AngelList CEO: Q2 surge in liquidity and LP commitments to micro-VCs signals strong early-stage demand

like insert. It's the Saur Stake F1 team. The Kickber, which is Kick is is their streaming platform for for steak. The kick stake saver. But without further ado, let's bring in Avlock. He's got a Q2 update for us. Great to see you. What's going on? Good to have you on the show. Welcome back. How you doing? Welcome back.

Thank you. Been great. Been great. Q2 was awesome. Break it down for us. What was awesome about it? Um, I mean, overall there's just a lot of optimism. Uh, maybe I'll just take from the top and and what we're seeing ecosystemwide and then what we're seeing in our data.

Uh, I mean, look, ecosystemwide, we're just seeing um exits uh across the board. M&A is up by a huge margin. Uh, IPOs are up by a huge margin. And so, what we're actually seeing is a lot of uh exit dollars coming through, making its way back to LPS. And that ends up flowing its way back into venture.

Uh because all of venture is power law. As you have some of the best companies go public, get acquired, uh all those dollars flow right back in and they go right back in and get recycled back into venture. And I think we just sort of hit the perfect storm uh in Q2 where a lot of optimism is there.

Obviously, a lot of exits, you know, uh a lot of it's been reported. you have Circle, uh you have um Scale AI and a bunch of other companies and these exits are massive, like huge. And so the LP dollars, uh the returns that LPs are getting are also massive.

And what we're just seeing is those dollars come right back in and they just get reinvested back into emerging managers and some of the scaled up uh scaled up venture firms. And so the the thing that was actually shocking to me personally um you know, you can kind of feel it.

So I invest of course um and you can kind of feel it in the deal velocity and the and the rate at which uh companies are growing like the revenue growth is real but what we saw in our data was the LP dollars to micro VC emerging VC uh think of these as like managers with hund00 million fund size to million dollar fund sizes was up 50% quarter quarter almost 50%.

So that's in one quarter it was like a giant increase that you know for many quarters it was sort of the the valley of debt there was yeah there was a very dark dark period where you we we track that we track those dark periods actually in our data too.

it was like we have the boom times and the bus times and for a while there were a lot of the bus times and but we're just seeing a lot of optimism uh coming in and it's it's actually really really great to see uh and I think some of the data that was circulating around uh X over the past few weeks was around the emerging the death of the emerging manager class and I just think that data is actually wrong.

Uh it it's coming from PitchBook and Pitchbook's data is very laggy. They don't actually have information on this uh class of venture. Yeah. They don't have a real-time view of it. Uh Angelus does. And so we see we basically see it all and that's great. A lot of optimism. Well, yeah.

And the emerging managers that were steadily deploying over the last couple years during that dark period are the ones that are now I'm sure you know showing uh you know tremendous markups during this time which will hopefully catalyze more investment as well. Yeah.

The liquidity is psychological for LPS versus actual dollars going back into LP pockets and then they just need to redeploy them because there's something about like if you've been in some fund for years and years and years and the marks and they don't really feel real and then all of a sudden you actually get a check you're even if that's only 10% of the money that you put in or 10% of what you commit in the next fund it kind of feels like okay this is the this is working at least I'm ready um just deploy new cash because I have cash on my balance sheet.

Now it depends on the type of LP. Uh so if you are a uh more of a traditional larger asset allocator, you have strict requirements on amount of money that goes into public versus private.

So that is a little bit stricter but you have a large swath of capital that comes from uh non-institutionals like you've got family offices, individuals, lot of lot of wealthy individuals. I just saw a report the other day the number of millionaires in the US has gone up considerably.

Uh for them it's all psychological a lot of it psychological. Even if you get 10% of your capital in 20%, 30%. It feels real because venture is it's a weird asset class when you think about it.

You basically invest in it and uh you're you don't know if you're going to get liquidity for 101 15 years depending on where you invest. But when you start seeing that cycle of liquidity coming back, all of a sudden you gain confidence not just in the asset class but also the manager that you're backing.

And so we do see a lot of that. So that that that's what the reflexivity is that we're seeing on the platform where you know you have NASDAQ that was up 18% uh year-over-year. Um and even venture dollars deployed as an overall uh ecosystem uh is up like 30% year-over-year.

uh but within the uh micro VC emerging VC uh area it grew 40 50% quarter over quarter right so there's this reflexivity of excitement uh because you're starting to see the dollars come right back and people are looking at going this is real these companies are real uh it wasn't just you know uh in their minds like propped up valuations which was a lot of the narrative I would say for the past uh two years post ser and the thing also it's it's interesting Think about people that maybe invested in the first six months of Angelist being a platform and then maybe they just made a couple investments at the time and then checked out for a decade and then suddenly they get an email and it's like yeah it's a liquidity event.

It's like whoa maybe maybe pay more attention here. We we actually have that uh you know there there's this thing that happens with banks sometimes and uh even crypto platforms where people have money and they're like trying to get in touch with them to take their take their money.

It's pretty significant in some cases and so yeah we have cases of that as well which is hey you have a return you probably want this this is actually pretty significant um yeah so we see we see that um what do you think about potential new sources of liquidity coming into the LP pools coming into venture um I saw some news about some crossover funds potentially lowering the requirement uh to invest in the fund maybe down to from like a million down into like the single digit thousands or maybe 25,000 co had a 50k maybe it's a separate fund and so I don't know if I don't know if that changes the requirements around um around uh in uh what's it called professional investor rules no accredited investor rules accredited investor rules um but but but we're we're seeing you know private company stocks go on chain and potentially be traded on consumer retail stock apps.

We're seeing lower, you know, lower hurdles to get into venture funds. It feels like there could be a wave of sort of like retail liquidity coming into venture. Uh do you think that narrative is real? How early are we in that? Do you think that could be a significant shift in the dynamic of early stage investing?

Yeah, short answer is it's real. Um and Angelus is also working on something around there and we'll have something more to announce. The the way to think about it is venture has never actually been connected to the public markets directly, right? It's always been venture dollars get invested into companies.

Those companies maybe 10 years, 15 years later, maybe never, right? But uh go public and that's when uh people in the public markets uh end up uh investing in those companies. But what's never happened is venture or dollars going into venture funds coming from the public markets.

And what you're seeing is you're starting to see a lot of these different experiments uh and people trying this out. Uh CO2 as an example and there are a couple of other funds as well. And the accredit investor rule that you're referring to is um you can only take on uh 99 uh non-qualified purchasers in a fund.

Qualified purchaser effectively you have $5 million in assets and above. So if you have less than that then you can only taking on 99 of them into a fund. So that's what actually keeps those fund sizes pretty restricted. Got it.

But you can register your fund and you uh are effectively under different regulatory regime and you can take on a lot of investors at once right but that's uh takes time it's expensive and all dep also depends what SEC regime you're under right and what the uh goals are of the administration in power at that moment in time.

And right now the goal of the Trump administration is capital formation, the golden age, right? The golden age of America. And so what's happening is everything is optimized towards uh new startup formation, more capital coming in.

And so you're seeing a uh loosening of restrictions or a reinterpretation, if you will, of some of the SEC rules to allow for this to happen. Right? It's actually not even new laws. It's just most people don't realize this. The look at them differently. they just look at them differently.

It's it's interpretation, right? It's um they they look at the law and they can interpret it and write their own rules based off of it. So, a lot of that is changing in real time. And so that's leading to uh funds like the CO2 fund and a few others. So, it's real. It's happening.

I think venture is undergoing a pretty significant shift. It is not the same as it was 5 years ago, 10 years ago. You're you have a very large number of these micro funds, emerging funds, and then you have the mega mega funds, right? And these mega funds are not the venture funds of yesterday, right?

These are full-blown sophisticated uh financial asset allocators uh that some of them are now getting into rollups, right? And that's a whole separate strategy uh that that comes from the private equity world. And so we're in the midst of a massive change within uh within venture.

How do you think about new products and experimentation? We've seen Angelist doesn't have the same luxury that Robin Hood can do, which is run some crazy experiment and in Europe and make companies.

You know, OpenAI was posting yesterday that they were frustrated with with uh what was going on there and that they didn't endorse it. Obviously you guys have to maintain and build trust within the venture community and part of that is kind of balancing the desires and and uh of a bunch of different kind of players.

So how how do you think about kind of innovating because at the same time it is core to angelist like the initial platform was an innovation right and then the RUV and the and the and the rolling funds and and things like that. Yeah, it's it's actually really simple for us.

Um there's a through line that has never changed for Angelist since the very beginning, which is the founder is at the top of the pedestal. So everything we do, we always ask is this what the founder would want, right? And if it's not good for the founder, it's not good for the startup, we just don't do it.

And so this even applies to uh innovations like the rolling fund. We ultimately asked, hey, is this going to drive more capital into early stage founders? And if the answer is yes, great. We're going to do it. We're going to pursue it. Uh if the answer is ever no or we're not quite sure, um we just won't do it.

Uh because founder trust is everything. And ultimately, we're here to uh make sure that we increase the amount of innovation in society and that always comes from ambitious founders. And so that's actually been a very easy thing for us to do. It's also why we never really went into um secondary markets.

Uh I mean, you think Angelist with our entire portfolio and everything would be the first to get in there, but we never did because there's always this question of well uh are they like are we adding more work on their plate, right?

And having been a founder myself multiple times and uh also having been in that seat, the answer is it's just a distraction, right? like you're busy running a company, building a company, recruiting, dealing with a thousand fires at any moment in time.

And so, uh, it's been it was easy for us to not fully pursue that path. But any new innovation we have, we always ask that question. Is it is it good for the founder or not? If not, we won't do it. And that's just a through line all the way up to the uh as a board, we we view it that way as well. That's super key.

And when you look at uh many of the new experiments that are happening, they don't they don't pass they don't pass that test. Still, it'll be interesting to see to to to to watch and and witness.

um it I I've been interested to see if if some of these experiments can can end up um kind of forcing innovation or change, but again that's still not that's still not the role of of someone um you know angelist shouldn't piss off every Fortune 500 CFO or every latestage company, right?

Like it's not just not a good not a good business practice. um given given your basis, I think there's some cases where you actually want to push the Overton window, right? I think that's where you're referring. It's just like can you push the Overton window and make something normal.

Um and so with that in mind, I'm actually very I love all these experiments are actually happening.

In fact, right now is such an amazing time in venture and startups and starting a company having you know even Robin Hood Robin Hood experiment is amazing because we have a chance to push the overton window but where it is today um uh that that particular one is very fixed. Uh I don't see a way around that. Yeah. Yeah.

It's uh h how are you thinking about uh the angelist kind of core business and scaling the team? We were talking yesterday. There's a lot of signs of wild top signals right now between these AI hiring packages and and different valuations and and the list goes, you know, uh Sohom working six jobs, right?

They're they're all across the board. Meanwhile, Satia is scaling back on some new uh data centers. He's, you know, doing uh kind of routine layoffs.

It feels like he's not letting at least Microsoft get too exuberant in this moment even though there's a lot of I'm curious uh what your approach has been and and will be for the next half of the year. Yeah. So Angelus has been profitable for for a little while now and so a lot of the way we've all Yeah. Yeah.

So, we hate to cut you off. Hate to cut you off, but we love profitability. Yeah, I love it. I love it. We need a gong like that in the office. Definitely.

Um and so, you know, we've actually always approached it um approached headcount and and people in the in the in the company as do we really need this next person and how is it how are they actually going to move the company forward?

Um so, none of that's actually changed in how we're approaching any of the new bets that we have.

uh uh the uh the the bars actually increased now which is hey for this next new person we're bringing in are they truly uh curious to work with AI tools and the models do they really understand how their job is completely changed and if not we probably shouldn't bring them in because as as you both knowledge work is completely changed forever right whether you're in sales marketing definitely coding right um and so you want people uh who are naturally curious and are naturally leaning into these new tools.

And the reality is uh the uh amount of headcount needed to continue to scale will go down over time. Um uh and so that's how we've thought about it is you just bring in people are naturally tuned to this uh way of working because we're in the early innings right now.

It's like so early in terms of how companies are going to be formed, how teams are going to be formed. Do you even have your traditional functions anymore? sales, marketing, yeah, engineering, product design. I don't know because yeah, people are starting to blend skills very, very fast.

And so we're in such early stages that you almost want to rewire your culture right now. I think every company should rethink whatever culture they had and rethink however they formed their teams.

You may need to blow it up because what's going to happen is I'm telling you that uh I've been watching some of the newer founders are just graduating from school. They operate differently. They're like, you know, I recently for the first time I came to attack in 2009.

Uh for years I didn't feel like oh I'm kind of part of an older guard if you will. In the last 12 months there was a distinct change in San Francisco. I'm like these new founders just offering I'm a I'm a veteran now. Yeah veteran. I never felt that.

I never felt that before except for the last 12 months where they are very capable, very creative. They were just born in a different era. they don't have any of the hang-ups of how things used to be done about a decade ago.

And I I think the um I think it's very important for any company that's been around for even 5 years or seven years or 10 years to just rethink the entire company from the ground up at this point. Uh otherwise they're going to get completely demolished. Totally. Well, always great talking. Always fantastic.

We should make this uh let's schedule it quarterly. Yeah, let's get the next one on the calendar ASAP. Have a great rest of your day and enjoy July 4th. Yeah.