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500 Kobe Pre-Accelerator Demo Day >> Rishi Narang of AngelList

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Rishi Narang, AngelList Venture Hacker
Trends from both the fundraising & investing trends from Silicon Valley to Asia and globally

Published in: Technology
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500 Kobe Pre-Accelerator Demo Day >> Rishi Narang of AngelList

  1. 1. Silicon Valley Trends
  2. 2. Fundraising & Talent Trends
  3. 3. AngelList is the world’s
 largest marketplace for startup
 investing & hiring
  4. 4. $425M 78K INVESTED JOB MATCHES / MONTH Fundraising Talent
  5. 5. Trends • The Rise of the Early-Stage SPV • The Rise of the Small LP • The Rise of the Operator-Investor • The Rise of the Student Founder • The Rise of the Talent Marketplace
  6. 6. The Rise of the Early-Stage SPV
  7. 7. Special Purpose Vehicle • An investment vehicle created for the purpose of investing in a single company • Historically used by investors for pro-rata opportunities • SV Angel lead $200M Pinterest Series F via SPV in 2014
  8. 8. Key Differences Funds SPVs Up to 100s of investments 1 investment GPs only decide companies GPs, LPs decide companies Raised over several months Raised over days to weeks Fast decisions Slower decisions GPs control $$$ LPs control $$$
  9. 9. SPVs • LPs • Deal-by-deal investing • No 10-year lockup • Invest in the deal or partner – not the firm • GPs • Capital uncertainty • Easier to raise
  10. 10. Players behind SPVs • SeedInvest • WeFunder • FundersClub • AngelList
  11. 11. Every great investment starts with an angel
  12. 12. Syndicates
  13. 13. Tim Ferriss invests in Shyp
  14. 14. $ 2 5 K Tim Ferriss invests in Shyp
  15. 15. $ 2 5 K$ 2 5 K $ 7 2 2 K Tim Ferriss’ syndicate invests in Shyp
  16. 16. 15% 5% TIM’S OUR CARRY $ 2 5 K$ 2 5 K $ 7 2 2 K Tim Ferriss’ syndicate invests in Shyp
  17. 17. Metrics Invested $425M Active syndicates 210 Average investment $390K Follow-ons $2.9B
  18. 18. $1B Exits for Late-Stage Syndicates
  19. 19. Why are SPVs growing? • Limited Partners get deal-by-deal flexibility • Companies are able to more easily raise from large pools of small investors • Operator-investors are empowered to become larger investors
  20. 20. TAKEAWAY Deal-by-deal investing is valuable for unlocking investment capital The Rise of the Early-Stage SPV
  21. 21. The Rise of the Small LP
  22. 22. Online Investing • Large groups of small LPs investing $1k each • Historically, large LPs have provided the vast majority of investment capital
  23. 23. Case Study: Lending Club • World’s largest peer-to-peer lending platform • How it works • Customers apply for a loan • LendingClub determines credit rating & interest rates • Investors select loans
  24. 24. Loan Volume $0B $2B $4B $6B $8B $10B 2012 2013 2014 2015 Self-managed individuals Individuals indirect Institutional Case Study: Lending Club Source: Lending Club Statistics (https://www.lendingclub.com/info/statistics.action)
  25. 25. Case Study: Lending Club • Lending Club • $20.7B loaned through June 2016 • $8.3B loaned in 2015 • U.S. consumer credit market • Total size: $3-4T • Addressable size: Roughly $400B • P2P lending 72% larger per capita in UK
  26. 26. Case Study: Lending Club Small investors in aggregate can take significant 
 market share from large incumbents TAKEAWAY
  27. 27. Key Differences Large LPs Small LPs Invest millions of dollars Invest hundreds or thousands of dollars Pension funds, endowments, family offices, etc. Tech employees, consultants, bankers Weeks or months to close Days or weeks to close Seed & above Pre-seed & above Uninvolved with portfolio Can be value-add
  28. 28. Small LPs • Value-add investors don’t need significant capital or proprietary deal flow • Can directly help with brand/marketing
  29. 29. Platform Investors Investment Volume Companies SeedInvest (since 2013) - $50M 70 FundersClub (since 2012) 17k $63M 200 CircleUp
 (since 2012) - $260M 200 AngelList (since 2013) 5k $410M 1000 Traction
  30. 30. Democratizing Startup Investing • SPVs have unlocked small investors as a fast-growing pool of capital • SPVs help companies avoid large cap tables • Recent years: accredited investors • May 2016: Title III Equity Crowdfunding
  31. 31. Title III Equity Crowdfunding • Anyone can invest in startups • Designed to protect lower-income investors • Annual investment limits • Company reporting requirements • No SPVs
  32. 32. Concerns • “Least knowledgable investors + worst companies” • Investors can be protected, but they’re ultimately responsible • Why might there be adverse selection? • Small investors may be a privacy risk • Fundraising may be significantly more work • AngelList’s vetting solution: syndicate leads
  33. 33. Online Investing at Scale • Companies get better access to investors (capital & value) • Investors get access to a new asset class with top deal flow
  34. 34. TAKEAWAY There is a huge opportunity for small investors to provide significant capital & value The Rise of the Small LP
  35. 35. The Rise of the Operator-Investor
  36. 36. Key Differences Professional Investors Operator-Investors Invest full time Invest part time May or may not have prior operational experience Have full-time operating jobs as founders/executives 2-3 to dozens of deals annually A few deals annually Invest systematically Invest opportunistically into their close networks
  37. 37. Operator-Investors • Dave Morin • Elad Gil • Matt Mullenweg • Gil Penchina & Flight.vc
  38. 38. Dave Morin • Past: Apple (2004), Facebook (2006), Path (2010) • Expertise: social networks, platforms, product, mobile, design • Board Member @ Eventbrite (2012) • Now: Founder & Partner @ Slow Ventures – $65M Fund IV (2015) • 50+ personal investments since 2009 • Highlights: Social (Venmo, Hearsay Social, Yobongo, Tilt), Luxe, Artsy, Birchbox
  39. 39. Elad Gil • Past: Google (2004), Mixer Labs (2007), Twitter (2009) • Expertise: scaling product/operations, biology, mobile, analytics, internationalization, M&A • Now: Co-Founder @ Color Genomics (2013) • 50+ investments since 2008 • Highlights: SaaS/Dev (Stripe, Optimizely, Mailgun), Commerce (AirBnB, Square), Social (Pinterest)
  40. 40. Matt Mullenweg • Now: Founder & CEO @ Automattic (WordPress) • Expertise: open source, distributed teams, scaling, community, content management • 35+ personal investments since 2008 • Highlights: Makerbot, About.me, ZenPayroll, SendGrid, Wealthfront
  41. 41. Flight Ventures on AngelList • Gil Penchina, Shawn Merani, and Alec Hsu • Network of ~25 value-add partners, including current & former CEOs, CMOs, etc. • SaaS Startups by Flight.vc • Nathan Creswell (Product Director @ Zuora) • Bitcoin by Flight.vc • Nick Sullivan (CEO @ ChangeTip, acquired by Airbnb)
  42. 42. Operator-Investors on AngelList “AngelList has become a place where value added investors who don’t have access to capital, and aren’t full time VCs, can access capital and enable investors who are outside Silicon Valley to join these high quality deals”
 
 - Zach Coelius, Flight.vc, Former Founder/CEO of Triggit Source: AngelList: Inside the Deal (https://blog.angel.co/inside-the-deal-zach-coelius-investments-in-cruise-and-branch-metrics/)
  43. 43. TAKEAWAY Successful entrepreneurs have operational expertise and 
 high quality networks of founders. With the right resources, they can become key investors. The Rise of the Operator-Investor
  44. 44. The Rise of the Student Founder
  45. 45. Background • Mark Zuckerberg started Facebook at Harvard • Evan Spiegel started Snapchat at Stanford • Matt Mullenweg started WordPress at Houston • Others: Birchbox, Warby Parker, Reddit
  46. 46. Why Students? • vidRover: indexing videos on the web using computer vision • Founded by 2 Columbia PhDs • Immudicon: training the body’s immune system to fight cancer & other deadly diseases • Founded by Dartmouth molecular biology undergrad • Students study the cutting-edge and think big
  47. 47. Supporting Student Founders “If you think of dropping out of school as being the precursor to starting a company, that makes starting a company very limited to a small set of students who have the safety net.” – Rei Wang, Director of Dorm Room Fund Source: https://blog.mixpanel.com/2016/08/25/student-entrepreneurs/
  48. 48. Supporting Student Founders • Student Associates/Ambassadors (Sequoia, KPCB, Alsop- Louie Partners) • Student Summer Programs (Highland Capital, Lerer Ventures) • School Funds (The House Fund, A-Level Capital) • In progress: UT Austin, Carnegie Mellon • School Programs (Princeton Entrepreneurship Council, Various Entrepreneurship Labs) • Shift: dropping out → in-school support
  49. 49. Students as VCs • Dorm Room Fund • Rough Draft Ventures • 500 Rookies • Model • Backed by larger VCs • Students investing in students • Carry goes back into the ecosystem
  50. 50. Traction • Rough Draft Ventures: 50+ companies • Dorm Room Fund: 100+ companies • Highlights • Blockstack Labs: $1.5M (YC, USV, SV Angel) • Lily: $15M raised (Spark Capital, SV Angel) • FiscalNote: $28M raised (Renren, NEA) • Beepi: $150M raised (Redpoint Ventures, Sherpa Ventures)
  51. 51. TAKEAWAY Student founders live in a creative environment that nurtures innovation and can make a huge impact. The Rise of the Student Founder
  52. 52. The Rise of the Talent Marketplace
  53. 53. Talent Ecosystem • Job boards (Indeed) • Candidate search (LinkedIn) • Recruiters on demand (RecruitLoop) • Applicant tracking systems (Greenhouse) • Talent marketplaces (Hired) • Freelance/contract marketplaces (Upwork) • Resume tools (Kickresume) • Interview preparation (interviewing.io)
  54. 54. Recruiters • Source candidates via LinkedIn, social media, job boards, referrals, etc. • Evaluate candidates • Track candidates in the recruiting pipeline
  55. 55. Talent Marketplaces • Recruiting firms at scale • Candidates sign up & fill out their profiles • Companies indicate interest in candidates • Platforms monetize successful placements
  56. 56. Talent Marketplaces • Hired: 2000+ companies (Forbes, Groupon, TransferWise)
 Founded 2012 • Vettery: 1500+ companies (JP Morgan, Jet, eBay)
 Founded 2013 • Indeed Prime: Facebook, Uber, Dropbox
 Launched by Indeed in 2015 • A-List: Pokemon Go, Bloomberg, Postmates 
 Launched by AngelList in 2016
  57. 57. Talent Marketplaces • Productize or outsource recruiter responsibilities • For companies • Cheaper per hire • Shorter placement times • High-quality candidates • For candidates • Less time spent job hunting • More companies & offers • More educated decisions & better matches
  58. 58. What’s driving demand? • LinkedIn: online professional profiles • Recruiting practices deeply ingrained • Better data + matching algorithms
  59. 59. What’s driving demand? • Hiring can be a huge bottleneck for fast-growing companies • Startups don’t want to miss great candidates • More competition
  60. 60. TAKEAWAY Talent marketplaces can help companies & candidates move faster and make better decisions The Rise of the Talent Marketplace
  61. 61. Takeaways
  62. 62. Takeaways • Deal-by-deal investing is valuable for unlocking investment capital
  63. 63. Takeaways • Deal-by-deal investing is valuable for unlocking investment capital • There is a huge opportunity for small investors to provide significant capital & value
  64. 64. Takeaways • Deal-by-deal investing is valuable for unlocking investment capital • There is a huge opportunity for small investors to provide significant capital & value • Successful entrepreneurs have operational expertise & high-quality networks of founders; with the right resources, they can become key investors
  65. 65. Takeaways • Deal-by-deal investing is valuable for unlocking investment capital • There is a huge opportunity for small investors to provide significant capital & value • Successful entrepreneurs have operational expertise & high-quality networks of founders; with the right resources, they can become key investors • Student founders live in a creative environment that nurtures innovation and can make a huge impact
  66. 66. Takeaways • Deal-by-deal investing is valuable for unlocking investment capital • There is a huge opportunity for small investors to provide significant capital & value • Successful entrepreneurs have operational expertise & high-quality networks of founders; with the right resources, they can become key investors • Student founders live in a creative environment that nurtures innovation and can make a huge impact • Talent marketplaces can help companies & candidates move faster and make better decisions
  67. 67. Global Sector Trends: 
 Cooling Down
  68. 68. Food Delivery • Grocery Delivery • Instacart, Door to Door Organics, Thrive Market, AmazonFresh • Meal Delivery • UberEats, Caviar, Sprig, Postmates, DoorDash, Grubhub, Munchery, Prime Now • Meal Kit Delivery • Blue Apron, HelloFresh, Plated
  69. 69. Food Delivery Source: CB Insights (https://www.cbinsights.com/blog/food-delivery-startups-funding-trends-2016/)
  70. 70. Food Delivery Source: CB Insights (https://www.cbinsights.com/blog/food-delivery-startups-funding-trends-2016/)
  71. 71. 2016 Shutdowns • SpoonRocket (integrated into iFood in Brazil) • Ola Cafe (food) & Ola Store (groceries) • PepperTap
  72. 72. Global Sector Trends: 
 On the Rise
  73. 73. Healthcare AI Source: CB Insights (https://www.cbinsights.com/blog/artificial-intelligence-healthcare-startups-funding-trends/)
  74. 74. Healthcare AI • 2014: 47 deals globally • 2015: 60 deals • Q1 2016: 30 deals
  75. 75. Healthcare AI Market • Genomics (Deep Genomics) • Wearables (AiCure) • Medical Imaging (Bay Labs) • Drug Discovery (Atomwise)
  76. 76. Atomwise • Find cures faster via algorithmic drug discovery & evaluation • $2B,15 years to discover & develop new drugs • AtomNet’s could save half of early stage drug screening experiments • $6M Series A in June 2015 with Khosla Ventures, DFJ; previously YC
  77. 77. Source: CB Insights Auto Tech • 2014: $354M raised globally • 2015: $556M raised globally • H1 2016: $467M raised globally • 2016 Exits • Lytx acquired by GTCR ($500M) • Cruise Automation acquired by General Motors ($1B)
  78. 78. Auto Tech Market • Self-Driving Technology (Cruise Automation) • Vehicle-to-Vehicle Communication (Peloton) • Security (Argus) • Telematics & Fleet Optimization (Zendrive)
  79. 79. Zendrive • Uses mobile data to measure driver behavior • Produce actionable insights for fleets • Automatic Collision Detection developed with BMW • UIUC study verified accuracy of mobile data • 13.5M Series A in February 2016 lead by Sherpa Capital
  80. 80. Auto Tech “With a company like Cruise, worst case scenario, especially for a seed round, is that you are going to 5X your money because there are so many acquirers.” – Tikhon Bernstam, investor in Cruise Automation Source: AngelList: Inside the Deal (https://blog.angel.co/inside-the-deal-tikhon-bernstams-investment-in-cruise/)
  81. 81. Real Estate Tech Source: CB Insights (https://www.cbinsights.com/blog/real-estate-tech-startup-funding-trends-q2-2016/)
  82. 82. Real Estate Tech • 2014: $1.1B raised, 174 deals globally • 2015: $1.9B raised, 212 deals globally • H1 2016: $1.8B, 108 deals globally
  83. 83. Brendan Wallace on Real Estate • Background • 5 years in real estate at Blackstone, Goldman Sachs • U.S. Real Estate Market • 13% of US GDP ($40T asset class) • One of the lowest spenders on IT • Corporate software • Paper/excel → mobile/cloud/data-enabled software Source: AngelList: Inside the Deal (https://blog.angel.co/inside-the-deal-brendan-wallaces-investment-in-clutter/)
  84. 84. Real Estate Tech Market • Residential & Commercial • Marketplaces (Opendoor) • Crowdfunding (RealtyShares) • Property Management (Cozy) • Listing & Search (Zumper) • Mortgages (Blend) • Virtual Viewing (Floored)
  85. 85. Opendoor • Making buying & selling houses a better experience • Sellers: receive an offer immediately & Opendoor handles the rest • Buyers: buy a home with a transparent process • $80M Series C in October 2015, $100M raised to date • Khosla Ventures, GGV Capital, Access
  86. 86. @narang_rishi Thank you

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