Jeffery:
the best way to start joseph is welcome to ask an angel. Uh we’re excited to have him here today. Thank you for joining us.

Joseph:
Appreciate it, appreciate it. If I don’t do many podcasts so it will be a should hopefully be a new and fun experience.

Jeffery:
I love it. Well we certainly will. We do our best to make sure that it uh brings a lot of value and helps our listeners learn more about you, but also learn more about the investment community in the world and how it works. So the best way for us to start is if you can provide a bit of a background on yourself…

Joseph:
Sure

Jeffery:
Where you been, where you’re at, where you’re going and then one thing about you that nobody will know.

Joseph:
One thing. Okay, I’ll see if I can remember all of that. But uh — so a little bit of background on myself. I did my undergraduate universe Chicago and economics. I kind of started my career in Silicon Valley during the first dot com from 97 to 2001. I did some technical consulting, some technical sales, product management. And then I decided after the dot com bust to go back and get an MBA. So I uh went and got my MBA at Columbia Business School From 2000 to 2004.

And then afterward made a little bit of a career switch to uh capital markets and I spent 10 years uh in and around Wall Street, doing mostly structured credit and structured products, eight years in new york and a couple of years in Hong Kong, then in 2014 came back to be closer to family. Decided I had, you know enough of Wall Street or wanted to kind of just switched careers again. Got involved at that time in real estate, both on the residential and commercial side. So, these days I invest in commercial real estate, mostly as a limited partner.

And about that same time, um kind of fell into angel investing if, if I’m being truthful, had some guys, you know, kind of, that I knew that we’re looking for funding in an early-stage company called X earn, they do big data out of new york. And I was familiar with them and I thought that this is an emerging kind of market and to jump in. And You just got lucky. They recently, I think raised an A and I think the last funding round was at a 40 million valuation.

So I’m one of the earlier of investors there. These days I uh spend my time looking at real estate, angel investments, and some smaller private equity deals.

Jeffery:
Perfect. That sounds pretty, pretty exciting. And one thing about you, nobody would know.

Joseph:
Uh, probably for your listeners, I spent a lot of time doing Brazilian jiu jitsu. So it’s not, not that it’s not public, but I don’t think you would know just from looking at my linkedin profile.

Jeffery:
So you got a bit of Royce Gracie going on?

Joseph:
That’s right.

Jeffery:
I love it. Well, it’s a great skill to learn for sure. So I want to kind of take a step further back because what I’m excited about and learning from you, Joseph is that most of the time, you know, everybody investor-wise, they kind of fit into different buckets.

You know, some are accountants, some are legal, some our product managers, some are experts because they worked in one category for a long time. But one thing that’s pretty unique that you’re doing is that you’ve kind of gone through this capital markets in the money, working with dollars and derivatives and things like that throughout time.

And, and I want to kind of explore that because I think a lot of that when it comes to numbers and investing in companies or in the markets, having an understanding of how that all works plays a big part and I’m gonna say over the years for making it pretty comfortable to jump into early-stage investing. So maybe you can tell us a little bit more about that background on, you know, working at those times in the, in the big banks and the, on the derivative side and learning more about how money works, what that experience was like.

Joseph:
Yeah, I mean, you know, I don’t know if the skill set of working in capital markets transfers over necessarily directly.

You know, I think that I have a pretty diversified and well-rounded background, you know, from the five years in tech, obviously the capital markets help kind of just understanding the lingo and valuations I think, you know, angel investing is, it’s kind of like an apprenticeship and it’s kind of like any job, it’s a lot of it’s on the job training. So you know, if I were to say, you know, the recommendation to some of your listeners, how to get started is, you know, paper trade, you know, get involved with some syndicates. You can kind of cut your teeth and see what kind of deals that they’re looking at and how they kind of approach. I really do think there is a process uh, to learning, you know, I when I first started, you know, I was kind of all over the place as far as you know, where to invest and you know, what kind of companies invest these days, I tend to be a seeds a series A investor um just because I invest my own capital, I’ve seen a lot of preseed um kind of early-stage startups, just, you know, too many to name that that that fail or just not a good business idea or even it was a good this idea, the leadership can’t execute.

So because of that, you know, I try to de risk myself. Um but still, you know, I feel like from the seeds to series a kind of spectrum, I can add a lot of value as a as an angel investor after a series A the check sizes get quite large and they bring in professional venture capitalist.

And so you know, not only can I not add as much value to the founders um when I usually invest in companies, I’d like to, if the planners want help them do business development, you know, I helped them, you know, I try to be more than just capital. I tried to bring in strategic, other street investors. You know, I deal with a number of other high net worth individuals, family offices and VC funds, like later stage PC funds. And so I try to bring that in or strategic partnerships with other portfolio companies that I might have in my portfolio.

Jeffery:
Which are all like, that’s obviously a huge, huge value for the start-up and the entrepreneur that’s, that’s running the companies. And if we go back on the numbers side, um, being able to understand the markets, understand the lingo, even jumping into your tech side of things. Do you find it having that experience has opened up the door to this angel investing in helping you reduce the stress or the risk of jumping into this?

Joseph:
I think the risk is still there, right? I mean, you have to, you know, I don’t think any angels and nobody can say that they know everything about all things, right? All industries. So you kind of got a pick where you’re most comfortable and obviously, you know, I have a fair bit of prop tech in my portfolio just because of the overlap with real estate. Um, but, uh, you know, I’m not opposed to that. You know, kind of, the qualifications that I look for is, you know, product-market fit.

You have to have some customers and revenue. You have to have a large moat and a big tam that you’re addressing for people who don’t know what that is. That’s total addressable market. And the founders need to be competent. You know, obviously have to get along, but you know, have some core competence in the, in the vertical that they’re trying to disrupt.

Jeffery:
And you mentioned the tam side of things. So you’re, you’re obviously going back to your market experience. Are you looking at companies, are you doing that homework? Are you going out and you know what, I need to figure this out because if I’m going to make an investment, I better figure out that this is real or if these guys are just selling me.

Joseph:
Right, Right. So, you know, part of the due diligence, you know, you know, first, it’s usually an email intro, Hey, look at our deck. You know, I’m a numbers guy. I like to look at the deck. I like to look at a proforma because I think that’s often overlooked.

I think that a lot of early-stage founders, um, don’t bother putting together a proforma, but you know, I kind of see it as a flag. Like if you are not able to, or too lazy to together Proforma and think about how you’re going to be spending your investors’ dollars. Do I really want to be investing with you? You know, a good Proforma is, you know, we know that there are kind of projections, but it’s a road map.

You know, that you can track week by week, month by month to see am I hitting the metrics? You know, how’s my cash position, you know, and that’s got to be reassessed every month, right? Uh, either your revenues are blowing out the numbers and that’s great. You won’t need to raise as much or, you know, you get less dilution in the future or you’re burning extra high and, you know, you’re gonna have to get funding, you know, months earlier. So being able to understand that and really, you know, not get jammed up, I think it’s critical, so, um, that’s an important piece. When it comes to the decks, you know, it’s, you know, tam is important to, you know, but you can kind of get a sense like, I don’t have the, you know, the exact size of, let’s say, the real estate market in new york off the top of my head, but these are all things that you can fact check. And you know, it depends what source you’re using, right? Different people have different ways of looking at tam and sam and whatnot.

So, um, but that’s not the most important piece right there. I want to make sure that, you know, you’re not in a super niche space, but you know that that’s pretty easy to find out, just do a google search.

Jeffery:
So in this maybe you can dive a little bit more into this Proforma and what what you like to see in it because it is quite important and feel it kind of comes from your prop tech space because a lot of that is exactly how you’re buying into a lot of properties.

They’re giving you all the facts, all the data right up front and you can find out nowadays a lot of the systems are telling you, you know, what’s the walking distance to this place and what is this value? So there’s so much data that’s built in to protect, that really helps you decide if this is going to be a good investment. But then early-stage companies don’t tend to have as much data and reassurances and things that are built into it. So there is a lot more risk. So can you define more of what that performa looks like for a start up?

Joseph:
Yeah, I mean, I want to see kind of what kind of margins you’re contributing. Usually, you know, when you’re talking about SAAS-enabled companies, the gross margins are pretty high. You know, I want to see what your projected burn is. That kind of full deployment. I want to understand, you know, if you’re raising a million or two million at the seed level, how much runway does that buy you?

Um, you know, how many FTEs or employees are you you know, currently at? And what are you looking to ramp up? What’s the sources and uses of the money? Um, there’s a lot of detail that goes into that. And I would recommend for folks who are, you know, not as proficient with, you know, kind of the financial trying to understanding um, you know, all of this is uh, you know, you can get smart on it online, there’s plenty of free resources to understand, you know, what a balance sheet is, what cashflow, what income statements are.

And again these are just projections, but I need to understand, does the entrepreneur, you know, are they making reasonable assumptions? You know, uh, and those are important, right? You know what your LTV and CACS Ocak is a customer acquisition and cause LTV is lifetime value of your customer, you know, is that, is that ratio appropriate? There’s no hard and fast rule, but you know, there’s some general rules of thumb and independent on, you know, what kind of start up it is, right. Um, obviously, you know, if you have a LTV ratio that’s very large versus your customer acquisition cost, that tends to be very favorable. Not that would be something that, you know, would jump out to me. And if it’s the inverse, then that would be a red flag that I would need to drill in and say, you know, why is your LTV detect low?

You know, and how, how do you guys plan to improve that?

Jeffery:
So there is a, there is a lot of dependency on the numbers.

So when you first started working on the investment side and you shared earlier that you kind of got thrown into this mix, did you automatically kind of go into what you knew and what you learned before in your past and you’re just like, okay, I need this kind of information to make this investment or to just jump in because they’re like buddies, Yeah, here’s somebody good luck. Um, and then after that, they were kind of like, hey, we’re doing well, you’re thinking, hey, that wasn’t a bad investment. I did well, I think I’m gonna do this again. And then you started looking at it, going, wait a second. Maybe I need to bring in some numbers here. Maybe I need to ask more questions. What kind of, you know, how does that process work for you?

Joseph:
Yeah. I mean, if I’m speaking truthfully, I think like I said, I kind of fell accidentally into it and you know, you know, I knew enough to be dangerous, but I wouldn’t say I was super efficient and like, I think it’s like life, you know, I’m a lifelong learner. Um, you know, I believe in just iterative processes and every, I think every time I look at a company, every time invest in the new company, my process gets better, it gets tighter.

I’m always learning, you know, I, you know, especially as a one-man shop, I don’t have analysts, you know, I don’t have a lot of resources. So, you know, each time you get a little better, you know, when I first started out, you know, I didn’t even look at proformas, you know, and so, um, you know, some of the early, early investments were just more based on, you know, what’s the market opportunity? Does the technology seem reasonable? Are the founders qualified? Okay. Go. But, you know, I got lucky.

I mean, so far some of those earlier companies are still around, you know, no, no exits but up rounds. But, you know, as as the process, you know, as I’ve gotten deeper into the angel investment world, certainly, you know, just learning from other angels, learning from other VCS what they like and what they want to watch out for, because I think, you know, one of the great things about angel investing and this is one of your questions is why do I do it? I do it because, you know, one obviously in the capitalist, I expect a return on my capital, but it’s super interesting and the ability to work with people who are type A players, super motivated and doing really, really interesting, cutting edge stuff and helping to push that along, you know, and hopefully some of the companies that invest in turn out to be, you know, impactful, not only, you know, for my bank account, but also for society, right? Um you know, you could argue, you know, whether, you know, google is, you know, it’s for, you know, whether you like it or hate the company, you know, they’ve brought a lot of value to a lot of people.

Jeffeery:
Oh, that’s for sure. A lot of the big tech players have done that in a massive way. But now I think as they’ve grown as the size they have, are they now changing what impact they’re bringing to the world? And are they becoming the while the oil industry of the world where we’re all kind of against it because it’s a pollutant and it’s bad.

Well as google now gone to that side of things where they’re kind of changed from this was amazing how much I learned from google searches and everything else to now. Their ads and everything are intrusive, they’re reading my data, they’re reading by this and they’re feeding me with this and they are now controlling so many elements of my day. Have they gone too far? So I guess it’s part and parcel to the industry, but you know, have these players all grown too fast and grown too much because of tech

Joseph:
Right. I mean, you know, google, I think is it’s easy to pick on because they’re so large. I think they’re less uh invasive than some of the other social media companies who, you know, really their goal is to get, you know, spend you to spend as much time on the screen, and I understand that their business, but, you know, is that a positive net net to society? Uh you know, for, especially for younger folks, don’t know, um it’s uh you know, as an investor, that’s something that I think about, you know, you know, what impact, you know, I’m getting more and more into impact and ESG investing in for people who don’t know what that is, that’s the environment, sustainability and governance, I believe it stands for.

So, um these are companies that obviously their for profit companies, but they also have a mission where they hopefully uh impact and be beneficial to society rather than be a kind of a detriment.

Jeffery:
Well, there’s been a lot of great things that have come in the impact society and the on the environmental side, to just a lot of the businesses are now trying to focus on this, even from amazon all the way across, that, they’re going to be carbon neutral in the next five years, and how they’re going to get their buying up credits.

Now, there’s credit businesses, so it’s pretty crazy how far tech has come and how much it’s been an enabler of business, and how it’s pivoted out of the old school ways of doing things and really built up many, many new industries when you look back at your original tech selling side and the things that you were working on back then, do you feel that while one of the world’s changed significantly when you feel that you were able to keep up with the pace of technology change?

Joseph:
I think it’s very difficult for anybody to keep up with all, you know, technology is just so vast and wide, right? I mean you have hardware, you have software, you have, you know, so many other things that you could personally call tech, you know, uh crypto currency, Bitcoin, cryptocurrencies, you hold the pole Blockchain.Quantum is is another space that they also falls in the text. So uh and and there’s deep tech, right? And so I, you know, I don’t personally invest in deep tech.

Uh not because I don’t think it’s a good investment, I just think it would take too much for me to come up the learning curve to, you know, um, you know, unless I had access to somebody who is an expert in the field, now, there are ways that you can do diligence, um, without having, you know, that technical knowledge, but that’s probably a more advanced discussion,

Jeffery:
For sure, but like you said, you’re you’re a global learner and you’re you’re always driving out to figure out these types of things. So I’m sure this isn’t gonna be, uh, wouldn’t be a tough one when you’re throwing in front of a real deep tech company.

And it sounds pretty exciting. I’m sure you’ll figure it out before you make that investment regardless. So it’s a fast-moving pace, but we got google, we can research as much as we can and learn from those founders too

Joseph:
Absolutely, and I think, you know, if I was, you know, like I’ll give you an example, one company and this kind of ties into that ESG impact theme is a company I’m invested in uh, called Tigris, T Y G R us, They’re a specialty chemical company, probably one of my largest angel position. Super bullish about it. But you know, I’m not a PhD in chemistry, I have no idea about chemistry. So, you know, uh, you know, how did I do due diligence on this company? You know, one, you know, there’s a lot of, you know, they have patents in the public information space.

They have a bunch of advisors which I called, you know, who are reputable and you know, you can google their advisors and spoke directly to advisers. You know, obviously these are people, thought leaders in the industry and you know, they wouldn’t be associating the cells with a you know, a fly by night company. Two, you can look at you know, kind of contracts that they may have signed. You know, talk to their customers say are you know, are you really purchasing this chemical?

You know, those are things that can kind of validate, Does this does this chemistry work or not? I like that company in particular because it’s a little bit different than software. You know software you have to get product fit. You have to make sure your code is not bugging The chemistry. It’s you know, it’s it’s the law, you know of nature’s right. Either is a chemical compound that works or it doesn’t and that’s it. It’s binary. And once you prove yourself, that’s binary is the business model. You know, it doesn’t make sense. And the reason why I like this company, you know, they have 80% gross margins, 50% net margins. Um, you know, they’re pursuing a licensing model so it’s scale beautifully. Um, yeah. And just really gray hair on the, on the, and experienced founders. So those are, you know, wide mode, 21 year international patents, uh, and, and, and technology that, and, and a core team management team that I think can perform.

Jeffery:
I like it. And there’s one thing that you are a couple of things in there that you, you brought up that I really like and one was that you called, the advisers can say that. I’ve never heard anybody say this and I think it is pertinent to anything you do in a business when you’re making an investment, especially if you’re going to make a large investment, you should be calling everybody and their grandmother to find out how much information they know, what they’re willing to share, how well they’re embedded into the company because the success is going to be bound to these people that are benefiting or that are working with on the outside and the inside of that business.

Jeffery:
Absolutely. I think anybody who’s asking for money from you, you know, if they’re not willing to open up and speak about it, that, that set off all kinds of red flags, you know, you know, being able to talk to customers, partners, advisors, all of the above and other investors potentially. Now listen, depends on your check size, you know, in some founders may or may, you know, may not be amenable to that. Um, but, uh, you know, certainly as part of the due diligence process, you know, what’s also helpful is, um, you know, me being a small angel investor, um, depending on the company sometimes, you know, I like to make sure that they have a lead. So, you know, what a lead is is, uh, you know, some kind of venture or institutional money that’s kind of done the heavy lifting as far as background checks and all these things. And if they have a lead that gives me a little bit more, you know, especially named, uh, you know, venture capital gives me a little bit more comfort.

I still have to do my own due diligence. But you know, I could be fairly certain that these guys aren’t, you know, outright running some kind of Ponzi scheme or something like that. It gives me a level of comfort, you know, to kind of go down there.

Jeffery:
So do you, do you, would you advise the startups to when they’re building their data room to be a little bit more open and sharing this type of information, so it’s readily available for the investors before all of this happens? Or do you think it should come out in the questions when you’re doing the due diligence and you ask this to move it forward?

Joseph:
You know, I think, you know, a brief email with an exact summary or a short deck that kind of gives the high levels is kind of, you know, usually the way things open up and if there’s interest, you know, the more data you can show and, and, and, and build your case, it’s always helpful for investors. You know, for me, if I have to go and ask you for a data room, um, you know, it’s, it’s, uh, this isn’t really, it’s not that it doesn’t reflect poorly, but, you know, the more I feel like I understand about the company that gives me, you know, at the end of day, you’re making a decision to invest money and we know that angel investing is a high-risk kind of high reward business. And so, you know, nine out of 10 or whatever the numbers are of companies probably won’t be that successful. Um, so or fail and so I need to get comfort around that. And uh, how do I get comfort with early-stage companies that may not have that many customers, not much revenue. It’s about that data, you know, what kind of progress um, you know, are you making maybe it’s not on the revenue side, but you know, your users are there or maybe your deep talks with the Department of Defense.

Um, you’re running some trials there. Those are interesting nuggets of information that would help a founder build their case

Jeffery:
Agreed. So you also mentioned, um looking at contracts of existing customers that they have or maybe even going to the extent of being able the option of talking with some of their customers.

Have you found that they’re also open to that and allowing for you to kind of move into that space and start investigating. And if you had any pushback or are you kind of going in with the approach, I’m gonna help you sell this through even better because if I’m talking to them, they see that you’re growing. So there’s a potential of me talking to them, it’s going to bring some extra values. So is that kind of a drive into that at the same time?

Yeah, I mean, look, I think it depends on the founder and you kind of have to take it on a case-by-case basis. I mean, it’s harder to ask if you’re writing a $10,000 check versus, you know, a quarter-million dollar check. So you have a little more leverage there. But you know, I don’t think it’s, I don’t think, you know, if you’re going direct and not to the syndicate, that’s a little bit different situation, but if you’re going direct to the company and they’re asking you to write a check, um I think you’re entitled to ask for those kind of things. Now, I wouldn’t come with like, you know, a laundry list of 100 things, but like, hey, do you have any advisors or customers that you know, will give you a good reference or I could talk to. Now, you know, if they do now, you should expect that they’re going to give you their best customers invest references. You know, you should try to spot check that with, you know, somebody that’s, you know, maybe I didn’t have a great experience or they haven’t listed that there’s a customer, but they haven’t listed as a reference and see how their experience with them.

Jeffery:
And that’s just doing your homework, right, diving in and exploring. See what you can find on google again and see what information has been shared. Because you can’t do this in the public markets. You can when you’re investing in big companies, but they’re not going to reach out and tell you, yeah, go and talk to, uh, this company because they invest in us like Apple or someone. They’re not going to be sharing all of their deep investment portfolio because you want to invest 100 grand, maybe if it’s 100 million, there’s a there’s a different deep dive in it. But when you’re working at an early stage, it really does make a big difference for, um, investor coming in and risking their early capital to help you move the business forward. And they really want to make sure you’re on that truth line, if that makes the most sense and it balances all up and everything checks itself out.

Joseph:
Absolutely, Absolutely.

Jeffery:
So you’ve kind of talked about a bunch of different aspects of the investor side, and of course, on the startup side, is there something along the lines that when you’re working with these startups that you’d like to see more of, that, they don’t actually provide enough for and that you spend too much time asking questions on, is there something like says, we need an international standard for how an early stage company should be providing information or opening the door up or where they should go for money, They should do these three things.

Is there something that stands out to you?

Joseph:
Are you saying, uh, posts investment or pre investment?

Jeffery:
Pre- investment.

Joseph:
Okay, so I’ll make two comments. We’ll talk about the post investment because the trigger thought. So pre investment, listen, uh, you know, as I said, a data room is always helpful. You know, your financials, if you have some, uh, you know, your, your deck, um, you know, in a list of, you know, that that should be, you know, uh, concise and, you know, you know, I prefer when it’s not just a long paragraph, but you’re like, you understand and you can, you can, you can explain it like it should be, you know, the problem is you’ve got to assume that most investors, especially angel investors, they probably don’t know a whole lot about your space or your vertical.

So you’ve got to educate them and you’ve got to kind of, you know, for better or worse, kind of break it down like 6th grader and say, okay, this is the problem. This is how we’re solving it. This is how we make money and you know, kind of stepwise like, okay, that makes sense.

Okay. You know, it’s a large problem. You have some technical solution that assumably has a, you know, some kind of moat that, you know, other people or take a long time to develop and you have great economics. You know, you can charge, you know, you know, 300 bucks a month or whatever the number is to do that to get meaningful revenues. And, you know, another piece about the performers like how long is it gonna take, you, you know, in your projection to get to cash flow break-even, right?

Which means that I no longer have to raise or at least I’m getting to some size, right? I don’t like companies that take, you know, they’re like, we’re they’re better farm their binary 01 We’re going to just give it away and look not to say, you can’t make a lot of money linked into this very classically they for 10 years or whatever the number is. They didn’t monetize. And then they started monetizing, but by then they had this massive network effect. But in general, that’s very difficult to do, you know, spend hundreds of millions of dollars, spent five years, you know, hopefully getting this community network and then trying to monetize. I would prefer companies to really test it out early and say, can you really get somebody to pay for this? And can you build that? Um, the second comment I would say, is on the post, post investment, and you ask, you know, what could they, you know, founders do? And this is even pre investment to is communication. I think, you know, if I pass on a deal because you’re too early or, you know, it’s just not the right time, whatever it may be.

You know, you should be having some kind of regular updates to your potential investor base. And I don’t think enough founders do that. You know, it’s not hard to put out a monthly or quarterly update like, oh, this is what we’ve done and that keeps investors engaged. You know, it maybe I’m not a precinct guy, but by the time you guys get to see, I’ve seen the progress and, uh, you know, and you’ve developed a relationship and furthermore, on the post investment side. You know, I don’t think, you know, some of my founders update me quarterly and which is fine. I’d like to see more often than not because I am trying to micromanage, but it’s just like, it’s good to get an update. But I don’t think founders lean on their investors enough for, um, resources, you know, Oh, could you introduce me to?

So and so could you help me find an engineer? Could you do, you know, a portfolio company that is interested in this? So those are things that if you have a good cap table and you have good angel investors who are motivated, you know, I’m motivated the moment I write a check, I want to help you as much as I can now.

I don’t want to I’m not investing for a job, I want to be passive, but I want to give you strategic advice. You know, if you want it, you know, I don’t say, you know, every investor or every founder that i invest in has to take that advice, but you know, it’s there, it’s available and I don’t think enough people take advantage of that.

Jeffery:
Wholeheartedly agree with that. And communication is key, but it also invigorates you to find areas that you wouldn’t think of maybe. Oh, I met that person last week, I could introduce them. So there is a lot of value that could come out if they continue to communicate and share with you as an investor or even as just someone that’s been interested in what they’re doing. The thing is that if they were interested once you could probably interest in four or five more times, especially as you start to communicate and share the growth or the opportunity that keeps getting bigger and better in the business.

Joseph:
Right? And I think you should be sharing both positive and negative results. You know, I don’t think enough.

I think a lot of founders shy away from like the problems they’re having because they’re afraid their investors will get mad or whatever. I would rather know about a problem months in advance and you know, before you’re going out of money, uh, and maybe I can help you, You know, or at least I know that you have, you know, issues, but no, don’t come to me.

You know, when you’re like, you know, your last dollars in your bank and you’re like, oh, we need some more money because the bridges to the next round because of this, you know, and I’m not going to have very much, um, sympathy for you because you just haven’t been communicating and you know, I can’t help you. It’s too late.

Jeffery:
Yeah. Earlier the better allows you to jump in quick or two. Right?

Joseph:
Absolutely.

Jeffery:
Yeah, very good, awesome. And you mentioned in previous recordings and other things that uh you can sometimes do to help circumvent and move and the risk and one of them was doing things like an SPV, is um is that something that’s common and things that you do or that in the network that you work in? Um do you like doing those types of vehicles or you rather have just straight in work off equity and and build into the company?

Joseph:
So is the question, do I like forming SPVs to invest in startups? Is that the question?

Jeffery:
Yep. Correct.

Joseph:
So I have done so, you know, obviously through syndications on that, you know, the syndicators will naturally build an SPV and I think that’s appropriate.

Um when I’m just angel investing, I usually go direct um you know, at some point, you know, I may look at, you know, putting all my investments into an SPV, I think that just the additional filings on the tax side and, and just dealing with all that stuff, it’s relatively unnecessary.

Um, at least of the size I’m doing, I think if you become a super angel, like Jason Calacanis, Chris Aka, then, you know, those guys obviously have a lot more resources and, and bigger teams and, you know, makes more sense for them to do that. Um, you know, I don’t think there’s any tax advantages. I think it’s more from a liability protection start of things. I’m less worried as an LP investor of getting sued if the company gets sued and more, you know, I think it would be more just general protection. Uh, you know, but I have, you know, umbrella insurance, you know, so, you know, it’s more personal protection of your assets, right?

Jeffery:
I like it. And just the last question, just because you mentioned it and it’s a fantastic point. Maybe give us a little bit of an understanding of what umbrella insurance is for the average investor that would be jumping into this.

Joseph:
Yeah, I mean, you can get it through your, whoever provides your homeowners and car insurance. I mean, you know, I think I have a $5 million dollar policy. You know, it’s, it’s to prevent, you know, things like if I were driving down the road and somebody jumped out in front of me and I accidentally killed them. You know, there would be a lawsuit, civil lawsuit involved, probably, you know, hopefully not any criminal, but, uh, you know, that, that could be meaningful.

And if you have, you know, real assets, you know, uh, private investments, they could potentially go after that. But if it’s in an SPV, um, depending on how you set it up, you know, you may, you know, that may give you a little more protection. But again, I’m not a lawyer, uh, you know, so consult your lawyer for your best structures to put that together.

Jeffery:
That will be on our next show. But I love it. But thank you very much for that. All insightful.

I think now what we’re gonna do is we’re going to kind of jump into the rapid-fire questions. Some will be a bit of a repeat because we’re re-emphasizing some of the conversation that we have had. But so far, I think you’ve rounded out both sides, thrown out some good advice, but let’s jump into the questions.

Joseph:
Sure.

Jeffery:
Um, well, you talked about how you got started investing. So maybe the bigger question is why do you invest in start up companies?

Joseph:
Yeah, I think I touched on it a little bit in the beginning of the conversation. Um, you know, one I think, you know, I’m looking for an outside return.

You know, you know, as I mentioned, I do real estate and angel investing. Real estate is kind of the core in that kind of pays the bill and it’s, you know, slower growth. And uh, and then I’m looking, I’m unicorn hunting obviously, um you know, I’m looking to really expand my portfolio to, I think, you know, as Jason Calacanis said in his book, it’s one of the best jobs you can have because you’re working with super smart people, super motivated and they’re doing really interesting things right?

And as I mentioned, I’m a lifelong learner and I think you have to have that desire to want to learn and explore new business ideas and verticals and you know, I don’t know everything about everything and anybody who claims to do so is probably lying. Um, but I enjoy that process. Um, I know nothing. You know, I didn’t know much about, you know, quantum security.

I invested in a company called Q secure, Q u S E c u r e dot com. They have a post quantum encryption solution. I think it’s super interesting. You know, they mentioned it’s a $1 trillion problem that’s coming, you know, in the next couple of years to me that seems like an opportunity, you know, when you think about, okay, security is based on keys right now, but everything from IOT devices to the military’s unmanned drones have some kind of encryption, right?

And when quantum does finally come online, you know, they’re going to be able to break, these RSA keys, you know, in seconds, minutes, you know, where we take millions of years or where thousands of years from a supercomputer currently? Well, you know if that’s that’s a problem because we have, you know, foreign nation states like China and Russia allocating billions of dollars, you know, 10, 20 times x what the US spends.

Um I would be concerned. I think that’s the new, you know, and this is a little diverting from the angel. But I think on the political side, I think that’s where the new battle will be fought.

Jeffery:
I love it agreed. And it was one of the companies that you shared that I did actually have an interest in as a side note

Joseph:
Fantastic well happy to introduce, you know, we can talk about that offline

Jeffery:
Perfect. Alright. And your favorite part of investing.

Joseph:
Favorite part of investing. The exit obviously I think, you know, I had one of my portfolio companies toxin just got acquired uh wasn’t in there for very long, it was done through a syndicate but probably four months ago I invested. And you know, it’s always nice to get a win. You know, was it great IRR, you know, not not huge on the MOIC. Which is multiple on invested capital, but a win is a win. And so you know, I’ll take that, I’ll take that capital back and redeploy that um So yeah, you know, and then just chatting with uh entrepreneurs um and invest in another company. I’m an advisor to a company called Super World. Um They’re building a kind of the platform for the next Pokemon go, which a lot of people don’t know was the fastest company to a billion dollars in revenue ever.

And so you know and it’s on a on the back of Blockchain so they play in ARVR. And then the the real estate plots are nonfungible tokens or FTS which are very hot right now. So they’re in a very exciting space.

Jeffery:
awesome. Ah Any any verticals that you like to focus on?

Joseph:
Well I mean you know prop tech because of the real estate. I love prop tech. I think there’s a lot of inefficiency is a real estate. Um I’m relatively agnostic as far as vertical. Uh You know as I said if it’s I don’t do direct consumer I must say I do B2B. Only U. S. Domiciled. It’s not that I don’t think you can make money and direct consumer, it’s just um it’s an animal that I haven’t yet figured out.

I find it very cynical. Um, but if, you know, if you get it right, dollar shave club and a lot of these other companies, you can make quite a bit of money, but I just think it’s, it’s very expensive and difficult to build a brand and that’s kind of, I think the biggest determining factor for startups in general. But you know, when you layer on that, you’re selling some kind of CPG product or something like that, it’s, it’s tough stuff.

Jeffery:
Agreed. How many companies do you invest in per year?

Joseph:
Last year? I didn’t count, I think I did roughly 10 ISH. You know, I have a little more than 30 companies that I’ve either done direct or two syndicates. Um, it really, I don’t have a target number. You know, it’s just, uh, you know, um, do I find interesting companies and I don’t ever want to be under the guns like, oh, you know, I’ve thought about doing a fund and, and let me do it in the future. But you know there’s different responsibilities that come with, you know, investing your own capital versus, you know, being a fiduciary brother folks money.

I think when you have a fund, you know, there is a huge, kind of motivation to deploy that capital because you don’t want that cash just sitting around drag. But that’s sometimes I feel like makes venture capitalist makes up off the mole investments. So I’m not saying that, you know, that is bad. Uh, it’s just not how I like, I’d rather take my time and if I go a whole year and I don’t find a single investment, I’m okay with that. You know, if I find 10, you know, then I’ve got — that’s not a bad problem to have, you know, because I do have limited capital, I invest my own money. It’s not like I can go out and raise another $10 million for under $20 million. Fun to do that. So I have to kind of keep my dry powder for opportunities.

Jeffery:
Awesome. Do you lead rounds?

Joseph:
No, I do not lead rounds in general. You know, I’m — like I said, I’m not, I’m a smaller angel guy, you know, somewhere between 10 and 100,000 depending on the, you know, conviction. But I try, you know, my whole goal in life through real estate, private equity angel investing is to have multiple, multiple passive streams of income, you know, for when I retire.

So um that’s just kind of a game plan and I think diversification through a lot of small bets. Um it’s kind of, you know, one way to head yourself, you know, I can’t control the market, I can’t control the operations of the company but I can control where I allocate my money and how you know what the concentration is.

Jeffery:
So so from your initial conversation with the start-up to the investment period to make an investment, how long does that usually take you?

Joseph:
It really depends on the company, how quickly they can get me information back and you know, how quickly I can do the due diligence. I mean I’ve made investments as quick as, you know a few days a week. You know, sometimes it takes me a month or two because you know, the founders are busy or unbusy, so there’s no hard and fast rule. I just have to get a comfort level. You know, sometimes they’re trying to close around by a certain date and I miss that day because either I can’t get to it or you know, the data is not there. And I think, you know, there is a little bit of FOMO, but I think as an investor, you have to realize that there’ll always be another startup.

There’s other opportunities, you know what it is it going to be the next Google maybe, but you know, I think of the law of large number, it’s highly unlikely. Um, so you know, just be disciplined, stick to your thesis and uh, you know, try to, as I said, diversify across a lot of different little companies. Um, if you, if you put it all in one company, um, there is a strategy that people do that, but I think it’s risky because so many of these startups fail.

And so, um, you know, I’m trying to make 100 bets and, you know, maybe one or two of them, you know, pay for the rest, um, as opposed to making just one big bet and, and putting all my eggs in the basket. Um, and then having something, you know, maybe the founder dies or, or maybe, you know, bigger competitors steps into the space. I just can’t control that.

Jeffery:
For sure. Do you — how many preferred terms that you like on investment? Like pref shares? Common equity?

Joseph:
I mean, I would like pro rata rights, you know, for follow on, obviously that’s, that’s, that’s good. Um, press would be nice. Um, You know, I look at the terms, um, you know, discounts if you’re raising on a note, it’s always appreciated. You know, people will do that. Warrants are great. Um, I don’t ask for them, but if they’re offered, you know, certainly take them. Um, but yeah, no, I just like standard terms, you know, I don’t like anything too crazy like how to, you know, not market terms. Um, you know, if if you’re coming, you know, with a valuation that seems appropriate for your space, then that’s great. But don’t, you know, don’t, don’t have like, you know, 100,000 in ARR. And ask for a $50 million evaluation. You No, no, no. You’re multiples. No, no, no, no. Your audience, you know, you know, do a little research.

You know, it’s on my legs and my whole portfolios on my linkedin and it tells you specifically, I am a C two series A, B to B. U. S. Domiciled investor, you know, don’t waste my time or your time by sending me and I’m not trying to be, uh, you know, uh, disrespectful or not friendly about it. I just think that it’s not a good fit. You know, I have a certain thesis. So, you know, sending me a pre-seed deal in a direct consumer company.

It’s probably going to go in my trash box or, or a file for later. Um, so it’s a waste of your time and clutters up my email as well.

Jeffery:
It makes sense. And being direct and it helps everybody move faster and helps you get to where you need to be in investing in the right companies faster, Right?

Joseph:
Absolutely. Time is the one resource that we all have, but can’t buy more. Can’t make more. So, you know, I’d rather just tell a founder, you know, a quick no. And you know, so they can move on because not every investors right for every company, right? You’ve got to find that, that, you know, that good fit. You know, some people love direct consumers. So great. Go talk to those guys. You know, I’m gonna be the business to business guy. I mean, I do have some direct consumer in my portfolio, but um, you know, my, my thesis now is, is, you know, business to business

Jeffery:
that well, you’re sharpening your thesis overtime, right?

You’re finding where you like and where you provide the most value. So it makes sense to shape everybody into that funnel so that it works better and more convenient.

Joseph:
Absolutely. It’s an iterative process. I’m trying to get better at it better, a little bit better every day. Um, you know, anybody who starts in this, you know, you’re not going to get it right. You’re gonna, you know, I definitely have some dogs in my portfolio for companies that are probably going to go to zero and I think, you know, if you are not comfortable with the possibility of complete principal loss, this is not a game for you. You know, it’s, you have to have that investor mentality if you want more certainty, I would say stick to real estate or private equity or things that have a well-established business model and you know, it’s cash flows. These are not typically cash-flowing businesses.

Jeffery:
For sure, some good advice. Uh, so just before we jump into the personal questions, we have 11 last question for you.

So in the experience you’ve had and the companies have invested in and work with, were always kind of looking for that real entrepreneurial, heartfelt driving story that really put that entrepreneur over the top, any stories that come to mind that really, um, blew your mind away with, uh, with a startup that you work with or maybe invested in that just, you know, you didn’t think they were gonna make it and then took off like a rocket and they were able to overcome every adversity and, and just stuck to it and really dedicated and made it happen.

I’m obviously seating in a different direction, but you choose what, what kind of works best.

Joseph:
You know, um, a lot of my companies are earlier stage and you know, have, you know, to be honest, the bulk of my angel investments come into probably the last couple of years.

Um, you know, Xturn is like my first investment, A C C E R N. They’re a big data, um, you know, uh, company, I think that, you know, they have done well, um, you know, certainly they’ve made their mistakes, but I think this year is on the right path recovering and so and you know, young kids amazing when I met him, I think he was fresh out of school um 22 but you know, had the wherewithal to go talk to, you know, the people that he’s, you know, he’s able to recruit um you know PHDs to come work for him, talking to the highest level um for on the south side by side of you know, financial institutions, you know, the biggest hedge funds and to be able to do that at 22, 23 whatever his age was at the time, it’s really amazing.

So you know, kudos to him, um you know, I recently was a judge on a pitch competition first time doing that. Super interesting. There were three um sisters ages, I think 11 through 13 that are building a Indiegogo for kids.

So super, you know, whether they fail or not or succeed, it’s not the point. I think the fact that they are starting their entrepreneurial, you know, career so young, super impressive. I hope that more kids get inspired to do that because the platform essentially allows kids to do these kind of uh, you know, start-ups for, for kids ideas and I think building that ecosystem is important.

Jeffery:
Awesome. I love it. All right, want to jump quickly into the personal questions. So, question number one, what’s your favorite sports team?

Joseph:
Yes. Uh, you know, I, I like the Seahawks, I’m from Seattle area, um, uh, I don’t follow professional sports as much as UFC, so that’s kind of,

Jeffery:
well, still professional sports, so who’s your favorite country fighter then?

Joseph:
Uh, you know, I’m a little bit old school, I like George to NPR GSP, I’m not for that genre when when he started uh he’s retired now, but I think, you know, amazing record, amazing person, you know, very embodies the discipline of a martial artist, very well rounded and a true gentleman when it comes to the fight game.

Jeffery:
I love it and he’s Canadian, so throw out there just because that makes it huge.

Joseph:
Gotta love have love for Friends next to the North.

Jeffery:
Yeah, he’s a great, great fighter and he does put a lot of value into the demeanor of how a sports person should treat an opponent but also treat a match and the environment they’re in.

Joseph:
Absolutely

Jeffery:
okay. Your favorite movie and what character would you play in the movie?

Joseph:
Uh Past. I don’t have a favorite movie, I mean I have certain genres but there’s no one particular one.

Jeffery:
Alright, alright fair enough, I was just thinking now because of your martial art background you’re probably thinking of. Uh huh. Yeah. Yeah actually I was thinking
john Claude van Damme or something. Yeah just or even uh Jackie chan and all that that was he’s never been really he’s always been more fun.

Joseph:
Yeah no he’s he really legit.

Jeffery:
He was he was legit but he was more fun in his characters but if you go to someone like uh gently yeah like those guys were like very not they’re super serious in their roles but they were kicking butt so they’re kind of like totally different like Chuck Norris and uh Jet Lee and all these guys they’re really real tough characters. Always played that right? Whereas Jackie chan always played less of a tough character but obviously had the moves and sick moves. Yes he played…

Joseph:
I think that’s why he had such a long standing career because not only was he a martial artist but he was an entertainer. He made you last he you know he was you know he could play a wide variety of roles you know and both in Asia and you know he was he’s one of the few I think asian actors to kind of cross over from Asia to the U. S. And and make the U. S. Box office.

Jeffery:
Agreed. He actually uh filmed way back with Bruce lee. So he was in a bunch of movies with Bruce lee back

JosephL
I think he wasn’t enter the Dragon.

Yeah he was a big big so it makes

Jeffery:
a made a big difference but you’re right he was more dynamic. Did a lot more things and more more of a character on on on the on the T. V. So that made a big difference. Right

Joseph:
yep. Absolutely Very cool. Well joseph, it has been awesome and a pleasure chatting with you got to learn a lot. We went across multiple spaces which really is what matters learning as much as the way you think and how you operate and how the space works.

So I think there is a ton of learnings for the startups and for the investors. So I appreciate that. And the way we like to kind of end off our shows is we like to leave you the last word. So anything that you feel that you want to share back to an investor or to the entrepreneurs, uh your advice thoughts, feelings whatever you like, we turn it over to you. But thank you very much again for your time today.

Jeffery:
Yeah thanks for having me. I really appreciate it was enjoyable discussion.

Um You know I think you know we only kind of touched the surface. There’s so many levels to this game. I think there are a lot of resources out there. I think Jason Calacanis, I’m a big fan of his, his book Angel and his podcast. If you’re looking to get, you know, smart on and understand some of the lingo and what happens, I think it’s well worth a listen.

They’re free. The book is 20 bucks. I think that’s a good place to start. I think there are a lot of online resources that, that are free or cheap that you can, you know, quickly kind of comes up to speed, especially with um, some of the syndicates out there. Angel.co does a good job and Jason has his own syndicate. Um, you know, that’s an unsolicited plug.

I’m not actually a number of his syndicate, but you know, there are ways that you can kind of get into the game, even if you have a full-time job or you’re just thinking about it, you don’t have that much capital, but you can definitely dabble. I think some of the syndicates allow you to invest with as little as $1,000. So, definitely ways to play this if, if you’re interested.

Jeffery:
Perfect. I love it. Thank you very much for the insight.

Joseph:
Pleasure.

Jeffery:
Thanks for your time today.

Joseph:
Bye, bye.

Jeffery:
Okay, Okay, well, that was fantastic, man. Like, you know, as much as I try to take away from not writing notes, I always end up doing it anyhow, but I really liked the emphasis on the proformas and being able to take the background and what he was able to work on.

And the reason why I always loved going into the background on the show with these investors is because they’re always working off of what they know best. What did they learn from their numbers? What did they learn from their background? And those things really help you when you’re getting into these spaces. We tend to think that we want to know everything and invest in everything. But take your background and understanding of the things that you focus on that’s going to help you define your thesis and what you’re going to invest in.

And that’s 100% how Joseph is kind of work through this. And as he mentioned through the background, uh, his tech background, his numbers background. A lot of that’s played into even the types of companies he likes to invest in and work with, which is pretty impressive and pretty amazing. He’s done a lot of things in the space. Some things you can look at. He talked about umbrella insurance, um, uh, impact investing, so figure out what really benefits you and where you think you fit on that investment cycle outside that. It was a great discussion and you guys have a great day and feel free to please follow us on social.

We’re on youtube, Twitter, Facebook Instagram and of course, our podcast will be going through all of the major podcast channels and you can find at supportersfund.com or at OPN.ninja looking forward to staying in touch. Have a great day.