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From Safe Jobs to Startup Risk (Investor Mindset) · Success Story with Scott Clary

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a lot of people don't recognize how much risk they're taking in exchange for that potential
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upside because most startups don't turn into that big payday. But if you can be intelligent
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and really understand the industry, the market, where the players and get in with an organization
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instead of founders that really do have the backing to turn that into something great,
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it can be a phenomenal way to be able to make a big payday at some point in the future.
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Welcome back to the investor mindset podcast. I'm your host Steven Pessevento and today I have
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Scott Cleary in the studio. How you doing today, Scott? Hey Steve, how's it going? Nice to be here.
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Thank you for having me on. Yeah, it's good to see you, man. You're doing some really cool things.
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You've got a huge podcast. You've been able to get some incredible partnerships with it.
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You've interviewed some amazing people in your building businesses. So we're going to talk a little
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bit about building businesses and being an investor and kind of the difference between the two,
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we're getting some other stuff on your story as well. But before we get into all that,
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let's start at the very beginning. What influences or events from your childhood shape to you are today?
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I would say that I wanted to end up in the exact opposite position as my parents
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funny enough and not because they ended up in a bad position because they were very safe and
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they were very risk-adverse and they only dad worked for the government. My mom worked for
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university. She took some time off from work when she had me and my brother. But they had pensions
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set up until the day that they die, which was something that I don't think a lot of us were
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even aware used to exist. The defined contribution or the defined benefit pension and that was something
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that if I wasn't going to get access to that kind of safety and security after I stopped working,
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I realized very quickly that I had to make enough money to put into a little bucket so that when I
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stopped working, I could take out whatever $80,000, $90,000, $100,000 until the day that I died and I
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started to realize that that ended up being quite a bit of money that was hard to save when you
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consider inflation and cost of living and home prices in Toronto, which are not much better than
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other major cities in the US. So in my mind, it was not going to get a pension and working for
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a mediocre salary is probably not going to make me the money that I need to make to truly retire
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comfortably. So it was, let me try and be a little bit riskier in my career choices at least early on
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and see if something works out. And if it doesn't, then fine. I can default to the type of career
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that I kind of know from my childhood. So I would say that was probably the one thing that pushed
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me towards tech and working in startups and consistently trying to not be complacent and not be
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comfortable and move into the next thing and move into the next company. And I made jumps very
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quickly, but that was probably it was it was fear of how do I want to live my life from 65 to 100?
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Yeah, it's so fascinating because I see this often where high achievers grew up in kind of either
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a very rocky environment or very safe environment and they took a look at what they were seeing
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around them and they made a decision, hey, I'm going to go a different path because I know this is
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always available, but instead I'm going to go out and try to find my own way whether that's in a
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career or entrepreneurship. I know you did both, but let's let's talk a little bit about kind of
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the entrepreneurial journey. You've bought or you've built and operated a number of businesses.
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You've invested in some businesses. You've been both an operator and investor. Talk to me a little
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bit about what your journey looked like and what was what what is the business that you run today?
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So the journey was the journey was very clear. I never went into sort of public service or more
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safe positions. I always worked in tech even for someone. When you work in tech, then you start to
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I guess become aware of opportunities in earlier stage tech and to really move your career forward,
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you're not necessarily going to get the fastest career progression by working for even a
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Fortune 500 or a Fortune 1000. So you start to try and jump to earlier stage companies to move
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a little bit quicker. Maybe get a better role. Maybe get at the point I didn't realize, but you
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could get equity. You can make a little bit more money by jumping ship and moving to something
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which is kind of sucks, but that's the reality. You're playing a game with your career and I think
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that the days of working for a company for 15, 20, 30 plus years are gone. So I think you have
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to be strategic if you're going to get the most set of the time when you're working. Anyways,
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moved from very large. Yeah, I couldn't agree more. I was going to say, so yeah, I mean, it is
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what it is. It sucks for an employer, which is also why I'm a strong advocate for if you are
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an employer and you're hiring somebody, um, enter into a period of time contract with them. Could
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it be two years, three years, whatever, you know where they want to go. You know the commitment
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they can give your company so that at the end of the day, you're not disappointed with that higher,
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and you're you've both mutually committed to the goals of that individual. So you're not asking
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to say that for 10 years. You're not, you're not fooling yourself. You're saying, give me
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three years of your life to get to here and then I'll help you get to where you want to go next.
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This is the way I think that leaders should hire an op right now because it's more in line with
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how employees think through their careers. Well, it's tough because when you're running a small
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organization, you, you know, they're making a bet on you. You're making a bet on them. You're
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investing a lot when people leave in a small organization. It does make a big impact,
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but there is the reality that a lot of people are job hopping. And so if you can create incentive
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plans or expectations up front where, hey, this is the kind of benefit you get if you're loyal and
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you stick around. And this is, you know, the metrics we need you to hit. And we of course want you
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to be able to go above it. And these are the kind of results you get. If you're up front with
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people and you show them the vision, a lot of people are willing to, you know, to jump in with you
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and go on the ride. Yeah. I would say that I would say that's exactly what you should do.
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And it hurts more when you aren't expecting somebody to leave because then you have a gap in
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your workforce and you're pushing that work onto someone else. And then that other person's life
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sucks a little bit more. So I would just say like the way that I navigated my career is a way
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that a lot of people navigate their careers even more so than when I was still working for someone.
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So I would say just understand that as a leader or a founder or a CEO or whatever hiring anybody.
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Anyways, so move to a smaller company. That company was acquired by a private equity firm
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for a large aid figure exit that was private, but that I didn't have equity in that company,
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but that company showed me the power of ownership and equity. And what that could actually translate
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to in my career, right? If I had a piece of something when you go through that exit event, well,
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then that could be a nice payday. Super high risk as well because not every company gets acquired
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for a significant amount. But that was sort of like a light bulb moment for me. It was okay.
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It's easier to work in large companies. It's harder and way more high risk to work in smaller companies.
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But if I play my cards right and I trust my own expertise and I can go into a company and
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execute on ABC XYZ because at this point I was a more senior sales marketing executive.
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Maybe I can actually have an impact on helping them get from where I join them to where they're
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going to go to a potentially an exit if I have a piece of that. And that's great. So this is
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like the concept of switching from employee to equity owner. Did a whole bunch of consulting,
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taking fraction, equity and companies. But that was very difficult because startups don't have a
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lot of money to pay you. So it's a lot of it's a lot of sweat equity. Yeah. And part of the pun. But
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then I think there's pause here. There's really like two really important things I think to
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underline here is yeah, this concept of you're thinking like an investor, thinking like an owner
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when it came to going out and finding the job. At first, you're going out, you're taking a little
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bit more risk, but you're getting an opportunity to build skills knowledge and more importantly to
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have a higher level role in a smaller company where you can learn and grow much faster. But you're
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giving up maybe some of the security and potentially some of that front front end compensation.
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But in return, you're gaining those skills. And then in some instances, you can get that equity.
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And I think it's a really valuable thing to recognize because there's so many small companies
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whether it's a startup or just a boutique firm where you can go in and have that strong upside
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if you're really a top performer. Those kind of organizations are not good if you want to just kind
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of sit back, kick back and not really like drive things forward because you're going to miss that
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opportunity that you could if you're just sitting back at a big corporate company. Yeah, like I
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think that one idea or one thought that is really resonated with me across my entire career is
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extreme ownership. Like ownership of your situation, your condition, your, you know, your
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bank balance, everything, your health, like a massive extreme ownership. So I don't,
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like I don't put a lot of not trust. What's the word? Expectation on anyone else to improve my
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life situation. So if I want more and not saying you have to, you don't have to want more.
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If you want to optimize for ideal life and you're comfortable with the income that you're
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currently earning, there's a lot of easier ways to do it than to work in a startup. But I knew,
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again, I had my north star since I was like 16 years old of I need to make X amount of dollars
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to be comfortable. So that's on me. So you got to put yourself in these positions where that's
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attainable. So I think that that's what that sort of pushed my migration into these higher risk
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companies where you're starting to think like an investor with your time, right? It's not
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investor so much with your money, but it's investor with your time, which if done right,
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then eventually gives you the opportunity to be an investor with your own money.
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I think one of the things a lot of people overlook in the tech industry in particular,
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because I started my career in managing consulting and then worked in tech in the startup world was,
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you know, very ingratiated in that space and VCs. What was fascinating to me as I left was recognizing
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how much risk people are taking when they're joining a startup, even if it does have 10, 15, 20
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employees, because a lot of startups don't make money. They're really focused on getting market share
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and it's all based on that next founding, uh, funding round. And so I think a lot of people don't
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recognize how much risk they're taking in exchange for that potential upside because most startups
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don't turn into that big payday. But if you can be intelligent and really understand the industry,
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the market, where the players and get in with an organization instead of founders that really do
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have the backing to turn that into something great, it can be a phenomenal way to be able to make,
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you know, a big payday at some point in the future. Well, my investing strategy is very similar to
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how I align with companies. So what's the value add? What like I see where the company's at now?
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I see what they're doing and what success they've achieved so far with the strategy they've deployed.
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What are the things that I know? What are the levers that I can pull that can take it to the next level?
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So if I see that they're doing everything that I already know and they're sort of like
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they've been in the market for X period of time and they've already done the playbook and most
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companies haven't, but say they have, well, maybe I wouldn't align with them professionally,
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maybe I wouldn't invest in because I don't see an opportunity for growth that I know. I don't have
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that unfair, unique advantage that I can deploy into that company. So again, at the time,
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I was not thinking this through so thoroughly, but this is just naturally what made sense to me.
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So worked with a whole bunch of startups, found one in particular that I was like, okay,
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this company's been in the market for 10 years now. Co-founders are product and technical,
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like technically oriented, they're not sales and marketing people. Let me take my years of
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experience and sales and marketing, deploy it to a great product that has some samples of product
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market fit and really pour gas on the fire. And that was the last company, which was a broadcast
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software company. It was called Swift. We sold that at the tail end of COVID. So that was the play,
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really. And that's the same play that I did. I didn't put money into that company. I put my
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expertise into that company, right? But that's the same play that I do now when I invest in companies.
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Or when I choose to spend my time doing anything because you asked another question,
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what are you doing now? What's your company now? Well, we can talk about it. And part of its
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podcast, part of its private members community. And then I also do again, some angel investing,
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private equity investing, but it's all the same concept. It's like, what's the thesis? What's the
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idea? What's my unfair advantage? An unfair advantage could be knowledge. It could be skill set.
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It could be network. There's a whole bunch of different unfair advantages you bring to an
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opportunity. But that's how I evaluate any opportunity, be it new company, investment, whatever.
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If I don't know it, and I can't improve it, and I can't value add to it in some capacity,
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why would I be doing it? Leave it to someone else who knows this. Yeah, I think it's a really
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important thing to point out because I call it being an insider. So like becoming an inside investor,
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whether you're the insider yourself or you're connected to people who are insiders and they have
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those unique relationships or network or skill sets or knowledge, whatever that is that's
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going to lead to a higher rate of return with less risk. What I think is super valuable that I
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think a lot of people when they are stepping into the world of investing, whether it's time,
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money, relationships, any of those things that they're using as the currency is they overlook the
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fact that there is phenomenal ways to add value to an organization that is beyond the dollars
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that are being invested. So you you just explained how you have skills and knowledge and you were
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able to get a piece of that company, help them grow and as a result get a big payout. The same
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thing is true when you're writing a check, if you can go in and write a large check, but you can
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also bring skills knowledge, relationships, any of those things to the table, it can allow you to
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earn, you know, additional points or percentage of of equity or participation that can be a real
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game changer if you're willing to think creatively. Yeah, I think that the concept of this insider
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advantage, Peter, I think it's Peter Teal that originally coined the phrase earned secret
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when he looks for who to invest in. And I'm going to show you why that just doesn't apply to
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writing checks, but that earned secret is an entrepreneur who's lived in an industry for a period of time
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and they know something that no one else knows. That's the statistically the highest
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hit rate success rate of entrepreneur. Somebody who has an earned secret who's lived in an industry
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till they're like 40 and they see an issue in the industry and then they build a product or service
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to solve the pain point or the issue they've experienced over their lifetime in the industry.
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That is the most successful statistics have proven this out entrepreneur versus what we think
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of what an entrepreneur is, which is like a Stanford grad that dropped out or a Stanford dropout, excuse
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me. So that earned secret applies to what Peter Teal and what I just literally interviewed
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Chris Dixon from Andries and Horowitz and he heads up all their crypto division. He's the guy
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who basically stood up their crypto division. And this is also how they invest. They look for
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people who have earned secrets in whatever product they're building. So that's from an investor
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looking at an entrepreneur, but the concept is very similar. If you are a sales and marketing
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operator or a product operator or anything that can monitor, it's usually sales and marketing
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or product or the product includes technology. Those things can radically change the trajectory
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of a business if executed on properly. If you have earned secret or experience in those categories
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and as a fractional operator you go in and you apply that and you become a repeat fractional
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or full-time CXO and you help companies explode that way or you're an investor and you have
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that secret sauce and this is what large VC firms and funds now do. They have operational
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partners that go in and you can deploy that secret sauce and that earned secret and that earned
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expertise to that particular investment opportunity. Then it just de-risks everything, right?
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It's figuring out where your unfair advantages because like a great example is in our business
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in the real estate side, we met a group, a high nine figure, low 10 figure family that has a
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lot of experience, but they don't do exactly what we do. But what they bring to the table is they
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can write very, very large checks and by having them involved just being able to talk about it,
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that adds a ton of credibility and trust to the organization. Not only are they going to get
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a great return on their investment, but they also are going to get additional other benefits.
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And so just by figuring out what is it that you have that somebody else doesn't and how can
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you be of value, that family in particular by being an anchor is able to then get bring in other
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anchors and get additional participation that a normal investor wouldn't because most people
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don't have what they have, i.e. the track record, the name, the relationships and all those
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kind of things. And so you just have to think to yourself, what is it that I have that other people
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don't? And how can I go and find the right places to make those connections? I would ask you
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something because I've seen this in real estate as well, because I'm not from real estate. Now I'm
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trying to figure this game out. So when you invest in real estate, do you focus on a certain state
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or a certain type of real estate? I mean, type of real estate is obvious, but do you manage
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down even more? Yeah. So I think I think one of the biggest mistakes people make is that they're
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not insiders when they start. So when someone first begins being being an investor, it's like
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going into a new industry without any relevant skills. Obviously, everyone has a set of relevant
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skills, but they don't know those little insider things. And so for example, in the Colorado market,
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we know it very detailed down to the street. So we know where the government's making investments,
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we know where big companies are making investments. We know what a property's worth,
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you know, without even necessarily run the numbers just because we understand details at that
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level so we can move fast. Like this morning, I went and looked at a property and we're going to
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have an offer out by the end of the day, hopefully beating everyone else that's got to come in from
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out of state or whatever it is to try to compete. And then, you know, we invest in other markets with
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a different strategy because we're able to then apply that strategy that works in that market.
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And so being niche is extremely valuable. If we were just doing general real estate in Denver,
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we would have a tough time. If we were trying to buy 300 unit buildings in Denver,
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we're competing against New York and LA firms. And despite us being able to do that in the past,
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the market today, we're getting the biggest return on investment by buying 50 to 100 unit
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buildings. Things we normally wouldn't look at, but we have an advantage locally that others don't.
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And so it's the same thing as what you're talking about, you know, in the business world,
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this is just, you know, another type of asset and you got to have that insider knowledge.
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I was going to say, I think that like what you do and how you deploy capital and how you buy,
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it's very similar to my closest friends who are the most successful in real estate. I have a
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very close friend who only does Ohio. And he's now, and now he lives in South Florida, but
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I've asked him many times, like, why don't you, why don't you do something? He's like, I don't know
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South Florida. I know Ohio and I know how long it takes to get this permit and to do that and do
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this and this person in this office and this city. And it's just, it's so, it's interesting because
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what this lesson is is that you should specialize to the point where you know this thing
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better than anyone else and you actually don't diversify when you start. You actually specialize in
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in what you are the subject matter expert in. And I think that even in my investments,
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you were asking about that, the things that I've lost money on are things that I don't understand
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and the things that are still running because I lost a lot of money in angel investment,
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which is just a really high risk precede, like, $5,000, $15,000, $20,000 checks. And then I take
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those same checks and do smaller private equity investments in cash flowing companies,
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in categories like CPG, like SAS, that I know. And those are still running and those are still
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operational. And I can understand the opportunity, I can understand if the founders full of shit,
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I can understand if when I'm doing due diligence, they're showing me like the back end to their
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Facebook ads, if it makes sense, if the numbers make sense, if they were like doing something
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funny with the numbers to try and make it seem better than it is, the CAC to LTV ratios,
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the row ads on ad sets, I can see and I can understand this stuff more than somebody that was
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a real estate person trying to go acquire a small consumer goods company, CPG company.
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Yeah, I think it's really valuable to recognize that diversification is really good for
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preserving wealth and concentration is really good at creating wealth. Like, if you run a business,
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majority of your wealth is going to be in your business because it's something you control.
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And at a certain point in time, it's going to make sense to then diversify into other strategies.
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And the only time you should do that is when you find people who you trust, but you still have to
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have a certain amount of knowledge to know whether they're talking, you know, a good game or whether
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they really can play, which is a challenge a lot of people have. And it's one of the difficult
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things I think in the real estate spaces, I definitely am a big proponent and believer in real estate.
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But when somebody comes to me and they say, hey, should I invest in this deal? I don't even care
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about the deal per se. Of course, I do. But what I care about is who's operating it? What's their
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background track record? What are they? What have they done? And how are they going to do it?
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And what's the structure? And the interesting thing is when people are first coming into
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investment, they, oh, this is exciting. But the people who are running it just like in a founder
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run company is the most important thing next to what is the strategy and is it going to work?
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Like my strategy for overcoming that hurdle is quite simple. So I'll put money into thing.
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And this is not something that I learned leaving a company. I've lost quite a bit of money
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learning this lesson because another thing people don't realize is just because you've made
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some money, you become a good investor if you're good opera, like it's not the case. And maybe this
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comes intuitively for people, but it wasn't for me. But then I stopped focusing on stuff that I
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didn't know, only put money into stuff that I do know. And for anything that I wanted to put money
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into that I didn't know, I would build relationships with people that were experts in that thing.
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But I wouldn't put money or go into a deal with somebody else until I've probably known them for
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about a year and a half, a year and a half, two years, three years, gone to a wedding,
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gone to a birthday party. Like, they're friends. Like I don't put money into deals with people that
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are outside of what I know who are not friends. It's very rare for me. I'm not an institutional
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investor, right? I'm a casual investor. So maybe this is not doable for some of the audience.
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But I think enough people listening to this are probably not professional investors. And they're like,
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OK, I want to get into real estate. OK, we'll start with investing in what you spent your whole
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career doing and make some friends who are real estate investors and just spend time with them.
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And don't don't become friends with them. Become friends with them because they've been successful
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in real estate. That's great. But become friends with them because they're good people.
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You like them. You start to get to know them. You start to get their circle of friends.
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Get to know their circle of friends. And over time, if you want to do a real estate deal,
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do you know what to do with a real estate deal with? I think it's a super valuable thought.
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It's a very, very conservative strategy. But what I'd add on to it is if you build those
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really close friendships with people who are experts and have expertise in that specific space
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and niche, they are going to have people that they can refer you to that they trust. And because
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you trust them, that's going to help get you one step closer to then being able to make a smart
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decision. So what I'm curious, Scott, you've been both on the investing side. You've been on
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the operating side. From your perspective, how do you or what have you seen that's different
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between the way that owners or operators think versus the way that an investor thinks
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when looking at a business? Well, I think that this is not a hard and fast rule,
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but sometimes owners do not look at an exit strategy, which I think is incorrect. I think a lot of,
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and this will, this will decrease as the business grows because there will be more systems and
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operations in people in place that will help guide you forward. But I think in like the sub 10
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million 50 employee category, I think a lot of businesses are driven by just the owner's pure
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hard work and a little bit of ability to manage an insane amount of chaos. And beyond five to 10
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million dollars, you really have to start thinking about firing yourself as the owner from most of
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the jobs that you're doing, building systems and processes and hiring people that can actually
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grow and scale because you can't just hustle your way to a significant size business. And you
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also have to start thinking about at that point, or you should start, you don't have to, you
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should, if you want any kind of work life balance or enjoyment in life, you should start thinking about
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how do I build how do I build a business that is able to be acquired without me working in
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the office every single day. So an investor immediately already thinks that going in because
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that's the only way they get their money back if they can buy a business that isn't completely
27:18
contingent on the founder or what's known as key man syndrome or key man problem, right?
27:24
So that's the way if investor always has to think there always has to be some sort of return
27:27
in the future and no investor wants to turn into an operator ever. So that would be the one thing
27:34
that investors that investors look at when they're acquiring a business that maybe an owner
27:40
hasn't thought of yet. However, eventually an owner will have to think of that.
27:46
And it's not just something they should be thinking about if they want to sell, it's something
27:51
they should be thinking about firing themselves from all the jobs they're doing so that they can
27:56
truly achieve a massive scale because that's the only way to really get to any significant size.
28:01
But around 10 million to 15 employees is when most businesses start to break,
28:06
when just the hard work from the founder is no longer a sustainable business strategy.
28:13
Yeah, it's such a good point because a lot of owners, they had to do the work to create the
28:18
business and get it where it needed to go. But there's a whole nother level to operating a business
28:24
as it grows and a private equity company doesn't want the owner to stay involved. I mean, sometimes
28:30
they do. But most of the time they're looking to buy a business that is batteries included.
28:37
It's ready to go. Well, they don't want, they definitely don't want, because this happened in
28:41
the first company that I was a part of that was acquired by private equity. I'm sure the owner
28:47
personally accounted for about 50% of the company sales every single year through relationships
28:52
he's built over the past 10 years. Yeah, that's not a good huge discount for that. For sure.
28:58
Yeah. Yeah. Because what if he wants to retire? What if he wants to take a step back?
29:04
Okay, well, he's working, he's working 80 hours a week right now. So how is that a,
29:08
how is that a purchasable business? So part of the process in being acquired because I was part
29:12
of it was it was bringing in somebody leads sales and marketing, bringing in operations,
29:18
like a COO. So VP sales and marketing, COO, like basically getting people to take over all the
29:23
stuff he was doing, which was he was a sales and marketing CEO founder. He loved selling
29:29
to customers and he really cared about these relationships. That's great. But you've got to know
29:34
you have to be self aware enough to say, listen, this is not sustainable. I can't,
29:40
I don't want to be doing this with the rest of my life. I want to have a life. I want to travel.
29:43
I want to be at my kids' graduation, whatever it is. And also, I want to eventually sell.
29:50
So I think that that's something I believe you should be thinking this way from when you start
29:54
a business. But this is not something a first-time entrepreneur would think of. It's usually
29:59
something a second-time entrepreneur would think of because they realize a shit show that they
30:03
went through the first time to get a business ready for exit. And that also includes like
30:10
not treating your finances like it's a family business like actually like doing doing all the
30:15
things properly, which seems silly. But I mean, you've looked at deals. I'm sure that are very
30:22
messy that someone's treating it like it's literally a family business where their cousin has
30:27
like a business debit card and they're buying shit. And they're just like, why? Why? They're not
30:32
an employee. They're not on the books. You have to tighten this up. And there's different ways
30:36
to structure it so you can still achieve all the things that you want to achieve in terms of how
30:39
much money you're taking out of the business what you're spending money on. But just it has to be
30:44
like a tightly knit package so that it can be sold. But that same package can also be scaled.
30:50
Yeah. I mean, they call that in the industry addbacks when you're buying a business. So you can't
30:54
always, you can't always trust them. So there's always going to be a discount for that.
30:58
So obviously, you know, on the real estate side, you know, we're creating a 15 to 20% return or
31:04
a 20 to 30% average annual return when we're buying growth-focused assets. When you're investing
31:12
yourself into private equity, you're adding your skill set. You're adding additional value.
31:18
What type of return profile or multiple is common in the type of private equity that you're
31:24
looking at in particular? And I know it's different across kind of as companies grow and
31:30
different industries. But I'm curious from your perspective, what have you seen as far as the
31:34
kind of rate of return investors are looking for or that you're personally expecting when investing
31:40
in PE? When I'm when I'm investing in PE, the returns are very similar to what you're proposing.
31:46
Plus, there's dividends paid out obviously because we want to be profitable. So that's really
31:52
the goal. If somebody is promising you more than that, I think that they may not have like if a
31:59
business does exceptionally well and it hits some sort of growth curve and blows up overnight,
32:05
that's fine. But I would never really promise that. And I actually tend to stay away from deals
32:10
that are promising more than 12 to 15%. Yeah. I just I just don't think it's responsible. So
32:16
I would I would like to I would love that. But I've been more I've been burned more on deals
32:22
that promise those types of returns versus the ones that are 12 to 15% plus they pay dividends
32:27
because there is some margin left over at the end of the or there's some there's some profit
32:31
leftover than the year than somebody who's 20% and like fizzles out here and a half. So I think
32:37
that's that's a really important thing to point out because you know different deals different
32:44
structures are going to offer a different return to the investor. But people who are who are buying
32:51
things and they're expecting and projecting a very high rate of return unless they've done it over
32:56
and over and over again in that exact same niche and you know exactly what they're doing they
33:01
have an exact plan and they're still setting lower expectations than they create it can be a red flag
33:08
for sure because for my perspective PE has a little bit more risk than real estate
33:15
less less risk than venture capital. So it's a nice in between place and what I've seen is always
33:22
you know somewhere in that 15 to 20% return including the dividends including that appreciation
33:29
and then when a deal goes really well you know it's you know 50 to 100% more than that.
33:36
Correct the difference being in venture capital or angel investing I mean you you probably have
33:42
like a depends on the firm like a like over a 50% failure rate or things go to zero. So I mean yes
33:51
you can have even an even an venture capital unless you are doing a seed round and most people
33:59
don't have the capital to participate in like a even a series A which is now pushing 10 million
34:05
dollars or B or C or D which is just astronomical amounts of money. Unless you're doing a seed round
34:12
which is I don't have the stats in front of me but I'm sure 80 to 90% failure rate more maybe
34:19
you're probably not going to be expecting more than 20% like an A round I don't think I used to have
34:26
a chart of it I wish I could I probably should have pulled that up but an A round I don't think they're
34:30
even expecting more than 20x. This is what boggles this is what boggles my mind you know I've
34:38
done some angel investing mostly I've looked at it for fun. I'm I actually look at angel investing
34:45
as gambling and I'm going to put my chips in but the I really don't gamble about when I go to
34:51
the casino I'm going to put my 50 or $100 out and I don't expect to get it back but it'll be kind
34:56
of fun to go along for the ride and play and you know as a result I invested early in SpaceX and
35:01
momentous and ore ring and a bunch of these other interesting companies but what blows my mind is
35:10
how much risk there is versus the return that's being projected or is realized because you know coming
35:17
from real estate I don't have the opportunity to triple or quadruple or 10x somebody's money I might
35:23
double it I might triple it but it's probably not going to be higher than that unless there's some
35:28
crazy thing that happens but in the venture capital world all it takes is one of those deals going
35:35
10 20x that makes it all over its failure it could be ridiculous right but but that's the issue
35:42
that I have with venture capital because venture capital is not a popular investment vehicle
35:49
because it's it's a safe investment vehicle it's popular because it's sexy it's sexy that's it
35:57
and and like you could make the same argument for crypto yeah it's just a very sexy investment
36:03
vehicle and there's hype around it and there's there's headlines around it and and people are
36:08
becoming I mean crypto more so than even VC like people are becoming you know to millionaires
36:18
worth tens of millions overnight in crypto so you you buy into the hype and you're like well why
36:24
can't I be one of these people yeah or you think you're smarter than you are which is the thing
36:28
that people have an issue with too and you have some success and then you're like well I'm sure
36:34
I could be an angel investor I've made money how hard could it be this is where it's it's the irony
36:42
because I get it it is sexy that's why invested in those companies because their name brand they're
36:47
cool I use some of the products I really respect the founders etc but I know because I'm looking
36:56
at it rationally and logically I know that I'm making that tiny little bit like 5 10 25 grand not
37:02
huge but in real estate it's the same thing you buy a 300 unit you know five year old or brand new
37:10
multifamily building you're gonna get like a five six percent maybe eight percent return maybe 10
37:18
it's not very very high but it's sexy it's much easier to sell versus a big part of what our
37:25
business is focused on is buying you know buildings that don't look good making them look good selling
37:31
them and we make big money on that but it's ironic because if investors were really being rational
37:38
they would choose to invest in that type of a strategy over something that's sexy but you know
37:46
everyone gets kind of pulled into this trophy type asset where they can say hey I own this big
37:51
building or I own SpaceX or whatever it is well yeah I mean so I see again I just referencing
37:57
the one friend I know that does a lot of real estate in Ohio and he's buying homes for I'm sure he
38:02
has over a hundred properties right now so he's not buying you know he's not buying massive properties
38:09
but he's cash flowing pretty well he has a tight team and he does well for himself and and he's
38:14
buying homes that are like 25,000 30,000 40,000 dollars and he's fixing them up and I'm like
38:21
it's not sexy at all because I see I see his Instagram and he's like walking through them the houses
38:26
are shit and there's like literally shit on the floor I'm sure in some cases and it's just like
38:34
it's not but he's as an investor wildly more successful than many people that just sit on their
38:40
ass and go to angel list and put money in some new tech stock and even angel list is more vetted
38:46
than just you know shooting from the hip and and and taking pitches from people on LinkedIn for the
38:52
next tech start I've been putting into putting in 10 15 20,000 dollars into a founder that you've
38:57
never heard of before with no track record so I mean humans are humans emotions drive unfortunately
39:03
a lot of our choices and then we justify those emotions with logic is as flawed as our logic is
39:08
so I think education is the answer education and understanding of different opportunities especially
39:14
people that are not like like a people that didn't go into finance and didn't understand investing
39:20
from a earlier age or a younger age it's just like don't be naive don't be so myopic in in your
39:27
in your thinking like you think about the work it took you to be successful at your craft or your
39:31
job why would making money in another format be any different put the same amount of work and respect
39:38
into that particular thing and that thing being investing right and learn about it you didn't
39:42
become a successful CEO or founder or sales executive or marketing executive in two years it took you
39:51
10 20 30 years so don't be naive yeah well two two last questions before we wrap up today Scott
39:59
tell me what was the biggest mistake or lesson that you learned while investing
40:04
sort of touched on it very briefly I have to say it's it's investing in things that I don't
40:12
know if anything about just because it seems like a sexy fun opportunity like all my mistakes happened
40:18
in not all my mistakes most of my mistakes happened in angel investing um less so in in PE angel investing
40:28
was more me like sort of just acting on my own and trying to put money into things I didn't understand
40:35
or I thought I understood but they were not industries that I grew up in so just because you know
40:39
like I came my whole career is B2B enterprise SaaS like that's actually what I know and then you
40:44
could niche down even further and say well I know telco and I know broadcast I know video and
40:49
streaming tech those are the companies that I helped build um but I would say that just because
40:56
there's nuances to B2B enterprise SaaS or other SaaS or consumer SaaS so a lot of it was ego
41:04
and just thinking if I had success in one field I could translate that success into understanding
41:08
another field and put my money and make my money grow I think that's I think that's a fallacy I
41:13
think that when we talk about specializing people don't even understand how important is to
41:17
niche down and like a particular thing that even an adjacent thing can throw a curveball that
41:22
you're not aware of so that would be my biggest issue it was ego and thinking that I knew more
41:27
than I did putting money into things that I had no business putting money into yeah before I
41:32
get to the last question Scott tell people where they can follow you or listen to your show
41:37
yeah so uh have an awesome podcast kind of like this one uh where we have conversations very much
41:42
like this so it's called success story um you can get that anywhere you download your podcasts or
41:48
social super easy it's all at Scott D. Clary um so if you want to follow me there you can connect with
41:53
me I'm pretty much active anywhere and everywhere amazing well this has been a lot of fun as we kind of
41:59
wrap up Scott for the folks who are listening and they're thinking to themselves hey I'm really
42:05
interested in getting involved in private equity or angel or real estate but they just feel like
42:12
they know what to do but they haven't taken that first step what advice do you have for them
42:16
I would say start with a fund first and invest your money through somebody that has a track record
42:23
significant track record just so you understand the process um so you don't have to do everything
42:28
yourself to begin with and and just like try and pay attention to first of all be an auto
42:34
diet act be a self-taught individual and you go watch youtube videos listen to podcasts you can
42:39
get a majority information there but when you start to put your money into something I would say
42:42
start with a fund or start with somebody else who you trust or a close friend trust and has had
42:47
success with and has a track record with before you do your own thing even for a few years like I
42:53
think it's just a smart move because again if you were for example trying to learn how to I don't
43:00
take a product to market you'd probably work for a company first before you start your own company
43:06
that's usually a good pathway and increases the odds of success so I think that that's the
43:12
the same path that you should follow if you're trying to learn how to invest in a new thing that
43:17
you don't have experience in and you don't have to do it for like 10 years but do it for like a year
43:21
or two at least well that's such good advice and uh it was really amazing having yon
43:28
Scott we'll have to do it again real soon thanks all for listening and we'll see you on the next
43:33
episode thanks for listening to the mastermind set podcast make sure to hit that subscribe button
43:41
and if you'd like to watch another years one up top and here's another great video right down below