Apr 24, 2023, 8:49 PM ETInterview, Fireside Chat

AngelList CEO Avlok Kohli: The Funding Market Today; Last-Mile Delivery; Competing w/ Carta | E1005

Appointment: Avlok became CEO of AngelList in mid-July after accepting Naval Ravikant's invitation to lead the firm, having previously served as an investor in three startups backed by Naval.
Startup Experience: He founded three companies between 2011 and 2017 (including FastByte), which were acquired, before transitioning to a semi-retired investing role.
Entry Speed: Upon accepting the CEO role, he was instructed to start immediately, leading to a rapid acceleration in operations.

Process Elimination: Avlok mandates the cancellation of any meetings or processes that do not directly facilitate shipping products customers love.
Speed over Form: The core operating principle is to "crush" anything that slows down iteration and feedback loops with customers.
Hiring Strategy: The company prioritizes hiring "ambitious, dissatisfied people" to drive rapid execution and clear deadlines.

Utility Optimization: Avlok learned that product success depends on optimizing the entire utility function (price, speed, convenience) rather than a single variable like delivery speed.
First-Mover Myth: He argues being first to market is irrelevant, as early entrants often build the "idea maze" for successors without guaranteeing victory.
Self-Building Bias: Building products for oneself increases the probability of others liking the product, as it validates personal utility first.

Bear Market Severity: Venture activity has compressed to its lowest point on record, with the gap between "boom" (early 2022) and current "bad times" being the widest and fastest contraction ever tracked.
Valuation Disconnect: While pre-seed and seed valuations remain high due to a surplus of capital from later-stage investors moving earlier, Series A, B, and C valuations have dropped over 50%.
Deal Volume: Series B deal volume is down more than 50%, and Series C deals are now "basically gone."
Investor Behavior: Multi-stage fund principals are writing early checks despite partners being "underwater," creating price-insensitive capital at the seed level.

Raise Timing: The average time to raise pre-seed or seed rounds has increased, with a 33% drop in companies meeting historical fundraising timelines compared to 2015 data.
Adverse Selection: Only companies with credible traction are currently able to raise; many are unable to secure Series A or B funding entirely.
Round Structure: "Party rounds" (no lead investor) remain common at the pre-seed level but are becoming rare for larger seed raises ($2M–$5M) due to the necessity of capital depth.
Secondaries: There is a rising trend of LPs selling fund positions, with clearing prices typically trading at 20–50% discounts to the last round valuation.

Automation Scale: AngelList has deployed AI to automate workflows previously requiring human judgment, such as routing 15,000 weekly emails and analyzing legal documents for cap table discrepancies.
Product Margin: The "funds" product line holds the highest margins (north of 80% overall), whereas small SPVs often operate as loss leaders to subsidize the platform.
Pricing Shift: Fees for larger funds have been right-sized and uncapped to reflect the increased cost of managing complex, large-scale funds (up to $200M) via software.
Strategic Focus: The company is leveraging AI to build a closed-loop platform where products feed into one another, creating compound revenue growth.

Europe Shutdown: AngelList shut down its European operations to concentrate resources on the US market, citing regulatory fragmentation and the need to achieve scale before expansion.
Market Share Goal: The target is to secure over 50% market share across fund support and startup infrastructure in the US.
Competitive Stance: The firm ignores direct competition (e.g., Carta), focusing instead on product experience and speed to capture market share regardless of incumbents.
Acquisition Outlook: A rapid M&A spree is not expected, as public companies face pressure on stock-based compensation and private acquirers face high integration costs and valuation alignment issues.

Market Trajectory: The venture market is expected to worsen in late 2023 but improve in 2024, contingent on interest rate reductions and inflation subsiding.
AI Disruption: Avlok predicts the most significant upcoming shift will be the massive amplification of white-collar knowledge work via AI, requiring extensive re-skilling.
Investment Criterion: A "great team" alone is insufficient; a "great team" must align with a "great market" to avoid burning capital on broken market dynamics.
Fundraising Diligence: The primary mistake of the last 18 months was FOMO-driven investing with a lack of rigorous due diligence.

Infrastructure Role: The long-term vision is for AngelList to become the immutable infrastructure and "fabric" of all venture activity, replacing offline spreadsheets.
IPO Strategy: The company is not targeting an IPO; the goal is to build an enduring, cash-flowing company that compounds value without public market pressures.
Counter-Cyclical Design: The business model is designed to remain strong during bear markets by capturing market share from struggling competitors and moving up-market to larger, established funds.