Jason Calcanis, Angel

+ Add to

For years, I wanted to ask Jason Calacanis a few things.

Like, how is it that after his company, Mahalo, took a ton of painful hits he still kept acting like each new idea he had was sure to be the one? Was it an act? Or something innate about the guy?

Or, if he’s an Angel who can help guide startups to huge success, then why didn’t his companies ever have that level of success?

What I love about Jason is that he digs these kinds of questions. (He waved me off before the interview when I tried to tell him the direction I planned to take.) So when I interviewed him about his book, Angel, I spent over an hour asking.

Jason Calacanis

Jason Calacanis


Jason Calacanis is a serial entrepreneur, podcaster and angel investor.

He recently published the book, Angel: How to Invest in Technology Startups-Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000


Full Interview Transcript

Andrew: This interview is sponsored by Fireside Conference, a conference I’ll be attending soon and urge you to come join me at. And it’s sponsored by Toptal, the company that helped remake Mixergy’s website. I’ll tell you more about them later, let’s start the program.

Hey, everyone. My name is Andrew Warner, the founder of Mixergy, where I interview entrepreneurs about how they built their businesses. And as you can see if you’re watching the video, and I know more and more people are listening to the audio, not the video. But if you’re one of the people who’s watching the video, you’ll see that I’m in a new studio here today. That’s because I’m in the This Week in Startups studio. When I’m not listening to my own podcast, I’m listening and absorbing This Week in Startups. So I’m actually excited to be in here and get a sense of how this is recorded.

I’m here to record an interview with Jason Calacanis. He is an entrepreneur, he is a podcaster, and he’s an angel investor. His start-ups include Weblogs, Inc., a blog company that he sold to AOL, and inside.com, a collection of topic-based e-mail newsletters that he’s running right now. He is an angel investor who has backed Uber, Thumbtack, Calm. And his latest book is one that I’ve read cover to cover, it’s called “Angel,” it’s about how to invest in tech start-ups. There is a camera right there, right?

Jason: What you have is the galley, just so people know.

Andrew: This is not what it’s going to look like.

Jason: It is designed, it’s got a beautiful cover.

Andrew: Yes.

Jason: You have a galley.

Andrew: I think this was a good cover, too.

Jason: Somebody was like, “I love how subtle the cover is,” and I was like, “It’s a galley cover. It just says the words.” Yeah, it has no photo or anything.

Andrew: And I like the personal note that you included with this in addition to saying, “Andrew, if there are typos, remember you got the galley.”

Jason: Yeah, exactly.

Andrew: You care that much about the details.

Jason: Yeah.

Andrew: I like that about you.

Jason: Well, yeah. When they get something that, I didn’t realize they were even going to print this. And, by the way, thanks for having me on the show. Obviously, we’ve known each other for a while. But I had never written a book and I had an agent for 10 years. And then finally I just decided, “This is the book I want to write. This is a book that I think I can write credibly.” So I wrote the whole thing myself over 19 sessions, like full-day sessions. And it was arduous, but I was really happy with how it came out.

Andrew: Okay, so my goal for this conversation, Jason, is to understand your strategy behind the investments that you’ve made. I also want to talk to you about your past companies, like Weblogs, Inc., a little bit about Mahalo. And not to be a jerk here since I’m in your house, but frankly if you know so much about running companies that you’re telling entrepreneurs how to do it, why didn’t Mahalo take off to the level that you’d want your investments to take off? And I’d like to talk to you a little bit about your fighting. I’ve noticed that you’ve become a little bit nicer as you’ve gotten older and richer. Yes, and I want to ask you about that.

Jason: [Inaudible 00:02:39]

Andrew: Maybe.

Jason: Wow, magnanimous. I’m magnanimous now.

Andrew: Why don’t we start with this? So on this really sparse version of the book cover it says that you went from $100,000 to $100 million.

Jason: Yeah.

Andrew: I’ve interviewed so many entrepreneurs, Jason, who the first version of the Internet they, in the bubble, became super zillionaires, and then they lost it all. I’m curious, how much of this is on paper and how much do you have in your bank account now?

Jason: Yeah, so let me just pull up my Wealthfront account right now. I would say the majority is on paper, but a significant portion is not.

Andrew: Have you taken off like, let’s say, $25 million and put it in liquid assets?

Jason: I have done well. I don’t want to talk about specific numbers, because then when the plumber comes to my house, he’s going to charge me triple. But let’s just say that I don’t have to work again for a couple lifetimes.

Andrew: You don’t have to work again for a couple of lifetimes.

Jason: Sure.

Andrew: Impressive. All right, let’s go back a lifetime ago.

Jason: Yeah.

Andrew: Right? Weblogs, Inc., you told an interviewer that when the paperwork finally came through for that, that you teared up. I think you actually even said “cry.”

Jason: I did cry.

Andrew: Talk about that moment and why that hit you so much.

Jason: So I had grown up. And the book is not a biography, by the way. I had that option, but I was like, “46 years old, writing a biography seems a little insane.” Well, a memoir even. But I grew up poor and my family lost everything. They had a small business, a bar and cafe. And I had to fend for myself from the age of 17 on.

Andrew: Let me interrupt you.

Jason: Yeah.

Andrew: I’ve heard you say this story on This Week in Startups before. You said that the government came in with guns and everything.

Jason: Yeah, it was pretty dramatic.

Andrew: What you didn’t say was what did your dad do?

Jason: He did not pay his taxes.

Andrew: He knew he wasn’t paying his taxes because he was getting cash from the bar. They kept track of it.

Jason: It was a complicated situation, and he had some partners. But essentially the stock market crashed in 1987, I was 16, 17 years old, and then it was 1998 the business was up against the ropes. He was behind on his taxes. He was behind on his rent. He was behind on payments to all the suppliers. And the whole thing just collapsed and he wasn’t able to pay. And all the people who had tabs at the bar didn’t pay, so he had $20,000, $30,000 in tabs. And he was stuck six figures to the IRS, and the IRS and the liquor authority and all these people who collect taxes were not pleased and they came with shotguns and very dramatic.

Andrew: How did you feel towards your dad about that?

Jason: Complicated.

Andrew: Did you feel embarrassed for him? Did you feel upset at him?

Jason: When you grow up and your dad owns a bar and is a bit of an impresario, you kind of think like, “Wow, my dad is the mayor.” Like I actually thought my dad was the mayor of Bay Ridge when I grew up.

Andrew: He walked into a room, everyone lit up. They knew who he was.

Jason: People knew who he was, “Oh, that’s the guy who owns Beards.” “That’s John the Beard,” it was his nickname. And I had learned a lot about entrepreneurship, and he was a bit of a hero to me. And so, yeah, you see your dad lose everything, it’s kind of crushing. But I wasn’t mad at him, exactly. It was disappointing to me, and it put in me a fear of failure and a fear of being poor and a feeling, now that I’ve got so much distance from it 30 years later, frankly of powerlessness. And I think that a lot of my formative years were defined by the fact that I was powerless, that I had no money, and that I felt like my existence was very on the tip or edge of complete and utter catastrophe.

And so I think that could have broken me as an individual. Instead it put a fire in me. So if you’ve ever seen the movie “There Will Be Blood,” did you ever see that film? Where the guy is like, “There’s a competition in me. I can’t let other people succeed.” And I was watching that and it just hit me so hard. I was like, “Oh my god, that’s me. I feel like it’s a zero-sum game. I feel like I have to win. I feel like I have to be important. I feel like I have to be powerful.” And it was all a reaction to the failure of this business and watching my family lose everything, and then having to fend for myself from 17.

And it does explain, I think, a lot of my rough and tumble attitude towards the world. And I think some people had to suffer through that, but a lot of it made me who I am. And now I think I’ve throttled it and I understand it. It’s almost like a superpower, like being the Incredible Hulk.

Andrew: Yeah.

Jason: It could come out in the wrong way. Or if you learn to channel it, you could be like Cyclops when he puts on the glasses or Wolverine when he learns how to use the claws. You can take that beast mode and use it when you need to, but not live in constant beast mode.

Andrew: I do feel like there was a period there where you were in constant beast mode.

Jason: Yeah.

Andrew: Where you went to Hacker News back when Paul Graham, the founder of Y Combinator, founder of Hacker News, was running it and you said to everyone, “Paul Graham is wrong, don’t listen to him about this stuff at all.” “Who is this stuff coming to his website saying this?” But you had that fire in you all the time. Do you feel like once that …

Jason: In that case I was right, because in that particular instance Paul Graham was letting Facebook come into Y Combinator to hear about the early ideas. And I said, “Anybody who allows Facebook to see their start-up at Y Combinator in the first year is insane and has to have their head examined.” And even in that early day, this is pre-him stealing everything from Evan Spiegel and Snapchat. In those days, he had still stolen a bunch of stuff, and he was essentially a knock-off artist. He would take something that didn’t work, Friendster or Myspace, and just do it better. And he kept doing that. And so I said, “If you show it to Zuckerberg, I don’t think that that guy has got a lot of morals or ethics when it comes to stealing your ideas. You have to have your head examined.” And I stand by that statement, because look what he did to Evan Spiegel. He stole every innovation.

Andrew: And, by the way, I’ve heard you talk about that, I’ve heard from people who were in the room at Instagram who said, “We can’t solve this. What do we do?,” and talk to me about how there was a clear decision to absolutely copy. So I get it. I’m not disagreeing with you about you being right or wrong.

Jason: Yeah, but who am I to do it?

Andrew: I’m just saying in the comments, who’s reading the freaking comments of Hacker News 10 levels deep back before they even had the plus/minus sign to let you collapse the comments? That’s the fire. What I’m wondering about is that moment where the money came in. And Peter Kafka interviewed you about that too. He asked you if it was $30 million, and I think he assumed that the answer was $30 million and that you kept half of it or more. Was that true?

Jason: Yeah, about that, yeah.

Andrew: So you get $15 million, less some taxes.

Jason: Yeah, a little bit. Yeah, whatever.

Andrew: Why at that point do you not say, “You know what? Life is good. I don’t have to fight with Paul Graham”? You e-mailed me once years ago, I don’t know if you remember this.

Jason: I don’t remember half my clients.

Andrew: I interviewed someone. He was a teenager. You e-mailed me and you said, “Andrew, you’re doing a bad job with this,” and you had to tell me why.

Jason: Yeah.

Andrew: And I remember I loved you for doing that.

Jason: Like you did two weeks ago.

Andrew: Was I being too soft on someone two weeks ago?

Jason: No, you e-mailed me two weeks ago and told me how to run this podcast.

Andrew: Yeah, I figured you’d like that, actually.

Jason: Thank you. That was comeuppance. I like it.

Andrew: But I like that you care to that level. What I’m wondering about is, so it comes from hunger for your dad. You have money, suddenly you can provide for your family.

Jason: Yeah. It was a pretty good feeling.

Andrew: So then why don’t you lose it? Why don’t you at that point say it’s gone?

Jason: So, again, back to the superpower. I think everybody has got a different superpower. And if mine was my combativeness and my ability to be candid and direct, I do think that is my superpower. Is that people know when they talk to me, whether I’m right or wrong, there is never any doubt that what you’re hearing from me is what I believe. There is never a time when I’m like, “You know what? Let me say something I don’t believe because it’s politically correct.”

Andrew: Yes.

Jason: Right? It’s not who I am.

Andrew: Yes.

Jason: And so that becomes super powerful when I do things like, now CNBC. I do CNBC every other week. I could do it even more. I’ve got other networks who want me to be full-time on this. And it’s like, “Wow, how did that happen, that I could be a TV presenter and I could make a living doing that?” It’s because when I go on there people know, “He does not care where the chips fall. He’s going to tell the truth.” And that’s what the people who are high up in those organizations tell me, “We love you on TV because you say stuff that people are thinking but are unwilling to say.”

Andrew: By the way, I keep interrupting you because I’m still trying to find my rhythm in this room. I’m not an interrupter usually, but I’ve noticed that I’m doing it and I’m pulling back on it.

Jason: No, no. You know what?

Andrew: Yes.

Jason: We’re friends.

Andrew: Yes.

Jason: For a long time. So this conversation will have a little bit of interrupting because we don’t see it as interrupting, we see it as a vibrant conversation.

Andrew: Yeah, I want to get in your head.

Jason: Yeah.

Andrew: Because here’s the thing, that when I had nothing, I had more of a fight because it was like, “It’s either this or nothing.”

Jason: Right.

Andrew: It’s hard to recreate that without being artificial, and it’s even harder to channel it and bring it on when you want to.

Jason: Sure.

Andrew: You went to that level. I’m wondering what it was that got you there. Was it therapy? You mentioned one time, someone on my research team found an old comment of yours where you said, “I’m overexposed. Someone told me to not be so overexposed,” meaning, “Stop freaking picking fights with everyone.”

Jason: Yeah.

Andrew: I feel like someone or something helped you get here. Was it the money with Uber? Was it the reputation? Was it a friend? Was it therapy? What was it?

Jason: I would say that as life goes on you become more and more confident in who you are, and your success obviously helps that along the way. Failure also can help that because it can inform you of who you are. You might not like it, but it does inform you.

And so I think you start to understand who you are, you start to understand you motivation, but more importantly you start to understand what your goal is. So I started thinking I’m not just going to react to what’s happening in the world. I have specific goals. Right? And I started thinking to myself, “Gosh,” maybe 5 or 10 years ago, “what actually is my goal here? Because right now I’m just running on adrenaline.” And adrenaline and combativeness and competition is an incredibly underrated motivator. It is fantastic.

People like Michael Jordan or LeBron James have taken competitiveness and adrenaline to incredible heights. But then there’s a certain point after you get those first two or three championships and you get those rings you have to really start thinking about your motivation. Because just getting on the basketball court again, me starting another company, me investing in another company, it doesn’t actually in all likelihood change my fate. Once you’re past a certain amount of wealth or power or recognition, it doesn’t help. Me getting on TV another time, me being on another podcast, none of that helps. It doesn’t do anything for me.

Andrew: Okay.

Jason: And neither does a million dollars or $10 million, it doesn’t have any impact now.

Andrew: So what is the motivation? You kind of wrote about it in the book in “Angel.”

Jason: Yeah, so my motivation is … I just set a mission statement for my company which is to support founders and inspire innovation. And now Launch is all sort of architected around that mission and we just try to break even on the events we do, the podcast we do, all the stuff we do. And if we make money in the long term, it would be through the angel investing.

And I think I have a chance to be the greatest angel investor of all time. I think right now objectively I would be maybe 5 to 15, somewhere in there. Nobody knows exactly who made how much money or how would you even weight the greatest angel investor of all time. I wouldn’t do it strictly on returns. I would do it on who provided the most value to their founders over time.

And right now that would make Ron Conway number one, or Chris Sacca number one, or Esther Dyson. There’s a bunch of people in front of me. But I think if I do it for another five years, I invest in another 200 companies, which is my goal, get to 300, 350 companies invested in. And maybe hit four more unicorns. I have 4 now, maybe get to 10 unicorns. If I hit 10 unicorns in 300, I think I’m the greatest angel investor of all time, and that’s the goal I set for myself. And it’s a goal that is completely pulled out of the sky. But I just said, “You know what? I want to work. I want to do stuff.” I love what I do. I love getting up every day and meeting with founders, I love having conversations and doing the podcast. So I just want to be number one.

Andrew: I do feel like you finally hit your rhythm. You knew all the superpowers you had, and now they’ve all coalesced into this one thing where every part of your business now all makes sense together.

Jason: Yes.

Andrew: Let me go back in time though and read a Google+ post of yours.

Jason: Uh-oh. Oh boy. Look at the research here.

Andrew: Google+, to give you a sense of how far back.

Jason: I’m bracing for impact.

Andrew: Here’s what you wrote:

“After four years pounding away building Mahalo we figured out a business. The open Web is a dirty, dangerous, noisy, and spam-filled mess. I love it. I love that it exists. But let’s face it, the Web, the open Web sucks for building a business today. However, the App Store, ew, my beautiful, sexy, and loving App Store. Kisses. I love you so much, App Store. My lovey, my lovey, clean and profitable App Store. Kisses.”

At that point do you remember what you discovered? What was the business model for Mahalo at that point?

Jason: Well, what we realized was, gosh, if we started selling stuff to consumers, if they actually paid us for the content as opposed to us putting content out there and trying to monetize it through advertising or search ads or whatever, we would be more in control of our own destiny. And I think it’s one of those trends that was bubbling up over the last decade, which is advertising was reaching all these great heights, but there was this undercurrent. Something was wrong. It was getting harder to be a publisher. Why? Right?

And everybody had this nervousness like, “Okay, there’s more people using the Internet, there’s more advertising dollars, but it’s harder to be a publisher. Why? Okay, there’s competition, but I’m still getting more and more traffic, my traffic is growing. Oh, but the CPMs are going down. What’s happening?” And it turned out that Google and Facebook are 90% of the growth in online advertising right now, they’ve won. And independent publishers are going to, I believe, just…I think most of them are going to die unless they get 5%, 10% of their audience to pay. And it’s the only way value is going to actually accrue to content creators, is for them to get paid. I actually believe that in my heart.

So we pivoted and we said, “Hey, we’ll sell apps.” The App Store has its own set of challenges. Now you’re once again in somebody else’s ecosystem and you once again have to get into gamesmanship. Mahalo was driven by SEO, Huffington Post was driven by social, and a bunch of companies in the App Store, Zynga, were driven by Facebook and App Store optimization. All of that optimization, when people say they’re optimizing the stuff, it basically means they’re doing some kind of game to try to grow. And what I realized was there’s just a much more honest trade. I make something, you pay me for it. Let’s focus on that. It will be slower, it will cost more money. It will be slower and it won’t be as sexy, but it will make more money and it will just be this long, slow coal.

So if you look at something like Stratechery, the e-mail newsletter. So there’s an e-mail newsletter called Stratechery, and Ben Thompson writes it. This is incredible. The guy is just an analyst. He’s independent. But there’s probably 10 other analysts who do as good of a job. But he does it independently. He charges $10 a month, and from what I understand he has over 10,000 people paying for this. So when you start thinking about those numbers, this is $100,000 a month or more. This is serious money that one individual is making. You charge for your content, as well. I’m sure that you’re probably in that range.

And Sam Harris’ podcast is user-supported now, if you haven’t listened to that. And inside.com is now user-supported. Launch Ticker has 27,000 subscribers, of which 1,000 pay $10 a month. So you can do the math there. Plus we have some advertisement. But 4% converted to pay. So I think that’s the future, and that was really what I learned from Mahalo. Which, although it failed, we had gotten to the 140th largest site, we had 15 million uniques, and a $10 million-dollar run rate. We had mastered SEO. But mastering one of these tricks is fantastic until the trick stops working. And the Panda update and eHow and associated content, everybody who was doing SEO got demolished overnight, and it was a really good life lesson for me.

Andrew: Let’s take a moment away from this great program because I’ve got tell you about Fireside Conference. It’s a conference I’m going to and I urge you to come, too.

You ever notice how when you go to conference it’s the dinners and the drinks and those socializing activities that give you the most value from the event? Because that’s where you get to meet other people, that’s where you build the bonds that you can then build business relationships on. Well, that’s the whole idea behind Fireside Conference. They have got this campground basically in the middle of nowhere, I’m not really sure I’m going to get cell reception there.

And the reason they did that is so that we can all get together and socialize and do things like kayak and jet ski, and I’m hoping to do a little bit of swimming and running. We’re going to do a little bit of jujitsu. Basically all the reasons for us to get together to socialize, to get to know each other, to build relationships, so that later on when we leave this experience and go back to work we have a group of people who we’ve all bonded with, connected with, and know on a personal level.

That’s the idea behind Fireside Conference, I will be there. If you’re a Mixergy fan, I worked out a deal with them where you skip to the front of the line. They ordinarily have a very rigorous screening process, but I said, “Look, if you’re working with me, you got to accept the people from the Mixergy community are going to be a perfect fit.”

And so they’re going to get you to the front of the line and you will be automatically accepted. There will be a Mixergy table if you want to have dinner with me and other Mixergy fans. We’re going to have other events, like I’m expecting to do Scotch night over there. But beyond that all the meals are taken care of, all the drinks are taken care of, all the accommodations are taken care of, everything is covered so that you can be active with other participants, socialize with other participants, and really just have a good time.

Come, disconnect from your technology, and connect with me and other entrepreneurs and investors at Fireside Conference. Here’s the URL where you signal to them that you are a Mixergy community member. It’s firesideconf.com/mixergy. That’s “conf” as in “conference.” Firesideconf.com/mixergy. They offered to give me my own bunk, they said, “Andrew, you’re a celebrity, you probably don’t want to mix with other people. We’ll give you your own space.” I said, “No, put me in with other people. I know the people that you guys are attracting, I want to have the full experience and get to know them.” So I’m urging you to come, let’s have this full experience at firesideconf.com/mixergy. See you there.

I want to go through the biography of Mahalo for a little bit.

Jason: Yeah, sure.

Andrew: So Mahalo, for anyone who doesn’t know, is the company that you started after you sold Weblogs, Inc. You worked for AOL for a bit.

Jason: One year.

Andrew: And then you went out and you did this, yeah.

Jason: And Inside is still that company. It’s the same corporate structure. So it’s not gone.

Andrew: Right, which is amazing, right?

Jason: It’s crazy. They never give up.

Andrew: You’ve said, “The investors wrote it off. I’m still here. We’re still going to continue to build this.” And they wouldn’t be upset with you if you said, “Hey, look, it didn’t work out. We’re going to close it up.”

Jason: Yeah. In fact, most of them would like for me to do that so they get a tax write-off.

Andrew: So here’s the thing that stands out for me about this. Notice how you’ve just said, “Email is the thing. Here’s how I discovered it.” You say it with such freaking confidence.

Jason: Yeah.

Andrew: You said the same thing about apps with such confidence.

Jason: Yeah, I could be wrong.

Andrew: And apps also were, I don’t know what version of the site. First it was, “We’re going to go after Google by creating the user-generated version of Google.” Right? Which is kind of like Wikipedia, inspired by it.

Jason: Yeah, the original idea for Mahalo was content plus search. And we would mix together on one page images, video, news. And we had this, what we call, comprehensive search. And it turns out Google wound up taking all those ideas and doing them. So when you do a Google search now and you get a little Wikipedia box, it’s kind of obvious in hindsight, but you get a little snippet of videos, little snippet of images. They did all that. We were two years ahead of them. But it didn’t matter, because they had the monetization engine and we were SEO-driven and they had all kinds of search deals. So it didn’t work, but it was a good idea.

Andrew: But, also, even before that it was, “Look at Google’s page for Paris travel, look at how spammy it is. And we’re going to have humans create our page. It’s not going to be spammy.” So it was humans only, and it was your personal curation, like you came at it from an editorial point of view. Then it was anyone online could edit it. Then it was, “Okay, this is not going to work, we’re going to create our own how-to.”

What I’m wondering about the person behind all those decisions is where do you get the balls to, after you’ve tried something and said, “This is the one,” to come back when it fails and go, “This number two is the one,” with no sense of flinching, no sense of insecurity in your voice? And you talked to Brit Morin on your program recently about it. She said that she could be a little more like that. So talk to me about where that comes from and do you ever doubt that in your head as you’re saying it.

Jason: The way I look at it is if you’re an entrepreneur, you’re like Christopher Columbus or somebody exploring the planet, right? So you’re out there exploring and everybody on land has never even been to North America, and I found North America. Okay, and I got to North America and we wound up actually in Mexico and it’s a desert and there’s nothing here. But, okay, we know up north though it’s a little bit more temperate and there’s a bunch of cool stuff, places we could live that would be a little bit more temperate and would be more sustainable.

And then eventually you find California and you’re like, “Oh my god, this is actually the best part of North America, is California.” But it took a couple hundred years since people found North America to figure out that California was the Gold Rush, was the place you wanted to be in terms of the geography.

So I think that’s how you are as a person and I always know that I have more information than the other people who are, let’s call them, the Greek chorus, the riffraff who are just throwing stones at the people actually in the arena making stuff. So I know more than them, so I should be confident that my pivot or my evolution is going to result in it.

Andrew: But in your head do you ever say, “Maybe this one isn’t going to work out”?

Jason: No.

Andrew: You don’t? You don’t?

Jason: No.

Andrew: I saw that smile on your face. That was a smile of sincerity, “I just don’t.”

Jason: No, I don’t, actually.

Andrew: You just always think, “This is it.”

Jason: You have to.

Andrew: And you have to be that kind of person in order to make it, right?

Jason: Of course. When you think Elon Musk, and I’m not comparing myself to him. Obviously he’s a million times the entrepreneur I’ll ever be. But do you think Elon Musk thinks, “Oh, electric cars are never going to work,” or, “I can’t get to Mars”? He assumes we’re going to get to Mars, and then he works backwards about how you’re going to get there. Now will Elon Musk get to Mars? Nobody knows for sure. It would be really stupid to bet against him. But he has gotten to the point at which he’s sold hundreds of thousands of these electric cars and people thought he would never get to 10,000. So betting against Elon Musk has made a lot of people go bankrupt or cost them becoming very wealthy.

So what an entrepreneur is supposed to do, and actually I think the great angel investors do, is they take the long list of reasons why something won’t work and write them down. I literally do this. And then I make another list on the opposite side of my Moleskin of the reasons the idea might work. And then I take the one on the left, I look at it, and I rip it, and I throw it in the garbage. And then I take the one of reasons that it might work and I focus on those.

Andrew: So why even write it in the first place if you’re going to throw it away?

Jason: Because it’s a good mental exercise to say, “Okay, tell me all the reasons this won’t work. Great, we’re aware of them. Okay, we could flip the car. Okay, we could run out of money. Okay, Google could change the algorithm.” There’s a bunch of ways it might not work. “But here are the two ways it will work. Let’s focus like lasers on that.” And because outsize returns come from the long odds that are against you, it actually is a great technique. The longer the list of reasons why something will fail and the shorter the list of reasons it will succeed the better chance it has of outsize return.

Andrew: I see.

Jason: If I told you I’m going to make a Slack competitor sitting here in 2017 and I’m like, “Okay. Well, that will work, but there’s always other competitors now. Cisco makes one and IBM makes one,” and whatever.

Andrew: Microsoft.

Jason: Microsoft makes one, Skype. And so, okay, that doesn’t seem to me to be that risky of a bet, therefore the upside is going to be very low. But if you told me, “Hey, I’m going to create a transportation service or a couch-surfing service,” Uber and Airbnb before any of those had ever been established, you’d say, “Wow. Regulation. Can you find drivers? Will consumers use the product?” There’s a million reasons of why it won’t work. And, lo and behold, there’s a couple of reasons why it will.

And race car drivers have the best way to think about this. The best race car drivers, they say, “Do you ever worry about crashing?,” and they’re like, “I don’t look at the wall. I look at the road.” They just keep their eye on the road ahead.

Andrew: When you look at the wall, you start getting closer and closer to the wall.

Jason: You look at the wall, you run into the wall.

Andrew: Yeah, it’s called object fixation. Look at YouTube videos of people on motorcycles. If you google “motorcycles object fixation,” you’ll see them crash into walls. And because they wear those GoPro cameras now, you see their heads are looking at the wall before their bodies and the bike go towards the wall.

By the way, you did something that I had to write down. You talked about Elon Musk and you did this little aside where you said, and I wrote it down on the back of your book, which I hate that I did, you said, “He’s 100 times the entrepreneur that I’ll ever be,” and then you continued with your statement. This is like Jason, the year 2017. Jason five years ago would have said, “And I, like Elon Musk, am a visionary.” You used to sneak in, like I remember one time you talked about Marissa Mayer coming in to run Yahoo! and you said, “They need a product person.” Like, “She’s a product person, I am a product person, I notice the details of the product,” and then you went back to the news story. And I said, “That’s what Jason does well, these subliminal messages about how great he is.”

And so this is my dorky thing that I’m going to admit to you since I’m asking you to admit stuff. I said, “Screw it.” I said, “Fuck it,” actually. “I’m going to make a list of all the things that I should be interjecting so that I at least, if I’m not going to…

Jason: Neuro-linguistic programming.

Andrew: Right. The thing was it felt unnatural to me to bring up, but I do feel like you were doing it intentionally without the dorky, unnatural sense that I did. Am I right? And what was your thought process behind it?

Jason: Completely unaware of it.

Andrew: You weren’t aware of it?

Jason: No.

Andrew: You really felt like, “Hey, I’m such a good product person that I’m going to interrupt”…

Jason: Well, I think I’m a better product person than Marissa, to be candid. I don’t think Marissa is a bad product person, but I think I would have done a much better job of running Yahoo! than she did. A massively better job, massively. Only because I think that she wanted to maintain the culture of the place and she wanted to be liked and she didn’t do the hard work of cutting half the staff on day one.

Andrew: That’s what you would have done, cut half the staff? And then done what with it?

Jason: I would have come in day one and I would have said, “Listen, I want to let everybody know you’re going to get huge severance packages. All your stock is going to be vested. But there are 3 things that are working in this business, and there are 7 things that are okay, and then there are 20 things that are underperforming. We’re going to take the top three, we’re going to focus on them for a year, and then we’re going to sell two of those three and work on one. So that requires half as many people. You all can stay for up to six months, but find another job in the six months and take severance.”

I would have been very kind to them, obviously. But then I would have just said to the rest of the team, “Video, news, and e-mail,” whatever three we chose. “We’re going to do it and we’re going to sell all the other businesses. Flickr, Delicious, whatever, we’re just going to get all that stuff out of here, sunset it, sell it, and focus on that. Cut half the staff, then you’d be massively profitable.” Then you could say to the board, “Hey, listen, we’re massively profitable. We’re massively profitable. We’ll pay a dividend to you. Or how about we buy some promising businesses?” And she did buy some businesses that were sort of promising, but she didn’t do the cuts. So then it was like, “Oh, well, the optics will always be that this business will never work.”

Few people could actually make that work. And the approach she took, which was to try to pursue five things at once, she tried to pursue five product lines at once. What did they call it? They had some acronym. Mavens. Mobile, ads, video, engagement, news, I don’t know. Mavens or something, it was some crazy fakakta nonsense. And it was like, “Okay, just because you made an acronym doesn’t mean it’s one thing.” I would have just gone all in on content and video. Because it’s so clear with all their traffic they could have built what YouTube has, what podcasting is. If you just took all their money and just hired the top 100 podcasters, think about how great that business would be right now.

Andrew: All right, so I’m going to page 100 of your book.

Jason: Okay, here we go. “Angel,” available July 18. I hope you like it. I put a lot of effort into it. Wrote it myself. Was it apparent that I wrote it myself? Did you hear my voice in your head?

Andrew: It was. But I really expected not the suit and tie Jason, I expected the Jason who’s going to throw fists. There’s some cursing in here. There’s a lot of poker references, a lot of Jedi references. So I got that it was clearly you, there’s no guy sitting in a room somewhere who has your obsession with freaking poker.

Jason: They offered.

Andrew: I get it. But I also feel like you’re a writer who naturally just enjoys writing.

Jason: I do.

Andrew: Yeah. Your e-mails went really long and I’d actually read them to the bottom back when everyone would do three-paragraph e-mails tops.

Jason: I do 3,000.

Andrew: Yeah, yeah. But here it is.

Jason: Okay.

Andrew: On page 100 you say, “Look,” you talk about how Ev offered you an opportunity to invest in Twitter, you didn’t get it. You said, “It was my $50 million-dollar mistake.” You’re still in pain now thinking about it. “It was the point that I realized I did not need to know if the idea would be successful. I only needed to know if the person would be.” And you talk about the importance of the person, you’ve said this over the years. You ran Mahalo.

Jason: Yeah.

Andrew: You now are telling Yahoo! what to do, you’re telling entrepreneurs what to do. Why didn’t Mahalo work?

Jason: Yeah.

Andrew: If it’s about the entrepreneur.

Jason: When I look back on it, there are things that were very successful. Obviously, we got to a $10 million-dollar runway, we were 140th. The big mistake I made was being dependent on one source. And then there was another mistake I made, which was we figured out YouTube before everybody, but I just didn’t think it had a massive upside. So I kind of was like, “I just don’t want to be under somebody else’s ecosystem again.” And there were a couple of opportunities if you think about Maker and a couple of other companies that got sold. So I probably could have, actually if I doubled down on the video stuff, probably could have sold it then. So there was two mistakes.

And then the App Store I don’t consider a mistake. I think we were considered one of the best news apps. And we got featured by Apple. We got five-star reviews. It was amazing. But nobody has made a news app work, for whatever reason. I think it’s the social success at sharing news has made it impossible to make a news app. Like why would you ever go to a news app, Pulse, Inside, whatever?

But the really great realization was I took the list of quarter-million people who had signed up, I took the top 25,000, and I sent them the top 10 news stories a day. And I said, “As an experiment, we’re sending you the top 10 news stories every day and we’re going to do it for 20 days. If it works, great. If you want to unsubscribe, click here. But it’s just an experiment.” Like three people were like, “I didn’t sign up for this experiment.” We’re like, “Yeah, well, the terms of service, you did sign up for experiments. But okay, fine. We’ll unsubscribe you, don’t worry about it.” And we had 50%, 60% open rates.

And so we’re looking at it going, “Wait a second. You get 500,000 downloads and under 5,000 people open the app a day, it’s 1%. You’re never going to be a business. But then you put 25,000 people on something and 15,000 are opening it every day. Wait a second. What’s the difference?” And it’s like old people don’t have to remember and it’s so efficient. So the format was right, the delivery mechanism was wrong. Now we have 25 of these newsletters, and we started turning on payments literally three days ago and we’re already 5% of the way to the goal that would make the company sustainable after three or four days.

So we think that we’re onto something and we could get to … We’re launching one e-mail newsletter a week and we built our own content management system. That’s the secret playbook, which is make your own platform, make your own system. Because if you have that, you can out-hustle other people. That why we beat Nick Denton so consistently with Engadget versus Gizmodo.

Andrew: Because you had your own publishing platform.

Jason: He was using some hacked version of Movable Type or some garbage and we had Brian Alvey doing Blogsmith. And so whatever, the SEO trick, or the tagging technique, or live blogging, or galleries, we were always six months ahead on the technology basis. And that’s what’s happening with e-mail newsletters right now. We have people coming to us who are using MailChimp or SendGrid or TinyLetter saying, “Wow, you can do all this interesting stuff with your platform, can I pay you for your platform?” We’re like, “No, it’s too valuable.” We’re going to get to 250 newsletters. When we have 250 newsletters, that makes us like Condé Nast or Time Inc. of the future. And it’s really working. Whenever I see a product where 30%, 40%, 50%, 60% consume every issue, it’s like, “Whoa.”

Andrew: So one of the questions that you have in the book Angel is, “Why now?” You say to ask entrepreneurs, “Why now?” Everything you said about e-mail makes total sense to me, but it made sense 10 years ago, it made sense 20 years ago. What is it about now that’s different?

Jason: Yeah, it’s a really critical observation that you have there. So the “why now” for e-mail now is if you think about what works in publishing today, what are the techniques that BuzzFeed, Huffington Post are deploying? They’re deploying social media strategies to trick people into clicking on links. Right? And then they’re trying to monetize it through page views. This means that when the writer hits “send,” what is the writer thinking about with a BuzzFeed story or a Vox story or any Web-based story? They’re thinking about their traffic.

So when you start thinking about traffic, you start thinking about click-through rate on the link, on social, on Facebook, and would it go viral. Okay, so now it’s got to be outrageous, it’s got to be outlandish, it’s got to trigger an emotion, all these things that don’t actually have to do with the truth. When you send an e-mail as a writer, what you’re thinking about it, “Will people unsubscribe? Is there a typo? Would an intelligent person feel duped by the subject line? Would they feel duped by the stories?” So where actually the motivation and the incentive of the writer is to produce the cleanest, most truthful content in the age of fake news. That’s the “why now.”

We’re living in an age of fake news where the people producing the news are purposely tilting the news to make it more outrageous to get more clicks. Think about that for a second. The journalists are responsible for their traffic today. 20 years ago the idea that a journalist at the New York Times would even know how many people read their story would be…

Andrew: Would be so wrong.

Jason: It would be wrong, it would be verboten.

Andrew: Yeah.

Jason: Now Nick Denton started this whole problem. He’s a friend of mine, but he’s crazy. He was like, “I’ll give you a bonus based on the traffic.” And you know what happens when you bonus people based on traffic? They print a Hulk Hogan sex tape. They print that the CFO of Condé Nast is a closeted homosexual who is being shaken down by a male prostitute. And the whole thing explodes, and then they take it down and get sued by Peter Thiel and countless other people.

So they basically went down this path of growth at all costs and it blew up. That’s the “why now.” Consumers want quality content, and they want it efficiently, and they’re willing to pay for it.

Andrew: Okay.

Jason: That’s the thing that’s changed. Consumers are so sick and tired of garbage content. And it may only be the top 10% right now, but it will be 50% eventually. Just like organic food may have started slow, but now everybody wants to eat organic. It took a little while, but consumers are starting to think, “God, I just want to pay for something healthy and high quality, and I don’t want to deal with all this nonsense anymore.”

Andrew: Yeah.

Jason: That’s the “why now.”

Andrew: That makes sense. I think spending money actually is a surprise. You asked Brit Morin, and this is the most recent interview that I heard you do, where you asked her, “Are people really willing to pay for stuff that’s free?” And it’s true, they are. If the stuff is good and if it’s useful.

Jason: Yeah. Well, and also some amount of people are willing to do it, I think 1% or 2% of every audience is willing to do it to support the person creating the content. So if you make it personal. And you can listen to Sam Harris’ podcast because he does these personal appeals where he says, “Listen, I don’t want to be beholden to advertisers, I want to just produce great content. And if you have value, I want you to pay for it. And if you can’t afford to pay for it and it puts you out, don’t worry about, the other people listening will pay for it and you’ll be on their nickel until you can afford to pay for it.” And all of a sudden he’s completely sustainable without advertising, it’s pretty amazing. I think that’s going to be the trend we see over a couple years, people willing to pay to support high-quality people.

And Patreon is another perfect example of that. Patreon is a group of the top fans of Tom Merritt, or pick the person, who just want him to keep doing what he’s doing. So they pay him $15,000 a month, $200,000 a year, and he doesn’t have to worry about who his boss is. His boss is the audience.

Andrew: Right. By the way, I still feel like paying without getting something in return makes no sense. I understand touching on the emotional appeal of we’re connected. Which is what I like about your ads, you’ll say, “And thank you for sponsoring independent media.”

Jason: Yeah.

Andrew: You’re saying to the audience…

Jason: [Inaudible 00:38:11]

Andrew: Yeah, exactly.

Jason: Pretty meta, right?

Andrew: It really is effective.

Jason: Yeah.

Andrew: But the idea of the whole Patreon thing, unless they’re being given something back, it just doesn’t make sense to me.

Jason: And they’re starting to realize that, right? Patreon just released their own version of Snapchat Stories where it’s only for the people paying, so you get this inside VIP experience.

Andrew: Right.

Jason: And so we’re going to keep doing that here. This Week in Startups, I think we’ll keep having ads, but I think eventually we’ll start having a patronage type thing as well. I can just have that be the foundation of it.

Andrew: I dig how you keep freaking experimenting with this stuff.

Jason: Yeah.

Andrew: Because I don’t know how many freaking meetings you take a week, right?

Jason: [Inaudible 00:38:45]

Andrew: You’re recording this, you’re preparing for your events, you’ve got three kids. I don’t know why you even bother with this, but you can’t help it. Like you have to launch a mighty network for your community.

Jason: Yeah.

Andrew: And a Facebook group after you tried Slack. This is one of those things about you that is amazing and it’s just you. And I can’t ask a question that gets into why you’re doing it. All I can understand is, “This is what Jason does. He can’t just do one thing and stay focused, he has to do 100.”

Jason: If you’re a chef and you like to cook, you cook, right?

Andrew: Yes, yes.

Jason: So on a content basis I’m a creator. I like to create. I don’t think I’ll ever stop creating brands. I love creating brands. I love the Inside brand. I love This Week in Startups as a brand. I love Launch as a brand. And we just did Angel University, Founder University. What people don’t see is I have a team of nine people that I’ve put together over the years and a bunch of freelancers where I pay them well, and they have a sense of purpose and a sense of mission and they have complete autonomy.

So while I get a lot of credit, I joke about Emmy Award-winning producer Jacqui on my show. I hired somebody with four Emmys who’s better at producing This Week in Startups than I would ever be, and I forced her in maybe the six months after joining us, I said, “From now on for the rest of the year I don’t want to pick any of the guests.” And she fought me, “Well, you have to pick the guests. You have good insights.” I said, “You know what? I’m tired of picking the guests. We’re at episode 400 or 500. I want you to pick the next 50 guests. I’ll come in, you give me the dossier, I read it, you give me my notes, I’ll read it. But no more me picking, you pick.” And you know what? The show got better.

And so that radical delegation with the right person can lead to what the world perceives as me being like, “How is he doing all this stuff?” Well, I have somebody who runs the incubator. I have somebody who did the curriculum for Founder University.

Andrew: I get it. But you know what, Jason?

Jason: It’s radical delegation.

Andrew: How many people do you know who have a big team who are not experimenting as much as you are, right?

Jason: Oh yeah.

Andrew: There’s a need to experiment, too. Which is interesting, which is what makes you interesting to watch, and I like that part of you. All right, I learn from that part of you, it’s not about affection.

Jason: I’ve been a little bit of a mentor to you, like in a virtual way.

Andrew: You know what? I do believe that because I’ve seen you do certain things…

Jason: Because you’ve studied this stuff.

Andrew: I what?

Jason: You’ve studied this stuff.

Andrew: First of all, I prepare like crazy and I have a good team of people.

Jason: You do.

Andrew: I hate when I watch somebody who does an interview and they ask the same freaking questions as somebody else has. Or worse, that it’s common knowledge that it’s the opposite. Right?

Jason: Yes, it’s on the Wikipedia page.

Andrew: Oh, I want to just strangle the…

Jason: “Why are we?”

Andrew: Right. You’re either doing it or you’re not going to do it. Okay, so we talked about Mahalo, we talked about Weblogs, Inc., we talked about your fights, let’s talk about the book.

Jason: Yeah.

Andrew: I want to ask the harshest question that I have about the book, and then we can become friends.

Jason: Okay.

Andrew: Let’s take another moment for me to tell you about my second sponsor, Toptal. I’ve got an e-mail here from a Mixergy fan named Brett Stapper, he said that he heard me talk about Toptal. And you might have, too, I talk about them a lot because they buy a lot of ads here, right? Well, he said, “Look, I’m a Mixergy fan and a huge listener of your show, I just wanted to drop you a note and let you know that we started working with Toptal after hearing about them on your show and it’s been a complete game changer for us.” Said Brett Stapper from Hack PR, that’s his company.

“We’ve always,” he goes on to say, “always just patched together design and developer projects from,” and then he lists all the usual freelance sites that you know but who haven’t paid for an ad, so I’m not going to read their names. But the important part is he says, “We’ve always ended up with okay work, okay quality. Well, we’re launching a new project and we decided this time okay was not going to cut it, so we went with Toptal. Two weeks in and it’s by far the best looking design we have ever had. Thank you for the tip and thank you for the awesome show.” Says Brett.

If you’re looking for not just okay work, but really the best of the best, I urge you to do what Brett and so many others have done. Go to Toptal. If you go to the special URL they gave me to give you, they’re going to give you 80 free hours when you pay for your first 80 hours, in addition to a two-week no-risk trial period. Do what, and I always say people’s first and last name so you can go look them up, do what Brett Stapper of Hack PR did. Go to toptal.com/mixergy. That’s “top” as in top of your head, “tal” as in talent because they feature the best talent. Toptal.com/mixergy. And I appreciate that they keep fostering independent media like Mixergy. Go support them, too.

I wonder, Jason, if in this book what you’re trying to do is tell people they could get rich by angel investing.

Jason: Yeah.

Andrew: And here are some quotes. “I buy a lottery ticket for a living,” page 10. Page 25, “You need to look at 500 start-ups over five years to place your bets 20 per week.” Right? So you’re telling people to invest, but at the same time they have to talk to 500 start-ups over five years?

Jason: Yeah.

Andrew: Okay, you also tell them you’re going to suck.

Jason: Shocking, you have to do work.

Andrew: Right. But you’re also telling them to go and do this stuff.

Jason: Yeah.

Andrew: You say, “Do all your investments in your underwear while doing another job.” That’s a quote from page 88.

Jason: Yes. I’m talking about syndicates in that specifically, right? And the syndicates are a great hack. I don’t know if everybody in your audience is aware of them, but AngelList syndicates, FundersClub, Republic, SeedInvest. Mine is at Jason’s Syndicate now. I do it on my own. These syndicates are a great way to learn on the cheap. So if you were going to make $20,000-dollar angel investments, I would tell you, “For your first $10,000 make $1,000-dollar investments in the syndicates you see on AngelList or FundersClub, and then act as if you invested $20,000.” You put $1,000 in, but you act as if you put in $19,000 more. And you study.

Which is what I did when I learned to play poker, is I would go to Hollywood Park in Los Angeles, or the Bike, or the Hustler club, all these different card rooms, and I would play at the cheapest table, which is a $40-dollar buy-in, $1 or $2. And I would play at the $1 or $2 game with a bunch of old ladies or old Chinese guys who barely spoke English, and we would sit there until 4:00 in the morning playing cards. And I would get to try different strategies at a very low cost dollar amount. So I got to play the game for $40. Then when I started playing the game for a $4,000-dollar buy-in or $40,000-dollar buy-in, I was prepared. I had done my work in the low-level games.

And that’s what I suggest here. Which is, yeah, when you start getting into the high level and you start putting $25,000, $50,000 into a company, you better be pretty sure that they’ve got a decent chance of getting an outsize return. When you’re putting $500 or $100 or $1,000 into companies, if it’s only $1,000 of your net worth or 50 basis points of your net worth, and you lose it, at least you learned something, right? Just like me losing $40 at the $1 or $2, I learned how to play poker. So that’s what I’m advocating there.

Angel investing has become a career. It’s become a career for a lot of people. But you and I both know 10 years ago there weren’t any. That’s why I started the Open Angel Forum, which was like a little networking group for the dozen angels that there were in each city. There was only a dozen in each city. Now there’s 1,000 in each city. So it’s becoming a career and the book is really the first book to tackle what is this and how does it work.

So it’s not that this is easy or it will be easy, nothing in life is easy in my experience. But I do think that when you play in Silicon Valley, the odds are so much more in your favor. So when I invest in companies, they’ve typically been pre-vetted by my friends who have invested who are smart and they’re getting co-investment from multiple smart people. Just those two, and they’re here, just those three things alone increase the chances of success exponentially. Because they’re in Silicon Valley, because they have great investors who can put more money in, in the future, and because they were referred by a friend I’ve lowered the chances of it being a dud.

Andrew: So how many people are going to be able to actually do that? Not that many, especially when you talk about all the things that you do, including the time that you spend per meeting, an hour per meeting, plus research per meeting, and that’s what you advocate.

Jason: You could do it half-time, you could do it full-time. There are people doing it right now in just AngelList syndicates, and they could do it 10 hours a week if you’re just doing AngelList syndicates.

Andrew: If you’re leading an AngelList syndicate.

Jason: No, no. If you’re following on an AngelList syndicate.

Andrew: Right.

Jason: Then you don’t have to pick the company, you’re just picking the syndicate to follow.

Andrew: That’s basically what it comes down to then.

Jason: Yeah, how many hours you have.

Andrew: You’re saying, “Here’s the possibility.”

Jason: Yeah.

Andrew: But the majority of people don’t have that time. Frankly the majority of people don’t have the money or the inclination or the time to do it.

Jason: I challenge you on that. I challenge you on that.

Andrew: You think that there’s a market for how many more angels?

Jason: 100,000.

Andrew: 100,000 more angels.

Jason: Sure, easily. Easily 100,000 more. And I’ll tell you why, there’s two reasons. One, there are a bunch of people who are affluent who have time. Right? How many people do you know who have made a bunch of money and they’re retired or they’re quasi-retired? There are millions of those type of people in the country. And their money is sitting, in the 20 years before they die or the 30 years before they die, it’s sitting in real estate, sitting in bonds, sitting in index funds. That money is all dead money. That money will grow at 1% to 10% a year, but on average 4% or 5%. And it doesn’t really help society all that much.

Apple having more shareholders or some bond being traded doesn’t really add that much to society when compared with the possibility of a start-up. If a small percentage of those people put a small percentage of their net worth, and I think it’s 1% to 10% depending on how risk-taking you are. In other words, a percent that you would reclaim with just one year’s interest, or two years’ interest.

So let’s say you were worth $2 million and I say, “Hey, put 5% into angel investing.” That’s $100,000. If you lose 100% of it, you have $1.9 million, you make 6% on your money every year. Okay, you’re going recoup that money in a year or two, but you will have invested $100,000 in 20 start-ups, $5,000 each, and you will have learned so much. And if you lose half your money or you lose all of it, just the act of learning and investing in them, then the next group of 20 how much better will you be? You’ll at least be double or triple as good. And then if you hit one of those and it becomes 100 X, if it becomes 200 X, all of a sudden you’ve made back $500,000 or a million.

So it’s not as hard as people think. What it is is it’s an opaque, secret society, angel investing. It’s an opaque, secret society that people do not talk about because they don’t want to let people in on the game. They don’t want to have competition or people come in here and be able to compete with them. I don’t have to worry about that because I’m doing it for 5, 10 more years and I’m done. And I’m already in the top 10, I don’t have to worry about competition.

Andrew: And so are you trying to say that there are 100,000 more angel investors like you or angel investors who are going to be in people’s syndicates? Is the goal of the book to say, “Look, it’s really hard to do what Jason does,” and frankly it is, “Just join Jason’s syndicate and put a small fraction”?

Jason: No.

Andrew: No?

Jason: No, I think there’s two different groups. One, there’s accredited investors who could put hundreds of thousands of dollars to work each. So that’s that pool of people. Then there’s tens of millions of people in the United States, hundreds of millions, right? 200 million who could qualify to do this. Of which I think eventually millions, maybe even 10 million will start doing this.

If you talk to anybody in that non-accredited group, and non-accredited investors are now just starting in last June, are able to invest in start-ups through sites like Republic and SeedInvest, in equity crowdfunding. And it’s very early days. But if you risk $100 or $250 or $500, if our parents did that or our cousins did it, and they did it 10 times and they put $2,500 to work and they lost it and they made $50,000 a year or $100,000 a year, would we feel bad for them? Probably not, it’s not that big of a deal. They probably would have spent that going on one vacation. Right? And people spend $150 a month on their cable bill, $125 a month on their cable bill. I would say to those people, “Stop watching television four or five hours a day,” which is what the average American spends.

So I disagree with what you’re saying, Andrew. You say people don’t have the time, you say they don’t have the money. 100% correct. Stop watching television, you get back four hours a day.

Andrew: Stop watching.

Jason: Stop watching television. Four hours back a day, stop paying for your cable bill, turn it off. You get back $125 a month, you get back $1,500 a year. Do that for three years, you’re going to save $4,500. And if it was $100 per company or $250 per company, it might be a dozen companies or 10 companies, you’re going to be further along in your life.

So I think people are sitting there scared and not taking risk and not improving their lot in life, and they could. We’ve been trained to be in this matrix and to think that we cannot become rich, to think that we can’t move from what class we’re in now, poor to middle class, middle class to rich, rich to ultra-rich. The rich actually know they can become ultra-rich because they got rich, but there’s a bunch of people in the middle class and who are poor who think that they cannot do this. I contest that, I think they can do it. It will be hard work, it will take discipline, but it will pay off if they do the work, I believe.

Andrew: And you’re saying of all the things they could be doing, starting side businesses, investing in more mainstream companies, saving more money, this is the thing, investing in start-ups.

Jason: I believe that wealth in the 21st century will be created by being on cap tables of high-growth start-ups. I think the idea that people will come out of school now and be able to buy a home with $200,000 in school debt or $100,000 in school debt. And then homes now cost on average 10 times people’s salaries. It used to be that homes were 1.5 or 2 times people’s salaries. That’s changed generation to generation. Our parents, when they bought their house, made $30,000 a year and homes cost $60,000, homes cost $50,000. Now people come out of school, they make $40,000 or $50,000. What does a home in L.A. cost? $500,000, $750,000. They can never do it because they also have that god damn school payment for $100,000.

This is the new hack. The old hack was the art of the deal, the secret millionaire on the block, “Rich Dad Poor Dad.” The old model of making money and becoming rich was eat peanut butter and jelly, don’t go to movies, don’t go out to dinner, put all your money into your home, buy a second home, and be a white-collar professional, work overtime or a side job, and you’d be a millionaire, and then you die.

What I’m saying is take 5% of your net worth, 1% of your net worth, and let it roll. Let it roll and work in the most exciting industry in the world. You know in your heart that this is the most exciting moment in time in the most exciting industry. Why not take a shot and put 5% of your net worth to work? If you lose it, who cares? You would have spent it on beer or your cable bill. Who cares? I’m not saying spend 100% of your money, I’m not saying go bankrupt. I’m saying 4%, 3%, 5%. Maybe if they’re really aggressive, 7%, 8%, 9%, 10%.

That’s my hope, is that people read the book and some number of them try it and some number of those move from the middle class to rich, from poor to middle class, or from poor to rich. And, secret ulterior motive, yeah, I would love it if somebody finds a great deal after reading this book and says, “You know what? Jason taught me how to angel invest. And I found the next Facebook and I’m going to call Jason first.”

Andrew: But you’re going to get so many calls, that can’t be the model. Is the business model that?

Jason: Oh, it is the model, you can be sure that’s the model.

Andrew: That’s the model?

Jason: Of course it is.

Andrew: And you have a screening process if somebody sends someone over?

Jason: Yeah, I have nine full-time people. I have the screening process of screening processes.

Andrew: I thought your screening process was they should talk to someone that knows you first.

Jason: Well, that’s what I say publicly.

Andrew: I see. But if they could get through privately, if they’re halfway around the world, but they have a robot that makes coffee.

Jason: I’ll give you the super hack. You send somebody an e-mail.

Andrew: Yes.

Jason: You get back that bounce message that says, “Chris Sacca is too busy to answer his e-mail.”

Andrew: Yes, Yes.

Jason: And, “Jason Calacanis is too busy,” or, “Dave McClure is too busy.” They’re all reading the e-mail anyway. It’s just a front. It’s a front for all of us. And then you put in the e-mail, “Here’s my 12-month revenue chart, here’s my growth for the last 12 weeks. And here’s our burn rate and just a growth chart.” You send the growth chart to Chris Sacca, he’s not angel investing. Or Tim Ferriss, not angel investing anymore. Who else? A bunch of people say they’re not angel investing anymore. Gary Vaynerchuk, whatever. You send them a growth chart that’s a hockey stick, they’re investing, guaranteed.

Andrew: Yeah, Tim Ferriss said he’s not investing anymore, and then he invested in The Hustle. All right, let me end it with this then…

Jason: Straight up bullshit.

Andrew: I want to get a couple of stories from the book as a way to end it. You said that a lot of this is opaque. And here’s the part that I didn’t realize, you ask for side letters from everybody who you invest in, right?

Jason: Side letter.

Andrew: Excuse me, side letter.

Jason: Or side letters if it had multiple members.

Andrew: For multiple, right?

Jason: Yeah.

Andrew: So talk about founder Shane who’s in this book, right?

Jason: Oh boy.

Andrew: And the founder letters. Tell that story as a way of helping us understand how you ask for something that most people don’t even know exist.

Jason: Yeah. So when you invest in a company, as a new angel you will have very little negotiating ability. You’ll probably be dragged along on the terms that everybody else is investing in. And that’s fine. At a certain point though if you become influential, if you’re Tim Ferriss, if you’re Gary Vaynerchuk, Esther Dyson, whatever, you could say, “Hey, my dollars are worth more. My dollars are worth 10 X. I’m not going to ask for free shares, but I want some extra rights here.” One of the rights I want is I want to have pro rata. Which means if I bought 1% of the company now and you raise money later and those new investors, because you’re issuing new shares, would dilute me 20%, 50%, I have the ability to top up. I can keep my 1% over time. I have to pay for those shares, and they can get expensive, but I have the ability to top up.

Then I might ask for you to send me a monthly update. So I put that in the side letter because so many times people I’ve asked to tell me what’s going on with the business, they chase me for three months, they’re e-mailing me, calling me, texting me every other day. Then I give them the money, and then I can’t get a hold of them. And I say, “Okay, listen. The reason I want you to send me a monthly update is so that I can help you because it’s going to be hard. You’re starting a start-up company, most fail. You need to tell me how much money you have left, how many months of runway, what’s working, what’s not, where you need help.”

So because of many bad experiences with companies where they wouldn’t send updates until the company was shut down or the company was out of money or about to run out of money, I just require that if you want my money I have pro rata and I have that monthly update.

Andrew: What else do you ask for?

Jason: So I can also ask for what’s called information rights. Information rights means I know how much money the company is making, how much they’re spending, that kind of stuff. When you’re starting out as an angel, you may not have information rights because the founders, especially ones who have done it a bunch of times and who are older, lived in a world where there was less transparency. And they would say, “You can buy shares, but you can’t know what’s going on in the business.” That’s changed a lot, but information rights are something that can be negotiated. So I like information rights a lot.

And then I also negotiate that I can have a board seat in perpetuity, which means forever I’m told, if I own over 5%. And I added this after I had Thumbtack, Uber, Wealthfront, and now Robinhood, all these incredible companies became worth billions or tens of billions of dollars and I never had a seat at the table. And so I said, “You know what? If I own 5% early on, I kind of played a significant role here.”

So with calm.com I don’t have a board seat, but I own, whatever, 9% or 10% of the business. And I would like to be on the board of calm.com. I would like to be on the board of some of these high-growth start-ups and help them and represent the pools of capital that I do. Because now I’m representing larger pools of capital, so I need to exert a little more control. This is not what the early angles would have to contend with. But now that I represent other people’s money, I have a syndicate, I’m not just investing my $25,000 to $250,000.

With a company like Cafe X I brought along another million dollars, and then a friend of mine put in a million dollars, another friend of mine put $100,000 in. So I represent a million dollars and 12% of the company, and then my friend put a million and he’s 10% of the company, so I joined the board. And they’re like, “Well, we’re not going to have board meetings.” And I’m like, “Let’s start having board meetings.” Just so we can separate ourselves from there’s a group of people who are pretending to be entrepreneurs, they don’t have governance, party rounds, nobody is in charge, and the founder is the god king. That’s fine. But what I wanted to say was let’s just start having board meetings so we have six dates on the calendar, we sit for two hours, and we strategically think about this business, what could go wrong, what we need to do. We can make a plan, we can review our plan.

And people who makes plans and review their progress against a plan tend to perform better, just like people who weigh themselves every day or wear a Fitbit do more steps and weigh less. If you wear a Fitbit, you will weigh less. If you use a scale, you’ll weight less. Because you get on the scale and then you’re like, “Oh my god, this has to stop. I’m going to stop eating ice cream.” But if you never have a scale, you’re going to just get huge. If you measure it, you can manage it.

Andrew: You mentioned pro rata. I forget where it was, but somewhere in the book you said it’s disrespectful to take an angel’s money and not give them pro rata rights.

Jason: Yeah, I think so.

Andrew: At what point do you get that?

Jason: I think in the old days there was a moment in time where the Y Combinator culture was very much, and Paul Graham had written about… [Inaudible 00:59:30] starting another fight. Paul Graham had written about like, “Fuck investors. No rights, no information rights,” all this stuff. Now of course he’s running Y Combinator on 6% of every company that goes through, so it’s a little bit hypocritical. But they were basically on a real jihad to minimize the rights of angels, and it almost felt adversarial. And that’s why people started saying, “I’m not going to go to Y Combinator on Demo Day anymore.” Which they still went, obviously, but people would say that. Like, “I’m quitting Facebook,” that kind of stuff. Like people say they’re going to do it, and then they do it, and then they come back. Like Lena Dunham is really moving to Canada after Trump was elected President. She’s still here, I think.

So I think that there was this moment in time where they’re like, “Yeah, no pro rata, no information rights, no governance. 10 times voting shares for the god king or god queen CEO.” And then that kind of blew up in people’s faces and a lot of people who raised money… I remember Circa, MG who was running Circa. I love Circa, I was an investor. And he said his one regret was when the shit hit the fan and he needed help, nobody had enough skin in the game and there was no board and there was no lead investor and nobody had information and nobody really had any rights. I’m not actually sure exactly what they were, maybe they did have information rights. But basically said, “I would have had more governance earlier, I would have had a better support system around me.”

But people were convinced during this 2014/2015 vintage that the uncapped notes, the investors are the enemy. And that’s why I passed on a lot of, frankly, really good Y Combinator companies, because I just thought the terms were disrespectful, and uncapped notes and adversarial. And I would talk to companies and I’d say, “How did you come up with this valuation?” And they’d say, “Well, the company last year that I knew at Y Combinator was 12 and we think we’re better, so we made our valuation 14,” so it’s only like 10% more. And I’d be like, “That’s the worst reason I’ve heard,” and I’d pass on investing.

That problem, I think to Y Combinator’s credit, they realized that this was happening and you had all this negative kind of pushback from VCs. When a VC publicly says, “I’m not going to go to Y Combinator,” like three or four of them said that publicly on Twitter, it’s like, “Whoa.” That’s a big red flag for everybody that something is wrong. And I think Y Combinator told the founders like, “Hey, enough with the uncapped notes. Let’s be more reasonable. It’s not in your best interest to hammer the investors as much.” And now we have equilibrium. But when I started, there were all these protective provisions where people would get two X liquidation preferences, they’d have control over your company, they could fire you. It was the other way, it was too investor-friendly. So now we’re finding equilibrium, which I think is healthy.

Andrew: What about this? How much of an investment does an angel need to make in order to say, “Hey, you’re being disrespectful, give me this right”?

Jason: Well, I think you can ask, there’s usually a minimum threshold to directly invest. When you’re in a syndicate, you have a group of up to 99 people putting $1,000 and up into a start-up. And they get dragged along into one SPV, special purpose vehicle, one LLC, that is controlled by the angel syndicate. So when they need to get signatures, they get one from Jason or one from Tim Ferriss or one from Ed Roman, or whoever it is on one of these sites. And it’s one item on the cap table and that LLC shares those shares pro rata, or those shares based on how much they invested.

So it becomes very lightweight. You as a micro-angel, if we call a syndicate member a micro-angel, you don’t have to do any paperwork, or do very little, and it becomes super easy for people. When you start investing direct, usually there’s a threshold of $25,000, is what most founders would set it at. And then if you do it directly, then you could have a conversation and say, “Hey, I think we should have pro rata.”

If the round is oversubscribed, they might say, “Well, nobody else is getting it and we don’t need your money, so no.” And then you have to make the decision, “Okay, it’s oversubscribed, maybe this is a really good company and it’s oversubscribed for a reason. Maybe I can back down on the pro rata because, hey, having $25,000 in the first round of Airbnb is with it. Even if I can’t keep my percentage up, it’s still going to be a great return.” So you can make that decision as you go.

As you put more money in, then you could say, “Hey, listen. I’m putting $250,000 of the million dollars in this round, I’m putting $100,000 of $500,000. Here’s what I need to do that,” and you probably have a more likely chance of getting it. And you don’t have to be overbearing. Like I think Lightspeed got into a little bit of a riff with Evan Spiegel that was very public about they had the right to veto other investors. And Evan Spiegel wanted to have some other investors, Bill Gurley or whoever, and Jeremy Liew from Lightspeed had to do a mea culpa and say, “Okay, we’re going to reverse those rights and not be overbearing to the founder, or else you get a bad reputation.” So you have to be careful as an angel that you’re not overbearing.

Andrew: Let me bring it back to a couple more of your experiences. Let’s talk about the company that in your book you call Sparrow. And now, because I have the early copy of the book, I know who it is.

Jason: You know who it is.

Andrew: Yes.

Jason: Oh my god.

Andrew: I want to talk about that, and then I have one other final area to talk about. Tell me the story there and what you learned from that experience.

Jason: Yeah. So with Sparrow, the company we’ll call Sparrow… I change the name of the companies in the book and the names of the individuals and I did a little compositing of maybe different situations to mask what would be…

Andrew: Yeah, that’s the part that I was surprised by. Where is the Jason who’s going to…

Jason: I’ll tell you what happened.

Andrew: Tell me.

Jason: In the original manuscript, you have a later version, but in the original one I just named everybody. And I was like, “Let the chips fall where they may, I don’t care.” And then I got a call from HarperCollins and they’re like, “Okay, so we have 17 instances where you might get sued. And would you like to get sued or have conversations with people that you’re about them or would you like to just move on and just use pseudonyms and mask these things and make them into composites?” And I was like, “Yeah, let’s do the latter.”

Because I kind of thought it and I was like, “I’m writing the book because I want to inspire people.” And hopefully some people get rich and hopefully some people move from poor to middle class or poor to rich or middle class to rich. The goal of the book is not for me to cut people down or to knock people over or to get vengeance, I don’t have any vengeance.

Andrew: That’s what I mean, the older, richer Jason. The younger Jason would have…

Jason: Whatever. Go ahead. Listen, I’m more than willing sometimes to mix it up, but in this case I just thought it would be more fluid if I didn’t.

Andrew: I also think that if you’re going to do work with future entrepreneurs, it’s better for them to know that they’re not going to end up in a book if there’s a problem.

Jason: Maybe. Some of the stories are neutral, in fact, they’re just sort of, “Here’s what happened.” And so I’m doing a follow-up book, I think. And when I do the follow-up book, I’m going to talk about specific companies.

Andrew: “That asshole, Andrew Warner.”

Jason: Exactly. Oh my god. No, I’m going to actually do specific companies, but I’ll just do it with their permission, right? Because I never speak for companies without them approving it first, or speak significantly. I might say I love Cafe X, but I’m not going to say Cafe X’s business model and what they should do if Henry hasn’t given me the okay with it.

So in the case of Sparrow it was doing a million dollars or so and the CEO was like, “The board has decided that this person should be CEO, professional CEO.” And I’m like, “But it’s going so well.” And they’re like, “Yeah, but we want to be at $10 million and we should be at $10 million now.” I was like, “I don’t think that’s exactly how it works. Enterprise software can take time and maybe it’s not growing as fast, but I think you should stay CEO.” And I got overruled in that and even the founder got kind of acquiesced, let’s say.

And they bring in this hired gun person who negotiates an incredible severance package and incredible terms. When the CEO is negotiating their severance package that hard, you kind of know what’s happening, right? The CEO then goes and takes a million-dollar company down to $750,000 in revenue during the hottest market in the world, so you really have to try to lose money. Loses big clients, totally fucks the thing up.

And then I get a call that they’re going to sell to another company for $400,000. And I’m like, “$400,000? We have $750,000 in revenue.” They’re like, “Yeah, but that revenue is going to go down next year.” I’m like, “Again?” And it’s like, “Yeah.” And they’re like, “Well, we want you to sign off on this.” I’m like, “Hold on a second. I’m not signing off on anything until we have a conversation. What’s going on and why can’t we get more money from the acquirer and who do we talk to?”

And then I find out that they hired a banker. And the banker, of the $450,000 that the company is being fire sold for, which is 20 cents on the dollar, it’s now at 20 cents on the dollar at $450,000 because they’d raised 5 times that $2 million. Of that $450,000, like $200,000-plus was going to the banker and the CEO on the way out the door. I’m like, “You guys failed, and you failed as the banker to find somebody to get just our money back. And you’re going to take all this money?” I was like, “Fuck no I’m not signing off on that.” And they’re like, “Well, you kind of have to because we sent half the employees over to the acquirer.” I’m like, “What? You need board approval to do that. Did the board approve that?” Then the whole board is scattering, like, “Oh my god, we approved this? Did we approve it? I don’t know, did we?” And now everybody is taking notice.

I was like, “All right, listen. I’m going to talk to the person who’s buying the company.” And they’re like, “If you talk to the person buying the company, you’re going to tank the deal.” I’m like, “There is no deal here, we’re getting back five cents on the dollar or something. There’s no deal.” So I call the CEO of the company, I said, “Listen, I know you want to buy the company.” He goes, “Go talk to my CFO.” I said, “Okay, fine, I’ll try the CFO.”

I talk to the CFO on Halloween. He calls me, I’m out trick-or-treating. I was like, “Listen, I don’t know what you know or whatever, but this is the situation.” He’s like, “Oh, listen. I’m a big fan of your podcast.” I was like, “Fantastic. How can we make this work?” He’s like, “We can’t make it work, but we love the company.” I’m like, “Okay. Well, then I’m not going to approve it.” He’s like, “All right, well, we already got the employees.” I’m like, “Yeah, I know you got the employees, but you’re going to have to let those employees go. And it’s going to be a mess and I’m not really happy about it.”

And you can’t really take legal action because it would cost more than you would get, and then you’re an angel investor suing, so the whole thing is a mess. And I said, “Listen.” And the guy said, “Well, want do you want out of it?” I said, “Well, listen, I don’t want cash. I want equity in your company because it’s doing very well.” And he’s like, “Well, that’s impossible.” I was like, “All right. Well, then I’m not going to sign on it,” and we’re getting this game of chicken. And I was like, “Okay, how about I am an advisor to your company.” And he’s like, “Oh, would you do that?” I’m like, “Yeah, I’ll be an advisor to your company. I’ll meet with you twice a year. Give me $100,000 in shares for my investors and vest them immediately and we’re good.” He’s like, “Okay.” And then they’re like, “Oh, you got to vest them over five years and you got to do all this stuff.” I was like, “No, I invest them immediately on signing without any condition.”

And we wound up getting my investors this special deal because I agreed to use my influence and my “I’m going to do work for them over the next couple years.” I got my investors 30 cents on the dollar, but with the ability for that extra 20 cents in shares to go 5 or 10 X from here and we could be in the black again. And I think sometimes you got to put your foot down and tell people, “This is not acceptable.”

Andrew: And you can do that, work out a special deal for you that the other investors don’t get?

Jason: Well, basically what I said was, “I’m going to offer me, my services, my Twitter handle, my podcast, to this company going forward in exchange for shares, and then I pledge to my shares.” And I wasn’t going to take them personally. I could have just taken them personally. I said, “I pledge my shares,” and I made a document that says, “I pledge these shares to my investors and my co-investors and my team, my syndicate.”

So that’s the level which I’ll fight to kind of help my team get their reward. But I do think that you have to, again back to you said, “Hey, I’m not a fighter anymore,” you don’t see the fights. That’s one of the things I’ve learned is that there are strategic fights that I need to make to let people know that I’m not a pushover. But I’m much more of a politician these days about how I do it. I’ll say, “Hey,” publicly, “everything is great,” but then behind the scenes I’ll say, “Hey, this is not great. Here’s what needs to change and this is an easy resolution. But if you don’t do it, here’s the ramification of that.”

And I just explained it as dryly as I’m explaining it right now. Which I told to one VC who’s a very good friend of mine, told me, and there’s a chapter in the book called Jason Calacanis Does Not Eat Shit. He said to me, “Listen, Jason, I’m putting millions of dollars in, and we’re going to get rid of your side letter, we’re going to get rid of your pro rata, we’re going to get rid of this information right. But we’re putting $4 million in. And you know what? When I came into the industry I had to eat shit, so you’re going to just have to learn how to eat shit.”

And I just said, “Let me stop you right there.” And I talked about myself in third person, “Number one, Jason Calacanis does not eat shit. Number two, I brought this company to Silicon Valley. I put the first $400,000, $500,000 in. And I am going to take this CEO to Sequoia, Benchmark, Andreessen Horowitz, whoever, social capital, personally. I’m going to tell the founder exactly how many unicorns they have and how few you have. And then I’m going to get another VC to take this deal from you and I’m going to get a VC who actually respects my rights.”

Andrew: And then what do you think about an entrepreneur who would go along with a venture capitalist who wants to…

Jason: Well, that’s what I did, is I sat down with the entrepreneur and I said, “By the way, if this VC is going to screw me, what do you think will happen to you eventually?” And I don’t mind, I’ll fight for myself. And I’m not going to kill the deal for you, but I am going to get you more options so that you can make a better decision.” And then I told the VC, as well, “By the way, I’m the point guard. I’m Chris Paul. I’m bringing the ball down the court. You will never, ever get a pass from me again. You will be frozen out on offense. I will pass it to your three or four top competitors. And any founder who will ever ask me for an introduction to you, I’m going to tell them to call me, and I’ll tell them on the phone how you screwed me. And I’ll tell them if they want an introduction to somebody who screwed me, they should just cold email you because it doesn’t make sense for me to make that introduction.”

And this person, who is a friend of mine, was like, “Can I think about that?” And I was like, “You certainly can think about screwing your friend.” Yeah, and he wrote me an apology letter, “I’m sorry, this is how it normally goes down,” or whatever. But I think you have to put your foot down, because angel investors have been run over historically, run over. And the things I’m talking about, the stories I’m talking about our minor compared to major ones that have occurred where angel investors have gotten demolished.

And I just said, “You know what? If I’m going to stake out this claim to be the number one angel investor, I’m going to change how this works.” I’m going to change how it works a little bit. And I’m going to bring in my side letter, and I’m going to bring in a level of protectionism and protectionist approach to the angels and not letting them be run over by people with bigger chip stacks, because I have a big chip stack too. And I got a big network, too. If you’re going to try to run over me because you have a $300 million-dollar fund and my fund is $30 million or $10 million or whatever it is, guess what, we’re going to dance. We’re going to do a little dance here. And you may win sometimes, I may win others, but I’ll tell you I’ll win in the long run. Because if I hit a unicorn every 30, 40 investments, what you have to ask yourself is, “Do you want to take the risk of me not sending that unicorn to you and the assurance that it’s going to your competitors?”

And when you phrase it like that, I don’t need to say it publicly. This is like high-level, just matter of fact, behind the scenes, private phone call on a Saturday afternoon while the kids are on the soccer field. You know? This is like the high-level shit that goes down in Silicon Valley.

Andrew: [Inaudible 01:14:26] on the soccer field.

Jason: Well, I happened to be trick-or-treating in one case. In the other case I was walking my dog and my daughter to go have brunch. And I said, “Listen, I’m the point guard. I’ll give you a great metaphor. I’m the point guard, you’re never getting the ball again. Never.” And that was just terrorizing to the person.

Andrew: I’m curious about who it is. One of the things that I like about being here in San Francisco is I get to hear who people are behind the stories. Like now I know who Sparrow is, and that’s so good.

All right, let’s close it out with this.

Jason: Okay, okay, here we go.

Andrew: Towards the end of the book, page 257 in my copy.

Jason: I’m so happy that you read the book. Thank you for doing that, Andrew.

Andrew: I do like that. I feel like if I’m going to talk to you about the book, then I should read it. And otherwise I don’t have to interview everyone, it’s not like I’m NPR where I’m being forced to interview whoever they put in front of me. So you close out with this line. Actually, it’s not the closeout.

Jason: Close enough.

Andrew: Yeah, one of the last sections of the book. “The bottom line is that many of the great companies in the world were built on the premise of removing pain from people’s lives.” And you talk about why that’s more important than trying to find the next [Inaudible 01:15:27].

Jason: Yeah.

Andrew: Talk about, in relation to the biggest successes that you’ve been a part of, how has eliminating pain factored into their success and their business model?

Jason: Yeah. So another way people say it here in Silicon Valley is, “Are you making painkillers or are you making a vitamin?” If you have a sprained ankle, you’re going to get those painkillers right now. If you have a zinc deficiency, you might find out about it at some point if you take a blood test and you may or may not feel compelled to go get vitamins, it’s pretty obvious. One is much more valuable than the other.

And if you look at a company like Uber, which is obviously the biggest success I’ve ever been involved in, but there are other successes too, they did something very unique. People couldn’t get from point A to point B for a reasonable amount of money. And we used to all go to different cities around the world and we would have this arduous and anxiety-producing moment, “Will I be able to get to my hotel? Will I be able to get to this function? Will I have to rent a car? How much will it cost? Are they going to screw me when I fill the gas tank? Can I get a taxi driver? Is that taxi driver going to be an hour wait in Vegas, or are they going to take me the long way?”

Andrew: That’s what they do to me. Yes, yes.

Jason: Not to you, they do it to everybody. And all of a sudden you have all these pain points and this massive anxiety. Getting the hotel was easy, but just moving around a city was hard. All of a sudden now you go to Los Angeles, now you go to New York, now you come to San Francisco, it’s like $15 to get to where you’re going from the airport, $5 to $10 to get across town. This was an amazing removal of pain, knowing that you can get a car in under three minutes in most cities, four minutes. What’s the wait time in L.A.? Under five minutes? The wait time here in San Francisco is two minutes in the city.

Andrew: How much of that pain was factored into the presentation that you heard at Open Angel Forum when you first heard the idea?

Jason: Yeah, not much, not much.

Andrew: What was it at the time that was the idea, if not the pain?

Jason: It was always the person, I always invest in the person. But I had a very interesting moment where I used to take … I get carsick, I have motion sickness, like my one Achilles heel.

Andrew: Even when you drive?

Jason: If I drive, I don’t.

Andrew: Yeah, yeah.

Jason: And if I’m in the passenger seat in the front, half the time it happens. If I’m in the back seat, 100%. On a boat 100%.

Andrew: Okay, sorry, go on.

Jason: Yeah, so I have this crazy motion sickness. So whenever I went to another city and had a meeting, a speaking gig, whatever, I would always say, “Get me like a Carey car service Lincoln Town Car because I can’t get in a yellow cab that smells. And the guy is driving and hitting the break and the gas at the same time.” The quality level of the drivers is obviously very different when they have the Lincoln Town Car versus a yellow cab.

And so it would always be very expensive, $125 to go from San Francisco Airport to Santo Road or to the city. Literally it was $125. And I was like, “I can’t not do it, I have to bite the bullet.” And it was $60 to take a taxi, so it was double the price. And one time in the early days of Uber when they were only operating in San Francisco, I would use Carey car service, my assistant had the name of a person I liked, so we had the same driver often.

And I was testing Uber and I came out and I pressed it and it was the same guy from Carey car service. And I was like, “Joe.” And he’s like, “Hey, Jason, how are you doing?” And I was like, “Oh, great.” He’s like, “Oh, you’re using Uber? Great, I love Uber.” I was like, “Great.” I was like, “$65 to the city and the other was $125.” He goes, “Jason, I make more doing Uber to the city than I did when I did it through Carey car service at $125. So I’m moonlighting on Uber. I still work for Carey, but we’re all freelancers. But they take $75 of the $125, so I get $50. And now I’m getting $55 or $60 from Uber, I’m getting like 10%, 20% more. It’s worth it. And I get more rides.” So that for me was like, “Oh.”

But then the other thing that happened was I was talking to David Sacks and David Sacks doesn’t like to drive, from Yammer, and he’s like, “Yeah, I’m selling my other car.” And I’m like, “You’re selling your car? How are you going to get around?” He’s like, “I’m full Uber.” This was before they had UberX, he took Lincoln Town Cars. I’m like, “Isn’t that a little expensive?” He’s like, “No, I did the math.” I’m like, “Wait, wait. How did you do the math?” And he’s like, “Well, the cost of my insurance, the cost of my parking at my office, the cost of my garage at home,” all this stuff he put together. He made a spreadsheet and he said, “It’s obvious that going full Uber is cheaper because I get to do e-mail and I get to make a phone call, and I added that into my factor, was getting back 40 minutes a day at whatever my hourly salary is. So it’s massively profitable.”

Now everybody can’t make that calculation. But then when UberX came out and UberPool came out, it was very obvious to everybody that it could be a car replacement. Not taxi replacement, not Lincoln Town Car replacement, but car ownership. That was the thing nobody anticipated.

Andrew: But, Jason, that’s not pain removal, I’m trying to understand what that is.

Jason: That’s a new market.

Andrew: Right.

Jason: The creation of a new market. So there was pain removed from the Lincoln Town Car experience, and then the big win that nobody could have ever anticipated would be that young people in Los Angeles, as an example, where you have to have a car, how many people in Los Angeles do you know that are full Uber?

Andrew: I have a relative who does not have a car in Los Angeles because of Uber, yeah.

Jason: Exactly. And to think that you could live in L.A. without a car was a joke.

Andrew: Yeah.

Jason: There was jokes about people who didn’t have cars. There were like three people in Venice who were hippies who Ed Begley, Jr. didn’t have a car and he had a bike and he would put the bike on the front of the bus and they would take pictures of him because he didn’t have a car. Now young people are like, “Why would I ever want a car? If I need a car, I can get a GoCar for the weekend,” or whatever these car rentals are that are easy. And now there’s UberX and UberPool everywhere.

Andrew: All right.

Jason: Or Lyft Line, either one.

Andrew: Let’s close it out with this.

Jason: Yeah.

Andrew: We started out by talking about your family and how challenging money was for you.

Jason: Yeah.

Andrew: What’s the best thing that you bought for yourself or someone in your family because you feel like you’re in a safer spot in your life?

Jason: Oh, well, god, I usually talk about these kind of things. But when I sold the first company, as you mentioned, I cried. Because I was sitting there reloading the page on the Bank of America account and all of a sudden you see all this money come in and you’re like, “Oh my god. I just went from like $3,000 and added all these zeros, this is an incredible experience.” And I cried and my wife said, “Why are you crying?” And I was like, “We don’t have to worry about money.” Because I just spent 35 years of my life worrying about money and watching every fight my parents ever had was over money.

And so it was a very cathartic. And so when people say, “It’s not about the money in Silicon Valley,” they’re so full of shit because they have the money already. So like, “It’s not about money, I do this because I want to move the human species forward.” It’s like, “You’re already rich. If you were broke, it would be about the money.” People who say it’s not about the money are the people who have made the money already, who are then trying to cue the other people. And they’re basically trolling the people who need to get money. The truth is we all need to have money, we all want to have financial security, and it sucks to now have money.

And that was really what was super, super cathartic for me, was this lifelong fear of being broke. And so I wanted to buy myself a Ferrari. I couldn’t do it, so I bought a Corvette because I just couldn’t bring myself to spend that amount of money. And I bought myself a One Touch Jura espresso machine. Which I felt like it was this incredible luxury for $2,000, that I had a One Touch coffee machine. As nouveau riche as you could, I bought a One Touch coffee machine and a Corvette that was yellow. So that just gives you an idea how ridiculous I am.

But meaningfully I just thought about my brothers and how much they had supported me over the years. And I just set up a little bit of money on the side in one of those 503s or whatever they are for college kids. And my nephew just graduated college and I paid for a portion of it. And it really helped him get through, so I felt really great about that.

And then the last couple years I just told my mom, “Why are you working? Please stop working.” And I finally convinced her to retire and took care of some bills and those kinds of things. And that makes you sleep easier at night, because when you see your mom work five jobs your whole life and she’s now pushing 70 and you’re like, “Is she ever going to stop working? And, god, she worked so hard for me to get here.” You start to get riddled with this incredible guilt. Like I try not to look at the bank balances, I try not to think about the amount of money that is at stake and what we all do here.

And, listen, of my friends, I’m the least affluent. Most of my friends have 9 figures, or a lot of my friends have 9 and 10 figures in terms of net worth. I have a lot of friends who have planes and stuff like that and it’s very heavy, it’s very weird. But I’m always pretty balanced because I grew up with nothing and I don’t really care about the money all that much.

Andrew: And your dad?

Jason: And my dad is retired.

Andrew: They’re not together?

Jason: What’s that?

Andrew: They’re not together?

Jason: They’re still together, still together.

Andrew: They’re still together. So you retired your mom and he’s retired, too.

Jason: Well, he was retired as a function of the fact that nobody will hire a man over 60 years old, or 55 years old, to do anything in America if he doesn’t have a college degree, has no skills. So he was a bartender, and then what happens is you get to a certain age as a bartender and people are like, “It’s kind of depressing to have a 60-year-old bartender.” And so he couldn’t even get a job as a bartender. And so he had to just retire, right? And so they’re in good shape now, they don’t have to worry about money, and that’s a nice feeling. They certainly don’t have to worry about providing for their kids anymore and they’re safe and secure.

So the hope with the book and the reason I chose to write it. And writing the book was literally an opportunity cost. It took so much of my time and effort that I could have put into investing in companies. I could have invested in another maybe 30 companies in the amount of time this took, 20, 30 companies. But I wanted to write it because I do think in terms of paying it forward and showing people how I did it. I sincerely wanted to show people how I did it because it is opaque and nobody wants to share this information. If you go ask somebody, “How did you become a great angel investor?,” like, “Yeah, I got lucky,” and that’s it, end of conversation.

I wanted to write the manual and I want to see people go out there and take what I wrote, they can adapt it, they can change it, but I would like to see some number of people take some risk in their life. Don’t take risk that is the risk of ruin. I’m not saying put 100% of your money into one start-up. I’m saying put 5% of your money, 3% of your money, 7% of your money, something you can afford to lose, into 20, 30, 40 companies. And let’s see where you wind up, if you invest in the companies here in Silicon Valley. Which is critical, that you have to invest here where all the great companies [Inaudible 01:25:45].

Andrew: As opposed to New York.

Jason: Yeah, I think you can selectively in those markets. But if you’re optimizing for return, this is the place you want to be. In New York you have Tumblr, Etsy, Kickstarter, DoubleClick, and bunch of companies that became worth a billion, $2 billion, $3 billion. Here you have dozens of companies a year that become worth a billion and you have companies every decade that become $100 billion.

Andrew: You may not remember this, but you spoke at an event that I organized in L.A. when I got there and you said in San Francisco people work really hard, here people kind of hanging out, going to the beach.

Jason: It’s true.

Andrew: I was wondering what were you doing then in L.A.? Why did you stay there for so long?

Jason: I was decompressing after 9/11 and just really enjoyed the lifestyle there.

Andrew: I see.

Jason: I was kind of burnt out from New York and I was kind of trying to figure out what I wanted to do with my life. And that’s when I started Weblogs, Inc. when I was out there, like as a remote company. And then eventually the reason I moved up here three years ago into San Francisco, I really loved living in L.A., I actually would probably prefer to live there in terms of quality of life. It’s a better run city certainly, and it’s a much better quality of life than in San Francisco. San Francisco is a horribly run city. Terrible. They need a new mayor.

Andrew: I look two blocks away, now I understand why people say that the wage disparity and lifestyle disparity is so dramatic in San Francisco.

Jason: Well, you’re in the Tenderloin.

Andrew: Right.

Jason: Which is literally like if anybody in America comes to the Tenderloin, they are rocked to their core because you see 100 people literally … It looks like a zombie film or like a MASH unit, there’s people laying in the street, people defecating in the street, people with needles hanging out of their arms, people who have been stabbed.

Andrew: And then you’re at WeWork.

Jason: It is violent and desperate and horrific in the Tenderloin.

Andrew: And then you’re at WeWork with some of the greatest entrepreneurs on the freaking planet. And I understand why you would come to San Francisco, and you’re right. And in the past, before I lived in San Francisco, if I read that in your book, where you said move here, I would have said, “Eh.” Now I totally get it.

Jason: You have no choice if you want to play this game.

Andrew: Yeah.

Jason: And I was basically coming up here every week. And when you have kids, traveling for three days a week and missing their childhood is kind of a bummer. So my wife, who has been tirelessly supportive of me, was like, “Let’s move up there and we’ll just see how it is.” And we love it, we love living here. It’s not as good as San Francisco or New York in terms of how good of a city it is, but I bought the domain name mayorjason.com. And so maybe this city will get the mayor it deserves some day.

Andrew: I’d love to see that.

Jason: Who knows?

Andrew: All right, the book is “Angel.”

Jason: You’re not the only one. There’s a group of people who would be really excited.

Andrew: Just as a runner I’d love the city to be better run so that I don’t feel like I could get killed halfway through my run.

Jason: In about six months we’ll do another interview where we’ll talk about the Mayor Jason platform. I’m doing a lot of podcasts and a lot of reading about how cities are run, I think it could be an interesting concept.

Andrew: So five more years of angel investing.

Jason: You never know.

Andrew: All right. The book is “Angel.” A friend of mine said, “What are you going to do, spend all day reading Jason’s book?” I said, “No.”

Jason: Easy-breezy.

Andrew: It literally took me two hours to read it. I’m a fast reader.

Jason: 288 pages.

Andrew: I don’t think it’s going to happen to most people. Yeah.

Jason: It’s like a six-hour audiobook.

Andrew: And it’s breezy.

Jason: I read the audiobook.

Andrew: So there is an audiobook coming out?

Jason: Yeah, I read it myself. I just did it last week.

Andrew: That is tiring.

Jason: It was so hard.

Andrew: Yes.

Jason: Exhausting.

Andrew: How long did it take you to do that?

Jason: It was supposed to take four or five days. I did it in three. But there’s a new thing that makes it really hard, you have to have every word precise, because they now sync Audible to e-books word for word.

Andrew: Yeah, I love that. I love that.

Jason: If you miss a “the” or an “a” and it doesn’t change the meaning of the sentence, or of you ad lib, it breaks it so that it cannot sync. Therefore they stop you in the studio, if I say “VC” versus “venture capitalist” or if I say “venture capitalists” instead of “venture capitalist” and it doesn’t change the meaning, they stop you, “Let’s try again with ‘venture capitalist’ plural. Let’s start again. Let’s try again with the word ‘the.'” It’s painful. Have you done it before, have you read a book?

Andrew: No. But I listen to Audible a lot, I get it.

Jason: And you know what? I love Audible too. And they fought me. HarperCollins was like, “We really don’t want you to do the audiobook. We have the greatest person. It’s going to be much more expensive for us to do this other person. Trust us, do this.” And I was like, “What’s the reason?” And I was trying to get the reason of why they were trying to dissuade me so much and they said, “Okay, candidly, most authors suck at reading it. We don’t know if you’ll suck or not. And second, most people quit after the first day or two because it’s too exhausting and too frustrating.”

On the first day I literally said to myself, “Am I going to keep doing this? Because this is two hours of fucking bullshit of being corrected on minor shit and I’m going mental.” And literally I clicked in. And the second day something happened, I figured out the rhythm, and now I feel like I could read the Iliad or the Odyssey. Anyway.

Andrew: It is nicer when the author reads it.

Jason: I think so.

Andrew: You feel more connected to the person.

Jason: Yeah.

Andrew: They’re in your head. All right, the book is “Angel.” Jason, thanks so much for doing this interview with me.

Jason: Thanks for having me, I appreciate you doing this.

Andrew: You bet.

Jason: Is this the first time I’ve been on the show?

Andrew: Now, this is the second time.

Jason: Second time, I was on it one other time?

Andrew: Yes.

Jason: We did a live show, I think, or something.

Andrew: It was back when we were in L.A.

Jason: L.A.

Andrew: You recorded from your studio, I was in my place. Yes.

Jason: All right.

Andrew: All right, cool. Thank you and thank you all for being a part of it. Bye, everyone. Cool.

  • Tom


    Mixergy is your side hustle right now?

  • Andrew,

    I finished Jason’s “Angel” Investing book last week. Bought copies for friends.

    Enjoyed your interview today BIG TIME! Especially your questions regarding how relevant Jason’s thesis is for everyday households & his thoughts on the future of creating wealth.

    You brought out additional info and enabled him to expand on his strategies that his book failed to emphasize!

    Thanks Man!!
    @MyPotGuru and @PayDayLoanGuy

    Jer – Trihouse
    PS: I so thoroughly enjoy being a paid customer of Mixergy Premium for 6+ ?? years. I tell my FRIENDS [never my competitors ? about Mixergy all the time.

  • Thanks for reading the book Jer!!!! And thanks for the interview Andrew — I loved our talk!

  • No, Thank You!

  • Great dynamic between you guys. Really good interview.

Who should we feature on Mixergy? Let us know who you think would make a great interviewee.