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VENTURE CAPITAL & PRIVATE INVESTING
Recorded: Sept. 11, 2025 Duration: 0:58:51Space Recording
Short Summary
In a dynamic discussion on venture capital and blockchain, speakers highlighted the launch of a new public company utilizing tokenization to innovate home equity lines of credit. The conversation explored trends in fundraising, growth indicators for startups, and the potential for early liquidity events through tokenization, signaling a shift in how investments are approached in the crypto space.
Full Transcription
Thank you. Thank you. Hello, good afternoon everybody.
Thank you for joining us here.
I know there's another Wolf Space going on.
They're finishing up their stock markets, daily recaps.
So once that's over, we'll get that audience here as well and get things rolling from there.
Once that's over, we'll get that audience here as well and get things rolling from there.
I know my co-host Kyle is in Asia this month for the whole month working on deals, making
moves happen, getting things done.
So he'll be joining us from Asia, but he will be on here shortly.
And I know we have one other speaker that is coming on to join us as well.
Usually on the show, we just go through and cover
oh, there's Kyle right there. Usually on the show, we just go through and cover
the latest updates in the VC world, kind of what's going on
and go over some hot takes. When I was going through and put together some of the show notes
this week, a little bit more on the hot take side.
We'll just kind of let the discussion flow where it wants to go
and go from there. If you're new to the show, thanks for being here.
We host this every Thursday, 5 p.m. Eastern.
My name is Jared. I'm one of the co-hosts here. My connection to the VC space
is I work with founders and startups anywhere
from pre-seed all the way up to publicly traded
companies and I help them grow their brands on X. So we've done somewhere around three and a half
million plus followers, billion and a half impressions. And the idea of that is when you
can market to more people, you can make more money. So that tends to be a good thing for
companies. So that's kind of my background. Kyle has a little bit more of a traditional background. Kyle, if you want, you can hop in and introduce yourself.
What up, what up, what up? It's so good to be here calling live from Bali this week
and having a great time. Jared, I'm excited to talk venture capital at Brighton Early here locally.
It is 5 a.m., but you better believe I'm here for the hustle, and we're going to make it happen.
So, you know, I think that the venture capital market is always hot, always has something interesting going on.
We had a new public company that just went live today, I think at market close, which was a private
company I've done a lot of work with at its figure. It's done a lot of interesting things
in the private space, especially with taking kind of more traditionally public style of vehicles or
public facing vehicles and turning that whole business of home equity lines of credit on their head, using tokenization to do so.
A really cool, cool model there. And a whole host of awesome things that we have on tap today.
I've done a lot of work in this space. If you haven't listened to the show before,
I am a venture capitalist. I do all kinds of investments into companies as well as syndications where I bring
others to invest with me. I also have worn the founder hat and often wear the founder hat,
including now where I build my own businesses. I have a portfolio of companies that I've invested
in as well as companies that I've built. And so I just absolutely love everything you do with capital markets, especially in the private sector.
So it's time to really kick it off.
I see we have some fun guests.
Jared, did you want to kick off the introductions of our guests?
Yeah.
One of the things that's cool about the show is we bring on a bunch of different guests every week.
So every week, if you come back next week, we'll have different guests next week.
And the week after that, it's always new guests.
Sometimes we have some reoccurring, but there's always a new guest.
So excited to have two different new guests on here today, but we'll start it off.
Ravi, if you want to give a quick introduction to yourself.
Ravi is a frequent flyer on the show.
And then we'll hop into our new guests, Matt and Gabriel.
Yeah, I was wondering if I'm really a guest because I've been here so often.
But it's one of the best spaces to be in. guests, Matt and Gabriel. Yeah, I was wondering if I'm really a guest because I've been here so often.
So, you know, but it's one of the best spaces to be in.
We seem to be worse, you know.
So I'm an author.
I've written a book on AI for food.
I do a lot of investing in food, agri-tech, clean tech, water tech, and emerging markets.
In fact, this morning we had a fantastic space in London looking at at a big food tech event coming up Dubai next week.
So I'll be in Dubai again next week,
looking at some innovation in this area.
So we're excited to listen to all the new folks coming
and really please tweet and retweet, sorry,
post and repost the space and spread a word.
It's one of the best spaces on PE and VC.
Again, thank you so much to everybody on the team
for inviting me back here.
Always a pleasure to have you, Ravi.
Matt, I'll pass it to you and then Gabriel.
Quick intro, who you are
and kind of your connection to the VC space.
Yeah, sure.
It's great to be here.
I actually don't know if I've done a spaces before.
So excited to be on my first one.
My connection to the VC space is I've been a scout for various funds for about the last six years.
My kind of MO is I help early stage founders that may not already be in the mix yet.
Maybe they're not in Silicon Valley or they haven't raised money.
And I spot them.
I help them understand how the game works.
And I help connect them to, you know, investors and, you know, so they can build their company and build their visions um i'm strictly pre-seed and seed at the earliest stages
and um i i'm having a lot of fun and looking forward to sharing some of my thoughts and hot
takes with you all today all right i guess i guess i'm up um hey everyone excited to be here. So my name is Gabriel Jarosand. I'm a VC, general partner at
Lobster Capital, where we just invest in the top 2% of Y Combinator startups. So YC is pretty
selective. The acceptance rate has dropped below 1%, but we reselect top 2% on top of that. So we make few very few bets with a very high conviction.
And I'm excited to be talking with you all today. Awesome. Glad to have you. And Gabriel,
if you don't mind, I'd love to just ask, just kind of get the show started with asking you a
question based on your background. So when you mentioned you guys are looking for the top 2% of YC companies, what is that qualification?
Are you looking at what qualifies a company as the top 2% for you guys?
Yeah, yeah, sure.
I mean, that's the question I sort of want people to ask.
And the answer is it's pretty arbitrary.
We define it as we want.
But there are two main things that we
come back to and that really define where we invest first of all we back the top two percent
of teams uh you know repeat founders who've had a big exit people who've been at big name
universities we do know that for example uh sandford is the place that created the most
unicorns uh when founders come from there it's not the only place we invest into obviously,
or come from great background.
They've been working at great tech companies before.
So top 2% of teams,
and then top 2% in terms of strong early traction,
which is also a reflection on the team at demo days.
So why see the three months program
that ends with demo day where startups present to investors and are trying to raise around most of the startups will be doing 5 10 50k maybe 100k in
revenue some will be in another category where they do 500k a million dollars in revenue and
that does not happen by just chance does not happen randomly you have to have found probably
product market fit in order to get there
and you need to know how to actually build something and to sell it and people actually
are buying it and so it means you're a crack team again you don't get to a million by chance and so
those are the kind of companies we like to invest in you bring up good point there i don't know how
much of uh alex fromose with acquisition., how many acquisitions they're actually doing or if they're more so just an info company now.
But a couple of years ago back, I don't know, maybe this three years ago or so, their whole basis was if you want to get acquired by us, you have to be doing three million.
And the reason for that is basically what you just said. You have to show competency. And there's a huge filter just in, are you going to be
successful or not? In the fact of if you've already seen some success of, are you competent?
Can you hire a team? Can you hire the right people? Can you operate? Can you sell something?
Do people actually like what you're doing? And there's a certain threshold of revenue that really validates what that product
market fit is. So I don't know if anybody else has any thoughts or would like to expand on that,
but I'll just kind of pass the mic to the speakers here and let you guys go for it.
You can just invest on conviction. That's what many city investors do but you gotta have some uh you gotta have some numbers so yeah i'll leave it to others to comment
as well yeah it's it's a really interesting point it's definitely like almost the the nature versus
nurture argument for the venture capital space like are you investing in a business idea, especially in
the earliest stages? Are you investing in a business that you think is really incredible
and has awesome legs? Or are you investing in founders that you think are incredible people,
right? And obviously, in an ideal world, you want the answer to be both, right? But the question I
think that's more interesting is if the choice is binary, which is more important or which is the primary driving factor? And to be honest with you,
for me, it is absolutely the founders, which if taken to the extreme, theoretically could mean
you're investing in founders without really having any conviction or any clue about their business. Now, is that what happens in practicality?
Oftentimes, no.
I almost always want a strong business model
on top of a strong team in the earliest phases.
That being said, I just think it's an interesting thought-provoking conversation
on which is more important, a strong business model or a strong team. shoes with the business no matter what the company is, considering they're going to be exposed to need to pivot multiple times in terms of what they think their business is
to what the business actually becomes based on feedback from customers, based on opportunities,
and a variety of other factors.
I do think that, again, if we're playing the hot take side, I would take a founder with
no business over a good business with no founder 10 times out of 10. That being said, I often deploy it to a family office,
which means that the investments I make are off my own balance sheet. I don't have to necessarily
justify my decisions as often to someone else. Whereas a lot of venture capital funds also have
a different level of burden required on justifying the decisions that they make.
And so perhaps that could adjust the perspective there.
If you need to answer to somebody, well, why did you make this investment?
Sometimes, well, that's because this founder is the best person I've ever met.
Might not be a good enough answer.
You may need some of those quantifiable metrics that only a business model could provide.
That being said, for me, I think it's clear 10 out of 10 times i'm going founder over business model if i had to choose between the two
and by the way i i wanted to reiterate that i agree with that uh i believe the strong early
traction it's not only business model it's what what result do you have how much dollars are you
making in the bank and that's a direct link to the quality of the team if the best way
to prove to me that you're a great team is to actually you know grow the company very very
quickly we're playing this game of trying to predict the future and obviously we're all very
bad at it because there's just no way to predict the future but my vision is the best way to predict
someone's future or a company's future is to look at its immediate path. Yeah, I definitely think that's right.
I do think there's a consequence of, you know, you don't get into the company at the same price,
you know, on the spectrum.
Like, obviously, a company is founded, they get the team together, they get early capital,
they build, they commercialize, they grow.
And through that period, like, the valuation goes up.
And I think the upside of investing in a team before impressive traction is a lot of the time, not all the time, but a lot of the time, you can invest on a lower valuation because it's more risky.
There's less proof.
And there's also probably less investors around the table that are interested in investing at that stage.
Of course, the chances of being wrong
pretraction are much higher um but i i i often like getting involved or like as early as possible
um mainly because like yeah like i love when there's a founder and no investors touching them
because there's no objective proof points but there's some interesting things about their
background that's like that's interesting to me.
But it's much more risky.
So it kind of depends on where you want to play in the stack.
And everyone has their own place, of course.
Yeah, great.
It's pretty... No, sorry, I was just going to say that I think it's pretty interesting
because it's not really a clear formula.
Like, it's really...
For me, one critical piece really is, of course,
a strong background, as you said.
And if there's a history of somebody who's already created and sold.
But again, traction is something that really drives, at least when you're looking at companies.
Because if you see some good movement there, you want to go back and really go and see if something's coming out.
So I think traction for me is one of the biggest indicators whether this will really make it or break it. But of course, I've been also
proven wrong when you've seen some very good traction, good logos have come in and then
you're thinking that this founder is brilliant, but when it comes to team player, everything
crashes. So it's really, I don't know if we really have a formula, but really, as you said, you know,
nobody's seen the future. But you look at some parameters and then you really see whether
this will work out or not.
But definitely the bio, the history, the team and the traction are critical.
So let me pose a follow-up here.
If, you know, you guys are all founder-based, I'm with you there.
To me, if you don't like the founder, to me, it's an automatic no.
But a lot of times the winners as founders, like when you look at somebody like that person's a winner, they're going to make it work.
A lot of times those really successful founders go through several failures or misses.
You know, this startup fails or
this one just does okay and whatever until they hit that big one.
And so do you think that those failures are what makes them the winner or do you think
they're a winner before and then you're just hoping that, you know, this first company
that they're starting or the second company they're starting is the winner and not one
of those failures on the way to that founder's unicorn.
I mean, it's a lot to do to really define what is that failure, right?
Is it a failure of being an entrepreneur, a failure of, you know, being a manager, a
failure of really being a planner or an executor?
So what I'll say on the failure side is, as somebody who's investing into the startup,
you're investing into the startup
and you don't make your money back.
Yeah, I think, you know, I mean,
if you've seen at least two, three major failures,
you've done extremely well
and suddenly everything crashes well, I've seen,
at least with co-founders on the road,
because I've also looked at companies which are more co-founder driven rather than just a founder driven, because then
you look at probably asking the co-founder to step in more than the others. I've seen some insane
clashes between three co-founders and everything goes to a shit show. Even they have one of the
best product, they have a great traction, and then just personalities. That's one of the biggest I've seen failures and people refusing to let go of power when you start moving up and advising them to get a real CEO with some great background.
That I've seen as another big failure not to let go at the right time and thinking, you know, I have everything and I can take it to the next level.
Those have been some interesting points that I've seen failure happening.
Yeah, to answer your question, I mean, I think you can, there's no such thing as being a
winner or being a loser.
So you can, you can, you know, create a first company that fails, create a second company
that fails, and a third one can be a massive hit.
It doesn't mean you're a failure before a winner after.
It just means you learn from your mistakes.
And the company is the winner.
And the founder is the winner as well,
but he couldn't have won on the business in the first trial.
That's what you see.
You see the first, the second company not work out.
The founder takes the learnings, then applies them,
and that creates the winner.
It's never the idea.
I think it's rather, I mean, the idea does count going back to the previous discussion,
but it's also who the founder became, what he learned, what he did different.
It's a good take.
Anybody else want to chime in on that?
Yeah, I agree.
Agree largely with with Gabriel.
One thing I'll also add in is a lot of startups and startup success is luck.
Imagine starting a company in February of 2020, right before COVID like that, that that probably sucks.
But on the other hand, there's a lot of companies that were boosted by by that.
Obviously, that's an extreme example.
But a lot a lot of things that happen in the industry are because of luck, and some of those things are good or bad for a company. But I agree with
Gabriel. If a founder starts a company that fails, they're not a failure. They could build a billion
dollar company next. It's just kind of, is everything come together at the right time,
right place to make that happen? But a founder is never a failure or a success alone.
but a founder is never a failure or a success alone.
Good take, good take.
So if we don't have any other thoughts on that,
I'll give you guys if you want to jump in,
but otherwise kind of move on,
maybe shift a little bit to a next topic here.
This is something we've talked about a few different times. I'm going to pin this tweet here in the scoreboard of the space here. And actually a tweet from our co-host Kyle here, just talking about tokenizing, tokenizing equity on the blockchain. Kyle, I'll just kind of open it up to you if you want to dive into that point a little bit and maybe explain that a little bit more. Sure. Sure. Yeah. Well, look, it's been no doubt about it, probably the
most impactful year for blockchain and tokenization writ large this year, 2025, just with the
international presence, with the network effects, with kind of the, I don't want to say too big to
fail because it's crypto and it will certainly have its day in the shade, if you will.
There's going to be a 50, 60% drop at some point if history repeats itself.
But it certainly has reached a point where it's almost too big to ban and too powerful
to ignore.
And so I think that there's been some really, really interesting discussions around how this technology can potentially create earlier liquidity events for investors.
This is something that if you've listened to the show for weeks on end, this is something that's such an interesting and important point for me as an early stage investor is that we need to find more opportunities to allow early stage investors to get liquidity earlier. That way they can actually then deploy again into the next round
of early stage deals, as opposed to being stuck with their investments for seven years nonstop,
which means that they can really only invest every seven years that particular dollar.
And so obviously if you sell earlier, you're not going to have quite as much exposure to the upside,
but I think there's a lot of early stage investors that would be happy to take a 10, And so obviously, if you sell earlier, you're not going to have quite as much exposure to the upside.
But I think there's a lot of early stage investors that would be happy to take a 10, 20, 30
times return on their investment, then maybe miss out on the final 5 to 10x in exchange
for three years or four years of earlier liquidity.
And then you could kind of pass it on to a different set of investors who would rather
see significant traction, more mature startups, more market penetration, who would be more interested in taking a 5 to 10 extra turn on that later stage business.
And you can kind of separate or bifurcate those into two separate business models, if you will, because I really think they are in a lot of ways.
And so that's how I've always felt.
That's how I've always felt.
And so there was a lot of conversations, as we've talked about on the show recently,
about both SPVs, which are special purpose vehicles.
That's the term for these type of business entities that invest into later stage startups
that are really hard to get access to.
So if you wanted to invest in OpenAI, for example, it's a private company, which means
getting exposure to the company's equity is very difficult.
And there will be people that have access to those shares that will instead create a vehicle that owns those shares.
And then they'll sell shares of that vehicle, which might be more accessible.
That being said, those vehicles that kind of act as the intermediary often will take fees.
act as the intermediary often will take fees. And so a lot of times you're now seeing it get a
little out of control with SPVs on SPVs, where there's fee companies on top of fee companies
that own these shares or fee companies on top of fee companies on top of fee companies that own
shares. So it's getting a little bit out of hand. And so I think the reason for that, in my opinion,
is actually just because, as I mentioned, a lot of people went into this stuff and a lot of people went out.
And so we've seen a lot of recent pushback from OpenAI, from Anthropik and from other AI companies that basically is trying to defend against this idea of SPVs.
this idea of SPVs. And so the article that I was responding to was discussing the fact that OpenAI
is really trying to cut down on these SPVs, where they're trying to say that they need to have
rights over any share transfer within the company. And so if these types of things,
SPVs could happen, they're going to void the deal. They're going to avoid the transactions. They're going to prevent this from happening. And the reason for that is because they don't want
the multiple layers of SPVs. And that's the excuse that they're using when I believe it's probably
a bit more about control over who owns their equity, for example. They want to take those
fees and write up their valuations as opposed to having
somebody else take the fees at the same valuations. So I think it's probably more economic than it is
about protecting their particular shareholders. But the reason I believe that is not actually
because of any perspective on corporate greed. I actually think it's because of the fact that they
don't want to go public. And so as I've talked about a lot, I'm actually very excited about the IPO markets being healthy,
very excited about the acquisition markets being healthy,
because if we're not going to have this earlier opportunity for investors to get liquidity,
then we need to shorten the duration of companies to go public or to get acquired.
And so when you look at some of the world's largest companies being private companies,
I think that's a bad thing.
So the tweet that I had put out there was, you know, the answer theoretically may not be tokenization of shares, which, again, theoretically, that might not be the answer.
Maybe we don't do tokenization.
I obviously know that I'm biased.
I think that that solution is one that works very well.
But even if we assume that tokenizing these shares and then creating a trading market
or a collateralization market around it that allows the company to stay private from a
compliance perspective but is public from a trading perspective, that seems like a really
fair answer for everybody.
But if we say theoretically that is not the answer, at some point we're going to have
to find new ways to encourage these huge companies to go public.
I've talked about this quite a bit. I don't know how I feel about forcing companies to go public.
Obviously, that doesn't seem very capitalistic and certainly seems a bit more socialistic in
terms of doing that. So I think it's much more about incentivizing companies to go public as
opposed to forcing them to do so. But if we don't do tokenization, at some point we need to do it a better way.
And then my real kicker, my real perspective here
was the only reason that these multilayered SPVs
actually exist is because shareholders
want earlier liquidity.
And so this doesn't actually, in my opinion,
solve the problem where I state
they'll just start selling the LP interest
in the base layer SPV instead. And so really what I think is going to happen here is that this doesn't actually solve the problem, where I state they'll just start selling the LP interest in the base layer SPV instead. And so really what I think is going to happen here is that this doesn't actually solve
the problem. Instead, you already have businesses that have invested in the cat table. And so what
I think is more likely is that you're just going to have more actual second layer SPVs because
OpenAI actually cannot control what happens to business equity that is not their own, right?
So if I have 5 million shares of OpenAI that I own personally in my business entity,
and that business entity is called Solon Ventures, which is my firm, OpenAI LLC, right?
So it's literally an LLC that's only job is to hold the OpenAI shares that I own on behalf of my family office,
which is very common, by the way. People will set up their own business that then owns these
shares. They do that to kind of protect the tax liabilities. They do that to protect all kinds of
liabilities of owning those shares and gives them a bit more flexibility on how they do it. Maybe
you can set it up as a trust. Maybe you can set it up as an international entity for tax reasons.
There's all kinds of stuff you can do. So let's say I now have this business
entity that acts as an SPV, but I'm not syndicating it to anybody. I just own it myself.
Now, I can actually sell shares of Sunland Venture, OpenAI LLC, and sell those shares to
other people. Now, I can take economics on that. And theoretically,
opening eye doesn't really actually have a say on how those shares are moving because it isn't
moving, right? The shares are fully owned by some adventures. Oh, see, what I choose to do
with those shares, I can do whatever I want with. And so they don't have quite as much control here as they think they do.
Theoretically, maybe they could actually try to avoid my shares saying that I am shilling
them out.
I'm not sure if that's what they're trying to do.
If they are, I think it's actually kind of wild because that certainly could provide
way more power than I think we would want to provide founders.
Maybe it works in solving
this problem, but it would potentially give them opportunities to do things for other problems that
are not deserved and be able to avoid your shares for random reasons. So you'd have to be really
careful about the powers you'd give them on that to have somebody say, yeah, you can invest in my
company, but I'm going to take away the shares whenever I want. That doesn't totally seem like
a fair trade. But yeah, so I'm rambling now, but I'm really interested if anybody on the panel has any
thoughts around special purpose vehicles or on syndications, because I think that while
it's been an opportunistic thing and can sometimes get out of hand with multilayered
SPVs and fees, I think that this is almost addressing a symptom as
opposed to addressing the real problem of this reality, which is more people want access,
they don't have access to do so, and more people want to be able to take profit on their opportunity
and they haven't been able to do so. And so these parties naturally come together into the deal
making process. So interested to hear if anybody else has any thoughts. Are SPVs evil, like what these big startups are trying to kind of claim here,
and they're just for opportunistic capitalists to take advantage of the system? Or are they kind of
a necessary evil with respect to creating a bit more of a liquid market for an asset and industry
that I think desperately needs it? Anybody have any thoughts? Well, I got started with spvs i run probably 100
plus spvs and what you're talking about is late stage spds for those big which are very common
there's a lot of those open ai those spacex shares those tribe shares etc now you have to remember
there's also a lot of very early stage spvs where you don't have all of those sort of problems or issues because they're just companies raising and
SPVs are great because it gives access to individuals with very small checks like sometimes starts at 1k, 2k to those startups,
whether it's big names or like small startups. So it gives them access to that and the startups it allows them
to raise from from more people even if the funds don't back you you can raise from your community
from you know 50 100 people that you know all pony up and put two grand and that's 200k fits
100 people um there's always the question of liquidity of course that the blockchain could potentially solve um
i'm not necessarily a big fan of early liquidity i think if you're choosing to invest in a startup
you should be around for the ride of course the investors and the lps in the fund they do want
early liquidity so you have to be mindful of that and respect their wishes and choices as well
um but spd in themselves are not bad.
Of course, when we're talking of those very big names
that everyone wants to get into and then everyone wants
to get out of and then the company has usually
right of first refusal on the shared transfer,
that's where it really gets messy.
I personally chose to just stay out of all that,
make my life so much simpler by focusing on early stage,
which is where you
make the most money anyway but also where it's obviously the longest so um but i know this is a
big big big big mess and yeah potentially potentially blockchain could be a solution here
i don't think the companies want the shares to not move but the underlying asset to move on the
blockchain without them knowing
who they go to like I think we're a very very long way from companies allowing that but we'll see
yeah yes my take on this is um I was listening to a interview with the stripe founders a few
months ago and they were saying how they never want to go public. And they may be able to pull that off.
You know, they're doing tender offerings with the employees.
You know, there's also opportunities for investors to get out.
And I think that like you just think of what is the job of going public?
I mean, I think the most important thing is to like get liquidity in the company and pay
out the early believers, the employees and the investors.
If that can be accomplished through other means,
I think it's like an interesting conversation
on who goes public and why.
I think the public markets are important.
I think they're a key part of our financial,
you know, fabric of the country.
But I don't know if a lot of,
you know, with these tender offerings
and with the ability to get liquidity without going public, I'm curious to see how this shakes out.
I don't necessarily have a prediction.
I'm more just curious.
So I'll jump in and kind of ask a follow-up. I know we kind of get on some other points there. And Kyle definitely learned a few things from you on that as far as even just setting up a separate LLC to hold the shares and tax benefits of that.
So that was definitely a good dunget to get.
But to kind of follow up on the tokenized aspect or even you guys mentioned some of the allowing smaller people to get
in, you know, $1,000, $2,000, whatever it may be.
Does tokenizing the equity or some of those other options we talked about here, does that
change the view for the company standpoint?
Because traditionally, you know, the VC world has really been for, you know, people million dollar plus accredited investors, people with money.
So allowing more of the, I guess, if you want to call it the retail base in, how does that change the perspective from the company view?
your investors or even just less people on your cap table or their ability to have patience
because they already have money, you know, and that's not their last thousand bucks and
have been through the game before.
How does that change the dynamic?
I'm a little bit of a skeptic.
This makes me pretty unpopular, I think, for some people.
But I don't think that the startup game should be, like, it should be the goal for all retail investors to, like, invest in startups.
Look, like, the most sophisticated investors in the world have a very low hit rate.
And that is by design, because when they they do hit it covers the whole portfolio but like there's so many companies that get started that seem to be promising that will
never deliver liquidity and i feel like it's just like not an asset class at least for the earlier
to mid stages that that i i think like retail and like i think on one hand retail investors probably
shouldn't want to get in it and then i don't know if the founders want the retail investors to get in it there are tools
from angel list for example the roll-up vehicle where i want to get a bunch of one thousand dollar
checks from from smaller investors i can then it rolls up into one item on the cap table so that
is fine because it's it's a bunch of investors in a roll-up vehicle it doesn't impact my operations
it doesn't impact really anything but i get these people involved but i think that it's a bunch of investors in a roll-up vehicle. It doesn't impact my operations. It doesn't impact really anything,
but I get these people involved.
But I think that it's a slippery slope.
And last thing I'll say on this is
I've never been that supportive
of the reg CF type thing
because most of the companies that are raising that
are companies that couldn't have raised through venture. And there's maybe a reason for that. And a lot of retail investors have lost their money
through things like that. Not all, but a lot. And I would say a majority. So I'm conflicted on this.
Maybe it makes me not popular, but I just feel like I know too much just not say what I just said.
I think that's good. I definitely think that's a take on on the reg cf so i want to pass it to the panel see if anybody else has any
thoughts on that that's a good hot take fellas come on nobody's got any thoughts on that. Reg CF, not the best way to go.
And those companies can't raise from bigger investors.
What do you think?
Yeah, well, look, I mean, as somebody that's done a coordinated Reg CF campaign, I've done
a Reg CF campaign, fully audited financials with one of my previous
portfolio companies. I think what you're describing makes a lot of sense and aligns with our experience.
It was difficult for a variety of reasons. I think that, one, you have to go through
a broker. You have to go, you know, there's no way, excuse my yawn, it is 540 here, as I mentioned, AM.
There is no way to do a RegCS campaign
without going through a licensed intermediary.
And not necessarily to talk shit
about licensed regulated financial intermediaries, but fundraising with
them sucks because traditional investors are used to a much different process than one that is
highly regulated, one that has all communications monitored, one that has extremely high requirements
around the information you provide, for example. So once
you have a live Reg CF campaign active, you are not allowed to talk about the terms of the deal
in terms of what actually the specifics are financially. You are not allowed to provide
information that is not publicly available. You are not able to accept funds from any place other than through the portal itself. And so these three
components in and of themselves present a really complicated environment and structure in order to
fundraise. And so I think that just those three factors alone makes these types of offerings
dead on arrival with respect to traditional venture
capital style of investors. Perhaps that doesn't hurt the average retail person as much if
they just scan a QR code and go to a platform. It's all the same to them. But we have not
seen the reg CF really catch on in any meaningful way, I think, for this particular reason.
That being said, there are some interesting little hacks to optimize that flow that I did not take advantage of, admittedly, that I've learned after the fact.
But I think that the main point stands true that it's been a really tough process.
So follow-up question, and maybe I'll pose this question to Gabriel. When these
companies do their reg CF, that's maybe their starter round or one of their first rounds.
When they go to raise again 12 months from now, how does that reg CF impact that second raise?
Because now instead of five investors led by this guy who's really successful, now it's
led by 150 random people on the internet.
How does that second round impacted by the first?
Does that make those second round investors hesitant to get in because there aren't any
impressive lead investors.
Yeah, that can happen.
I mean, I'll tell you the truth.
I really live in the world of Y Combinator startups.
And so there is very, very few of them that go out and actually do REC CF either before or after.
And to be honest with you, Y Combinator themselves sorts of tends to discourage that, for many reasons, one
being what you just said.
It's not that I like it or endorse it in any way,
but it's crazy how much it still relies on, oh, who else
is investing in you?
So I'll give you a very specific example.
For investors evaluating to invest in my subsequent funds in my second fund
one of the big questions I can ask is who are the investors co-investing or investing after you in
the startups that you've invested they care more about that and about the performance of the
startups so of course Rekia doesn't give you that
you talked about the next round even in the current there's many vcs and fans who will not touch you in this seed or precede round with if you're doing a any sort of crowdfunding um
there's this i don't know it has somehow a bad reputation it's viewed as and again i don't
believe that should be the case i'm just
telling you what it is that way that oh if you're doing crap it's because every other every real
quote unquote every real bc rejected you and that's you know really really not true and of course
sometimes you just want to have your community be able to be shareholders and there's lots of it
like we're all here on x and spaces because we believe in
community obviously um but yeah it's too bad it gets to that wrap um it's been like this for the
last 10 years i was thinking and hoping it would change it would change so so far it hasn't in my
opinion um but it is it yeah it's both a blessing and a curse it could also be a blessing again
because it could be,
you don't need to wait for any VC's permission.
You can just go out and raise if you have a strong community.
But it could be a problem down the line as well.
I think one thing that ties in really close to this
is this tweet that I just penned here in the bio
or in the scoreboard of this space.
And basically what the tweet says is this guy,
born in business, views venture capital as one of the worst paths you can go on early in your
career. And I think a lot of that translates kind of to the aspect we're talking about as far as,
you know, the retail people who have less experience, have less money.
Maybe they get trapped in VC and they don't quite have the patience
and they're just not quite ready for it
versus the people who are more tried and tested who have had the success.
It's a lot easier for them to wait that out
or to deploy some capital and still be okay
and not necessarily need that money.
Just with the hit rate of different companies you invest in, you know,
with the success failure rate there.
So didn't know if anybody had any thoughts they wanted to add on to what was just shared,
but then also, you know, this new kind of hot take as far as, you know, VC or venture capital should be something that
you get in later in your career after you've already had some success.
Yeah, I remember seeing this tweet. I have a little bit of a different perspective on it.
I see this more about like choosing not to actually invest in this industry and more
choosing to take a role in the industry.
Like when I saw this tweet, I thought of like it's speaking to analysts and people that are coming out of college to join a VC firm and do the thing.
And I perceive the reason this tweet exists is because a lot of those people aren't actually interfacing with the LPs.
A lot of people aren't actually interfacing with the founders.
They're doing a lot of work that the either GP needs done that they don't want to do themselves
or they're just like, you know, they're just kind of like doing work they think is important,
but in the entirety of what you can be doing in venture is not.
And I think that like what I agree with what you just said is that like if they go out
work for the next Uber, then say they want to join VC.
They get to skip being an analyst, skipping an associate, skipping a principal and probably just jump straight to be a partner.
But so many people just want to do VC because it's high status.
So they jump in and then they realize they realize the truth of this tweet, which is like it's actually not that simple.
And to do good at it, you should find success elsewhere than jumping on a high level, not work your way up. Of course, there's
some people that work their way up, obviously. But, you know, that's kind of my take on the tweet.
Yeah, I mean, that's a good take, Matt. I mean, it's one of those things like everything is
everything is glitz and glamour. And like, it always looks easy, but that's not always the
case. I mean, you're looking when you look at the guys that are super successful in any field that they're in it's um you know they're
anomalies i guess you could say so kyle sorry i saw you come off what do you what do you what
do you want to add to that yeah it's uh you know, I think that it's an attractive space for young people for a variety of reasons.
I think ideologically, it's fun, right?
Because you're innovating.
You're changing the world in an impactful way.
You're at the ground floor learning, getting your hands dirty, X, Y, and Z.
All these things are wonderful.
I don't think that that hurts an individual.
I certainly think that working at an established business teaches you a lot of things that you're probably not going to learn.
In the startup world, you may develop kind of bad habits, if you will, because startup culture is very different than corporate culture.
if you will, because startup culture is very different than corporate culture.
And so a lot of people do benefit from established company work before working in startups,
because it does kind of create some level of, you know, CLC 6 training.
So then you can go into the entrepreneur world.
I tend to disagree with that personally, because, you know, I certainly never did that.
But I can see where some of those perspectives come from. It also, if you work in
the traditional markets, you may learn a little bit more about where the actual opportunity is.
Whereas, you know, if you're just in startups all day, you may not quite develop the barometer to
determine what is a solution in search of a problem and what is a solution that has product
market fit. And those two things can look similar, can sound similar, but are very, very different.
And so many people, I think, struggle to build that muscle, which is maybe where some of
the additional perspective comes from.
But other than that, I think this is also just kind of a hot take and somebody that is kind of hard done in one way or another from either working in venture capital
or they're generally a skeptical person of venture capital.
I know there's a lot of people on Twitter that, especially right now, they love kind of the sweaty businesses,
you know, the, you know, buy a laundromat or,
you know, do, do something like that. Um, Airbnbs or, or a variety of other projects. Um, and so
those people are just never going to understand venture capital. And again, there are a lot of
flaws and a lot of negatives to the industry. I think there are a lot of people that are overhyped.
There's a lot of people that, that, you know, drink the Kool-Aid too much. Um think there are a lot of people that are overhyped. There's a lot of people that drink the Kool-Aid too much. There's a lot of vaporware that gets created.
And venture capital is definitely the closest thing, aside from crypto, the closest thing to
gambling in the capital markets stack. So there are certainly plenty of reasons to be critical
of this market. But at the same time, the highest risk often comes with the highest reward.
And to be honest, when we're talking about innovation, innovation disproportionately comes from younger people or at least more flexible minds that are willing to challenge the status quo.
So I think that any entrepreneur or any tech person that reads that article is going to see right through it and see it as a challenge to get into the industry and start making a difference.
Good take. There's always people who are skeptical on anything you do, regardless of the success rate
or even after you have success, whatever it may be. I think that's just naturally part of the game.
Gabriel, did you have any thoughts you wanted to add in on this one?
No, I think it's mostly been covered.
Nothing here really do.
Cool.
So follow-up question that kind of sparked my thought there.
Kyle, you're kind of talking about the gambling side of it with really just the hit or miss rate.
Do you guys find, you know, Kyle, you're a guy who's actively deploying capital.
I know Ravi is.
I know he had to hop off.
But do you guys have a hard time coming across companies?
There's always companies that are looking for money,
but do you guys have a hard time coming across companies
that are even worth considering
before you go into a super deep dive analysis,
I guess I would say?
Do you guys have a hard time coming across good deals,
like good companies?
There's always companies that are looking for money,
but as far as companies that are worth taking a deeper dive in your analysis with
if you want to invest them in or not, do you have a hard time coming across those?
Yeah.
I mean, deal flow is always the most difficult section.
This is why, as we talked about before,
this is why you would invest if you are an investor,
why you might consider investing in a venture capital fund
instead of doing it yourself
is because finding the deal flow is incredibly difficult.
And look, I don't think that there's any investor
that is worth their weight, in my opinion, that feels that they have enough deal flow.
I've heard this before from funds and from people, and my jaw hits the ground every time.
And that tells me that they don't fully understand the scope of this market.
You're trying to sift through thousands of companies to find the 10 that may
change the world. And so you can never have enough businesses in your deal flow. And so obviously,
there is a bandwidth constraint. And that may be more of what people say when they say,
I've got too much deal flow, is that it's more about just I'm overwhelmed with the current crop.
And so I don't need to add more to that funnel. But I would say the answer is you need to find a better way to streamline your
funnel. You always need to be looking at companies. I'm always making time for businesses and always
trying to prioritize deal flow. So I think that you can never have enough deal flow unless you
know every company that exists on the market at all times. But if there's ever been a seed or series
A or whatever round you invest in, if there's ever been a deal that you like that you would
have invested in and you didn't have access to, that's all you need to know that you didn't have
enough deal flow because you were unable to find that one. You were unable to get access.
Oftentimes with these startups, getting access means actually knowing the founders personally.
And that's incredibly difficult,
right? You can't be in two places at once, let alone a thousand places at once at every startup
con, at every pitch night, at every networking event, every place around the world, never going
to happen. So the short story is you're never going to have enough deal flow. It's definitely
a problem, both in terms of top of funnel, as well as actually being able to sift through them.
As I mentioned, there is a bandwidth constraint.
And figuring out tools like AI, for example, that can help you sift through some of those things is incredibly valuable.
But it's only one core piece of the puzzle because, as we mentioned, the founder is really what I make my investments based off of.
And you're never going to be able to have AI analyze a founder.
Or maybe you can one day in the future.
You can't do it today.
So I think that there's definitely bottlenecks where you've described.
And it's why I have found it interesting to invest in funds as an LP as opposed to as
an actual investor.
Because I pretty much have hit my bandwidth on my ability to scale my venture business.
So if I want to deploy more capital, I either have to deploy a larger check size into the same amount of companies or to try to capture those network effects.
I want to try to expose myself to more companies, which in this case is much harder for me to do while keeping the standard that I have.
So it's more effective to essentially delegate that onto a fund that i feel has a
similar level of you know standard on what they invest in find a fund like that find a fund manager
who does that and then invest in them to help you scale um that's essentially how i look at it
yeah i would tend to agree um and i would tend to agree despite the fact that we don't need more deal flow, but that's
because we are only investing in YC companies.
So we just look at all YC companies and we have all the sort of possible deal flow out
there.
But for 99% of funds, you cannot have all of the deal flow available.
And we mean just knowing everyone.
And I would agree as well that I, even doing JustYC,
I don't get to personally hang out
with every single founder.
I mean, I'm lucky that I know most of them, but...
So yeah, you did more deal flow.
You need, you know,
yeah, you just need to get your hands
on as much deal flow as possible,
and then it becomes a sorting problem,
and you mentioned it, AI can really help there.
You gotta build good model
so that it does not say no to a company that's actually good and you never know because it you
didn't look at look at it manually the AI did the mistake so that's another another question
awesome so we got we got about three minutes here. I feel like there's definitely been some good information here today. So I definitely appreciate that from our panelists and my co-host Kyle. So I'm definitely learning and I appreciate that. But I just want to give you guys an opportunity. We got about two minutes left. If you guys want to give about a 45 second or so uh you know explanation or share something
that you're excited about something you're working on Kyle I know you mentioned one of the companies
you're working with just went public um so I'll I'll start it with uh with uh with we'll just go
Matt and then Gabriel and Kyle I'll pass it to you and then Kyle um once you finish up with what
you're excited about you can close out the show too. But so just, you know, one thing that you're working on, one thing that you're excited about, one thing you're seeing. About 45 seconds. Matt, we'll start with you.
that I've noticed throughout my experience in tech
is that one of the most important things
a founder needs to raise money is context.
I think it's often more important than anything else.
Proper context on the industry,
proper context on what's required of them
to succeed in the industry.
So I started about three months ago
a little thing called Arena
that allows any founder off on the wake of the earth
to come in, join Arena,
get access to programming and events and accountability to allow them to build context on tech and startups
so they can become more high context when it comes to raising money i'm really excited about
that it's been successful so far and i'm looking forward to scaling it up oh yeah congrats matt i Oh, yeah. Congrats, Matt. I think I'm next. So I'm excited with the next batch of YC companies coming through.
The demo day was last Tuesday, and so it's a cycle every time demo day ends, a new batch starts.
So we have a new batch last of the year for 2025.
And every time there's a new batch, there's new exciting companies in there.
And then just like Matt started a new thing,
I just very recently, this week, started a new sub stack,
just talking about YC and demystifying VC.
And it's been going really, really well so far.
The first few posts are just have exploded.
So I'm very excited about that.
And yeah, I'll also thank you both for having me here.
That was great.
Awesome.
I appreciate it.
Go ahead, Kyle.
Oh, no, I was just going to take it away.
I see we've had an interesting conversation here today
and really appreciate everybody listening
and it's been a good conversation today.
So with that, we are going to close out the show.
It is 5 p.m. on Thursdays at Eastern Time.
We break down venture capital, private equity, everything going on in the space, whether
it's from an investment perspective, from the market's perspective, and a lot of really,
really good things.
So I'm happy to be here, Jared.
I thought you crushed it today.
Thanks for helping me out as co-host.
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