Naval is such a genuinely nice and caring guy. So many investors say they are entrepreneur friendly, but hardly any of them live up to that when things get hairy. Naval is a guy who absolutely lives the mantra of putting entrepreneurs first and goes above and beyond to help them out in so many ways. There is a long story about the stuff he went through to get where he is (when he was at epinions), google for it- its worth a read.
I wont get into it too much, but I owe alot to Naval for where I am today. The help, advice and just conversations he gives to entrepreneurs is completely 'no bullshit, no fluff'. All in all, its very refreshing to see that AngelList has risen to the top and has helped disrupt the 'old boys / sand hill road' way of doing things.
Naval is an unbelievable investor, entrepreneur, and friend. He's completely founder aligned in a way that is almost unheard of in silicon valley. Someone you don't have to watch what you say and can simply be direct with. I've only recently gotten to know Naval. But, immediately, he's risen to the top as my favorite person to work with hands down.
Truly a unique founder ally amidst the staunch traditionalism of silicon valley investing. Can't wait to see AngelList continue to change/democratize fundraising.
Imagine some combination of the crowdfunding website Kickstarter and the social-networking site LinkedIn, only everyone on the site has to be an accredited investor. Early-stage startups show up, hat in hand, and 165 different angel investors, called “leads,” evaluate them.
If an investor likes what he sees, he can put in some of his own money, while encouraging other investors, who are part of what is known as his syndicate, to fill out the investment with their own funds. These first investments average around $315,000 per startup.
Wait, what? We joined a few years ago and put several of our existing investors on there. We're not well connected on the west coast and I never heard from anyone major on the site. Was our company evaluated by one of those 165 people who then lead a syndicate? How does it work exactly? How do they discover startups that are on the site?
> Never said real due diligence, just most of the due diligence that is actually done
Which in a lot of cases is zip, zilch, nada by professional standards. A few lunch conversations and "social proof" don't constitute due diligence, but that passes for a lot of angels in Silicon Valley.
> However, if one is investing in 1,000 startups then due diligence is actually of less importance as you approximate a normal distribution of returns..
The problem is that the "normal distribution of returns" could easily turn out to be very different from what you expected. Markets aren't static. A lot of fund managers who rushed to buy boatloads of subprime MBS without doing their own due diligence learned this the hard way. They simply relied on the credit rating agencies and assumed everything would work out.
Here, you don't even have credit rating agencies. You have a hodgepodge of individuals ("syndicate leaders") who are black boxes. Just look at this[1]. According to https://angel.co/syndicates, he has the fifth largest syndicate on AngelList.
Pure madness.
When it comes to investing, ignore these words of wisdom at your own peril: do your due diligence or eventually your due diligence will do you.
But that's the point: everyone believes somebody else is doing due diligence, even when it's not actually happening. This is a huge problem today because of the "party round."
I'm not sure you could easily find one LP willing to put up $400 million for a fund that, according to the article, will potentially make more than 1,000 investments. AngelList, because of its platform, obviously has a way to deploy this capital more efficiently than a typical firm, but these types of small early-stage investments are still fraught with challenges and I think sophisticated domestic LPs who have experience in venture capital would be very skeptical.
As the WSJ article implies, CSC may have certain motivations that a domestic LP wouldn't, such as a desire to get capital deployed outside of China. And fast.
Personally, this looks like dumb money hoping AngelList can turn it into smart money. It could very well distort market for early-stage startup investments, but it isn't likely to change the way these investments tend to behave in terms of returns.
There is a big trend in Chinese PE throwing money into the US market with expected returns that much lower than what the western market would expect, and therefore western PE is continually being outbid by the Chinese. So, even if Chinese get lower returns for their capital in the US than typical PE's, those returns are still higher what they would get domestically in China.
Yes, and the Chinese have logical reasons for accepting lower returns because they're exposed to risk in China that domestic PE firms aren't exposed to. This said, it should be noted that when the music stops, these firms aren't guaranteed a return at all. Many of them are going to lose. It's just a question of how much.
It would be interesting to see the effects of a combination of something like AngelList together with robust decentralized technology for identity and smart contracts. How much work is still ahead of us until I'll just have to set up a new team on a service like AngelList which will be a globally accepted business entity?
AngelList isn't using this money for their own operations, they're using it to invest in hundreds of other startups.
You question is equivalent to asking "Why does KPCB need so much cash?" to which the obvious answer is "so they can invest in interesting companies where are likely to generate substantial returns for their partners."
> We are, as ever, either at the dawn of a
golden age of startups and innovation, as
technology’s boosters claim, or soon we’ll
be shaking our heads that investors ever
believed the market for startups was as
big or fast-growing as they thought it
was.
Well, for at least 10 years now,
traditional, mainstream US information
technology (biomedical is different)
venture capital has been essentially stuck
in the mud due to a dirty little secret.
As a result, on average, returns on
investment (ROI) have been low, e.g., as
reported in Kauffman
It used to be that venture capital firms
could invest in a project described only
on a napkin, but this practice was brought
to nearly a halt.
How? Traditional US venture capital
gets nearly all its funds to invest from
its limited partners (LPs) which are
mostly pension funds, insurance companies,
wealthy individuals, sovereign wealth funds
(likely Mideast oil money), hedge funds,
and not much more.
Well mostly the LPs are quite
conservative, invest only a tiny fraction
of their funds with traditional
information technology venture capital
firms, and, apparently, have a relatively
uniform deal with such firms.
The deal: Invest much like private equity
investment, that is, in a company
evaluated mostly via standard accounting
except instead of revenue be willing to
substitute traction.
So, here's the recipe for traditional US
information technology venture capital:
Look for a company (1) exploiting
information technology, i.e., Moore's law,
computing, the Internet, the Web, the
cloud, mobile, etc., (2) with a novel
product/service, (3) addressing a huge
market, (4) with traction significant and
growing rapidly, (5) that is desperate
enough for some cash to be willing to
accept onerous terms.
So, here are some of the weaknesses of
this traditional approach:
(A) Any development work, e.g., writing
software, needed for (4) traction has to
be already funded and done.
Result: This part of the deal means
that usually the development work has to
be what a few guys can do on a diet of
Raman noodles, and that severely limits
what products/services can be offered.
(B) The deal does not permit giving
weight to real progress in research or
technology; so, venture partners will not
attempt to evaluate such progress and,
indeed, nearly never have the background
to do, or even direct, such evaluations.
Again, the evaluations are basically to be
much like in private equity, that is,
based on traditional accounting.
Result: The companies that get venture
funding are doing little or nothing to
exploit original research or technology.
Maybe something about a market niche, a
user interface, or a partner list is
novel. But, from US national security,
there is now a history of 70+ years of the
astounding power of original research and
new technology, and, with the deal of the
LPs necessarily, that power is nearly
always neglected.
E.g., for a joke, venture capital would
have said: You build and test the first
one, build and test the B-29, build a good
base in Tinian, and build a good base in
Iwo Jima for fighter escorts, and for 30%
ownership with BoD control, a full
ratchet, and 2X liquidation preference we
will chip for in half of the aviation gas
for the Enola Gay. In other words, that
is vulture capital.
We should not expect vulture capital to
do much to bring us to
> ... the dawn of a golden age of
startups and innovation ...
and it has not.
So, as a result of weaknesses (A) and (B),
the information technology startups are on
average much less valuable than they
should be. So, in particular, there is an
opportunity to do much better, in
particular, to get much higher ROI.
AngelList and YC have a chance for this
progress and, thus, to disrupt
traditional US information technology
venture capital.
If the CSC in the OP is willing to
consider being an LP with a new deal,
then there is a chance of
> ... at the dawn of a golden age of
startups and innovation ...
Tech stock in general are underrated it's the SV investments that are overrated.
If the problem you are trying to solve is big enough and you have an idea on how to solve it then back of the napkin drawing ARE enough to get you funding with the right people.
But when everyone is running around and trying to invest yet another social, location aware travel and transportation unicorn to get rich and famous instead of investing in actual problems that need solutions but perhaps more years then we are left with a media backed startup reality show.
You have to think about that in the past building a company was actually much much harder in every respect.
You didn't just build and app or used aws. You had to spend a lot of money on getting things set up.
And if the problems where genuine enough then I think it's fair to say that this happened much more often. But I don't have any data to back it up only my own experience.
When I was at IBM's Watson lab, the PC
on my desk had parts worth a total of
$50,000+.
When I bought my first PC at home, from
Gateway, it cost me $10,000+. Single core,
90 MHz clock.
Later a friend and I considered a startup,
I went shopping, and saw that parts
for a good PC would run ballpark $6,000 --
we didn't do the startup!
Later I wanted a more up to date PC,
and the parts cost about $5000.
So, single core 1.8 GHz processor,
that is 1800 / 90 = 20 times
faster for half as much money.
Now I'm shopping for the first server
for my startup. I've been assuming that
the parts would cost about $2000.
Nope: How about $1000, for
a processor with 8 cores,
at 4.0 GHz, with 32 GB of ECC
main memory, etc.
But I already have a spare
screen and power supply,
now really want to do backup
from one hard disk to another,
both internal, and to a
2 TB external hard disk via
USB so don't need Blu-Ray.
And good 1 TB hard disks go for
about $60 and, thus, make
room enough for internal
disk to disk backup
surprisingly cheap and
easier than working with
Blu-Ray disks.
And main memory prices are
significantly lower: E.g.,
the Kingston, 32 GB of
1600 MHz ECC main memory
KVR16E11K4/32
was $429 but now
is easy enough to find
for $230.99, nearly half price.
So, $700 gets such an 8 core
box.
But, for my first server, really
not sure I need the full 8 cores,
32 GB of main memory right away
so could
settle for 4 cores with a slightly
slower clock and 16 GB of main
memory and three disk drives
1 TB each, for under $400.
So, start with a $400 server
and, if it stays busy sending
Web pages with ads, then
the ad revenue just from
on the way to getting busy
should be much more than
needed for some high end
servers.
And now 1 GbE IP routers are
much cheaper, too!
And for $90 a month
my ISP can give me
a connection with a static
IP address, no ports blocked,
and upload bandwidth
of 35 Mbps. Half fill
that 24 x 7 sending Web pages
with ads, and should be
able to show a profit!
Several US locations
have 1 GbE service!
Prices, they've been a coming down!
It used to be, to bring up a
busy Web
site, needed big bucks to, say, Sun
and maybe a T3 leased line, etc.
Now nearly everything about bringing
up a Web site is much easier and cheaper
than 10-15 years ago.
E.g., my startup is based on
Windows, so I get to use IIS and
ASP.NET for the Web site,
ADO.NET and SQL Server
for the data base,
parts of the rest of .NET
for more, e.g., de/serialization
of instances of classes
for program to program communications
over TCP/IP sockets. Some big
sites use this infrastructure;
it should work well enough for
my startup!
E.g., I
wrote my own Web site session
state server key-value store using
TCP/IP sockets, de/serialization,
and two instances of a .NET
collection class. The .NET collection
class was great fun to use!
Terrific infrastructure.
Thats a great way to put things in perspective. Thanks for that. If you don't mind I would love to use this as an example of the difference between now and then in one of my future essays?
First, there's plenty of money in he US and Europe. I feel they could have worked a bit harder to secure non-Chinese funding.
Second, like it or not the world is engaged in an economic war with China. The industrial bases in the US and Europe have been destroyed to the point that entrepreneurs have trouble finding such things as machines to sew socks. Issues abound across a myriad of industrial segments.
While some in the western world might be all hippie/feel-good about China this is at the cost of ignoring what has been going on. Before you call me a paranoid asshole consider I've been manufacturing products in the US for over thirty years. During that time I have seen, first hand, what the reality of manufacturing has become. Over the years I've seen vendor after vendor systematically taken out by China's expansion into every nook and cranny of industry, even in areas you'd think make no sense.
Now the Chinese are going to insert "probes" into thousands of startups by means of providing insignificant (to them) funding. This will give them unparalleled visibility into trends, products and whole new industries ripe for pillaging.
AngelList is a fantastic resource. I am sure they could have made an effort to source this fund in the US and Europe. In the grand scheme of things $400 million is not that much money with the clout AngelList has, particularly if spread across a range of investors. I, for one, would not want to have a Chinese investor.
Even taking your skepticism about Chinese investment at face value, having LP involvement is tremendously different from operational involvement or investment committee involvement.
Having been involved in LP reporting at a seed fund, I can say that it happens regularly but infrequently (quarterly, or at most monthly) and at a 30,000 foot level. I've really never seen LPs interact with portfolio companies at a seed stage, beyond chatting at a cocktail party after the annual meeting.
Besides, given the nature of the platform, if they're looking into trends and products, isn't that information publicly available (this is just adding money behind the top syndicate deals on AngelList)?
You are probably absolutely correct. Yet, based on watching what's gone on with China from my front seat in manufacturing I can't help but remember a multitude of instances where someone said something akin to "what's the big deal with having them ..." and few years later they are out of business or hooked to China in a big way.
China looks at things at a different time scale than we do. Among other things, companies can sell at insane prices because they make their profit at the end of the year when the Chinese government hands out 15% "bonuses" on their exports. I've been in businesses where a 15% net at the end of the year would have been a dream.
When you are dealing with someone who has been systematically eroding your industrial base over decades you have to, at one point, take pause. I know I might come off as paranoid, I get that. There's a reason for that. I have experienced the "China effect" personally. It can be absolutely devastating. And nobody is doing a thing about it (not sure it is possible to any more).
You are absolutely correct, of course. My apologies.
Let me offer my opinion on where this sort of thing comes from.
Why would someone say something like that?
Well, because voting on HN (and other platforms) is still broken. People will down-vote you simply because they don't like what you are saying or if you are saying something that paints a different light on their hero, ideology, etc. It has nothing whatsoever to do with the strength or quality of the argument at all. And, because of this, it also does not open the doors for discussions.
For those of us who might not align with the most prevalent culture on HN (pick a topic, there's a favored ideology) this can be rather frustrating at times. You have rules for all sorts of things but no enforceable rules for when and how to down-vote and people don't have to justify their down-vote in any way at all. I have the ability to down-vote yet I don't remember when and if I have ever exercised it. Because, for the most part, I don't feel it is a fair system.
Personally, I think down-voting ought to be eliminated because it is conducive to emotional or ideological abuse, particularly by the younger members of the audience. Up-voting is a far more positive type of engagement and one where if you don't like the argument you simply do nothing about it or pick the one you think might be better. With software limiting such things as rate-of-voting and mass up-voting one could make it far more civil. For example, a reader might get only two or five up-votes per thread or some such thing.
Sometimes you look at topics where, perhaps, you'd like to contribute some experience and the first thought is "crap, if I write anything on this I am going to be showered with down-votes" and that's where, sometimes, making that comment comes from.
I would urge you to view such comments not as rules violations but rather a symptom of something that might need to be addressed.
Facebook is dealing with this right now with their like/don't-like voting system. Their reasons and platform are different, of course.
Learning does not happen when everyone agrees with you. A healthy dose of counterpoint is how you learn. I know it's difficult to manage these kinds of fora, I've done it in the past, back in USENET days, and it was a nightmare. Your job isn't easy. Just take what I said as constructive criticism and nothing more. HN is excellent, so you are doing something right.
I think you were being down-voted because your answer was mean spirited, that is your intention appears to have been to want to hurt someone verbally.
Besides their question is very legitimate. How does a directory spend $400M? I had to read the answers to understand they were planning to make some investments.
I do have an issue with people who are mean or rude. Your comment was not just rude, as in not agile; it appeared as if you wanted to say something to hurt someone.
If you father/spouse/best friend asked the same question, would you say "Get your nose back on to your plate." If not, then you should not give the same answer to someone you do not know.
Listen friend life is too long to go on being not sensitive to how you talk to people.
By the way I upvoted all your comments, because I want you to be enlightened. The world is a better place when you are nicer. You sound frank, so I assume you do not even know you were being impolite.
Unfortunately I had an experience with Naval completely the opposite of what you're describing. I'm a student and had heard of him before several times along with using AngelList. Earlier this year I saw him walking in downtown San Francisco with somebody else, so I thought I would say hi and introduce myself for a moment since he seemed like a nice person.
I think they must have been having some kind of very important, heated conversation because as soon as I went up to him and simply started to say "hi, hope I'm not interrupting...", he stopped me and said "we're having a conversation!!" and kept walking.
Most likely it was just the wrong time and place to do that but unfortunately I now have a pretty disappointing first impression of him.
"We're having a conversation!" is a perfectly legit saying, even to someone who is not a stranger on the street. On the other hand, Naval is a celebrity, and it's more expected for a celebrity to get such requests - maybe not wanted, but probably common. The deeper question is less anecdotal: to what extent, to cite Kevin Spacey (who cites Jack Lemon), the tech community sends the elevator back down. In this respect, AngelList has done a tremendous change to open more opportunities to more people. It actually opened the closed doors to many, and great news they are taking it to the next level. If this fund succeed, even more funds will follow.
> On the other hand, Naval is a celebrity, and it's more expected for a celebrity to get such requests - maybe not wanted, but probably common.
I'm not sure I agree. He might be relatively prominent within the SV startup community, but that doesn't make him a celebrity. The vast majority of people (heck, the vast majority of engineers) would have no idea who he is.
I have no idea what the context was for Naval, but if someone walks to you and say "excuse me I hope I am not interrupting," REGARDLESS of your conversation (because you are in a public place), you stop and give them 15 seconds.
For how do you know they are not telling you your car is being towed, or your kid is being taken away, or you dropped your wallet.
If it were Obama who walked to them would they have stopped for 15 seconds? If yes, then what is the difference?
At the very least say with a smile that you are sorry, but this is really not a good time, but they can email you if it is not urgent.
> For how do you know they are not telling you your car is being towed, or your kid is being taken away, or you dropped your wallet.
You don't generally start conversations like that with "hope I'm not interrupting". "Someone's taking your kid!" would be the starting point, most likely.
> If it were Obama who walked to them would they have stopped for 15 seconds? If yes, then what is the difference?
If you are nice to people simply because it is advantageous to you, then you are not nice. As far as I am concern, yourself and Obama get the same first 30 seconds, countenance, and respect. And if I must turn both of you down, I should do it politely.
Note: I am not saying this is what the guy did, I have no context and I was not there.
Look, I think quite highly of myself... but 30 seconds of my attention is not worth 30 seconds of Obama's attention to the average person. "We're having a conversation here" isn't impolite, and a no one has a right to a random stranger's attention.
Sorry spike, I wasn't trying to be rude. Never my intention. You likely caught me unawares and my animal brain responded before my human one could catch up. Be well.
I'm not quite sure how just saying "hi" is butting into a conversation. I didn't shove my hand in his face and ask to have five minutes of his time immediately. That's rather extreme.
Why not just say something along the lines of "it's alright, but I'm not able to speak right now"?
His response was probably a bit more aggressive than necessary, but think about how many times he gets propositioned/pitched to per day.
Also, consider the venue: someone who comes up to you on the street and starts a conversation (especially in SF, I lived there for 7 years while working at startups) is likely asking for a handout, donation, trying to get you to sign a petition, trying to scam you, mentally ill, or some combination of the above. Someone who interrupts your conversation with another person on the street immediately comes across as rude regardless of their intentions.
There was probably no way you could have successfully engaged him in a conversation, even a very short one, at that chance encounter. It just wasn't a good set of circumstances.
Why is everybody down-voting the guy/gal. Can you at least give an explanation?
Nowhere in their comment did they write something negative about Naval. They just described their interaction, and frankly if this is exactly what happened, I would go out and call it "not friendly" at best.
One unfriendly interaction does not make a person bad, or take away from Naval. We have no idea what his context was, or what he was discussing at the time.
As for OP, I think it is great you shared this. If for nothing for the simple reason that you have just given him a chance to reflect on that and rectify it if it were a mistake.
OP would have to be pretty oblivious to life if he needed feedback for that interaction. He saw that someone was in a conversation, tried to interrupt, and then was offended when that someone didn't want to be interrupted. Look, if someone's doing their own personal business, don't try to interrupt. And if you do, at least be understanding that they had no obligation to stop what they were doing just to humor a stranger, so there's no right to be offended.
Last comment on the subject. There is a difference between "Hey how are you man? Thanks for stopping by, but I am really sorry but we are in the middle of something very important. Could you email me instead" and "Sorry we are having a conversation."
You have to understand in SF it's somewhat common for scammers, homeless people, or very aggressive Israeli sales people to butt into conversation and try to talk to you on the street. It's very likely he has been conditioned to this or thought you were one of the above.
I'm guessing it is in reference to the folks who work at the booths found in the hallways of shopping malls. AFAIK, those who own those stands prefer to hire good looking young people with a lot of hustle. A lot of Israelis taking a gap year after the army coincidentally fall in that bucket
Probably referring to people who are vendors typically in shopping malls and other busy areas since there can be more Israelis doing that kind of work.
Chris Chen, why do you think Israeli sales people are on par with scammers? That sounds more than a little bit out of line. Why do Israelis bother you so much?
Chris, you need to take a good long look in the mirror and decide if this is who you want to be. I'm also surprised that this forum is not down voting comments which don't seem so on topic.
I didn't even realize they were scammers, but I didn't say they were scammers. I said they were very aggressive, because those Orogold and Adore cosmetic salespeople stand out on the street and aggressively try to make conversation with you and interrupt you.
The common thread with all those people I mentioned were that they were aggressive and they would try to interrupt you.
You found 2 links and you've concluded that Israeli sales people are scammers. The first article starts by refer to an Israeli as a Gypsy thief. You should be ashamed to link to an ugly statement like that about the Romani and the articles don't get much better.
I don't see anything in your two links about Israelis interrupting conversations. In both links they are giving away free products and not interrupting people. I'm guessing you took a free sample and then bought something. I'm not a fan of the entire beauty care industry and won't defend such companies. Perhaps you should consider a healthier lifestyle if you want your skin to look better, or better yet, don't worry about your skin, instead worry about what's in your heart.
A quick peek and I can see that people have contacted the BBB about your company. My customers (yes, I'm a salesperson) can always call me up and I proactively make sure they are happy so they don't have to. Maybe you should contact your customers after they receive your product and make sure they are happy. Forcing your InstaPainting.com customers to go to the BBB to get a response out of you is not ideal. I don't think you are a scammer though. That'd a very unfair conclusion, don't you think?
I wont get into it too much, but I owe alot to Naval for where I am today. The help, advice and just conversations he gives to entrepreneurs is completely 'no bullshit, no fluff'. All in all, its very refreshing to see that AngelList has risen to the top and has helped disrupt the 'old boys / sand hill road' way of doing things.