The State of the Venture Industry: Q&A with Jason Calacanis (video)

On Fundraising

“There has never been a better time to be an entrepreneur”

There have never been more problems to solve in the world and more money is trying to enter venture capital than ever before. Most people believe that the stock market is fully valued and the number of publicly traded companies is half what it was at its peak. Though the number of SPACS, IPOs and direct listings is increasing, there's a lot of capital chasing very few deals.

One of the things investors have realized is that they should get in on deals much earlier. We see the trend every 5 to 10 years when new money tries to enter the industry. Recently capital from Russia with Yuri Milner as well as Japan with Masayoshi Son / SoftBank’s vision fund have entered the US VC market. 

On Valuations

“Currently, we’re at a peak and valuations are really high”

This swarm of new capital is vastly increasing valuations at the early stage. Investors are now having to pay premiums because of the market conditions. For example, when I invested in Uber, it was reasonable to expect a $20k-$50k check to turn into 9 figures, that’s not the case today.

Now some companies that have done less than Uber, Thumbtack, Robinhood are being valued at $50 million even before they launch. So investors are having to pay 10 times as much for a company that's done 1/20 of what companies were doing 10 years ago. This is a great deal for founders but it's not great for investors. The equation of buying low and selling high has somewhat been broken because of this.

For example, I once spoke with a Ycombinator company that was valued at $15m with no revenue. When I bought up the fact that Uber and Thumbtack had a $9m valuation, the founder said “yes and this is 50% more”, without realizing that $9m was the total for both companies.

On Pitching Investors

“There are do-ers and then there is everybody else”

One of the things we focus on in the early stage is the customers of the startup. As a founder, you should have data on your paying customers at hand. It’s especially concerning when founders are not tracking data regarding their customers. Your customers cannot be friends or family members, nor can they be people you met at a party. They should be individuals paying for the services you are providing.

What I look for when talking to a founder are ping-pong and tennis volley-like conversations. A rhythmic back and forth discussion with clear, direct and short answers are what investors are looking for. Don’t go on a tangent about your vision, your previous startups, or your childhood as it signals that you cannot answer the question and you are at the early stages of development.

On Being an Outsider

“Newsflash, the world is unfair and bias exists”

As a kid from Brooklyn, I thought wow I’m so far behind the kids who went to an Ivy League college like Stanford, Harvard, MIT, and who had rich parents. Then, I looked behind me and saw a whole other crowd of people whose starting line was even further behind mine. I realized everybody has a different starting line and you just have to work hard.

It’s important to make a plan and route your journey. I become an advisor to companies and helped their marketing efforts. You should use your skills which are unique in the world to help founders. This is a great way to build your credibility and get 25 to 50 basis points in a company.

Today, being a recruiter to companies or growth hacking is a great set of skills. Every great company needs great talent, growth, sales and PR. If you don’t have such skills then you can learn them on YouTube or MITs open courses. 

On Building a Community

“Build brick by brick”

There is no shortcut to building a community. The secret is to turn up every day. When I started I would host meetups and pick up the bills. People want instant results. Myself and Adeo can now host an event and have 400 people show up.  When you do it for the first time only 4 people will show up. Next time it will be 8 and so on. So just put in the work, be consistent and take it one day at a time. It’s like building a fire, add small sticks and pieces of kindling and eventually, you will build a roaring fire. 

Advice to Founders

"The key is to not overcomplicate things"

Being a great founder is about building a great team which then builds a great product that delights customers so much so that they repeatedly use it. Obsessively work on your product 10-14 hours a day, 5-7 days a week. If you are willing to sacrifice, be the leader and not cut corners you have a good chance. 

Stay focused on your mission for a couple of years. It may or may not work out for you in your first company but statistically, it will work by the third or fourth company. If you focus on that flywheel you will do great. What you should not do is focus on getting on TedX or Forbes 30 under 30 or 40 or whatever it is. 

Lastly differentiate your company and product. For example with Slack. Salesforce could have made a chat room in about a month as they have hundreds of developers. They recently paid $25 billion. So brand matters as does the intangibles at the early stage.

Read more on Jasons thoughts on early stage investing, the market, strategies and Sequoia’s new fund structure

Jason Calacanis is an entrepreneur, author, and angel investor in 250+ startups (including 7 "unicorns"). He is also is the host of the popular podcasts 'This Week in Startups' and 'All-In'. Named “arguably the world’s greatest angel investor” by The Twenty Minute VC, Jason was one of the first investors in companies like Uber, Robinhood, Wealthfront, Thumbtack, and Trello.

Jason is also the author of Angel: How to Invest in Technology Startups (Harper Collins, 2017), Founder & CEO of LAUNCH (including the LAUNCH Festival and the LAUNCH Incubator), Founder & CEO of Inside.com, and more - you can learn more about Jason at https://linktr.ee/calacanis.