Back in 2012, in the middle of my old TV show (which is over), I hosted Naval Ravikant from AngelList “In the Studio” for a brief discussion on AngelList as a product, not a service. This interviewed aired in August 2012. Many people think of AngelList as a place to get investment, and it is, in a way, but in this discussion, Naval shares more of the product strategy for AngelList and lays out a vision for the platform that is positioned to only grow in power. I’m already planning to leverage the platform as the year ends. I’ve commissioned a service to create transcripts of my discussions in order to increase the reach of the content. Below is an edited conversation I had with @naval:
@semil: We’re in the TechCrunch Studio today with Naval Ravikant, who’s the CEO and co-founder of AngelList. Naval, welcome to the Studio.
@Naval: Thanks for having me.
@semil: Everyone now knows about AngelList. You guys have built an incredible product. Talk to us just real briefly about how you and Nivi started, and started blogging as your first product?
@Naval: Sure. I’ve been on the entrepreneur side and on the venture side, and in 2007 I ran into Nivi – actually at Mike Arrington’s house, is where I met him. So TechCrunch had a role to play there, in the early days. Nivi was out raising money for a company that he was involved with. He asked me for my advice, and I gave him a lot of tips and theories and details about term sheet negotiation, and what I call the “game theory of raising money.” Back then it was very opaque, and there were few players, and it was a long process. Nivi said, “How come I’m the only one who’s learning all this?” He said, “So, I’m going to write it down.” He started blogging it on Venture Hacks. I would provide a lot of the source material, and he would write it down. It turned into a joint compendium on everything from how to negotiate a terms sheet, to how to keep control of the Board, to how do you set up vesting schedules, to how do you negotiate employee severances.
@semil: How long were you and Nivi talking? You giving knowledge, and him scribing it and composing it – how long did that take?
@Naval: We ran the process for probably three years straight. Then we found we were just repeating ourselves. We were basically saying the same things over and over. The most important question that kept coming up wasn’t how do I do this? It was just, do it for me. Introduce me to investors. At the time, I was also actively into investing on my own and had done a number of good investments, but was realizing just how inefficient, opaque and silly in some ways, the market is. I would also complain about it to Nivi, and we actually made multiple attempts at what is today until this day, and this is actually a fourth attempt at the same product.
@semil: Briefly, what were the first initial attempts?
@Naval: There was a little social network that we built in 07/08 that we called the “Deal Floor Network,” which was a complete flop. To my knowledge, we only had one investor using it regularly. We then tried a Google group. We tried a Yammer kind of setup, and then Angels itself just launches a straight up email list 2010.
@semil: How did you productize the email list? How did you get to that point?
@Naval: Yeah, it started as Wufoo and MailChimp, so it was very simple at first. We operated that way for six months, and then we decided that this was real and serious, and the world needed this to exist as a platform. We’d always had a bigger vision for it, so then we brought in developers, focused on a product, and started hacking. Today we are almost an all product team and we are really intensely product focused.
@semil: I want to talk about the current stage, mid 2012. People think of AngelList as place to get investment, but it is really at the core…You guys build a product.
@Naval: Yes, It’s a platform for us to make everything about starting a startup efficient, except you building your own product. There are a lot of things that as a starter founder you have to do, that we feel is very inefficient, very slow, very opaque and very broken. Starts up founders spend a lot of time networking, getting the same piece of information over and over again. We want to take all of that, headache and hassle away from them.
@semil: Can you walk us through some of the product decisions and features you guys are building just today?
@Naval: We rebuilt the product from almost scratch probably 6-7 times at this point. We are always reinventing it. Part of that reason is because what we are doing is fundamentally unique. We don’t have a simple analog to copy from. We are not LinkedIn. We are not Twitter. We are not eBay. We are not NASDAQ. None of those analogies apply perfectly. We are always experimenting. Today as its core the product is a couple of things. One, it is a place where you can create a social executive summary of your startup, that other people contribute to…It can be validated. Second, is investors can find it and you can be introduced to investors. Third, is it’s a data source for the industry where every unit is self maintained and broken down by location, market, traction, type of company and who is involved. Another thing is, it’s a platform; It’s an API and there audio venture forums who are using the API for their internal analytics and deal tracking. Most recently we launched a recruiting service on top of it, where companies that didn’t get funded can then take their talent and go ahead and find great positions as startups that did get funded. There are more and more services we layer on.
@semil: You and your team are building, are looking at and testing all sorts of features to make it more and more efficient.
@Naval: That is right, we test features that are vertical, such as going deeper into the financial process. We test features that are horizontal, such as adding more services, like helping you find advisers and helping you find a law firm.
@semil: Have you guys ever thought about a small investment of 100,000 to 500,000, actually running the payment.
@Naval: Yes and no, the security laws are quite strict and this area is heavily regulated. We don’t want to do anything that crosses the line. We would have to be redstripped broker dealer to handle payment. But there are definitely more things we can do to make it more efficient and at the right point, we can hand it off to a broker-dealer to complete the transaction for the parts that require a broker-dealer.
@semil: Just for folks out there to maybe understand how nitty-gritty you get on the product, what’s something that’s going on this month that you guys are, from a product sense or feature sense, either trying to figure out or trying to ship soon that’s going to be different?
@Naval: Oh, I can give you an infinite list.
@semil: Yeah, but a top-of-the-mind example.
@Naval: Top of the mind is, we have an unprocessed queue of probably 15,000 angels that are willing to join, and we have to vet and screen them all. We used to do in manually, but now we’re building an automated system. It’s our third or fourth attempt at it. It’s failed repeatedly in the past, because there are too many corner cases and loopholes, because we have strict sophistication and experience requirements. That’s one thing that we’re working on. We’re redoing the entire startup profile from scratch to make it more mobile-friendly and to support more entity types included within. We’re constantly reworking how the emails look. We’re going to a more digest format – lower email volume, more cross-selling. We’re building tools, do better discovery of good teams, because right now, I think, we do a really good job identifying companies that have traction or have good investors involved, but we don’t do a good job of identifying the best teams early on, so we’re getting more data out of them and structuring it, and so on and so forth. There’s a huge list of things we’re working on.
@semil: That gives an example of how you guys are thinking about product.
@Naval: Oh yeah, recruiting. We’re doing a lot of stuff on recruiting. [laughs]
@semil: Now we’re in 2012. What does AngelList look like? What are you thinking about big picture, 2013, 2014? You’ve got a ton of momentum, people going to the site, building identity, building startup corporate identity. You’re seeing a lot of relationships, and the platform is really foundational and growing.What can we expect from AngelList in the future? What are your plans?
@Naval: I don’t know. The best laid plans are devised by man, so [laughs] even though we have a big vision that we want to make life a lot easier for startups, I don’t know exactly where it’ll end up, but where I would like it to be is, I would like every startup to have an AngelList presence. When they think of, where do I raise money, how do I find great talent, where do I find a good attorney, how do I found space, how do I find a good adviser or cofounder, I want to be able to help them do that quickly, efficiently, at, basically, zero cost, because I don’t think that stuff should cost anything. I also want to see other people building applications on top of it.
@semil: They’re using the API.
@Naval: Correct. I want to see every web-savvy investor using it and engaged. There’s a whole class of investors who are pretty old school, who’ll never use an online platform for their investing activity, and that’s fine. But I’d like to see every web-savvy investor using it. To your point, I’d like to tackle the challenge of how do we efficiently, quickly close these transactions fully online, without there being a lot of delay and cost in them.
@semil: The final question is, is there something you think that, in the process of fundraising, especially the early stages of formation of a company, that AngelList, the Web, or any platform, can close a loop on?
@Naval: Cannot. Huge, actually, even if we do our job flawlessly, which we probably will not, I don’t think we’ll ever handle more than 30 to 50 percent of the problem. At the end of the day, recruiting people, financing a startup, are highly, highly people-judgment situations. I think the best we can be is someone like a Craigslist that does the introduction, but the actual decision making, the thought process, the negotiation, all that’s going to happen offline, human face to face or Skype to Skype.
@semil: Well, Naval, congratulations seeing the success, and thanks for coming in.
@Naval: Thank you.