20VC Gil Penchina on Building The World's Largest AngelList Syndicate with Flight.vc

In this episode, host Harry Stebbings announces his collaboration with Jason Lemkin and the SaaStr team to produce the official SaaStr podcast, while also featuring angel investing platform AngelList and its successful users. He welcomes Gil Penchina, founder of Flight VC, a network of AngelList syndicates, and a prolific angel investor with a record-breaking syndicate raise. Gil shares insights into his journey from eBay to angel investing, the rationale behind his syndicate approach, and the unique community-driven investment model of Flight VC. They discuss the changing landscape of venture capital, emphasizing the efficiency and entrepreneurial focus of AngelList. Gil also touches on the future of Flight VC and the potential of platforms like AngelList to transform startup funding. The conversation includes a nod to Wonder Capital's support of the episode and Gil's nomination for Angel Investor of the Year at the Crunchies.

• Harry announces his visit to San Francisco after 19 years.
• He invites listeners in San Francisco to meet up for a mojito.
• Harry is in town to work with Jason Lempkin and the SaaStr team on the official SaaStr podcast.
• The podcast aims to be a comprehensive source for the world of SaaS, featuring founders, operators, VCs, and angels.

"So many exciting things to kick off with today. Firstly, after 19 years I have finally made the trip to San Francisco and I am in town now as we speak."

The quote announces Harry's visit to San Francisco and his presence there at the time of speaking.

"I'll be working with Jason Lempkin, the Godfather of SAS and the Amazing Sasta team to produce the official Sasta podcast, bringing you the latest and greatest from the world of SAS."

Harry explains his reason for being in San Francisco: to collaborate on the production of the official SaaStr podcast.

• Gil Pencina is the founder of Flight VC, a network of AngelList syndicates.
• He is known for the largest raise for an AngelList syndicate.
• Gil's investment portfolio includes well-known companies like PayPal, LinkedIn, and AngelList.
• Gil is nominated for Angel Investor of the Year at the Crunchies by TechCrunch.

"Therefore, who better to join me today than by welcoming the incredible Gil Pencina, founder at Flight VC, a network of angel list syndicates that covers a wide range of sectors from SaaS to security, from Israel to England."

Harry introduces Gil Pencina and highlights his extensive involvement with AngelList syndicates and investments.

"And some of Gil's investments include some pretty well known companies that you might have heard of, including PayPal, LinkedIn, angel lists themselves, Indiegogo, and many, many more."

The quote lists some of the notable companies in which Gil has invested, underscoring his successful track record as an investor.

• Wonder Capital is a sponsor of the 20 Minute VC podcast.
• It is an online investment platform focused on solar energy projects.
• Investors can earn up to 11% annually and contribute to environmental sustainability.
• Wonder Capital charges no fees for investing and offers a free account setup.

"This episode of the 20 minutes. VC is supported by Wonder Capital, the leading online investment platform that allows individuals to invest in large scale solar projects by allowing you to earn up to 11% annually while diversifying your portfolio, curbing pollution, and combating global climate change."

Harry discusses the episode's sponsorship by Wonder Capital, emphasizing their investment opportunities in solar projects and environmental benefits.

• Gil Pencina is a Silicon Valley engineer with a history of starting companies.
• He was an early employee at eBay and witnessed its growth from 100 to 15,000 people.
• He later ran Wikia, a spinoff of Wikipedia, and helped start Fastly.
• Throughout his career, he has been an active angel investor.

"I'm sort of a classic Silicon Valley guy. I'm an engineer who's always been tinkering and starting companies, and then was one of the early folks at eBay, where I learned how to sell Beanie babies on the Internet."

Gil provides a brief overview of his background, highlighting his engineering roots and experience at eBay.

"Left Wikia and worked with a friend of mine to help start fastly. And then in my spare, you know, through all of this, I've been angel investor, basically as a way to connect to young people who are trying to do interesting things."

Gil outlines his post-eBay ventures, including his involvement with Wikia and Fastly, and his ongoing angel investing activities.

• Gil has a successful track record in angel investing with five times cash on cash performance.
• He chose angel syndicates over starting his own VC fund due to his entrepreneurial approach.
• AngelList provides a community-oriented platform for funding entrepreneurs.

"I mused on venture a couple of times. Basically, I think I approach the world too much as an entrepreneur and not enough as an investor, to be perfectly honest with you."

Gil explains his preference for angel syndicates over venture capital, citing his entrepreneurial mindset.

"Angelist is this great sort of happy medium where you're working with entrepreneurs, my fellow investors, the backers of our syndicate, to fund small checks, 100 grand to a couple of million dollars to other entrepreneurs."

Gil describes AngelList as a platform that aligns with his investment style, focusing on community and support for entrepreneurs.

• Flight VC is the umbrella name for Gil's 25 syndicates.
• The syndicates cover various sectors, including SaaS, fintech, IoT, and are international.
• The multi syndicate model allows for specialization in different industries and regions.

"So we basically had to come up with a name for what we do. And so flight is just an umbrella name for the now 25 syndicates we run, ranging from the SaaS syndicate to the fintech syndicate, to the IoT syndicate."

Gil discusses the creation of Flight VC as a collective name for his numerous syndicates, which span a range of sectors.

"We then branched out and launched syndicates in the UK and Germany and Israel and Canada, and we just sort of needed a name to call all of these things."

This quote explains the international expansion of Gil's syndicates and the need for a unifying brand name.

• Gil Pencina draws parallels between AngelList's approach to syndicates and the mutual fund industry.
• He highlights the importance of offering consumers a choice, as seen in companies like Fidelity and Vanguard.
• Different consumers have different investment preferences, which is why AngelList provides various syndicate options.

"If you look at a fidelity or vanguard investment company, they don't just have one fund like the S and P 500 fund. They believe consumers should have choice, and that different consumers have different theories about what's going to do well."

The quote explains the rationale behind offering a range of investment options on AngelList, similar to the variety found in the mutual fund industry. It emphasizes the belief that consumers deserve to choose investments that align with their individual theories and preferences.

• Gil Pencina describes the typical investors in AngelList syndicates.
• Approximately 30% are entrepreneurs or executives at early-stage companies.
• Another 30-40% work in technology at larger companies.
• The remaining investors include professionals like doctors and dentists who are interested in business and often have ownership stakes in companies.

"I think the only thing they seem to have in common is an interest in business, and in many cases, someone who owns their own business or is an equity owner in a business. So ownership seems to be a common theme."

This quote provides insight into the commonalities among investors in AngelList syndicates, highlighting their shared interest in business and ownership.

• Gil Pencina discusses the process of attracting investors to AngelList syndicates.
• He believes they do not convince people to invest; rather, they offer exciting startups with potential for co-investment.
• Information is shared so investors understand the decisions being made.
• There is a limitation of 99 people per investment, with about 3000 backers across the portfolio, leading to high demand and exclusivity.

"We invest in startups that we think are very exciting and that have a lot of potential and either have great teams, great traction, or very disruptive ideas."

The quote summarizes the criteria for AngelList's investment choices, which are startups with potential, strong teams, significant traction, or disruptive ideas. This is part of the appeal to potential investors.

• Gil Pencina likens the challenges of running Flight to those faced by startup founders.
• Starting from nothing, building infrastructure, and gaining momentum are the hardest parts.
• Engaging in active work and generating excitement is key to attracting people and growing the company.

"Turning nothing into something is always the hard part. You're starting from ground zero. You have no infrastructure, you have no office. Every person you convince to join you is doubling your staff."

This quote encapsulates the initial challenges faced when starting a company like Flight, emphasizing the difficulty of building from the ground up and the importance of each new team member.

• Flight's workforce includes syndicate managers, volunteers, and backers.
• There are about 25 syndicate managers and around 100 volunteers divided into analysts and scouts.
• Scouts are incentivized with a share of the carry for deals they help bring in and manage.
• The 3000 backers are also encouraged to assist the companies through tasks distributed via a software called Angel Mob.

"So there's 25 partners, there's 100 associates and scouts, and then there's 3000 backers. And we actually ask the backers to do work to help our companies as well."

This quote describes the structure of Flight's workforce and the collaborative effort involving partners, associates, scouts, and backers to support the companies.

• Angel Mob is a software that leverages the AngelList community to support startups.
• It is used to facilitate introductions, recruitment, and social media promotion.
• The involvement of professionals from top companies adds significant value when persuading startups to choose AngelList over traditional VCs.

"The idea that everyone from vps of engineering at Google to guys who work at Goldman are going to get messages when you need help with an introduction or help recruiting or help getting your message out on social media."

This quote highlights the value proposition of Angel Mob, showing how it connects startups with a wide network of professionals who can provide assistance with various tasks.

• The Beta Z community is involved in providing help, even if they are not part of a deal.
• Assistance from the community can accumulate significantly due to the large number of members.

"minute or two helping someone, and 3000 beta Z people can add up to a lot of help."

This quote highlights the collective power of the Beta Z community, where even small individual contributions can lead to substantial overall assistance.

• Pro rata rights are generally insisted upon by investors to maintain their percentage ownership during follow-on investments.
• Flexibility is maintained as every deal can have unique exceptions.
• About 80-90% of deals include pro rata rights.

"We generally do. I think this game is my joke is all venture capital is a game of exceptions, right? Every deal is different. Every deal has some strange exception that you hadn't seen before. So I would say we insist upon it to a point."

This quote conveys the idea that while pro rata rights are a common term in venture capital, there is an understanding that each deal may have its unique circumstances that could lead to exceptions.

• Venture capitalists (VCs) often promise help during fundraising pitches.
• The best VCs follow through on their commitments to assist entrepreneurs.
• The average VC may ignore follow-up requests, while the worst may outright refuse to help prior to investment.
• Paying it forward is part of the culture and helps in evaluating potential partnerships.

"And the worst vcs will actually just tell you like, no, I'm not going to help. Once you let me invest, I'll help, but until then, I was just storytelling."

This quote criticizes VCs who do not provide any actual assistance until they have secured an investment, highlighting a disconnect between what is promised and what is delivered.

• The Silicon Valley culture encourages helping others and sharing opportunities.
• Experiencing how a VC operates before formal engagement is valuable for entrepreneurs.
• Reed Hoffman exemplifies the pay it forward philosophy.

"So to me, paying it forward is not only the right thing to do and sort of consistent with the culture of the valley, it's a great way to learn if you can work with someone."

This quote emphasizes the importance of the pay it forward mindset in Silicon Valley, suggesting that it is both a moral imperative and a practical approach to business relationships.

• The future of AngelList and its impact on traditional VC is uncertain.
• AngelList provides a more efficient way to move capital to startups.
• Entrepreneurs are considered better judges for funding decisions than traditional investors.
• The platform allows entrepreneurs to lead the decision-making process.

"I think what angelist does and what flight does with our various families of entrepreneurs is we create a way for entrepreneurs to be the ones making the decisions about who gets funded."

This quote explains the philosophy behind AngelList, which empowers entrepreneurs to make funding decisions, challenging the traditional venture capital model.

• The goal is for Flight VC to become a well-known investment firm, akin to Fidelity and Vanguard.
• Flight VC aims to be a place where consumers invest for retirement savings.

"I mean, my dream is that we'd be buying a 32nd ad on your show, talking about our family of funds, and we'd have ads in a magazine just like Fidelity and Vanguard do."

This quote reflects the ambitious vision for Flight VC, aspiring to achieve a level of recognition and trust similar to established investment firms.

• The expansion fund is a new project focused on traditional venture investments.
• It aims to provide a more conservative investment option in later-stage companies.
• The fund will co-invest with Flight VC and is managed by Eric Vaplu.

"So the expansion fund is something I am working with Eric on, and it will coinvest with."

This quote introduces the expansion fund, which represents a strategic move by Flight VC to diversify its investment portfolio and cater to investors seeking less risky opportunities.

• The cost of starting a business, particularly a website, has drastically decreased over the past 15 years.
• There has been a significant increase in early-stage experiments due to the reduced startup costs.
• Scaling a business has become the primary challenge in the current environment.
• The value of a business increases logarithmically with its customer base; scaling at rapid rates is highly valuable.

"15 years ago it cost you five to $10 million to get a website up, and now it costs you $10 for a URL and everything else is free."

• This quote highlights the dramatic reduction in startup costs over time, which has enabled a surge in new businesses and ventures.

"The value you get for a business with a billion customers instead of 10 million customers is enormously higher."

• Emphasizes the exponential value gained when a business successfully scales its customer base.

• Gil Pencina believes that education is the next sector to be disrupted.
• He has made investments in the education sector, specifically mentioning an investment in 'old school'.

"Education."

• Gil Pencina identifies education as the imminent sector facing disruption.

"We invested in old school."

• Reveals a specific investment made by Gil Pencina in the education sector, indicating his belief in its potential for disruption.

• Gil Pencina suggests that starting a syndicate is easy, but the challenge lies in gaining traction and building momentum.
• He advises developing a thesis and actively seeking out great deals.

"Give me a call. I'm happy to help."

• An open invitation from Gil Pencina offering guidance to those interested in syndicates.

"It's really about coming up with a thesis and going out and finding great deals."

• Stresses the importance of having a clear investment strategy and the ability to identify promising opportunities.

• Gil Pencina's ethos is to invest in people who are perceived as 'actually crazy.'

"Invest in people that are actually crazy."

• A succinct statement of Gil Pencina's investment philosophy, suggesting a preference for unconventional thinkers or risk-takers.

• Gil Pencina uses a service called Nuzzle to receive curated content based on what his friends have read.

"So I actually use a service called nuzzle that I'm a small angel in."

• Gil Pencina discloses his use of Nuzzle for content curation and his financial interest in it.

• Gil Pencina's favorite book is Ayn Rand's "Atlas Shrugged," which is popular among libertarian entrepreneurs.

"Atlas Shrugged is pretty hard to beat. Sort of a classic for the libertarian entrepreneur types."

• Identifies his favorite book and suggests its appeal to a particular demographic.

• Happn is a dating site that shows users people they have physically passed by.
• The company has achieved a scale that provides a network effect, making it difficult for competitors to match.
• Gil Pencina finds the service addictive and compares it to the 'chance encounters' section of Craigslist.

"It's a dating site that only shows you people you've walked by."

• Describes the unique selling proposition of Happn, which differentiates it from other dating sites.

"This effectively automates chance encounters."

• Explains how Happn modernizes the concept of serendipitous meetings, enhancing user engagement.

• Happn is expanding into Asia and has recently closed a funding round.

"They just closed a nice round that we syndicated a small piece of, and they're off to the races."

• Indicates recent financial support for Happn's growth and expansion efforts.

• Gil Pencina thanks the show for having him, and the host, Harry, invites listeners to contact him in San Francisco.

"All right, cheers."

• Gil Pencina's closing remark, signaling the end of his participation in the podcast.

"And do not forget to hit me up if you fancy meeting in San Francisco."

• Harry offers an invitation to listeners for a meet-up, providing his contact information.

• The podcast episode is supported by Wonder Capital, which offers investment opportunities in solar funds.
• Wonder Capital boasts a 100% success rate in meeting investors' targets.

"They allow you to earn up to 11% annually by investing in their solar funds, and even better, they do not even take any fees."

• Promotes the benefits of investing with Wonder Capital and highlights the absence of fees.

"100% of investors have achieved their investment targets with wonder capital."

• Testifies to the successful track record of Wonder Capital in meeting investor expectations.