Learning from Authors - David S. Rose, Full Episode

Welcome to Sardar TV. I'm Jennifer Crompton. Today, we're speaking with David S. Rose, CEO of Gust and author of "Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups." Welcome, David.

My pleasure. Now, you started your first company at 10 years old and you've raised tens of millions in capital. What has made you so successful in your career?

Well, I'd like to think it's still a work in progress. So, what has gotten me this far has been a combination of perseverance and energy and always moving forward. I think that I probably am a classic entrepreneur, which means somebody who goes through life seeing things that don't exist and trying to make them happen. So, that's probably the, what is what it is that accomplishes whatever you want to do in life, as opposed to sitting back and taking the world as it is presented to you. You go out and take, you know, "arms against a sea of troubles, but by opposing end," of the Shakespeare said.

What role have mentors played in your life, and who have been some of your mentors?

Mentors are really critical. And mentors are, mentorship is one of those words that is way overused for the simple reason that most people in their lives never have a mentor. And so, therefore, because most people have never seen a real mentor, know what it is, the word gets debased over time. So, now there are thousands of mentorship programs that you'll see in everything, and those are not real mentorship. A real mentor is somebody who gets to know you as a person, typically over a long period of time, because you've been working closely with them in some context, a professor or somebody in your workplace, who takes an interest in you and is almost in loco parentis. And so, a true mentorship is worth its weight beyond its weight in gold. Most people, if they're lucky in life, will have one or maybe two mentors.

So, I'm a great champion of the true meaning of the word mentorship. In my particular case, I totally lucked out because I've got a father who is a brilliant, B, an entrepreneur, C, very successful, D, a great parent. And so, I have had a built-in mentor for my entire life. And in terms of my father, who currently is 85 years old, and last night he gave the commencement address at Sing Sing prison to their graduating class of master's degree students. He's developing shopping centers in Ghana. He's publishing newspapers. He's an extraordinary guy. So, that's, bet for me as a mentor and a role model. And I've been lucky at various points to have had mentors at various stages in my career in different businesses. I started out after school working for Senator Daniel Patrick Moynihan, who was, of course, one of the greatest senators we've ever had, who, for a number of years, there was a mentor to me personally. And at various stages in my professional career, in whether it's government, or real estate, which is my original career, or investing, I've had other people who have worked with me very closely and it's been extraordinarily helpful. So, I would suggest to anybody that if you keep your eye open for mentors, it doesn't happen real quickly. If you can't pick up on a website and say, "I want you to be my mentor," it doesn't work that way. It's somebody who you have been working with, who knows you, who takes an interest in you. And it's a two-way street, because I spend a lot of my time mentoring other people. And when you see it reciprocated, when you see somebody learning from what you're doing and the advice you'll provide as a mentor, it's extraordinarily fulfilling.

What general advice do you give young people who are entering this crazy business world today?

The advice to a young person entering this world depends on a couple of different things. One of which is, are you creating a new business, or are you looking for a career in other business? And the, and I would differentiate those two, because the first are clearly the entrepreneurs. And entrepreneurs are very weird people. They are crazy people. They, like, I see dead people, I see things that other people don't see. And so, almost every role in life that applies to a regular person does not apply to those 12%, 5% maybe people who are entrepreneurs. But, but one thing I think that everybody could benefit with, entrepreneurs and normal people, is just do it. I mean, most people go through life in reactive mode. Um, your school tells you what to do, the books tell you what to do, you're looking for a boss to tell you what to do. And the difference that entrepreneurs, 24/7, live does just do it. Kind of like, but for everybody else as well, take advantage of what is available. It pains me to see people who go through life totally reacting, sitting back until some outside impetus tells them to go do something. But if you take the advantage of what, in any kind of context in which you were existing, any work, in the educational environment, any city, there are all kinds of things to do, places to go. And that is how you enlarge your life and do extraordinary things. So, just do it.

You personally went from entrepreneur to investor, and then sort of circled back to create Gust to fill a gap that you saw in early investing. Tell us a little bit about that journey and the lessons learned.

Well, I am by nature an entrepreneur. I, as you said, I started my first company when I was a young child. My first company was a multimedia organization, which was doing marketing communication materials for my brother, who was a magician. He did kids' parties. Uh-huh. And so, we did his headshots and playbills, business cards, and posters. The only problem was, after a couple of years, he realized that the sum total of his income equaled the sum total of my income. And so, there was a slight problem there. So, I was intact my client. But ultimately, I started other companies when I was in high school and college, graduate school, and getting out of graduate school. So, I'm actually a third-generation entrepreneur. So, it sort of comes by it naturally. I think there is, is partly genetic, partly environmental, partly role models and mentors. So, my natural operating role is as an entrepreneur. And after creating my first business, and after graduate school, and then another business morphed into a larger business, and hit the very beginnings of the dot-com boom, and got very, very big, and then it crashed and burned. And then we started again, and it got even bigger, and crashed and burned again. So, after this, the second really big business really crashed and burned, my wife said, "Okay, that's it. You're grounded. No more starting companies." So, I was, I was removed from the field as an entrepreneur. And so, what I could do was, you know, sit home and twiddle my thumbs and, and, you know, help me get my kids in college and spend some time. And my other passion project, which is actually the antique art of letterpress printing. So, I have a whole other life in that kind of world. I've written books and, and teach and stuff on that. And then, as I was sort of, you know, off the field, somebody who I'd met during the dot-com boom, a guy named Andrew Weinrich, came to me with an idea for a business. Now, Andrew is the person who invented social networking. Most people don't think that somebody actually invented it. Like a new invented water. He actually invented and patented social networking. And, but the company called Six Degrees, that I saw on during the dot-com boom, and I just walked into their office one day and said, "I got to meet the CEO. This is a great idea." And this is the year, mid-90s. And so, we got to be, became friends. He ultimately sold the company at the height of the dot-com boom for 130 million dollars or something. Unfortunately, it was all in stock. When the dot-com crash happened, and the company ultimately got shut down. He was back on the street, as another entrepreneur. Ultimately, the patents that they had, they had been issued on that, for inventing social networking, became the foundational patents for LinkedIn, among other things. But Andrew was, Dr. Weinrich was back on the street, and he had another idea for a business. And he came to me and said, "I got this idea for a business in the wireless space. I'd love to have you work with me on it." But I was still, you know, not allowed to be a co-founder. So, I said, "Well, okay, all I can do is help and support you and provide some, some seed financing." And so, that's how I became an official angel investor. And I became his first angel. And, and then from there, I joined the local angel investing group here in New York, which was the Angel Investor Program from the New York New Media Association, sort of the trade association of the dot-com world. And this is where I met people like Esther Dyson and Alan Patricof and Josh Kaufman and Howard Morgan, folks like that. And so, I did a number of investments there. And then, since I still couldn't start a company, I could start a nonprofit organization. So, when the trade association ultimately went bankrupt during the dot-com crash, in the aftermath thereof, I spun out the angel group and created something called New York Angels. And, and that's how we founded one of the largest, most active angel groups in the country. And I got more serious about it, taught myself, learned from mentors and other people who had been investors, you know, ahead of me. And that's how I became a professional angel investor.

So, here I was now doing a lot of angel investments and running an angel organization. And I began to get involved with Singularity University, which was founded by Ray Kurzweil and Peter Diamandis from the West Coast in Silicon Valley. It's a postgraduate program in sort of exponential technological development and the future of society. And actually, I am an associate founder of that and founded their finance and entrepreneurship program. So, here I was looking and thinking about the future and looking at the angel world as an angel investor, having been an entrepreneur in the, in the past, who had raised almost all of those money, organizing investors in an investment group. So, you put all this together, it's like the perfect storm to realize that the future of the world, I believe, will be determined by these new startups. And these new starters would be funded, as the cost of starting a company was dropping exponentially, by angel investors, not by institutional investors and large venture funds and the like. So, I thought, "My hands and knees," and pleaded and finally got released from, from non-entrepreneur prison and was allowed by my spouse to start another company. So, I started the company that eventually became Gust, while continuing at the same time to run an angel group and invest as an active angel investor and do Singularity University and everything else. So, I'm, so it's all sort of additive in life. So, these days, I'm founder and CEO of Gust, the founder, are now Chairman Emeritus of the New York Angels, and I do a lot of teaching and lecturing and stuff on the side.

That's a fascinating story. And I'm wondering, how did you take some of those crash-and-burn failures that got you grounded? Not only did you find loopholes, but how did you use that to propel you forward and to learn?

And the answer is, it's searing. And nobody likes to fail. Failure is not fun. But if you look at it as a growth experience, and you chalk it up to learning, and you don't let it kill you, you know, what doesn't kill you makes you stronger. And frankly, until my first, you know, version of doing this, you know, happened in terms of the corporate failure, my life had been an unbroken success. And everything was just absolutely perfect. And all of a sudden, becoming morning her, ah, I've got, you know, 125 people and the ends, you know, in the middle of the, you know, crash. We've got a real problem here. And so, whoop, the whole thing crashed and burned. And so, sort of like, I cry myself to sleep, you know, that night. And then said, "Okay, now time to put on your big boy pants and figure out what to do next and try to learn your lesson." So, in terms of the kind of business, the first time, the first business we had was based on one particular set of content that we were creating. It was broadcasting it out through one particular set of networks to one particular set of devices. And so, he said, "Okay, well, we need to be more generic than that." So, the next version of the company was actually a platform that allowed multiple sources of content and multiple devices and multiple networks and so on, and a much more robust system. And you know, so you'll learn from the first time. And so, this time, p.i., got it right. And nothing could go wrong unless, like, the entire internet crashed simultaneously on a global basis. What are the odds of that happening? So, when that happened, okay, now you realize that markets are actually bigger than any individual company. But having, you know, this thing was taken out, having done it once before. So, now, yeah, you be, you again, you learn from that. And, and, and, you know, somebody once said that the, the biggest part of life is just showing up and just doing it. And I've seen too many people who, when the first setback happens, they just let it knock them down, and they stay down. And, and they, and they don't get up. But the, the people who survive, you know, it doesn't matter how many times you get knocked down, as long as you get up one time more, right? And so, that's, that's the essence of what you learn from, from failure. And the United States is amazing in that. Now, I've spent a lot of time recently in Europe and around the world, looking at their startup economies. And one of the challenges that entrepreneurs have outside of the US is that the culture is not designed to tolerate failure. The US has, we're in a nation of immigrants. We are a nation of entrepreneurs, of self-made startup companies, a capitalist free market-based society. And so, therefore, we don't necessarily celebrate failure. "Always isn't it wonderful that you went bankrupt?" But we, but we say, "Okay, that's part of the world." And there have been many, many people, named of the biggest successes out there, have had failures and setbacks of one kind or another, and then they started again, and they were successful the second or the third or the fourth time. And much of Europe, for example, if you fail in anything, you are permanently tarnished. To me, you are not allowed to start another company for another seven years. You can't be a director of a public company. You can't raise money. You're personally liable. People, you know, spit on you in the street and shun your children. I mean, it's a repair. The culture is not designed for failure. And there's such a societal, you know, overload that it becomes so terrifying, the risk level becomes so large that you can't do it. And we're, and one of the things that's now happening, as this entrepreneurial innovation culture is spread out from the US to around the world, is societies are realizing, "Okay, even though we're a thousand-year-old country or society, and here that a lot of this innovation depends on taking risk." And when you take risk, as often as not, you're going to fail. But then, provided that you can get up from that and learn from your lessons, you start it again. And that's where innovation comes from.

You founded New York Angels. Why is it so important to have groups of investors?

An angel group is a wonderful place to get started for investors. Historically, business angel investors were a weird kind of thing. They were, there was no industry for it, certainly, because companies did not grow as fast and start as fast. They were typically small, local businesses, or hardware stores, or whatever. And so, to the extent that you had fast-growing companies, they were initially funded post-World War II by the early venture capital firms and the like. So, what you're seeing is, with the decreasing cost of starting a company, which is going down by orders of magnitude, my first company took 20 million dollars in venture capital to get to our internet product shipment. My second company only took two million. My first angel investment took 200,000 to get into entering that product ship. So, you're seeing as the cost drops and drops and drops, it becomes accessible to a wider number of people. Many more people who can actually invest. An average person can't put in 20 million dollars, 2 million dollars, 200,000. But a well-heeled, successful person can invest 20,000 dollars into into a company. And so, now it's becoming a mainstream thing. Historically, it wasn't. I happen to be not only a third-generation entrepreneur, but I think I may be the world's only third-generation business angel investor. As my late great uncle, after whom I was named, the original David Rose, to whom I dedicated my book "Angel Investing," was the angel investor behind the portable kidney dialysis unit, vascular stapling for operations, hyperbaric operating chambers, desalination projects in the Middle East. This was an extraordinary guy who didn't out of the sixth grade in school, but who, you know, late in his life, and his best friends of whatever's work, invented television. I once had lunch with my uncle, and it was, you know, Dave, me, and four Nobel laureates. You know, I, Robbie, Rosalyn, Yala, Murray Gell-Mann, extraordinary people. So, this was a guy who had unmentionable curiosity, a total entrepreneur, and part of the entrepreneurial heritage there. But when he was, would be, you know, funding, he would keep it. He called himself at that point, a biomedical catalyst. He would travel around the world, see new interesting developments, bring them back to the US, fund them as an angel. But we now call angel funding. The, the lab that dimensioned the artificial heart, that generally been Barney Wolf, the first patient, he was, that he was, that lab. He had an artificial heart in his, in his, and he was showing me. And so, you know, you know, with that, back then, people thought he was crazy. I mean, even people in the family, and I come from a rather liberal and intellectual family, they would look, "Oh, that's Dave. He's playing things. There's no, no percentage and there's no interest in there." And I was the only person in the family who thought this was actually a very interesting kind of thing. Even today, the rest of my family thinks of what I'm doing is a little weird. So, if you are interested in being an angel investor, there's typically not a lot of support. How do you know what to do? That's one of the reasons I wrote the book "Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups." It steps you through, for the first time ever, it steps you through the whole process of, "This is what angel investing is. Here's how you do it. Here's where you find companies. Here's how you structure deals. Here's how you work with your entrepreneurs to add value," and so on and so forth. But, so, you know, before the book, or absent the book, the question is, how does a regular, ordinary person become an entrepreneur, become an angel investor? And while there are, aren't any classes in it. And so, joining an angel investment group like New York Angels means that here you have people who are like-minded, people who have done it before, people who are learning with you, who, people you can learn from, mentors in terms of angel investing. And so, joining a local angel group is a wonderful first step for somebody who's looking to be a potential angel investor, because the group, it sticks up its head and says, "Hey, we're a group of angel investors. If you're not a rep, you want money, come let us know about it." So, they develop deal flow and inbound opportunities that an individual person would never have. They then provide others who have led deals before, who can, who can help you understand, "Does this make sense? How does this look relative to other opportunities we've seen? What are the likely pitfalls here? When you structure your, having a structured, how much should we put in?" You get to do things in a group and learn by doing with like, training wheels on. And so, it's a marvelous place to start. And then, over time, it's a great place to continue, because you see a constant stream of deal flow, which is being vetted by your peers in this group. So, that's why we join angel groups.

Now, your career is very unique because you've been on both sides of the fence, an entrepreneur and an investor. And Gust is unique in the way that it connects entrepreneurs with investors around the world. How, as CEO of Gust, do you lead? What's your leadership style? How do you encourage innovation?

Well, the, the question in terms of being a founder and being a CEO and leading a company is, there is a real challenge. And so, ultimately, as companies, when you're starting a company as an entrepreneur, remember, so you have a founder who starts a company, you have a CEO who manages the company. An entrepreneur is a combination of a founder and a CEO. You have to do both. You're an entrepreneur. You don't just say, "Hey, here's an idea. Somebody else go run it." Nor do you take somebody else's idea and just and execute it, right? So, so an entrepreneur. And so, in the first, you know, day, you are everything. You are the chief cook and bottle washer. You are the sales team. You're the fundraiser. You're the product developer. You're the designer, and everything else, right? As you, as a company gets larger and larger and larger, you basically try and hire people better than you in every area. You want to hire a better CFO than you can do finance, a better coder, if you're a techie, a better product designer, and a salesperson than you are. And so, ultimately, you hire really, really great people to take on those pieces. And then, when you get to a certain scale, it turns out that they are doing all of the operational things that make the business work, developing new products, handling market analysis and finance, and so on and so forth. So, what then is the role of the entrepreneur, the CEO at that point? And then, and so, it boils down to, what is leadership? And I think that in terms of the core things that you're doing, one, you're establishing the values. What are the values of the entrepreneur? They come from a person. An organization doesn't have any values in it. Corporations, it's an abstract thing, exists on paper or in a database. But it comes down to the founder, the leaders. What is the, the culture and values of the organization? And in our particular case, since I wear my values on my sleeve, I write about them in the book as to what entrepreneurs, investors look for in entrepreneurs. They come down to two things, like, like integrity and transparency and doing the right thing. And so, that is so imbued in our company. I mean, that's the one firing offense. You can make mistakes. People make mistakes all the time. And it, in an entrepreneurial startup world, yeah, if you are leading a company, you have to give people the opportunity to create things, do things that you wouldn't necessarily do, to take risks, to explore, because you single-handedly can't do everything. Unless you're saying 100% of this company's innovation is in my head, which is the recipe for failure, because things are moving so fast, it doesn't work. Then you have to let individual people, you hire people correctly, spend a lot of time getting the right people in, giving them their head, letting them go ahead and, and, and make mistakes, if necessary, and then learn from your mistakes, and then, and then do something else. So, in our company, making a mistake is not a firing thing, right? Even taking a risk is not a firing thing. Any integrity issue, instant on the spot, that's, that's criminal. Because the core and guts of this, and the values that we espouse the highest, as personally become the values of the company. And so, the goal and the role, ultimately, of the CEO, as a company matures, is maintaining the values. Is the value person in chief, holding the vision for the company. Of men to reach must exceed his grasp. So, you may be doing this now, but what you're doing now is dependent on where you're going in the future. And that future vision has to come from, from the CEO. So, those are the primary things: the vision, you know, the values, and then ultimately, being, in many cases, that the public face of the company, the, the outside sales, not selling individual deals, but selling the company and representing the company to the world. And so, you hire great people, establish the values, you have it, be keeper of the long-term vision, and be the public face of the company.

You gave a famous TED Talk on the 10 things that you must know about yourself when pitching to venture capital. What are two or three of the most important aspects of that talk?

It was actually phrased as the top 10 things that investors look for in an entrepreneur. Because when you're an investor, and you're betting on, on an entrepreneur, you're not betting on a company. This is not like buying stock in the stock market, where you can look at a company's financials and see what they're doing, who their customers are. Typically, as an early-stage investor, we are looking at a doctor who has an idea for a company. And they may have a product, and may have a beta, beta, a prototype, a couple of customers, there. But we're not investing in a finished thing. We're investing in the promise of something. And that promise lives in the entrepreneur. So, and it comes down to investing in you as the entrepreneur. We call that betting the jockey, not the horse. Because ultimately, every company pivots. Things change. Markets affect things. So, the question is, we're coming out of relying on you. And we have this, though, in the in the video, and also noted in the book. There are these ten characteristics that are the top 10 that most investors, certainly, may look for. And the number one thing, if you ask people who haven't seen the video or read the book, you know, what is the number one thing that investors look for in a company? They will give you all kinds of answers, from commitment to coding skill to networks to whatever. And they are, in the number of people who actually get the first night of the box is unfortunately tiny. Because the number one thing, the number one characteristic that investors look for in a company is the entrepreneur. And the number one thing you look for in an entrepreneur is integrity. And it's, this is not a do-good, feel-good thing of a goody-two-shoes, you know, you should just be a good person. No, this is a business decision. The reason being that when we're investing in an entrepreneur, we know that we are investing in a whole lot of known unknowns. Right? We don't know what the market's going to happen. We don't know if the product is going to work. We don't know if there's something, but the competition is doing. We don't know about anything. All we know is we don't, we don't know those. So, the one and only thing we can control for is, do we trust the entrepreneur? Because this person is to be making decisions as an entrepreneur, every single hour, every single day. The entire company is a series of decisions as you go forward. You're picking paths to do. And if I don't trust you, totally, absolutely, I will never know if you're making that decision based on what's good for you or what's good for the company. And I'm an investor in the company. And so, therefore, integrity. And a belief that whatever you make wrong decisions, you're going to make mistakes. We may disagree on stuff over there, that's all fine. But if I can't trust you, it calls into question every other decision you will ever make. And I can't live with that. So, the number one characteristic we look for is integrity. The number two characteristic is, what is driving you? What's the passion? There has to be passion there. Because entrepreneurs are these crazy people. Entrepreneurs do not follow normal rules. Entrepreneurs are effectively sacrificing their entire life. There is no such thing as work-life balance for an entrepreneur. There is work-life balance for people who work in startups, but not for the entrepreneur. The entrepreneur, unfortunately, is sacrificing their life. Because the only thing they know how to do is start a company. It is this, it's like, like Gene Kelly in the character in "Singing in the Rain" is the hope for coming in from from Ohio to New York, you know, "Gotta dance." "God, and dance!" knocks in the first world of the of the agent, and they say, "That makes land his face." And he goes to the next door. "God, it dance!" God, it slams in his face. He goes to the next door. "God, it dance!" God, it seems an entrepreneur has got to create a company, right? So, therefore, what drives you? There is the passion. You have to. I have never yet seen a successful entrepreneur who wasn't passionate about the company, the business they were creating. Not necessarily the technology, not necessarily the marketplace, but the act of creation of the company. And that passion, it can be too much. The passion, like me, I know how I come across. I am loud. I speak fast. I use my hands. It can be a James Earl Jones type passion, controlled, sitting there, but you sense passion. Luke, I am your about in every, in every word that comes out of you, right? So, we need to see that kind of passion. And then the third thing, yes, for three, would be experience. And that's actually comes into their sort of three subsets of experience. One of them is experience is starting up a company. You know, if I'm going to the barber, I would like you had learned to shave on somebody else's whiskers before you, your first time with the razor is on my face, right? So, therefore, before you spend money on my money on your company, be very nice to be learned how to be an entrepreneur, how to do a start-up on somebody else's money first. So, experience in starting a company is really, really useful. And that's why investors love to invest in serial entrepreneurs. Number two is experience in the space you're in. We call it domain expertise. Do you know, if you're in the shoe business, do you know anything about shoes? You know anything about retail? Note in that fashion? You certainly wouldn't go to meet, start a shoe company that would not be a good idea. So, domain expertise. And then the third kind of experience is experience in the functional skills of being an early-stage startup CEO. Somebody you have to have the skills of product development, when technology, sales, finance, all those kinds of things. And if you don't have those skills, you look for as many of those as we can. And if you don't have them, then you have a team around you that you built. And that's the leadership skill it comes into play. So, those are the top things that we look for.

You've also been dubbed the "Pitch Coach." What's the number one consideration or strategy when it comes to pitching a VC?

The vast majority of people who give presentations approach it the wrong way. They think that what they are doing is giving a presentation. So, historically, for certainly in the last couple of decades, when you are pitching for money, you're trying to raise money, you go to an investor, you show them a slide presentation, originally with slides, then it was over projected transparencies, now it's PowerPoint or Prezi or computer-based presentation. And so, people think, "I'm giving a presentation. Here's the presentation." And they look at the pit, they put up a presentation, they look at it, and they say, "Ah, on this slide, I'm telling you about blah, blah, blah, blah." And they're effectively narrating the slideshow. And that's the wrong approach. The correct approach is to understand that the purpose of the presentation, per se, is to add emotional resonance to what you are saying. Remember, it all comes back to what an investor on the other side is looking for. I'm looking at you as the entrepreneur. I'm looking through those ten characteristics. I'm trying to bet on you. And so, therefore, I'm going to spend my entire time during your pitch looking at you. And you want to, therefore, in return, if I be looking at me, I want you to make eye contact. I want you to talk to me. I want to know that all the stuff you're telling me is stuff that you know, not that you're narrating some slides on a screen. So, the goal of a presentation is to support its speaker. Support material is to support you. So, I should be able, there's something should be able to come behind you, turn off the slides, and you should be able to give the exact presentation, and it should work exactly as well. Because I'm getting it from you. You are the source of information. You are the source of all the explication around of telling the stories of making it real to me. And all the slides do is add emotional resonance to what you're saying. And once you get that in place, then you think about the slides in a different way. You think about your relation to your audience in a very different way. And it becomes a much, much stronger presentation.

Well, let's still have a little bit deeper into your book "Angel Investing." What would you say is sort of the central theme or thesis of the book? Who did you write it for? And what's the one big idea that you really want the readers to take away?

The book "Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups" was written for the potential angel investor. Somebody who was interested in investing money into startups. Now, typically, this is a person of some means. I call angel investors typically rich-ish people. I mean, if you're really a super rich person, if you're a billionaire, you just don't have the time, frankly, to invest ten thousand, twenty thousand dollars into a startup company. You have people to manage your money for you. Your concern with the great affairs of state. You don't get down and putting a little bit of money into little companies. So, angel investors tend to be people who have investable capital. And typically, in the United States, you need to be what's called an accredited investor, with the essence of over a million dollars, not including the value of your house, or income of over two hundred thousand dollars a year. That's the baseline level. Over that, hey, it's fair game. In reality, most angels tend to have a little bit more than that. So, they're investing some tens or hundreds of thousands of dollars into overtime into startup companies. And so, the book was written as the instruction book for somebody like that who says, "Okay, I've heard about this angel investing stuff. I see Uber and Google and Twitter and stuff out there growing very rapidly, making on money. How can I get involved here?" And so, until now, there has been no instruction book at all. There were, there were no, there were virtually no classes. There were no instruction books. How the heck would you know what to do? Well, you could join an angel group, which is a great way to do it. But other than that, it was by trial and error. And so, invariably, angels make all these mistakes. And they, and they, they'll invest the first deal they see, and the right big checks, and they won't think about deal structure, and all this kind of stuff. So, this book was designed as the step-by-step guide to saying, "Okay, you want to do it? Here's how you do it right." That's it. It was designed for, as the central thesis of the book, there are actually two different approaches to angel investing, two large sort of meta approaches. One of them is what I call the, the Silicon Valley approach. And this typically is by the people you have heard of as angel investors or super angels, and in all these high-flying companies in California. And they are what's called unicorn hunters. They are on hunt. Brain, a unicorn is a billion-dollar company. Twitter and Facebook and LinkedIn and Zynga and Uber. And these are all unicorns. And they're called unicorns because they are very, very, very rare. And so, the unicorn approach to angel investing says, "I just have to be in that deal." And if I'm in that deal, and that one unicorn deal, nothing matters. Terms don't matter. Valuation doesn't matter. Anything matters. I mean, take for example, Uber, the taxicab sharing company. If you had invested as an angel investor in Uber at a, what, a million-dollar valuation originally, you would have done fine. At a 10 million valuation, you would have done fine. At a 100 million valuation, you would have done fine. At a billion valuation, you would have done fine. And a 10 million dollar valuation, you would still today have made five times your money, right? So, so, therefore, if you happen to hit Uber, all bets are off. You just throw money in there and say, "Hey, take the money and give me something at the end," and you'll do just fine. However, in the real world, most people do not have access to Uber. Most, know, most people who are looking to be angel investors, even if you're in California, and certainly if you're not tied into that, that kind of community, are unlikely to have that opportunity to hit a unicorn. And so, therefore, the problem with unicorn hunting as a, as an approach to angel investing is, if you don't hit a unicorn, yeah, you're dead. I mean, everything you get zero. It's either 100% or zero. It's like betting on, you know, double zero and roulette. Mean, that's your one shot. The essence of the book is the other approach to angel investing, which I call the everybody else approach. And so, this says, "It's not a unicorn hunt." You don't need to get. As a matter of fact, I've missed it in 110 companies, and I have not hit one single unicorn. Okay? On the other hand, I've been in all these companies for over, you know, 15, 20 years at this point, and my IRR, my annual rate of return on this is over 30%. Okay? 30%. Now, that's not, it's not hitting a, you know, 3000x return on an Uber. But a 30% IRR compared to if you put your money in the bank, you get 1%. In the stock market, maybe 5%. A hedge fund, 10%. Getting a 30% return, that's really pretty amazing. And so, there, it comes down to effectively Moneyball. The idea of doing it with discipline, at doing it rationally. And so, the essence of this book, the lesson from this book, is if you do angel investing as a rational person, follow the lessons in the book. There's no secret. What there is, there is discipline. And there is an understanding of how the markets work. And because it is a hits business, and you are going to have, if not an Uber, you're going to have one company's wildly successful, and many that fail completely. The actual typical outcomes for professional angel investing are, the venom out of ten companies, five of them are going to fail completely. Not just under stay. Few us money in the stock market, you, you expect, you're hopeful, you come, please gonna go up. It may go down a little bit. You don't expect it to go bankrupt the next morning, right? That would be awful. Well, in case of angel investing, that's what happens. Five out of ten companies, which us, yep, go bankrupt. And so, therefore, you got five left. Up those five, over six years, because it's a long holding period, six, seven, eight, nine, ten years, you're holding these companies. Two of them will return the money you put in. Well, it's not great. Not gonna lose a bit. Returning my, you put in. That means you get three winners. And of those three winners, typically two of them will be nice, solid successes. They'll return double or triple your money. But it takes a long time. It takes six, seven, eight, nine, ten years. And turns out that because money has value over time, called the time value of money, you learn in business school that those two winners, the two to three X, and the, and the two that return even money at the end of, say, six years, you add all that up, you're right back to where you started from. But the cash you, you put in, accounted for the time value of money, but you haven't made a profit yet. And so, therefore, the profit on your whole portfolio comes from that one last company. Now, one last company doesn't have to be a unicorn. But it does have to be something like a 30X. And there is, that has to be worth about 30 times the, the cash, the valuation when you put your cash in. And so, we look for companies that are called gazelles. A gazelle is a company that's a high-growth company, doing very, very well. But there are hundreds of thousands of these gazelles that aren't unicorns. They're fast-moving, high-growth companies. And, and the goal is to find some company, the early on, that is likely to be a success, a very solid success, real, really big, and do so with not taking a lot of money, and invest at a valuation upfront, when you put your money in, that recognizes that it's an early-stage, not profitable startup company. So, if you invest, for example, in a company at a million-dollar valuation, where you're putting in your money, and we say, say the company comes to you, they say, "We're 900,000. You put in a hundred thousand in total as an angel investor." After your investment has gone in, the company's worth a million dollars, and you put in a hundred thousand dollars. Well, if six years later, that million-dollar company sells to another company for 30 million dollars, okay, that's a 30 times return. And your hundred thousand at that point would be worth a lot of money, three million, right? So, therefore, the question is, how do you get those kinds of companies? And how do you have to find the companies? And then you have to negotiate appropriately on those valuations. And the essence of this book is saying, "Okay, angel investing, when done appropriately and with discipline, is not crazy. It's not crap shooting. It's not hunting for unicorns. It's not throwing darts at a wall. It's actually being a rational investor." And if you do it right, even without getting those unicorns, you can still over time get a 20, 25, 30% return on your money.

Tell us a little bit more about your portfolio theory.

The portfolio theory of angel investing says that you are unlikely to hit a unicorn on your first try at investing. So, there are people who have invested in only one deal in the world, that deal was Twitter, which is great. Congratulations. But in the real world, that is not going to happen to you. So, so therefore, it turns out that the distribution of returns, as we've discussed, is most companies fail. And one out of ten is going to be a home run, six order magnitude. And so, therefore, the goal is to have enough companies to make enough bets at the table that you have a likelihood of getting that one in 10. So, if the active, you know, five out of ten fail, and you flip a coin, your dear, the odds are, the only invest in one company, the other is going to fail, right? So, so therefore, I would suggest that it makes sense if you were going to be doing this seriously over time, that an angel invest in 20 companies. You know, 20 to 30. I would say 30 is probably the ideal number. I'm investing 110, but I'm crazy, and that's a long-term written out of the spectrum thing, right? But, but, you know, even 10 companies would be a pure minimum. Because investing less than 10 companies, the odds of your getting that one out of 10 that's going to be the big money maker return for the whole portfolio is actually very small. And so, it turns out over time, if you do the, the simulations, that a 20 to 30 company portfolio is about what it takes to give you a pretty good, you know, set of odds that you're likely to hit at least one company that's going to have enough high returns to make up for all the ones that don't succeed.

How can you actually best identify the high potential opportunities? What are some tips?

Every angel, new angel that I've ever met, it says, "You know, I'm interested in same semester, but I really only want to invest in the hot companies." You know? Well, that's right. Yeah. You'll be both right. I would love to have invested only in the hot companies. And, and I will tell you that there is nobody who invests only in...

The best companies, I mean, even the world's greatest pictures of early-stage companies, people like Josh Kaufman, a First Round Capital, or Fred Wilson, Union Square Ventures, or Marc Andreessen, you know, great guys who have an insane track record of identifying early-stage opportunities that later become these unicorns. Even these guys, more often than not, miss. Even these guys, the majority of their companies are not these mega successes. So, therefore, if they can't do it, and I certainly can't do it, the odds are you probably can't do it.

So the question is, there's no surefire answer. And because a lot of us, you're dealing with with early-stage companies, um, you know, the potential outcomes are from, you know, nothing to everything. Whereas if you're investing in a company on the New York Stock Exchange, a blue-chip company, you know what they're doing, what the revenues are, and the odds of what their diplomas next year could be, oh, a little worse, or a little better, or the same thing. So the odds are, you know, the out, potential outcomes are like here with this startup act, where it's like this from you, from zero to nothing. You can't, you can't play that hand.

But what you can do is you can get, tilt the odds in your favor. The most important thing is looking for the entrepreneur. We've discussed this before. I spent a lot of time in the book saying, you know, you're, you're betting the jockey, not the horse. You're betting on the entrepreneur. So you look at these characteristics and the qualities of the entrepreneur that will outlast the business. Because if the business pivots, if it completely gets changed, you're betting on this person to pull it out. That's the number one thing.

Then, they're beyond that, there are a bunch of other things, right? So around that entrepreneur, who's the team that she has assembled, or he's assembled? You know, whether that's the hustler and hacker pair, or in the hustler, a crown suit to do the sales, or, or there are a lot of different approaches and acronyms for how you want to look at a team. But you look at the team, the founding team. Really, really important is the market. Is the market that this company addressing a big and gray sir? It's a big market today. Does it exist? And there are people spending real money into this market? Because if nobody is spending any market, any money in this market, buying anything that they're selling, now it's a real crapshoot. I mean, you're betting if they're going to somehow create something out of scratch. So you want something where there's already money changing hands. But if changing hands on a trajectory looks like this, it's a growth market.

So, for example, if somebody comes to me with a new buggy whip company, well, let me may have the world's best buggy whip, but the number of horses and carriages out there right now is really, you know, small. So that would not be a great, great big business. So you look for a market that is large and growing. Because a growing market, even if the company you're investing in is not the world's most successful company in that market, if the market is growing, the company itself might be acquired, might be part of a rollup, might do okay. And so you look for it.

But for that, you look for business models that are scalable. A business model says, how does the company make money? And if you are in the widget business, you could be a widget manufacturer, you could be a widget distributor, you could be a widget designer, which is painter, you could, you know, eat, which is, you could do in widget reviewer, you can do all kinds of things, right? So the question is, what is, what is the company actually doing, and how does it make money? Does it sell widgets wholesale? Sell widgets retail? Does it provide widgets for free to people who read advertisements from their sponsors? There are all kinds of things. So when we look at business models, we monitor, does this business model make sense, first of all? And second of all, is it scalable? Because scalable business models are really important. Scalable says, is this a business model that you can prove out with a small sample, with a little bit of money, with my angel money upfront, and then if it works, is it something that by just throwing more money into it, we can go forth and make it really big? That's why businesses that are dependent on people tend to be really challenging for angel investors to invest. A consulting services, you may be the world's greatest consultant in widgets, but the problem is, you know, that's you. And so once we've exhausted your capacity to take on new consulting clients, it's very hard to get new clone, you two, three, or four, you to do the same thing. Whereas if you have a website, a Twitter, where people are individually typing and things going into this magic computer in the sky, and then it sends them out, that's actually very easy to scale. And you can get hundreds, millions, tens of millions, hundreds of millions of people using the Twitter account.

So we look for businesses that are scalable in a large and growing market with an entrepreneur. And that we're in terms of making the deal, the valuation for the company, which we're investing upfront, is such that if the company does scale and succeed, when the company ultimately has an exit, and either is sold and purchased by a larger company, or it goes public, we will be able to get an economic return on that company that is worth the candle for us putting it in.

Hmm. Terms and exits and all of these technical things. You talk in the book about how important it is, the term setup, and how often people sort of just skim by this. Talk a little bit about the tips you give in the book about the terms.

Well, when one investment, when an investor puts money into a company, they don't just say, here's the suitcase of cash, goodbye. You know, have, have fun with it. It comes with a set of terms that define the relationship between the investor and the company, as it should. You're dealing with real money here. Because the money that I am putting into your company is fungible money. I could use this company to go buy a sports car, take a vacation, you know, have a very nice dinner over here. But instead, I'm investing it in you, the idea being that it will grow into more money, and I will be able to get more votes and more dinners over here. And so, therefore, I need to know that it's going in, how it's going to be used, how I get it back when good things happen. And part of the challenge is because the, the terms that govern this relationship between the investor and the entrepreneur tend to be substantive and many, many pages of this stuff. If you just sign things without reading them, you won't know what had, what happens. And so it's important to understand for both the entrepreneur and the investor, exactly what is governing the relationship. Because I have seen all too many times, nasty surprises on both sides, where a company sells for a lot of money. Let's say I invested in a company at a million-dollar valuation, and then it sells for a hundred million dollar, 100 million dollar valuation. It's perfectly possible that if the company sells for, you know, 100 million valuation, I may get, you know, a million or two back. All right. So, women, it's all night. What happened? You know, what happened to my money? By the same token, if, you know, a company can have a sale for 50 million dollars, and the entrepreneur can find that they get zero money back because it all goes to the investors. The entrepreneur sitting there saying, what happened? Right? And so all this is defined by the terms. And so the book goes into a lot of time discussing the various terms. We have sampled term sheets of different types of structures, convertible loans to a company, which might be done by a friends and family round before Series A investors come in, to a Series Seed round, which is what the kind of terms angel investors, professionals usually put in, to help. And, and I actually annotate an entire term sheet in the book, so both sides understand exactly what these terms mean, why you put it in there, why both sides want to do it, what the effect will be when you come to the end of the day. So it's very important to understand how you're being created, what your money is being used for, and then what happens in both the good side and the bit. Because, because, you know, in the end, there's a saying that, you know, success has a million fathers, and failure is an orphan. You know, with, you know, if you have a wonderful outcome, your company sells for, you know, a billion dollars, becomes a unicorn, that's great. They're probably enough cash to go around, so we'll all make money. The problem typically comes when the company, you know, and if a company fails totally flat, that's business, everybody loses everything, and we go home. The problem typically comes when in those between those two cases, where it's a modest success, or a, you know, partial not-so-success, and it's picked up, you know, off the street. There, then even there's not enough money to go around to pay everybody back. What happens? Who gets that money? And, and why? That's what term sheets are written for, and that's why it's important to understand them.

Once you close the deal, what are some ways investors can continue adding value?

One of the things about angel investors, as opposed to people who buy stock in the stock market, when you buy General Motors stock or Google stock, you own stock, and that's it. You don't talk to, to Sergey Brin and Larry Page, they don't call you up for advice. There is very little you can do aside from, you know, clicking on, you know, ads on Google search engine to affect the company. But that's quite different in the early stages. And so angel investor, professional angel investors typically want to be, and want to are wanted to be by the entrepreneur, what's called smart money. And those are investors who can really add value to a company. And so the, the question is, what can you do, having put your, your penny into the pod and bet on this company? You want to do everything you can to help it. And different people can provide different things to a company. One, if you happen to be a wise, experienced person, you can give advice and guidance and serve as a mentor to your entrepreneur. Um, not everybody can do that. But when you do, what happens? One thing everybody should do is constantly be on the lookout for potential partners, investors, customers. You can introduce the company to. Typically, startup companies are relatively small. And so any early state, early clients, particularly big name ones who write big checks, can be really helpful. Um, when a company is thinking about an exit, okay, you can think, if you're plugged into the, to the community in or the industry, and you know companies that you might be able to introduce them to who might want to acquire them. Really, really important in terms of getting other people to invest. If you think this is a great deal, and the company is now doing another fundraising round, and you're going to put money in, then the fact that you can identify people you know who or co-investors and help convince them to put money in, that's an enormous value to the company. Part of the problem there is that if you're not putting your own money in, but you want to get something else, put their money in, mmm, then that's a big negative, right? Because somebody would say, well, why aren't you investing? But so things like this, where you're advising the company, you're introducing into clients and customers, you're tweeting out, you're retweeting, you know, their, their posts and reblogging their posts about their success stories, mentioning them when you give speeches, what you do TV interviews, these are all good things that an angel investor can do for the company.

And what are some non-monetary reasons to become an angel?

Well, the title of my book is Angel Investing: The Gus Guide to Making Money and Having Fun and Having Some Right. And so now, the first thing there is making money. So first of all, angel, there are songs, real systems for end. And but by the way, in most operators don't realize this, most on Twitter's think, oh, and you're an angel investor, that means you must be coming out from heaven as an angel to give me money. You've answered my prayers. You're here's the money. No, doesn't like rub my gun, right? So we are, first and foremost, every angel investor is economically driven, right? And so the goal is to make money in this investment. It's not a charitable contribution because you're not a charity. My goal is to make money. Now, that being said, there are a host of other things that come out and come from angel investing. So among other things, you get to see the latest and greatest of everything. You get to be kept at the forefront of innovation because you're investing in a new company that doesn't exist. It's typically based on some new approach to business, some new technology, some new markets, some new something. And if you're a curious, interested person, just being at the forefront and watching what's happening and learning it can be really fascinating. And if you do nothing other, even if you're just looking at companies before you make your first investment, you'll be seeing pitches from all of these companies that are doing these new interesting things. So it's wonderful entertainment in that sense and knowledge. And for people who are, who are curious. Next, it turns out that the average angel investor today in the United States, so this is beginning to change, is actually a former entrepreneur who was cashed out. So the typical member of an angel group that belongs to the Angel Capital Association here in the United States has been an entrepreneur for 50 years, has started two or three of their own companies. And so they know what being an entrepreneur is like. And so in that sense, this gives you much of the benefits of being an entrepreneur without actually having to have the all but the craziness of being. I liken it to being like a grandparent. Get all the fun of children that haven't changed diapers. You can. So, oh no, you can sit home. Okay, take your kids back, right? So young Curt doesn't get any sleep, but you know, you can actually sleep. But you get a lot of the vicarious fun of doing that. You get the chance to to nurture and give back. I mean, for me, mentorship, which we discussed before, is a, is a, is a such an important part of this. I mean, I spend my time, much my time teaching and mentoring and helping. And for somebody who has been successful in their career, and in theory, if you're an angel investor with disposable capital that you've got somehow, someway, and typically of an age where you've had some experience, the ability to pass that pay it forward, to pass it on to the next generation, is one of the most heartwarming and exciting things. Make him a couple of examples in the book where were young people who I bet on early on did phenomenally well. Um, you know, one of them was David Steinberger, who started a company called ComiXology, which was acquired by Amazon. He had never had experience starting the company. And watching this company actually grow and turn into a serious player was really heartwarming. And being his advisor and chairman of the board was great. Another company, a woman named Alexa von Tobel, started a company, sheep, in a product manager, another one of my portfolio company. She started a company doing financial information for women called LearnVest. Just last month, the company was acquired for over a quarter of a billion dollars. And it's just, you know, to watch somebody with with vision and an idea and a goal implement that and be really successful, it's extraordinarily heartwarming. And then finally, the last piece is you get to change the world. Because, you know, any company that's going to be a success, starting from nothing, is doing something that has an impact, clearly on the world. People are using it, they're buying and selling, they're using its products and services. But there are also companies that can change the world positively, not just from the operation of the capital environment by people buying and selling things, but by having a business purpose that is that it has an impact on society. We call this impact investing. The flip side is social venturing, if you're applying entrepreneurial skills to two things that are good for society. And so there are a number of angel investors who specialize in investing in new kinds of companies that are profit-making companies, but that will also change the world on the side, whether they are, you know, providing mosquito nets to, you know, households in Africa. Or me and you, frankly, I think that our platform, Gus, is a social venture because it's enabling entrepreneurship around the world. Most people look at this as a purely commercial venture, but to me, this is actually having a positive societal effect. The trick, of course, in being an impact investor is you have to decide, yet, make a decision upfront. Are you impact first, or are you financial first? You all can hear the term a double bottom line. I'm investing in a company that's going to do well and do good for society at the same time. The challenge is doing good doesn't fit in the same math equation as dollars and cents. There's no physical way to get these two things into one calculus. So you can have a double bottom line. What you can do is to say, either I'm going to optimize for the biggest possible return I can economically, but I'm going to set a floor. I will only invest in companies that do at least this good for society. Or I'll turrble, you can do that around. And you say, okay, I'm going to best in companies, you know, problem in companies that do good for society, but the most important me is optimizing, maximizing the societal impact. So I'm going to look for the cup, for those startups that have the most impact on society, but I set a floor for the kind of economic return that I'm looking for here. And I discuss that in the book, and I provide some charts and graphs to help you figure out where you're going, what kind of businesses there are in there. But impact investing can be really extraordinarily rewarding as well. So when you add all these things together, to making money, which is the first part of the book, right? So if you can get a 30% IRR and see what's, you know, be at the forefront of what's going on, and mentor somebody, and see a young person flower and and and really blossom under your mentorship, you know, and change the world, and have the fun, exciting world of entrepreneurship, what more do you want?

So let's, let's go back a little bit into the nitty-gritty. Talk to us a little bit about doing your due diligence and looking under the hood. What do you need to do? What do you need to focus on when you get pitched by an entrepreneur?

What do they tell you? They tell you the good things. They don't say, oh, here are all the problems we're facing. Not no seed. They spend a wonderful story about how they're going to change the world, make a fortune. They have this amazing product that nobody else has done that everybody wants. I mean, that's the essence of a pitch. It's called spin. And so they have, you know, whether it's an elevator pitch, or a put five-minute pitch, or a typical 15-20 minute venture pitch, it's all about making the company look good and exciting. And so one of the first challenges that face every new angel investor is falling in love with the first company they see, and the second, and the third. If you want to invest in every company that you see, because there are all these amazing pitches. But there actually have been studies that show there is an absolute direct correlation between the amount of time spent on due diligence on a company and the ultimate returns. Because things are rarely exactly the way they are presented in the pitch. And even if they are, you need to know what you're getting into, what the market is like. And so due diligence means, if they say they have these very happy customers, call one of them, or two or three of these kinds of customers. If they say they have, you know, no competitors, boy, if they have no competitors, you've got a problem. Because either there are really no competitors at all, which means not one other person out of the seven billion people in the world thinks this is worth pursuing, in which case, hmm, seven billion to one, you've got to think about it. Is this really, there's no customer, no competition at all? Or alternatively, there is competition, and they're not telling you about it, which means that either they don't know about it, which is very good, or they know but are not telling you, which is even worse, because that's the integrity issue in there, right? So things, you know, and then you, if you're, it's a product, an area that you know about, you want to try the product. Does it work? And so you want to take a look at their experience, want to make sure their books are all correct. So there's both legal due diligence, technical due diligence, business due diligence. And so sometimes you're, depending on how much investment you're putting in, your attorney can help with the legal due diligence, making sure are they appropriately, you know, incorporated? Do they have all of the sign forms of intellectual property assignment from their employees? You know, are they in compliance with all their laws and regulations? Is that all back on the stuff? You know, then technical due diligence is, does the product work? Are they, you know, do they actually have what they say they have? I mean, people, people have been known to fake things. And it sounds insane, but I have, you know, I've had people actually try and pull the wool over your eyes, or they have something they taken is, you know, something else, and we skip, when you put a new logo on it and say, is there's that's so awful, doesn't happen that often. But God forbid, if you put your money into it, and if I have that happens, oh, won't you feel like an right? So you want to detect adults to make sure the product works. And then, you know, for an angel investor, typically most important is the market and company due diligence, business diligence, which, which is that, you know, who are the competitors out there? Are the customers happy? You know, how are they selling? What look at their historical sales over time? Is it going as a hockey stick, which is great, going up? Is it steady going up? Has it been flat for a while? Is it going down? That would be awful, you know? So, yeah. And, you know, is it possible to invest in a company whose sales are going down? Maybe. But you better be damn sure there's some reason why it's going to turn on all of a sudden, then records they go up, right? So if you do your due diligence, the more due diligence you do without tying the company in knots for months and months and months, typically the higher return you're going to get.

What would you say is the most critical thing to know about the financial ecosystem?

It's really important for both entrepreneurs and investors to understand the place of each player in the overall ecosystem. So, for example, if you ask, you know, an entrepreneur, a new fresh entrepreneur, what do you get money from? They'll say, well, you know, thanks, or angels, and VCs. Well, those are like three completely different operations that invest or provide money at three completely different times in the life cycle of a company. And, and so again, and again, I'll often hear the question, well, sure, you know, what should I good? Which is better for me to get money from an angel or VC? Well, you know, what, typically you don't have a choice. It's not a binary choice. It's like, it's like saying, you know, what should I drive? A, you know, a school bus or a Formula One racer? Well, the question is, what are you doing? Are you taking 40 kids to kindergarten? Are you driving in 24 Hours of Le Mans? Or are you, you know, taking 80,000 pounds of machinery across an ice road? Right? Well, you know, so the answer is one or the other, or neither in that case, may be appropriate for what you're doing. But it's certainly not going to be both, right? You can't, you can't, you know, there's no way that both a Formula One car and a school bus are going to be appropriate for any one thing that you're doing. So therefore, typically angels and VCs are at different parts of the spectrum. It, you know, the very first cash into a company comes from you, from the entrepreneur. The entrepreneur has to put their own money in it. There's a wonderful New Yorker cartoon which shows two entrepreneurs pitching a VC and they're saying, we put our heart and soul into this company. All we're asking from you is 10 million dollars. So now, your heart and soul is great, and I'm sure it's worth more than 10 million dollars. But as an investor, okay, before I want to see you put your fungible money, the money that you can spend on a vacation or a fancy dinner, into this company. I don't want you to bankrupt yourself, but I want to see that you have have some faith in your own self as an entrepreneur, that you're willing to bet money that you could spend having fun or doing something else somewhere on yourself, on this company. So that's what the first cash comes in. And then typically, at that point, you still have nothing to show for anything. It's still a pie-in-the-sky idea. So the next cash that comes in are typically from people who are investing not because the company is great, because they're professional investors, they're not domain experts. What they are are people who know you and love you and trust you and respect you as your friends and family. You don't have to have friends and family, but typically they're the only source you've got. Because each of these, these sources of capital is typically available, the only capital available at a particular stage. Right? And so, and friends and family are investing in your company because they know you, they want to help you, support your second old community barn raising, you know, they're all going to get it, going to pitch in. And so, you know, most people typically can figure out how to get some money, raise some money for people who are not professional investors, whether it is 10,000 or 50,000 or a hundred thousand, whether it's from their parents, their siblings, their an ester, their, you know, somebody they met at work or whatever, is that's a friend's dependent. And that's typically where the first cash comes in. And it's only after you've got some kind of traction, where you have a product that's done or just about done, or people are using it, or you have beta sites, and increasing these days, you actually have customers for your users, that's when you go to angel investors. And so those are in diff, these individually talk about the richest people who are putting in, you know, personally, you know, in the, you know, tens of thousands, maybe the low hundreds of thousands, but typically in that kind of range for quick, for cash. And it's easier to convince one person, one angel investor, who you met somewhere, knows something, and knows about the industry, than it is to do an institution. And so for angel investors, the, and then the next day after that is organized angel, my angel groups, where they'll have multiple angels getting together to pool their resources and write a bigger check. So instead of a twenty-five-thousand-dollar check, it might be 22 and fifty thousand dollars, right? If you had ten angels together at 25k and peace. But typically in the angel, angel group stage, angels are investing in one out of 40 companies they see. So it's very competitive. So that means that, you know, you have to be better, more investable than the other 39 who are staying next to you. And that's why the bar continues to rise in terms of how far along the way, because if you just have an idea, but the person next to you, she's got an entire company and customers and a product over there, she has arrested a lot more than your great idea. So I'm going to invest in that. And so typically, that's where the next cash comes from. VCs, an angel investor, VCs after angels are a whole next group. VCs, traditional VCs invest one out of 400 companies they see. That's 10 times as hard to get money from an MBC. But they invest in many, many fewer companies. I mean, you have, you know, something like, you know, seventy, eighty thousand companies a year, startup companies a year, that are invested in by angel investors in the US alone. The number that are invested by VCs of any kind, seed funds, are fewer than a thousand companies. So you're, it's, it's much tougher to get a VC investment. And VC investments, they tend to be bigger because they do fewer than every year and they need a higher return. So you're looking at, you know, that's why they're investing, they're trying for unicorns. And if you're a traditional VC fund, they have to mist in the company that could be a billion-dollar company. And so your startup idea for a social network is unlikely to be that, you know, unicorn. And so, so therefore, if you are at a stage where, you know, VC is going to come in and right groove a five-million-dollar check, you've probably passed angel investors at that point. On the other hand, if you're a space where you can only get angel money, you'd be seized aren't going to get it, going to come in. So understanding where they, the sequence goes from angels to angel groups to to venture funds. There are strategic investors who will invest at any point in a company's lifestyle. There are corporations who are providing funding for not just a financial return, but for other returns as well, whether it's building their their pipeline of gee, whether it's for building a customer pipeline or adding value to their products. There's something else going on there. And they can therefore be much less sensitive to valuation than a financial investor can. But there's always a catch for what they're looking for. If you know what the catch is, and it makes sense, that's great. Otherwise, should be very, be careful. Right? And it's only as a company gets more and more successful, gets farther down the line, and actually has revenues, perhaps even profits, but then you can go to banks. Because banks not in the business of taking risks. Banks from the business of renting money. So they don't care if you make a fortune or lose a fortune. You know, banks and say, okay, here's a hundred dollars, I'm charging campers an interest, and one year, now come back and give me a hundred and ten dollars. And if you take that hundred dollars and you make it uber, well, congratulations, you can buy me dinner. If you know what, if you take the hundred dollars and you lose the whole thing, I'm very sorry. Maybe I'll buy you dinner because I'm sorry for you, but I need one hundred and ten dollars back. At the other side. So therefore, since banks are not in the risk business, banks are not going to invest money or lend money to startups. Because as we discussed, the average startup fails. Instead, banks only want to provide money to people where they know they can absolutely get it back at the end of the year. And so therefore, typically, you've got to have revenues, and you probably should have profitability before you go to a bank. And then for a tiny few companies, the ability to go after the public markets and raise money from everybody on the stock market. Because now you're big enough to, you you register with the SEC and you file your reports. So people, you're very transparent. People know what you have. You can access public capital from anybody, not just the credit investors, but from every widow and orphan and person on the street. So understanding the role of the ecosystem and the finance echo system, where money comes from, at what stage, what kind of risk for return ratio is it looking at, is critically important to know where you should be looking for money at any given time.

David, thank you so much for joining us today. Mud woofer, that was David S. Rose. Thank you so much for joining us at Sardar TV today. I'm Jennifer Crompton. We'll see you next time.