AngelList CEO Avlok Kohli on the Transforming the Company — and Venture Itself

Hello, Acquired listeners, and welcome back to another awesome conversation here. I am so excited about this one today with Avlok Kohli, the CEO of AngelList. We were joking just before we hit record. Ben was like, you should do the intro on this one because AngelList literally changed your life. And that's not an overstatement. Just within the past few years, I and my friend Nat Manning have raised over $30 million together on AngelList platform through a combination of funds and SPVs. We've invested in close to 100 companies. We've done so much. We are actually investors in AngelList itself. This is like a homecoming episode here. I'm so excited to do this.

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Well, Avlok, welcome to Acquired. Great to have you here.

Thank you. Excited to be here.

So the first thing that I wanted to ask you is around this concept of sort of rebirth. AngelList is a 13-year-old company that if you would have asked me 5 years ago, I would have told you, yeah, I understand what they do pretty well. That's where startups that want to raise capital can sort of go and find angels and do party rounds. And I think it's for companies to go and find capital. And then—

It's a list of angels.

The business has completely transformed. So my first question to you is like, what happened over the last 5 years and what is AngelList today?

It's a great question. Early AngelList started off as an email list, literally, where a startup could come in meet a bunch of angels, raise investment, and go off and run the company. And Uber was famously one of the first startups that did just this.

I hear there was some guy named Jason who, uh, yeah, yeah.

And Uber actually raised successfully, including many other startups early on. For the first couple of years, AngelList was just that, and it continued to scale with just that. The theme to think about of early angelists is it was really looking for product-market fit, and there was a team that was just focused on finding glimmers of product-market fit, like where is it. There was an issue around adverse selection. Basically, if you announce to the world, hey, come here, you'll get money, you're gonna get everyone in the world that's gonna show up. And so you can imagine the quality of the startups starts to decline. And so at that point, there was an inflection point for the company around how do you innovate out of this? Like, what does that actual product look like? That's actually how the original idea for syndicates was born. It was like, well, why don't we actually have GPs who can put skin in the game and then bring a syndicate of LPs and they can actually serve as the quality filter, right? The signal from the noise. And so that was that. Original spark of that innovation that turned into Syndicates. Along the way, the early team, again, more of like a think tank, also focused on a few other problems that startups used to have. It's raising capital, it's hiring employees, and it's finding customers. And of course, Syndicates was focused around raising capital. The job board, AngelList Talent, was around finding employees and hiring employees. And then Product Hunt, which was acquired a few years later, was around finding customers. That sort of takes us to timeframe of 2018, 2019, where you had these three different products that by this point, even though they solve for a single customer, solve problems for a single customer, they basically branched out into several different product lines and really business lines at the end of the day. And on realizing that, the first thing that was done was to say, okay, let's experiment with spinning out one of the product lines as its own company because trying to do all 3 in one place is actually incredibly hard. It splits focus, splits the team and all of that.

And this is right around when you came in as CEO, right?

Yeah. So this is actually just a little bit before when I came in as CEO. AngelList Talent was actually the first to spin off as its own company, even though it still shared the name AngelList underneath the hood. It was a separate corporate entity with a separate CEO, with a separate team. And that ended up working really well. And that's around the time that I came in, which was in mid-2019. The goal was to actually take Venture, which is the financial platform, spin it out its own company, and then really think about Venture as its own business and really rethinking it from the ground up of if we're to build a venture-scale business out of it, What does that actually mean? What decisions do we need to change? What do we need to make? And really focused on that. And then same thing happened to Product Hunt just a couple of years later. So you can almost think about Early Angelists as like a think tank, and then it sort of split off in these different business lines. Because when it comes to scaling a company, you really do need a team that's singularly focused on one thing, a board that is singularly focused on one thing. You can't have split focus on this. And so the key juncture was actually that splitting off into different companies. Some of that Naval and I talked about before I stepped in around like, hey, if we're really to make this thing huge, like large business, what are the things that would need to be true and how would we get there? And some context on me, I've started 3 companies, one of them was bought by Square. And so for me, The only thing I really wanted to do was build something large. And so we really focused the entire conversation and discussion around, great, there's something that's obviously valuable in the venture business, and how do you take it? How do you build it into this large platform?

And so now that WellFound is the new name for AngelList Talent, the only thing that retains that original AngelList think tank name is AngelList Venture, correct?

That's correct. AngelList Venture is now AngelList. Our purpose is to increase the rate of innovation in the world. And so we've really embedded it.

We want to dive into a lot with you, and I want to learn too, like, how this transformation happened. I know a little bit of it, but I just want to underscore, go back to something Avlok Kohli said a few minutes ago. The transformation and the brand perception— I know that's not exactly how you put it— but of AngelList Kohli in that 2017-2018 period before you took over in the transformation. If you had told me back then, you know, I was a quote-unquote professional venture capitalist at large firms that went and made a decision to start a new fund, explicit was like, I would never start that on AngelList. Like, if you had told me that fast forward 5 years and I would be running funds and managing capital on AngelList and an investor in AngelList itself, like, I would have said you are completely crazy. That is for— there's the adverse selection problem, there's low quality stuff on there, I would never want to be associated with that. And today it's completely the opposite, and I'm 100% in on the platform. Like, this, this is an amazing transformation.

Yeah, I think the key reason for that early perception is because Early AngelList did look like a toy. The SPV product, when you just think about that product itself, it's such a simple product and it looks like a toy. And if you are a professional VC, you're not really going to be using a SPV product, right? You're actually going to want to use a fund product. And not only that, a very complex fund.

And Avlok, maybe for folks in our audience who aren't investors or venture capitalists, Why would SPVs look like a toy? What was it about them that felt overly simplistic?

So the way to think about a venture fund or a venture SPV is there is an agreement that governs all of it, which is called a limited partnership agreement. It's an LPA. That's the acronym. When you have an SPV, the LPA that governs an SPV is effectively a set of parameters, and the number of parameters that you need to consider for SPV LPA is, let's call it, just to make a simple example, let's call it 5 parameters, right? Pretty simple. Now, as you get into a fund and you get into a larger fund, you can think of the number of parameters that you need to set up could be 40, could be 50. It really depends. It gets very nuanced very, very quickly. And so SPVs are simple and they look like a toy because there's just not that many parameters around it.. And a fund, it gets more and more complex because there are just many more parameters. And the reason these products look like a toy and the reason AngelList only focused on SPVs in the very beginning is because our entire approach to fund management has been distinctly different from anyone else doing this. We truly are an N of 1 company. I have not found anyone else that's done what we've done. And I think it's because we made an irrational decision early on. Maybe it's because we like doing hard stuff, or maybe we just didn't know what we didn't know. I've heard many founders, CEOs who've built a successful company like, well, if I knew then what I know now, I never would have done it. And honestly, like, I kind of feel like that sometimes where I'm like, yeah, I don't know if we would have done it back then, but we did it. What we did different from everyone else is We built software and we took everything on about running a fund and an SPV. Okay, let's talk about software. What I mean by that is we actually took the LPA and we wrote code to model the LPA in code in a database that then would output financial reporting, tax reporting, portfolio management, and all of it we'd build code around. And we did all of it, like many aspects of managing the life cycle of, of an SPV and a fund. When you're writing code to do this, you can't take on more complexity until you build a foundation. And so early on, what happened was we had SPVs, they were simple, right? Simple relative to a fund. We took the market on SPVs. We actually became the market leader.

Well, I think you really enabled it too. Like, they didn't happen in the same way before AngelList.

Exactly. You would need to go hire a lawyer. You need to go hire an accounting firm, and you would essentially pay a lot of money to do that. And that would actually definitionally restrict the number of GPs that can use it. But when you build software for it, you bring the cost down. And so by definition, you can bring the size of the SPV down, which then enables more GPs to get into business. What am I describing? Well, I'm describing technology innovation, right? At its core, this is what technology is, right? It provides more leverage to more people so more people can do it. It's interesting. It's literally the classic sort of innovation cycle. You, you start with something small, you really compress things. It looks like a toy, but then of course you expand and then you expand and then you expand, right? So of course what happened was we started SPVs, looked like a toy, but then once we had the foundational software built, then we expanded. And I think of this as stacking innovation. It's actually a concept I pulled from my time at Square. Which is as you're building the layers and you stack the layers, you have higher and higher defensibility and you can do more and more complex things because these innovation layers stack, they connect like Lego blocks, and then they effectively give you superpowers. They give your customers, more importantly, superpowers. And so SPVs, we laid the foundation, then venture funds, we laid the foundation. And then the really cool thing is when Naval and I got to talk about rolling funds, which it was a shower idea I had and sort of connected this broader theme of like, this is the way funds should be. I remember that initial, the conversation we had, he's like, yeah, I had brought this up in the past, but I don't think we had the infrastructure then. And now that we looked at it, we're like, well, we have the layer that we built through SPVs. The layer we built through venture funds. And it turned out that rolling funds, we had it all. We had the layers to now support rolling funds, which is an incredibly complex vehicle. And we had the layers and we actually went from idea to market in like a couple of months because we had all the foundational layers built out and the innovation just stacked along the way. Going back to your earlier observation of 2017, 2018, The feeling was around, "Hey, AngelList can't handle this, can't handle more complex funds." Honestly, that was valid. We couldn't. But that was the point. It was by design.

Did you even have a fund product at that point in time or was it just the SPVs?

It was primarily SPVs. We started working on funds and we were primarily focused on very small funds, like half-million-dollar funds, million-dollar funds. If you actually map the fund size by year, you'll actually see a very clear increase in total fund size that AngelList is taking on. And again, this is the standard march of us just moving up market and moving up market and moving up market. And fast forward to today, we're supporting $100, $150, $200 million funds, whereas, you know, 2 years ago, we would actually say no to these funds because we're like, look, We can't credibly support your fund for the next 10 years. AngelList takes an incredibly long view, incredibly long view. And we also take our commitments to our customers very seriously. I feel like physical pain when our customers don't have a great experience, right? I like really internalize it and the team internalizes it. And so—

I just wanna highlight it too. Like you're building product, you're building software, but like the product is a lot of money, people's livelihoods and companies' livelihoods. Like, which is also so funny given the brand and AngelList's origins and perception as this toy, but like a large part of the Silicon Valley ecosystem now is managed by your product.

And I mean, David, you've brought endowments onto AngelList by investing in Kindergarten.

Yeah, 100-plus-year-old university endowments are now LPs of mine and others, you know, on AngelList.

We're pretty private overall, private in terms of what we share, but we have one of the highest quality endowments as an investor in AngelList as well, right? Again, this is all around as we become the fabric of venture, we're essentially bringing in all of venture, like all the large LPs, all the great GPs, all the best companies. And at this point, we're managing across 20,000 funds and syndicates, 13,000 portfolio companies. These aren't just records in a database where it's a read-only record, where once it goes in, we never do anything with it. For a good portion of the funds, we're the signatory on the funds. We review the docs when the follow-on rounds happen. We handle the back and forth of the company when there's a distribution. And then we also handle the distribution to the LPs. And so we handle everything and then including banking. We actually have integrated banking. That's built in. We really do manage it all. And so when it comes to managing the portfolio, it is managing all aspects of that portfolio on behalf of the GPs. It, it really is the product that should have existed in the world but didn't because you just couldn't get the technology leverage back in the day. And we really have absorbed all of the paper pushing back office work that GPs don't want to be involved in because again, a GP has a limited amount of time. And they should really be focused on finding great founders, investing in great founders, and then helping great founders. That's the real differentiation for GPs, not back office work.

Well, and to grab a playbook theme that we talk about a lot here on Acquired, when you vertically integrate, you have to take on a lot of fixed costs, you have to do a lot of forward investments, but vertical integration almost always leads to a better customer experience. And so by you guys willing to take on all this vertical integration and all this platform sort of years of building, it does sort of enable this fast and fluid experience for GPs, founders, LPs. David, correct me if I'm wrong, but when you and I invest in a company and I have to go back and forth with the company's legal team, like, you CC AngelList, and I think they're the GP, right? Like, you're not even technically the GP.

It's very funny now when Ben and I invested companies together outside of the PSL remit. Ben, you're investing personally angel checks, and I'm investing out of AngelList. Again, I never would have believed this. My life is easier than yours.

But is that right, that AngelList is actually the GP of your fund?

Yes, I don't even sign any documents.

That is like serious vertical integration.

Yeah. To sort of build on that, there are actually two different ways in which we can support a fund. One is, think of it as like full vertical integration where AngelList can be the GP, if the GP wants that. That typically comes in when all the GP wants to do is make the investment and then AngelList handles literally everything soup to nuts. And we also support the structure where the GP is the GP and AngelList is still managing the fund. And then there are aspects of it where we could be the signatory and we would still review the docs. Think of it as a dial of control, right? You can have it in full vertical integration where you're like, you know what, AngelList, you handle all of it. I'm just going to focus on investing. And then you can dial up the control like the GP can say, you know what, I actually want more control. We now also support that. And actually, I'm glad you brought that up because that was one of the other things that made it look like a toy earlier on, because early on, again, to reduce variability and to reduce the number of parameters so we can actually automate, build software, kind of build that foundational layer. We by default were the GP on everything. GP on SPVs, GP on funds.

I believe when I in Kindergarten started, that was the only option. There was no option not to be the GP, which was fine for us because this is our side investing activity. We're not trying to build a full-time firm here.

Exactly. Once you get into a larger fund, and again, we actually see also this split. There are some people that still are like, I just want AngelList to be GP. And people now just know this. LPs know this and they're comfortable with it. But again, this is the interesting thing about venture and is one of the things that surprised me actually stepping in as CEO of AngelList is anything that's new or novel actually originally is viewed as like, uh-uh, not going to do it right. And I get it. Early on, I was on some calls with LPs where AngelList was the GP and there was a lot of questions around it. It was like, why is AngelList the GP? Why isn't the GP the GP? This was part of the growing pains, if you will, of us building out the full product in the software stack. But then a couple of years ago, we built an option. So it's like, look, you can be the GP now. We're ready to do this. And of course that then allowed for larger and larger funds to come on, ones where they do want more control. They do want to be the GP and they want AngelList to manage everything else. And that of course allowed us to continue to move up market, take more and more of the market.

Did that also unlock existing funds and firms already? Because like, for me, when I was starting Kindergarten with Nat, like, it was that we were de novo, we were new. Of course we're going to start on AngelList. But if you are already have 3 funds under your belt, you manage $500 million in capital, that's a much tougher decision to then move over to AngelList, right?

Exactly, exactly. Another way to frame that is we were literally creating the market. We were creating new GPs, enabling new GPs, and as we continued to build out the software, the platform, we were now able to take on existing GPs. People have already started funds, people who do want to be the GP on the fund, people who need a lot more variability, a lot more configuration, a lot more customization. We've already built all of it because again, it goes back to stacking the innovation where once you lay the foundation, you lay the next foundation, lay the next foundation, you actually get compounding benefits. There was actually a time, by the way, when AngelList had a waitlist because there were just so many funds trying to get in and we hadn't productized a portion of it. And we're like, we just can't take these on. This is literally gonna break us, right? It's gonna break us. And I remember at one point I was dual-hatting the CEO role And I was also an account manager for 30 funds, launching funds. And at night I would go home and I would get, you know, requests of like, "Hey, I wanna invest in this company." And I'm like, "Great, let me work on it." And I'm like reading people's LPAs. And that's just to give you a sense of like, there was a moment where we were absorbing so much demand, but we were still building out that software. But once it's there, boom, you get compounding benefits, compounding advantages. And we're now sitting on years of innovation that's stacked. That's compounded that for us we can just simply scale to increasing levels of complexity, scale to increasing levels of quantity, and we don't skip a beat. We're just moving forward smoothly, managing all of Venture.

It seems like there's got to be huge advantages to your ability to scale having an engine that translates LPAs into code. Can you talk a little bit more about what that actually looks like?

So the way to think about the LPA, it's an agreement that binds the GPs and the LPs for the next 10 years. And the agreement captures everything from who invests what on what terms, what does the GP get, what does the LP get, what happens in the future. Around distributions. And so you can think of each of these clauses in an LPA has to be reflected in code for when there are specific events that happen. One example of an event is the fund has to raise capital from LPs. Great. Now an LP is going to wire money in. What happens from the second the LP wires money in? Well, you need to reconcile it. You need to match it to the LP. You need to take it, then you need to put it into the limited partnership vehicle, and they need to make sure that ownership is captured in the correct way. Okay, that's the first part. Next, what happens when you start deploying capital into companies? You need to capture the entire record of that and you need to store that. Okay, what was invested and what valuation? You need to make sure the share price, total number of shares is all fully captured. And these events all need to be managed. And I share this with the team internally where I say, look, we can't be 98% accurate on things. This is a financial instrument, right? If your bank was 98% accurate on your cash that's sitting there, I mean— You throw a fit.

Too soon, Avlok, too soon.

Yeah.

Oh yeah, that's right. Exactly. Well, technically, I think the FDIC posted 81% or 88%. Yeah, too soon.

Yes. If your bank is 98% accurate or if I make an investment in the company and I wire $3 million in and they're like, "Great, we got like 2.95 or so-ish, give or take 10%," I'd be like, "Okay, this is 0% accurate. This is not 98%. This is 0% accurate." Exactly.

When you think about all of the events that have to be captured precisely and correctly across the entire life cycle. 10 years, right? 10 years. It's not, oh, you do it for 1 year and you're good. Nope, 10 years. These are obligations. So everything is captured across 10 years, and it has to be reported on around financial reporting, around tax reporting, the distributions. And so having everything captured correctly and accurately for 10 years ends up being really, really important and can actually only be done with a platform play. And it's incredibly hard to do it in the way that the rest of the industry does today. And so this has been the other interesting part about running AngelList, where as we're building, it's just becoming clearer and clearer that this is the only way that this industry will scale. And this is the only way that people can actually build and scale venture funds because the other way just has a lot of human error, a lot of data portability issues, right? Because most other providers, they'll only support one small slice of it. You'll have someone that only handles subscription documents, right? You have one vendor who only does financial reporting and accounting. Another one only does tax reporting. Then another one that only does investor relations. And our view has always been like, we should be able to do all of it and that's really the ideal product. That's what GPs really, really want. And in fact, by not doing it, you're actually keeping a lot of GPs out. People who could be great investors are not getting in because like, you know what? This is too much overhead, too much back office overhead. Totally.

Nothing against these firms, they're great firms. But you walk into a Sequoia, you walk into an Andreessen, you walk into any venture firm that in recent years has been managing large amounts of capital across multiple sectors and stages, there's 40, 50, maybe 100 people working there in the back office managing all this. The GPs didn't get into the business to do that.

Exactly. And actually, we're managing very privately. I can't share the name specifically,, but I can share the tier of the firm. We're managing one of the top 10 VC firms. We're managing entire scout infrastructure, like all of it, end to end, the entire thing. All right. And it is actually a result of us building this platform that can handle more and more complex funds and volume as well.. And so we're handling it end to end, every single aspect, including compliance, portfolio management, scout management, literally everything. And by the way, it's all run through software, right? All through software.

You don't have to preview your customer conversations over the next few years, but that's like a gateway drug too, right? Like, oh, manage my scout program. 5 years from now, we'll be managing the whole firm.

Exactly. This is just a sort of the classic move up market. Continue to take more and more of it. Yeah.

So Avlok Kohli, I want to keep digging at this LPA to code thing. So you could imagine it's pretty easy to translate some parameters of an LPA to code. For example, oh, I don't want 2%, I want 2.5%, or I want 2.5% at the beginning and 1.5% at the end, and I want each year to incrementally change between those two things. But let's say I get like really clever in my LPA and I say something like, well, I want, of course, an escalating amount of carry depending on how much capital has been returned so far. And also I want a nonstandard window where, let's say I distribute shares of a company after it's gone public. I don't want a 5-day look back at the average price of the S&P 500 in terms of what I get my credit for. I want a 20-day look back and my LPAs agreed to it and it's on a signed document. Like, how does wonky stuff get translated to code?

In a few ways. First is having an infrastructure that is flexible enough where you can actually stack and add these different types of terms so that it isn't fixated on, okay, you can only do this particular term on like lookback. You can only do this one lookback. You can actually have the infrastructure itself be flexible. Second, there's an aspect of reading the legal documents, then translate into mathematical representation of what the clause means, right? Legal agreements are basically code in English. That's what it is, right? If the agreement's written in English and the job to be done is how do you translate that English, that clause into some formula that then can get represented in software as long as the infrastructure supports that. Now the job to be done is how do you translate that LPA and the clauses of the LPA? This is where As we're making big advancements in AI and large language models— what is a large language model? It is using English, a language, natural language as a programming language, to query other natural language, like other unstructured data. So you can effectively ask unstructured data to structure itself, and that's what you get back. And so we have a lot of innovation inside the company that's focused just on that, around— we have a huge repository of LPAs, obviously, because we're supporting so many of them. And we've already, through humans, have taken the LPAs and represented in code today. And so we have this repository that we can then feed in such that going forward we can actually have the LLMs prompting as a, as a way to pull the necessary information out and represent in code. And that, by the way, that's just one small aspect. Of what it means to build software for a venture fund. There are many other aspects as well around managing it for the full life cycle, as I shared earlier.

Oh my God, I'm just thinking tax, K-1, and SLIP.

Everything. Oh my God.

Oh my God. What a nightmare.

And I don't think this has been shared publicly before. There are 100 workflows that we execute on on behalf of all the funds and SPVs. These are 100 workflows that are operational workflows that could be anything from updating portfolio valuations, preparing K-1s, responding to investor questions about K-1s, right? 100 of them. That's 100 that all need to be done precisely and perfectly for 10 years. Now, of course, it's like a rolling 10 years every time we take a new fund, 10-year obligation. What's actually been happening internally is bit by bit, we're actually turning the non-engineers in the company into engineers using LLMs. And we have an in-house tool that is effectively the operational nerve center that we've actually hooked up to GPT. It's like a flow tool, like a flow charting tool. You can pipe different parts of the workflow and then you hook it up to GPT for different parts. So you can say for this set of emails that come in, automatically categorize all the emails. Okay, great. This one's a follow-on round for Series A. This one's a new investment. This one is, you know, tax question from an investor. Okay, great. Based on that, go down a certain path. Okay. Now let's say it's a Series A follow-on round that We need to review the docs and make sure all the investor rights are managed, make sure the cap table calculations are correct. Great. Read all the documents automatically, by the way, automatically categorize all the documents. Okay, we've got the cap table, we've got the share purchase agreement, right? And we know that for every Series A follow-on documents, we need X number of documents. And so let's say the cap table is missing. Automatically we see the cap table is missing. Draft an email, auto-generate it. No, mind you.

Yeah, it's so funny you're saying this and I'm like, oh my God, I've been living this for the past several months. Like, I know everything you're saying. I'm like, yep, I've experienced all—

like, you're on the other side of these emails.

Yeah, we just have one of our portfolio companies go public. You know, we had some questions back and forth with the AngelList team, and I've started noticing on that and another one, you guys have been proactively suggesting messaging and bullet points for us to tell our LPs. And now I'm like, oh, I see where this is coming from. This is amazing.

Yep. Again, the reason we're able to do this is because we've already been doing this for a long time. And so we have this massive set of training data is the best way to think of it, or fine, you can use this data to fine-tune. And this is leading to a world where we now, for example, going back to the Series A follow-on round, Let's say cap table is missing. Great. Hey, can we get the cap table automatically? Great. Now we get the cap table, ingest the cap table through code, like through LLMs, ingest it, structure it. And we're doing all of this, by the way, we've already built tools for non-engineers in the company to build all of these automations for their workflows. And we're seeing a lot of movement. It's actually fascinating. And at AngelList Confidential, which is our annual conference, I actually did a fireside chat with Sam, and that's what opened my eyes. He said something to me that just stuck with me, which was, "The cost of intelligence is going to zero." And that just stuck so fiercely in my head that I basically took that and I was like, "Huh." things that we assumed a human needed to do, they don't actually need to do anymore. And so if we can build tools inside the company for non-engineers to use this such that they can now take intelligence and automate it, 'cause the cost of intelligence is going to zero, we'll get insane leverage, like insane automation coming out of it.

This is crazy. I mean, this is gonna, have such a transformative effect on you as a business, right? 'Cause like, I remember when we were investing in you guys, we got questions of like, isn't that a like super heavy services-oriented business? As AngelList scales with funds, with companies, with everything, they need people to service all this stuff. This is a major unlock for you guys, right?

Exactly. All you need to do is follow that cost of intelligence curve And the way to think about it is, as long as the tools are getting built out such that humans can take their intelligence and automate that intelligence, because again, the cost of intelligence is going down to zero, you're going to see an insane amount of unlock, like insane amount of leverage, insane amount of automation. Now, of course, the companies that are best suited to take advantage of it are the ones who have a depth of experience, depth of training data, in order to be able to do it well, and those will win out quite a bit.

The vertically integrated with good established software foundations like you guys.

Exactly. You can then just imagine 100 workflows with multiple agents per workflow, right? It's this concept of how do you chain all these different tasks in a workflow and you automate different parts of it. Basically think about it as all these bots that are running AngelList operations, right? If you're trying to visualize it, Just visualize we have a few bots today, we're going to have many bots in the future, and each of these bots are highly intelligent bots that are very, very good at a specific thing, and they're essentially helping run the entire world of venture capital. That's the way we think about it, and that's what gets us incredibly excited.

It's so funny, without realizing it, I'm like, oh yeah, I've been on the other end of this for the last few months. I really have noticed like a change in the nature of interactions with AngelList, the types of responses, and especially the proactiveness coming out of the platform. And now it's just like, oh, of course it's LLMs.

There's an interesting high-level trend that you're hitting on here because a long time ago, 5 years ago, fund back offices were exclusively a low-margin services business. And through all the software you've built, and then this new addition of LLMs on top, you could really imagine it becoming a true 80% gross margin SaaS business. And it's sort of this unlock of, oh, what other industries are perceived to be only possible to have services business margins but actually could have software margins?

Bingo. The assumption that all services business have low margins comes from a world where the cost of human intelligence was high because there were things that computers just couldn't do, and there were things that required engineers to tell computers what to do. Let's cover both. There are some things that computers could not do. Computers could not solve these— read an LPA., right? They can solve these like unstructured problems or these kind of fuzzy problems. They needed very precise problems to solve. Great, massive unlock. You can now solve fuzzy problems, things that you actually thought you needed a human to do. It's like a lot of pattern matching, basically very complex pattern matching. The second big unlock was it used to be the case that you needed engineers to tell a computer what to do. Well, guess what's happened? English has turned into a programming language. You don't need an engineer to tell a computer what to do. And by the way, there's a third big thing that is a huge unlock. There is no need for hardware adoption. Everyone already has a supercomputer in their hand. You have 7 billion people in the world that are all connected on the internet. And so take all of those three combined. 7 billion people connected with a supercomputer in their hands, they can tell a computer what to do using English, and the computer can do what they want it to do and solve fuzzy problems, the cost of intelligence is not high anymore. And things that were typically limited by service margins, they won't anymore.

Well, I think there's also, it's not high and it's also not linear, right?

Yeah.

And I think there may be a different problem to contend with now, which really may be differentiation, right? Like, how do you now differentiate? So maybe that's what eventually drives costs down or like the margins down. But that's where if you have specific moats or you're vertically integrated or you're very specialized, you can actually have high margins. But I think The assumption that you need humans to do things and margins are low is an assumption off of the old world, not the new one. And by the way, the new one is coming fast. This is coming very, very, very fast, right? We had our all hands today. Every Tuesday we do all hands. And one of the teams that's been working with a lot of the internal tool that we have hooked up to GPT was sharing an automation they did. Everyone just went, wow, that's insane. Like insane. And it's coming so fast to all other companies. We're not the only unique company that's doing this in terms of like looking at all the different parts that we can automate inside a company. And so you can imagine all the different use cases are getting deployed very, very quickly. We're in the midst of the biggest technology wave, the biggest. 100%.

If you're willing to share, how many people work at AngelList right now?

We're at 170-ish total. That includes everything, including our back office, AngelList, any sort of affiliated entities we have. It just includes everything. It's like 170.

Already today, the amount of capital that you manage across any dimension— dollars, number of entities, you know, number of investments, whatever you want to take— There's no way that only 170 people could manage that in the old way. Like, zero chance. Zero. I mean, Andreessen has more than 170 people working there.

Yeah, we shipped, I think, 350,000 K-1s last year, and it's, it's probably going to surpass that this year. Like, yeah, you can't do that through like humans sitting there just like, you know, drafting these K-1s and sending them out.

Totally. I mean, Kindergarten alone, I think, is responsible for like 100 of those.

So yeah. There is a significant amount of volume. AngelList really is at its heart, we're just a bunch of like tinkerers and builders, right? Like truly it is founders building for founders. Like I basically get to build tools that I would use. I actually use every single product of AngelList except for CapTable. I need to go start a company, so I may, and I was joking around, I'm like, I just have to start a company so I can use the last product I can't use right now, which is CapTable.

Wait, the AngelList CapTable?

Is it on AngelList? Yeah. Oh no, no, that one. But I'm talking about me myself as going through as like a net new company. I'm like, I just really want to like use this cap table product. The one thing that is incredibly interesting about this moment and also about the correction that we went through around a lot of the layoffs in the tech industry was really all of us finding our footing and ground of a technology company is meant to scale and increase the leverage per person, not scale headcount based on how the company's scaling. And so the way we've run AngelList has always been, how do we just bring together the brightest individuals who can use leverage, right? Like really use leverage. And okay, what really are the forms of leverage? Well, you have code, capital, humans. Humans are the worst form of leverage because you Your leverage is a function of the number of humans you hire. So we really lean pretty strongly on code. So how can we actually get higher leverage per person? That's how we've actually designed the company. And so we have different ways in which we have that forcing function, the constraint. One of the most recent ones is— this has been the case for a while— I've basically said, hey, we're going to keep our headcount constrained. We're still hiring new people. That's sort of the natural, like, as we backfilling roles. But my message has been pretty clear. We're going to keep headcount constrained. We're going to force the decisions needed such that we're building more and more and more leverage for the business. And this is something I actually picked up from early Square. Square was actually ahead of a few things on a lot of different trends. One of them was when I first was acquired by Square, first message we received from Jack was, "All right, not adding any more people in the company." It's a good forcing function. For the company to really focus on the points of leverage and like building out those points of leverage. And so there are all these things that I actually, you know, bring in into the company and sort of test around and play around. Like one of the other ones I love doing is I'll just cancel all my meetings every quarter. And I'm like—

See what happens. Yeah.

See what happens. Like if it's important, I'll get back on. Sometimes I'll just cancel one-on-ones entirely. And I'm like—

I love it. It's like garbage collection for your schedule.

Exactly. Like this idea that there's a calendar invite that was set like 6 months ago is even relevant in terms of the prioritization of today. Makes no sense to me. So yeah, it's really good to try out different things that help shock the system because that's really where I think teams and individuals can actually explore new things. And again, going back to increasing leverage for the company, there are things that we do that continuously test that and push on it. And we take that very, very seriously. Like And we really do believe in individual exceptionalism. That's another thing. And so I really expect any person that joins the company can create a new founding moment for the company. They can truly change the trajectory of the company because, you know, I've been in and around founders for the better part of the last decade and I've actually seen how a single individual can just change the world. And I do believe everyone is capable of it. And so that's another thing that we really believe in at AngelList.

Well, it's also like your whole business. I mean, that's the customers, but it's like, that's the ecosystem you serve, right? Like, you have the data right there.

Exactly. It's literally in our ethos. It's like, yeah, we truly do believe a single individual can change the world. We're serving them. We're actually like, like serving the GPs who go back those individuals are going to change the world. So it is a little like ingrained in our ethos. Yeah.

So as listeners think about the business of AngelList today, which is simplified, you know, Wellfound has been spun out, so there's no more talent. You mentioned Product Hunt, that's been spun out?

Mm-hmm, that's correct.

And so the business of AngelList today, how does it kind of break down in terms of, you don't have to give specific numbers, but like how does AngelList make money?

So there are 3 customers of AngelList. The first one are the GPs. These are the folks who start SPVs, start funds. The second are the LPs. These are folks who invest behind the GPs. And the last one are founders and startups. For the GPs, two products, SPVs, funds, pretty simple. For LPs, they're typically investing behind the GPs or sometimes they'll actually find other deals to invest in on the platform. That is a part of the business, but the core part of the business really comes from the GPs, right? In terms of starting SPVs and funds. And then the last one for founders and startups, really it's fundraising tools and cap table management. So we actually launched cap tables last year. It's actually growing very, very quickly. We're incredibly excited about the rate of adoption on that product. Each one of these products has their own revenue model. So for SPVs and funds, we charge an administrative fee to manage it over 10 years.

Can I just double-click real quick on that? For me, when Nat and I were making the decision of the platform to— well, we didn't have a choice. Our first Kindergarten Fund was $3 million. There was no other way to do it except on AngelList. But then as we got bigger and managed more, having the experience of having started a firm before and made all the platform decisions, the cost of going with you guys to do that for the administrative fee is like night and day. It's like a 10x difference versus doing it the traditional way.

Yep, exactly. And again, it goes back to Because everything is vertically integrated in a single place, we can actually absorb all the different service providers in one and then provide a single price than what you would otherwise need to go and stitch together and everyone's going to quote you something different. You want tax provider, fund admin, etc. So that's on the GP side. That's how we make money. On the LP side, if there's a— what you think about as a primary investment or secondary investment, If there's a primary investment or secondary investment that AngelList has helped facilitate and bring to the table, and this is what we call AngelList LPs, then there's a broker's fee on that one.

Where you're matching supply to demand between LPs and GPs.

Exactly. By the way, you can actually see where that goes, right? The product strategy goes there around, look, today it's a lot of its primary investment, but we're doing a lot of very interesting experimentation around how do we help funds provide their LPs liquidity within the fund itself. This already happens offline today and we think we have a unique approach there and we're going to be launching a product around that pretty soon and that's for GPs to control and manage. And so that's on the LP side.

Would that look something like, you know, I'm just imagining like take Kindergarten, you know, we have stakes in close to 100 companies, many of them now very well known. Lots of people would like to invest in those. Some of our LPs may want liquidity, AngelList would be a platform to manage that.

Exactly. And we can be the platform that manages it end to end. And we have a unique view on it as well. We think that we can help facilitate that in a single company in a portfolio as well. Again, once you get into the nuts and bolts of the LPA and the way you can—

Which in the old world, the only way that happened was say I was kindergarten that needed to happen. I sold a piece of the whole commitment into kindergarten, the whole blended fund, but you can atomize it to a company basis within a fund.

Yep. We have a unique approach on how to do that and how to make that work. Then on the founder and startup side, the revenue model is a SaaS fee. Pretty straightforward. You're managing the cap tables, we charge a SaaS fee. It depends based on your size of company, the number of investors you're managing on the cap table. And then there are other fees that sort of get baked in because once you're a financial platform and you're moving money in and out of a financial platform, there are other different ancillary fees and everything that you can actually earn by reducing more and more friction. That's the other piece that's not as well understood about AngelList is as a platform that serves 3 different customers, that has a portfolio of products, there are actually many revenue models that you can earn, especially as you get larger and larger. A lot of what we're doing is just continuing to build out this platform, and we're actually gonna be launching a series of products over the next 2 to 3 months that will further emphasize what product strategy we have and how we're gonna blanket the rest of venture. We're actually taking a lot of what we've built over the years and we're gonna start unbundling pieces of it and you'll sort of see how all of it's gonna connect. It's sort of a continuation of our strategy to move upmarket. I'm very, very excited about this. It is, yeah, our team is just pretty jazzed like building this out. It's sort of part of the evolution of a platform and that's another revenue model that starts coming in as well.

And so on the breakdown question, I have to imagine SPVs were a large part of the business before, It seems like the funds business has to be meaningfully larger today than SPVs ever was.

Yup, it is. Even before the market crash last year, May of 2022, SPV business was not the largest part of the business. That's actually a fact that most people may not know, but SPVs hasn't been the largest part of the business for a while now. The funds part of the business is Definitely largest part by many multiples.

Interesting.

Yeah, very interesting. Some people may think of SPVs as like the key thing, and don't get me wrong, we're going to continue to support SPVs. We're still the market leader in SPVs. It's a very important component of our product portfolio, but AngelList is firmly in the funds business as well and actually has a very strong hold in the funds business. Each time we go into a new target, like in terms of fund size as we keep moving up market, if you map our market share each time we enter a new fund size, we essentially take the market each time. We just fundamentally just absorb it, take it, and then we move on and then move to the next one and the next one. Just by virtue of us building that out, the fund side of the business is just much larger.

There's something that to my mind on the SPV and fund dynamic has been the case, but I don't know if it's just my experience or if this also reflects the broader market, which, you know, you have the purview of. To me, SPVs have really changed over the last 5 years from being a way for individuals and groups to invest in companies that, like, otherwise they wouldn't be able to, to more of a elastic scaling product for funds, or at least that's how I think about it. Like, we have core funds that we invest out of that are blind pools, and then when we have opportunities to write larger checks, we use SPVs to flex up on certain investments. Is that the primary use case of them now, or is that just like my use case of them?

I would say that's one of the use cases where a fund uses an SPV to amplify the check they could be writing into a company. The other use case are GPs who are just running SPVs and not writing checks from their fund. So the SPV business segments into two types of GPs, one who are doing exactly what you said, amplifying checks from the fund, and then the other one are GPs who are only doing SPVs as the primary thing. And so the use case for both actually looks very, very different. So anyone who's amplifying from the fund typically is really looking to bring their LPs in on an opportunity where they can invest behind the company if you can get a larger allocation. And the ones who are investing directly into only investing in SPVs is really optimizing around angel SLPs. How can you bring, you know, more dollars into a company? And so it really bifurcates into the two and they do look very, very different.

Those two different types of SPVs and kind of what we were just talking about there, to me, that's a good way to kind of start to wrap things up here. It's really changed my thinking on what a venture firm and fund can and should be. In the pre-Angelist world, pre-Atomized, pre-software-ized world of this, you needed a certain fund size to just be able to do things. Your strategy was literally limited and dictated by the size of your fund. That's now no longer the case because whatever your core fund size is, or at least this is how I think about it, you still can do much larger and different things by amplifying via SPVs. The complexity around that is enormous, but I think it's really interesting, right? And like, it's in many ways a better product as I think about it for all the participants in the ecosystem. As a GP, I can get deal-by-deal economics on my high conviction bets where I have access. As an LP, I don't have to commit tons of capital to this blind pool where I don't know what's going to happen with it. And then as a company and a founder, like, yeah, I still can go to— and these days am going to— the large established funds to be my leads in all my rounds. But like I can get a lot of capital from these other folks that I otherwise couldn't get.

So what we're noticing as well, if we kind of rewind back to a few years ago, is that founders weren't as familiar with SPVs. The world of venture has always been kind of this very mystical to founders. And if we fast forward to today with AngelList RUVs, roll-up vehicles, which are fundraising tools, we've normalized this idea of a vehicle where you can bring many checks in and it's a single line item on the cap table. And what we've noticed is because of that, more founders have been educated out of the gate on what SPVs are and also more and more open to SPVs if you just track it over time. And so I think there's also been an Overton window, like shifting the Overton window around SPVs, understanding it, roll-up vehicles. All of this coming together actually does firmly go into a world and lead into a world where founders are going to be more and more willing to take smaller and smaller checks wrapped up into an SPV or wrapped up into roll-up vehicle and really get these supporters to help them build the company. And I think that's incredibly important. And we're seeing this across the board. We're actually regularly seeing large established venture funds educating founders to go do an RUV because they're saying, use this as a way to bring on helpful operators, investors into a simple, you know, cap table line item. And so I think we're firmly in this world of, yep, how do you bring on many more people to help support the company so you can continue to build your company?

Well, nothing better exemplifies your long-term vision than that. Avlok Kohli, where can people find you on the internet? And if they're interested in any of the stuff you mentioned, where can they go to learn more about AngelList?

So to find me, you can follow me on Twitter, twitter.com/avlok. I'm always there. To learn more about AngelList, you can go to www.angelist.com.

Great. And if folks are interested in becoming GPs on AngelList, what does that process look like?

Really fast. You just submit the form online and we get back to them within hours and we go through a quick call. Just to get a better understanding of the fund and we then move forward to next steps.

Technology. It's going to change the world.

So great. Thanks, Avlok.

Thanks, Avlok Kohli.

Cool. Thank you.

Listeners, we'll see you next time.