Hello everyone, this is a versatile Cusick. And today on the hoorn podcast, we have our first guest, Gilly. We're gonna talk about how he sees the markets, his unique background brings an interesting perspective and what he's going to invest in and how he seeks Alpha that extra to bit of return on his investment. What further I do? Let's introduce Mr. Giles Gil, Gil is a good friend of mine.
Bill and I were both RMB program together, along Shimon, and Gil has an incredible career of successful startups, investments, entrepreneurship, and has an incredibly unique perspective on the market. He first started out as a digital marketer. He has an MBA from
Kellogg, which is where we met. And throughout his whole life, and Kellogg's been working on different startups in, he started pushing the idea, raising capital from celebrities, the folks like Lenore, the Capri land arm, Shanks Winans, and this is to get and gained visibility for the companies that he was investing in are working
for... To get that celebrity edge, if you will, then in 2013, Gil became on the world's foremost experts in influencer marketing, and he started a company called Hyper, which was sold in April 2020, and hyper basically focused on data driven decision making and finding the right influencers for brands, today, he is one of the 30 of the most influential people in the world and influencer marketing.
He's now the founder, along with DUI Irving, which is career rings, father of a company called Star funds and start on basically invests in consumer focused startups and brings not only investment but strategic celebrity appeal to various startups, and he's even working with service team properties, these guys are the owners of the World Trade Center in New York to help them think through different investments and lead the thinking of
the future of the workspace post covid? So huge persona. Huge bio Gallo, and let me know if I'm missing anything from your background. Thanks, Alex, thanks for having me. No, I think you summarized it really well. That's fantastic. Fantastic. Look, we're very excited to have you. The podcast we had up until now where she may discussing various ideas, and it's gonna be good to have you on to get your perspective of the market or investing and how you think
about the world. So I gave the listeners a little bit of a background, but maybe in your words and a 30 seconds, tell me a little bit about your journey in terms of... You've done a lot of interesting things and a lot of your careers focus on the celebrity edge and that how that edge brings value to company. So talk a little bit about that. Does every company need a celebrity endorsement, what kind of celebrity should people be looking for...
Is that the aimless celebrity? Is it just an influencer that has maybe 100000 Twitter followers, but there's not any kind of a list of Belle, How do so companies think about when to go out and see library advice? It's interesting, one of the things in my career that's always defined me, that I try to think differently than what most people are thinking, and the challenge with or maybe the biggest struggle for celebrity endorsements
for influencer marketing is that it's an age old... It's 300 year old idea of, We'll get a famous name to promote and say that we have a great product, and that's going to get people interested in the world has evolved significantly to the point where you have different social networks, you have influencers that
you can... Now, measure who their audience is, they're not just famous that you actually know what they talk about with their audience, engages with and who their audience is, and so just how Space has become way
more data driven, way play, more sophisticated. And it's hard to say that there's one answer, really every company needs to have and build the strategy of its own round thought leaders and experts, especially in the consumer world, in the B2B space, there's a room for thought leaders, but it's sometimes a little harder to find the right ones, or to find the right channels to post as far as consumer facing brands, I would say that it's rare to find
a brand that doesn't need to have a thought leader or an influencer strategy, but it's also very hard to say that there's one cookie cutter
strategy that appeals to all. And if you look at success stories, you'll have all kinds of success stories from that one loan, super famous person who's the face of the brand or to companies that might have thousands of micro influencers and no real big name leading them, so it really, really depends on what stage you're in, what you're trying to achieve, and more importantly, what the metrics that you really care about are,
'cause influencers can contribute the sales, they can contribute to visibility, they can contribute to credibility if you're in a market where there's a lot of skepticism, for example, if you're trying to sell a hair growth solution, the best way to do that is to show someone who is bold and now is here, I don't know if there's a company that can do that, but you probably would do really well by taking the rock and giving them a full head of hair. And a lot of people would be interested in that.
And it's not just about the same, it's also about the credibility that is created when you do something like that, so it really varies on a case by case basis, and when I look at companies as an investor and as an advisor, I always think first and foremost, that is a celebrity, the right strategy, but what what I do, how would I really gain competitive advantage and make this company stand out within its specific market by using well known and appreciated
respected individuals in the space? Yeah, so you brought up a lot of good points here. And so I wanna pull these apart a little bit, and so we're now going to maybe take off our investor hats and put our founder hats, and thinking about building a business, but this will
tie into investment in a second, but let's say... Let's say when you're starting a business or you're trying to scale a business, you, like you mentioned, have many problems, you wanna get scale, you wanna get credibility, you obviously want to increase sales, and you should always be thinking about unit economics and profitability now, if
you... As a manager of a company, have a war, just X number of dollars, it doesn't matter, and let's say that going after a celebrity is the same cost profile as doing, let's say performance marketing or other traditional types of marketing. I know that's not the case, but let's just
assume it's the case of a star example experiment, certain... Is there certain, let's say, problem that you wanna optimize getting celebrity, for example, you've mentioned if you're selling hair products, you want credibility, you wanna get the rock to grow hair, all of a sudden you're solving for credibility, you're not necessarily solving for scale, or maybe... Then you go out, if you wanna solve for scale and get a celebrity that has a asakura, I don't know. That has a ton of
Twitter followers. How do you think about doing... Allocating an extra dollar towards a celebrity endorsement versus allocating an extra dollar towards a different or traditional, maybe a more traditional marketing and why? For which problems the celebrities are, they just naturally better
at solving versus your other marketing channels. So starting out where it's really important to have a presence is when you're a consumer facing product, and I think we live in a world today where it's much easier to create a competing brand, the world is global, so almost every brand can be almost every consumer brand can become global through Amazon and Shopify and other channels,
and you... You can deliver... So it used to be that you would have a restaurant, you only competed with the restaurants that were nearby, so if I wanted Chinese food and I lived in a certain city or in a certain area, I could only compete with those returns, now you're getting ghost kitchens and something you can order from a brand that may not have a location next to you, and if you wanted products, you could go by at the target near
by, and now you have Amazon, you can order from anywhere in the world, and so that allows competitors to really create similar products very easily, and they might have advantages such as cost structure and better branding, better appearance, or any really a way to stand out, maybe they have a domain name that really stands up, so celebrities come in and they're part of a greater marketing solution I would never tell anyone, don't do any digital marketing just through celebrities,
I don't think that's the way to do it, but I think what happens for a lot of these companies is that you start with a digital marketing strategy, as we all know, those become more and more difficult as you grow because your audience, the initial targeted audience that's really interested in your product runs out relatively quickly and you start having to sell to the top or audiences and build your brand and get recognized, and you're competing in markets that are really, really
tough the celebrities or micro influencers can help in several ways, one is they can create sales, which is really great, but really where we use them in the most effective manner is to see how we can improve the traditional digital marketing metrics that we're tracking.
So what does it cost us to acquire a user through a traditional ad versus a video that's made with our celebrity in it, and are we getting higher quality users, are we able to get the users that otherwise wouldn't have heard of us or... I would have chosen the competing product, but because we have differentiation and credibility that's generated through these types of people, are we getting better metrics, so it all comes down to those same metrics that you're used to
seeing as a marketer anyways, and they measure the health of your marketing channels in the pipeline that you have, but what we try to do is leverage them to improve it, and it's a really tough space on the Digital Marketer, Facebook, Google and very, very few other companies that have a very strong grasp over this market, and they're working to maximize their return. Not your return as a marketer. And so
it's just getting more and more competitive. The goal of Gallus to make as much money as they can on each keyword and each search term, and the goal for Facebook is to get the highest return for every audience that you can ask us through them. And so if you only focus on digital marketing and you tend to limit your scale, again, it doesn't apply to every market, and they're certain markets where it's not as bad, but that's where it comes in, it's never a stand alone strategy in my mind.
So let me ask you a kinnick questionnaire. Do you believe in a celebrity or influencer marketing should be part of any marketers or any companies that want to scale war chest, so to speak, or marketing tool. In their marketing tool bag. I think... You can't afford not to have it at this point. If you're going direct to consumer, if you're going to be... It's a whole new story.
It's much harder to do influencer marketing for a variety of reasons, we can talk about that if that's interesting, but it's definitely a more complex environment, but today you can assume that your competitors are using influencers to get to the audience, and it's demonstrated that if done correctly, then those competitors will get better metrics and you can bless, if you pull it down to the bottom line, if it cost your competitor is less money to acquire customers or if they can acquire
a larger amount of customers for the same budget. That's a really bad situation to be in. Now, it varies. If you have a lifestyle business and you're trying to reach a million dollars in sales, you don't necessarily have to have influencers, you can reach that to traditional digital marketing, and it's probably not going to be cost effective to work with big
name celebrities, if you have... If you have big aspirations, you wanna get recognized a world line, then you probably have some kind of layer of influencer or celebrity involvement, it doesn't celebrity involvement in the traditional sense, you don't necessarily have to have it, most companies don't have it until they're really big, but influencers, people who will speak on your behalf, people who will respond, whether they're micro really small people, but they're still your biggest
ambassadors. Almost every company has it, and it's not a new concept. Microsoft did it 30 years ago with people who were certified to be Microsoft professionals to help people who struggled on their software by making them advocates an ambassador, so it doesn't have to be
that influencers are necessarily famous. So that's an interesting thought that you compare the Microsoft, they're called the VaRs value added resellers, their strategy that they've employed and the Mikes employs the strategy quite quite well, it's actually probably the goal standard anatomically tech companies that I know that uses this huge army of second third parties that go ahead and push their software... But it's an interesting perspective for sure. Have you seen where influencers
or celebrities have taken a company astray, so where you... Or stories to... Yeah, I did a deal with Land Armstrong maybe three or four weeks before he confessed or caught with it, had the drunk confession, so I got to live through it very, very vividly. And as a company at that point, you have to either embrace it or completely reject it, so a lot of these sponsors at that point, you're kind of turned away from him... We were a smaller company.
Really couldn't really do much. So what we did is we decided to embrace it and we said, Okay, we're gonna take photos of every part of this journey because it's a historical journey, that's an interesting journey of how he's dealing with this, and so that led to... A very good relationship with him at a time where he wasn't doing as well as he could have... Now, of course, you see, even of the century, you see,
be careful here because I still wanna maintain that relationship. But you see cases where it's very hard to recover, we're filing or drugs or really embarrassing behavior really harms the brand, but I think we've gotten more and more patient with our celebrities, we've seen a fat which celebrity was that was looking
donuts at a store and everybody forgot about it. The week later, people cheap, people go to prostitutes and people kind of forget it the next week, and maybe it's just the shock value has gone down, there's just a story now about J algorithm is sex tape, and people already talking about what a genius move it was. Where Kim Kardashian, who did it 15 years ago or 10 years ago,
got a lot of criticism for it. Yeah, it's an interesting perspective of how social norms have changed and how they're still kind of right or wrong, don't do stupid things, but the shock value of sex tapes... For sure, I remember Paris Hilton sex tape and that one, that was a scan Lamon scandals. But now, again, I like celebrity puts out a scape, it's almost intentional. And one of the things is really what kind of brand are you... Not every brand is sleek Clean.
Yeah, I totally hear you there. So let's change
topics a bit and talk a little bit about... So you're investing now, when you're looking and evaluating companies, what do you look for in startups, and maybe take the listeners from some of the basics, I'm sure you're lowering cost of acquisition, car, increasing lifetime value, LTV of customers, but beyond the unit economics, what special ingredient you look for what's going to signal to you that, Hey, this company is about to maybe take off, and I think I
wanna make a bet here. So for Star Fund specifically, which you say we have a very specific formula that's worked for us before, and the idea is very, actually really simple, is we're in a world word, it's not very hard to create consumer products, it's very hard to make them stand out and so what we look for in the company is a few things, forget anything to do with the founder of forgot all the natural stuff that everybody's looking at, and let's talk about
the unique stuff that we look at social To one second in 30 seconds, tell us about the Elliston ers about the standard stuff because just to bring everyone on the same page. Yeah, so of course, we look at the basic things, do we have a great founder, do we have a product that is unique, that has positive qualities that will actually be valuable and helpful to
that customer, do we have... We recognized and identified marketing channels that are going to be effective, so that if we do raise capital, we know where to spend that are we able to create inventory at the right pace? It's probably different than a lot of other companies, but were very consumer focused, so the questions that we often
come across are those... So for example, it's very hard for us to invest in say, We'd related products, even though that's been legalized in a lot of the US because it's so hard to market them, social networks and mobile are making it tough, and it's just a problem
that's bigger than us. So we basically try to understand the thesis behind it, understand what their unit economics are, what does it cost them to create a product, what does it cost them to get it from the factory, rotor, can they do that at scale, and there's a cost increase or decrease when they do that, and then assuming all that happens, how would they spend the capital that we're able to give them to grow rapidly, and then now we go to the less standard, but what we basically
are started to is very simple. We look for a company that's shown initial sales that have a unique product that needs...
That's in a market that's proven, meaning we don't typically invest in, Oh, I invented a new space suit in five years, everybody's gonna need it, we invest in companies that have something that they could sell tomorrow, but it may be competitive, there might be inferior products in the market, there might be a history of the market having low quality products that have caused people to stop believing in them or in this market, or thinking that everything is a scam,
and that we know that by bringing in the right celebrity... And this is a really, really important thing. The right celebrity are the right influencers, we can create both visibility and credibility, and then what we look at is, do we have the ability to do that in the market, do we believe that we can find that right celebrity, we can get them engaged enough
to create interest in that market. And the goal is really simple, we have a 12 month plan for every company we invest in, which is very quick, the products already on the market, we build a very credible and manageable direct to consumer marketing channel, and then we layer on top of it very heavy celebrity endorsement of visibility credibility, bringing all the guns together with the idea of generating a name for the brand, and once we reach a certain milestone,
say a million dollars a month in sales, approaching the retail partners and saying, Look, we have a brand that could drive people through your door, people are looking for us online, look how fast we've grown, you wanna have this brand at your store, because really that's the virtual cycle we're looking for when you can have a great online product, but if you're not in
stores people... You're always fighting for people to remember you... The good thing about being in stores is that people walk into the store looking for your brand, so the store is happy about it, and then when they get to the brand, they look it up online, so they remember that you can sell it on the line and it creates a one plus one equals three, and the goal is within 12 months to be in retail with each one of the brands that we invest in. So Is it the wrong time to tell you that I
invented an incredible, incredible space. So that in five years, you're definitely gonna Need... Is this a long time to tell you I'm afraid of hopes... Well, then maybe someone else, I need a space suit. So you brought up a couple of interesting points there, and I wanna tease them apart, two points in particular, at one point you said, Hey, we wanna bring in a celebrity, and obviously this has been the topic and thesis of the discussion, but a celebrity that's going to amplify
the business. Do you ever run into a case or how do you control for a case where, let's say celebrity over amplifies the business, it's almost like a good problem to have, but because of that, the supply chain and the inventory and the infrastructure of the smaller business can keep up and what happens is customers get disillusioned because the order of product and it says it's gonna get there at a certain point, but then it takes longer and longer, longer the views become
bad just because it... Yeah, you too. Look, I just turned down a company that is... Without talking about... They do, they basically have a version of the homemade coffee machine for a different product, which I want to... I won't say what it is, but I would love to have one. It's just that it's very clear to me that these are very complicated to make and it's going to be
hard to sell them at we're... It's almost like it's a self fulfilling prophecy, if we're successful, we're gonna fail, because I just know it's gonna be impossible to sell millions of these without resources that I can't
provide... I'm not able to provide 50 million to a company, so I have to know my own limitations, and so with the products that we tend to invest in, we do a lot of our due diligence comes into the question of, Can you produce a lot of this really quickly, and that's a big, big question in the process, again, not because we don't think you can make a lot of money on complex products, in fact you can, it's just beyond our scope of expertise where marketers...
We're a fund of marketers or No, we don't know much about operations, we don't get involved in the day to day management of the company, in the operation and the product chain from when it's built to the point where it gets to the customer.
We kind of wanna see that the company has those capabilities as a pre requisite, mainly because we just don't know how to do it, so ironically, a lot of founders will do this, they'll over create inventory early on because they overestimate their sales and we'll meet companies like that where they have a great product, but it's just hard to get to the market, and so they have a lot of inventory that for us is actually a plus, so the founders will sometimes be apologetic
about it. They'll say We have a lot of inventory. And I'll say it would have been better not to have built this, but the good thing is, is it's actually a check mark for us as, okay, I'm not worried about running out of products, of course,
unless it's not a short life cycle... That's super interesting. These two points, and I wanna push on this a little bit because traditionally, my philosophy, and for the listeners, I grow in a couple of businesses, end up selling a few of them myself on my previous life in my younger day, so to speak, but my philosophy when I work on skilling businesses is... I'm nervous about inventory actually,
so there's... You definitely need to be able to scale the scale quickly, and you have to test for that, you kinda have to test and... We stress test the system. But if I would come to a business and see a lot of inventory laying out there that's about it, that's bad, not new because... Exactly, because it raises a flag of why isn't it turning wires in a moving...
And where you see it as a positive, that's very thinly Would be better if they told me I made 10 million in inventory and I sold it all, but then they'd probably be too expensive for me to invest in, and it happens to be the problem that I know how to solve. So it's a good match, but it's not over projecting your sales is something that I think in the world of even... You've worked for big companies. I work for some big companies.
They do that all the time. I remember working for Dell during the summer of my first and second year at Kellogg, and they just released, I forget what it was called, it was like a tablet at the time, right after the IAT came out. And I was just shocked that the fact that we didn't know how to project how many were going to sell, and by the way, we called Wales, that were rejected, and that was fanatic is the opposite of a start up and the company that has all the
resources in the world. And so it's not... To me, it's not something that you can reasonably expect the founder to project at that point, which touches on financials in general, a lot of founders tell me, I'm worried about giving you my financials 'cause I don't want you to think I'm too optimistic or too... And really, I just look at them to understand what... How do you think about this business? What do you
think that's gonna require a customer... I'm not expecting you to really project what's gonna happen in three years, if you could do that, you would be a billion... Yeah. When I was at one of these aforementioned big companies that you talked about, I did some MNA deals, and when I would look at... Typically, when I look at companies and I look at projections,
I think, Okay, 50% of it is complete bullshit. And everyone is gonna show a heating stick, but for me, it's similar to what you're saying is slightly different, I look to think, to see if the thought process was there, then they check up all the boxes... Right. Did they think
about these things? They are these... Did they realize that past a certain level of production, they need another factory, did they realize that once they sell outside the US, there's a car, if... I don't know, there are all kinds of things that really... You wanna see that they thought it through, and the hockey stick is great when business is really headed, but let's be honest, it's a real exciting...
Exactly, exactly. So the other point I wanna push on is the thought process of getting things into stores and to me, certain products definitely deserve shelf space, and these are kind of mass products, and retail is a great channel, although retail is not cheap and we can go into... I think without going too deep into this, but do you have to sell on consignment, you have to pay to be in various parts in the store, then end cap or not,
so there's a whole economic model, and you know this better than anyone of what it takes to be in a retail store, that to me says, Just take it out of my margin and... Why can't I do the exact same thing online? What does retail give me...
For most products, not all products, some product, again, definitely deserve to be in the store because it's just you gotta touch it, feel it, and it just sells itself versus something that's maybe online, you can't experience, but if you don't need to experience it...
Why be in retail like that to me that I would push on that and say, why cut my margin, why even have a headache of someone dealing with all the bullshit the retail brings to the table, if you can just sell direct the consumer online... Well, I think it varies by product obviously, but there's a virtue of cycle of being in the store that's really important to keep track of... It's a signal to a buyer, the brand that's in the store is, tends to be viewed as higher
quality, it's been vetted to a certain degree. Now, the way you get into the store is really important at the end of the day, I... Shall space is really important to stores, and they view products in two ways, they see them out of somebody... That drives customers into the store. Something I'm really more than comes about me either, it drives customers
into the store. Like milk, you gotta go into the supermarket, it might be a loss leader that may even sell it at a loss for that, they view it as a product that you just have to have... If you're gonna be... You just have to have Apple at your... You may not be making a lot of money on selling Apple products because they're so strong, but you can't have a necrotic store and not have other products,
or it's very hard to do that. And then they view products as like an experiment, Let's see how the cells and what kind of velocity we can see for this product, what we try to do, what our goal is to come in and be in that first category because of the celebrity and because of the fact that people... There's a lot of hype around the product when we come into the stores, we say, Look, we're gonna bring you food traffic because this celebrity
is going to be talking about this, this entire... You're gonna get free publicity all the time and something... We do sign it, so CIVITAS, we're gonna say... We're gonna say that it's only available at
this retailer, and that's an important... It's kind of a really weird world, and I always compare it to the MBA programs, I don't know how many MBA programs are you applied to before you ended up choosing Kellogg, but I applied to four and I had four additional ones I would have applied to if I didn't get into one of my top schools, ended up getting into Kellogg, and then the ball flips from you praying the school accept you, now they're really hoping that you
accept them because they wanna have a high acceptance rate and other things, so it's kind of the same way with these products where you wanna be in the category of products where the stores really want you there, and then that affects everything that affects the business model, that affects the cost, and it affects the scale, and at the end of the day, for a lot of products, it's very hard to get massive scale without having the support of retail,
not for every product, and they're definitely products that don't need it, specialty products, high fashion designers who are working on their own brands might not need it, but their own fashion brands or beauty brands, they might not need it, but at the end of the day, even if you look at brands like highly cosmetics and the biggest influencers in the world, which have their own brands, they end up going into retail because there's just only so much you can sell online,
because it's so easy to price shop and to see alternatives, and people wanna try stuff in and you wanna have that location where people can experience it beyond just what the influencer is saying. So it really depends, and you know that the deal that Kylie cosmetics gets is not the deal that an average beauty brand gets when they speak to for... To Ultimate or whichever.
I don't know what store they're in. Yeah, yeah, so look, it's a great perspective about... I love the analogy of first you seek them out and then they seek you out, and then becomes this... It's a game really. And who holds up or hand and when do you play your cards? And how do you negotiate?
Well, we can talk about negotiating theory Langer hours here For sure, but at the end of the day, it's a question of creating scarcity, and if you're just another one, a lot of beauty brands, you're not gonna get in the store or you're gonna have to pay a high price to give in to the store, if you're the only one that's carlism tics, then all the stores are gonna want you in
there. So let's take this and kind of zoom out a little bit, I think from a macro perspective, so obviously there are many asset classes to invest, and I do wanna ask you about how you think about allocating a generic portfolio or even your portfolio of...
Between Annex funds, different stocks, investing money into startups, crypto or whatnot, but before that, you are one of our listeners or if a person out there, once you get exposure to startups there, I guess traditional paths of angel investors, which are very early supporters of a company that are willing to roll up the sleeves and help a company going Venture Capital a little bit later,
which is where you play... Look for in quick returns over a course of three, four, five years, many rounds a venture capital, you become big, you go to private equity and then you go to the public markets, that's typically a very rough path here, but if an average person out there... Once again, exposure to startups, can they... Yeah, I think the biggest thing is to join a group,
they're angel groups, they are... Don't allocate more than you're willing to lose, and don't put it all on one deal, I think the biggest mistakes I see people doing is saying, Okay, I have 100000 that I wanna allocate to this, let me find a start up and give them 100000, but really, you want variety, and you wanna start creating a peer group that you can invest with, and ideally, you also wanna find a mentor, so in the best case scenario, you have somebody who's done a few deals or has done a
lot of deals, who's willing to cut you in on to their deals and let you see him, you work for free for them, really, you say, Okay, tell me what I can do to help you, and then let me write in a small check into the deals that you're doing. I think that's a great way to do it.
And at the end of the day, it's very easy to see this shiny new start up and be very excited about it, but when you see a lot of them, you start getting numb to some of the things that get you excited and you understand that they're not that rare or that while they're exciting, they're still a way from there to success, so in an ideal scenario, you either work with someone who's already done the leg work to gain from their experience, you join a group that's looking
at a lot of startups, so you're not limited to your own deal flow, and you don't write a check very quickly, you look at a lot of opportunities, or you find that person that you trust and you join them, eventually you can start writing them on your own, but it's very easy to lose a lot of money this way, if you just kind of invest some start ups without really understanding what's behind them, or we're seeing a lot of other
startups in the category... Personally, I'm not a huge investing and I don't invest 50 million in the company that don't have that kind of capital, so I know a lot of smaller investments and that's how my portfolio works, I happen to have a brother who's exactly the exact opposite. He's a financial manager, invest in the stock
market, so we share... We basically have a joint pool, I invest in the... I do the start up stuff, he does the more safe and traditional stock market stuff, and then I made him invest a little bit in Bitcoin initially to this May, but he's happy now. But yeah, I think I kinda look at it this way. You have a pool of money, and a lot of people have said
this before, you have to pull that you need... Don't touch it, you have a pool that you invest in solid stuff, real estate, stock market within a conservative environment in the side, then you have the money that you would be willing to spend a very... On a vacation, or you'd be willing to...
Or you'd be willing to gamble away if you have to, and that's the kind of money that you wanna take into the startup world and into this place, and for me, working with the founders, enjoying their excitement, seeing them grow their companies is much more fun than going on a cruise. So if you're that type of person, then go into this Work, what type of returns should
the investors seek after how many years... And so the, I guess, three elements, what returns in terms of percentage, or you can maybe explain what cash on cash means, and then after how many years and how many other startups that I would invest in or investor would vest and me to hit... So to speak, like 10 startups fail two or... Okay, one hits...
What are those ratios? Right, so we have to keep in mind something really point about the startup investing, so much of what happens to a start up has nothing to do with anything you as the investor or the founder can even do it. It's who expected covid, and that's changed. 90% of the startups in the world have completely changed over the last year, and some of them benefited from it, some of them were destroyed by it and who could have predicted it?
And so there's so much macro that you can't expect that the only way to really be successful for a long time to have a portfolio and understand that macro events are gonna affect your companies differently.
So if you're thinking of getting into this space, you need a few things, when did you need patients, it's very rare to see a return very quickly, two is you need to have some high tolerance for risk, if you're the kind of person who's gonna make it harder, for the founder, because we're worried about your cash, I'm gonna call them every other day, you probably just shouldn't go into this world, there are other places where you can sleep better and the founder can...
It wouldn't be the right place for you to be. So in general, is you need to be the type of person who's a little adventurous and ready to do this, and the returns can be very significant if you get lucky, if things work your way, and the reason...
The reason is, there's just simple math, we come into companies typically below a 10 million investment valuation, we try to go at 5 million valuation usually, so a relatively early stage and very quickly raise their valuation, it's evaluation on paper because you can't always cash out, which is something you have to remember, but if we bring the company from say 200000 a year in sales to 20 million or 20 million, that significantly impacts the evaluation,
sometimes 10... Sometimes 20 and sometimes more, depending on the product. So you can make a very, very big return with the understanding that that's not gonna happen with every company you're probably... If you do 10 companies in statistics show that six or seven will completely fail, one or two will give you a reasonable return and one will give you a really, really good return, so you wanna have a 10 or a 20 or 30... In different funds have different strategies. To achieve that, the
bigger you get, the bigger the exits you need, so... Because we come in so early, a 50 million sale, 50 million sales for us is a 10X return. So what other funds would view as a complete failure for us is great, I mean 10 times on the investment... So the strategy really, really varies, we like to go early stage, like I do want some day if I have a bigger fund and if we have more money to invest, go a little later stage in
the CSA, but we really think of it as multiple... So when we invest in a company, we assume that a lot of stuff can go wrong and that our job is to... The only value we can bring the founders, if we make his life easier or their life easier, if we we're gonna make their life harder, then it's not a good deal for either side, it's not a good place for us to park our money, and it's not a good place for them to be working.
So if we can bring real value in our case, and every fund has different value, if we can bring real value because we have the celebrities or you happen to be an expert in their space, so if it's a medical... And you're a doctor, if it's a medical start up and you might know stuff about that that can help them, or if you have connections with the types of people that they need to work, you can create real value for them. That's a good opportunity to do it, but you have to be...
To understand that, you have to do that scale, if you're just gonna do one or two, odds are they're going to fail and you're gonna lose your money, so you really have to have the ability to ideally spread over at least 20 start ups over appear or... Or four years, if you really want to see this as more than a final little adventure. So I love what you said there. I wanna say Mo, but I love when I went out on the school you said... Because I couldn't agree with you more, and I think
people miss this. Is that if you're an investor or vice versa, you're a startup founder, you want to get an investor that's gonna be good for you, not only is gonna write a check, but that's going to be strategically good, open doors. And so what... What you said is, you're there to make the founder's life easier, and if you're not, and if you're calling every single day and saying What's the... So what's happening with the profit and blah, blah... You shouldn't be in this game, and that is...
It sounds like, of course, statement sounds very obvious, yet when you're in it, and the markets are moving and macro environments are moving, and a lot of times, like in any start up, there's a big element of luck that makes something succeed and you just see one big sale and the customer is waffle or what they're gonna buy or not, there's tension and the pressure, and it's really easy to default to the bed, your bad demons, if you will,
and start putting pressure and saying, We'll do more and sell more and be more, instead of thinking, Okay, how can I be more helpful? And I think this is key, right? Can you hold your shit together frankly, through the hard moments, the the moments of pain and pressure, and when you don't know whether which way the lock will break your
way or not. Is also the issue of humility. I think as an investor, we see a lot of deals and we tend to think that we're becoming experts, but the truth is that no one is a bigger expert in this company than the founder, and they're spending 10%
of their time... They're the ones up at night, and we're spending initially, maybe a significant amount of hours helping them get set up, but on the day to day, we're getting updated once a month or once a quarter or whatever it is, and we're there when they need help, but we just don't understand the business to the level that they do, even if on our spreadsheets, it looks like we do, and us, that story, I forget what the name of the company is
that the presses out west, and a lot of the big funds invested in it and the idea was it was a machine that would press the juices and the old press fresh fruit, and it would make juices for you, there's healthy drinks and there's all on brand and everything, but at some point they decided that instead of pressing the juices, they'll make a package that is already pressed and you just put it in the device, which effectively made it so that you can just
push it with your hand, and so this is a great example of... I'm sure the founder knew that this was not a good move, but I would imagine that they got pressured into it because on paper... That looks great. It's much cheaper to produce. It has a much longer shelf life, but the founder could have told
them, Look, this makes us... Every other machine out there. I might just say I. And so sometimes a spreadsheet makes a lot of sense, but being on the con floor, we could all be great coaches watching on TV, but if you have to bring up the ball and run the play, you know a lot of things that we don't... Sure, Well, look, when you think about the market today, right,
zooming out a little bit further, what are some... How do you think about stocks, real estate bonds, Bitcoin or other crypto startups, how do you think about allocating our portfolio, and again, we're not financial advisors, and neither were just how you think about your own investments, and do you see any trends in the market, maybe sub trends, if you will, that are starting to bubble up, that will become big movers in the future that people should call on Him,
like you said, Don view... This is advice, I think it varies from person. Person, my perspective is, I'm a big believer in Bitcoin. I do not believe in any other coins to the point where I would put any meaningful money in them, but again, not as an expert, but just at the high level,
I think... I've held Bitcoin for several years now. I knew, somewhat notoriously known for a big sale I made when I started, I was really struggling, that would have been worth a lot of money today, but I think You should tell us a story, I think As I was running Hyper, the enos and downs are a great periods, tough year. This was, I had bought 25 Bitcoin very early, relatively early around... I think I spent about 10000 to get
them. So around 400, at the advice of a friend who had been nagging me to buy them all they were, I could have bought them at 40 if I'd listen, but I didn't... 'cause I thought he was crazy. And I kinda put them aside and I was running to start up in the startup, had it, I was really struggling to his capital... Struggling to pay salaries and Bitcoin had gone up a little bit. I think it was probably worth... I don't know, close to 100, maybe a little less, and I had
no choice. I, at some point, I said, I can't pay my rent if I don't sell this Bitcoin stuff, so I sold about 80% of that portfolio, which would have been worth today, 87050000, a lot of money, but that's like... I'm looking at the part that I kept as what I'm happy about and...
That's exactly it. I can decide that I'm gonna wallow and say, Oh man, or I use the story as a cautionary tale to people, but there's a cost to running a startup, and sometimes it's not exactly visible if I had just accepted that job at Zynga that I got after school probably would have had the cash to keep on the Bitcoin, maybe I would have had more Bitcoin,
who knows, but... Or I would have never met that friend who called me to buy the Clos, who knows, but I have a similar story, but it's even worse, I want an early... And I actually got Shimon into this and later on, right as after the ICO, which is the initial coin offering in the an 2017, she onesie, listen, exit all your
positions. Got a big cook, got a Bitcoin, and I was think, No, these things will rebound, and as these are calculated risks that some of these will rebound... I was so stupid, I should listen to him. We adopt, I always doing it. I always is that... Imagine myself burning that money, not a lot of money,
I've done... I've tested a few thousand dollars here and there in other coins and always ended up the same, so I'm just assuming that if there is another coin that's gonna do really, really well, I'm not the guy who knows enough about finding it, and there's a value of market leadership obviously be claims, a market leader, so investing in a market leaders always has its advantages, it's not always
the right movement, but it definitely has sassy advice. Again, you know, if you just look at me as when I invested in Bitcoin and I assume I'm gonna lose that money, I got really lucky because I invested really without any education in his trust in somebody who told me to do it. So I would say to people, it depends which part of your money you're investing, if it's money that's really important to you, do not invest that way,
investing in a solid... Go to the stock market, go to real estate, real estate is interesting right now, obviously with covid and depending on where you go, you know the other war is the future of the workplace with Silverstein Properties, and you may have heard, we've made some massive acquisitions right now, because things are really, really
cheap, so it depends on... We just bought the tallest building in LA and almost half a billion dollars, so if your profile is of a cash rich investor, you can take different risks, and if you really believe in the market for traditional people who are thinking about investing their savings or...
Need to be more conservative with how they do it, I think you really wanna find someone that can guide you, that you really trust to help you, it could be a professional relationship, it could be a friendly relationship, but don't enter these markets, especially the riskier markets without... Holding hands with somebody and doing it alongside, but then
that's something I really, really believe in. If you're investing with someone else who's investing, that knows more about you than you're training on their expertise and their knowledge, you're in a better position than just jumping in. I just listen to a hard core finance to the podcast that listens to all the good friends that we're gonna bring on A Kino, an investment advisor or professional or anything like that.
I'm also not... Marin buffet where I can say, Oh, I've made so much money investing in that, you should copy what I do, but my brother has a smart saying, which probably still some more in buffet, but he's like, first and foremost, I try not to lose money. Once I got that handled, then let's talk about earning money, and I think that's a smart way for most people, unless if you're Marquand, you can take a lot of risky investments, some of them work on some of the... Well,
well. Look, on this note, I think I wanna thank you for your time and we can start wrapping the conversation up, but any parting thoughts, tidbits, words of wisdom, funny stories, celebrity
stories or other that you'd like to... In part, I'll... For all, it's been so much fun to talk to, I always find back to you and then actually having it recorded for now, I can listen to it and hear how often my voice sounds... I don't know if you remember this, when I just started hyper, the biggest challenge was how do you get attention and we talked a little bit about the issue with celebrities
misbehaving or getting in trouble. And one of the things that we did initially with hyper, we introduced to the market this idea that you can analyze the audience of influences, so it's not how many followers they have, but who is the audience, what are they talking about? And how engaged and actually there's a very vocal voice in the industry not to do this, people said to me, You're gonna kill your company because celebrities are gonna look at it and say, No, this is untrue, or...
No, I have a different audience, I have an audience and personal and you're not representing that, and so we built these tools and to release them, and I said, I'm praying that that happens, and every time a celebrity would come out or an influencer come out and say, These reports are nonsense, is an opportunity for me to get an audience, and I didn't wanna make them look that I would just say, Here's how we do the research, we'd love to get your input onto
it, but suddenly we were talking and we were on their level so one of the things that celebrity has allowed you to do is look a lot bigger than you really are, so when... I'm not gonna say the name, you guys can research it, but when certain influencers came out against and said, You can't trust this data. We have much better audience, I have 20 million followers, and there's those
times... The fact that they even mentioned us as something that they don't trust, I actually got us in the conversation, and then you start getting to those phone calls from reporters, any times that they're writing about this stuff, so leveraging celebrities isn't necessarily just them being pretty... On the package, sometimes them getting in trouble with them doing things that create attention, if you're using it the right way,
it could be really valuable. I think that's super powerful. This is a goth hacking before growth hack and became a popular, but... Yeah, it's great. It's almost like a saying that said, back in the day, I said, No, price is bad press, any price essentially is good, and you're just getting free, free attention, free free time in the limelight and... Well, we have a many recent political temples of how these dividends to certain political figures in the US at a year.
He reminded me of a story that I don't remember how long ago this was, but I used to call this the grenade. So
early on, I was kind of making... When I was just beginning my career is trying to make money and people wanted me to drive traffic, it was a less sophisticated time, and I needed to drive very quick traffic to this page, I forget what it was, but I need to drive traffic to it and I didn't really have a budget to do it, I have to find really cheap ways to do it, and it just so happened that Oprah had announced that she's retiring a few days earlier or something like that, so I built this
fat account on Facebook or what the account was that or sex, and then I'm happy the Holocaust was about how Oprah sax and I'm happy that she retired and... Good, ridden. And then I went on all these Facebook groups, were opera and posted
it, and I said, And if you want... If you want, it was some kind of click BAE, I forget what it was it something about like, If you wanna hear more cleaner and the amount of... I call it like the grenade, you go into these discussion groups, you post something really annoying, Volant to see who this idiot is, but then they go on to the landing piece that you want when
you put advertising and other stuff around it. So yeah, marketing, I really, I'm attracted to the indirect or the different ways to get attention, it doesn't necessarily have to be the template version of let's take a face on it with a smile and say that they endorse it. I love it, I love it. There's so many stories that do exactly this and when you wanna listen in is a good way of controlling your way... Getting your way into the Oratorio, I really appreciate your time.
Thanks for doing is. Hopefully, we can have you on again. And yeah, this has been great, I think a lot of very good, interesting tidbits about how to growth hack your way and really how to analyze businesses, how to look for growth, and how to think about library endorsements may be in a new late. Thanks so much for having me so much fun and... Yeah, any time I'd love to come back on Fantastica. I EA.