By Jason Calacanis
The two most important startups in the world: AngelList and Kickstarter.
They're more important than Facebook, Twitter and Apple. Heck, they're more important than Pinterest! ( ← zing! pow! )
These two projects have been hated, dissed and dismissed for much of their existence, but soon folks will see just how disruptively awesome they are.
In the early years, having your vision hated by most people, but absolutely loved by a few is -- of course -- the surest sign you're going to change the world. Conversely, projects that are loved by everyone early are sure to have absolutely modest outcomes. Even Google had doubters. "Why do we need a new search engine?" they said. Others saw the actual, better results behind the goofy name.
At poker games here in Los Angeles, my friend Kevin Pollak (oops, you dropped a name, let me pick that up for you!) and I have bridged the celebrity and internet circles by hosting poker games with degenerates from both groups. It's not uncommon to have at the same table a couple of folks who have products at the top of the Apple App Store and the top of the box office (or your DVR).
For the past year, I haven't been able to shut up about Kickstarter. I keep pitching top directors and producers at games, telling them that in five years one of them will raise $10M to $20M on the service, own 100% of their film that they will give to the world for free (or low cost) and never have to deal with a studio.
Hard to believe, except in that time Kickstarter has had multiple $1M+ raises -- albeit for mostly design and technology projects -- and has funded dozens of indie films. Read David Carr's awesome Sundance story for background (side note: Carr's such a great writer).
[ Note: I'm not an investor or advisor to either AngelList or Kickstarter, although if they asked me to invest, advise or be a board member, I would in a heartbeat. Not angle shooting here either -- I have told the founders of both I would get involved if they ever needed my help. ]
In fact, if George Lucas or Quentin Tarantino wanted to, they could raise $20M on the service tomorrow, give their movies away for $5 online without DRM, $10 on Blu-ray and for millions of dollars to a cable channel and make much more money -- net-net -- than they do with the studios.
They would also build a mailing list of their top one to 10 million fans who they can hit up again and again. Lucas actually has those mailing lists because of the StarWars.com site, so why he wouldn't say, "I'll make a live-action Boba Fett movie if you guys put up $20M in advance" is beyond me.
C'mon, do it George!
In fact, one has to wonder why QT hasn't tried this yet. Someone on this list knows QT, right? Forward this to him, please!
Now, AngelList is for folks who are looking for funding from qualified investors (as in folks with a net worth in the millions). They don't collect money, they just list deals. They are not a broker/dealer.
Somehow I've got 7k followers on the service, which is bizarre to me. Turns out 10% to 15% of them are accredited investors. What, really?
The top 25 angel investors on AngelList all have thousands of followers today. Legends like Reid Hoffman of LinkedIn fame and Dave McClure of 500 Startups. It's amazing how AngelList is growing.
It's going to change all funding in the Valley. It's literally the most important startup in Silicon Valley today. And because of that some folks -- the ones being challenged by -- absolutely hate it.
The very public co-founder Naval is becoming loved by startups and despised by some of the venture capitalists who his service is marginalizing. You won't hear this publicly that often, since most folks in Silicon Valley avoid public spats and like to compartmentalize their dissent.
Of my followers, 99% joined in the last 12 months. I can't imagine where AngelList will be in five years! Reid and Dave McClure might have 250k followers with 25k of them being accredited investors.
Three of the startups I've referred to the service told me that after I "syndicated" their deals on the service -- in the forms of a comment like "this is interesting" -- they closed their rounds instantly.
Well, before AngelList, I never built a list of every angel investor I knew and shipped them all a deal at once. Nor did I have a tool to let angel investors I didn't know follow my deals.
Now I do, and boy is it awesome. It's like a nuclear option for funding: push the button, get 50 meetings.
For backround, the reason this is happening is that after investing in awesome startups like Gowalla (bought by Facebook), Rapportive (bought by LinkedIn) and Uber (crushing it), folks want to follow my deals.
I've got a mini halo on the service (not literally, just by the nature of my profile at www.angel.co/jason ).
In fact, when I listed the LAUNCH Festival on the service for PR reasons (the site lists all startups--not just ones looking for money) it quickly became the second-most followed startup -- after AngelList itself -- with 1k+ followers.
That told me that there is an interest in investing in the LAUNCH Festival even though we're not raising any money (we're running the firm at break-even in order to help startups). However, when you get 1k folks showing interest you start to think, "Gee, if there are 1k folks wanting in on this deal maybe I should raise money and go bigger."
IMPORTANT Note: I'm not saying I am raising money, because I think (lawyers correct me) if I did say I was raising money, the S.E.C. might actually say I was soliciting you guys and put me in jail (or fine me). So, to be clear, I'm not raising money. I'm just telling you what an entrepreneur might think when so many folks show interest.
The crazy thing about what I've said above is that unless you have a net worth of a couple of million (aka an accredited investor), you're not going to be able to understand what I just said -- let alone invest -- so says our government.
Yes, if you have less than a couple of million in net worth, you're simply too dumb to invest in startups according to our laws. Face. Palm.
Only rich folks in this country are allowed to be solicited for break-out investments. You know, the ones that generate true wealth. The "poor" folks in this country can only invest in the sucker's market: the IPO and public stocks (and trust me, if you buy tech stocks at that point, you're a sucker).
You can blow $10k on blackjack, but you can't invest $10k in a startup. That's the law today.
For background, these laws were designed to protect folks from scams almost 100 years ago.
Go ahead, read these to catch up if you need to:
However, it seems like we're on the brink of changing those laws -- the House passed H.R. 2930 (The Entrepreneur Access to Capital Act) last fall, and the Senate is considering a similar bill. If we do change these crowd-funding and accredited-investor laws, folks who "have an idea for an app that does BLANK" will actually be able to put that idea on a service and give equity -- shares -- in that idea to anyone.
Yes, I could tweet right now "invest in my startup BLANK!" and not get a call from the S.E.C.
Imagine a doctor who works with kids who have ADHD wakes up one day and says, "I have an idea for an app for kids who suffer from ADHD that could help them concentrate better without drugs!"
The doctor could put it on a new crowd-funding service and say "I'm raising $100k and for $1k you get 0.5% of the company" (putting the value of the company/app at $200k).
You invest the $1k because your kids have ADHD and because you think it might be a good investment. The app sells $1M over the next year and you get back $5k in dividends.
Or you wind up paying $1k for an app that doesn't work. Or the person never gets the app built because they are incompetent. Or it sucks and no one cares. Or it actually causes damages to kids with ADHD and they sue the company to oblivion!
Those are the risks you take: just like betting on black in roulette. It could be black, red or the dreaded green (although you should always put a chip or two on green to balance that out).
Let's gamble, baby!
Right now, this is not possible since AngelList is only for accredited investors, and Kickstarter is only for donations and "thank you gifts" (e.g., donate $100 to my film and I will send you a signed DVD and movie poster).
Kickstarter says they will never do equity investments, only projects with benefits.
Why Is This So Important?
This is so critical for our country right now because innovation is not limited to the folks in New York or Silicon Valley where angel investors are eavesdropping on every cafe conversation. And because people who are not millionaires should be free to spend -- or gamble -- their money however they like: be it betting on sports, playing poker, gambling on a mutual fund, speculating on gold coins or -- gasp! -- investing in startups!
Anyone who has used Groupon, Farmville, Facebook, Angry Birds or LinkedIn in the first year knew they were good investments and should have been allowed to invest. Only the rich were allowed to invest. How is that fair?
Finally, there are thousands of people out of work who also have a great idea for a sustainable business who would give it a shot if they could just get their hands on $10k to try. What's the harm in letting those folks swing the bat? Who cares if they miss, it's only ten dimes.
Entrepreneurs need kokua [ pitching in or helping in Hawaiian ] , and the system is broken in the United States.
all the best, Jason
PS - The LAUNCH Festival is my own little Kickstarter/AngelList project, with 50 startups launching on stage and 150 in the Demo Pit. It's 10 days away on March 7th and 8th. Be there!
Oh yeah, there will be $489k in prizes. :-) (two will be announced on Monday)
And there have been $5B+ in alumni in four years of hosting LAUNCH/TechCrunch50.
Note: if you're broke and can't afford a ticket, I might have a couple of scholarships for deserving folks -- apply here. If you're a VC, angel or bigco exec, just buy a ticket and support the event. :-)
0:43 PM PST Sun, Feb 26, 2012