AngelList CEO Avlok Kohli: The Funding Market Today; Last-Mile Delivery; Competing w/ Carta | E1005

1. 0:00 – 0:38

   Intro

   1. AKAvlok Kohli0:00

      Let's not have meetings about meetings, or process about process. None of that shit matters, right? The only purpose for a, a company ... It's just a group of individuals that are coming together to build product for your customers. Any process, anything that gets in the way of that, crush it. If we have too many meetings, cancel the meetings. Like, I'll regularly go cancel all of my meetings on the calendar because all that really matters is that you're shipping products that your customers love. And anything that gets in the way of that and you drag, kill it, crush it, and just focus on speed. (instrumental music plays)

   2. HSHarry Stebbings0:31

      Avlok, I'm so excited for this, my friend. It's been a while since we last had you on the show, but I wanna start today with a little

2. 0:38 – 2:01

   How Avlok Became CEO of AngelList

   1. HSHarry Stebbings0:38

      bit of context. So, how did you come to be CEO of AngelList and what was that entry to the role for you?

   2. AKAvlok Kohli0:43

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

   3. HSHarry Stebbings2:00

      Now before we dive

3. 2:01 – 7:19

   Last Mile Delivery

   1. HSHarry Stebbings2:01

      into some of the craziness, I just have to ask about one of the startups you founded. Um, believe it or not, um, you know, last-mile delivery is a, a passion area of mine.

   2. AKAvlok Kohli2:09

      (laughs) Professional.

   3. HSHarry Stebbings2:09

      Um, and so my question to you is, I know Gokul, um, obviously, and you kind of coincided around this, uh, with Fastbite, which was 15-minute delivery. And it was the first 15-minute delivery startup. "What were your single biggest lessons from the Fastbite experience?" was Gokul's question.

   4. AKAvlok Kohli2:25

      So it was act- ... Average delivery time was actually seven minutes, um, even though we billed it as 15. I, I would say, um ... I'll actually share two of the lessons. I think first one is building for yourself will lead to a much higher probability of building something that people love. Because when you're building for yourself, you then just need to believe you can find other people like yourself that are gonna use the product. Uh, and the second one, and the reason I, I wanna add this one, is you wanna think about the variables that you can optimize for the utility function of your product. So, every product, any product you use has some utility function. The utility function could be price, convenience, speed, right? Anything. The customer experience itself. And you wanna think about, what are you optimizing on? Because different products actually have different diminishing returns. And as you think about really fast delivery, uh, you can optimize on the delivery speed, but then sometimes people actually don't want it to be as fast, right? They actually want it to be a little bit slower. And so that was a pretty good lesson for me in terms of how to think about overall product experience. It isn't just about a single variable you wanna optimize on; you wanna optimize on multiple.

   5. HSHarry Stebbings3:36

      Uh, Gokul made a special note of you saying that it was really the first in market to do this.

   6. AKAvlok Kohli3:41

      Mm-hmm.

   7. HSHarry Stebbings3:41

      How important do you think is being the first?

   8. AKAvlok Kohli3:44

      I don't think being first in market matters all that much. And before I get into the answer for that question, I'll introduce the idea of, uh, the concept of idea maze, which I believe Balaji had coined, and I think there's a post on, uh, A16Z's website on it. And the idea maze basically, uh, talks about how every entrepreneur has to go through this journey of looking at an entire industry and looking at all the twists and turns. And they base their business idea and their strategy accordingly. And if you're first to market, you're effectively building the idea maze for all the other entrepreneurs that'll come after you, unless you navigate that idea maze yourself successfully. And we've seen a ton of examples where sometimes first to market isn't the company that wins the market. Uh, Google, uh, I believe was the 17th search engine. iPhone was not the first smartphone. And so, uh, the way I think about first to market is, it doesn't guarantee success. And you should probably assume you're building out the idea maze for all the future founders that will benefit from, uh, fr- from your work.

   9. HSHarry Stebbings4:51

      I find so many investors oscillate on defensibility.

   10. AKAvlok Kohli4:54

       (laughs)

   11. HSHarry Stebbings4:54

       Um, and I think it's just complete bullshit, especially at pre-seed and seed.

   12. AKAvlok Kohli4:58

       (laughs)

   13. HSHarry Stebbings4:58

       Do you agree with me in finding it completely useless at pre-seed and seed, or do you think there is inherent defensibility within companies?

   14. AKAvlok Kohli5:05

       So, let's define defensibility as the cost to replicate your business as time goes on, right? When we say defensibility, when we talk about moats, what we're really saying is, how easy is it or how costly would it be for someone to replicate your business and compete with you? So definitionally, you don't have any defensibility on day one (laughs) because you don't have a business. Or even day 30, unless you magically get, you know, pretty large, uh, network effects. And even then, I would, I would doubt that because that means if you were able to get a more large network within a, a few days, that means someone else can do it as well. So I agree with you. I don't think there is any defensibility on day one.

   15. HSHarry Stebbings5:45

       Final one, and then I promise we'll get to the schedule. But what did you think when you saw the host of European 15-minute delivery companies launch?

   16. AKAvlok Kohli5:54

       (laughs) I thought, uh, "Hope to God they are keeping track of the capital markets," because-... anything in logistics, anything in on- online, uh, offline to online or online to offline just requires a lot of capital. And capital is really a function of the capital markets and the macro environment. And so, uh, when I saw a lot of them launch, and I think some of them also were in New York, uh, the number one thought that went through my mind was, "I, I hope they're keeping track of the capital markets, uh, because they will need a lot of money to scale."

   17. HSHarry Stebbings6:28

       Do they all go bust in the downturn?

   18. AKAvlok Kohli6:30

       100%, because the cost of capital goes up. And when the cost of capital goes up, you can't invest into, uh, launching new cities and you can't invest into, uh, what typically ends up being the J-curve of this type of a business, where you end up losing money every order. And then at scale, it's, you know, it spins back up. And it does work, but you need a lot of capital to sink in. But when the capital markets dry up, interest rates go up, you, where are you gonna go get that capital? It is near impossible.

   19. HSHarry Stebbings7:01

       We're just killing industries one by one on 20VC. Last week-

   20. AKAvlok Kohli7:04

       (laughs)

   21. HSHarry Stebbings7:04

       ... we were like, direct consumer subscription model does not work, boom. Now we've just killed a whole nother industry there. Good, glad that we are continuously losing friends.

   22. AKAvlok Kohli7:14

       (laughs)

   23. HSHarry Stebbings7:14

       It's, it's me that takes the heat for this, don't I? Um, I do wanna, we spoke about kind of funding markets there.

4. 7:19 – 33:37

   Today’s Funding Market

   1. HSHarry Stebbings7:19

      I wanna talk specifically about the funding market that we have today.

   2. AKAvlok Kohli7:22

      Yep.

   3. HSHarry Stebbings7:22

      So much has changed, and you have this incredible purview at AngelList. What are the most notable changes that you're seeing in how companies are getting funded, given the unique seat that you have?

   4. AKAvlok Kohli7:32

      Yeah. So for, for context, AngelList supports 20,000 funds and syndicates now, and we manage a portfolio of more than 13,000 startups across, uh, all of these, uh, funds and syndicates. So, we have a pretty deep and broad view, uh, of the industry. And, ah- ah, when we manage the investments for these funds and syndicates, we're actually the signatory on the funds, so we also receive all of the deal documents for follow-on rounds, all of the cap tables, all of it. Now, of course, this is being done on behalf of the funds. You can, we're effectively managing everything, uh, for the fund. And so from that purview, we actually do have a pretty deep understanding of what happens in venture, and we actually track on a quarterly basis, um, uh, to put it really, really, uh, simply, the good times and the bad times. We actually have a chart that we publish every quarter now, the rate of activity, uh, or it's actually called the boom times and the bad times. And on this chart, what we have is the activity rate as the X axis, the positive activity rate as the Y axis. Activity rate you can think of as, did the, um, uh, what percentage of startups actually had a, an investment, right? Some sort of an investment, uh, and the percentage ac- positive activity rate is what percentage of those were actually up rounds? So you, you can generally sense that, um, if you have a, uh, high number of investments and then high number of positive activity, you're gonna have a dot at the top right quadrant, which is boom times. Awesome, right? And I actually have it up here, uh, and 2022, like early 2022 and 2021 is like this top right quadrant, boom times. And then now, it's actually the bottom left, and it's actually one of the worst bad times, where not a lot of startups are actually even getting an investment. And of the ones that do, a much smaller percentage actually have a positive investment. And so we're actually in the, the depth of the bear market, if you will, for venture right now. And, and that spread between where it was, uh, in the boom times and the bad times is the farthest distance it's ever been on, uh, on everything that we track.

   5. HSHarry Stebbings9:44

      Is it a different time length between the f- like, the highest and the lowest than traditional? Like, when you compare back-

   6. AKAvlok Kohli9:51

      Mm-hmm.

   7. HSHarry Stebbings9:51

      ... to prior, um, chasms in those two dots-

   8. AKAvlok Kohli9:56

      Yeah.

   9. HSHarry Stebbings9:56

      ... is this a faster compression timeframe-

   10. AKAvlok Kohli9:59

       Yes.

   11. HSHarry Stebbings9:59

       ... between those two dots?

   12. AKAvlok Kohli10:00

       It's incredibly fast, and it's actually incredible, that, that distance is also incredibly large. So typically, when, when you have these stocks that collect, and it's reported every quarter, they all kinda collect, um, you know, pretty close to each other, right? It's like, "Okay, yeah, there's a little bit of variation quarter to quarter." And, uh, the gap between early 2022 and right now is, like, the farthest it's ever been and the fastest it's ever, uh, ever contracted, is, is the best way to think about it.

   13. HSHarry Stebbings10:26

       But people still say prices remain the same, especially at pre-seed and seed, and honestly-

   14. AKAvlok Kohli10:30

       Uh-huh.

   15. HSHarry Stebbings10:31

       ...

   16. NANarrator10:31

       (laughs)

   17. HSHarry Stebbings10:31

       ... I think they, they are staying the same.

   18. AKAvlok Kohli10:33

       (laughs)

   19. HSHarry Stebbings10:33

       So help me understand this, because to me as-

   20. AKAvlok Kohli10:36

       Thanks.

   21. HSHarry Stebbings10:36

       ... an investor day to day, they are still really high prices. But you're telling me that actually it's never been a greater chasm. Where's the disconnect here?

   22. AKAvlok Kohli10:47

       So, the disconnect would be in the, uh, pre-seed and seed market versus the series A, series B, series C market. So as we look at follow-on rounds and the, uh, up rounds or down rounds, those typically happen at the series A, B, C onwards.

   23. HSHarry Stebbings11:04

       Right.

   24. AKAvlok Kohli11:05

       And that market has absolutely compressed pretty significantly. I mean, you're talking about deal volume in series B down more than 50%, valuations down more than 50%. Uh, series A is also down. Uh, series C is basically gone, right? Like, I mean, you don't really hear of many late-stage deals getting done anymore. It's, it's very r- it's rare. Um, and what's happened actually at the pre-seed and seed stage is all of the different investors that were investing later stage, some of them have started moving earlier and earlier. And so you just have a larger number of investors who have a lot of capital to deploy. Well, where are you gonna go? You're gonna go to pre-seed and seed. And so what you have is you have pre-seed and seed that are buoyed, and we don't see that changing. We actually, uh, still see that staying the same and the valuations staying the same. Maybe a little bit of compression, but we're not gonna see it in the same rate of series A, series B and onwards. Which I know isn't good news for, you know, for, for you, where, uh, you know, it would be great, uh, for, uh, for pre-seed and seed valuations to compress a little bit. But, uh, I don't think it, it'll happen.

   25. HSHarry Stebbings12:10

       So, I think there's also an additional component here which is also bluntly, the check writers at the multi-stage funds who are writing-

   26. AKAvlok Kohli12:17

       Yeah.

   27. HSHarry Stebbings12:17

       ... these pre-seed and seed checks are actually principals and associates because their partners are saying, "Hey, Avlok, I'm underwater with my board positions. I'm fighting so many fires. Go and write two million dollar checks and be in market. It's good for the brand."

   28. AKAvlok Kohli12:31

       Uh-huh.

   29. HSHarry Stebbings12:31

       And so those new check writers are less price sensitive than ever. They're more excited than ever 'cause they're writing their first checks, and it's creating this increased less price sensitive capital entering seed-

   30. AKAvlok Kohli12:42

       Mm-hmm.
5. 33:37 – 36:45

   How AngelList is Using AI

   1. AKAvlok Kohli33:37

   2. HSHarry Stebbings33:37

      Hav, look, I mentioned before we started that I'm more direct with my questions nowadays. Um-

   3. AKAvlok Kohli33:41

      (laughs)

   4. NANarrator33:41

      (laughs) Sure, sure.

   5. HSHarry Stebbings33:41

      ... that would lead to cost reduction. Um, it would lead to cost efficiency and, and, bluntly, uh, increased productivity within the team. Um, I, I think I saw recently in a group someone having a moan about AngelList pricing for managers going way up.

   6. AKAvlok Kohli33:58

      Mm-hmm.

   7. HSHarry Stebbings34:00

      Um, help me kinda coincide the two, which is, like, increased productivity, usage of AI to make costs lower, and then pricing going up.

   8. AKAvlok Kohli34:09

      I think what that's referring to is the pricing, uh, update we made on funds that are larger-sized funds. And if we think about the journey AngelList has been on, it's typically been a v- it's, it's a very different journey from most fund administrators, um, and most, um, fund back-office platforms. And the journey we've been on is, we've actually built software to help automate a lot of what it takes to manage a fund, all the way down to financial reporting, tax reporting, et cetera. And when we s- when we launched the, a fund product, which I believe was in 2017, the very first fund product, it was, like, a tiny fund. It was kind of like an offshoot of an SPV, and it could only do, like, $1 million, 'cause that was the simplest thing we could do, right? And what we had to do was, over the years, build more and more software to get more and more, uh, support more and more complex funds, more and more complex parameters, like carry hurdles, cashless contributions. Oh, I'm sure you, you've been through all of this, right? All those little details, well, to do that in software, it takes time. And so our, the path we've been on is, every year you can actually chart, uh, and we've done this, the size of the funds we take on. And every year, it keeps increasing, keeps increasing, keeps increasing. Uh, and so today, uh, we're regularly taking on, you know, 50, 100, $200 million funds, whereas two years ago, we were saying no to all of them, right? They were coming in, but we said, "Hey, we just cannot take you on, because we can't credibly serve you for the next 10 years, because we have a very strong eye towards software and automation to handle all of the, um, you know, all of the portfolio management, uh, distributions, et cetera, over the years." And so the pricing change that we made was a function of taking pricing that was actually meant for, that was actually meant for, uh, funds that were, like, 2.5 million, 3 million, 5 million, right, from a couple years ago. And there was a pricing cap that was set. It was like, you know, your p- uh, I, I believe it was 1% a year, capped at 25K a year, which effectively caps it at 250K overall, right? And that's for everything. We handle tax, uh, financial reporting, all of it. And al- what we really did was we said, "Well, the fund size that we've taken on has kept increasing," and we never removed the cap, 'cause that cap was meant for much smaller funds. And it was, uh, the change that we made was mostly just removing the cap and then right-sizing it to, like, the size of the funds. Uh, so if you actually take a look at the...... fund size relative to what it costs today, it's actually similar. And- and- and so I think some of that is just our own, uh, I think the way we rolled out the pricing probably caused a little bit of confusion.

6. 36:45 – 41:52

   AngelList’s Margins

   1. AKAvlok Kohli36:45

   2. HSHarry Stebbings36:45

      Is it a loss leader?

   3. AKAvlok Kohli36:46

      S-

   4. HSHarry Stebbings36:46

      I- I- I've obviously been a wonderful customer and- and-

   5. AKAvlok Kohli36:50

      (laughs) Yeah, last time.

   6. HSHarry Stebbings36:51

      ... user of AngelList, and it's amazing. But I look at them and I go, "They cannot be making money." (laughs)

   7. AKAvlok Kohli36:56

      (laughs)

   8. HSHarry Stebbings36:57

      And I mean it nicely, but it's a great service and it's not that expensive. What I-

   9. AKAvlok Kohli37:02

      Mm-hmm.

   10. HSHarry Stebbings37:02

       Yeah, so like for those small funds, is that a loss leader when you look at the 25Ks a year and all that you're doing? What are the margins on that?

   11. AKAvlok Kohli37:10

       Yeah, it's- it's not a loss leader. A lot of the automation that we've built in, the- and- and that's also- also continuing to come in, keeps expanding those margins. And so anything around funds is definitely not a loss leader for us, and, uh, we're- we continue to see the margins around that increase. And the other- the other way we actually think about it is, we think about the entire business as a whole, not just- n- not necessarily on a specific product. Because when we think about a GP or we think about an LP, we think about it as, "Hey, you should just come to AngelList and we'll handle everything, all of your needs around venture going forward." So for a GP, it's all of their funds, all of their SPVs. Okay, great, they're gonna go raise AngelList Capital. Great, we have a business model around AngelList Capital. And when you're a financial platform, there are all of these other different ways of, uh, capturing more and more value as you scale. And so the way we look at margins are actually more holistically over, uh, for the entire product experience, uh, so all of the products GPs would use, all of the products LPs would use, versus on any single product. And so our margins are actually, uh, north of 80% when you actually take a look at the overall experience, uh, and you take a look at overall products that customers are using. And so again, this is the- this is the key around a platform play, right? If you're doing just only a SaaS play, it's li- little bit different. When you have a platform play, you actually have products that can feed into other products that can feed into other products. And, uh, I actually learned a lot of this, uh, in my time at Square. Uh, so Square had acquired Fastbite. Uh, that's actually how Gokul and I started working together. And when I joined, Square was, uh, basically just a payments dongle.

   12. HSHarry Stebbings38:52

       Mm-hmm.

   13. AKAvlok Kohli38:52

       And in my time there, I saw how Square went from a payments dongle to a platform, where you would literally have one product that feeds into another, (laughs) that feeds into another, that feeds into another, and you get this compound effect of pretty rapid revenue growth, rapid revenue, or, uh, gross margin expansion. Um, and so I- I- I definitely took a lot of the lessons from there, uh, and applied it at, uh, AngelList.

   14. HSHarry Stebbings39:17

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

   15. AKAvlok Kohli39:22

       I would say funds have the best margins and the smaller SPVs have the worst. And for some of the smaller SPVs, those are a loss leader for us. And this shouldn't be a surprise for anyone paying attention. We saw Assure, which was an SPV provider, effectively blow up completely, and they blew up in a spectacular fashion. (laughs) They basically ha- took money in from all the SPVs that they were supposed to manage over six years or 10 years, and, uh, when they blew up, they were like, "Hey, we don't actually have any of the money left." And so all the GPs were now left to fend for themselves in terms of, well, how are you gonna get the money to manage all the SPVs for all the out-years? And the- the- the- the key, um, learning there, and we already knew this, but the key learning there for other folks in the industry is that SPVs and managing these SPVs, and especially the smaller ones, it looks easy at the outset. It looks easy to set up. It's like, "Oh, how hard is it to accept LP capital? How hard is it to close this SPV and invest in the company? That's great." But what they're missing, um, is that a lot of the surprises actually happen in the out-years, right? It's one of those, like, tail issues. And it's not that, uh, the SPVs, then the tail issues that come with the SPVs is like, you know, uh, only a small percentage. It's more about what could be- what could happen that could be really costly for the company, and so it can actually wipe out the margins of a larger group of SPVs. And so generally, I think most people get surprised by the margin profile of SPVs, and especially small SPVs, and I see this with GPs sometimes. Uh, it doesn't happen as much anymore. I think Assure going out of business was a pretty big wake-up call for the industry, um, but, uh, sometimes I'll see GPs ask about, "Hey, like, why is it so expensive? Why can't this be even lower and lower and lower?" And, uh, my- my response typically is, "Hey, these are complex financial instruments that need to be managed for 10 years, and it's not the place you actually want to be optimizing on costs at all." Because it's one of those things where when it's just working in the background and you have someone, you know, someone credible that can run it, you never have to worry about it. But as soon as you're dealing with a provider who's using cost and price as a way to get you in, you should stop and ask them and think about, "Why are they doing that?" Anyways, I'll- I'll pause there. It looks like you have another question.

   16. HSHarry Stebbings41:51

       No, I- I- I

7. 41:52 – 43:06

   Most Regretted Product at AngelList

   1. HSHarry Stebbings41:52

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

   2. AKAvlok Kohli41:57

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

8. 43:06 – 46:03

   Why AngelList Isn’t in Europe

   1. AKAvlok Kohli43:06

   2. HSHarry Stebbings43:06

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

   3. AKAvlok Kohli43:16

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

   4. HSHarry Stebbings44:50

      What does winning the US mean?

   5. AKAvlok Kohli44:52

      Winning the US for us is what percentage of venture funds are we supporting, and what percentage of venture-backed startups are we supporting on our infrastructure? And so, we look at it simply as percentage of market share, and we want to be north of 50% across all of the different segments, uh, as we scale. And it's as simple as that.

   6. HSHarry Stebbings45:14

      What are we today in terms of funds and companies?

   7. AKAvlok Kohli45:16

      It's, uh... So companies, we at, we just started, uh, last year with our cap table product, and, uh, it's growing quite fast. Uh, I, I can't share market share data yet, but it is growing incredibly fast, uh, and we're very, very happy, uh, with, with that, and we're, we're continuing to invest there. On the fund side, anytime we enter a particular fund s- like size we go after it, we'll typically get north of, uh, 50% market share pretty quickly. And so, that's how to think about it. It's like 50-60% market share as we kind of eat into the different funds because a- again, our product is just fundamentally different than any other, uh, back office provider.

   8. HSHarry Stebbings45:56

      You mentioned the cap table product down block.

   9. AKAvlok Kohli45:59

      Mm-hmm.

   10. HSHarry Stebbings45:59

       Uh, again, I kind of swim for the warning sign.

9. 46:03 – 48:10

   Competing with Carta

   1. AKAvlok Kohli46:03

      (laughs) .

   2. HSHarry Stebbings46:03

      Um, it's kind of like a, um, I mean, well, let's be blunt, it's like a full-on direct competitor to Carta. How do you think about competition? What's the right way to embrace it? And bluntly, how have you been able very quickly to catch up and level with them in such a short space of time?

   3. AKAvlok Kohli46:22

      So, the way we think about competition is, um, really having an eye towards competition. We're not really focused on the competition. Uh, there's, there's actually this great quote. I think it's from YC, but it may be from somewhere else, where startups die of suicide, not homicide. And I've believed that for every single company. And candidly, I've... You know, my first company died by suicide. I, you know, basically killed it. (laughs) . It, it had nothing to do with competition. And so, as we think about running AngelList and the products we build, we really stay focused on, how are we delivering an amazing experience for our customers? And what makes sense for us to pursue and grow regardless of the competition, regardless of, you know, whatever market share someone may already have? And if we think that we have a unique view on something and we can create a significantly better product experience, we will just go do it. And the thing we have working for us is, we are very product-focused. We are a team of pretty ambitious tinkerers, product builders, and we move incredibly fast once we're clear, clear on the direction. And so, I, I don't really think about competition in terms of focusing on it. I think about it more as, how do we build something amazing for our customers with an eye towards the competition? Meaning, you, you know, you can't just ignore competition, um, but that's more of a secondary thing. Our main focus is on building an amazing product and just, you know, owning that market.

   4. HSHarry Stebbings47:51

      Are you taking customers from Carta, or are these net new companies created? What's that spread?

   5. AKAvlok Kohli47:57

      It's all of the above. Uh, we are, we're definitely, uh, taking on net new customers. We're taking on customers that are using other providers. Uh, and so, we are just sucking in companies and customers from everywhere at this point.

10. 48:10 – 49:50

    The Secret to AngelList’s Incredible Speed of Execution

    1. AKAvlok Kohli48:10

    2. HSHarry Stebbings48:10

       You mentioned about being a team of product tinkerers. I tweeted this, but I, I think it's something that Gokul shares, which is an awe around the speed of execution with which AngelList executes. What do you, what do you do to be able to execute on new products so fast? 'Cause it is faster than anyone else. What do you do to enable that speed?

    3. AKAvlok Kohli48:29

       I think the most important we- thing we do is we've hired a group of very ambitious people. A group of ambitious people are very dissatisfied all the time, right? Like, all the time. It's like...... "Hey, why aren't we there yet?" Like, "Why aren't we building something even larger or bigger?" So that's a number one ingredient. Just hire a group of incredibly ambitious dissatisfied people all the time, which is great. From there, we just set, uh, very clear and ambitious deadlines, right? Uh, product launch timelines. And the last piece is just keeping a very tight, uh, loop between the working team and, uh, just making sure that if there are any blockers, anything coming up, just address it, and then let's just get the product out. Let's not have meetings about meetings or process about process. None of that shit matters, right? The only purpose for a, a company, it's just a group of individuals that came, that are coming together to build product for your customers, and any process, anything that gets in the way of that, crush it. If we have too many meetings, cancel the meetings. Like I'll regularly go cancel all of my meetings on the calendar because all that really matters is that you're shipping products that your customers love. And anything that gets in the way of that and you drag, kill it, crush it, and just focus on speed. Focus on getting the iterations with your customers, focus on getting that feedback. So that, that's how we think about, uh, shipping

11. 49:50 – 52:37

    How AngelList Wins the US Market

    1. AKAvlok Kohli49:50

       really quickly.

    2. HSHarry Stebbings49:51

       What do you think are the biggest external threats to you achieving winning the US market? Final one.

    3. AKAvlok Kohli49:58

       The biggest external threat, I actually don't think we're in that anymore. I was gonna say, I, I never, I never underestimate a group of, you know, a, a small group of really ambitious individuals, and I would say the biggest external threat would just be anyone that's looking to compete with AngelList that's a startup. But I've always been like that. I'm, I'm, I'm pretty paranoid when it comes to, with small teams, right?

    4. HSHarry Stebbings50:23

       How would you respond to the suggestion that the macro sentiment is your biggest external threat? If you think about AngelList, it is-

    5. AKAvlok Kohli50:30

       Mm-hmm.

    6. HSHarry Stebbings50:31

       ... your, your trajectory and your transaction volume is predicated on the amount of deals done, the amount of funds closed, the amount of SPVs done.

    7. AKAvlok Kohli50:38

       Mm-hmm.

    8. HSHarry Stebbings50:38

       When the market shrinks and cadence is reduced massively, your business is damaged, no?

    9. AKAvlok Kohli50:44

       It actually isn't. It actually is the strongest it's ever been. Again, it goes back to the platform play that we have and how we have the, uh, you know, how we're actually continuing to move up market, take larger and larger funds. And so while net new fund creation may have gone down, we're actually taking on funds who have already fundraised and deployed, right? We're not just, we're not just going live with funds that are net new. We're also going live with funds who are moving to AngelList after they've already been somewhere else, right? So we're effec- You can think of AngelList as just continuing to grab more and more market share and is not dependent on net new funds. The way we actually generate revenue is we actually have all these different products that feed on each other. And so we're actually the strongest we've ever been. And AngelList has always run as if the next bear market's around the corner. Literally every year (laughs) that, that I've been at AngelList, we've always said, "Oh, you know what? The next bear market's gonna be next year. So we have to make sure we have countercyclical products in place and we diversify the product portfolio." And every year, uh, since, uh, since, uh, (laughs) mid-2019, we're like, "Yep, next bear market's coming. Next bear market's coming." And so we've actually always been paranoid about the next big mar- bear market, so we actually built in countercyclical, uh, motions in the company as well. But yeah, it's, it's the strongest it's ever been. We are, we are absolutely firing on all cylinders right now. We have a, a series of new products coming. I'll just tease that here. It's, uh, it's coming-

    10. HSHarry Stebbings52:14

        (laughs)

    11. AKAvlok Kohli52:14

        ... in the next, uh, in, in, in the next, uh, couple of months. And not just one, it'll be a few.

    12. HSHarry Stebbings52:19

        Do you wanna give a teaser? Do you wanna give one?

    13. AKAvlok Kohli52:21

        Not, not, not yet. It's, uh, not-

    14. HSHarry Stebbings52:23

        (laughs)

    15. AKAvlok Kohli52:23

        Not, not yet.

    16. HSHarry Stebbings52:24

        That was a moment and you I remember when you and I were having it, you were like, "Oh, really?"

    17. AKAvlok Kohli52:25

        It was a moment. I was thinking, I was thinking. The, I, I'm, I'm very excited. I'm very excited. Um, but n- not yet. I was about to, and I'm like, "Ah, no. Bruce is gonna kill me." (laughs)

    18. HSHarry Stebbings52:35

        I love that. I, I, listen, you can't blame

12. 52:37 – 58:45

    Quick-Fire Round

    1. HSHarry Stebbings52:37

       me for trying.

    2. AKAvlok Kohli52:37

       (laughs)

    3. HSHarry Stebbings52:37

       I wanna do a quick fire-round outlook. So I say a short statement-

    4. AKAvlok Kohli52:40

       Yep.

    5. HSHarry Stebbings52:40

       ... and you give me your immediate thoughts. We mentioned the macro there. Will we be in a worse or a better place at the end of 2023?

    6. AKAvlok Kohli52:47

       I think worse. But I think it'll get better in 2024.

    7. HSHarry Stebbings52:50

       What trend do you see that others are not seeing?

    8. AKAvlok Kohli52:53

       I think people are seeing this. Um, I just don't think they're seeing the, the rate of change, which is the rate of change, uh, through which AI will actually, uh, completely, uh, not decimate, but amplify knowledge work. But I do think there will be a l- lot of reskilling, a lot of retraining needed. And it's getting deployed extremely fast across many, many industries. And so I would say the biggest trend others aren't seeing is just the magnitude of the change that's coming for white-collar work.

    9. HSHarry Stebbings53:20

       Who are best placed to instill that change? Is it incumbents integrating AI into existing product suites or startups providing new products?

    10. AKAvlok Kohli53:28

        I think startups providing new products, and I think it's because the quality of the team of, like the product craft, right, or, or, or the, the team that's gonna care about the product the most typically comes from the founders and the founding team they bring together. So I think they're gonna be most suited. That said, incumbents do have, you know, a lot of advantages, distribution advantages being one of the biggest ones. So I wouldn't count out any incumbent, as we've definitely seen. But I, I, I personally lean more towards startups being able to capture a lot of value.

    11. HSHarry Stebbings53:58

        I love Alex Rampell's, you know, "Will the incumbent acquire innovation before the startup acquires distribution?"

    12. AKAvlok Kohli54:04

        Yep.

    13. HSHarry Stebbings54:04

        I think that the whole time, actually. Okay, my friend, you can buy one multi-stage firm and you can short one multi-stage firm.

    14. AKAvlok Kohli54:12

        (laughs)

    15. HSHarry Stebbings54:12

        Which one do you buy? Which one do you short?

    16. AKAvlok Kohli54:15

        Uh, Sequoia, to buy, multi-stage firm. No comment on shorting.

    17. HSHarry Stebbings54:20

        Fuck. Fuck.

    18. AKAvlok Kohli54:22

        (laughs)

    19. HSHarry Stebbings54:22

        Uh, you can buy one seed-stage, like, specialist. Learning. And you can short one seed-stage specialist. Go.

    20. AKAvlok Kohli54:31

        Seed-stage specialist, Haystack, um, I would buy, and then short, also n- no comment on that one.

    21. HSHarry Stebbings54:37

        Fuck. (laughs) One day, I'm gonna get someone just be like, "Fuck it, I don't care."

    22. AKAvlok Kohli54:41

        (laughs)

    23. HSHarry Stebbings54:42

        I need someone who's, I need someone who's, like, retired and just doesn't give a shit. Um-

    24. AKAvlok Kohli54:45

        I'll just be a curmudgeon and may- maybe catch me in a, in a couple years, I'll, maybe I'll be a curmudgeon. (laughs)

    25. HSHarry Stebbings54:50

        What did you believe in investing that you no longer believe?

    26. AKAvlok Kohli54:54

        That...A great team can go find a market, and find a great market. I actually think you need a great team and a great market to come together. Uh, otherwise, you just have a great team that can burn a lot of cycles on a market that is just utterly broken, and I've seen this time and time again. Uh, and, uh, that's the one thing I think a lot about now, is what market are they going after? And I don't, I, a- and look, I think, I think there are some founders can, that can pivot and find it, but that assumes that they'll have enough capital in the bank to go do it.

    27. HSHarry Stebbings55:28

        Man, it's exactly the same for me. Like, 100%. If you are going after, uh, something really fucking hot, consumer education market, and you're raising 18 months of runway, sure, you may be the world's best team, but you're gonna take 12 months to get to that realization place, and then you're gonna raise again, or need to, with nothing but, again, a good team. That's a hard another raise.

    28. AKAvlok Kohli55:49

        Exactly.

    29. HSHarry Stebbings55:50

        I'm tot-

    30. AKAvlok Kohli55:50

        Especially in this environment now.

Episode duration: 58:45