This Week in Startups - Elad Gil on his product-market driven thesis, importance of market pull, entering the “go public sooner” decade | Angel S5 E3

Episode Date: February 4, 2021

Check out Elad's website: http://eladgil.com FOLLOW Elad: https://twitter.com/eladgil FOLLOW Jason: https://linktr.ee/calacanis

Season 5 of Angel 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. LinkedIn Jobs A business is only as strong as its people, and every hire matters. post your first job for free at LinkedIn.com slash angel. And Odo is a fully customizable and fully integrated suite of software that lets you build and scale your stack your stack your business. Your first app is free forever and right now Odo is offering $1,000 off your first implementation pack at Odo.com slash twist.

That's O-D-O-O-O-com slash twist. Hey, everybody, welcome to Angel. This is the podcast where we talk about Angel investing with some of the greatest angel investors of all time, and today will be no different. We are doing our season five on Super Angels. What's a Super Angel? I don't know. It's open for interpretation.

But generally speaking, I think people who've invested in call it over 50, over 100, David Tisch, 350 with his partner. so that's, you know, over 150 each, is probably a good way to look at it. And when you get past, you know, five or 10 years as an angel investor, and when you get past 30, 40, 50 investors, you probably have a chance at hitting an outlier and you probably learn a couple of things. You also get humbled because the things you think we're going to work out never do. And the things that you did as a flyer sometimes come to incredible fruition.

Today on the program, we have an angel investor who has invested in, and I'm going to need you to sit down for this. Airbnb, Airtable, Coinbase Flexport, Gusto, Instacart, Open Door, Optimizly, Pager Duty, Pinterest, Square, Shripe, and Wish, among many others. You know Al-Gid, I'm sorry, Lad Gil. He is E-L-A-D-G-I-L. I know everybody likes to follow people on Twitter. And he, he, um, Welcome to the program allowed. You've spoken at the, you've spoken at our, you have spoken at our incubator many times, or a couple times, I think, and gotten great reviews. But we've never had you on the pod, which I realized when I haven't had you on the pod, I was like, well, that's an oversight. So apologies for it taking so long. What have you learned in terms of angel investing?

When you look back at an incredible track record, there's obviously you and I benefit from having, I believe, you start, it around the same time I did, which is about a decade ago in that incredible period after the bust of the real estate market and the Great Recession. And certainly that makes a lot of people look smart. We haven't been through the subsequent bust yet to see who looks really dumb. But you and I benefited from that. But what have you learned over the last decade in terms of angel investing? When did you start? Yeah, well, thanks so much for including me. To your point, I started about a decade ago. And it was right around when I had left Google and I was starting my

first company, which was an early data infrastructure company that Twitter eventually acquired. And to your point, I think a lot of things that people talked about then that I think we actually underestimated was the enormous size of online markets and just the sheer size of the internet and the liquidity that would provide to people to be able to buy things online, sell things online, interact with other people. And so I do think we benefited from this enormous wave of change between the cloud, between SaaS, mobile, and other trends, all sort of combining into one of the one of the of the biggest technology waves of all time. And I think that's still running right now. But it was a

really good time to start investing in companies as an angel. It's a really good point. You know, when we started and the desktop revolution was, I think, kind of reaching its zenith, its apex, we had a perception of what the market size was. And that was all these desktop computers and some number of them are on broadband connections. And those are really the great ones, those whatever it was, 50, 60, 70 million households. And maybe we pick up some people in Canada or the UK. But nobody really thought that a company like Uber or Airbnb, I think those are our two biggest hits each, nobody really thought at the beginning that those could become a global

phenomenon as fast as they did. So maybe you could speak to how these things were able to capture that market so efficiently. And I should note that you're the author of the high growth handbook, scaling startups from 10 to 10,000 people, July 2018. It's when you published it right around the same time. I published Angel, actually. And you've gotten incredible feedback on that book, and a lot of people, you know, really refer to it often.

But let's talk about that. What was it that made startups go global? And then, of course, we had the mobile wave kind of crescendo as well. Yeah, it's interesting. If you basically look at every single metric around the Internet, it could be hours spent online, hours spend on work online, commerce happening online, the penetration of Wi-Fi, penetration of mobile devices.

Each one of those factors is up anywhere between two and over 10x. And then you just kind of add them all up. And we have markets that are online now that are at least 10, 20, 30 times bigger than they were maybe a decade ago. If you really view that as translating them into the set of services that people use. And the proportion of humanity that's online obviously is also ballooned dramatically, in part due to mobile and part just to internet penetration. And so I remember writing a blog post 10 years ago that said that it's incredibly rare to have a $5 billion company and incredibly rare to have a $10 billion company.

And, you know, that happens once every five, six years. And therefore, are people running ahead of themselves on valuations and other things? And of course, that turned out to be completely wrong in hindsight. I don't think any of us ever expected to get to a trillion dollar market cap or almost $2 trillion market cap company in the public markets this soon as well. Right. I mean, every aspect of technology has accelerated dramatically. And there was, you know, if you look at Apple's revenue in the last three months, I think they generated over $100 billion in revenue. You know, that's an immense portion of just US GDP, if you think about it. It's bonkers when you think about how much money is being thrown off into their, I think they have the largest hedge fund in the world, basically, based on that amount of money. And what would you even begin to do with it? When you look at a company like Apple, what should they do with that money? Because they don't seem to be able to spend it. You know, they built a $4 billion campus or something, and they can't put it debt to it.

That campus is the ultimate luxury, like completely unnecessary to spend that much money. They don't know what to do with their money. Yeah, I'm actually surprised at the degree to which the fang companies, you know, Google and Facebook and Netflix and Apple and others, how non-aggressive they've actually been in terms of acquisitions. And to some extent, you could argue, well, it's great. They've really stuck to their knitting and they've been very focused as companies, at least a subset of them have.

But the other side of it is there are these really massive verticals that they could enter around healthcare education and other areas that I think are not tractable, or not that tractable for startups, but to a large player, especially taking a little bit of a private equity plus growth mindset combined with technology, you could actually create some pretty magical experiences for people

that I think could help those systems in pretty fundamental ways. And so I know that each one of those companies have, except for Netflix, maybe have teams that are looking at, at some of these areas now. But I do think that they could be very strategic and accelerate some of those activities, for example. Why do you think it is that we look at these giant companies? They do launch new products on a regular basis. Like a Facebook is very, very apt to copy other new startups that we invest in. Certainly Twitter now, they seem to actually be speeding up their

pace of development with Twitter spaces to compete with Clubhouse. And then they just bought a a newsletter company. So they do seem to be picking up their velocity. Yet, we have on the other side, everybody's saying, they're so much,

they're so big, oh my God, it's going to be crushing innovation. Yet we are seeing more startups than ever, more investors than ever, more billion dollar companies, more $10 billion companies, and now more $100 billion companies.

Congratulations to Airbnb and Uber for sort of hitting that $100 billion mark, which seemed unfathom unfathomable when we invested 10 years ago, that $100 billion in value could be created in just over a decade. Absolutely. And Snowflake and Stripe or others that, you know, are hitting sort of the scale of just, you know, these incredible outcomes. You know, it's very interesting. I think there's two points that you made that are worth touching upon. One is the degree to which technology is transforming multiple aspects of society and therefore the surface area of what software is doing is so much larger.

but yet there's enormous white space between all these different incumbents. And I think that's related to just the size of the markets as well as the scope of what startups are trying to do today. I think if you go back to the 90s, Microsoft was a much more threatening force to the average company because their OS is really the only way that you could do anything. And now with the internet, you do actually have dramatically more openness in terms of distribution or other aspects of what you're doing, which creates the ability to build scale in different companies.

So I do think there's way more activity ongoing than we ever expected. I think back to Twitter, one of the really interesting things that's happening is for the first time you see two companies that could potentially be credible threats to Twitter in the form of Clubhouse on the one hand because of their generation of both the new content format, which I think is super interesting, but also their reproduction of a social graph and an interest graph. And I think they're generating one of the strongest interest graphs of any company in a very long time, even though it's still a nascent service. And then substack is coming at it from a very different angle, which is fascinating, where they're pulling all sorts of content. that could have normally resided on Twitter off of Twitter. And there's this, I think, broader societal movement from public open content that can be attacked by a mob or people getting upset at each other as colleagues.

So from the public square into sort of the privacy of your inbox. And that's almost how you used to read the news in the olden days, right? You'd open a newspaper in your house and read it. You wouldn't be yelling at people online about it. No. Like, you wouldn't just take the headline, rip it out of your newspaper, run into the middle of street, grab five people and yell in their face. And make it super controversial and have nothing to do with the actual article, right?

And so it is substack is basically like the Twitter thread. And the Twitter thread was based upon blogging previously broke down into Twitter threads. And now it's it's popping over there. When we get back from this quick break, I want to expand on valuations. What we saw when we started our careers was five to $10 million, you know, angel seed rounds. And now things have gotten very heated. And we see something like Clubhouse, which is confounding people that how was this worth $90 million or $100 million? the founders sold some shares in secondary before the product was even launched and then a billion

dollar market cap I guess with two million weekly users. It seems kind of crazy. Is it crazy? Is it not crazy? We'll find out when we get back on Super Angels. Do you ever wish you'd 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, a crowd, a Redded investors can invest directly and easily in startups early before they IPO or they get bought. Our crowd investors have benefited from companies IPOing, like Beyond Beat, what an amazing company, and some of the companies have been acquired by buyers like Intel, Nike, Microsoft, and Oracle. Their in-depth due diligence process includes meetings with the management teams and a comprehensive vetting of deals that Our Crowd does decide to invest in.

Accredited investors can participate in single company deals for as little as $10,000 or one of Our Crowd's funds for as little as $50,000. So here is your call to action. You can join our crowd's investment in Nanowocirity, N-A-N-O-L-C-K, Nano Lock Security. This is a company offering IoT cyber protection, and it includes billions of low-end devices that other technologies cannot protect. Nanoloc is the only device level protection that has both near zero power requirements and is operating system agnostic. You can get in early on nanoloc and other unique opportunities at our crowd.com slash twist. Once again, our crowd is free.

You can use it, get an account for free right now. Read the deal memos, get educated. O-U-R-C-O-W-D dot com slash twist. Welcome back to Angel. It's season five. It's episode three and this season is about Super Angels. boy, Alad, you've had an incredible run. What a 2019 and 2020 and 2021 is going to shape up to be pretty good for you too with, I think, Stripe and Instacart and Coinbase, three amazing

companies that you were able to invest in. Let's talk a little bit about Clubhouse and just valuations in general. We do see weird valuations occur where they're outlier valuations. And it's very hard to understand that one before this was a company called Secret, which allowed people to, I don't know if you were involved in that one, but it was quite notable because it allowed people to kind of anonymously slander people in their, and share secrets with their address books. It created like a social graph from your phone book, as you remember. And then on the series B, they sold two million dollars or shares each or something in secondary before they were profitable, but at least they were launched. And then the whole thing blew up. Now we see Clubhouse

seems much more stable, seems like a much better format. And obviously doesn't have the toxicity of a secret. But it was confounding to people. Let's take the two moments in time and tell me, was that first valuation at that moment in time insane. And is this valuation at this moment in time insane? And then would you participate in this insanity? Either one, the $100 million or the billion. And then is this a sign of a bubble or is this just a unique edge case? Unpack it for us.

Sure. I mean, at a high level, if you look at every great company that truly became outsized, every fundraise was viewed as insane at that moment. And so Facebook at $500 million, oh my gosh, what are they thinking? that's insane. And Facebook at a billion, oh my gosh. I don't remember who it. It was a Greylock, I think, or somebody.

Or maybe, again, it was insane. And then Yuri Milner came in between 5 and 10 billion and invest in Facebook. And that was insane. And now it's a whatever, it is 400 and 500 billion dollar company. And so that pattern repeats over and over and over again. And so I do think that the very best companies always look overvalued at the time. And six months later, they look very cheap in hindsight. Now, the hard part is distinguishing between the very great companies that deserve that

valuation and everybody else who really doesn't, and usually valuation multiples or how you think about the comparables for a company gets set by the very best companies. And then every other founder points at it and says, well, that's me too, even if it isn't in terms of the market cap that's deserved. And so you end up with this bimodal distribution and venture valuations where a subset of companies are probably dramatically undervalued at almost every single stage of the company. And then the rest are somewhere between fairly valued and overvalued. In the case of Clubhouse, I do think it's the first really interesting social product in a decade. You know, it's recreating all sorts of really interesting use cases that exist in other media today.

That's everything from talk radio to podcasting, panel events, online discussions. You know, I think it's actually capturing an enormous amount of behavior that normally would be happening elsewhere. And it's also democratizing it in terms of allowing anybody to effectively create a panel on the fly and build a follower. ship. And it's the first time in a very long time I've seen celebrities flock to an nascent product. You know, maybe the last one was Snap. You know, it was basically Twitter and then Instagram and then Snapchat in terms of the companies that captured almost like celebrity mindshare. And you're starting to see that as well on Clubhouse so early in its life. And so, you know, it's a company I'm very bullish about. It's still very early. We'll see sort of

what happens over the longer run. But, you know, I think it may end up being one of those rounds where in hindsight, everybody's like, wow, that was a steal because now it's a $20 billion company. what do you think the monetization model will be eventually they've pre-announced or tip their cards a little bit that they're going to have tipping like YouTube has or Twitch or any number of platforms and I guess they get a percentage of that there's a take right there doesn't seem like advertising would work particularly well but maybe featuring your discussion but I said that about Facebook I didn't think Facebook advertising was going to work very well when compared to Google but and it didn't on a per click basis you know like it didn't have the intent but it did have the reach. I mean, my goodness, in terms of reach. So it was less effective than a Google search in terms of advertising, but it just was more time spent on site, et cetera. So what do you think the monetization is going to be for it? I'm curious. You know, I think there's two answers. One answer is, if you look at every single social product that I've ever seen grow rapidly, at almost any given moment, people said it was never going to be able to monetize. And you have to

remember that was actually said about Google in the early days. And Google went through three different business models. They tried to do enterprise search and they were selling these You know, yellow boxes that go on racks. Yeah, exactly, for like enterprise search. And, you know, they went through two or three different iterated. They were syndicating search and selling that to Yahoo and AOL and others. And then finally, they hit upon their advertising model and it worked magically. And, you know, if you look at Twitter and you look at Pinterest and you look at Facebook to your point, you look at every single social product before this, everybody always said you can't monetize it.

And then it monetized just fine. And often what you ended up doing is creating an ad format or alternatively a monetization. format that fit the native uses of that product. So for example, at Twitter, they ended up with promoted who to follow and then ads, and that made sense in the context of their network. With Pinterest, it's promoted pins. Substack obviously is doing a very different model with subscriptions. To your point, there's tipping and other things that you can do as well.

So I think there's going to be lots of different things that could be monetization mechanisms on that platform. And it really just comes down to what direction do they want to go in? How does that fit with their community? and their network and what's also just native to that experience. And honestly, I think it's one of those things that they probably shouldn't even worry about for another one, two, three, four years is they really focus on executing and building out the user base, because if they end up with a massive service, you can always

monetize aggregations of people. And so I think the thing they should really be focused on is building up the product. Let me ask you a somewhat controversial question. and then we'll move on from clubhouse, but it is the most extraordinary startup, I think, in the last couple of months, if not last year. A lot of the community was built

with people of color, African Americans, black Americans, and they seem to do that as a very deliberate strategy and bringing an artist, and it seemed like it was a very effective strategy. And there's a lot of black people right now on Twitter saying, hey, this is the, you know, fifth, 10th time we built a platform, whether it was black Twitter

was a phenomenon, Instagram, and we don't own it. And black people are not getting these valuations and there's no diversity in Silicon Valley and, you know, et cetera, et cetera, et cetera. What's valid about that? And what do you, you know, and I don't mean to pick on Clubhouse about this. You could say the same thing about Twitter. You can say the same thing about Instagram. You say the same thing about Facebook.

You say the same thing about WhatsApp. Black culture is culture as far as I'm concerned. and it does drive things. But this one seemed incredible, and it's being pointed out now. I've never heard it pointed out. I've never heard such a wave of power users say, why don't we own this or why don't we have any upside in this? So what are your thoughts on that generally?

Yeah, you know, I think that happened a little bit with Twitter too, where the black community really contributed to its early growth and adoption. And I think fundamentally, a lot of services have been asking themselves, what are ways that we can have the creators in the community really participate in the upside of it. And at different times, Uber and Airbnb and other companies that had these large distributed hosts or workforces or drivers or other things, they also tried to think through how can we distribute stock to them or how can we make them personal owners in what we're doing. I know in the first round, the first institutional round that Clubhouse did, I think they really

went out of their way to try and include women and minorities as angels in the company so their cap table would have diversity on it. And, you know, I think there's a lot of actual crypto projects that try very hard to think about, can you create a token that gets partially distributed to community and how do you go about doing that? How do you make mining or other things accessible? And so it's quite possible that the crypto community has some of the more interesting thoughts and answers to this

because they've spent so much time thinking about community enablement and empowerment and all the rest. The other piece of it, though, is that people on Clubhouse or other social products, Twitter, etc., are being rewarded by audience. And audiences in some cases can be, quite valuable. And so I don't think that people who are participating in those platforms are receiving no value. There's a lot of monetary value in being the top person on YouTube or having

a very large follower based on Twitter. And in some cases, people monetize those and in some cases they don't. And so I think it's one of those things that's ever evolving. And I think people are really genuinely trying to be inclusive in many cases. And the question is, again, like, are there models that we can learn from? Yeah, I mean, it speaks to the broader issue of we have this incredible economy that's occurring. I guess people are calling it now the K-shaped recovery, where people who make income are going down and people who have equity participation are going up. Now, you and I understand that implicitly because we've been doing this for so long. And in the early days of Uber, you know, Travis used to talk about it all the time,

trying to get driver shares of Uber. And they weren't allowed to. You're not allowed to give shares as compensation. It's just a legal issue with the SEC. And the SEC is quickly, trying to address this. I had Hester on the pod this year talking about it, or late last year. And I know Airbnb tried to give the host equity and they had to give up and then they just made a host fund, right? That would fund issues if they, if somebody had a bad beat or the house burnt down or whatever, they could do that. So this does seem to be a fundamental issue that we need to solve for America so that people who are helping build these platforms and networks can participate in them. I mean, who would know better that Clubhouse was a good purchase or Airbnb

or Uber that a Clubhouse host, an Uber driver, or an Airbnb host? Any one of those three would buy as many shares as possible last year or 10 years ago in those companies started. And can you imagine what an Airbnb host from year two buying shares at a dollar each would have experienced? I mean, they would have experienced what you and I experienced as angel investors. Yeah, I think it's a broader question because I think if you look at equity participation in general, because companies take so long to go public now, there's also just less participation by individuals in companies when they're really growing or going through hypergrowth. And so if you go back to the 90s during sort of the first wave of the internet, I think Netscape

went public after being in business for 18 or 24 months or something. You know, Yahoo was a few years old. Amazon went public quite rapidly. And so the public markets allowed people to really capture the upside of the upside of these companies where they then grew 100x, a thousand X, whatever it may be. And so part of it may also be the degree to which companies with communities are willing to go public earlier. And there's all sorts of downsides for companies to do that, but there's also some upsides. And one of the upsides may be actually the ability for communities to participate earlier in the life of a company.

Which is a great, great segue for us. When you and I started, there was this giant movement that made our friend Bill Gurley lose his mind, stay public longer, stay private, I'm sorry, stay private longer, stay private longer, and he rallied, hey, get public, it's good hygiene, let people participate, it's great for employees, et cetera. And now our friend Chamath has brought back SPACs, and we're seeing, I had one desktop medal, a very, you know, young company. I don't know if I've been an investor for three or four years. And so exactly what you're talking about, this earlier access to companies is starting to happen with SPACs when we get back. I want to know how that's changed your thinking, if at all about Angel investing when we get back on Angel.

All right, the new year is here, and it marks a fresh start for your small business. And you are going to need talent to pursue all of these new efforts you thought about over the break. So we're hiring a ton of people at launch. Customer support. We need another producer for this weekend startups. We need another video editor for this weekend startups. We need a community manager. I need people who are driven, hardworking, and who have skills, both hard and soft skills.

And you know where I'm looking for them? the best place to look for talent. That's LinkedIn jobs. You know that. LinkedIn is the greatest place to find talent. They have more than 722 million members worldwide. And let's face it, we're now a remote company and I'm willing to hire anybody anywhere. Doesn't matter to me where you live. I'm able to post jobs on LinkedIn jobs with screening questions. And they will get all of those job offerings, all of those amazing career opportunities in front of the right people. And you can edit this on your mobile phone or do it on your desktop. Bottom line, LinkedIn is going to match your job with the right candidate. So I want you to visit LinkedIn.com slash angel. Again, LinkedIn.com

slash angel and you can post a job there for free right now. That's right. They're giving everybody who hears my voice right now a free job listing. Some terms and conditions do apply, of course, because they're giving it to you for free. LinkedIn.com slash angels to get that first free job posting because we need to get to work. We need to do the work in 2021. Okay. let's get back to this amazing episode. Welcome back to Angel, Season 5, Episode 3, Super Angel. Alad Gill is with us. He wrote the amazing book, High Growth Handbook. Go ahead and buy that. Right now, pause the podcast, go get the audio book. Go get the book. Buy both. Why not? He was on episode 860 back in September 28 when he gave it an incredible talk at the lunch accelerator. He's the co-fired and chairman of color

from 2013 till now. You wound up getting the color.com domain again and tell everybody what that company does. Sure, yeah. Color is population health and care delivery company. And so they both have a software platform that's being used by everybody from the NIH to California state in the context of COVID for the testing lab that California has put up as the centralized testing lab. And it's really focused on building the software infrastructure for public health and population health in the U.S. When we went to the break, we were talking about SPACs. Well, this has been incredible. Although, when I started to see my friend Shamath doing it, and I was like, oh, these are great companies. Fantastic. Yeah, certainly Virgin Galactic is a very speculative space company. But space is a real category.

And they have deposits from people. And obviously space tourism is going to be a thing. Is it going to be a giant thing? A humongous thing? A modest thing. Who knows? But I think that's a reasonable bet for people to make. And then I saw, and I got really nervous, Nikola Fisker.

A lot of companies, which I consider like no chance of getting in front of the Tesla, Elon must train at the pace he's going on. I don't if you saw the Model S today, 500 miles and the cockpit looks like it's a fighter jet. Like, Niccolo and Fisker will never produce a product that is 5% as good as Elon's. I think everybody who is in the know would agree. So there's going to be some really bad product put out into the market as well. But how is this going to change what you and I do and participation in these markets? because you and I had to sit on our hands for a decade with a lot of these companies to wait for our payday and to get a return on investment that we could then put back into the market.

So talk to me about SPACs and how you think that might change things. Yeah, I think SPACs are going to be yet another tool that people can use to go public. And I think it's great that Chamatha has done some really pioneering use and the use of SPACs in the technology sector. They've been around, I think, for a couple decades before that more broadly. It's interesting because if you look at the crypto protocols, those actually become liquid really quickly. So, for example, in the last year, both Filecoin and SLO, two crypto protocols that I invested in are now at least partially liquid. They tend to have vesting schedules and everything

else. And so really, it's core tech that had a long period where people weren't going public very frequently. But I think that's shifting. And I actually think it's generational. I think people who started companies between 2008 to 2012, perhaps because of the Facebook example where Facebook went public and then I think, you know, the stock dropped a lot and then eventually it went way back up. I think that created a little bit of turbulence that others interpreted as a sign that you shouldn't go public. And there was other reasons that I don't think are quite correct that people were hesitant to go public. But I feel like it's generational because when I talk to founders who started companies more recently, they're actually much more interested in going public than people

who started companies 10 years ago. And I think that's a really fascinating split in terms of just generational viewpoints in terms of cohorts of founders around what should and should be done. You know, Lemonade is a good example of a company that went public after just a couple years and is saying, we're going to grow in the public markets like people used to. And so it's been fascinating to watch between SPACs, crypto, and then this generational shift. And I think now suddenly it's popular again to run a public company. Who knows what it'll be in five or ten years and it may end up being cyclical. I think this had something to do specifically with Gen Xers having experienced the dot-com bust and then right after it, having

experience the great recession. One of them we were blamed for. I don't think the tech industry was particularly to blame for even the dot-com bus. I think it was the bankers who just, you know, really overhyped a lot of this. And now, and then certainly the real estate bust was Wall Street's fault again. So I think both of those were really Wall Street's fault. And so there's, we just got hit with two hurricanes. And now you're like, I don't want to build a house. I don't, I don't want to get hit by a hurricane. It is actually kind of a reasonable thing. But I think your analysis, I've never heard anybody say that. I think it's actually correct. Because we had this, when you and I were coming up, that was the brass ring, like,

take your company public, ring the bell. I mean, it's a moment of time, of course, people give that speech. Oh, it's just a financial transaction. But that's not true. It is a really meaningful moment as a company to really clear market with the public markets. It is something special. Is it not? Yeah, I think so. And I think also as the first YC companies went public and as more and more momentum happened in terms of companies going public. People started to think, oh, you know, companies are being celebrated for doing this. Founders are being celebrated. Some of them say it kind of sucks. Some of them say it's fine or that they like it. And so when your peers start doing something, you're like, oh, okay, maybe it's fine and I can do it too.

I think an interesting analog was payments because after PayPal got bought by eBay, a lot of folks who were sort of director level at PayPal started talking in Silicon Valley around how hard it was to do payments. and I think that stopped real innovation and payments companies for five or six years. And then suddenly Stripe emerged and Square emerged and a firm emerged. And all these amazing payments companies got started. And now it's something that people know they can build again. But there was a period where people claimed it was too hard and there was too much fraud online and it was just impossible. And I think it was a similar thing where there was a generation of people who dealt with it really early at PayPal.

And then it kind of spread as a meme as something that you shouldn't do. And I think going public was kind of a similar meme like that. And it was interesting too because Why Combinator now is 15 years old, right? Started 2005, I believe. So it's 16 years old. It's going to be two decades old. We were sitting here just three years ago and Y Combinator had zero public companies after a decade and people were starting to like go, what's going on here?

Like, is this actually going to happen? What they forget is how early Y Combinator was engaging with companies. A VC putting money into a Series A is getting in year two or three of the company typically. Why Combinator was in year zero for companies, AirBiator. and B DoorDash, now public, Stripe, and... I think Dropbox may have been the first. Dropbox was the first. That's true.

That was four years ago, maybe. And so that was the first. And it was, you know, a moderate success. Like you said, a $10 billion company, $5 billion company, was an amazing task at the time. Now it looks, you know, relatively small compared to the other ones. But they're going to have, you know, quickly two dozen, I think, given what's going on here. Do you, how do you think about selling shares and exiting

positions. I know you've done well in your career. So now that you don't, I'm assuming, have a pressing need to get that capital out, how are you looking at this? Because you obviously want to reinvest money in other places, stock markets on a tear. How do you think about secondary? You must have had many opportunities with Stripe, Airbnb, and others to do secondary. Did you take advantage of secondary? And how would you advise, you know, an accredited investor who's worth millions, but maybe, you know, could use some cash to think about pairing their position or going long, right? Yeah, you know, I'm very unsophisticated about it. I think I have almost a Forrest Gump style approach.

That is so honest. Thank you for that. If something just keeps compounding, why would you sell out of it? And so, for example, my intention with Stripe is to just hold Stripe for the next 10 years. I think it's just going to keep growing at a really good rate forever. I hold almost my entire position of Square, which I invested in many years ago. And just in public markets, I've just sat on it and it's been compounding. Yeah, I have Square shares.

I sold half of them. And I feel like an idiot because they've done so incredible since going public. It just keeps going. And so you see these companies and you look at their Tams and you look at their growth rates and you look at their rates of innovation and you think, why would I ever not keep participating in that company? Now, that means that I've remained incredibly illiquid throughout my entire career. And, you know, I always had a very large proportion of my net worth and startups, even when I didn't have any money.

You know, I put it all into startups. I mean, literally all of it, you know, two thirds or three quarters of my liquid net worth would go into these things. And so I'm very comfortable with doing that and just letting things compound. And, you know, I don't have a lavish lifestyle. I don't live large, you know, so it's easy to do that if you don't ratchet up your expenses. Well, I mean, it's actually a really interesting. Yeah. And I think I had a similar approach to.

which was, I started selling 10%, 20% of my Uber position, you know, and now I'm just like, I don't see a world in which Uber is not number one at ride sharing and either number one or number two at food delivery. And so why would I sell the rest of my position? I just don't see it. You know, it's like your Airbnb position. Is there any way to knock Airbnb out? I don't see it. I don't think it's going to happen. I think that that company will be here in 10 years. how do you think about actually we're going to go to break so this is the question everybody wants to know how do you pick winners when angel investors are looking at companies do you have your own playbook i have mine i want to hear yours and then maybe we'll trade some notes here looking back on

our portfolios what patterns did we see about our wins and what patterns did you and i see about our losses when we get back on angel as somebody who's invested in over 250 startups oh my God, has it been that many? Well, I want to talk to you about a serious pain point that I see all the time with my startups. Too high of a burn. They're just spending too much money and the runway is too short. One of the things that people have spent a ton of money on these days is buying SaaS products. Great idea. Make your company more efficient. But what if you're buying too many? What if you're not using some and then you're wasting all this time integrating them together? Well, there is finally a solution and the solution is O-D-O-D-O-O-O-O.

dot com slash twist. That's O-D-O-O-O-O-com slash twist to get $1,000 in credits. That's right, $1,000 in credits. O-D-U is a fully customizable and fully integrated suite of software that lets you build and scale your stack as you build and scale your business. It's simple, it's modular, and you only pay for what you use, and you can just add components as you grow. You can do project management, invoicing, sales, marketing automation, help desk, timesheets, inventory, and so much more. For example, their accounting products are perfect

for anyone who upgraded from Excel or QuickBooks, but doesn't want to break the bank with some of the more expensive options out there. And they're going to give you $1,000 right now on your first implementation pack. That's right. Not a joke. They're going to give you $1,000. They really want you to try the product.

ODO.com slash twist. Check it out. Odo.com. Wow, what an amazing guest. I want to apologize to the this week in startup's audience for not having Alad Gill on sooner. I knew I should have had you on. When your book came out, I'm such an idiot. I apologize to you again. We have to have you on a regular basis because you're candid and you've got so many insights. And oh, for those of you asking, yes, I am, that is a blizzard behind me. I am in Tahoe. And literally before this, Alad, I had one of the peak experiences of my life.

I was on the lift alone. I went for the final run after I brought my daughter in for Hot Coco. And it's a complete white out blizzard. And I put in my dire straits, alchemy, and I went up the lift twice, and I did two incredibly long runs. And I could not see more than 15 feet down the mountain.

There was so much snow. And I was whipping, and I was just carving through this powder. And I have been so losing my mind in this pandemic. I just want to give a PSA. you can go skiing. You could go on hikes. You could go fishing.

Do something outdoors. Go get that nature bat. I don't know. You ski a lot? A little bit. I snoboard a little bit. I think I'm the last person left in San Francisco, according to Twitter.

So it's just me and I walk outside and those streets are empty. There's nobody left. It's so weird. Let's do a little, before we go to like what we've learned in terms of picking companies, let's do a little detour here. We'll go on a little tangent. How has the pandemic affected you personally? Are you an introvert, extrovert?

And how are you thinking of, about 2021 on just a very personal basis, you know, with the pandemic appearing, hopefully, to be in its final stages. What do you think? Yeah, no, I mean, I think ultimately we have somewhere between, you know, nine months in a year before we kind of wrap this up one way or the other. And so I do think that this is the year that we're going to be done with it in the Western world, or at least the, I should say more broadly in the developed world. And then I think the developing world will take a little bit longer or just sort of reopen. It really kind of depends on how countries are going to look at things relative to vaccination and everything else. So I think we're kind of entering the

endgame of it. And to me as an investor, that's actually one of the reasons I recently co-led around in trip actions, which I think is a fantastic company in the travel space. And part of the thesis there was, you know, either through vaccine or through herd immunity, the end is in sight for COVID. And so I think in general, now is a good time to start thinking about what are other services that once all this is over are going to start sort of rushing back. And what are the companies that executed extremely well in what may have been the toughest environment that those companies will ever face? And so I think there's probably some really exciting companies out there who've managed the storm.

I have to agree with you. I think travel would be a great investment to make. If the travel company survived, by this point, it's going to have a tremendous second half of the year. And I've been doing this back of the envelope bath and tweeting about the pandemic and the vaccine deployment and comparing Israel and West Virginia and some of the smaller states here where we've gotten over 10% of those states, you know, with vaccines and are vaccinated. And it really is dramatic. You see the number of hospitalizations in Israel is just plummeting. And they took a very, I mean, listen,

It's a, what is it, it's a six million person country with four million Israelis and two million other folks who live in the region. Four million folks is a lot easier than what we have to do with 300 million. But this has been pretty extraordinary when you think about the science behind it. And now we seem to be really deploying these things professionally. I don't want to make it political. But I don't know if you watched the, this morning they did a briefing. And the briefing was about the science.

and the facts and the deployment. And there was nobody, people could say, like, I don't know. And we'll get back to you on that. And here's our plan. And there was a plan. And I was like, oh, my Lord, we can beat this thing. Yeah, you know, it's interesting. We can do it's 1.6 million shots yesterday.

1.6 million shots. Yeah, it's good. It's good progress. It's good to see the U.S. starting to kick into gear a little bit more on it. I wrote a blog post a couple of weeks ago. We're actually called up a bunch of people who were involved with vaccine deployment in Israel and I try to deconstruct what are the things that were working really well for them. And then what are the common things that people say about the U.S. that are just false in terms

of why the U.S. is not working. And so, you know, I do think that, you know, the Israelis have done a very nice job of rolling out the vaccine and they're vaccinating, you know, two plus percent of the entire population every day now, which is outstanding. If you think about it. And it's a company that spends a third as much. 2% of the entire population is getting a shot every day. They spend a third as much of GDP on healthcare per person.

And you know what? Fundamentally, like New Jersey is the same size as Israel. L.A. County is the same size as Israel. Like, I don't think size is really the excuse. I think the reality is they came up with very simple criteria, which was age-based. They didn't make it a complicated political thing of, are you this essential worker, that essential worker? And we should reward and encourage essential workers to get vaccinated as the next set.

I think essential workers also care about their elders and people with comorbidities who are likely to die. So, you know, prioritize the people who are actually at risk, which is what Israel did early, open as many vaccination endpoints as possible. And, you know, there's three or four other things that they did that really were effective. And so I think the U.S. is finally starting to adopt some of those things. And then you see velocity in the places where they're like, okay, simple criteria. A good example.

I think in California, they had seven different tiers or something like that for health care workers, depending on how much time you actually spent with the patient and who should should get prioritized in line versus somebody else. In Israel, one of the people told me, instead of coming up with the criteria for a hospital, we show up and we vaccinate everybody who works at the hospital and then we know we're done with the hospital. And then we go on to the next one. Because we know eventually everybody has to get vaccinated anyhow, so let's get it done. You know, it's very pragmatic. Why politicize it? But you got to be pragmatic about these things, you know? And I think America has become so politicized because we're so soft

and entitled. And if you're in Israel and you have bombs dropped on your city, you know, every X number of weeks or months, you kind of look at the world slightly differently and you take a wartime stance to the vaccine. People are dying. It's a wartime situation. When people are dying, you have to do certain measures and there's no time for woke nonsense politicizing this. I mean, if you're over 65, give them the goddamn shot, period. And let's not debate who's essential because teachers now, it's so outrageous, teachers fought unions to get the shots. And now they're saying they won't go to school until the kids get the shots, full well knowing that kids are not getting the shots are not even able to get the shots. The vaccines are not rated for children yet. They will

be in 2022. It's infuriating. Yeah, yeah. I think everybody is frustrated with how the vaccine relates have gone. And there's a handful of states who've done it very well. There's a handful of states that have really lagged. And I'm excited to hear that, you know, we're now up to one and a half million a day. And hopefully that goes to three million and four million. And it keeps growing because, you know, if the U.S. has 300 million people or, you know, 250, you have to get vaccinated as adults, that means 500 million shots. So even at the rate of, you know, one and a half million a day, that's still a year before we're done with it. And again, if you prioritize the 20% of the population that's truly at risk, which is really people over the age of 60 and people

with comorbidities, you can start thinking about reopening society more and more because if nobody's dying. Yeah, if nobody's dying, you know, you bring down the death rate 95%. you know, that makes a very big difference. It's, yeah, 85% of the deaths are over 65 and then the comorbidies of the other 10. It's almost nobody under 40 who doesn't have a comorbidity. So we can literally get the economy back on track. We could literally have people not committing suicide or opioid abuse or domestic violence, all these other second order painful suffering that's going on in society.

You know, that has to end as well. For sure, keep it simple is what we need to do. I mean, the other thing I heard was at the Friedberg was talking about this on the All-In podcast, David Friedberg said in Israel they were, when they get to the end of the day, because you have to defrost some of these vaccines, I guess, and they go to waste within three hours. They would, if they had any of the shots left, they were told, go out of the street and grab people. So imagine if in San Francisco we just said, you know, at four o'clock, any extra vaccines you can do, and people are doing that in the United States. The citizens of the United States are finding out where these vaccine centers

are and they're waiting outside. Yeah, and that's fantastic because you have to remember, everybody will eventually get vaccinated, and instead of throwing it away, you should give it to somebody because eventually that person will get vaccinated anyhow, and there's no point I'm wasting it. There's a really famous story in Israel where, to your point, people line up at 7 o'clock at night every night at the clinics, and that's the line to get the excess shots. And in some cases, those lines get depleted. And so the nurses will go out on the street looking for somebody to inject.

And so there's a great story where these two nurses run outside. and they see a pizza delivery guy, and they start yelling, pizza guy, pizza guy, come over here and they vaccinated. Of course, pizza guy is going to be a vector. I mean, how many pizzas is he dropping off? That heads up thinking, right? He's on the street, so he's got the chance. Let's talk about when you look back, do you have now, after all this great success, a thesis? Because that's what I get from a lot of members of my syndicate. Hey, how do I pick companies, et cetera? I'll give you my advice. after I hear yours. But I'm curious when your friends ask you, how did you do it?

How do you pick them? How do you pick them? You know, I think there's lots of different criteria, but the summary of it is that I'm a very product market driven investor versus a team-driven investor, even at the earliest stages. And I think most angels talk about how they really look for specific characteristics in a team or an individual. And I think that's crucial, right? Without the founder, things will never work.

But I actually index even more on the product market. Like, does a product make sense for the market? Does a market seem like it could be big in some form or another? And are there signs that this thing will get traction? And if so, that's when I invest. And so I think that's the biggest difference between me and a lot of early stage investors in terms of what they emphasize. Yeah, it's interesting.

Why do you think so many VCs like to talk about this, like, characteristics of the founders? Is it like some sort of pandering kind of thing? Is it strategic signaling? Like, oh, we really care about, like, the driven founder? Yeah, I actually don't know. It's possible for some people at signaling. I think in other cases it's just they believe it, right? They really think that the single most important thing is a person. And in some cases, you do see these singular individuals build businesses that are bigger than others would have in the same situation, right? And, you know, you look at the difference between where Stripe ended up and Braintree ended up in Brain Tree is an amazing company, but the strike founders were special, right? Or Dill in at Figma special or you can run through the list, right? There's all these sort of special founders. but I think really the product market side of it is what gets you from like zero to a half billion or billion dollar company or in some cases bigger, right? You see these companies that just did a terrible job of executing and they're five, 10, 20 billion dollar companies. And then, but some of those companies should have been hundreds and hundreds of billions of dollars of market cap and they weren't.

And that's just the difference between an amazing team and not. But if you're in a good enough market, the market will pull you up beyond what, perhaps you deserve. Let's talk about the total addressable market because you did say, hey, does the market need this and how big is that market? And, you know, there's obviously market pull. The market needs the product so much that they just can't not have it. I mean, I think Clubhouse had this incredible market pull actually during the pandemic, right? We're home, we're bored. We're not going to movies. We've watched every single thing on Netflix. It's like, that's what I do. I'm just like, okay, I've got every single Netflix show done.

I've got every email done. I've put my girls to bed. I did. my workout in the treadmill. I played two games of chess. Maybe I'll throw on Clubhouse and listen to something after my podcasts are done or whatever. How do you think about Tam with these companies? Because I don't think the Tam for Airbnb was hotels. It seemed like it was something very different. And I know for Uber, it was not taxi cabs. So let's talk about Tam for a second, and especially with the outliers, because you and I have made our careers at the end of the day, half, 80 percent, 90% of our returns will be two or three companies. That's just how it goes. So let's talk about it. It's kind of interesting because I think one of the key things about companies that become very big

is that their start, they're not obvious. And there are markets that are not obvious. Because if it was obvious, everybody would be doing it. There's no opportunity left. And so definitionally a great company has to be non-obvious to begin with. And so then you start getting into Tam and what's the true total addressable market? And I think people tend to underestimate Tam for, for the two breakout companies, right, pretty dramatically. And I often think of it more as effective Tam versus Tam, because people will show up and say, I have this trillion-dollar market,

which is a very rare thing for the actual market to be a trillion dollars, right? Corporate travel really is a trillion-dollar market, but most things are really, you know, a $500 million market or a billion-dollar market. And then the question is, what portion of it can you capture? But there's also sometimes these other things, which are adjacent markets that really turn out to be your market. And Uber is a great example to your point where it wasn't the yellow cap market. it was the market for transportation within a certain geographic region, right?

That was really the market. And you see sometimes big companies do this in really smart ways. So the reason Coca-Cola entered bottled water is they used to only look at their market share in soda. And they said, look, we're at 60% versus Pepsi and others and we're winning and we're doing great. And then eventually one of their CEOs said, well, what are we in terms of beverages? Like if you compare us to water and juices and all these other things, and it turned out that they were less than a percent of that market. So by redefining the market, they redefined their strategy.

They bought Desaunt or they brought out Desauny and they used the shelf space and distribution they had to cross-sell that. They rolled out more and more products so they could gain share in the new market that they perceived themselves as having. And that's the really hard part, the really hard thing to get right. I just love that example because think about the blind spots that we build up in terms of what we think we can do in the world. we sit here and we go you know what we have done all we can do in in soda and it's like

it's a liquid in a bottle what other liquids in bottles are it's like there's tea and coffee there's milk there's juice uh there's a lot right and once you like release that from your brain you're like oh and looking at uber i was like in the early days Travis would always talk about being a logistics company. And then I'm sitting here during the pandemic and I'm losing my mind. I'm like, why are they not helping these small stores that are selling these other, that are not restaurants, but there's a small store. It's got inventory. There's a Uber driver sitting there. They got no passengers. And there's a candy store. And there's an ice cream store. And then there's a Walgreens. If I want to get something from Walgreens, I'll do a Walgreens. Obviously,

Instagram has some of that. But people need to really open up their minds and just be a little bit more open-minded about what the possibilities are, correct? Exactly. And that's why I think when you look at these very early companies, it's sometimes very hard to extrapolate what they'll become. And sometimes the proxy that I use, honestly, for a market size is growth rate. Because if something is compounding at a very fast rate, it suggests it's actually in a very big market, even if you don't think the market is big. And if something is compounding or growing slowly, it's probably in some niche or there's something wrong with the product or distribution isn't quite working, but it's kind of stuck

somewhere, right? And it could just be market size. And so for me, when I look at companies sometimes, I think, oh, it's growing this fast and everybody says it's a small market, but it's impossible for it to grow this fast if it's a small market. It has to be a big market. It's such a good point. You use the growth rate to determine the market size. And when you see a company that's growing 20% a month, and if you know the rule of 72, you know, divide the growth rate for the period, By 72, you get how many periods it takes to double. So if, you know, in the early days of Uber, it was doubling, it was growing 20, 30% a month, which meant every two or three months, it would double in a city.

And I think you probably have seen other situations like that, correct? Yeah, exactly. And that's when you're like, okay, no matter what people say about market size, this is a really big market. Is Amazon not the most amazing company in this regard? Like, they hit a trillion dollar market cap and they still are growing. They're still growing. It's crazy. Yeah, it's amazing.

It's hard to sustain, isn't it? It's hard to sustain, but I think also the thing that people underestimate is the degree to which companies, particularly if they have a consumer angle, tend to accelerate with scale versus decelerate. And so I think that's, you know, I don't remember exactly where it is, but I think there's often an elbow around 5 or 10 percent penetration in a given market where consumer products go faster. Why do you think that is?

I think sometimes it's brand recognition, it's liquidity, it's sort of organic spread. I think Uber accelerated over time, right? It started growing faster. Yeah. It would actually did start growing faster because, as David Sachs would say, it had that real world virality where somebody would take it out and they would have a car and the person would say, I'll give you a ride on my Uber. And they'd be like, what's Uber? The person would show them their phone and what's a company that you invested in where you just thought, my God, this is going to change the world, it'd be huge. And, you know, maybe it didn't. And, you know, and, you know, it may be underperformed and what did you learn from that?

And then give me the converse, something that just overperforms so dramatically that it changed how you think about the world. Yeah. I mean, there's lots and lots of companies that I've invested in that didn't end up as big as I thought they would be. And I don't want to. Oh, yeah, that would be, we don't want to give a. Yeah.

Well, give us a composite of one, you know, without saying the name of it, like a composite of one or two, that why you think they stalled out? Yeah. I mean, in one case, I think they really did have sort of a limited TAM, and they never really bridged into other things. And the original vision was, it was a SaaS company, build out a set of customers and get a big enough footprint. You can start cross-selling other products, and you can launch these other things that are adjacent.

And they never did any of the adjacencies. They just kind of really stuck to their lane. And so in that case, it was both a TAM or market size issue as well as an innovation issue. And one thing that I've noticed is that companies that tend to innovate early tend to continue innovating late, companies that tend to innovate late never really innovate. And so you see this pattern over and over again in companies, right? And you can imagine your own examples of the companies that never really came out with a product too.

And 10 years later, they still don't have a product too, right? And so I think that's a very interesting pattern. And you want to encourage companies that once their core product is scaling repeatedly, and they have a great sales motion against it, and they have a clear product roadmap, that's probably the moment that they want to add a product to. And the advice I usually given is stay focused on your corner matter what and don't get distracted and your core market's big enough. And that's true. But you need to build that muscle of innovation. And if you start saying no all the time, even though you have a stable base for product one. And stable base also probably means at least tens of millions of revenue. It's not like you're at 200k and you're like, I should do product too. But at a certain moment, you should really start the next thing. And that's what Google did. And it was quite controversial internally, right? When they started doing Gmail and they start doing different forms of search and then. Chrome. Eventually they got the Chrome and other things.

I mean, they did a dozen really interesting things. And then the acquisitions, YouTube, Android. I mean, these were big swings. Yeah. And Android alone is worth everything that they ever wasted money on in terms of like bad acquisitions, right? Same with YouTube, right?

Absolutely. Absolutely. They have like half a dozen things like that, right? That justified every. Well, I think YouTube and I'm trying to think of the greatest acquisitions of all time. YouTube, Chrome, WhatsApp, Instagram. I think Whole Foods for Amazon could wind up being one. I know that's probably controversial, whatever, but it could be.

There's a lot of things, too, that were acquisitions, for example, for Google that aren't talked about as much. Applied semantics? Android would be one. Applied semantics, right? That was the original. Plied semantics. The Maps.

Deep Mind. Was an acquisition. That's true. Yeah. And Deep Mind. Deep Mind. And, you know, you look at some of the other companies that are really acquisitive. I'll give you a Facebook example that I think was more important and just doesn't get talked about very much, which is a company called Snap2, which was a mobile application for the developing world that had multiple social products on it.

And it was a way that a lot of people accessed Twitter or Facebook or other products in Latin America or other places at the time. And Facebook bought them, made them part of their growth team, ripped out every app except for Facebook and just distributed across every carrier they could get it on. and they grew, I think, I think they added like 100 million users just through this. This was the light, I think Chmop worked on this too, because this was like the lightweight version of Facebook that would work on older phones and SIP data and something like that. Maybe related. I think there was the thin client stuff and then there was this thing on this app and turned into. But the same focus, right? It's the same focus. Make it more available. I remember the guy who is the CEO of that Ron

Makavi eventually ended up at Lyft and, you know, he was a SVP at Lyft running a big chunk of that company. But it's one of those things that nobody talks about and nobody, I think, may have even recognized, but it seems like it actually was pretty important, right? And there's a couple other acquisitions like that. Like Facebook also bought an email scraper company so that they could accelerate virality and growth. Like there's a couple of these that they did in a very smart way that were very quiet. And enabling tech is really amazing. What, why is app, do you think Apple's got to change their approach of maybe making some big acquisitions? I mean, they are just so, it's not built here. We don't care. You know, like we'll build it ourselves. Like they could have bought Tesla for 50 million,

50 billion. You know, they could have had a Model 3, Model Y, whatever, cyber truck in every Apple store. I mean, it would have been incredible. Yeah, yeah. Honestly, I don't know. I mean, it's worked out pretty well for them. Yeah, it's hard to argue with it,

but it's one of these things where you don't know how much more it could have worked out. Like, imagine if they owned, you know, Instagram or Uber or, you know, pick the company. Like, yeah, it could be. Yeah, the counterfactual is really hard to guess on these things. And that's the word I'm looking. for the manufacturer. Yeah, and buying Tesla could have been it. I mean, Google could have bought Tesla too.

Like, multiple parties could have bought Tesla at a given moment. Google looked at it too. Google, I think Larry really wanted it. But I guess Waymo, yeah. When do you think soft driving cars, Car with our steering wheel, will drive you from San Francisco to, you know, Tahoe? To some in Tahoe. Yeah.

What will a car with no steering well drive you in the snow on IA? With no steering wheel. So there's no steering wheel. That's why I'm trying to make it so that there's, it's not like we're talking about an. autopilot situation or a safety driver. Let's talk about real, like, level five, like you can go to sleep. There's no windows on the car, no driver.

When is that going to happen? Give me a over under. We'll make a little bet here. Me and you, the little bet. Yeah, yeah, yeah. You set the line. I'll pick over under. Yeah.

You know, so the hard part for me on this one is I think that you need a discontinuity to make that happen. And I think when it happens, it happens really fast. It's almost like a technology discontinuity, right? And so what does that mean for people who are? don't know. Like I discussed you. Yeah, so basically every once in a while you see something that just changes the

capabilities from a technology perspective. So one example for that would be machine vision, right? Suddenly you can unlock your phone with your face. And that's based on a technology breakthrough around neural networks or AI that can allow you to do really good vision and machine vision. And that really got kicked off, I think, around 2012 with a famous sort of paper slash approach. And then it took like five, six,

seven years of substantiate, but that was the breakthrough moment in terms of approaches to to that class of problems. And so every once in a while, you have this breakthrough moments and it could be a new sensor type. It could be an algorithm. It could be a chip or semiconductor that specifically helps you with inference for self-driving or other things like that. But I do think we need that moment in self-driving.

But then once we have that, I think it'll suddenly spread really rapidly everywhere because it's going to be such an important societal shift and technology shift because it enables so many different things. So I think when it happens, it'll happen fast, but I don't know when it's going to happen. What's your view on it? You know, it's having drove on autopilot for six years, I think, I've had it, you know, from level two to now, which is like, I think, level three-ish. It feels to me like on a major highway, if we could make a major highway for self-driving cars,

and then in three, four, five years, we could say, hey, the 280 is for self-driving, and you could be on your phone or you could be watching Netflix. But only on the 280, because when I ride the 280 in San Francisco and I am on autopilot in my Model Y, it is rock solid. I have not seen it, have any mistake. And I see people all the time on their phones, doing their lipstick, eating a slice of pizza, doing Starbucks, and texting up and down the 280 when I drive. I look in these people's windows and I see them not, I see people texting like this, you know,

with their hand in front of their goddamn face. and I'm just like, please put autopilot on. We all know your texting. So I think it could be as soon as three, four, five years, on a 280, on the five down to L.A. But I think for city streets, I don't like the idea of, you know, in rolling hills in Tahoe, this technology has too many factors. And then in a city, too many factors.

Yeah. And that's why I didn't have a time frame either. Yeah. I think it's more than two, it's less than 20. But I think the place where... Yeah. I think that's the good way to put it. Yeah.

I think the place where we're going to see the biggest. impact of self-driving soonest is on long-haul trucking or point-up-point trucking without the city driving. And that's where it's kind of a no-brainer. And I think that's what's going to come first versus, you know, you're going to get into a car and I'll just drive you somewhere in the city. Well, and you could also put them all in the right-hand lane. They could have a big sign on this is self-driving. They could be, you know, doing 55 miles an hour in a caravan. And there could be a driver in them that is asleep, right? So they could go 24 hours. The driver could be asleep taking a nap in the cabin. Something goes wrong may come out. And it could be remotely

controlled because you would know on that highway you have 5G the whole way. So you make that infrastructure investor. That's why I think in China will exist. The thing I think's going to happen beforehand is I think within five years, we will be able to take a veto from San Francisco airport, you know, to the marina or from the marina to Tahoe eventually. Like, I think vetoes are much closer than people think. Now, there will be some safety issues, but over water, you got to think eight of those propellers, you know, those rotors, you lose one or two. It can safely land in the water. It can safely land anywhere. They're much safer than helicopters, and they're not loud. And if they're over water, nobody cares. So I think this like, they could in a city like Sydney or the Bay Area just do

extraordinary. Are you invested in any of them? Kitty Hawk. Yeah, I'm not. Yeah, I think it's a really cool area, but I'm not involved with any. I mean, that would be my dream. I think actually that'll become the new status symbol is people will be living when we get whatever this new time is going to be post-pandemic. People will be living, you know, in Tahoe or, you know, wherever, pick a place, Santa Cruz, and V-Tal will just take them up into the Facebook office or whatever or San Francisco.

That would be like the new status symbol. As we wrap here, you're one of the last people in San Francisco. San Francisco is collapsing under its own like insanity and stupidity. How long have you been in San Francisco? Are you thinking of leaving? And what do you think the slide is going to look like? Because it's in a debt spiral as far as I can tell in terms of real estate, tax revenue, chaos and management.

What's your take? Yeah, you know, it's interesting because when you look at clusters for every industry, they exist, right? there's Hollywood for movies and for finance, you'd go to New York or Connecticut. And if you wanted to go to the movie business, people would always tell you go to Hollywood. They'd never say go to Denver, you know. And technology is the only market where I feel like people give you the advice of, oh, you can go anywhere now and it's fine.

And, you know, you could write a movie script from anywhere. You could edit it from anywhere. You can shoot it anywhere, et cetera, et cetera. I think there's a lot of analogs for finance and movies in almost any industry now. So I do think the Bay Area will continue to be one of the major tech clusters. I think it'll be a little bit reduced from where it was before. And I'm saying the Bay Area on purpose. I mean, beyond San Francisco, this will continue to be a tech cluster.

I think it'll be reduced relative to pre-COVID. And a lot of the really strong founders I know are spending a lot of time in L.A. now. Some of them are in Colorado if they have families or Utah. They're doing some SaaS stuff. And some are in New York. And so, you know, I do think that some of those places will benefit from founders just deciding to stay. I think a bunch of people will come back just because of the network effecting clusters here. And then the question is, to what degree do they stay in San Francisco versus start branching out

into the East Bay or, you know, strike moved to South San Francisco or other sort of parts of the Bay Area? Yeah, Sacramento, et cetera. Yeah. It's pretty phenomenal. I think it's a five to 10 year slide for San Francisco. And then maybe it hits some sort of bottom in terms of the price of a two-bedroom apartment. And then it will start to look for, you know. The thing I'm fascinated by is young people don't want to come here anymore.

And, you know, five years ago, and I've only lived in San Francisco, I think, well, in the Bay Area now. I live a couple of years in San Francisco, a couple of years in the Burbs and the Peninsula. But in those six years, it went from everybody feeling you needed to be here to people saying, don't come here. Especially the investors saying, don't come here because you're going to blow my money in six months instead of 18. Take this money and go back to Canada, Austin, San Diego, wherever. It is the best practice, right? it was just too expensive for this period of time. Yeah, and I think also is because people just remained in San Francisco.

Like, there's cheaper places in the Bay Area outside of SF, depending on, you know, where you're willing to go. And so we'll see how it all plays out. I mean, 10 years ago, the real epicenter was in San Francisco. It was Palo Alto, right? And that's where Facebook was. And that's where Palantir was. And you'd start a company and you were in Mountain Viewer, Palo Alto. You were on University Avenue.

It was even more concise than that. Like, beyond university plus or minus two blocks. And so that was the real epicenter, and that was the cluster in the cluster. And then it moved up into San Francisco over the course of 10 years. And the question is, where does it move next? And I think the biggest cluster will continue to be in the Bay Area somewhere. It could be SF. It could be Oakland.

It could be somewhere else. I think L.A. and New York have accelerated. And if you look at tech market cap, even pre-COVID, you know, every year or so I do an updated blog post on like, where are all the unicorn market caps, right? And it's a little bit backwards looking, but the Bay Area has been pretty consistent at about half of all the U.S. space market cap and about 25% of all global unicorn market cap. But L.A. was starting to catch up a bit, in part because of SpaceX just being so big, but in part because of about a dozen other unicorns, New York was accelerating as well. And so, you know, I really do think that we're going to end up with a little bit of a multi-cluster situation where the primary place to be will still be the Bay Area. and then L.A. and New York will be two interesting places.

And we'll see if there's other cities that start to take off. I mean, there's stuff happening in Colorado and Utah. There's a lot of noise around Austin and Miami. Like, you know, my hope is that there's like a dozen different tech clusters. Yeah. You think work from home sticks with us, right? That's staying. I think it's partially staying.

I think what we're going to end up with is a lot of companies where they say two or three days a week, everybody has to be in the office on those same two or three days. and there's more flexibility on the other days, and then there's going to be remote-first companies. If you look at the unicorns who've decided to go remote first, all of them are in the Bay Area, even though it's only half of the market cap.

So there's only a 1 in 32 chance that that's going to be the way it is, right? Just if it was a twin cost of like, is the company in the Bay Area or not? So I think that's reflective of governance, particularly in SF, because five of them are in SF out of six companies in the top 100.

Yeah, so the stripes, the Twitters, the squares. I just looked at the private ones, and of them, all six that decided to go remote first as of a month or two ago are all in the Bay Area with five of the six in SF. So is that a sign of people going remote first, or is that a sign of SF?

It's an accommodation. It's like it's so painful to be an SF. It's so painful to commute. It's so painful to pay $4,500 a month for a two bedroom that their employees are so delighted to work from home that I think it's going to be very hard to compete for some top talent because once that talent's like, you know what, I'm really enjoying my lifestyle in this place. I'm going to find a place that's remote. So then what is, this is, I think, the game theory, right? Like, if you're, I saw Reid Hastings said

Netflix is going back to offices, period. But we don't believe in this bullshit. Like, no way. We're all going back to offices. Now, what if what if, like, five of his key lie lieutenants say, you know what, I'm going to go work for Zuckerberg or I'm going to go work for Elon or I'm going to go work for wherever because they let me work from home and come like two days a month or whatever. Like what's he going to do? The people who start the massive companies aren't optimizing for lifestyle. That's true too. That's true too. Yeah, they're dogged. Yeah. So I think the people who made it optimized for lifestyle and they optimized for taxes and they optimized for all sorts of things. I remember, you know, when I first got started and I had no money and all I had was like ambition

and like wanting to do something great, you know, I didn't care about. taxes because I didn't have any money. Like it didn't, it didn't impact me. Yeah. And, you know, similarly, I wanted to be around to other people who were ambitious and wanted to do great things and make a dent in the universe and build a great company or do something societally important. And people like that tend to cluster. And so the question is, where will those people be? I don't care where the- Well, there is a breaking point, I think, for, I mean, I'm guessing there's even a breaking point for you. If they, you know, increase the taxes to, three percent and put a 1% wealth tax, it made you value all your stuff, you'd be out, right? I mean, that's a hard

out. Sure. Yeah. And I think that's, that's, I think a lot of people will leave under conditions where they just feel like it's unfair in terms of the taxes they pay relative to the services they get, right? If California or San Francisco was a utopia where they had great public education and there was real investment in infrastructure for society and, you know, because if you think about it. To be dealt openly and take it openly. Like, that, I mean, that to me is the big tragedy. I don't know how we could allow fentanyl to be, I mean, it's so dangerous. It's just so dangerous.

And we just treat it like it's an economic issue or an injustice issue. It's like, are you people not paying attention? This has nothing to do with a homeless surge. Or, you know, it's a fentanyl surge. There are people overdosing on fentanyl. Like, this is a super drug. It's not like a normal drug. And I'm not saying that to be hyperbolic.

Like, there are ambulance strives. and, you know, police officers who've died confiscating fentanyl because they just happen to get a couple of specs on their body, like, into their eyes or whatever. It's really sad. Yeah, no, it's a really, you know, tough situation. And I think fundamentally, it all comes back to, like, the tradeoff and the environment that you're in. And, you know, fundamentally, I think, you know, back to the original question, people who want to achieve great things for ambitious and driven are going to end up clustering. And the question is, where were they cluster?

In the short run, I think it'll still be the Bay Area as sort of the preeminent place in the states. And then there'll be other places. And of course, there will be cloud-based companies and all the rest of it, right? But I think fundamentally, hungry, ambitious people like to spend time with each other in person. And that means they're going to be clusters. I mean, look at what's happening in Miami and Austin.

Like, the people are clustering already, you know, Joe Rogan and Elon and Keith Rabe and Shervin and other folks in Miami, like they're going to create their own little clusters, right? And each of those super node, when you have a super node move, like you never see super nodes move, right? So like to have Keith Rabeau move, it's like, oh, well, who's he going to bring with him? He's a super node.

Like, he's connected to everybody. And even if those other people don't move, he still brings all those connections. So it's almost like moving a giant fiber back end, you know, you know, to another location. It's like, oh, everybody's got high speed internet now. This place works. He's like high-speed internet for Miami.

Yeah, I think he's obviously an important part of the ecosystem. And I think he's done amazing stuff. The people I worry about or the people I'm tracking most is the next generation of founders, because that's where the big companies will get built. Exactly. If he's able to track them, then it will go to Miami. If they decide that they really want to be in L.A. or they really want to be in South San Francisco or they really want to be in,

you name the place, that's where it really is going to end up happening. And access to professional services and capital and customers and executives and all that other stuff is going to be incredibly important for those companies to scale. And right now that still means largely the Bay Area or the Bay Area and two or three other places. What a great episode. Al-G-G-I-L-G-L. Follow him on the Twitter, E-L-A-D-G-I-L. If you want him to invest, you probably should email and send him a chart. He likes things that have a great product, right?

Great product, great customers. good start. Yeah, great product, great market. Great product, great market. Okay, I'm great product, great customers. You're great product, great market. I like it. All right, and we'll see you all next time on Angel.