What's up, everyone? This is Anthony papiano. Most of you know me as pomp. You're listening to the podcast. Simply the best podcast out there. Let's kick this thing off a block Coley is the CEO at AngelList Venture. This includes the syndicates funds and capital products. He previously built and sold to companies including an exit 2 square pre-ipo in this conversation. We discuss the Angels Ventures platform how to lines incentives for
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Follow a particular strategy, but only as an expression of his opinion this podcast is for informational purposes only. All right guys bang bang. I have a very awesome guest today who is one of the people behind I think was probably one of the most exciting products right now definitely Adventure, but probably in finance more generally. So thanks so much for doing this sir
excited to be
here. Absolutely. Let's just go through your background real quick for those that don't know you before you got to Angel list.
In the Venture business, they're kind of where'd you grow up and what you do that for AngelList?
Yeah, so I'll do a really quick summary. So born in the Middle East Center to to immigrants. I really grew up in the Middle East India and then Canada, we sort of moved around to a certain world events like the Gulf War and things like that that cause us to move around and move to San Francisco in 2008. So it was right in the financial crisis. I still distinctly remember the Sequoia memo
I didn't quite know I didn't really quite feel it then because I hadn't really participated in the internet economy yet, but I still distinctly remember that moment and then through the years I first worked as a software engineer for several different companies. One of them is now the world's largest doctors Network and other one was acquired by StubHub, and then I really got caught the bug and started working on a few companies. So in total I've started three companies sold to them one of the most
The square where I was a director there for two and a half years was with them through the IPO. And then the second one. I described up the acquisition of it in January of 2019 around that time. I decided to take a step back. I've been operating pretty aggressively for a decade and that started Angel Investing around that time Nepal. We'd been an investor in my previous companies approach me to consider stepping in into a CEO role in AngelList specifically the venture
- you know at the time I didn't really have too much context on Venture. I was an angel investor and of course of the founder, I'd raise Capital so I spent the next six months really doing a deep dive with Nepal and Venture and also what angels have built in the Venture business because for a while for at least majority of the world, it wasn't very clear that India has had a large and sizable Adventure platformer. And yeah the more I dug into it and the more excited I got and I guess
We accepted the role mid July last year. So I've been in the role for about a year. You're a month. Now.
It's awesome you have now work at or worked at two of the most exciting companies that think in finance and fintech. Let's start with square first, you're there for two and a half years went through the IPO as you described kind of what were your takeaways from from working at that
business. Yeah. It's a great question. I would say two primary takeaways one is financial.
Services are basically an unbundling Andre bundling of services. And the second one is reducing friction as much as much as possible for your core customer is super important. You can actually build a sizable business, but just focusing on that one thing and so we actually take a look what squared did and you think about, you know, you download an app and you get to accept payments within seconds a decade ago. That was Unthinkable right the
Is a decade ago was you have to call someone talk to someone fill out these paper forms just to get the ability to accept payments on them. By the way, you're going to pay an arm and a leg for that square came in and said, nope. This should be as simple as tapping the button and you get you actually get an account to start accepting payments and from that they had a giant multibillion-dollar business line that came out of it in a brand that people love and you did the exact same thing again with Kasha right you are
Use the friction so you can literally that cop a button and now you get a bank account and then you get all of these other things along with it. So that was the other key takeaway for me.
Yeah, and as you were kind of there one of the things that really seems to stick out today is this focus on deposits, right? And once you get the deposit, you can kind of build all the services around it. I think kind of comparing that to AngelList they're specially deposits, but there's a similar mechanism of once you
You get the marketplace setup, you can build all of these services around it. So we talk a little bit just about how the experience at Square either help to prepared you for what you're doing now at AngelList.
Yeah, it's a really good question. So the framing that has helped me a lot and what's comparable between square and AngelList Venture is once you're in the flow, so as you're building out a Marketplace or a platform once you're in the flow of a transaction
You are in a position to own everything Downstream about transaction Oh, you's a real example Square started off with just accepting payments and you know is interesting for the longest time and I was there when this was happening for the longest time. There was this feeling that squares margins are just going to get compressed because you know, just accepting payments means it's low margin and you going to compress because you get larger clients, they're going to negotiate their fees, etc, etc.
Sir, what that was missing though was the fact that square was in a position where they were accepting payments, which means today those payments go to a bank account that the merchant or their customer may have somewhere else. But because they're in the flow of the payments you can almost think of it as a router sure today. It goes to the Merchants Bank account. But what if tomorrow Square builds a better product and says, why don't you just keep it here and it's easy and the underlying principle there. It's the
At least resistance right customers will always choose a path of least resistance when there is a ton of value also attached to it so that I carry that with me to this day would Angeles Venture where the thing that struck me when I was originally looking at it was it's just massive platform tons of LPS all over the world tons of fund managers using it tons of startups indirectly getting funded of course because although all these fund managers and we're really in the flow of all of that Financial.
Petit and you essentially only everything Downstream event, right? So it's just a function of time and it's a function of a tree bundling process where you can own everything Downstream.
So that's a great way to I think look at it. How do you choose where you insert yourself in the transaction initially, right? So obviously the the kind of farther Downstream you start the less that there is the capture of value over time unless you're somehow able to kind of move up screen. But if you pick the right spot, then there's you know a good place where you can provide value do it cost effectively and then everything Downstream is kind of your addressable Market if you will from a product standpoint, how do you think about picking that spot to actually enter in?
In that transaction.
Yeah, it's a great question. You always start with the customer first, right? Where is the point of highest friction and you look at that and you ask the question or you uniquely suited to remove that friction. And when we think about friction friction is basically a number of steps that someone has to go through and if you can go from 10 steps to get something done to 5 Steps to get something done. That's Innovation, right? That actually is really some pressure.
It's hard. That's what Innovation is. You're essentially removing some that used to take longer and you're making it shorter and more pleasant. And so really you start with a customer first you ask yourself. Is this the point most friction for them? And then you simply asking you remove the number of steps in order to get there and the the really interesting part is when you remove the number of steps what you're inherently doing is you're taking that complexity from the customer in your taking it on as the business, right? And there's this really
Ali good concept of by Jim McKelvey who's one of the founders of square called The Innovation sake after wrote a whole book on it. And I thought it was fascinating and The Innovation cycle basically gets to the heart of this which is as you read as a reducing correction for your customers you as a company take on the complexity, but then what happens is you build a moat because you build an innovation stack to actually create that frictionless experience. So always starts with the customer first, then you ask. Can you remove the number of steps? What would that look like?
And then you add the Strategic element around it, which is where in the process is that right? Like if it's earlier in the process, then you get to own everything Downstream of it. So it really is a framework that that II really think about as I look at that
tell us a little bit more about angel adventure and kind of what you guys are building just from a theoretical standpoint or gonna. How do you think of maybe your mission as a business year?
Yeah. So AngelList
really started with a simple premise. It was sort of the founder. It is in its ethos. Oh, it's just like it's weeds right heard. It's great. You know if I just go back a decade actually remember my first office space that I actually got for my first startup was because of a post that Nepal in Navy Road hunt on I think was better hacks of the blog, right? So it's just it's always been ethos of the founder. And so that has carried, you know, we carry with us to this day and our mission really is to
Increase the number of starts in the world number of successful startups and world. We want to enable the founder and really there's three pillars for Angel Adventure one is increased number of investors and VC's in the ecosystem, right you had more you have more Capital more capital is available more Founders can get funded. The second pillar for us is to increase the capital for these VCS. So, we actually we have a huge Capital raising side of the business its massive forty percent of the capital flowing through Angeles venture today or all Angel is source.
Help he's right there the LPS that we brought by the way, it's all software. It's all its platform software All Digital. It's beautiful. And then the third pillar for us is to make it really easy for startups to get founded and funded. We are excited to share something on that third one pretty soon. It's just a, you know, going back to the rebounding process. We are Angeles Venture is already at scale and we're in the process of re bundling across the ecosystem and really the way to think about the
Tire business is that we are a financial platform for the Venture industry and we're effectively looking at who are all the players in the industry and how can we build something that stitches everything together so that the ultimately the founder has an easier time building their company.
And so when you think through that today, maybe walk us through kind of the the journey that a Founder has with the product in terms of what's the most popular kind of entry point for them or first touch point. And then how does that evolve as they kind of scale their business and look for more Capital over time?
Yeah to clarify the journey on Angeles venture or the journey. Generally that our founder goes through
on AngelList.
Yeah. So for on AngelList venture today the Journey of a
Founder is really one of those are raising their proceed or seed which is the first round of financing. They're usually talking to a VC an investor. That's actually holding the hosting their fund on AngelList Venture. So the interaction that they have with our platform is one of once the capital has been invested they're engaging with our platform to be able to get the capital and then as the founder continues to raise additional rounds of capital the early
Our investors actually use the platform to be able to continue to invest in these Founders. So there's this journey that actually last a decade sometimes. I mean, we have some companies that started, you know that raise Capital Kuai investor on the platform six years ago that today as a become larger than public were still involved. There. We are as we look forward. We're actually building out products that are going to include the founder as a core part of the journey, so we are actually in a
Very unique position to be able to build out a lot of very impactful tools to make it easier for Founders to not just manage their fundraising but then also really think about other forms of financing right? Like if we take a step back Equity financing is just one type of financing and Equity financing is really great for Innovation, right? It's great for hey, we have you know, this product line that we're thinking about. We don't quite know where it's going to go great. We want to talk.
Or Capital towards that right that's Equity financing is amazing for that. But it just one type of financing once you have a repeatable process, whether that's to grow the you know, without security marketing funnel or it's to be already have Capital coming in from your customers, but you just need additional cash flow. There are other types of financing that are easier. It's just harder to get to Tibet for Founder's so we actually view ourselves as if as as a
To bundle all of these types of financing it is give them as options to Founders over time. So that's how we think about how the platform itself is going to grow. Its you know, Equity financing is just one type but there are many others that companies can use to grow and we're actually seeing this now like I think startups are and Founders are starting to wake up to it right there all these different different types of financing models. Now they're coming about I think that's a very net positive for the
ecosystem. And so you have a marketplace where you've got
A relationship with the founders and as your estate AngelList is there to serve the founder but yeah relationship with the capital side of that Marketplace and these LPS for the most part, you know from using AngelList and kind of seeing it. It's very very software-driven but there still is if you're going to go and get somebody to put a really big check in or come out of the platform with some sort of commitment in size. There's still some kind of communication there and relationship talk a little bit about how
See that relationship between Angeles Venture and the capital base.
Yeah. So the capital base. We like to call the they're all PCS limited partners. These are people who invest into Venture funds and Venture funds are the folks who invest in confounders and startups. So that's how the Journey works. Now the capital base itself in our relationship with them is a is actually a very useful relationship in that
they come to us and they love Angeles Venture because they get to see all of the best fund managers in the world. Right? Like there's just nowhere else in the world. You can go to see all of them at once and now we're rolling funds because they're publicly marketable SAS like funds they can see all of them at all times and really get access to the best potential deal flow in the world. And at this point we're seeing, you know, we publicly stated this a 20-19 that we're seeing 36% of all
Here deal flow. We are much larger than that today covid actually interestingly accelerator entire business because of one simple fact LPS used to want to meet in person. And this is by the Visas were the same and help. These are the same like if you're going to meet if you're going to invest a large amount into someone you don't want to meet them right? It's really a trust thing and you're gonna want to look them in the eye and build a trust that great. Am I going to invest this large amount for the and have built a relationship with this person for the next few years?
Here's what happened through covid was that all of that just went out the door?
Almost overnight everyone sitting at home and everyone is you know that there's still have to make the Investments. They still have to engage with the Retro funds and overnight what we found was the idea that you had to meet someone in person to make an investment basically just went out the door all of a sudden people are making commitments through zoom and we're seeing this in math across the entire industry. Actually the Venture industry right now is
It's is so active. It's actually never been this active before we're seeing this in our data. We are we are growing on almost every metric and you know, I thought about like why and one of the reasons I think actually is this is that people are now comfortable investing just threw a zoom call and what that did for our business itself and how LP's now and it would be Venture funds that we have on the platform is they'll engage they'll join the zoom webinar. I you know saw Hill of course did one of those
They'll get their questions answered the boat across and then boom one best. So we are seeing covid accelerate that entire behavior on the
platform.
Got it. And what metrics can you share or you guys have shared publicly in terms of just how big right how many funds how many types of deals have been done through the platform so far?
Yeah. So we've done almost 5,000 syndicates and funds so we're hosting all of these funds one and a half billion dollars in deployed for the platform and we're well north of 2 billion in assets under management right now. We have 47 unicorns.
Portfolio that number is going up. It's gonna be pretty quickly. And yeah, and then rolling finds itself is actually crushing all those numbers very very quickly. So yeah, it's very exciting.
And so today we look at it from the product Suite if you will the AngelList Syndicate has been a product that's been around for a long time. Maybe talk a little bit about what exactly that is, and then we'll get to Rolling funds in a second, but I
Think The Syndicate was kind of like the initial product that people said, oh wait, there's something more here than just like a startup directory.
Yeah, exactly. Yeah. I can provide a little bit of context there.
The Syndicate Project, so the way Venture funds usually work is that you you have a GP who's a general partner in the fund? They go raise Venture fund meaning they go raise money from bunch of people then they start making Investments or use invest in 20 companies 30 companies in the fund.
And then the way, you know, five ten years until the liquid events and then they'll just be pointing to the whole piece in 2013 AngelList launched syndicates and what syndicates were effectively single investment funds being rather than raising a venture fund to go invest in 20 or 30 companies. You raised a single investment fund to invest in one company and for the first time
That actually reduce the friction kind of going back to our theme again over be some friction reduce the friction for who can participate as an investor in the Venture industry in the tech economy. And when that launched that that just started growing very very quickly because for the first time you could actually you can have an allocation in a company as an investor and then say hey, I'm investing $100,000 in this company who else wants to join me, but look the
Founder is it going to have time to meet all of you? But hey, why don't you just join my Syndicate and then I'll invest in the company as one lump sum. And so that is the concept of a of a Syndicate. It's a single investment from
and as this got launched obviously one introduced a bunch of friction, but also what it did that was very interesting to me. Was it now gave a subset of the population access to Capital to monitor?
Eyes their access or their relationships, right? And so maybe talk a little bit about the impact. You guys saw not only on allowing the capital base to now get access to these deals, but actually the new capital allocator at people who previously didn't have a fund and kind of the dedicated traditional sense and also weren't independently wealthy writing these large Angel checks and how has that product kind of opened up that opportunity for really thousands of people.
Yeah, so
So the way it ended up opening up the opportunity is that you didn't have to go down the the previously well-trodden path of how you become a venture investor before syndicates. And really if you just kind of go back like a decade the path to becoming a venture investor usually was you either sell a company. You start your own foot luck large fund, right? So you need very large LP or you operate for a long time at a company and then you join a venture fund.
And really there was a hazing ritual of you join a venture fund and then maybe eventually make it to partner and then from there now you're investing in startups, right? So is this like long, you know, multi-year sometimes dense sometimes decade Journey that then eventually be in a position where you're writing checks because most people in adventure fun don't write checks, right? It's only the GPS people who actually have check-writing authority that can actually invest in companies. So with syndicates what ended up happening was for the first time people could choose their own path.
All right, they could say you know what? I don't want to get on that path or hey, I still have a company or hey, I'm still you know, I founded a company or operating a company but I have access right my friends are starting these companies. I know there were great and I have access to these companies. Hey great who else wants to join me to investing and what we found over the years. What was that? We new Venture fund managers people who became great. BC's came out of this I could literally rhyme off a ton right now, you know folks who started with
Indicates the ended up building a Croc record pretty quickly and then off based on the track record. They ended up raising larger and larger slug Capital to the point where the reason leading series a leading Series be bills. And so we saw that become the Journey of some of these early fund managers people who had access but didn't have the means before because Ken didn't want to go through the path of the Hazen virtual begun become Adventure, you know to
Become a VC over time. They were just able to start a Syndicate build a track record and then continuing to evolve on their Journey
so that when incredible for you guys from the outside looking in and lots of people used it companies found it valuable kind of the capital allocator the new VC found it valuable and then Capital Partners found it valuable at what point did you say wait? Maybe we should actually kind of innovate on this model and go after the rolling funds product.
Yeah, so after send Achatz there was actually another moment where we've launched traditional funds that's a traditional Venture fund. But the real Innovation there was actually the Innovation to make a venture fund as small as possible. So usually Venture funds when you start a venture fund there are all of these legal costs back off. This cost accounting cost is everything that need that's needed to run a venture fund. It used to be very expensive.
Little used to be a hundred thousand dollars a year two hundred thousand dollars a year just to start a fun. And by the way, that's charged across ten years. So you actually got a million dollars at least to get get a fund off the ground which means your target size will find end up being very large and as soon as it's that large you like you have to have relationships, right? So in a way it kind of restricts access to the industry because of that so the Innovation going from syndicates a traditional fund was how do we compress the cost of what it takes to run a fine?
So Angel has managed to we managed to compress the cost by an order of magnitude. And again, it did the same have the same impact. It was like great you're able to now bring in a lot more folks into the industry because that's what you don't need to go raise up $50,000,000 fun just to get started. You can actually raise $1,000,000 fun. Right? And so we found that to be very powerful and effectively it kind of took the person on the journey, right you stop with syndicates you build a track record a reputation and then you
Balls and you go into a traditional fund and so we kept you know, we actually stayed with them along that journey and then with the crystal fund that would start one deploy the capital and go raise the next one, but number 2 3 Etc. So that was the second Innovation that AngelList that Angeles ventured that and this was in 2016. And so from there, you know, we've Now supported hundreds and hundreds of these traditional bonds, right? So we have over time. We actually built a ton of infrastructure.
All the way from banking infrastructure to accounting infrastructure. It's just all of the software accreditation checks everything and from there. We still noticed kind of going back again the theme of how do you reduce friction? Right? How do you remove this step? We still notice that the biggest friction point for anyone raising capital is the process of raising Capital. It's that when you go to raise a venture fund the way the traditional Venture fund the way it works is you
Basically set aside 6 months 12 months 18 months sometimes to just go raise the capital and then you're just heads down raising Capital taking all of these meetings all warm intros. You can't talk about it publicly because it's illegal to talk about it publicly. And then once you raise the capital you lock down the fund and then you can't raise Capital again into it for the next two three four years and we found that the there was still a friction point on the fundraising side. Meaning you still have to put in a ton of your time kind of your energy.
She and one for people who don't have the access meaning they don't have the network of LPS to talk to or to people who have access but like you're just too busy. Right? Like if you're running a company like you're not going to go through six months 12 and process just to go raise capital. And so what we noticed was, you know, we actually just looked at the core of that whole thing and went why is a structure this way but like why do
Raise capital and then lock down the fun because it doesn't actually make sense. Your your best time to raise capital is when one of your Investments has a markup and there's so much excitement around it. Right? And so we just were sitting there and it actually came through the jam session the ball and the ball is great at that stuff. By the way. He's probably one of the best strategic strategic thinkers out of I've met in which is jamming on this and he's like, yeah, you know
I've had this idea in the past like and question like why why are why is this traditional fun structure this way? What can't you just keep raising capital? And so we kept thinking about it and we're like, you know, it's interesting the traditional Venture fund structure was built in a world where the Assumption was that people would be doing all of the legal back Office Accounting work, right? It was built in a world before software.
Rolling funds are a venture fund structure built in a world post software. So our view is that ruling funds are actually a superior structure to a traditional Venture fund meaning if the software existed when the Venture fund structure is ruining built. It would be a rolling fraud and a rolling fund. If you want you can actually apply constraints and build a traditional find out of it. Right? So it actually is just a structure that is it's a venture fund structure that's built through software that essentially has many more features.
Hers and you can choose a features and mix-and-match mix-and-match the features, however you want but it really at its core. It's just a venture fund built crew software and because of that you don't need all these constraints of oh, you need to go lock the fund down and then go, you know and then go deploy and then raised again go to this big bang fundraising you can just always keep it open for Capital. So that was the real breakthrough moment for us and and you know from there we
Because we had all this infrastructure that we built up over time. We were able to go from idea to initial launch very quickly and some of the early data that we saw was was very very promising for us. And yeah, we just haven't looked back since we've just been more than thrilled by but how but not just emerging managers loving the product but also establish manager we're seeing people coming from the VC industry. Like wow, this is great. I don't need to go through the
18 months fundraising process I can just set this thing up. So yeah, it's been great,
maybe talk about an example or two in terms of somebody who set one of these up when you say, you know, successful. What does that look like in terms of capital committed and kind of how that plays out just so people can kind of tangibly understand what some of these examples
are. Yeah for sure. So when a traditional fundraisers Capital, they're usually raising Capital to
Over two to four years. So if you're going to raise ten million dollars, you're going to be deploying that Capital over the four years. And so when we think about the rolling funds and the capital that that a better VC is Raising in the rolling fun. We think about it in terms of subscriptions, right? It's every you know, every quarter this flow of capital is just coming in and it's just increasing over time and it's actually aggressively increase
in overtime and how we look at it and how think about it with a rolling fund is how much in yearly flow do you have right ultimately when you think about deploying into companies and startups you think about on a yearly basis how much Capital they have to deploy into startups and that way you can essentially manage how you know what your check size is how many companies you need to invest in and all of that and so success and what we're seeing in our data, is that the
Capital that these rolling fund managers are raising our increasing its increasing every quarter right? I know that there was some chatter around well these LPS are not going to be as stable as a traditional fund, right it turns out there, you know while some of them may drop it the the fact that you can always accept New Capital means that some of the LPS will actually increase their Trek size and we're seeing this because what's happening is LPS are seeing the deal flow and they're like, oh wow you're making great in
Vestments great. I want to increase increase my check size. So we actually saw this through covid right post post stock market crash when everyone is playing that was probably the biggest test for us with the rolling find it's like who because we're hearing in the industry like institution of LPS are delaying or even backing out of some of their commitments. I know several funds where this happened.
And but with the rolling find were like, okay, let's just let's see what happens here. It turned out that the lp commitments increased during this because again, it was a lot more flexible. Right people are they don't feel like they're getting locked in for two to four years. Now a lot of the commitments that do come in our for a longer-term again rolling fund is a structure you can set it up. However you want and so I saw Hill for example has his fund set up to get a minimum of one year.
Commit mail piece, right? So you actually have the ability to get this cash flow or the investment for a longer time period and so we have it set up that way where you can do just quarterly or a longer time period and because of that you end up getting a larger base of LPS that engage with them and so as we you know as we think about success we will look at what is the largest fund equivalent fund that we have on a rolling plant structure and today. It's a hundred million dollar fund on a rolling Constructor.
And by the way, it is still growing and it was raised in a fraction of the time because what's happening is your daily activities as a fund managers as a VC is doing your fundraising for you right? Whenever you send out the lp updates every quarter you can actually accept more capital and the other great thing is because these are all publicly marketable funds. It's actually a sec rule called 506 C.
Angels was actually involved in writing this in the jobs act in 2013 because these are publicly marketable. You can also just every quarter talk to your old peas share the update but you can also share it with other folks. You can do a webinar and you can accept capital income. So we're seeing that like those characteristics are having this compounding impact on the amount of capital that rolling fun GPS are managing to raise and it's interesting because the
Saahil is he's probably said this I'm not saying anything that's confidential. It's all I'd started with a hundred K Target a hundred K per quarter. He crushed that in if I remember correctly was literally three weeks or four weeks absolutely crushed it any questions next area again and he still crushing it. It it is because it's so flexible that LPS LPS now are able to engage with it. However, they want they want to commit for a longer time frame great. They can they want
to just commit for a quarter. That's fine. They can they want to just wait and see and maybe come in the next quarter totally good because the funds not going to lock down this not closed down and the other interesting thing is this is their only fun eating your because we rolling fun is the last one You'll Ever Raised, you know, you're getting access to all of their deal flow, right? So if I want to if I want confidence that I'm you know, I'm going to get access all of cells deal flow. I'll just invest in the role in front and I'll just keep investing in it.
Um, and so those are all the characteristics why we're seeing such, you know, very very strong success with it across the industry.
What's it what's interesting is I think it's a lot of products that would serve one side of this marketplace, right? So you can make it better for Founders. You can make it better for investors and there's a lot of value that can create it in captured by doing that the rolling fun seems to actually be one of those rare cases where you get kind of a win-win-win alignment of an improvement for the founders right because
Has more capital in the marketplace. There are people who can make decisions much faster, you get the investor themselves now can raise Capital much easier right focus on investing be a better investor and then on the lp side now, I've got kind of more choice and also more flexibility in terms of our relationship. And so when you get that rare situation where you kind of get, you know wins that align these incentives they tend to be really really big products or anything. That's what kind of what you're alluding to here is you're already seeing in the data like hey, this has a massive.
Stressful marketing is can go after because you're really just making the entire stack much more efficient and more valuable for people.
Yeah, that's exactly it's it. This product ends up being a better product for everyone involved. Right? And that is why we think it's actually striking a chord so deeply it net is just very positive because usually most Financial products, especially if it's a platform. There's always someone losing a little bit right and and it's sort of like a trade-off and I'm like
All right. Well, okay fine and you find that those products to really I mean they'll grow but then because you know as it grows, there's an anchor of like up the incentives aren't quite aligned and you know, this product is one where as it's growing because all the incentives are aligned. We're now seeing everyone talked about it. So yeah, this is so exciting. This is great for us. It's so exciting is great for us and that is you know, very important in building an enduring financial company and during Financial platform and
You know what matters most is customers love it and we are you know, we're again going back to our mission will helping increase in numbers increase the number of stars in the world today, you hit the nail on the head like the incentives are aligned across all all actors
from an advantage standpoint. There's a tweet that Navarro had where he responded to somebody and it was basically, you know, and only the weight of almost had to do a single tweet that you know, really highlighted like look, this is a SAS based fun.
Structure whatever when you guys talk about it internally. I don't know if that's a kind of a mantra for you guys that one sentence that he used or if it's just something that you guys have thought through in terms of what those advantages are. How do you describe it to people who are considering rolling fund versus traditional fund?
Yeah. Good question. I will say Nepal is very very good at compressing complex Concepts into into tweet form. So it's always great. It's always great to see that.
As we think about it internally the discussions are definitely there layers to it in terms of what the like how we think about why this is great for different types of managers. One thing that is pretty clear is it is a like it's a clear product. It's a product add value for every single type of manager now in terms of why we see an emerging manager at someone who's just starting to
Maybe I'm fun to is using it for them. What were noticing is they can effectively raise any time. They can start small. They can raise a hundred K and then start making Investments and publicly share them. If assuming of course the founder is the startup has publicly shared it and then raise more capital and Q2 or Q3 Q4 and to keep raise more Capital over time. So we're seeing this resonate with them because they're able to
Get started small and then scale up with it and our pricing structure actually is like we made a very thoughtful decision to make sure that we set up everything in a way that allows for that to happen. So even for the smallest rolling funds we want to make it accessible for everyone. We're not trying to shut anyone out. It's a great come here. If you want to if you want to become a VC, you can come here and get started small and then we'll grow up with you for the establish manager. And the definition here is anyone who's on
Fund two three four or they've worked at a large Venture fund and they have a network the what's resonating. There is the fact that they don't need to go spend 12 to 18 months of their lives every few years on raising and all they need to do is get the fun started today get the capital in start deploying and then I'll just keep growing over time. And so the key piece that's actually resonating with them is never raised another fund. Again. This is your last fun.
You're all set. And by the way, it will do everything their traditional fun does you know like I mentioned earlier ruling fun is a venture fund structure that would have been built in the age of software were in the age of software. So we build it so you can create a conditional found out of it if you want at you know, constraints and parameters, but you don't need to and so we're you know, we're seeing that resonate with the established managers, which was just never worry about raising underfund. Again, this is your last fun. It's Gonna Be Your Grave fun and that's it and for emerging managers, it's the get started very very
I just love the idea that it's so flexible. And so kind of compartmentalize in terms of the different features and parameters so that you can make it identical to a special fund or you can make it something that you deem is more beneficial. Right? And so kind of that that flexibility I think is a key piece everyone's excited. But what are the disadvantages like when you look at it? You say well, obviously you're gaining a lot here. What is the trade-off or what are you losing by using a fun versus a traditional funding?
Yeah, it's a really good question. I it's been number one question. I think about every every day. I would say some of this is actually changing very quickly. It's improving very quickly. The biggest trade off is it is a it's a new structure, right? So if you're an LP it because it's a new structure. It's just new information to take in but what we found is once the lp knows like how it all works very very quick and some of this is changing.
In so quickly even read even as recent as like a few weeks ago where now the community is writing up all these amazing pose. I'm reading some of these and I'm like, this is amazing. I'll actually send some of that collateral over to help ease or even GPS and I would say that is the biggest trade off today is that it is a new structure there, you know, there are additional questions that will come up but you know our solution to that one. It's already happening which is the community now, there's six hits in
The broader ecosystem now people know about it and and every day more and more people are knowing about it. So we think it's actually getting solved pretty quickly. And the other thing that we do to help in that is Will hop on a call with anyone any LP. We're here will provide all the collateral and we're able to share that. So yeah, I would say that if I was to be, you know, if I'm going to be if I was like really pick one, that would be one
and then how do I do the fees work in terms of on a deal basis and then also
A 4/4 kind of the owner or manager of the Rolling fund.
Yeah, so we simplified the fees as much as possible. Right? We really do believe in a simple models. There's not a lot of fine print and ask risks and all of that the fees are basically point one five percent annually of the commitments coming in and what the fund manager the VC will usually charge a 2% management fee.
He annually and a 20% carry now again, the management fee and carry configurable. We do see some folks charge no management fee and a carry or a lower management fee and carry. So it's completely dependent on the GP and what they want to do, but our fees are just a simple point one five percent. So for an LP, all they need to think about is whatever the Deep he's charging to sad point one five percent to it and that's what we're charging. So we've made it very
Very very slim because again, we want to make sure we bring on as many of these GPS as possible simple pricing and we're just going to grow with them
got it and then one of the things that I've heard a lot of investors ask and actually don't know the answer to this is let's say that you've got a rolling fund you make a couple of investments in 2020, they end up being you know, the best investments of 2020, right? And so now all of a sudden in the way that the world is moving by 2021 there now all you need
no corns and corns, but I'm sitting there I'm saying wow, like I would love to invest in this rolling fund. Can I invest and get exposure to basically the deals that you previously have done or do I basically get to bet on the manager and hope that they go find more deals like that?
Yeah. It's the latter and it's the latter because that ends up being a lot.
Fairer to the earlier LPS, right? Because if you if you allow for an LP to invest after investment has been made and the companies are growing that new LP basically has an information advantage that the earlier lt's then have and and then it would be unfair to them in traditional fund. It's actually written into the contract sometimes which is also interesting why get so stressful because in a traditional fun, what happens is you can do something called a first close you get the initial
Lynn so you can start the cloying you continue to Fund Raising and you'll have maybe multiple, you know a couple more closes and then you lock down the fund and what happens is in the documents in a traditional fun. It's usually written in that when you you know, when you reach the specific muscle groups in a day or something, you have to lock down the fun because what they're doing is protecting against the issue that if it later I'll be comes in. They don't want exposure to the earlier LPS Investments, which is how it's structured today.
In a rolling fund the way we do it as soon as an investor comes in and I'll be comes in they don't get exposed to anything before their investment. Only two after what's interesting is that in VC when you have like when you're investing in a fund where someone has a track record and you want exposure their future Investments that's actually still a very very good sign because you have someone now who's built a brand new built a network.
And they're most likely just going to get stronger and stronger over time. Right? So we see this with some of the best Venture funds in the world Sequoia and greeson. It could build sort of strong brand Founders to crack the to it so that that was our thinking in terms of how we designed this product again goes back to you know, what you astutely pointed out earlier, which is our incentives are aligned for all people involved. And so we thought deeply about that particular piece as well.
Yeah, and then rolling funds are obviously growing and it's very obvious at least from my perspective that this is just a better way to do it. How do you see the impact on kind of venture capital more broadly is every early stage manager going to have a rolling fund do kind of the traditional fund structures disappear and Angeles runs the world to know kind of how do you just think about that impact and how the kind of traditional World changes over time?
Yeah, it's a great question.
My view is that the Branded traditional funds or going to be here by they're going to stay and and I think that they will continue to stay right? I just think that's how you know, think about that as a series a branded series a firm Series be seriously onwards what will happen is over the next couple of years because we're basically leading indicator of this. We're seeing all this happen.
We're going to see the solo capitalist concept scale very quickly and the solo capitalist if you really break that down. It's basically one person with a brand that is leveraging their brand to raise Capital to get great deal flow and to use a judgment and invest in great companies. And today all this is possible because Angel Accenture has the tools to make it very very easy.
It you literally top a button you have a role in fun. We'll handle everything for you and they're then able to use our audience right people that are interested in them to go raise capital and fund and then start deploying and what we're going to see is we are going to see a lot more competition coming into the space for precede funds and see finds when they sold capitalist and we will see some portion of them scale. They're fun to start leading series A.
Deals, so there will be more competition that will start coming in across stages. But I do think the Branded firms the ones who built the brand over multiple decades, they will continue to endure because again, they have a track record, but we are going to see more competition and I do think that even at the series a stage we're going to see more more firms company in which by the way I think is huge net positive for for startups because they're you know for the longest time. There was this choke point at series A
Of the number of firms that are their writing series HX. We think this is going to add a lot more people into the series a stage and potentially even Series be over time. So I definitely don't hold of you. It's going to be a you know, this thing eats, you know all Adventure. I do think that there will be a coexistence for sure. And again, we have a very sizable traditional fun business. I don't it is something we're actually sharing more and more but it is very sizable and
We do see we do see that side of it as well. But yeah, I think rolling funds will be from a percentage of number of funds and capital deployed in the startups. It's going to have an impact at precede seat series Aid and seriously, let's all stand by the word be seeing this. We're seeing some really fascinating stuff around very notable influential early stage managers are now Banning together and raising an opportunity for me, right the start participating in some of these layers you all's it is is
being very very quickly across multiple managers. And again the common theme is it's so simple, right? We reduce the friction so that you can raise and you keep raising into the structure and because of that your what's happening is you bringing in all of these new people as well in the industry that just didn't want to go through that long, you know painful fundraising process could maybe running a company or you know, they're already, you know, the they're already making Angel Investments this one.
Clear process for this one. It's so easy. I personally actually rolled my angel investing into a rolling fun because I had I had some friends. I just wanted to get exposure to my investing and I don't have an intention to raise a large rolling fun. But for me personally great, I'll just roll it into it and it's easy. It was just so easy. So I think that we're going to start seeing all sorts of different types of managers coming in. Yeah. I'm very excited to see like how it's all going to unfold. I've been like watching.
Watching SCI Hills even his videos on how he's like posting how he's making Investments. It's just great. I think it's gonna Inspire whole generation of new investors. And yeah, it's fascinating to see you.
I think I think you're onto something for sure. I asked the same two questions everybody before we wrap up first is what's the most important book that you've ever
read?
Loon shocks. It's it's especially important out moonshots. The thesis of the book is that as you building a large organization you want to have the team that is constantly tinkering with new products and the team that scaling they have to coexist. It's hard to co-exist its actually brutal to co-exist. But if they don't coexist then you'll either have a company that can't scale or you have a company that can't innovate.
But as a tech company your job is to innovate. It's to release new products in the world. So I just love that book that gave me a framework that I've carried with me for actually pretty much my entire career. Yeah, that's a great one.
The next one is a little bit more fun. And then you'll get to ask me one question to finish up which is aliens believer or
non-believer. I'm a Believer. I am a believer. I just don't think that they reached Earth yet, but I just I can't see a world where
We're a unique special Snowflake and there's no one else in the world. I just don't see it. So I'm a Believer but I'm also a huge sci-fi Geeks. Yeah,
I don't know you gotta the UFOs. You got all these people who think they're here. So we will end up figuring that out. You could ask me one question to finish up what I look like right. Now.
When are you starting your rolling
fund? I was worried that I was going to be your question. We'll
talk what we'll get it set up in 48 hours. So
We're going
to talk. All right, let's do it. Absolutely. No. Listen, I appreciate you taking the time to do this. I think that you know, obviously you guys are at the bleeding edge of innovation here and any time that you can kind of have a big breakthrough, I think just in the structure and again align those incentives. This is a no-brainer for a lot of people. So where can we send people to find you on the internet or find out more
about AngelList and Angeles features? Yeah, so follow me you can go to twitter.com
Cam a block AVL. Okay, and to find out more about AngelList Venture, you can go to Angel dotco / Venture.
Awesome. Well, listen, this was this was a lot of fun, please, please. Please keep doing what you guys are doing go faster if it for the end for working on it. Yeah. I'm I'm really impressed. And obviously I think that the impact here is not yet quite understood to be fun to watch over time. But what they do in the future
definitely sounds great. Thanks for having me.
Take care.
