treat you when there's control issue so the good news is it's pushing the industry an entrepreneur friendly Direction yeah that's where the best brands are built mhm there's really been an aggressive move against the value ad VC's bring I mean you know we had Mark Pinkus you know a couple months ago and he said that you know Yuri mner is ideal investor because he doesn't want a board seat he gives you lots of money he doesn't bother you I mean you know over and over again when you talk to entrepreneurs you hear that and I feel like that's been the fashionable thing that people have gone after Daniel L actually sort of said the same thing in his fundraising advice last week but for an entrepreneur kind of coming to Silicon Valley for the first time is that really good to optimize for an investor who you know either is a seed invest like you know Dave McClure or Ron Conway who's so spread so thin or um you know someone whose brand is about I'm not going to take a board seat or bother you isn't there some role for VCS and investors being inv absolutely I mean nobody else is going to Care to the level that a VC who has a lot in the company will care but that can backfire on you too so I think it ends up being a mix and the market is finding its bearings on this but you get your early advice from the incubator and your early network from there uh and then after that you get your first big bet from a McLure or a Conway cuz they are very prolific with writing those early stage checks so at least you get an early believer and then you probably have one or two angels in your round who have invested more really care more about the company and maybe you put them on your board or you make them Sherpas or advisers and then by the time the VC comes along you have this other constituency that can advise you support you to making sure you have a balanced relationship with a VC and not an unbalanced one um like how many VCS are going to screw over a YC company right um so they they have a little cartel over there they basically the entrepreneurs have unionized almost through through the incubators um so uh I think it's a good balance it's a healthy balance but definitely it used to be that there was just you had to get everything in one you got your advice you control your money and your brand from one investor and so you had this bundle and there were only 20 of them and you maybe you only had two term sheets they don't have a lot of choices now you can mix and match a lot more it's a good thing choice is good mhm um you to be savier as an entrepreneur to negotiate that though uh you have to be very Savvy it's it's actually a little unfortunate but uh the lead in in a company whoever that founder is who's spending all their time dealing with investors I feel like half of a Founders one founder in the team will spend roughly half their time over the life of the company just dealing with investors or investor issues and the investors don't want to acknowledge this but I've been on the entrepreneu side enough to know that either you're pitching an investor or you're keeping them happy or you're looking for the next one uh or you're negotiating with them or you're working on their pet project or whatever it is right uh but there's just a lot that goes on uh so it it can be a real time suck MH um there's I still hear um investors say that not every company should be listing on Angel list that there's there's some sense of you should raise your money first and then list on there to get a lot of the job benefits the recruiting benefits yeah I don't I don't think it's an in Investor's interest to send you to the market right that's just obvious um so you have to kind of consider where the advice is coming from uh it's true because Angels is an online medium it has different characteristics than fundraising offline uh fundraising offline is a lot more about the personal relationship so you can actually convince someone just through your charm uh whereas angelist is because online is much more objective so they're going to go based on your metrics the quality of your product and frankly who else is in your around gives you some social proof some credibility um or what famous advisor do you have or what incredible award have you won or what have you done so if you can't show it if you have to tell it then yes angelist will not work as well for you but if you can show it angelist will actually work better for you because you get to show it to thousands of investors at once instead of just the five that you happen to meet so you can end up with a very competitive round U where you can really set the terms the way you want but if what's helping you get that competitive round is having a superstar advisor or having a good angel I mean like in the case rally they had Mike Maples and they had you know re Hoffman I mean are you really opening up the market that much cuz those guys could get the money uh absolutely I mean there are lots and lots of companies that come into Angeles and get funded that have no investors to start out loku did their seed and their a and they had no investors coming in Talia did their entire a um so you know you can you can absolutely do that you just have to have something else compelling incredible to show um so I would say today it's probably about half and half half the companies that we feature um have good committed investors and half of them don't they're they're actually just starting out and what we're starting to do now is uh for a lot of companies that come in that are too early to even have something to show but they just have a good team uh we're passing them to incubators um so we did that with 500 startups last month uh where in a two-e period we sent them 600 companies uh all the data was structured rank rated sorted social graph everything you can see where the Stanford Founders are and who was connected to a mentor we gave them a processing queue just like we used to go through them uh and they took in a whole bunch of companies and they liked it enough they're going to use angelist as their standard acceptance me uh mechanism into their accelerator from now on um and actually I mean it's is not a real announcement announcement like there not a press announcement but we're going to do the same thing starting tomorrow uh for both Angel pad and techar uh Boston I believe um and I think by q1 next year you're going to see dozens and dozens of incubators that will basically take your application directly from angelist so you build your references and your profile in one place um and then if you want to go for Angel money you can do that but if you're early um and you want to go for an incubator you can go click click click and off you go interesting um there's also by the way a bunch of VC funds um who use angelist to find their initial 100K seed investment so I can't announce them yet but there are two that we're already working with internally where they kind of review basically every deal that goes through that is above a minimum quality threshold basically not spam um and and they say hey do I want to be the first one in to write 100K check into that company so the companies are getting looked at by people who are using it to find seed deals so how does how do those Partnerships work for you because I know when we talked about the the um seed documents you know it was in your best interest to have there was there was a law firm you launched with I believe it wils and it was your but it was in your best interest to get sort of as many as possible so it didn't look like there was preferential treatment you know I imagine with incubators and investors you know that's going to be that gives people another reason to you who are looking for reasons to hate no no I mean it's going to be open like everyone can use it there every incubator can use it every investor can use it uh all these processing cues are going to be open um so there's no there's no prefer Advantage we would does that kill some of the advantage I mean if you know again like their advantage has to be done in their brand and what they have to offer that's not incubator or an investor opting into this you Bas they're basically accepting there's your premise that there's no longer a world with proprietary deal flow that 500 startups is not getting a better class of applications than Tech Stars Boston or whatever if if you're 500 startups uh you want as much deal flow as you can get uh five startups actually has a huge worldwide Network they have people on the ground Mexico and Brazil and New York you know all kinds of places uh London and uh India um so they are going to get some proprietary deal flow but they also realize that there are a ton of great companies on angelist who are coming in not necessarily for 500 startups they're coming in to raise Angel money and 500 startups would love to Al have a look at them and try and convince them why 500 startups is great so there are many investors who believe there is a stigma to listing on angelist and that they they say that they see deals that did the circuit That Couldn't raise money and magically they raise money on angelist and they argue there's some adverse selection do you think that is still a legitimate issue you guys deal with I don't think so I think we've been around long enough now that you can see the success cases I mean Uber was on angelist Pinterest was on angelist Branch out was on angelist rally kaggle recurly flash off got sold I mean there's you can go to our done deals page there are 2,000 companies that have been on angelist that have gone on to raise big rounds okay and the alumni have now raised over 1.3 billion and that's a trailing number we don't get the last 6 months cuz they don't announce their financings um so the real number is probably closer to two billion um there are Acquisitions that have been done because evangelist right so um you can sit there and and pretend that you know it's not happening but it's happening MH uh you can bury your head in the sand if Want U there are VCS who tell me especially ones who are out of market like they're not in Silicon Valley who basically say we would not be in business if it were not for you um we've had uh recently a good company um we had a we had a brussels-based VC who has already done three Deals on Angeles including a series a two for companies in Austin one for a company here normally those companies would never been able to reach that VC that VC would never be able to reach that investor uh there's a company we'll announce shortly uh that did their seed on angelist then their a they had a term sheet here from a well-known VC and we got them a term sheet from a VC in London they flew back and forth they talked to the London guys decided they like them better better evaluation better Partners went with that so those channels that just open up you can't do offline right um I want to I do want to go to questions in a minute so that Dave or whoever else is out there that I before I yell at them they can ask you whatever um but I I want to talk about your experience with the jobs ACT first all right Ben horo whats when he was here was talking about how impressed he was that you went to Washington and changed the law is that how you would characterize what happened uh we definitely were very involved in it uh the Securities laws were written in 1934 which is a long time ago MH um probably I mean they probably reference a telegraph in there somewhere um and so a lot of the ma you know a lot of the stuff that goes on at incubator demo days and at these conferences is technically illegal you know when when someone stands up at demo day some mentor says you should invest in this company that's a that's not completely kosher or says here's a standardized term sheet that we're using this is the standard Angel pad or teex Stars note that is not legal that you're supposed to be a broker dealer if you're doing those kinds of things um so uh all of this was operating very much in the gray area of the Securities laws and uh you know we bend over backwards to be Securities laws compliant we have a full legal opinion up and all that stuff and we never touch money it's part of the reason um but it's still pretty scary and there bunch of uh products we wanted to offer like docs that we could not legally do it was just illegal for us to offer a docs product without being a broker dealer broker dealer means you have all these regulations and requirements that actually make it impossible to work with startups um so we wanted to get the law changed people told us it was impossible um which it actually is basically impossible um we hired a bunch of gumshoe lobbyists who are awesome and we paid them purely on like a contingency Victory fee and then we just pulled out all the stuff it turns out how did you find these guys uh friend of friends through friends of Twitter actually and then uh what really made the difference was we were doing something that we thought was pretty good which was we were spreading uh investment and investing around the country and that's really what Congress wants to hear right now which is okay you are helping Co companies in my jurisdiction get funded um and so when we went to Congress and we said this needs to exist um you know all the lobbies can do is open a door for you you still got to make the pitch um and we basically showed them how in every state in almost every major city we had a bunch of investors and we had a bunch of startups who were willing to stand up for for what we were doing um so there was just all this Good Karma that was paid back and I spent six months of my life just calling in favors left and right and it turns out there were a lot of them to call in um you know it's like that old there's this old show on TV Stingray where this guy drives around and like solves people's problems and get fights crime but what he does is at the end when they say what do I owe you he always says you owe me me a favor that's it I'll call it in someday uh and then he gets all this done by spending favors so it always turns out he has contacts here and there we can call in favors the math doesn't work cuz he calls in five favors every episode and gets one back right so it's like fail out of business now yeah but we had we had a different ratio so we called in a lot of favors we had a lot of friends we got a lot some of these favors what are examples basically call up your Congressman uh tell them that you are an impressive entrepreneur or investor tell them you raised money or you invested because of angelist tell them that this is a good thing tell them that you want us to be able to offer docs tell them that you want us to be able to do these new features um and tell them that they want to support this kind of activity um you know like the general solicitation law which is still in effect but it's about to go away shortly means that if I were to stand up right here and say by the way we're fundraising I've broken the law and I've VI and I've invalidated my financing for the next six months every time you write an article that says that this company is raising money boom you've destroyed their uh financing and normally you guys don't care about it because we operate in such a close little environment here but Angels is online and it's Global so it's very visible you become a Target um you can get sued you get attacked by Regulators by state by state um so these were the kinds of things that we had to basically make sure uh we taken care of and and the jobs act did it it was the only bipartisan act signed by this Con passed by this Congress in the last four years um we got to go to the Rose Garden and Obama signed it and I have a copy and sitting next to me uh signed by him uh which is great it's a and there's there's a story there I'll write a book someday um it was really fun and really crazy well thanks a lot for coming here and saying there's a great story and not telling it on stage I mean it's just no no it's just it's just all crazy detail but these people need to pay $40 to get the good story yeah it's funny it's one of those things like where you you pull a hundred favors right and like I had Mitch kapor call up Anna ESU who's a Silicon Valley rep and had Steve case you know work with us to get a piece in his recommendation to the council and so on and you call in literally a hundred favors and each one of them takes a toll on you at the end of the day a random five magically come together and make it happen uh and then at the end for a while it looked like it was going to get shot down in the Senate I mean by the way we had to put together this crazy thing where you had to like satisfy the investment Banks and the regulators and all these different constituencies and and it ended up being a a giant dogs breakfast of different bills like combined together and then some genius you know I don't know who but I can almost imagine is sitting around some probably some Congressional staffer he's like how are we going to get this thing to pass right doesn't make any sense oh let's call it let say it has something to do with jobs what does it to do with jobs jump starting our business startups yes jobs jobs and then what Congress person can vote against something called the jobs act right so it was it was a miracle right it was literally a miracle um and uh you know we had so that wasn't even you you don't even know who did that I don't know who did that but there was a lot of stuff going on we there's a guy who works with me our coo Uh Kevin laws coincidentally um who's like the most likable pleasant person you know grew up in Pennsylvania he went with me to Congress and you know I get angry so I'm like Travis you know from Uber where if somebody says well you know all this should be regulated I'm like we're from Silicon Valley right we don't believe in regulation uh but uh Kevin was you know would talk him through and he'd be friends with everyone he' get everyone to like him and he' get everyone to agree and he'd not along and uh you know we get phone calls from Stafford and they tell us the politics be like well he's going to vote against this because he voted against him this bill and they're actually horse trading on this and so and if you can get Goldman Sachs to sign off on this then we can trigger this whole back and this piece will go through how do you do this right so it it's like every day there's like a new puzzle to solve um so there were just there were tons of these little things then you put them all together just somehow I still can't believe it just sort of magically came together um but it was one of those things that I went into thinking there is a 10% chance this will work and it will cost us X worth of effort and so multiply through expected value still worth it but we'll probably fail but we didn't so we got lucky so was there anything that was a takeaway from that experience that that other you know groups in the valley who want to see stuff pass to take I mean you know you were going in with something called the jobs act other people are going in trying to like get you know reform around immigration which is imra is a wrong brand so the moment you say immigration you're mixing skilled and unskilled and you're in trouble so they need to rebr branding is important right the other thing is we insisted the entire time that we were going to approach the problem like a startup and we were told you cannot approach it like a startup so for example anyone that we had to pay we paid them success fees right we were like you don't get paid if we don't succeed um but they said that that's not the way it's done right but that's the way we did it another thing was um we were asked the last second it looked like it wasn't going to pass the Senate and they said you you really have to show your support you have to show that there are people out there who support this and so they said get a get a petition get a letter signed by a bunch of people so he said okay we're going to do it our way we're going to do a little Twitter predition and we're going to have login with angelist or oath with Twitter and we're going to have everyone's photos and their bios and all that stuff and they said none of that stuff matters they just want a Word document right just like get a bunch of signatures stop acting Silicon Valley but we ignored them and so in like one frenzy 36- hour period we pulled an all nighter and we basically put out this viral Twitter petition that got signed by 5,000 uh investors and entrepreneurs so not 5,000 randoms but these are investors and entrepreneurs and we were able to slice and dice it by location and how influential were they were and what they invested in what they look like and who who their Senator was and all that stuff and then we sent this to Congress and the A and uh one of the unions who was afraid that the job Zab taking advantage of like older people or union workers somehow opposed it so they ran their own petition you know these unions have mailing lists of millions of members they got 3600 signatures against we got 5,000 for but ours was beautiful and visual and show these people are powerful and we were like yeah I see that guy he's one of your big campaign donors we can do those kinds of links and we just crushed it and I think Congress thought oh my God this is soapa pipa all over again and a lot of people who were in opposition dropped it and it got passed so we managed to uh use technology as a weapon in this cause and I I don't think we should be afraid of acting like startups um and so that was part of the lesson that's awesome um all right so why don't we why don't we go to some questions from the audience there's a microphone there and a microphone there um guys um line up and while people are amassing um there's been a lot of criticism about how long it's going to take the job Zach to actually get enacted I mean where are we I mean it's a whole sort of mess of things going on yeah there's a big bunch of it that's already in in effect uh like the 500 shareholder rule is already in effect uh the general solicitation rule will probably get lifted in January um there are pieces around broker dealer laws that are already in effect um the crowdfunding piece is the one that's taken the longest but rightly so it's ridiculously complicated which is how do you prevent small investors who haven't met the company don't have a track record of investing uh how do you prevent them from getting ripped off um and the SEC has to design a system where it's restrictive enough that it's not easily frauded and uh it's not so restrictive the good companies just stay off and I don't envy them that problem I think it's really hard to solve and I think it will probably take them the better part of next year figuring it out what do you think about companies like um funders Club who are you know there's a ton of these guys who are trying to do stuff around crowdfunding already who are kind of getting out in front of that yeah so we're we actually have an experiment going with crowdfunding right now you can invest online small dollar amounts on angelist uh but it's through second market and that's our we have a little partnership with them and they're a registered broker dealer um so we think it's worth trying to do and our early experiments have actually been quite uccessful but you really have to be careful about being compliant with the Securities laws uh if you jump the gun the problem is you're taking money from small investors who are likely going to lose their money because most startups lose money and this is their first time losing money so they're going to get bent out of shape and they're going to sue somebody and they're going to sue you and so if you don't have an ironclad defense and if you weren't fully 100% Securities Law compliant uh the penalties actually can go to you personally long after your startup is gone so if you're if you're using these kinds of systems you really have to make sure you're 100% securi law compliant so that means that you do have to get your lawyer involved um that means you do have to do legal diligence and I would say right now our read on it is that the best way to do that is through a broker dealer so you're you are not of the belief that this is a Napster Uber like situation where you change the laws by breaking them o uh I mean yeah Napster is a good example of why you may not want to think that Uber is a very different case because uh Uber is you know and disclaimer I'm a small investor in Uber um from when they use angelist disclaimer they hate us but but I like I like Lyft also and and sidecar and all the others in space and Airbnb you know these guys are breaking or not breaking they're routing around local laws and local issues and those laws are more easily fungible and in some ways they're actually more Antiquated uh because local governance is smaller it's more easily hijacked by corporate interests um so you know the number of medallions and taxi Medallion San Francisco is a crying shame need more taxis and so people know that they know it's hard to get a cad so uh while the people aren't looking you can have some shady business with the you can have Shady with the city council but once people are paying attention and galvanized on it the law is going to change because people want their cabs they want their Ubers they want their lifts um so given that I think they actually have a different issue than the napers of the world right who were basically just uh that music you know was available in other ways but now it's like free right so that's a very different thing um so I I think the longterm the Ubers and lifts and the airb airbnbs of the world will win all their fights uh it's just going to be a cost of doing business for them it will be an expense MH but you shouldn't have the same philosophy when it comes to crowdfunding the Securities laws are radioactive they're very different uh the Securities laws are not going to you know if if you get for example if you raise money from an unaccredited investor um or if you raise money and handle money through an unlicensed broker dealer your entire transaction is void not just the bit you did through them but all the money you raised from all the other investors too and they have a right of recision which means they can put the stock back on you personally once they decide it's lost money um so those Securities laws are not changing anytime soon even the crowdfunding when it comes through you can't get ahead get out ahead in front of it cuz nobody knows what it's going to look like you don't know what the final rules are going to be so by definition already breaking some of them um so I don't think you can expect to get grandfathered in and then even if you do you can always get sued by your own investors when they lose money so that that's civil right they have to sue you doesn't go away so don't mess with the Securities laws like yes we went we got the law change first then we're doing stuff I wouldn't do it in other order all right great go ahead oh actually you might have already answered my question I I read a article about in Tech blog a few months ago about something else and they were talking about angelist and people investing in using five to $10,000 and actually investing in it sounds like that's what you were talking about soon as I got up here yeah that that's uh you know what we're doing with second market so there are a couple of companies on Angeles today where you can go you can review the profile and if you like what you see you can invest a small amount online and then we'll send you off to Second Market they'll actually test you for suitability accreditation Patriot Act requirements and then happily take your money and pass it on to the company um so we're trying that right now but uh to be Securities Law compliant it only works for accredited investors it only works for investors who understand the risks uh as judged by the broker dealer um and uh it's uh it has to be done through second Market or an equivalent broker dealer but is this where your business is going eventually once this is all legal once it's out in the open it's a test we'll see I honestly don't know okay I don't know it's like any startup you know you try a lot of things $20 tickets we'll see how it goes so I I love this last part on wear you're buting heads with regulations and I'd like to follow up on that for a second because it seems like most of the uh The Innovation and the most of the things that you've been able to enable have been in spaces where there has not been another large hurdle that people have had to go up against like the FDA right do you think angelist can be as much of a Force for good um in the biotech space or in in a context where people have to go up against other imminent regulations yeah it's really frustrating what's going on in the for example with the FDA where a lot of Biotech Innovation and testing is is moving overseas uh cu the approval Cycles here are insane uh I don't know if we can solve that but one thing we can do is at least by assembling the community of startups hopefully giving them a voice uh there's no question that uh Congress is paying a lot more attention to Silicon Valley now uh it's mainly because of soapa and pipa secondary early because of the jobs act it's coming up again with a startup Visa uh there's a lot of money here there's a lot of influence here everyone's using the iPhone everyone's using Android um so Congress gets that and I think you know you saw Barack Obama do the uh IMA on Reddit um so I think we're going to have a lot more influence in the future it's not going to come soon enough um things like the FDA will take forever because those are highly you know highly controlled regulatory bodies with deep entrenched interests maybe on a decade time frame uh but there are also regulatory bodies that have been uh very favorable to Innovation uh I would argue that a lot of the Innovation that is even possible today in Silicon Valley wouldn't have happened if the FCC hadn't taken a forward-looking stance uh you do see the FCC actually passing rules to unbundle more Spectrum to uh release it from broadcasters to force you know like the the Verizon iPhone 5 uh if you buy it it's unlocked and it's unlocked because the have said if you want LTE Spectrum then any phone you sell Verizon on that LTE Spectrum has to be unlocked um so I hope that's a good model that uh more of the regulatory bodies can follow but I'm not holding my breath um it would be good for us to be more in more helpful in that regard and and we'll try I think when the startup Visa act comes up I I've been very explicit with Steve case and others that uh when that comes up for a vote and if it is narrowly enough targeted at the Silicon Valley interest I.E we don't have to you know make a decision and 10 other things that are bundled with it um we will do our best to get our community organized behind it what do you think the odds of that getting ped are I think they're actually if it's if it's targeted enough I actually think it's quite High uh especially because of the the drubbing that the Republicans took from the Hispanic vote in this most recent election um there's now suddenly a lot of bipartisan vote on immigration excuse me that said the worst thing that could happen to the uh startup Visa is it gets bundled into the larger immigration debate uh what's more likely though is that it could be viewed as a quick win something they can pass to that they can all agree on that you know gets the gets the wheels grease for the bigger Immigration Act okay great hi my question is about lawyers like what do you see um the future of lawyers is Angel list going to take them totally out of the equation that you can just sign a standard document with investors and just get your money uh most lawyers so by the way Wilson sansini and kie and mofo and a bunch of others will actually do the closing online for free using angelist docs uh there's now about a half dozen of them although we haven't fully announced it Ben probably knows the full list um but they never viewed the uh docs as a uh as a profit Center it was a loss leader for them to acquire the customer and uh the cost didn't come in actually doing the docs it came in all the back and forth negotiation because everybody wants their pet uh their pet sentence or pet clause or pet phrase in there and so by moving it all online standard izing it what we basically said it's free you want to change anything it's suddenly $220,000 so now it puts the onus on the first person who was about to submit their pet Clause to say no because it'll reveal to all the other investors that oh yeah that guy his his little special Clause is costing you 20 grand um and so it just it uses social pressures to standardize rather than actually uh you know it's not the time saving comes in not in not having the negotiation not in creating the paperwork um so I think the the lawyers uh will continue to work with the company afterwards you still need a lawyer for all kinds of things and that's just you know some of it is is good hygiene and some of it is just the regulated environment we live in uh I actually have a side point of view that I don't think any startup can be in business if they follow every law like I mean if you just went and actually read all the regulations you're pinning up on the wall according to San Francisco laws like you'd be like oh yeah I'm breaking that one breaking that one and that should that should shut down right here so you can't you can't pay too much attention to them and luckily a lot of the small a lot of them are not forc against smaller companies um but you you you still definitely do need a lawyer it's a necessary part of doing business mhm and by the way the best lawyers are actually advisers you can think of them as cheap advisers there are few lawyers in the valley who have actually built a reputation being founder friendly and I really encourage you to seek those lawyers out because they can be a good counterweight sometimes against if are some of them I mean there's entrepreneurs in the room like name names this is helpful to people um you know I think Buddy arnam at Perkins kui is kind of got that reputation um I'm blanking Pillsbury uh there's a Jorge delvo has that reputation uh I use Eric benisek you know he's a boutique lawyer vbl he's really good uh silicon legal Andre Karan spun out and formed his own little firm they're they're now actually startup lawyers um so those are good ones to seek out but there there are quite a few of them um we will add a category at some point to angelist that will show you um good lawyers and what companies they're associated with um you know Ted is now a lawyer to the Stars cuz he's a lawyer to Facebook but he actually he's our lawyer too I just want to point out right to the Stars thing yeah but uh he he did the whole uh ecosystem a great service by releasing series seed um you know um Yokum uh at uh Paul Carl's cars lawyer is he okay Paul needs a lawyer um Yokum loves Paul a lot of business there keeps him busy it's the next best thing to be Michael arrington's lawyer oh yeah Mike probably has two he does yeah so there's a lot of good ones out there okay awesome I would say if anything the lawyers have had to do more work branding themselves uh and provide more value to the ecosystem than the investors do because the investors can always write you a check there's my value ad lawyer you got to pay them so they really have to convince you that they know their stuff all right oh sorry yeah so uh no a here my question is what is a successful angelist profile uh I'm struggling with at what point do I list myself uh the startup on Angel list in idea phase or when I have all my advisers and everything lined up I mean you have a lot of stuff there that you have to Lo check check check check check sure I mean I'm just wondering if you can talk to that you can list yourself anytime but with 100,000 companies on there you're not going to get noticed until you get promoted or something unique or special comes along so you can build your profile with impunity um if there's anything even mildly interesting about it we'll follow it and keep track of it um you're probably not going to get funded until you either have traction or you have a pretty unique product or unless you just have a stellar team assembled uh or you have some social proof those are the four things that investors look at uh like I said starting tomorrow you'll be able to use it to apply to Angel pad and to techar um and of course 500 startups in the next cycle and we're going to announce probably dozens more um so you'll also be able to use it earlier stage for that basis so I don't think there's any downside to creating it early just keep working on it um just the the thing that's uh the the the part where you might do yourself a disservice is if you just leave things uh blank that are obvious like the team stuff you know take the time to fill out the team bios um because investors really do at the end of the day they fund teams everything else is a kind of proxying or uh you know if you have traction definitely en list it um I I like to think there's no thing is too early I know a lot of different memes get spread the reality is you're not going to get noticed until something spectacular shows up in your profile or unless we promote it there's just too much out there what do do you mean when you say traction and social proof I feel like those are terms that get thrown around and a lot of startups like don't really know what that is if they have it or what they're aiming for yeah social proof is when somebody who's worth listening to believes in you and they show that in some way if it's an adviser they commit their time if it's an investor they commit their money um or it could just be like an you recruited some incredible team member excuse me like you you recruited a core contributor of Ruby on Rails to be on your developer team that is a form of social proof because that person's committing their time um traction is uh basically quantitative evidence of customer demand so if you're an Enterprise software it might be two or three early customers we paying a bit uh if it's an a consumer you know it might be it the bar might be as high as hundreds of thousands of users uh if it's an uh mobile apps you know it might be your download rate um but sorry if I used this choke before because now I use it all the time but it's like it's the Supreme Court definition of porn you know you'll know it when you see it um so you you you you'll know traction is and investors know what traction is it it it is a moving Target um the the entire ecosystem is getting far more efficient companies are accomplishing a lot less uh a lot more with a lot less two years ago you could have gotten your daily deal startup funded pre-ra uh 18 months ago you could not have gotten a daily deal startup funded no matter how much traction you had uh 12 months ago um you know you could have gotten your mobile app company funded with 10,000 downloads today it's probably going to take a few hundred th000 downloads and a and a strong rapid adoption rate for real financing to take place so the definition of traction keeps changing the environment gets competitive so that's why it's actually useful to look at angelist and see what companies just got funded because that will give you an idea of what the bar is uh and you can see that through our trending list through our feature lists and through our um our done deals featured you can't see unless you're an investor it's again the general solicitation law so there's a lot of privacy settings and controls but um you can you can see funding announcements as they come out and you can get a sense of how much traction these companies had okay great yeah so as angelist has started to grow um I'm sure there's been people that have wanted to try to take a piece of that pie whether it be patent trolls or you know somebody who's litigious coming out there so I'm just curious what have you experienced like that what could you share that could help us kind of not have to go through some of those headaches uh us personally yeah you personally and that could be even um you know people like recruiters trying to buy pass your system you know yeah so plenty of people bypass the system investors recruiters lawyers companies have at it more power to you don't care um you know that's that's what it means to be a platform right that's people do that on Craigslist people do that on LinkedIn go nuts um as long as you got some value out of it um the patent trolls luckily we have not been hit with yet I don't think anything we're doing is patentable let alone patented but the reality is that the patent examiners have a lot have let a lot of stuff slip through um we don't make any money yet so you know you're coming after an empty pile an empty box so I don't know what you're going after but uh maybe someday they'll come after us I guess it's a it's a mark of success but we haven't been sued yet I do think the patent system is in horrible need of Reform so that's a big problem entrepreneurs have are you going to solve that one uh you know there's so many entrenched interests on the other side uh the intellectual ventures of the world now also making money off of it it's a really and and it's getting really scary uh with Google buying motorol Mobility 12 and a half billion for patents Apple and Samsung Samsung suing each other in patent Oblivion um the the good news is the incentives to solve it are now with Apple and Google and Samsung and those big companies because they're embroiled in so many patent lawsuits they can't necess view it as a victory um they have a lot more influence than us and I and I think and hope they'll get the law change but then again knowing big companies they'll get a change in a way that it benefits big companies how does it to be changed you know I think that there's just a phrase uh obvious to those skilled in the art that goes into granting a patent like you're not supposed to get a patent on anything that's obvious to those skilled in the art um and that just needs to be enforced yeah uh and certainly software and business model patents are you know need to either not exist or just have a much much higher bar maybe in this day and age of innovation the time frame for a granted patent needs to not be 17 years right like what it was was in 1800 whatever when they built the steem engine it was 17 years maybe that made sense today if you compress down at internet time it should be a lot lot lot shorter um and there should probably be open review and feedback process uh you know they should probably what just a random idea making one up maybe every patent should be thrown up on the internet and there should be an expert panel of one representative from each you know company and from each part of the ecosystem and there's hundreds of them and they vote on whether this thing is obvious or not and that's it if it is you don't get it granted mhm you could be really high bar sorry you could build that could be part of angelist eventually maybe all right so a few last things um and then we'll get out of here um so we you're our last one of the year as I said we're taking a much much desired break in December um in January though we have a very strong lineup we're going to have um Brian chesky from Airbnb in San Francisco we're going to have Chad Dickerson of etsy in New York who like never ever does things and I've spent like six months twisting his arm to do this so I'm incredibly glad and then we're going to have someone who I think is one of the most exciting new entrepreneurs Sophia Amorosa of nasty gal in La who will I think be our first woman that we've had um so an amazing lineup of three people whose businesses are actually all making assloads of money who've raised it billions of dollars in valuations so um it'll be a great month um next year we have a lot of great people lined up we have um Drew from Dropbox we have Phil libbon um Mark andreon said he's doing it dick Costello is going to do it um we're going to have a phenomenal lineup and we're really excited um as you know a lot of these will sell out really quickly we're about to start opening up memberships for next year which guarantees that you get in plus a lot of other benefits it is also the reason that we don't completely go out of business doing these events and offering a $20 ticket um so if you have an expense account you want to make sure you get into every event and help you know support the kind of journalism and events we do we're going to be opening that up probably in the next week um so keep an eye out for that um the other thing that keeps us from going out of business with doing events at a loss our sponsors and as Nal said earlier brain tree sponsored this one so if you enjoyed being here for free or cheap um it would be really nice if you thanked brain tree for paying for your ticket uh on Twitter or something like that um so this brings us to the end and the LA final two questions um that we always ask everybody so the first is what is the one thing that you believe that very few other people believe yeah I don't know if this is all that rare of a belief in this audience but uh I really firmly believe that the actual efficient size of a company shrinking very rapidly and so the future will be almost all startups like I think most of the world and most business will adopt the startup mentality in the sense that there will be small companies Loosely connected didn't couple to each other almost through apis or processes for their needs um the Industrial Revolution uh way back when before I was born uh created this massive uh clustering effect where basically said there's uh economies of scale from having factories and so everybody has a gang together in these 5,000 10,000 person companies and I think that uh trend has now reversed thanks to information technology and you could have a future where maybe your son or daughter will wake up in the morning and there'll be a message on their phone or in their brain implant or Google Glasses or whatever the heck it is and they will have been assign you know they'll have a couple of job offers right that morning they'll pick the one they want to do for the next two or three days they'll do that through a series of uh kind of apis and interface the rest of the world and then they'll get rated and they'll get uh feedback so in the future we're all Uber drivers right or we're all driving lifts around with pink mustaches or uh delivering people's food or uh but I think the contract work trend is going to increase and I think the size of your average company is going to decrease I think we're going to see more and more billion dollar businesses built by four or five people and it'll stay at that um and so I think that is one thing for example The Venture Capital industry does not believe I think the Venture Capital industry still believes that you're going to have to put a couple of hundred million dollars into some company at some point to continue scaling it I don't think that's true I I think uh you will be able to break out and Outsource pieces that today you don't think are Outsource like you will be able to Outsource your sales you will be able to Outsource your Revenue collection you will be able to Outsource your bookkeeping reconciliation you'll out you may not Outsource the final stage of your hiring but you'll Outsource the early stage of it so the the there's going to be lots and lots and lots of small companies Loosely coupled this is really bad news for all the people who were laid off in the last recession because they don't think that way they are going to go and try and find jobs at big companies and a lot of the jobs are going to be created now going to be at small companies uh which are going to require them to be more Dynamic more adaptable more information Savvy uh you know a corollary to that is anybody who is comfortable with information technology today has a 10x advantage in productivity or greater with over someone who is not comfortable with uh information technology and so what you have is a phenomenon where it's you know Everyone likes to say the rich are getting richer in in income inequality but I think the smart are getting richer and Society doesn't know how to deal with this and uh so literally if you're someone who is good with computers you can produce 10 times the output with someone who's working with their hands all day or a 100 times or a thousand if you're Kevin cister um so given that uh Society doesn't know what to do we're not meant to handle those kinds of differences in productivity between individuals and it's very hard to retrain the last generation um but uh and in the process I think we're going to try and and punish the rich and we're going to catch the smart in that dragn uh and that's going to be an interesting dislocation so you think we won't see things like Facebook anymore where a company in eight years goes from a handful of guys to thousands in a huge campus and sucking up as much talent as they can I think any entrepreneur worth their salt could today build Facebook with if they if they were building Facebook today and they had the same feature set they could do with a few hundred people wow it's just that if Facebook and Google are in the situation that large companies end up in where the founders know that 80% of the people in there are not really needed they just don't know which 80% you can't ident they're all lost now in the politic think you described Yahoo yeah you can't identify yeah yeah the ratio might be different there but but you know that's Marissa's job she's got to get in there and clean house you'll know she's doing her job she fires a whole bunch of people yeah we' said that since she was hired she still hasn't done it so she's trying to figure it out she's trying to figure out which which chunk how much of Yahoo do you think needs to be fired no one's watching anymore I haven't you know the truth is I haven't used Yahoo in a long time so all of them I know I just haven't used it I don't even know what they do that much I mean there are parts of it that are pretty cool like the the they Marketplace products like Yahoo autos and Yahoo finance is probably still the best Finance site on the web um but like you know we switched off Yahoo mail a long time ago Yahoo search what happened to it right they go to Bing or something yeah um so they Yahoo just needs to figure out what business is not in cut all of those um so Yahoo probably Yahoo doesn't just need to fire people it needs to exit entire businesses and then Focus down new set um the future is all mobile so Yahoo's got to got a bet on mobile but saying you got a bet on mobile is like saying you got to bet on Tech it's too broad so you got you know so hopefully she won't come out and say we're betting on mobile like okay yes of course you're betting on mobile what part of Mobile so if in the future we're all working for small companies and you know in some cases you're even your own contractor and your own startup does that mean everyone has to work harder because people with startups work a lot harder than people at big companies on average yeah but you're working it your way there's less hopefully um you're uh and when you're doing it your own way it doesn't feel like work to me the definition of work is a set of things you have to do that you don't want to do um by definition if you want to do it it's not work mhm that that that is literally a difference between work and Leisure right like when you play video games for examp example when you're you know when you're uh raising cows and farm will and and paying money to Mark Pinkus right and you depositing coins into his his wallet uh that's that's work right farming is work why are you farming but you don't consider it work because you want to do it uhhuh so that's the genius of Zinga I'm looking so genius anymore um okay that I would say that is a thing many people I know do not believe so so you've pass that one now Mr ravikant what would be your mediocre superpower yeah this is a weird one I tried to think about this I couldn't come up with a great one um I think so mediocre superpower you can interpret that a lot of ways right like to to someone who is obsessed with world domination mediocre one might be you know Continental domination but I guess you're not going to let me get away with it that either no that's not mediocre yeah my mediocre superpower if this qualifies mediocre enough would be having the ability to say no without feeling guilty and uh I kind of feel like especially now with angelist we're in this position where we've sort of Taken on the mantle of trying to help all the startups and you can't help all the startups most of them are not ready to be funded most of them do not deserve to be funded you can't meet with them all they all want to meet with you they all want personal time they all want personal advice um and you have to triage and so you have to say no all day long and when you say no you just feel bad cuz that's you know setting out to do the opposite um and so I'd just love to be able to say no without feeling bad about it make my day a lot easier I end up in a lot of meetings that I feel guilty I get guilted into them but I really don't want to be in that meeting I want to get out your solution could have been you a way for you to say yes to everything like you just want to be let off the hook oh but that would be a mediocre superpower if you could say yes to everything then you know that's that's a real superpower yeah I suppose Sur um how many meetings cuz you seem like a pretty blunt guy I'm surprised you get guilted I've now gotten ruthless about killing uh useless meetings uh I own the domain I don't do coffee.com so I was a jerk for a while I would say responses from the ball at I don't do coffee.com that was too too much of a jerk um and I like coffee and San Francisco's great coffee so um I still do a couple of meetings but I really try and solve everything by email first say look if it's if it can be solved by email let's do that cuz then you can help 30 companies in the same time period you could have met one or if you can't do that let's do a phone call and if you can't do that then let's do a Skype if you can't do that let's do a meeting and let's bundle them together as four of them in one hour and just be very efficient cut to the Chase and uh actually Harge tagger from YC told me this that you know when he shorten the amount of time that he spent in office hours um it got way more efficient there was just there's no time for someone to come in and kind of start doing the pleasantries they know they have 15 minutes before the next guy walks in so they're just more efficient and I would say to startups like don't spend your time doing meetings unless you really really have to I really think networking is overrated uh there's all these articles about like oh you got to network more and this is how you it makes me want to vomit right go do something great and your network will instantly emerge if you build a great product or if you get a good customer base I guarantee you we will get you funded you will not have to go take internal meetings building relationships years in advance uh all that meeting stuff you're doing shaking hands um you know do it for recruiting do it to learn from really really smart people but you got to make sure you have something to offer them too otherwise you're just taking but just sort of networking if you're standing around an event with a name tag and a glass in your hand then that kind of includes this event not that I think about it yeah sort of you're doing it for entertainment you're doing it because that's your leisure time this F this is not your work time this is your leisure time yeah let's just be clear uh for those of you who told your co-workers oh I'm going to an important no it's not work this is entertainment if the beer and pizza didn't tip you off I'm sorry to say I'm not louisy K that would have been far more entertaining for show I was still very entertained oh you're very kind thank you thank you very much for being our last guest of the year and a all R [Music] [Applause] [Music] everyone Back To Top