[MUSIC PLAYING]
HEATH ROWE: My
name is Heath Rowe,
and I'm research
operations manager
for the Brand Studio of Google.
And we're here today
with Jason Calacanis.
Jason is a technology
entrepreneur, angel investor,
and the host of a weekly podcast
called "This Week in Startups."
He's the founder of a
series of conferences
that bring
entrepreneurs together
with potential
investors, and he was
a scout for top-tier Silicon
Valley venture capital firm
Sequoia Capital.
He lives in San
Francisco, California,
used to live down this way
in Southern California,
and is author of a
relatively new book,
it's about a month
old, called "Angel:
How to Invest in
Technology Startups,
Timeless Advice from
an Angel Investor
Who Turned $100,000
Into $100 million,"
published in July
by Harper Business.
I've known Jason for
probably 20 years now?
JASON CALACANIS: Yeah.
HEATH ROWE: Haven't seen
him forever and a day.
So it's good to have
you here, Jason.
JASON CALACANIS: Thanks
for having me, Heath.
We were journalists
together back in the day.
HEATH ROWE: Yeah, we were.
JASON CALACANIS:
Covering technology.
HEATH ROWE: Well,
let's start there,
because I first met you--
it wasn't photocopied
when I met you,
but "Silicon Alley Reporter."
You went on to "Digital
Coast Reporter," weblogs,
Netscape, Mahalo.
That journalism was
all generally focusing
on the gathering, curation,
and promotion of ideas,
and powerful ideas.
JASON CALACANIS: Yeah, I was
lucky enough to be in New York
when the internet
hit in 1994 and '95.
CD-ROMs were becoming a big
deal, multimedia, and then
all of a sudden,
the internet became
commercialized with the Netscape
browser supporting images.
And I started a zine,
because back then,
if you wanted to be important
in the world, the real startup
idea you had was a zine.
And a zine just
meant a magazine that
was not professionally
produced, but that
was literally a photocopy.
And so after starting that
photocopy zine, "Silicon Alley
Reporter," it quickly grew
into a print magazine.
It had 300 pages, and I got
caught up in the whole dotcom
sort of wave of innovation.
And so I got very lucky,
but being a journalist
is a great way to learn
how to interview founders
and to cut through BS.
And you're kind of
a detective, right?
Like when you're
a journalist, you
have to ask questions,
let the person talk,
and maybe try to figure
out what the truth is.
And when you're an angel
investor, it's very similar.
You're talking to founders,
and sometimes they're tourists.
They're people who are just
trying on the concept of being
a founder.
They saw "The Social
Network," or they
have seen how Uber, or
Google, or Airbnb have grown,
and they say, I want to be--
I want to be a founder.
And then they start
pitching investors,
and you realize, wow, this
person's going to give up.
This idea does not have
real meaning to them,
and they have no idea how
hard it is to be a founder.
So I think that
journalism background
has helped a number of people,
including Michael Moritz, who
is the original investor
in Google was a journalist
and wrote a book, actually,
about Apple back in the '80s.
And so it's one of the great
paths I think to investing
is either being a founder.
Today you can be
a founder and then
go on to be an investor,
or somebody in growth.
That's another
big one right now.
Everybody is looking
for growth hackers
to become investors,
and the journalists.
It used to be MBAs.
You have to go get a Harvard
MBA, or Stanford MBA,
and then your fraternity
brothers would get you
into a venture firm.
Now, it's really delightful that
the whole model has flipped,
and it's like if you don't
have operational experience,
they really don't want
you in venture capital,
and it used to be all venture
capitalists had zero operating
experience, and they
were all finance,
you know, MBA bros,
and all the firms
were just groups of, you know,
Harvard and Stanford MBAs.
Now, it's totally changed.
They don't want to hire people
without operational experience,
because the founders can
see through it immediately.
They're like you've
never run a company,
and I'm going to
take your advice?
I'm going to take
a pass on that.
HEATH ROWE: Mhm.
And what do you
think caused that?
Or what happened in
the industry that
led to that shift in thinking?
JASON CALACANIS: The
founder-friendly movement, I
think.
When a market gets hot,
and really Sean Parker--
I would give Sean Parker
a lot of credit for it.
You know, Sean Parker, and
Google, and Michael Moritz
had a little bit of a back
and forth over Plaxo back
in the day.
And he then brought Zuckerberg
out to Silicon Valley
and famously left
Sequoia at the altar
and wouldn't let them
invest, because of how
he felt he had been treated.
And then Founders Fund,
Peter Thiel and Sean Parker
created Founders Fund.
And the reason they named it
Founders Fund was specifically
to attack Sequoia and
other venture firms
and say, those firms are
interested in kicking out
the founders.
These firms are interested
in being founder friendly.
And then that just changed
everybody's thinking.
We have to be founder friendly.
And you know, there's
pros and cons to it.
HEATH ROWE: How do you balance
the operational experience
with maybe an
idea-driven founder?
JASON CALACANIS: Yeah
it's pretty interesting
when you look at the
history of Silicon Valley.
If you were to
say, I'm only going
to invest in founders who
have great experience,
you would miss Larry and Sergey.
You would have
missed Bill Gates,
and you would have
missed Zuckerberg.
You wouldn't have
missed, you know,
Uber or some other company
that had serial founders.
Twitter had a serial founder
obviously in Evan Williams.
So there is actually a theory
that the biggest outcomes are
by people who are first timers.
It's not actually
backed up by reality.
It's kind of 50/50.
But the thing about venture
capital and angel investing
is you don't have
to hit everything.
So if you missed Google,
and you get Facebook,
or you get Facebook, and
you don't invest in Google,
or you get Airbnb, and you don't
get Uber, all you have to do
is hit one, and then they
let you write a book.
I hit six unicorns in the
first 100 investments now.
When I wrote the book
and did the book deal,
I had three unicorns.
And since the book came out,
three of the other companies
have tipped over
into that territory.
So it's a pretty
good track record.
But you know, the reason
I wrote the book really
is it's so opaque the idea
of being an angel investor
and doing it professionally.
But because of large--
the scale of internet
companies now
and the amount of
wealth being created
has gotten so great
that now we went
from just maybe 10 or 15
years ago, 10 years ago
when I started angel investing--
I started about seven years
ago, but about 10 years ago
when I was a founder--
raising money-- there was
only like a dozen or two dozen
angel investors of note.
And you could kind of make
the rounds very quickly.
Now, I'd say in
Silicon Valley, there
are 500 to 1,000 people who
do it as a primary activity.
In other words, they
spend 50% of their time
on angel investing or more.
So I think there's going to be
a professional angel investing
class.
The VCs have
retreated and said, we
don't want to take risk anymore.
We don't want to do a
series A that's speculative.
Bring us companies, because
there is so many companies,
they've moved
downstream and said,
just bring us companies that
have revenue and traction.
If it's an enterprise company
with $100,000 or $50,000
a month, we'll meet with them.
If it's a consumer
product, and it's
got 10,000 to 50,000
people using it a day,
and you've got three to
six months of traffic,
we'll probably wait till you
hit 10 million users a month
before we invest
and do a series A.
But really, that's opened
up this huge swath of what
I call the Goldilocks zone--
pre-series A,
pre-venture capitalists
wanted to join the board, but
post the product being launched
into the market, because
let's all face it,
we know that you can get
any product to market,
or I'd say nine
out of 10 products,
you can get some version of
it to market for either sweat
equity or $100,000 or less.
Right?
So if you wanted to build
Slack, or Twitter, or even Uber,
you could do that
for low hundreds
of thousands of dollars.
In other words,
people can bootstrap
it, friends and family,
some close friends,
to get that beta out.
And that Goldilocks
zone is where
I think a lot of
wealth creation is
going to occur in the future,
because you've removed
the 99% of founders who never
get their product to market
from your investment criteria.
And then you don't have the
VCs with their sharp elbows
blocking the angel
investors yet.
And that's just
probably a, I'll call it
a three year window in
most startups, where
angels can participate.
There's probably about
four or five rounds
of funding in there as well.
Anybody here have a friend
who's actively running a startup
and has raised money in
the last 12 months or so?
Right, so almost
half of the room.
And if you talk to
them, they probably
will raise five rounds of
funding before a series
A. It used to be you raised
an angel around, friends
and family, an
angel or seed round,
and then a series A. Now,
you raise friends and family
that you do a pre-seed round,
a seed round, an angel round,
a pre-series A, a
series A extension.
They come up with all
these crazy names for them,
but just call them $250,000
to $1.5 million rounds.
And usually, there's
six convertible notes
converting when they finally
get to series A, which
means you can really take
your time as an angel investor
and get to know the company.
There is really no
need to panic and like,
I have to get in this round.
You can actually wait and
just build the relationship
with the founders
over six months, which
is kind of what I
outlined in the book is
my theory on how to do it given
today's environment, which is--
there's a lot of
startups, and they
raise a lot of
rounds of funding,
and you really don't want
to be investing in startups
before they finish
their product,
because it's a bit of a talent.
You can't finish the product
without raising a ton of money,
maybe you're not
an actual builder.
Sometimes it's true,
but most of the time
you're not an actual builder.
HEATH ROWE: Yeah, it's
'99 all over again.
JASON CALACANIS:
Basically, I mean,
it is highly tourist
season right now.
So the opportunity is still
very great, but a lot of people
are trying on and playing
the role of founder.
And what they'll find is it's
a really, really difficult job.
It's very hard to
be the founder.
You don't sleep at night.
You've got somewhere between six
weeks and 12 months of runway.
Your product is probably under
assault from competitors,
and investors are
waiting to see,
and people are deciding between
joining Facebook or Google
and getting huge RSUs or
coming to your company.
And you've got to convince
them, and then they
come for six months and leave.
So it's very hard.
And I think that's one of the--
the interesting
parts of this is just
trying to figure out who's
going to stick with the idea,
because most days as a
founder, I would say,
are not super rewarding.
They are generally hard.
The reward you get for being a
founder of a technology company
is you hire the smartest
people you know,
and they all bring you the
problems they can't solve.
You know, so literally
every week, it's
like, hey, we got
all this stuff done,
but here's what we
didn't get done.
Can you help us?
Wow!
That's challenging.
You know, that's Elon's
life is like, OK,
I hired the smartest
people in the room,
and now they can't
figure out these things,
and I've got to figure out how
to get the Model 3 out on time
or get the Falcon to
land properly, right?
It's a hard life, and
it never gets easier.
HEATH ROWE: So you
mentioned Sequoia.
Do you still work as
a scout for Sequoia?
JASON CALACANIS: I'm still part
of the Sequoia scouts program.
I do like a investment
once a year with them.
But I just finished up my first
proper fund at a $10 million
angel fund, which was basically
my friends' and my money.
And then I'll do
something in the future.
You can't talk about those
type of things, obviously.
But one would suspect I'm
going to stay in the game
and do another 150 investments.
And then that'll put
me at 300 investments.
It's very hard to
scale angel investing.
That's one of the things
I'm trying to do right now.
And part of the reason
I wrote the book was I
think there's a lot of
people who have money
in very boring asset classes.
I call it dead money.
You know, you've got
your money in bonds,
real estate, some equally
balanced equities portfolio,
using Wealthfront, which is
a great tool for doing that.
I'm an investor in that company.
And so you have these swaths of
money that are sitting there,
and it's not kind
of helping society
in any way or changing things.
I think people should take
maybe 5% of that net worth,
10% of that net worth,
and put it in something
that's highly risky.
It may not return--
it may not have the
stability of, you know,
the stock market
balanced portfolio
that people talk about that
returns 4% to 7% a year
and doubles every eight years.
But you have that outside
chance of going at 100 to 1
on an investment, or 1,000
to 1, which would then
double your net worth.
So I think people are
overly risk averse,
and I try to outline in the
book, here's a strategy,
maybe investing in syndicates.
People know Angel
List, or Seed Invest,
or I have my own syndicate
now, Jason Syndicate.
People know that they can invest
alongside of angel investors.
That's a great way to
learn how to do this.
You're investing $1,000
or $3,000 in each startup,
and you do 20 startups.
All of a sudden, you may
have invested $60,000 total.
But you've done 30
investments, and you
are watching the monthly
updates of 30 companies.
It's a great way
to build a network
and get in the game for what
most people would consider
the price of one angel
investment, $50,000 or $60,000.
So I try to outline all
of that in the book of how
to slowly learn how to do this.
And I think it's probably
the most exciting career
you could have.
You get to hang out with
the smartest people, who
want to change the
world, and meet them
when they have 1 to 10
employees in their company.
It's pretty exciting,
I have to say,
and even if you lost
half your money doing it,
you'd be losing half of say
5% or 10% of your net worth.
The network and
the knowledge you
would build during
that time would easily
make up for that 2.5%
of your net worth.
HEATH ROWE: You're
smarter, bigger regardless.
JASON CALACANIS: Yeah.
And [INAUDIBLE].
HEATH ROWE: That's
one of the things
I liked most about the book
was the kind of attitude
of democratizing
angel investment.
You mentioned earlier today
that there's a couple hundred
angel investors in the valley.
But this is saying that grandma
can be an angel investor.
A college student can
be an angel investor.
Talk us through some of
the steps or the advice
that you would give people.
JASON CALACANIS: Yeah, So I
think it's purposely opaque.
We have a very unfair
system in the United States
where there's two classes of
people, accredited investors
and non-accredited.
People who make
over $200,000 a year
for a couple of years in a
row are considered accredited
if they have $1 million
or $2 million in cash.
You can look it up
on the SEC's website.
And then the other
95% of America
are considered non-accredited.
But those 95% can go to Vegas
and bet on a sports team,
or they can play in their local
poker game, or they can buy,
you know, they can do whatever
they want with their money,
using bad judgment, good
judgment, et cetera.
They could even buy stocks
in the public market
without having to
check with anybody.
But the idea of investing
in private companies, which
is where ultra wealth is
created, really outsized
outcomes, is very--
there's nowhere you can
have these kind of odds
to get these kind of
returns except in Silicon
Valley and startups.
So I think that we'll
see that change.
It's in Europe,
which is interesting,
because it's a pretty
protectionist kind
of vibe over there obviously.
They allow everybody to invest
their money however they want.
So here in the United
States, we have a little bit
of history of not trusting
people with their own money,
but that's unraveling.
It's good intention, but now
they have some actual equity
crowdfunding, websites like
SeedInvest and Republic
are taking companies
and allowing
them to raise money
from civilians,
non-accredited
investors for $500.
So I look at it and
say, you know what?
I see people out
there spending money
on all kinds of dopey stuff.
I think making investments in
startups would be a lot better.
And if you were to ask
all of the Etsy sellers,
early Etsy sellers, hey,
you're not accredited,
but we have 5,000
creators on the platform.
You could each invest up
to $1,000 in the platform.
How many of them
would have done it?
And what kind of wealth
would be created?
EBay, same story, think
about all the AdSense
partners in the early days.
If you had told me
when we were in Gadget
is AdSense going to work?
I was like, well, we're
making $3,000 a day
off of it 10 years ago, I
would have made that bet
and bought pre-public
Google shares for sure.
But that opportunity
wasn't open to me.
I wasn't accredited
yet at that time.
I was negative $10,000
actually in my bank account.
So I was stuck.
So I'm hoping that
all changes over time,
and since I wrote the
book, it's been 25 days,
we had 1,200 people in
our angel syndicate,
and we've had 700 more joined.
So we're averaging something
like 30 people a day
applying and then accepting
maybe half of them.
And so I think this is going
to change in a big way.
A company Cafe X, which
I'm an investor in,
which is a robot
a coffee machine,
who has raised two, not
equity crowdfunding,
but two syndicates of note,
like upwards of a million
from investors
$10,000 at a time.
Now, we have hundreds of
investors on that [INAUDIBLE]
table under one
umbrella, my syndicate.
And all of those people
get to participate.
I'm super proud of that.
If that becomes a unicorn,
and those people turn $10,000,
and it goes 100x,
I mean, I would
be super excited to see
people become millionaires
or to generate that
kind of wealth.
And I've seen it happen.
I mean, in Silicon Valley, I
see people who are pretty dopey
make angel investments and
make millions of dollars
pretty regularly.
And it should be
open to more people,
and most people have
a good eye for this.
If you were to ask anybody
who was on LinkedIn
in the first two years who were
recruiters, or HR executives,
those HR executives
and recruiters
who would normally
not have access
had the inside information.
They knew that LinkedIn
was going to become
a very significant platform.
The early creators
on YouTube knew
that it was going to
be something special.
It was obvious to them, but they
could not participate into it.
And Chad would have absolutely
allowed YouTube creators
to invest if that was allowed.
And that's what we're slowly
starting to have happen.
It started last June.
And it's been a year.
The companies that
are doing equity crowd
funding I would say are the--
in some cases, the ones
that didn't clear market
with venture capitalists angels.
But I think that's
slowly starting
to change where the scariness of
doing something new, like angel
with syndicates was very new,
and people were very scared
of it, that's flipped over.
So if everybody were to
invest 5% of their net worth
in startups, I think the world
will get better a lot quicker,
it would create a lot
more jobs, and we'd
see a lot more problems
getting solved.
So I actually believe that
this is something bigger
than just making money.
I think it's making
change in the world.
If you think about all the
great change that's occurred,
it's because some angel
investors supported
some crazy kids who had some
crazy idea, whether it was
Larry and Sergey, or Chad,
and the team at YouTube,
or Snapchat, and they all needed
some small amount of money
to get going.
And these experiments
are worth trying,
and if you lose, you know,
6, 7, 8, or 9 out of 10 bets,
and the last bet returns more
than 10x, you're in the black.
And just as a gambler myself,
as a semi-professional gambler,
in fact, like high
stakes gambler in poker,
it's very hard for people
to deal with losing
six or seven hands in a row.
Anybody here play poker?
Anybody here ever lose
seven or eight hands
in a row when they
were the odds favorite?
Yes, people are
raising their hand.
I mean, it's going to happen
one out of every 500 games
you play, right?
And when you're not ready for
it, you stare at the ceiling
and go, how did I lose
all of those hands?
I lost six hands in a row
that I should have won.
It's a very odd feeling.
That's actually normal
for angel investing
if you're doing it right.
Like when I introduced people
to Uber, 17 of 22 or 23,
only three people said yes
out of maybe 20 or 25 people
I introduced them to.
And we're talking about
the greatest investors
in the world said no to Uber.
And they said no
two or three times.
And the three people
who said yes all
have nine-figure positions.
And the people who said no, some
of have 10-figure positions.
Some of the people said no,
just every time they see me,
they go, I should have listened.
And the list of reasons of why a
startup will fail is very long.
And the list of reasons of why
it will succeed are very short.
And so what I've learned to do
is work against my natural--
our biological nature is to be
conservative as humans, right?
If you were to swim
across the river,
the river might take you, or
the alligator might take you.
Or if you go over the hill,
the lion might eat you.
We are conservative
animals for good reason.
But we don't need to be
conservative in this aspect
of our life.
We should be risk taking.
But risk taking is
something that people just
don't have in their DNA.
So you have to unlearn what
your DNA is telling you.
You should be taken this risk.
There is no crocodile
that's going to eat you
if you lose your $10,000.
You're just going
to lose $10,000
and make it back next month.
So don't worry about it.
It's fine to burn that $10,000.
It's a worthwhile risk.
And people overestimate the
downsides so much it's crazy.
HEATH ROWE: Let's
unpack that a bit.
So when you're looking
at an opportunity,
what characteristics or
qualities do you look for?
And the question beyond
the question, what
makes you push past that fear?
JASON CALACANIS: Sure.
Yeah.
So I usually do make that
long list of reasons just
to get it out of my system.
And then I just take it, and
I cross it out, or rip it,
because I assume that a smart
founder will get through those.
And you have to ask yourself,
not what could go wrong,
but what could go right.
What could go right
for the company?
And if those things are even
a 1 in 100 chance, or a 1
in 50 chance of it going right,
if the odds payoff higher
than that, it's worth doing.
And so that's kind of how I look
at the entire world right now.
I've changed my whole thinking.
I tend to bet on people.
And I am good at
reading people, and I
think the biggest mistakes
I've made in investing, which
were Tesla, Twitter, and Zinga,
I wasn't an angel investor
at the time, but my friends
were starting those companies,
and I could have
invested in each of them,
and it would have been a $50
million return on average each,
based on the checks size I was
writing shortly after that.
And in every case,
with Twitter it was--
I just thought Twitter was
such a terrible idea, because I
sat there with Evan and Biz.
And I said to them
like-- they were
like, hey, look just
take your BlackBerry out,
and we'll text 40404.
And you say what you're having
for breakfast, and Biz is going
to say what he's having for
breakfast, and Ev says what
they're having for business,
and all of our phones go off,
and it was an SMS
service at the beginning.
There were no apps.
And I was like,
oh, my god, Evan--
this is Evan Williams--
I was like, this is so stupid.
Nobody cares what Biz is
having for breakfast or what
we're having for breakfast.
And you just cost me like $0.04.
I'm going to run through
my whole SMS plan.
And there's no blog post here.
You created Blogger.
You sold it to Google, right?
People wrote their thoughts.
It was full thoughts.
And now you're saying just--
it's the same as blogger
except without the blog post.
It's just the title.
HEATH ROWE: And now
it's back to medium.
JASON CALACANIS:
Right, and I was
like, you realize that if
this succeeds it's going
to be a cacophony of idiots?
Like literally everybody
who can't put together
a blog post, which
is only 400 words,
they're going to write
140 characters instead
of 140 or 300 words.
Every idiot in
the world is going
to be on this thing all
day saying stupid things,
and it's going to be getting
magnified like crazy.
I was absolutely right.
And it cost me $50 million.
So then I realized,
you know what?
I don't have to know.
If there is a Jason's
law of angel investing,
it's I don't need to know if
your idea is going to succeed.
I just need to know if
you're going to succeed.
So since I started that
approach to angel investing,
which is does this
person have passion?
Do they have skill?
Do they understand how to
build a product and a team?
I look for those traits.
And when you ask people
questions, short questions--
what are you working on?
Why will this idea work now?
Has something
changed in the world
that makes this idea work now?
Or tell me about
the product design.
Or why are you doing this?
Just like literally pointing
out one feature of the product
to say, what does this
syndication thing,
this little snippet here on
YouTube, why is that important?
Like if you were
to ask Chad early
that, he was like, oh,
because people want
to put videos on their site.
There's no easy way to do it.
They have to put up a server.
So if they put this JavaScript
into their blogger, dotcom
account, they could put
a video on their site.
Oh, why is that important?
Well, because it's
free marketing for us.
We're giving them free
hosting of videos.
They give us free marketing
to their audience,
and we're going to grow
the service that way.
That was the why now
syndication and cloud computing.
So I now have three
or four founders
who are creating products
that I invested in
after investing in
their last company.
So Raul created a
company called Rapportive
that people may have used.
That was that little
sidebar in Gmail
that told you
everybody's social stats,
and this is their Twitter
handle, and here's
a bunch of information on them.
He sold that to LinkedIn.
Now, he's doing something
called superhuman, which is
like a better Gmail, I mean--
well, anyway, I
don't want to make
anybody feel bad in the room.
But it's kind of like nobody's
taking on Gmail in a long time,
right?
It feels like Gmail is like--
it was so radical when
it came out 15 years ago.
So he's kind of taking
an approach of--
the same approach that
Gmail took towards email
of like a radical email client.
And so when he
sold Rapportive, I
made two or three times
my money, and I told him,
hey, this is fine.
I'd rather we don't sell.
But OK, you've got
four co-founders.
I only ask one thing, Raul.
When you have your
next idea, you call me,
and I can be the first investor.
He called me.
I put a million dollars in.
I joined the board.
Boom, we're off to the races.
This has happened
like three times
now where somebody who I
invested in who got a single,
or double, or lost my
money, we come back.
We do it again.
So I'm investing in arc
of a founder's career.
And I think that's the way to--
that's, in my mind, the best
way to do it.
If you know somebody
is a winner, if you
know they work, if you
know they're passionate,
if you know they're
not going to give up,
these are the qualities
of the founders who win.
They won't give up.
They have skills, and they
have passion for the space.
If an intelligent
person wakes up one day
and realizes how
hard it's going to be
and how much sacrifice
there is, and they're not
passionate about the idea,
the rational thing to do
is to quit and say, this
is going to be too hard.
You have to really, really care
to blow up two or three rockets
and still go to work
the next day, you know?
Elon is a close
personal friend of mine.
When he blew up the second or
rather rocket, I mean, it was--
you know, I think that was--
that pushed him to the brink.
I mean, he was really,
really focused.
But he wasn't going to give up.
It strengthened his
resolve, if anything.
And now you watch these idiots
on Twitter, back to Twitter,
a cacophony of idiots,
like criticizing the Model
3 for it being like a couple
of weeks late or something,
and can he hit the numbers?
I mean, I was just driving
the car for a couple days
last week.
It's got a 300-mile range.
It drives like a Porsche.
These idiots are
still doubting him.
It's like, did you not--
have you not been
paying attention?
These guys--
HEATH ROWE: [INAUDIBLE].
JASON CALACANIS: Literally,
there were always these haters
out there and doubters,
who throw rocks
at these companies who are
trying to change the world.
And literally, if Elon
succeeds, no more smog,
energy independence
from dictators
who won big swaths of fossil
fuels, global warming,
like free transportation
eventually, no more road deaths
because of self-driving.
There's this whole swath
of incredible things
that will happen.
So it's so amazing to
me how people could not
be positive about what's
happening in the world
where everything is trending
so much in the right direction.
And there are small
issues here on the sides
that we have to solve.
Some of them are big.
But I look at them all as
incredibly solvable, incredibly
solvable, including jobs,
including environmental issues.
I think we can
solve all of them.
It's a lack of positivity and
a lack of paying attention
to what's happened to date.
We seem to solve a
lot of the problems
that we face as
humanity if we are
indefatigable and
clever in our approach,
and we're a clever species.
HEATH ROWE: Well, let's talk
about the people building
that better world,
because the book is
written kind of in the guise
of how to become an investor.
But it would also be
really useful to people
who want to build a company
that others would invest in.
JASON CALACANIS: That's
what it's really about.
HEATH ROWE: Talk about that.
JASON CALACANIS: Yeah, well
as a founder, you know,
everybody is trying to figure
out how to hack investors.
The whole point of Y Combinator
for the last couple of years
has been how to manipulate and
get an edge on the investors.
And I think it's
the wrong approach.
I think they've realized
it's the wrong approach,
because you're really
in it together.
You don't want to try
to trick the investors.
So people are
constantly asking me,
how do you get an
investor to invest?
And it's like, well, if
you have a great team,
and a great company,
and great product,
and customers who love you,
and some level of traction,
you're going to
meet 100 investors.
And eventually six or
seven of them will invest,
and then it's that simple.
But they're trying to figure
out how to hack the investment.
Instead of trying to hack the
investment, how about hacking
the usage and the engagement
level of your customers?
So if you had 100 units of
work, this idea of spending
90 units on hacking the
investor community, which
is a pretty sophisticated group
of people to try and hack,
why not spend those
90 cycles trying
to triple the engagement of
your current customer base
and then explain with the last
10 units of energy, here's
what we did to increase
engagement and tell that story?
So I think this is
the rookie mistake.
It's just too much gaming
of the investor community
and trying to figure
out how to hack it.
And what are they thinking?
It's pretty simple
what they're thinking.
Does this person
have the ability
to build a team that can build
a product that delights users?
And if they can get
that product to market,
you've built that credibility.
And to think it's going to
happen after one meeting is
probably silly.
Like it usually
happens over five,
six, seven meetings
an email update.
So I'm so pro this monthly
update that I require it
for my investments, because
the first 100 investments
I did, I didn't require them
to send monthly updates.
Now, in my legal documents,
I require a monthly update.
That starts with the
most important metrics.
How many months of
run we need to have,
how much cash is
left in the bank,
when do we need to
raise money next, what's
the revenue, what's
the user engagement.
And so I've been making
this a requirement,
because so many founders
don't send these updates.
And then they don't
have the opportunity
to raise money from the
investors who they have already
convinced to put money in,
because those investors
lose faith.
What I tell founders now is,
if you want me to invest,
so many deals coming
at me right now,
put me on your monthly
update for three months.
I'll read your monthly
updates for three months
before I invest,
and then I'll decide
like looking at your monthly
update when it's right for me
to invest, when it's
in my Goldilocks zone.
And so the best thing
the founders can do
is really understand what
that investor is invested in
and what their
timing typically is.
There are investors who like
to invest when the company is
worth a $1 million or
$2 million before it
launches their product, because
they're product driven people.
They make products.
So they want to be involved
in the product creation,
and they want to be there
for the day it launches.
There is other people who want
to be there right after it
launches, like myself.
I want to see six weeks of data.
There are other people who
want to see two years of data,
you know, VCs typically.
And you just have to
know your audience.
And so I get monthly
updates more consistently
in some cases from companies
I passed on investing in
than the ones I did invest in.
Literally, I have somebody who
was sending me legal documents
to sign for an approval of
a Silicon Valley bank loan
and credit facility.
You know, when
you're an investor,
you have to sign off on
these future investments.
And I'm like, I haven't
heard from you in 18 months.
What's going on
with the company?
It's explaining
everything that occurred.
I am like, you could've just
done this monthly or whatever.
HEATH ROWE: Don't catch up.
JASON CALACANIS:
Yeah, It's just weird.
So I think the monthly
update puts people
on this cadence where they
can build trust and build
credibility with investors.
And that's what
you're really trying
to do with those
investors is just
trying to build this
sense that you're credible
and you're not stopping.
Like when people get the
sense that you're not
going to give up and that this
train is leaving the station,
and they can either
get on it or not,
that makes it a very
attractive investment.
It's like, this person's
not going to give up.
And that's a-- at least you
know that your money didn't
get burned without
people even trying.
It's nice to know
that people tried,
and I don't mind people
losing the money,
as long as they tried hard.
That's really the goal.
HEATH ROWE: You've lived in
New York for many, many years.
You've lived in
Southern California.
JASON CALACANIS:
30 and 10, yeah.
HEATH ROWE: And
now San Francisco.
JASON CALACANIS:
For three, yeah.
HEATH ROWE: How do the
business communities differ?
How does being an investor
in those communities differ?
JASON CALACANIS: Sure.
You can build a great company in
those three cities, no problem.
A great founder will
build a great business
in those three cities.
If you're in
Southern California,
or if you're in
New York, you are
going to have less competition
as a founder for talent.
Talent will stay longer.
Cost will be a third less.
Those are all great things.
You're going to have
to come to the valley
to meet with investors.
And those investors
will not mind
going to New York
or Los Angeles,
because they are awesome cities.
And if you were to
rank the three cities,
New York is the greatest
city in the world.
Los Angeles is probably the
better lifestyle and very
similar to New York, as people
who have lived in both cities
will say.
And San Francisco is
the worst-run great city
in America.
It's just horribly run.
It's completely dysfunctional
and like can't even
solve minor issues.
So it's pretty tragic in a way.
But if you're a founder
there, obviously you
have access to a
wider talent pool.
I wouldn't say
necessarily better.
But the costs are ridiculous.
It's really like
showstoppingly bad.
So the high art
I think right now
is to put your headquarters in
Silicon Valley in a wee work
office and then have
everybody in Arizona,
or Los Angeles, or San Diego,
or have your team at Waterloo
doing your code.
HEATH ROWE: So have a
mail drop in the valley.
JASON CALACANIS:
Basically, it's like having
this little headquarters in
the valley until you can get
valley VC to put a series A in.
Your chances as an angel
investor in hitting a unicorn
are greatly reduced
outside of Silicon Valley
just statistically.
Everybody knows that.
And if you look at the $100
billion, the $50 billion,
or $100 billion
outcomes, those almost
universally come
from Silicon Valley.
You do have Amazon and Microsoft
as the two notable exceptions,
and you have Snapchat down here.
But Snapchat might
be a $5 billion
company, not a $10
billion plus company.
So what I say in the book
is to be a great investor,
do you need to be
in Silicon Valley?
The answer is yes.
Now, you could go there.
So I've lived here and
was going up their weekly.
And that was a lot of work.
But that's how I did
investing, and I hit four
of the six unicorns doing that.
So just going up
there and going up
for two days,
three days a month,
you have a chance to just
book all your meetings
and get it done that way.
So there's something very
special about the community
up there, but you see
something very nice
happening down here as well.
And I think the
question is will those
people who make
money off of Snapchat
or working for
Dollar Shave Club,
will they become angels or not?
And will they start investing
in this community or not?
And that's what
happened in New York.
You know, the "Silicon
Valley Reporter" days,
there weren't that
many investors.
Things started to work out, and
you had some of like Kevin Ryan
from DoubleClick, who had made
a ton of money, launch "Business
Insider" and a DNA
company, a CDN company,
I can't remember the name
of it, that did very well,
and he also did a
flash site sale.
So he was just investing
in everything there.
And you start to see that cycle.
I think actually [INAUDIBLE],,
was at Ziff Davis in New York,
and then they did [INAUDIBLE],,
and they started a venture firm
that invested in "Buzzfeed,"
and "Huffington Post,"
and all that kind of stuff.
So you see that
renewal happening--
new firms and new
individuals in those cities.
So Stockholm is
another crazy example--
nine unicorns out of Stockholm.
It's crazy.
How did that happen?
I've been asking
for an explanation.
Nobody can give it to
me except that they
work really hard over there,
because there's no sunlight.
HEATH ROWE: Long winters.
JASON CALACANIS: Long winters.
They just work for
12 hours a day,
but you know, there were
nine that came out of there,
which is pretty amazing.
So innovation can
come out of any place.
How are things going
here after the memo?
I'm curious.
Are we allowed to lot of
talk about that or not?
I was like, what
should we talk about?
They are like Google
Memo, Uber, and Benchmark.
They are like, those are all
the controversial topics.
HEATH ROWE: Well, to sidestep
that question entirely--
JASON CALACANIS: Go ahead.
HEATH ROWE: --let's
talk a little bit
about growth and optimism.
JASON CALACANIS:
Growth and optimism.
HEATH ROWE: What areas do you
see nascent opportunity in?
We've talked a little
bit about free energy.
We've talked about robotics.
JASON CALACANIS: Yeah,
well, in our industry,
we always have false starts,
and so if you think about VR
as an example, how many
people remember VRML,
the Virtual Reality
Markup Language.
There was like, literally, we
were going to through the Yahoo
index and be like,
flying through in 3D,
and like picking arts and
leisure, photography, nudes,
you know, whatever, like
pulling out the folders.
And it was going be this
incredible gyrolinear world,
and it never happened.
Now, you put an
Oculus on, and you're
like, wow, that's incredible,
but still hasn't happened.
Like when is that going
to happen exactly?
VR might be a false
start right now.
The headsets seem
extremely expensive,
and it might still
be four or five years
away before we have 100
million people using it, right?
You really need to have
tens of millions of people
to possess the technology
in order to have 10 million
use it in a day, and that's
when you sort of hit the tipping
point.
Now, AR feels a
lot closer, right?
So that's something
where it feels
like you could have 10
million people a day
using it two years from now.
And so I do think there's
something there with AR and VR,
whether it's two,
three, four years.
So that would make it a good
time to start investing,
but people who invested two
years ago in VR companies,
those companies are running
out of money right now.
And they're desperate,
because they
thought they would be selling $5
million worth of software apps,
and they're selling
$50,000 a year.
And it's like really
early adopters.
AI was one we had a
lot of false starts on,
and now it's not a false start.
So I've been pitched on
six or seven companies that
are taking AI into human
resources, customer support,
legal, and it's pretty
obvious that like,
I don't know, 60%,
70%, 80% of legal docs
that have been created, you
should just be able to be like,
OK, Google, I need a
nondisclosure with Jason that
says this, this, and this.
And then it's just like,
OK, we sent it over to him.
And then I get it, and
OK, I sign it, and boom.
Like, we could do most
contracts that way.
And so white collar
jobs like that I
think are going to be at risk
in the next 10, 20 years,
because it's going to
be so easy to do things
like contracts or
accounting, you
know, these kind of things--
AI is for real, obviously.
And you guys all know
that from DeepMind
and the impact
that's going to have.
And that's a horizontal impact.
So when you have
something like AI
and machine learning
hitting at this pace,
and people learning
about it this
quickly, and implementing
it, tensor flow,
all of this other stuff,
like, it's getting easier
to implement Watson, et cetera.
So that means
you're going to have
a whole group of
entrepreneurs being backed
by angels to try to redo every
vertical to make it AI enabled.
If you look at Google Photos,
I think it's a great example.
Google Photos is just
anticipating what I want.
I don't know if anybody
works on Google Photos here,
but high five to you
guys crushing it.
I'm like, I download
Google Photos
for my phone like for a year.
People are like, you have to get
Google Photos on your iPhone.
I'm like, no, I don't.
I got iCloud.
I'm paying for it.
And then I get Google
Photos, and I'm like,
oh that's pretty dope.
It's telling me I should
check out these photos,
and it's telling
me, look here we
made a video for you, because
we know you like videos.
It's kind of scary.
It's figuring out what I like
and delighting me every day,
and it's obviously using
machine learning and AI
to figure that out.
It can only get scarier
and better as time goes on.
So I think that's pretty real.
And I think robotics is the one
that was another false start.
We had all of these
Roombas, and Segways,
and other robotic-ish
devices, hardware devices,
that were going to change
the world and didn't.
And now I have two startups
that are using robotics
in a way that are
truly disruptive.
The Cafe X one is a
robot a coffee machine
that maybe you'll see
here in Google one day.
I wouldn't be surprised
if you saw it here.
And it's two Coca-Cola
machines wide.
It's got the arm, and
it makes your coffee,
and it makes it perfectly.
And you can order
it on your phone.
It knows the distance
you are from the machine.
So it makes your coffee
in under 60 seconds.
It gets it perfect every time.
It remembers your
last instructions.
I want this type of milk.
I want this type of bean.
I want this type of caffeine.
I want this temperature.
You can really dial it in.
You pick it.
You go order it.
It hands it to you.
It takes under 45 seconds.
And so the idea of
waiting at intelligentsia
for how long to get a coffee?
That's about 20 minutes.
They have the same Intelligencia
beans in their machine now,
and you'll be able
to, every airport,
every two gates there'll
be a Cafe X machine,
and it will cost one-third
less to get a cup of coffee,
and it will take 19
or nine minutes left.
Everybody has been
in that position
where there's like a line for
coffee, and you just give up.
So the idea of people
making coffee for a living--
a robot should be
doing that, right?
It doesn't make much sense.
Unless you want to have
the charming experience
of a barista with suspenders
and a big mustache.
That will still exist
somewhere in the world.
And then this other
company Blockable
is making modular housing.
And they're going
to use robotics.
So you are going to be able
to take out your phone or iPad
and be like, I just bought this
lot over here in Culver City.
And I need a house that's
like this dimensions,
and I want to have it delivered.
And the robot is
going to make it.
HEATH ROWE: It's like prefab,
modular, robot-made housing.
JASON CALACANIS: Yeah.
And so it may be
the same price--
$200, or $300, or
$400 a square foot,
but it may take out six months
or 12 months of time to build.
Or then eventually it might
cost less actually too.
Or it might cost
10%, 20%, 30% less,
but the time savings will be
where the real savings is.
And then they might have
four of those factories.
So depending where you
live in the country,
you know, it could
be conceivable
that you order a nanny
unit or an in-law unit,
I think they call them, in the
back of your place in Culver
City.
And it's outside your
house in two days.
HEATH ROWE: So you
order the addition.
You laser cut the new door.
JASON CALACANIS: Boom,
and then like literally
like the crane drops
it in your backyard.
So housing and coffee
are like two areas
where robotics specialized
are going to do really well.
So I really believe
in looking at areas
where we had false starts,
because if you think
about going back to
YouTube as an example,
there were hundreds
of startups that
tried do video on the internet.
But the reward for putting a
video on the internet back then
was you would, if it went
viral, you got a $5,000 bill.
And then the video
got turned off.
Some people in the room might
be too young to experience this,
but it was often that you
would go to a website that
went viral, and it
would say, this user
has used up their bandwidth
cap, and therefore, you
can't see the blog
post for the video.
HEATHE ROWE: You couldn't
afford to be successful.
JASON CALACANIS: You couldn't
afford to be successful.
And because of cloud computing,
just Stephen and Chad
had this like vision
like, wow, it's
cheap enough where we're
kind of in that range
where we can kind of let
people host for free.
The idea that you
could put a video
online without putting
your credit card in
was kind of crazy.
Now, it's like, 4K video,
uploaded to Google, free
forever, uploaded to
iTunes, almost free forever,
like we've come a
long way in 10 years.
So I like to look
at those spaces
where people try
try, try, and tried.
And that's one of the things
that investors totally,
by and large, mess up.
They always look at their
personal history and knowledge
of the space, and they
correlate that with, oh,
it hasn't worked before.
Therefore, it won't work.
Google was the 11th
or 12th search engine.
It was just 20 times better.
PageRank was just
that much better.
The algorithm was the why now.
It's this very
complex algorithm that
really made the results
demonstrably better.
And somebody taking
another swing at bat
at an idea that
became $100 million
or a billion-dollar
company is worth it.
And we saw that with WebVan
versus now InstaCart,
and other Google,
Amazon Prime Now.
Google has-- I don't
what it's called in--
I don't know if you have
the Google delivery here.
Do you have the Google?
HEATHE ROWE: I think we--
JASON CALACANIS:
Shopping Express up here?
Or is just in San Francisco?
It's here too?
Yeah, so like all these
things that we're using now,
UberEats and PostMates, these
were things that were tried--
Cosmo, Urban Fetch, WebVan,
and now just GPS, logistics,
robotics, all of this stuff
has gotten so much better
that it's actually working now.
And they're to figure
out the unit economics,
and it's going to
change the world again.
HEATHE ROWE: It's
kind of replaying
the hype cycle for new
appetite, and new timing,
and new position.
JASON CALACANIS: Look at gaming.
We had this whole
thing on web gaming
where casual gaming was
going to be a big deal.
Then all of a sudden,
Facebook came out,
and social gaming
was a big revolution.
Then apps were a big revolution.
So you keep having
these games, you know,
waves coming one
after the other,
and I think we'll
have that for AR.
I think there'll be an AR gaming
wave that'll be just crazy.
When you put glasses
on, and like we're all
playing like zombie paint ball
around the office right now.
HEATHE ROWE: We're
playing it now.
JASON CALACANIS: Exactly.
It's just some
people with glasses
on are like watching
the zombies attack.
It's going to be a lot of fun.
So I think there's
going to be some--
I think the AR stuff
is really interesting.
It's super, super interesting.
HEATHE ROWE: Can we open
up the floor for questions?
JASON CALACANIS: Yeah, sure.
Yeah.
HEATHE ROWE: Does anyone
have any questions for Jason?
We have a microphone.
JASON CALACANIS: They're
going to throw the box at you.
There it is.
AUDIENCE: Sure, right.
So you mentioned that you
started off in journalism
and then broke into
investing, and you
were doing it long distance
even from LA to Silicon Valley.
How did you break into the
kind of bro MBA circles?
Because I guess investing must
be a pretty social activity.
JASON CALACANIS:
Yeah, Sequoia had
this idea that their
entrepreneurs, who
they invested in,
and they had invested
in our company, Mahalo,
which is now Inside.com.
They thought that it would
be really cool for founders
to scout out
investments for them,
and that's actually how I did
my first 15 or so investments.
So I was kind of pushed
into it by Sequoia,
because they had this
idea to do scouts.
And then they kind
of created a monster,
and I started
doing it on my own.
But now, since that time, I used
to host something called Open
Angel Forum, which was just--
I would have a conference
room, and a law firm, or at
somebody's house, and
invite 10 angel investors
to see companies.
And actually Thumbtack
and Uber both came
to Open Angel Forum, which
was AngelList, but in person.
And so now Angel List exists,
and these syndicates exist.
The best way to break in is to
just join as many syndicates
as you can--
Funders Club, AngelList,
SeedInvest, and just watch
the deal flow go by.
And then you could do
one of two scenarios.
One, you could play
fantasy sports,
where you read the deal
memos, and you say,
I think this is going to
work for these reasons.
I don't think its going
to work for these reasons.
And my conviction level
is between 1 and 10.
It's a 7.
And so I'm going to
pretend I put in $5,000.
And I'm going to remind myself
every six months on this Google
sheet to check in on
the company's valuation
and see if they raise
more money and to see
if I'm good at picking.
And you could do it in a
"Moneyball" fantasy sports kind
of way, which is what I
tell young people in college
is you're like creating
a virtual portfolio.
But now if you have a
little bit of money,
I think doing this
micro investing
and putting real
money on the table
will make your senses
go a little bit,
you know, just like
playing for money,
changes it when you're playing
for pennies or for fake money.
So I like the idea
of going to a casino
and playing poker for
$1, $2, while you're
learning, even though
you're going to burn
for a couple of hundred bucks.
You're going to play
these tournaments,
and you'll feel the
sting of losing your $40.
You need to have that pain.
So I like that pain
for you specifically.
You look like you need
to feel that pain.
So I would say, just go on Angel
List, join all the syndicates,
go on Seed Investor and all
syndicates, and trust your gut.
Make 10 bets of $1,000 each,
and see how you wind up.
Now, here's the secret.
Building networks is not
as hard as people think.
After you do those
10 investments,
you put $1,000 in each.
Act as if you put $10,000 or
$100,000 in, which is to say,
email the founder.
Introduce yourself.
Follow them on Twitter.
Favorite and retweet
what they do.
Look at their job board.
And check in with them every 60
days and say, how's it going?
Is there any way I can help?
And then find all your
co-investors in the company
by looking at Crunchbase,
or Mattermark, or any
of the publicly-available
places.
Put them in a Google sheet.
And then email the hundreds of
them with a mail merge and say,
hey, I notice we're co-investors
in Acme Company together.
I was wondering if you had any
interesting companies you're
looking at.
I'm breaking into
angel investing.
And I'm investing in
this company next.
So I started doing
that in the early days.
I was telling people
like, hey, have you
seen anything interesting?
And literally, I
would do a mail merge
like that, where I
would email 50 people
and say, have you met any
interesting companies?
Like one sentence.
And I would say a half of the
time, people would respond.
And then some people would
respond three or four times.
Yeah, I'm meeting
with this company.
I met with that company.
People are more than
happy to share deal flow,
because in the early stages,
you need probably 30, 40,
50 investors before the company
gets ready for a series A.
So if you're one
of the first 10,
that means there's another
40 spots left to fill.
If you're investor
50, there might only
be a couple of investments left.
So that's how you
build that network.
You just email your
co-investor and say,
we're co-investors in this.
That makes you like
family members.
You're now on a
first-name basis,
because you're both
invested in Uber together
or this company together.
And what other deals
are you looking at?
People really don't
understand how easy
it is to build a network
in today's environment
with all this
information online.
It's super easy.
AUDIENCE: Does that mostly
work when you get a hit?
It's not really
your [INAUDIBLE]..
JASON CALACANIS: No,
because it's sort of like--
it's sort of like poker.
You ever get invited to a poker
game, and you're a bad player?
And you're like, why
are they inviting me?
It's like-- we need
some bad players.
HEATHE ROWE: I think
they want your money.
JASON CALACANIS:
They want your money.
No, but also, you need
to fill a table, right?
So we need to fill a table.
We have a company Cafe
X that's just starting.
We need to raise
a million dollars.
We have $400,000 in.
We don't care what
that next $600,000 is.
When it's that
first round, we need
to get that $600,000 so they
can prove out in 18 months
that this is a possibility that
they can build the machine,
that they can get
to $1,000 a day
and profits, whatever it is.
And so, again, most
people overthink it,
and the whole industry
is cracked wide open,
because of AngelList, and
SeedInvest, and the reason
I wrote the book
was really to try
to inspire people to
get involved in it
and not overthink it.
Investing and losing 1% of your
net worth, if you learn a ton,
it's going to be well
worth it in my mind.
AUDIENCE: A quick follow up--
thinking about this.
On overthinking, do
you try to time it
in terms of, well, this thing--
there's been not enough
false starts quite yet?
Or there's a paradigm
shift, and I really
should be looking
in this direction?
JASON CALACANIS: Yeah, don't
overthink it is what I think.
To the Twitter
example, I understood
it could become a huge
cacophony of idiots.
Yet I missed the obvious.
If it does, who cares
if they're idiots,
or geniuses, whatever
it is, it's a big thing.
And big things in the world
generate tons of wealth,
and this thing also, in addition
to being a place for idiots
to spew hate, is a place where
revolutions can start, right?
AUDIENCE: So you're saying
that if you don't personally
like something, that shouldn't
be a barrier toward--
JASON CALACANIS: I think you
have to let go of your ego,
and what you think
of the idea, and what
you think of the possibility
that it could work.
Now, if you're offended by
the existence of something,
then I don't think
you should invest.
You're not enthusiastic.
But I'll give another example.
I didn't have a chance
to invest in Airbnb.
But I thought when I
heard the Airbnb idea,
I literally said to people,
they were like, yeah,
you can rent your couch.
It's like couchsurfing.
So you let somebody
sleep on your couch.
And I'm like, like
a serial killer?
So I'd let a serial
killer sleep on my couch?
They're like, no,
no, no, no no no.
They're all like,
it's a community.
And I'm like, of serial killers?
They're like, no, it's not.
Or you could stay
on somebody's couch
for like $50 or $30
bucks, if you go to--
if you couldn't
afford to go to Paris,
you could stay in Paris for
$30 on a serial killer's couch.
Like how many people here
have stayed in an Airbnb?
Raise your hand if you
stayed in an Airbnb?
It's everybody.
How many people have hosted
somebody as an Airbnb host?
Raise your hand if you've
done an Airbnb host.
One person.
OK, how do you--
I could never have
somebody in my house
who I don't know and do this.
Like I'm just not brave
enough to do that.
And sure enough,
I was like, how do
you stop a meth head
from renting a place,
and just tearing
it to the ground,
and ripping it apart,
and having a meth party.
And sure enough, in a year
two of Airbnb, it was like,
there was a meth party
at this woman's house,
and they took all
her photos, and they
made their own collages,
and put like, kill everybody
on the walls, and it was like
the most horrific horror movie
ever.
And I was like, yep,
just like a hotel room.
I was like, oh, I see.
I overthought it.
Like there's 20 meth
parties going on right now
in hotels in Los Angeles.
We are not aware of them.
But this is what
people do in hotels.
There's meth parties
going on, I guess.
So of course it's going
to happen to Airbnb,
and there's whatever.
So you have to be able to like,
again, write the long list
of why it's not going to work.
There's going to
be a meth party.
Or somebody is in it
tragically-- you know,
a ride sharing service
is going to flip a car,
and people are going to die.
Or an airplane is going to die.
People are going to
die in an airplane.
I just couldn't get
through it in my mind,
so I think sometimes, taking
yourself and your understanding
of the issue in the
market out of it
and just looking
at the founder--
are they passionate?
And are they making
a great product?
If they're able to make a great
product, and their passionate,
and they're smart, well, if the
product doesn't get that uptick
from users, they're probably
going to pivot a bit
and figure out another product.
Whereas a team of idiots who
have a great story about how
big the market
is, but they can't
build a really great product,
they're not going to succeed.
They're just not
going to succeed.
AUDIENCE: Cool.
Thanks.
JASON CALACANIS: I think
you have a question here.
HEATHE ROWE: You have
a hand in the back.
JASON CALACANIS: I'll
do shorter answers.
AUDIENCE: Yeah, what
about the people
raising money with
virtual currency now?
JASON CALACANIS: It's
a great question.
I have looked at the companies.
And I would say the first wave
of ICOs are extremely scary.
It reminds me of the dotcom
bubble, so I'd be very careful.
People who have
crazy ideas, have not
built them, raising $30
million or $100 million,
is a recipe for disaster.
In the height of
the dotcom boom,
we had people raising money or
taking companies public based
on the idea that they
would raise $100 million
and then figure out what
to do with it, right?
There was a company
called CMGI, I remember,
that was like an incubator.
And all these companies were
going public with the idea
that they would
create companies.
So you have people
who are creating
ICOs for products that don't
exist that are crazy ideas.
Will one of them work?
Sure.
Will 99 of them fail?
Probably
And then where is this
money coming from?
And this money is dark money
from I think the crypto boom.
So people have a ton of
Ethereum, or a ton of Bitcoin,
and like, OK, I'll diversify,
so I'll buy all these ICOs.
It feels like the ultimate
Ponzi scheme to me.
It's real technology.
It could have a real impact.
But this early cohort--
I would not be surprised
if almost all of them
went to zero, and all of
that money got burned,
and there were massive
lawsuits around it,
and that there was massive
fraud occurring right now.
I believe Bitcoin is probably
one of the most massively
manipulated currencies in
the world or most manipulated
things in the world.
What's to stop somebody from
creating 100,000 wallets,
or 10 of us from creating
100,000 wallets each,
and moving a bunch
of bitcoins around
and making it look like
there's all this volume,
and then making the
share price go up?
There's a lot of
ability to manipulate
anonymous currencies.
And the SEC is not very--
we talked a little bit earlier
about non-accredited versus
accredited.
The SEC, they do not have a--
what's the right way to say it?
They're not looking
for creative solutions
to be put into the market
with people's money at risk.
They're risk averse.
Their whole reason to
exist is to protect people
from losing their money
and being tricked.
These things seem like
people could get tricked
and could lose their money.
And then a lot of people are
like, it's not an offering.
It's not like a stock offering.
And then the people
buying it are buying it.
When you ask them why
are they buying it?
They're saying, because it's
going to go up in value.
If the people buying it
believe it's a security,
and you are pretending
it's not while you're
cashing in tens of
millions of dollars,
this is, I think, disingenuous.
So some people who are
taking in the money in I know
are doing things like
paying taxes on it,
saying it's future
revenue for software,
because this is our
API calls or whatever.
So they're actually
going pay their taxes
on it-- pay as if it's profits
against software revenues.
So I think that's smart.
I do think that the fund,
having a venture fund, where
the LP interests, the Limited
Partners are in coins and are
on a ledger, is inevitable.
And that people will then be
able to trade their interest.
So if you were in
the Sequoia Fund
with Google at the IPO
or right before the IPO,
and you wanted to sell your
shares to another person
or your benchmark right now in
the Uber situation where Uber
and Benchmark are fighting.
If Benchmark shares
were freely tradeable,
and the LPs could
trade them, well, they
might liquidate right now.
Or they might be wanting to
buy from another party, right?
And so you would have
this more fluidity.
So I do think that that will
come very quickly, like two
or three years, and other
countries are going to lead it,
because we are very conservative
when it comes to this.
So I think
Scandinavian countries,
and Asian countries,
not companies,
are going to be
very fluid with it.
But I'm monitoring it, because
you know, if you were a fund--
if you have funds like
I have had, or have,
it's an interesting concept.
I'm certainly a believer
in the technology.
But I also saw a
lot of companies,
I think, in that group,
that I just thought,
they could not clear a market
with the venture community.
That doesn't mean the
venture community is perfect,
or the angel
community is perfect,
but they tend to know
what they're doing.
And that machine is
a well-oiled machine
that knows how to take risks.
So if the well-oiled
machine of Silicon Valley,
and venture money,
and angel money
passed on investing
in these companies,
and then they were able to
raise from dark pools of capital
of unsophisticated
people, I don't know.
I don't know if there's
that much wisdom in crowds.
I'm very worried about it.
HEATHE ROWE: I
think we have time
for a couple of more questions.
Do you have a question?
AUDIENCE: Yeah, I
actually had a couple.
The first one was
on average, how many
of your initial investments
significantly change
product direction?
Like prototyping stage
or initial customer base.
And then another
question would be,
how many investments have
you made or do you usually
see where you're investing
in someone who's also like,
for example, like
working at Google,
but has legal acceptance to
work on a product on the side,
or maybe any of the big
five and have done very well
those companies, and they
later on quit, of course?
And then maybe just
how do you see it
in terms of Southern California.
Excluding Silicon
Valley, where do you
see Southern California against
the other cities in the US?
JASON CALACANIS:
Yeah, so we talked
before, technology and talent
can come from anywhere.
And I think Southern California
is so close to Silicon Valley,
and the people in Silicon
Valley, especially investors,
and people who live
there, are kind of tired
of Silicon Valley.
It's pretty horrible to
live there right now,
because of cost, because of
homelessness, because of crime.
It's much better to
live here, to be honest.
It's a much better lifestyle,
like five times better.
So I think you have
a lot of them who
are moving down here
and a lot of people
who are willing
to move down here,
because it's literally like--
it's like a borough, right?
It's a one-hour flight.
So your question about
people doing their side
hustle, I think most investors
like to see a clean break,
because they want to
know that you're all in.
So I generally don't invest
when people are doing
those kind of side hustles.
Even if they have permission,
we want to get a clean break,
know you're full time
on it, and then make
the investment, but willing
to meet and see the prototype.
But I've been in a
lot of cases where
people have those side hustles,
and they've got permission
from their manager, and
then the big five company
is like, yeah, we're
going to pull you back in,
because we kind of
like your side hustle,
and let's get that
back in the company.
So because those big five are
so competitive with startups now
and aware of the
startup ecosystem,
I think a clean break
is the wisest way
to go if you want to
raise some serious people.
And most companies
pivot here and there.
The term pivot used to mean
taking what you've learned
and changing your
direction slightly.
One foot staying where it is,
and then you're moving around.
The word pivot somehow meant
dropping the existing idea
and coming up with a
completely different idea.
That's not the term
pivot as we all use it.
But people are like,
we're pivoting.
And pivoting now in Silicon
Valley means this failed.
Now we're doing this.
That's not pivoting.
Pivoting is we were
going to go and do
video for the enterprise.
But then we found this
new class of prosumers.
So we're kind of going
to make it prosumerwear.
It's free for most people and
paid for the elite people,
but it's not going to
be an enterprise video
solution anymore, because
we realize the enterprise,
you know, they like
to roll their own.
That would be a pivot.
You're staying in
the same vertical.
You're shifting the
customer base a little bit.
But the product and everything
is in the same zone.
So that happens in
almost every company
where you learn as you go.
Very few get it right.
In fact, if you look at
Uber, is going into ride
sharing an Uber pool, a pivot?
No, but maybe in the
classic term it was.
We started with black cars--
Lincoln Town Cars,
expensive cars.
We pivoted to ride sharing.
We added it.
You know, we moved our
focus over a bit to it.
So I think it depends on which
definition of pivot you're
going with.
But there are people like
Stewart Butterfield who
did Flicker after doing
a failed video game
and did Slack after doing
a failed video game.
I mean, basically, if he
does another video company
I'm investing, it's
just for the pivot.
HEATHE ROWE: He did a
really good video game.
JASON CALACANIS: The video
game will never be released,
and a billion dollar
company will come out
the other side
that has something
to do with the team that's
building the failed video game.
Like the second he
succeeds at a video game,
I'm going to be worried.
HEATHE ROWE: All right, is the
fellow in the back still here?
It doesn't look like he is.
I think that's all the
time we had for questions.
JASON CALACANIS:
Thank you so much.
If anybody wants me
to sign their book,
I'm willing to do that as well.
HEATHE ROWE: All right,
thank you very much, Jason.
[APPLAUSE]
