Insight Newsletter: Featuring Jason Calacanis
Everything You Wanted to Know About Investing in Startups From an Iconic Angel Investor
I’m excited to share with you the podcast transcript from my interview with iconic Angel Investor & podcaster, Jason Calanacis:
Angelo Robles:
Welcome, everyone. I'm Angelo Robles at Angelo Robles's Effective Family Office Podcast, where I look to distill the best practices and best ideas of the world's most successful families and their family offices. I hope to provide thought-provoking opinions and feature amazing thought leaders to our listeners of the podcast with an eye towards the future of the family office.
Angelo Robles:
Today's podcast is titled Renowned Angel Investor, Jason Calacanis, Everything You Wanted to Know about Investing in Startups. It features, obviously, from that title... you know we have a special guest when their name makes the title. So we have Jason Calacanis who's an angel investor and podcaster... since I see that Jason uses that and, by the way, hello, Jason. I started to use podcaster in my title now. Thank you!
Jason Calacanis:
Thanks for having me. Yeah, podcasting's a wonderful medium. Well, you get to talk for a long time and really there's no time limit. And as opposed to when we're on something like CNBC or in a tweet, you get this very short, concise answer, which has its value in the world. Podcasts let you just really open up the conversation. I think that's why people are moving towards them and embracing them.
Angelo Robles:
I started doing them two years ago, but really, really, like Joe Rogan, three to four days a week since COVID-19. I haven't missed a beat in 10 weeks, and I'm really liking it. Now let's hope, Jason... you're a couple of notches ahead of me because of who ‘you are,’ we hope we both, like Rogan, get a Spotify hundred million dollar contract!
Jason Calacanis:
Yeah, I think it's a great thing that the talent in podcasting is getting recognized. When I'm on CNBC, I reach I think 100,000 people, 200,000 people, and it's a really great audience. With my podcast, I get over 200,000 people each month and that's my tribe, right. So I think what people are starting to realize is Joe Rogan gets 10 million people on some of these episodes watching. Certainly, he gets in the low millions, I think, every single episode, and that is the future. He gets numbers that are similar to certainly MSNBC Rachel Maddow or Anderson Cooper. I think those all get one, two, three million. So being on Joe Rogan, for a politician, is going to be a bigger impact than being, in fact, on MSNBC or CNN, which is crazy to think about.
Jason Calacanis:
I started my podcast 11 years ago, 12 years ago, done over a thousand episodes, have six or seven full-time people who work on it, and I don't do it for the money. I do it to meet founders and to build our funnel in terms of investing. It's the top of the funnel for us. People hear me on the podcast, they hear me interview a great VC angel or founder. And then I say, "Hey, if you have a company and you'd like to come to our accelerator, like for me to invest, just email me, jason@calacanis.com," and people stop me on the street to tell me about their startups.
Angelo Robles:
Yeah, it helps because you do the video as well as I do. And yeah, that does help a little bit with that. To give people a little bit of context, I've known about Jason for many years. I love his book, a big fan, a mutual acquaintance some of you know, Bryant Hayward, had a chance to introduce us. Jason was kind enough to be one of the keynote speakers at a big event I hosted last summer. Those were the good old days of doing physical events on the waterfront in Santa Monica at the Casa Del Mar. He also appeared at about that same time on a podcast. I don't want to repeat exactly what we did in that podcast, Jason's background in Brooklyn, we caught up on pizza. Those are all great things, but again, you can listen to that podcast from last summer. We will touch a little bit upon Uber because that's such a great story.
Angelo Robles:
And Jason really is, with all due respect to the legends of earlier startup investing, the Ron Conway’s, the Dave McClure’s and others, Jason really is kind of the man right now. He's going to be a little modest, but when it comes to investing in the earliest stage startups, I mean, we're really excited to have Jason on the show. I could go on for two or three hours. We're going to have a strict limit today of an hour. Jason has a very busy schedule.
Angelo Robles:
You mentioned your TV appearance, which I did see, and that prompted me to actually... why don't I lead with that question because you went off, and we have more than seven or eight minutes, so go off...you went off on a combination of California, regulation, taxes, and to some degree the Bay area now with COVID-19, now with overly expensive real estate, and people realizing that remote working for white-collar workers works, where do I start?
Is California in trouble? Is Silicon Valley going to be the Silicon Valley that we know in five years?
Jason Calacanis:
Yeah, it's a great question. And I can tell you what I'm seeing on the front lines. On the front lines, every company that I've invested in is changing their Work from Home Policy. Now startups, typically 5 to 10% of them were now a hundred percent remote, and I would say the other 90% might have a remote worker here or there, but they had an in-office culture, and they wanted to work on that culture and build that culture because it leads to an edge in terms of competing.
Jason Calacanis:
So I don't believe an Uber or a Facebook or a Twitter or any of these companies could hit the scale they did without being in an office with people collaborating in that culture. It remains to be seen, the size and the scope of the wins from work from home companies. We do have anecdotally a WordPress, which is worth a billion dollars. Can a company that's worth a 100 billion, or 50 billion, or 500 billion be built work from home?
Jason Calacanis:
That's I don't think realistic, but I do think many people will be embracing this. And then you do get this massive benefit. And what people are not understanding is the economics, right. Incentives and economics really drive everything in this world, we all know that. If you're in the capital game in any way, as somebody who is responsible for capital as I am and is placing bets like I am on a very frequent basis when you think about capital allocation, and when you think about what's going on here in terms of incentives, what do you gain by not having to be in the Bay area?
Jason Calacanis:
Well, Bay area salaries are inflated because the average home, the average apartment living expense is going to be two to three X other cities. And it might be five X living in a rural place. So going and living in Tahoe, which a lot of people from San Francisco have chosen to do, or Sacramento, your two-bedroom apartment is now going to cost a thousand dollars a month, not $5000, an 80% reduction. And so people are now taking advantage of that because they can.
Jason Calacanis:
And then if you think about commercial real estate, we were kind of living off this 150 square feet, 250 square feet per employee. Now with Twitter and Square and other companies saying, listen, you don't need to come to the office anymore, we're permanent work from home, or Facebook saying half the people will be working from home, that means the number two or three-line item, which is facilities and food and those facilities, goes away. So those companies become 20% more profitable, 10, 20, 30% more profitable, right, by removing that last expense.
Jason Calacanis:
Now, if people work from home, the other thing that happens is you realize these three or four people are performing at a very high level and these two or three people are not actually getting anything done. In an office, you can kind of hide because you're there and you're physically present and they see you at your keyboard typing, and managers kind of step back and say that person put it in a good day's work. They were here for 10 hours. They were here for 12 hours. They were the first one in, the last one to leave.
Jason Calacanis:
Well, what happens when you move remote is people send a little standup in the morning. They say this is what I'm going to get done today. At the end of the day, they send an end of day report in their Slack room or they do a meeting. Now people are realizing, wait a second. I'm looking at what this person got done today and what they said they were going to get done today, and that's actually not moving the needle. So that's part of the bottom 5% or 10% or 15% of the company that doesn't actually need to be here, and they're not actually performing. So people are going to be much more apt to cut those positions.
Jason Calacanis:
Then when they rehire for them, they're going to remove the, I would say, $20,000 to $50,000 premium people got paid to work out of the Bay area. And so the developer job that might've been $175K now becomes $125K. The sales executive who was getting paid a $100K base and $100K in commissions, that base goes down to $50K and the commissions go down to $75K. And in recognition of this, the only person who's cutthroat enough to even recognize that this nuance is happening, this is what will ultimately make companies more profitable is Zuckerberg.
Jason Calacanis:
Zuckerberg said, we're going to let up to 50% of, I think, positions are going to be able to go remote. However, if you leave San Francisco, you have to tell us where you're going to be working from and we're going to adjust your salary down to that location because San Francisco is the highest. So those people who choose to leave and not come to the office anymore are going to get a pay cut starting January 1st, and there'll be severe ramifications for lying about where you live. So eight people are not going to rent a condo and say they live there and get the San Francisco thing.
Jason Calacanis:
So I think this will actually be what leads us out of the recession because it's always that efficiency or new products or services that lead us out of the recession, whether it's an iPhone or a Tesla or Disney by Marvel, all of those new innovative products create monetary velocity, which then spreads money around and creates economic opportunity. So I think the economic opportunity that will come out of this tremendous implosion that we've had with 30, 40 million people being unemployed is that the companies are going to become wildly efficient. They're going to remove 30, 40, 50% of expenses in some cases.
Jason Calacanis:
Well, what does that do for profitability? It's going to skyrocket. And then it's also going to allow them to invest more in other places. So people who are shutting their facilities down, maybe next year, they don't renew their lease. I know companies that aren't renewing their leases or they were month-to-month, and they just handed the keys back. Okay, well, all of a sudden you've got $50,000 a month, a $100,000 a month, $20,000 a month in additional money to spend. You hire two more people. So that's what's going to happen. I believe the work from home and the efficiency of that is going to lead us out of this terrible recession we're going into.
Angelo Robles:
That would be very optimistic, and certainly some aspects of that I would agree with. San Francisco and your old hometown, New York, I find very intriguing. New York more so because of the volume of people here, but there are concentrated relatively smaller geographic areas, they're a very popular tourist destinations, and New York, specifically has great mass transit, all negatives via COVID-19. Commercial real estate for the reasons you noted is going to be impacted. I know you're not a real estate investor, so it's a strange question, but it popped in my head, why buy high and sell low, the opportunity potentially to buy or to move into New York to San Francisco is when it appears to be on this trend, but it has enough good metrics where in three, five, seven, 10 years, you're going to see an upward trend. Potentially, we could finally buy in New York and not pay crazy prices. This might be a little bit of a return to the seventies or eighties in New York before it's bounce back. What do you think?
Jason Calacanis:
Yeah, I think that's probably directionally correct. There is a kind of standoff that occurs in real estate where the sellers have to accept the new reality, and the buyers have to wait for sellers to kind of reach down there. And so somebody who bought a home in Manhattan for $3 million might not be apt to sell it for $2 million or $2.5 million, but the buyers don't want to pay that, and so you always see it from brokers that they're trying to get everybody to reality, and it takes time. What will not take time is commercial. So I think we're going to see commercial collapse. It can go down at least 50% because people are not going to want to go to an office.
Jason Calacanis:
It's going to be very hard to compete for employees if your competitors are offering work from home, which is the number one thing employees want. The number one thing employees want is that flexibility to either come to the office or not, and so if you don't offer it, you might not be able to compete for the best talent. That doesn't mean people don't want to come to the office, but they may want to come to the office from 10:00 to 4:00, and miss traffic. They might want to come in Tuesday, Wednesday, Thursday, and have Friday and Monday to work from home. So I think that commercial gets crushed, and then in areas where they've been pro-development.
Jason Calacanis:
So New York has been wildly pro-development for decades in terms of apartments and building these high-end units. Well, those high-end units will come down in price. Affluent people will buy those, and it will take the pressure off the inventory from the fifties, sixties, and seventies, and those apartments that maybe weren't as modern, have smaller windows and weird floor plans. And that will give a new opportunity for people to move into Manhattan, then this beautiful cycle will start again of young, energetic people being able to live in cities again.
Jason Calacanis:
San Francisco had been anti-development. And so you have not been able to build homes here. The nimbyism, not in my backyard, phenomenon in San Francisco and NorCal is unlike anything I've ever seen. If you try to do build any kind of a building, you're going to be in for a decade long fight, whereas in New York or Houston or other cities, they've been really pro-development to try to push things through. So I don't see the Bay area changing as the hub, but I do see... and I don't see, I don't see residential crashing here. I think it will correct, but not crash. But I do see universally office space will crash, and if you have money in office space, we all knew it was kind of looking frothy there.
Jason Calacanis:
And now I just think a lot of the landlords are going to be handing their properties back to the banks, right. All those people who were flipping buildings, and then taking the money out and then buying another building. All my friends who were doing that, they were telling me last year or the year before that they were concerned. And now you have the black swan event that just murders those companies.
Angelo Robles:
I know it's not the kind of companies you invest in, but I want to get your opinion. It's a little sad, at least going through in my car in New York and seeing all these, like 90% of the businesses are small businesses. Let's really be honest for all the reasons I noted, and the fact that many of them don't have a lot of savings, 25 to 40% of these small businesses are going to be out. It just feels terrible. And I don't know, they're an entrepreneur in their own way. They just don't necessarily build tech companies or companies that, in theory, could scale, but that doesn't mean that they don't have a spirit inside them, that they don't provide wonderful services to the economy. What would you say to them in terms of needing to start from scratch and rebuild and start over again because if they just go back to a lease they can't afford at a restaurant at 40% capacity, the math is not even going to come close to working.
Jason Calacanis:
It's going to be a severe challenge for small businesses. I'm hoping that landlords are reasonable and they don't want to see those storefronts, in the case of restaurants, go empty for a long time. And so I think the landlords are going to have to negotiate with the banks that they owe money to say, listen, I'm going to have to give this restaurant... I'm going to renegotiate the lease. And so it's just going to be this great unwinding where... and I'm seeing it already. If you have a long-term lease, maybe you just shutter the business and start again next year if you think it's going to be better and start a new lease. If your landlord's willing to play ball, and give you 50% rent for the rest of 2020, and then maybe 75% rent in 2021, maybe those businesses survive.
Jason Calacanis:
But that's the thing, I'm super concerned, I'll be totally honest, that this bifurcation has happened. Anything in the real world is going to be severely crippled, and anything behind the keyboard could even be accelerated. So in our portfolio, we bucket things into three groups. We have companies that have literally doubled their usage and revenue during the pandemic. So just let that sink in. A company that in February was doing X dollar amount is now doing X times two. And then we have companies that were doing X in January and February that are doing literally zero.
Jason Calacanis:
And it's really challenging as an investor doing this triage in your portfolio where you have one group of founders who are basically furloughing everybody, and another grou saying, should we be hiring people now, is this going to be sustained? Should we be raising money into this? And so people are going to be very confused watching the behavior in Silicon Valley, and what you're going to see is intelligent investors are going to be investing during this period of time. I believe this is the best opportunity to be an angel investor or to be investing in private companies in our lifetimes, second only maybe to after the financial crisis or after the dot-com bust. But I have a feeling this one might be even better.
Jason Calacanis:
When I made all my great investments, they were in the years during the great recession when Uber was worth $5 million, and Comm was worth $5 million, and Thumbtack was worth $4 million. I mean, I invested in those three companies for, I think, a $14 or $15 million valuation combined, and the last two or three years companies with less performance than those coming out of YC or other accelerators were asking for $12 or $15 or $20 million evaluations. In other words, I can invest in three Ubers or Thumbtacks or Comms for the price that people with less performance were asking for them the last couple of years.
Jason Calacanis:
Entry price matters when you're angel investing. And it doesn't matter because hey, if you hit a $10 billion company, does it matter if you invested at five, 10 or 15? Well, sure it matters, but you're happy to have hit that outlier. The reason it actually matters is shots on goal. If I have a certain amount of capital to deploy and it's costing me a hundred million to invest in this company, I'm putting a million dollars in and I'm getting 1% of the company. Well, I can invest in 10 companies, a hundred thousand dollars, get 10 swings at bat and still spend the same amount of money and still have the same percentage ownership.
Jason Calacanis:
And I try to explain this to founders and to new investors, be valuation conscious. It actually matters your entry point. And a lot of people in the public markets are going to learn this because maybe they bought momentum stocks that now the momentum's gone, oh my Lord, they're never going to catch up to where the momentum was, right. So it's a very nuanced thing, but we're investing more going into the crisis than we were before.
Angelo Robles:
There is an amazing creative spirit that happens during crises from really all sorts of people. And again, many great companies have been founded during crisis. Henceforth an opportunity for investors, whether directly or through someone like you or others to be involved. So you just said, and you gave some reasons as to why right now may be an incredible time to be active as an earlier stage investor. Now we all know the math. For every block of 10 companies I invest in, most won't make it. And these are the pros, people like you. As a family office, how do I think that I'm going to get in early enough, just because I have money, that helps. And how am I going to have enough diversity to get some big winners?
Jason Calacanis:
This is absolutely something that you have to think about as a family office. What I see with family offices typically is they will get the deal flow after it's passed through Silicon Valley.
Jason Calacanis:
I just want to pause on that for a second. This would be like if a bunch of poker players were at the table, and there were 10 of us and the family offices were three people at the end. Y Combinator, LAUNCH Accelerator, Bill Gurley at Benchmark, et cetera; we've all looked at these deals, we looked at those hole cards and we said, "You know what? I don't want to play 10/7. Don't want to play 3/8 off-suit. I'm going to pass those cards down. Then we see ACE/King. We see Queens. We see Kings. We're going to play those cards.
Jason Calacanis:
We're going to play King/Queen suited. We're playing the premium hands and then you're getting the non-premium hands. This is not meant as an insult. It is meant as the reality of having an edge in investing, I cannot compete with high-frequency traders. I don't know how to make the high-frequency trade. I don't know how to do puts and calls and spreads. That is not what I do for a living. I'm in a different world. And I need to have a different edge. My edge is to meet the founder first and to be the most helpful to them, and then introduce them to the most helpful people downstream. I want to get my company in front of Sequoia in front of Benchmark and have them join the team. And we both work on it together.
Jason Calacanis:
I don't try to have an edge in public market investing. I put everything when I'm in a public market in my Wealthfront account in a very balanced, low-fee setting, because I know for me to compete in that public market, I'm not beating the high-frequency traders. It's going to be about me lowering the big I have to pay. What percentage I'm paying to a fund manager. If I can get into those Vanguard funds that are just unbelievably low fees, that's what I want to do. But in private market investing, I want to have an edge.
Jason Calacanis:
If you are a family office, people in the entrepreneurial community say, "I would like to get a family office because I want an investor who is not valuation-sensitive". That's what they say to me. I say to them, "What you're saying is you want an investor who's not smart". That's how entrepreneurs look at family offices. They look at it as dumb money. Now that doesn't mean it's true, but that is something to consider, that if they're looking at it saying, "I'm not going to clear market at this valuation, but a family office might jump the fence and do it".
Jason Calacanis:
Just understand everybody has their level of expertise. What a family office may be very good at is preserving wealth and managing many categories of investments from real estate to resources, to startups, to venture, to private equity and maintaining the wealth of that family for generations. That is a different mission statement.
Jason Calacanis:
Whenever I see family offices want to like get into individual company investing, I really tell them, "Make sure that this company has not been passed on by everybody else, because then you're just trying to split the arrow, you're trying to really make something work that's going to be challenged". It's better to align yourself with fund managers who know what they're doing. Then maybe see if they'll give you their allocation for pro-rata down the future, or just invest in companies that have revenue. Try to get an allocation in a later round where they have revenue and you don't need to be on top of it. I need to be really on top of the early-stage companies. I need to be in constant contact with them, monthly contact with them weekly, quarterly.
Jason Calacanis:
When you are investing in the later stage, you can kind of invest in checking with the founder every 6 to 12 months. They've already got 10 million in revenue. They've already got 50 million in revenue. That's where I would advise family offices. That would be a sweet spot. If you can get into venture deals, when they have 10 to $50 million in revenue, you're way before the IPO, but you're after the world I live in, which is 80% go to zero. You really don't want to be investing in that world unless you want to really roll up your sleeves and you want to be involved on a very detailed level and deal with a lot of mortality. It's pretty depressing for most people there, their brain psychology can't deal with 80% of bets losing.
Jason Calacanis:
Imagine you bought 10 publicly-traded stocks, but Disney, Netflix, Google, Amazon, and like three out of four went out of business. You'd be, "What just happened?". That's my life. It's literally in my life, three out of four, zero, and a lot of pain and suffering to get to zero. And then 1 out of 30 being an outlier, one out of 40 being an outlier.
Jason Calacanis:
That's really what's going on here, in Silicon Valley. If you're just honest about that, then you can really free yourself and be more humble about what it takes to win. What it takes to win is being able to have proprietary deal flow, make a lot of bets, identify which ones are breaking out, and then 10x-ing down on them; that's what I've spent the last five years learning how to do.
Angelo Robles:
Do you think those pro-rata rights are really important?
Jason Calacanis:
They're critical. Because when you have a winner with Uber and other companies that I invested in when I was an early angel investor putting in $25K or $50K, I never even thought about pro-rata. Now I have pro-rata in a deal, or I don't do it.
Jason Calacanis:
We're looking at our portfolio and we examine their revenue and we try to get their monthly revenue, their quarterly revenue. Then I have somebody on my team who is looking at which of our 150 active companies made 250 investments in the last decade or so. Of the 150 active ones, which ones had the greatest quarter over quarter, year over year performance. And are they looking to raise money? And we make preemptive offers to them. We've had maybe a half dozen companies in the last year or so that we've said, "Hey, great job. Would you like an extra $250K? Would you like an extra million dollars?" And they say, "No, I want to go to the market. I want to see what valuation I get". We'll say, "Okay, but we'll give you a million out of $15-million cap. Would you like a million?" We'd like to own 7% more of the business, 8% more of the business, whatever it is.
Jason Calacanis:
I'm happy to report, I think four, five times 80% of the time we wind up getting that deal. We're preemptively funding our own winners. Then we moved from a 6% ownership percentage to a 12 to 20% ownership percentage. That to us is... In my early days, I owned under 1% obviously on Uber; but then with Superhuman, we own 2% with; Calm, we own 5 or 6%.
Jason Calacanis:
Now with this latest crop of winners Fitbod, Steezy, we're starting to own 9, 10, 15%. That's why the next 10 years for me as an angel investor, instead of just being this amazing angel who happened to hit an outlier, people going to look at me and say, "Oh, he's a fund manager who figured out how to get 5% of Calm, when nobody else would invest. He figured out how to get 12% or 9% of Steezy or Fitbod before anybody realized these were breakout companies. That's what I'm really working on now.
Angelo Robles:
Could I make the point of what you said that it would be possible for a family that's big enough and has the money and has the fortitude for it, as opposed to looking to fit a square peg in a round hole and have their current people become experts in startups, could they find a young Jason Calacanis before you become who you are and woo them with salary, bonus, and I have a lot of money to spend, and you're not going to need investors, I'm your investor, I'm going to take care of good for you.
Jason Calacanis:
I see very little downside to that. I think even just for the intelligence, let's say you had a 20... I don't know what the average family office size is, but pick a number and if they were putting 1% of the fund to work every year for five years, and they put 5% of the fund to work, and it was a hundred million dollar family office, and they put $5 million to work over five years. If they even returned half of that money or they just broke even, all of that intelligence and knowledge about where the market is going with the outside chance of hitting a home run would be well worth it. That's one of the things that I think people don't understand about this business, is that if you are making these bets and you just break even, or lose a little bit of money, the chances of being in the game to hit an outlier are so dramatic that it's worth doing.
Jason Calacanis:
I would say yes. If that purchase cost you a hundred thousand dollars a year or $150,000 a year, and they just brought you 50 great ideas a year, one a week, and you invest it in the top five of those $200K, that could be a nice portfolio that could be built, but what's more important is the intelligence you would be getting, you would know the future because you'd those 50 deal memos coming to you and you would be picking the top five, just think about the knowledge your organization would have when that associate or principal was bringing that company a week to them, that they wanted to invest in. The whole company would get smarter. You would be able to make a better bet on Disney knowing about streaming services 10 years ago. You'd be able to make a better bet on Hertz knowing about what Uber and Lyft were doing 10 years ago, you can make a better bet on JP Morgan, Goldman Sachs, or E-Trade knowing what Robinhood was doing five years ago.
Jason Calacanis:
That's what I love about what I do every day. That's why I'm so attracted to the early stage, it's because I get to see the future 10 years before you all. It's a wonderful, brilliant career to have knowing where the future is going.
Angelo Robles:
Let's talk a little bit about the origins of the industry, probably more so in VC, but go back to what, 1958, 1959. Ironically with Silicon Valley, not a lot of innovation, and then you did have something come along that you're going to be very familiar with, but talk about how it did change the game a little bit. That would be AngelList.
Jason Calacanis:
AngelList was an incredible innovation. I was the first syndicate on AngelList. When Naval launched it, I was doing something called Open Angel Forum. He was doing something called Venture Hacks. A little bit of history for you. Venture hacks involves an introvert, really smart, I'm an extrovert and more of a hustler. Let's leave it at that. I would host an in-person event that he would come to and I would have six startups pitch, Uber and Thumbtack and StyleSeat were some of the ones who did in fact pitch. He would be there and he was doing venture lists where he would take the same companies, or he would introduce me to companies, because there really weren't that many, it'd be like one new company a week, two new companies a week back in the day.
Jason Calacanis:
He would email everybody and say, "Hey, check these out". Then he started making content about how to read a term sheet, all the stuff that people didn't know 12 years ago or so. He said, "I'm going to take what you're doing, I'm going to move it online". I was, "I'll be part of that, seems like a good idea". That was his real big contribution. Then he started doing these SPVs. I became the largest syndicate on the platform. I wound up leaving after about 40 or 50 investments. We can get into that and why, but my first investment was calm.com and we put $378,000 into it. That company went from being worth 5 million to $1.4 billion.
Jason Calacanis:
That position, depending on where you evaluate the stock is a 200X investment. If you put in $5,000, you're going to get back a million. We actually sold 10% of our shares when it hit a $250 million valuation. In secondary, we booked a three-point X win for the syndicate in under five years, cash on cash while still owning 90% of our shares. That's just a great outcome and it's brilliant what he did.
Jason Calacanis:
We wound up creating thesyndicate.com so that we could have control over our experience, we could have a direct relationship with those investors and we have the top 10% of the syndicate, top 250 of them in a Slack instance right now. They're helping us work on projects. I've activated the syndicate.
Jason Calacanis:
What AngelList does is they don't want the syndicate members to be involved with the companies really. They are steering people towards funds. Why are they steering people towards funds? You get the diversification, I'm doing the opposite, I'm telling people, "Read my book, angelthebook.com, Angel. For 12 bucks or whatever it costs on audible, you can hear me, read it, you're going to learn some stuff about angel investing, all the mistakes I made. Then watch my podcast this week in startups or angelpodcast.com and learn how to be a picker". Because I think learning how to pick individual stocks in the public market or learning how to pick individual companies and the private market is really the reason to do it because it's fun and it's educational and you get to hang out with the smartest, most driven people in the world, those reasons alone are a reason to do it. The fact that you could hit an outlier and hit a life-changing home run even more reason to do it.
Jason Calacanis:
We've done, I think 130 deals and the first deal we ever did, I think would return the entire portfolio, which is the power of all of this. I have been teaching a course angel.university while in quarantine. The first one had 150 people come, then 250, then 150, then I'm doing it next month, another 200. And we put all of that... We ask people to make a donation of a hundred dollars to charity, and I teach it for three hours. I think we've raised 50 or $60,000 for charities, which we gave away on Twitter, you can watch me doing it. We gave it to the frontline workers. We fed in ICU for a week, two meals a day in Brooklyn, my hometown.
Jason Calacanis:
It's been wonderful. I think that's what people are learning about this time is if a hundred percent of people have set up their cameras and set up their ethernet, and you and I are doing this now, we've all embraced it. Now the whole world can participate. That really is the vision for... I'm 49 years old. I'm going into the last kind of chapter of my career. I want to build a syndicate of 10,000 active members on that 4,000 members now of which 2.000 are active. I want to get to 10,000 because I want to be able to fund a company with $10 million from 250 people for $40,000 each and boom! Be able to do a series A or Series B funding.
Jason Calacanis:
That's my dream. I want to inspire all of these affluent, rich people who are bored, who have already made their money, to join me in the greatest career that you could ever have for an affluent person, which is meeting the smartest people in the world when you're 25 or 35 years old and starting this company, sometimes it happens with 40, 50-year-olds, not as much, but you'd have to hang out with a bunch of young people or young at heart people who want to change the world and want to steer the arc of humanity towards something amazing, a better future. It's just the thrill of a lifetime to invest in those companies.
Angelo Robles:
Actually, after this next question, I've had multiple entrepreneurs say, "Yeah, I know you're going to be more focused on investing for family offices", but I’d love for you, and I will, ask some questions from their perspective, which will be good insight for the investors and families in terms of how you help to identify what we hope is going to be a winner and advice you would have.
Angelo Robles:
But my first question, we didn't completely dive quite into enough. I think it needs a little more. That basically is the US is dominant in the startup community, but more so even in VC, that's where on the investing side, we really shine. You got Silicon Valley, New York, Boston, LA, San Diego, Austin, a little bit of Miami, Boulder, Seattle, Portland, you got various communities, but California, mainly the Bay Area, really "dominates". Do you think that we could be losing a little bit of an edge to what the number two, three and four players are? I'm going to take a guess. China is real. They're probably way behind us, but is it great that we have people coming to our universities, getting educated, not staying here and taking their knowledge and their entrepreneurial spirit back to let's say China and creating great companies there?
Jason Calacanis:
China, we could do an entire podcast on it, I have very strong feelings about it. I have always been a hawk about supporting or becoming dependent on communist countries, authoritarian countries, and the ones that do not support basic human rights. I believe that the United States' role and our best selves is when we are the champions of human rights and the champions of justice in the world. I believe capitalism plus justice, democracy is the greatest operating system for humanity that we've discovered to date. I believe that in my heart, I believe that capitalism plus democracy plus justice equals the best human condition. That does not mean that there are not issues in our country, we have the death penalty, we tortured people, we created GTMO, we make mistakes, we do bad things, we waterboarded people, we should not have done that.
Jason Calacanis:
This is not comparable to the policies of Saudi Arabia or China or North Korea. These are places where people are murdered, reeducated, put in concentration camps, this is a different level of sadistic dominance of the human spirit. We have to make a decision as a country. Do we want to make an incremental 10 or 20% in our companies by pandering to a communist country that tortures and imprisons its own citizens for reading books or practicing religion? Or do we want to give up that 10 or 20% and keep our morals and ethics and be able to sleep at night? I really think we need to choose the latter. That's what I think is getting lost in this discussion, it's the very basic concept, do the people of Hong Kong get to decide their future? Do the people of Taiwan get to decide their future? Do they get to be free people?
Jason Calacanis:
The answer in Hong Kong is No, they're losing their freedom. You're going to see millions of people be absorbed by a communist country and we have to decide, do we want the world to become authoritarian? Do we want the majority of people living in the world to live under communism or authoritarianism? Do we want them to live under democracy?
Jason Calacanis:
It's a very serious issue. And capitalism is the key linchpin in it. We have to be dominant in creating great companies. We have to make the world's best products. If they want to participate in our market, in our free market, there is a price to be paid. If China wants TikTok here, if they want Huawei, if they want to go public on our stock markets, they're going to have to improve their human rights and we have the right as a sovereign country to say, "We want to participate in your market if you participate in ours. If you don't let us have Instagram and Twitter and Google in China, you don't get to have TikTok in the United States".
Jason Calacanis:
I think the person who went to go work for TikTok, who's an American, is a traitor. That's how I feel, going to work for a company based in a communist country, I think you're a traitor, I think you have to have your head examined. I wouldn't do it. That's just my morals and my ethics. Other people might want to make a lot of money and TikTok's going to make a lot of money. But TikTok is a company that's run out of a communist country. You can be certain that if there is anybody who needs to be turned over to the communist party in China, that TikTok we'll do it in an instant and that person who left Disney to go work there is going to have blood on their hands when they hand over freedom fighters, dissidents and religious leaders to the communist party. Not that I have-
Angelo Robles:
Incredibly well said, I completely concur. Again, I did promise the entrepreneurs. We'd get to some things for them. For them, I'll try to do it a little quickly and round robin. You get a deck it's not 20 years ago of a 75-page business plan, is it one-page? Two-page? Do you get a slide? PDF format? 10 or 15 slides? It seems like simpler is better. What do you like to see?
Jason Calacanis:
Yeah. So, for me, I am trying to make a decision on your potential based on your performance. Let me just unpack that. I want to try to figure out if you have the potential to build a company that gets to 50, to a hundred million in revenue.
Jason Calacanis:
What's the best way for me to do that? Well, the best way for me to do it is look at your performance. And so looking at their performance, I would want to know, is this performance great enough? And are they committed enough to take more capital, and have they earned that right in the competition? And this is critical.
Jason Calacanis:
We are there in a competition. It is a zero-sum game. And one of the problems with this country is that we've told the generation that it's not a zero-sum game. It is a zero-sum game for capital. If I make an investment in your company, that means that another company doesn't get that check. That's that me being some hard-ass, that's just reality. There's only so many checks each person can write, whether it's Sequoia or Goldman Sachs or TPG, we all have a certain pool of capital, and you're in competition to win that capital.
Jason Calacanis:
So, if it is a competition, then performance is paramount. What do you look for in performance? You look for customers. If you're a family office and you're trying to figure out, "Is this a company I should invest in?" The number one thing you should do that you are not doing, and you're not doing it, let's be honest, is to talk to customers of that product. And you need to ask them, "What would you do if this product went away?" And if they say "I'd be upset," okay. But if they said, "Wait, is the product going away? Because can I get a license for the software? I'll pay you $10,000 because this is mission critical for us."
Jason Calacanis:
Or if they say, "Oh, I'd be bummed." This is two levels of product-market fit. You need to talk to the customers. You need to study the data, but it doesn't need to be a lot. And so, founders are self-selecting for charisma. Founders are incredibly charismatic people. What we are trying to do is take those incredibly charismatic people and figure out with this incredibly charismatic person, are they full of shit? Pardon my French. Or are they actually a high performer?
Jason Calacanis:
And man, if you just listen to them, there are some people who could spin a heck of a yarn. What you need to do is take the yarn that they spend, put it over here as a checkbox for, "This person is charismatic. This person is convincing." That's important. What's more important is that their customer loves their product.
Angelo Robles:
Okay, so now you meet them or in the old world, you meet them. Maybe you'd meet them via Zoom. Do you think after you know the map and metrics from looking at their deck, whatever, within five or 10 minutes, you got to feel whether they have it or not?
Jason Calacanis:
Yeah. I mean, I like to think that my superpower is the ability to read people. That's why I put myself in the early stage. I like to read people. I like to look in their eyes and I listen very intently, and I ask them very pointed questions to try to figure out if this is legit or not.
Jason Calacanis:
One of the questions I've asked is, "Is there some other idea you have that's better than this one?" And I ask that not to be a jerk, but I've had people say, "Yeah, I have another company I'm working on on the side." And I'm like, "Okay, why are we even talking about this, right?" And you'd be surprised.
Jason Calacanis:
Or you ask somebody like, "Why did you pick business to business? Isn't this really a consumer service? Shouldn't you be doing a consumer service?" And they'll say to you, "Oh, do you think so? Will you invest if I make it a consumer service? Okay." It's like, "Nah." I like to look for somebody who has some craftsmanship. I don't know the gender-neutral word for craftsmanship, but they are a craftsperson. It sounds a little weird, but craftsperson, we'll go with it.
Jason Calacanis:
Are they a craftsperson? When they make something, is there a craftsmanship to it? Does it have a certain thoughtfulness to it in the way an iPhone or a Tesla does? In the way Comm did or the way or the way Uber did?" I could see it in the product. And if I could see it in the product, I could see that level of detail. I know the other customers can too.
Jason Calacanis:
I'm really a product guy. I feel like I can read the person, but you have to remember, again, these are highly charismatic people who will pull the wool over your eyes. If you're just going based on their charisma, you're not getting a 360-degree view. Their charisma, their product, their customers. This is what really ultimately matters. Are they charismatic enough to get customers and get employees and get investment? But it's the product so good? Does the product have charisma? Does the product draw people in? And do those people not shut up about the problem? That's really what you're looking for.
Angelo Robles:
I'm seeing a question come in that I am going to read. Jason, do you see whether the VC space should or could be disrupted? Now, we spoke a little bit about AngelList, or is the current model copacetic as is whether during or after COVID-19?
Jason Calacanis:
Yeah. There's nothing wrong with the venture capital model. I mean, people like to attack it. They like to point out the absurdity of it. And it's very easy to point out the absurdity of people who invest in 10 companies with full knowledge of six, seven or eight of them go into zero, depending on the stage you're in.
Jason Calacanis:
It looks like a crazy cowboy kind of approach, and it is. And that's the strength of it, is that we say yes to crazy ideas and we give them millions of dollars. We call them experiments here; that forgives you from making a bad bet. I did an experiment. I spent $3 million seeing if this company could do X. I spent $5 million seeing if the company could do Y, knowing that if it did work, it would be 500x my investment. That is a risk worth taking if you have the bankroll to do 100, 200, 300 investments.
Jason Calacanis:
And so that's, I think, just the reality of what we do. There's nothing broken about venture capital. It's a really great system. There are flaws to it. We can list them all. But overall, venture capital has created the greatest innovations of the last 50 years, almost universally. I mean, once in a while, you'll have somebody create something in government. Obviously the internet was created by the government. So, people like to point to that and GPS. That is a fair point, but without venture capitalists saying, "Hey, let's build Uber based on GPS, or let's build Google based upon the internet." You wouldn't have that commercialization and you wouldn't have all those downstream businesses that were created.
Jason Calacanis:
You look at something like an eBay, look at something like Shopify, Squarespace. The amount of business, those businesses creates a violent entrepreneurial capitalism that just creates more and more businesses, more and more opportunities and jobs. And that's why our little country of 300 million punches above its weight. It's because of our entrepreneurial and risk-taking spirit. Venture capital is a key piece of that.
Jason Calacanis:
And what venture capitalists have done is, because they have so much money, they've kind of moved a bit downstream and they've said, "You know what? For the Apple orchard, where you're picking the apples, Y Combinator, Seed Funds, AngelList, Republic, Seed Invest, all these platforms, all of these accelerators, they can take over that piece."
Angelo Robles:
And actually related a little bit to that is Successful Entrepreneur effectively wanted me to ask you, and they're an entrepreneur from, really, never went to college, blue collar-type industries, but they bring up some decent points. Basically. Jason, what advice would you have to someone... they're not a techie. They're not going to build a hundred million or a billion-dollar company, they're going to look at opportunity in distressed areas and potentially put laundry mats there or this or that?
Angelo Robles:
How come people can't take a dry industry like that and scale it up to some level? Again, it's probably never going to be the monster, but again, what guidance or advice would you give to that entrepreneur? Before you answer that, someone did go on video. We're recording this. If you could pop your video off, I'd appreciate it. Thank you very much. Thank you. Go for it, Jason.
Jason Calacanis:
Yeah. Yeah. I mean, listen, people conflate venture capitalists' indifference to moderate growth companies as an insult. And what they should conflate it with is: this group of people is trying to put satellites in space. They're not trying to take people on a flight across the country. When you try to get a satellite to space, you use a rocket and a lot of fuel and they blow up frequently.
Jason Calacanis:
And when you try to take a flight for on Southwest, you're trying to do it... or Ryanair, you're trying to get the lowest possible price, the most safety, and you're optimizing for something completely different. You're not for optimizing for going MAC whatever. You're optimizing for safety. You're optimizing for cost. That's a different model than what VCs are looking for. Where in order to take this risk of seven of 10 going to zero, you would need to take so many risks at the rocket ship blowing up that it wouldn't be palatable for pizzerias or dry cleaners or people making jackets or something.
Jason Calacanis:
Those businesses are going to grow 10% a year. And in seven years or 7.2 years, they're going to double and that's going to be awesome for the founder. And venture capitalists call that a lifestyle business. That's not an insult. What it means when they say a lifestyle business, and it's been often misunderstood as a derogatory insulting term.
Jason Calacanis:
What they're saying is, "You're going to have a sick lifestyle. Your lifestyle is going to be awesome. You're going to grow this business 10 to 20% a year. Every three to seven years, it's going to double in size. You own 100% of it. And all those profits are going to go into your pocket every year. When you make a million dollars in profit, every year you get that million dollars and you still own the business. All the shares so you can still sell it. Congratulations on an amazing lifestyle that you now have."
Angelo Robles:
Oops, Jason, you might've froze up a little bit. Going to check in again, Jason. At least on video, you froze up. If you wanted to switch to audio, that would be fine. That may free up a little bit of bandwidth, even on ethernet. And these are some of the challenges, everyone, in today's world with everyone Zooming and being online, whether wifi or ethernet, or simply certain services.
Angelo Robles:
We might have lost Jason, he may be able to pop back in. We're going to have to wrap up for his schedule at the top of the hour. So, what I will do is I'll find a way to talk for a minute or two and see if he's able to bounce back in, and then take himself off of being muted and on no video. So, we'll give that a minute or two to play itself out. And we were basically heading to the home stretch anyway.
Angelo Robles:
There was a couple of points I was going to bring up in Jason's book, which I highly recommend. And he, to some degree already touched on them. He basically has four key points. One, you want to make 30 plus investments so you have a chance of an outlier. And he did talk about that in the podcast today.
Angelo Robles:
Two, you want to only invest in startups that have products in market and revenue already. And there are thousands of them. Three, you want to make very small bats when you start and then go to 10x on the winners. And these are all things that Jason spoke about. I know it sounds logical. Many of them are going to fail. You need diversity, but when you see them starting to win, that's when you want to multiply your bet down.
Angelo Robles:
And this stage, you want to make these 30 plus investments over a three-year period. Perhaps don't be in a rush to get them all done in two or three months. You're going to learn along the way. I mean, I just find Jason's story about knowing Travis from Uber and identifying that opportunity, that many, many people in Jason's situation looked at and said, "Come on. What is this? There's cabs. Why is this needed? It's a technology play."
Angelo Robles:
And that ended up being, I guess is an all-time great investment, although certainly Comm and some of the others have done incredibly well, but I just loved Jason, his background from Brooklyn, so the New York thing. We could catch up on pizzerias, that's always fun. And like he said, Naval at AngelList is this brilliant intellectual. And Jason's a tough kid, Greek heritage from Brooklyn.
Angelo Robles:
We're always smarter than maybe we let to the outside world, us from that kind of background. So, I could certainly relate to Jason, but I think even if we don't get him back, we were about ready to wrap up in a couple of minutes. I absolutely recommend that you have a chance to learn more about Jason, to potentially be involved in what he's doing. And again, in anything in investing, never invest more than you could lose.
Angelo Robles:
Investing in startups is incredibly, incredibly risky. I mean, these are the pros. Look how talented Jason is and look at what he does in terms of understanding the depths and the entrepreneur and the idea, and is it making money? And even then the vast majority, especially earlier stage, just won't make it.
Angelo Robles:
And look at the VC firms where they even have more insight from the startups already having some success. Yet, a lot of them are not going to be the grand slams and make it either. It's really, really, really hard to be an entrepreneur. It's hard to be an investor in these kinds of industries. And that's what Jason was noting even for family offices that have the money. It's a really hard business to compete with our professionals.
Angelo Robles:
You may not like two in 20, where that's applicable, but there are times when that simply is absolutely the way to go. And for you to build an internal team, that's not going to be free. That's going to cost money, and they still have to compete with the professionals.
Angelo Robles:
Now, I thought that my idea that, how do you identify a young Jason Calacanis and bring them on and give them a good part of the action probably would be the way for a significant family office to go if they want it to be more active directly as an investor? And realize, even compensating Jason in his younger days, eventually, he's probably going to want to go out on his own.
Angelo Robles:
And like a lot of legendary hedge fund managers have done, you can't stifle that. You bank them for the time you had with them. You potentially have an agreement where you're able to invest in what they're doing in their company, and you're able to walk away on good terms from my experiences with families that are sitters and early adopters and alternatives, that is likely the approach that I would take.
Angelo Robles:
We're just about the top of the hour. Unfortunately, it doesn't look like we're going to get Jason back. I recommend you listen to the first podcast I did with him last July, if I remember correctly. So, probably a good 40, 50 episodes ago. We go much, much deeper into the Uber story and all these great stories that Jason has, but I felt it would be great to bring him on. We'd like to have them on much more frequently. I thought he was a great guest.
Angelo Robles:
And so much more that we left on the table where there'll be a next Google, the next amazing company coming out of COVID-19, what he's seeing with entrepreneurs, what's happening with AI, with machine learning, with VR. I would have liked to have asked him that; we'll save that for the next time. And a little bit of the dark side of what some of that will bring to blue collar workers and how that could be a challenge and ways that we could potentially address that.
Angelo Robles:
Yeah, working from home and remote has been great for many people in the white collar industries, but that really isn't going to be an option in a lot of blue collar industries. So, there's some grave concerns there. Jason, I think you might be back.
Jason Calacanis:
I'm back. We lost our internet in San Francisco, but we rebooted the router, so we came back. Sorry it took a minute.
Angelo Robles:
I was waxing poetically about you. I wanted to ask you some of the questions, so I'll be happy just to have a couple of minutes of your time. What I was talking about is through the crisis of COVID and creativity, will there be amazing companies in AI and machine learning, VR? VR has lagged a little bit to what we hoped it would be. And it does make working remotely not quite as personal yet. I'm feeling in the next year or two, that's going to radically change. Are we about to be... and I think you believe so from what you said, at the early stages of what could be the next wave of great companies to come?
Jason Calacanis:
Yeah. People tend to, I think, overestimate technologies in the short-term and underestimate them in the long-term. Somebody's credited with that expression. I can't remember who said it first, but it's one of those expressions that everybody here says. And VR is probably one of those technologies where, my gosh, since the '80s, into the '90s, 2000s, 2010s-
Angelo Robles:
Always disappointed.
Jason Calacanis:
It always universally disappointed. And today, I put them on and I'm absolutely amazed at the fidelity, but I get motion sickness. And then what I realized is video, which we were told, "Hey, you will..." Remember the old and T&T commercials? "You will be doing video conferencing with your family."
Jason Calacanis:
That is now a reality, and video conferencing existed in the '80s, and now here we are; '90s, 2000... 30 years later, video technology actually works flawlessly. What we're doing right now used to take a Cisco, $250,000 dedicated room with a satellite up link. And now it works over the internet for free. And every camera... everybody's got a webcam built into their laptop. Zoom is free up to 40 minutes. You get the idea.
Jason Calacanis:
So, given all of this, I think it is probably another 10 or 20 years until VR actually has the Zoom moment that Zoom is having right now. I used to love GoToMeeting. For some reason, GoToMeeting was too complex for people, and Cisco maybe was too expensive, but I used to use GoToMeeting all the time. I loved it, but Zoom was just like, "Here's a URL. Pop up the room. You don't need to have anything else." Right? They kind of stripped it down and made it easy to use.
Jason Calacanis:
This is what we call the consumerization of the enterprise, where enterprise software is made as easy as a consumer app like Uber or as easy as Sonos. So, Zoom is as easy to use as Spotify. Slack is as easy to use as Spotify or Uber. That's really what's happening is that consumerization of the enterprise.
Jason Calacanis:
I'm not a huge fan of VR. I think AR is going to be more interesting to be honest, but who knows. Like I said, people tend to underestimate it. I went to a VR, a real world VR center over last Thanksgiving with the family where you play in a group, where you all put on backpacks and had VR headsets and you shoot zombies. And it was the most fun time I've had in a long time.
Jason Calacanis:
So, I think the in-person VR stuff, the gaming is just really fun to do at an amusement park kind of way. It's open-ended, we'll see about VR. I think AR is the big winner. I think that's why Apple pushed all the chips into augmented reality. So, glasses that we'll put your name or your latest tweet above your head. Or above my head, it will put... I don't know... how many angel investments I've done. If we were all on AngelList, it would show our AngelList stats above our heads.
Angelo Robles:
Yeah. I mean, the amazing thing about these technology-driven companies, even a company like Zoom, but going back to truly iconic companies, how we use Apple, Google is... Lost a little bit in the irony is how easy they are to use. It needs to be convenient. Even Uber, et cetera. It's not like we need to have a PhD or be a techie ourselves. That's very niche-y, and there may be good opportunities for that as applicable, but generally what's going to have the mass appeal to the masses is going to be something that people could use, and utilize, very easy.
Jason Calacanis:
Yeah. The bottom-up sales of enterprise software is truly amazing. It used to be that a CTO would go golfing, or to the Knicks game, with a VP of enterprise sales at Oracle or Cisco, and these top-down technology decisions would be made for a giant organization. When I started my career in IT at Sony, that's how it worked. We'd find out what software we were using when the CTO approved it. And then this bottom-up technology movement is what's really been compelling. Some organization starts using Notion, or they start using LinkedIn jobs, or they start using Slack, or they pick the bottom-up software. Somebody uses Fiverr in an organization, puts it on their corporate card. Then 50 people use Fiverr, or Notion, or Slack, or GoToMeeting, whatever it is. And then somebody says, "You know what? We have 50 license of this. We should get a site license, and we should get a discount, and we should train everybody." But that bottom-up approach has led to lower costs initially, and it makes the software better. Because-
Angelo Robles:
For sure.
Jason Calacanis:
Unsubscribe at any point in time. That's the opposite of how licensing worked in the Microsoft and Oracle era. You would buy a five-year license to Microsoft Office. You would buy a 10-year license to Oracle, or a seven-year license. They were selling long licenses, multimillion-dollar deals. Now people are like, "I'm on Amazon Cloud Services, but you know what? I'm not happy. I'm going to Google Cloud. Google Cloud's not doing what I need it to do. They didn't pick up the phone. I'm going to go to Microsoft Azure." People are really bouncing between the different services, and it makes everybody more focused and making better products, which is good for consumers. And businesses are consumers.
Angelo Robles:
And I know we're going to be very tight for time, so we'll maybe get the two-minute version, not the 20-minute like we did the first time. How you met Travis, the founder of Uber... and really one of the greatest investments of all time. You were what? Investor number three. What did you see in him?
Jason Calacanis:
Well, I had known Travis when I was a journalist.
Angelo Robles:
Ah. Okay.
Jason Calacanis:
Where you host your events, that ballroom at Casa Del Mar in Santa Monica on the ocean, that's actually the same ballroom where I interviewed him.
Angelo Robles:
Oh my God.
Jason Calacanis:
And I used to do a CEO interview, and he was doing company called Scour. He had just been sued for a quarter trillion dollars, $250 billion, by Hollywood because people were stealing movies on it. Scour was sort of a Napster of its time, but it supported video files, and PDFs, and any file type. And I was always good friends with him. I watched him build Red Swoosh. And when Uber came out, I was trying to be helpful in the ecosystem. People knew I was writing small angel checks, and he said, "Hey, can you help me?" And I said, "Sure, let me introduce you to some investors." And I think two or three of the investors at the Open Angel Forum, which is now called RemoteDemoDay.com... So if any investors want to come to RemoteDemoDay.com, just go there and sign up.
Jason Calacanis:
And we just have seven companies... Some of them are ones I've already invested in. Some of them are just new ones... share what they're working on. And if people are interested, they go invest. And that's really what I've learned in my career here, is if you just are a person who's helpful, and you're helpful to everybody you meet, like many people in Silicon Valley were to me... And I probably wasn't the easiest person to be helpful to at times... you're going to have a great career. So I focused on just being super, super helpful to everybody. And that's, I think, how ultimately the Uber investment happened, was I was just being helpful to a lot of people, and luck struck. And since then I've got lucky 12 times.
Jason Calacanis:
No, I sort of say that as a joke. People are just like, "Oh, you're just lucky." I'm just like, "Yeah, no. I agree. Lucky 12 times in 20 years. Sounds good. Every year or two, I get lucky.”
Angelo Robles:
I'm going to take a question. I'm going to take a question from a live listener, but reposition it a little bit. And basically it's talking about what we would perceive as the future. And it may apply more to ed-tech and education. And that would be the advent of hologram for learning, of taking someone's voice, saying the right couple of pronunciations or words, and being able to create a whole vocabulary from that. Now, that could get a little eerie with a loved one that may have passed on, but I'm finding this intriguing. It reminds me, of course, of the Star Trek from the '80s, with the hologram. Are we on the cusp of something amazing with this, and will this change education, or we're still 10, 20 years out?
Jason Calacanis:
Yeah. I think everybody's getting a fast-forward view of the world because of the pandemic and being forced to stay at home. And one of the things that we're all having to deal with is, "Hey, the kids are home," and they're having a double or triple summer in some cases. And, especially if your kids went to camp, you might have a week off, and then they started going to camp. The idea that they're home this whole time, and then parents are responsible for educating them... People are starting to realize, "Wow, there's an opportunity here to make education better. And, oh, wait a second. The work that they're actually doing is two hours a day. What's happening during the other four hours a day?" Socialization is happening, and other things.
Jason Calacanis:
And so I think you're going to see a homeschooling boom. People are finding resources like Khan Academy. We have an investment in a company called Brilliant.org, which is for high performance in physics and math, and they're doing tremendous business. And I think you're going to see this emergence of... call it... $10 to $500 a month subscriptions to educational resources that give your child a better education than public school. And public school varies greatly, but it's very important. But I think what we'll find is, for some kids, doing homeschooling's going to work better.
Jason Calacanis:
And then people now, because they've been left to fend for themselves... I was talking to another set of parents, and I said, "I don't know what's going to happen in September, but if they're not going to go back to school, I'm going to hire a teacher. I'm going to hire the best teacher, have my three daughters go to that school in my living room or find a space. And then I'll just invite five of my friends, six people. If there's 10 kids amongst them, and we have one teacher for 10 kids or two teachers for 10 kids, we're just going to divide their salary by 10, or five, or whatever it is."
Jason Calacanis:
And it actually might equal the same as what we were paying for private school or something close to that. Elon did that with his Ad Astra school. And I think it worked out great for his kids and some other kids there. And so I think whatever was the sacred cow, whatever was the obvious choice, is now no longer that. And college is the other one. Who's paying $50,000 in tuition to take Zoom classes in September? All the students I've talked to, and all the parents I've talked to... They all say, "Gap year, next year." Everybody's taking a gap year, and they're just telling schools, "I'm deferring." I saw something about Berkeley was like, "We're not making SATs," or whatever they were qualifiers anymore. So they basically said, "You know what? We're going to open the aperture. We're going to let more people into schools." And there needs to be more competition. You can get an online education for a much better price than traditional college. And traditional college, as we've seen in some cases, is bought and paid for, and that it may be the admissions process is not exactly fair. I think that's being charitable.
Angelo Robles:
Are we going to see tech companies align with universities, and the dynamic of how we're educated and secondary education's going to change radically?
Jason Calacanis:
I think you're going to see a lot of the second-tier, third-tier schools just shutter, and they're going to put their campuses up for sale. And so I've been waiting for a campus to open up for a school. And then I was going to move my Founder University, Angel University, and my incubator to it. So I think the idea that there are thousands of schools teaching the same math class, or the same economics class, when you could just have the greatest economics teacher do it over Zoom and have a thousand students in it, who then go into breakout groups... I think people are going to radically shuffle the deck. And if you look at a company like MasterClass, which I passed on investing in, like an idiot... It was just so stupid. I mean, I just knew when I met David, the founder, that he was special, but I didn't get it. Like an idiot, I convinced myself not to invest, when I knew I should have. And that's just one of those things you get better at.
Angelo Robles:
Yeah. The reverse confirmation bias, so to speak.
Jason Calacanis:
You get zero credit for being like, "Majority chance this fails." It's like, "Yes." We just said in this conversation 10 times, "The majority outcome for ambitious companies is failure, but don't stop betting." If you were looking to go to film school, the hundredth best film school... Maybe taking all the MasterClasses, maybe hiring a video editing tutor, and maybe spending 10,000 on your first short would cost you $30,000 total over two years.
Jason Calacanis:
Going to college might cost you $100K, and you go into debt. So I like the idea of rethinking this whole education process
Angelo Robles:
Oh, completely. But is it acceptable not to have a paper, a diploma on your wall, a degree?
Jason Calacanis:
100%. 100%. Now, I was talking to one of the most powerful CEOs in America. We just having lunch, or dinner, or something. I don't remember. And I said, "Did you hear about this kid who went to MIT? He took all the MIT courses in 18 months and documented it, and he basically did their online courseware and has all the documentation, and he's writing a book about how he did that. And he did it in half the amount of time, and he scored in the top percentile because all of this stuff is online for free." I said, "Who would you rather hire, a person who did all of that work from MIT on their own, and did it in half the amount of time, and never set foot on the MIT campus or somebody who graduated from MIT?" And the person was like, "Well, obviously, the one who had the chutzpah and the drive to do it from home."
Jason Calacanis:
So, that example is incredibly illustrative of how entrepreneurs think. We want the underdog, grinder, hardworking person who hacked the system more than we want the person whose parents Photoshop them on a fucking... sorry... Photoshop them on a beep... Photoshop them on a rowing equipment to try to get them in. We all know it's a game. We all know that certain people are getting into these doctorate places because of money. It's obvious to everybody. It's always been that way. What we want is the people who can actually perform. And companies are no longer looking for a Harvard degree... or a Columbia degree, or an NYU degree, or whatever great school it is... as the lead for hiring a person. Almost universally, when I talk to startups, they're saying, "I need somebody who can solve this problem with this skill."
Jason Calacanis:
So I tell young people, "What are your skills?" And they're like, "I have a business degree." I'm like, "Not a skill. Do you have a skill of creating pivot tables in spreadsheets and building models?" And they're like, "Well, yeah, I kind of used..." It's like, "Are you an expert on it? Rate yourself on a scale of one to 10 at how good you are at spreadsheets. Oh, you're a six? The world does not need you. Oh, you're an eight? The world might tolerate you. Oh, you're a nine or 10? Now you're going to be employable forever." And so young people need to realize it's all going to be skill-based. The idea that the degree is going to save you is over. That's over. And it's actually been over for a long time.
Jason Calacanis:
People are hiring based on skill. They're based on motivation, how hardworking the person is, how clever they are. They're not basing it on what used to be the proxy, which was that Harvard magically took a smart person and made them smarter. Harvard's taking smart people and not making them dumb. That's really what they're doing. If Harvard had the formula to make dumb people smart, there would be a thousand Harvard campuses. Harvard’s would be Starbucks. And everybody who went to Starbucks would get 10 IQ points. That's not what's happening here, people. They're taking already smart people in a competition for a limited number of seats to get the most storied degree, the most beautiful logo, the most impressive logo for your LinkedIn page. And they're just selling that. And that doesn't mean that you don't have a great experience if you go there. I'm sure you do, but they haven't actually cracked the nut of making brilliant leaders. Let's be honest. They've identified brilliant leaders and not fucked it up.
Jason Calacanis:
Sorry for the Harvard MBAs who are 200K in debt. [inaudible 01:13:40]-
Jason Calacanis:
... just good at picking. They're good at picking, just like I am. It's not that I'm making the startups I invest in 10x more effective. I might make them 10% more effective, but I'm not making them 10x more effective. I might give them 10 times the number of introductions. That might save them six months, and that's important. But I do not think that I invest in Travis and his performance goes up. I identify that Travis is a high performer. I'm lucky enough to invest, and maybe I help him get a couple of investors and get through a certain acute problem he's got at the moment. And maybe I'm a good person to have a conversation with Travis when he wants to discuss surge pricing, which we did back in the day. But that's about it.
Jason Calacanis:
I think a lot of times investors want to take credit. I want to give a high five. I'm proud of the companies I invest in, but I in no way think that I've made those companies, or I did what the founder did. I'm along for the ride. I am there to high five. I'm part of the entourage. I'm lucky to be on the ride with them. And yeah, on the margins, I can help them, but let's be real.
Angelo Robles:
It's a very humble approach, and it served you well. For those in the audience, whether live or hearing it on a podcast or a video, that would like to learn more about what you do, how could they do that?
Jason Calacanis:
Yeah. So number one, read the book or listen to it. Number two, my podcast is free.
Angelo Robles:
The book name, Jason?
Jason Calacanis:
Angel is the book. You can go to AngeltheBook.com or you can just type Angel, Jason Calacanis into Google. You'll find it. I like the audio book a lot. I think the audio book outsells the actual print one because I speak it, and people... When you're a podcaster, they like that. Second, I have angel.university, which is a course that I teach, basically, for a donation to charity. And I go into three hours, into detail, how I make investment decisions. And it's kind of based on the book, and I do it monthly. So there's a June date out there. You can sign up right now. And if the June is filled up, you can sign up for July, angel.university. And then I'm Jason on Twitter. So twitter.com/jason. And Instagram, instagram.com/jason. And Tumblr, jason.tumblr.com. And calacanis.com. And my email is jason@calacanis. And if you can't find me, then you don't know how to use the Internet.
Angelo Robles:
Wow. That was fantastic. I'm glad we covered so much. And still a lot of things left unanswered for the next time.
Jason Calacanis:
And just thanks for including me, Angelo. You've been very nice of just including me in everything you do, and that really means a lot to me. And you do a high-class job of putting these things together. As one content producer and event producer to another, I just really respect the work you're doing, and I appreciate you including me.
Angelo Robles:
Well, thank you. Coming from you, that means a lot to me. I appreciate that, Jason. Thank you so much.
…
Angelo Robles
Founder & CEO | Family Office Association
Note: This will be the only interview transcript provided for free subscribers, all subsequent transcripts & access to the private podcast will be members’-only.