[0:00]How do you think about launching a new product when there are competitors who have significant market share? This was actually the second market crash. There was a big dip, but this one was like a really big one. A key question for startups is how do you take a wedge product and make it a platform? And two, how do you leverage each inevitable crisis along the way to make your business stronger? AngelList makes a great case study. Today they have over 120 billion in assets on the platform, as well as 12,000 startups. But in 2022, revenue from their biggest product SPVs collapsed overnight. Revenue growth didn't just slow, it fell to zero. So what did they do? Well, today I'm at their headquarters in downtown San Francisco. To talk with Avlok, the CEO of AngelList, about where they are today and how they leverage that crisis and others to reinvent the business. In 2019, you had started three companies, sold the most recent one to Square and then Naval reached out and pitched you on becoming the CEO of AngelList. So what was that pitch and why did it resonate with you? Yeah. So the pitch in 2019 to join AngelList, at that time was really, uh being at the center of information flow of startups. And as a founder, having started three companies, uh like you mentioned, uh always being curious about what other founders are working on, uh was something that really pulled, pulled on me. And uh so that was the qualitative pitch, uh which was, hey, come to AngelList and you'll be at the center of all the information flow. And at I think at that time, uh the GPs on the platform were investing in, uh 20% of all the US startups that are backed by top tier VCs. Yep. And you captured about 40%, I think, of all unicorns as well. Exactly. Yeah. So it was it was still a smaller, um, platform in terms of, um, you know, overall revenue. But in terms of reach, uh, there was quite a bit of reach because, uh, the GPs running SPVs going into companies, uh, were investing in quite a large percentage of some of the top tier companies. Uh, so that was the one, you know, one pitch that really resonated with me. Yeah. Uh, and the second one was just the ambition around what it could become. And we had a lot of uh good conversations around what the platform can scale up to and so purely from a, uh financial lens and financial platform when it gets big, it can get really, really big. And it can take, uh it can effectively be like rolling a ball down the hill where it just gains more and more steam. And so that was also very, uh, yeah, uh, very, um, attractive. Uh, and I saw a lot of this happen at Square. So I was at Square, Square acquired one of my companies that had started and I was there pre-IPO. And really saw them go from being a payment dongle business to the juggernaut that they are today. So back then cash app was a glimmer, was still small, but you could just see how some of those early bets uh can really start to gain steam uh within a financial platform and really scale up. So I'd say those are the two things. One is, uh just being at the center of information flow, and the second is what the platform could become in the future. I think in Silicon Valley we're like obsessed with startups, specifically like new small startups. But one thing that's very exciting is like you take your eye off of a company for a little bit and then you look back at them, like AngelList, you're like, oh my God, they actually have three or four products that are doing a lot more. So talk about the, uh, kind of information flows that AngelList got to see, uh, back then, and then what they get to see, uh, today as well. Yeah. So in terms of the information flow, uh, you can really think of us as having pretty broad visibility into all of tech. And it starts off with, uh, GPs making an investment into a company. And typically the GPs on the platform, they are the, uh, folks who've started individual SPVs, all the way now we're much larger, where, uh, if you're doing like a, uh, mid-stage fund, you can also run an AngelList, or even a large fund. Yep. And so the information we did, we started to see first was all of the deals that were getting done in pre-seed and seed companies. And because we're the signatory for most of these companies, we also see all the deal docks, all the following deal docks. And so we're able then to see how some of these companies, uh, continue to graduate from round to round to round, and you can effectively think of us as being an index in all of venture. And in fact, uh, the way that we run our some of our data analysis, when we're comparing to market data, we have to actually wait for pitchbook or others to catch up to us for us to be able to say something like, yeah, we do see a pro X percentage of all top tier US VC deal flow. We have to actually wait two quarters, uh, for them to catch up to our data. And, you know, beyond that, we are also, uh, starting to see some of the underlying portfolio KPIs, uh, because we're launching some new products around being able to track investor updates, structure it on behalf of the behalf of the fund, uh, and those are some of the new products that we recently launched. Yeah, and that's one's AngelList relay, which we'll talk about. Yeah. But before we talk about the breadth of product you're doing now, 2022 was probably not your first crisis at AngelList, but your first very big crisis. Your biggest product, one of your best known for, uh at the time SPVs, revenue doesn't just flat line, it literally goes to zero. So how did you respond to that? What was it like at the time to be operating the company and what does AngelList look like on the other side of that crisis? Yeah. So that was in May of 2022 and just to remind folks, uh because I think, uh as humans, we have a very short-lived memory. And now when you say crisis, like, wait, was that the SPV crisis? Was that the, was that the venture funding crisis? Very first one was actually COVID. Um, that was like a few months in the job and it was like The world is literally shutting down. Okay. Uh, just roll with it. Um, but speaking of May 2022, uh, crisis, this was actually the second market crash. There was a big dip, but this one was like a really big one. And there was something about this crash that intuitively struck me as different. And struck me as different in terms of it impacting venture in a way that the first one didn't feel like it was going to impact it. And maybe it's because I'm I'm uh way too online on Twitter, maybe it's something else, but just the overall chatter felt like venture was going to freeze. Uh, and uh, obviously the public markets were already frozen. And at that time, uh, a large portion of our business was indexed on SPVs and, uh, carried interest that we have because of AngelList LPs investing into deals. And when you have activity freeze in public markets and venture, well, by definition, you would also see activities there freeze. And so we did see a, uh, decline in in revenue in like a very short period of time. And the way to think about AngelList is, uh, and this is how we think about the business is we spend a lot of time creating products that deliver a ton of value. And then we actually, uh, wait. And AngelList has been around since 2000, uh, is it 11 or, 2000, yeah, 2011. The way to think about the current instantiation of AngelList is effectively a restart and a reset when I when I stepped in.
[7:05]Because we actually changed a lot about the underpinnings of the business. I took, uh, what was the syndicates business back then, uh, and I spun it out, actually, it's its own company. Uh, and so think of that as like a founding moment at that moment in time, and an and it wasn't a very contentious conversation. It was more of a, okay, this has happened. Let's move fast. Effectively turned into great. Here are all the things that we have in a roadmap. Here are the things that really matter right now. We now need to get it done in three months. Let's go. And it ended up being a really energizing time for the company, um, and, uh, I was, you know, super proud of the way the team came together. And we evolved the company overnight and, uh, you know, if we look back now, we're actually stronger than we've ever been, uh, as a company. Uh, we are also profitable and we're now just continue to expand and build on the momentum that I mentioned earlier, which is how do you just create more momentum? How do you create more products that feed into the overall strategy, uh, so that we can just continue to gain more and more market share? And I want to bookmark that entire, like one interesting question about product is how do you think about launching new products and what gross margin? But first, just to put a pin in what the transformation looked like, going from more SPV oriented to helping GPs, general partners run and manage venture firms and having the multiple products. So what were some of those products you had to launch and compress the timeline for bringing into market to help serve GPs joining funds? So a lot of it actually came from us accelerating the work we were doing around venture funds and rolling funds and being able to drive a lot more volume and a lot more sophistication around the fund product. So one, uh, underappreciated, uh, fact about AngelList is when we went into the funds business, we've actually always approached it very thoughtfully and carefully in terms of us going after certain sized funds. So when we originally started with the SPVs, it was only SPVs. Uh, when I stepped in, uh, we just started getting into funds, but these were like 500k funds, $1 million funds, really, really small funds. And Rolling Fund, you I guess you started with a traditional funds product for very small funds. And then you launched the Rolling Fund. And then you kind of revisited and rebuilt traditional fund products. Exactly. Yeah. And the core of that, uh, was, when you're a, um, a technology company, you have to pursue products that are differentiated, that you are known for, uniquely known for. And when you do that, the rest of the business sort of lifts, right? So rolling funds, uh, were very uniquely known for, and in fact, no one else has done that. Actually, also uniquely lifted the rest of the business. So you always want to think about certain products, uh, that have the ability to lift the rest of the business and feed the strategy for the rest of the business.
[10:07]Yeah. And so the sweet spot used to be people doing SPVs or maybe small funds. Now today, probably the sweet spot is people running $10 to maybe $50, and I know you support, you know, folks with $100 million for the sweet spot, especially in differentiation of the market is probably $10 to $50 million funds. So no, it's actually now, so every year it actually grows and changes. Because every year, uh, we actually keep expanding. And so now we're looking at $150, $200 million funds from a, uh, full service perspective. So the one of the products is we just handle everything end to end. We do serve, um, the ultra large funds as well. Uh, so we do serve, uh, the entire scout program, for example, for a top five VC. And then for, uh, some of the ultra large funds, like a, uh, $20 billion valued uh, V fund, uh, we actually, uh, serve them with all the software needs as well. Yep, totally. And that's been the big focus since you joined in 2019, but especially after the crisis in 2022 with the benchmark correcting. Exactly. You've also built other products. I think it's interesting to talk about some of the products you built for founders and for startups, specifically AngelList stack. The way to think about it is AngelList has three customers. Um, we have GPs and funds, we have LPs, uh, folks who invest in the funds, and then we have founders and startups.
[11:34]And so for startups, um, when I joined, uh, we didn't have a product for startups, which felt, um, a little bit off. And, uh, so we started looking at different products that we could build. And just like any new product exploration, we did some wandering, right? I have a, uh, a tweet, uh, pinned on my on my Twitter account, which is from Jeff Bezos of guided wandering, right? I've always loved it. I think I've just had that pinned now for many years. Uh, it's always just a good reminder of, uh, how sometimes uncertain new product discovery is. Yeah. And, uh, so we did some wandering, uh, and our first instantiation of stack was, the second you have an idea for a company, click a button, we'll handle it all. Incorporation, banking, cap tables, you come to us, we got it all. I can just see the product session that's like, okay, let's map out the founder journey. Incorporation, you're like, great. Let's start there. Yeah. And it was great. It was exciting. We're like, fuck yeah, this is awesome. Yeah. Let's go do it. And we actually launched it at AngelList confidential. And, um, so we launched it and, uh, we had people that loved it. They loved the whole bundled product. But, uh, as we went through, we realized, hey, you know what? Incorporation is commodity, right? And we'll never own all of incorporation. In fact, I think Stripe Atlas has done a great job working with partners trying to create that funnel. And now more and more they're centralizing, but we viewed incorporation as a commodity and not something that we thought we could own 100%. Uh, and so we said, great, we'll partner with Stripe Atlas, so that's what we did. And same thing on the startup banking side, uh, so we have a pretty sophisticated banking infrastructure, uh, and that's on the fund side. That's with I think Unit and Thread and probably some other folks for treasury as well. Yeah. So it didn't even use our core infrastructure, which is very sophisticated. Um, but we built it, uh, you know, we kind of incorporated it, but built it as a experiment. Let's just see what happens, right? Uh, because our view was, hey, get them in incorporation, they get everything, and let's see where it goes. And, um, you know, same thing, we weren't uniquely positioned there, uh, for what we really wanted to do. Um, but when it came to cap tables, uh, we looked at it and we said, hey, we have a unique point of view on cap tables. We have a unique point of view on fundraising. We have a unique point of view on how you can fundraise from small checks. So that's that's how RVs came about, uh, and, uh, that's how some of the other products features came about. So specifically, the incorporation product you mostly sunset and turned over into a partnership with, yeah, Wandering like kind of pushed that. Exactly. Same thing with banking. How hard was it to kill a product? Like, were there people inside like, whoa, why are we doing this? Because that's one of the big questions if you're going to wander and you want to build a platform, you are going to have to build a lot of product. Yeah. It can be very hard, like there can be the personal political aspects of someone owns it, they don't, they're like baby to die. Or just the higher level strategic questions of deciding how do you measure ROI, decide whether or not to kill. So, how did you decide to kill that product? Yeah. I think, uh, for each product, it's different. Uh, for this one, it came down to a simple question of, are we uniquely suited to win here? And you kind of know if you're uniquely suited to win. You just know in your bones, you just you intuitively just know, yeah, you don't have a unique point of view. Yeah. There's probably uniquely also the CEO's job to figure that out because your individual teams, you need to understand, you have more context, and they may have may slightly different incentives, although hopefully culturally even instilled with them the right Yeah. Yeah. And so, I think that's a part of it. Uh, sometimes though, you just need more information, right? I think some some folks in, uh, in the company, uh, would argue that sometimes I take too long to come to that conclusion. Yeah. And, uh, and I think, look, it's all, it's actually all correct. It's just a question of where on the spectrum, uh, are you in that, uh, decision making? And, you know, so certain products, it's pretty clear. It's like, yes, we don't have a unique right to win here. We don't have a unique point of view. Yeah. And other products, it's, uh, hey, we're just there, we're waiting for more information for another turn of the card. And if that other turn of the card gives us the information, uh, to keep at it, great, we'll keep going. And so there is no one right answer. Now, to your point about the organization being able to absorb those types of decisions, we do a lot of work to, uh, frame ahead of time that, uh, something is an existing product and a core product and something is a new product. Uh, and new products, you should assume a failure rate. So what matters isn't, uh, that you failed a bunch. What matters is that when you're right, you want to be extremely right.
[16:35]Yeah. I think no one's perfect at this, but the idea of having kind of a pre-mortem or like, like if we don't hit these things, default kill. Yeah. It's really hard to instrument, uh, back to what I mentioned earlier, sometimes, uh, you're just waiting for that one extra bit of information. Yeah. And, um, I'll I'll share a story from from Square to to make this point since, uh, now we can actually see the the the the result of it. And, uh, and maybe this is, uh, you know, uh, this is a selection bias thing. I'll share it anyways. When I was at Square, uh, before the company was going public, Cash App, um, at the time was popular, but it was sort of sideways in growth, um, economics wise, it wasn't doing that great. And there was a chorus of people inside the company that really wanted to shed it. Uh, and they all made very strong logical arguments. Uh, one of the strongest ones being Venmo has network effects. So how can you beat a network of that company? You can't, right? That that was the argument. And it was like, man, that sounds smart. Yeah. Especially when it's tied to a larger incumbent who's willing to subsidize it. Exactly. And I was like, okay, that I mean, strong argument. And then the other side argument is, well, yes, they have a network effect, but only in the coastal cities. So actually, if you look at Google, That's what's surprising is, I don't think people understand that the communities using these two platforms were quite quite different. Exactly. Completely different. In fact, um, uh, I was forcing all of my friends to to download cash app and they just hated me for it. They're like, why are you telling me to download Cash App? I'm like, I'm only going to pay you if you download Cash App. And I would sit there and wait for them to download and like, I'm using Venmo. And I'm like, no, you have to download Cash App. So the network effect argument was real, except it was a selective network effect. It was within specific communities. And, uh, ultimately, the decision there was to keep it and to keep going, right? And if you'd applied any sort of quantitative metric and saying by this date, if this and this doesn't happen, then you definitely shed, you effectively, uh, make an irreversible move. So this goes, uh, back to, um, are you dealing with a, uh, one-way decision or a two-way decision? And so sometimes it is hard to just set that in place and make that decision. Um, but, uh, at AngelList, we do try to, um, be intellectually honest about it.
[19:15]Yep, totally. And at any moment in time, we are, uh, you know, we're always experimenting, tinkering, uh, and, you know, like I mentioned, uh, we have certain unique, uh, point a point of view on the world that we want to share. Uh, and if we do it right, it'll become the next big product for the company and, uh, it'll create a whole new growth trajectory for us. Yeah. So being fabric of venture, private equity, private ownership, generally. Um, I want to move on to just a more rapid fire section of the interview, talk about especially because AngelList has your unique data set and unique lens in a certain part of the ecosystem. Just ask some more general questions. So one, um, curious your perspective on the extent or the value that having lots of new and smaller funds launch does or doesn't bring to the ecosystem, speaking as a solo GP running a.
[20:17]Yeah. I think the the key thing is focusing a lot on these like interim metrics, um, and not enough on, are they just getting into the best companies? Are they backing the best founders, who founders want to work with them? And a lot of time there's a focus on all these intrametrics, like TVPI, IRR, um, and I think those are important metrics, but ultimately, those metrics are a reflection of has some investor marked up the company and nothing else.
[20:59]Yeah. And it didn't work when the market was hot, because then graduation raised for 100%. And it didn't really tell you about the underlying quality of the companies. Doesn't really work today because the market's cool. And so emerging don't have markets. So you have to use Exactly. And so this goes back to, uh, you have to apply, um, a judgment and look at other signals.
[21:26]And so I think, um, yeah, it's hard, don't get me wrong, because it's a hard problem to solve. Because it's in a way, it's an adversarial environment, right? It's a, it's a founder's fundraising. It's an adversarial environment. They are by definition incentivized to say, hey, um, I'm great. You should invest in me. Yeah. So then the question is, how do you, how do you parse through that? And sometimes you need that, you just need that judgment. Um, but I think that's what they get wrong today's a little too much of a focus on metrics and less on just asking, will great founders want to work with this person?
[22:15]Right. What can they bring to the table for them? Yeah, totally. Um, another question. I'm curious how you think AI, how it might change the practice of venture capital. So not necessarily the types of companies, but how venture capital itself is going to change as a result of the new capabilities we have with large language models. Yeah. So, um, yeah, we actually have, um, uh, it's one of the products I alluded to, and something we're, uh, pretty excited about, uh, I think, it's going to change the way in which, um, GPs access data and access information about founders, about their portfolio, uh, how they engage with LPs. Uh, today, a lot of it's very mechanical. If you have a question about a portfolio, or a question about a founder, you're searching, you're constantly searching, right? Uh, well, I think, There's a lot of unstructured data inside the venture firm who takes a very slow to answer simple questions. Not only inside venture firms, outside venture firms, right? Imagine there's all of this data that's out there at any moment in time. And you have teams of humans out there sourcing and doing this and applying their judgment, when in reality, what if you actually had an agent that took your own judgment and replicated you out into the ether, right? And so you're grabbing all the information. So I think we're going to see a big change, uh, around how the how GPs and the best of the best GPs operate, where everything's at their fingertips, right? So ask a question and get an answer, or, um, information is pushed to them. And so I think there that's a very interesting area of exploration, and generally where I think the world is going, uh, where you have, uh, a really smart, capable, um, agents that is really tuned to exactly what you want to do, what you're looking for, uh, except I think in this case, for us, we're going to be looking at a venture, venture space. Yeah. Um, I think I curious, you react. One impact, so you talk, it'll change how you use data inside of a venture firm. That'll be interesting. I think the most interesting will be outside of a firm, how you actually source deals. I think it's going to become, it's already become, but incredibly hyper-competitive, uh, series A and later. Uh, because there used to be this constraint on how much a data an agent, which was a real person could process. Yeah. Now you have thousands of agents across thousands of firms extracting tons of data insights. Also, maybe they just charge slightly lower carry and management fees and they can get the same net of fee return. So I think just the competitive in this happens in capital markets. It'll be incredibly competitive for any late stage.
[25:15]Which is crazy because it's competitive. Yeah. Yeah. And then of course, as a broader question of, uh, what happens to returns, and, you know, we'll we'll see how all that plays out.
[25:26]Uh, and last question, what trends do you see at AngelList today that maybe others aren't seeing? Actually, I think the one, um, one trend is seeing how, like how good of an investor some of the very best technical founders are.
[25:46]And I've seen this across multiple founder led venture firms, where they're running a company, uh, and to be clear, they're running a late stage company. I think it's actually pretty hard to do it when you're a small, uh, an early stage company, but you're running a late stage company. And what's happening is other founders want to work with you. It goes back to his mentioned earlier. What right do you have, uh, to, uh, invest in a company where the founders want to work with you? And this is something AngelList uniquely sees because, uh, you know, our products have made it even simpler for them to get going, even simple to raise money. And I think that's actually been very under discussed. So it it kind of, uh, rides on the solo GP wave. But it also rides on the technical founders, um, having some visibility in the community and that other founders want to work with, and that turns out to be extremely, um, uh, extremely, um, useful in building a great portfolio. And uh I was I was actually surprised by it, mainly because of the amount of time sometimes it takes to to meet with the best companies, but it turns out that your selection bias is pretty good at that point. Um, so anyways, I think that's it. That's been an under discussed trend, uh, mainly because we haven't really shared that data externally. Yeah. And I think it's interesting because you just talked about solo GPs and why people like working with them. And I think the dimension is like, yes, they understand and they're able to underwrite good investments. One thing that's interesting too is if you understand that you're also able to show more conviction. And you probably know as a founder, like when someone shows up and they like understand your business, it feels so good. Yeah. Because there are so many people who don't. And like the last businesses I don't understand, right? I play in a certain niche. And so that's incredibly powerful. Yeah. And they can actually help. And especially if you have a company in in in a similar space, they can actually help you accelerate, uh, your company, whether it's through, uh, you know, finding the right investors, whether it's through, uh, helping with, uh, amplifying the product. There are many ways in which that that works. And that was not a trend 10 years ago, at all, right? Uh, you know, I was I joke around all the time, if the fund infrastructure existed 10 years ago and I invested money into all my close friends, I would literally have the best return in portfolio of all. Because it's just like, there, because investors is very hard. There's you could start a $50 or $100 million fund, but Yeah, there's I didn't even I didn't even think about that when I was starting my first company. This was like 2011. It literally didn't even cross my mind to go do a fund, right? Some people be like, oh, founders should not be running a $5 million or $10 million fund on the side. And maybe they're right, but what's great is that you actually conceivably can, and the infrastructure exists. So you don't have to do it, but you could do it, and sometimes it will make sense.
