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So, I started angel investing almost 1 year ago.
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Well, I I did it five or eight companies personally last before that. I forget.
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And a couple of them have turned out to be like meaningful, like turning 20 grand into like 300, 400, 500 thousand dollars.
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And I'm like, holy this is how it works.
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And and like but like it it sucks for a while, right?
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Because you just invest it and you're like, well, that money's gone and you don't ever hear about them and then you're like, oh, nice, it works.
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And so, I'm like And so, some of those cases those are huge markups.
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In other cases, I'm just now experiencing like two and three and four X markups and I'm like, that's awesome.
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What would that happen if that was had I invested in this company at a 10 million dollar valuation instead of a 50 million dollar valuation?
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That would have been wild.
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I've noticed that your angel investing is on a tear.
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Our friend Sully just said, whatever Sean What did he What did he say?
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Whatever Sean out a joke.
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He was like, oh, I got this new brilliant investment strategy.
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Uh, Sean invests in something and then he tells me about it 2 weeks to 2 months later and then I pay 10 X price for the same item for the same company.
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And he's like anecdotal like the he was joking, obviously.
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Obviously, that's not great.
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He's like making fun of himself because that's literally what's happened in like I think six or eight deals now where I'll I'll even I'll even tell him about it, but he just delays responding for a couple weeks or I forget to tell him and I tell him or he tells me about the company a few months later and I'm like, oh yeah, I invested in that.
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He's like, awesome, can you make an intro?
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And I make the intro and but the price has gone up like dramatically because the company has more traction or more whatever.
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So, that's what he was joking about.
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But, how are you getting such good Um, I don't know, like dude, it's amazing.
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So, I feel like there's I think the easy answer is, uh, cool, I do this podcast and because of this podcast people come inbound, right?
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The bigger this podcast gets, the more people uh, want you to invest.
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And there's this great, um, thing my buddy Vishal taught me which he goes startups are the only asset class.
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Like, real estate doesn't work this way.
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Stock market like In real estate, if you want to buy it, you go buy it.
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If you want stock, if you want to buy it, you go buy it.
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Startups are the only thing where even if you want in, you don't just get in.
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The security selects you.
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The asset selects you just as much as you're selecting the asset.
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And that one insight is pretty important.
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It basically means you need to build your brand and your like reputation so that people want you in deals.
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Um because the best deals are all like kind of like super competitive to get into.
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Um and you want people to when they're first thinking of an idea to reach out to you cuz they know oh, you know, like for example, I did a great deal recently and it's so funny, you're going to hate this.
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You're going to It's going to piss you off so much.
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You've been talking about short-term rentals.
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Somebody came to me with a short-term rental startup idea cuz they thought I was you or something or somebody who was like, "Hey, bro, why didn't you say THAT TO ME?"
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THE By the way, the subject subject line that she reached out with was last one in.
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It was like, "Hey, I have I have the smallest bit of allocation left in this. Mother. Thank god. Holy. called Hostfully.
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You'll love it because it's it's literally exactly what you're doing. You should get in. I'll I'll intro you. You will get in.
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Uh but but basically, what they're doing is you if you own a bunch of Airbnbs, which kind of like a new market.
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Uh it's basically like you're a property manager.
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So, you're more than just renting out your home or one home.
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So, you have multiple properties, but you're not a traditional property manager who owns a multi-family, you know, like uh building of like 32 units.
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And so, this is for people who run multiple Airbnbs and it's just like it makes your life way easier as the owner as the owner of that.
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And they have like few million dollars in recurring revenue. The valuation was great.
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Founder was really impressive.
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So, I was like, "Oh, yeah, great.
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SaaS software for people who manage multiple vacation rentals."
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And then you're over here building short Sam short-term rental club, building in community, doing this thing, and I got the benefit because people thought I was you.
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That's That's one answer. The piss you off answer. That's ridiculous.
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That is a piss me off answer. Whatever. It is what it is.
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Send me the What I'll send you that.
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What's the company called? Can we talk about it? Hostfully. Hostfully.
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Well, then I can just email her.
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It's Is it Do they have a bunch of VCs behind it or all angels?
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Um I think this round's a lot of individuals. I'm not sure.
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It was like I was kind of late to the party, so I was just pretty quick to just be like, "Okay, this makes a lot of sense."
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Uh you know, the right Once Once you have revenue in the few million dollars uh that's recurring and they really haven't even like figured out what their marketing strategy is going to be yet.
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So, like, okay, that's a pretty good signal that this is going to work and uh it's a pretty indispensable tool for a property owner. So, So, I like that one.
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But, I would say, okay, here's here's some of the things that have happened.
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One is when I share deals with you, you share your deals with me.
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My buddy Julian Shapiro shares like some of the best deals.
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Um he's just very act- He's very like consistent with it.
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I mean, he's like every week he's sending me some good Um that's I would say 40 to 50% of the portfolio is relationships with friends who themselves are experts and specifically people who are experts in one niche.
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So, it's like we've been doing a bunch of like sales person software and it's because we like have a relationship with Craft Ventures who is started by David Sacks.
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He's kind of like the enterprise SaaS guy.
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He built Yammer, sold it for a billion dollars.
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His fund specifically just focuses on SaaS companies.
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And what you're you you talk to So, David sends you stuff?
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David not not me particularly.
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So, my partner Romeen uh who runs my fund, he basically has a good relationship with somebody at Craft.
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So, for example, when they're seeing something good, they're just trading notes all the time.
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And so, we're getting to get in on a lot of their deals.
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So, if even if you don't have a relationship with Craft, you're being But, do they Are they giving you the deal because they like Sean or they like Romeen?
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In this case, it's Romeen because uh he has that relationship.
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He's catching up with that guy every 2 weeks, goes get coffee or whatever it is.
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And but then I do the same with my guys, right?
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So, I do the same with the people in India or the people in Southeast Asia cuz I'm like I think that's where a lot of opportunity is and that's where I have the right relationships.
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So, we're sharing stuff just amongst that.
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So, and then the other thing is like themes.
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So, for example, once I decide that a theme is correct like worth worth betting on, what I learned from Suli actually is the level of aggression you need to have once you decide X is a good idea, you need to go invest in that company and then like the five other companies that are like adjacent to it.
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So, for example, um there's this trend of neo banks, right?
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So, this started several years ago where people basically were like, "Look, banks are something everybody uses but has super low customer satisfaction scores.
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Like their apps sucked, their marketing sucked."
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So, basically people were like, "Look, we can create like a digital first bank."
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And this started like Nubank is probably the best example of this. It's a in Brazil.
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They're like, "Oh, look, Yeah, and they're about to go public.
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People are underbanked there." So, they started Nubank.
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A friend of a friend of mine was like led their investment and now it's a $10 billion company and it has like millions of customers in Brazil.
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And then the same thing happened in the UK with Revolut and Monzo or whatever.
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So, this idea of neo banking basically of can you make super slick like slick app for customers, digitally market to go get customers, and basically you're building You're actually not building the banking part.
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You usually go partner with like some bank like BBVA or something like that.
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Under the hood it's BBVA, but the customer relationship is with a with a company that's really good at at taking care of customers and building good user experiences.
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Anyway, so that's the the short answer is like, "Okay, decide that that's a good idea."
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Um and that takes many forms.
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So, like we talked about this before like Ramp or Brex.
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These are like Brex I think was the fastest growing YC company in the last few years and you look at it you say, is this a good idea?
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You say, well, what are they actually doing?
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They're basically giving credit cards to some group of people that were dissatisfied with current credit card providers.
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Brex did it for startups.
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And they get a portion of every time that card swipes. Oh, interesting.
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So, if a million people are spending a thousand dollars a a year on it, and they're keeping 1.
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3% of the interchange fee of the debit card or whatever, you can come up with some number, you say, wow, this company's going to get big pretty fast.
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So, we did that math of neo banks, how much is a neo bank customer worth, and how much is a credit card customer worth.
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And then we went and did it in every niche we could think of.
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So, we we invested in Keep, which is doing this for Canada.
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And then we invested in uh Pluto, which is doing this in the Middle East.
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But but did you holler at them?
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Yeah, then we go search and destroy, basically.
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It's like, how do you go hunt for the best companies that are doing this in any either this geography or with this customer base.
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So, for example, And you just DM them on Twitter, probably. Yeah, exactly.
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We just reach out, cold DM, and say, hey, I'm a believer in this for this this and this reason.
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What you're doing looks super interesting, we'd love to invest.
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And sometimes it comes inbound, sometimes it's, oh, you got a hundred things inbound, but you know what you're looking for, so you quickly pounce on the four that fit your your your thing.
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Aren't you out of money at this point from the fund, though?
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I raised more money, cuz I was like I was like, before I thought, dude, uh you know, will I get a million dollars worth of deals every quarter that are good deals?
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I'm not just trying to invest in crap.
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So, I need to invest in good deals.
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So, I I I was like, I don't know how many high-quality deals I'll have.
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And now, um I realized that like whatever I whatever I had before was too low.
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So, now we're doing almost two million a quarter.
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Uh we raised more money because we just had better deals.
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Man, I cuz I'm starting so, I started angel investing almost one year ago.
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Well, I I did it five or eight companies before that. Before that, I forget.
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And a couple of them have turned out to be like meaningful, like turning 20 grand into like 300, 400, 500 thousand dollars.
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And I'm like, holy this is how it works.
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And and like but like it it sucks for a while, right?
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Because you just invest it and you're like, well, that money's gone and you don't ever hear about it and then you're like, oh, nice, it works.
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And so I'm like and so some of those cases those are huge markups and other cases I'm just now experiencing like two and three and four x markups and I'm like, that's awesome.
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What would that happen if that was had I invested in this company at a 10 million dollar valuation instead of a 50 million dollar valuation?
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That would have been wild.
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And like how do I do that?
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one of the reasons I hated startup investing for for a while because I was like, you know, is this the best use of time and money?
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Dude, it feels like a expensive hobby.
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I'm just spending money and not getting anything in return.
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Yeah, and then I then I realized two things, which is Bezos has this quote, which I believe he goes, one of the biggest competitive advantages you can have is being long-term oriented.
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Basically, if you prioritize like a if you have a 10-year view where you're like, okay, I'm going to maximize what I can do in 10 years and the other guy is trying to make the most they can make, you know, for their quarterly earnings call, right?
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This is what this is how Amazon worked, right?
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Amazon was basically like, we're willing to lose money to invest so that we provide two-day shipping instead of seven-day shipping or free two-day shipping or a larger selection, but it's going to cost us more because we're going to have more inventory or whatever.
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So, we're going to go into all these other verticals, books, CDs, whatever.
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They basically said like his strategy was long-term this is going to be the most valuable strategy, short-term we're going to get punished by the market because our quarterly earnings are not going to look great.
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But that turned out to be the like magic, you know, the the sort of like the the biggest competitive advantage Amazon had was their ability to be long-term oriented.
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I think this is true just in general, which is if you're competing at somebody who they need a result in one year and you're willing to be patient and get the result in five years, seven years, or 10 years, you can make bets that they can't make.
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So, that means you get to have lower price bets um that will pay off bigger just over a longer time horizon.
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So, I think if you have the luxury of a long-term time horizon, that's a competitive advantage.
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So, that's how startup investing works is if you need money or you will you need to see positive growth in 1 year, startup investing sucks.
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If you're willing to play a 10-year game, this can be an awesome game to play.
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And so Do you think that Well, but do you think is you at you told me you're like, "Man, I think I could three and a half X my fund cuz that's average."
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Now, it seems like it's going to be significantly more.
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Yeah, like you know, you think about kind of like what's the floor?
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Uh, you know, I think a three and a half X would be, you know, a a a solid outcome, but, you know, nothing to write home about.
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Um, but like with a small fund like ours, you know, you can see things where you you can get a a 15 X, you can get a 20 X.
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There are literally crypto small funds like ours that that have had a 100 X.
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They 100 X the fund in in in the period of time, right?
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So, so, you know, you shouldn't really the ceiling is high.
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Um, but but the floor is is is pretty reasonable.
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So, the first thing was, okay, long-term oriented is a competitive advantage.
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I I like startup investing for that reason.
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The second one is um, you want to do things that compound.
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So, for example, if I wanted to beat the market in the stock market, right?
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I want to beat the S&P 500.
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I need to have proprietary like intelligence.
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I need to be smarter than anybody else about something.
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And I think just being smarter at a game where money's on the line is just really hard to do.
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Whereas, if you do, um, if you basically say, "Hey, um, my advantage comes from my reputation or my my my network of people that I know, that's just going to compound every year.
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The more deals I share with you, the more deals you're going to share with me.
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The more companies I have that are winners, that's going to make it easier for me to get into the next winner or for founders to come reach out to me cuz they'll say, "Oh, I saw you did these five Indian unicorns. I'm in India.
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I want to be the next one of them, so you should invest Can you invest in me?"
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So, compounding also comes into play here in a way that doesn't happen in the stock market and doesn't even really happen in real estate.
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Real estate has it to an extent, but but not in the same way as how fast your reputation can compound in startup investing.
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So, anyways, these are my two reasons why I now actually view startup startup investing as a as a game worth playing because it it uses two of the superpowers that that I believe in.
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That I think most people undervalue.
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Is it going to What do you think will earn more, the e-com thing or this angel investing thing?
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Uh probably the for me personally the e-com thing because I just own the majority of that company.
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So, you know, if it sells for $50 million or $100 million, you know, I'll own the majority of it.
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But uh whereas with startup investing, you know, it's like my fund invest $100,000. We own 0. 8% of this startup.
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I personally have 20% of the carry, but then I share with Ramin and Ben and Zach and so I personally own 14.
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something% of the carry or whatever.
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You know, so it's not like you know, you're owning a slice of a slice of something big versus just owning the You know how it is.
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Owning the majority of something that sells for a decent chunk is is just better financially. It's so much better.
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And yeah, I I think that whenever people raise money, I'm like, are you sure, man?
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You might be able to sell this for $50 million and you'll make more money than if you raise money and sell it for $500.
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Now, you know, but I have to operate that other business, whereas startup investing is like, you know, a joy, right?
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You just read about cool ideas, you meet meet awesome founders, and you say yes, you write the check, and then they go do the hard work.
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So, it's you know, it's a different thing.