This Week in Startups - Ask an Angel with Zach Coelius: changing VC landscape, pitch deck punch-ups, Tesla’s future & more | E1186

Episode Date: March 19, 2021

Check out Zach on AngelList: https://angel.co/p/zach-coelius FOLLOW Zach: https://twitter.com/zachcoelius FOLLOW Jason: https://linktr.ee/calacanis

This week in startups is brought to you by Our Crowd helps you invest early in pre-IPO companies alongside professional VCs. If you're interested in investing, you can join Our Crowd for free at OUR-CROWD.com slash twist. And Fundrise provides access to diversified portfolios of private real estate to all investors with their industry leading easy-to-use platform. Sign up today at funderize.com slash twist. That's F-U-N-D-R-I-S-E dot com slash twist. Hey, everybody, welcome to this week in startups.

We're going live, live. I know this is risky. It's crazy. But we're doing Ask Jason again with my boy, Zach Collius, who is an angel investor, who grinds it out just like me every day of his life, finding great companies to invest in. Welcome back to ask Jason and Zach. Zach.

What up? How are you doing here in the final days of the pandemic? You're ready to blow the doors off this and get the roaring 20 started? I am. Yeah, yeah. We've got a Roaring 20s are on fire. So hopefully our Roaring 20s will be better than those Roan 20s and won't end up quite as horrible. Yeah.

I cannot wait to get started to see y'all. We're going to do this week in Startups Live, combined with the all-in podcast live. So imagine. What? Yes, we're doing, like, it's going to be fucking bonged. Insane. I am going everywhere.

Is that legal? Sure. Dude, in this city, is that legal? They might show up at your door and start. You might cancel me. Here's what we're going to do. My, the venue I dreamed of going to the Royal Albert Hall in London. I think it's in London.

I want to rent out the Royal Albert Hall and do this week in startups. then have a dinner, or maybe this week in startups, then have like a cocktail hour reception, and then everybody goes back in the hall for Act 2, this all-in podcast live, besties all over the place. It's going to be a party. But I want to rent the Royal Albert Hall, where Mark Knopfler did a six-day residence and broke the doors off of the records there. And I am going to go to London, and I am going to stock Mark Knopfler.

I'm joking. I'm not joking at all. Here we go. First question from Jake, big picture, what is the future of venture capital? With all these new syndicates, rolling funds, capital being cheaper than ever, who is the loser in all of this? Mid-tier firms, and I'm going to add to that. I'm going to punch up your question, Jake. Republic doing a $5 million investment in one day, equity crowdfunding has now raised,

where non-accredit investors has gone from $1 million to $5 million. This seems to be a turning point. happened. What are your thoughts, Zach, to Jake's question, who is losing? And then if you want to expand upon what we just saw Sahil do with Gum Road for $5 million on Republic, I'm interested in your thoughts. Yeah, I mean, it's a crazy time to be alive. It's fun. There's so much money sloshing on right now. I mean, and there's, I think the cool thing is that that's just leading to a tremendous amount of innovation. You know, people are trying new ideas. They're doing new stuff and it comes in all up and down the stack.

And it's not just sort of startups, but it's also in venture capital. I mean, if you look at the tired, bullward old white guys that have been running VC firms for the last, you know, 30 years, they're finally being forced to like up their game. And new entrants are coming in and,

and pushing the throttle and really challenging them, both from the bottom end, you know, the angelist, syndicate, rolling fund area, but also from the top end, you know,

the hedge funds are coming down and saying, hey, we can play it to this game. So I think it's great. It's innovation is good, new entrance. The game is just going to get more exciting. So in terms of losers to Jake's question, I think it's pretty clear that the existing industrial venture capital complex, the top tier firms, I don't think are impacted at all. In fact, I think they do better because there's more funded companies for them to choose from. Who does lose? I think Jake, you answered your own question, the bottom tier funds and the mid-tier funds who are part of the industrial complex, who are just eking out barely enough of an IRR and internal rate of return, they're going to be

challenged. I think they're going to lose the top deals. And then where is their space? If the hedge funds and the late-stage funds are coming down and grabbing that deal flow earlier, and if Republic can basically say to any founder, you don't need a venture capital. It's just write a deal memo and put it on our website. that to me seems highly disruptive. Then there's nobody getting carry on the deal.

There is no sponsor. But then the follow-up question is, well, that's a platform. They're not the sponsor of the deal who gets carry. So who is actually shepherding that deal? That does seem to be the weak link in the crowdfunding chain. Am I right, Zach? Yeah, I mean, I think no sponsor. I think if you open up a platform and you let all comers

come, you're going to end up with bad actors. There's no question about that. I mean, look at like what's happened on Clubhouse, the, you know, audio chat program. I mean, it opened up and now suddenly you got scam artists all over it, basically ripping people off, trying to convince them to part with their hard-earned money through, you know, MLM scams. Same thing happens when you, when you open up the world of sort of funding to anyone, scam artists are going to show up. You know, how we get through that and sort through that mess is going to be, you know, a process, but it's just, like any process when you open up a new gold rush and a whole bunch of scammers will be there. It really needs to be, I think this is my advice to the folks who are not accredited investors,

dare I say non-sophisticated yet, you will become sophisticated over time. I think you need to really be cautious when investing in alternative assets, whether it's bubble gum cards, NFTs, or startups. And you're going to want to make small bets as you learn. And in that spirit, Zach, we are opening up Angel University, which was previously only for accredited investors. And now anybody can attend. We sell the tickets for $300. All the proceeds go to charity.

If you can't afford the $300, you can email me or somebody on my team and we might give you a discount, like a scholarship or whatever. But we're going to open it up to everybody because, you know, Zach, my thinking is, you know, I want people who are going to, you know, these equity crowdfunding sites to actually get the education. Why not? Yeah. It's good. It's amazing. Okay, from LinkedIn. We are using LinkedIn live for the first time. And I got a lot of followers on LinkedIn. This is from Joe Timmons. Joe Timmons. Question. Who do you guys think? You know Joe? Okay. I know Joe. I mean, I know a lot of Joe's. I don't know this Joe. Who do you think is the next legitimate competitor to Tesla? Rivian Lucid Lordstown. I don't know what that is Neo. No, no, what that is L.I. auto, BMW, et cetera, et cetera.

I could take this one first, I think. I don't think... You won the pro here. Well, I mean, I just... Yeah, I mean, I have... I own the Tesla's. I own one of each, I think, at this point. Or four out of five.

I traded in my three for a while. So, I think that Ford and Volkswagen are going to produce electric cars that become more and more compelling. But I think the electric car challenge... and this is going to be a little controversial, was solved five years ago. When Tesla started hitting $50,000 a car and they got it to 300-mile range,

all of the issues around electric cars were basically solved. Now, I'm sure you're going to say, hey, there needs to be a $20,000 version or a $30,000 version. There is. It's called a used one. And the used ones are starting to hit market.

So, and in terms of range, the average American only drives, this is pre-pandemic data, 27 miles a day. So even in the, you know, edge cases of people driving an hour to work and back, even if they're driving, you know, very fast, it's still half of the 300-mile battery range. All the issues in electric cars are solved. And your question was, you know, the competitor to Tesla on electric cars, I don't think it matters. The new game is electricity writ large for cities like Texas or Sydney, which were having problems with their electrical grids or all of the incompetent California.

Tesla is now an energy company building batteries for cities, batteries for your home, solar panels, and EVs for your driveway. But I believe EVs will be but a portion of their revenue and that the actual business is energy and who's close to Tesla and self-driving only really two or three companies. Waymo. I don't know who else is actually really GM. GM, I guess, with the cruise. Yeah, sure, sure. Okay, yeah, so there's your big three. Yeah. What do you think?

Do you think there is actually a challenger to Tesla at this point? I don't think there is. Fusion energy. I agree with you. I think the electrical car problem is less now the car and more of the distribution of the charging stations, the ability to basically manage, you know, that scale that's required to do that. And then the big next game is self-driving. Because the thing is, once you have self-driving, it's like the number of car companies in the world

probably shrinks by 70 to 80 percent because 90 percent of, our vehicles sit there and not moving in any given moment in time. And so, you know, we, you just don't need so many car companies if people don't need to own cars anymore. When you have automated fleets, the world changes. And that's the other issue here is you are 100% correct, Zach, that car ownership could go away just with Uber and self-driving cars. Both of those were pushing the envelope on people getting out of cars. Obviously, the pandemic created this moment in time when people wanted to be in a bubble separated from people and not be near a ride-sharing driver or whatever or on public

transportation. That all gets reversed after the vaccine, and I think it's going to get reversed very quickly. And, you know, my understanding was there were tons of American car companies in the 1900s, a big boom, and here's a graph of it. We'll have them throw it up in post. But in the 1900s, there were like 250 new American car companies, and they all consolidated down to the five or whatever. we have now in the, or we had by the 80s. So I think all of these new car companies are almost all of them will fail. Fisker is a multi-time failure. We had Niccolo's founder or former founder on the podcast.

He's under investigation. That whole thing's a house of cards. And so I think it's a complete disaster. Yikes. I think it's all going to come dab burning down. Yeah. Both of those companies, I believe, will be worth $0.0. That's my personal belief.

If it's not slander, it's just my educated guess. I can guess that I think they're worth zero. I think it's loud. If you don't like it, come on the program. Explain to me why you're not worth zero dollars. Do you ever wish that you invested early in some of the best performing IPOs of 2019 and 2020? Well, our crowd investors did invest early in many of those awesome IPOs. With our crowd, accredited investors can invest directly and easily in startups early before they IPO or they get bought.

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So go ahead and do that. O-U-R-O-W-D dot com slash twist. Another question coming in from Justin on YouTube. Any thoughts on the new Google certification? This is really interesting. Did you see this that Google's creating a certification? And I don't know what the cost of it is, but it's very low. And they're basically doing a, I think it's a six-month certification.

Yep. And I think it's close to free. So they're basically going to give everybody, and I think this was their internal MBA-ish program, that they've now, as a mitzvah for society, decided to give for free to all people on the planet. What do you think? God bless Google. God bless Google. I mean, it's a pretty cool thing, right?

Yeah. I mean, you can look at the sort of academic industrial complex as it currently exists today that is totally broken. I mean, it's just a disaster as far as anyone can tell. And it needs competition. It needs basically, it needs to figure out how to innovate. And the only way to do that is to force them to do it. And the best way to do that is have new entrants like that or Lambda or, you know,

the fact that you can go online now and fight all the information in the world, you can study yourself and learn things. it's super powerful and i think i think google is really is really pushing the ball forward for all this i got a hot take on this hot take hot take i think google certification programs will mean more to employers than a university degree than a university degree and will be on par with even if you complete them an ivily degree within the next couple of years now this is a little bit crazy but here's what i'm thinking what they teach you in the Ivy League or in a college is got to be far, far behind what the state of the art at Google is, one of the world's leading companies. Google's new professional certifications are now joining the IT support certifications they've had for a little while.

These cost $249 for a data science course. They take 10 hours of study per week, which is basically like you binge one less series, okay? you lazy bums out there who are complaining there's no way for you to move up in the world. Go take some certification courses at Google and apply for some jobs and tell me that after you've done it and you stop watching TV. Each of these certifications is basically what you need to land the entry level job. U.X design, Android developers, IT support, data analysis. And just here's the quote from their course that started in 2018.

These certificates have been successful in bringing in more talent from groups, underrepresented in tech. Fifty-three percent of graduates of the IT support certificate in the U.S. have been female, black, Latino, or veterans, Google claimed in a blog post. And 82% of graduates overall say the program helped them advance their careers within six months, including getting a raise, finding a new job or starting a new business. This is so huge and underreported. this is going to be, I think, one of the great, great moves by Google to really, really help the world. And you know who the losers in this is? We want to always look at the losers.

Here's the loser. I don't want to say University of Phoenix. I don't want to get sued or something like that. But I think University of Phoenix and these other, you know, online universities that some people felt had maybe too high prices and maybe not enough. now I'm telling you right now University of Phoenix and others who have a varying degree of reviews and who charge I think 20 or 30 or 40 times with Google's charging you're about to get your asses handed to you yeah because University of Phoenix when I hear that I think oh really bad you know content and maybe people don't get these great you know great experiences and they

overpaid yeah now what is an HR person going to think when they see a university of Phoenix IT degree next to a Google one. Which one are you taking? Who are you hiring? It's pretty simple. Is University of Phoenix public? Can I short that company? I think those companies lose.

Yeah. And the bottom thousand colleges, which are overcharging and running people, running roughshod over people. Okay, let's take another question. Looks like I'm going to go to my Notion page. Shout out Notion. What are, this is from Devin. What are the common mistakes, red flags you see?

in a startup pitch pitch deck. How could inexperienced founders avoid this mistake? Zach, this is your way. Let's go ahead. Yeah. Where do I start? There's so many things. I mean, I think the biggest red flag is that they haven't really done any research

on how to do a startup deck. And if you go out and you spend a couple hours schooling around, you can learn a incredible amount of information. A ton. A ton. Yeah, yeah, exactly. And there's just, There's so many things in there that they overlook.

But I think the biggest red flags that I look for are, like, I basically say three things. One, an idea is worthless. A validated idea is priceless. And the difference between that is when you come and say, hey, I got this idea to create this thing, it's going to be amazing. And I'm like, okay, prove it. Whereas when you go in and say, hey, I got the same day to create a thing, and I went and talked to these 20 customers and here's their feedback and here's their, email addresses and they want it tomorrow, suddenly it's like, oh, that's exciting. You got something there. That's one, a validated idea. Two, like, you really need to basically use less words.

I think a lot of people basically want to write a book. Great, go write a book, but don't send me a book to basically try to look. Because I look at, you know, 50 pitches a day come in and I have to dig through them and figure out which ones I want to talk to. And so when you got an investor's attention for a few minutes at best, you really need clarity and your ideas need to be very simple. And then the last thing I would say is like they really, really, really, really, really, really, really, really, really, really, really, really, really, really, don't try to hide things. Because, like, whenever you leave something off, like, when you show me your 20-21 revenues, but you don't have your 2020 revenues, I'm like, okay, guys, clearly something happened in 2020.

Maybe you should tell me that because I'm going to figure it out anyway. Right. I think being candid up front about all things is super important. One slide, one point, I think, is the punch up, I would say, Zach, to what you're saying, which is people put like a paragraph on a slide. That's not a presentation is not a deal memo. A deal memo is one that's written with words. A deck is supposed to be visual. That means charts and, you know, bullet points and brevity. One point per slide, please. When you put three or three for points on one slide, you know, and you've got your KAC over here and you've got your team on the same side. It's like, whoa, just brazen into two slides and move through the deck. I think a good cadence is moving through the deck every 30 seconds or so, every minute. So if you're going to do a 20-minute meeting, that means the deck's like 30 slides and you're going to just click, click, and you're in sync. What you're saying in the pitch meeting is what's in the deck. Now, the deck should be beautifully

designed as well. An ugly deck is like coming in with a stain on your shirt. It just shows that you're not refined. And that doesn't mean you have to spend a fortune. There are templates online that are gorgeous. And just keep making the deck cleaner and cleaner. And when people are making a decision, they're going to make a decision on your traction, on your customers, on your team,

and on how amazing the product is. The TAM and, you know, a bunch of startup awards and competitions you won and some non-paid partnership you got, all the, all the croft, the more you take out croft and bullshit and put in customers, product, team traction. That's the cycle here. You hire a great team, you build a great product, you get great customers, you get great insights, and then you hire more people to make a better product, then you get that flywheel going. Keep it in that zone. It's my best advice. Great question. In 2021, a truly diversified portfolio.

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You just go to fundrise.com slash twist today. it's free to join F-U-N-D-R-I-S-E-C-com slash twist. Fundrise.com slash twist. What is the best way, and this is from B-Stom, CEO, what is the best way to go into an investor meeting pre-revenue? Hmm, interesting. You got the investor meeting, so this assumes you have the meeting, but you don't have revenue yet.

What's your best approach there, Zach? Yeah. So it's kind of like I just said. I mean, it really comes down to validation. Like if you don't have something to sell your customers yet, I really want to see customers who desperately want it built. I want to see people who are like, I really want that. Can you please build it for me? I'm happy to pay for it as soon as it's there.

Because, you know, for a certificate to succeed, you need to be 10x better than either the existing solutions that are out there or you need to solve or you need to solve a pain that's so painful that they are desperate to have it solved. And in either of those cases, if you can't find somebody who's willing to basically publicly or in an email say, I desperately want this, then you probably aren't going to succeed. Yeah, if you're pre-revenue, but you have a product and some level of product market fit, that's okay. And you got the meeting. So obviously, there's something that's intriguing. I would say you got the meeting.

It's intriguing. Talk about the usage patterns of your top 20% of customers. In other words, assume the looky-lose and the drive-by users are just that. They're not important. They're going to churn. So you say to the investors, when you're in the meeting, yeah, we have 100 people using the product every day. If you take out the people who use it once a month or twice a month and we look at just the top 20% of the users, these are our ideal customer profile. And what we see with them is that they are using the product 14 times a day.

And this would be the equivalent of in the clubhouse example saying, okay, they've got 14 million downloads. Tell me about the top 500,000 people using the product. So not even 5%. We're talking about low single-ditch. Just tell me about the top 3% of users. Oh, they're in the app four hours a day. Okay.

Now what you have to ask yourself is, out of the 14 million, if they got to 1.4 billion downloads, like a YouTube or a Chrome or a Facebook, if you imagine that world, and you imagine the 14 million people who make up the top 1%, or let's times it by 10, the top 140 million. What are those 140 million look like?

What I just described is Twitter. Twitter has a very small number of users who are addicted to the product, like Zach and I are, to a level that is absolutely unhealthy for anybody involved. I mean, celebrities are so addicted to this thing that they get themselves canceled. This dummy from the Mandalorian was one of my favorite goddamn character. characters couldn't shut up enough to stay in a Star Wars series when they were going to make her her own spin-off show. Did you hear about that side? It did. I mean, how dumb are you people? You picked tweeting, which you don't get paid for, over being an anchor character that Disney was going to build a series around you. And now you're working for Ben Shapiro in some Fakaka movie. Dummy. So dumb. It's unfortunate. Oh, so dumb people. I mean,

feel sad. I mean, it's really crazy. And you know what? This also happened with Snapchat. My understanding is when a friend of mine invested in Snapchat, he said, you know, when you look at the top 20% of Snapchat users, they were in the app every couple of hours, you know, literally all day long because it was the first social network that really had messaging at the core of it.

And we just did wonderful. Okay. There's another question. This one's from YouTube. I'm from Belgium. Working on an app. I hear a lot that it's easier to make apps succeed in the U.S. How much truth is in this statement and why?

it's the first time I'm hearing of it. Zach, you ever heard this before? I mean, I think it's the nature of a lot of startup wisdom is that people say something five years ago and then they still think it's true even if it's totally not true anymore. Yes. So, yes, this is an example of that. No, it's actually probably easier to build the app in Belgium because the cool thing is in Belgium, you probably are seeing things that are different than all of the sort of herd mentality that is Silicon Valley. you probably are having different ideas.

You probably have a different way of looking at how to build something to make the world a better place. And that's the place to do it. Not to mention it's cheaper probably to hire engineers. It's cheaper to hire people. Like all these things are true. Plus, there's so much money floating around in Europe right now for if you're in, oh, my God, the European governments are just literally firehosing money into startups. Oh, wow.

Fantastic. There you go. Grants. I mean, this is why Europe will do respect. has some weak startups because the government's funding them. Anytime the government, I mean, I appreciate the government trying to help, but I'll be honest, when the government gives your grant, it kind of makes you weak. You kind of got a clear market with the serious investors or clear market with customers

to make a go of it. So if your company is living off of grants, you're probably going to fail. Yeah. And you need to get more focused. It's a fine for a starting place. But, you know, I don't know if you've met these companies that are in year three or four and they're applying for grants. I'm like, this is like your friend

who is on their third graduate degree and you're like, everyone to enter the real world? We just want to stay at college. Oh, really? Oh, now you're going for music theory? Okay, congratulations. How's this a complete degree and your pre-med going?

Okay, yeah, okay, good. You're scared of being in the real world? Got it. I was only thing I was thinking here is maybe Europeans have more balance in their life and they don't, they're not as addicted to their phones and maybe they're just isn't as much of a consumer wave.

But anyway, it's a weird question. One of my best companies is from Paul, and they're just crushing it. You want to give a shout-up? Give a shout-up. Oh, yeah. It's called Booksy. It's basically the much, much bigger version of StyleSeed.

So if you want to basically, you want to get your haircut and get your nailsstone, if you're in one of the markets where Bookseat, I mean, they're the biggest in the world now. Oh, wow. Congratulations. I'm an investor in Style Seat. It's a great category for sure. It's, we got a little, little dual going on there. I love it.

Jason Zach Joust. You know what? That's like being like, you know what? I own the ARIA Casina and you on the win. It's like, eh, we're both going to win. I think it'll be okay in the end for us. That would be awesome. You're both going to a casino?

Let's inspire to that. Now, that would be even cooler than literally owning a sports team if we own like one of those casinos because they would have to cash flow that would come out of that. I want to start, this is my idea. I want to start my own private club like the battery, but a little bit smaller, maybe a 10,000 square foot location. That's just for car players and, you know. In San Francisco.

I would do it in the Bay Area maybe. Maybe somewhere more central on the peninsula. People could drive there, have parking, security. Oh, yeah, maybe that's good. So then our friends could just fly in and just walk. Yeah, you can fly in the wells. Like, literally walk over to the card room and we've got our world-class card room right there. Exactly, but it's just like a place where there's four rooms.

There's no rake. There's no chips or anything. There might be some, you know, it's good food. And maybe people have lockers with their cigars and scotch or whatever. I mean, it's a good idea, right? I mean, let's do it. Let's do it. Let's do it.

Okay. All in card rooms. All in card club. All in card club. We can't call a card room because we wouldn't be dealing cards. It would be, hey, you can play some cards. It would be a membership. A membership.

And it would be a good place to host events. Yes. Yes. Now you got it. We'll see you next time on this week in starters. Bye bye.