I can finally announce my new AngelList project - it’s been a whirlwind getting set up the last few weeks, and the main reason for my writing hiatus. DV Collective, started by Sundeep Ahuja, is a group of half a dozen deal partners working together to source deals, conduct due diligence, write memos and run deals on AngelList. The amount of collective LP reach and deal flow we’re generating is an order of magnitude above what I had flying solo, and everybody is very sharp with some unique experience to share.
When I run a deal on DV Collective, I’ll also be co-syndicating from my own AngelList syndicate. I’ll also occasionally run deals on my syndicate if the relationship with the founders pre-dates DV Collective (e.g. pro rata shares in new rounds), and I may co-syndicate with other syndicate leads by providing links to their deals as well.
I already launched and filled two deals with DV Collective: Sound Credit (the future of music metadata) and FarmTogether (the best marketplace for investing in farmland).
I’m also deep in the process of talking with two dozen companies from the current YC batch ahead of Demo Day near the end of March. This class has some great prospects, which I’ll be writing about in March.
Today I wanted to share a few recent discoveries that have been on my mind:
I’d read a bit about FJ Labs and Fabrice Grinda before, but I just dove into the details of his investing strategy and it blew me away. It happens to be very similar to my own in terms of diversification, so let’s hope I have similar results! The most interesting part for me was that he evaluates every follow-on round as if it was a new opportunity, and rather than defaulting to doubling down, he’s sometimes selling off positions as a secondary offering in late stage rounds. This runs contrary to 99% of the advice I’ve heard on the subject. Yet here’s the result:
“As of April 30th, 2020, we invested $284 million, of which $114 million was provided by Jose and I, in 571 startups. We had 193 exits with a 62% realized IRR.”
The news of Bezos stepping down from Amazon, in part so that he can focus on backing other startups (“…I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions…”), brought to mind something I read a while ago but never hear much chatter about - in addition to leading Amazon for the last 27 years, Bezos is arguably one of the most successful startup investors ever too. Amazon overshadows it from a wealth creation perspective, of course, but, look, here’s the list: Google (super early), Uber, AirBnB, Twitter, ZocDoc, Workday. My point here is that if he has more time to devote to startup investing, I have no doubt he will have a major impact.
Are you old enough to remember the pneumatic tubes that banks used in the drive-thru? Then check this out: https://www.pipedreamlabs.co/ - this is the most bonkers startup idea I’ve seen yet in 2021. But the more I think on it, the more I think that it makes 10X more sense than HyperLoop from a capex perspective, and is truly the ultimate and final supply chain disruption possible (…unless somebody invents a teleportation device).
I’m starting to see a new pattern with demand for fundraising rounds. For a while, I saw smaller funds and angels really rush in the fastest to deals with momentum at the late seed stage - effectively attempting to front run a Series A markup for the best possible IRR. However, given the amount of cash flooding the world these days, and the rise of SPACs, I think there’s a recalibration happening around exit valuation expectations that’s making so called “late stage” more appealing. Five years ago, I imagine many angel investors assumed that if they entered a Series B-D in the $100M-$500M valuation range, then the bull case would be a 10-20X return (i.e. single digit billions). But now, with the increasing number of companies reaching valuations > $10B on exit, and the shortened timelines to reach those exits, I think we’re seeing investors really believing that they might get a 100X return from investments even at that later stage. As a result, I’m seeing some Series B, C and D rounds on AngelList fill far faster than Series A rounds, which I’ve never seen before. This strikes me as some kind of startup inflation, but it’s not evenly distributed across stages.