Episode #469: Jason Calacanis on Democratizing Venture Capital, How to Handle Large Winners, & Why The Price You Pay Matters…Even in Venture Capital
Guest: Jason Calacanis is a serial entrepreneur, angel investor, podcaster, and writer.
Date Recorded: 2/10/2023 | Run-Time: 1:07:41
Summary: In today’s episode, Jason shares why he’s more excited about the startup landscape than he’s been in the past 10 years. He touches on his approach to handling his large winners like Uber, Robinhood & Calm, lessons learned from surviving multiple cycles as a venture capitalist, and why he’s now focusing on democratizing access to venture capital.
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Transcript:
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Meb Faber is the co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
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Meb:
What is up, my friends? We got an awesome show for you today. Our returning guest is Jason Calacanis, famed angel investor and podcast host of the All-In podcast and This Week In Startups. Today’s episode, Jason shares why he is more excited about the startup landscape than he’s been in the past decade. He touches on his approach to handling large winners like Uber, Robinhood, and Calm, handling your losers, and also lessons learned from surviving multiple cycles as a VC. And, why he’s now focused on democratizing access for everybody to venture capital.
Before we get to the episode, do us a favor, please be sure to share this podcast with a friend. We have some incredible shows lined up and you don’t want to miss them. Please enjoy this episode. Jason Calacanis.
Jason, welcome back to the show.
Jason:
Great to be here, big fan of the show and yeah, let’s get to it. Lots to talk about.
Meb:
Man, it’s been, I was like, I looked it up the other day, because I wanted to listen to our old interview. And I was like, “How long has it been?” And I cannot believe this, but it’s literally been five years. You were in LA. It was episode 69, and we’re closing on like 500 now.
Jason:
Oh. Am I 420 and 69? Wow. What a coincidence.
Meb:
Well, we’ll see what number this is.
Jason:
Name it 420, just for the heck of it.
Meb:
Yeah, no matter what. But listeners, definitely go back and listen to the first episode with Jason because we do a lot of background and lay some foundation, talking about angel investing and we’ll talk, we’ll get in deep again today, but it’s definitely worth a complimentary one, two listen. It’s really thoughtful and I think it aged well, and we’ll touch on some of the stuff today. But first we got to talk about a couple things. Where do we find you? Are you in the Sierras?
Jason:
I am at Lake Tahoe. And so, I gave some thought over the last couple years after a friend of mine died. Tony Hsieh, the founder of Zappos, a very close friend of mine, tragically died. And I was like, gosh, he lived such an amazing life, such a beautiful human being. His book was Delivering Happiness. He tried to make everybody happy and joyful, every chance he got. And I was really impacted by his death, which came the day after my 50th birthday, during COVID. November 29th was, I think, when they officially said he had died. And as I was having conversations with some friends, and it turned out I had never really thought about anything that I enjoyed in life, or optimizing my life for my own enjoyment. I’ve always tried to be of service to my family and my friends. Tried to be a really good friend, really good father, really good husband, really good investor, board member, collaborator, boss, whatever it is.
And I was talking to him, I says, “What do you enjoy?” And, “I like doing my podcast. I like angel investing.” Like, “Yeah, that’s for other people as well as yourself, but is there anything you do, just purely for yourself?” I said, “I always like skiing. Great memory, skiing with my dad when I was a kid at Hunter Mountain and Wyndham.” Then I just said, “YOLO,” and I bought the best ski and ski outhouse I could find with a movie theater in it. Quite an indulgence for a kid from Brooklyn who grew up middle class to own a second home. To even own a primary home, to me, but to own a ski house. That ski-in, ski-out was a mind-blowing concept for me. And last year, I skied 40 days. This year I skied 16 or 17 so far, and then I’ll be going to Nasako in Japan in two weeks or probably at the time you publish this, and I’m doing a, speaking again in Tokyo.
But I had on my bucket list, I always wanted to ski in another country, whether it was South America, Europe, Courchevel, Italian Alps, whatever. And Japan specifically. And I got a speaking gig in Tokyo, a low paying one, not one of my big corporate ones. And I told my speaking bureau and the people who do my speaking stuff internally, anything in Miami, Salt Lake City, or a ski town or Japan, I’ll do. France, whatever, if I get a paid speaking gig, because I had said no to them for a couple years. And yeah, I’m going to Salt Lake next week.
Meb:
Is this the first time for you to Japan?
Jason:
First time to Nasako, to ski in Japan. I’ve been to Japan many times. It’s one of my favorite places to go. So anyway, long story short, I’ve been trying to incorporate some things that I enjoy into my life every year, now that I’ve turned 50. You know that I’m in my fifties.
Meb:
Well, smart and thoughtful. Before moving to LA, I was a Tahoe resident, so I lived down in Dollar Point, different part of my life. I lived with five roommates and worked in Incline Village. But, Jason, I just got back from Japan last weekend. I grew up skiing in Colorado. But we have a kind of an annual ski trip that’s been going on for a very long time. It started out mostly in the US, but then to Canada and elsewhere. But you and I can download after this, so we don’t spend the whole time talking about it. But we’ve been to Japan skiing, probably five or six times. And I imagine we should talk something about markets eventually on this podcast, but.
Jason:
Yeah, sure. Absolutely. Well, I’ve become a public market investor now, with my jaytrading.com.
Meb:
I was going to ask you about how many days you got in this year, and all right, so one more rando question before we start. I don’t know if you saw this, but I tweeted this to you. There’s an annual thing we do every year. We’ve been doing this for probably seven years on Twitter. And I was actually writing about a variant today. I was talking about free money in markets, and one of the things I tweeted out today is to the followers to say, “What do you earn on your savings cash balance?” And I’ve done this various years and the answer is always, half the people say either they don’t know what they earn on their bank account or it’s essentially zero, which is free money because you can get 4% anywhere now. Buy an ETF, get 4%, put in T-bills.
But there’s another one that we’ve been doing for a long time, which is looking up abandoned assets at state governments. So it’s in, the main website is called unclaimed.org. But we talk to financial advisors who do this and I say, “Hey, you can do it for clients. You go to Thanksgiving, talk to your family, look them up.” And what happens is people move, they have stock certificates. We found millions and millions of dollars for people. I think the largest is like 250K. We don’t take anything obviously. We say, “Hey, go find this.” Nothing people like better than found money and goodwill, but we are demonstrating this other day on Twitter, so you don’t believe me. I say, “Who’s got a funny name? Calacanis.” Did you know this? You got like 15 grand sitting in the state’s treasury.
Jason:
I know about this.
Meb:
You’re not going to claim it? You’re just going to let us sit there? Jason, come on man.
Jason:
I have people in the process of doing this. This has literally been coming up for two years. And yeah, I do have 15K and I think it’s from when I was in New York. We had a bank account on one of my businesses and somebody didn’t empty it and, or it was some bill that somebody owed me or something. So yeah, they’re trying to find that 15K. And I think I’m getting at Robinhood, five or 6% on my cash there. And so I was like, “Whoa, that’s compelling,” because I’ve been Jay Trading. And if you go to jaytrading.com, I decided watching you do public market investing and Bill Gurley and other people, I was like, I need to learn. As a private market investor, we invest in 50 to a hundred startups a year. We tend to build an ownership position of six to 10% in them nowadays. We used to be under 1%. And I certainly saw companies I invested in like Uber, Robinhood, Desktop Metal, become publicly traded companies.
And I started to have to have a strategy as a portfolio manager of, when do I distribute these? And this is a big discussion. Do you let your winners ride or do you pair your positions? And in some cases, I was selling Uber in the private market for 31 to $36 a share, when it was a private company. Essentially, where it’s trading right now, but below its IPO price. I had opportunities to sell Robinhood at $25 a share, more than the price it’s trading at now. And so I made some amazingly prescient private market trades. We had calm.com, a meditation app we’re in. We had another SaaS company that hit a billion dollars in revenue and we started selling some of our positions and distributing to our syndicate members and to our fund members, which are, they’re incredibly grateful for.
And other people when I sold them were like, “Why are we selling?” And so I said, “You know what? I have to become, just because of the job I have, I have to start trading public markets to understand equities.” And I talk about public equities or just public companies on my podcast all the time, This Week In Startups and All-In. And so at Jay Trading I have made, I’m up 3%. I started last summer making trades. The S&P is up 1.5% in that time. I was up as high as 10, down as much as 15. But I started buying different stocks based on different theories. So I bought Stitch Fix because I was watching people who were involved in the company buy shares in it. I bought Disney, Amazon, Warner Brothers, Taiwan Semiconductor, Shopify, Robinhood, Uber, Apple, Netflix and Facebook.
But I had a different theory on each and I talked about it on my podcast, just to be accountable. And I found when you’re publicly trading, being accountable, saying your thesis on a program, you get back people who are so much more knowledgeable and deep in these names, who then tell you you’re wrong. And then you get to have this great dialogue. And public market investing is completely different than private market investing, because you have so much public data available and you’re not allowed to trade on internal private information. Now you look at private companies. All you’re trading on is private information, insider information. If you do insider trading, you go to jail for public companies. And in private companies, that’s all there is. There are only insiders and there’s only one to a hundred investors in these companies, typically. Everything is insider information, technically.
You’re sitting with the founders and hearing their vision. They’re giving you a deck, they’re giving you projections, and you’re the only person seeing it and you’re making a private market trade. And so this has been wonderful for me. As I look at what’s happening in private companies, I’m seeing layoffs there, I’m seeing restructuring, I’m seeing pricing discussions, marketing discussions, and then I’m seeing the same thing happen at Facebook or Apple.
But one example, Apple made it harder to target users for customer acquisition. They started giving people more privacy and not letting you track people. Well, Facebook got hit by that pretty hard, but my startups got hit by that before that was ever public knowledge. I was watching startups tell me, “Hey, we’re trying to acquire customers and our CAC, our customer acquisition costs is going up.” I said, “Why is that happening?” “Oh, this personal information is being blocked by Apple.” I’m like, “Tell me more.” So all of a sudden you start to see what is happening at a five to 50 person company and at a 50,000 to 1 million person company like Amazon. It’s been really great for me to sharpen my blade and see what happens when they go public. But you do this, too. You did the opposite. You went public to private.
Meb:
Right. And I think they inform each other. A very personal example, I was laughing as you’re talking about this Apple because listeners, if you try to buy a ticket on StubHub using Apple Pay, it makes your email … You have the choice to be anonymous email, but it jacks up the connection between the ticket brokers and they lose the ticket. And so I was sitting there at a Nuggets game, downtown LA and one person after another came up and said, “Hey, I got the StubHub ticket, but it’s not downloading.” It was just like dozens of people. I’m sure they’ll fix it, but just don’t use an anonymous email if you’re Apple Pay and using StubHub.
So talk to me a little bit about, this is a topic that I think so many people struggle with. We do a Twitter poll and we ask people, we say, “When you buy a security,” and most of my followers are going to be public markets, but I said, “Any investment, when you initiate the position, it could be a fund, it could be anything else, but what percentage of the time do you have sort of sale,” this is to the Twitter poll. “What percentages the time do you establish sale criteria when you initiate the position? So how are you thinking about selling it?” And it’s like 90%, 95% don’t.
And the reason I say that is hey, look, there’s the investments that are going to tank or do poorly, and you got to think about how you’re going to deal emotionally with, are you going to double down? Are you going to cut your losses? Lots of different schools of thought, but you also have to think about it from the winners. And you have a stock that doubles. Hallelujah. Thinking about skiing in Tahoe, “Hey, I’m going to take this money and go to Japan.” But every 10 bagger, every hundred bagger was once a two or three bagger. And so a lot of people tend to be very quick to sell their gains. And so Ernest Sequoia has started, was the big one moving into this kind of like, “Hey, we’re going to maybe hold on to some of these public companies,” but how do you think about these winners? Because, I’ve seen both sides a bit.
Jason:
So my goal was to become a world-class public market investor. Now, I’m a world-class private market investor. That took me a decade, so I assume this will take a decade as well. So then I said, “I want to find companies that are going to be five times bigger in 10 years.” I just thought, that is way bigger than the market grows. It doubles every seven years or so, I guess is a common wisdom. And so rule of 72, et cetera. So I just said, “Five times bigger is absurd. These things are in 10 years, will be growing one and a half times or something. So I’m going to try to find real outliers.” And so that requires a high growth company. I’m not doing this to preserve capital, I’m trying to find five X winners. So that means you’re going to have some risk taking companies that can’t be consensus companies all the time.
And I looked at what was happening during this down market in the third quarter of 2022, and given what I know about companies, I said, “These companies are greatly undervalued in many cases and they have incredible management. And I have a front row seat to how innovative they are.” And so, I believe in studying products in the early stage. I make the majority of my decision based on the founder, the product, and the customer reaction to that product. Three things, the founder, the product and the customer. And in an early stage company, they might have two customers when we invest, it might have five customers when we invest. Might have 15, 50, who knows? And they might only be making 5,000 to 50,000 a month. That tends to be our sweet spot for an angel investment. Very early stage.
In public markets, the management teams are pretty well established. You can garner some data on that. Do they do what they say they’re going to do? And then the product is where I start to really look at it. And so, when I made my Warner Brothers Discovery trade, and I made my Netflix trade, and I made my Disney trades, looking at those companies, I perceived in each one of them some massive strength on the product front. And then maybe, that the overall category would be transformed in a way that people didn’t anticipate. So for Netflix, people were in that stock, but it was incredibly low-priced, historically. But when I saw what they were thinking of doing with advertising and how quickly they were moving, I said, “Whoa, product velocity, they’re moving really fast to add this advertising tier and they’re losing subscribers.” And I was like, “Wait a second. They’re losing subscribers. People have given up on the business, but people really want that advertising inventory.” And I think that they can, they’re one of the three possible winners on the road to what I believe will be one billion user products.
I believe Netflix, Warner Brothers Discovery and Disney will have, the three of them will have 500 million to a billion users in the next decade. Those subscription level services have never existed in the history of humanity. The largest subscription services tended to be the telcos, a hundred million people for AT&T or Verizon. Even AOL. It hit 30, 35 million at the peak, paid for dial up service. But when you watch these companies all of a sudden start to break into 150 million, 250 million subs, I looked at each one. Netflix I bought, because they were adding the ad tier and they were doing it quickly. Turns out that was a pretty good bet. I’m up moderately on that one. Disney, I’m kind of treading water on, but I was watching their innovation with specifically Disney+, and specifically what they were doing with the Star Wars series and the Marvel series.
And I watched those with my daughters and I think the quality level here and what they’re doing with John Favreau, with the Mandalorian, Obi Wan, Book of Boba Fett, it was very clear to me, having watched the Clone Wars with my daughters, how much IP there was in Star Wars and how well they were executing on it. I knew about Ahsoka and then I saw them, they’re going to do an Ahsoka series. She’s Anakin Skywalker’s Padawan. So Anakin Skywalker became Darth Vader. It’s Obi Wan, it was his teacher and I said, “Wow, they’re going to really crush this if they just execute at a moderate level.” And then I was like, “And God forbid, they figure out how to connect the parks and merchandising to Disney+, it’s game over.” So there is so much lift left for Bob Iger.
If they can say, “When you’re watching the Mandalorian and you get to the end of the series,” if it offers you to buy a Star Wars experience at a park, at a discount, or get your reservation for the new Mandalorian ride or whatever experience, which they don’t have yet, or they got you to buy the baby Yoda Grogu Doll, which they didn’t do. And we bought, if I’m being candid, we had bought on Etsy, a Grogu Baby Yoda that maybe wasn’t exactly licensed properly, but we had to have it for our daughters and somebody had made a bespoke one. Boom. I was like, “That’s the winner there.”
Then I watched Warner Brothers Discovery and I talked about Zaslav. DC’s a mess. He puts James Gunn in charge of DC. James Gunn, who did Guardians of the Galaxy, who’s incredibly talented, great leadership. Then HBO. All the shows that people watch, White Lotus, this new House of the Dragon, the new one. Oh, then you have Succession, you have the new one they’re doing, The Last Of Us, you have Euphoria. These are must watch appointment television, which doesn’t exist anywhere. So I just looked at the three of them. I’m like, “There’s no way these things are not two, three, four times bigger in my mind in a decade. I’m going to start building positions in them.” And then when they went down, I bought more, a dollar cost average into them. I want to hold them to see which of those three get to a billion first. I think those will triple in value, quadruple in value, five X in value if they get to a billion.
And then in terms of selling, I’m going for the long ball here. So unless management screws up, what I said to myself is, “Let’s look at them on a yearly basis, not just quarterly, but let’s look at them on a yearly basis. Do they get momentum year after year?” And if they don’t, I can always sell them and take the losses, but right now I’m feeling pretty good about them.
Meb:
And by the way, Andor, listeners, my wife kind of despises a lot of this sci-fi fantasy shows that I love, but she was like, “Andor is the best written show of 2022.” She’s like, “I hate watching these Star Wars, but I love this show.”
Jason:
And that one is not like any other Star Wars television they’ve read, there was no lightsaber in Season one. Spoiler alert. It’s not about the Jedi. It’s about the rebels and it’s about the authoritarian stormtroopers and the emergence of this. It was really an intellectual new take on it. So you say, “Hey, this IP can be mined forever.” And not only that, they can restart the IP anytime they want. So if they want to do the Star Wars movies over again in another 20 years, there’s nothing that says they can’t recast Luke Skywalker and redo the whole trilogy. In fact, they will. They’ll redo all of them. They’ll make alternate universes. If those sequels, the last three, Force Awakens, they were terrible. They could recon them and take them out of Cannon and then just start a new one. And that’s the power of this IP.
They’re going to have the X-Men and Fantastic Four as part of the Marvel Universe since they bought FOX. It was an expensive purchase, but when they put them in there, can you imagine they’re going to get to have the original Wolverine, the original X-Men characters, Picard, all those great actors who played them, and then they’ll get to flip them over and start them over again with a new young cast. It’s going to be, the X-Men alone is double as a cinematic universe. It’s going to be extraordinary, what Disney’s going to be able to do.
Meb:
There’s a great book for the listeners out there who have never been deep in the weeds on venture and not venture, excuse me, distressed debt and activist investing like Carl Icahn days. There’s a great book about the Marvel sort of bankruptcy and a lot of the agony and ecstasy, and just behind the scenes looks into it. We’ll put it in the show note links. It’s really a fun book.
Jason:
Comic Wars.
Meb:
Yeah, I think that might have been it, but.
Jason:
Yeah, Marvel’s Battle For Survival. How two tycoons battled over Marvel. I can’t wait to read that one.
Meb:
Any of these, particularly from the eighties, these leveraged buyout world of barbarians at the gate, there’s so much intrigue and complications behind these stories and it’s always got big personalities. Anyway, so you’re doing this publicly. Part of it is, “Hey, I want to keep myself honest.” Part of it is, “I want to learn.” Has this started to inform your private market on how you decide to distribute or hold onto these? Is it more just like, “Hey.” Talk to us a little bit about that.
Jason:
Yeah, what I’ve learned is the public markets are getting priced to perfection, and a lot of the value is captured in the private market. I think you know that, that’s probably why you dipped into angel investing in early stage investing, was to see if you could capture that spread, between the series A and the eventual IPO. And so if that’s the case, I have now said to my LPs, “When we are at 25, 50, a hundred X on our investment, when we see those moments, we think it’s going to be prudent if we have the opportunity, and we’re going to become even more maybe proactive in pursuing opportunities, as opposed to just reacting from them.” So I’m going to try to build that practice of being a little proactive, and I think selling 10, 20, 30% of your position in one, two, or three tranches, you could sell 10%, 10%, 10%, maybe you get a chance to sell 20% and then 10%, whatever it is, to then lock in a series of wins, knowing that these are really high variance bets.
That’ll allow us to distribute to our LPs, to distribute to our team, keep everybody motivated in the game. And if we have 70 or 80%, or 60%, somewhere in that range, I think 70 is probably the right number. It could be 80, it could be 60. If we have that amount when we distribute from an IPO, that seems about the right number. Because you got to remember, we’re investing, we invested in Uber when it was four and a half, $5 million. Thumbtack, $5 million. Calm.com, $4 million. We’re investing extremely early in these companies and now we’ll invest with a company like calm.com. We own 5% of the company. For us to go from six or five to four and a half. Does it really make a difference before it goes public and as an exit? I think we want to lock in those bets.
And so the only regrets I have right now in some of these selling early, is that I didn’t sell. I don’t have many, I’m trying to think of one where I sold and I regretted selling. I don’t mind selling Uber at 31, 37, a couple years before the IPO at 45. But then I also like the idea of holding the winners, and so that’s where I’ve wound up.
Meb:
Yeah, no, I mean, I think your approach is really thoughtful because behaviorally speaking, there is nothing worse as a poker player, than building up a big stack and then losing it all. The next day you’re kicking yourself like, “Oh my God, I shouldn’t have played that hand. I shouldn’t have done this.” And then that very real emotional pain lasts for a long time, and this happens so much in investing markets. Is it the necessarily optimal outcome? And we always joke with you, because people are always, email me, calling me, saying, “Hey, I’m thinking about buying this fund. Should I buy?” Or, “I’m thinking about selling this fund,” or this stock, and they’re tearing their hair out, gnashing their teeth about it, stressing out.
I say, “Well, if you sell half, or sell a quarter and it’s not, it’s going to give you the average of all the possible outcomes.” And people hate hearing that because they want the sort of guru certainty, but also they want to cheer for something. They want to look back and say, “Ah, I was so smart. I told you so. I was right. I sold at the top, or I got out before it crashed.” But that’s not probably the most thoughtful way to go about it.
Jason:
Robinhood is my big example. I had opportunities to sell and we also were locked up in that one. Unlike some other investments, we have a direct listing. This was a lockup, it wasn’t a SPAC. So we didn’t have the opportunity to sell those shares for six months, and then it’s a $10, $12 share when we’re distributing, as opposed to a 30 or 40 or 20. Or, it had peaked at like 60 when there was some weird stuff that happened in the first couple of days of trading. But I still believe in the company and I actually bought some, because I think this company’s going to be worth more than $8 billion or $9 billion, wherever it’s at now, in the coming years. So I think it’s going to be a $50 stock in the next five years. So I think it’ll be a five X-er for me. And so I literally bought it with cash in addition to owning it, from when I bought it for a couple pennies a share as an angel.
Meb:
Yeah. One of the reasons I like listening to you on Twitter and elsewhere, your podcast, by the way, listeners, two good recent Jason podcasts. You had a great one with, I’m blanking on the name, but a Airbnb co-founder.
Jason:
Joe Gebbia, who people thought, he’s with a G. Gebbia is how people have pronounced it, but it’s actually Gebbia, and he’s one of the co-founders. Thank you. He was just on, amazing guest.
Meb:
Brad Feld, also. We’ll put him in the show note links, so take a listen to those. But you’re not that old. But some of the older VCs or public market people who have been through a few cycles, usually have the scars or the experience to, in a good way, remember it. And you had a couple good quotes or tweets, I don’t know which, but you were talking about cycles and you talk a lot about it, the good times and the bad times. A lot of people don’t. They simply are used to one regime and they get used to it, and there was a really long one for a long time in the US, but he said, “Fortunes are built during the down market, collect in the upmarket. People’s reputations are made in the bad times, more than the good times.” So very similar sort of takes. And talk to us a little bit about how to think through a sort of full cycle investing in your world, because in no other world does it kind of swing between euphoria, Armageddon, on the operating side, as well as the investor side.
Jason:
Yeah, I’ve been very lucky to have great mentors. I was a journalist and then I was an entrepreneur, and then I became an angel investor because Sequoia Capital, my friend Roelof Botha started the scouts program, he gave me some money to invest famously. And I was the first scout along with a guy named Sam Altman. So the two of us had Sequoia companies, he had Looped, I had Mahalo. Neither of those companies worked out particularly well, but we were amazing at placing bets. He actually did a bet on Stripe and I did Uber and Thumbtack as scouts, and those two are two of the greatest investments in the history of venture capital on a return. Because he invested on Stripe in, I think the seed round. So it’s an amazing, maybe 2000 X or something, depends on when Stripe goes public. Anyway, I got to hang out with Michael Moritz, Doug Leoni, Brad Feld, Jerry Colonna, Fred Wilson.
I mean, these were the people who I got lessons from as a journalist, as an entrepreneur and as a capital allocator. And what I learned is great companies are formed, independent of the cycle, and then when the cycle is hot, the prices are high and the diligence and the time to get to know companies is low. And control provisions and governance gets weak, and so you’re paying a very high price for a company. What actually matters is entry price and protective provisions. So you don’t get massively diluted. The primary one is pro rata, do you have the ability to keep investing in a company? Now with Uber and as a scout, we just made a small investment, turned into a huge return, but we didn’t have a follow on strategy for this Sequoia Scouts program.
And when I did my first fund, it was a $10 million fund on paper. I think it’s five or six X right now, and I’m raising my fourth fund. So I’m a very elite level. If you were to include my scouts, I am super elite level, in terms of returns on paper and distributed. That being said, watching what happened, I was like, “Wow,” I was flummoxed at the difference between when I started investing after the great financial crisis in 2008, 2009, 2010, investing in companies for five million and taking our time, and you had a month or two for the round to close. And then the last five years, people were throwing money at these companies. And I was looking at companies we had invested in get 50 million or a hundred million dollar valuations before they had product market fit. And I was like, “Hey, can we sell into this?” And sometimes the founders were a little offended, but I was like, “Hey, for our shareholders, this might be a good time for us to give them a little bit of a return.”
And I passed on investing during that 2021 period, and in 2020 on many companies, because I said, “We’re comfortable with our 8%, our 12% position. We’re either net sellers or we’re going to stand pat.” And I had to explain to people the term, stand pat. And for founders, they’re like, “Well, we want you, Jay, how to invest in every round forever.” And we said, “You know what? At this valuation, we’re going to stand pat. It’s a hundred times revenue. You said you have two million of revenue, you’re getting a $200 million valuation. We’re going to stand pat. We’re not buying more shares. When the valuation in the becomes 10 X or 20 X top line revenue, okay, yeah, let’s talk about it. You have two million and you have 20 million.” So that’s where my brain unlocked. You have to look at the fundamentals of the deal and is this going to get a return for your investor?
Not just, do you love the founder, not just do you love the space, or the customers, or the product, which my 1.0 angel investor did. But becoming a public market investor and watching some of these come to fruition, I got very much attuned to the concept of, “Hey, the public market’s weighing these stocks, right? It’s a weighing mechanism,” I guess it’s the famous quote. And I was like, “We’re not weighing these things anymore in private market land.” These things have nothing to do with gravity. There is no scale. The scale’s been thrown out the window. People are momentum investing. And I’m looking at a company saying, “Wait a second, you’re investing in a company with zero revenue, and is losing all this money at a $30 billion valuation, a $20 billion valuation.” I’m talking about ChatGPT right now. Now it’s a strategic investor. They have different reasons to invest.
And I’m not hating on the company. If you can get Microsoft to invest at a high valuation and do a commercial deal with them, Sam Altman is a genius and he is timing it perfectly. I think he’s playing everything. You couldn’t do it better than he’s doing with ChatGPT. But somebody asked me, “Would you invest in that round?” And I said, “Of course not.” And they said, “Why not? Do you not believe in ChatGPT or Sam?” I said, “No, I believe in those. Sam Altman’s just a great capital allocator founder.”
And so I’ve gotten very disciplined on that and I’m very proud of the fact that we passed on so many rounds, and we’ve had to do a little communication with our CEOs and founders. Because you’re like, “Oh, does that mean you don’t love us anymore, Jay Cal?” I was like, “Nope. It means as a capital allocator, as somebody who represents pools of capital, I can’t invest in a company where the revenue’s flat, or sideways or down. You need to come to me with six months of up and to the right, or on average, up and to the right if you want us to increase our position.”
So we’ve just gotten very good at communicating that to folks. And I am more excited about this year investing than I have been in 10 years. This to me, people are coming to me with amazing deals. They’ve got discipline and the scale makes sense. You’re putting the startup and the business on a scale. You’re looking at it going, “Okay, that checks out with the valuation. Okay. The diligence checked out. We talked to the customers.” Meb, I had people who said to me, “You cannot talk to the customers,” during the diligence process, and I said, “Why not?” And they’re like, “You’re not investing enough.” I’m like, “I’m putting a million dollars in.” They’re like, “Yeah, well the lead investor’s putting in four million. It’s a $10 million round. You’re putting in only a million. And they didn’t talk to customers.” I’m like, “What? They didn’t talk to customers?”
And I’m now going back in our diligence and we’re not perfect with diligence. Sometimes, we make mistakes in diligence, but our diligence process as seed stage investors was I would say two, three, four X than what I was seeing venture tourists doing series B and Cs at, and I’m like, “You’re putting in 25 million and I put in 500,000. I did more diligence than you?” They’re like, “Well, these people are relying on you doing the diligence.” I’m like, “That’s dangerous, because I invested in a five million or a $15 million company and you invested in a 500 million. You need to talk to some customers here. You need to look at the P&L. You need to look at the customer acquisition costs.”
So the discipline is back in Silicon Valley, private market companies are coming back to me. They wanted to do, I had a company, just an obscure find into a profile of let’s say three or four companies recently. They told me in 2022, they’re raising an up round. It’s going to be two X where we invested at. Great. So let’s just pick 20 million as a number. We invested at 20 million. They say, “Hey, we’re going to get 40. Are you participating or not?” I said, “Yeah, get the term sheet and we’ll do our pro rata in all likelihood, or at least we’ll offer it to our syndicate members.” They said to me, “We want you to lead it.” I said, “No, it’s better hygiene. We own 12% of the company.” Just picking a random number here. “You should get another lead. It’s better for you as the founders to price it, because if I price it, I’m pricing it at last year’s price, same price, 20 million.”
So I said to them that, and they said, “No, no, no, no, we’re doubling it.” I said, “Great.” They come back, they’re like, “Hey, we didn’t get a lead, so we want to do a round at the same price.” I’m like, “Get a lead that prices it at that, because the market has deteriorated and the performance isn’t here. Your revenue has gone down or it’s flat. You need to show revenue going up.” They’re like, “Well, what would you price it as?” I was like, “If you get a deal,” let’s just take the 20 million average. I said, “If you got a deal for 15 or 10 and you got somebody to put in five million, we would stand pat, and we would take the dilution. Because the company’s not growing.”
“So not only am I not going to pay double the price, I’m not going to do the flat round because that was six months ago we had that conversation. The market has deteriorated. You should just close $5 million at any valuation you can get. And we might do a little pro rata or put in a token amount of support.” And these are very hard conversations to have with founders. And I watched them go from not believing they weren’t worth twice as much, to not believing they were worth last year’s valuation, to then now coming back to me and be like, “We’ll do a deal at any cost.” And it’s like, “You know what? Investors have their choice of companies right now. You should have taken the money when you had the chance.”
Meb:
People start to anchor, if anything, the hedonic adjustment of money and numbers and wealth. People always anchor to that new number.
Jason:
It’s problematic.
Meb:
It’s problematic, particularly when that number-
Jason:
To use what the millennials say, problematic.
Meb:
It’s not necessarily liquid, right? It’s a number up there somewhere. So for the listeners, give us a quick review. I mean, if you listen to our conversation five years ago, Jason, it’s funny because you’re like, “What’s the future hold? What’s things look like?” You’re like, you’re now probably going to do X, Y, Z, this many deals a year, probably for five more years. And then that’ll probably be it. And then here we are. You’re doing more than ever, killing it on a number of different initiatives. Give the listeners an overview of your syndicate, direct to investor offering, as well as your new fund, to the extent you can kind of talk about it and what you’re doing there.
Jason:
Paradoxically, I can talk about it. So when you raise a venture fund, you cannot talk about it. 506B says, “Hey, you can only invite people you already know, and if you publicly talk about raising a venture fund, you will then reset your sort of quiet period,” just using a term. And that’s why venture capitalists don’t talk about their funds. And then people are like, “Oh, I would’ve loved to bid in your fund, Jay Cal,” or whoever. And it’s like, “Yeah, I’ll talk to you again in four years where we raise the next fund or three years, whatever the pace is.” And then there’s 506C where you can talk about it. And the difference is, when you talk about a publicly, which I have on All-In, or This Week In Startups, as I’m raising our fourth fund, I can meet new people, but then they have to be certified independently that they are in fact an accredited investor, or what’s called a QP, a qualified purchaser.
You can look that up online, basically says you’re a rich person, you’ve got a lot of resources, a lot of net worth, and you can make decisions to invest in private companies or funds, because you’re sophisticated in some way. That’s how it works here in the United States. So the benefit of doing this is I get to meet new people, which is what I want to do. I can close a 10, 25, $50 million venture fund, just by emailing people I know at this point in my career. I wanted to meet a lot of new people. So I said, “Just emailed our big syndicate list,” which is an angel investing club at thesyndicate.com. So when our funds would make an investment, like we did in Calm, we put 50,000 in from our first fund, and then I emailed everybody on our syndicate list and $328,000 came in from the syndicate. That first fund was a $10 million fund.
I was like, “Okay, 50 basis points in this meditation app. I’ll give it a shot.” I had no idea that $328,000 would come in from the syndicate or so, or about that number, but that’s six X what the fund did. So we were doing these small funds, 10 million, 11 million, and then 44,000,000. One, two, and three and a multiple. We would put 250 in and then 750 would come in from the syndicate. So there was more demand, but only half the companies that our fund invested in, elected to do a syndicate. So our syndicate represents the half of the deals that we do.
Meb:
What was the main reason? Was it because people, they didn’t want information leakage? They just, too much of a hassle? What was?
Jason:
Oversubscribed is the number one reason, they didn’t have the room for it. And number two was, they didn’t want to go through the process of pitching the syndicate. And it takes six weeks to close, and you have now 150 people on your cap table under one LLC. And yes, some people might think leakage of data, although we’ve never had that happen. Ultimately what happened was, in the non-hot market, everybody was like, “Yeah, I didn’t want to do the syndicate.” When the market got hot and things were closed and they’re like, “Oh, I don’t want to do it.” Now, in some cases, the syndicate had pro rata. So we had founders who were like, “I’m not going to do the syndicate this time.” I’m like, “We have pro rata. We have information rights. You don’t have a choice here. I don’t have a choice. We’ll get sued if we don’t offer them their pro rata.”
And they’re like, “Yeah, well, I don’t want to do it, so tell them we’re not going to do it.” I’m like, “No, my job is to make sure they get their pro rata.” So we had to defend our pro rata as we call it in the industry, a number of times. And it was uncomfortable in a small handful of them, but we fought for it, we demanded it. We told new venture firms that were coming in, because sometimes a new venture firm will come in and say, “Tell Jay Cal and the other angel investors, they don’t get their pro rate, we’re not doing our investment.” And then in those situations, it happened about five times. Five out of five times, those venture firms relented and said, in fact, apologized. And I think three or four out of the five, “Jay Cal, we want to have a good relationship with you. We’re not going to take your pro rata.”
But they put the founders in a really gnarly position. And this is why public versus private investing is super difficult and different. You have to have a reputation, chutzpah, stature in the industry if you’re going to defend that position. And when I was a first time angel, I didn’t, but after a time, do you want to off Jason Calacanis? I’m talking about myself in the third person, but it’s not a good look. If I’m an early stage investor and you’re a series B investor and you try to elbow me out of a deal, and you try to use the founder as the way to do it. So the founders would be like, “I think they’re going to pull the term sheet if you take your pro rata.” I was like, “Who’s doing it?” And they’re like, “This firm.” I’m like, “I just had that person on my podcast six weeks ago, and I’ll call them.”
And they’re like, “Don’t call him.” I’m like, “Of course, I’m going to call him. We’re shareholders. Don’t worry about it.” So I have to talk the founder off the ledge. I talk to the person and I tell the person, “Listen, I know you want to put 10 million and I know you want the whole round. We have 10% of the round, we have a million. Do you have a problem with us taking our pro rata? And we also have a board seat option when we own over 10%, which we do. And you’re asking them to give up our board seat and to give up our pro rata. Did you want to have an adversarial relationship with me? Because the next time I do a deal, I’ll email Roelof, Chamath, David Sachs, Bill Gurley, and I won’t introduce them to you.” Dead silence on the phone.
This is high level, sharp elbowed, private market, conflicted sparring that occurs that you don’t, maybe you do, have in the public markets. I don’t know if there’s an equivalent to it, but that’s the stuff I have to do. And I think that’s what I get paid for, is fighting for the early investors. And so we’re raising our fourth fund. I think we had 51 million in demand so far, and I haven’t met with institutions yet. I’m starting the institutional thing after my Japan ski trip and my speaking gig. So in March, late February, March, I’ll start going to institutions. We filled up, let me take a look here, hold on. I’ll tell you the exact numbers, because I literally have a Slack room that tells me launch fund four’s allocation requests. And looking at the allocation requests, we had 260 credited investors for 22 million, 161 qualified purchases for 29, for a total of 51 million.
Now, we already had some other accredited investors, but that’s 421 investors in demand. I think we’ve been able to close about 30 or 40 million of that somewhere in the range. And I don’t have the exact numbers here, because you could only have 250 or 10 million in accredited, so we, I’m sorry, in credit investors. So we have maybe 12 or 15 million more in demand than we can accept. So now that all accredited investor slots are open, except for maybe five or 10 that I keep for my close friends, like in pocket, we can only accept qualified purchasers now. So I’ll start meeting with family offices. People put 250K to 5 million in, and I’ll start that process. But it’s been wonderful to just be able to say on Twitter, or All-In, or on this podcast, “Yeah, I’m raising a fund. Jason@calacanis.com. Email me if you’re interested.”
And I did five webinars with accredited investors, and all this demand came in. And we met all these people, and we were oversubscribed immediately. So this is the democratization of venture capital. That is the next step for me as a fund manager. I did the democratization of syndicates along with Naval and Angel List, and Republic and some other folks, and you did some. That’s been accomplished. Now there’s a bunch of angel investors after I wrote my book Angel, and it’s translated into 11 languages, yada, yada. Now there’s all these people who are like, “You know what? I’ve done some private market stuff. Now I want to be in venture. How do I get into a venture fund?” And typically, you don’t, is the answer. Big retirement funds, family offices, sovereign wealth funds, they take all the stuff.
So I’m going to start meeting with those people. I don’t know how I’ll do with them, but I don’t have to have them anymore. I could just raise a 30, 40, $50 million fund, raise that every two years, or year, or three years, whatever it is that we deployed intelligently, and then just start launch fund five, launch fund six, with a wait list. And so, I think the democratization of venture capital is the next card to turn over. And for me, having studied the data and Chamath studies the data, my friend Brad Gerstner studies the data, and we talk about it on All-In, and This Week In Startups, and at our poker game. The vintages of these funds are very important. My vintage as an angel investor was, whoa, with Uber and Thumbtack, and Robinhood and Fund One, amazing.
What’s the vintage going to look like for 2020, 2021? It’s not going to be good. I think the vintages of 2023 to 2026 are going to be the incredible vintages, because the grapes are so delicious. Like $5 million, $10 million valuations with 10 customers. Oh, yum, yum. If I can get in a company between five and 10 million and they already have customers, what I’ve eliminated is product market fit, or basic product market fit. Or, are these founders brave enough to release a product and to charge customers? Once you’ve charged a customer, zero to one, not in finishing the product, but in getting a credit card, that as David Sachs has talked about. My friend David, he said, “Forget about zero to one product market fit. Zero to one customer, zero customers, one customer. Getting one customer to give you a credit card. That speaks volumes for the potential of the customer, the company.” And so, I’m just loving this period of time, to your overall question.
And the focus level is great. Man, the focus level for founders, the last four or five years, I have so many founders who would be great number threes, great number twos. But they got the CEO slot because there’s a lot of money sloshing around. And I just thought, “This person would be a great CTO or a great head of sales, a great chief marketing officer, evangelist. But are they cut out to be the CEO?” Well, based on the performance, no. Maybe they need more years of training. It’s like almost like the NBA had 300 teams. It went from 30 teams to 300. And you’re like, “Oh, you used to have two all-stars per team.” Or some teams became super teams with three, and those were the teams to look out for. Then we had teams with no all-stars. And like, “Who is this ragtag group of people?”
Now the industry’s consolidating back, and you’re starting to see two or three founders start a company, as opposed to those three founders start three companies. And that consolidation of talent is critically important. And so that’s, I’m working on that a lot with companies that maybe should shut down, or maybe these three companies should merge, create a new cap table. So there’s a lot of funkiness going on in the industry right now. But the overall thing people should understand is, the fortunes are made in the down market, investing in private market companies. And then the market gets hot and things go public. And as best I can tell, that’s when they’re collected. And just have to have the chutzpah and the doggedness as a capital allocator to make bets in a down market. And that’s why the public market investing’s been so great for me. I made those bets in this Q3 and Q4 when people were like, “Market’s going into recession. This is the worst time ever to invest.” I think I may have made some good trades. We’ll see.
Meb:
We talked to investors for the last number of years and I said, “Look, on the angel side, people getting excited about it, they want to cannonball into the pool,” and say, “Look, think of it in terms of vintages, and wine or whatnot, and commit to a five-year process.” Because you just put all your money in year one over the last few years, there eventually will be a downturn. It’s natural, it’s normal, it’s the creative destruction of financial markets. But if you don’t have some money to invest on the other side, you’re going to miss a lot of the opportunities.
Jason:
You got to have some cash around you.
Meb:
Or said in poker terms, “You can never have your stack taken away, then you can’t bet.” Right? If you’re down to zero. We don’t need to get into this, because we’ve bemoaned it over the years long enough. The accredited investor rules are stupid and eventually, hopefully they’ll get replaced. But listeners, email Jason if you’re interested in the funds. The syndicate, it’s got a lot of information. But one of the things you do really thoughtfully and tell the listeners, because I miss one of them, but there’s a number of things. You got Founder University, you got an Angel Conference, which is what I miss. It’s not happening this year.
Jason:
No, it is happening. We’re doing Angel. We’re going to do our Angel Summit in June in Napa and we’ll have a website up shortly. You can email me about it. But yes, it’s been 110 people. Launchangelsummit.com I think is the last website we had up. It’s going to be June fourth, fifth, sixth and seventh. So everybody arrives on a Sunday and then Monday, Tuesday, Wednesday we just talk about … Monday and Tuesday are the main content and event days. Kind of modeled after Sun Valley, Allen Companies conference where you do activities in the afternoon, and in the morning you meet people and do talks. And then great dinners and late night poker. Then we have something called founder.university. It’s a program where we charge people $500 for a 12-week program if they come to all 12 weeks on Monday night. Thursday’s optional.
If we take attendance, if they come every Monday, we give them their $500 back at the end. 96% of people complete the course. And then some of them just say, “Keep the 500 and put it towards the next thing.” That’s how we meet people really early. And then we have our Launch Accelerator. Launch Accelerator, it’s just like YC or Techstars. We put a hundred thousand dollars into a company for six or 7% and that’s what our fund does. But with Founder University, we said, “If anybody gets their product completed and gets a couple of customers, and there are two or three founders and their builders, let’s give them $25,000 for 2.5% of the company, and be their friends and family round.” And we’ve done this, I think 20 times now, where we gave 25K for 2.5% on a simple note. And then we just tell them like, “Hey, we just want to start a relationship with you,” and it’s actually really fascinating to be that early.
So I was like, “Wow, we’re not making 25K checks anymore, but I want to have a little structure and get to know these people with my team, and I don’t scale.” So I put two of my best people, Kelly and Presh, on running this, and we’ve now done three or four of them. Three or 400 people come to them and we find 10 to 20 companies at the end of it, who I think, actually, we have more than 30 of these companies. Of the 300 founders who come, about a hundred of them actually build companies that are interesting. And then out of those, we invest in 20 of them. And so that’s what our fund will do. Our fund might put a hundred, we might be doing a hundred or 200 of these investments, two and a half to $5 million worth of the fund might be these 25K checks.
What that does is, now we have skin in the game, we’re on the cap table, we’re the first investor in the company. It’s super powerful to be the first investor. I was the third or fourth investor in Uber. That was super powerful. Made me a legend in Silicon Valley, to the point at which people joke about it and it’s kind of a meme, that I was the third or fourth investor. I want to be the first investor in 10 unicorns. And the way to do that is to give them that 25K for two and a half percent, $1 million valuation. Take my 25K, incorporate, get a lawyer and set up your website, is basically what we’re doing.
Then we have our Launch Accelerator and all of that’s done through the fund. And then maybe the fund invests 250K to a million dollars, and then the syndicate will do maybe 250 to a million dollars. Between those four investment opportunities, we hope to get to 15% in our winners. That’s our targeted goal. Why is that important? If you have a winner and you are the early stage investors, you know it. You watch it go, from iwatch.com, go from 10,000 in total revenue to then have 10,000 paid subscribers at $10 a month, to a hundred thousand, to a million.
Meb:
It’s like the most magical thing to watch. You see some of these.
Jason:
It’s crazy.
Meb:
It’s so much fun and feels so-
Jason:
Which one was the most fun for you, and had the best ramp-up?
Meb:
Oh man, let me think about this. I actually looked the other day because my approach is slightly different. I definitely used the Jay Cal playbook when looking through these companies, but it’s almost 10 years in, it’s over 300 companies. But I was trying, and a lot of these are on paper now, only 10% ish, maybe 20% have had some sort of liquidity, bankrupt IPO. And my wheelhouse is sort of, well historically, I don’t know what you call it today, but sort of seed A, so five to 20 million. So in the last two years, five to 30 million.
Jason:
You had any 50 X-ers, any hundred X-er yet?
Meb:
On paper there’s a few. Chipper Cash, which was an African startup is well into that territory. Jeeves was one that’s well into that territory. GRIN didn’t do so bad, out of your group.
Jason:
Oh, did you get a distribution on it?
Meb:
Yes.
Jason:
That’s great. Yeah, that was a great one for us. Yeah, GRIN was huge.
Meb:
But a number of these on paper, but I’ve seen two that have gone public that have shown both sides of what we were talking about earlier. Where one, they both sold some on the way up, and in both cases I was kind of furious. I mean not really, these are small bets for me, but one then went public and had liquidity, but the other one went down like 95%. So it’s like as you see both sides of it, where you say, “Oh god.” If it had only been the one that had gone up, and then it had been my entire portfolio and then went down 95%, I’d be despondent.
Jason:
Well, you learn about the power law, and the power law is like nothing else in investing or in society in the world. The concept that an angel investor or a seed investor could get a thousand X an investment, like that doesn’t exist in public markets. I don’t think in the history of public markets. I’m not talking about a thousand percent. We’re saying X at the end, or 500 X or a hundred X. When people talk about a huge win in the public markets, they’re talking about a five bagger or a 10 bagger. In fact, I said I’m going for five baggers in 10 years. You have to get very comfortable with 80% of your companies being worth zero, and those companies take a lot of your time. In fact, they’ll take the majority of your time, just on a percentage basis. And if they’re struggling, well they’re going to have three or four times the amount of questions, problems, conversations, and your reputation is built on the failed companies.
With the winning companies, the founders love you for everything. Me and Travis and Uber, Robinhood and Vlad, and Michael and Alex at Calm. When we see each other, it’s high-fives and hugs, and war stories and awesome. I spend a hundred times that effort on the losing company. I have been working on a company that’s being recapped and was worth 20 million, and now is worth the recap, one million, maybe two million, and I’m still fighting with them to save the founder’s equity value, the team’s value, and give it another shot. And it’s uncomfortable to have a company that was worth 10 million become worth a million, but the founders want to keep going. If the founders and the management team want to keep going and I can, I’m literally giving, I’m going to make this a blended story again, so I don’t talk about a specific company. But imagine a company where 15 million, has three million invested in it, is now worth a million. And then you have to recap the company.
So I’m dealing with a bunch of cantankerous situation, and people are not happy. And I said, “Okay, number one, do we believe in the company and the vision?” The answer is yes. Great. “Okay, number two, does everybody want to work together or fight?” Okay, everybody wants to work together. So I got consensus, I said, “Okay, here’s an idea. We take the three million, we make that worth,” I’m just going to pick a number, 30% of the company in common shares. Those three million people, the people that put three million in, they have 30% of the company, but it’s common. Sorry, you’re going to convert. We’re going to give the founders of the company, let’s say 10%, the management team, 30%, and we’ll give the new investors 25% of the company for putting but 250K in. And the existing investors who put three million can participate pari passu, on a percentage basis pro rata in that incredibly juicy financing, since the company has tried for a year to get funded again. And now the company’s still in play.
If we do this and okay, I’ll put in 50K as a high profile angel to get this started. And I’ll take some risk where a hundred K or 150, whatever of the 250. I’m doing that kind of hard work. It’s never going to hit my Uber investment, my Robinhood investment, my Calm investment, or GRIN investment. It’s never going to be worth what LeadIQ’s worth, whatever, in all likelihood. But it feels to me like the right thing to do. And if I save that company and let’s say it sells for 20 million, well then those people that put three million in, doubled their money and they got to save from a zero. And the founders 5% each or 10% each, whatever it winds up being. The management team, they got $8 million or $16 million distributed, and the new investors, hey, they got a 20 X. Mazeltov, fantastic. We did the right thing.
And I’m looking at it saying, “This will be a reputation building experience.” This founders and this management team and these investors, they’re going to love me forever, that I took the leadership position here and said, “Here’s how we should do it.” And people think I’m an idiot. I have contemporaries of mine who are like, “You’re an idiot for wasting your time on this kind of stuff. Just tell them you’re happy to sell your shares, or shut it down and take the loss.” And I was like, “Nope. I’m happy to fight to the end, and I want to have that reputation.”
Meb:
I mean, it’s hard to always look back on it, but when it feels like the right thing to do regardless of the effort, you got to play the long game in financial markets, because people, they do remember. And one of the things you touched on, and we talked about this on one of your events, can’t remember if it’s Founder University or whatever. But this concept of power laws and it certainly exists in private markets. There’s some great research that’s come out in public markets, Bessen Binder. Listeners, we’ll put a bunch of the show note links. We talked about this before, about public markets where all the returns come from five, 10% of the securities. The McDonald’s, the Walmarts, Amazons, the Apples, and that’s one of the reasons indexing works.
And there’s another whole area that we talk about which is trend following. Jay Cal, which you would love to have this whole, as somewhat of a trader now. This managed futures world where this famous trading experiment from the early 1980s, involving Richard Dennis and William Eckhart called the Turtles. Have you ever heard about this? It’s such a fun story where they were debating, can you train traders? And these were guys out of the pits of Chicago, and they had a methodology that’s essentially, letting your winners ride and cutting your losses. So trying to capture the giant multi-baggers but doing it on cotton, I mean wheat, or the Swiss Franc or Euro dollar, or the 30-year US bond.
So global macro stuff, and it’s been one of the most successful trading strategies the last 40 years. It’s a little more esoteric, but it’s such a fun story because they put an ad in the paper and they trained 20 traders and they made hundreds of millions of dollars. Some of them who are still investing today, Jerry Parker, one of my favorites, one of the nicest guys ever from Richmond, Virginia. I think he’s now in Florida. Anyway, we’ll send you a link later, but some of our old podcasts with Jerry Parker. It’s a similar philosophy, different application. So VC public markets, you’re trying to find the big winners because a 50, a hundred X takes care of all the losers. Right?
Jason:
Basically, in parallel.
Meb:
Yeah. It’s getting dark in Tahoe.
Jason:
This is when we had a great pod is when the sun has gone down and my face is super shiny, and the last skier goes by. I don’t know what that skier’s doing, because the mountain closes at four and it’s 4:45, so that person was, these guys were having hot toddies or something at the top of the mountain, and they decided to do a final bomb. Good for them.
Meb:
There’s a place in Austria called St. Anton, where they have the big operas is kind of up the mountain, and so people have to ski down afterwards. And this seven, 8:00 PM or whatever the time it is in the dark, and it just looks like a little minefield. There’ll be like people sleeping over here, just like, oh my gosh. You kids, you can’t walk down. There’s no way to get down.
Jason:
I heard there’s night skiing in Japan and that’s like a thing. They light up the whole mountain. Is that true?
Meb:
It’s true, but it’s the last thing you want to do, because it’s often cold and you are exhausted because you just skied for six hours in the best powder of your life. So I haven’t done it.
Jason:
Do you ski or snowboard?
Meb:
I do both, but I mostly ski now, because I usually have a limited amount of days and it’s hard for me.
Jason:
Did you bring skis with you or did you rent?
Meb:
I did bring them, historically with our guides. They used to have all the equipment and we do the kind of combo touring, alpine setup, but I would definitely, if you could try to bring your own gear, and Nasako will be fine. Nasako, you’ve got plenty of stuff, but if you’re going to some of the other places, it’s you’ll be happy to have your own stuff and eating ramen and udon for lunch, and sushi for dinner, so.
Jason:
I don’t have powder skis, I have hybrid skis, Rossignol, so they’re not the really wide ones. I need powder skis, yeah?
Meb:
I personally would not go over there with anything under a hundred underfoot, so I was skiing on some 120 Atomic Bent Chetlers and they were actually a little long, but I’ll send you a video. You definitely, I brought two pairs of skis and I only almost-
Jason:
120s are the width or the height?
Meb:
The width, right under foot. So they’re high 170s, low 180s, but 120 is the width of the powder skis. But most kind of mountain cruisers are like nineties, but I don’t think I would ski anything under a hundred, minimum.
Jason:
Yeah, I got to figure out what my Rossignols are, but this has been great, just for this ski advice for everybody. And anybody that has tips for me, jason@calacanis.com. My first name, at my last name. I’m Jason on Twitter and Instagram. DM me, put my Jason handle.
Meb:
You can get some locals. I did. I did a tweet. I was like, “Who wants to do a meetup and in Hokkaido,” and got some fun responses, but yeah.
Jason:
I’m excited to do it. Yeah. All right, brother. Well, this has been amazing. Love the pod.
Meb:
Jason, it’s been a blessing. What’s the single best place where people can go if they want to get in touch with you, they want to send you a wire with a bunch of investments, they want to follow your Angel University?
Jason:
Anytime, jason@calacanis.com. Calacanis.com. That’ll be my email for life because it’s my first name, it’s my last name. First name at last name.com, and then I’m Jason on Twitter, DMs open, and Jason on Instagram, if you want to see ski pictures from Nasako.
Meb:
One last question. For someone who is a domain acquirer who’s been very good, inside.com, the syndicate.
Jason:
The syndicate.com. Yeah.
Meb:
You have a good job of acquiring things early, the Tesla, early off the ramp.
Jason:
Serial number one of the Model S, and number 16 of the Roadster.
Meb:
I need a Jason estimate. I’m trying to get my last name, so faber.com from the people who own it. I’m not going to tell you who own it because I might bias your estimate. So it’s a one word, but it’s a name and it’s not a vernacular word like sofa.com. What do you think is the correct ballpark about?
Jason:
Five letters?
Meb:
I have the .org, but I need the .com.
Jason:
Five letter .com, 50 to 250.
Meb:
Okay.
Jason:
It really depends on if it’s common language, and I don’t think there’s like a faber, common language. I had jason.com in my sites. I think they wanted 500K for it, 250 for it. I was like, “I’ll give you a hundred.” I don’t mean jason.com. I got calacanis.com. And somebody else bought it, unfortunately, like a crypto person, and so maybe I regret it.
Meb:
They’re in a bear market. That might be coming up for sale soon, so you don’t know.
Jason:
I think it’s a developer. Jason Greenwald owns it. Shout out to Jason Greenwald, good purchase, and I think he’s a domainer and he’s obviously very wealthy. And he is an internet guy and he owns jason.com. Congratulations. He owns, so I don’t think I can get it from him.
Meb:
Oh well, Jason, thanks so much for joining us today.
Jason:
My pleasure. And yeah, if anybody has a great … The most important thing for folks is, if you meet a company, they have 5,000 to 50,000 a month in revenue, $500 a month in revenue, but you think the founder’s amazing, the product’s excellent, introduce me to them. Or, them, I should say they, them, he, she, whoever immediately. And don’t ask for permission to email, to introduce me to a founder. Just introduce me to the founders. I can take it from there. Jason@calacanis.com. You do not need to ask permission to introduce me to a great founder.
Meb:
Perfect, bud. This was a blast.
Jason:
Thank you, sir. Hope to see you soon.
Meb:
Podcast listeners, we will post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at feedback@themebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe to the show, anywhere good podcasts are found. Thanks for listening, friends, and good investing.
