Animal Spirits Podcast - Talk Your Book: Direct to Consumer Venture Capital

Episode Date: January 6, 2025

On this episode of Animal Spirits: Talk Your Book, Michael Batnick and Ben Carlson are joined by Elia Infascelli, Partner and CEO of The Cashmere Fund to discuss celebrities within VC, utilizing networks for private investments, how Cashmere was able to bring this to retail investors, how liquidity works for investors, portfolio structure with an evergreen fund, and much more! The Cashmere Fund disclosures: https://www.thecashmerefund.com/certain-risks-and-disclosures Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Past performance is not indicative of future results. The material discussed has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk Your Book is brought to you by the cashmere fund. Go to thecashmerefund.com to learn more how you can invest in venture capital in a retail product, ticker C-S-HM-X. That's the cashmerefund.com to learn more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinions. and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only

and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael, one of the things you and I have been talking about on the show and internally, off-air, I guess, is just the explosion in private assets that are coming for, financial advisors and retail investors. It seems like it's already started, but it's only going

to get bigger because fund companies are now figuring out, let's take away a lot of the bad operational stuff about running funds, the capital calls, the distributions, all this, the stuff that individuals are just never going to be able to administer like institutions can. And let's make it more of these evergreen funds, rolling funds, what are the interval funds, and make it easier and just make it a wrapper and give you a little bit of liquidity. And I think that sort of thing is going to become more and more commonplace as we go along. Yeah, there is an inevitability that the lines will start to blur the convergence of public and private markets is definitely a thing. And I think for the end investor, they have to understand the risks and the rewards, the lack of liquidity, how this fits inside their portfolio, what is actually happening.

what do the fee structures look like, what does success look like, all of those things to determine whether or not this is a suitable investment for themselves. So I am really bullish on like education in the space. Yes. Because I think there's just a large gap of investing in an interval fund, like the one that we're talking about today, how many people know what an interval fund is? How many people have invested in one? Very few. Right. This is something probably a lot of advisors don't even have experience with. Yeah. So on the conversation today that we had, which I had a lot fun with because Alia has a very interesting background. He started at, I don't know if he started, but he was at Endeavor, the talent agency worked for Ari Emanuel, got the bug of investing and did

that for a couple of years before starting to do this formally. So their whole thing is networking and finding people of influence, whether it's the founders or the investors or the partners to distribute this. Like they are very much leaning into the fact that people trust people and brands as opposed to like the incumbents. And being a talent agent is a lot like being a VC in terms of the networking piece. And so we talked to Elia and Fischelli, who is the partner and CEO at the cashmere fund. They have Josh Allen of the Buffalo Bills as a partner investor in the fund. Oh, you know what?

On this conversation, I almost forgot about this. Afterwards, I was thinking, wait, did I, did I see the name wrong? I said, I think I called Norman Osborne from Spider-Man. I think I called Norman Oswald on this episode. Maybe that's why it went right on my hat. Did I call Norman Oswald? I think I did. And if I didn't, disregard.

We'll find out. It would have been really awkward if you messed up a movie line when we talked to someone from the entertainment business. I think I did. I think I did. That's okay. Let it slide. So anyway, we talk, they have a venture capital fund that is available to people in a,

what do you call it, a 40-X fund? Is that correct or not? Correct terminology. So minimums are what, like 500 bucks? Like something. Yes, it's very, yeah. So anyway, the interesting conversation to learn how they're doing and the types of companies that they're looking to partner with.

And it definitely has his time as a talent agent. Definitely colors the way that this fund invests as well. It's very interesting. So here is our talk with L.A.N. Fischelli of the cashmere fund. So, E. You have, we've been told you have an influential quarterback on your roster in Josh Allen. And I just want to protest this because he kicked the crap out of the Detroit Lions last week. Well, I'm a fan up.

So I take umbrage with this, but I'm curious how that all came to be that Josh Allen is on board with the Kashmir Fund. Yeah, that's a great question. We started a lot of the partners at Kashmir. We started a venture capital fund a few years ago. And a lot of the thesis of the fund was to deploy capital and influence in consumer brands, or mostly consumer brands. We really did sports health and wellness. And at the time, we had done a lot of angel investing and we came from the sports and entertainment side, one of our partners comes from the finance side, we didn't have a kind of formal kind of VC background. So as we were putting the fund together, and we really leaned on kind of our unique value prop of like the influence kind of driven model of deploying,

you know, saying influential people coming on cap table, influential people that can start brands, that we can back, et cetera, et cetera. And Josh was very close with one of our partners. And, you know, we reached out as most people, you know, first time VC guys and girls, you know, kind of kind of do like Friends and family. That's how you start the fundraising. And Josh was incredibly gracious to us. And he said, you know, I believe in what you're doing. I believe in you guys as people. Let me let me write a check. So he became the first check in our venture fund, which is kind of form of capital, which is the first fund that we raised kind of pre-Cashmere. And he's been an awesome supporter ever since. When we started the cashmere fund, he was, you know, it was kind of the same thing that we still have this kind of idea of deploying capital and influence. We actually use the word kind of compound influence. influence. And he kind of said the same thing. You know, love what you guys are doing. And I think he's, he's a, he's a real, he loves VC. And, you know, he decided to join us again, which was awesome. So before we get into the fund and the opportunities and the, the investors that you're allowing into it, because it is a unique structure. Talk about your background. You're not a, you're not a finance guy. You're not a venture guy. You got your career started in Hollywood. So how did you make the leap from advising talent and doing that sort of stuff to, to, to hear? Yeah. That's a great question. There was an interim step for me. I was a traditional agent. I would say it was an agent at a traditional company called Endeavor. And it was an agent for kind of agency for the first like 10 years of my career there. And I think I had a little bit more of an entrepreneurial itch than most people there. And I really started seeing the kind of social media and the effect that influential people can have through having really for the first time a direct connection with people through social media. Before it was really in this. intermediateated. They had to go to a network or to a studio to kind of speak to their audience. And when Endeavor actually merged with William Morris, which was 2009, there was an aha

moment for me that I was like, I don't want to be an agent anymore. But like, I want to go build things with these people that are highly influential and now have a direct connection with consumers, right? And my boss at the time, Ari was incredibly gracious and said, you know, let's go build this thing. Let's see what it looks like. You could say his last name. His name's Ari Emanuel. And what we did is we eventually became the brand ventures group, but we started incubating like, what does this look like? How can we help talent kind of like build their own entities? And the first guy that we helped, it was like an incredible, like few years was Dwayne Johnson.

So basically he had a number of endorsement deals. And he was a big deal back then. He was a huge deal now. And, you know, those were deals that paid him, you know, multiple, you know, million a year to, you know, do a social posts or show up or something? And basically we went and we just said, you know, do you want to go build something? Do you want to own something? And I think that was obviously something that was in the back of his mind already.

We weren't the catalyst. So we can't take credit for it. And he was awesome. He was like, yeah, let's do it. And, you know, we had an ad agency called Juga 5, which is an internal asset of the company. And basically we acted as an incubator for him. We just said, let us build a brand for you, right with you. And we created the whole kind of ecosystem.

And that became Project Rock, which was the first owned brand that he has. And then eventually opened up kind of the world. So for me, it was kind of like an interim step. I went into incubating, creative brand ventures, then eventually I left in 2017 just to invest. And I knew that my life was, I love to invest over incubate, although I kind of have a soft spot for that. And I joined up with a bunch of partners. And basically, we, we just started investing from then on. I have this joke that in like the 90s and early 2000s, every professional basketball player wanted to be a rapper and every rapper wanted to be an actor. And a lot of them

tried to do these things. And now, did you, hold time out. Did you act like you just made that up? I have the tweets to back this up. Don't even, don't go there. It's a long time ago. You also invent the question mark? So, but now the point is all NBA players and all rappers and all actors, they want to be VCs or run businesses or have brands. And I'm just curious how you've seen that evolve in terms of the entertainment space with these people just being way more aware of everything outside of the business and creating these own, like they're their own business and brand now. I'm curious how that's evolved over the years.

Yeah, I think that I think totally. I think that Jay-Z, you know, I'm a businessman, I think resonates to a lot of people. I think it comes down a lot to like the scale of social media, right? Like when it started happening, I'd say like in the probably in the early odds at some point, you know, and people saw what Drey did with beats and what Jessica Alba did with honest company. They were like, oh, man, I can, if I have social and I can connect with people directly, I can go build something that's incredibly valuable. So I think that was, that was obviously the start of brands.

And I think that's evolved a little bit into from just creating a brand to creating, you know, to be in the investment space, right? Like where Jay Z and Serena Williams and some other kind of celebrities have done. I think they have the power to do that, right? I think I think talent are becoming brands. You look at the podcasting space like you guys, you know, like you can create a brand on your own. You don't need a distribution partner. You don't need someone else that can kind of dictate what is successful or not if you're good and you have direct connection with consumers and a good idea and really the willingness to do. it like sky's the limit yeah that's certainly true the however that i would be curious to hear

your take on and how you sift through this is that influence is maybe a prerequisite but it's not enough on its own like 100% right it's just table stakes like okay fine you have influence but let's how are you is it is it product bullshit is it great like how great how big can it be how do we get to market how do you not take adventure to the audience you can only go back to that while so many any time. So how do you think about wrapping a product or service and idea around the idea of influence? Yeah, that's a great question that we really try and unpack and get better at every day, right? We think we have a significant advantage because we've been doing it for, you know, a decade plus. But nonetheless, I think it's it's an evolving business. I would say the table stakes

are that. I would say the table stakes is also authenticity, right? Like does someone really care about a product? You look at, you know, like Hocktoa coin. Yeah, exactly. Exactly. Who could have seen that coming? I have no words. You know, you look at some of, you know, we're invested in, for example, like DeSois, which Katie Perry is non-alcoholic, sparkling wine. Like, you know, when we saw her and you see the amount of effort that goes into it and

the things that she does and, you know, the rights that she gives the brand and the support that it's like pretty, you can't doubt the fact that she's in it to win it. And like, this is her life. And is it her legacy? I don't know. Maybe, right? And there's a lot of people that do that. and Selena Gomez with Rareling.

And then on the other hand, there's a lot of money grabs. And by the way, some of them work, but most of them don't. I'm sure you've seen a million examples of like, okay, this person, they have fame, they have this, but they might have had influence, but they lost it because they did too, they spread themselves too thin. They were just cash grabs. They didn't, they were, they were, they were, they're, it wasn't their passion project. So I think probably from your point of view, you know what that looks like.

You know who's been to the well too many times and you know who's like doing something that like they actually, they actually care about? 100%. We think, you know, we think we have better data than most entities in this space, right? We've been, we're five partners, four out of the five come from sports and entertainment. We've been in the business for 25 years plus each. And we have good networks, good relationship with the agents, the managers, the talent, the athletes, et cetera. And we think that we can kind of ascertain better than most, you know, are these people,

do they have the drive? Are they authentically engaged in what they're doing? Are their management teams supportive of those endeavors, you know, kind of, et cetera, et cetera. Will they go above and beyond? It's also really interesting. You said something also about who are the right people to also do this. One area that we're leaning into, and it also to your previous question about a quarterback, is, you know, there's a lot of athletes that also have a very finite shelf life, right?

So it's like you think they're like the megastars. They're making, you know, they have two, three hundred million dollar contracts, 100 million dollar contracts over, you know, five years plus. And then all of a sudden, it's over, right? Like, sure, they have endorsements and, you know, they can go and have, like, big speaking engagements, et cetera, et cetera. But effectively, like, their day job is gone and, you know, they're highly influential. What do they do next?

So that's also an area where we're spending a lot of time in and on and figuring out, like, how do you really kind of, like, create longevity with those athletes? I'm curious before the cashmere fund, were you doing this in a typical GP structure of a VC fund? Were you doing one-off deals? Like, how did this evolve for you as an investor over time? Yeah, former capital is a traditional venture fund. So we're 2 and 20 model and, yeah, traditional a GP structure.

What was interesting to us is just the ability to reach consumers at scale. So think about like our kind of value problem, aside from the deployment of capital, which is a huge pillar for us, we're really trying to deploy influence its scale in a smart way. And being able to have, you know, the cashmere fund right now, it's kind of still in its nascent stage. And I think 2025 will be a big year for us. We'll go from a DTC brand, an Omni-Channel brand. And we already have 5,000 investors, 5,000 retail investors, like just having the ability to kind of take that investor base and really create a community around them and a community

around the brands that we invest in. You know, how can you activate and how can you have them, like, organically be engaged and evangelist of these brands? That's what really got us excited about the model of creating kind of this DTC, you know, low investment minimum and having disengaged community really drive a little bit like we're a very different entity, but look at what Robin Hood started doing, you know, four, five, six years ago, or four years ago at scale, you know, they built a platform way beyond that. Like, that's inspiring to us.

Like, how can you create a community around people that are backing these companies? So we'll spend a lot of time talking about that idea and what you're doing. But before we get there, I'm just curious. So you have an incredible network of highly influential people. does that mean that the companies that you're investing are led by influential people or not necessarily? It's just that they're somehow, somehow you got connected or they've got it back or like talk more about these type of companies. Yeah. Great question. It's a nice to have, right? We're not going to look at our portfolio. We have 38 investments right now, 34 are direct

investments for our funds of funds. We don't want to see. And ideally we want to get somewhere between 100 and 200 investments in the next two three years we're not going to look back and say like wow we have you know a hundred or 50 percent of the portfolio that's that's led by influential people when there are those opportunities we think we have better data to ascertain if those are good investments like kitty perry is a kind of a good example we think that's how do you have better data you've said that twice now i'm curious what do you mean about that well first of all we have access to their networks right so a lot of a lot of times we know the people the talent and the athletes directly and you know that that means a lot right you know you know

person, you kind of know, or are they, is their heart in the right place to build this? You know, are they doing it just for the money? Are they doing it for legacy? Or they're doing it for their kid or they're for something else? A lot of it is really knowing the people around them. And let me tell you, a lot of these people have a lot of people around them. And a lot of times it's a good thing, right? They have business managers and agents and managers and assistants.

And everyone kind of typically has to say, which, again, not a bad thing. So really also understanding the ecosystem that they live and breathe and, you know, what are they doing on a day-to-day basis? You know, do they just want to, you know, play golf, you know, 36 holds a day and really just, like, at some point, do they get a text from their manager being like, oh, you forgot to text, your contractual text about the brand? Or do they wake up, you know, Ryan Reynolds, right? We're not invested in Ryan Reynolds, but like that guy. Don't get Ben started. Ben is a huge Ryan Reynolds stand.

Michael's had a paper shot on Ryan Reynolds for like three years. Not true. I've been just raking it in. I'm equal weight, Ryan Reynolds. Not short. Actually, maybe slightly underweight, if I'm being honest. So I'm curious how the cashmere fund came about then, because this is a very unique fund structure. So I'm curious how this whole thing evolved.

Yeah. So basically, you know, the premise was, you know, we believe roughly 99% of people in the U.S. have not had access to venture capital. And that's really because of an accreditation issue, you know, minimum six figure check, you know, no liquidity, not being able to, you know, it's 10-year time rise. And there's a lot of, like, massive hurdles for the everyday retail investor. to be in the space. So we spent a lot of time really trying to figure out, is there a way to create an ecosystem in which a retail investor can invest? And we did that. And we really, really tried to look at like, how do we remove the barriers to entry into this asset class

that has really overperformed most major indexes over the last three, five, you know, 10, 20 years. It's an asset class that really should, people should be into. The biggest one, or one of the biggest ones was accreditation requirements. Over 80% of the U.S. population is not accredited. So effectively, four out of five people didn't do that. So we created a fund. Technically, we're an interval fund, part of a mutual fund ecosystem. And that allowed us to take capital investments from retail investments, which is a huge priority for us, too, is low minimum investments. We have a $500 minimum investment. That was kind of huge for us. And then we have liquidity, right? So you can, you know, if something comes up, first of all, we're never.

green fund. So like you can invest in the fund and, you know, two years later, three years later, you can exit the fund and we have redemption windows and without any penalty, right? So you can also have it as a two, three, four, five year investment, et cetera, et cetera. It took a very, it was a very, very heavy lift from a tech stack standpoint, right? It just didn't exist. We kind of had to create the, how do you, how do you onboard, you know, thousands, thousands of investors in a very time and cost efficient way? So we had to create kind of custom integrations of like how do you to be able to kind of do that. And, you know, that was ultimately kind of the goal is how do you create this, you know, how do you give access to this asset

class? How did you get around the rules and regulations for this, that you don't have to be accredited to invest in the fund? So technically we abide by the kind of where the 1940s and the 1933 Act Fund. And by doing those two things, you can raise capital for not accredited investors. There's about 100, just under, I think, 100 interval funds in the U.S. Most of them, I think, 97% of them are not in venture capital, right? They're typically real estate driven, credit driven, I think in large part because they're a heavy lift. They're expensive to run.

They're expensive to set up. And, you know, venture typically is, you know, you start with a smaller fund. And, you know, it was a big risk and kind of a heavy lift for us to be able to kind of put that capital and create that tech stack and kind of create everything around it. But, you know, technically we're in, you know, SEC registered entity. Again, we have pretty high, high bar of, um, of a regular. which is just something that we live in. It's also huge kind of positive for the people that invest with us because there's real visibility into the portfolio. And we have yearly audits

and quarterly audits and everything's very transparent. So not only do we, yes, it's a little bit of a burden on us, but also it's a real value add to the to the consumers. Let me ask a cynical question. Going downstream instead of doing what the traditional route is, which is you raise money from rich people, you take two and 20. You keep it to a limited number. of LPs, why, like, is there any sort of adverse selection or anything? Like, when you get this sort of question, how do you answer it? Let me clarify the question. It wasn't a great question. It was a bit rambling. No, no. Go ahead. So how did you interpret my question, my bad question? Can you become a successful venture fund by starting with $500 checks?

Sure. The vision was always to start as a DTC brand, as with where DTC fund or effectively were a DTC brand. I think most brands today are not DTC, right? They're omni-channel, but you start with a kind of loyal customer base on a DTC side, and that was basically what the cashmary fund is. So we started a couple of years ago. We raised, you know, 50 million plus, or sorry, the value of the fund is 15 million plus. It was a little bit less, but we've performed. So the value of the fund is now over 50 million. And we did it through 5,000 investors. The future of the fund is to become an omnichannel. So 2025, we have a number of distribution partners that are that we're onboarding with. So for example, in January, we're launching with one of the kind of major brokerages in the

U.S. that have 10 million customers, right? Like the customer acquisition journey with those partners is much more efficient, just like any other business, right? Like you look at a consumer brand, they're going to go DTC, but at some point they're going to talk to you about how do we get into Target, how do we get into Walmart, et cetera, et cetera. And that's really the stage where we're at. We're transitioning from a DTC to an omni channel brand. And we're having those partners onboarded, really in 24 that are launching on 25. So you anticipate multiple different chassis or different types of investment vehicles. Are they all going to share the same underlying investments?

In other words, I'm going to ask you a very question that is an easy softball for you. Are the $500 checks going to get the same great investments that the $5 million checks are? Yes, the fund is the same. I think what we, so right now we have one share class in the fund. and I think at some point where we'll probably do, if the check sizes get very, very large, which obviously we hope we do, we'll probably just create separate share classes to make sure that the kind of incentives are aligned across the board, but the underlying fund portfolio will be the same for everyone.

The evergreen structure obviously makes a lot of sense for retail because you don't want to be chasing down retail for capital calls and distributions, and it's just an operationally inefficient way to run a fund. But how do you deal with the time horizon mismatch and liquidity mismatch? when I assume most of these investments are made for five, seven, ten plus years in some cases, but there's, I don't know, daily liquidity or quarterly liquidity. How does that work? Yeah. So we strike NAV daily. So you can see the value of the fund from a daily basis. As far as liquidity, you know, we're creating, we're getting an asset class that is highly illiquid, right?

Like basically liquidity once every 10 years. And we're making it as liquid as possible. Today, we have bi-yearly redemption windows. So those redemption windows are 5% of the fund twice per year. So we redeem out a total, a max of 10% of the fund per year. And then we have a distribution window, potential distribution window at the end of each year. So there's really three potential liquidity windows or redemption windows for us. So that's kind of the, I would say, the quote unquote, exit mechanism. You know, customers on board, and then they exit through those redemption windows.

The fund has been performing quite well, so we've been lucky that a lot of, we've got, I think, four redemption windows out of those four, three have been over subscribed, which is 100% the norm, kind of in these funds, because again, that's how you kind of get liquidity out of it. And then one hasn't, which is kind of a real exception, something that, like, actually, we pride ourselves. So there's, so that's currently the liquidity mechanism for the fund. I'm very curious. How does the, how does the nav work?

Like, what is, so the price I'm making this. up. The price was $20 yesterday for the shares, and now it's $20.5. And then tomorrow, it's $19.85. How does that mechanism work? Like, who's setting those prices? Is it just buyers and sellers? Or talk us through that? Yeah. So you can only buy the shares of the fund through us. So we're like closed ended fund in that respect. So there's no, there's no trading of the fund assets on a public market. We are NASDAQ listed, but we're not traded on NASDAQ, which we see very much as a positive. So there's, it's a very stable. kind of asset, right? There's no activist investors and the share doesn't go up and down by 10

percent, et cetera, et cetera. So kind of that's the positive kind of of the fund. So you guys are setting the price on a daily basis? Yeah, we're setting the price of the fund based on the underlying asset. So what we do is we audit the, so we operate under level three accounting, which is a much more stringent accounting level than the kind of traditional venture funds to in 20 models. you know, that's a little bit of a negative for us because it takes kind of more bodies and kind of back office to be able to do that. That's a positive for retail investors because they really, the value of the asset is actually valued quite accurately from a venture level, which is quite rare.

So what we do is we audit the full portfolio once a year in March. And then we do monthly updates based on what the portfolio companies give us as far as information. So if you have an upround, that'll filter its way through it into the nav. 100%. And if you have, all right, so what happens in the case that there's an exit and let's say it's three years down the road? So there's existing shareholders that have been in the fund the entire time. And then somebody comes in three years later, a month before a deal closes, do they get the

same benefit as the early investors? Or I guess in theory, the nav would be higher. They do if there has not been a bump and nav along the way. But that's typically not the way that it's done because we get kind of quarterly updates from the brand. Because typically there's like step ups before there's an exit. of course. That's right. That's right. But theoretically, if it was just in the unlikely event that the company did so well that they raised their seed around and they never had to raise another

dollar of capital, which I know is unlikely or rare, theoretically, the new investor would get the same benefit as people that have been holding that company for a couple of years. Theoretically, yes, highly unlikely because we have information reports that come on a quarterly basis when we adjust value of the asset. But yes. So you would mark the company up even if they hadn't officially raised money. Because if you invested a seed round, then there's literally $0.00 of revenue. And all of a sudden, three years later, the company's doing $10 million from revenue, you're going to mark that position up, even if there hadn't been a round raised. That's right. I'll give you an example. There's a, there's a company we invested in a consumer

brand in our portfolio that we invested in. I think they were doing 11 million in revenue when we invested two years, a year and a half, two years ago. They just announced that they're going to do, that they've done 60 million in revenue this year. There's been no kind of, there's kind of be no. the way, we also look at projections, right? Like, kind of like, what is the run rate and what this 2025 kind of look like? So we take all the information. And then based on that, you know, we adjust the value of the portfolio company and therefore the NAF changes. And that's a positive. We think it's positive, again, one for the early investors, but two, also for the visibility of the fund and its assets. Do the companies that you invest in end up being a lot of consumer-facing brands?

Is that the general focus or do you have a wider focus on that? Yeah, that's a great question. So we, you know, we have this compound influence thesis that is really kind of more specific to the consumer and consumer brand. So we over index a little bit in consumer. It's about 40% of the portfolio today. And we're really like that, right? Like when we onboard influential people and investors and athletes, et cetera, we think that those people can really have a positive effect on the portfolio. How the fund is position today.

And the remaining 60% is quite diversified. So we're in health care, B, SaaS, kind of, et cetera. How we're positioning the portfolio and how we think it's kind of positioned so far is we want to be the first check that anyone has in venture capital from a retail investor standpoint. So the 99% of people that have never been into venture, we believe that they should invest in venture. We believe we are a great option for them to invest in venture. And we want that venture asset to be highly diversified, almost track the asset class. So like if you're investing in us, you have a macro kind of exposure to the venture to the venture fund. So for fund one, this is what we're building, right?

So there are areas of business that we are still not invested in, that we will invest in, but we really want to track kind of portfolio with a little bit of an emphasis in consumer because we think it's just a value add for kind of the value prop in the investment thesis that we have. So I'm something of a venture capitalist myself to quote the great Norman Oswald. What's the name of that movie? Anyway, so we raised a fund a couple of years ago. Are you quoting Wayne's World again? I don't know what, okay.

No, Spider-Man, Spider-Man. So we raised a fund a couple of years ago to invest mostly in our lane, which is wealth tech. And it's a messy industry. It looks really sexy from the outside. Like, oh, you give money and then, you know, the, then you get a lot of money later on. And like, it's a messy, dirty industry. Not dirty. But there's a lot of fucking work that you have to do.

Like these are, these are in some cases like baby companies. And it's hard. Business is hard. And then investing is hard because you've got all sorts of like cap table stuff that most people don't know about. And there's dilution and there's like preferred share and all this sort of stuff. How involved are you? They actually want you to help them with the business. Yeah.

There's a lot more to it than just meeting an influencer and writing a check and then, you know, hope it works out. So what do you all guys do in terms of working with the companies, talking to the lawyers, knowing the players, the influencers, the competition, like all that sort of stuff that is like very not sexy and actually not fun at all. Yeah. So from a traditional kind of probably split into like from a traditional venture fund, we obviously want to support the full portfolio in the kind of quote unquote traditional ways, right?

When a company is raising their round, you know, we want to be there for them, either invest directly or find other investors to help them out. Obviously from an operational standpoint, you know, look at their kind of quarterly updates, see if there's ways in which we can. help, et cetera, et cetera. I would say from an influence standpoint, I think we're really a partnership based kind of venture capital fund effectively, right? And that means obviously kind of influential people a little bit what we discussed kind of earlier. But two, you know, a lot of brands are also growing, especially in the consumer and consumer tech space. You know, there's, there's a lot of

partnerships. A lot of brands use partnerships to grow, right? Whether it's with sports teams, sports leagues, you know, influential people, et cetera. And that's really that a lot of our value for them is like if you're thinking of doing something with the NFL or the NBA or in the NIL space, you know, with athletes or with, you know, with leagues, et cetera, et cetera, we think we have fantastic know-how connections, uh, ways to kind of like cut to the chase, you know, are you the right brand to do this? Can we help you introduce you to the right person, et cetera, et so I would say that those are the two primary ways like kind of traditional, you know, venture capital. We're going to help you from an operational standpoint. Again, our, our, our, our

goal and a hope is to have a pretty wide portfolio. So we're not going to be super hands-on on on that. We do not lead rounds. So we're not going to be the guys that are kind of day-to-day holding your hand. And we don't set that expectation from an kind of influence, leagues, partnerships, athletes, et cetera, et cetera. That's where we can really play a role and kind of get our hands dirty. So how do you think about portfolio structure and position size where you don't know what size of the fund is going to be? Like, that's got to be a challenge. Yeah, that's a thing. It's a challenge and it's exciting. That's certainly the case, right? Right now we've kind of average check size is kind of 250 to 500K kind of historically in the in the 38 companies

that we've made investments in. We don't know what that will look like next year. We think we have, you know, two, three kind of major partnerships that are that are in place that I think will change that pretty dramatically. And AUN will change pretty dramatically. I think there's some flexibility there. We are fans of large portfolio theory where you do have to have a minimum number of investments to really give you the chances to have one, two, three, four, five unicorns that have an outsize effect on the portfolio and the value of the portfolio. Most venture traditional VCs don't have the ability to do that because they don't have a robust back office enough to handle 100 investments or 200 investments for better or worse. We do.

SEC kind of requires us to have a certain robustness of back office and because of that we can we can scale the number of investments. So we're not afraid. Also, one of the benefits, sorry to cut you up, but one of the benefits of the other side of this is that because you have more money coming in, it's like it's unusual where when traditionally when you've got when you've got a certain pile of money, you really have to think about position sizing and how much dry power do you want to keep for deploying into into later rounds and scale up and ride your winners. You have that benefit of not, it's not permanent capital by any means, but you have more money coming in. And so you are able to lean into your winners, whereas with a closed fund, like the traditional style, you might

have to do like a side pocket or like do a separate round if you run out of money. So that's that's kind of the flip side, which I'm sure you've thought a lot about. A hundred percent. And obviously with a growing portfolio, you have potential for follow on rounds. And, you know, there's a synchronicity and information. And it's a positive for, you know, venture funds and that potentially where you can win really big with the winners. So I think you can kind of also manage that a little bit, right? If there's a lot more capital and we say, like, great, we're, you know, 2025, the fund is going to go from, you know, what it is now to 5X and hopefully, you know, hopefully that happens. Then we can also lean more into fall on rounds versus just

doing, you know, new investments or do a little bit of both. One of the more frustrating things about the investment business is that you could be the smartest person in the room and there's a lot of like very quant math-based people who are ridiculously smart people, but they have no social skills or they have no ability to tell their own story. And it's a lot of, it's hard for them to attract capital because they're not good at marketing themselves. You coming from the entertainment industry know that the best story wins, right? So I'm curious how that experiencing the entertainment business has impacted you in the investment business because it's not always about just putting out the best product and saying,

here it is, the money's going to come in. You have to actually make a sale and market and tell that story. So how has that helped you in this business? Yeah, that's a phenomenal question. And I totally agree with that, by the way. I think it's, I think that the VC world is definitely, uh, results driven, but it's definitely network driven. I think we, you know, are the way that we fundraise at cashmere is very different, right?

We are not going to family offices and, you know, high networks on a one-on-one basis, on a hopping on a plane, you know, trying to get that, you know, 100K, 1 million check, five million dollar check. I think we are really leaning into the retail investor. We have done a lot of brand work in 2024 that will be live in 2025 in how we communicate that value prop kind of in a from from a technological base on our platforms on our social etc etc and i think we we will have a number of megaphone you know partners with megaphone that will be able to help us do that so i think what i 100% agree with with your question and i

would say we might have to wait a couple more weeks or months to really see the full effect of that because we're kind of putting putting that into place now we really wanted to build the tech stack and prove the fund and raise the minimum viable fund and kind of do all those steps prior. And that's kind of our priority. What I think you'll see in 2025, which is super exciting for us. So for people that are listening and they're like, oh, exciting. I get to invest in venture. I've never been able to access that asset class before. I want to make sure that they understand exactly what's going on here. So talk about the liquidity profile of the fund, because these are these are businesses that are not publicly traded. They're not trade on a stock

exchange, they're building hopefully for a potential exit down the road, whether it's through M&A or heaven forbid an IPO, the daddy of all exits. So what can investors expect if they invest in terms of liquidity and return expectations? Of course, you know, ranges, guidelines, just risk. How should they think about all of this stuff? Yeah, that's a broad question. So let's unpack it. So we have a fund. We have 38 portfolio companies. Today, A, someone can come to the cashmerefund.com, invest in our fund, right? $500 minimum and be part of the fund, and they can really track the value of their fund through the NAV that's listed on NASDAQ, right?

CSHMX is our ticker symbol. That's the basics of it. The way that the fund operates from a liquidity standpoint being an evergreen fund is twice yearly in February and August we have redemption windows. That's 5% of the total fund. So on the last redemption window, I think we were over. oversubscribed, which again is totally the norm, I think, by 60%. That means if you invested $1,000 and you wanted to exit that position in the next

redemption window, you would roughly get, you know, 60% of your 60, 70% of the fund back of your kind of, if you wanted to liquidate the kind of the whole portfolio. So roughly, you kind of look at two redemption windows based on like, you know, historical basis. And it's quarterly? And it's biannually. So it's February and August or September. So that's how it works today. What we also have is we have distributions at the end of the year.

So if the value of the fund goes up in any way, there's a potential distribution window where people say, like, well, I don't want to roll over my capital. I just want to take a distribution. And that distribution happens, you know, based on NAV kind of at the end of the year. And I think technically, I think happens in January. But it's basically based on the results of the fund kind of that year. So those are really the three kind of moments in the year that people can redeem their fund. And our hope is really to be able to give consumers the ability to exit their position like 100% or as close as possible at 100% into redemption windows.

So that's the hope. And that's historically kind of we've been pretty close. We've been over 90%, which is great. So it's like whether it's family emergency or thing, you need to cash or you need to invest something in your house or you just want to exit the business. That's kind of how it works and kind of as simple as possible. But what do you see as the time horizon? Like, what should it be for someone realistically in a fund like this? We want to build long-term value, right?

We are not, this is not a close step in fund. We don't want to tell consumers, hey, invest with us for five years and we're going to give you the kind of this return. You can kind of see, and we also have in our website, like historical returns of venture capital. They're fantastic, right? Like, they typically kind of outperform most major indexes. And that's where we want to be. fortunately, that's, you know, in a since inception of the fund, you know, I think we track through the frequent VC index, which has been down like 20-ish percent.

We're up, I think, 12 percent kind of since then. So we're definitely performing, which is great. And we want to keep performing, right? As far as consumers, this is the beauty of having, you know, kind of an illiquid asset with liquidity. You can invest with us as much as you want, right? Like, I think what's a great value prop. So ideally we want people to be with us for five, ten years, right?

Like, that's the ideal case scenario. The beauty of venture is it's also asynchronous to the holdings that most people have in the retail investor kind of landscape. Like most people have public investments that kind of basically just go with the market, right? If the market goes up, their investment goes up. If their market goes down, their investments go down. And if there's a little bit of a downturn, basically they're looking at their portfolio. And they're saying, oh, shit, this is not good, right?

Venture operates at a different cycle. So while they're still, like, kind of great potential returns, they can create a little bit of a hedge, right, based on kind of where their portfolio is, which most likely is over indexing on public kind of stocks and bonds. Last question for me, Ben mentioned like best story wins, and this is, you know, communication is a big part of our business. How do investors get a sense of some of the underlying companies? Do you do annual reports, quarterly reports?

How are you communicating the ups and downs of the companies that you're investing into the investor? Oh, yeah, we do better. We do monthly reports. We do monthly, quarterly, and yearly. The monthly is more of a kind of a newsletter that we send on a monthly, but then we do quarterly and yearly. We are also being an SEC, a 1940s fund, we are very transparent. So if you look at our website at the bottom, you know, the boring stuff, the disclosures and everything, there's all the fund documents that show kind of all the investments, the NAV, the kind of underlying assets,

the value of the assets when we invested, there is total transparency in what we're doing, which we think is a huge plus. Perfect. Where do we send people to learn more? Thecashmirfund.com and socials. Go follow us on LinkedIn and Instagram. And we want to educate people on the value of VC, the historical value of VC and how we're approaching it.

And we'd love to check out kind of what we're doing. Perfect. E. Thanks for your time. Awesome. Great to chat. Thank you. Thank you to E for that talk.

We appreciate it. Check out the cashmerefund.com to learn more. Email us. Animal Spheres at the CompoundNews.com.