Ask Jason Live! March 26

Jason Calacanis' Q&A Session on "This Week in Startups"

• Jason Calacanis hosted a live Q&A session on "This Week in Startups," discussing various topics related to startups, investments, and entrepreneurship.
• The show was live-streamed on YouTube, LinkedIn, and Twitter, with viewers submitting questions through these platforms or joining the screening room to appear live.

Startup Funding and Investment Structures

• Calacanis discussed early-stage investment instruments, including convertible notes and SAFEs (Simple Agreement for Future Equity).
• Convertible notes are loans with an interest rate that convert into equity at a certain valuation or discount, while SAFEs are similar but have been criticized for allowing founders to never convert the equity and instead withdraw all the money from the business.
• For founders who don't want to raise additional funding rounds, Calacanis suggested negotiating with investors to extend the convertible note or convert it into equity.
• He also mentioned the possibility of using a priced round at the seed stage for companies considering this option, but cautioned about the high legal fees associated with priced rounds.

Founder University and Solo Founders

• Founder University is a program that helps founders learn best practices for starting companies.
• Solo founder companies have a higher failure rate compared to companies with multiple founders, and investors prefer companies with multiple founders due to redundancy and downside protection.
• Solo founders need to demonstrate exceptional performance to be accepted into accelerator programs, and many struggle to find co-founders due to various reasons such as an uncompelling idea, lack of charisma, or unwillingness to share equity.

Customer Validation and Product Development

• Investors prefer to invest in startups after the product has launched and acquired paying customers to reduce investment risk.
• A founding team with multiple members holding significant equity (e.g., 4% each) can provide stability and motivation to the company.
• Co-founders with substantial equity (e.g., 20-30%) are less likely to leave the company, even if they have only vested a portion of their equity.
• Launching an MVP with a grassroots marketing effort can be beneficial for building a better product through resource constraints, and private beta testing can provide valuable information about product-market fit before a wider release.

Entrepreneurship and Customer Engagement

• An entrepreneur shared their product idea of turning newsletters into podcasts using AI, which was considered a great idea with potential for success.
• The importance of transparency in summarizing content from other sources and providing proper attribution was emphasized.
• Engaging with customers through social media groups, understanding their needs, and gathering feedback can help entrepreneurs build better products.

Advice for Entrepreneurs and Investors

• Kelly, a social media video marketer and film producer, shared her experience in reducing mental load and her idea for a new app. Calacanis advised her to focus on a small number of projects and suggested she write another book based on her insights as an investor.
• Francis, from Twitter, asked about balancing skepticism with enthusiasm when evaluating a company. Calacanis emphasized the importance of listening to founders and repeating their vision back to them to ensure understanding. He encouraged investors to focus on what could go right rather than what could go wrong, using Shake Shack as an example of a successful business that went against conventional wisdom.
• Investors should be aware of their own psychology and energy levels to optimize their investment process, and building a team that complements one's strengths and weaknesses is crucial for success.

Founder University Cohort 7 Graduate's Key Takeaways

• A Founder University cohort 7 graduate shared their key takeaways from the program, emphasizing the importance of being clear about the problem being solved, moving as fast as possible, and being comfortable asking questions when stuck.
• The founder also discussed the concept of defensibility (moat) at the early stage of a startup, and the investor explained that data can be a strong moat, as seen in companies like Google, Tesla, and Microsoft.

AI in Startups and Investor Discussions

• Tom, the co-founder of Vual, an app that helps families and colleagues share critical information during emergencies, asked Jason Calacanis about the importance of emphasizing AI in their pitch when seeking pre-seed funding.
• Calacanis advised Tom to be honest with investors about the role of AI in their product and company, focusing on how AI enhances their product and customer support, and how it could potentially solve future problems.
• He also highlighted the opportunity to gauge investors' understanding of AI and their overall approach to business discussions.