Episode Summary
Executive Summary: In this episode of Super Angels, Jason Calacanis and Joanne Wilson discuss angel investing, the current market bubble, New York City's post-pandemic recovery, and the importance of diversity in venture capital. Wilson shares insights from her 15 years of investing in underestimated founders, emphasizing the need for founders to ask for help and manage their equity wisely. The conversation also covers the frothy valuations, the role of banks in real estate, and the potential of NFTs in the art world.
Main Topics: Market Bubble and Valuation Concerns (Priority: 5/5): Discussion on inflated startup valuations, the risks of raising too high, and the importance of not getting ahead of performance. New York City's Post-Pandemic Recovery (Priority: 4/5): Analysis of NYC's real estate, retail, and restaurant sectors, and the opportunities arising from the pandemic reset. Diversity in Venture Capital and Founding Teams (Priority: 5/5): Wilson's pioneering work in investing in women and underrepresented founders, and the slow but positive change in the industry. Founder Pitfalls and Advice (Priority: 4/5): Common reasons founders fail, including lack of product-market fit, not asking for help, and stoicism, with advice on fundraising and equity management. Portfolio Management and Taking Money Off the Table (Priority: 4/5): Strategies for selling portions of winning investments to lock in gains and reduce risk, especially in frothy markets. Education System Disruption (Priority: 3/5): Critique of traditional education and the potential for online learning, income-sharing agreements, and pod-based models. NFTs and the Art World (Priority: 3/5): Mixed feelings on NFTs, their potential to disrupt the art market, and the importance of provenance via blockchain.
Key Arguments: Raising at too high a valuation can lead to a down round and a death spiral, damaging the company's reputation. Founders should ask for help early and be honest about challenges; investors want to support them. Taking money off the table by selling portions of winning investments is crucial for portfolio management. Diversity in venture capital is improving but still low; firms need to actively seek out underestimated founders. New York City will rebound post-pandemic due to its unique cultural offerings and reset real estate prices. Education needs to change: online learning, pod systems, and income-sharing agreements can make it more accessible and effective. NFTs have potential for provenance but are currently overhyped; the art world is ripe for disruption. Founders should aim for profitability and maintain 18 months of cash runway to control their destiny.
Data Points: Valuation increase: $16 million to $36 million - Example of a startup's valuation increase over six months, deemed unsustainable. Female founder funding percentage: 3% to 6% - Increase in VC dollars going to female founders over the past 15 years, from a low base. Wilson's portfolio size: 130-135 companies - Number of companies Joanne Wilson has invested in over 15 years. NYC rent decrease: $3,500 to $2,500 - Approximate decrease in Manhattan rent during the pandemic. Retail real estate value drop: 50% to 60% - Expected decline in retail property values post-pandemic. NYCHA funding need: $40 billion - Amount needed to clean up New York City's public housing buildings. Founder equity at IPO: 7% to 11% - Typical founder ownership range when a company goes public or is sold.
Pivotal Quotes: "When you raise above your performance, it's just going to be a disaster 18 months later when you try to raise, you know, a flat round. And then you start that death spiral, right? Like, oh, this company's damaged." — Jason Calacanis: Discussing the dangers of overvaluing a startup early on. "I think that most of the kids that are in these charter schools have no necessary structure at home. And so that's been very helpful. But, you know, with education, there's not one golden bullet that's going to fix the whole thing." — Joanne Wilson: On the role of charter schools in providing structure for some students. "The thing that I find frustrating is they might not operate the business in the hardworking 24-7 mode that they actually need to be in. They are not willing to change modes or go down a new path when they realize things aren't working." — Joanne Wilson: Identifying a common reason founders fail: lack of adaptability.
Implications: Listeners should be cautious of inflated valuations and prioritize profitability and cash runway. The conversation underscores the need for diversity in investing and the importance of founders being transparent and seeking help. The post-pandemic recovery in NYC presents opportunities for new entrepreneurs, while the education and art sectors are ripe for disruption.
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.