In the final episode before the Christmas break, AngelList Venture CEO Avlok Kohli joins the discussion to delve into the transformative impact of AngelList on the startup and venture capital landscape. With over 5,000 startups funded, including 47 unicorns, and $2.2 billion in assets under management, AngelList is at the forefront of innovation with the introduction of rolling funds. Kohli, who successfully built and sold two companies before joining AngelList, shares insights on customer-centricity, the importance of founders becoming investors, and the democratization of venture capital through rolling funds. The conversation also touches on the future of AngelList as a comprehensive financial platform, extending beyond fund managers and LPs to include startups, and the potential for rolling funds to scale up to the size of traditional billion-dollar funds.
"They have facilitated the funding of over 5000 startups, including 47 unicorns, and they're the home to 4300 funds and Syndicus with over $2.2 billion in assets under management."
This quote highlights the scale and impact of AngelList Venture in the startup ecosystem, emphasizing the number of startups funded, the presence of successful unicorns, and the assets managed.
"This year, Angelist Venture launched the much discussed rolling funds and Avloc recently launched his own rolling fund, Avlock Capital."
The quote explains the introduction of rolling funds by AngelList Venture and Avlok Kohli's personal involvement with the launch of his own rolling fund, Avlok Capital.
"I grew up in different parts of the world. My early childhood was spent in the Middle east and India, and high school and university was spent in Canada. I'm indian by background, and so the usual influences were doctor or engineer, but I get squeamish about blood, so engineering was an easy choice."
This quote provides insight into Avlok Kohli's personal background, his global upbringing, and his decision to pursue engineering, which paved the way for his career in technology and entrepreneurship.
"The biggest learning was always keeping the customer in mind. And we did this across everything we did, and I mean everything."
The quote emphasizes the lesson of customer centricity learned at Square, which Avlok Kohli identifies as crucial for a company's success and a principle he carries forward in his career.
"The simplest thing you can do is always write as if you're building for a customer."
This quote conveys the strategy of approaching product development from a customer's perspective to ensure that the end product meets their needs and expectations.
"Look, we don't always need to agree, and that's okay."
This quote reflects Jack Dorsey's leadership philosophy, emphasizing the necessity of making decisions in the face of disagreement and the value of commitment from the team despite differing opinions.## Leadership and Decision-Making
"And it was really fascinating to watch how firm he was in his thinking and his principles, and he stood his ground and he still did it."
This quote exemplifies the importance of being steadfast in one's decision-making as a leader, even when facing opposition.
"The important piece is that you are soliciting everyone's opinion, so you're understanding all the different blind spots."
This quote highlights the necessity for leaders to seek diverse perspectives to identify potential blind spots in decision-making.
"What people really want to feel is that they've been heard that their opinion and perspectives were considered, and that with all of that, the right decision is made."
The quote emphasizes that people want their viewpoints to be considered in the decision-making process, even if the final decision does not align with their own opinions.
"Similarly, rolling funds enable capital to flow to more VCs who fund the tech innovation."
This quote explains how rolling funds facilitate the flow of capital to a broader range of venture capitalists, thus fostering technological innovation.
"Now all you need is a tweet and a fund, and the network just comes to you."
The quote illustrates the ease with which venture capitalists can now raise funds, emphasizing the reduced barriers to entry in the venture capital industry due to rolling funds.
"When you have more VCs in the ecosystem, you actually do get more innovation."
The quote conveys the belief that a greater number of venture capitalists in the market correlates with an increase in innovation.
"Some of this is actually taught over time."
This quote suggests that knowledge of portfolio construction and reserve allocation is acquired through experience in venture investing.
"We as AngelList, we are actually starting to educate rolling fund managers."
The quote indicates that AngelList plays a role in educating new fund managers on best practices in portfolio management.
"You can create a spreadsheet and this beautiful model of how prorata and reserves and everything's going to work... But in reality... people get squeezed out."
This quote points out the discrepancy between theoretical investment models and the actual dynamics of later-stage funding rounds.
"I've seen folks write 25k checks, return many, many times their fund, because the company just does really, really well."
This quote illustrates that even small initial investments can yield significant returns if invested in a highly successful company.
"Can you get into the best companies? Can you have the deal flow and the access into the best companies at the right time?"
The quote raises the question of whether an investor can secure opportunities to invest in the most promising companies, which is a critical factor in venture capital success.## Risk Perception in Hindsight
"I should have written a larger check. That's what I'm saying to myself. And I'm like, wait a second. At that moment in time with that information, I thought the founder was great, but it was still risky."
This quote reflects the common retrospective realization that a larger investment could have been more profitable, tempered by the acknowledgment of the risk involved at the time of the initial investment decision.
"In your winners, you will always have wanted that larger check. And then the other one is anyone that invests past your stage, they're growth investors. And anyone that invests before you, total gamblers."
The quote captures two prevalent sentiments among investors: the desire to have invested more in successful ventures and the characterization of investors based on the stage at which they invest.
"Software markets are much larger than anyone thought. The billion dollar companies are now $10 billion companies."
This quote suggests that the growth potential for startups has been underestimated, justifying higher entry valuations and, consequently, an impact on pricing.
"Now, for VCs, what happens, you now have to go earlier, and if you are investing at seed, you'd want to find a way to invest at pre-seed."
The quote explains how VCs are responding to increased competition by shifting their investment focus to earlier stages in a startup's lifecycle.
"The rolling fund can continue to accept new capital from new LPs, while being fair to all of your prior LPs."
This quote highlights the unique structure of rolling funds, which allows for fairness and flexibility in accepting new investments and LPs.
"You can actually create a traditional fund structure out of a rolling fund by adding constraints and parameters, and you can simulate a traditional fund, but most people choose not to do that."
The quote explains how rolling funds can be adapted to resemble traditional funds but are generally chosen for the benefits that come with their flexibility and modern features.
"Short answer is yes, we're already starting to see this, and it really is a question of which institutions are actively investing in venture and which ones sporadically invest in venture."
This quote confirms that institutional investment in rolling funds is occurring and suggests that the trend will continue as institutions become more familiar with the structure.## Rolling Funds and Institutional Investment
"The institution invests in venture overall, the more time it takes them to understand the new structure. And we're actually working with a lot of them right now in order to walk them through the structure itself."
This quote explains that there is a learning curve for institutions when it comes to understanding rolling funds, and efforts are being made to educate them on this new investment structure.
"And that now, as any distributions are coming in, there's a liquidity event from a startup, it is coming into that pool of capital, and then, based on whatever the terms are, either get your distribution from that pool of capital that's calculated across the investments made in that pool of capital for that time."
The quote clarifies how distributions work for LPs in rolling funds, emphasizing that each LP's capital is pooled for investments and any returns are distributed from this pool.
"And there really is no limit to the amount of capital that you can close into a rolling fund."
This quote emphasizes the scalability of rolling funds, indicating that they can accommodate an unlimited amount of capital.
"Think about Angelis is we're going to be the largest financial platform in venture, and today our customers are fund managers and lps who invest in funds. And tomorrow we're also going to be including the startups."
The quote outlines AngelList's vision to expand its role in the venture ecosystem, ultimately encompassing fund managers, LPs, and startups.
"I have a tendency to get consumed by work, which takes me out of the present. And the book taught me a few concepts and frameworks to stay in the present."
The quote reveals Avlok's personal challenge of staying present and how the book "Meditations" has helped him with practical concepts and frameworks.
"Founders becoming investors."
This quote encapsulates Avlok's desire to see a shift in the venture industry where founders also take on the role of investors, bringing unique insights and networks to the table.
"The importance of building a product that delivers extreme value to customers and constantly, constantly thinking about that."
This quote highlights the fundamental principle Avlok has learned from Naval, which is the relentless focus on delivering exceptional value to customers through product development.