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

http://www.forbes.com/sites/alexkonrad/2015/03/25/how-venture-cowboy-chris-sacca-made-billions/

by wj • 11 years ago

98 50 11 years ago

jalonso510• 11 years 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?

ryandrake2• 11 years 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• 11 years 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• 11 years 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• 11 years 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.

existencebox2• 11 years 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.)

AndrewKemendo• 11 years ago

There are just way too many exogenous variables to any exchange within a market to give an individual credit for success. As a founder, I know that my inputs and the inputs of my team are necessary but not sufficient to achieving market/financial success.

I think we need to be addressing instead the problem of causality as relates to success and trying to decouple success from individual inputs.

josu2• 11 years ago

Even Chris Sacca says it in the video: "It's almost like the game is rigged". He got lucky at the beginning and now that he has tons of money he can afford to diversify his portfolio enough to be able to buy all the lottery tickets. On top of that, he has become the legendary Chris Sacca, so the probability that the next big thing won't be presented to him at a very early stage is very low.

So it's not only the survivorship bias, you have to add to that the Matthew Effect [1].

And I'm not denying that he is probably smart, has people skills, hard worker... The thing is that, in my opinion, there quite a few Chris Saccas out there that never got as lucky as him. So the survivorship bias here doesn't nullify all his work, since he showed that if you do the things his way you can get the chance to become the next Chris Sacca. It only shows, that even if you follow his path you can still fail.

I realized that people that don't see the survivorship bias tend to view people that do as cynical pessimists that downplay the hardwork of the Chris Saccas of the world. But this is just a problem of perception, at least in my case, I admire the Musks, the Jobs, the Gates, the Buffets... of this world. However I realize that in order to become like them, it takes more than just hard work and a vision, you have to get lucky and preferably be born white, to well educated and relatively wealthy parents, in the right country, be sent to a good school...

I like to consider myself a realist, if somebody gave me 80% of the lottery tickets I will probably be really hopeful that I will win, but if I only have 0.001% of the tickets I won't probably even remember to check the outcome. I want to believe that that does not make me an optimist in one case and a pessimist or a cynic in the other.

[1] http://en.wikipedia.org/wiki/Matthew_effect

cushychicken• 11 years ago

Chris Sacca admits himself that if Twitter hadn't been his first investment [1], you'd never have known his name - he spent every dime he had (plus a few thousands of dollars he didn't) in their seed round. It's not cynical to mention survivorship bias. It's the name of the game to not hear about the failures.

[1] http://gimletmedia.com/episode/1-how-not-to-pitch-a-billiona... (You'll need to listen for a bit.)

steven2012• 11 years ago

Because otherwise HN becomes an echo chamber for "aspiring entrepreneurs" who think that it's easy becoming a billionaire. Most people here forget that 95% of all startups fail, even in this environment.

ig12• 11 years 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• 11 years 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.

foobarqux2• 11 years ago

What was the result, formally?

fapjacks2• 11 years ago

Perhaps, but the overriding salient point is whether or not you can take the investing "ability" out of the individual performant VC, implant it into a random human being in the developed world, and still predict a performant future for that individual. I mean, obviously it's not lost on anybody that network, means, opportunity, and luck play a big part of the whole picture. But what I'm starting to think is that you could take investing "ability" out of any successful VC, and leave them with their current station (network, means, opportunity, and luck), and they will perform as admirably as before.

ffn• 11 years 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.

kzhahou2• 11 years ago

I don't need to read a story on mediocrity, since I'm already living it! :-)

graeme• 11 years 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• 11 years ago

It's simple - these stories attract the most eyeballs. Ever seen a black swan?

DanielRibeiro• 11 years 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 It is long. I recommend watching it fully nonetheless.

[2] http://pando.com/2012/11/01/how-chris-sacca-turned-his-stude...

staunch• 11 years 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.

kzhahou2• 11 years 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.

fapjacks2• 11 years ago

As if "clever enough" is all it takes.

ig12• 11 years 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/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• 11 years 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.

josu2• 11 years 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/

zemvpferreira• 11 years 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_buster2• 11 years 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.

foobarqux2• 11 years 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• 11 years ago

Here is a video of him talking about it with Kevin Rose https://www.youtube.com/watch?v=0cWl9UTHZoE

quickpost• 11 years ago

Great interview with Sacca - highly recommended. Thanks for posting.

padobson• 11 years ago

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

brianstorms• 11 years ago

As Spock once said, "Colloquially expressed, but essentially correct."

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

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