Naval Ravikant's Life

Naval Ravikant. You probably know him as the founder of Angellist, a prolific Twitter philosopher, or one of the few Silicon Valley insiders to ever appear on the Joe Rogan Experience. But his life story is actually full of ups and downs that inform who he is today and can be really instructive to prospective entrepreneurs. I'm John Coogan and this is the saga of Naval Ravikant. Naval was born in New Delhi, India in 1974, but moved to New York City when he was just nine years old. His parents separated when he was still young, so he was raised by his mother in Queens while she worked long hours and attended night school. Consequently, Naval had long stretches of time where he was left to his own devices, which he made very good use of. Here's Naval describing his upbringing on the Joe Rogan Experience.

I was raised by a single mom in New York and she used the local library as a daycare center because it was a very tough neighborhood. And so she would basically say when you get back from school, go straight to the library and don't come out until I pick you up late at so I used to basically live in the library and I read everything. I read every magazine, I read every pictograph, I read every book, I read every map. I just ran out of stuff to read, I just read everything.

His voracious appetite for knowledge served him well and he was able to test into a public magnet high school named Stuvesant by performing well on the admissions test. Since his mother didn't earn enough money to pay for a private school, a tuition free public school like Stuyvesant was really the only option for Naval to gain a strong education. He took his studies seriously and was able to attend Dartmouth after graduation with the help of a financial aid package. Naval didn't go directly into technology or entrepreneurship after graduation though. Instead he went to work for the Boston Consulting Group where he got exposed to the inner workings of large corporations and learned some business fundamentals. Management consulting is a common jumping off point into other careers since it gives you a good overview of a variety of different businesses and instills strong analytical skills. So Naval left Consulting to go work at a high speed cable Internet provider named At Home. This was in the late 90s when Internet stocks were booming and At Home was no exception. At Home merged with Excite, a popular web portal at the time and the combined company was worth $7 billion. But Naval had higher aspirations than growing rich in a comfortable position at a late stage tech company. He wanted to start something of his own so he walked away from $4 million worth of unvested at home stock options and joined August Capital as an entrepreneur in residence to start planning his venture. This turned out to be a great move since the high flying company did not make it through the dot com crash in 2001. At the peak of the bubble, the company was worth $35 billion. But by October of 2001, the company had filed for Chapter 11 bankruptcy protection and Naval's shares would have been worthless if he had stuck around. Naval quickly assembled a team of co founders and raised a massive seed round of $8 million for this new company. Half of the funding came from August Capital and the other half came from Benchmark Capital. And this funding round was believed to be one of the highest seed valuations for a company ever. Starting a technology company was much more capital intensive in the 90s. You had to buy actual server hardware since AWS didn't exist yet. So Naval's close ties to venture capital really helped him get started here. But it wouldn't all be smooth sailing. His new company was called Epinions, and the idea was create a place on the Internet where anyone could review anything. The site had sections for reviews of cars, computers and even physical places like ski resorts. This was all before Yelp and there weren't many competitors in the space. Naval served as CEO and grew the company incredibly quickly, hiring 31 people in the first 12 weeks. Less than one year after launching the site, Epinions was able to close a $25 million Series A. But things started to get difficult for the company after the dot com bubble popped later that year. The site reached nearly 6 million users in 2003, but valuations of tech companies had fallen so much that there wasn't much hope for an ipo. Naval and three of his co founders left the company to move on to new projects, leaving Nirav, talia and the VCs from Benchmark in August in charge of the company. When growth stagnates, it's not uncommon to see a change in leadership at a startup. And with $45 million invested in epinions, the venture capitalists were probably just focused on getting the company to acquisition so they didn't lose their entire investment. While Naval had moved back into the venture capital world, he received some news about Epinions. The company would be merged with a comparison pricing site named Dealtime, but the common stock that Naval owned would be worth nothing. Naval and his co founders approved the merger, which is completely reasonable if the company you founded is struggling and A merger will keep the product alive and allow the company to avoid layoffs. It's immoral to block that merger on principle. You gain nothing and it just winds up hurting employees, customers and investors. But after the merger was completed, things got much more complicated. Epinions and Dealtime relaunched as shopping.com, and in 2004 the company went public at a valuation of $750 million. Everyone made a killing in the IPO, but naval and his co founders had nothing to show for it. So they sued. In the lawsuit, Naval and his fellow plaintiffs alleged that their co founder Nirav Talia and the VC firms had misrepresented the value of Epinions at the time of the merger in order to get them to give up their shares. Lawsuits between founders and venture capitalists are extremely rare. This is because VC firms have vastly greater resources to fight off lawsuits, and no founder wants to be known as someone who sues their investors. It's usually better just to move on, bury the hatchet, and start something new with a different group of investors. But Naval had good reason to believe he was being misled, especially after documents showed that Epinions was on the verge of signing a deal with Google that would more than 10x the company's profit right after the merger. They wound up settling the lawsuit out of court. So we don't know exactly what happened, but I think a few things are likely here. The first is that Naval definitely got paid. It's unclear how big the settlement was, but Naval was able to raise a $20 million early stage venture capital fund shortly after the settlement, so it's likely he got at least a few million. When you're raising a VC fund, it's typically expected that 10 to 20% of the fund will come from your own capital. There are of course, exceptions, but it's unlikely that he would have been able to close this fund without a few million in personal capital. It's also extremely likely that everyone signed a mutual non disclosure agreement and non disparagement agreement as part of the settlement, meaning that Naval could never talk publicly about exactly what had happened. Even though Naval couldn't discuss the Epinion settlement, stories about a young founder successfully suing his VCs echoed around Silicon Valley and helped him earn a name as someone who had been through the wringer. Once again, Naval was able to capitalize on the opportunity in front of him incredibly well. He started writing a blog called Venture Hacks, which offered detailed advice on negotiating term sheets and other information usually reserved for experienced Silicon Valley Insiders. He also started Angellist with the goal of democratizing the startup investment process. Naval has spent the last decade laser focused on the early stage fundraising process and he's grown Angellist significantly, adding products around recruiting, cryptocurrency and equity crowdfunding. And he's also continued to carve out innovative content marketing strategies and created a very unique voice on Twitter. In one of his most successful threads titled how to Get Rich Without Getting Lucky, he maps out his entire philosophy on wealth accumulation in a series of extremely succinct tweets. The thesis of the thread is that there are no get rich quick schemes, but by focusing on developing specific knowledge that can't be easily taught in schools and then applying leverage through technology, capital or media, anyone can accumulate wealth with enough time and effort. This type of pithy tweet is sometimes criticized as fortune cookie Twitter, and when done poorly, tweets like these can come off as cocky. But Naval has a great explanation about why he tries to boil things down so much.

And this is where Twitter is great for me is I try to understand something and then I try to write it down in such a way that I could remember it. Just the basic hook that'll point towards the deeper understanding and I'm forced to explain it to people and that's how I know I understand something.

The density of information exists on a wide spectrum. On one end you might have a textbook or academic paper with copious sources and data supporting each argument, and on the other end there are these fortune cookie tweets. But that doesn't necessarily mean that one is better than the other. You have to consider the goal. Naval is taking his own advice here and using leverage as effectively as possible. He could probably spend months writing a book that would sell a few thousand copies, or he could write these uniquely terse tweets that reach millions of people. And it makes sense for him to cast as wide a net as possible because he invests at the earliest stage and wants lots of entrepreneurs to use AngelList. And naval isn't just focused on entrepreneurs anymore, he's also innovating on the way angel investors raise capital for their funds. In 2020, AngelList announced the Rolling Fund to allow more people to get into angel investing. The Rolling Fund is unique in a few ways. Generally, fund managers need to raise their entire fund's capital in a short period of time, but rolling funds are always open, meaning they can accept new investments at any time. This also lets the fund capitalize on big successes to raise more money for the fundamental. So if a portfolio company breaks out and raises a huge round of funding, a rolling fund could immediately add a bunch of new limited partners and then be able to make bigger investments immediately. The second big innovation with rolling funds involves marketing. Typically, managers cannot market their funds publicly, which is why you'll never see an advertisement to invest in a VC firm. But rolling funds fall under a special SEC exemption called Rule 506. Marketing securities directly to the public is always controversial because there is a real risk that stock promoters will take advantage of unsophisticated investors. We've seen Leonardo DiCaprio play the role of one of these penny stock scammers in the Wolf of Wall street, and Ben Affleck played a similar role in Boiler Room, both great films. But the fact that certain startup investments have performed phenomenally well over the past few decades and average investors have not had access to that asset class whatsoever makes a really good case for allowing unaccredited investors to gain exposure to startup equity markets. Like I discussed in my earlier video on chamath, Polihopitiya and SPACs, financial innovation will always come with risks and plenty of criticism. Naval is undoubtedly aware of the fact that scammers could try to abuse rolling funds and that could hurt the entire industry. I personally hope that these rolling funds get stress tested and wind up having a positive impact on the startup ecosystem. As an entrepreneur, I'm generally in favor of anything that will bring more funding dollars into the early stage sector of the economy, since that will support innovation and allow more people to start companies. But it's always important to weigh the societal costs and risks of abuse against these financial innovations so we don't end up with another 2007 financial crisis on our hands. So it's 2021 now, AngelList is bigger than ever, and Naval looks poised to dramatically reshape startup financing. But what about all that Epinions drama between Naval and Benchmark Capital? Fortunately, it looks like they were able to reconcile somewhat and let it be water under the bridge. In 2016, Bill Gurley, one of the VCs that Naval sued, sat down with Kara Swisher on a podcast and discussed the Epinions lawsuit. Here's what Gurley had to say about.

Naval CEO was Naval Robbie Naval?

Yeah, that's right.

And interesting story about him. We ended up splitting from him and there ended up being a lawsuit. And this was, I don't know, 16, 17 years ago. And and I had always thought of Naval as one of the the smartest people I'd ever met. But when someone sues you, you tend to get on the other side of things. And just this past winter I was in at a ski event that Chris Sacca put together and he was invited. We sat down and we talked for the first time and hugged it out. Yeah, it was awesome. It was just like it reminded me of why we worked together in the first place. But I regret that we spent 16 years not chatting. He's obviously gone on to do some.

Spectacular it's great to see that they were able to let bygones be bygones and move on from the Epinions drama. And in an interesting twist, both Naval and Gurley wound up making a fortune when they invested early in Uber. Naval was in the seed round and Gurley led the A round. So the big takeaway for me here is that success in business requires the right amount of aggression. If someone is really taking advantage of you, a lawsuit might be your best bet, but there isn't much to be gained from trashing them publicly. Ultimately, other opportunities will come around and if you work hard enough, you will eventually find success. Naval made the best out of a tough situation and was seen as an outcast in Silicon Valley for quite some time. But his willingness to fight for founders paid off as the Valley shifted to a more founder friendly model and his experience in the trenches became something that founders loved. But what do you think of Naval? Let me know in the comments if you liked the video and how it shaped your view of Silicon Valley. And if you like this type of video, please consider subscribing to the channel. I have a bunch more in the pipeline. If you want to get in touch with me, you can message me on Twitter. And as always, thanks for watching.