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Special Episode: Jason Calacanis

Limited Partner Episode

May 20, 2020
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We're joined by the one and only Jason Calacanis for this very special episode, wherein we chronicle Jason's journey from a kid porter in the barrooms of Brooklyn to building the largest independent media business in tech, becoming the "3rd or 4th greatest seed investor of all-time" (and the original Sequoia Scout), launching one of the top accelerators in the world, and constructing a one-man empire that may just disrupt the entire capital stack in our industry. We dive into how it all ties together, and where the money and power is shifting in the ever changing sands of Silicon Valley...

Sponsor:

  • Thanks to Silicon Valley Bank for being our banner sponsor for Adapting and Acquired Season 6. You can learn more about SVB here: https://www.svb.com/impact
  • Thank you as well to Wilson Sonsini - You can learn more about WSGR at: https://www.wsgr.com/

We finally did it. After five years and over 100 episodes, we decided to formalize the answer to Acquired’s most frequently asked question: “what are the best acquisitions of all time?” Here it is: The Acquired Top Ten.

Note: we ranked the list by our estimate of absolute dollar return to the acquirer. We could have used ROI multiple or annualized return, but we decided the ultimate yardstick of success should be the absolute dollar amount added to the parent company’s enterprise value. Afterall, you can’t eat IRR! For more on our methodology, please see the notes at the end of this post. And for all our trademark Acquired editorial and discussion tune in to the full episode above!

10. Marvel

Purchase Price: $4.2 billion, 2009

Estimated Current Contribution to Market Cap: $20.5 billion

Absolute Dollar Return: $16.3 billion

Back in 2009, Marvel Studios was recently formed, most of its movie rights were leased out, and the prevailing wisdom was that Marvel was just some old comic book IP company that only nerds cared about. Since then, Marvel Cinematic Universe films have grossed $22.5b in total box office receipts (including the single biggest movie of all-time), for an average of $2.2b annually. Disney earns about two dollars in parks and merchandise revenue for every one dollar earned from films (discussed on our Disney, Plus episode). Therefore we estimate Marvel generates about $6.75b in annual revenue for Disney, or nearly 10% of all the company’s revenue. Not bad for a set of nerdy comic book franchises…

Marvel
Season 1, Episode 26
LP Show
1/5/2016

9. Google Maps (Where2, Keyhole, ZipDash)

Total Purchase Price: $70 million (estimated), 2004

Estimated Current Contribution to Market Cap: $16.9 billion

Absolute Dollar Return: $16.8 billion

Morgan Stanley estimated that Google Maps generated $2.95b in revenue in 2019. Although that’s small compared to Google’s overall revenue of $160b+, it still accounts for over $16b in market cap by our calculations. Ironically the majority of Maps’ usage (and presumably revenue) comes from mobile, which grew out of by far the smallest of the 3 acquisitions, ZipDash. Tiny yet mighty!

Google Maps
Season 5, Episode 3
LP Show
8/28/2019

8. ESPN

Total Purchase Price: $188 million (by ABC), 1984

Estimated Current Contribution to Market Cap: $31.2 billion

Absolute Dollar Return: $31.0 billion

ABC’s 1984 acquisition of ESPN is heavyweight champion and still undisputed G.O.A.T. of media acquisitions.With an estimated $10.3B in 2018 revenue, ESPN’s value has compounded annually within ABC/Disney at >15% for an astounding THIRTY-FIVE YEARS. Single-handedly responsible for one of the greatest business model innovations in history with the advent of cable carriage fees, ESPN proves Albert Einstein’s famous statement that “Compound interest is the eighth wonder of the world.”

ESPN
Season 4, Episode 1
LP Show
1/28/2019

7. PayPal

Total Purchase Price: $1.5 billion, 2002

Value Realized at Spinoff: $47.1 billion

Absolute Dollar Return: $45.6 billion

Who would have thought facilitating payments for Beanie Baby trades could be so lucrative? The only acquisition on our list whose value we can precisely measure, eBay spun off PayPal into a stand-alone public company in July 2015. Its value at the time? A cool 31x what eBay paid in 2002.

PayPal
Season 1, Episode 11
LP Show
5/8/2016

6. Booking.com

Total Purchase Price: $135 million, 2005

Estimated Current Contribution to Market Cap: $49.9 billion

Absolute Dollar Return: $49.8 billion

Remember the Priceline Negotiator? Boy did he get himself a screaming deal on this one. This purchase might have ranked even higher if Booking Holdings’ stock (Priceline even renamed the whole company after this acquisition!) weren’t down ~20% due to COVID-19 fears when we did the analysis. We also took a conservative approach, using only the (massive) $10.8b in annual revenue from the company’s “Agency Revenues” segment as Booking.com’s contribution — there is likely more revenue in other segments that’s also attributable to Booking.com, though we can’t be sure how much.

Booking.com (with Jetsetter & Room 77 CEO Drew Patterson)
Season 1, Episode 41
LP Show
6/25/2017

5. NeXT

Total Purchase Price: $429 million, 1997

Estimated Current Contribution to Market Cap: $63.0 billion

Absolute Dollar Return: $62.6 billion

How do you put a value on Steve Jobs? Turns out we didn’t have to! NeXTSTEP, NeXT’s operating system, underpins all of Apple’s modern operating systems today: MacOS, iOS, WatchOS, and beyond. Literally every dollar of Apple’s $260b in annual revenue comes from NeXT roots, and from Steve wiping the product slate clean upon his return. With the acquisition being necessary but not sufficient to create Apple’s $1.4 trillion market cap today, we conservatively attributed 5% of Apple to this purchase.

NeXT
Season 1, Episode 23
LP Show
10/23/2016

4. Android

Total Purchase Price: $50 million, 2005

Estimated Current Contribution to Market Cap: $72 billion

Absolute Dollar Return: $72 billion

Speaking of operating system acquisitions, NeXT was great, but on a pure value basis Android beats it. We took Google Play Store revenues (where Google’s 30% cut is worth about $7.7b) and added the dollar amount we estimate Google saves in Traffic Acquisition Costs by owning default search on Android ($4.8b), to reach an estimated annual revenue contribution to Google of $12.5b from the diminutive robot OS. Android also takes the award for largest ROI multiple: >1400x. Yep, you can’t eat IRR, but that’s a figure VCs only dream of.

Android
Season 1, Episode 20
LP Show
9/16/2016

3. YouTube

Total Purchase Price: $1.65 billion, 2006

Estimated Current Contribution to Market Cap: $86.2 billion

Absolute Dollar Return: $84.5 billion

We admit it, we screwed up on our first episode covering YouTube: there’s no way this deal was a “C”.  With Google recently reporting YouTube revenues for the first time ($15b — almost 10% of Google’s revenue!), it’s clear this acquisition was a juggernaut. It’s past-time for an Acquired revisit.

That said, while YouTube as the world’s second-highest-traffic search engine (second-only to their parent company!) grosses $15b, much of that revenue (over 50%?) gets paid out to creators, and YouTube’s hosting and bandwidth costs are significant. But we’ll leave the debate over the division’s profitability to the podcast.

YouTube
Season 1, Episode 7
LP Show
2/3/2016

2. DoubleClick

Total Purchase Price: $3.1 billion, 2007

Estimated Current Contribution to Market Cap: $126.4 billion

Absolute Dollar Return: $123.3 billion

A dark horse rides into second place! The only acquisition on this list not-yet covered on Acquired (to be remedied very soon), this deal was far, far more important than most people realize. Effectively extending Google’s advertising reach from just its own properties to the entire internet, DoubleClick and its associated products generated over $20b in revenue within Google last year. Given what we now know about the nature of competition in internet advertising services, it’s unlikely governments and antitrust authorities would allow another deal like this again, much like #1 on our list...

1. Instagram

Purchase Price: $1 billion, 2012

Estimated Current Contribution to Market Cap: $153 billion

Absolute Dollar Return: $152 billion

Source: SportsNation

When it comes to G.O.A.T. status, if ESPN is M&A’s Lebron, Insta is its MJ. No offense to ESPN/Lebron, but we’ll probably never see another acquisition that’s so unquestionably dominant across every dimension of the M&A game as Facebook’s 2012 purchase of Instagram. Reported by Bloomberg to be doing $20B of revenue annually now within Facebook (up from ~$0 just eight years ago), Instagram takes the Acquired crown by a mile. And unlike YouTube, Facebook keeps nearly all of that $20b for itself! At risk of stretching the MJ analogy too far, given the circumstances at the time of the deal — Facebook’s “missing” of mobile and existential questions surrounding its ill-fated IPO — buying Instagram was Facebook’s equivalent of Jordan’s Game 6. Whether this deal was ultimately good or bad for the world at-large is another question, but there’s no doubt Instagram goes down in history as the greatest acquisition of all-time.

Instagram
Season 1, Episode 2
LP Show
10/31/2015

The Acquired Top Ten data, in full.

Methodology and Notes:

  • In order to count for our list, acquisitions must be at least a majority stake in the target company (otherwise it’s just an investment). Naspers’ investment in Tencent and Softbank/Yahoo’s investment in Alibaba are disqualified for this reason.
  • We considered all historical acquisitions — not just technology companies — but may have overlooked some in areas that we know less well. If you have any examples you think we missed ping us on Slack or email at: acquiredfm@gmail.com
  • We used revenue multiples to estimate the current value of the acquired company, multiplying its current estimated revenue by the market cap-to-revenue multiple of the parent company’s stock. We recognize this analysis is flawed (cashflow/profit multiples are better, at least for mature companies), but given the opacity of most companies’ business unit reporting, this was the only way to apply a consistent and straightforward approach to each deal.
  • All underlying assumptions are based on public financial disclosures unless stated otherwise. If we made an assumption not disclosed by the parent company, we linked to the source of the reported assumption.
  • This ranking represents a point in time in history, March 2, 2020. It is obviously subject to change going forward from both future and past acquisition performance, as well as fluctuating stock prices.
  • We have five honorable mentions that didn’t make our Top Ten list. Tune into the full episode to hear them!

Sponsor:

  • Thanks to Silicon Valley Bank for being our banner sponsor for Acquired Season 6. You can learn more about SVB here: https://www.svb.com/next
  • Thank you as well to Wilson Sonsini - You can learn more about WSGR at: https://www.wsgr.com/

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Transcript: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)

Ben: Welcome to this special episode of Acquired, the podcast about great technology companies and the stories behind them. I'm Ben Gilbert.

David: I’m David Rosenthal.

Ben: And we are your hosts.

David: Acquired is all about stories. Ordinarily, we tell the story of a great technology company, a great leader, or a great adaptation. Today, we are telling the story of someone who doesn't just have one story. He has a whole anthology across all of those categories, the one and only Jason Calacanis. Just to give our audience a small sampling of all of the enterprises that Jason has started and is involved with.

Ben: Yeah. David, I bet you can't do this all in one breath.

David: No, especially not in the time of Corona. Jason has founded four companies, by our account: Silicon Alley Reporter, Weblogs, Mahalo and Inside.com. Did we miss any?

Jason: No, those are them, those are the four. Inside.com is the same captive which is the pivot of Mahalo so arguably one. People don't know that.

David: Did not know yet, we'll get into that. Three conferences, three podcasts, Angel, All-In, and of course, This Week in Startups, which is now over a thousand episodes, the YouTube channel around all of those. You were the first Sequoia Scout, you were literally the prototype of the Sequoia.

Jason: Correct, and still the greatest returner. But who's counting? It's not a competition, but I won it.

David: Maybe some time, I might have something to do. We'll get into that. You've made over 200 angel investments in your career. You're a blogger, you're an author, you have a newsletter, you started the LAUNCH Accelerator, The Venture Fund around that, The Syndicate around that, you are self-professed. We have you on record as saying you are the either third or fourth best angel investor of all time.

Jason: For sure. For sure, I'm out on Mount Rushmore. Chris Sacca, Ron Conway, obviously ahead of me, and then there's a bunch of people. Nobody knows who did incredible angel investments in Google and Apple but they don't feel the necessity to put it on the cover of a book like I did.

David: Speaking of a quote that we want to wrap this up with from your book, "Most folks think I'm lucky. Some say, I'm a complete fraud and a handful think I'm a brilliant hype man. I don't agree with any of them, I agree with all of them." Jason Calacanis, welcome to the show.

Jason: Big fan of the show, thanks for having me on. David, thank you for doing that intro because your voice is so much better than Ben's. I mean, that is a radio voice, David, so soothing. Ben and I are just like scratchy records but Ben's got good insights. I'm glad to be here. I'm a big fan of your podcast.

Ben: Gotta have something to rely on, Jason.

Jason: Exactly the insights.

David: Thanks for joining us. Probably most people listen to, subscribe to Jason on one of these many channels we've talked about. Today, we're going to talk about two sort of less, less discussed parts of Jason's story. One is kind of like this whole empire, how you built it, how it all ties together into the bigger picture. And then two, more importantly, what that bigger picture is and what it might lead to, which could be a deconstructing of the whole way that the investment ecosystem works.

We'll get into all that. We're also going to have a special behind the scenes discussion for LPs with Jason afterwards. Be sure to join the LP program for access to that and much more acquired content. You can click the link in the show notes or go to glow.fm/acquired.

Jason: I'm a member. I pay $100 a year or something.

Ben: Well, thank you. We appreciate it.

Jason: It's worth it. The LP show is like the best parts. It's like you cut the rib eye and that's like the best part. It's like the New York strip of the podcast. It's great.

Ben: We hope that the whole podcast is good but we appreciate the LP stuff.

Jason: You guys put the most work into that and people just pay for it. You want good content to exist, pay for it.

Ben: If only all of our guests were like you, Jason. Before we get into it, we want to thank Silicon Valley Bank who is our sponsor for all of season six. As we navigate these unprecedented times, SVB believes that collective action is the best way to overcome the challenges that we are up against. That is why SVB, in partnership with Founders Pledge, has formed the COVID-19 Global Impact and Innovation Fund. This fund will deliver resources directly to organizations around the world that can make the most immediate impact in the fight against COVID-19.

Jason: Let me take it from there. Silicon Valley Bank has made an initial $1 million investment to fund this critical work and invites you to join them in helping those in need. For over 35 years, Silicon Valley Bank has supported countless innovators with a passion for finding solutions and remains committed to helping our communities overcome the challenges we're all up against that. Back to you. Pick it up from there, Ben.

Ben: Took the words right out of my mouth. To learn more, you can visit svb.com/impact and thanks to Silicon Valley Bank.

Jason: Great bank. They do all my loans, my mortgages, everything, my business banking, tremendous.

David: Us, too. Jason, you've talked a lot about growing up, your childhood, so we'll do that briefly here. You're born in New York, right?

Jason: Brooklyn.

David: Brooklyn?

Jason: Yeah. When you come from New York, you don’t say New York. Not only do you say the borough, you say the part of the borough. I’m from Bay Ridge which is literally the last stop on the train.

David: Love it. Tell us a little bit about your family and what growing up was like for you.

Jason: Yeah, I grew up in the 70s and 80s, which was a fantastically interesting time to grow up as a young person. We were free range kids to the extreme. Brooklyn was not hipsters back then, it was working class and connected guys, the Hells Angels, cops and bookies. It was a little bit more rough and tumble. My dad owned a bar and he was essentially the mayor of Bay Ridge in a way like people loved my dad, John the beard. They loved his bar and I worked at his bar—my two brothers and I'm the older brother, my younger brother, Jamie and Josh.

From a very young age, my mom was a nurse and she ran the emergency room in Brooklyn at Victory Memorial Hospital, and then later ran the ICU. She's a nurse practitioner and she's got, I think, three graduate degrees. I had this amazing, hardworking mother doing three or four jobs and this amazingly hard working dad. It was a blue collar lifestyle, we owned our house, but barely. We were always living month to month.

But there was a lot of love and a lot of craziness growing up in a bar. I literally grew up in a bar and made espresso for my bosses, made baked clams for Tony Bennett. Would go get cigarettes for the coke dealer, would put Bailey's in cappuccinos for police officers in uniform coming in at 2:00 or 3:00 to have a steak or burger because my dad would let them come in at any time.

David: It sounds like not just a bar, it's more like a pub.

Jason: It was a pub, exactly. It was kind of like a pub. The cops would come in at any time they wanted, but usually they come in between lunch and dinner and my instructions were just give whatever they want and just charge them $10 each. They would proceed to drink four or five Irish coffees, each.

David: Did they order them as Irish coffees or there's a code?

Jason: Yeah. There was the wink. They were in uniform so they just wanted to have a cup of coffee. "Hey kid, get me a cup of coffee." Whenever I got the bookie, Maresca, or the guy who dealt cocaine, his pack of cigarettes or whatever, they would just say, "Here's $20," or "Here's a $50," sometimes or sometimes even $100. "Give me two packs of Marlboro Lights," I go out, get two packs of Marlboro Lights, I'll say, "$2 or $2.50 a pack," and they say, "Keep the change."

David: This is like the Brooklyn version of Bob Iger story with the chairman, Frank Sinatra, going on and getting their mouth wash.

Jason: Exactly. I basically got exposed to commerce at a very young age, and I became very interested in power and money, perhaps too interested in it. My first real job was a guy owed my dad like two grand, he had lost playing backgammon to him. My dad used to have a backgammon and a poker game. When the bar closed at 4:00, the fun began from 4:00 until 7:00 or 8:00 in the morning, after hours. It was mainly cops, Hell's Angels, mafia guys, and hippies.

David: All playing together?

Jason: Yeah. I would come and I would do the porter work at 7:00 A.M so I would come and sweep up the place on Saturdays and Sundays when I was 10, 11 years old with my grandfather, rest in peace. We were the porters, a fancy way of saying janitors. My dad would be there playing cards or whatever. This guy, he was in for two grand, too large for my dad and he couldn't pay. He needed a little time so my dad was like that's fine. He said here, I know the kid likes Star Wars. Here's the Empire Strikes Back. Empire Strikes Back was in the theatres.

He handed my dad a VHS tape and my dad had gotten a VHS player that had fallen off a truck. This is before Blockbuster, obviously. It's like 1984 or something, I don't know, '83, '84, something like that. They were just starting to have video rental stores, but something like Star Wars would never be allowed there, maybe come five years later. Anyway, long story short, I was like, "This is incredible, I have Empire Strikes Back." I had my friend bring his VHS over and I make copies of it. My first job was Jason's hot tapes. I would make copies of the Empire Strikes Back and sell them for $20.

David: I thought you were going to say you started rent screenings.

Jason: No, that would be a better idea, actually.

Ben: This is before Jason learned about marginal costs.

Jason: Exactly. I said wait a second, how much does a VHS tape cost? My math teacher says, "Hey, Calacanis, stay after." Oh my God, I'm going to get pinched. He says, "I know you're selling this tape." I said, "Yeah." "You think that's an okay thing to do?" I was like, "No, I probably shouldn't be doing this." "You have these tapes with you?" I said, "Yeah." He goes, "How much are they?" I said, "$20." He said, "Okay, I'll take one." I said, "Here." Somehow, I gave him the tape.

I was watching Goodfellas, I was using this Chrome extension called Scener that we invested in to watch Goodfellas with some fans of the show and I just tweeted, and you guys are like group viewing, like just a Netflix party on Scener. Every time you go watch Netflix with your family, whatever, I put on Goodfellas. I just watched this kid growing up and I was just having flashbacks. I mean, literally, my life was like the first act of Goodfellas.

Ben: Jason, I'm going to deviate from our little outline here a little bit. I know you're a prolific poker player, I know semi-pro is the right word but you play with pros, you're friends with pros. A lot of your investing patterns sort of match poker patterns.

Jason: Informed by, yeah.

Ben: Yeah. Did that start here?

Jason: I was exposed to gambling at a very young age. I didn't participate in it. My exposure to poker came when I was in New York. A friend of mine, Adeo Ressi, who started the Founder's Institute just started a $20, $30 poker game. Myself, Scott Heiferman from meetup.com, Nick Denton had come to a couple of games, Jeff Dodgiest from Razorfish and now, One Drop, which I'm an investor in, just a bunch of the Silicon Alley folks would play cards and I'd play cards with them. It was like one of those card games where people said, "What's better, a straight or a flush?" I had to look it up kind of thing.

Ben: You have the whole card next to you on the table or you're sort of referencing it?

Jason: Yeah, literally. That was like that. It was just an excuse. We used to play down at a place called Forlini's, which is still down in Chinatown, which is like an Italian restaurant and leave it at that. We used to play in the back. If you go to the back table, it says Tuesday poker group, there's a little placard on the wall. Basically, cards too.

Anyway, when I moved to LA and I spent a decade in LA, a lot of my friends like Sky Dayton were playing cards. My friend Kevin Pollak was friends with the actor, he was playing cards. Those games were $200 buy-in, $500 buy-in, so you had to be a little more serious about it. The stakes started going up. I tried to study in the game, I was terrible at it. Then, I started getting invited to this game. This woman, Molly, kept inviting me and she was like, "Oh, Toby really wants you to come to the Four Seasons. Leo really wants to see you." I was like, "Toby and Leo want to see me lose 20 grand, they don’t want to see Jason Calcanis." I never went to Molly's game, but she invited me frequently because I was a fish or a whale as we say in the business. That's when I got exposed to it.

One of the early D conferences, myself, Bill Gurley, Mark Pincus and Sky Dayton were all there to say, "Hey, you guys want to play cards?" We went up to, I think, it was Mark Pincus’s room. We just took the folding table, we started playing cards. Then we started hosting this game at the D conference, which later became Recode, and became very famous as a poker game. We have a weekly poker game that everybody knows about here in Silicon Valley. That's just my best friends, Phil Hellmuth, Draymond from the Lawyers, Chimoff, obviously, and David Sacks, just a really good group of guys who get together. We've been playing virtually now, which is kind of fun.

David: Now, you have a podcast around.

Jason: Chimoff was one of these guests on my podcast who aged and burned the building down. Nobody really knew who Chimoff was until he came on my podcast, we started having him at the events. And then CNBC got their hooks into him, and now he's just throwing bombs for a living.

Ben: I'm sure he gets just incredible paid views whenever he goes on CNBC.

Jason: Yeah. It's just a problem for me, though, because he's like, "Let me come on your podcast and just say everybody's a fraud in venture capital." "I know you made your money and you're retired and running a family office, not your mouth, but I'm raising funds right now. Doesn't really help me to have you on the podcast saying that this is a giant Ponzi scheme." He's like literally pouring gasoline over himself, lighting himself on fire. I gotta step six feet back, burning the building down.

David: This is great because this is the perfect saying to the media business. You go to Fordham, was it after Fordham that, at night, you start as a reporter. What draws you into the media business? Obviously, your growing up years and everything with a [...] then, but starting in the media business as the wedge that brings us all to the Calacanis empire now.

Jason: This is a very interesting thing. What happened was, I would go into Manhattan and I was just in awe of the people in Manhattan, people who were rich or famous, and who were powerful. I had no power growing up, and I was in a very dangerous situation. I was watching people who were powerful and I was like, "Okay, the bookie is very powerful. The head of the Hells Angels is very powerful. This cop is very powerful. I am not powerful, my dad is powerful. He's got all these people in his bar." I was watching money go around. I was just fascinated by these topics, probably too much.

I saw magazines, and magazines are how information was really transferred in the 80s and 90s. I just started subscribing to every possible magazine. In the 80s, I got all the PC magazines, bytes, and all that kind of stuff. Then I started this Esquire, this paper magazine, Time Out New York.

David: You were kind of a geek even back then. It wasn't just that you were reading Esquire, The Source, or whatever, you were reading the tech blogs.

Jason: I was reading all the tech stuff and I was really into technology. I had a PC junior computer that my dad had bought me with cash from the restaurant or poker game. I was doing a little phone phreaking, which is like getting phone codes.

The phone freaking thing was kind of scary. The way Sprint worked in the early days, you just dialed an 800 number and then it asked you to put it in like a 5 or 6 digit number and then you either got a dial tone where it went eh, eh, eh. It doesn’t take a genius to figure out if you put up a war dialer, which is just a random dialer on your modem that dialed all these different random numbers in the morning, you'd have two or three codes. They start using somebody's code until it gets turned off. We were doing all kinds of scams, stealing floppy disks, and selling chess master.

Anyway, I got out of all that and I just went into IT. I worked in the computer lab at Fordham. I was making $250 an hour, which was the minimum wage in 1987 I think, then I went to $350, then I got fired from that job because I partitioned a hard drive and created a hidden hard drive where I put a bunch of video games and I was selling video games.

Ben: So, you're entrepreneurial?

Jason: Well, yeah. I was a criminal. I was selling word perfect out of the Fordham computer lab and I got busted. Then, I started selling SPSSX or whatever that's called, like the 10 disk, a $400 statistics package. This is a really bad idea because now I'm 17, 18.

Ben: It started to get worse than Star Wars tapes.

Jason: It's a little bit worse than Star Wars. I stopped all that and I realized I could just make $6 or $7 an hour and then I went to work for Amnesty International, started making $10, $12 an hour doing IT. IT just opened my eyes to like, whoa. I saw the Internet early, I saw modems early, and it really opened my eyes.

Then, I thought, maybe I'll write a book or whatever. I was watching the Zine movement happen. This meant you published on photocopy paper, and you called it a magazine, and in Tower Records, they had a section for Zine. I used to go there, look at these crazy Zines and 2600 was one of them. In 2600, they would just self-print it, self-publish it, and it was just hacking stuff.

Ben: Is that named after like 2600 baud?

Jason: Hertz, yeah. I think it was Hertz which I think when Captain Crunch made the whistle, that would then give you dial tone. I think it was the 2600 Hertz. We can look it up online while we're here. But anyway, they used to always meet Manhattan in the city, The Citibank building, the lobby where the phones were. There was a sort of culture in New York of hacking and media at the same time.

I started a magazine called CyberSurfer about dial up because somebody had told me that Star Log and Fangoria, that magazine, wanted to create a magazine about CD roms and dial up. I started CyberSurfer magazine, which nobody knows about, and I got in a fight with the publisher after five issues. He sued me because I had trademarked the name. He didn't know I trademarked the name, I had no contract with him, he was 23 years old, the whole thing blew up. I was like, "The Silicon Alley thing's going to become something." I started Silicon Alley Reporter. It is a 16-page photocopy and Fred Wilson bought the first ad in it, along with Jeff Dachis from Razorfish.

David: No way. He bought an ad for Flatiron?

Jason: For Flatiron Partners. $250, and he bought 4 ads at once. He gave me $1000.

David: Advertising like their services?

Jason: He just put a logo, Flatiron Partners. This is 1995 and I got two people to give me $1000. I printed it out, it cost $2000, and I just started handing it out at parties. I didn't understand how silly I looked walking around town with a luggage cart like I was a street salesman with a stack of photocopies and I would drop them off at everybody's offices. Once I got a thousand copies of this, I didn't have the money to ship it anywhere. I would go to Razorfish's office, I would go to Site Specific, I would go to iVillage. I would go to all these places and ask them if I could put 20 copies in the reception area and they'd say, "Sure."

David: This is amazing. You're going to these early Internet companies.

Jason: Dropping it off and they would say, "Oh, you're dropping those?" I'd say, "Yeah. I'm the delivery boy." They'd say, "Oh, that's very cool." I said, "I'm also the editor," and there was a joke in the magazine. I put the CEO, editor, and delivery boy on the top.  What it was, was that it was quite charming to people that I believed in it so much that I would carry it with me. This is why I wouldn't want people to say they think I'm a huckster, hype man, or a fraud. People bought that back then because I would go to parties with a stack of them in my hands and I'd be handing them out to anybody who would take them because I just wanted to be famous, I just wanted to be powerful, I just wanted people to know my name.

Ben: It's so akin to the early days of blogging. I mean, it's just analog blogging where I'm sure any real publisher was looking at this like it's some kind of joke. It's not a magazine, this is like putting it on a photocopy paper.

Jason: That was literally what people thought of me. I said to them, "No, I have a full page photo on the cover. That's what makes it a magazine." They said, "No, it's a newsletter." I said, "No, newsletters have text on the cover of the magazine. This is a full page photo." A guy named Karol Martesko emailed me. He saw the email in there and he said, "Hey, I do this magazine called RES and I do this Filmmaker Magazine." He was doing Filmmaker magazine, et cetera, and he knew how to do magazines and he was like 10 years older than me.

He said, "I can print this on real magazine paper for you." I asked how much it cost, he said,  "It cost $30,000," and I said, "I have like $20,000 in ads now,” this was by the fifth issue. He said, "Don't worry about it. I can put it on my credit. I know the person,” he printed it for me, just for free, just to do it for me. He's like, "Do you have the money? You have to pay the printer." I was like, "Yeah, I got to collect the money from the advertiser." I went around and just asked people to give me the money and I would bring him $2000 or $3000. Thank you, Karol Martesko, shout out, we’re still friends to this day. He basically mentored me how to do that.

At a certain point, my assistant Linda Miller said, "John Winter called." I said, "Okay." Yeah. "From Rolling Stone," and I was like, "Yeah." It's like year two of the magazine, I say. "Okay, great." Then I went to lunch and then when she got back, "Do you want to call him back?" I was like, "No, I'll call him tomorrow." I come back the next day and she goes, "Did you call John Winter back?" I said, "I don't want to do any press right now." She goes, "No, no. He's not a journalist. John Winter created Rolling Stone." I said, "Oh." "He wants to meet with you."

I went out by meeting John Winter and he had all my magazines on his table and said, "Hey, I want you to come work for me and do a magazine with me. I want to do a digital version of Rolling Stone." I said, "No. I want to do my own thing." I was up in his office and he had marked all the pictures.

Ben: Jason, wouldn’t that have made you famous? Why wouldn't you do that?

Jason: I realized I would be a number two and I never wanted to be number two.

Ben: It's about fame and power.

Jason: All that. Fame, power, money, fame, power, money—that's all I wanted. I just wanted to have fame, power, money, all of those things. I'm just like, "Number two, no." But I said, "What would you change about that?" He's like, "This, this, and this. What's your budget for photos?" I just took my camera out and I said, "I have this camera with the Carl Zeiss lens, I got a [...] photo." He's like, "Okay, yeah. Let me get you on the phone." He called Frank Micelotta or somebody and he was like, "What's your budget for photography?" I was like, "Well, I take all the photos myself." He goes, "Well, what can you spend on a photo shoot?" I was like, "I don't know, a thousand dollars?"

He just called somebody, he was like, "Can you do a photoshoot for this kid for the cover?" The person was Frank Micelotta or somebody who was like, "Sure, John. I'll do it for you." He set me up with the photographer, we then did the cover photos. The guy said, "You do understand that this is costing me a thousand dollars to develop the film and my photo assistant and I'm making zero dollars on this." I was like, "Oh, I'm sorry." "No, no. I love what you're doing. Can you help me set up my Internet connection?" I said, "Yeah, of course."

All of a sudden, I became the king in New York because the internet hit. Magazine went to 75 full time people, $12 million in revenue. I built up my credit cards. I was on Charlie Rose, I was on the cover of The New York Times. In three, four years, I went from being a nobody to writing for Paper Magazine. When I would walk into any club or whatever, people knew what Silicon Alley Reporter was, I could get into any party. I made a list and ranked the top 100 people in the industry, and I ranked it just to tweak people. People would beg me to move up 10 rankings and I got everything I wanted.

Ben: The list is still doing that to this day.

Jason: Yeah. I did my first event in 1995 called Ready Set Pitch. You can look it up in The New York Times, there's an article about it, Ready Set Pitch. I ask people to pitch their best idea for a startup and tell the audience. It's pretty fun.

David: As you're getting all this power, what's going through your mind?

Jason: More.

David: More? Are you thinking about, I parlay this into investing? How's it taking shape?

Jason: I wanted to be the next media mogul. I wanted to be Eisner, I wanted to be like Iger, I wanted to be Ovitz. I wanted to be somebody like that because the media was power back then, it wasn't really about the tech companies. The tech companies were kind of like this cute little thing on the side. That's what I wanted to be. I wanted to be one of those media executives and be the CEO of a giant media company. Barry Diller, someone like that.

David: You end up selling Silicon Alley Reporter to Dow Jones, right?

Jason: Yeah. It kind of collapsed and we wound up selling. I got two years of salary. The year before, Alan Mac went from internet.com and offered me $20 million for it. I own like 85%, 90% of the company. It was like the one of the most difficult times of my life because I had my chance to be rich and then I was poor again.

David: Was it the dot-com crash?

Jason: Yeah, the dot-com crash and then 9/11. I was there for 9/11, my brother's a firefighter. We didn't know where he was. That was the second fire he ever returned to, so it was a very scary day for me. After 9/11, I was kind of left with this, "Oh, everything is a fraud. Everybody thinks I'm a fraud. Everybody thinks I got lucky."

David: You had all this power.

Jason: And it was gone.

David: Did it disappear? Did it really disappear?

Jason: It really was trying for me because everything I had done had gone up into the right and everything I touched turned to gold. When you have the Midas touch and then you start touching stuff and nothing changes, it really is humbling. It's literally like you go from feeling like you’re superman, and then you can't fly. You're like what's going on? Is there a kryptonite in my shoes or something? It was a very humbling inspiration for me and it made me really angry. I remember it vividly, I just felt very angry at the world and at myself for not taking that $20 million.

David: You were specifically angry about passing on.

Jason: I was angry on passing on that, I was angry that the market collapsed. I was angry about 9/11, I was just angry about everything. But I also had skills at that point and confidence. I said to myself I am coming back and I'm going to come back and I'm going to dunk on everybody. I will show everybody that not only am I not a fraud, that I can do this again and I could do it quicker, faster and better."

I started looking for an idea and I was studying, studying, and studying. Two people who worked for me after the whole thing collapsed, had moved on and started blogs. They were doing really well with their blogs. One of them was Rafat Ali, who is doing this paidcontent.org. I had admonished him because he started it when he was working for me.

David: I didn't realize Rafat worked for you.

Jason: Yeah, he was one of my writers. I think that was his second job. He had worked for inside.com, and then for me. He had owned the inside.com domain at one point so there's a whole sort of history there of who got to own inside.com at the end of the day. I could tell that story too at the end. Xeni Jardin went to work at BoingBoing and I found out they were both making four or five grand. I was like wait a second. I think that's more than what I was paying you.

Ben: Is that per month?

Jason: Per month.

David: Just on ads on their blogs?

Jason: Exactly. I was like wait a second. These people are working in their underwear, they have no editor, and it dawned on me. The right writer and editor is a hindrance. They're taking out what's special about what the person said. This is like taking out the production. It's like Bob Dylan just on stage with a guitar. It's better when it's not produced, it's better when it's acoustic. There was that thing that was going on, MTV had unplugged. I said this is MTV Unplugged for journalism. Blogs, it just clicked in my mind, clear as day. When you saw Kurt Cobain on MTV Unplugged, you wanted to throw the other records away that were studio produced. I said blogging is going to be a thing.

I started looking for other blogs and I knew this kid, Nick Denton, who started First Tuesday and he started Gawker. I said, "Hey, Nick, you want to have lunch?" We went for lunch. I said, "Think about doing a blogging thing. I think this could be big. If somebody did it for business, it would be huge. You're doing this Gawker gossip thing, I'm not interested in that. But if somebody did a business version." He wrote a blog post, he said, "The worst thing that could ever happen to blogging is Jason Calacanis bringing his unique brand of whatever to it."

David: Corporate sellouts.

David: Well, that's what he said because I was like this can be an advertising juggernaut, because think about it, you get rid of 80% of the staff. You just have the one great writer and one great salesperson.

Ben: Did Valleywag exist at this time?

Jason: No, no, no. Valleywag he created much later, it was just Gawker.

David: I worked at The Wall Street Journal, you did, too, for a while. It's a wonderful organization, there are a thousand people in that building. You don't need that to do this.

Jason: You don't need a building, you don't need middle management, you don't need anything. I was really taken by Denton's vision for this. I was like are you going to do more? He's like yeah, we're doing this. We’re going to do a political one, I  think. I'm going to do this one on gadgets like the fetish thing in Wired magazine, we're going to just make that into a whole thing. I was like that's interesting.

He wrote his blog post trashing me, I was like, "You [...]." I'm a pretty aggressive guy. My partner, Brian Alvey, who I convinced to do this with me. It's 2003 and none of us had any money, we're doing it all for free, the economy was flatlined. I said I'm going to destroy him.

Ben: It turns out you were not the last person to have that.

Jason: No, no, no. I might have been the first, but not the last. I said I have to destroy Nick Denton. How am I going to do this? I said I know, talent. Nothing worse than losing talent. Elizabeth Spiers, she's writing for Gawker, I'm going to make a run at her. I had heard that he was paying the writers $1500 and the MacBook Air had just come out.

I contacted Elizabeth and I said let's have coffee. She agreed to have coffee or something. There's like a photo of it, actually, of me talking to her at the park that somebody took in the early days. She's looking at me like I am the Antichrist. I was like you are a unique talent. Nick Denton will never give you equity, I will give you equity. You will become a millionaire. I'll give you a MacBook Air and I'll give you two grand a month, which is a 33% more raise.

She's like, no, I'm going to go work for New York magazine. I was like that's the worst career move you could ever make, Elizabeth. Magazines are going to die, blogs are going to take over. There's no way magazines can ever keep up with blogs. Whatever they print is going to be old news, and you're already proving it. You're number one at blogging, and you're going to become number 500 at a magazine. She says it was always my dream.

David: The blog story, this is going to be a big theme that we'll come back to later with what you're doing now. Before the brand was New York magazine, The New Yorker, Wall Street Journal, New York Times and everybody you wrote for, it was just a faceless name. In the blogging paradigm now, the blogs don't matter. It's the writers that matter.

Jason: Absolutely. So, she wouldn't do it. Xeni Jardin said to me, oh, you picked the wrong target. I was talking to her because I was trying to recruit her. She's like no, no. I love this Boing Boing thing. I don't want to do anything commercial. I was like all right, that's fair enough. Who should I target? She goes you picked the wrong target. I said what do you mean? She was like oh, Nick's not making any money on Gawker. Gawker doesn't make any money, loses money. I was like okay, tell me more. She goes, 100% of revenue is coming from Gizmodo. You know Peter Rojas? I was like yeah, I've heard of him. She said that's the one you want.

I went to Peter Rojas and I called this guy who was running Jewel Bako, which was like a fancy sushi place on the Lower East Side. He was the owner, and his wife. It's like a pretty hot ticket. I asked Peter to come and have sushi with me and his wife, Jill, or his girlfriend at the time. He says can I bring my girlfriend? I said of course.

We go there and I'm prepared to knock their socks off with some Omakase. I said you guys have anything in terms of like [...]? “We're vegans.” I said okay yeah, that's no problem. I said give me one second. I went back to the guy and said listen, I'm trying to close this deal. It's really important. They're vegan. He says don't worry about it, I'll be right back. He runs to the Korean grocery store, he comes back with two big shopping bags full of things, and he makes them the most amazing Omakase vegetables.

I said Peter, Nick Denton is a bad actor. Equity is what you need. If you join me and you create a Gizmodo killer, I'll give you equity in the company, you'll become a millionaire, and we'll be in it together. You'll be a partner. He goes, "Nick said he's going to give me equity." I said he'll never give you equity. When did he tell you that? He said, "They told me that like six months ago." I was like yeah, how's that going? I said, I will give you equity on day one, fully vested, everything, just like me. He said, "Okay, let me think about it." He came back and he said, "Okay, I'll do it." I said great.

David: By the way, at this point in time, I'm probably 17, 18, 19 years old at this point, I'm reading Gizmodo every single day. I always wanted to know what happened. How did Engadget become bad? I never knew.

Jason: Yeah. He said, "Oh, my girlfriend Jill made a logo. Jill made the first Engadget logos." I said great. He said, "Can we pay her for it?" I was like, "Sure, we can. What did she charge for logos?" He's like, "$300." I said give her $500, it's fine, because Mark Cuban had given me $300,000 for 15% of Weblogs Inc.

Ben: How'd you get to know Mark?

Jason: I had known Mark because I had written Broadcast.com, it's a billion dollars worth of hot air in Silicon Alley Reporter. I said your revenue is like $10 million. Do you know what the revenue is next? He was like, "No. You're a publicly traded company, of course, I know." I said, "Why don't you wait?" Then, the revenue went from $10 million to like $60 million, like quarter of a quarter. I was like, "Okay, it's not a billion dollars and hot air." I did a mia culpa kind of situation. We became good friends, Mark and I, for a long time.

He put $300,000 in. We started Blog Maverick for him. Brian Alvey came up with all the good names, the best collaborator I ever had in my life, and Peter. Peter said listen,  I feel really bad about the stuff with Nick Denton. I said you shouldn't feel bad, this guy promised you equity and he gave you nothing. You've given him this incredible brand that's going to become worth millions of dollars, you should feel zero guilty. He robbed you of your vision and we're going to take it back. He said yeah, maybe you're right. I was like yeah.

I've been in fights. If somebody sucker punches you, you have to teach him a lesson so they don't do it again. Because if you don't teach them a lesson, what I learned is they will come back. It has to be such a beat down, it has to be so painful that the person says, I should have never sucker punched that guy. That's how powerful the beat down has to be. It can't just be retribution of one for one. If they punch you, you have to annihilate them. This is what I learned about violence when I was growing up and I've since disavowed this but this is literally what I saw on the streets of Brooklyn in the 70s and 80s.

I said when are you going to tell Nick? He said he's been working so hard for like a year and half or whatever, he's just burnt out. He's been working seven days a week on this. He said he's going to take his first vacation. I said rally? He said yeah, he's going down to Brazil or whatever. All these famous people are going. I said when is he going? He's going Sunday. I was like oh, what time is he leaving? He said I don't know what time he's leaving. I looked up online, flights to Brazil, whatever, I couldn't figure it out. I said listen, I want you to write a blog post about this. We're launching the site at 2:00 P.M on Sunday." We literally launched the site the first day of his vacation. He landed with his people going Gizmodo has no blogger. We have all these advertisers and there's a competitor.

Ben: Oh, my God.

David: Wow.

Jason: That was the approach I used to take to competition. I don't do that anymore. By the way, the postscript to that is Denton and I became very good friends after that for a long time and still are. I consider him one of just the great publishers.

Ben: You can't graze over that. How did you become friends?

David: How has that happened?

Jason: He reached out afterwards. He wrote a blog post actually saying, "Jason really stuck it to me but we're going to be great competitors." I launched Joystick and then he launched Kotaku. Then, I launched Autoblog, then he launched Jalopnik. We were head to head. We always had three, four or five times the traffic as him. But it created this rivalry that everybody followed. We became Coke and Pepsi, it became a big media company versus a media company, and everybody was following great competition between this brash Brooklyn kid and this aloof quiet.

David: It probably made you both better.

Jason: It made us incredibly better. Literally this quietly gay, very understated versus this brash Brooklyn bulldog. It just played really well in the press. If you type Denton Calacanis into Google and look at some of the posts from back then, it's hilarious, it was just a good time. But he reached out to me. He said Jason, I respect what you did there. I understand. Best of luck with Peter. We went to have coffee and whatever, we're sitting there and he said I have a proposal for you. I said, yes? I think that if we're going to have this spirited competition, that's great. Well, good for the game and all that. You are a worthy competitor.

David: And you're just waiting for the knife to go?

Jason: Yeah. I'm just like okay, this could escalate. He said I'm proposing a no poach agreement. I said what does it mean? He goes there's so many writers out there, we're not enemies. We're fighting against just the magazines and the newspapers. We're up against The New York Times and it's enough competition for us. I said that makes a lot of sense. We agreed to not poach each other's writers.

Ben: Jason, I got to tell you, just a quick personal note, and this will surprise zero longtime listeners of the show. I think the number one website that I checked every single day at high school was The Unofficial Apple Weblog.

Jason: TUAW. There's an interesting story to that. We called it the Apple Weblog, and Steve got upset.

Ben: No way.

Jason: Yeah. We had a phone call and I said okay. Actually, we had called it The Unofficial Apple Weblog and Apple called, Steve told his people to call. We had a pretty close relationship with Steve, or at least Peter did. Steve responded to our emails.

David: Steve always realized power in the media.

Jason: Well, yes. I mean, Steve was the master. I had spoken to Steve in person two or three times and over email, half dozen times during the Engadget time, Peter much more, he really loved Peter. Steve was really great. Anyway, they had some sort of problem with it and they said, "You can't use Apple in the name." I said okay, this was back when you could buy domain names and I said The Unofficial Apple Weblog. This can make an acronym, TUAW. Then, just build a logo and I think Jill Fehrenbacher—Peter's now wife, mother of his kids—she built that one as well.

Ben: Took the little leaf of the Apple and just threw it above the TUAW and called it a day.

Jason: I think that was Brian Avi's joke, it sounds like it's French so let's put an accent on top. I was like sure, let's troll them. We do shows like a lot of crazy stories like that. Long story short, that company lasted 18 months, we sold it for $30 million to AOL.

Ben: This is all of Weblogs Inc.?

Jason: All of Weblogs Inc., we had $100,000 in revenue to date and probably $200,000 looking for it. Depending on how you count that, they paid a big multiple.

David: But the real question, though, is like looking back now, was that actually a good idea to sell?

Jason: Of course, that gave me the money to become dangerous and it gave me that foundation. The first $10 million is the hardest. Once you get that under your belt, you're dangerous, nobody can stop you. I was already dangerous because I didn't care but once you get the cash, then you really have the ability to not care.

David: Right. Feel free to disagree, but if you hadn't sold that, we're still an independent company. It will be worth a lot more money today.

Jason: Listen, here's the joke. Denton wound up selling I think for $150 or something like that. Half of it went to this new company that had put in the bridge financing, and then some amount went to Hulk Hogan and Peter T.L., and then some amount got left over. I think we wound up netting about the same. It just took him 12 years, it took me 18 months.

David: But for you, you got to start writing your next chapter and you're back in the game.

Jason: The great thing about Silicon Alley Reporter crashing and burning was I learned very early on that I was more than the brand, because the brand Silicon Alley Reporter had gotten so big, and I was so identified with it. People would call me the Silicon Alley Reporter, that was like what people refer to me as. Because it crashed and burned, I was forced to disconnect myself from that, and Bob Dylan was always my favorite artist.

I had always studied and been obsessed with how he went from folk to electric, and rock, to gospel. He just kept reiterating and then he started collaborating with Mark Knopfler of Dire Straits and did Empire Burlesque and all these other really infidels, these very interesting albums. I saw Bob Dylan maybe 20 times in person and he was always my favorite. I was like don't look back. I just told myself, you cannot look back. I never look at my press con. The amount of press I got in the 90s between being on Charlie Rose, being on 60 Minutes, all that stuff, I knew that I was never going to top that. That was a moment in time and I didn't want to top it. Who cares?

I put all that press in boxes, I taped it up. It's literally in my brother's garage in New York still. I don't want to ever look at those clips. Don't look back, only forward. Next brand, next brand, next brand. Don't worry about the last brand. That's how I looked at myself at that point. I looked at myself and I said, "You know what? Kurosawa did all those samurai films and then he went into noir and the noir stuff was better. No one even knows about the noir, the film noir stuff he did. High and Low, Stray Dogs. He was kind of soft.

David: The next chapter, you get money, you're back in the game after weblogs. Is that when you move to LA?

Jason: I had been living in LA right after we started Weblogs Inc.

Ben: At this point, do you still want to be famous? Once you've adopted this mentality of don't look back, are you still fame driven?

Jason: No, fame wasn't. I really wanted to build things. I had gotten into the mode of building, not to say empire building.

David: Was that from hanging out with like Silicon Valley types?

Jason: I think it was. I think also when you get the wind under your belt, it takes the edge off. I always tell that to young founders like, winning really takes the edge off, and you will be successful. It may take two or three companies. If 60%, 70% of these things fail, don't worry about it. Just start three or four, you're going to have a hit. Nobody remembers. When people meet me, they don't know what Mahalo is, they don't know what Silicon Alley Reporter is, they don't even know this stuff. Nobody has any sense of history, but people are all caught up in their own history.

Ben: I, for sure, have a Mahalo account.

Jason: Yeah. Mahalo did really well. That's a whole another story. That's another one where you build a brand that becomes so big and you kind of get associated with it, and then you have a big flame out. It's like, who cares? Just move on, next one.

Ben: We'll get there but I do want to talk about the Mahalo, Pounce, Twitter, that sort of, Tumblr like. Let's put a pin in that. David, keep running with your line here.

David: This is a diversion, side track, but we got to cover it. When you're in LA, how did you meet Travis Kalanick?

Jason: When I was doing Silicon Alley Reporter, we had started an addition called Digital Coast Reporter. I had interviewed Travis when he was doing Scour, which was his first company.

David: Oh, wow. Yeah, which was sued.

Jason: He got sued and all that stuff and he told the famous story. That was the night, allegedly, when Michael Ovitz’s people came and were in the audience at my event—I used to do a CEO interview and I interviewed him—that was that famous story. We'd always been friends, we always liked each other. That's how I wound up investing in Uber because he was raising money for it, he wasn't going to be the CEO and he was like hey, I'm doing this company. It was Ryan and him.

Ben: And Ryan was CEO?

Jason: Ryan was going to be CEO and then I was going to invest a little bit of money and I was helping Ryan raise money. Then he said you know what? I'm going to be the CEO. I was like, is that a little shaky or whatever? Then, I just made it as the first gap ad and I introduced, I think first round and definitely Cyan. We're at the Open Angel Forum, the little event I used to start where I matched angels.

David: You're running Mahalo at this point.

Jason: Yep.

David: I think it really was Uber, the very first scout investment.

Jason: I think it was the third.

David: Third, okay.

Jason: In the first seven, there were three unicorns.

Ben: And this is Sequoia Scout?

Jason: As a Sequoia Scout, I had the first seven. Uber, Thumbtack, and Datastax. Three companies, three unicorns, one of them public deck richaun. We'll see what the other two do but I think the two got a chance to go public too.

Ben: Our listeners understand here, and we didn't list all the companies that you've angel invested in, but now we're going to keep touching on it as we go. When you're investing as a scout, that's not your own money. How did economics work on that?

Jason: No, it was 50/50.

Ben: It's 50/50 basically splitting the carry, the profits of that.

Jason: Yeah, the profits. That's crazy. They since dropped it 35 or 30 like a normally high carry.

David: How did this happen, though? Did you go to Roelof or did Roelof come to you?

Jason: I had emailed Sequoia and lobbied them to invest in my friend's poker game, Zynga Poker. My friend created a virtual poker game, Mark Pincus, called Zynga. I said hey, you should invest in this. They couldn't get there.

David: You were a portfolio entrepreneur?

Jason: I was a portfolio company. I said, "Hey, this Twitter thing's going to be big and the Zynga thing is going to be big." I was pushing Roelof, and I have an email where I told Michael Moritz you have to get the Twitter deal, you have to get the Zynga deals. These are very important companies.

David: What did they say?

Jason: They went the next day, actually, and tried to close Twitter, but they couldn't get their head around the valuations or whatever it was at the time. I'm not sure of their exact objections. Both of those cases, Fred Wilson had invested and actually introduced me to Mark Pincus. Mark Pincus, Evan Williams, and I were talking about Sequoia or Fred Wilson and I was a Sequoia CEO. I said listen, when you are Sequoia CEO, your phone rings off the hook. Everybody wants to do your series B. I raised my series B from Mahalo before launching the product six months after I raised my series A. I went from an $11 million valuation to a $100 million valuation.

David: Wow. And this is in 2006?

Jason: Yeah. 2007. 2006–2007. Mark Pincus and Evan were like how did you go from $11 million to a $100 million before the product launch in 6 months? I was like I don't know. They were going for $30 or $40 million each, and they were further along, and their products were launched. Fred Wilson's East Coast is awesome. He's been one of my best friends for a long time, he helped me get in business. Also, Joanne Wilson, his wife, worked with me at Silicon Alley Reporter and the reason she was successful was she was the salesperson. It was two bulldogs, she's a tiger.

Ben: She's now a great angel investor herself.

Jason: Absolutely, yes. Just one of the great collaborators I ever had in my career. Long story short, I said listen, you're picking between Fred who's the up and coming hustler, who will work hard, but he’s East Coast. Fred would tell you to take Sequoia's money. But I think Fred is great too so I actually think it's a coin toss you can't lose. They were both struggling to get that deal. I think that gave me the credibility with Sequoia that they said Jason keeps sending us these great deals. There's many more companies now, Jason has this collaboration with Arrington for TechCrunch50 and they broke up. Now, he's doing this LAUNCH festival on his own.

Roulouf came up with this idea, what if we raise like a $2, $3 million fund and we just gave everybody the ability to make $25,000, $50,000 checks. There was an issue of signalling back then where if Sequoia gave you money and they didn't give you the next round, your company was dead. That was the end of your company.

David: Obviously, the check is do what you did and just raise your next round before anything even happens.

Jason: That works too. If your venture fund did not follow on, you were damaged goods and nobody else would. The higher profile the fund, the higher profile the signalling risk. Sequoia was acutely aware of this. They just said the Scout's program we would announce, it will be on the DL, you can tell people what it is when you make the check, you don't have to, you can. We just weren't sure what to do.

I just went around town. I started this thing, Open Angel Forum, and I tried to kill something called Keiretsu Forum which was charging people $5000. I went to war with. They got really upset and called Michael Moritz on the phone and told him, “Who is this employee of yours?” He said, “He's not an employee of ours.” "He said he's going to kill the Keiretsu Forum." He's like, "Why would he say that?" Moritz called me and he said, "Did you tell them you were going to murder them?"

Ben: You really love these situations where you take a mild-mannered brit and you really anger them in a way where they would have to talk to you.

Jason: No, no, Michael Moritz was not angry. He's like, "Why would you tell them you're …? I'm just curious." Moritz was cool as ice. He's the greatest. I said they're charging founders $5000 to meet angel investors. He goes, "Oh, that's terrible." I said yes, so I want to kill them. He's like, "Okay, carry on." The phone call was great.

David: So great.

Jason: Anyway, I started Open Angel Forum and I just started Thumbtack, Style Seed, Datastax, all these Science posts, all those great companies just came.

David: And Uber, actually.

Jason: And Uber came. On the spot, myself. Saka was there but Saka knew Travis before. I introduced Cyan Banister to Thumbtack and Uber, and has always been very gracious about giving me credit for that. First round, I think I introduced them but I think that [...] or maybe somebody else in the firm has heard about it as well, who knows? Success has a million fathers.

David: What's going through your head as this is happening? You're running Mahalo, Mahalo is super high.

Jason: They anointed me, Sequoia anointed me. Now, I became dangerous because now, I wasn't just East Coast, now I was West Coast anointed. You understand?

David: Yep.

Jason: Nobody really had ever done that. That was a very unique thing. I knew it.

Ben: I think a lot of our audience, probably, has not ever heard of Mahalo. Fill us in real quick on that.

Jason: I had this idea. I emailed Michael Moritz, John Doerr, and Mark Cuban and I said, "I have an idea for my next company." I didn't know any venture capitalists, even through all this, I really didn't know any of the West Coast venture capitalists. But I know John Doerr and Michael Moritz are the number one and number two, probably in reverse order, Michael Moritz and John Doerr but anyway, let's stop arguing about that.

I had run into Moritz one time at a conference and he wouldn't remember me but I emailed Michael Moritz and I said, "I have my next idea for a company. I sold my last company to AOL for $30 million, 18 months after I started it. Would love to get your advice." Shortest email possible with a little microphone drop in it. Moritz called both of my phone numbers, emailed me, and his assistant called me all within one hour of me sending the email.

David: I was going to ask how many minutes it took him to respond.

Jason: John Doerr, somebody on his team, got me the next day. I was in both their offices next week and also, Mark Cuban—because I think when we sold, we turned his $150,000 into $5 or $6 million so he said, put me down for a million or whatever you want, Jason. I think there's actually a second payment coming and he just CCed his attorney and said, "Whatever the second payment is for the AOL thing?" I was like, "A million bucks." He said, "Just throw it into Jason's next thing," which is a very Mark Cuban thing to do.

David: Did you actually have the idea or did you just send the email?

Jason: I did have the idea. My idea was—Wikipedia was the thing at that point in time—I went to Wikimania which was their conference up in Boston. I studied the Wiki Soft, I started playing with it and I made a little proof of concept where Google was dealing with web spam at the time and the order of the links weren't very good. My wife's Korean and I had heard about Daum, daum.net, and comprehensive search in Korean.

In Korea, Daum owned the blogging company and the picture hosting company. When you do a search, they would show pictures, they'll show links, pictures, and blog posts on one page. I made this comprehensive search and I said, "It's going to be called 20.com., the Top 20 links for any keyword."

I went into the meeting and I put three pieces of paper on the table—I don't think I ever told the story—and I said, "iPod. Look at these 10 blue links, these are the search results. One's Yahoo, one's 20.com, and one is Google. Which one do you like best?" Moritz and Roelof pointed to one and I said, "Turn it over." It said 20.com. I said, "Turn the other two over." I did it again and I said, "Kauai vacation," and they picked mine again. They said, "Why is yours the best?" I said I had a human look at the Google result and made a Wikipedia page. Mark said, "That's a great idea. What are you looking to do?" I was like I want $3 million for 25% of the company. He said, "Okay. Work with Roelof, " and he walked out.

He was on the board of Google and he's like, "I can't do this but Roelof can, he's not competitive with Google." That was the start of it. Then, my friend, Elon, put some money in. He was working at a rocket company, he just called me and he's like, "I think you're smart, I'll put some money in." Uber put some money in, CBS put some money in, just a bunch of people, whatever. I was on the top of my game, got the company at $10 million in Google AdSense revenue and then, Matt Cutts felt we were getting too big and eHow is getting too big.

David: There was also Cosmics, right?

Jason: Yeah. Cosmics, wikiHow, there was a whole cohort of us making content.

Ben: Let's pause for a minute, just to catch a growing up on Matt Cutts. Matt solved a really hard problem for Google over the course of a decade which was basically link spam. How do we stop people who are gaming Google, getting too high in the ranking, and getting too much traffic in abusing us? I think Matt actually is leading a really important initiative now in the Federal Government at the US Digital Service.

Jason: What will happen is our pages were so good that Kauai vacation would rank in the top five and people would blog about it, link to it, and ask us to update the links and then we started putting contents in the pages so we had content on the pages. Basically, Google, this was all in their roadmap but what I created was a Google's roadmap 5 years, 10 years before they got there.

David: Right. Because if you Google Kauai vacation on Google, you get this.

Jason: You get that now. I was 5 years or 10 years ahead of them. Moritz had said, "I don't think Jason is right. We have to debate at a conference at one point." Somebody asked about Mahalo and he said, "I don't think humans can scale, we got to do it with robots." Then, they basically took 90% of our traffic away and the punch line was, they took 90% of their own revenue away because the way we're monetizing was with their tools.

I called up everybody that I knew there. I was like what are you guys doing? You just killed my site. I have to lay off a hundred people. We got in this big public spat and they're like, "Yeah. We don't know." I was like we’re partners. Matt Cutts says, "We don't have partners." I was like, "I forged an email from the AdSense Team that said Partner Meeting, Partner Lunch, partner this, and partner that." Yeah, that's a different group. I'm like, "But you're so Google." They literally took everybody who would eventually become competitive with them and they just neutered us. This is why Google will face anti-trust action like they did in Europe, maybe here eventually, I think Yelp's right.

What they did to Yelp was equally bad. They basically studied us, copied us, killed us. But I learned a really important lesson there which is don't have a dependency. The problem was they just think they're so quick, I was like we're on a $10 million run away. We're making just a lot of money everyday. The peak in AdSense, this is all honky [...]. They'll never shut us off, we're giving 30¢ of our dollar to them. I was wrong, they had a long game. They just didn't want Mahalo.com and other things to exist so they killed us. I pivoted Inside and it's still going today, 12 years later. It's actually doing really well for email newsletters.

Ben: What’s all this new again.

David: What's going through your head at this point in time?

Jason: The scouts thing, I didn't take too seriously, I just thought it was a fun diversion. They got about halfway through the program and Roelof said to me, "Nobody else is making investments. Sam did Stripe or something, you did Uber. You did four and Sam did two. Sam Altman had done Stripe." They said, "We may not do another scouts thing. We got a couple million left in the fund." I was like, "You don’t have to tell me the buffet is open."

David: Wait. In the fund are Uber, Stripe, Thumbtack.

Jason: Datastax.

David: Datastax.

Jason: That fund is the greatest fund in Sequoia's history on a percentage or term basis, I believe, I don't know that for sure. Not on cash, on multiple on cash. On multiple on cash, it's definitely in their top five, I would think.

David: And they're saying to you, "We don't know if we're going to do this again."

Jason: Well, it was very early days, we didn't know. They're like, "We still have this money left in the fund.” Roelof said, "If you want to make some more." I did 19 investments, I put 700 to work, and became worth over $100 million in total, largely due to Uber. My friend Naval had been coming to the Open Angel Forum because he was doing venture hacks and he was an angel investor.

He said, "I'm going to start this thing AngelLists." He's kind of competitive so I was like, "No. You're doing online, online is done. Nobody's going to invest online, it's all in person." He's like, "Yeah, I disagree." I was like, "I don't know, Naval. I don't see anybody investing blindly online." He's like, "This is new thing, SPV is a syndicate," I was like explain that to me. He explained it to me and I don't understand.

He explained it to me again, he explained it to me again, and then he sent me a link and it was angel.co/jason/syndicate and he said, "Start with syndicate here." I filled out the stuff and I tweeted it. He called me, "What are you doing?" I said what? He said, "You're not supposed to tweet it." I said it says on the page, tweet your syndicate. "I didn't launch it yet, I'm launching it on Monday." I said oh, I'm sorry. Do you want me to take it down? He’s like, "No, don't worry about it. TechCrunch got the embargo but they're upset." I said nobody's going to see it. It's on Twitter, nobody's on Twitter.

Ben: It's also so interesting that, in your head, you're like, I don't get it, why would people invest alongside another person without ever meeting the company in person, and that's what Sequoia was doing with you. They are giving you money.

Jason: Yeah. Listen, Ben. I'm not saying I'm the smartest guy in the class, I never said that, that's not my claim here. I'm a hustler, that's why I made that self-deprecating joke in the book that you, so nice, to read. I am a hype guy, I'm not a complete fraud, that's kind of me being self-deprecating. I've definitely been lucky and I'm definitely good at hyping things. That's why Naval sent me the link.

Ben: I think we should have glaze over this. The set of people you've already talked about, clearly there's something special about the way you build relationships. You’re keen to spot yourself as a hustler, as someone that works hard, as someone that is extremely driven. But I think the way that you think about this is oh my God, are you good at building relationships and making it so people want to help you? Helping them, knowing that over the next 10 years, that's going to be a good bet.

Jason: I think enthusiasm is contagious. I've always been very enthusiastic about what I do. I always pick up the check and I always set up dinners with a lot of people. I always introduce people to other people with no intent of capitalizing on them. Tim O'Reilly invited me to a food camp early on where Larry Page came in his helicopter and landed it outside of food camp. I was like Larry, what are you doing? You realize how douchey it is to land from a helicopter? He's like, "You think so?" I was like dude, come on man. Just land it at the airport. We know you're rich, you don't have to fly your goddamn helicopter from Palo Alto. He's like, "You're probably right, Jason."

He was pretty funny. But he did really have them clear the field so he could land his helicopter. He was taking helicopter lessons at the time. I'm not speaking at a school, he literally landed his helicopter there.

Anyway, Tim O’Reilly said something about if you attract very little from the network you're building, you do really well, but you don't need to attract all the value.

David: Yeah. It's like the Bill Gates' Platform quote.

Jason: Something like that, yeah. He said it better, maybe my producer, Nick, will look it up, this is a thing about networks. Anyway, I was always just introducing people to everybody. In fact, I remember when I was at the top of my game with Engadget, I was at Sundance. My friend, David Sacks, was producing a movie there called Thank You for Smoking. We're all there, I just sold Weblogs Inc. and this is the famous hot coffee story which I can tell you another time.

I'm at Sundance and Elon, myself, Sacks were hanging out. My wife, his wife at the time, and Sacks' new girlfriend who's now his wife. Walt Mossberg is there and he says, "Hey, let's have lunch," because he knew I was there. I was like sure. I was like hey, let's meet over here. I'm going to bring my friend, Elon. He's like, "Who?" Elon Musk, he's doing this thing. Walt Mossberg was very big then, he wrote me this admonishing email. I agree to have lunch with you, not Elon Musk, you, forcing me to have lunch with this person is just unfair, our friendship, whatever. I'm like okay. I won't bring him.

David: I'm just trying to help you out.

Jason: Literally, I have this email from Walt Mossberg calling me out. Walt was very sensitive at the time, everybody was trying to get to Walt. He felt like I was trying to put Elon a firm and Elon didn't even know. I was just like Elon's here, Elon wasn't running Tesla at the time, he was just an investor. He was doing SpaceX stuff. This is my friend, Elon. That was pretty funny.

Ben: You're good at...

Jason: I was always good at just connecting people and meeting people together, just hanging out with people. My book agent, John Brockman, introduced me to Sam Harris. Sam Harris and I started to hang out. Sam was in my podcast and he did an AMA from Mahalo. He says, "How do you do podcasting?" I was like you're built for podcasting. He said, "Do you think I should do a podcast?" I was like absolutely, you're built for this. "So, what do I need?" I'm like a guest and a microphone. I was like, you can use my studio. Anyway, I convinced him to do a podcast and now, the rest is history.

Then, I introduced Sam to Elon. We all started talking about AI, and Elon introduced Sam to the concept of AI and all this AI stuff going in the book, Superintelligence, and all that. The people who write Westworld, Christopher Nolan and Lisa Joy, then met Elon and Sam Harris. Literally, the entire season this year, I'm watching it and I'm like this is a conversation I had with the four of these people years ago, it's pretty surreal. I always picked up the check and I always bring everybody to dinner. That's why I got good at this.

Ben: We're not doing playbook this episode.

David: That's a playbook.

Jason: That's your mini playbook, always buy dinner and set up dinner.

David: I got to ask, that playbook, that mindset, that wanting power and connecting people, as Mahalo is post-Panda going on, why do you not go join a venture capital firm and become a traditional venture capitalist?

Jason: Self-awareness.

David: You don't have to be a VC as we all know.

Jason: Here's the thing. It's called a venture partnership and that's not why I do it, right? I like to make my own decisions and I'm like a solo artist. You put somebody like me in the band, the band will break up.

David: You always hear Bob Dylan not like any better.

Jason: Yeah. I could play with Tom Petty and The Heartbreakers, but I'm going to write my own albums. I want to do my own thing. I want to keep it small, authentic, and true to what I want to do. I did have a bunch of venture firms over the years make runs at me, and then maybe want to incorporate my little empire into their empires. It'd be a good feeder, you can plug what I'm doing into something bigger if you were a billion dollar late stage fund. Imagine having the only real viable Y Combinator competitor out there as the top of your funnel, the only real AngelList coexisting with your competitor.

These things are not really competitors, they're really coexistors, but we're the number one largest syndicate in the world. AngelList is the largest collection of syndicates. But if you took the top two or three syndicates together, they would be smaller than ours, on AngelList. You look at our program, really only people who compete with Y Combinator heads up. The only reason we've had people pick us over Y Combinator and people pick Y Combinator over us or go to Y Combinator then come to us. We're really the only, I think, accelerator, who can say that.

Ben: Jason, I want to T this up in this direction. You want to be a solo artist, not join a band. I'm sorry, at this point in time, I'm just playing through what’s in your head. You want to be a solo artist but you also deeply understand returns to scale. As you're thinking through This Week in Startups, The Syndicate, which I really want to understand mechanically how that formed and how that works, how are you thinking about scaling what is working for you in being a soloist?

Jason: I had started the podcast as CalacanisCast and we did 40 episodes or so of that, just on an open microphone in a room. I did it with Ron Conway, I did it with Evan Williams because my friend, Dave Winer, had started, who's created our RSS and said, "Hey, Jason. Check this out. You can attach a file to our RSS feed." I was like you could put a PDF in there? He's like, "Yeah. You could put a PDF in there but that's the same thing." I was like oh yeah, again, I'm not the smartest kid in the class. He's like, "Check this out."

It was an RSS feed with mp3s. He said, "Now, check this out." He sent me a little script and it took the RSS feed and then it wrote the mp3 files as an album into your iPod. The reason this is called podcasting is because you could sync your iPod on your Mac to an RSS feed that then put it there. The idea was you would plug your iPod in at night to sync and to charge to your Mac. Also, in the podcast, you would download, at night, all those things. When you got on your commute, you'd have a couple podcasts on there. I was like wow. Then, they convinced Steve Jobs to add it to iTunes.

Ben: 2006 or 2007.

Jason: There's a famous clip of me talking to Steve at the D Conference. I ask him about making money if we’d ever sell advertising on a podcast or whatever. He said, "Yes, it's a really good idea. Just email me, Jason." I said, "Yeah. At the email I always email you at?" He said, "Yeah." The whole audience laughed. But I just said it as a joke, like being a wise ass. I did talk to him on email. I better be funny to say, "You know the email we always talk on?" The audience cracks up, it's a very funny clip. You could embed it in the show notes.

Ben: Yeah, we will.

Jason: But anyway, I did the podcast because I just thought it'd be fun. To me, it was just a fun way to promote my friends. I had Brian Alvey on my long time collaboration as a first guest, David Sack came on early, Jason was starting a company, just having people on when I was in LA. Somebody from Microsoft called me and like, "Hey, we love this podcasting that you're doing. We want to tell you about something secret." I was like what is it? They said, "We're starting a search engine." I was like everybody knows. He’s like, "Yeah, it's called Bing." I'm like that's a terrible name. He's like, "Anyway, we want to advertise on your podcast." This was 11 years ago and I was like okay.

David: You hadn't put two and two together.

Jason: There was no advertising in podcasts, it's just like a blog, it was just a thing.

David: But of course it was just like when you're starting Silicon Alley Reporter, Weblog, it's the same thing.

Jason: Yes. Anytime a new medium comes out, I assume it's going to work. This is my big trick in life. Whatever something comes out, I just assume it is going to reach critical mass and I behave as such. When blogs came out, I was like okay, I assume it's going to work. I'm going full bars as if it's going to. When podcasting came out, I went to a full bar. Twitter, the same thing, I just went full bar on Twitter.

Ben: When has that not worked?

Jason: Oh, God, probably more times than I can count.

David: But it doesn't matter when it doesn't, what matters is when it does.

Jason: Yeah. At Tumblr, path.com, FriendFeed, there were a bunch of other things. But if you take the relentless enthusiasm like spastic—oh my God, this is going to change everything—Google Plus. I was all in on their services too and that was all wasted time. When it does hit, people remember the hits, the same thing that you guys know about investing.

Ben: Asymmetric returns, yeah.

Jason: Yeah. Asymmetric returns, correct. If you get in early and you have your baking in whatever that service is and you get there early, you're going to have a head start than everybody else. I think it just works for me. "How much are the ads?” I was like $3000. They're like, "Okay, per ad?" I was like yeah, but you have to buy 10. They're like, "Okay, $30,000." You'll send me $30,000? They're like, "What is the ad?" I was like I'll just talk about Bing. I literally just pull up Bing and I'm like, "Hey, check out this feature. Check out our feature. Thanks, Bing. Bing, Bing, Bing. Then, that would be the end of the ad. It's pretty funny.

David: So great.

Jason: Yeah, we just goofed off. We'd have puppets on the show, it was just this approach to it. It went from 500–1000 people would see it, to 10,000, 20,000, you know how the stuff goes, 200,000, 300, 000. All of the sudden, it becomes a thing.

Ben: Hey, what's the listeners ship on This Week in Startups now?

Jason: Over 200,000 per episode. It's a niche podcast by design. I could make it bigger by dumbing it down, going shorter, or having post-production on it but I just told everybody I'm not interested in that. Joe Rogan is taking the same approach, the same Howard Sterling's approach. You put the recorders on, as long as it's interesting, you go. We have three ads slots and we sell them out every year and it does a couple million bucks and it's enough to pay for a 7, 8 person team that works on the podcast now.

David: That's awesome. How does that play into your angel investing?

Jason: It was very simple. I would say on the podcast hey, here's a company I'm investing and I'm having them on the podcast. Or in the case of com dot-com, somebody told me, "Alex was a genius." I was like why? He's like, "He did a million dollar homepage." I was like that was genius. "Yeah, he’s doing a meditation app." I looked at it, it was a web page where you went and it just played a meditation in a loop. I was like yeah, I’ll have him on the podcast. I need a guest. Back then it was like, "Can we get any guests?" Alex came on. On the episode, I said hey, can I put $25K in for like 1%, 2%, or whatever. He says, "Yeah. We'll need to talk about that."

David: You did this live on the episode?

Jason: I did it live on the episode. I was always trying to get somebody to do that and nobody would do it, but I thought it was funny, it was entertaining for me. Anyway, long story short, I put $50K in for my fund, this AngelList thing has just come out and I made it the first deal in AngelList. My expectation was maybe another $25K would come in or $50K because I have like 100, 200 people that signed up. $328,000 came in and the company was worth $4 million or $5 million at the time, we had a 6% or 7% position. That company is worth $1.4 billion now, it's the most successful syndicate history of syndicates. In fact, it's probably the top three syndicates combined with being smaller in the composition.

Ben: For people that have neve used AngelList, how does that work? Where you're like, "Hey, I'm in for $50, how is that?"

Jason: The original deal was AngelList would take 5% of the carry, I would get 15%. I started negotiating at 18 in two deals which led to a lot of animosity. Eventually, AngelList and I broke up, that's another story to tell. Naval and I are friends still but we were just a little too big for it. That's back to being very clear about I am not the bull you want in your China shop. I know that some people think, "Wouldn't it be great to buy Jason's company and put it as part of a big venture firm?" The answer is no.

I'm going to do what I want and it's going to knock s**t over inside your plans. It's not good for you, and it’s not good for your partnership. You're trying to build a partnership and you want five or six people to sit there and have a really good conversation in dialog about an investment. That, to me, would be purgatory.

David: That's a nightmare.

Jason: It's literally my nightmare. I want to make an investment because I look at the founder size and I push the chips in. I do not want to have five people sitting in my seat while we discuss if I should go all in on this poker hand. That's the opposite of what should happen in early stage investment. The second you debate it is the second you lose the outliers because the outliers make no freaking sense. That's why consensus equals death in the early stage. Consensus at an early stage equals protecting downside risk and due diligence and all that stuff is very important.

David: Can we digress for a minute before we picked back up at the story of your empire? Talk to us a little bit about your philosophy because I think it's super incisive about the difference between bets and, informed by poker, shaping your bets experiments versus investing.

Jason: Here's the thing. Imagine a poker table existed in the world where you would buy in for $10,000 and there were 10 players so it's $100,000 on the table. But every 100 hundred hands, you could win $1 million or $10 million. There was uncapped upside, somebody just gifted $900,000 extra or $9.9 million extra to that table. It would change the way people play it, it would change the game. That's called the World's Series of Poker, by the way, for pros because the World Series of Poker, when they have that series of 50/60 games, all these amateurs coming from the world, dead money, people who are easy to pick off.

For the pros, for Phil Hellmuth, it's literally like if you started the NBA Finals and the war is you have to play against the high school team, we're just going to win a lot of games here.

Ben: It's the only way to get asymmetric upside in poker.

Jason: Correct. There are ways but asymmetric, for sure. Once you realize that, that frees you from you trying to understand if the idea is going to win or not. That's what trips early stage investors at which is why I wrote my book. It's because I felt I had figured something out and I wanted to share it with the world which was this is the greatest casino in the world, in my opinion. Nobody knows about it and the people who know about it do not want to talk about it. Another group of people thinks it's the stupidest thing in the world and a scam. Why is that? People come into angel investing, they have $500,000 in their bank roll and they gave $250,000 of it to their daughters, sorority sisters, ex-boyfriends, brothers because they're going to build an Instagram competitor that has links in the comments.

Instagram doesn't support links in the comments. That's the reason they're going to exist. They put the $250,000 in, the product never gets released, they give that $250,000 to the dev shop in Estonia that never finished. They asked for another $250,000, they gave the other $250,000, the product came out, nobody cared, they shut it down, those people go work at Boston Consultant Group or whatever. They made one bet so it's literally like walking up to Black Jack and putting your entire stack on one hand.

David: Or like in poker like betting, you need to go all in before the flag.

Jason: Yeah. Before you look at the cards. You're just like I'm going to sit at this table and put it all in on the first hand, which I know some people would do that for fun.

Ben: For people that are not professional investors, it sounds ridiculous to dumb it down this far but even if you're only making 5, 6, 7, 8 angel bets and you're not really creating a 12, 15, 20 company portfolio, it's mathematically the same thing. You're taking way too much concentration of a bet.

Jason: You need to really hit 20, 30, or 40 in what I've seen an angel investor has succeeded. You have to be investing in a certain pool of entrepreneurs. If you're a nobody who starts out, any deal flow that gets to you, by definition, has been picked over by all the qualified people.

If you're reading scripts in Hollywood as a first time director and the script got to you, that means every bad director has passed on it and never got to the good director so just understand that.

David: This is what I want to go deeper on because I think there's a really important insight here. How do you square what you said a minute ago, about the early stage consensus kills because you want the crazy stuff you can't predict? What is the signal on the clock?

Jason: Yeah. We have a course called Angel University, that goes along with Angel, the book. In that course, I explain to people that when you make your first 20 or 30 bets, make a small bet as possible which is using syndicates is a good idea, forget about mine, just sign up for everyone because it's free to read the deal memos, you'll learn. If you do that, you're playing at the lowest stakes poker table while you learn. If you want to learn Black Jack, sit at the $1 Black Jack table instead of the $100 end because you will lose a minimum and it doesn't matter if you lose, it's like paying for an educational course.

I tell people only to invest in companies, startups that have gotten their product to market, have some customers. Hopefully, paying customers but if not, customers who were using the free product that you can at least talk to. You've now limited. As you guys know, 90% of the failure rate, 90% of attrition in startups—

David: They just don't ship the product.

Jason: They never ship the product. Then, you get down to that 10% of that, 90% of those never get a paying customer. If you were a starting angel investor to only invest in companies with some amount of revenue, even a little less $2,000 to $10,000 amount, you probably have eliminated 80%, 90% of the risk. Start there while you're learning. Then, as you get more sophisticated, just like in poker, if you want to play under the gun with Phil Hellmuth at the table and you want to play 9/10 suited, okay, maybe, if you've been playing for 10 years.

But you don't want to take those kinds of risks and bet on a meditation app or a couch surfing app when you're just getting started. There's five times you could have invested in Calm, maybe three, four, five times in Calm, three, four, five times in Robinhood, even these outliers. You probably have four, five chances to invest in Airbnb as an angel investor. It's a misnomer that you're going to miss the deal.

Y Combinator lost to angel investors and told them, "If you don't invest quickly within this 48 period, this deal is closed and you miss them forever." It's literally not true. They try to create a false sense of urgency, they train the founders to do this, and it's nonsense. Not only is that round not closing immediately, there's going to be four rounds after that you can get into. No great investor invests on demo day.

Ben: Especially now at a safe and not priced round that's rolling.

Jason: It's rolling, super rolling.

Ben: Jason, there's one thing you said I think is really insightful. When you're not Phil Hellmuth and you're playing poker for the first time, just invest in things that have shifted and have revenue. Once you became better and better and you became Jason Calacanis, you can invest in Calm. Why are you comfortable at the level you're at investing in a no-revenue meditation website? Why is that okay?

Jason: I can take you to the background, it was very simple. I had known Sam Harris, I had heard positive visualization. I heard that term and I used that in sports because I was a Psychology major. I've done positive visualization to get to the New York City Marathon which I did 11 of. I didn't know it was called meditation but I just positively visualized myself along the route. When I did the run, I had had that in my mind how good I was going to feel at each part and how the Bronx and the wall was going to be difficult.

When I saw Calm, I talked to Sam Harris about it because he was doing cat scans of brains, he was a meditator, and into psychedelics and all that stuff. He put me in touch—when I was doing my research on Calm—with the woman who ran the Mindfulness Center at UCLA. I found out that Phil Jackson, who I'd known when I was in LA, when he was coaching the Lakers, he had become friends with him. He had Kobe and Shaquille O'Neal meditating and it just clicked through me. Wait a second, Phil Jackson, innovator, Sam Harris, innovator. There's something at UCLA around the corner for me in Brentwood. They're studying and they have a program, they're teaching people this? They're studying it on PTSD Soldiers? This is the future.

But unlike yoga, which also started in Santa Monica, this could be delivered through your ears. Wait a second, yoga, you have to do in person and yoga is everywhere but meditation is delivering it in your ears. If this does work and it becomes as popular as yoga, there could be 100,00 people paying for this. It could be a $10 million a year business, this could be $4 million, this could be the future. That's when it all clicked for me. It was like an easy bet for me to make.

Then, the subscription service came out and Apple allowed subscriptions. When we invested in Calm, they had done $10,000 in revenue a month.

Ben: It was a post-revenue startup.

Jason: They had post-revenue, yeah, they did. With Robinhood, they didn't. Robinhood hadn't launched yet. That's another one where I just saw them and it made sense to me.

You can get signalling. I'm not saying you can't do this but if you want to reduce the amount of pain you're going to go through and you want to have a less painful junior year, like your junior year has an angel investor when you hit the J-curve, is so painful because you think you're an idiot.

Ben: You've deployed all your money, nothing's broken out yet and you can't keep investing.

Jason: Half your portfolio can't raise money and you're shutting down, and the other half can barely raise money and they're begging you for a bridge. Literally, the junior year, everything tells you to quit. All of a sudden, you're four, five, or six. Travis calls up and he's in six cities and he's closing around with Menlo at $300 million. You're like, "$5 million times 60, holy s**t. That's a lot of money." I said, "Woah, this could work."

Once you hit one of those unicorn types investments, then all of a sudden, it clicks in your brain, your brain chemistry changes. You have to have the brain chemistry change from being risk-averse and outlier-reverse to outlier obsessed. I'm outlier obsessed, I do not care about losses. That took me a long time because remember I was such a rabid competitor. The idea of being fine with losing all the time, like imagine losing 29 nights in a row at poker but on the 30th night, you hit a 5000x or a 200x.

Ben: Right. It's because you're playing in this very special poker table right now where the losses don't matter, supposing that you're actually fishing in the right pond where you do find those magical ones.

Jason: Correct.

David: I think there's one more layer though that I think we didn't touch on yet (that I've heard you speak about before) which is shaping your bets into this. As you're making these angel investors, keeping them very small and thinking of them as experiments. To me, that seems a really good mental trick. It's not a loss, it's a failed experiment.

Jason: Correct. This is why I started the LAUNCH Accelerator three years ago, we have a hundred companies that have gone through. I basically was like what was Paul Graham's original idea? Six or seven companies? Great. I'll just copy that, seven companies. Paul was the draw, right? Now, the legacy is the draw and Paul Graham's not the draw, it's the legacy. I said okay. If Paul was the draw, I know I'm a draw, let's see if it works. I just said 6% I prefer for a 100K which is a $1.7 million applied evaluation. We'll go with that. We'll just start accepting 7 people at a time and deploying 700K at a time.

Imagine if YC and Angel got married or merged, what'll that look like? That's what I had. I had left AngelList and I had started thesyndicate.com and it took me a while to get that domain name but I got it, coveted that one, I have a domain name coveter.

David: There's definitely a correlation on stories you're telling on the show between being good at domain name acquisition and having success.

Jason: It's like picking a co-founder. The reason I invested in com dot-com was because of the domain name. I was like how did you get that? That's a million dollar domain. I would pay much less than that. "I'll tell you after the show." He told me after the show.

David: We'll put it in the LP show.

Jason: Yeah, I'll put it on the LP show, really incredible. Anyway, the point is, I started saying to people the original deal was 50K for 5%. I'll put in 25K for 5% and I'll put 25K whatever your reason around is and I'll syndicate it. Then it was too hard to just syndicate all of them because not all of them wanted to do the syndicates, then I just said okay, we'll put in a 100K. It's the same deal as Y Combinator at the time. We're betting on these for $1.7, round it up to $2 million evaluation.

Then, one of the companies raised a round and I always told myself we'll put more money in in the C round and we'll try to get 10% ownership. Two of the best companies raised rounds and the founders was like, "We have no room for you." I'm like what? I introduced you. I called up those people who were doing the rounds and I read them the Riot Act. I introduced you to them. How dare you try to muscle me? I said you're springing an elbow at me? I'm the point guard, I passed you the ball. Now, you're not passing the ball back when you're a triple team? Pass the ball, move the rock.

I got both of those people to give me allocations. I'm like this is not how power is supposed to work. If I’m the point guard, I have the power. I have the power to freeze you. I said okay, now, the freezing will begin. I wrote into our documents that we have the right to do half the next round.

Ben: That’s a hefty pro-rata, my friend.

Jason: Not if you're Jason Calacanis, and not if you're the founder. It's a feature, not a bug. It's a feature for the founders who we work with, because they can start the fundraising with me as an anchor.

Ben: Do you pick winners? Do you say, "Hey, you three. You guys are getting half the round from me.”

Jason: Yeah. We’ve evolved it over time. In order to make it more fair to everybody, what I say to them is if you're doubling revenue in six months, we're likely to just preemptively make you an offer if your performance is in the top 5%. We've done that. We'll let other people invest in it but we'll actually price around and put in a 500K or 250K and get them started.

As for everybody else, if you're not just a crazy outlier, we're tripling revenue every six months or something during the program. We still leave room for other people. When you get your term sheet, give it to us, we'll have five business days or something to make a decision. We'll let you know what allocation we're going to take, but we usually do it in a day or a two which is actually what Y Combinator announced that they're doing now.

David: That is what they're doing now?

Jason: Yeah. They switched to my position. Because I think they were experienced in the same thing which was they were getting boxes out of their winners. Now, we just say give us the term sheet and if it's a reasonable term sheet, it's not like something outrageous or non-traditional, we had one of our successful companies do a deal for common shares at a ridiculous price. It's some non-traditional private equity firm and we passed. We said, "We'll just stick with our 6%.

Other times, we're putting in 500K. For companies like Fitbod, a major breakout for us, they came to us with just $2000 a month in revenue or maybe $1000. They've been public about hitting 8 figures in revenue, they were very public about that. At the Launch Festival, they gave a keynote. I offered them live on stage $2 million out of $50 million posts. Anyway, we wanted to put in more money a couple of times.

We book precision over 10%. That's what I'm trying to do now, just get to 10%, 15%, 20% and eventually, with our fund, The Syndicate and the Accelerator, we can make 3 or 4 bets in the company and get to know the founder. If we can do these three or four bets, we'll be the first people to combine Y Combinator, AngelList/Seed Investments Republic whatever, crowdfunding syndicate you like with a seed fund like Homebrew or PIER, whatever. That's what I'm constructing right now.

We don't have a proper series A because we don't need to, because the fund plus The Syndicate kind of hits the $1, $2 million number. But the next fund, perhaps, will be able to do a full A like a $5 million A but I don't need to do that. I like being in the early stage, it gets less interesting for me to go and do the big check. Somebody specialize people at that rather hand it off to Sacks, Chimoff, Bill Gurley, Roelof, or somebody like that.

Ben: Jason, this has been so fun. We got to this more often because it's incredibly fun to reef with you. I think there's a good place to call it for the main show here. For the LP show, what we're going to do is we're going to dive into your investing, the way that you're sort of frankly deconstructing the jobs of a VC firm—sourcing, evaluating, winning the deal, helping, and then future access to capital. It's really interesting what you're doing.

I also want to discuss the way that all these things tie together and how you view the flywheel or the funnel, or how you sort of visualize it. I know you've got some...

Jason: Good insider stories?

Ben: Good insider stories, for sure, and the couple you brought up. Also, frankly, the way you see the world. I'm sure there's a hot take in there.

Jason: I got a hot take post-Corona.

Ben: Yeah. Listeners, thanks so much for going on the journey with us here.

Jason: Spend $100, become a LP member like me. Get in the Slack. I'm in their Slack, I'm up in the Slack.

David: Jason is super active.

Ben: That he is. All right. Listeners, thanks. LPs, we'll see you on the other side.

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