Continuous Improvement: How to 10x Your LP and VC Processes with Jason Calacanis

This episode discusses the strategies and philosophies behind successful venture capital (VC) and limited partner (LP) investments, featuring insights from investor Jason Calacanis.

1. Importance of deal flow and decision-making in VC investments.
2. Strategies for learning through direct investment and real money.
3. Insights into the lifecycle of VC and LP investments and their interconnectedness.
4. Calacanis' approach to building relationships and understanding markets through hands-on experience.
5. The value of process and systematic improvement in investment strategies.

1: Introduction

Hosts introduce Jason Calacanis and set the stage for a discussion on VC and LP processes.
Ernest Sweat: "Welcome to Swimming with Allocators, where we dive deep into the VC world from an LP perspective."

2: Jason's Journey

Calacanis shares his start and evolution in the investment world, emphasizing the learning gained from being both an LP and a VC.
Jason Calacanis: "I started by investing small checks into big name funds and learning the ropes of being an LP to better run my family office."

3: Decision-Making and Deal Flow

Discussion on critical aspects of successful investing, including deal flow management and investment decisions.
Jason Calacanis: "Your deal flow is super critical, as is your decision making and your ability to double down on winning investments."

4: Reflections and Future Directions

Calacanis reflects on his past decisions and discusses the future of investing and his current strategies.
Jason Calacanis: "I'm learning public market equities by doing it and have a really good run and have gotten my ass kicked on a couple of bets."

1. Prioritize establishing robust deal flows.
2. Develop a systematic approach to decision-making.
3. Learn continuously through active participation in investments.
4. Build and maintain strategic relationships within the investment ecosystem.
5. Use failures as learning opportunities to refine investment strategies.

Jason Calacanis is an American Internet entrepreneur, angel investor, and podcaster known for his keen insights into the tech startup ecosystem. With a net worth of approximately $100 million, he invests in over 100 startups annually through Launch.co. Calacanis also educates aspiring founders at Founder University and hosts the popular podcasts “All in Podcast” and "This Week in Startups." His notable investments include Uber and Robinhood.

Armstrong International is a specialist financial services executive search firm with 30 years'​ experience across Public and Private Markets. Our consultants possess deep subject matter expertise within; Fixed Income, Equities, Private Equity, Private Debt, Digital (Data Science & Technology), Private Wealth, Corporate Finance, Real Estate, Infrastructure, Emerging Markets, Credit, FX, Emerging Markets & Commodities We are trusted by some of the world's leading financial institutions, who use us for 3 primary reasons: industry expertise, speed of hire, and ease of doing business. We like to innovate and have been at the forefront of some of the most profitable and exciting changes in the industry, including the technology revolution and the ever-expanding world of Private Markets.

Swimming with Allocators is a podcast that dives into the intriguing world of Venture Capital from an LP (Limited Partner) perspective. Hosts Alexa Binns and Earnest Sweat are seasoned professionals who have donned various hats in the VC ecosystem. Each episode, we explore where the future opportunities lie in the VC landscape with insights from top LPs on their investment strategies and industry experts shedding light on emerging trends and technologies.

The information provided on this podcast does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this podcast are for general informational purposes only.

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Jason Calacanis, Ernest Sweat, Alexa Binns

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Jason Calacanis

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Ernest Sweat
Welcome to swimming with allocators. I'm Ernest Sweat, and each episode, Alexa Benz and I give you a VC podcast from the LP perspective. You ready? Let's dive in. Today our guest needs little introduction.

Alexa Benz
Jason Calcanis, an investor, entrepreneur and co host of the all in podcast. And this week in startups, better known as angel Investments. Yeah, a lot of podcasts. This is the podcast on podcasts. Yeah, Jason, you're most known for your angel investments and VC investments, but today we're having you on specifically as an LP.

He's written LP checks into 25 sum funds. Additionally, a media and marketing guru, Jason's going to chat with us today about the approach to his own fundraise and marketing of his VC fund. Thank you for doing this, Jason. My pleasure. It's great to be here, starting out with the LP perspective, wearing your LP hat.

Could you share this first story of your first LP? Who did you back and why? Wow. So I have been lucky enough being in Silicon Valley to be offered to be in some of the big brand name funds that are out here. And so some of those funds will have programs for founders or early stage investors maybe they want to build a relationship with.

Jason Calacanis
So I was invited into a bunch of those sort of well known funds and would put small amounts of money, and typically when you get invited to them in these kind of like sidecars for founders or influencer ish early stage angels, it's a small amount of money. Maybe they have twenty five k, fifty k, one hundred k available to you to put into them. And then I started looking at, you know, funds like, you know, by first time funds by friends of mine, et cetera, and putting small checks into those, again, 25 5100k. I'm in, I think exactly 24 or 25 right now. I think your number is correct.

And four of them are my funds. Launch fund, one, two, three, and four. And the other ones, I'm probably eight or nine managers across, two or three funds each now. And so Raul from superhuman, you might know, he started his own little fund. I had backed his first company.

He has a partner, Todd, who they got together, they started a fund. So I put a small amount in. I might have put 50 or 100k into that fund. And it's just a way for me to build relationships in the ecosystem and learn about being an LP. So I would be lying if I said I understood all this.

I thought the best way to do it is with real money to learn. And I've come up with my own framework for selecting one LP a year. I get invited to maybe 50 funds a year. I don't spend too much time on it, but I try to look at a small subset of criteria and in a way I'm doing that. And J trading.com dot check out the domain name.

I started trading some public equities publicly on this week in startups because I was also faced with, okay, well, you've now been given shares of Robinhood, desktop metal, Uber or square DoorDash from when I'm LP's in companies. What do I do with those shares? Well, I need to learn when to exit a public company, what percentage to exit, when they're overvalued, when they're fully valued, if there's other opportunities for me. And so all of this is kind of heading into now that I'm in my fifties, which is really crazy to say, like running my family office. And so I don't want to hire somebody to run the family office.

I want to understand the entire lifecycle of investments. So I understand fully seed investing and series A investing. I'm learning public market equities by doing it and have a really have had a good run and have gotten my ass kicked on a couple of bats can get into that. And then also learning how to be an LP in funds. And I don't have too much going on in real estate, other than residences that my family and I can enjoy.

Like we have a ski house and we have a primary residence and an office space. So, you know, we have three properties there. So, you know, it's just when you get to a certain amount of wealth and resources, I think you need to understand each of these. And being an LP and being a GP, you really get to understand the lifecycle there. Right.

Ernest Sweat
Jason, how has your criteria changed over time as you learned more about being an LP and different funds? Yeah, so I think at the core, your deal flow is super critical, your decision making is super critical, and your ability to double down on winning investment, supercritical. So those are three ds. There is also being able to fight to get an allocation into a company. Right.

Jason Calacanis
Competing. I have been very lucky in my career because of the podcasts. I have too much deal flow, and that's like a different type of struggle when you have too much deal flow, because then you're missing things. And in my email box are countless emails from the last 1012 years of people who pitched me and then reply when they go public and say, you never got back to me, but we went public and I'm like, well done. Played the long game and so, you know, but new funds, like my friend Sophia Amarosa has her trust fund, and small LP's in there.

Put 25, 50k, maybe it's only a $5 million fund. And so, you know, she has distribution already because she has a best selling book, Girl Boss. She did these girl boss rallies. She's got a following on social media. So deal flow already done for her.

So then my question to her with her fund, trust fund is, okay, tell me about your decision making process. Tell me about your doubling down process. And so those are the three things that I think really matter. If your deal flow is basically the denominator, and on top of which, you have the companies you actually invest in. If we have a thing, we're trending right around 20,000 applications for funding a year from our fund.

We've actually stopped asking for applications because we were actually having a hard time getting back to founders, which I take seriously. And we need more people. We have 21 people at launch, and you can just go to launch, co apply to apply for funding. We try to take all those seriously. Sometimes people send us pizzerias or movies or albums.

We can very quickly let them know, hey, we don't invest in that space, and we can point them to resources, but, you know, you do want to be thoughtful. And so we have a decision making criteria. We came up with 13 reasons to invest in companies, 25 red flags. So I built this internally, but by being an LP in other people's funds, I can say, hey, tell me about your deal flow, tell me about your decision making, and tell me about your doubling down strategy. And then I'm learning from them, because deal flow, we've got done.

Decision making, we've got done. And I just finished in our firm, our philosophy around doubling down. And so then that gives me the ability to hear if people have other ideas, how are they doing the doubling down strategy? What do they keep in reserves? How do they pick which companies in their portfolio to give additional funding to?

And how do they say no to people? And so it's almost like when you're an LP, it's a bit of a hack. I get to have people explain to me how they're solving a problem that I'm also facing right now. We don't have. Also, the issue of competition.

When you're a seed stage investor, there's typically 2030 names in each rank, and there might be two rounds before the Series A. You put that together with overlap, there might be 30 slots on the bus, so to speak. It's like, literally a bus pulls up and you can get in the seed round. Now, when you get to the series A, it's a two seater corvette. You know, the Corvette pulls up, the founder is in the driver's seat, and then one vc gets in and does the series A, and they zip off and they go fast.

But it's generally a bus, right? And, you know, everybody gets on the bus, pays for their ticket and the tickets, 25 to 250k when you get in that Corvette or the Ferrari. And there's one seat available that's a 510 million dollars series a ticket size, and that person wants to take the whole round. And so, you know, you don't really have to worry about competition in these early stage funds. You do have to worry about it in the series a when it gets really chippy and one person leads and they block everybody.

They may even ask all the series seed investors and the pre seed investors to waive their pro rata so they can get more of the company. And so, you know, they'll ask for rights to be taken away, hard earned rights by those seed stage investors, where they'll say, we'll just pull the term sheet. So, you know, those are the four criteria. Deal flow, decision making, doubling down, and competing for deals. So 3D is in a sink.

Ernest Sweat
You know, you kind of described kind of like your archetype as an LP. It's one in which you get to do the learning and actively learn and kind of co collaborate and steal the best ideas. Is there other aspects of your archetype? Do you feel like you one that helps the funds that you do, or are you more passive? Yeah, I mean, that's a great question.

Jason Calacanis
By the way, there are different LP types. Some of them are in it for the action, and they want to know every investment, and they want to sweat each hand. So if somebody backs you in a poker tournament, they call that staking. Now, I will stake somebody in a poker tournament, and, like, I've been lucky enough to stake my friend Phil Hellmuth, and what he'll do is he'll have the people who he, let's stake him in a little group chat, and he'll just tell you a couple of the hands, or he'll point you to a website where somebody broke down a couple of the hands. So you get this, like, really cool sweat, which is like, why people might bet on football, right?

They makes the game more exciting. Even if the game is, you know, a blowout, you might still be betting on individual players performance or the over under. You get all kinds of action. So when it comes to venture firms, I'm not in it for the action, I'm in it for the relationship. Want to build a relationship with that person, want to talk to them about the industry writ large.

And largely, if I double my money, then I'm like, okay, I put in twenty five k, I got 50k back. Ten years later, that's what would have happened in the stock market. That's totally fine. It's like a little. I call them wealth bombs.

You bury some kimchi in a clay pot or you bury some cabbage with some hot sauce in a clay pot. You come back, it's kimchi and it's delicious and you just pound it. And sometimes you go back and it's a really big pot of kimchi, and it went 20 x, right? And you got this, like, giant bowl of it. So I just kiss it on these little wealth bombs and I don't sweat it too much.

If I were to lose half my money in 100K LP commit and I lost 50, and then the next fund, I've had like two funds that have been ten x and 20 x. Like that 20 x makes up for. I'm already at break even across all my funds. So, you know, it's. If you have access to these funds and you have a ten year arc, you can kind of like, maybe not worry too much, especially if you're doing it over time.

And I've been doing it over time. I make one a year. So I do get a little bit, and then I have some people re up. So that you do get a little time, you know, balancing over it. What's the word for it anyway?

You're investing over time. So you would maybe lose money on, you know, or have less returns during like, peak Zurp era. 2020, 2021, those people might have deployed capital at the peak of the market. Now people are deploying at the bottom. 2010, 1112, they were deploying at the bottom of the market.

So you do want to have that time dispersion of the bets as well. Yeah. So to answer your question, I don't try to sweat it, and I just love the idea that I can talk to them or they can send me deal flow and say, hey, this is our best performing company, you should meet them. Although that really hasn't happened. So that part of my thesis that, like, the GPs would proactively send me a great company, it actually hasn't happened.

So I have a system for doing that with my GP, my LP's, I create a Google sheet. Anybody who has over a $1 million ticket size in the fund. I give access to that Google Sheet and then we update the Google sheet every month. And it just says, we invested in this company at this month, convertible note safe. This valuation, this amount of money it went through, found university, the launch accelerator, or it was a direct invest, and then they can click on the link.

And then I'm adding a one simple sentence description from us, and then I'm adding another column which will be, have they raised follow on funding since we did our investment? Because that is a criteria that you get judged on as a fund manager, especially seed stage one. The way to determine early on how they're doing is just to say, okay, you did 100 investments in fund one. How many of them got to series a, how many got to series b? How many got to series C?

How many made it public? And so there are people who look at that criteria, and I've gotten hyper focused on that, and I have new systems in place to increase that because it is a statistic, and it's a statistic for a reason. It's an early warning for a reason. If the company doesn't get future funding from a notable person, how's it going to ipo? In 100% of cases, if somebody IPo, they probably had a notable Series A or Series B.

So, you know, the whole concept of being a great capital allocator is constantly learning, constantly examining your decision making, constantly increasing your understanding of the game on the field. And if you look at basketball, you look at poker, other games, you know, Steph Curry comes into the league and the league changes, right? Steph Curry has this incredible game at Madison Square Garden where he hits like eleven or twelve three pointers, and people are like, wait a second, that's 50% more points than he should have gotten. When Patrick Ewing did, you know, hit twelve shots, he got 24 points, but he had twelve shots and he got 36 points. How's that possible?

You get 50, you get rewarded 50% more by shooting 5ft behind Patrick Ewing's mid range floater or jumper. When he would do that little wrist flick, Patrick Ewing was a basketball player for the Knicks. Putting that aside, since you guys are young, but when Shaqeel O'Neill came into the league and you had this dominant center, it was the era of center. So you had Akeem Elijah O'Neal, Patrick Ewing, you know, Tim Duncan. It was a different era, right?

And the same thing happened in poker. People used to play by reading people. People used to play super aggressive. They used to play now they play GTO game. Very optimal.

There's all types of things that change in these systems. So I like to stay on top of that and I like to really study it to be better at what I do every day. I love the example you gave of how to, how to have co investments actually, how to actually invite your gps in a more fluid way into the deals that you've got inside information. Are there any other examples from your experience as an LP that have informed your strategy? Yeah, I mean, the communication level is a really interesting one.

I don't need to get like a quarterly update on every investment and the markup and the DPI and the TVPI and all this stuff, because at the end of the day I care about cash in, cash out, and I understand the power law, but there are other LP's who are like they, especially when you're doing a 506 c like I do, we have to kind of a lot of people who are investing with us, it's their first time into venture and I'm trying to democratize venture capital a bit. I think that's one of my core theories that maybe people don't agree with. But as an emerging fund manager, man, when I said we were doing a 560, and I mentioned it on all in, and this week in startups, we got 110, $120 million in interest. We can only capture 10 million of that from accredited investors. So that's kind of a bummer.

If it wasn't, I would have raised my fund in literally a week. I do think that will be the future. There are people trying to change the laws to increase the number of accredited investors or have a path for people to become a sophisticated investor through taking a test. But here in the United States, the SEC has got to approve all that. And so it's going to be a slog.

But I do think about, well, maybe we need to have two groups it two mailing lists. This one is for people who want a quarterly, and this person is, this is for people who want a yearly audit in venture. I get a yearly audit from these top venture firms. That's it. It's like a very sort of mellow, buttoned up yearly cadence.

But you know, I have people who, you know, they're only putting in fifty k and they're like, how are we doing? It's kind of like the chef, you ordered like a $50 steak and the chef is like, yeah, I put the butter in the pan and like, okay, how's the steak taste? I'm like, we're gonna find out. Then I'm like, see, the butter is turning brown. Now we're gonna put the steak in.

I put the steak in. How does it taste? I said, well, wait for it. I put a little salt on it, you know, then I flip it over and then I put it on the rack. And I said, it's gotta stick for ten minutes, you know, and they're like, okay, but how does it taste?

And I'm like, we'll find out. Ten minutes. And then in 30 minutes, we cut the steak and you take a bite and we figure out how we're doing here with the steak. So, you know, I'm okay with that. I just think different people want a different cadence.

If I were to send quarterly updates to some folks, they'd be like, thanks, but I'm not going to read it. I'm not into it. So, you know, I like the idea of, you know, anybody asks a question, I just send them a link to that Google sheet and say, click on the links. And if you think it's an interesting company, you can contact them and say, I'm an LP in Jake house fund, and he shares his investments with us. And I saw you're doing something interesting in AI and in Hollywood.

I work at Disney. I was wondering if you would be open to taking a meeting. And I just tell them, like, just represent us well as an LP. Like, don't call them and say like, hey, do you need a real estate broker? Like, that would be lame.

But, you know, don't email every single one of them and be like, I'm 0.1% of launch fund four. I'd like to have a meeting. Like, you don't want to waste the founders time. So generally, I try to trust that people understand how to be good people in the world as LP's and trust them. I get disappointed one in a hundred times.

Like, I've had one in a hundred of people. In our syndicate. We have a syndicate, the syndicate.com. We were the first syndicate on Angellist. We did the largest deal, ever return deal on Angellist for.com, my first deal.

And, you know, it's amazing to me that somebody will be like, you didn't send an update and the company went out of business. And I'm like, we told you, 90% go out of business. Don't play in this part of the market. If you can't deal with nine out of ten of your investments going to zero, you should be investing in companies that are 20 years old. Like, just put your money into an index fund.

If you want to not have to deal with zeros, like an index fund doesn't go to zero. I don't know that QQQ or, you know, any of these vanguard funds are going to zero anytime. So be, be there. Get your four, five, six, 7% a year or bonds or maybe a REIT. I don't know what the devices are that don't go to zero because they have some core value.

But this, in order to have 200 x 500 x 1000 x power law potential, you got to deal with a lot of zeros and, you know, just grow up and deal with that. It's really hard. People really, some group of people really take losing poorly, and I don't have a problem losing. The only thing is when people try to subvert the sale. Like, we've had that happen a bunch with aqua hires, so we'll see an acqui hire.

This happened, I think, with Zuckerberg a lot. Chris Sacca called out Zuckerberg on. He would buy companies, put all the value into the stock equity plans for the two founders, and then screw the investors. And Chris Sacca called them out on it publicly. You can go find that.

I called him out publicly on that. And obviously, Zuckerberg bought Instagram and WhatsApp for large numbers. So I think he changed that. Immature behavior, predatory behavior. But I still see predatory behavior like that occur to this day, where we'll have an acquihire situation and you're like, okay, the investors are getting their money back, or they're getting half their money back or their money back plus some interest, and then there's millions of dollars occurring in other payments and.

Wait a second, what's going on here? Like signing bonuses? Yeah, yeah. And so we. We've gotten better at that.

That tweaks me a little bit. Only because it's not going to affect me as a GP, because these, by definition, are not big deals. We only make money on power law deals. But I just don't like my lp's getting screwed. That really tweaks me a little bit, especially when people do it knowingly.

Sometimes it's not even the founders are doing, it's the acquirer. And the acquirer's like, screw the investors. We only care about the people we have to deal with going forward, which is the employees. So we just, let's put 95% of the value in the employee packages and fuck these investors. And that really is not cool.

But I have a technique. I just call the CEO of the company and say, hey, this doesn't feel fair. And I have a bad feeling about your company. And so if you do unfair things when people say your company to me, I'm going to say, I think that this is an un, we had a bad experience with that firm. If you're okay with that, then be predatory.

But I will not have a problem when your name comes up. I'm not going to, like, tweet, like, this person's terrible. But if somebody asked me about, like, Acme corporation, I will say, like, yeah, we had a terrible experience with Acme Corporation. They tried to screw us. And if they want to double click on it, I'll explain exactly what happened.

And 100% of the time, people are like, yeah, we don't want you to have that experience. Let's be fair to your lp's. And I just think fairness. But, you know, in our industry, you could be a bad actor over and over and over again and still find people to back you. So it is the nature of the business.

I think Hollywood has a similar kind of vibe where people can be bad actors, but if they make money or they have a good deal, you know, who's the guy, Mel Gibson, who, like, how do all these, like, bad things occur where he, you know, said horrible things, and then people were like, wait, how much money did the passion of the Christ make? Oh, those make a lot of money. Yeah, sure. Well, back to the next film. Let's go.

You know, or, you know Adam Newman from Wework. It's like, oh, what happened? You screwed Masa. You took 2 billion out of the business. Everybody else, the employees, got nothing.

You got a $2 billion payout. You screwed all your employees. They got zero for working for you all these years. And then Andreessen Harris was like, yeah, but you're crazy. Here's another 500 million, right?

It doesn't matter. Like, so you could have, like, the SEC could fine you. I mean, this is the nature of venture capital. People and investors, if they think there's a return to be made, they will literally push their grandmother down a flight of stairs and, you know, send her to the emergency room to get an allocation. It's really weird, because I try to be principled about these things, and I would never throw my grandmother down a flight of Sarah, that's for sure.

But, man, say about half the people I met would literally throw their grandma down and fly the stairs to get to a deal. One of my favorite radio early morning pranks was the radio station would have people call their grandma, and all they could say is, grandma, hang up. And if she did. They got like a car. Oh, well, grandmas don't hang up.

They'll just stay with you. But if you call your grandma and you say, grandma, hang up. Oh, what's wrong? Oh, no, it's gonna happen. Where are you?

I'm bringing your cousin, the police officer, in bagels. We're gonna make sure you're okay. What do you need? I'm calling an ambulance, you know. No, no, grandma just hang up the phone.

Alexa Benz
No, precisely. Grandmas don't hang up the phone. That's their best feature. Now we're gonna take a quick break to speak with our sponsor. On the show today we have industry expert and sponsor Hugh Barron, who runs the venture capital practice at global executive search firm Armstrong International.

Thank you, Hugh, for partnering on the show. Any advice for folks looking to work in venture? Yeah, sure. So I would, you know, from, from the people I speak to, you know, and what I would, you know, I think if you are currently in banking, currently at a startup, whatever it might be, I think at the end of the day, venture firms invest in technology.

Hugh Barron
Most of that technology is software based. So if you can find, and it's about being authentic, and I think that's when I speak to VC's and hiring for VC's on the investment side is authenticated curiosity. So what do you do outside of your day to day that shows that you're passionate about x, Y or z? Because that's venture. At the end of the day, it's 24/7 all consuming industry.

And if you don't love it, there are easier ways to make money. That's why, that's why I say to everybody, so if you're two years into Goldman, you're three years in consulting or whatever startup. I would say pick two areas. It can be food tech, it can be crypto, it can be AI, it can be deep tech. Find what you're passionate about and I think go super deep in those areas.

The first thing I'd say is it would probably don't expect it to happen in the next six months. It might take two years, but you just got to prove that and do enjoy it at the end of the day because it's like, it's too hard a job, it's too consuming for you not to be, not to absolutely love it and want to do it outside of your day to day work. And if you can authenticate, find what you're interested in, authenticate that curiosity. Write a blog post, whatever. Start a podcast, go on to meet founders in your spare time.

Find what companies you're interested in, if you've got the money. Trying angel invest in stuff that you find interesting. I think that's just, you've got to show that you're in it for the long haul, I think. And that will really impress most venture funds.

Alexa Benz
I will say the best advice I got breaking into venture, Rebecca Camden said, you can start doing the job when you don't work for a specific fund, learn how to filter, and you can start sending great deals to the people who've been kind enough to take a coffee chat with you, and you can prove you know how to do the job before, before you're in it. So I love that advice that maybe the job comes two years later, but you can actually start doing venture. You can start sourcing and filtering for 20 companies at once, 20 funds at once. Because they haven't got dibs on you yet. Yeah, exactly.

Hugh Barron
And you know, I do also like the Paul Graham quote, which is like, if you people go to, and say, I want to go to VC, go to a startup first, because if a startup is successful, you might never have to work again, and you have invaluable experience to help a founder. So I would also echo that. Echo that as well. From your perspective, what does venture look like going forward? Look, I think we're in an interesting.

I think we're in a, you know, an interesting spot where I think we're in a recalibration and a restructuring of how venture's been for the last 20 years, which was bluntly investing in fintech, consumer tech and enterprise, and b, two B SaaS companies, I was coming 80, 90% of where venture dollars went. I do think with the use of AI building those companies, making engineers more efficient, is going to come dramatically down. I really hope venture goes back to solving the really, really hard stuff. And nothing against 15 minutes delivery. But if there's more venture dollars that goes into whether it's hardware and climate tech, AI and robotics, some of the areas of defense tech and aerospace, which I think is super, super important globally, if we can see more venture dollars, just, you know, risk capital going into solving real problems, I think that's where we'll, that's where I hope the next 20 years, that's why I think there's going to be some really interesting returns.

I think software and SaaS had a great 20 years, but it's coming to an end. And I hope the next 20 years is focused on solving real problems of real capital. And so I speak to one fund the other day, that said, you know, we'd want today, 80% of our portfolio is software, 20% is hard tech, and b, two c. And we'd want that to be 50 50 over the next five to ten years. Yeah, I can see solving big, major problems is also probably quite helpful for recruiting the best talent to this industry that you have real.

Alexa Benz
You have a real mission in the work that you're doing. Hugh. You are such a good partner to have in venture. Thank you. For folks who are interested in working with you and Armstrong International, feel free to email qbrmstrongint.com dot.

And now back to our LP interview. You were talking about this new world of democratizing access to LP funds and setting expectations for some of the LP's who. Maybe this is the first deal that they're coming into launch. It's their one and only LP deal. Yeah.

Is the role of limited partners going to change? You now have over 99. Yeah. I mean, there are things happening where you're going to be able to have a larger number than 99 and 10 million. So I do think that'll happen in our lifetime.

Jason Calacanis
I'm not holding my breath, but, you know, you could just do. I've considered this. Instead of trying to raise a $50 million fund and deploy it over four years, what if you did a $15 million fund every year and you just name the vintages by year and you just tell people first of the year, which is, I think, what rolling funds are attempting to do to a certain extent, you know, make it a little bit more fluid for people. But I have also thought about that. I'll just do this is launch five for 2025.

Launch six is going to be 2026 primarily. Right. Or, you know, and so I might actually pursue that strategy because it's really exhausting. I've been to the Middle east three times in the last year. Amazing.

But that's, you know, whatever it is, three weeks, I got to give up my family in a year. That's 15% of the year. And so this fundraising effort in a down market has been really hard. In upmarket was really easy. You know, even somewhere in the middle, it still takes a lot of work.

And so I think being able to raise capital fluidly without doing road shows and stuff like that is, to me, for seed stage, I think, very appealing. So I might not do this approach again. I might just make it like, here's our returns. Here's the thesis of the current firm. Here's what I've learned.

Just get on a podcast, get on a webinar if you're interested, put your allocation in here. If you're not interested, totally understand. You can skip a fund and launch fund. Six, we anticipate, starts on January 1, 2026. We anticipate this will be the 2025 fund.

And I think the smaller funds benefit the gps as well, because you can get to the hurdle quicker. So my first two funds were ten and 11 million. You could have one investment return, ten or 20 million, and all of a sudden you're paying carry to your team and to yourself. I'm not resource constrained at this point in my career, and money isn't the primary driver for me. It's.

I mean, it is a driver, but it's not like I'm desperate. Right. And that is a dangerous thing to say, because some people do like the gps to be desperate. What I'm desperate to do is, like, have a great legacy and to build an architecture here that really works. So I have a slightly different motivation package at this age, but I do think it's important to, you know, at these funds to have a really tight thesis for, you know, your, your portfolio strategy, your, your, your bankroll is really critically important to think about.

And the architecture of how you think you're going to get returns is super important and fun. Size and follow on strategy are the two, and the number of names in it are really the variables you get to tweak. How many bets did we make? Okay, we bet. We had 30 bets or 100 bets.

So is it better to have 30 with three times as much money in each or 100 with a third as much? Well, if you were following the power law, you need 30 or 40 to hit an outlier. Therefore, 30 is kind of the minimum. And if you're at the early stage and you have a certain amount of attrition that's different than series A when, you know, hopefully they've proven more, or series B. So the returns on series B funds are lower on a percentage basis, but the number of zeros goes from 90% to 50% zeros.

Right. And so, you know, there's a lot to consider about portfolio construction, and that's my current obsession, portfolio construction. Jason, you kind of hit it, me and Alexa, before you got jumped on. We're talking about when is enough enough? Like, what is motivating you?

Ernest Sweat
You are doing money isn't a constraint right now. But you've mentioned legacy. When is enough enough on the legacy portion, what's the ultimate goal? Yeah, I've had a lot of thoughts about that because I could retire because of the uber bet and a couple of other ones. Robinhood calm.

Jason Calacanis
You know, you do have this ability to retire early, and there's a movement amongst, I think, your generation. It's like, get rich, retire early or something. I forgot what it is, but there's an acronym for it, and there's a whole subreddit fire. What is it? Yeah, but you're retired early.

What is the fi, in fire? What is it? I'm trying to figure out the. I. Somebody look up the acronym.

I know it's retire early, and then there's two letters before it, so I'm going to look it up. But anyway, there's a group of people who are. Financial independence. Got it. Retire early.

So it's a lot of you talk. You'Re talking to, you're talking to two Capricorn elder millennials who don't like, I'm gonna work until I die. So, okay. I don't know anything about astrology. 16.

Alexa Benz
But he's actually in his forties. I don't know anything about astrology. I use astrology for men. It's called the Myers Briggs. You may have heard of it.

Jason Calacanis
So ENTJ. So, you know, for me, the way I look at it is I think I'm in the Vinod Khosla sort of mold, which is you may have to drag me out of the building and, or Alan Patrickoff, who I just saw, and he's in his nineties, and Alan Patrickoff was at the iconnections conference down in Miami. And I'm like, alan, he's like, oh, I haven't seen you in 25 years. Like, I met him when I was a cub reporter doing Silicon Alley reporter, and I interviewed him, and that was 25 years ago. And at that time he was.

But if he's 95 now, 25 years ago, he was 70. And I interviewed him when he was in his seventies. And I'm 53, so I'm 17 years from when I first interview him, and he's still going 25 years later, and he's investing solely in life extension. Pretty good bet. Pretty good thing to bet on when you're 95 is extending life.

There's a passion for you. So, you know, I do think financial rewards, you know, status, a lot of those things I was able to achieve a little bit early. And, you know, and certainly people have gotten them much earlier than I have. But it is one of the things, as a capital allocator, that winning early then confers a certain amount of status on you, which then starts to fly. Well, so there's been studies about this.

If you hit a unicorn early, and I hit three on my first seven investments, you suddenly think you're good at this. Now, that happened probably because of my network, so maybe there was something to it, but it also made me think I was good at it, which is the experience. Like a young person might have. Let's say you're, you know, Alexa, you were. It's Alexa, right?

Yeah, Alexa. I just turned on, like, a hundred. I always be more careful saying Alexa, because I think 100 people's. Alexa's just went off. Hey, Alexa playing.

Alexa Benz
You can call me Binsey. That's. That was the general, general way around. Alexa play dire straits. Sorry, everybody listening on hint.

Jason Calacanis
This is why she uses headphones. But anyway, if you had, you know, started playing basketball and in your first game, game was on the line and the ball got tipped to you and you were behind the three point line, and it was a two point game, and you chucked it and it swished. The whole crowd goes crazy. It's your first season as a player, and then everybody's like, wow, you could hit the three now. It could have been just pure luck.

You could have had your eyes closed and just chucked it. Somebody said, throw it, and you threw it out of fear. And then they say, you know what? We've got a three point coach from two towns over. We're going to send you to three point coach because you're great at three pointers.

And then all of a sudden, you believe it, and then you manifest it, and then people tell you you're great at it. That's what happened to me in angel investing. They're like, whoa, you hit Uber, data stacks, thumbtack, and you were the first investor, second investor, third investor. You're good at this. You should start a fund.

And I was like, okay, how do you start a fund? And they're like, you just ask your rich friends for money. And I was like, hey, everybody, at the poker game, I'm raising a fund, and then all of a sudden, I had $10 million fund, and people were like, oh, my God, Jake, how raised a $10 million fund? And then more positive reinforcement. So I really believe in this power of positivity, early success, and then building on it, and, you know, but then you need to.

If you want to scale it, you have to study systems and create, you know, this kind of systems and the process. So I believe in, like, the process and trust the process over my own skill now, because when I look back on it, I've deconstructed it, and it's like, the process is what got you there. People knew you because you were a journalist. People knew you because you threw parties, you hosted dinners, you had a network. You're 100% extroverted on the Myers Briggs.

So you have a lot of friends, and a lot of friends talk to you, and you like to talk to your friends, and your friends tell you about other deals. That's why you had success. It's not that, like, I could look you in the eyes and be like, oh, you've got it. You know, and I'm Yoda. No, I was just a really great networker.

And that goes back to your original question. You know, your original question is, like, how do you make LP? How do you decide which funds to LP? Deal flow is pretty important. I had deal flow, but I didn't know it.

And so, you know, I really focus on process over my goals. I focus on. It's good to set goals, but process. You have control over outcomes. Sometimes you don't have control over, because I know people who had unicorns in China, in the education space, and then Xi Jinping was like, yeah, you know what?

You can't have these anymore. They're controlled by the state. All your returns are zero. So they went from having a ten x fund to having a one x fund, and it was completely out of their control. So process over individual performance.

Alexa Benz
Yeah. Seems like originally it was about winning a spot, and now it's a little bit more about sorting, since you've got such insane deal flow. Yeah. That is what I obsess over, is, how do we not miss? We know there's in 20,000 applications, we know there's ten unicorns, it's going to be, you know, you know, if there was 20,000 and they were, let's say.

Jason Calacanis
Let's say there's 20,000 applications, and 10,000 of them are just not venture scale, so they got 10,000 left. And let's say one in 100 become unicorns. There's 100 unicorns in there. Or let's say one in a thousand become unicorns. So there's ten unicorns in there.

So every year we have a chance to find those ten unicorns. I think it's probably something like that one in a thousand. So if we can find the one in a thousand. But how do you find the one in the thousand, is the question you have to ask yourself. And then let's say you invest in 200 per fund.

Out of those 10,000 you invested in 2% of them. How do you know which ones are out of those? If you do have a unicorn in there, how do you know which one's the unicorn? And then how to bet more on it. Right.

And how to get more money into it and double down on it. And that's where doubling down comes in. So, you know, you really need to have a really great system. So I believe in systems. I believe in the process.

So how can you make your process 10% better? Every quarter means every seven quarters, your process is twice as good. Right. So I try to be 10% better at what we do every three months. We'll be twice as good every two years ish.

Ernest Sweat
We'd be remiss, Jason, not, you know, picking your brain on where the industry's going. Yeah. You are besties with some of the top fund managers in the world. Yeah. What's kind of, like, really happening that we might not be hearing on the, you know, on the headlines and where the industry is going?

Jason Calacanis
Everybody's talking about AI, obviously, because it is a paradigm shift, and it feels like all the paradigm shifts we've experienced are leading up into AI. So cloud computing was a prerequisite, mobile a prerequisite. The Internet itself, broadband, pc computing, cpu's, GPU's, all of these revolutions and paradigm shifts that occurred feel like they're culminating in AI. And so that's obvious to everybody. AI is just kind of like mobile or cloud or broadband Internet in that it's going to help a lot of businesses accelerate and build really great products for consumers and businesses.

What I look at is how businesses are constructed and who constructs those businesses. And what I'm finding is there is a global market for startups that has emerged. There is remote work that has emerged and doing more with less. So I believe there will be ten person companies. I don't believe in, like the one person, $1 billion company.

I think that's like a sensationalistic thing to say to get headlines. But I do believe in the ten people making generating 10 million in revenue each, a ten person company generating $100 million. I believe that will happen many times in the future. And so I am finding three person teams that have gotten to 3 million in revenue, 1 million each. And I'm like, hmm, is it too much to think that this could ten X?

It's like, nope, they could just raise their prices ten x, or they could double their customers and raise their prices five x, double their prices and add five times as many customers. You could just do simple math and so that's the trajectory and the trend I am obsessed with. It's not like robotics versus AI versus crypto nonsense scams, blockchain versus broadband versus fiber versus satellite. It's really about how do you construct businesses? Which goes back to process.

So what's our process as a fund, and what's the process that founders are using? And the process founders are using is fascinating. Two or three core people who understand customers and product and product design and building a product, and then everything else, outsourced, hr, legal accounting, everything is abstracted. Servers, marketing, everything just abstracted. Abstracted.

Abstracted away through tools and AI and outsourced companies, and then just this core group of people who obsess over the product. I believe that's the future. Any suggestion of questions LP's should be asking gps who they're either potentially considering re upping with, or new manager, what have you learned? What mistakes did you make that you fixed? Which just speaks to process, right?

Like, my mistake in the first two funds was we didn't have reserves to double down. And when we looked at that first fund, even though it's 4.9 or five x, on paper, we've returned over 1% of the fund already. So we're in that, like, will this be a seven x fund or a two x fund? A four x fund, you know, getting DPi. We looked at the four unicorns in there, which were calm, Robin Hood, superhuman, and density.

And in three of those four, we knew Robin Hood had the trajectory.com had the trajectory, and superhuman had the trajectory of a breakout unicorn, and density didn't, because it was a hardware product and they were figuring it out. And now it's, like, super clear. Like, I believe that'll be a decacorn, actually. But what that means is, early on, in three of the four, we knew they were going to be unicorns because they fit a certain criteria, and actually, density fitted as well, which is they had a lead investor who wanted to lead the next round, who wanted the majority of the money in the round, and they wanted to take a board seat. So when you see that characteristics, that's undeniable, that this is a likely winner, or we call it a definitive winner internally, we knew the definitive winners in three out of four cases.

Had we made a second bet on one of those Robinhood, superhuman, or calm. If we had made that second bet, that five x fund on paper would probably be a 20 x fund, 15 x fund, 25 x fund, let alone if we had doubled down on two or three. So being able in your own portfolio to define likely winner, definitive winner. What we did in those early funds was the squeaky wheel. The founder who lobbied me the most, who begged me, who convinced me that I should put that extra 25 or 100k into their business, were the ones who got it.

And I look back on that, I had a big heart. I want to be supportive. That's a weakness in some ways, for a capital allocator. What you have to do with that reserve capital is have a system for investing it. Communicate to the founders, hey, we only invest.

We are a seed fund. We don't do your series A, we don't do your series B. We might start selling at Series C, just really communicating that to them, that they have to go find that money. We're not a permanent source of capital. There are some permanent sources of capital in the world.

We're not one of them. And most venture funds are not, actually. But there are a couple who want to believe that they could take you from cradle to grave. We're not that, nor are 90% of funds. We only do the top 5% of our portfolio.

So in that first fund, there were 109 names. I think 5% of that would have been five companies, and we would have known three of them. So two of them we probably would have lost in the best. Three of them, we would have actually gotten right. Boom.

And so now with this fourth fund, I'm reserving half the dollars for follow on, half the dollars for primary, and that fund is right around 50 million. Now, I suspect it'll be 75 to 100, but let's just say it's 50. That means, you know, maybe 20 million in primary investment, 10 million in fees, 20 million in second in the followance that 20,000,100k each, 200 companies, let's say, just on average. So 200 companies to pick from 5% is 1010 into 20 million is 2 million each. So that 20 million will go 2 million each into ten, but hopefully it goes 1 million each into seven, and then there's 13 million left for three.

And we put 4 million into each of those. So we really know, you know, like power law, getting more money into the top ones, that's the, that's the name of the game. And, you know, you get better at it. I didn't. So that's your Alexa play dire straits you.

That's the answer to your question is, like, ask them, like, what did they fuck up? And, you know, I'm brutally honest, which probably means, like, some endowments and buttoned up people from Ivy League schools might find me not their cup of tea, but family offices, sovereigns, high net worth people. They're like, fuck yeah, J Cow. Yeah, you sucked at that. You realize you sucked at it now you got a really cutthroat, hardcore, aggressive way to solve that problem.

Yeah, that's how life works. And I just, you know, I'm going to be me. I'm going to, you know, be a bit Charles Barkley or Dennis Rodman around the rim. Some elbows might get flown. You know, I might make a mistake once in a while.

Might be, you know, a little bit like Phil Helmuth, me, the poker brat once in a while and lose my cool. But, you know, just so you know, I take the game serious. Like, hopefully anybody's learned anything. If you're an LP listening to this or you're a founder, is that I'm thoughtful of, passionate about it. I really think about how we do a great job for founders and kick ass for them and that we kick ass for the LP.

And so I guess I could leave it at that. Yeah, Jason, that was great. We definitely can tell you trust the process. And I had to hold back all of the basketball analogies and telling you, when I used to be an AAU guy playing against Chris Paul and LeBron. James, if Dwight Howard had half of Kobe or Shaq had half of Kobe's motivation, those guys would have ten rings each.

Ernest Sweat
Easily, easily. Shaquille O'Neal suffered from the, you know, the biological physique he got, which didn't require him to do what Kobe did. Kobe had the average physique. Michael Jordan had an average, perhaps below average physique. They had to, you know, without having it.

Jason Calacanis
They had to use resources in a certain extent. I feel that way as well. Not that I would compare myself to them, but because I didn't go to an Ivy League school, I didn't have the Stanford network, I didn't have the Harvard network. I didn't have a rich dad, rich mom to cede my fund. I had to fight for it.

And I do think there is something about having to fight for it that makes a great matriarch or patriarch. If you look at the leaders of these funds, the person who had to fight for it to get that spot. The number of people who want to start a venture firm is like everybody in business, because everybody perceives it as, like, the greatest status in power and in our business. And the number that make it to a second fund, it's like the new statistics. I talked about it on all in, and I shared it on liquidity, it's like 15% of fund managers are making it to their second fund.

I'm on my fourth. Not going anywhere, folks. Like, I feel pretty good about it. Like to get your fund to four. Pat yourself on the back for that.

Now, I still have to fight to get to my fifth and 6th, but I do feel like I figured a couple of things out, and I hope they're helpful to the audience. And if anybody's got questions for me, you can always email me. Jasonalacantis.com dot. If you want to pitch me on your startup launch co apply to get into the funnel, but you can still dm me. Jason.

DM's open on all platforms. Jasonalacantis.com anytime. If you want to be an LP in the fund launch co memo, I wrote my deal memo. I put it out publicly. I said, here's my deal memo.

Tell me what's wrong about it. And you know what? I got some people who did fix some leaks in my game. If you have a process, sharing your process, like I'm doing here, the reason why I said yes to you so quickly was, I like, sharing my process, because people will email me and say, you know what? I invested in a fund.

They fucked it up. Here's where you're gonna, here's where you're gonna make a mistake. And it's like, okay. Oh, really? When you hit the three, you know, your feet planting and your elbow being tucked in, like, Steph Curry gave me some pointers.

Hey, tuck that elbow in a bit. And I was like, okay, sure. Steph Curry tells me, tuck the elbow in. I'm tucking it in. You got to, got to.

All right. I can't wait to hear your basketball. Thanks, Jason. Appreciate you have me on again in a year. See you later.

Ernest Sweat
Allocator after portfolio tile investing with a smile.