20VC The First Online Venture Fund Built On AngelList with Dustin Dolginow @ Maiden Lane

In the 20 Minutes VC episode with host Harry and guest Dustin Dolganow, General Partner at Maiden Lane, the conversation delves into the evolution of venture capital through the lens of online platforms like AngelList. Dustin shares his journey from a farm in Missouri to Wall Street and eventually into tech and VC, emphasizing the importance of operations experience for investor empathy. Maiden Lane, as the first online venture fund using AngelList, represents a shift towards democratized, community-based funding, challenging traditional VC models. Key points include Maiden Lane's unique fund structure with a 30% carry and no management fee, its strategy of investing through AngelList syndicates, and the future of VC as a mix of consensus, conviction-based investing, and direct LP investments. Dustin also highlights the significance of building a community of influential syndicate leads and the potential of underhyped markets like Canada.

• Dustin Dolganow is a general partner at Maiden Lane, an online venture fund that operates using AngelList.
• Maiden Lane serves as a capital partner to top angel investors globally.
• Dustin has invested in companies such as Gettable, Pipedrive, and BP.
• He is also a venture partner at Accomplice, supporting entrepreneurs.
• Before investing, Dustin was involved in operations with Social Swipe, a company focused on transaction data value for merchants.
• The episode is supported by Techstars backed Wonder Capital and data provided by Matamark.

So I'm so thrilled to have Dustin Doganau, general partner at Maiden Lane, join me today.

This quote introduces Dustin Dolganow and his role at Maiden Lane, setting the stage for the conversation.

• Dustin was born on a Missouri farm and moved to the East Coast for college.
• He witnessed the largest bankruptcy in history on Wall Street.
• Opted out of business school and pursued building his own company in the payment space.
• Self-taught in product development and front-end web development, transitioning from finance to tech.
• Joined Atlas Venture (now Accomplice) in April 2010, initially for a few years, which turned into a six-year tenure.

I walked off the farm to the east coast to go to college, then down to Wall street to watch the largest bankruptcy in history.

Dustin describes his journey from a farm to Wall Street, where he experienced significant financial events that influenced his career path.

• Dustin's operations experience instilled empathy for entrepreneurs and respect for the challenges of starting a company.
• Although it hasn't shaped his investing thesis, it allows him to connect with and advocate for founders better.

I have so much respect for people who are able to start something and get it off the really, really make an effort to not snicker and kind of fault people for not building something maybe as big as a Facebook or a Google or an apple, because I myself wasn't able to do that.

Dustin reflects on the value of his operational experience in developing empathy for entrepreneurs, regardless of the scale of their success.

• Dustin became an early user of AngelList, which became his first source of deal flow.
• He believes in the shift of venture capital online and the changing landscape of company building.
• Atlas Venture led the series A for AngelList and continued investing in subsequent rounds.
• In 2013, Dustin and his partner Jeff started Maiden Lane to invest in AngelList syndicates.
• Maiden Lane was named after the location of the AngelList offices in San Francisco, reflecting its close association with AngelList.

In 2013, when they launched syndicates, my partner Jeff and I had the idea of starting a fund purely dedicated to investing in Angela syndicates.

This quote explains the inception of Maiden Lane as a fund dedicated to investing in AngelList syndicates, highlighting the innovative approach to venture capital investment.## Maiden Lane and Venture Trends

• Maiden Lane is a venture fund named after a common street name in major cities, contrasting with Sand Hill Road.
• It signifies a shift in venture capital towards being more public, accessible, and distributed.
• Maiden Lane was established in the heart of a city center to be part of this trend of democratization in venture capital.

I got a little bit of a giggle out of the fact that one of the bailout funds that Goldman used for the real estate assets was named Maiden Lane, which obviously was sort of the ashes from which I rose.

This quote highlights the irony in the naming of Maiden Lane, tying it back to Dustin Dolganow's personal journey and the broader symbolism of rebirth and change within the venture capital industry.

Maiden Lane is being built, an angelist is being built in the middle of a city center of a major city.

This quote emphasizes the physical and metaphorical positioning of Maiden Lane as central and accessible, contrasting with the exclusivity often associated with venture capital.

It's going to become more distributed.

Dustin Dolganow predicts a future where venture capital expertise and opportunities are more widely available rather than being confined to an elite few.

• Maiden Lane originated on AngelList but is legally and operationally separate.
• The relationship is akin to an app on a platform; Maiden Lane uses AngelList for deal flows.
• Initially, there was skepticism about the sufficiency of deal flow on AngelList, but it quickly proved to be a robust platform.

So the reason people sometimes confuse maiden land and angelist is we were born on angelist.

Dustin Dolganow clarifies the origin of Maiden Lane on AngelList and why there might be confusion about their relationship.

We are legally separate. Mainlane's just a fund.

This quote establishes the legal and operational independence of Maiden Lane from AngelList, despite their close association.

95% of the investments that we make are done through angelist and specifically through syndicates.

Dustin Dolganow quantifies the extent to which Maiden Lane relies on AngelList for its investments, showcasing the platform's growth and utility.

• AngelList is unbundling the activities of venture capital, making the mechanics more transparent and accessible.
• Maiden Lane is a proponent of this unbundling, aiming to productize and innovate within the venture capital space.
• The concept of a fund is being redefined as a simple container, with a focus on the people and companies involved in investments.

Angelist is unbundling the activities of venture capital.

Dustin Dolganow describes the transformative effect AngelList is having on the venture capital industry, breaking down traditional barriers and processes.

A fund is just a container.

This quote downplays the importance of the fund structure itself, emphasizing the human element of venture capital.

• Maiden Lane differentiates itself by being born and bred online, avoiding traditional venture capital practices.
• It utilizes a product-first approach, leveraging data to enhance its process and judgment.
• Instead of investing directly, Maiden Lane works with angel investors who invest the fund's money and share in the carried interest.

We really focus on what makes us different.

Dustin Dolganow highlights the unique aspects of Maiden Lane that set it apart from other funds in the venture capital landscape.

What's really going on is I'm working with a set of angel investors who invest our money on our behalf.

This quote explains the operational model of Maiden Lane, where angel investors play a pivotal role in making investment decisions.

• Maiden Lane has a distinctive fee structure with a 30% carry and no management fee, deviating from the industry norm of a 20% carry with a management fee.

And you have a 30% carry as opposed to the normal 20, but then you have a no management fee. Am I right in saying that?

Harry Stebbings inquires about Maiden Lane's fee structure, which Dustin Dolganow confirms to be true.

That is correct.

Dustin Dolganow confirms the unique fee structure of Maiden Lane, which could potentially influence industry standards.## Maiden Lane's Unique Fee Structure

• Maiden Lane operates with a 30% carried interest, which is a premium rate in the venture capital industry.
• A portion of the carried interest (15% to 20%) is shared with syndicate leads who source deals and add value.
• The syndicate leads earn more from the carried interest than the fund managers themselves.
• This structure incentivizes syndicate leads as they are key to sourcing deals and driving the brand.
• Maiden Lane focuses on creating a community and resources for syndicate leads, such as a live work loft.

"The reason we asked for 30% carried interest is because we share 15% to 20% of that carried interest with syndicate leads."

This quote explains the rationale behind Maiden Lane's carried interest rate and how it is shared with the syndicate leads to reward their efforts in deal sourcing and value addition.

• Maiden Lane is still in the early stages and aims to prove the sustainability of its model by returning capital to limited partners (LPs).
• A significant milestone for the fund will be when a syndicate lead makes a million dollars.
• The fund acknowledges that it is still learning and is open to new directions for the future.
• Venture capital has not changed significantly in 60 years, but Maiden Lane is attempting to modernize the model.

"We need to return capital to our lps and show that the model is sustainable."

This quote emphasizes the importance of demonstrating the fund's success by returning capital to investors and proving the long-term viability of their model.

• Venture capital has remained consistent in its approach to capital allocation over the past 60 years.
• Maiden Lane is challenging the traditional model by introducing new assumptions and modernizing the process.
• The fund aims to create a seamless, efficient working environment and to collaborate with people outside of traditional funds.

"I think at the very basic level, that's what Maiden Lane is trying to do, is say, hey, what if we re kind of jigger some of these assumptions and take some of the best parts of that, but try and move it into modernity?"

This quote highlights Maiden Lane's goal of rethinking and updating the traditional venture capital model to better align with the modern business landscape.

• Complete democratization of funding is unlikely due to the limited number of talented individuals capable of building substantial businesses.
• Venture capital is moving towards more explicit community-based models.
• Maiden Lane draws inspiration from Y Combinator, First Round Capital, and SV Angel.
• The future of venture capital involves shared capital resources and community building.
• The economics of venture capital are changing, with angel list unbundling traditional structures.
• Three models for decision-making in venture capital will emerge: consensus-based, non-consensus (conviction-based), and a third unspecified model.

"I think where venture capital moves is more explicit sets of communities."

This quote suggests that the future of venture capital will focus more on explicit, community-based approaches rather than traditional intermediary roles.

"The capital is not mine, it's not my budget to invest. It's my responsibility to build a community around it so that our lps can make a really healthy outsized return."

This quote indicates a shift in venture capital philosophy, where the focus is on community building and managing capital as a shared resource for the benefit of investors.## Venture Capital Trends

• The consensus investment strategy is expected to decline.
• Non-consensus or conviction investing will likely expand.
• Direct investments from LPs (Limited Partners) into companies will increase.
• Established firms like Sequoia, Benchmark, and Horowitz will remain influential.

And then for lps, the third bucket will be direct investments, where they basically take from their managers opportunities that they already have shares in through their investments in funds like maiden Lane or first round capital or Sequoia. And then they invest directly into companies that are a fit for the bigger, broader portfolio.

This quote explains the increasing trend of LPs making direct investments into companies they are familiar with through their existing investments in venture funds. This is part of a broader shift in investment strategies within the venture capital industry.

• Dustin Dolganow emphasizes product quality in his investment analysis.
• He values high-minded design and thoughtfulness for the user.
• Anticipating users' needs is key to successful product development.

So you've said before that for the analysis, it starts and ends with product so what is it you look for then in products? Are there any must haves, any design requirements?

Harry Stebbings is asking Dustin Dolganow about his focus on product quality in his investment strategy, highlighting the importance of product-centric analysis in venture capital.

• Ryan Hoover of Product Hunt is recognized for his work in building a strong community.
• Community building is considered extremely challenging.
• Product Hunt is praised for its evolution and thoughtful approach to user engagement.

I think Ryan Hoover at product hunt deserves massive credit. To see how they've unfolded that is just really impressive.

Dustin Dolganow is acknowledging Ryan Hoover's success in building Product Hunt into an impressive and engaging community, which is a significant accomplishment in the tech industry.

• Dustin Dolganow is excited about the disruption in the venture capital sector.

Venture capital.

This is a concise expression of Dustin's anticipation for changes and innovations within the venture capital industry itself.

• Prescription delivery is considered overhyped due to rapid market saturation.
• Canada is viewed as an underhyped region, with strong performance from entrepreneurs in Toronto and Vancouver.
• Factors like cost of living, developer tax credits, and exchange rates contribute to Canada's success.

Prescription delivery is amazing. It went from like one company to six in three months. It was wild to watch.

This quote indicates Dustin's perspective on the rapid expansion of the prescription delivery sector, suggesting a bubble-like growth.

This probably isn't a sector, but I think Canada for the last two years deserves full credit for just really slaying it.

Dustin Dolganow is giving credit to Canada for its performance in fostering successful startups and entrepreneurs, highlighting it as an underrated region for innovation and growth.

• Maiden Lane aims to create a community of influential syndicate leads.
• The goal is for entrepreneurs to seek out these leads and eventually join the community, fostering mentorship.

For Maiden Lane is a community of absolutely kick ass syndicate leads that are so good that entrepreneurs call for them by name and then when they get liquidity themselves, want to become a member of our community and continue to pass kind of the torch down through mentorship.

Dustin Dolganow shares his vision for Maiden Lane, which is to build a prestigious and impactful community of syndicate leads that entrepreneurs actively seek out and aspire to join.

• Dustin takes a "shotgun approach" to reading, seeking diverse sources to avoid echo chambers.
• He frequents Twitter and tech media for information.

I dance all over the place. I take a very shotgun approach to try and get out of the echo chamber.

Dustin Dolganow describes his broad and varied approach to reading, aiming to expose himself to a wide range of thoughts and ideas.

• "Development as Freedom" by Mark Hessen made a lasting impression on Dustin.
• The book provides a compelling case for the importance of GDP growth.

The one that left a really lasting impression on me was development as freedom by Mark Hessen is because it basically helped me understand why we can and should wake up every day to make GDP grow.

Dustin Dolganow shares the impact that "Development as Freedom" had on him, particularly in understanding the significance of economic growth.

• Dustin credits Tom Williams for guiding Maiden Lane to invest in a company called Venue.
• The investment in Venue was not initially obvious but became compelling after further exploration.

Said yes at venue. A not obvious investment for us, but a huge, huge thanks to Tom Williams for steering us in the right direction and just opening our eyes to the company and what it could be.

This quote reveals Dustin's appreciation for Tom Williams' influence on Maiden Lane's investment decision in Venue, acknowledging the importance of external insights in the investment process.

• Dustin Dolganow expresses gratitude for the opportunity to share insights.
• Harry Stebbings provides his contact information for meetups in San Francisco.
• The podcast episode is supported by Wonder Capital.

Really, really appreciate it.

Dustin Dolganow appreciates the chance to discuss his views and experiences on the 20 Minute VC podcast.

And I'd like to give a huge hand to Dustin for sharing his immense journey with Maiden Lane with us today. And do not forget to hit me up if you fancy meeting while I am in San Francisco.

Harry Stebbings thanks Dustin for his contribution to the podcast and invites listeners to contact him for meetups in San Francisco.