Jason Calacanis On the Expensive Lesson Coming to Silicon Valley

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, we've been talking a lot about tech, startups, VC, but this space is so big and it's so opaque because we don't really know what's going on with VC funger performance, we don't really know what's going on with startup earnings or most likely startup losses, that I feel like it can never hurt to get more perspective.

Tracy Alloway (0:36)

Yeah, we've had this conversation before. It's easy enough for a publicly listed stock, you just look at a line on a screen and you get some sense of how things are going.

Much, much harder in venture capital world. And then just to add to that, you also have this really interesting culture and dynamic around VC and angel investing where it seems like everyone is incentivized to pour more money into stuff and to get the valuations up. And then the question is what happens when that dynamic starts to go away or at least becomes a little bit more challenged, which is what has happened over the past few months?

Joe Weisenthal (1:12)

Right. All kinds of interesting dynamics. Publicly listed companies like Amazon or Facebook, they might come on struggling times, but I don't think anyone really doubts the viability of the business. With startups, of course, some of these companies may just not have business models that work. They may be a long way from anything resembling profitability and might have to make tough decisions about growth versus survival.

All kinds of sort of tricky questions arise in the private tech world that you just don't see when we're talking about public stocks.

Tracy Alloway (1:43)

Exactly.

Joe Weisenthal (1:44)

So let's talk about it more. I want to jump right in. We have a big guest today. We are going to be speaking with Jason Calacanis. He is a popular podcaster on the All In podcast. He is an author. He is an angel investor who has done over 350 deals over 11 years.

Former journalist, former blogger, specifically. Over many years.

And he is going to talk to us about the state of the world. Jason, thank you so much for coming on Odd Lots.

Jason Calacanis (2:15)

Oh, big fan of the show. Thanks for having me.

Joe Weisenthal (2:17)

You know, I DM'ed you a while back about having you on. And then I looked in our DM history. We haven't really talked that much. But I saw it in like 2009 You're like, hey, I'm going to be in New York and meeting some people for Dim Sum. Do you want to come? And I don't think I responded, or I definitely didn't go. But I should have, because you've had like a pretty great like 13 years or 10 years since then. So I should have been your friend all this time.

Tracy Alloway (2:39)

It's such a humble brag. I was too busy to respond to the big angel investor that DM'ed me to grab lunch.

Joe Weisenthal (2:45)

I blew it, because you've, you know, I'm here, but you've grown up, so you've had a good run.

Jason Calacanis (2:51)

This is my credo as an angel investor, actually. I have 20 or so people in my investment company, Launch and thesyndicate.com.

And the first thing I teach new investors is never underestimate anyone, because we will see people from, you know, a random assortment of beginnings and weird products and terrible ideas, and all of a sudden, they change the world. And so, you know, if you look at the first version of like Uber, the app, Travis hated it. You know, it was like really ugly, and, you know, he was just beside himself at how janky it was.

Joe Weisenthal (3:25)

What was Uber worth when you invested in it?

Jason Calacanis (3:30)

I think that round was four and a half million dollars. Yeah, five million dollars, something like that. And com.com was worth five million dollars when we invested. Density was around four million dollars. density.io, that's another unicorn we invested in. So in that cohort, when I started angel investing was right after the great financial crisis, 2009, 2010 What happened was I was running a company called mahalo.com, which is now called inside.com. It's still running, doing millions of dollars a year in revenue.

And Sequoia, Rulof Botha, who was the latest partner there, he had just started as a partner there working with Michael Moritz and Doug Leone.

And they said, you know, you introduced us to all these really cool companies.

Would you be a scout for us? And I said, how would that work? And they said, well, we'll give you money and then we'll split the returns 50-50. And I said, well, don't you get like 20% and 2% like management fees? I said, oh, we get more than that. We get like 30% worse than Sequoia.