Ask an Angel with Zach Coelius: is moving to SF still worth it, bubble/recession potential, post-COVID funding & more | E1172

Episode Summary

Executive Summary: Zach Coelius and Jason Calacanis discuss angel investing strategy, the changing dynamics of startup fundraising, and the post-pandemic future of San Francisco and tech. They cover rolling funds, syndicates, founder quality, consumer subscriptions, crowdfunding, cannabis legalization, and how market cycles create both bubbles and long-term opportunities.

Main Topics: Angel investing vehicles and portfolio strategy: Zach explains how he deploys capital through a main fund, rolling fund, and large AngelList syndicate, and why each serves different purposes across stage, speed, and LP flexibility. San Francisco’s role after COVID: The hosts debate whether founders should move to San Francisco, weighing dense tech networks and investor access against lower costs and remote-friendly fundraising elsewhere. Free vs paid apps and monetization: They compare growth dynamics in free products versus subscription businesses, arguing that monetization clarity and strong growth are both essential signals for investors. Bubble risk and long-term tech cycles: Zach argues tech remains a long-term upward trend despite periodic speculative excess and possible recessionary pullbacks, emphasizing decade-scale thinking. Founder quality, execution, and self-awareness: The conversation repeatedly returns to the idea that great founders matter more than ideas, especially because execution, resilience, and self-awareness determine outcomes. Crowdfunding, marketplaces, and take rates: They discuss crowdfunding as a signal of demand, the pitfalls of underpricing on Kickstarter/Indiegogo, and how marketplace take rates vary based on competitive dynamics. Government policy and cannabis investing: Zach expresses frustration over delayed U.S. federal cannabis legalization and says it would unlock major investment opportunities.

Key Arguments: Different capital vehicles solve different problems: syndicates are best for broad diligence and larger/later checks, while rolling funds provide LP flexibility and faster access to early-stage deals. San Francisco remains uniquely valuable because of the density of smart technology people, even though remote work and lower-cost hubs like Austin, Miami, Colorado, and Salt Lake City are now viable. Free apps can grow quickly but need a clear monetization path; paid apps may grow slower but can be more attractive if they demonstrate durable revenue and value. Consumer subscriptions are attractive because they force teams to deliver ongoing value and have proven consumer willingness to pay, as seen with Spotify and Netflix. The tech market is prone to bubbles and pullbacks, but long-term technological progress is still strong; investors should think in 10-20 year horizons. Great founders are more important than great ideas because execution, resilience, and the ability to attract talent determine whether an idea becomes a real company. Crowdfunding can validate demand, but it can also reflect niche enthusiasm or poor pricing rather than scalable product-market fit. Marketplace take rates depend on whether the company is an incumbent or challenger and whether lower fees are strategically used to win adoption. Federal cannabis legalization would open up a major new investment category for angel investors and funds currently restricted by LP mandates. A founder’s self-awareness about weaknesses is a major signal of fundability, because the best teams know when to hire missing skills or ask for help.

Data Points: Angel investing portfolio size: 50 companies - Zach says he has invested in about 50 companies since starting angel investing in earnest. Start year for angel investing: 2015 - Zach says he began angel investing in earnest in 2015. Early-stage check size range: $200K to $1M - Zach describes his current early-stage check barbell. Later-stage check size range: $2M to $5M - Zach says he can invest this amount in Series B and later rounds. Main fund size: $45M - Zach mentions a main fund with Industry Ventures as sole LP. Syndicate size: 2,500 people - He says his AngelList syndicate includes 2,500 members who help source and diligence deals. Average syndicate participation: 150 people per deal - Jason cites their average deal size in the syndicate as around 150 participants. Rolling fund commitment cadence: Quarterly - Zach explains LPs can commit or stop committing every quarter. Rent decline in San Francisco: $3,400 to $2,650 per month - Jason cites Zumper data for a one-bedroom dropping year over year. Number of apartments for rent in San Francisco: 2,671 - Jason cites current inventory from Zumper. Potential recession pullback: 20% to 30% - Zach says a market pullback of this magnitude could qualify as recession territory. Growth expectation for free apps: 20% to 30% month-over-month - Jason says free apps should grow quickly if the model is working. Growth expectation for paid apps: 10% month-over-month - Jason suggests paid apps can grow more slowly and still be viable. Consumer subscription pricing: $60 to $300 per year - Jason says consumers are now comfortable paying within this range for value. Kickstarter/Indiegogo risk example: $1M raised, then another $1M needed - Jason warns that some crowdfunding campaigns underprice products and then need venture funding to finish delivery. Marketplace example ARR: $300K ARR - Zach describes a deal that reached extreme valuation levels despite limited revenue. Marketplace example MRR: $25K MRR - He gives monthly recurring revenue for the same deal example. Private market valuation example: 73x pre / 80x post - Zach describes a highly speculative private-market auction valuation.

Pivotal Quotes: "If you can't cold call a customer who you've never talked to before at nine o'clock at night on their cell phone while they're putting their kid to bed and tell them what you do in one sentence... your startup idea is not a good one." — Zach Coelius: On what it takes to gain U.S. customers and whether a startup is compelling enough to sell itself. "If I had to choose between a great idea and a great founder, I'd always invest in a great founder because great founders always end up coming up with great ideas." — Jason Calacanis: On founder quality versus idea quality in venture investing. "The thing about being a founder is it's the hardest job in the world because you rise to your own personal level of incompetence." — Zach Coelius: On why self-awareness and learning matter for founders.

Implications: Founders should prioritize strong execution, clear monetization, and self-awareness over novelty alone. Investors remain bullish on tech long term, but the best opportunities will reward resilient teams and disciplined capital use amid volatility.