🔊 AngelList Associate GC Amir Hassanabadi on Venture Capital, Tech Valuations, and Remote Productivity
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The pandemic and economic downturn have changed “life” at AngelList and for startup founders generally. However, AngelList’s historic remote managerial model has made it easier for us to understand how to remain present and keep team engagement high in remote settings.
VC seems to be faring well in a post-Covid world. Although the “how” and “where” of work is changing, the fundamentals of VC investment remain intact and are functioning well in this environment.
Later stage companies have an opportunity to use the changing nature of the post-Covid world to reevaluate their approaches and adjust accordingly so that the investments they’re making truly support their models.
Businesses are transitioning to a more fully remote model, but this change won’t be a wholesale one. There is only so much productive work that can be done in a fully remote capacity. Both businesses and individuals will have to find the balance that best accommodates their interests.
Participating in AngelList syndicates and venture lead syndicate opportunities offers investors the ability to either place their resources in a single, innovative venture or to spread their risk around.
Amir Hassanabadi is the Associate General Counsel at AngelList.
An Introduction to AngelList
The verticals of the business itself can be described differently from the perspective of the client at hand. There are three major client needs fulfilled by AngelList services and three main products we offer to meet those needs:
Startup fundraising - AngelList Venture
Startup hiring - AngelList Talent
Building a startup customer base - Product Hunt
The AngelList and Lawtrades Relationship
Lawtrades is a great supporter of AngelList because we help our clients fundraise on Venture and hire through Talent and we launched on Product Hunt. Now AngelList is a customer of the Lawtrades platform, which illustrates how valuable it can be to connect the visions of different startups and business models to produce mutually beneficial relationships.
How Has the Legal Team Been Evolving at AngelList?
Less than two years ago, the legal team was a “team of one.” Counting on a single individual to manage a superhuman workload isn’t sustainable, so by leveraging the services provided by Lawtrades, working with contractors, and growing the in-house staff to a team of four, the team is still over-leveraged but in more robust shape.
Evaluating the ways in which the legal team will continue to evolve has obviously been influenced by the Covid-19 pandemic and recent economic downturn. We’ve obviously transitioned to remote work, but we’re feeling different impacts in different business units beyond that change. AngelList has experienced some layoffs, cut back on some spending, and taken some legal work in-house in an effort to keep operations sustainable. By contrast, the venture side of the business is growing. Our company exists to help startup founders and investors… we’re noticing that startup founders are finding that the current climate makes it relatively easy to fundraise but harder to build a customer base and navigate the hiring process.
Making Remote Work Effective
The AngelList model allowed for a lot of remote work generally pre-Covid. A remote managerial approach pre-Covid allowed the team transitioning into remote work during the pandemic to understand the importance of remaining present. Some useful tools and approaches have particularly aided in allowing staff to remain present during working hours:
Fun gifs to punctuate the solitude of remote work
Virtual in-house happy hours to help everyone remain connected as a team
Additionally, the legal team has a standing weekly lunch and learn to talk through the issues of the day or an interesting shared piece of legal literature. This bonding helps to facilitate team morale by encouraging a shared consideration of issues with broad internal and external consequences.
Venture Capital in a Post-Covid World
AngelList is privy to a wide view of the VC world simply because AngelList works with such a wide variety of clients. If the AngelList view is a solid indicator of how VC is faring in a post-Covid world, VC is doing surprisingly well. The number and quality of the deals that are being made are reasons for optimism in this environment. It’s possible that valuations as a whole are going down, but that may be a good thing overall as it’s possible that valuations were becoming somewhat inflated and were in need of a deflationary influence. Interestingly, pressure from society is fueling an interest in pumping more money into venture. Americans want to spend money on physical infrastructure and other endeavors that allow for VC to thrive. It certainly seems like VC is in a better position to pull through this time period than some other industries are.
With that said, some of the later stage companies that have raised tens or even hundreds of millions of dollars at high valuations and are now dealing with massive revenue declines and/or are seeking to secure another massive valuation may have a somewhat harder time. Many of these companies are tethered to physical locations and may need to lay off more workers, so the recent economic climate affects them in a nuanced way when compared to some startups and less traditional business models. When you’re grounded in a system that requires rapid growth, you’re not always making investments that are logical in the long-term. It is in this way that the current climate is allowing some businesses to reevaluate their approaches to support their most fundamental metrics.
How Do Seed Stage Companies Look in a Post-Covid World?
New founders launching companies during the crisis should consider that enterprises are likely going to look different moving forward in regards to the “how” and “where” of work. Remote teams, reduced or non-existent office space is going to be a reality. However, the underlying dynamics of VC at the seed stage - a time of “growth at all costs” as opposed to profitability and other factors that fuel future sustainability of a given model – are likely not going to change much in the wake of the current crisis. As the crisis was not born of mismanagement in terms of business dynamics, the fundamentals of VC remain intact. The only thing that would potentially shift the dynamics of VC (as opposed to the ways in which physical work is conducted) is a truly radical shift in the way the world operates after the crisis itself has resolved.
Founders can take advantage of the “destruction” in the current market, including cheaper, readily available labor, more affordable costs generally, etc. to create noteworthy, valuable startups. The last economic downturn produced interesting, innovative business models (like Uber, AirBNB, etc.) and we should expect nothing less from this downturn.
Will a Transition to a Fully Remote Work World Become a Reality?
Not every company is going to go fully remote, either in Silicon Valley and the Bay Area or in the rest of the country in the wake of the pandemic. However, it is clear that a change is happening. Some companies, particularly newer companies, are going to be fully remote. With that said, when newer companies become truly expansive enterprises, it becomes harder for these ventures to operate in a 100 percent remote capacity. For example, in recognition of this changing world, companies like Facebook are allowing some employees to go fully remote, but that transition tends to come with a pay cut. Companies may need fewer workers to be physically on-site at any time, but as most large companies need at least some on-site workers, it will become a balancing act for individuals to determine whether they want to work remotely for less pay or on-site for higher pay. Similarly, it will be a balancing act for businesses to determine what percentage of their workforce they need to be physically present vs. remote in order to function at peak levels.
With that said, disintegrated teams are learning how to function effectively as a result of the pandemic. Everyone knows how to use tools like Zoom now. Even populations that would have been resistant to use such technology before the initial lockdowns occurred. A shift towards remote work is going to happen post-Covid, and it’ll be more effective due to what we’re all learning now. That shift will help to satisfy a pent-up demand for more flexible working conditions that was affecting the workforce before the start of the pandemic. However, it won’t be a wholesale change because there is only so much effective work that can be done remotely at all times.
Participating in AngelList Syndicates
Syndicates are AngelList’s bread and butter. A syndicate is an investment in one single company. This form of investment represents the ultimate VC “bet” as you’re placing all your resources in one place. The platform provides access to these deals, which are often very good deals. Yes, if the company doesn’t succeed, you’ve risked a lot by placing all your eggs in that company’s basket. However, you similarly are rewarded handsomely when an investment pays off. For example, Uber was a syndicate on the AngelList platform and we all know how well that model has functioned.
A potential syndicate investor on the platform will get to choose between various syndicates. We provide lead investors who supply the deal flow to the platform and show the syndicate on the platform. It’s up to investors to determine which syndicate leads and deals they trust and ultimately want to back. Note that a syndicate lead is different than the lead for the round of the venture fundraising. In this context, lead is a term that is used liberally.
We ultimately created a set of legal processes for a fund lead to invest in multiple syndicates because we were seeing such positive investment activity from syndicate leads that this transition naturally made sense. This way, as an investor on the platform, (instead of backing one or two syndicates) you can back a fund lead who will invest in multiple syndicates on your behalf. This can reduce risk and increase the probability of getting some “big hits” for individual investors. The resulting model acts more like a traditional fund in which multiple investments are made with the aim of having at least one or two pay off in big ways.
A newer, successful innovative product we’ve created is a rolling venture fund, which is more focused on the fund lead and making their life easier. This process allows for accepting new capital into the fund in the form of auto renewing quarterly commitments. You can therefore start a venture on the platform with a relatively small startup amount and simply rely on the autofund commitments to increase the fund’s size. That way, fund leads don’t constantly have to go back to investors to raise new rounds.
Who Are Some of Your Favorite Angel Investors?
Ryan Hoover, who is the founder of Product Hunt has a fund called Weekend Fund and he does a fantastic job.
What Are Some of the Resources You Recommend for Anyone Interested in Startups?
AngelList generally and our blog specifically… of course. But also, the book “Venture Deals,” is a great foundational text.