AngelList founder warning vc: you can deceive the LP, but don’t lie to yourself

note: Naval Ravikant AngelList, founder and CEO, he is an active angel investor, investment companies, including Twitter, Uber, conduct, Stack, Overflow and Wanelo. This article take you enjoy the way of the risk investment, to understand the mystery behind his success. In this paper, the author for Pandodaily founder Sarah Lacy:

as I write to you yesterday, earlier this week, I hosted a symposium on risk investment in innovation.

after the activity, the national venture capital association, Jon callaghan wrote me an email, mainly on the vc industry is unusually innovation speed: “innovation is everywhere: portable design, geography, splitting the acquisition software. A lot of people reflect on the market at present with me many innovative ideas are too avant-garde.”

“maybe you don’t know the meaning of the term, but now even the most staid old venture capitalists have to nervous as they service company, because in the case of more diversified investment, market competition is becoming more and more intense.”

let’s take a look at what happened in the past ten years: top company by the former founders, the raise, syndicate syndication, partial liquidation, seed funds, hedge funds, late basically is committed to venture capital, rather than on the market. Russia’s billionaires and with Sand Hill Road competition, late do investment risk. (note: cloud network king hunting Sand Hill Road, a common name in silicon valley, is called the VC street, hundreds of famous of risk investment company together here). The entire funds like Rocket Internet, is based on the former employee shares arbitrage and highly scalable international stores (note: hunting cloud network king Rocket Internet GmbH, founded in 2007, headquartered in Berlin, Germany, is one of the world’s startup incubators). Valuations for new thinking to guide our era of mini – corns ($75000 +), unicorns ($1 billion +), decacorns ($10 billion +), yetis ($50 billion +).

the panel members include Gil Penchina founder, AngelList Naval Ravikant, Path, co-founder of Dave morin, angels Sumon Sadhu. Through syndicated investments AngelList Penchina said, do not give any additional restrictions on investments limited partners, such as: investment quota, proportion of investment, investment department, investment way, etc. So he and his team can only follow one’s inclinationsly investment they want.

for car, there are so many super growth needs to be done, it was a big problem. But Ravikant accelerate rotation single multi-purpose vehicles, have the ability to invest millions of unicorns within 48 hours. So much money after AngelList operation, to streamline a lot of technical details. This is exciting, because entrepreneurs have more cash; This is terrible, because some people feel so easy to do effect must be bad.

we even talked about, like AngelList websites can be found in Sand Hill Road change gender and diversity, because it is essentially the defender of intermediary investment. Can you row? Will face the obstacles and what is it? Unlike venture capitalists is other people’s money, angel investors invest their money. So either you need a male partner to persuade your general partners, or you will have enough money. Ravikant acknowledged that this means that the men become the possibility of angel investors is much bigger than women.

Ravikant track down all the relevant innovation, found a venture capital industry of Moore’s law: the cost of building enterprise down two levels since the late 1990 s. When a company becomes low, the steps of (even after total giants raised billions of dollars of private equity financing), everything have changed.

one of the most interesting moments throughout the symposium, is talked about Ravikant venture capitalists from seed investment this recent trend. Or micro vc seed investment 2011 all reached a peak, the Sand Hill Road of companies find themselves trapped in the first round of investment. But from the point of view of history, the industry won a higher return, this is just a hidden threats.

so, a company has announced a new “seed project”, and their investment pool is different from ABC round of investment, the jedi fund, found that funds. I remember TechCrunch have been reported these companies. But as a Benchmark except those stubborn, even if market conditions change they will only do the traditional vc. (the result is quite good. Some people estimate that Benchmark is one of the best fund ever) but now other top five or more funds, all chasing the “seed” tide.

now under numerous challenges, vc silently out of the project. One of the biggest challenges is the problem about the “signal”. When the angel investors to tens of thousands of seeds into the company’s round and A round stage, is it’s not A big deal. Angel investors usually just using the money to work early. But as A large vc to tens of thousands of seeds into the company’s round and A round stage, this is A strong signal. Seed round the main risk vc do, after all, in order to sound out the depth of the water first, then go and compete with rivals.

but often there will be other reasons lead to the less investment venture capitalists. First, the law of averages. The purpose of these seed program is widely scattered money, and will not affect the process because of the negligence. However, partner will only do one or two times A year. A round of funding. So many good companies can’t up to par. In addition, the conflict will also affect in portfolio investment partners to choose which one. One of the most famous example is the venture capital firm Andreessen Horowitz, PicPlz emerges, it abandoned the sets of the same type.

venture capitalists are beginning to do seed trading also can lead to a “side effect”, entrepreneurs will think they got a dozen will really care about their future investors. However, no one can guarantee A smooth round. Silicon valley’s top venture Greylock fund and investment is a huge difference. (believe me, after all I have from one of the oldest venture capital firm Greylock Partners to raise $250000 m)

this is a big challenge in both, many entrepreneurs in the beginning of “the wind” began to raise money, but it was too late. Don’t they defeated the excellent company? No, good company always find financing. But A lot of big companies during A round of funding situation is not optimistic, later will be better and better. If your business is a bad company, it will only get worse.

some vc firms are trying to change through the secret “scouts” partnership, it is not like risk investment is, in fact, entrepreneurship, but vc hope to retain some of the benefits. But to be honest, it’s almost a perfect solution.

now, see a lot of venture capital of incubator, accelerator and the advantage of the seed. Even need to spend big money, they will settle, strive for the top. After all, the real needs now is A round of funding. As a result, they are no longer wasting energy for these projects, and focus on long-term development of the company.

to do so is right, but also should be careful. Ravikant said that although VCS before lessons have been learned, they will meet the challenge of the same have a loud and clear. He thinks that if VCS give up first investment, that is also in the future. Because of A round of funding now is no longer A simple first round, created during the period of this influence is universal, and is already before the company culture. The so-called round A round of funding in fact more like A B or C round of financing. And this is never an industry the most efficient point, especially like Coatue fund management company and the financial group T.R owe constantly came down from the other side, from the IPO climbed to D to C round of financing.

Ravikant said: “the current generation of partners in an excellent location, behind the scenes on the seed companies in A round of funding. As they rise, seed fund, a syndicate, incubator will become a solid first bucket of gold, and hedge funds and fund managers are C round of financing, and will be squeezed.”

“you must find a way to winning in the first round of.” This is josh why pell man became brand genius. The first round of capital, he put ‘first’ in the company’s name. Its importance is obvious.

Ravikant to venture capitalists a words: “you can lie to your partner, but don’t lie to yourself. You are doing B and C round of financing, also called A round of funding.”

at the end of the conversation, I asked, traditional vc has what good? Silicon valley will never change? Why do they want to traditional enterprise still represent the core of the industry. Penchina gave me the best answer, he said the valley under we can’t understand the enormous pressure, in order to adapt to the rapid change, many companies are in “uncomfortable” at the speed of moving forward.

“the company with the fastest speed run forward, hope can with the strength to break through all obstacles.” He said.

before you do, the process of need to bear the pressure is unimaginable. And I also began to think about, but not healthy are “normal” of doing business, and then he added: “this is what I hope will never change.”