SPEAKER_00: Angel is brought to you by Audible with an unmatched selection of audiobooks, original audio shows, news, comedy, and more. Get a free audiobook with a 30-day trial at audible.com slash angelbook.

Chamath Palihapitiya: Hey everybody, welcome to another episode of Angel, the podcast that goes along with

SPEAKER_03: this book. And the book I'm holding up for those of you who are listening to the audio only is Angel. It's a book I wrote about how I was able to break into angel investing here in Silicon Valley. And I've invested in over 150 companies, and those first 125, I hit six unicorns. What's a unicorn? That's a company worth over a billion dollars. That's what every angel investor is looking to do, to have some outsized success that makes up for a lot of failure. Because most startups fail. That's the rules of the road. We all know getting into this game that startups are hard. And being an angel investor is one of the most unique professions in the world. And it's a profession that now is opening up and becoming actually professionalized. There are thousands of people here in the United States who are self-identifying as full-time or part-time angels. In other words, this is what they think their careers will be. That's why I wrote the book, and that's why I started this podcast for you, for the people listening, because there is very few ways today in society to move up from poor to middle class,

SPEAKER_04: from middle class to upper middle class, or even into the wealthy or the 1%. The American dream has never been harder to achieve. We have income disparity here in the United States. That is considered one of the top issues that we have to resolve. Now, I'm not saying anybody who listens to this program is going to be a successful angel like myself or my guest. However, it is one of the paths that will lead to great, enormous, tremendous, I don't want to sound like Trump here, but it is one of the ways that great wealth is created. Getting on the cap table of high-growth startups. And you know those startups. You know LinkedIn. You know Facebook. You know Uber. You know Airbnb. You know Dropbox. You know Lyft. You know these because as a consumer, you used these products. And one of my premises is that if you use great products and you appreciate them, you might be able to identify the next great one. And if you learn the other techniques in angel investing, like figuring out who is resilient and who has got craftsmanship and does hard work, you might have an excellent chance at getting a positive return. This comes with a lot of risk, just like anything else great in life. But I am so glad to have our next guest on the program because he started his angel career at the same time I did, has had equal or greater success than I have, and is an outsider's outsider. Even more of an outsider than me. The kid from Brooklyn who made it good, who made everybody proud in Bay Ridge, Brooklyn with a 71-year, three-year average in high school. Who they told would not be anything more than a police officer or a fireman. Not that there's anything wrong with those professions. God bless those people for running into burning buildings and having a target on their backs. But the truth is, the expectation was low of me and the expectation of my guests was even lower.

SPEAKER_05: Pejman Nozad is on the program finally. Welcome.

SPEAKER_07: Sorry for my rant in the beginning.

SPEAKER_05: I was inspired that you're here.

SPEAKER_09: No. Thank you, Jason, very much. I'm truly honored and humbled to be here.

SPEAKER_10: I love your space. I have to tell you, you have a pretty amazing team. As soon as I walked in, they just welcomed me like home. So thank you again, and I appreciate it.

Chamath Palihapitiya: One of my key beliefs in life is you can judge yourself, or you can judge a person, by the

SPEAKER_03: people around them. And I know your team, also, since we're going to be doing high fives all around, Mar on your team is fantastic.

SPEAKER_04: She has been a speaker at our events and is always in the top 5%, not top 10 or 20, top 5%. She's your lieutenant and partner.

SPEAKER_13: Yes, she's very special, so we can talk about it.

SPEAKER_03: We will. But I want to start with the beginning of your story. It is truly a rags-to-riches story, or in fact, a rugs-to-riches story, to make a little bit of a pun there. How did you get into angel investing?

SPEAKER_10: Sure. You know, I grew up in Iran. I was 10 years old when revolution happened in Iran.

SPEAKER_18: Was that 1978? 1978.

SPEAKER_10: Yeah, 1978, exactly. And I was a very good student. I was going to German school in Tehran, and our school was shut down. And, you know, my teenager life was through revolution and war, so we had eight years of war. And, you know, the first 10, 15 years, post-level revolution wasn't like today. It was tough, so I couldn't wear short sleeves like you to go to high school. And although I was, you know, top students, and they denied me going to college because every high school had this Islamic association run by students, and they had a say on you. So they were a watchdog the whole four years. And although I became, you know, my score was like 536 out of a million and a half on the SAT score, I couldn't go to college. So the reason I bring it up is just my skin became really thick by going through the war and revolution. And, you know, I went to college the next year, but after two years, I decided to leave the country. But in Iran, you have to serve in military. Luckily, I was playing soccer, professional soccer. So, but I asked my parents to leave Iran. So I left Iran and I was alone in Iran. And then I got a visa, went to Germany to stay with my parents, and they gave me a scholarship and playing soccer. But my brother who left Iran had this American dream, forced me to go to U.S. embassy. I went over there and, you know, somehow they gave me a visa. So before that, I started to write for sports magazine when I was 16. And at the age of 18, I hosted Iran's most popular radio talk show. So I became very good at sports writing. And that's why they gave me a visa. I told the counselor that I want to go watch NFL, NBA, and so on. You know, I took a chance. I was 22, 23. I was in love with the girl in Iran. And I just came here to San Carlos. And my uncle used to leave. I had $700 and didn't speak a word English. And my first job was at the car wash. So I found a job as a car wash because I had to find a job that doesn't require language. But I was the best car washer the world has ever seen. I tell you, no one has ever watched. You got in there. Detailed it. I just did like no one else, like my own car. And in my English improve, I found a job here at a yogurt shop in Redwood City. And at that time, I wanted to go marry the girl I loved. And I didn't want to ask my father to pay for it. So I decided to save every penny. So one of them was just a rent. And working in a yogurt shop, we don't make much money. So I said, okay, I have to not paying rent. And I asked the owner of the yogurt shop if I can sleep in an attic above the yogurt shop. But it's real attic. It was like you couldn't walk because it was short. You know, fast forward, I was waking up in the morning, opening up at 5.30 a.m. to yogurt shop till 4.00, 5.00, go to college, take a shower because I didn't have a shower. My clothing was there. And, you know, one day, Sunday, it was a Persian TV advertising, Medallion Rug Gallery in downtown Palo Alto is hiring salespeople. And I said, wow, this place is nice. And as an Iranian, you think you know things about carpets. Like every American, they're an expert in baseball or football, but they're not. Yeah, hamburgers, whatever. Yeah, same thing. French fries. So I called and the owner asked me, have you sold carpets? I said, no. Have you sold furniture? No. Have you sold cars? No. I said, okay, why did you call? And, you know, before he hung up, I said, sir, how can you deny someone you haven't met? It was a pause at the end. And he said, come tomorrow. So I was hired on the spot the next day. And then a couple of years after, he said, wait, man, do you know why I hired you? I said, why? I said, you didn't give up on the phone. So he hired me. My life changed. So I became a rock salesman. The next day, I showed up with a tie and suit. And he said, no, you're not selling carpets.

SPEAKER_33: I said, well, you hired me as a salesperson. So you sweep the floor, you bring tea. I said, okay, I'll do it. So gradually, I became really good at it. I created a passion for it.

SPEAKER_10: Without having any background in sales, but I was very good at making friends. And I think that's what it takes when you sell things. And for Persian carpets, because they're expensive, people come. Like you buy a home and say, I have a home in Hillsborough or Atherton. I bought a home and I need a carpet for my living room. So you look at carpets, I come to your home. And when I go to Jason's home, I spend two hours with Jason and kids and family. We become friends. What do you do, Jason? I'm an investor and so on. You know, fast forward, like late 90s, 97, 98, I felt like everybody who was buying carpets from me, they are either venture capitalists, founders, CEO, lawyers. And I was just amazed, not because how wealthy they were. It was, you know, for me, in my mind, building something was like building things. I saw what these people are creating things with knowledge. And I said, I want to be one of them. It's mind-blowing, right? Yeah, it's mind-blowing. I said, I want to be part of this community. And I told myself, maybe this is the most important street in the world I'm working. And maybe this is the most important time of my life. I have to capture this. So my mindset changed. So every time I was going to people's home, I would start to ask questions. What do you do? I said, I'm a venture capitalist. Okay, how does it work? And so on. And because I was friends with them, you know, they opened it up. You know, after a few years, I built a really great network of the most influential people in the valley. And I walked up to the gentleman who I really owe a lot. He passed away. And I said, you know, you're in carpet business. You're in real estate. I think we should invest in tech.

SPEAKER_37: This is your boss at the carpet shop. Yes, this is the guy who hired me.

SPEAKER_10: At the rug shop who hired you because you wouldn't give up and you were persistent. Yes, and he actually left Iran. The government nationalized his asset. He was like, you know, top 20 industrial families in Iran. He started from zero. He had to reboot. Yeah, reboot from the whole thing. So he got me really from day one. I think we had kind of the same DNA in us. So he said, that's fine. I think, how do you want to do it? I said, you know, we don't know tech, but have a lot of people who can provide advice. But we have this space. We can do a lot of events. And imagine, this is 99, 2000. It was no tech crunch, no YC, nothing. So I started with a lot of events. I remember.

SPEAKER_09: You would host events at the rug shop, right? Yeah.

SPEAKER_04: Because I remember, I was like 27, 28 years old at the time. And I remember coming to Palo Alto and coming out here and meeting Yahoo. And I was a journalist. And people would talk about this rug store. And people knew about it. It's kind of like legendary on University Avenue, right? Yes, still there. Still there.

SPEAKER_38: And you start hosting events in the rug store for investors and startups. Yes. Incredible.

SPEAKER_47: Yeah, and I tell you.

SPEAKER_38: What gave you that insight that this would be a good idea?

SPEAKER_09: No, because I thought, you know, I thought if this is, let's imagine, we just talk about it.

SPEAKER_10: If this is NBA, I cannot be Michael Jordan, but I can be the best agent. Right. So I want to be that agent who connects people together. Yes. And I think I have an amazing asset, which are the network I built over there. He said, oh, he will start with $2 million. You put 10% of it. I said, I don't have $200,000. I didn't have $200,000. Yeah. He said, okay, every month we deduct from your commission. So he made me work hard. I started to sell twice. And for 17 years, I mean, for 10 years after, I sold carpets, but I was looking at startups also. But I was not afraid. I thought there's something great will happen.

SPEAKER_09: And this is what we talk about it. You know, I didn't have tech background.

SPEAKER_08: I actually college dropped out. But in fairness, you did have a great yogurt and car washing background. And you were pretty good on the radio. Yes, yes.

SPEAKER_10: But another thing, I think this is the, I think the magic of Silicon Valley, it was people, you know, give me the benefit of the doubt. They didn't judge me. They said, you know, when I was going to people's home, they didn't say, oh, this kid is selling carpets. How can you do, you know, tech investments?

SPEAKER_08: And I give you a story. One of these people was Doug Leone. Doug Leone from Sequoia. Yes.

SPEAKER_52: Literally one of the three greatest active living venture capitalists on the planet.

SPEAKER_09: Doug Leone, you sold him a rug or something? No, I went to his home to sell carpets in Africa. I spent like two, three hours. I couldn't sell anything to these guys.

SPEAKER_10: Italian, negotiator, fun, tough, nice guy. At the end, I said, Doug, by the way, I invest in tech and so on. He looked at me, you know, listen to that moment. Yeah. He said, I'll come to your office tomorrow, 7 a.m. The Rug Gallery, we open it at 10 a.m. So I opened the shop. He came in and he said, how can you help us invest in tech companies? I said, I'll put an event. You bring the entire senior team. I'll bring 100 people here. The Rug Gallery, we had an amazing night. This was like senior parties of Sequoia Capital at the Rug Gallery. I had like 100 entrepreneurs, Persian food, dance, and so on. And the things kicked off. And, you know, seven years after, when I picked up the phone, I said, I just met two great kids, Drew and Arash. They have this company, Dropbox. You should meet them. He just didn't pause. We met Doug the next day. And in five days, Sequoia invested in Dropbox.

Chamath Palihapitiya: Amazing. And so then you wind up being one of the first investors in Dropbox.

SPEAKER_58: Yes. And what I want to tell you. What was the company worth at that time? Sorry, in Dropbox. Like maybe $4 or $5 million or something.

SPEAKER_60: What's the ballpark range of the companies when you were investing the value?

SPEAKER_10: Yeah, I think it was just, it wasn't today. Like Seed was like real Seed.

SPEAKER_60: $3, $4, $5 million round.

SPEAKER_10: So, but I started to make a horrible mistake. I think I didn't know what companies to invest. But I became very lucky. One day, a guy came in, bought carpets.

SPEAKER_09: And I said, what do you do? I said, he said, I'm starting this company called Danger. And that was Andy Rubin. Danger.

SPEAKER_58: Yeah. The mobile phone that opened sideways with a keyboard. It was like ahead of everybody. Like ahead of time. But this is like, really, for people who don't know, this is five years before the Palm Pilot.

SPEAKER_08: Yes.

SPEAKER_63: And at the time, the BlackBerry was the number one smartphone in the world.

SPEAKER_08: Correct.

SPEAKER_33: And we ended up investing in Danger. You invested in Danger as well? Yeah, the first check, actually.

SPEAKER_08: They were on Sand Hill Road for nine months. And nobody gave them money. Well, I've got to stop you here.

SPEAKER_03: You meet Andy Rubin, for people who know the industry, they'll know that this is the person who created Android later and sold it to Google. And Google's revenue right now, I would say, some very significant portion of it, a third

SPEAKER_04: or so, is probably driven by the Android ecosystem. It's one of the most powerful and largest companies in the world. So you happen to meet Andy Rubin. He cannot raise money. You give him the first check.

SPEAKER_10: This is what happens. He had an office on University Avenue. I went over there, two other founders, Matt Hersenson and Joel Breed. And Matt, it's Mars' husband, my current co-op founder.

SPEAKER_22: So this goes back to 17 years ago. I was just amazed by how Andy thinks. He was seeing future before anybody else.

SPEAKER_10: And I said, okay, if this guy sells balloon, we should give him money. I convinced our team to put money. And then because Andy and I, we built a good relationship, I just saw him in action. And I said, aha, these are the people I should go after. So after that kind of pattern recognition, made mistakes, venture capitalists took my call seriously and had a really good deal flow. And being Iranian-American, I think I was a hub for any Iranian entrepreneurs. If you look at the history, Arash, co-founder of Dropbox, is Iranian. And we have a lot of influential people now. So anyway, fast forward, being lucky at the right time and so on, I end up investing in

SPEAKER_30: the companies that you mentioned.

SPEAKER_03: Yeah. I mean, it's so mind-blowing to think. Just to recap this story for people, you're a nobody who has no money. You're washing and drying cars in San Carlos.

SPEAKER_63: For people who don't know, San Carlos is kind of like the tiny town between Atherton and Palo Alto and Mountain View or whatever. It's like, if you were looking for a cheap apartment, that's where you'd look, I guess, right? It's like not the most true.

SPEAKER_33: Actually, the car was in San Jose. I was driving from San Carlos to San Jose. I bought a car for $750. $750? Whoa, nice. Yeah, and I didn't have the $750.

SPEAKER_10: I managed to pay five payments of $150. Perfect. It was a 1973 Chevy.

SPEAKER_17: 1973 Chevy.

SPEAKER_04: My first car was a 1973 Mustang Grande, and I paid $650 for it.

SPEAKER_03: And the great part about that car was the air conditioner didn't work, but there were two holes in the floorboards that had rusted out, so you got plenty of air blowing in when we were driving on the Bell Parkway in Brooklyn, where I almost died driving that car. But one of the things people have to realize here is a lot of people get intimidated when they hear about the technology industry in Silicon Valley and all these titans of business. And I think what's important for people who are listening to realize, and then just also in their lives, is that these are just human beings. They're normal people. And our industry, as much of a black eye as it's gotten in the last year with some of the issues that we certainly need to rectify around diversity, for every bad story I hear,

SPEAKER_04: I hear a hundred stories like yours, where people were helped without an expectation of return. The goodwill in Silicon Valley and the opportunity to break in, I believe, is greater than most

SPEAKER_63: other industries, greater than Hollywood, greater than finance, greater than media. It is a very open community. Do you agree?

SPEAKER_10: I completely agree. And this didn't happen overnight. When Hewlett-Packard started from Stanford, this is the culture. People think Silicon Valley is about the capital, but it's not. It's the culture being created. You go to every coffee shop in Palo Alto, people like you are advising other entrepreneurs without any expectation. And that's magical to me.

Chamath Palihapitiya: One of the things that was controversial in my book was chapter five, where I said,

SPEAKER_03: to be a great angel investor, you need to be in Silicon Valley. And I just said the word yes. Because to be truly great at this, I believe you need to be a part of this community, because this is where the outsized returns have traditionally happened. It doesn't mean it will happen in the future. But how much was the proximity to all this great stuff going on critical to your success?

SPEAKER_09: Oh, a lot. I couldn't believe that I would have been here not only in Silicon Valley, on that street.

SPEAKER_22: You know, University Avenue was the mecca at that time. I mean, things have changed. I mean, things have shifted to San Francisco now.

SPEAKER_10: But at that time, every good company, including Facebook and Google and Yahoo, were on that street that started.

Chamath Palihapitiya: They all started on University. And in fact, Palantir, Facebook had bought up all the buildings.

SPEAKER_03: Then Palantir has bought them all up now. Correct. It's crazy to think.

SPEAKER_08: You know, I've missed Facebook. You missed Facebook.

SPEAKER_40: Oh, my God. Tell the story. I tell you the story. Oh, it's painful. So, my partners who own Medallion Rug were my partner in the entity.

SPEAKER_89: What's the name of the workplace? Medallion?

SPEAKER_10: Yes, Medallion Rug. Medallion Rug. So, Amidi family who we started, Amidzot together, invested in companies. They own real estate. And one of the real estate is this building called 165 University Avenue. If you Google it, New York Times actually wrote an article that this is a lucky building. Google was there. PayPal started there. And Logitech started there. So, I got a call one day and he said, I'm Sean Parker.

SPEAKER_22: We have this company called Lee Facebook. And our investor, Peter Hill, said, you have a building, has a lot of karma and we want to move there.

SPEAKER_10: I said, let's meet. So, he came to the gallery and he invited me to their office. It was a tiny office. I went over there. It was kind of a messy scene. Pizza all over at 10 a.m. And then Mark came in and said, hello. And then he pitched it and I never heard any pitch. I mean, he was amazing. And he said, we want this space. I said, this space is for the companies that we can invest. He said, impossible. We sign a deal with Accel. They're wiring money next week. And I went back and said, I can't give it to you. Three days after, he called. He said, oh, we manage that you can invest $50,000. Great. In the company. I said, fine. And then lawyer came and I actually published that. It was $49,998.36 at around $85 million valuation. 80 or 85? Yeah. This is what I did. I took and attached to that investment. 10 basis points almost. Attached to that investment was a lease agreement and they had five years option to extend it at the same price. I took it to the real estate office. They didn't accept it. So, we didn't end up to invest, but I think it was a lesson to me that I didn't push it. I should have pushed that. Right. Like on the phone. I shouldn't have given it up to the real estate office, but we should get these things done. But you learned that you don't overanalyze much in the early days.

SPEAKER_03: Expand upon that because I think that this is a very important point of you don't overanalyze in the early days. When you're looking at a new company, there is so little data to go on, right? What are the signals that you look for?

SPEAKER_96: Yeah. I spend a lot of time to get to know the founders.

SPEAKER_10: I like founders who are not tourists. Not tourists. Explain that. I think the people who have this desire to make a difference, no matter what, if this works or not, they do it again. And I think if this company doesn't work, they do another company and so on. Even angel investing is not for anyone.

SPEAKER_22: This is a long, long road that you have to be patient. You have to work. And as you mentioned on your motto, do the work.

SPEAKER_33: Yeah. So I spend a lot of time to get to know them. I like founders who are close to the problem they're solving. What does that mean, to be close to the problem?

SPEAKER_10: Okay, either you live through that problem, you've worked at Salesforce or Google, and you say, okay, this is a huge opportunity here I can solve.

SPEAKER_22: You have academic background, or somebody in your family was sick and you figure out that I have to do something about cancer.

SPEAKER_108: Got it. I like teams who have chemistry together.

SPEAKER_03: Chemistry. Okay, so we got the founder. It is a meaningful problem to them, and they're dogged and resilient. They're not a tourist. They're not here on vacation. They're going to be here in Silicon Valley or wherever working on projects, and then you're looking at the team. Yes. So talk about team composure.

SPEAKER_72: Yeah, I like teams who have history together.

SPEAKER_10: They either work together or they rock climb every weekend or they went to high school together. They have a lot of things in common, they discuss, and they can look eye to eye. That's the one thing that you cannot fix as an angel investor when there's no chemistry within them. I like teams, especially CEOs who are paranoid in a healthy way. Yes. They wake up in the morning, they question themselves. Although they're confident where they want to be, they question every single decision they make, and they have this fear they can go out of business soon. Right. So I love to see that in founders.

SPEAKER_38: The thing about being paranoid is I think that you're right to be paranoid.

SPEAKER_03: An enlightened person who understands the history of business and has watched the arc of companies knows about crossing the chasm and the disruptors challenged and the innovators dilemma and all this stuff,

SPEAKER_04: they know that there is going to be somebody who's coming to take their business. They know that there are 20 different ways that a business can be destroyed in a day, and they have to be vigilant. And some people are not vigilant. I've had investments where they didn't know how much money was in the bank. And I literally, to this day, and I'm rich now, let's be candid here, I've got plenty of money, I get an email every week with the cash balances in my businesses. That's how insane I am. Yes. Because I want to know how much cash is left. I absolutely agree. And I know what the burn is at every company. I know everybody's salary. I know what I spend. I've had founders who are not vigilant. I absolutely.

SPEAKER_33: The paranoid survive. Yes, I absolutely agree. I like founders who are insanely focused. You typically don't see them anywhere.

SPEAKER_22: You don't see them in conferences. You don't see them in parties. You don't see them in cocktails.

SPEAKER_10: You don't see them even in the Christmas parties that are big funds. But you don't see them. I think they're heads down focusing on it. And I love founders. I think the best founders I've ever worked with who build multi-billion dollar companies are intellectually curious.

SPEAKER_27: They just spend so much time and invest in themselves to grow as a person.

Chamath Palihapitiya: See, this one, I think, is one that I've learned over the years, which is the real skill in the world today is not any particular skill.

SPEAKER_03: It's the ability to add skills. It's the ability to add skills, right? So with our children, what I'm optimizing with my daughters for is can they learn new skills quickly and do they have a joy of learning a new skill? And it's very challenging because human nature is when you learn something new, you fail. And so I had to have a long talk with my seven-year-old about, listen, the precursor to success, what comes before success is failure.

SPEAKER_04: And you have to learn how to do these new skills.

SPEAKER_03: And, of course, when you first shoot the bow and arrow, the arrow is going to go flying and you're going to miss the target. But after you shoot 10, you're going to start hitting the target two out of three times, and that's the goal. All right, we're going to take a quick break. And when we get back, we're going to go through some of the most common questions that new angels need to know the answers to, like what terms do you look for in a deal and which one should you negotiate for and which one shouldn't you? And how do you decide if you're going to follow on or not?

SPEAKER_04: And then how many companies do you look at in order to make an investment when we get back on Angel Podcast?

SPEAKER_03: Hey, everybody, let me tell you about my favorite app on my smartphone. No, it's not Waze. I do love Waze.

SPEAKER_04: It's not Uber. I do love Uber. But my favorite app right now is Audible. Why? Because every day when I wake up and I'm doing that morning commute, driving from the peninsula up to San Francisco or driving from my home all the way down to Sand Hill Road, I listen to something on Audible to get myself motivated, to get myself smarter, and to just expand my consciousness. Audible is my meditation. I love to listen to audiobooks. Sometimes, if they talk too slow, I put it at 1.5 and I can get through a book quicker. Other times, they talk fast like I do, and I just leave it at 1x. They have a beautiful sleep timer, which I've talked about before on the program, where I put my AirPods in, boop, and I get to listen for the last 15 minutes before I drift off into my sleepy sleepies. But there are tons of features for this product. If you haven't used Audible in a while, get back into the app. The app is so amazing. The feature set that they've added, including sharing a book with somebody and taking notes and bookmarking specific moments where you can then go reference it again. The speed control I talked about. And channels are amazing. This is something most people don't know about, but they have exclusive content, original, short stories, comedy, best of news, podcasts, handpicked, and continuously refreshed.

SPEAKER_03: Channels is a great little feature inside of the app. So, remember, when you use Audible, if you don't like a book, you can get it back and exchange it for free. That's right. They have the great listen guarantee. If you don't like a book, you can exchange it. No questions asked. And I've got to tell you, I've got two or three clunkers that I'm going to take the time to do this with and get those credits back. There's an amazing selection there, and it's unmatched in science, business, motivation. And the narrators turn your mundane drive into a delightful education and enlightening experience. So, ride with Audible. I'm going to give you my pick right now. This is the book I'm listening to right now. It's Nassim Taleb's Anti-Fragile. And this book is about things that gain from disorder. So, it's not about being resilient.

SPEAKER_04: This is about actual things in the world that when there's disarray and chaos, they actually do better. I won't spoil it for you, but he is obviously the author of The Black Swan. He's incredibly brilliant. And this book is just, it's one of those books where he says things that are so profound, so eloquently, that you hit that rewind 30 seconds button. And that's really easy on the interface. Whether you're driving or you're, you know, on your commute or you're running, you can just hit that boom. Go back 30 seconds. I want to hear that again. Or boom, boom. I want to hear the last minute again. And I do this all the time. If I hear something great, boom, boom. I just want to listen to it again and let it sink in. It's a great book, Anti-Fragile. The other one I just finished is Red Notice. And Red Notice is by Bill Broder, who is a hedge fund manager who is operating in Russia. And this is like a cloak and dagger story with Putin and the Russians and the KGB and violence and business and the mob. And it is the most compelling thriller that I've listened to in years.

SPEAKER_03: I mean, not since Shadow Divers have I listened to something so compelling. That should give you an idea. I love Shadow Divers, another audio book. So anyway, go check out Red Notice. It's so good. I'm going to have Bill Broder on this week and start up soon. So here's a special offer just for our audience. Go to audible.com slash angel book. Audible.com slash angel book. And you'll get a 30-day trial membership. And you can download my book of the week for free. Just signing up at audible.com slash angel book. Audible.com slash angel book. Very important that you put that in there to get that 30-day free trial membership, the free book. Audible.com slash angel book.

SPEAKER_04: And to Audible and the team there, especially the product team, I just want to let the product team know there that you are kicking butt. I mean, I am just delighted. Every time I see you update that app, I look in the notes and I see what you're adding to my precious, loving Audible app.

SPEAKER_127: I love Audible. I just give a big hug to Audible. I love, love, love Audible. I'm addicted to it.

SPEAKER_128: Go ahead and go to audible.com slash angel book.com. All right, let's get back to this amazing episode.

SPEAKER_131: Hey, everybody. Welcome back to Angel, my new podcast.

SPEAKER_127: I'm Jason Calacanis, angel investor and host of This Week in Startups. You can follow me on Twitter. I'm Jason on Twitter, J-A-S-O-N. And if you interact with me on Twitter, if you like and retweet what I say, I will reply to you and follow you back. That's the secret of Twitter. Follow somebody, like and retweet them, and they may do that back. And then I'm also on Instagram, also instagram.com slash Jason. And you can find me on the Facebook as well.

SPEAKER_03: And if you have a great company out there that is in my Goldilocks zone, which means they've got their product built and a couple of customers, but they don't have their Series A yet, email me an introduction. Jason at Calacanis.com. My first name and my last name. I am always available to meet with great founders who are building awesome products. Okay, enough of the plugs. My guest today is Pejman Nozad. And he is one of the top three angel investors currently investing in Silicon Valley. His firm is pear.vc, P-E-A-R.vc. Why pear?

SPEAKER_133: I never asked you that. You know, when we started the fund.

SPEAKER_10: I love pears, by the way. My favorite fruit. Thank you. My partner, Mar Hershenson, said Pejman, everybody knows you. So why don't we put your first name and my first name? So it was Pejman Mar. But we never wanted to have our name at the door.

SPEAKER_22: And we want to build an institution that lasts for a generation, bring partners on board. And I never want people to work for me.

SPEAKER_10: I want them to work with me. And when we searched for the name, and I always thought ideas, founders are like fruit. They need water. They need soil. They need farmers. And I thought pomegranate is the right name because there's a lot of seed in it. Yeah, great. But it was overused, hard to spell. And in this firm, I asked them to bring a name that, it's fruit. And when pear came up, I said, well, this is the name because we are pairing with entrepreneurs. And the PE is Pejman. The AR is Mar, if you look deep.

SPEAKER_139: Yeah, and what's great about it is it literally is my favorite fruit. Oh, is that right? I have a pear tree in my backyard.

SPEAKER_03: And literally for the last three months, when I'm working in my home office, I hear these thuds. And it's sometimes the wind will kick up in Hillsborough and a pear will go flying into the window. And then I have these crows who come and eat all my pears. So this is my life now. I'm like an old man with my pear tree.

David Friedberg: All right. So we're going to go through some rapid fire questions here.

SPEAKER_03: These are blocking and tackling for people who are new and aspiring angel investors to understand what your best practices are at pear.vc. And so how do you decide if you've invested? I get this question a lot. I've invested in a startup. It's now 12 months later.

SPEAKER_04: They want more money. How do I decide if I give them more money or I stand pat?

SPEAKER_70: I go pro rata. I go super pro rata. How do you make that decision?

SPEAKER_10: You know, as a firm now under pear, we looked at every company. Our pro rata investments or follow on is as a new investment. So we look at as a new investment. We look at the progress the company has made, the type of a team they attracted, the type of the investors. If there is any revenue, we look at it. And the possibility of if we invest today, what would be the upside from that?

SPEAKER_22: And then we make that decision. You know, last year we had like 11 or 12 follow on. We didn't do in three of them. So we didn't feel that the company made enough progress or investors.

SPEAKER_149: So you did three out of four though?

SPEAKER_10: No, we did eight out of 11. Oh, eight out of 11. Three, we didn't do it.

SPEAKER_08: Three didn't, right.

SPEAKER_10: When you're an angel investor, it's maybe harder because you might not have the data you need to make a decision. If you're not a major investor, you don't have information rights, it's hard.

SPEAKER_150: Explain what information rights are so people understand.

SPEAKER_10: So information rights is actually the right you have to get information from the company. As an investor. As an investor, you know, revenue projection, team dynamics, and anytime you reach out, they can show you the financials or other important business matters inside the company. Got it. And for us as an investor, it's very important to have. Yeah. And as an angel investor, you don't have maybe enough capital to follow on, but that's a great thing about have syndicates and so on. So if you're good, you can have a syndicate.

SPEAKER_17: Yeah, I insist on information rights now. And not only do I insist on that, I have it contractually in all of our documents.

SPEAKER_03: I also insist on a monthly update, which I talk about in chapter 27 of the book, which is just super important because if the founder has the discipline to email the core metrics

SPEAKER_04: to the investors, they're much more likely to invest in the future because they feel like they've been kept up to date.

SPEAKER_03: The worst thing a founder can do is contact their investors after total silence for six or 12 months and then ask for more money.

SPEAKER_10: I absolutely agree. And I know you have this discipline that you ask our founders to send monthly update. And it for us is the way, I mean, we meet our founders regularly, but I think that's one of the best discipline CEOs have to inform their founders. Because if you have good investors, you're very transparent with them and you talk to them when things are good or bad and ask for help.

SPEAKER_161: Yeah, that's critical for founders who are watching the show. And the majority of people watching the show are actually founders for Angel.

SPEAKER_03: Paradoxically, I think they want to figure out how angels think. It's just a great sign of discipline that you can explain to your investors. And I tell people, it shouldn't take more than half an hour to write because you should have this data at your fingertips. Keep it short.

SPEAKER_63: It should be less than five minute read, 500 words or less, and one or two charts and just the key metrics. And ask for help. And ask for help.

SPEAKER_10: I think you'll be surprised at how much investors are willing if you specifically ask, I'm looking for this contact at this company.

SPEAKER_38: Right. Yeah. It is amazing that people ask for help when they're literally 10 feet underwater for a

SPEAKER_04: minute. And you're like, I can't reach you in time. You're going to drown. It's over. You're waving to me and you're halfway down the river. If I jump in the river, I'm going to drown with you. Yeah. I always tell people, if you're going to be drowning and you get a sense that you are going under and you're in over your head, wave your hands and ask for help.

SPEAKER_63: You know, like don't try to be a hero and swim back to shore when you know you can't. When you're caught in that riptide, you got to raise your hand and say, send a lifeguard.

SPEAKER_11: You know, another issue I think founders have, which I give them right, is when you have too many investors and they invest in small checks, then you can't give everybody information rights.

SPEAKER_10: It's very hard to manage that. Because? Because if you have like 30 people leak and so on, discipline the background. So you give to people. I mean, I know there's a challenge for founders to give everybody information rights.

SPEAKER_04: And there's some information that you don't have to give people. You don't have to tell them, hey, listen, in an email, these are the three things that

SPEAKER_63: are, were absolutely working for us in terms of growth tactics and these four aren't, or this employee has crushed it for us. Like you don't have to broadcast that.

SPEAKER_173: Yes. Your secret weapons.

SPEAKER_10: You know, one of these monthly news updates, I mean, we get from our founders, he's so transparent. As soon as you open it, it says, situation red or yellow or green. Seriously. And he said, we're in deep trouble for this. We lost our engineers. Can you help? Wow. It's pretty amazing.

SPEAKER_08: And then we have helped that founder so much. Yeah. It's like Defcon one, two, three, or four.

SPEAKER_177: It's like, we are going to nuclear war now.

SPEAKER_03: All right. How many companies do you meet with before investing in one? In other words, what's your ratio?

SPEAKER_96: Yeah, we met 2,000 companies last year. 2,000? Yeah, we invested around 10.

SPEAKER_179: Wow.

SPEAKER_96: Yeah. Wow.

SPEAKER_10: You know, and in particularly, we have to say a lot of no, but because we're doing kind of the ground zero investments, you know, precede majority of it, we need to get to know them. So we take a lot of meetings. We have to find a way to do less meetings, but last year we did over 2,000 meetings.

Chamath Palihapitiya: And how do you keep yourself disciplined in those meetings? Because this is one of the things I've seen with investors.

SPEAKER_03: A lot of investors, I've been on the other side of the table where an investor is on their phone during a meeting with me, or they're not paying attention, or I can tell they're not into it. How do you keep that discipline as an investor to be respectful to the founder?

SPEAKER_10: Yeah. You know, I started my life here from nothing.

SPEAKER_22: So I have so much respect for the founders who come and they can get a comfortable job and they come to my office. They put everything on the table. Right. So as an investor, you want to be respectful, spend time with them, lesson to them, and provide good feedback. Right. So we have this kind of the culture inside our firm that we put founders in the center of the universe and we work for them. Right. And when people come and pitch us, we are just very respectful. We keep it on for 30 minutes. So we found out that if it's like 45 minutes, one hour, we do follow on a lot, but the first meeting is 30 minutes.

SPEAKER_10: I think the good founders, they send a lot of information before that meeting to us. We always ask for decades and so on, but good founders send a lot of material. So when you go to this meeting, we are educated, we ask the right questions, and it's really up to the founders and CEO to conduct a very productive meeting.

SPEAKER_17: Do you care about the total addressable market, what we call here in Silicon Valley, the TAM? Some investors seem obsessed with understanding the market size before investing.

SPEAKER_70: Is that important to you?

SPEAKER_09: I think it's important for us. I think it's important for us, but sometimes there is no market.

SPEAKER_10: Explain. You know, when Airbnb started it, there was no market. Right. I mean- What was the market for renting your couch? Yeah.

SPEAKER_08: I mean, was it? No. I mean, it was like 50 people probably doing it across the nation on Craigslist. Yes. And you grow the market. So, and in going back that you and I discussed the quality of the founders, or when you invested

SPEAKER_10: in Uber, you didn't know, I mean, everybody can drive and become an Uber driver.

SPEAKER_170: Right.

SPEAKER_58: Nobody knew that it was going to replace cars. Exactly.

SPEAKER_03: We knew it would be competitive versus Lincoln Town Cars and carry car service or whatever.

SPEAKER_127: I mean, that was obvious that it was cheaper and better and faster and, you know, more efficient, but it wasn't clear that people would be using it to commute.

SPEAKER_10: You know, at our firm, we look for founders who are building or solving real problem in the market that they can become monopoly or category defining companies and they can become venture backed. Some, some of these tech companies are not venture backed long run.

SPEAKER_38: Yeah.

Chamath Palihapitiya: So let's discuss that for a second.

SPEAKER_03: What makes a company venture fundable? Because you and I are early stage angel investors. That means for people who are listening, you know, angels tend, and angels in early stage funds tend to put 25 to $500,000 in a deal. Is that your, what's your average check size now?

SPEAKER_10: I'm around 250,000 to 750 a million.

SPEAKER_03: So, yeah. So, it's not enough for the company to get escape velocity and be profitable, generally speaking. It's enough to get a bunch of milestones that would attract a VC. What are those milestones in 2018, you know, 2017 going into 2018 in your mind here in Silicon

SPEAKER_60: Valley for technology companies? What makes them get that Series A, $5, $10 million funding?

SPEAKER_09: I think they are looking obviously for an exceptional team.

SPEAKER_10: I think they all calculate if things doesn't need to work now, but if it works, it could be a public company or it could be a massive exit for the fund.

SPEAKER_22: And these are the funds who want to own 20 to 30%. It has to be massive. Explain why. Because if you have a, let's say, $500 million fund and you have to return it to our, this, I'm talking about, not about us, I'm talking about. A big VC. Charles River Ventures. Yes.

SPEAKER_10: Excel. Or like NEA or Sequoia. NEA, Sequoia, whatever. You have to return this money and have huge multiples. And if they own 20, 30% of your company and you ended up $100, $200 million exit.

SPEAKER_210: They make $60 million on a $500 million fund. Yes.

SPEAKER_10: And it's not enough. It's not enough. So they just want to make sure that you get 20, 30% of a company who become a multi-billion dollar company. And when we look at our portfolio when we invest, it's okay that things doesn't work now, but at least we should be convinced and imagine if a thing works, it could become really, really big and we take that risk.

SPEAKER_17: Right. And at the beginning when you and I are investing, you can have a partial team, but when you go to get venture capital, the team's got to be more filled out. What are the key positions in a team that a venture capitalist will look at and go, this feels like a good team?

SPEAKER_10: I think when you get to series A, they want to make sure that there is leadership in the company.

SPEAKER_22: I think a founder, CEO could be the first time CEO. All these companies were started by first time founders.

SPEAKER_40: Yeah. Facebook, Microsoft. I think they want to make sure that somebody owns technology. Right. A VP of engineering, CTO.

SPEAKER_10: And then it could be, the VP of engineering can change down the road after a few years, but somebody who can manage a team of 10 to 50 people. Right. It's okay if you grow up and you need to bring more senior people. Right. I think it depends on the company. Some companies, they don't need the salespeople, but if you have, you need to have somebody who owns that.

SPEAKER_161: Yeah. Some chief revenue officer, sales executive. Got it.

SPEAKER_10: But at the end, I think I agree with you, just the team should be exceptional to get the funding in series A, top tier firms.

Chamath Palihapitiya: What are the terms in a deal that are critical for you to have now?

SPEAKER_03: When you're doing that term sheet, what are the deal breakers you have to have and which

SPEAKER_161: ones are you less concerned about when you're going through that?

SPEAKER_183: You know, we always want to make sure that is a fair valuation, but that has never stayed

SPEAKER_10: between us and the founder, as long as they are fair. Fair. Yeah. Because I think the valuation early days, if it's in a range, you know, doesn't make you rich as long as it's in the range.

SPEAKER_168: What is the range today for a seed stage company, five employees, pre-product market fit?

SPEAKER_10: I think I've seen it between six to eight million. Yeah.

SPEAKER_161: That would be the average. Is that what you're saying? Yeah. Yeah.

SPEAKER_10: The average. You know, there are some crazy ones, 12 to 15, 20, and so on.

SPEAKER_40: Yeah. I've seen those come out of Y Combinator sometimes. Yeah. So I think for us-

SPEAKER_161: One time I was talking to one of those Y Combinator founders, I said, how did you come

SPEAKER_03: to this valuation of 15 million? And you know what they said? They said, last year, the record was 12 or 13, so we wanted to beat last year's record. And I thought, hmm. Right now, Feshman is kind of smirking. Hmm, that's interesting. And I was like, here's the thing. If you set the benchmark at 15 million, I need 100X for me to make the investment. In my mind, I always go through a little discipline where I say, how can this grow 100X? Because if it grows 100X and I experience some dilution, maybe I'm 50X, 75X, if I go pro-rata, maybe I'm still 100X. But at 15 million, you've got to get to 2 billion or 1.5 billion for me to be 100X. That's hard. But if you're 4 million, okay, 100X is 400 million.

SPEAKER_38: Okay, that's not as hard.

SPEAKER_09: And the other one we look at, it's obviously as a VC firm, we look for pro-rata rights,

SPEAKER_22: information rights, and so on. Many of our investment that we lead, we take your board seat. But if you don't want us on the board, it's okay.

SPEAKER_10: So you lead investing?

SPEAKER_235: You like that board seat?

SPEAKER_10: We like that discipline, and it sends us a message that how a CEO wants to interact with us. But if you say, oh, we don't want to have a board, it's not a deal breaker for us.

SPEAKER_03: So if it's a great company, they're not ready for a board, you'll pass on that? Yeah. See, it's very interesting. You and I are very similar in so many ways. And one of them is, a lot of people thought it was cool to not have governance and to not have boards. And all the early stage investors and a lot of people are like, I don't, you know, marketing is like, I don't sit on boards. I don't need board seats. I don't know. Everyone's like, I don't need boards. And I think one of the problems we're seeing right now is these companies start to not have

SPEAKER_04: anybody care when everything hits the fan, right? And so when things go wrong, if there's a board, the board will have anticipated it in all likelihood and discussed it and have a strategy. Whereas if you don't have board meetings, how would you ever have anybody care enough to save the company?

SPEAKER_10: If you have chosen the right investors that you think it's a right partner with you, I just don't see why they don't want to have a board seat. We are okay not having the board seat if the founder insists on it. But I think it's a good discipline. And if you're claiming that you're building a public company, it's better to have that discipline today.

SPEAKER_63: That's a great way to phrase it.

SPEAKER_03: See, I'm going to use that because I've had this discussion with a number of people. I have one company in my portfolio I invested in when they were 5 million. Now the company is doing 20 million in revenue. There's still no board. So a 20 million dollar company is worth 200 or 300 million dollars now. You know, 10x revenue is what some of these high growth companies will go for. So I'm like, we're 150 to $250 million enterprise. I own 8% of it. This is a 16 or $20 million dollar position for me and my fund. And we don't have a board? Yeah. What are we doing here? We need to get some discipline because we could skip a series A. We're at series C. And we still don't have a board?

SPEAKER_17: What if something goes wrong? What are you going to explain to these investors that they lost tens of millions of dollars?

SPEAKER_27: I think part of it is this notion that some founders, they think they're scared of VCs or investors. They come and fire you. But those days are gone.

SPEAKER_10: I think when I started, there were 3x liquidation preferences. You control the board now. But, you know, founders control the board. You can't fire founders and so on. So I think this is kind of the, I see the board as a really close working relationship.

Chamath Palihapitiya: Yeah. I mean, even in the case of Uber, which I don't want to get too into because I'm obviously a conflicted party here.

SPEAKER_03: But even in that situation, they couldn't oust Travis. He had to resign himself, right? And if you look, that company had massive governance and a lot of people. And they still had some challenges, right? So proper governance, absolutely critical for those people who are listening here. Okay. We're going to do a quick portfolio review as we wrap up here. This is my favorite part of the show. It's your chance to tell us how you met the company, how you made the decision to invest, and just a little bit of color on that. So Lending Club. Everybody's heard of Lending Club. They have TV commercials. I think they're public, yeah? Yes. They went public. Look, how did you meet them?

SPEAKER_17: And that's one of your billion-dollar companies. And how did you make the decision to invest in it? Why did they succeed?

SPEAKER_11: I think we met them with my partner, Saeed Amidia, at Plug and Play at that time. What is Plug and Play?

SPEAKER_10: Plug and Play, it's actually incubator, offices, space, community that Saeed Amidia started in Silicon Valley and hosts over hundreds of startups over there. You can rent space, have different categories that you get mentors over there, and you get funding.

SPEAKER_40: Got it. And actually, when we met Renal, I'm from Iran.

SPEAKER_22: In Iran, when you start a business, you ask money from other people to come and help you, and you get loan from other people. And, you know, when Renal explained his philosophy that there is no such a thing, a platform, that you can, as a small business in particular, you can get loan from, you know, regular people, and they can make money. For us, for us, it was very obvious. And then getting to know Renal was just pretty amazing. And at that time, they thought, everybody thought, he's crazy. The bank's going to sue them. Every bank started to sue them. At the end, every single bank was on his board. Wow.

SPEAKER_03: So this is, it speaks to that dogged resilience you need to have. A lot of times when you're changing the world, people will try and stop you.

SPEAKER_09: Yes. And I think, you know, these founders, they see future before us.

SPEAKER_10: He was saying something that I didn't see. So, and then insist on it that this works like Airbnb founders. Right.

SPEAKER_03: They just knew something that we all didn't. Airbnb is the example I give to people over and over again of why they don't need, as an individual, to understand if the business is going to succeed. They need to understand if the founder will succeed in their life. And the reason is, when I heard the idea for Airbnb, and I didn't have an opportunity to invest in that company, but I am in awe of it. Because when somebody told me the idea that I would sleep on somebody else's couch, I said, like a serial killer's couch?

SPEAKER_63: And the person was like, no. Like, these are normal people. Like, they log in with Facebook so you know who they are. I'm like, I think they're serial killers. I'm absolutely certain there are serial killers on Facebook. They're like, oh, yeah, but, you know, you rate each other. I'm like, you realize, like, Hannibal Lecter is one of the, like, most charismatic serial killers ever. Like, he was loved by everybody who he didn't eat. And they're like, yeah, no, no, no. It doesn't work that way, Jason. And then I was like, okay, well, who are the people renting? And they're like, oh, well, just people who need extra money. I'm like, well, I can rent to people. And then who stays on my couch? Oh, people. Okay, so I'm going to rent my couch to a serial killer. So either I'm sleeping on a serial killer's couch. Anyway, long story short, I just could never get my head around it. And that's when I realized you don't have to get your head around it.

SPEAKER_03: If the founder sees it, great. If you love the founder and they're executing at a high level and the metrics are there and the team's there and the early customers love it, why do you, as an individual, rich, now you, rich venture capitalists living in Palo Alto or Atherton,

SPEAKER_244: you don't need to understand. It could be for a totally different demographic.

SPEAKER_241: Yeah. So, all right, this is an interesting one.

SPEAKER_03: Gusto. This has done really well. How did you meet Gusto? And what does that company do? And they've done really well.

SPEAKER_10: I got an introduction from one of my founder's CEO. I met Josh here in a cafe in San Francisco. Ten minutes into the conversation, I said, I'll commit. I didn't see a product.

SPEAKER_07: Wait, you ran into him? No, no, no. Or you had a meeting? You had a meeting.

SPEAKER_10: An introduction.

SPEAKER_07: So, ten minutes in, you told him, I'm in.

SPEAKER_09: Yeah, it was very clear to me.

SPEAKER_07: Do you do that often in the meeting, tell them, I'm in?

SPEAKER_09: No, sometimes. But this was very, very rare.

SPEAKER_10: I mean, people, you should get to know Josh. He's going to do this for the rest of his life. And he wants to build a category-defining company. I knew the market is pretty big. And as a small business, I had this payroll and so on. And it sucks. Nobody likes it. And the way he explained that, his thought process, then he called me and he said, I'm sorry you can't invest because the round is full and so on. I said, that's fine. And I started to make introduction without being an investor in a round. A week after he called, he said, who was it? One of the investors couldn't invest because of the conflict with his firm.

SPEAKER_40: Ah. So, you had a portfolio conflict? No. Actually, he was a CEO of a public company. Oh, got it. And he said, you know, he helped us so much.

SPEAKER_27: And he's my biggest, largest check I've ever written for any startup. Really? As an angel.

SPEAKER_63: Wow. What did you put into that? So, $250,000. Wow. So, as an angel. That's a big bet for you as an angel. Pre-fund. I love it.

SPEAKER_03: App Lovin'. This was sold for a billion and a half dollars. So, this is a realized investment, huh?

SPEAKER_183: When I was selling carpets, I asked, and I was managing like 30 people.

SPEAKER_10: One of the things I ask every salesperson that, at the end of the day, I want you to Google whoever you sold carpets you went to a home, report to me. Because I was going to say, who is coming? And one of these days, my brother was working there. I said, well, this Iranian kid is very smart and so on. His name is Arash Faroqi, Adam Faroqi. You should meet him. I became a good friend with Adam. And the next time he started App Lovin', I was an investor in his company.

SPEAKER_127: Amazing. And DoorDash. I love this company. I know Sequoia is an investor in it. How did you meet DoorDash?

SPEAKER_10: DoorDash, we met them at Y Combinator.

SPEAKER_58: Ah, yeah.

SPEAKER_10: We met them over there, and we spent a lot of time.

SPEAKER_58: Did you go early when you were mentoring, or did you meet them on Demo Day?

SPEAKER_10: We met them before Demo Day. And actually, Mar, my partner for due diligence on University Avenue, she went to every single restaurant and asked about DoorDash, and everybody loved it. Because they were, you know, actually, we knew there was something there. We loved DoorDash because they were not touching food. They were determined to build a logistic company. Right. And they spent, they're all mathematicians. They thought software should solve it. And Antonia, I think, is just walks through the wall to make things happen.

SPEAKER_127: Absolutely. All right. Now, this is interesting because you brought up due diligence, and you had Mar, your partner, she went and went to the actual customers and asked them, hey, what do you think? That took her probably a day or two total, maybe five hours. But that is all the difference in the world. You can decide through a little bit of due diligence to make an investment. What is your typical due diligence process today? And what was it when you were just a solo angel? How is it different now?

SPEAKER_10: Oh, very different. I think when you're an angel investor, and you have developed this pattern recognition, and you've seen founders, you meet them, and you look at the size of the market, you talk to the rest of the team, and you form an opinion. When you're a venture fund, you have to go much deeper. I think we look at that, we talk to the customers, if there is customers. Sometimes there's no customer. At the time, DoorDash had customers. But we have some companies now becoming really big, like Branch, or One Concern just raised $20 million. There is no customer. If it's a technical due diligence, you know, Mara has a PhD in W from Stanford. She was a professor, so she gets the technical part pretty quickly. And if things that we don't understand, we reach out to our immediate network to get their feedback, their opinion. Sometimes we reach out to a real expert in that thing. See, we want to see if we have missed anything or not. We look at other people to see the world through their eyes. And spend time to get to know the team, reference check at the end. So it's really thorough.

SPEAKER_154: Explain what a reference check might be.

SPEAKER_10: You know, reference check is typically founders send three or four of their people who know them. But we manage to go through other people because the references always come really positive.

SPEAKER_269: Of course.

SPEAKER_10: So you manage to find people who have worked before.

SPEAKER_63: You can do dark reference checks. Yeah. What do they call that when you do a reference check that's not the – we have to come up with a term for that. A reference check that's not given to you, like an independent reference check or a backdoor reference check.

SPEAKER_22: Maybe a true reference check.

SPEAKER_03: No, it's a true reference check. Yeah. Because I do this now. Like if I was raising a fund right now, I would call the other fund managers and ask – I would call the other funds I know and say, what do you think of these LPs?

SPEAKER_04: Sure. If you're raising money from a venture capitalist, you should call the other founders and ask them, what do you think of this VC? Yeah, exactly.

Chamath Palihapitiya: And if you're investing in a founder, you should ask other founders and other VCs or other customers.

SPEAKER_10: Actually, one of the advice we give to the founders are raising money next round from VCs.

SPEAKER_72: We ask them to talk to the founders who – their company didn't work and see how the VCs help them.

SPEAKER_77: Ah. So if a company failed, that founder is going to have more authentic feedback. In failure, you really get to see a person's character. Correct.

SPEAKER_17: Yeah. How do you handle failure? Majority of startups fail. Has it changed?

SPEAKER_03: Have you become more philosophical about it now that you've got a couple of – not a couple, but a dozen wins under your belt? Or does it still burn you deeply when things don't work?

SPEAKER_10: You know, it always hurts. I actually – but I always try to learn what mistakes we made, what mistakes the company made. Can we have done more for the founders? So I put myself on the seat and ask questions. It's not only founders' fault. I mean, sometimes the market, the timing, and people don't get it. But, you know, it hurts, but, you know, I've learned as an angel investor you have to lose in order to make –

SPEAKER_288: The big wins. Yeah.

SPEAKER_40: Yeah. It's so true.

SPEAKER_10: Yeah, and I think you have to go back. I think the discipline that you lose money today, you go back to the next meeting and be as excited as ever. It's not for everyone. I think you have to have this. I have lost money. You go back to the meeting. You think this could be the next Dropbox or Mark Zuckerberg or Travis.

SPEAKER_22: So you need to create that discipline, and, you know, you have to have a strong character.

Chamath Palihapitiya: Yeah, I think that this is something I learned from gambling, large amounts of money in poker.

SPEAKER_03: Because I had one night – I was actually – speaking of Persians, I was playing – I used to play cards with Persian guys in L.A. Is it a big thing in the Persian community in American gambling? I don't know.

SPEAKER_170: The Iranians are good in math and science and poker. Yeah.

SPEAKER_03: So it's amazing the number of Persian guys who play poker in L.A. It was a big Persian community there, too.

SPEAKER_04: And I lost one night – I think I lost $70,000. Eight – I lost eight hands. And I did the calculation. I was ahead on all eight. I was even on one, and I was ahead on seven. And when we ran out the all-ins, I went home to my wife.

SPEAKER_03: I was like, I was 60, 70, 80% in all these hands. The chances of me losing those six hands was like under 1%. And my wife said to me, well, haven't you played more than 500 times? And I was like, oh, my God, you're right. This is the 500th scenario. She goes, you should go to that game tomorrow night. I went to that game.

SPEAKER_04: I get in the game. I'm down $50,000. So now I'm down $120,000 back-to-back nights. And I am mental. So I said to myself, I'm not leaving to this table until I'm even. And this is when I play my best poker is when I'm down. So sure enough, I start playing more aggressively, and I get back to even for that night.

SPEAKER_127: And now I'm even for the two nights. So in my mind, I'm even for the two nights. This is a huge win. But then I'm like, I've got to press my luck. I wind up up $160,000.

SPEAKER_131: Because that other two nights, people knew I was losing. They were just beating me up. They were all challenging me, constantly raising.

SPEAKER_03: And I said, okay, it's 3 a.m. I'm going to play till 5 a.m. I mean, these are crazy games. I said, I'm going to play for the next two or three hours. I'm going to play mental.

SPEAKER_297: So I put my phone off, and I just started calling everybody down. I called some guy down on a $100,000 hand and won.

SPEAKER_283: And then I was like, that's it. I'm pulling the ripcord. I went home to my wife. It was like one of the greatest victories of my life.

SPEAKER_03: But the lesson there is, the precursor to great success is often multiple failures, back-to-back-to-back. And when you do angel investing, all the bad news comes first. Yes.

SPEAKER_244: And all the good news comes 7, 8, 9, 10 years later. Yeah. The first two or three years of your portfolio must have been brutal.

SPEAKER_10: Exactly. And you don't know you're good at it or not. You have to pay it. And speaking of that, I think we all live as an investor for those moments that somebody walks out your door and surprise you. And that's the moment. And that's, I think, I think what distinguished and amazing investors and not are those who detach from whatever they believed before, and they can see the future through the eyes of the entrepreneur. And that's where you end up investing in Uber. Yeah. Or Airbnb. Right. Because whatever you believe till that moment doesn't make any sense.

SPEAKER_04: How great is our life? We sit there and we meet with people who want to change the world. It's amazing. And they tell us everything. Yes.

SPEAKER_298: And then we get to have this incredible, joyous moment where we get to support them and join

SPEAKER_268: them on that journey.

SPEAKER_10: I feel myself so lucky to be here. I think- I do too. You know, people come and educate you about an industry in 30 minutes or 45 minutes.

SPEAKER_22: So I think we're just all lucky to live around here.

SPEAKER_249: It's one of the amazing things. If you think about how smart you can get in the world.

SPEAKER_127: Well, how could you become smart? Well, you can go to college and a bunch of professors will teach you what's in the books. And some of them maybe do some primary research. But then you think about the role of an angel investor. If we just did this as a job that paid, you know, $150,000 a year. It was a good, well-paying, white-collar job, like being a lawyer. And your only thing was to just assess, is this company going to win or lose for a bank? And just write a statement. Like, your job was to work for, you know, Bank of America.

SPEAKER_77: And you just had to meet with the companies that were asking for lines of credit and just write up if they were going to succeed or not.

SPEAKER_09: That would be worth it. Yes. It's so much fun. Yes.

SPEAKER_10: Funny you brought it up. Remember the day I was hired by the owner of Medallion Royal Gallery, like 20-some years ago, the owner took me out and he said, out of the gallery, he said, at the end of the street, there's a university called Stanford.

SPEAKER_22: You can go there, get your master in business, but the real PhD in life, you get it with me here. So whatever I tell you, do it.

SPEAKER_139: Pejman, it's been an amazing hour. It's just a tremendous joy to have met you because...

SPEAKER_03: Likewise. You know, it's so nice to meet somebody who worked hard and that had extreme success. Thank you very much. It is one of the great examples. I don't want to go on a super tirade here, and I try not to make this show political. But in the current climate, you would have a very hard time to get into this country, correct?

SPEAKER_16: Yes, of course not.

SPEAKER_10: I mean, I came here, I sent Iranian Muslim, no visa. So I don't, you know, my worry is the next Pejman might not have a place in America. And I think I'm grateful to America. America gave me every single opportunity to be... Greatest country in the world. Yes, and you know, they never judged me, they never told me, I never felt foreigner here, I never felt outsider, especially in Silicon Valley.

Chamath Palihapitiya: Right. How disturbing is it to you today when you see how Muslim individuals, people from the Middle

SPEAKER_17: East are just treated in general? It's got to be heartbreaking for you.

SPEAKER_317: It is.

SPEAKER_09: I mean, a small example is the travel ban. I mean, my uncle can not come here for New Year. Right. Why?

David Friedberg: He's a member of ISIS, right? Yeah.

SPEAKER_10: Clearly, if Trump banned him, he's a member of ISIS. Well, look at just the contribution of immigrants, an Iranian, like CTO of Yahoo, Iranian, CEO

SPEAKER_16: of Uber is Iranian. He was an immigrant here. CTO of Dropbox is Iranian, chairman of Twitter is Iranian.

SPEAKER_319: Well, actually, isn't Dara Iranian? Yeah, Dara, CEO of Uber. CEO, right. Oh, they said CTO. Yeah, CEO is.

SPEAKER_10: Chairman of Twitter is Iranian. Yeah. I mean, he's got all immigrant people. I think they came here. You know, I hope that America doesn't lose that spirit.

SPEAKER_03: As they say in Hamilton, immigrants, we get the job done, right? Yes. They do the work. If you're coming from nothing, this is one of the great things we have to fix in the next couple of years is we've gone backwards on one of the key growth techniques, one of

SPEAKER_04: the key hacks of America as an operating system has been to allow people who are hungry enough to make that journey around the world with nothing in their pocket and to clean cars, then surf frozen yogurt, sit in the attic, get the girl they love over, and hustle. We give them that hard, it's a hard journey, but we allow them to take that journey. And to deny people who want to climb that mountain is the biggest mistake. It is so foolish beyond words to not let the aspirational, hardworking people like yourself and the countless others who have come out of dictatorships, harsh regimes, sometimes that

SPEAKER_03: pressure is what makes the diamond. Yes. Peshma, you are the diamond. Oh, I appreciate it. We cannot lose the diamonds, right? We get these diamonds in the rough in this country.

SPEAKER_04: And it really is heartbreaking. We have to, as a country, come together and say, we are all, with the exception of the Native Americans who did not get a fair shake here, we are all immigrants. I'm two generations away from it. You're first, you're here. You're not even first generation. You're an immigrant. I'm second generation. I'm third generation, actually. And none of us can claim this as our homeland, with the exception of the tribes.

SPEAKER_03: That's it. Everybody else here is an immigrant, period.

SPEAKER_34: I appreciate it bringing this one up. Thank you.

SPEAKER_03: All right. Listen, I could go on and on. One of the great things you're doing, by the way, is this great incubator in the summer.

SPEAKER_127: I want to get a plug for your summer incubator accelerator. It's public knowledge, correct?

SPEAKER_326: I'm not spilling that.

SPEAKER_10: Yeah, I'll tell you a little bit. So we are, you know, PEAR is an early stage seed fund. We started with my partner, Mara Hershenson. You know, we know each other for 17 years. We're kind of like a yin and yang. I'm a college dropout. She's a Stanford PhD. I invested in 120 startups before this. And she's invested in one company. But we have such a complementary skill. She started three companies. We raised two funds. First one was $50 million. Second one is $75 million. We have university endowments, you know, fund-up funds, amazing LPs. And like any traditional seed fund, we invest in early stage companies. But we started to look at communities that are already filtered and go deep. And the first community we went after was Stanford. The first thing we did, we thought, what if we get the smartest students from Stanford, wilder students under this roof, and something good will happen. So in 2014, we selected 20 students, 12 students actually, from Stanford, from freshman all the way to post-doctorate. You don't need to have any idea. It's okay you have an idea. But you need to be a builder. You want to be an entrepreneur. While you're in school, we give you mentorship. We give you space. We give you around $50,000 credit of Amazon, Facebook, and so on. We don't invest, but we don't take any equity. And you don't need even to start a company. So this is the fifth year we're doing it. Imagine, like, there are 100 people out of Stanford. They're either founders or work somewhere. So we built a great community. We built a great brand inside Stanford. And like nine or 10 companies came out of that. We had us wanting it. One of them actually, we seeded it, and Joe Lonswell invested $10 million. This is a company called Affinity. Huh, I've heard of it. It's kind of, you know, related IQ on steroids. What happens was some of the members of that garage, they finished school. They said, okay, we finished Stanford. Now we're a seriously starting company. Can we hang out at your office this summer? And we said, okay, you can come here. And they said, can you give us $20,000? So casually, we started at the Stanford graduate students the first summer of 2014. And we put them in front of investors who came and talked about, I mean, they provided feedback. And TechCrunch all of a sudden wrote that, well, this is the best demo day in recent years and so on. So now every year we select 15 companies, they have to be, we invest in 15 companies, up to $40,000 uncapped note.

SPEAKER_77: Yeah, so there's literally no downside for them. It's just an uncapped note, whatever they wind up raising money at, it converts out. And for you, it's a small check.

SPEAKER_35: Yeah, and actually, but you have to be for 10 weeks at our office. We work with you every week for one day.

SPEAKER_10: I mean, the whole team's over there. We have workshops every week. We have speakers every week. Are they there every day? Every day. Wow. We put it in front of investors, and we invest in some of the companies, some not. Great.

SPEAKER_139: Awesome. All right, listen, Pejman, it's been great to have you on the program. Everybody follow Pejman, P-E-J-M-A-N-N-O-Z-A-D on the Twitter.

SPEAKER_03: And go ahead and visit PEAR, P-E-A-R, dot V-C, and make sure you follow PEAR, V-C, on Twitter. P-E-A-R, V-C, to hear about all the exciting programs and programming they do. And I can tell you, one of our incubator companies, I think from the launch incubator four or five,

SPEAKER_04: went to FitBod. They went to your program, and they told me that it was fantastic. And they went, I think, 7X in revenue while in your program for 10 weeks.

SPEAKER_10: Yeah, that's an exceptional team. So kudos to you to pick that team. I use the app, actually, every day. It's great. You and I are going to be in shape. I never, because I play professional soccer. I always was runner or cycling. I was not really used to weight. But now I wake up in the morning for 30 minutes.

SPEAKER_40: I have my program, and they use AI and machine learning to just tell you the next exercise. It's pretty amazing.

SPEAKER_131: And you tell them what, at FitBod, they will tell you what equipment, you tell them what

SPEAKER_127: equipment you have, they tell you what you can do. Yeah. So if you go to a hotel and they only have dumbbells, or you have no equipment, they'll say, okay, do push-ups, do this, do sit-ups, do crunches.

SPEAKER_131: But if you have, say, access to five different, you know. They customize it for you. They customize it. Yeah. So if you have kettlebells, they're like, oh, here are some kettlebell workouts. And for you and I, old guys, right? We're both in our 40s now.

SPEAKER_63: I don't know if you hit 50 yet. I'm 47 now in November. Everybody get ready for my birthday. Yes. You and I are going to get hit 50 soon. Yeah.

SPEAKER_70: We lose. You know about muscle atrophy? We lose like a pound of muscle from this point forward every year. Wow.

SPEAKER_127: That's why guys like us all of a sudden become these frail guys.

SPEAKER_04: But what you have to do is, you ever meet these 60-year-old guys who have more muscles than us? They're just lifting weights twice a week. Yeah. If you lift weights, not only does the muscle atrophy go away, you gain muscle, and then you live longer.

SPEAKER_03: And you look better.

SPEAKER_343: Yes.

SPEAKER_03: That's what I'm trying to do. I'm trying to try. I used to be then. Now I've got to do more weights. All right. Listen. Peshaman. Continued success. And for those of you who are watching, if you haven't read the book yet, please go to angelthebook.com. If you have read the book, I have one request. If you got any value from it at all, I have two requests. One is you go ahead and write a review. Audible, on Barnes & Noble, on Amazon, iBooks, wherever you bought it. The second is, go ahead and join jasonsyndicate.com. If you join jasonsyndicate.com as an accredited investor or a non-accredited one, we're going to be having some non-accredited deals shortly. We're working on that. That's going to take a little bit of time. But we'll have an announcement about a partnership with SeedInvest in all likelihood to do something there. But on the accredited side, you get to see every deal memo I write. So it costs you $0, and you get to learn, and we get to know you. And then next summer, every July, right around Bastille Day, which is July 14th, we host a

SPEAKER_04: retreat up in Napa for three days for 50 angel investors and 50 founders. It fills up immediately. So go ahead and join jasonsyndicate.com, and you'll get the first notice about the angel summit. Okay. Thank you so much to Emmy Award-winning producer Jackie, to our sponsor and partner in this podcast, Audible, which I love. It's one of the great services. I listen to, I read three books a month, two on Audible, one I read manually in a print book. I still like to get a nice print book. Sometimes I get an e-book, but usually print. And literally, the smartest people I know in the world share one thing in common. They read books. But we all have this downtime on buses, cars, training, on bicycles, on treadmills. That's when you put Audible on 1.5 speed, and you become smarter. You take notes. And the one thing you're going to love about Audible, I hate to do a second commercial, is the sleep timer. Every night, I put in my iPod, what do you call these, AirPods? And I put the sleep timer on 20 minutes, and I listen to 20 minutes of a book. Then by the end of the month, I'm done, and I get to sleep nice and easy. Sometimes I wind up dreaming about weird things, but that's the price you pay. All right. And thank you to Director Jake. Director Jake has been working very hard on the new studio. Master Jake, I call him.

SPEAKER_10: Thank you, Jason. It was a pretty humbling experience, Pierre. I'm honored to be on your show. So thank you so much.

SPEAKER_298: See, you're like the humble version of me. Like, if I was humble, I would be Peshmon. And if you were obnoxious and conceited, you would be Jason. We're very similar in that fashion. But essentially, we always have the same exact number of investments. We start at the same time, and we have similar size funds that we're working on

SPEAKER_127: and similar incubators. So it's been great, and we'll see you all next time on Angel, the podcast.