01/27/2016 02:56 pm ET Updated Jan 27, 2017

Angel Investor Jason McCabe Calacanis Explains Why Large Angel Funds Exist

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Answers by Jason McCabe Calacanis, Angel investor (Uber, Thumbtack, Wealthfront); Founder: Engadget, Inside, LAUNCH, on Quora.

Q: Why do large angel funds exist?

A: ... because the number of amazing founders and startups have increased the amount of money needed to get a product to market has decreased.
Also, there are individuals who like working with early stage startups. For them, a fund is a great way to "plant a flag" and develop a system for getting huge returns -- or a bigger fund down the road (like Chris Sacca did!).
I just deployed my first $10m fund in the past 30 months and I'm now in a position to do a larger one or focus on the Launch Incubator 100%. It's a great way to formalize your ability and build for the future.
Since telling the world I have Launch Fund I and my Angel List Syndicate my deal flow has gone supernova. 1,000+ folks wanted to come to the last incubator... we accepted 14!
That's a great thing... the quality level goes WAY up when your deal flow is second to none (which is to say, there is no angel with better deal flow than me right now!)


Q: Why are people full-time angel investors, rather than become venture capitalists and write bigger checks?

A: I can't speak for other people, but I can tell you that I'm a solo act not a band member.
I'm Bob Dylan, not the Rolling Stones.
I've been offered to join the biggest VC firms in the world, but the idea of being forced to debate a $25-250k investment in a company that's 16 weeks old is death to me!
The worst thing you can do as an angel is debate investing in a startup, you have to go with your gut read of the person and their execution -- not debate metrics or the product at that early stage.
For me, angel investing is the most exciting part of the ecosystem... being able to say I was one of the first two, three or four investors in Thumbtack, Chartbeat, Uber, etc. is just so rewarding.
I want to be the guy who writes the check to you when no one else believes in you -- that's the biggest rush in the world to me!
Finally, yeah, you can make more money going big (look at Marc Andreessen ), but money isn't everything. I'd rather work with a two person team on launching a product than go to meetings with a bunch of accountants and MBAs to debate the LTV and churn for the D round of an enterprise software company that's plotting to fire the founder.


Q: What was the Uber seed round like? What was the dynamic and who led the round?

A: Travis came to my angel group (the Open Angel Forum) and presented the idea to about 20 angels. Most passed, four of us invested: First Round, Sacca, Cyan and myself.
Sacca had already known Travis, but the other folks there were introduced to them by me (I believe).
The night before the angel forum was hosted Travis called me and said "we're oversubscribed I'm going to pass on coming," to which I said "can you do me a favor and not cancel, because I'll look bad!" He came (he's a very loyal guy like that).
I emailed at least 20 VCs in the early days; there were two very specific reactions I remember:
First, one VC asked me to convince Travis to turn Uber into enterprise software for the cab companies. I didn't forward this idea on to Travis because, obviously, the magic of Uber is that it eliminates the annoying dispatch system!
A second VC told me they didn't want to be in a "dirty real-world business with those type of people," referring to... cab drivers! At the time Uber came out, the idea of a startup doing something in the real world was crazy. Internet companies were supposed to happen inside of computer -- not out there in the real world where cars crash and people, sadly, sometimes die.
Uber really changed how investors and founders look at the world, letting everyone dream about breaking out and doing things outside of the desktop.

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