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Breaking Down Venture Capital · Earn Your Leisure

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  Speaker 2: In terms of so like what are the economics in
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  Speaker 2: you investing into a company? Like how does that work?
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  Speaker 2: As far as you go you say I have one
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  Speaker 2: hundred thousand dollars, I want ten percent of your company,
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  Speaker 2: And then they come back and they say, no, well
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  Speaker 2: we want only give up five percent. How does this work?
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  Speaker 2: As far as you going in and actually offering to
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  Speaker 2: buy somebody's company and.
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  Speaker 3: Buy some equity. Yeah, usually they have around that they're raising,
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  Speaker 3: so they the company usually itself says we want to
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  Speaker 3: go out and raise a million dollars and they know
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  Speaker 3: how much they want to raise for the reasons that
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  Speaker 3: they figured out internally, and then they go to investors
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  Speaker 3: and say, what, you know, what exchange will you do
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  Speaker 3: for a million? Then you'll have the In a good scenario,
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  Speaker 3: you'll have two or three, you know, lead investors come
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  Speaker 3: back to you with a term sheet that says, okay,
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  Speaker 3: we'll buy that on a five million dollar valuation, meaning
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  Speaker 3: that's twenty percent d D. And then the next one
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  Speaker 3: may say we'll do it on a six million, So
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  Speaker 3: it's better for you. You get a little less diluted
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  Speaker 3: because we want the deal so bad. And so usually,
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  Speaker 3: like the best case scenario is you have two or
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  Speaker 3: three lead investors buying for to lead you around, and
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  Speaker 3: you take their terms. You don't necessarily take the terms
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  Speaker 3: that are most expensive. You take the terms that you
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  Speaker 3: feel like, that's the company, that's the fund I want
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  Speaker 3: to work with, that's who I want to lead and represent.
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  Speaker 3: So we have that, and then you have other investors
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  Speaker 3: around it who are followers, who like, you know, follow
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  Speaker 3: whatever terms have been created. So it's it's usually that negotiating.
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  Speaker 3: So most of the time backstage does not lead just
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  Speaker 3: because of the amounts that we're putting in, but we
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  Speaker 3: always advise, so it's almost like we act like we're
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  Speaker 3: on their board even if we're not on their board,
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  Speaker 3: like with their help.
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  Speaker 1: Well, what are some of the because you brought up
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  Speaker 1: challenges earlier, and I'm thinking to myself, we've heard about
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  Speaker 1: what it is to try to be a founder and
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  Speaker 1: race capital, but actually having a VC and representing three
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  Speaker 1: categories right like yes woman, yes, LBGTQ, yes, underestimated popula population.
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  Speaker 1: What is it like from that end? What are some
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  Speaker 1: of the challenges that you face and how have you
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  Speaker 1: dealt with it? Out of you overcome them.
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  Speaker 3: A lot of a lot of people who just you know,
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  Speaker 3: they talk, they say they're going to do something publicly,
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  Speaker 3: they get the picture or whatever, but they really don't
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  Speaker 3: do anything. But then there's really more like people actively
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  Speaker 3: trying to not like to stop what I'm doing. So
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  Speaker 3: I had a white investor. I have a lot of
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  Speaker 3: white investors, and I had one guy who is like,
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  Speaker 3: I don't know, I think he's kind of like mafia
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  Speaker 3: in Silicon Valley, Like he truly he's interesting and I
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  Speaker 3: don't think he's literally mafia, but he can make a
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  Speaker 3: phone call and stuff gets done and stuff goes away, right.
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  Speaker 3: And he called me in the middle of night one
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  Speaker 3: time a few years ago and he said, I just
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  Speaker 3: want to let you know I just left a closed door,
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  Speaker 3: like you know, poker games essentially with a bunch of
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  Speaker 3: guys who are very powerful, and there's an understanding that
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  Speaker 3: you're not going to raise more than you know, ten
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  Speaker 3: or twenty million dollars ever in Silicon Valley. And I
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  Speaker 3: was like, okay, that was a conversation. Y'all had time
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  Speaker 3: for that. And he's like, no, I'm serious. He's like
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  Speaker 3: you the powers that be are like, there's only a
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  Speaker 3: few of us. And the conversation, he's like, I you know,
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  Speaker 3: I said what I could, but I had to be
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  Speaker 3: able to not say certain things so I could come
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  Speaker 3: back and tell you. He's like, they don't want you
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  Speaker 3: to win. And look, we've raised I've raised thirty million
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  Speaker 3: dollars maybe twenty five twenty four of that has been
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  Speaker 3: like direct LP money to invest in other companies. We
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  Speaker 3: should buy our track record by the trailblazing part of it,
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  Speaker 3: the groundbreaking part of it. We should be at least
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  Speaker 3: one hundred million dollar fund, if not ten times to
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  Speaker 3: what we are at least, and so I believed him
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  Speaker 3: when he said it. But I always thought I could
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  Speaker 3: break through that. I think that I think that, yeah,
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  Speaker 3: there's there's you see like Elon Musk and like how
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  Speaker 3: he he's direct click going after Cuban talking about DEI
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  Speaker 3: is racist and all of that. That's what was happening
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  Speaker 3: behind the scenes. That's who I deal with. I've had
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  Speaker 3: so many conversations behind the scenes that are like a movie.
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  Speaker 3: They're like, I can't believe this person is saying this
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  Speaker 3: out loud to me, or somebody calling me and saying,
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  Speaker 3: you know, you need to shut up. You need to
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  Speaker 3: stop being so vocal about stuff. It's not good for you,
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  Speaker 3: like I've had so I had what was Paul Graham
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  Speaker 3: at YC speaking of YC. So I'm friendly with Sam Alman.
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  Speaker 3: I think he's cool. I've invested in Open AI, very
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  Speaker 3: happy about that. Paul Graham, his mentor and the founder
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  Speaker 3: of YC, I do not like very much. And it's
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  Speaker 3: because he sicked his minions on me on Twitter and
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  Speaker 3: I had to get security before I should really have
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  Speaker 3: had security because I said something he said about his wife,
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  Speaker 3: and I said it was very sexist and chauvinistic, and
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  Speaker 3: I said, I just commented myself on it, you know,
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  Speaker 3: on Twitter, because I'm outspoken, and he just like came
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  Speaker 3: after me. And it's happened a lot, like with different
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  Speaker 3: different people. Of note, that's happened because I'll just speak
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  Speaker 3: up when I want to speak up. I feel like
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  Speaker 3: I have the moral high ground to speak up because
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  Speaker 3: I'm actually doing action and I'm not just pontificating and
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  Speaker 3: criticizing from the sidelines. Like I feel like we could
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  Speaker 3: all be better. So I'm trying to be better. Why
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  Speaker 3: can't this billionaire be better?
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  Speaker 2: So as far as like valuations, right, valuations a lot
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  Speaker 2: like how do you guys look at the valuations, Because
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  Speaker 2: we were talking to one of our friends, John Henry,
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  Speaker 2: and he was saying a few years ago, like, depending
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  Speaker 2: on what kind of company it is, it has a
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  Speaker 2: different valuation, right, Like if it's a hair company, the
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  Speaker 2: evaluation might be a lot different from a media company.
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  Speaker 2: That might be a lot different from artificial intelligence technology
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  Speaker 2: based company. So and then part of raising the money
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  Speaker 2: is you have to raise one evaluation. That's one right, Yeah,
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  Speaker 2: So how do you know, Okay, this is a fair
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  Speaker 2: valuation and this is this company's overvaluated, this company's undervaluated.
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  Speaker 3: Yeah. John Henry is a good friend and I've invested
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  Speaker 3: in his company and after he became a founder.
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  Speaker 2: Yeah.
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  Speaker 3: So a lot of it is just like what the
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  Speaker 3: market will bear. A lot of it is a lot
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  Speaker 3: of people just deciding just to say, well, what can
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  Speaker 3: I push across the table and somebody says yes to essentially,
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  Speaker 3: and it's kind of a joke in the industry because
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  Speaker 3: it's like every year it's different. In twenty twenty two
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  Speaker 3: and twenty twenty one is super frothy, super everything was
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  Speaker 3: valued so high, ridiculously not sustainable, but everybody was like, okay, cool,
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  Speaker 3: sounds good, more money for us. And then when second
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  Speaker 3: half of twenty twenty two and twenty twenty three, everything
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  Speaker 3: came crashing down because you could understand that, yeah, you
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  Speaker 3: go ahead and y'ah. So the the so the valuations,
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  Speaker 3: but the reason that the valuations are different is because
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  Speaker 3: the multiples on an exit or a purchase are usually
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  Speaker 3: much different. So a hair care product or a CpG
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  Speaker 3: company is gonna sell different multiples than a SaaS AI company,
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  Speaker 3: meaning like a you might for something CpG, you might
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  Speaker 3: have like a one and a half x to six
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  Speaker 3: x multiple on your on your on your net revenue.
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  Speaker 3: If somebody buys you on a SaaS ai, you may
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  Speaker 3: have like twenty x or ten x. So when someone's
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  Speaker 3: valuing you to invest in you, all they're doing is projecting.
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  Speaker 3: All they're saying is, Okay, if I put a dollar in,
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  Speaker 3: what's the best what's the best guess I can make
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  Speaker 3: as to what your will sell for based on how
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  Speaker 3: you're doing today?
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  Speaker 4: So is that from from your perspective? Is what a success?
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  Speaker 4: Is it a company to exit? Is it to create more?
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  Speaker 4: Is it to create more opportunities for founders?
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  Speaker 1: Again from the three categories that we spoke about, how
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  Speaker 1: do you determine to measure success?
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  Speaker 3: I love that question. To me, it's all three. That's it, right.
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  Speaker 3: For very very sharky investors, they don't care about impact
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  Speaker 3: and they don't care about like people coming up. Yeah,
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  Speaker 3: that's just not important to them. That's not necessarily bad,
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  Speaker 3: but it's just not my vibe. Right. They're like apples
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  Speaker 3: to apples, how much about getting back? So that is
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  Speaker 3: a juggle thing. But I say, and many of us say,
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  Speaker 3: you can do both. And I just want to say
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  Speaker 3: one thing, you said earlier that there are not a
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  Speaker 3: lot of black investors. So there's so many now, which
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  Speaker 3: I'm so excited about. You know, like ten years ago
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  Speaker 3: it was so different, but today like that, like John
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  Speaker 3: Henry and I can be in a room and it's
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  Speaker 3: just back to you know, back to back. Still not enough,
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  Speaker 3: but so you have within black investors, you have some
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  Speaker 3: like six four or five ventures. Aaron and Nyambi. They
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  Speaker 3: are two black men. They've raised I don't know how
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  Speaker 3: much more than a hundred million dollars. I can't remember,
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  Speaker 3: maybe two or three hundred million dollars. And they're like,
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  Speaker 3: let me put it into this spreadsheet and do these
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  Speaker 3: numbers and see what this company might or may not make.
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  Speaker 3: And I don't care. You know, it doesn't matter to
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  Speaker 3: me if you're a woman or if you're purple. I
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  Speaker 3: want to do that because my success as a black
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  Speaker 3: man is then going to be my success story and
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  Speaker 3: help others. Right. So I'm on the category and so
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  Speaker 3: which I love that. By the way, I'm on the
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  Speaker 3: category of I want to get this one shot. I'm
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  Speaker 3: going to just make this more well known to people
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  Speaker 3: like you all are doing with your education, like being
• 11:43
  Speaker 3: a bridge to understanding this with my audience, which is
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  Speaker 3: mostly women of color, and I'm going, so that's impact
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  Speaker 3: and success that I have a video right now that
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  Speaker 3: I put up today. A black woman comes up to me.
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  Speaker 3: She's crying, she's saying that she's essentially saying that she
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  Speaker 3: felt she felt heard and represented and seen because of
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  Speaker 3: the work that I do. And she said a tangible
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  Speaker 3: something that happened. That to me is like the biggest
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  Speaker 3: that's the legacy. That's the thing that you can't take away.
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  Speaker 3: But I also not only want to. I feel like
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  Speaker 3: I have to make a lot of money from what
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  Speaker 3: I'm doing, even though even though we're not funded enough,
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  Speaker 3: I want to make multiples for our investors so that
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  Speaker 3: it serves as an example that you can do both.
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  Speaker 3: And that's a high pressure, but I also agree that
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  Speaker 3: it should be high pressure.
• 12:36
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