Video: Angel Investor Chris Dixon on Startups & Why the VC Model Is Broken

Chris Dixon is outspoken. He says difficult things. On his blog, Dixon writes about the technology industry’s taboos. “My blog is written from the perspective of the entrepreneur,” he says. “It was started as a VC countermeasure.” And when he’s really angry, his inner comic tweets gems such as: “Twitter is like a drunk guy with an uzi killing partners left and right. Expect investment in ecosystem to drop significantly.” So you might be thinking, just another blogging blowhard. No sir — Dixon is co-founder of a company called Hunch. He sold his previous startup, SiteAdvisor, to McAfee.

And these days in his spare time, he invests in startups through a New York-based founders-backed fund called Founder Collective. In fact, he’s on the speed dial of many Silicon Valley investors. And yet he marches to a different drum — one heard only by entrepreneurs and startup founders.

I first met Dixon back in 2005, when I was working for Business 2.0. An MIT graduate with big ideas, big ambitions and more importantly, a refusal to never take the status quo for an answer, he made an impression on me, and we’ve since stayed in touch. He’s come a long way, but the moment I sat down with him for this interview, it was clear to me that he hadn’t changed. Sure he had new, hipster glasses. A bit more swagger. But he’s still the same plain-speaking guy I met five years ago.

And he pulls no punches in our interview, especially when talking about the rise of super angels and micro VCs, a new trend that’s shaking the venture capital industry to its very core.

Part 1:

[youtube=http://www.youtube.com/watch?v=fI4LsmHeCh8]

He also talks about his transition to investor from entrepreneur. “I got involved in investing mostly to get into the flow of what was happening on the Internet,” he says. “It was the exact opposite of the reason as to why others may invest.” In the process, he said he discovered that some VCs were pushing large amounts of money to startups at a higher valuation than was necessary. “When a buyer is asking for higher price, you know there’s something wrong.”

And it’s why he believes the current seed-stage investment movement started. At Founder Collective, the fund has a negligible management fee. “We make money when our investors make money…What’s so radical about that?” he says, adding: “What scares most VCs is that they don’t know what they’re doing.”

Part 2:

[youtube=http://www.youtube.com/watch?v=fI4LsmHeCh8]

He also talks about lean startups, why entrepreneurs shouldn’t start a business with the goal of flipping it and why fewer people swing for the fences these days. As to his investment philosophy, it all comes down to one thing: the people. He looks for ideas that are unique and ones that others don’t quite understand. “If a Wall Street person is trying to start a company, it’s almost always a disaster and I wouldn’t invest in that,” he says.

I suggest you watch both videos. Before you do, here’s another little gem from Dixon:

“There are two kinds of investors: Ron Conways who try to create value by finding good people and helping them create something great, and others, who want a piece of someone else’s things. The builders and the extractors. Avoid the extractors.”

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