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In terms of so like what are the economics in you investing into a company? Like how does that work? As far as you go you say I have one hundred thousand dollars, I want ten percent of your company, And then they come back and they say, no, well we want only give up five percent. How does this work? As far as you going in and actually offering to buy somebody's company and.
Buy some equity. Yeah, usually they have around that they're raising, so they the company usually itself says we want to go out and raise a million dollars and they know how much they want to raise for the reasons that they figured out internally, and then they go to investors and say, what, you know, what exchange will you do
for a million? Then you'll have the In a good scenario, you'll have two or three, you know, lead investors come back to you with a term sheet that says, okay, we'll buy that on a five million dollar valuation, meaning that's twenty percent d D. And then the next one may say we'll do it on a six million, So it's better for you. You get a little less diluted
because we want the deal so bad. And so usually, like the best case scenario is you have two or three lead investors buying for to lead you around, and you take their terms. You don't necessarily take the terms that are most expensive. You take the terms that you feel like, that's the company, that's the fund I want to work with, that's who I want to lead and represent. So we have that, and then you have other investors around it who are followers, who like, you know, follow
whatever terms have been created. So it's it's usually that negotiating. So most of the time backstage does not lead just because of the amounts that we're putting in, but we always advise, so it's almost like we act like we're on their board even if we're not on their board, like with their help.
Well, what are some of the because you brought up challenges earlier, and I'm thinking to myself, we've heard about what it is to try to be a founder and race capital, but actually having a VC and representing three categories right like yes woman, yes, LBGTQ, yes, underestimated popula population. What is it like from that end? What are some of the challenges that you face and how have you dealt with it? Out of you overcome them.
A lot of a lot of people who just you know, they talk, they say they're going to do something publicly, they get the picture or whatever, but they really don't do anything. But then there's really more like people actively trying to not like to stop what I'm doing. So
I had a white investor. I have a lot of white investors, and I had one guy who is like, I don't know, I think he's kind of like mafia in Silicon Valley, Like he truly he's interesting and I don't think he's literally mafia, but he can make a phone call and stuff gets done and stuff goes away, right.
And he called me in the middle of night one time a few years ago and he said, I just want to let you know I just left a closed door, like you know, poker games essentially with a bunch of guys who are very powerful, and there's an understanding that you're not going to raise more than you know, ten or twenty million dollars ever in Silicon Valley. And I was like, okay, that was a conversation. Y'all had time
for that. And he's like, no, I'm serious. He's like you the powers that be are like, there's only a few of us. And the conversation, he's like, I you know, I said what I could, but I had to be able to not say certain things so I could come back and tell you. He's like, they don't want you to win. And look, we've raised I've raised thirty million dollars maybe twenty five twenty four of that has been
like direct LP money to invest in other companies. We should buy our track record by the trailblazing part of it, the groundbreaking part of it. We should be at least one hundred million dollar fund, if not ten times to what we are at least, and so I believed him when he said it. But I always thought I could break through that. I think that I think that, yeah, there's there's you see like Elon Musk and like how he he's direct click going after Cuban talking about DEI
is racist and all of that. That's what was happening behind the scenes. That's who I deal with. I've had so many conversations behind the scenes that are like a movie. They're like, I can't believe this person is saying this out loud to me, or somebody calling me and saying, you know, you need to shut up. You need to stop being so vocal about stuff. It's not good for you, like I've had so I had what was Paul Graham at YC speaking of YC. So I'm friendly with Sam Alman.
I think he's cool. I've invested in Open AI, very happy about that. Paul Graham, his mentor and the founder of YC, I do not like very much. And it's because he sicked his minions on me on Twitter and I had to get security before I should really have had security because I said something he said about his wife, and I said it was very sexist and chauvinistic, and I said, I just commented myself on it, you know, on Twitter, because I'm outspoken, and he just like came
after me. And it's happened a lot, like with different different people. Of note, that's happened because I'll just speak up when I want to speak up. I feel like I have the moral high ground to speak up because I'm actually doing action and I'm not just pontificating and criticizing from the sidelines. Like I feel like we could all be better. So I'm trying to be better. Why can't this billionaire be better?
So as far as like valuations, right, valuations a lot like how do you guys look at the valuations, Because we were talking to one of our friends, John Henry, and he was saying a few years ago, like, depending on what kind of company it is, it has a different valuation, right, Like if it's a hair company, the evaluation might be a lot different from a media company. That might be a lot different from artificial intelligence technology based company. So and then part of raising the money
is you have to raise one evaluation. That's one right, Yeah, So how do you know, Okay, this is a fair valuation and this is this company's overvaluated, this company's undervaluated.
Yeah. John Henry is a good friend and I've invested in his company and after he became a founder.
Yeah.
So a lot of it is just like what the market will bear. A lot of it is a lot of people just deciding just to say, well, what can I push across the table and somebody says yes to essentially, and it's kind of a joke in the industry because it's like every year it's different. In twenty twenty two and twenty twenty one is super frothy, super everything was valued so high, ridiculously not sustainable, but everybody was like, okay, cool,
sounds good, more money for us. And then when second half of twenty twenty two and twenty twenty three, everything came crashing down because you could understand that, yeah, you go ahead and y'ah. So the the so the valuations, but the reason that the valuations are different is because the multiples on an exit or a purchase are usually
much different. So a hair care product or a CpG company is gonna sell different multiples than a SaaS AI company, meaning like a you might for something CpG, you might have like a one and a half x to six x multiple on your on your on your net revenue. If somebody buys you on a SaaS ai, you may have like twenty x or ten x. So when someone's valuing you to invest in you, all they're doing is projecting.
All they're saying is, Okay, if I put a dollar in, what's the best what's the best guess I can make as to what your will sell for based on how you're doing today?
So is that from from your perspective? Is what a success? Is it a company to exit? Is it to create more? Is it to create more opportunities for founders?
Again from the three categories that we spoke about, how do you determine to measure success?
I love that question. To me, it's all three. That's it, right. For very very sharky investors, they don't care about impact and they don't care about like people coming up. Yeah, that's just not important to them. That's not necessarily bad, but it's just not my vibe. Right. They're like apples to apples, how much about getting back? So that is a juggle thing. But I say, and many of us say, you can do both. And I just want to say one thing, you said earlier that there are not a
lot of black investors. So there's so many now, which I'm so excited about. You know, like ten years ago it was so different, but today like that, like John Henry and I can be in a room and it's just back to you know, back to back. Still not enough, but so you have within black investors, you have some like six four or five ventures. Aaron and Nyambi. They are two black men. They've raised I don't know how much more than a hundred million dollars. I can't remember,
maybe two or three hundred million dollars. And they're like, let me put it into this spreadsheet and do these numbers and see what this company might or may not make. And I don't care. You know, it doesn't matter to me if you're a woman or if you're purple. I want to do that because my success as a black man is then going to be my success story and help others. Right. So I'm on the category and so which I love that. By the way, I'm on the
category of I want to get this one shot. I'm going to just make this more well known to people like you all are doing with your education, like being a bridge to understanding this with my audience, which is mostly women of color, and I'm going, so that's impact and success that I have a video right now that I put up today. A black woman comes up to me. She's crying, she's saying that she's essentially saying that she felt she felt heard and represented and seen because of
the work that I do. And she said a tangible something that happened. That to me is like the biggest that's the legacy. That's the thing that you can't take away. But I also not only want to. I feel like I have to make a lot of money from what I'm doing, even though even though we're not funded enough, I want to make multiples for our investors so that it serves as an example that you can do both. And that's a high pressure, but I also agree that it should be high pressure.
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