April 8, 2021

#24 - Rolling funds and tech-powered venture capital: Avlok Kohli, AngelList Venture

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We live in a software-powered world but many practices in the venture capital industry still lack the technology it invests in. We see innovation increasing at an accelerated pace, whereas many of the VC firms that finance innovation seem stuck in time.

Avlok Kohli has a few possible explanations for this irony, and a lot of propositions to offset it. CEO of AngelList Venture, he's been leading the platform that adds more flexibility and accessibility to the fundraising process.

Among its products, AngelList changed the game by introducing syndicates and, last year, the rolling fund model.

In this episode, we explore some of the benefits and details of these initiatives, including:

  • The main differences between syndicates, rolling funds, and traditional venture funds
  • Best practices for engaging LPs
  • And the future of the VC industry.

Check out Latam's first rolling fund at fund.latitud.com

Brian Requarth: Avlok, thank you for being on the show here. It's great to have you. Let's just dive in real quick. I think it's good to set the stage about you because you know, you're an operator, you're a founder, you've built a bunch of companies.

So talk a little bit more about your experience. Share with us a little bit why you dove into a CEO role of a company. Maybe set the stage with that.

Avlok Kohli: Yeah, for sure. So I'll do a quick, quick background. I was born in the Middle East and actually lived in several different countries during my childhood and also high school. Went from Middle East to India, to Toronto, Canada, and then went to university actually in Waterloo. I studied software engineering.

So that's my background. That's the quick backdrop. I moved to San Francisco, Bay Area when the last financial crisis happened in 2008. So landed right at the time when Sequoia released the R.I.P good times memo. I quite know what it meant for me, but you know, I was here starry-eyed, ready to go build something.

The first few years tinkered on different projects. I was working as a software engineer for different companies, most of those companies actually did quite well, and then started on my founder journey. And over the years I've actually started multiple companies, one of them was bought by Square in 2015. I joined as director and was with them through the IPO. And this next company was actually bought by Postmates, which was eventually bought by Uber.

I had decided after the last acquisition that I was going to step back and take a break from operating and founding companies. I've been doing it pretty consistently for 10 or 11 years.

And Naval approached me, who's invested in my prior companies. He approached me to consider stepping in as CEO to spin out AngelList Venture and to run that. After a little bit of digging through the business and working with them on it, I officially accepted the role in mid July of 2019.

And just been having a blast since then. It's been awesome. I'll pause there if it's more useful to go into detail.

Brian Requarth: There's a lot of things I want to explore and, you know, I want to get into a little bit more about the AngelList business model and all that stuff, how you guys have scaled this new product with rolling funds, that's an interesting topic. And then really just everything around the ecosystem that AngelList is building.

You know, I wanted to ask you one quick question, just as we look at the kind of current environment, it's starkly contrast to your arrival, to Silicon Valley in what was it? 2009, sorry, 2008. Yeah, R.I.P good times.

And now it's like, man the good times, they're not resting in peace, they're alive. And what is your current kind of just feel about the current environment and just would love to kind of take your temperature on that. I mean, I ultimately think it's great for founders, but would love to hear your kind of feeling about the current environment and how kind of benefits AngelList.

And we'll double click on kind of what AngelList is exactly for those that don't know and how you're planning on scaling that.

Avlok Kohli: Yeah, for sure. So the way, you know, the way that I think about it is, I really think about it in terms of technology. And when you take a look at the arc of technology across all time, it provides leverage to society.

It helps us move forward, helps advance society. And what's been happening over the last couple of decades with the internet connecting everyone instantly, you have this global communications network with all of these different advances. The rate of technology innovation is actually increasing. Again, I can't point to a specific chart to prove that, but I can definitely feel that in the last decade that I've actually been in Silicon Valley.

And everything moves in cycles, of course. So you have, you know, the cycle that I came into was R.I.P times, and it was sort of a bit of a crater. And then from there it moved back up and then down and back up and down, but all the while, it still keeps going up into the right and the pace of innovation has actually accelerated.

We're in such a different time now, where I feel like the good times have been amplified and it's just like, there's nowhere to go but up, but there's something more systemic there. Obviously there are some tailwinds with pandemic accelerating technology, because almost overnight, the demand for technology companies went up.

In addition, there is an artificial attraction of capital with the interest rates being at zero and the FED printing money. But underneath all of this, there's still real tech technological progress happening, and that's actually accelerating right now. And so, you know, while we look at all the different ebbs and flows are still in pop into the right movement in terms of technology itself.

And when we think about what is funding this technology. It's called venture capital, right? Venture capital is risk capital. Doing anything new like this requires a lot of upfront capital, any sort of technology development requires a lot of upfront capital. And that's what venture capital is. It's a set of investors that come together to invest in these startups that will then go pursue new technology.

Most of them won't work, but that's fine. The ones that do literally change society forever. And so when we then think about AngelList, what AngelList is, it's a platform to allow many more of these venture capital funds to be formed, like yours. You're out there choosing which founders you want to back, that they're going to go change the world.

And you're able to create your fund, in this case, a rolling fund on the AngelList platform. So we're almost a meadow way of seeing many more venture funds in the world. Then it will go back into all of the founders that will create the next generation of companies that'll move society forward. So that's the way to think about what's happening in the world and how AngelList itself is uniquely driving and accelerating some of that change.

Brian Requarth: I find it ironic these venture capitalists, I'm friends with a lot of them. They have been investing in technology and innovation. Yet the business of venture capital hasn't changed for decades or like, has it ever changed?

So like, why did it take so long for someone to come in and rethink venture capital when like the venture capitalists themselves are all about disruption and transforming? Why do you think that is?

Avlok Kohli: Yeah, it's a good question. I think some of it just has to do with the nature of venture capital and what makes a great VC. And there are a lot of network effects in the business, there's brand in the business. For example, if you take a look at some of the top, top, top venture firms and the partners, they will still be here decades from now because founders ultimately want to be surrounded and work with investors that have built and been part of building large companies.

So there is a bit of that, you have this network effect, this brand effect help keep these firms in business. I think the other reason is that when you think about VC and you think about operating, they're two different worlds entirely. Actually the strengths of what it takes to be a great VC and the strengths and what it takes to be a great operator, they are two very different types of strengths. One actually has a very strong feedback loop, almost daily. If you're operating, you literally have a daily report that the entire company runs on. Whereas the other one, your feedback loops are much, much longer and they actually, sometimes it can take a decade to know if you've made a great decision or not.

I think that's another part of the reason as to why it's taken a while. And then I think third is, it does require the right combination of people to come together to rethink some of the infrastructure that's needed. And when we think about AngelList itself, the innovation that's moving forward is a combination of design engineering, legal and fund operations, all coming together, creating a vertical stack that allows us to create new products like the rolling fund.

So I think these are some of the reasons why it's taken so long for it to actually hit VC. But again, you know, for me, stepping into venture, I actually, when I stepped into it, I really viewed it as a financial platform. And even the way we build products and the ethos of how we grow products at AngelList is very much from a software lens first.

Well, how can we build software to get infinite leverage on the problems that we're trying to solve? And so that's a very different approach than most other infrastructure providers. in the VC industry. So I think it also just requires the right type of company and orientation on how you solve problems.

Brian Requarth: Yeah. Just to draw a parallel there, like my good friend, David Vélez at Nubank, one of the largest neobanks in the world, he likes to say that they're a tech company that happens to be in financial services. Whereas all the incumbents there, banks and they happen to try to use technology to build their business. So I think there's a clear distinction there.

Avlok Kohli: I say to our team that we're not competing with companies in our industry, we're actually competing with Square, Stripe, Google, Facebook. We're competing with all tech companies because we're competing with them for talent because we're all software technology driven companies.

And the goal of a software company is to consistently innovate. Consistently ship new products. If you're not shipping new products that have product market fit, you're dead. It's just a question of when. Right. And so that's how we think about it. We don't think about ourselves as competing with companies in our industry.

We think about competing with all tech companies, because that's really ultimately who we're competing with for talent.

Brian Requarth: That makes sense. And let's talk about the fundamental differences between a rolling fund or a traditional fund. Had a lot of investors on here and think that people are relatively familiar with the kind of two and 20 model and seed, you know, Series A, all the different kind of stages of venture.

Let's talk a little bit more about that. Just the fund itself. And I can attest to why I decided for a rolling fund, but maybe for the benefit of our audience, explain a little bit more about the main differences that you see, and why people choose that.

Avlok Kohli: Yeah. So traditional funds and rolling funds, they're effectively talking about a concept or a vehicle called venture funds and venture funds allow a GP who's a fund manager to collect capital from LPs, investors, group it together to then invest in multiple companies.

For most of the actually, better part of several decades, all funds were raised under a traditional fund structure and what that would look like is: You start a fund and it's fund number one, you're excited. You want to start a fund? You're great, you're going to set up a traditional fund and you start your fundraise. You now need to get an anchor LP is going to put most of the money in. You have to raise all the capital within six to 12 months, maybe 18 months, but then you have to shut it down for new capital. You cannot take in new capital and then you move into deployment, which is investing in companies. And if you do well, then you have to restart that process all over again on fund two and then fund three and then fund four.

What's crazy about it is for the majority of the time that you have a fund, you're not actually raising capital. You're not, you're not able to use the most marketable moments of your fund, which are portfolio markups to raise new capital and raising capital is a sales game. You want to make sure that you can close capital when LPs have the strongest desire to invest in your company and in your fund.

And so with a rolling fund, what we did was we said: "How can we actually solve some of these problems and make a rolling fund, your forever fund? Why would you actually look, why do you actually need to go raise fund 1, 2, 3, and 4 and so on?

And what we did was we found a way to actually create a structure where you can always raise capital. You're always open for business to take the new capital. And on top of that, we enabled it for general solicitation and general solicitation means you can publicly talk about your fund and publicly fundraise, 'cause now you have an incentive to. Youu can accept capital anytime. With a traditional fund, you can't generally solicit.

Most traditional funds, if not all, actually can only happen through closed networks, and it has to be someone introducing you to someone else, you go to a zoom meeting, you go to a coffee meeting and then they commit. So your overall leverage on a traditional fund is a lot lower. Whereas with the rolling fund, you can tweet it out and then you have the entire network come to you.

One of our rolling fund managers was sharing with me that he tweeted about this fund and Michael Dell DMed him on Twitter. And he's like: "I never would've even thought to go to Michael Dell. I wouldn't even know how to reach him." And Michael Dell reached out to his rolling fund.

So it enables all sorts of new behaviors, and that's why we're seeing such a massive move into rolling funds.

Brian Requarth: That's awesome. Yeah. I mean, I remember the rolling fund announcement and it was a lot of fanfare in the first couple of months last year. You rolled it out last year. And there was also a lot of criticism about it, I just didn't understand the criticism. To me, it was like criticizing guacamole or something. It's just like, it's better. It's good.

And like, it adapts to founders, particularly emerging fund managers. Right. Which we all know that we need more fund managers and emerging managers, like I thought about starting a fund for a long time, but it's just, I didn't want to go through the hassle. I got a quote to set it up with a traditional kind of tech, law firm. And it's 50 hundred thousand dollars. And then you got this big bang fundraising you got to do, it's like a closing.

And so this was just amazing for founders and operators. To me, it's a dream because if I know founders well, it's no one likes the administrative back office stuff.

You're a founder, right? What was the appeal to you? Like when Naval comes to you and he's like: "Hey, you know, I've invested in a bunch of your companies. You're a founder, you've scaled companies. You've sold companies. Come work for me and be the CEO of this new venture inside AngelList".

What was the draw for you? And what was the main thing that kind of was the tipping point for you as like: "I'm getting on board with this?"

Avlok Kohli: So there were two, one was, at that time when I joined AngelList was seeing just through the funds and the platform was those funds were investing in 20% of all the top tier USBC deal flow at that time. Today, our official publicly posted number is 51%, but unofficially it's much higher.

So just the rate at which we're seeing everything in tech, we are the number one source of overall trends. We know all of the information way before anyone else in the world does. So that was one big draw, just being at the center of the information flow.

And then the second was that there were all of the makings of a financial platform. Because when I joined, AngelList Venture had syndicates and had traditional funds and was running the full stack, including banking. So we're running the banking for all these funds. And the very interesting thing is once you're in the money flow, you can actually start building a lot of products around that.

And that's a very defensible, differentiated position to be in. And I saw this playbook play out at Square extremely well, where once you're in the flow of dollars, you can then start routing where the dollars go. And what I mean by that is you can build products that add so much value to your customers that they'll just want to keep those dollars in the ecosystem.

And that's what, you know, when we look at AngelList Venture, that's what stood out to me was, this has all of the makings, are they large financial platform. And the question is, how do you amplify it and how do you accelerate? How you go faster? How do you make it even larger? But a lot of those characteristics were there.

So that's the second reason is just the ability to build and scale out a very large financial platform. Those are the two main things for me.

Brian Requarth: Let's talk about the subscription piece. I think that's a unique kind of feature.

You talked about the general solicit, which is attractive. You know, one, if you have an audience. It's the 506(c) and first 506(b). This is a regulation under a jobs act that allows you to publicly say raising capital. I haven't actually really leveraged that a whole lot yet, but while we're on the podcast, I haven't even solicited any, any capital from all the listeners yet, but maybe this is a good episode to do it because you're here instead of maybe I'll leave it till the end to share that.

But when you think about the LP base, you've got rolling funds, you've got traditional funds, you've got syndicates. Walk me through your thoughts on like, you know, syndicates, where's the place for that in ecosystem? It seems like that's been a huge product for AngelList as well. And how did that kind of dovetail into what we're doing with rolling funds today?

Talk a little bit more about those kind of three options and like where you see the use cases for those three.

Avlok Kohli: Yeah. So I would say for syndicates, syndicates are really good for people who are just starting out and they want to build a track record. With a syndicate what you can do is you can start building up a following and what you need to do is you start getting access to great founders, great startups to invest in.

And you bring those deals to your syndicate, which basically is your following of LPs and investors. And you share the information with them and they can make a deal by deal decision. And when I say share the information with them, it's all hyper private, confidential, and of course, with the buy-in from the founder. That's great for someone who's just starting off and wants to build a track record.

We also see syndicates being very useful, for top-ups or pro rata rounds. So, you know, you have your rolling fund. Let's say you want to invest a hundred thousand from a rolling fund, but then you have even more allocation in the company, you can syndicate out the rest to then top it up to maybe 150 additional. So 250 total check size. I do this all the time, by the way, I have my rolling fund. I have a thesis on the rolling fund, I have the check size. I make sure the rolling fund gets the first bite and then I'll have more allocation, maybe it's because my pro rata that I'll then top up personally, or I'll bring a couple more people into it, like one or two people into it, but it's very, very private and that's the way to use the syndicate as well.

The traditional fund product is usually good for anyone who has a very large anchor and they're good to go. And that is where we're actually finding a traditional fund product very useful.

And then rolling fund, honestly, we're seeing a lot of pull there, it is our fastest growing product ever in the history of AngelList. And it is really fast growing because it allows you to start without any friction. It's amazing. Right.

You just got started. Like, for example, I started my rolling fund and I rolled my personal investing into it and then over different quarters I've actually had more LPs join.I don't spend much time fundraising, to be honest on it. It's just there. And then I'm like, oh nice. I've got a few more LPs. Right? I'll just have more capital to invest. And then at some point when I actually start fundraising for it and I start bringing capital into it, great. I'll be able to scale it up, but there's no pressure.

You can scale it up and you can let it grow on you. Let your portfolio speak for you. That's the beauty of it. Make great investments. They do well, you have amazing co-investors, you can go raise more capital. That's the beauty of it. It never shuts down for capital. It's always open. So, that's where we're seeing rolling funds, really fit for people who really like that flexibility, and don't want to handle any of the headaches, don't want to go try and find an anchor. Great. Just put it as a rolling fund and then let it scale.

And some of these rolling funds are scaling up fast, because again, it also is very beneficial for LPs. They can come in, start with a small bite size. And then as they see your portfolio, they can actually increase their bite size.

And we're seeing this happen consistently where people are actually investing more into rolling funds versus less.

Brian Requarth: Are you seeing like the average rolling fund? If you look at your customer base and like you look at the capital, AUM, where does that typically sit? I don't know if you can talk about some of the numbers, but in terms of like number of managers and like what that's looking like.

You guys ramped up. And I think that probably the demand is greater than what you can deliver on, which is the dream of any company when you launch a product, right? You want to have tons of demands. If you could talk a little bit more about the kind of the typical fund size, maybe who are these operators, these are founders. Like, do you have any kind of segmentation of who's running these rolling funds, kind of out of the gates?

Avlok Kohli: Yeah, so we haven't shared any of the numbers publicly on the average fund size medium fund size. What I can say is capital being driven to rolling funds is very large and it's a hockey stick. It's about as vertical as you can go.

And, in terms of, you know, in terms of segmentation, it really is across the board. We have people actually like yourself, who never would have considered a traditional fund, but didn't want to go through the administrative headache to deal with it, are instantly coming into a rolling fund. We have people who have been in traditional VC coming to a rolling fund. So it really is a mix of fund managers that are using it. Some folks actually have a traditional fund and a rolling fund. They're getting the rolling fund in front of all the pro ratas, so we are seeing a full mix of people using it.

In terms of the founders, operators. We see a lot of very credible founders and operators starting rolling funds. And interestingly enough, that actually is a very good thing, we think for the ecosystem, because these are the founders and operators that would be writing, you know, a 5k check, a 10k check into a company and then referring and then sharing the deal with another VC so that they can go do the round.

But instead, now they're writing $250,000 checks into a company, not $15k, $250,000 in the company, and then referring it out. And so we're seeing a lot of very interesting emerging behavior where you now have these credible founders, operators who other founders want to work with, have them involved, and they have enough skin in the game for it to make sense.

Brian Requarth: I'm just starting out. I would love some advice from you.

We had our first kind of partial quarter, right? Like I had my first closing last quarter. We deployed one check at the end of the quarter, because it was just kind of, when he came at the end, we now have about half a million, little more, maybe 600,000 thousand and probably another three or 400,000 in quarterly commitments that are coming in in the next couple of weeks. So I'm going to end up probably doing five or six or maybe seven investments, this coming quarter.

And when I look at this, we have one investment that's already kind of 4X. Like, you know, just like out of the gates, in a few months just got marked up immediately. It seems like there's an amazing opportunity to leverage that event for the next quarter. Right? Or even the existing quarter.

How are you seeing the communication with existing LPs? Are you seeing newsletters? Like I see Sahil killing it, like on all these different mediums.

What are the best practices there, and what's being super effective?

Avlok Kohli: Yeah. I would say best practices really come down to being transparent and authentic to the way you're investing. You know, as you have a markup, sharing that, or maybe even sharing as part of an update or quarterly update is a really good way to get your LPs engaged.

And honestly, those LPs referring you to other LPs to bring their friends into, into your fund. And so a lot of what we see are updates that are one being shared authentically, meaning in the medium that their fund manager is most comfortable with. For example, we don't see all rolling funds launching on Twitter, we see quite a few, but some of them have their own networks that they want to promote through or their own mediums that they're promoted through.

So I would say that the success really depends on the manager, like the different tactics that are used. The one that most of them do use are the updates and quarterly updates. And quarterly updates just talking about how the fund is doing and specifically the markups, because when you can show: "Hey, here's a company invested in and Andreesen's now leading the round" or "Hey, here's multiple companies I invested in and Andreesen, Sequoia, etc. are now leading the round, it's showing a strong signal that you are getting in before the top tier venture investors are.

And that, I think that's the narrative that you want to be able to tell to get people excited. The other thing is that you always want to have a unique viewpoint. You want to have something very credible to say where LPs are learning from you, because when you think about what's actually happening, when LPs investing, what they're inherently saying is: "I trust you with my capital, that you're going to invest it way better than I can, because you have some very specific knowledge and understanding about the domain that you're investing in or call it the way in which you're investing or the way you pick founders. And that I am paying you through management fees and carry that you are going to go make that investment."

So one of the other things that we see as extremely successful are basically when an LP is learning from the GP authentically, they will invest. So that's the other piece, like just having something very unique to say something that other LPs can learn from.

That's also why I think Sahil ends up doing very well. Every time he talks, he is something new and unique and a unique insight to share. And if you notice you also then talks about other companies he has gotten access to other companies he's gotten access to in the past. So you kind of add that unique viewpoint and ability to get access to great companies, that's your color combo, right there.

Brian Requarth: So one quick question for you on that, just to double click on.

In your perspective, do you think that the ability to pick or the ability to source is more valuable just as a general fund manager? What's your 2 cents on that?

Avlok Kohli: The ability to pick or the ability to source. Oh, I actually think all of them. So the way I think about it is, you need to have great deal flow. You need to have great judgment and then you need to have access.

So deal flow is a source thing. If you don't have that naturally happen, then you're not seeing the right deals. Judgment means that you're making the right decision when you're investing. And then access means the founders want you on the cap table and they want you in terms of giving you the right amount of allocation to be on the cap table.

So that's the way I think about it. It's deal flow, judgment, access.

Brian Requarth: Got it. And on the access piece, like, what do you think are the qualities or characteristics that you see where you carve out allocation more?

I mean with the obvious of building value through your network or whatever, but what else do you see there as the kind of primary driver for allocation?

Avlok Kohli: Yeah, I think it comes down to what the founder is trying to solve, right. If it's signaling, it's going to be brand and signaling means that you have the founder gets you involved, and then they're going to use that name to help with corralling more investors or talent. So that's a signaling thing. It's how you stand out from the noise. How do you stand out above the crowd from all the other startups? That's where the signaling, which means brand, comes into play.

Then you have the advice and really just helping in the day to day with go to market or product or sales or marketing. And that's where you have to roll up your sleeves and really help the company.

And so those are the two broad categories that I can think of right now. I'm sure there's some other ones, but those are the two broad categories that I can think of in terms of when and why founders actually want to have investors involved in the company.

Brian Requarth: And just to go back to the rolling fund for a second.

99 LPs, right, that's the max out? I mean, I think we're going to get to that really quickly. Is there a workaround for that? If like, and you just then increase the ticket to minimize the LP? Like, question for future self.

Avlok Kohli: Yeah. So these limits are actually SEC limits. And if you double click on it, it's actually 99 non-qualified purchasers and then 1,999 qualified purchasers.

And what we do automatically is when a fund reaches the 99 investor limit, we actually split and we create a parallel fund and we put all of the non-qualified purchasers (non-qualified purchasers for people that don't know is anyone who has less than 5 million in assets and qualified purchases above 5 million in assets.)

And what we do is we put all the non-qualified purchasers into one fund and all the qualified purchasers into another fund. And that effectively gives you the ability to keep scaling your rolling fund. So that's what we automatically do. You don't have much to worry about on that front. And it turns out that most people that actually invest in rolling funds past a certain check size, they actually are qualified purchasers.

Sometimes people will accidentally state the wrong accreditation. But they're, they're in fact qualified purchasers. So you have a lot of runway there.

Brian Requarth: On the qualified purchaser, accreditation is a disadvantage, right? If you don't have a certain net worth, it's like you're excluded from this asset class, which has been the historical.

And we can talk a little about crowdfunding in a second. I know that's not your focus, but maybe it is in the future because you know, you guys are pretty geared up for lots of different things to do.

Kind of quick question on the accredited investor. I have a lot of international investors, entrepreneurs that are building top tech companies in Brazil, Colombia and Mexico.

The accreditation, is that something that is required no matter what? And can you have a local public accountants certify it? Have you seen any like streamlined process for enabling that to happen? So there's just like, you don't have to make each person get their accountant, but maybe is that a service that AngelList offers or is there a service provider for that?

Avlok Kohli: Yeah. So we at AngeLlst Venture, we actually packaged everything. We have a flow that an investor goes through to be able to accredit and state what the accreditation is and when we make it easy for them to include their accountant or lawyer or anything like that to be able to say what their accreditation is.

So we make it very, very simple for that process. I apologize for the dogs barking, I'm sure she heard some noise and thinks it's an intruder.

And so for the accreditation and especially for international, what the SEC has is there's a set, literally it's a checklist and options you can choose of which one you can pick.

And there are a set of them that we can actually use for international investors as well. But, at some point the easiest, most frictionless approach actually is just to add your financial advisor, lawyer or accountant, just to say: "Hey, this person meets these accreditation requirements". And they sign it.

And that said, that's actually the easiest approach that most people take.

Brian Requarth: It makes sense. And there's like someone that can just be your go-to person there that does that and reviews it and signs it. That's awesome. How are most of the rolling fund managers thinking about following capital?

Is that mainly coming through the SPV when you've got your allocation? Or like, how should I think about that as an investor? Is there a right strategy or is there just different strategies?

Avlok Kohli: Yeah, just different. There've been multiple approaches. One is doing a whole new fund just for pro ratas.

Another one is doing it from future rolling funds and then the LPs continue investing to get allocation and access. And then another one is starting up an SPV and giving preferred allocation to the LPs that wants to invest in that SPV for the following allocation. So we're seeing multiple approaches.

To be honest, there's no one right approach. It really depends on what the fund manager is looking to optimize for. And you can imagine as well, by the way, on the SPV approach, you can create a blind pool of SPVs ready to go and have that allocated ahead of time. And that would actually be the, your pro rata part that you then put into the company.

So there's many different ways to do it. The way we think about it is we've given all the building blocks for a fund manager to choose which one makes sense for their strategy.

Brian Requarth: I like that. If you have it kind of teed up, then you have the allocation, you're ready to go. You just bring in the LP.

And I guess it's nice to have a few deep-pocketed LPs that can just come out and write a million dollar check if necessary or whatever's needed to kind of keep the pro rata.

Avlok Kohli: Yeah, and it can also be just part of the conversation when you're raising from LPs around: "Hey, this is how much we expect in pro ratas."

So when you think about investing the capital, maybe you want to have this much allocated pro ratas later. There's so many different ways. And like I mentioned, you can also put all of that into a blind pool, into an SPV, and that becomes your pro rata SPV. And that is your capital that is set aside, or you can actually just do it from future rolling funds.

Any of these options work quite well.

Brian Requarth: That's really cool. One question I had, this could be a global business, right?

Like you guys are right now very focused kind of locally in the region. And what does the long-term business look like? Where is it? Where are we going from here with this? I mean, is the vision that every operator, instead of just being an angel investor, you have your fund?

I mean, I saw like Naval's spearheads stuff that he had that to me is a brilliant model because then you're kind of like the perfect product. It's almost like scouting as a service and there's all these cool things that can happen. Just scale this as much as we can. Are there ancillary products that we can layer on top of this? Where are we going?

Avlok Kohli: The way to think about it is, AngelList Venture has three primary business lines and customers: GPS, LPs, and then founders. And on the GP side, every credible founder/operator is going to have a rolling fund and they're all going to have a rolling fund because they all have the network. It's their network that's actually going on to start the next generation

And we're going to essentially move the capital to them. So they actually can start investing and investing enough money for these, for their networks to start companies. So every credible founder operator will have a rolling fund.

On the LP side, we're essentially going to be bringing in a lot more capital to then start anchoring through these rolling funds. So you can kind of see how both of them connect more capital coming in, we can literally put more rolling funds into business.

So every credible founder operator starts a rolling fund. We drive a lot of the capital to that rolling fund, and then on the founder side, we see a world where every single founder, when they go to start a company, they're going to tap a button, they're going to get a venture backable company with AngelList Venture, you know, get everything all embedded in one place, including the incorporation, including cap tables, including RUVs, which is what we just launched, all of it in one place.

We'll be the entire financial infrastructure for the founder as well. So we see a world where all of it happens on AngelList Venture, and whether you're a GP, you tap a button, you get a fund or you're an LP, or you're a founder, you tap a button and you get a venture backable company. We're going to handle it all.

Brian Requarth: Yeah. And when you have the venture backed company set up, so it's like Stripe Atlas connected to a network at that point.

Avlok Kohli: It's more like Stripe Atlas that then one-click provides you the entire infrastructure for the cap tables and, and banking and all of that versus Stripe Atlas, you do it and then you have to go, you have to then go create.

What's interesting is that Stripe Atlas has the vision, but never integrated everything in one place. We are actually looking at integrating all of it in one place versus having to go hop and go, you know, create. 'Cause you use Stripe Atlas, it helps with the incorporation, but then you have to go choose a different banking provider and then you have to choose a cap table provider, and it's just all disconnected.

We actually think there's a much better way for anyone who's starting a venture backable company to tap a button and get everything integrated in one place. By the way, we do this with venture funds. So your rolling fund, you effectively tapped a button. You had one form and we'd give everything. Everything was done.

We do all the legal paperwork, the banking, the integrations, the portfolio, all of it, legal reviews, everything. But when you think about starting a company, okay, gotta go start a C corporation. Then you have to figure out the number of authorized shares, and then you have to figure out Delaware or not.

There was just all these decisions that are to be honest, pointless decisions. Why are you making all these decisions again and again? By the way, I've started so many companies in terms of incorporating and every single time I do it, I'm like: "Why am I making these decisions all the time?"

Brian Requarth: Just the decision tree that is unnecessarily like just over and over having to make the decision. Yeah. It doesn't make sense.

Avlok Kohli: Every single founder is doing this. And then they're paying lawyers huge amounts of money to do this, but by the way, they're all meant to be the exact same structure.

You do a Delaware, C corporation, ideally 10 million authorized shares. You do an 83 VO. Like there are clearly steps that are not that complex. They're not that they're complex when you learn about it, but not that complex. You just build it all into one integrated flow.

Brian Requarth: Totally man, this is exciting. Well, listen, I'm a fan.

I'm happy to be the first rolling fund in Latin America. Hopefully we'll trailblaze and bring some additional as soon as you guys open it up more aggressively and scale this thing kind, count on me to be a supporter. And I'm a fan of the product, it's enabled me to focus on a bunch of other things that are around deal flow and building value for founders, right?

The things that give me a competitive edge. It doesn't give me any competitive edge to manage the back office of a venture fund. Like if anything, it's like most founders absolutely hate anything administrative because you're not building and you're not creating value. So I think it's a genius products, it's amazing to see how it's all evolved from like venture hacks back in the day.

I remember, I think I bought one of the spreadsheets to calculate my cap table back in the day. You know, I was in Colombia at the time. There was no venture ecosystem at all back when I started. I was hungry for information that the idea of a SAFE didn't even exist. So not to be all like grandpa, like: "I walked 11 miles in the snow real quick to get to school, but it's changed, right?

So, thank you for making that. The mission is amazing, got Product Hunt in the mix also as the jobs platform. If we throw in the whole AngelList network. And I mean, this ito me is like the next JP Morgan, company of the future, because like, it's just very clear to me when I look at kind of where it's all headed. And I say that as a customer and then also just as like a, someone that sees it all evolving.

So, yeah, I think it was a smart move. I know, as a founder, the idea of being a CEO of another company, that's probably, you had to think about it a little bit because how long did it take you from those first conversations with Naval to like, are you in just 'cause Naval has got a crazy vision and the traction was insane or did it take you a while? 'Cause you know, you've got a lot of optionality. What was the time horizon from first conversation to obviously a long history before that, with him investing. But tell me a little bit more about that.

Avlok Kohli: Yeah, that was six months, I want to say. Yeah, I think it was six months and a lot of that was also just racked up by the company. I was still in the exploratory phase, was traveling. I think it was in Japan for a bit. I was just traveling in Asia for a little while and also just exploring new ideas and just generally decompressing and getting an idea of the venture business.

I did not come from venture. I, in fact, I at first said: "Hey, I'm probably not the right fit because I know nothing about venture". I angel invested a ton, but, just the crude venture, I just didn't have any sense of it. But that's also why I think it's been, it's been really good because you know, I've come in with absolutely no preconception of how venture is supposed to work. And then instead of just asking why doesn't it work this way? And that's why I think the conversations are so energizing. It's like: "Wait, why don't things work this way?

I mean, it kind of reminds me of when PayPal started. They would hire people that weren't coming from finance because you can essentially approach every problem with a sort of fresh perspective.

And so even when we hire for AngelList Venture, it's rare that we're actually hiring someone who's coming in from venture experience. In fact, the majority of the company does not have any venture experience. Now, of course you have to solve for context. How do you provide context? That's very important, but what also comes with it is, and people can ask the question of like: "Wait, why do things work this way? Why can't they work this way?"

And then that's where a lot of the interest in ideas actually come about. I actually have this little tweet on my Twitter account about guided wandering. I don't remember where it's from. I think it's from the Jeff Bezos quote. This idea of guided wandering is you're just following your hunch and you asked a question, you go explore.

And that's what it feels like for a lot of time at AngelList Venture is: "Wait, why are things this way?" or "what if you do this and this and this." And I find that very energizing.

Brian Requarth: Yeah, it manufactures some serendipity by moving and being in a different place and then discovering. And I think that it takes an outsider, right?

I mean, this isn't going to be built by someone that's in the mix. Like, you know, Rich Barton is transforming real estate. The guy doesn't come from real estate. He came from a completely different industry and, and then he goes in and says, let's redesign this market. So to me, it makes a lot of sense.

And yeah, I think it's, you're probably not having a lot of trouble at, you mentioned you're competing with a lot of talent. However, that talent is global. And you know, if you've seen it, it's now become decentralized, just like my LP base.

That's good. Let's wrap up. Thanks so much for being on the podcast, man.

Gabriela Levy

Head of Marketing at Latitud

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