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Venture capital firms that were invested in Lyft, Uber and Pinterest just got paid when those companies went public. The banks, foundations and pensions that fuel the venture capital funds will get a lot of money, too. These big VC firms will now have more to invest, and they’ll get more powerful. But the venture industry is changing. There are more smaller players like angel investors — usually really rich people who want to help fund companies. Increasingly even everyday investors have more ways to get in on the next tech “unicorn” company before its IPO.
Host Molly Wood talked with Jason Calacanis, a tech entrepreneur and angel investor who got in on Uber when it was still a pipe dream. She asked him how VC is evolving. The following is an edited transcript of their conversation.
Jason Calacanis: There are the funds that have been around for decades, like Sequoia, Kleiner Perkins or Benchmark, and those firms have partners who may stay with them for multiple decades. They are the first stops when a founder comes to Sand Hill Road or San Francisco. Then there’s a new crop of angels. I went from being essentially a nobody – somebody who was kind of annoying in the industry, this journalist entrepreneur with a big mouth and a big social media following and a podcast – to now I’m the first stop or in the first two or three stops for angel investing. I’m the most successful active angel investor in Silicon Valley.
Molly Wood: Let’s talk about the industry. We know that these exits [when these big, privately held unicorn companies go public] are important for the firms that have funded them and the angel investors that have funded them. How might that money then get funneled back into new startups? How important is it to that future person with a PowerPoint and a dream?
The VCs are looking for companies that have a lot more traction, a lot more revenue, fuller management teams. The world’s changed.Jason Calacanis
Jason Calacanis: It’s critically important. I’m emboldened now, having had a couple of great exits, to put more money into my own funds and put more money to work. That is a specific phenomenon that occurs, which then benefits the next generation of founders. We saw that with people who made a lot of money off of Google, then invested in Facebook and Twitter. The Facebook and Twitter folks obviously invested in Airbnb and Uber.
Wood: One complaint I have heard about venture capital right now is that there’s a lot of the same money going into the same big companies. Is it possible that the inflow of money could change that dynamic and introduce some more innovative investing?
Calacanis: The venture firms have raised bigger and bigger funds. The VCs are looking for companies that have a lot more traction, a lot more revenue, fuller management teams. The world’s changed. The markets are much more efficient but they’re private. This is where the [Securities and Exchange Commission] and the investment rules for private companies have to evolve. We’re starting to see that with equity crowdfunding, where civilians, nonaccredited investors, people with under $1 million in net worth, under $200,000 a year in income, are being able to write small checks through platforms like SeedInvest and Republic. That’s going to be, I think, the future. That process is just starting.
As the number of angel and nontraditional investors in the United States has increased, so has the percentage of female investors, from 5% in 2004 to about 26% as of 2016.
Alex Konrad over at Forbes, who’s also very funny on Twitter, has a good piece about how Facebook and its soaring stock over the years has produced a new generation of investors, like Calacanis was talking about. In fact, lots of them are women who are funding female-run businesses, who then hire women who might get big payouts if their companies go public or get sold and then might also turn around and become more diverse investors.
However, I am definitely aware that a lot of times when we talk about diversity in venture capital, we’re talking about adding more white women. To that effect, there’s a good story in Fast Company about an organization called Pipeline Angels. It’s a boot camp for would-be angel investors that focuses primarily on inclusivity, meaning people of color, women and nonbinary people, with training cohorts in Montana, Idaho, Ohio, Texas, North Dakota and Minnesota, among others.