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Jason Calacanis, on Being a Venture Capital Investor

Jason’s advice to new fund managers and his thoughts on the future of venture capital

In Part 2 of our interview with Jason Calacanis, we explore the next generation, syndicates, fundraising in the future and Jason’s advice to new fund managers.

Advice to Investors

It’s a zero-sum game

Naval Ravikant once told me that caring and providing the most value is a key factor to winning. There is a race to provide value and there are a limited number of opportunities. There were so many checks that could get into Uber. If you were the 21st check you didn’t get in and if you were the 20th it changed your career. As an investor, you have to earn it. Ask yourself why anyone should have you on their cap table. If you cannot come up with an answer then get back to work

I know why people should have me on their cap table. I can get you in the room with any venture capital firm in the world. I can promote your company on This Week In Startups or tweet it to my 450k followers on Twitter. I can also get you, 1,000 customers, if you have a good product. You need to utilize your unique advantages and provide value for others

Entitlement is a curse. Don’t think that you are entitled to success or deal-flow. Have the attitude of the underdog and outwork everyone else. Try to out-hustle me and make me your target. Put a picture up on your wall and say “beat that guy”.

On the Next Generation

My approach is to personally train researchers and associates with a very aggressive schedule

Roelof Botha at Sequoia is a success story in raising the next generation but VC firms like Kleiner Perkins had issues with succession. For example, they had to bring in Mamoon from Social Capital as they failed in training the next generation

This happened as the market got heated. Fund sizes grew with them and so did the management fees, which distorted a lot of things at large funds. With a billion-dollar fund, you got $20m per year, so each partner got several million in salary plus the carry. Some funds like Andreessen Horowitz also started investing in obscure things like an in-house HR and marketing department. No great founder really wants to outsource their marketing to a venture firm, so it got a bit weird. 

I’m a solo GP and do not want partners, but I do want to have managing directors, principals and associates for the next 10 years.

On Syndicates

Syndicates are my preferred method of sharing deals

It requires everyone to make a decision. Great investing is about making decisions with partial information and placing bets. With our All In Syndicate, we make all the decisions and with other syndicates, my thesis is to have a decentralized structure so it can run itself, kind of like what AngelList did.

 AngelList is one of the top 3 innovations in venture capital along with Ycombinator. But they relied on people like me, Tim Ferris and other syndicate managers. There was a misalignment of interests between us. After negotiating with Naval and AngelList we couldn’t come to an agreement, so I branched out on my own with my syndicates which are doing very well. Now I own 100% of my own syndicate and it’s one of the best decisions I’ve made. This is made me realize more that I’m better as a solo act.

On Fundraising in the Future

In the future HNWIs can become LPs with ease, thanks to folks like VC Lab

There might be less capital if the market does indeed crash. There is also a lot of venture firms so we might see a boom-bust cycle as a lot of funds are chasing the same deals

LPs can only handle so many relationships. When talking to endowments for my second fund, even with me they wanted to see a longer track record. It is not worth the time for an endowment to process any investment below $100m which is until a venture firm is on its fourth or fifth fund. But I don’t need them as I’ve got a network of high-net-worth individuals (HNWIs).

I can now raise a $25m fund by sending an email out to a list of people. I think in the future HNWIs will want exposure in this category and they will become LPs in funds. Thanks to the tools and the infrastructure from folks like VC Lab, they can easily become LPs in the future.

Click here for Part 1 where Jason talks about early stage investing, strategy and Sequoia’s new fund structure.

This content is provided by VC Lab, the venture capital accelerator. 

The free 16 week VC Lab program provides guidance, structure and a network to complete a fund closing in 6 months or less. Since mid 2020, VC Lab has helped launch 83 venture capital firms around the world.

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