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  • Jason Calacanis 05:26:52 on 2018-07-26 Permalink

    This is your Captain speaking, I’m turning on the fasten seat belt sign 


    This past weekend, I sent the email below to the 250+ founders I’ve invested in. The goal of this email was to prepare my founders for what happens to startups when a market corrects and then collapses.

    I’m not calling a top to the market, or a crash, but rather giving my founders  a blueprint of how to survive and thrive in a down market.

    I hope this is helpful to you as well. Feel free to forward it to a founder you know, as they might not be thinking about these issues.

    Best, Jason@calacanis.com

    [ Click to Tweet: https://ctt.ac/84ceF ]


    Launch Portfolio Founders,

    We are in year 10 of the current bull market.

    Chaos reigns from Washington to Moscow and all of you are all competing for attention for customers and talent with an unprecedented number of highly-skilled founders running impressive businesses.

    Having seen this movie up close three times in my startup career, I wanted to take a moment to explain to you what happens to startups when markets correct — and sometimes collapse.  

    In short, I want to explain to you how to avoid having your startup die when the stock market crashes — just in case the market turns.

    In my estimation there is a 20-30% chance we could have “an event” in the near term (the next two years), and since there is never a bad time to make long-term plans you should read this email twice, and discuss it with your senior team.

    There is zero cost to taking this information dead seriously, and there is a massive downside to ignoring what follows: the “risk of ruin” (as we call it in gambling).    

    Paradoxically, there is a MASSIVE opportunity to build in a down market.

    As I’ve told many of you over the years: “fortunes are built in the down market, and collected in the up market.”

    Rhyming History

    The last couple of major “events” included the Great Recession (caused by real estate shenanigans), 9/11 (caused by terrorism) and the dot com bust (caused by irrational exuberance & financial shenanigans).

    Two out of the last three were financial shenanigans, which is to be expected. Today we have cryptocurrency, monetary policy, trade policy and student debt leading the list of financial shenanigans that could cause the next correction/collapse.  

    In the Black Swan, non-financial event category we could list Russia, North Korea, China, Pakistan, Iran, domestic political unrest and the Mueller investigation as market busters.

    These type of events can result in stock market corrections (a 20%+ retreat in prices according to most definitions).

    When the stock markets corrects, most of the time it simply bounces back, but sometimes a contagion will occur and it will impact everyone from hedge funds to angels, and the venture capitalists and seed funds in between.

    When things go really bad, all asset classes tend to go the same direction: down. No one is spared the pain, but the degree to which the pain is distributed can be very different (i.e. bonds, domestic stocks, international stocks and real estate).

    The winners are those with massive cash positions they are willing to deploy.  

    Again, sometimes the correction is just that — and it has no impact on startups.

    No one knows!

    What we can do is look at what has happened in the past. Here is a basic rundown of what happens in the case of “an event”:

    1. Event occurs (Black Swan or anticipated)
    2. Stocks sell off, a series of head fakes occur around recovery, selling continues until a bottoming out.   
    3. Venture Capitalists decide not to make capital calls to their Limited Partners, sometimes as a courtesy, other times the result of a directive. They know their LPs have been heavily impacted by the market collapse and don’t want to stress them more.
    4. Fight to qualify: Portfolio companies that are profitable have opportunity to get additional funding to deploy in the down market to capture market shares.
    5. Portfolio companies that are close to profitability are forced to take a haircut on financing rounds — if they can even get them (think down rounds, warrants and multiple liquidation preferences).
    6. Struggling portfolio companies are left to figure it out for themselves.
    7. Seed Rounds Plummet: New startups will get funded at half to 1/3rd the price of similar companies the year before (i.e. $2-5m compared to $4-15m today).  
    8. Costs to acquire customers (ads), talented employees and M&A all plummet — allowing the strong and well-funded to become unstoppable (think Netflix, Google, Facebook and Amazon).

    After a crash, the stock market tends to recover in a couple of quarters (think three to six).

    The startup market, however, lags two or three years behind the public market recovery because angels and LPs who lost all their money will swing from being greedy to fearful.

    Right now we are at Peak Greed, with investors in unicorns, real estate and public markets all excited to deploy capital.

    After the Great Recession, these same high net worth decision makers were figuring out how to rent or sell their second homes, deal with having to fly commercial again and downsize their domestic staffs.

    It takes years for these high net-worth decision makers and stewards of capital to regain their confidence — years that 80% of startups don’t have.

    When high net-worth investors (HNIs) clean up their personal balance sheets and deal with the horror of losing half their chip stack, they will invest in your crazy vision again — but most founders will be out of business by that time.

    The Startup Preppers Disaster Planning Guide

    If you take the advice outlined below, you will be able not only to survive a crash, but even to take market share through it.

    Step One: Imagine that ‘the event” occurred today; ask yourself the following questions:

    1. Am I at, or can I get to, profitability on the money I have?
    2. Am I in the top 1/3rd of my investors’ portfolio?
    3. Are my customers loyal enough to keep consuming my product in a down market?

    If you answered yes to all three questions above, congratulations you’re crushing it!

    Go raise “opportunistic money” from your existing investors at a good or great price — they will be happy to own more of your company and help you cement your win.

    If you answered yes to one or two of these questions, congratulations, you’re doing good work!

    Go raise money from your existing or other investors at an OK or good price — they will be happy to own more of your company and see you get to the point of answering “yes” to all three questions.

    If you didn’t answer yes to any of these questions, you’re either very early (reasonable), haven’t found true product-market fit yet (reasonable) or you’re not a good founder (why are you doing this instead of working for someone else?).

    If the reason you didn’t answer yes to any of the questions is you’re early and trying to find product-market fit, go raise enough money from almost anyone (no judgments), so you have 18 months of runway and you can figure it out.

    If you’re reading this and have the feeling that you’re not cut out to be a founder, now is a fine time to merge your company with another founder and startup you highly respect and go kick-ass on someone else’s management team. (Of course, most folks are not self-aware to understand this.)

    Bottom line: In almost all of the cases above, my advice is to build a war chest of capital so that you can deploy it in the down market.

    In all of these cases, you want to raise from the best investors you can at the best price you can, but what you should not do is risk having less than 18+ months of runway in your bank account.

    How to Win the Down Market

    If we do enter a down market, and you have 18-36 months of capital in the bank, you will be able to capitalize on the following:

    1. Attention: Consumers and businesses will have fewer people asking them to try their products. This means it will be easier to get sales meetings and consumer trials.
    2. Lower Costs: You can literally go to all your vendors and ask them to give you a 50% discount and watch most of them offer to keep you as a customer at a lower price!
    3. More Talent: As startups shutter and big companies do rounds of layoffs, you’ll be able to find talented people at reasonable prices — go get ‘em!
    4. Marketing: The cost of marketing will plummet as demand dries up. Think about, if you’re a CEO and the market crashes, do you want to spend $30,000 a month for a billboard on the 101 freeway? No, you want to put that money toward customer acquisition. But what if you could get five billboards for $30,000 and that resulted in a great ROI? Well, then that’s what you’d do!

    Down markets are wonderfully quiet and efficient times for well funded startups.

    If you’ve gotten this far, what I am imploring you to do is “top off” your funding. There is little downside to topping off, and there is a significant (perhaps 10-30% chance) risk of ruin if you don’t.

    There is, of course, the possibility that we will have the longest bull market in history, with another decade of “up and to the right” in all markets!

    In that case, well, we will all be fabulously wealthy and we can all consider this a monotonous, while virtuous, fire drill.

    And, in that case, you will still be glad you built your company on the premise that not a single dollar of future capital is a sure thing.


    PS – Back in the day, Sequoia Capital sent me a similar warning. It was amazing advice for startups in their community, which became relentlessly focused on delighting customers and finding repeatable, high-margin, business models.



  • Jason Calacanis 01:37:25 on 2018-04-06 Permalink

    Defending self-driving cars in the face of tragedy 

    Last month we reached the tragic, and long-dreaded, moment in the history of self-driving cars: the death of an individual who didn’t opt into using self-driving technology. (In this case, it was a pedestrian, but it could have been passengers in a non-self driving car).

    [ Click to Tweet (can edit before sending): https://ctt.ec/Pf0vI ]

    This follows the May 7, 2016 Florida death of a driver using Tesla’s driving-assist technologies (“autopilot”), which are often confused with self-driving technology.

    Since that time, two other deaths have occurred while autopilot was engaged, including a driver in China on January 20, 2016, and the recent crash here in the Bay Area on March 23rd.

    Four tragic deaths, in four separate instances, using two different flavors of self-driving tech (driver assist & fully automated), but one common thread which we must, as a society and industry, address candidly: user error and — most confoundingly — the abuse or misuse of this technology.

    I’m a strong believer, and investor, in self-driving technologies.

    I’m a shareholder in all three of the major players in self-driving: Tesla, Uber and Alphabet (aka Google), which owns Waymo. Two of those names, I own blindly via my Wealthfront “robo-portfolio” (i.e., I don’t actively trade them and don’t know how much I own of each). I invested in Uber, which is still a private company, during their seed round.

    I also own two Teslas with self-driving technology, the Model X and the Model 3, and I’ve logged over 20,000 miles on autopilot.

    I use autopilot almost every day on the 101 freeway, the same road where the most recent death with autopilot engaged occurred. It’s important to note that I’m not saying “autopilot death” here, but rather a death that occurred with autopilot engaged.

    This is an important distinction, because in all three autopilot cases — and I want to be careful to not blame the victims here — the users appear to have potentially misused — or perhaps even abused — the technology.

    The Frustrating Truth

    The most disturbing and frustrating trend, in all four deaths, is that the human drivers played a significant role in them. From all of these crashes, we have a massive amount of data; in two, we have dashcam video, and in the tragic death of the pedestrian, we have video of the driver (which I believe is a first).

    The unprecedented amount of information we are getting from these accidents is steering our collective discussion toward logic over emotion — which is a nice thing to see.

    Here is what we know about each of the four crashes.

    Florida (Autopilot): The driver was going nine miles above the speed limit with autopilot engaged and had seven seconds to brake as a truck passed in front of him. The brake pedal was never touched. This means the driver was either incapacitated at the time or chose to look away for seven full seconds. There were various reports that a DVD player was found in the car, and the driver of the truck claimed that Harry Potter was still playing after the crash.

    China (Autopilot): You can watch the dashcam video of this tragic accident ( https://youtu.be/fc0yYJ8-Dyo ), in which a Tesla on autopilot crashes into the back of a stationary road sweeping truck. Based on the video the driver had ample time to avoid the sweeper if autopilot was on. Also, no self-driving technology can be perfect when dealing with stationary objects on the road (i.e., a boulder rolls down a hill onto a highway). Finally, why on earth is a road sweeping car sitting in the passing lane with no lights, flares or safety vehicle behind it to alert drivers to the fact that it’s stationary or moving slowly?

    Mountain View (Autopilot): In this case, Tesla quickly released the tragic news that the driver of the Model X had ignored warnings to keep their hands on the wheel while autopilot was engaged. Additionally, the driver was speeding and had the distance setting at one-car length, when it should have been set to the max, which is seven. The driver had, according to Tesla, five long seconds to avoid the concrete divider, but again, no action was taken.

    Arizona (Self-driving): It’s too early to know what failed with this tragic death, but based on the video of the driver, they were looking down — most likely at a smartphone — for most of the ~10 seconds of video that has been released.

    We won’t know for a while, but there is a chance that if the driver — who was being paid to drive the car — had not been blatantly and knowingly breaking the law, they might have been able to apply the brakes in time. There is a chance that the self-driving technology failed in this situation, as well. If the technology did fail (and that’s a big if), this would wind up being a serious edge case: the technology AND the safety driver failed.  

    The thread we must address in all of these cases is that all four drivers (three primary drivers using autopilot and one safety driver using fully autonomous) were confirmed to have ignored what was happening on the road for many seconds.

    If you look away from the road for five seconds at 65 MPH, which is what happened in three of these four accidents, you would have traveled a distance of well over a football field — without looking (65 MPH=95.3 feet per second; 95.3 feet x five seconds=~477 feet).

    How We Should Address Autopilot

    Autopilot, as currently designed by Tesla, consists of two primary technologies that are available in many cars: adaptive cruise control and lane assist. As such, it’s clear Tesla is being held to a higher standard than other players who have been deploying this technology.

    Some people have blamed the word “autopilot,” claiming that it’s giving naive users a false sense of security. Owning two cars with autopilot, I can tell you that the system makes it absurdly clear that you can’t take your hands off the road, and in fact, it disables itself for the entire ride if you ignore it completely.

    The fact is, smart people can take risks they shouldn’t, and sometimes smart people can make inconceivably bad decisions, like watching a movie while driving or taking the eyes off the road for five seconds.  

    The only fixes I can think of with autopilot are window dressing. We could require everyone to take an hour-long course and sign even more waivers, but I don’t see either of those measures stopping someone from deliberately misusing the technology.

    Just like Honda is never going to get motorcycle riders to stop splitting traffic, popping wheelies and (back to smart people doing incomprehensibly inadvisable things) standing on the seats of their bikes. In fact, there is an entire genre of YouTube compilations around motorcycle riders doing very stupid things: https://youtu.be/QeKFc3BNtU4

    How We Should Address Fully Autonomous, Self-Driving Trials

    In order to install massive confidence in self-driving, and in order to conservatively manage edge cases, we should require two “pilots” — one in the left seat and the other in the right seat — for all self-driving trials.

    This will help with the boredom issues that solo test drivers have reported, and that peer interactions with audits will (hopefully) eliminate.

    Airplanes are designed to be run by one pilot, but the benefits of two pilots running checklists (read the awesome “The Checklist Manifesto” if you haven’t), and having a backup, are well worth the expense.

    We don’t need to save money in these trials, we need to refine the edge cases of the technology while inspiring massive confidence in it. The drivers in this scenario should swap pilot/co-pilot roles every hour, in order to keep people fresh and engaged.

    If we do this, we will have a massive advantage over non-autonomous cars: two drivers AND an array of sensors backing them up.

    This is an easy concession for the industry to make, in order to avoid a complete shutdown of self-driving trials — which is what most savvy people believe will happen if we have another tragic death.  

    What about other causes of road fatalities?

    The leading causes of death in cars are speed, lack of seatbelts and distracted driving. All are behaviors that people choose to do and that could easily be solved with a combination of technology and enforcement — but as a society we choose to take a very light hand with these.

    Speed limiters have existed for decades, yet we do not require them despite the technology being cheap, available and speed being a top contributor to deaths.

    When Ontario, Canada added speed regulators to trucks, crashes dropped dramatically — between 25-73% according to research I’ve read. (Sources: http://bit.ly/2uObH5J, http://bit.ly/2qaS0PL)

    We allow consumers to decide if they want to speed every day, and have done so for almost a century.

    If we want to reduce road deaths, the quickest path to that would be to put regulators on all cars this year with a maximum speed of whatever the highest speed limit is in your state/region.

    Putting aside the ease at which speed regulator technology could be put in cars, our laws around speeding could be instantly changed to be so punitive that they would seriously dissuade people from speeding.  

    Imagine if you get tagged doing 20 miles or 30% above the speed limit, with or without speed regulator, and your car is impounded for a month. What if, on the second time you’re caught speeding at this level, your car was sold and the proceeds given to victims of car accidents?

    The same highly-punitive process could be deployed for distracted driving, which people don’t take very seriously.

    Behavior would change quickly if you lose your car for a month — or indefinitely. Sure, this is an extreme measure, but that’s why I’m making it: we have the power as a society to change laws and reexamine our approach to long-standing traditions, like speeding.

    So far, I’m very impressed with the press and public’s reaction to these tragic deaths. We’re not overreacting (yet), and hopefully we’ll take a moment to consider the big picture when it comes to road fatalities–taking a fresh look at all aspects of how we might get to “zero road deaths.”  

    All the best, Jason

    PS – I’m thinking about writing some more essays to this list. As always, you can hit reply and I will get your message. You can one-click unsubscribe at the bottom of the email if you prefer not to get my missives anymore.

  • Jason Calacanis 02:35:50 on 2018-01-29 Permalink

    “Why do you hate crypto, Jason?” (I don’t, but… ) 

    “If you are right, that 90% of crypto projects are scams or incompetent, what do you gain by taking that position publicly?” asked a close friend.

    I took a moment to think it through.

    [ Click to Tweet (can edit before sending): https://ctt.ec/3a1P0 ]

    Why was I sounding the alarm on Twitter, my podcast, and CNBC, that civilians should be very careful investing in virtual currencies that are unregulated, anonymous, easily manipulated, phenomenally hackable, global, and often run by bad actors or the incompetent?  

    “To protect people from losing their money?” I answered.

    I’ve got a complicated relationship with crypto, having monitored early projects like Bitcoin with enthusiasm.

    Six years ago I wrote a piece called “The Most Dangerous Project We’ve Ever Seen,” that introduced many in the investment community to Bitcoin.

    Full disclosure, while I don’t trade cryptocurrencies, I have a lot of exposure to it by investments in startups like Robinhood, Abra, and Talla.com (to name a few notable projects).

    Here are five important points I would like to state for the record:

    1. This Will End Badly For Most

    It would take me ten articles to catalogue all the risks and scams in this emerging space, but to give you the broad strokes here are the critical issues that most savvy people — including those with large positions in crypto — all agree on.

    Billions of dollars in crypto have already been stolen, and *most* of the ICOs I see are horrible ideas run by people who have no track record or ability to execute.

    Bitconnect is an instructive example that you can read about here:

    Most importantly, you should watch this hilarious video:

    And read about these pump and dump chat rooms, where thousands of people (it seems) are buying crypto coins before marketing them to the next group of suckers.

    Now, it is *possible* that while most projects fail, most of the money in crypto could wind up going to a smaller number of higher quality projects that become long-term successes — but that is obviously not guaranteed.

    In fact, it’s possible that Bitcoin could go to zero (which I talk about below).   

    1. ICOs are insanely speculative investments/donations

    ICOs are initial coin offerings and they are the black eye of the crypto industry for a number of reasons. Most of them have untested teams, but that doesn’t mean that those teams won’t eventually build very successful companies, but it does mean that you are taking serious risk.

    When you look at an ICO, understand that there are multiple levels of significant risks stacked on top of each other. Most ICOs share most of these risks:

    a. Untested teams — some are scam artists, others are just wildly naive.
    b. Top projects are raising far too much money before they hit any milestones — overfunding is a very dangerous thing.
    c. A large number of bad or derivative ideas with crypto slapped on them (“Uber with tokens!” and “a decentralized Twitter!”).
    d. You’re not buying stock in these companies, you’re buying tokens or, even worse, tokens that might show up, some day (i.e., the SAFT: “a simple agreement for future tokens.”)
    e. You’re investing in a white paper, which is a fancy way of saying “a bunch of ideas described in a PDF.”
    f. There is little legal framework for these offerings, and the SEC is a very serious organization — and they have started to sound the alarm.
    g. You have zero rights with your tokens — because they’re not equity!

    If you compare this stack of risks to a startup, here is what I do for a living in terms of taking risk:

    i. We typically invest in startups when they have built their MVP or a product in market with some early traction (as opposed to white papers, which are typically no more sophisticated than the back-of-a-napkin idea).
    ii. We get equity in the companies (as opposed to Chuck E. Cheese’s tokens that have never even been actually used).
    iii. We have protective provisions in our investor agreements that keep us from being diluted, give us information rights, pro-rata, anti-dilution, and other important legal concepts that keep bad actors from absconding with our money.
    iv. We have five decades of legal and regulatory stress testing of the system.
    v. We meet with the founders of these projects multiple times and do due diligence (as opposed to shipping Bitcoins to their wallets).

    Now, I’m not saying I will never buy tokens, but it’s very clear to me that tokens are most often either a Kickstarter contribution (you know, without the product being sent two years late), a donation, a gift to incompetent people, or a scam.

    There are probably 10% — a guess on my part — of these projects that are going to see the light of day and have a similar chance of success as an angel investment.

    So, of that small number — which I put at 10% — maybe 10-20% will succeed.

    This leads me to believe that 98% of these projects will result in people losing their money.

    That means you have to make ~50x your money on one of 50 token purchases to break even. That might happen; I had a 3,000x+ investment, and a handful of 20-50x investments as an angel (which I talk about in angelthebook.com).

    1. Bitcoin itself could go to zero

    The Bitcoin HODL crowd (a play on words for “hold,” as in hold your coins, never sell them), think this is insane, but we’ve watched many times as the early projects in a promising vertical go to zero and the 10th goes to the moon.

    Many of us used Ask Jeeves, Lycos, and LookSmart before seeing Google show up in 1998.

    Many of us used SixDegrees, Friendster, LiveJournel, and MySpace before Facebook in 2004.

    Bitcoin is facing massive challenges around speed of transactions, the size of the blockchain, transaction costs and governance.

    Governance could be the thing that takes it down. If you want to jump down that rabbit hole, you can watch this video: https://www.oii.ox.ac.uk/blog/the-blockchain-paradox-why-distributed-ledger-technologies-may-do-little-to-transform-the-economy/

    The majority case in my mind, is that Bitcoin will, as the first technology out of the gate, be supplanted by a much better technology. This could be a fork of Bitcoin or simply a new, much better product.

    As time moves on, consumers get savvier, and that means they recognize a better product quicker and move to it faster and faster. We’ve seen this with people jumping from Hotmail to GMAIL, BlackBerries to iPhones, and dialup to broadband internet.

    Consumers will not have the loyalty to Bitcoin that they have to their email account and BlackBerries, because they don’t actually use Bitcoin for anything other than speculation. The switching cost will be zero, as opposed to switching your phone, which requires backing up your data, moving your phone number, and setting up your new iPhone and selling your BlackBerry.

    We could see a run on Bitcoin that happens in days or hours, not years like the decline of RIM (BlackBerry’s parent company) and AOL.

    1. There will be an Amazon and Google in the Crypto space

    I’m guessing we will see an Amazon, Google or Netflix-like company come out of the crypto space. When we do, there will be a ten-year window to buy their stock and be rewarded. As such, if you are in love with the crypto space, my advice to you is:

    a. Spend 50% of your time learning.
    b. Invest no more than 5% of your net worth in a basket of projects.
    c. Be prepared to lose 100% of your investment in this basket of projects.
    d. If you do hit a massive winner, say a 50x investment, make sure to sell some along the way as “idiot insurance.”

    That last part is the critical one. I’ve had to have a heart to heart with a number of friends who bought Bitcoin early and who are “crypto rich and cash poor.”

    If 90% of your wealth is in any one currency that is a very bad idea — unless you control that currency, i.e., if you were Jeff Bezos, owning a lot of Amazon stock isn’t a huge problem because you control the company and have massive insight into it.

    1. Founders should be very careful doing ICOs

    If you take people’s money for a token that you hope will someday have utility, understand that the person buying it believes — 99% of the time — that this is a security.

    If people buy your token to make money it is no longer a utility token, even if those buyers signed a document that says, “I’m buying a utility token not a security.”

    Why? Because some percentage of our legal system and regulators will side with retail investors. You will get dragged into court and be forced to explain why you did a countdown clock to sell your utility tokens and why you hired promoters to sell them around the world.

    Even if you win, it will be a horrible victory. Just ask the people who were sued after the dotcom implosion. It took the brutal part of a decade for most the them to clear their names even if they were in the right — others got lifetime bans.

    Also, as Rob May from Talla points out, there can be additional costs to ICOs that founders might not consider:

    1. I don’t hate crypto, but I do hate seeing people get scammed out of their money.
    2. The space is now driven by scams, FOMO, and FOCO, which means it’s going to end very badly for a lot of people. (FOCO is the fear of cashing out.)
    3. Feel free to invest a lot of your time, if so inclined, but be very careful with your money.

    Best @jason

    PS – We are giving 1,000 founders a free ticket to LAUNCH Festival Sydney, June 19 and 20. http://launchfestivalsydney.com Please spread the word!

    PPS – We are hosting the next LAUNCH Incubator class starting on March 8. If you know of a company in our “Goldilocks Zone” (GLZ) please hit reply and introduce me to them. The GLZ means not too hot and not too cold, which for us means the startup doesn’t have a Series A yet, but does have a product in market with some traction (even modest traction, like $10,000/month in revenue or 10,000 daily users).  http://www.launchincubator.co/

    PPPS — We are just wrapping Season 2 of my podcast ANGEL. It’s free and you can listen here: angelpodcast.com & http://bit.ly/angelpodcast

    PPPPS — If you’re an accredited investor and you want to see what I’m investing in, and possibly invest alongside me, you can apply at jasonssyndicate.com.

    PPPPPS — The book is doing great. If you’ve read and loved it, please consider posting a review, which I understand really helps!


  • Jason Calacanis 23:46:13 on 2018-01-18 Permalink

    ANGEL in Miami 1/29-1/30/18 


    I’ll be in Miami, FL, in a couple of weeks to talk about my book, “ANGEL.”

    I hope you will join me at Refresh Miami on Tuesday 1/30 for a fireside chat and raffle. Raffle winners will join me for brunch the following day, Wednesday 1/31. Agenda & book tour itinerary are below.

    Hope to see you there.



    MIAMI ITINERARY: 1/30 & 1/31

    TUESDAY 1/30:

    12PM-2PM Private Lunch with Grammercy

    6:30-8:30PM Public event: Refresh Miami fireside chat & raffle. Raffle winners to join Jason for brunch following day.
    Purchase tickets HERE.  AGENDA:

    6:30pm – 7:15pm: Networking, drinks and light bites
    7:15pm – 8:30pm: Fireside Chat and audience Q&A. Jason will be interviewed by Melissa Krinzman, Managing Partner of Krillion Ventures

    WEDNESDAY 1/31:

    10:00AM: Brunch with raffle winners.

    ANGEL Book Tour Dates (frequently updated)

  • Jason Calacanis 02:58:26 on 2017-12-04 Permalink

    The Seed Slowdown 

    My pal Fred Wilson wrote about the “Seed Slowdown” today. The numbers show two clear trends:

    1. 2015 was the peak of angel investing in technology startups in terms of dollars and number of deals.

    2. 2017 is crashing in terms of the number of deals closed, with dollar amounts off significantly — but not as much.  

    [ Click to Tweet (can edit before sending): https://ctt.ec/CmkbL ]

    Fred points out some of the reasons for the boom and bust, and I’m in agreement and expand a bit on what happened — since I lived it and recently wrote about it in my book (angelthebook.com).

    There were two major trends contributing to the 2014/2015 boom:  

    1. Facebook created a crazy number of new investors (e.g., Dave Morin, TWIST #216 and Chamath Palihapitiya TWIST #238 & #776), who were added to the legions of Google angels running around town (e.g., Andrea Zureck, ANGEL #3).

    2. Coordinated seed efforts: These started after Web 2.0 (the 2002-2006 era) and created a professional class of early-stage investors. These efforts include stuff I was working on like TechCrunch50/LAUNCH Festival, Sequoia Scouts & the Open Angel Forum (where Uber Pitched), and notably, Naval’s work on AngelList (TWIST #244) and Paul Graham’s scaling of YCombinator to mind-blowing heights (TWIST #421).

    The reason for the decline? I would sum that up in 3 points:

    a. Indigestion
    When you break into the 30, 40 or 50 angel investments like Matt Brezina (ANGEL #10), Joanne Wilson (TWIST #358 & Fred’s better half) and I have, you need time to digest these deals. As I describe in the book, your startups will start coming back to you 9-12 months after you give them money, and most will not be able to clear market with other investors. This leads to dozens of founders needing your help to raise funds or come to terms with the death of their startups. It’s exhausting, and most angels take breaks investing.

    b. Startups Staying Private
    By now everyone knows that startups can stay private indefinitely, and this is a bad, bad trend for the entire ecosystem — but more often than not it’s worst for the company, which loses the discipline and the maturation that going public cause. My pal Bill Gurley (TWIST #722), considered by many to be the best VC on the planet right now, outlined this in his infrequently– but poignantly — updated blog, “above the crowd” (he’s tall, he’s a brilliant strategist): http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/  

    c. Angels Moving Downstream
    Many angel investors learn their craft and get picked up by major firms. Cyan Banister was a frequent guest at the Open Angel Forum, and invested in Uber and Thumbtack at the events. Over the years she became one of the most respected investors in the world and Brian Singerman at Founders Fund recruited her. Joining a big firm is a better life for an angel investor because, well, you do fewer deals at larger dollar amounts. This leads to the opposite of the indigestion in point (a) above! Fewer, more meaningful bets is simply an easier life than being an angel, which at times feels like being a hospice worker — which it obviously isn’t! In fact, that’s a big part of the job of being a great angel investor: explaining to distraught founders that this isn’t life and death.

    As Fred points out, being an early-stage investor is hard and some people are leaving to do later stage investing which means…it’s a huge opportunity!

    My team and I are doubling down on the early stage with the help of jasonssyndicate.com. Since my book came out, our syndicate grew from 1,100 members to 2,000. It will be 3,000 in the next year I would guess.

    This has led to us having a new set of challenges, including our deals closing too quickly and with two out of three interested syndicate members not being able to get an allocation (due to the 99 partner limit of SPVs/LLCs). We are working on solutions to resolve these high-class problems.

    At the same time as everyone is leaving, we’re ramping up AND taking steps to make our investments more sound. Those steps are, generally speaking (and we try not to have hard rules):

    1. We focus on investing in startups that have product/market fit and some traction. This could be $10,000 to $150,000 a month in revenue, or tens of thousands of daily free users.

    2. We focus on founders who are cash efficient. We want founders that get $1 in value from a nickel or a dime, not those who burn a dollar and get a penny in return.

    3. We want founders to have 12 to 18 months of projected runway after their fundraising. If you are cash efficient and embrace “low burn culture” you will have time to figure out who your customers are and what they want, while not having to waste time fundraising for a nine to 15 months on average.

    4. We try and find teams that have technical co-founders because they tend to be the most cash efficient (point #2) and because they tend to figure out their customers quicker (see point #3!). Startups with technical co-founders also don’t have their products stall in a cash crunch, because the founders can write code themselves.

    5. We focus on founders who have reasonable valuation expectations. We don’t do uncapped notes, and we will negotiate valuations fairly.

    6. We focus on founders who want to have proper governance at their startups. This includes doing monthly updates, having information rights and starting board meetings sooner than their peers. We want founders who want to put on the “big boy/big girl pants,” as my pal Chamath says.

    7. We obtain and protect our rights in future rounds of financing. We insist on a board seat option if we own over 5% of a company, and we take that board seat if the company gets their Series A. We have pro-rata rights and when a Series A or B happens, we follow on. This is one of the delightful aspects of our syndicate being oversubscribed.

    Open For Business

    Bottom line, we’re open for business and we’re going to do 40+ deals a year in 2018. If you want to “do the work” as my TWST coffee cups encourage, as a founder looking for funding or an angel investor looking to lead the industry, visit jasonssyndicate.com.

    I am writing a follow-up piece for founders titled: “Surviving the Seed Slowdown” on my email list. Sign up in the sidebar at Calacanis.com.

    Best, @jason Calacanis

    PS – Read the book and let me know what you think — please! Angelthebook.com.

    PPS – If you read the book, please consider a review:  




    PPPS – Angel University will be taking place two times in 2018. At it, 50 angels learn from each other and collaborate. Sign up at Angel.University.  

    PPPPS – Angel Summit will take place for the third time in Napa in July of 2018. At this 2.5 day event we do business in the AM, activities in the afternoon and play cards, video and board games at night. Launchangelsummit.com

    PPPPPS – We just finished Season One of ANGEL, the podcast. Our ten guests:

    1. Cyan Banister, Founders Fund

    2. Gil Penchina, angel investor & syndicate lead

    3. Andrea Zurek, XG Ventures

    4. Ed Roman, angel investor & syndicate lead

    5. Zach Coelius,  angel investor & syndicate lead

    6. Ben Narasin, previously Canvas (now NEA)

    7. Dave Samuel, Freestyle Capital

    8. Pejman Nozad, Pear.vc

    9. “Ask an Angel”

    10. Matt Brezina, angel investor

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