Episode Summary
Executive Summary: Reid Hoffman discusses his angel investing journey, including hits like Airbnb and Facebook and misses like Stripe, emphasizing the importance of contrarian bets and process over results. He also covers his investment in Joby Aviation (eVTOL), the future of Silicon Valley, and tech optimism. Key lessons: accept both type I and II errors, focus on grand slams, and maintain a portfolio approach.
Main Topics: Joby Aviation and eVTOL Future (Priority: 5/5): Reid discusses his investment in Joby Aviation, an electric vertical takeoff and landing (eVTOL) company. He explains the technology, safety, noise reduction, and cost advantages over helicopters. He predicts commercial flights by 2024 and believes eVTOL will be adopted before fully autonomous cars without steering wheels. Angel Investing Lessons: Stripe Miss and Airbnb Win (Priority: 5/5): Reid recounts passing on Stripe due to high valuation and low ownership percentage, a decision he later regretted as Stripe became a $100B company. In contrast, he invested in Airbnb despite skepticism from partners, leading to a massive return. He emphasizes the need to be contrarian and right, and to accept small ownership in potential grand slams. Venture Capital Philosophy (Priority: 4/5): Reid explains his investment philosophy: playing for grand slams, accepting both false positives and false negatives (type I and II errors), and focusing on process over results. He advocates for a portfolio approach and being contrarian but right. He also discusses the importance of upfront conversations about competitive investments. Tech Optimism vs. Tech Lash (Priority: 4/5): Reid describes himself as a tech optimist, not a tech utopian. He acknowledges technology's challenges but believes they can be fixed through better design and regulation. He criticizes the tech lash and argues that technology is essential for building the future. Future of Silicon Valley and Remote Work (Priority: 3/5): Reid discusses the impact of remote work on San Francisco and Silicon Valley. He believes Silicon Valley will bounce back due to the hunger of young entrepreneurs, but San Francisco faces challenges from local government hostility. He predicts multiple tech hubs will emerge, benefiting the ecosystem overall. SPACs and Investment Vehicles (Priority: 3/5): Reid mentions his involvement in the Joby SPAC with Mark Pincus. He explains the mechanics of SPACs and how they enable companies like Joby to go public. The discussion also touches on special purpose vehicles (SPVs) for angel investing. Politics and Business Leadership (Priority: 2/5): Reid discusses his decision to speak out on political issues, particularly against Trump. He argues that business leaders have an obligation to defend democracy, rule of law, and civility. He criticizes Trump's behavior and supports deplatforming him permanently.
Key Arguments: Contrarian but right is the key to massive returns; if everyone agrees, it's unlikely to be world-changing. Price and ownership percentage matter less for potential grand slams; missing out on a 10,000x return due to valuation is a mistake. Investors should accept both type I (false positive) and type II (false negative) errors; if you're not making both, you're not investing intelligently. Process over results: good decisions can lead to bad outcomes and vice versa; focus on the decision-making process. Technology is the solution to its own problems; we should optimize and improve rather than stop innovation. Business leaders should speak out on pro-business topics like rule of law and democracy, not just partisan issues.
Data Points: Joby test flights: over 1,000 - Joby Aviation has completed over 1,000 test flights, demonstrating progress toward certification. Joby commercial launch target: 2024 - Reid expects Joby to begin commercial operations by 2024, pending FAA certification. Facebook investment return: 10,000x - Reid's angel investment in Facebook returned approximately 10,000 times the initial investment. Stripe valuation at pass: $20 million - Reid passed on investing $750k at a $20M valuation, which would have been a 2,000x+ return at Stripe's $100B valuation. Airbnb valuation: $100 billion - Airbnb became a $100B company, making Reid's investment a grand slam. Greylock fund size: $1 billion - Greylock's fund size grew to $1 billion, allowing larger investments but requiring bigger returns. Clubhouse round size: $100 million - Clubhouse raised $100M at a high valuation, which Reid considered a reasonable bet given its traction.
Pivotal Quotes: "If you're not making both type one and type two errors, you're probably not investing intelligently." — Reid Hoffman: Explaining that investors should have both false positives (investments that fail) and false negatives (missed opportunities) to be doing the right thing. "The thing that I believed that you didn't is I said, this is part of being contrarian and right. That if it turns out to be right, then it's huge." — Reid Hoffman: Describing his conviction in Airbnb despite partner skepticism, emphasizing the power of contrarian bets. "I'm a tech optimist, not a tech utopian. Just because you build a technology doesn't mean that there's necessarily a good result, but you can shape the technology to amazingly positive outcomes." — Reid Hoffman: Articulating his balanced view on technology's role in society, acknowledging problems but believing in solutions.
Implications: Investors should embrace contrarian bets, accept misses, and focus on process. The future of work may be hybrid, but Silicon Valley will remain strong. Tech optimism is crucial for solving societal challenges. eVTOL and autonomous vehicles will transform transportation within a decade.
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.