𝙀𝙣𝙩𝙚𝙧𝙥𝙧𝙞𝙨𝙚𝙂𝙪𝙮™ – Angel Investor
Kae Huynh

"A billionaire is only worth a billionaire as long as the legal system remains in place."

- Kae Huynh

Kae outlines what he looks for in a start-up

Talk Takeaways

Jeffery and Kae Huynh, also known as the EnterpriseGuy, talked about the interesting world of finance. Gain insights on angel investment as the new asset class, the inner workings of the investment market, equity cap tables, web 3.0, and private market investing. Kae also shares the investment model he takes, his preferred verticals, and how he personally reach out to startups to build his personal ecosystem.

About

Active Enterprise Software Investor & Economic Chess Player.

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The full #OPNAskAnAngel talk

Jeffery:
Kae, welcome. Thank you very much for joining us today. We are on the OPN Ask an Angel podcast. This is, I should actually get the exact number but I think, let’s just say we’re between 40 and 50 of some great interviews that we’ve had with Angel Investors across the globe. And today we’re with Kae. And Kae, the best way to start this off is for you to give a bit of a background on yourself, where you’ve come, from what you’ve done, and kind of where you’re at now, and then we’re gonna just dive right into a conversation, and we’ll go from there, and at the end of it, give me one thing that nobody would know about you.

Kae:
Okay, do you want me to tell you the long story or the the short short?

Jeffery:
You do what’s best to give you enough information. We wanna understand more about you, and how you think, and why you’re doing what you’re doing.

Kae:
Yeah, yeah, so okay. I’ll give you the story that I tell everyone. So, I’m Kae, also known as EnterpriseGuy. It’s sort of cheesy but there’s a story and logic and strategy as to why I chose that stage name, right. And there’s a reason why I chose a stage name. So I’ll tell you the story. Everything from me started four years ago when I left the financial services industry. And the reason why I left was conflict of interest. What I realized is that working there they wouldn’t allow me to invest my money the way I wanted to. And so the moment I left, I literally had no idea what to do. But I knew I wanted to practice finance. So I started this investment club and that club started off with just three people at a cafe. And after that moment, I fell in love with teaching. And then fast forward four years later to today, I still teach every sunday and I get about 100 to 110 attendees. And through that journey alone, I get to meet… I got to meet engineers, investors, professionals all over Silicon Valley, as well as master my understanding of investing at the global macro level. Right, we talked about investing into gold, silver, gold miners, uranium, oil, agriculture. But, I eventually developed a sweet spot for enterprise software and this is from me slicing and dicing the global economy in 11 different sectors. So companies like, you know, Datadog, Sumo Logic, Snowflake, MongoDB, all those companies fascinate me. But if you’re like a pretty, I guess you could say well, sophisticated investor, and you track the markets pretty actively. These are some of the most fast… fastest growing securities globally today. So that’s how I kind of primarily focus my investment thesis on enterprise software. So as I was teaching eventually I met people that came into my life that really changed my life. The first one I would like to say is a meetup partner and then the second one’s a venture capitalist. The first one, the meetup partner he reached out he said, “Kae you’re growing on the meetup.com platform. Why don’t we team up and host events?”. And I told the guy, “Sure! Where can I help?”. And next thing you know, we’re hosting all these events all over Silicon Valley. And it got to a point where I was meeting about 400 people in person each month I counted. And the ultimate thing I learned was that people wouldn’t… were not able to remember remember my name. So I was the host of my own event but people were calling me like “Hey! you’re the host guy, right? You’re the startup guy, right?”. And I realized like huh these engineers are too busy to remember anything. So I decided to brand myself as EnterpriseGuy and that also fits a investment thesis that I see on the
world as well, right. The changing landscape of the consumer technology stack everyone has a higher level of digital infrastructure in their pockets today. It allows one to essentially build and distribute a lot more information more than ever. So I personally believe with that stage name the thesis is that everyone’s going to become an enterprise guy or girl they just don’t know it yet. But soon as the global economics and the wage inflation and all that and wealth inequality expands, all that economics they’re going to line up that’s going to force the average individual to participate more on the I guess you say digital economy, as well as the influencer stack. So I’m bullish on that stack. And again I think the individual today has a lot more digital firepower than they really know. So everyone’s becoming an enterprise guy or girl. Just saying that. So that’s the story of the stage name but what happened next was I eventually bumped into a venture capitalist at one of my lectures. And I guess he enjoyed the lecture enough to give me a call after and said, “Kae, I want you on my team and do venture capital with me”, and I said, “Sure. Where do I sign?”. And so the rest is history. And so today we’ve done about nine opportunities. And I think we’re looking at our tenth one right now. So the tenth one’s pretty interesting. It’s in the web 3.0 segment or blockchain and there’s also a billionaire who’s also an advisor investor in that startup as well. So still in the works but that’s where we are today. That’s my intro.

Jeffery:
Very cool. Can you give us a little bit on your background? Like, what got you into this? What was your, I don’t know, were you a little hustler as a kid? And you were making money selling toys? Or what were you doing? Like, what was the background? What got you into finance and got you moving along
this train?

Kae:
Damn, that’s pretty personal. I think the thing that got me into finance and economics was just kind of like growing up I wanted to… I guess it comes to a point in high school when you get out of high school you got to figure out what you want to do in life. And so the first thing I did was I went
to the library and I started checking out these books and they were related all in self-development. So I went through I… little did I know I was going through sales training so I was reading books on like Brian Tracy and all that. And you know just kind of reading those books it eventually made me realize like, oh all these sales people or all those self-development books they keep talking about economics. So, why don’t I jump into economics? And so I started with self-development, moved to economic books, and that gave me a foundation. And then I realized like huh a lot of the economics they kind of revolve around a specific technology hub in in the world somewhere, right. These financial centers believe. And so that that led me to the next
thing where I started chasing finance and then in college I jumped into this investment organization in college and became the chief investment officer.
And so I started running these stock market simulators in college. and what happened was well and I played a total of five games. The first game I played I was like top five, the second game I played I was dead last, and then the third game and then that summer I said I’m gonna train really hard and study the stock market to win this simulator game. And so that summer I came back and then I got first place the third time. And then the fourth and
fifth time I got first place. And it got to a point where they thought I was rigging the game because at one point I was the CIO or chief investment
officer of the organization and I ran the game and I won the game. And they’re like this guy is cheating so he can’t take the prize but it’s okay I did it for myself and that’s basically what inspired the journey for me to get into security analysis. And everything really started with me mastering the public markets for the last seven years of teaching. I’m sorry, four years of teaching but seven years as a practitioner. To now, recently moving into the private market and analyzing like you know frontier technologies and angel investment, private investing in just the landscape, right. It’s so different but it’s really nice to have the public market as my compass or guidance, right. I leveraged that a lot because most people don’t realize that the stock market, if you could pull up a portal, that is like the central hub of like worldly wisdom where anyone that decides to start a business, if it grows to a billion dollar in sales or whatever you could see how it performs, right. You could pull a Boeing or a Chevron and you could see that oh well eventually if I grow up to a billion they only take home like two three percent profit margins or or like the gross margins are very thin below like 15%. But enterprise software, the margins are like 70%. And these stocks are just screaming higher, right. Now of course there’s also macro tail ones like money printing and all that but it’s a segment that I think will infinitely continue to perform, which is like this advanced technology segment, which is always going to be changing, right. So that’s how I got into it.

Jeffery:
Very cool. What’s one thing that nobody would know about you that you want to share.

Kae:
Uh well, nobody would know about me… I’d say, I mean interesting fact is at this point I’ve done 181 lectures in the last 4 years.

Jeffery:
181 lectures.

Kae:
Yeah

Jeffery:
That’s pretty cool. That’s like teaching a class, right?

Kae:
Every sunday.

Jeffery:
You’re talking about doing a presentation or you’re doing the same presentation 181 times?

Kae:
No, I’m actually doing progressive lectures so anything that interests me during the week I’ll put it up on like you know on the weekend I’ll put in a few hours and just write up what I’m going to present. So every week it’s like a genius hour or two hours where I force myself to learn something new and just kind of better understand the world, right. So yeah.

Jeffery:
I love it. So in this genius hour have you done anything on the angel investing side and how you have built out this thesis around enterprise?

Kae:
Yes I have but it was actually you know my private investing or angel investing the the bulk of its thesis derives from a public place. And the public place that thesis derives from just observing the world and what the world’s doing. So it’s quite simple because if you look at public, you know public comparable something like a Snowflake that’s enterprise software, right? It’s trading right now at a 200 times price to sales multiple. So if you understand the mathematics of that — it’s price to sales not price to earnings. So price of sales at 200 that means if you go out there and you do a million dollar deal you just increase the company’s value by 200 million, shareholder value by 200 million. And the market’s willing to pay for that right now. Now it won’t be like that forever but as long as this environment exists then looking at the private side investing into infrastructure software, anything that’s part of Snowflake will be extremely lucrative because the market right now, currently speaking, is pricing this at 200 times price of sales multiple. So a lot of my thesis is revolved around if I’m able to develop or invest at the very very early stage then I want to pick a security you know look at a public market comparable with the highest multiple because that’s likely to… well have the quickest ROI and then we
could talk about the technology aspect of it as well, which gets super interesting.

Jeffery:
Fire away! Keep going.

Kae:
I’ll keep going? Okay, so I mean that that was you know that’s one thesis, right, enterprise software, Snowflake. I mean I think I think the simplest
way to teach anyone what I’m doing is really if you understand market structure, right, first of all understand the market structure. Market structure is basically saying at the lowest level of transaction you got the consumers, right. An average consumer will spend $5 on a cup of coffee spend $25,000 on a car. That’s typically the the transaction size. You go a little bit higher you got SMB, Small and Medium-sized Business. Those businesses could transact 25,000 a month on marketing. And then you go a little bit higher you got Middle Market Businesses. Middle market would be like let’s say a factory or doing logistics. So they could spend like 100,000 a month on whatever expenses. Then you go a little bit higher you got Enterprise. That’s kind of where I focus, right. And enterprise is typically those business models are global and that’s why we get these unicorn valuations. So whenever you’re talking to a startup at the angel level or private level you want to make sure that the opportunity is global. If there’s no global opportunity there’s no billion dollar exit. So global scalability is very important. So when we dive into technology we want to understand that okay what could
really scale and software could really scale compared to hardware investing. Hardware has a lot of upfront costs but software you’re building on top of
existing infrastructures already. So before we get into all those, right, you got the consumer, small business, middle market, enterprise, and then the highest transaction level is probably at the sovereign level or government level because the government level could spend upwards of 100 million
on like commodities or whichever. So that’s the biggest transactor but then it’s good to know the government’s at the top because they print the money
and it trickles down, right. And so what was your question again? I kind of lost my train of thought.

Jeffery:
You’re were give an example of if on your thesis and how the market is [inaudible] enterprise market and outside going to hardware and not maybe
not hardware but going into diving deeper into how and why you invest.

Kae:
So yeah I do apologize. So remember that structure, okay, from enterprise down to consumer and if you were to look at all the valuations across the spectrum, you know. A consumer could build a small business like a cafe. If you sold a cafe, a cafe would sell… a cafe or a restaurant. It would sell for two to three times of… I’m sorry one to two times of earnings. so if the cafe made 100k, it will sell for about 150-200k. So why would you want to build that? Now you go up a little bit, you go into like middle market. You can sell a factory or a logistics business for let’s just say a five price to earnings. So it makes 100k you sell it for 500k. You go a little bit more into enterprise, which is public. You look at something like Apple, or Google, or whatever, S&Pp 500 stock, they’ll sell at price to earnings of 20. So you know PE of 20 you sell for 20 times of what you make but then you go a little bit higher and you see this you know advanced technology and for enterprise software or some sophisticated software — ai software. It’s selling for just… it’s only for 200 times price of sales, which is… Snowflake is the example. So the question is, is prices to sales now price to earnings? Meaning these guys don’t even have to be profitable they just need to win the contracts. So as an investor I’m thinking like, okay do I want to invest into a cafe, a middle market, or enterprise? Okay enterprise is lucrative but then which part of enterprise you could further classify and you realize like software is just really… the markets are just really valuable higher, right. Now, you know a fundamental analyst will look at that and say like okay well the value is out the valuation’s out of control but I think I’ve looked at the public markets long enough now to come to a few conclusions because these technology companies is a reaction of an investor in what they believe, right. If they’re willing to pay you know buy up this momentum this price, they’re seeing the world of tomorrow in what and how they bid their money how they put their money. So I not only derive investment opportunities from this analysis but also I get to see where the world’s going next and so most of my angel investing thesis is deriving from that high multiplier, right. Anything that’s trading like a 50 times price of sales like a zoom or whichever zoom’s probably 100 I forget but I want to invest around that because I know I’m building from something from zero to one and it’s gonna sell at that price. And then you could further add you know other possible tailwinds like, you know, adding the demographic landscape it’s bullish for the older younger generation, adding global macro to it they’re printing money adding technological tailwinds like AI machine learning. So there’s many ways to go about it but you start to figure out the blend of
exposure you have as an investment, if that makes sense.

Jeffery:
No, it totally does. And I love the whole… your whole thesis around enterprise software. We’re a Deep tech. I call it Deep tech [inaudible]. Or a software company we have for 15 years and we build tech so we build software. But I’m a big fan of Deep tech because you don’t see companies that do Deep
tech anymore these days. Everybody is always front facing business to consumer B2C. There’s not a lot of really complicated systems that are doing a lot of back-end transactions so we’re big fans of Deep tech and Fintech because those two are the ones that run basically are going to run the world. And I think I talked about this but they’re also they’re great but these are long-term plays. They take a long time to build right like Netflix didn’t start last week and become a juggernaut. They’ve been around for 20-25 years I think it is. And they’ve gone through a lot of transformation they were selling
DVDs like that’s how much they’ve morphed their tech, right? And that goes for a lot of these big enterprise companies that have had to really deep dive into that tech stack and become analytical based and you know that’s how they’re forward-facing to that business-to-consumer. Like they’re really… the tech that they’ve built behind this you know just you looking at different Netflix shows. They know how to change the image based on the preferences that you’ve looked at to attract you to watch this flick because that’s generating dollars, more builds, and it’s telling them what they need to do next. Facebook does the same. Google does the same. So there’s the world’s evolving around that 100% and you’re driving at a whole different footprint
versus 2001 when you had the bubble crash and everything else. I think the markets are choking right now and over the last three weeks two weeks they’ve had a tough time in the public markets trying to figure out where they’re gonna position. What you’re finding is that they’re all kind of oh COVID’s bad even though COVID was bad when it’s all started, oh it’s bad again. So the markets are dumping down right now. But the problem is is that all of the
people that are pushing out their numbers this quarter they’re all crushing them. So the market’s like no we need to sell off so we can make more money and then the base market’s going, “are you kidding me? these guys are crushing their numbers. we can’t just sync the market right now because of COVID”. So they’re I think they’re fighting right now on where the base is or the bottom is going to be because it’s hard to go and crush the system when you have companies that are coming out and blowing out of the water like today, you have or this morning, you had shopify come out crush their numbers. Well if this morning they came out and the big money was going to crash the markets they decided well maybe we can’t today because five companies that were supposed to not make their numbers crush them so damn it Deep tech. What are we gonna do? So there is this imbalance going on and I saw this great stat the other day was that eighty percent of the market is all the US markets are owned by one percent of the US. And ninety percent of the market is owned by ten percent of the US. So it tells you how these things are fluctuating how they make money and how they control the money flow of what’s going on in these businesses. And a lot of money shifting into tech because it’s stability, it’s accessibility, it’s a lot of things that we can’t control but the markets can and there they are, right? So…

Kae:
Yeah. And it also that I love how we’re kind of going at the macro level of like angel investing or just investing and then down to the micro. But what you just said made a lot of sense and what we talked about last time as well is you know you’re talking about the majority of the market. 90% of the market is owned by a very small group, right. And so if now we’re in a global pandemic environment, the governments at least the USA they’re forced to print money to kind of hold the markets up. My thesis is that it’s going to create wealth inequality and that wealth inequality is going to expand no doubt. No doubt about that, right. You see stock prices go up, Apple going up to 2 trillion and we’re kind of asking ourselves, like, is this you know, is this like real? But when we know obvious productivity went down so it’s definitely a K recovery or whatever. But what I realize is that over time if
we continue to do this you have to as an investor I believe you have to think about the demographic curve because as you make the game more unfair or increase wealth inequality, generation Z, Y, X and maybe then later X to baby boomer and silent generation. That wealth inequality is going to force the younger generation to disengage from the economic games because it’s unfair and it’s going to take them to increase their attention in the digital economy. So as investors we need to look at what the younger generation believes in as value because there are other things that are emerging out there like web 3.0 or Blockchain and all that, and influence for stack and all it’s gonna really it creates opportunity. But this is like a dynamic that i’m seeing that the older I guess it’s political. We’re forcing the younger generation to behave this way because we’re not letting the game reset. Essentially, we can’t afford to let the game reset.

Jeffery:
You can’t afford to let the game reset. And that’s really what’s happening right now. When the recession was supposed to hit in march yeah numbers came out oh my god crashed. It wasn’t even a big crash. The bigger crash happened in the bubble in 2001, the financial crisis in 2007. Those were crashes. This was like a literally a miniature bump that was like okay panic sell and then they’re like okay catch it and then super hyper growth. Once they gained everything back that they lost over five years and in it… The thing is that… And I was thinking about this the other day and it goes back to the conversation we were having and it… before when a company would come in a new company would come in and pitch a big business they would be like you
know what don’t have time not really interested because you’re not really positioned I’m worried that you may sync and I’m going to lose clients because you’re not really ready or you’re not funded. So that was 10 years ago. Now the problem is is that as you mentioned they can’t hit the reset button. But the problem is it’s too high and the bar is so high that you can’t buy homes, they can’t buy companies, they can’t do anything because you have to be super financially rich. So you have two options — you inherit money or you find new markets that aren’t being tapped to get into [inaudible] effect which is now you look at digital currencies. You know five years ago they were nothing and then all of a sudden that was where everybody put their money in. So now they’re super high priced. Nobody wants to go into them. They’re kind of fluctuating a little bit but they’re almost in tandem with the rest of the market because they’re so high priced that everybody’s like okay really am I going to go and buy pizza anymore with my bitcoin? No way because the price could drop or go up by 400 bucks tomorrow. So why would I go and throw my money in that? I’m just going to sit on it. So now I have a whole bunch of these assets that are all super overpriced, homes, everything, and they’re all up in this top upper tier. But nobody will let them drop. Government’s even stated we will protect real estate because that’s everybody’s piggy bank. So if we don’t, we know the markets are going to crash big time so. Governments are protecting that where in 2007 they weren’t protecting it. We’re like you know what we can’t do anything about it financial crisis. You caused this. Too bad you’re all going to deal with it. So they spent a couple I think two trillion dollars in the US to correct. Now this crisis is not a cause by anybody per se. So now they’re saying well we got to protect everybody and we got to save everybody so we’re going to go to
universal income. We’re going to do all these things but we’re going to spend as much money as we can out of this. So now we’re at Canada will be in its first time hitting a trillion dollar deficit and the US is probably going to have [inaudible] in debt but they don’t care. Everybody’s like we got to protect our assets which all this does is means that in six months or a year that home you want to buy is still going to be 30% more expensive. Your average rate for hiring somebody is still gonna cost you fifty dollars an hour. And it’s gonna just keep going up. So the problem is that you’re reverse
inflation you’re going to have the same problems you’ve had in countries that had bad inflation which is like five million dollars to buy a hamburger. You’re gonna have the same problem here except for that five million dollars to buy a hamburger is the only way you can pay someone to actually do work and get that hamburger. So there isn’t… there’s got to be a reset button somewhere that levels things back to normal because we’re all trying to win money and that money is causing the dollar to keep getting so expensive that you’re crushing everybody out of the market. So the poor are going to get way poorer and the rich are going to stay rich and the divide is going to separate at a crazy rate. And startups are going to suffer in this because it’s going to be hard to get investors to invest because their dollars losing value just by putting money into something that you got to wait five to seven years on because it’s not carrying the same value.

Kae:
Yeah I think you’re right like economically speaking the game is pretty stretch and they did a good job of putting away the economic invisible hand let’s say. And right now the markets are very driven by politics. And if you ask my honest opinion looking at the financial structural forces of the governments around the world, I think they don’t have a choice but to print money and so the worser of two evils is probably wealth and equality is better than total chaos and destruction. So my belief is that okay the thesis even though this is not about global macro I could talk about global macro
all day. My thesis is that they’re going to print a lot more money globally. It’s going to be synchronized and as they print a lot more money investors will be forced to chase something that’s finite. So don’t chase money or fiat, chase a cap table, which is finite. That’s the angel investment.

Jeffery:
So does that mean that you’re going to end up or they end up creating more net value, net worth because they’re pushing so much cash out. Just like when they were giving everybody two thousand dollars a month based to work well I don’t know what it was us but in canada we have the 2000, right. So does that now create because there’s all that free-flowing money there’s that bump up net worth and now everybody’s looking for the next deal so now everybody’s pushing their money out yeah they’ve got nothing to protect themselves. So they’re all risking like crazy.

Kae:
I think the leaders of the world say or ss basically painting and saying, hey there’s nothing going on here keep the game going. Keep playing so… I’m not a fan of it but you know when I look at my big big venture funds like softbank being the biggest one raising 100 billion. I don’t know about you but to me the model that what what it looks like to me is that what they’re doing is we got 100 billion we’ll go out there buy the cap table. That’s finite. Doesn’t matter about money buy the cap table. We’ll accumulate enough equity position. Now we have an equity portfolio. Go to another investment bank. Borrow against it.

Jeffery:
It’s crazy. So what do you think that sits then with and today I was on a panel where they were saying um you know angel investing is now a new asset class. I’ve always thought it was an asset class anything new but apparently now they’re classifying it as new. They’re saying you know what allocate 10% here, 10% there like whatever you can but from a risk and expense standpoint, even the valuations of companies, you would think of would have dropped because of the pandemic they’re actually higher now. I’ve seen pre-money valuation companies we’re raising 5 million on a 20 million valuation we have zero sales. Okay we’ve got a great platform and you’re it just…

Kae:
It’s a zombie environment. I mean I look at the public markets and a lot of the enterprise software companies are just appreciating from 5 to 20 billion let’s say. It’s all zombies. It’s price to sales. Prices… I mean we’re just moving the game out a little bit because look time is only gonna keep moving forward. It’s not gonna stop and and be respectful of like where I’m at or where you’re at in terms of age. So I think we just have to listen to the politics now because again they they put away the invisible hand and we got the visible hand. And the visible hand is saying you gotta keep playing because if you don’t it’s a worser case scenario. And they just have too many promises and entitlements that they have to the older generation, right. Social security, defense, education, healthcare, all that stuff, they just have to pay it and so I think nominally they’re gonna pay it. Meaning I’ll give you those checks. I’ll give you two three thousand dollars, right. To pay what I owe you because I promise you. But on a real real basis I think they’re devaluing the currency and so in my lifetime I mean I’m a millennial, right. But in my lifetime I still believe that we’re all going to use a dollar just because if you understand the technology adoption curve, mainstream market doesn’t understand the dynamics of money and being printed, right. Yeah we have internet culture it seems to be distributed now and everyone’s saying the money the money printer goes burr, right. But I think you know looking at the level of financial literacy across the board because I’m an investment lecturer and I meet hundreds of people and lecturing to them I realize like we’re still going to use the dollar in my lifetime but what’s different in my opinion is the value the dollar. It might be significantly lower so you know in that in that case it would create a inflationary tailwind for equity prices. So I think we’ve evolved the game away from chasing fiat, right. That’s previous value. The new value is chasing equity cap tables or equity percentages because I mean you could chase bitcoin.I’m
bullish on bitcoin from a demographic perspective and mathematical perspective. But as long as the politics remain in play or in place they could easily declare that legal whichever that makes it kind of risky. So I think you know real estate and equity ownership, that’s part of the legal system and that’s going to remain right because my my understanding is that a billionaire is only worth a billionaire as long as the legal system remains in place. So if the legal system collapse which we’re all protecting essentially. What makes you who says you own that 100 million building anymore? So in a way you know when I look at like 5,000 years of history, I noticed that empires would rise and fall. Legal systems would rise and fall. But the one thing that remains is technology, I believe. Like technology over 5000 years of history, it just kept evolving forward. While legal systems and empires collapse and then reinvent themselves. So I think we’re getting to a period today where technology has just went on an exponential curve while while the legal system is just remaining constant. And so that exponential curve with the difference of that constant legal system curve or line creates a huge opportunity of delta for undiscovered margins and investment opportunities. But it also puts a lot of stress on the legal system so I mean we could get super political but this is kind of how I’m shaping my thesis as an investor and in shaping my performance in the private investing landscape. Also public.

Jeffery:
And you got to do those things because I think and I like again how you’ve broken this down on how you’ve kind of researched out where you’re getting opportunities. Because just like anything, if you’re going to invest your money, and I remember 20 years ago when I spent yeah 18 hours a day trading stocks and I was researching who was going to pop. Back then you could actually almost predict it because it was based off sales. It was based off revenue generators so you could figure out that this company was going to come out with some big numbers and the stock would pop. Well today they’ve shifted that all around. Facebook won’t tell you how many new users they have because it’s an irrelevant data point. Why? Because it’s about their revenue now. So if you base it on their new users, which netflix is going to go to, they’re at saturation, you know. It doesn’t matter that they’ve got two million or they get another billion, sorry, two billion but they’re going to get the next billion. It almost is irrelevant. It’s more about what they’re going to do with those the the revenue that’s coming in. Are they able to get that 40% increase in revenue? What were they doing to get more out of those users? and netflix isn’t at that they’re not in this market isn’t at that space right now. So now they’ve had a big decrease in user acquisition, which they were supposed to have 8 million. They had 2 million so they were way off, it looked bad, they put the projections in. So they get a little bit crushed. But when you look at the revenue model it’s gonna start to shift. They’re gonna have to start playing off the revenue model. It’s not about users anymore. So the other thing that goes to the big markets is that everybody when there was issues occurring and you saw this at the beginning of the pandemic people started to dump into gold. And today gold is still highly priced but nobody’s dumping into it anymore. Everybody’s like wait a second, I should put money in gold? why? what’s it protected? Gold is just as a loser than the rest of these companies so I don’t think I need to go into gold anymore. I’m going to dump all my money into securities because at least that way I know the big governments and the the tech have to pay pay money into this so they’re going to be more stable than gold. And since these other countries own it all I’m going to change. So now when you get into startups it’s the same. Am I really looking at my portfolio and deciding which ones can i invest in? Or am I shifting everything to what actually makes the most sense based on the times that we’re in and saying these companies are going to survive. Which then that means all new startups are for focusing just on organics. They’re just focused on stability and being able to weather through a two-year pandemic or a 10-year pandemic. And the rest of the things are going to have to do to make it on their own. And we’re going to have to hope a bank decides to take the risk on them in order for this to survive and to startups to have that space. So now you’re seeing a massive shift in how startups are functioning because they can’t get funding, which is AI, AI, blockchain a little bit, AI, AI, all software and everybody else is you know having a tough go. Yeah so that could create an opportunity for investment as well because those companies are now in stealth mode and they can slowly grow and be profitable without anybody knowing because they’re not really being paid attention to.

Kae:
And you have to fund them. Private market investing is completely different than public market investing where it’s simply go on to a web portal and click a few buttons and you you have exposure. Private market, completely different. And you got to be a great deal sourcer essentially angel investing as being a great hustler in my opinion.

Jeffery:
yeah you can create a great funnel too and I was thinking about this. We have a great funnel but really at the end of the day if you’re not going out there and hunting, you’re never gonna find the best if you’re not hunting. And that goes for any company you work for. You gotta hunt. You gotta really figure out where you need to be and go and corner that market, right? You can be the number one blockchain investor but if blockchain’s not getting the love and attention that you need, it might be short-lived. You got to find things that are currently relevant and getting a lot of attention, right?

Kae:
Yep, yep, 100%

Jeffery:
Well that’s brilliant man. And I know that we’ve had this discussion a few times which is is uh gets better every time. So I i guess now that as you’ve been working through this thesis, maybe you can give us a little bit of an idea of the type of structure and the way you guys operate. Because what I love about your model that you guys do is that it’s so unique but the best part was that… excuse me the GP, the owner of the fund… what’s his name again? [inaudible] The way Thomas said was that… and this is what I loved about the conversation I had with thomas was that he said, “I want to create a new group of investors. I want to bring in younger people they can invest and take the gauntlet if you will and change the way the world works by bringing in and helping younger people understand finance and invest”. And I thought like that’s brilliant. No, I want to make sure that our investors are getting returns and making money and doing all those things and he wants to bring people in younger get them into the mix and start investing. And I was like man that’s phenomenal because nobody thinks that way, right? They’re always just thinking I need to get the investors have been doing this for a hundred years. Get them in here working away and that changed. So maybe you can give us a little breakdown on that because I think it’s fantastic.

Kae:
Yeah I think the model is pretty simple. The model the way it works is I think you also find this with other venture scouts that exist out there
right. I think Sequoia Capital has a similar program. But what it is is essentially at the top you have the I guess the venture the the holdings or the family office company and then from there they will basically you know that that that entity will be a gp of the new entity that you uh create together. So my entity is called EnterpriseGuy Ventures Limited and together we split 50-50 myself and Thomas. And so that every time I source an investment opportunity the mothership holdings company will wire the funds into that other entity and then and then we will deploy the investment into the startup and then in return we’ll get like the safe, or the the convertible note. So that’s essentially the model. And it’s split based off of the the equity ownership.

Jeffery:
I love it. I love it. And you guys are now a team of is it…

Kae:
18 or 19. I guess 18.

Jeffery:
Just under 20 people, right?

Kae:
Yeah, yeah. Just under 20 people.

Jeffery:
It’s brilliant. And he’s creating a whole new area of investors, which I think is so awesome and everybody has their own thesis, hustlers, and they’re all going out and finding great deals that they can jump into.

Kae:
That’s exactly it.

Jeffery:
I’m sold I might actually have to come work for you guys I just think it’s brilliant.

Kae:
I know. I can’t wait. I like to see that too [Laughter]

Jeffery:
Yeah, no, that’s good. So tell me a little bit more about when you’re working with the startup and you get into working with them. Because they’re coming from a different approach. You’re not coming in from a pure like pitch dd, legal dd, like going through this whole spectrum. You’re doing a lot of the research. You’re approaching them and saying hey i want to invest in your company. How do we go about this? You give a little bit more description on that because it is so much different than the way an angel group works or the way a VC works. You’re basically structuring a whole different platform for how you deal with them so maybe talk a little bit.

Kae:
Yeah, I think this model that I’m kind of operating or my deal sourcing prospecting strategy it’s really classic enterprise software sales. So that was my background as well. And the difference between enterprise software sales and regular sales I like to say is that when you jump into enterprise software
sales, you’re leveraging the latest and greatest technology stack to accomplish sales development and sales closing of a transaction. But if you’re in an outdated company like Morgan Stanley, which I came from, they were just saying like hey just get on the excel sheets and hit the phones. And you’re not really leveraging a CRM or a mass email tool or social media and all that. So that’s the difference with enterprise software sales or latest and greatest bleeding edge software sales versus like traditional sales. You just you have to leverage a lot of technology to get your quantitative up. But to kind of get you more details into the process of how I do it. So the reason why I explain that is being an angel investor is essentially a sales person. It’s all about the network. You have to build up your network, your ecosystem, and later that also helps my portfolio companies and stuff. So the process is I personally like to go direct. I personally develop my own I guess you could say startup inbounds, right. And I’ll tell you exactly where I get all my deal flow. I could get it from linkedin inbounds. I get a lot like I have like 200 plus linkedin requests but I just never engage in those startups because I kind of just know I know what my thesis is so I won’t engage unless they fall into my ecosystem. Because I’m not just looking for a startup, I’m looking for the people behind the startup and their network economics and all that. So going back to where I get my deal flow, so linkedin is one of them, right? I you know my VC connections I have. If you’re great at building relationships you build friends with like you know product thought leaders or other VCs they have deal flow. And then maybe you know a company like let’s say like TriNet, right. So I have a friend in there. They get a lot of startups. So anyone that you could think of that gets a lot of startup deal flow. Be friends with them build a relationship there. But 99% of my deal flow comes from my own efforts of outbound. So it’s one… it’s like 99% deal sourcing myself. I reach out to the startups first and I’ll tell you why. My belief is that if you want the next unicorn, right yeah, they’ll probably come through the accelerators and stuff but the issue is that it’s like once it go like once a home goes on to Redfin or Zillow, everyone knows about it. Once the stock goes public everyone knows about it. So all the margin opportunities are squeezed. You always need to find an opportunity that no one knows about it. And the issue with accelerators in my opinion is that they’re also a business model themselves. They want to build up a large ecosystem so that they win the deal flow. So now you, as an individual investor or
angel investor, coming in building your own deal flow. How do you do that? You have to build up your reputation. And going back to my thesis earlier that everyone’s going to become an enterprise guy meaning consumer technology stack is going to be more advanced than ever. Everyone can build an individual brand today more than ever. So I like to go direct because the unicorns will never… I don’t think you will find them at accelerators. But the big you know the awesome unicorn, decacorn, or whatever uh come comes from direct outbound. And I’ll tell you why. Let’s say that that example startup employ Octa employee number three. For those of you who don’t know what Octa is, Octa is a identity access management enterprise software company valued right now at 25/27 billion in market cap. I engaged Octa employee number three through an outbound, right. So what’s this what’s his you know history. He pioneered a 25 billion dollar corporation product. The next product he built sold to HP enterprises. And now he’s working on this third startup and we recently invested into them. If you just understand where he came from from a track record, he’s so pro that he’ll you’ll never find him an accelerator. So how is an angel investor supposed to source his deal, right? You can’t just expect yourself to go on like you know angel list or whatever and the deals will come to you. Someone has to source it. So sourcing has its ability and you see this in the way technology communicates to humans which I find pretty fascinating. The way technology is evolving today is basically saying hey you’re human so you be human as possible. I’m technology let me be technology. In other words technology is automating everything away and coming… it seems like we’re coming to this ultimate conclusion that it needs
to exist on its own and let it be technology. And you have to be as human as possible, which basically means you know a salesperson. So you have to leverage a lot of your human capabilities going out there and directly engage with the startup. So that’s that’s my belief. I think the best ones will
come from your own efforts of direct engagement. And if you do it long enough you start identifying this higher caliber of you know startup ecosystem that exists out there, right. So let’s just say you know that you got the lower tier startup ecosystem, that’s the mid tier, and then the high caliber tier, and then you realize this just basically a few deals being passed around top tier VC firms like Greylock, Sequoia. So my goal is to intercept that flow of people or network that will never flow to an accelerator because I’m a third time founder. I don’t need to go to accelerator. I just need to put my head down, develop the code, and engage with my customer. So how do I as a stream of network engage with that network that will never find itself an accelerator? You have to build a network with the brightest, highest caliber investors. That will get you extremely far and that’s my thesis and that’s my effort prospecting, sourcing.

Jeffery:
I love it. Well that’s good. And I’m glad you’re…

Kae:
Pumped!

Jeffery:
What’s that?

Kae:
It gets me pumped.

Jeffery:
No, I like that man. I’m glad you’re able to share that. That’s fantastic.

Kae:
There’s also quantitative numbers to it but that gets into like the super technical aspect of all of it.

Jeffery:
For sure. I love it. Well I appreciate you sharing all that so now what we’re going to do because we’re at that time and you and I, we know we can talk for about two and a half hours. The longest conversation I’ve had in probably a decade. So, let’s just jump into the rapid fire questions and then I’ve got a few other things but you know what, you took us through some, the markets and everything. It was a great deep dive on the overview of everything. So I love that. It’s unique, it’s different, it’s not your typical way of looking at how to make an investment in finding companies. So, I love it. All right so first question…

Kae:
Sure. Let’s do it. Hit me.

Jeffery:
What’s your favorite part of startup investing?

Kae:
My favorite part of startup investing is geeking out to the frontier technology. I am… the difference between public and private is that in public, you know, I used to think public was pretty advanced. But once you hit the private and you hear you’re having a conversation with a founder and a startup that’s talking about technology that does not exist in many many hands yet. And it’s just so exciting to see like the technology you know like the trajectory and potential of this it just you feel you get this feeling, right. And then also like you get to hear the founder’s thesis on the world. Because that’s the thing about this world, like you know, the more the mass market gets marketed to I feel like there’s less genuine people. And so when I sit down on call with these guys it’s just I’m hearing your genuine thesis on the world of what you’ve collectively learned so far and where you think the world’s going next.

Jeffery:
I love it. All right more rapid fire. Okay, quicker.

Kae:
Yeah, sorry, sorry. We gotta go quicker.

Jeffery:
How many companies or dollars do you invest per year?

Kae:
So I’m relatively new as an angel. Done nine deals When I started six months ago I planned to do five but I ended up doing nine and we’re on our tenth now. So every year hopefully we could do 20.

Jeffery:
Well you’re already surpassing most angels in six months so that’s fantastic. You’re breaking averages here. Most angels I’d say on average invest about five companies. This isn’t super angels. This is regular angels who are phenomenal. Anywhere between three to five companies so you’re crushing your numbers which is good. You, at this point, I’m gonna guess you don’t do follow-up investments because you probably wouldn’t have had a chance if it’s over
months. Okay, any notable portfolio companies you’d like to share.

Kae:
Let’s see… there’s so many. I really like them all. I think one of my favorite ones — I might be sharing too much that might be an issue as well…

Jeffery:
You don’t have to name any names. Whatever’s easy. Just something…

Kae:
Sure sure sure. So one company that really inspires me is that it’s taking a such a strategic position in terms of like infrastructure software. My thesis is that the world is going to consume and produce a lot more software. And one example is consumption of like, let’s say TikTok. So the whole world is getting on to TikTok consuming that software and then this is just a little middle software that powers that platform of the world. So that’s my
you know that’s my favorite in terms of like infrastructure software and…

Jeffery:
You mentioned earlier man everybody is there now their own promotional vehicle. And it is the impetus to all of that because when I look through all the time when I’m on TikTok for that 10 minutes a day maybe. Purely just here look at me I got some smart intellectual stuff to share or some funny stuff whereas Instagram’s more of hey look at me in my glamorous life. I find that that’s terrible compared… and Facebook… compared to TikTok, which is actually cool and I’ve got some interesting stuff I want to share. And I actually find it a better product than Instagram.

Kae:
Well it is social media 2.0 and it is leveraging a recommendation engine versus a search engine. And we are moving into a new era here of overloaded information. So in the, what do you call it, the explosive information age search engine dominated — Google. But we just moved to the overloaded information age where now everyone can produce information. So in the future we’re going to benefit. The future is a recommendation engine and they’re saying in the future you no longer have to search for information because information finds you.

Jeffery:
Well and that’s the part that I dislike, which is the creepy side of it. Now more than ever are listening into everything we’re talking about and every ad served and everything that does come up happens to be the conversation I had 15 minutes earlier. And there’s a breaking point where it’s so intrusive that it’s actually becoming uh quite frustrating. I already own a power saw because I talked about them doesn’t mean I need an ad about power saws. I shared a picture of a power saw now I want to buy one. So it’s um it gets a little too intrusive and I’m not sure why people aren’t complaining about this. They make it, they tell me all the time oh I did this but they actually seemed fine by it. I’m like you don’t think that that’s odd that the computers are all listening to everything you do. Regardless, man. We both suck at doing these rapid firing.

Kae:
Yeah I know exactly.

Jeffery:
Okay any verticals you like to focus on?

Kae:
Ah verticals. let’s see so enterprise software that’s probably horizontal but vertical will probably be infrastructure, cloud infrastructure, productivity software, telehealth, blockchain or web 3.0, social media, and I might forget anything else but those are the typical verticals.

Jeffery:
Okay. Timeline for investment? Three months?

Kae:
No, much longer. I’m looking at five plus years but I’m not even thinking about the time frame. I’m…

Jeffery:
No, I meant like, sorry. When you make an investment into a company, like, due diligence take you a week, a month, three months? How long does it take
you before you make a decision that you want in on that company and that you make the investment?

Kae:
Case by case. It could be as quick as like “Hh man I love it already. There’s a billionaire on the cap table. We gotta get in.” to “You know, I gotta do a lot more research because this is web 3.0. I don’t know web 3.0 too much”. So it could be anywhere within three weeks.

Jeffery:
Okay, cool.

Kae:
Yeah. Average maybe a week.

Jeffery:
Do you look to lead rounds or take board seats?

Kae:
That’s what my partner has planned for me so he says so I have yet to find out. I’m still new but yeah.

Jeffery:
Well, in time you get to work your way up. It’s good. Is there anything else you do outside of financing to help the startups that you invest in?

Kae:
Dude I do so much because I think it came down to the model, right. Every startup has to go with product or product and customer, product and customer, and you just repeat. So I’m building up my network all the time so that later I could send them to my startups. So building network, building up my knowledge, my investment thesis, and helping them with fundraising. So I’m building both on the VC side and the customer side. If they need me to
reach out to CISO, I’m reaching out to CISO. So I hustle just as hard.

Jeffery:
Good. I love it. We need you in our fund. You’d be fantastic. Okay. I like it, I like it. All right so we like, some heartfelt, I don’t know what the saying is. Like tugging your heart kind of stories. So do you have any stories so far of the companies you’ve talked to that you know could have been a great company but just didn’t make it through COVID. Or they were not gonna make it and then COVID made them skyrocket and you really fell in love with the owners. Just looking for one quick story about something that just really changed your whole philosophy on humans and startups.

Kae:
That’s a big one. I actually don’t have a story since I fell into this gig during the peak of COVID, right. But you know, what I’ve realized if.. I guess if I could share anything else is the you know COVID has really changed a lot of things. I’ve seen a lot of small business owners lose their business. And I’ve seen a lot on the other there’s… it’s always a flip of a coin. I’ve seen the other side the digital business owners. They’ve significantly benefited. So if it’s anything that I’ve learned is you always gotta be hedging or having some exposure on the other side. But unfortunately, I don’t have a story and you know, heart touching story.

Jeffery:
Well, you will one day.

Kae:
Not yet. Yeah, yeah, yeah, one day.

Jeffery:
Save it for the next time we chat on this. This is good. All right. So, I guess we can we’ll shift quickly. You mentioned earlier but we’re gonna go quick personal for a second. I learned this from one of the podcasts, which actually they were pitching today. They came through our skip the line event. Awesome guys. And I listen to their podcast because they do a lot of sports. They’re called Title League. Big fan. And one of the things they do at the end is they ask some questions around personal things and I thought you know what this is a great way. I need to be more personal on my calls, not all business. So the question for you is what’s your favorite sports team?

Kae:
Oh, that’s so bad. That’s a… I’m not.. I don’t watch sports.

Jeffery:
Okay. That’s okay. It’s allowed. What’s your favorite hobby then? How’s that? What’s your favorite hobby?

Kae:
My hobby is truly investing i I just I enjoy this stuff and so I spend a lot of my time into it.

Jeffery:
Okay. They’re both terrible but we need to work on you getting a hobby because it can’t be what you do every day because then eventually when you get really good at it then it’s a job to you and then it won’t feel the same way so you need to have something that gets you away from things. [inaudible] that one later but okay. All right. Favorite movie?

Kae:
Favorite movie. Hh my gosh these are some… you know. Uh probably Benjamin Button. I watched that recently I thought it was pretty, it’s so it’s so deep in a way that you know to start your life as an older individual and you start to see, you know, in the beginning of life it’s not consumption but he starts to see like people dying and passing away. He see you see such a sadness in the beginning but then he starts growing younger physically but then maturely in the in the mind. So I find that movie so touching in so many on so many different levels that that’s probably my favorite movie.

Jeffery:
And what character would you play in that movie?

Kae:
Dang! Well you would ask that too. Well I guess I’ll probably play Benjamin Button yeah. Get to grow younger.

Jeffery:
That’s who you feel you represent at the same time, yeah?

Kae:
Maybe. Well, in a way with what I know, I feel like most of my peers don’t… they they’re they’re still going to raves and stuff. I guess you know there’s more raves now but they’re just kind of on a different wavelength for me.

Jeffery:
No, that’s okay. I haven’t seen Benjamin Button but I’m going to take a look.

Kae:
You should. You should. Yeah.

Jeffery:
I was I was talking with this guy yesterday um from the US and he was all about star wars and the first thing that came to my mind was “Oh my god. This guy’s like Lando” like reminded me totally of Lando.

Kae:
That’s hilarious.

Jeffery:
Like strategic, smart, super high energy. And then he’s like I kind of feel myself as being yoda and I was like, I like that! It actually still fit. He goes you know the calm the thinking. I’m like yeah, that’s good. But then on the other side and I told him like you’re more of a Lando. He’s like, no I know I’m a bit of both. The work’s in there. And I’m like totally. So that’s good. I’m going to watch Benjamin Button just so that I can see that reference.

Kae:
All right. All right. I’ll remember that.

Jeffery:
It’s got the heart strings pulling and all that and it’s a good flick. So well, either way, I think okay you did a fantastic job. I learned a lot. The audience is going to learn a lot.

Kae:
Thank you.

Jeffery:
I appreciate the the candor and learning more about your favorite movie and character. That’s always a good thing. I like to do this stuff because at the end of the day when someone remembers who you are, they use that as a reference point. We all need some unique identifier and that’s the usually the what it is. It’s those little things that they can relate to because no one can always relate to the big picture of an investor. I’m an investor that bores out over time, right? So, it’s finding things that make you creative and make it fun. So, I love it. Thank you very much for that. And in our fashion, as I take lots of notes one thing that I do wanna we leave with the show with is we like you to have the last word. So, is there anything that you wanna share to the investment community or to the startups, something that you think that they should know, or pay attention to, or be open-minded to whatever you like? We leave you with the last word.

Kae:
Sure, well another big one. I think with the trajectory of the world and this conversation might have sound very capitalistic but there are some evidence within technology, in my opinion, and you know interacting with humans at scale. I met 400 people in person each month… is that everything seems to be pushing towards relationships and caring for one another, right. So if you could have the right foundation, a good value system, I think it’ll set you up really well. And in this game of private and even public market investing I think relationships are everything. So the last word would be you know take care of all your relationships. Treat people very nicely and good things will come because I didn’t come from like an Ivy League school or anything, right. Very humble beginning and all that. I just knew that I loved investing and I just kept teaching on investing. So, one day a venture capitalist saw what I like to do and just pulled me in. So not the traditional path to becoming an angel investor but I accomplished becoming an angel investor through just being nice to people. So that’s probably the greatest wisdom in lesson for me.

Jeffery:
I love it. Brilliant. Very well said. I’m a big fan. So Kae, keep doing what you’re doing. [inaudible] And thank you very much for joining us today. And for the introductions you’ve made you’re still a rock star 100%. Don’t change. And we know whatever we can do to help we’re gonna support you at the same instance. But if there’s anything else we can do each other, we’re certainly going to make sure that happens. And thank you again. We’ll let you know when we’re ready to send this out. We’re trying to push more of them together sooner, quicker, and faster. Because right now we’re not deploying until January. doing them one a week. So, we’re trying to figure out how we can speed this up just because people are going to forget they had the conversation by the time we roll it out. So might start doing two a week and just rifle them off. But a lot of great people and I’m so glad that I get to do this so thank you very much for your time, man.

Kae:
No, you’re very welcome, Jeffrey. Thank you so much, man. Really appreciate it.

Jeffery:
All right that was fantastic. Kae, big fan big fan of what Thomas and the guys are doing and how they’re rolling this out. You know whole family office and being able to get more investors and more younger people coming in and finding great investments. And i think it’s brilliant. So I’m glad that we were part of that and we had to have this conversation. Great discussion around global markets and how everything funnels down to the startup. So it’s something worth checking out. But thank you guys. And yeah, I don’t even know how I can go in and really break it down. There was just so much good stuff so, Kae, you’re rockstar. Thank you everybody.

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