7 ms·

How Super Angel Chris Sacca Burned Bridges and Crafted the Best Seed Portfolio

98 points by wj 12y ago

jalonso510 12y ago
Would be really interested to see how big an effect the massive doubling down on Twitter and Uber had vs. if he had just been an a more normal super early investor. Did he generate the over the top amazing returns mainly by being first into great companies, or mainly by being crazy enough to make outsize allocations for the winners?
ryandrake 12y ago
I can't help but see Survivorship Bias in any profile of a successful investor. You rarely see the profiles of the more numerous people whose investments lost them all their money. It's always "How XYZ became that 1 out of ~1 million who flipped heads 20 times in a row. The secret to coin flipping revealed!"
- varunjuice 12y ago
  It's a story wrapped around randomness. That's what profiles are about more often than not. Of course, Sacca isn't ordinary but to achieve the level of success he has had, its clear that randomness has a significant role to play (one that's vastly understated in the profile)
  - jacquesm 12y ago
    This goes for anybody that 'made it'. The luck factor is discounted after the fact except by those who didn't have it. The main factor is the size of the pool, if the pool is large enough then some will end up to be outliers and those are the ones whose profiles you will read. The profiles of one of the countless numbers of also-rans never make it.
- imjk 12y ago
  I don't mean to come off too critical, but I'm curious how we the HN community can move away from this sort of survivorship bias cynicism without discounting it entirely. I openly acknowledge that survivorship bias is a very real phenomenon that can be easily overlooked, but every time a story about a successful entrepreneur or angel/vc pops up, there's the tendency to discount every thing that is being said as survivorship bias, as if there's nothing else to be learned from the story. These comments tend to overwhelm the discussion in their prevalence. I think it puts a overall cynical attitude in the community that I've seen overtake other entire online communities of entrepreneurs. I really hope it doesn't do the same here.
  - existencebox 12y ago
    I'm honestly not sure the cynicism is a bad thing. I'd say the HN community has a higher than average grasp of statistics (the same could probably be said about many other entrepreneur communities) As such, when we see something which all broad statistics tell us is "one in a million" occams razor directs you to assume that it is in fact one in a million. That "let's be extremely doubtful given a high bayesian prior suggesting that the doubt is legitimate" occurs strikes me as a wonderfully pragmatic viewpoint. If someone really wants to convince me there's some "trick" to being that one in a million they have to go against all of the evidence I've been presented thus far to say that simply doesn't happen. (evidence coupled with the fact that these sorts of news sources have a history and incentive aligned with the "how to strike it rich" style articles.)
    - wj 12y ago
      I like the idea of a "luck surface area" which suggests that the more you put yourself out there the more likely you are to be that one in a million. If you Google it you'll probably get a better explanation than I gave.
      - existencebox 12y ago
        I get what you're saying, and it seems totally fair. If all of the possible paths any human can take are the space of all outcomes, and there is some extremely sparse set of volumes within that space that are "one in a million successes", your likelihood of finding that success will be directly related to the amount of coverage you can explore. I don't mean to suggest there isn't an aspect of hard work here. Like many other side posters say, diligence is certainly a component to "making your own luck" which can be well expressed within the concept of a "luck volume". (Even things like opportunity and family connections fit in nicely by expanding the set of vectors you can follow)
- ig1 12y ago
  While I worked at a VC I ran some analysis on Angel performance and found (for top-tier angels) past performance does in fact predict future performance. That is if you took the top-tier angels today then the investments that they make over the next year will do disproportionately well compared to other angels.
  - balls187 12y ago
    > That is if you took the top-tier angels today then the investments that they make over the next year will do disproportionately well compared to other angels. Do you think that has to do with a virtuous cycle, and not say any magic in investment thesis of these angels. Said differently, because of Ron Conway's position, he gets first pick of all the best deals, which have a higher likelihood of success, because in part they're connected to Ron Conway.
    - akrymski 12y ago
      Of course. Just like Buffett gets deals that others (even with billions) simply can't get. Reputation matters much more than your investment thesis.
      - burger_moon 12y ago
        Another thing that kind of builds off of this that I've been thinking about lately after reading sama's blog posts. Do top VC companies that make predictions on the future of big companies shape the outcome of future startups? For example, if all the top VC firms are saying widgets are going to be the biggest thing in the next 10 years, does that cause enough of an influence to create that market and persuade people to go into that field rather than the one they were already intending on?
        akrymski 12y ago
        Most definitely. It's kinda like technical analysis in stock markets - it works because it's a self-fulfilling prophecy, people vote with their wallets. At the end of the day consumers don't really know what they want before it's marketed to them, as Steve Jobs has shown time and again.
- ffn 12y ago
  What do you expect journalists and writers to do? The true secrets to success haven't changed since the days of Aristotle: go at something you love with hard work and perseverance and when (and if) the world meets you halfway, you'll find success. But repeating that story won't get you to the front page of HN, or even basic readership, or even comments in your comment section.
- kzhahou 12y ago
  I don't need to read a story on mediocrity, since I'm already living it! :-)
- graeme 12y ago
  It would be useful to create a spectrum of investments where survivorship bias is more or less likely to be the complete explanation. From what I've read of stock investing, it's almost pure survivorship bias. The total number of investors guarantees some spectacular results by luck alone. To what extent is angel investing similar, and different? Angels often have significant business experience and some insider knowledge (i.e. They may know the person or industry in question far better than the market on the whole could) On the other hand, there are a fair number of angels, which raises the odds of survivorship bias.
- mbesto 12y ago
  It's simple - these stories attract the most eyeballs. Ever seen a black swan?
- DanielRibeiro 12y ago
  From his interview[1] with Sarah Lacy, I believe he would agree with you. The paraphrased quote[2]: At this point, the still unsophisticated investor got caught up in the realities of human nature that make people attribute their successes to their personal genius while attributing failures to bad luck. In reality, he says, the exact opposite is the case. [1] https://www.youtube.com/watch?v=iqUG2_cmZ6I https://www.youtube.com/watch?v=iqUG2_cmZ6I It is long. I recommend watching it fully nonetheless. [2] http://pando.com/2012/11/01/how-chris-sacca-turned-his-student-loans-into-12-million-and-then-lost-it-all/ http://pando.com/2012/11/01/how-chris-sacca-turned-his-stude...
staunch 12y ago
Altruistic first-money angel investors, like Mark Markkula at Apple or YC with Airbnb, deserve a ton of credit for the success of their startups. People who glom on to hot startups launched by already-successful Silicon Valley insiders deserve less. Twitter and Uber did not need help to exist the way Apple or Airbnb did. Angel investors should be judged by what they help bring into the world, the value they create, not how rich they get from doing backdoor deals with JP Morgan. That's how you judge lawyers.
- kzhahou 12y ago
  The article talks about the work that Sacca did by tenaciously evangelizing Twitter in the early days. I don't think the article mentioned it, but he did the same for Instagram. He was all over it, posting non-stop! You shouldn't assume he made no contributions simply because he was also clever enough to make himself mega-rich.
  - fapjacks 12y ago
    As if "clever enough" is all it takes.
ig1 12y ago
If you haven't heard it before then I'd definitely recommend listening to Sacca's critique of Blumberg pitch on TAL: http://www.thisamericanlife.org/radio-archives/episode/533/its-not-the-product-its-the-person?act=1#play http://www.thisamericanlife.org/radio-archives/episode/533/i... I've heard a lot of people pitch but I'm not sure I've heard anyone pitch better than Sacca can do while ad-libbing.
- yitchelle 12y ago
  It is almost an artform as to how Sacca did that pitch. I have hear it in an environment where a high energy debating teams were going head to head on contentious subjects.
- josu 12y ago
  I recommend listening to the whole Blumberg's Startup podcast, where that pitch came from. While you shouldn't take it as a lecture on how to start a business, it's certainly entertaining, well produced and it shows you that side of the story that you usually don't get to hear. http://gimletmedia.com/show/startup/ http://gimletmedia.com/show/startup/
- zemvpferreira 12y ago
  I agree that he did a great job, but consider the power of circumstances: it's a lot easier to pitch when pitching is an intellectual exercise for you, instead of the full expression of what you are and hope to be in this world as a person, delivered to the gatekeeper of the capital you need to make that journey, who will not give you a second chance if you fuck up, and without whom you're destined to go back to living in your mother's basement, a broken and destitute man shunned by society. Or back to Yahoo or Stanford or wherever you came from.
  - myth_buster 12y ago
    Perhaps it's psychological. I've often found that if I build up stakes for a test/interview/application, I perform far worse than attempting it with a more frivolous attitude.
foobarqux 12y ago
I don't know how a profile of Chris Sacca could omit how he was a math prodigy who hated math, never went to class for law school or lost $8 million dollars trading in the stock market and refused to declare bankruptcy, instead paying back creditors over many years.
- icpmacdo 12y ago
  Here is a video of him talking about it with Kevin Rose https://www.youtube.com/watch?v=0cWl9UTHZoE https://www.youtube.com/watch?v=0cWl9UTHZoE
  - quickpost 12y ago
    Great interview with Sacca - highly recommended. Thanks for posting.
padobson 12y ago
tl;dr loudmouth with a penchant for social media and oddball cowboy shirts made a lot of money investing in startups
- brianstorms 12y ago
  As Spock once said, "Colloquially expressed, but essentially correct."

98 points by wj 12y ago

Would be really interested to see how big an effect the massive doubling down on Twitter and Uber had vs. if he had just been an a more normal super early investor. Did he generate the over the top amazing returns mainly by being first into great companies, or mainly by being crazy enough to make outsize allocations for the winners?

ryandrake 12y ago

I can't help but see Survivorship Bias in any profile of a successful investor. You rarely see the profiles of the more numerous people whose investments lost them all their money. It's always "How XYZ became that 1 out of ~1 million who flipped heads 20 times in a row. The secret to coin flipping revealed!"

varunjuice 12y ago
It's a story wrapped around randomness. That's what profiles are about more often than not. Of course, Sacca isn't ordinary but to achieve the level of success he has had, its clear that randomness has a significant role to play (one that's vastly understated in the profile)
- jacquesm 12y ago
  This goes for anybody that 'made it'. The luck factor is discounted after the fact except by those who didn't have it. The main factor is the size of the pool, if the pool is large enough then some will end up to be outliers and those are the ones whose profiles you will read. The profiles of one of the countless numbers of also-rans never make it.
imjk 12y ago
I don't mean to come off too critical, but I'm curious how we the HN community can move away from this sort of survivorship bias cynicism without discounting it entirely. I openly acknowledge that survivorship bias is a very real phenomenon that can be easily overlooked, but every time a story about a successful entrepreneur or angel/vc pops up, there's the tendency to discount every thing that is being said as survivorship bias, as if there's nothing else to be learned from the story. These comments tend to overwhelm the discussion in their prevalence. I think it puts a overall cynical attitude in the community that I've seen overtake other entire online communities of entrepreneurs. I really hope it doesn't do the same here.
- existencebox 12y ago
  I'm honestly not sure the cynicism is a bad thing. I'd say the HN community has a higher than average grasp of statistics (the same could probably be said about many other entrepreneur communities) As such, when we see something which all broad statistics tell us is "one in a million" occams razor directs you to assume that it is in fact one in a million. That "let's be extremely doubtful given a high bayesian prior suggesting that the doubt is legitimate" occurs strikes me as a wonderfully pragmatic viewpoint. If someone really wants to convince me there's some "trick" to being that one in a million they have to go against all of the evidence I've been presented thus far to say that simply doesn't happen. (evidence coupled with the fact that these sorts of news sources have a history and incentive aligned with the "how to strike it rich" style articles.)
  - wj 12y ago
    I like the idea of a "luck surface area" which suggests that the more you put yourself out there the more likely you are to be that one in a million. If you Google it you'll probably get a better explanation than I gave.
    - existencebox 12y ago
      I get what you're saying, and it seems totally fair. If all of the possible paths any human can take are the space of all outcomes, and there is some extremely sparse set of volumes within that space that are "one in a million successes", your likelihood of finding that success will be directly related to the amount of coverage you can explore. I don't mean to suggest there isn't an aspect of hard work here. Like many other side posters say, diligence is certainly a component to "making your own luck" which can be well expressed within the concept of a "luck volume". (Even things like opportunity and family connections fit in nicely by expanding the set of vectors you can follow)
ig1 12y ago
While I worked at a VC I ran some analysis on Angel performance and found (for top-tier angels) past performance does in fact predict future performance. That is if you took the top-tier angels today then the investments that they make over the next year will do disproportionately well compared to other angels.
- balls187 12y ago
  > That is if you took the top-tier angels today then the investments that they make over the next year will do disproportionately well compared to other angels. Do you think that has to do with a virtuous cycle, and not say any magic in investment thesis of these angels. Said differently, because of Ron Conway's position, he gets first pick of all the best deals, which have a higher likelihood of success, because in part they're connected to Ron Conway.
  - akrymski 12y ago
    Of course. Just like Buffett gets deals that others (even with billions) simply can't get. Reputation matters much more than your investment thesis.
    - burger_moon 12y ago
      Another thing that kind of builds off of this that I've been thinking about lately after reading sama's blog posts. Do top VC companies that make predictions on the future of big companies shape the outcome of future startups? For example, if all the top VC firms are saying widgets are going to be the biggest thing in the next 10 years, does that cause enough of an influence to create that market and persuade people to go into that field rather than the one they were already intending on?
      - akrymski 12y ago
        Most definitely. It's kinda like technical analysis in stock markets - it works because it's a self-fulfilling prophecy, people vote with their wallets. At the end of the day consumers don't really know what they want before it's marketed to them, as Steve Jobs has shown time and again.
ffn 12y ago
What do you expect journalists and writers to do? The true secrets to success haven't changed since the days of Aristotle: go at something you love with hard work and perseverance and when (and if) the world meets you halfway, you'll find success. But repeating that story won't get you to the front page of HN, or even basic readership, or even comments in your comment section.
kzhahou 12y ago
I don't need to read a story on mediocrity, since I'm already living it! :-)
graeme 12y ago
It would be useful to create a spectrum of investments where survivorship bias is more or less likely to be the complete explanation. From what I've read of stock investing, it's almost pure survivorship bias. The total number of investors guarantees some spectacular results by luck alone. To what extent is angel investing similar, and different? Angels often have significant business experience and some insider knowledge (i.e. They may know the person or industry in question far better than the market on the whole could) On the other hand, there are a fair number of angels, which raises the odds of survivorship bias.
mbesto 12y ago
It's simple - these stories attract the most eyeballs. Ever seen a black swan?
DanielRibeiro 12y ago
From his interview[1] with Sarah Lacy, I believe he would agree with you. The paraphrased quote[2]: At this point, the still unsophisticated investor got caught up in the realities of human nature that make people attribute their successes to their personal genius while attributing failures to bad luck. In reality, he says, the exact opposite is the case. [1] https://www.youtube.com/watch?v=iqUG2_cmZ6I https://www.youtube.com/watch?v=iqUG2_cmZ6I It is long. I recommend watching it fully nonetheless. [2] http://pando.com/2012/11/01/how-chris-sacca-turned-his-student-loans-into-12-million-and-then-lost-it-all/ http://pando.com/2012/11/01/how-chris-sacca-turned-his-stude...

staunch 12y ago

Altruistic first-money angel investors, like Mark Markkula at Apple or YC with Airbnb, deserve a ton of credit for the success of their startups. People who glom on to hot startups launched by already-successful Silicon Valley insiders deserve less. Twitter and Uber did not need help to exist the way Apple or Airbnb did. Angel investors should be judged by what they help bring into the world, the value they create, not how rich they get from doing backdoor deals with JP Morgan. That's how you judge lawyers.

kzhahou 12y ago
The article talks about the work that Sacca did by tenaciously evangelizing Twitter in the early days. I don't think the article mentioned it, but he did the same for Instagram. He was all over it, posting non-stop! You shouldn't assume he made no contributions simply because he was also clever enough to make himself mega-rich.
- fapjacks 12y ago
  As if "clever enough" is all it takes.

ig1 12y ago

If you haven't heard it before then I'd definitely recommend listening to Sacca's critique of Blumberg pitch on TAL: http://www.thisamericanlife.org/radio-archives/episode/533/its-not-the-product-its-the-person?act=1#play http://www.thisamericanlife.org/radio-archives/episode/533/i... I've heard a lot of people pitch but I'm not sure I've heard anyone pitch better than Sacca can do while ad-libbing.

yitchelle 12y ago
It is almost an artform as to how Sacca did that pitch. I have hear it in an environment where a high energy debating teams were going head to head on contentious subjects.
josu 12y ago
I recommend listening to the whole Blumberg's Startup podcast, where that pitch came from. While you shouldn't take it as a lecture on how to start a business, it's certainly entertaining, well produced and it shows you that side of the story that you usually don't get to hear. http://gimletmedia.com/show/startup/ http://gimletmedia.com/show/startup/
zemvpferreira 12y ago
I agree that he did a great job, but consider the power of circumstances: it's a lot easier to pitch when pitching is an intellectual exercise for you, instead of the full expression of what you are and hope to be in this world as a person, delivered to the gatekeeper of the capital you need to make that journey, who will not give you a second chance if you fuck up, and without whom you're destined to go back to living in your mother's basement, a broken and destitute man shunned by society. Or back to Yahoo or Stanford or wherever you came from.
- myth_buster 12y ago
  Perhaps it's psychological. I've often found that if I build up stakes for a test/interview/application, I perform far worse than attempting it with a more frivolous attitude.

foobarqux 12y ago

I don't know how a profile of Chris Sacca could omit how he was a math prodigy who hated math, never went to class for law school or lost $8 million dollars trading in the stock market and refused to declare bankruptcy, instead paying back creditors over many years.

icpmacdo 12y ago
Here is a video of him talking about it with Kevin Rose https://www.youtube.com/watch?v=0cWl9UTHZoE https://www.youtube.com/watch?v=0cWl9UTHZoE
- quickpost 12y ago
  Great interview with Sacca - highly recommended. Thanks for posting.

padobson 12y ago

tl;dr loudmouth with a penchant for social media and oddball cowboy shirts made a lot of money investing in startups

brianstorms 12y ago
As Spock once said, "Colloquially expressed, but essentially correct."