Episode Summary
Executive Summary: In this episode of Angel, host Jason Calacanis interviews super angel Gary Tan about his journey from entrepreneur to investor. They discuss the challenges of transitioning from building a product to scaling a company, the rise of audio social platforms like Clubhouse, and the current state of venture capital with inflated valuations. Gary shares lessons from his startup Posterous, insights on investing in Clubhouse, and the importance of founder-investor relationships. The conversation also touches on Gary's split with Alexis Ohanian and the future of early-stage investing.
Main Topics: Entrepreneurial Lessons from Posterous (Priority: 5/5): Gary Tan reflects on his startup Posterous, which achieved product-market fit but failed to scale due to his reluctance to delegate coding and design. He emphasizes the need to hire executives and transition from player to coach. The Rise of Audio Social Platforms (Priority: 5/5): Discussion on Clubhouse's rapid growth, its $100 million valuation, and the competitive landscape including Twitter Spaces. Gary and Jason debate whether Clubhouse will be a dedicated app or a feature within existing social graphs. Venture Capital Dynamics and Valuations (Priority: 4/5): Analysis of inflated early-stage valuations driven by monetary policy and LP recycling. Gary explains how seed funds compete with larger funds and the importance of maintaining ownership percentages. Founder-Investor Relationships (Priority: 4/5): Gary discusses the importance of being a value-add investor, handling pro-rata rights, and dealing with downstream investors who may try to dilute seed investors. He shares his approach to protecting his stake. Career Karma and Income Sharing Agreements (Priority: 3/5): Gary highlights Career Karma as a platform that uses community and voice to help people retrain for tech jobs, and discusses the potential of income sharing agreements (ISAs) to democratize access to education. Gary Tan's Split with Alexis Ohanian (Priority: 3/5): Gary candidly explains the amicable split with his co-founder Alexis Ohanian, citing differing investment theses and the desire for both to pursue their own dreams. He emphasizes they remain friends.
Key Arguments: Startups have two phases: achieving product-market fit and scaling. Founders must transition from doing everything to hiring executives and focusing on strategy. Clubhouse's retention was Facebook-level, justifying its billion-dollar valuation despite no revenue. The platform's success is self-fulfilling due to strong user engagement. Inflated valuations are a result of monetary policy (25% of dollars printed in 2020) and LPs recycling IPO proceeds into mega funds. Seed valuations will never return to $2-3 million post-money. Seed investors should aim for 10% ownership and provide tangible value (e.g., introductions, marketing support) to justify their stake and protect against dilution. Income sharing agreements (ISAs) and platforms like Career Karma can help bridge the gap between too much capital and a shortage of skilled workers, enabling more people to join the tech economy. The split with Alexis Ohanian was a conscious uncoupling driven by different investment theses, allowing both to pursue their own visions while maintaining friendship.
Data Points: Posterous growth rate: 10x year-on-year - Gary Tan's startup Posterous achieved 10x year-on-year growth before failing to scale. Clubhouse valuation: $100 million at seed, $1 billion at Series A - Clubhouse raised at a $100 million valuation seed round and later at a $1 billion valuation with $110 million in the bank. Gary Tan's fund size: $230 million - Gary Tan's fund is $230 million with 18 team members. Career Karma success story: Six-figure job at Stitch Fix - Keisha Lake, a single mom from Atlanta, used Career Karma to get a six-figure job at Stitch Fix. Percentage of dollars printed in 2020: 25% - Gary Tan notes that 25% of all dollars were printed in 2020, contributing to asset price bubbles. Gary Tan's YouTube subscribers: 65,000-70,000 - Gary Tan grew his YouTube channel from 10,000 to 50,000 subscribers in a week after viral videos.
Pivotal Quotes: "What got you here won't get you there." — Gary Tan: Gary emphasizes the need for founders to change their approach when scaling a company post-product-market fit. "If you're going to exclude me, I'm going to make a point of saying I don't like to be excluded." — Jason Calacanis: Jason explains his competitive response to being excluded from investing in Clubhouse, leading him to invest in competitors. "You have to believe in things before it's obvious." — Gary Tan: Gary highlights the importance of conviction in early-stage investing, using Coinbase and Instacart as examples.
Implications: This episode underscores the need for founders to adapt their leadership style as companies scale, and for investors to provide tangible value beyond capital. The rise of audio social platforms signals a shift in user engagement, while inflated valuations require disciplined ownership strategies. The democratization of tech through ISAs and community platforms could reshape the talent pipeline.
About This Week in Startups
Jason Calacanis covers startups, tech, markets, media, and all the hottest topics in business and technology. He also interviews the world’s greatest founders, operators, investors, and innovators.