17 - Kevin Diemar on Angel Investing

Speaker A: The thing that I find interesting is that your ability to kind of cut through the noise. Do you think that's kind of something special that people, uh, learn to do, or is it just something innate?

Speaker B: I think probably a little of both. I just like being a salesperson. I think that's my natural gift to Gab. I never read a sales book in my life, and I just am pretty good at it. But I think anybody, if you get involved and you start doing it more and more, there are things that feel right and then some things that maybe feel wrong.

Speaker A: Hey, everyone, we got a great one for you today. Kevin Demar is back. He is, um, gracious enough to be the first guest that we've had twice on five to 50. Kevin, thanks for. For sharing some more time with us.

Speaker B: Kev, thanks for having me back. I appreciate it.

Speaker A: Awesome. So today we touched that at the end of our first interview, uh, which everyone should go back and listen to, which highlights your career, how you became, uh, the powerhouse in private aviation that you are. Uh, but we, uh, started to talk about some of your passions when it comes to angel investing. And I think that really resonated with, uh, a good amount of our clients who have had some success with their. Their first businesses, and they're growing their businesses, um, efficiently, and they have some extra discretionary income that they're looking to. To put to work. And so, um, we started to talk about your. Your passion for angel investing, and we want to dive in today. So, um, let's just start with. Start at the beginning. Like, how did you get into angel investing?

Speaker B: To start, really, it wasn't a plan. It, uh, it kind of just manifested into itself. Uh, I guess. Uh, I've always had an interest, uh, in the markets and stocks and stuff like that. Uh, my wife's background was retail. She used to be a buyer. And, uh, I mean, really, my first time dipping my toe in the water was really a product that I bought out in California. It was a pair of shorts. Uh, I thought they were cool. And, uh, that was it. I bought them. I wasn't even thinking about anything. But I do remember specifically, uh, the brand advertisement, uh, had a thumbs up, and it said investment in happiness. And it made me feel good, and it caught my attention. So, week or so later, I'm, uh, laying in bed like I typically do. My wife's watching tv. I have my laptop on my lap, wearing my shorts, and I'm like, let me check out what else this company has. And I, I went to their website, and it was. I Don't remember exactly, but four to five pairs of men's shorts, that's all it was. So. And it had a California flare to it, but it had kind of that Lululemon Athleisure high quality, uh, product. And I, anyways, I poked around and I said, look, this company looks really young and I like the product. And for whatever reason, uh, the stars aligned. And I wrote an email, literally on the, uh, contact us. I didn't even do any further digging to find out who the CEO was, anything. I just said, contact us. I wrote a nice little introduction email said, I bought your product. I love it. Uh, looks interesting what you guys are doing. I have no idea where you are in your growth or if you're even looking to expand. And uh, but if you are, I'd be interested in hearing and boom, send. A couple of days later, I get a reply. We received your email. Your timing is very interesting. We are wrapping up our Series A. There is a little more space available. Happy to really discuss and share the information. The only issue is this was like on a Thursday. We're wrapping it up next Thursday. Uh, so I don't want you to feel pressure, but that's really the timeline. And uh, of course I said, send me the deck. It doesn't, there's no harm in me exploring it. And um, it was a very professional deck. Uh, the brand at the time was being built as a men's yoga brand. Never, uh, had done yoga in my life. But I, I can specifically remember as I went through the deck, I was looking at stuff. One, I love the experience of the leaders. And uh, there was something that really stood out to me in that there was more men in the US doing yoga than that were, uh, snow skiers. And I've skied my whole life and I, uh, always love the fashions and stuff on the mountain. People are always buying stuff. But it said, hey, there's more men doing this that are snow skiing. This could have an opportunity to really be something. And that's all it was at the time, was men's yoga. So, you know, I looked it over, I made a decision, uh, said, you know what, I'm going to. This is money. And that's the thing I think everyone needs to know when you do any of these real early venture investing, is there is a chance. Even if it's the best product or the greatest leader, there's still a high probability it's going to fail and you will lose 100% of your money. But this was something I'm like, you know what? I want to dip my toe on the water. Being from the aviation space, I'd seen a lot of people get very wealthy, not really in the venture world, but in the private equity space, later stage stuff. But this was my way of doing it. And I said one, worst case, I'm going to spend this money M. And it's going to be a great education. I'm going to learn a lot. Best case, I'm going to uh, you know, have something successful and it will grow. So uh, this, I discussed it with my wife. I said, hey, check this out. Read it. She said, why would you ever invest in a retail brand? Retail's the worst. It's so competitive. And I said, fine, that's your opinion, but let me, let me run with this. So, uh, I wrote the check and uh, that was really my first foray into uh, venture investing and really getting involved with uh, a startup.

Speaker A: That's a great story. And so it's really interesting. The thing that I find interesting is that your wife has great experience in this industry and your ability to kind of cut through the noise and any negative, um, history you have with uh, that specific industry and see the opportunity for what it was. Uh, do you think that's kind of something special that people are learn to do or um, is it just something innate?

Speaker B: I, I think it's probably a little of both. I just like being a salesperson. I think that that's my natural. I have a gift of gab. So I don't think it's something. I mean I'm sure there's people. I never read a sales book in my life and I just am pretty good at it. Uh, I think I have good intuition. Um, it. I think as. And we can talk about other investments, but I like to invest in things that I would purchase myself that interest me, that connect with me on a brand level. And again, like I said before, I specifically remember the logo, little things that called me, the branding on it, obviously the product I liked. But even the words that it had, the thumbs up, the investment and happiness. I'm like that, that relates to me. I like that it caught my attention. So I think there is some, you know, call it a spidey sense or some intuition that maybe can't be taught. You just have the feeling. But I think as you anybody, if you get, you know, involved and you start doing it more and more there are things that feel right and then some things that maybe feel off. And I trust me, this was, this turned out to be My greatest success, this specific company, uh, that we're talking about, but there's others where I've learned about leaders and things like that, where it was a good idea. But there were some red flags that now looking back, I could have made. Maybe you want made those investments and

Speaker A: we'll get to the mistakes in, uh, in a little bit. But, uh, you make your first investment and how, how did that turn into the second investment? How long between making this first investment to. When you think to yourself, I want, I want to do more of this and I'm going to start actively looking for, for opportunities. Was it something that you did it in? You waited until something crossed your desk or did you go searching?

Speaker B: No, I think today I'm in search mode. Back then it was really when things kind of. Well, first it took a couple years for this to show how successful it was going to really be. So, uh, you know, the one thing I'll say taking a step back, is my first foray. I got a line with a superstar CEO who just. The reporting, every quarter so professional. We got market updates. We, we. It's all where sales were coming from, which big stores we were getting into. Really saw the playbook unfold and the communication was on point. And there was really never any hiccups or any scare that the company wasn't going to make it. It was just growth upon growth upon growth. So it was a really amazing, I guess, roller coaster that I've been on that it's just been. But really up, uh, up, uh, up. And it was incredible. And as I invested in other things, that's not always the case. I would say like one of the next investments really was again out on a trip. You know, I live in Miami, but my family and I, we do some traveling and we, uh, were back in California. I remember we were in San Diego. And all of a sudden my son and I start seeing these scooters all over the place. These were the, uh, you know, the mobility scooters. You scan your phone, you pay a dollar to turn it on, and you can zip around. So next thing you know, we're in spring break and my son and I are riding around on these scooters. They're going 15, 20 miles per hour. We're going up and down in La Jolla, and I'm like, this is awesome. I go, people are going to love these. And this was lime at the time. They clearly didn't need my money. But, um, about just again, fade. Two weeks later, I ran into a friend to have dinner On Miami beach, pulls up, he's on a scooter. And it was one I hadn't seen before. It was, uh, normally the scooters, you know, you put one foot behind the other, but this had, like, wings. It had feet on the side. He's like, oh, this is a local scooter company. They're here in Miami. I invested in them. You know, they're raising money. I go. It was like, again, aha. Uh, I go, well, I'm interested, you know, because this was a product I saw, you know, that I thought, I really feel it could. And I wasn't thinking about all the liability stuff, big picture. I was just like, this is one, fun. And two, it can be used for so much stuff, you know, like, just traffic issues. Small from here A to B, college campuses. I thought the market was big. So, again, same sort of thing, but this time I was introduced to the founder, saw some information, and, uh, made an investment. And again, this story ends totally different than the, uh, apparel story in that it wasn't the right leadership group. They didn't have the right funding, the communication on growth wasn't there. And unfortunately, this company, although other scooter companies have, uh, that. Okay, the, the. The. There ends up being a lot of. I don't know if you see these. I mean, there's a lot of. In sitcoms, there's. I was watching a thing with Seth Rogan and forgot, uh, the name of it. Every scene, he. He knocks them over just because they're all over the place. You know, they're like eyesore. So people have been turned off on them, but people still do use them. But this company, uh, unfortunately didn't have proper execution and the right leadership. And that's why I think it failed. Not because the. The machine wasn't right and unique. So, you know, sometimes you could be early and be wrong. That's one that didn't work out well, and I did learn from it. And there were some red flags that I should have been, uh, a little more, had my antenna up a little stronger. But again, that's the game.

Speaker A: So just a couple. Let's dive in a little bit deeper on these two. Compare and contrast. Um, how much time between the first deal in the clothing company and your second investment in the scooter company passed.

Speaker B: That initially was probably. You know, I didn't. I didn't really come prepared and write these down, but I want to say probably two to three years between the two.

Speaker A: So it was something where you caught a bug, but it wasn't uh, laid dormant in you. You thought it was something you wanted to do, but more passively.

Speaker B: Yeah. And again, with the initial investment, what I loved is obviously it was succeeding and doing well, but it was something where I felt I had real ownership in versus, you know, when you buy a stock. Okay, yeah, you own Disney, sure, you own a piece of Disney, but you're not, you're not getting on the phone with any executives. You're not giving them any real feedback. And that's what I loved, uh, in the apparel business is I, I actually, I would have ideas, you know, and I would tell the CEO, hey, I'm going to throw different things. Eight of the ideas could be horrible, but two of them could be great. And, uh, I try to leverage some of my network. I had some celebrity clients I would share the product with. And I really felt, even if it was a half a percent, that I was making a difference and I was a part of that company. So that was the itch that really said, hey, I want to do this more.

Speaker A: So let's compare and contrast the two management styles. And thinking back on that investment thesis for both, um, obviously for the first investment, it was serendipitous timing was there. You didn't have a lot of time to analyze the investment. Uh, you really liked the product. Uh, but post investment you kind of gain confidence through the reaffirmation of reporting. Right. What are the qualities of that founder that you think are just one in a hundred or one in a million? That, that if you, if you see that again, um, that's where you're going to invest regardless.

Speaker B: His background was accounting, among other things, but he had that. And I think he was very, uh, good with numbers. And I think he re. He recognized that his investors were very interested in the numbers. Not just pretty decks with pictures and graphs, but the real numbers, meaning how many, how many, what percentage of our business is coming from direct to consumer were very big on, you know, Instagram Online. Then we started to get in some big box stores. Rei Nordstrom. And you saw the shift happening. But the communication was there. Uh, anytime I would send an email or text, the responsiveness was there. There was, you know, interest shown and respect knowing. You know, again, I didn't write the biggest check of the investors, but I was treated, I, I believe equally, if not better. You know, we spent a lot of time talking and versus the other company. This one specifically. The communication was always. There was a lot of questions could be, we're trying this. Uh, sometimes there would be a lapse in communication, meaning there would be a quarter with no communication or hey, oh, we're raising money and it's like, okay, well what's the valuation? What are the terms? Explain to me again. Uh, I mean, the initial, I mean initially was night and day because my initial investment, they never had to raise new capital. Again, we get later into the story, but any, any private equity firms that eventually came into the story were with not new capital that the company needed, it was really just taking out existing shareholders like myself at a much higher valuation. So, you know, this, this was a company that just was cash flow positive really from the very, very early days.

Speaker A: So they caught lightning in a bottle or perfect execution. But they also reaffirmed the confidence, uh, on their cap table. Right. Their investors must have been not just confident that the business was doing well. Uh, they knew that the leadership was there to execute really well compared to the other company where you're not getting communication. They don't know their numbers. And obviously I'm talking my book here, M. Uh, on the importance of finance and accounting and knowing your numbers. But it really goes way, uh, specifically

Speaker B: at the earlier stages.

Speaker A: Right?

Speaker B: Yeah. The numbers are so important because you don't, if you don't have accurate numbers and have a good handle on your business, you don't know where. You don't know where you are and you certainly don't know where you're going and what the potential is. And this business, what started as again, six pairs of shorts, let's call it men's only. As the growth happens, you know, it's still a men's brand, only men's. But it's growing, it's getting traction. This was, you know, we were in luxury resorts, boutique stores. That was it. And you know, to the CEO's credit, they really, they didn't grow too fast. Maybe they could have. Maybe they could. At the time, there was other companies and competitors that raised a lot of money. They were losing money, but they, you know, they raised tons of money. And there was companies that even went public. I mean, you can look at them that, that the shoe company Allbirds and things like that.

Speaker A: Right.

Speaker B: We took a different route and we said, not we, but him at the time, he is an investor. We're just going to grow this thing naturally, let it grow, you know, really, and not try to put it in people's face. People are going to hear about it. The word of mouth spread. I think there's nothing more powerful than a referral from a happy customer versus, you know, seeing an Instagram ad 100 times. Like, I'm sure we all do it now. Any new category? You know, like, I will get to it, but I invested recently in a, uh, a nutritional supplement. You know, you put it in your water and it has all types of vitamins. But guess what? And I realized it, and I knew it was a crowded space, but now on Instagram, when I'm looking at my company that I invested in, I'm seeing 35 other companies. So I just recently jumped on a call with the CEO of that company. He's like, don't worry. He's like, you know, there's one major player, Liquid IV is the main. Not the company I invested in, but they're the major company which has like 87% market share. The other 30 companies have 13%. And, you know, we're one of the top three of those other 30 companies. So. So that helps. But, you know, uh, and this other thing, it really is communication, change of leadership. They had some CEO in a CEO out. Those are things that always worry you early.

Speaker A: Definitely.

Speaker B: Especially if it's not the founder, if the founder's lost vision or, you know, so those are things to look for.

Speaker A: So much as founder led early on, you know, if you're having churn at the top of your leadership, you know, that's a big red flag. Um, it's, you know, so much of those companies pivot, pivot so frequently that if you're having a change in strategy, that's one thing. But if you're having a change in strategy with a change in leadership and communication, uh, that's a, that's a big problem. So.

Speaker B: And I, I guess the one thing for your listeners is, unlike a stock, you're. You're committed to this relationship. You, you can't be like, you know what? I really don't like the leadership. Let me. Can I sell? No. There's. This is an illiquid investment until it becomes liquid. Yeah. So, uh, you know, then all you can do is try to give the feedback to try to help and right the ship. And there's some things, you know, one, you could be smart enough and you could say, I hope they turn it around. And if this is a loser, you wrote that one check. You don't write another check. Because sometimes you'll see, they'll come back around to their. And, uh, you know, the first people that get asked for a second check are the people that wrote the first check.

Speaker A: Yep.

Speaker B: So you have to, you have to know, just like they always say, cut your losses. Even though you still want to see them succeed, if there's things and red flags that are bothering you, don't always double and triple down. Sometimes say, you know what, I wrote that check. I hope the new money does help and turn this around, but it's not going to be my new money. I'm looking for a different opportunity.

Speaker A: Yeah, makes sense. So let's, let's stay on the sourcing, um, top theme. Um, you did your second deal. How do you start to build this muscle where you're getting deal flow regularly that you're able to analyze starting out there, it's a little bit of sales and marketing for yourself as an investor, right?

Speaker B: Yeah, I think then I got the itch. So now you start talking about with people. When I made the investment, um, you know, again, the company's vor When I invested in Vori, I'm telling my friends I'm m an investor in a retail company. So people start to know that you have an interest in this. So if they hear of opportunities, they share their, their pipeline with you. So it's like, hey, I know you did this. Do you want to look at this? So now there's again the network effect. People know that you're just like, if you're looking for a job, don't go. Put your resume online. Tell people you're looking for a job so people can help you. And I think that's how it worked for me. Again, my background and I didn't work in private equity, uh, but I started letting people know that I did this. I was proud of the company. I wanted to share with. People say, hey, order piece. You know, I'll give you 20% off. Try it. And um, you know, then things start to come and fall on your plate. People know that you're interested and uh, I mean, actually another investment. So the scooter company fails. I get some letters. Pretty much they're out of business. It's a loss 100%. I'm on spring break. I get an email from one of the guys that was affiliated with the scooter company who has a friend. He's like, here's another opportunity I'm looking at. You should take a look at it. Totally unrelated. It's a water company, like Grape Water. What do I know about water? But again, you don't just blow it off. You spend some time. You find a quiet place, whether it's by the pool, on your deck, wherever you are. And you take the time to read if you're serious. So I'm reading Through the deck. And there's others that I've read and I skipped. This is one that I actually invested. And one thing that really caught my eye on this was this company already had distribution and they had a, uh, an exclusive for all the Live Nation concerts. If they were going to be the water company at these concerts. And I'm like, wow. I go to concerts, concerts are sometimes 10,000. Sometimes I've been to stadium shows that are 60,000. That's a lot of water. Now I start looking at the product and I'm like, oh, it looks so cool. It's in this aluminum. Can you look at the logo and where I'm going? And a lot of people will know this product. It was liquid death. Now, this was an spv. This was an early investor who was getting out. He had probably got in very early, you know, again, beginning of the game, first inning maybe. Now I'm getting it at a little later stage.

Speaker A: So.

Speaker B: So now I'm looking at. It's not. It's still venture. It's still real early, before. Before real private equity has started to come in.

Speaker A: Yep.

Speaker B: Uh, but I love the fact that they had this distribution lined up. I tried the product, you know, and that's another thing. Anything I invest in, I'll go online, I'll order if it's on Amazon, if it's on Walmart, Target, whatever. I always like to try the market, see how it's delivered to me, the packaging, experience. And, you know, again, my little circle of friends, my wife, these are people that I say, what do you think? You know, I try to get feedback without influencing it and listen to their opinions. Despite what I may have, or if I love the investment, I still want to hear their honest opinion. Because maybe I'm wrong and maybe they're seeing or tasting something that I'm not. The water. I loved the water. It was just cool. I mean, there was nothing like cracking that aluminum thing. It felt like you're drinking a beer. And I'm like, this makes sense. A lot of people, one who are drinkers still need to be hydrated at these concerts and these fairs. And I'm like, I could see this taken off with kids. It really made sense. And again, this was something where I have no contact with leadership. This is through an spv, again, the way those typically work. Guy gets out early. Guy syndicates the deal. I don't know what he had, but maybe had $3 million and he sold it off to different investors like myself. He gets a 1% management fee, uh, for Yearly for putting the thing together and he gets 20% carry. So fine. So my contact point now is not leadership, but it's the head of spv. That's where I go for updates. And since then there's been some huge institutional raises at much higher valuations and that's that I believe will be a winner eventually. You know, either be taken out by one of the large, you know, Coca Cola, PepsiCo or Go Public itself. I mean they've really done incredibly well.

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Speaker A: We m have two different investment vehicles that we talked about here. One's direct investing where you're actually your name, where your entities on the cap table of the company. Uh, the second one we talk about, the SPV is um, a different structure. Your entry, you're investing in an entity that is uh, that is part of the cap table. Correct. Is the analysis that you do for both of those investment types the same? Are you, are you doing your diligence in your process on the company, um, alone or when it goes through an spb, do you have to do some added procedures to get yourself comfortable?

Speaker B: I've done both ways. So initially again that was my first spv. So a lot of these remember I would say I'm still, you know, in my rookie season even though this is over a couple of years. Yeah, I was, I was learning on the go. Uh, so all my questions went to the syndicator of the SPV initially. I just recently invested and um, I told you the uh, it's like um, you know, vitamins and stuff, they're adding to nutritional supplement that uh, you add into the water that spv. I, I liked what I heard but I said can I set up a call with the CEO? And I would do that going forward. Uh, I always like to meet the founder even though, and, and you know you tell them look, I'm, I'm going to go through this SPV and uh, but I wanted to talk to you, see where maybe I can Help the business. I always again, at these real early stages, it's, it's fun to try to get your hands dirty and see where you could help. And whether it's an idea or an introduction, I, that's what I like. Clearly we're investing to make a profit, but it's not just like, hey, let me sit on my hands like you do with a stock and wait for the earnings to come out. Here's where it's like, I can try to make a difference and try to use some influence to improve. Whether again it's a relationship or getting the product in some people's hands.

Speaker A: Yeah, so you're part of the value creation. You like to actually be active.

Speaker B: And a lot of these CEOs are young. Like uh, I may have some experience that I could offer them. It could just be a simple thing on hiring somebody, firing somebody, accounting systems, basic stuff that I want to say, hey, I'm here. I know, you know, sometimes, you know, these SPVs, they may get a board seat. Well, I want to be an extension of that.

Speaker A: Right, that makes sense. So, um, what other steps in your process, um, do you take? Uh, regardless of the investment, you talk about reviewing the board deck. We talk about or, sorry, the investment deck. Talk about interviewing the founder. Um, are there, are there other steps in your process that you make sure you, you take before you uh, before you decide whether or not you're going to invest?

Speaker B: I think it really depends on the stage of the business. So I just recently I kind of used my uh, my Vuori Playbook on an item that my wife was introduced to. It was a, uh, a high end sunscreen company. She comes home from her facialist and she's like, Kevin, you know, this is this new sunscreen. It's supposed to be better than any of the sunscreen and has some science in it and supposed to rejuvenate cells. And I go, interesting. You know, like everyone uses sunscreen. I'm always buying sunscreen. I go, let me see the product. I see it. It's this beautiful bottle, really marketed well. And I start doing a little exploring, I start digging. Can't find really much on the founder, but the product is getting good reviews. And so um, but I want to learn more about the science because if you can really prevent, you know, protect better than others and do some of these healing. And again, I'm no scientist, but I start reading it, I'm interested, I reach, I finally, I get crafty through my sales things. I, you know, there's ways you give Me a name. I'll find you their email. I always tell people that. So. And people are like, how did you find me? There's ways. So, you know, you just. And I'm talking totally legal ways or subscriptions. You just got to be crafty and look for your angle. And, uh, again, I wrote an email, uh, eventually got a phone call with the founder of this company, which totally impressed. This is a genius girl. Mit, Harvard mba, had Wall street experience, but really loved the science. And, you know, she had worked with founder, uh, of Moderna. Just really, really impressive resume of, of what she had done. And now this product. And I love the fact, again, I like to be early, but the product already was selling. She already had a product that was in production. It wasn't like, it wasn't a pipe dream. So I'm early, but I'm not like, the game's going. So again, she wasn't even looking for money, but they still had a little room and a safe and I was able to get in. And this was. There was a little more than I wanted to take off. And this is. I think I talked about this previously now because I've had some success and some of my friends know that I do it. I share the idea. So I'm like, guys, I'm going to do this. I set it up under, like, my investment vehicle, but I'm not a true SPV. I don't charge any of my friends 1% or a 20% carry. I want them to win with me. So this is a company, uh, that we got involved with real early called Pavise. And, um, there's a lot of other elements of this company. There's a biotech thing that they're. They're trying to get FDA approval for some eczema products that could be even another play. But, uh, this was a. It just came and it, it felt right.

Speaker A: But you're doing quite a bit of work, right? It's, it's not. I think the typical angel investor is, is reading decks, is interviewing founders, is doing some financial analysis, and so sounds like you're doing all those things. Um, regardless of how formalized it is, you do have a process that you're, you're operating under to make sure that you, you get comfortable enough before you make.

Speaker B: Yeah, I. Right. I'm never, I'm never seeing something and be like, great, let me write a check. You, you want to ask questions, make sure things check out, find out who other investors are. Uh, but the, the really good investments typically aren't just Going to fall and like hit you on the head. You got to be out there. And if someone finds something really great, they're not always sharing it, they want to take it. You know, people that are doing this typically have a network that they could go to to their friends. Like, I'm going to my friends before it gets out. I mean, obviously there's, now there's all these platforms and I go on them, the seed invest, and then there's equities in later stage and I, and I like those. But even on the early ones, like the seed invest, if I see something that I like, I'll still contact. Uh, even if I say I'm interested possibly in doing seed investments, I want to go higher and write a little larger check. And then sometimes you could do direct, but I want to speak, I don't want to watch a three minute video and be like, wow, that's such a great idea. I trust what I'm seeing. I need to get comfortable with what I'm hearing.

Speaker A: Awesome. Um, so one thing that I wanted to get your perspective on is everyone has their own kind of return thresholds, uh, for an investment. When you're thinking through these, uh, investments and you're doing your analysis, what kind of return do you think are, uh, these investments need to hit for you to, uh, make it worthwhile? I've heard some people need a 10x return to make it worthwhile because for every 10 investments, one of them will hit and that returns the fund, um, or returns the balance sheet. What is it? What are you looking for in terms of your anticipated, uh, returns?

Speaker B: So there's not a, there's not a definite answer because again, now I'm investing in real early, you know, sometimes direct to the cost to the company where I know the CEO and I'm real early. Those, those I'm looking at, I would think at minimum a 10x. Because I'm also looking at 100% loss. Like, I don't, I don't look like, oh, maybe I get out and I break even. These are, this is zero. And I, and I would say on the low side, really 10x.

Speaker A: Yeah.

Speaker B: Uh, because I'm so early. These are companies with really small valuations. Let's just say $10 million or less. Uh, maybe they're selling, maybe they are just to market. Not a lot of distribution. You've probably never heard or none of your listeners have heard of these companies. These are, these are ideas that have just, you know, if you're striking a match, the flame's just blowing uh, so those, you know, and again I've been lucky a little that I've seen returns, incredible returns like, you know, like that, some returns that I could lose a lot of times, but that's not always how it's going to happen. So you have to, it's clearly a game, it's a numbers game. You're going to strike out and miss sometimes. Uh, I mean, I think, look, we always joke, you know, you can be a hall of fame baseball player hitting 300. If you hit 3 out of 10 of these early deals, you would be the Warren Buffett of venture investing. Because especially if you got, you know, 10x on two of those and you got 100x on one and you lost on the other seven, your returns are going to be incredible. Uh, I think in reality most people are probably losing on 8 to 9 and maybe getting that 1 or 210 x's they're not getting the 100 or thousand. Those are really hard to hit. Um, or they had the opportunity to get the thousand but they sold after they got their 10x return. They, they, they didn't, they didn't keep, you know, enough skin in the game. They said, wow, I just made, you know, I put in 100, I'm getting a million and, and they're out. Because maybe they've had so many losers before. But guess what? That million could have been worth 10 million or 100 million.

Speaker A: Right?

Speaker B: If, if you really have the next Microsoft or Google or Nvidia, uh, whatever it could be.

Speaker A: So let's continue there. Um, you're, you're kind of making an investment decision every round, right? Whenever there's a secondary option, um, regardless of whether you, um, if you invest early and the company does well and they need to raise additional capital. A lot of times companies will offer secondary to their employees and also to initial investors, um, or participation to maintain your, uh, your position on the cap table and not be diluted. How do you go through that process for secondary checks or for um, follow on investments?

Speaker B: Do you think?

Speaker A: Is it the same process of where's this company? How's my investment performing? How do you determine whether or not you want to stay in the investment, take a secondary exit or invest more?

Speaker B: I think it's just like investing in the stock market. You got to let your winners run and maybe that could sometimes mean doubling down on your winners. If, if you like the story when it was, you know, in chapter one and everything's going according to plan and the valuation has gone up, but the story's so Much better. And you have the opportunity to put in some more funds, I would do that. Vice versa, if things kind of are going sideways and you're not pleased, and these are the guys that are going to really need the money. And it's harder to say no because you feel the desperation. Sometimes you have to be able to say no. You know, this is all I can write for this company. And, um, I'm always going to be here to help. I want to, I want to see you succeed. I still do have skin in the game, but you have to know when to cut your losses. The other thing I would say is when there are opportunities, like you said, they're secondaries or now they're, now the company really has reached a stage where they're bringing in, they want to bring in, you know, private equity investor who's going to come in at a much higher valuation than they came from. But the only way the deal works is if you, meaning existing investors will sell their shares. Look at who that investor is, go. You may have never heard of them, you know, but wow, okay, these are private equity guys. These are guys that do this for a living every day. These are the Harvard MBAs. These guys are crunching numbers night and day and look at a thousand deals. And now they want to buy the company that you're an investor in. Well, they probably aren't going to buy it because they think it's a loser. They probably, they think this thing has legs. So maybe you take a little off the table, you know. And again, it all depends where you are in life, how many deals you're in, what circumstances, everything. But if you can afford not to sell and hold and, you know, you really still believe that the growth story is just getting started, I would hold on and say, okay, now the real smart money is coming in right now. The ride's going to get exciting.

Speaker A: Yeah, I mean, it's easy to say that when, uh, when you have 100 bagger, um, and you have, uh, a good, um, or whatever the, whatever the, the winners are. You know, it's, it's easy to make that decision when, when the, the, your basis is so low. Right. Same thing with me and my house or, or any investment. Right. So it's, it's context. Right.

Speaker B: But again, I think the natural feeling is when you, again, when you hit that, you know, whether you're talking gambling and you hit that number, it's like, wow, I never thought I was going to be here. And it's like, take your money and run. But like, you may be running from the greatest investment that, and you're already in. And um, so I think there's a way again, you can be smart, you can take off your initial investment. You can take off your initial investment and 20%. But if something's running and it's working, don't get in the way of it. You know, this is so, and I, and, and vice versa, like you were saying, like, how do you decide which ones? Sometimes you may like a company and they're raising money, but the valuation, you feels a little rich. You still think it's a great company. Then you, you sit, you sit on your hands, you hold, you know, like, hey, I hope, I hope it is worth this and I hope it keeps growing but you don't have to necessarily double down and uh, you just watch it carefully. That's right.

Speaker A: Yeah, it's, that's where the hard work, uh, comes in and that's where discipline really just pays off. Right. It's hard to know whether the valuation's rich or not. You just got to trust your instincts a bit.

Speaker B: Right. And again, it all depends on what's going on in the market. I'm not like this tech heavy guy, but clearly today AI is the buzzword. Some of these companies that, again, I don't understand, they are making money.

Speaker A: They aren't.

Speaker B: But valuations are billions and billions of dollars. Those are scary investments because we don't know this is all so new. We don't know who the winners ah, and losers are going to be. Clearly there's going to be some winners that are going to be worth 10x what they are today. But there's going to be a lot of zeros because everyone, it's the hot thing. So you know, and I, I try to stay away from just chasing a trend. Uh, but you know, I think you have to invest like, go back to like what Warren Buffett would say, like invest in what you understand. If you have a tech background and you worked in that industry, you're going to understand that industry. You know, and like the SaaS model, it's incredible. But like if you're not someone who gets it, maybe stay away from that investment wise words.

Speaker A: Um, so we talked a lot about winners, um, and winners and losers of, of investments you made. Are there any, any investments you passed on that went on to be big that you kind of kick yourself for, for passing on?

Speaker B: Here, here's an example. There was another brand, uh, that I tried to get in on right around probably two years after, uh, the ori. I Reached out again, traditional kind of, I guess, the Kevin model. I reached out to, uh, these two brothers and I spoke to one of them of Faraday, highly successful retail company. And, uh, met with them. We had a great, great meeting in New York. I was late. They had, they had some real big investor, uh, behind them. They didn't need any money. So it wasn't that I, I missed, I took my swing. It's just the opportunity wasn't there. They didn't need, they didn't need any of it. Had great relationship, we shared stories and we still do talk. But, um, it was an opportunity. You know, I wish I, I always joke with Jenny. I go, could you imagine if we were in Verity and Viori, two of the largest retail brands today? So it was, uh, it was a swing and a miss. But, uh, it, the pitch wasn't really there.

Speaker A: Right.

Speaker B: And um, so again, sometimes, and again, that could have changed. That guy knew I was interested, so maybe he was. He didn't need any money or investor then, but he could have. It didn't turn out that way. His trajectory, they kept doing great and I'm very happy for them. But it also allowed me to be like, hey, Kevin, your instinct was right. You recognize that opportunity. It just wasn't right. So that, that was a situation where I wish I would, I would have written the check that day at the bar. It just, they didn't need it.

Speaker A: But I mean, I think the learnings from that are. You miss 100% of the shots you don't take. Uh, you got really good meeting, you got a good time. It's a good story. And you never know where it pays off in the end. Meeting people can always, um, not always, but, um, just meeting people, you don't never know where it's going to go. You never know if they're going to call you.

Speaker B: We talked about earlier, Yeah, I told these guys, hey, I love doing this. Do you know anyone else raising and you know, we've shared a couple deals with each other. So once you're in with somebody or you have that relationship and they know that you're interested, then you start to see opportunities in depth. And that's kind of like you asked about Pipeline. Now my source is now larger because people know that I'm in the game.

Speaker A: I think, uh, I think that kind of sums up, um, a good, a good chunk of what we're trying to get at here. Is that so much of angel investing's relationships trying to, you know, you gotta do, put in a lot of work To. To foster good relationships, to get these opportunities. Um, you can be the best investor in the world, but if you don't get. If you don't get swings at the plate, you're never gonna get. Get, um, any returns. So, um, it's something that's. That you've obviously done really well foster relationships with people.

Speaker B: But I think. I think if you're going to go about it, like, from where I am, where you're not really in the industry and I don't have. There's no formal, you know, Kevin Dar investments, you need to go. You need to be a hunter, and you need to look for the deals they're not going to. No one's knocking on your door and saying, hey, I just. Great opportunity, you know, you really have to be out there. And everywhere you go, like, I happen to, you know, get. My wife and I, we shop. But guess what? I'm always looking at different things when I'm in the mall. What bags are people holding? How much? How many people are walking to that store? What trends? I ask my kids all the time, you know, oh, what top? What's this? You know? And then, you know, now my kids have developed that. My son, who just started school at Vanderbilt, he'll be like, dad, have you heard of this company? Check it out. And sometimes I'm like, okay, that's cool. Not for me, but I think it's a great mindset to always have your eyes and ears open. Right.

Speaker A: But also, if you're going to look, you got to be ready to execute. I think reputation goes a long way in this industry as well.

Speaker C: Right?

Speaker A: You have a reputation, Definitely.

Speaker B: You don't want to call somebody and not have the means. Now, again, for these very early funds, you are not talking about tremendous. A, uh, $50,000 check could be really important to a founder in the very early stages. And that's why, you know, it is high risk, high return. So we're not talking, right, but you don't want to say, oh, great, I can invest. Okay, let me go see if I can get a couple of friends and we can round up ten grand. No, you don't want to waste people's times, but you want to be sincere in your efforts.

Speaker A: Makes sense.

Speaker B: Well, that's awesome.

Speaker A: Let's wrap up with a couple of lighting round questions, takeaways, um, for our founder listeners and also other angels. Um, when you're looking at A deck, what are the top two things that you. You're looking for that every good pitch deck should have?

Speaker B: Every pitch deck should have. I want to know the founder's background and experience, if he has any exits. I want. Yeah, and I would also say no errors, no grammatical errors, no misspellings, no charts that are so hard to conf read, uh, that I have to call and ask for explanations. Keep it simple. Love it.

Speaker A: What are the top two metrics you're looking for at early stage companies to determine if they're successful?

Speaker B: Number one for me is distribution. How many doors are you in or how many doors are, are you working towards opening and sales? Uh, again, like I'm looking at a lot of direct to customer retail stuff. So that, those are, that's what's important. You know, obviously you got to know the supply side. I don't get involved in much of that. A lot of the products are already being coming out or they're already to market. But really, you know, those doors, if you have distribution, that was something that really again, I know we're going off subject, but really got me excited about. When I invested in the supplement business, they had distribution. They're in Walmart, they're in Walgreens, they're in Target. You get in those doors and your product's good, you're going to grow fast.

Speaker A: Now, um, in terms of investment type, do you prefer safes or price rounds?

Speaker B: Again, it depends. Today it depends what check I'm writing on a very early price round, you know, seed investor or let's just see it. Or series A. I would prefer to go direct with the company but those are going to be, those are higher risk bets. You're going to write a little smaller check. I mean my latest venture that I just got involved with is a beer company. Uh, and it, I mean again, this was through a safe. Excuse me, it wasn't through a safe. This was through a whole nother, uh, investment vehicle. But it had some high profile names attached to it. Uh, getting at a higher valuation. But this is not a play that I'm looking for 10x. This is a 3 to 8x type of deal. So I'm m able to write a bigger check because I feel more secure in my investment. Yeah, so I, I like both. Uh, but if you, you know, for the big swings, clearly I, I want to be, you know, see or series A and, and, and know the founder direct.

Speaker A: Is there a book, a book, podcast or other resource you'd recommend their founders or angel investors listen to to get, understand the space a lot more?

Speaker B: I want the answer to that because I've been very bad, uh, about podcasts. Uh, now that my son just went to college, I'm like, I need to spend more time, you know, listen to podcasts, reading a little more. So I just, I just started listening to some podcasts and uh, I mean, I'm always trying to read some business books and stuff that I really don't have one specifically that I could recommend.

Speaker A: Got it. Any famous 5 to 50 is pretty good though.

Speaker B: Thank you.

Speaker A: I appreciate the.

Speaker B: Appreciate that you're familiar with it.

Speaker A: I am familiar with it. Love it. And the guests are great. Uh, so, um, I'll leave you with this, uh, last question. If you were to put up a billboard in your hometown of Miami targeting, um, founders, entrepreneurs or angel investors, one kind of piece of advice, uh, what would you put on it?

Speaker B: One piece of advice? Well, I mean, I think again, uh, you want an owner who's honest. Uh, but I think that that be. Be the word I'm looking for is be authentic. I think authentic is the word I'm looking for.

Speaker A: Awesome.

Speaker B: I, uh, want to give it a story. I want to, I don't, you know, I, I really don't want. Brands can shape in long term there is folklore, but at, really at the beginning, I want to know the truth. I want to know the good, the bad, the ugly, and hear everything. So, and, and I think if you don't share that, it's going to come out. So I'm looking for guys that are authentic and honest.

Speaker A: Love it. If, uh, people are interested in learning more about your angel investing journey or your actual career, um, or if they have opportunities, where should they find you?

Speaker B: I would say best way is just to send me an email. Kevinnityjets.com and always, uh, always looking for new stuff to look at. Always happy to give an opinion. Probably would write some checks if good things come across my way.

Speaker A: Awesome. Kevin, thanks so much for the time and I'm sure we'll be back soon.

Speaker B: Awesome, Jeff. It was fun. Bye.

Speaker C: Thanks for tuning in to 5 to 50. If you found today's episode helpful, be sure to subscribe, leave a review, and share with other business owners looking to grow. Do you have a question or a topic you'd like us to cover? Connect with us on LinkedIn or reach out to us at Proseer, where we're empowering entrepreneurs with real time, actionable insights and financial infrastructure through smarter accounting, tax and financial strategies. Let's keep this conversation going. Together we'll help our businesses thrive. Talk to you soon.