Last week I posted part one of my interview with Naval Ravikant. This is the second and final part of that conversation.

Part 2: Investing, Investors, New York and Start Fund

Ravikant is the co-founder of AngelList, a topic which we covered in depth in part one of this interview last week. He is also a serial entrepreneur and is generally considered a top global angel investor and a Super Angel.

In this part of the interview we talk about: His investments, other investors, the New York TechHub equaling Silicon Valley, his radical views on Start Fund and enjoying the journey.

AngelList is where Ravikant is now, but I wanted to know how it all started, more to the point, why he decided to become an investor? “I’ve been a serial entrepreneur and I started 6-7 companies, depending on which ones I confess to, and how you count them,” he said jokingly. He then went on to explain that it was his need to work on multiple projects that committed his path as an investor:

“After a few initial companies I sort of developed ADD [Attention Deficit Disorder]. I didn’t like sticking on one project, but I really liked to be involved in many projects and I liked to be in on the early intellectual stage, rather than the later stage, where you have a hundred people.

“I wasn’t really as much of an operator as I was a thinker. Sadly you don’t get paid in Silicon Valley to be a thinker, but you get paid to be an operator. And the best way to get paid for thinking and creating is by investing. You have some leverage that way.

“So I went out there and raised a small fund from people like Marc Andreessen, Tim Draper and about 20 entrepreneurs in total. I was originally planning to do an incubator.”

I interrupted him there, The Hit Forge Incubator, I wanted to know more, why didn’t it come to fruition? He said earnestly with a laugh, it was because no one would join him:

“I started meeting these great companies that didn’t want to join my incubator. I met Dropbox and Drew Houston [CEO and Founder of Dropbox] when he was first at Y Combinator, and I was trying to convince him to join my incubator after YC [Y Combinator] but he didn’t join.”

Ravikant then went on to tell me that he stopped pursuing the idea of an incubator when he met Twitter co-founder, Evan Williams. He went on to explain in more detail:

“Shortly after talking to Drew about the incubator idea I met Evan Williams from Twitter and everything went out the window. That’s when I said to myself, “I need to straight out invest. Because the best companies are run by the best people and they don’t need me to succeed. But if I can come in and bring some money and something more then I have a chance to participate and be involved.””

We left the topic of Twitter for the moment. I wanted to focus on how he knew the company was right for investment and what characteristics a company must have for him to invest. He told me about his ‘investment thesis’ and how it has evolved to be what it is today:

“I have had many versions over the years [investment thesis] and I have two that I go by now, one personal and the other for AngelList. In terms of personal investing there are three things I look for in a company. You need a great team, a huge market, and some sort of unfair advantage.

“I use Warren Buffett’s criteria for assessing the Team: Intelligence, Integrity and Energy. You want someone who is really smart, very hard working and trustworthy. A lot of people forget the integrity part, because if you don’t have that, then you have a really hard working crook and they will find a way to cheat you.”

Ravikant then went on to talk about how the criteria for Team was the deciding factor on funding Heyzap, a leading social games platform.

“First and foremost, in a team, they have to be really good people. When I invested in Heyzap I knew the CEO Immad Akhund from his previous company Clickpass and I liked and trusted him personally. I had never met his new co-founder, Jude Gomila . He and I had a 20 minute IM conversation and I thought to myself this guy has such an amazing energy, and I decided to invest in them there and then. They both have such great energy, integrity and intelligence. I just wanted to be involved with whatever they were doing.”

He then returned to the other criteria of Market:

“The Market has to be huge because everyone makes mistakes. You never quite get it right the first time. I believe that the Internet is very efficiently arbitraged. Anything you can think of has been thought of and tried. The only way you’re going to find something is if you stick to it, at an irrational level and try a whole bunch of things. Companies that don’t do giant pivots are always doing micro pivots. “You need a large enough market that you can pivot in and you still have a customer base. Another related point to that is – it’s just as hard to build a large company as it is a small company, so you might as well build a big company. It’s roughly the same effort.”