Coffeez with Joe Shalaby - The $25K Uber Bet That Became $135 Million

Episode Date: September 10, 2026

Corporate securities lawyer Eric Cox sits down with Joe. From Cooley and Silicon Valley to head counsel at Story Law and NetCapital, where a couple hundred companies have raised around $100 million through equity crowdfunding. The friend who turned $25K into $135 million on Uber, why a third of venture dollars burn on marketing, the $100 truck driver investor, the graphene deal that could change everything, why you can legally bet on sports but not own a startup, and why ownership is the new American dream.New episodes every week. Pour up.

One, two. And my name is Alyssa. Eric, pleasure to meet you, Alyssa. Eric's, welcome to coffees with Joe Shelby. Happy to be here. Amazing, what can I get you? Do you like coffee? Do you like tea?

What are we feeling today? Well, this late in the evening, I'm gonna stick with tea. Let's go with a soy macho latte, please. Soy macho latte, I like your style. I love my macha, so. You and me both. Yes, absolutely. Do you like chocolate by any chance?

Couldn't hurt. Okay, beautiful. Yes, yes, I'm so happy to hear that. Okay, I have an assortment of chocolate here. We've got Dubai chocolate, we've got Lindor. I live in the Bay Area too long to not go Garadelli down here at the bottom. So I think it's gonna see-soled caramel for your boy. Okay, open it up, give it a try.

So I hear you are a lawyer. Is that right? They don't hold it against me. Okay, so are you who I call if I get in trouble for like- That's exactly wrong? For laundering money? No, nothing like that? Oh, okay.

Good, because I don't do that anyway. So we're safe. You would never, nope. I'm on the corporate side. I help people most of the time. acquire and sell businesses. So most of my clients are happy with me and they're not going through too tough.

I love that. Okay, good. It's a good time in the world right now. How's that doing for you? Delightful, it's gonna pair great with macho. Absolutely, let's bring you over to Joe. Come on. Thanks, Alyssa. Absolutely, come on.

Joe, we have Eric here. Hey, thanks for coming, man. I know it wasn't much of a driver right here in Irvine, but I appreciate you coming. I know, sometimes it takes things like this to meet your neighbors, so thanks for having me. You're first got to take our chocolate today. Oh, yeah.

Oh, everybody's passing? Yeah. We had professional athletes here. Oh, that'll do it, yeah. No, no, no. What's up, everybody? Welcome to another episode of coffees. I am your host, Joe Shelby,

and today we are sitting down with Eric Cox, a brilliant attorney and the C.O. of Net Capital, a mega company that is taking companies public, business and acquisitions, and mergers. Also, the head. head counsel for Storylaw. Please welcome the one, the only, Eric Cox.

Thank you so much for having me, Joe. Appreciate you, brother. Let's go. All right. Hey, I know it wasn't much of a drive, but I appreciate you. No. For coming here today. Thanks for having me, my neighbor.

We're going to make some magic happen. Eric, I like to start the show off with the same thing. I ask everybody, what's your morning routine? Oh, so I am, I was never a morning person, but I had to become one. Like a lot of people that listen to the show, I imagine. I like to get to the gym early, and I try to get a little bit of a I have my matcha right next to me for coffees with Joe. So yeah, usually try to get to the gym first and then straight to, straight to business.

I do also try to get a little bit of the word in there, kind of sit down and get, you know, kind of make sure that I'm centered, but as best I can, it's a little bit of gym, a little bit of quick prayer and then straight to business. Right into it. Now, you work at a lifetime or were you trained? Oh, I'm a home. If I had to go a single mile, I wouldn't make it to the gym. So I'm a garage gym guy.

Most of the time, it's honestly largely a similar routine. My brother put me on. He's a physician. So most of the time I'm doing the same routine that he recommends for himself. What's that routine? So I do kind of chest and triceps on Mondays. We call it Christmas, a little back and abs, by his cab, shoulders, abs, then legs to bring it home on Friday.

Leg day Friday always ride into the weekend, right. Oh, gotcha. Okay. So it's just a lift schedule. Yeah, lift Peloton, Pelleton Monday, Wednesday, Friday, and then a quick run on Thursdays and then a soft run on Tuesdays. Oh, nice. All right, cool. Nice regimen. I appreciate that. Now, you are in the world of law.

Now, tell the audience what is it that net capital does? And how do you work with businesses like Apple and Snapchat, like mega companies? And what have you done for them? Yeah, no, I appreciate that. So, you know, I'm what my law school used to refer to as a non-traditional law student. I used to take a little bit of an offense to it, but now I kind of embrace it. But essentially, I've, always growing up doing emerging companies venture capital. I trained at Michigan Law School and then went straight to Silicon Valley to a large law firm called Cooley in Palo Alto. We got about a thousand lawyers worldwide, but represented two-thirds of all VCs in the United States while we're in the headquarters in Palo Alto. So we got to do some of the coolest deals on the, I was on the Apple team that acquired Shazam. I was on the Snapchat IPO.

I got to work on a really cool Corsair project for anybody who knew any gamers out there who know peripheral manufacturers. Yes, yes, thank you. So it got to do so many of the fun things. And then my best friend from law school actually brought me over to net capital, and that is where really supporting entrepreneurs and their fundraising journey beyond the law really began. And that's a funding portal and broker-dealer.

We help entrepreneurs raise capital entirely online. Hard to imagine after a couple years we've helped a couple hundred companies raise about $100 million to the funding portal from a little over 100,000 investors. So you can imagine if you have a cool group of people that love your product, and you want to let them into your deal.

You have to be really thoughtful how to do that legally and compliantly. And we have all the regulatory frameworks down. We have all the team members that we need to be able to launch a capital raise online, support the fundraise, and then get you to the next part of your journey. So what does like a small company, how many people do they need to reach out to you? Like what do they need? What's their model need to be in order to even get your attention to look at the deal to even reach out to these investors?

Joe, that really is the hardest part is because, you know, I like to be, I'm pretty honest to myself. I don't know. I've been wrong before when I thought companies would not have success. I've been wrong when I thought they would have success. Yeah, how do you model that? It's very uncertain. And a lot of it is, let's call it what it is, is guesswork. There are certain things that do help us feel confident in a fundraise.

A lot of things like social proof. If you have a strong management team, we always say we're betting on the jockey, not the horse. So strong management team. Yeah, the CEO is. like you're grill in the CEO all the time you know background so we could check into past success helps a lot if you have supporting like really supportive advisors and investors that moves the needles most of my family is in medicine as I mentioned so medical advisory boards if you're in the pharmaceuticals the biotech space that that moves the needle a ton and then at the end of the

day if you're if your clients or your customers love you that's one of the best one of the most important indicators to success for us because then we could reach out to you know users customers We call them investemers. Investors turn customers, customers turn investors. It's a pretty meaningful way to move the needle on net capital. Investimers, that needs to be going. It's goofy. I know.

Nobody liked it. I apologize, but. I like it. I'm cool with it. Investimers. Right. You heard it first here, guys. That's a real word.

He's going to coin that in Webster's dictionary. Let's go. As well, I'm here, I'm twisting Joe's arm to get a fundraise going for the listeners can own a small piece of coffees. Yeah, that would be cool. That would be the move. Yeah, we never, you know, We're now looking at, you know, big, big investments from different advertisers and hopefully

Netflix, we're knocking. I love it. They should be right here. Yeah. Let's go. Now, you know, why did you get into law to begin with? Oh, I actually love that one. I have a pretty, you know, I have a lot of friends who is...

Especially if your parents are in medicine, because if you go into law, because my parents are in medicine, if you're like a failed doctor. Yeah, that's one way to put it. No, I watched my dad do a colonoscopy. I didn't pass go. I didn't collect $200. I went straight to law school. It was about as clear as that.

It was hands down. God bless you for your service. Check, please. I'm going to do literature. You don't want to do colonoscopy. That wasn't ever the answer for me. My brother followed in his footsteps. God bless him.

Go Dr. Cox's. But no, not I said the fly. I think what really did it, though, was in undergrad, there's an incredible microfinance program at Pepperdine. Shout out Pepperdine here in Malibu. And we actually do, we actually, we would sell water at these sporting events and we would take the funds and go do microloans abroad. And so I studied abroad my sophomore year in Buenos Aires, Argentina, and there was a small leather working community called Adulam. And we took a couple thousand dollars over there and they were making all of their goods by hand.

And we're actually able to get a leather making machine there. And they actually repaid the loan before we left at the end of the academic year. So like when I saw that and the increase of productivity for the ability from them to scale and support, their families better. I was like, wow, that kind of ties into both why I went into law, because it was incredibly heavily regulatory. There were so many legal loopholes to go through to be able to deploy those funds. And in the same time, it also reminded me that a cumulative of small investments can be really meaningful. And so those two things kind of support why law and why a registered funding portal at the same time. Makes sense. Makes sense. Now, I got a quick

question for you. Yes, sir. You know, you left your big, fancy law from Cooley, which is world famous and you chose to be the number nine employee at a startup fintech company like was that a calcate move or were you high at time or did you did you feel like you're going because you know you've been obviously a contrarian thinker and not going into medicine so like what were you thinking to do that you know coolly I love it yeah I went to coolly and first of all I love myself time at Cooley, I think the best training in the world, in my opinion, one of the greatest law firm ever, especially in emerging ECVC, emerging company venture capital. For me, my whole goal was, you know, three to five years to start my own fund.

I was never going to try to grind for a partner. It was never really a real perspective of, you know, legal practice was always kind of a means to an end for me. Timing. Timing at the end of day is what does it for you. You know, the Jobs Act came out in 2016. I graduated law school in 2017. The funding portal was up and running.

late 17 into 18. My best friend from law school told me at this opportunity to help join early, be a founder, be an entrepreneur, but also support entrepreneurs. We work with investors, so it feels like we're kind of playing VC. We're members of FINRA regulated by the SEC, tons of legal implications. So it checked a lot of my boxes. It had law. It had venture.

It had kind of entrepreneurship. So, you know, when those things kind of all align, it feels like you have to, you have to opportunize. And I knew that this would be one of those things that we'd look back on and I imagine it would be a staple of the community, right? There's no way that we can continue to have this world where only a certain group of people can participate in these deals. I just couldn't imagine that could be the case forever. And the idea that everyday people, people listen to this show, people that are online, people were clicking the link, scanning the QR code, can own a piece of their restaurants that they love, the breweries that they love,

the technology that they love. It just felt like that had to be a piece of the future. So, yeah, I mean, it was definitely a leap of faith for sure, not to say the least. especially picking up I was grateful Michigan was pretty supportive but still had you know some meaningful student loans so to be able to take that leap of faith grateful for my family and my wife's support and yeah we went out there and took the risk together and we were fortunate that early on we were able to bring in some good deals from the University of Michigan early to prove the model there's actually there's actually one of our first deals was court innovations which I actually

worked for as a law student where you actually paid parking tickets online to avoid getting, you know, there's a debtor's prison where you would get a parking ticket, you get your license suspended, driving with a suspended license, bench warrant. So real clear path from not being able to pay a ticket to go into jail. And we just kind of created some simple software for people to be able to pay that online and avoid those complications. So it was cool to be able to prove that model, do some of that stuff early. And, you know, and I had one of my getting to work with your best friend.

We'd already done emerging company stuff at the law school together. We'd already worked for a student venture funds together. So we felt pretty confident that we'd be able to execute on the vision. So team, opportunity, timing. But I'll always be grateful for my time at Cooley. That's great. I mean, it sounded like you were really like, you know, looking for a wife for your job. You know, I checked a lot of my boxes.

Yeah, you know, and similarly, you didn't even mention that you got to move to Orange County. That's true. Yeah. I grew up down here. I grew up down here only really went to Michigan for law school, went to the Silicon Valley just for the job. and got to come back home. Yeah, fully remote for the last eight years before it was cool. So yeah, that was a big perk of it as well, getting to be down here.

My wife teaches Irvine Unified. So being down here at a great school district, all those things really, really added to the formula as well. You're right. Yeah, yeah. I mean, like you live in the best place. I would argue on the planet. I would not contest. Yeah.

So. I mean, people in like the hood and Van Nuys sometimes think. Oh, no. I pitch it. I pitchers all of the Southland. I love L.A. down to San Diego. I love the Bay, too, but the whole Southland has to stick together. Yeah, we do.

Except, you know, Irvine, Newport Beach, it's bona fide facts that it's the best place. Look at him taking jabs in the quarter, L.A. Now, I got a question for you. What do you think is harder to convince the first investor or the 100th investor? You know, I have, maybe this is, I'm not sure it's going to be super concerned. I think people will probably agree with this. The first. I think actually, well, it depends on what you've done since with other 99 investors' money, probably.

But that first investor, in Silicon Valley, we used to joke around all the time. Every investor wants to be first to be second. That first investor, people would always say, you know, add me to your newsletter, keep me posted. I can't wait to see what you're building. And then as soon as there's enough market signals and like lemmings, they start showing up out of the woodwork. There was probably a time in the 90s and early thousands where there's true real. But by the time I got to Silicon Valley, everybody had the same data. It was put more money in later gets better returns for your limited partners and That's pretty much been the state of things since then now. I got a question for me as an investor like what's the highest yields you've seen some of your investments at your firm payout at net cap? Wow, so we've yeah, we've held a couple we've held a couple hundred companies we have just under a dozen exits pretty early on still

Doesn't exits just about yeah So that's pretty good not not bad especially because we take really, really early risk when we go industry agnostic. So we've gone all the way from, we had a really cool company that raised for a Broadway show just last year. That might not ever return. But people who love the show when to support it, they get a credit and they get to support, and they get to go to the show and get a discount on things, all the way to truly high-tech, high-growth, lithium extraction companies or, you know,

boron nitrite nanotubes or some of the coolest things that we've ever seen. But I think we had just under 10x. We had an 8x return would be probably the best that we brought to the non-accredited investor pool, which is super, super exciting. Otherwise, they'd be excluded from the deal. One of our investors in net capital also invested in Uber. And I mean, you guys know the return on that one is probably still going to go down as one of the greatest returning investments of all time.

But I'm just bummed that we couldn't get those technology deals on the platform for everyday riders. I remember my wife actually told me about Uber. I'm embarrassed to admit it when she finds technology I didn't know about. But we were writing Uber when it was still limousines off time limousines. I remember those days. That was so fun. That was like, I don't know, 13 years ago, 12 years ago. I remember my friend, like, you got to invest in this company.

This is like a great investment. It's so cheap. Yeah. What is this? You know, like, damn it. I wish I put like 10 grand in. I'd be a million there. Yeah, yeah.

Oh, I mean, I'd be much more wealthy. Yeah, yeah. No, I mean, I think they put 25,000. thousand into the deal turned to $125 million. That's an unbelievable return. My wife also showed me one of her students was working on chat chbt early, but at the time, it actually wasn't even that good. I hate to say it.

It was just, it was like a worst version of Wolfram Alpha. And I just couldn't, I couldn't see the vision. But it was too early. I wish I would have kept track of it. But yeah, we all look at things that, I think we remember the ones that we miss more than the ones that were. Yeah, I don't remember the ones that like I even did. But the ones you missed, you know, like, why did I do that?

that. Now I got a trick question for you. Ooh, Lay it on me. Do you think a great company can still be a terrible investment? Yes. Why? All the time. Because we talked about team being the most important piece. So all it takes is one, for every good member of the team, you have to be more thoughtful about avoiding negative value. People lose track of that and you hate to say it. I think there's a lot of kumbaya sometimes where it's like, oh, you know, me and my roommate are doing something. And we already agreed that we're going to be part of the team together. And

And that's fantastic and beautiful. We love that. But oftentimes it's just not the team that you need to be able to execute at the next level, especially when you go from Series C'd, series A into the Series B and C levels. Sometimes it's an entirely different skill set that you need to the next level. And especially if you want to get to a public company level, get on the NASDAQ or the New York Stock Exchange, almost an entirely different skill set altogether. And so there's a bad rap for venture capital is bringing in more established different

expertise into companies, removing founders. I don't think that's the way to do it, but realistically, there's oftentimes an entirely different skill set for different stages of the company. And if you ride the wave with the same people at different stages, oftentimes that can be a great company and a bad investment. Also, you know, every once in a while, folks get a handful of the cash and they don't realize what the burn rate looks like and they don't know what the next stage is to get to the next round of financing. And, you know, down rounds can cripple a company where you raised, there's just like a frothy market and you were just so, excited to take the highest valuation possible, but that wasn't realistic. And then now all of a sudden, a couple months later, people are saying, hey, I don't think it's worth that. And the market has agreed, and now you're in a pretty tough spot. So, and then also, you know, about a third

of all venture dollars go towards marketing. If you can't get the word out, it's kind of like if a tree falls in the woods, you know, and no one's there to hear it, did it happen? And unfortunately, in startups, often the answer is no. If you have a great company that falls in the woods and no one's there to hear, it might not matter. And that's, that's heartbreaking. And marketing strategy, you could spend a ton of money, but if the marketing doesn't resonate, and there isn't an effective marketing strategy that actually grabbed someone's attention, and that's hard because that's a science. Oh, yeah. And people don't like boring products. That's why this whole spin on this podcast has been a marketing strategy for me to market a boring

mortgage company. Because nobody cares about my mortgage company. Highly effective power to. Amen. So like, I have to entertain you. to draw attention to my mortgage company. If we're going to be honest, then self-serving, not a lot of people are interested in corporate law either. Yeah. You know, like nobody cares about corporate law. It sounds like actually like not only does corporate law sound boring, but it's like, it's like anti-climactic. Oh.

Like I tell people mortgage, it's like telling you student loan debt. How would you like that? Yeah. You're like, oh my God. Yeah. So mortgage is like a step above student loan debt, but it's like it's debt on your house. But people like the house. They don't want the debt.

You know, they want the house. So we sell the vision and like the picket fence, you know, the dog, you know, like the American dream. Yeah. So but like what does it take to accomplish that? Like coffee's baby. No, you're absolutely right. You know, we see companies fail all the time in the wrong marketing strategies.

One of my favorite things recently has been the influencer investor recently where the actual, you know, you were just having athletes and entertainers on the call earlier today. Yeah. I love those investors. I love athlete investors because not only are going to take the cash, but you're going to have the supporter of the founder. One of my closest friends, Baron Davis, he was early in on vitamin water that he decided to take some equity instead of cash, promoted it.

I think the idea that, you know, the Golden State Warriors, we used to joke around in the Valley, their day job is basketball. But what will actually provide the generational welfare most of these guys is the Coinbase's deals that Kevin Durantz gets into. Yeah. That's what's going to really- I mean, Durant's a multi-billionaire from all his deals. But also, Steph Curry, any business he touches, you're investing in.

Like what is Steph Curry's involved? I'm in. You know, because anything he shouts out is going to, you know, it's, it's going to succeed. So you get their money and they promote the opportunity and you save the third of venture dollars that you would have poured into marketing instead. It's, it's a natural, just a quick question. Do you have any deals that Steph Curry's in right now by 10? I wish.

I mean, I'll invest in that. I love that. I actually don't think that I do right now. And every single deal that I have to mention, I have to do massive disclosures. Let's just knock out some quick disclosure. So I'm just going to go deadpan. Anything I say, it's not legal financial or tax advice.

It's not investment recommendations. Please consult your attorney. Consult your tax professional. Review every prospectus. Consider wisely. Only invest what you're comfortable losing. All right, that should do it. Oh, no.

No. I could never do that. I think you should. I've gotten a couple of these since I was reached out to. And I think what you're doing is incredible. Exposure is awesome. The opportunity seems super cool. But I do love, I do love it.

But on the same side, you have to also be every deal you have to screen, you have to be really thoughtful about these deals. Sometimes there are certain influencers who are willing to take, you're kind of pretty indiscriminate on their deal recommendations. And there's just a difference between who people are really supporting, believe in it, can do the diligence of the deal, support the deal, market this. deal versus folks that are really kind of just there for a payday and that's a little bit of a fine line so it's got to

and you're seeing like that isn't 100% like a sure win right you see what's happening with prime for example with the paul brothers it's tanking it took off big but you know they didn't create an ecosystem for retention right so yeah you'll get a big launch but what's the ecosystem to retain yeah like how are you going to keep the customers happy after the hype fades. Yeah, yeah. You know, they're going to all try the product. Then they're going to be like, just like prime, they're like, this is nasty. Yeah.

Yeah. You know, like, this tastes terrible. Yeah. Like the kids like, taste it. They're like, don't bring this back to football practice. Right, right. And demographics are fickle too, man. Things are super hot right now.

Everybody's waiting for the next thing. I think you have to be thoughtful about your timelines on on CPG on consumer package goods. That's really relatively quick turnover. And most of the times PepsiCo, Coca, Coca, Coca, Coca. well, they're not inventing anything new. They're buying. They will, they tend to buy versus build. And so the exit should be, you know, build something enough that they like it and get rid of it.

Yeah, poppies. Were you on the poppy now? Perfect example. No, honestly, I always struggle with those ones because in the very beginning they were talking about the probiotics, prebiotics, all that stuff. There's not real, you know, there's not like a ton of science to support that there's any health benefit to that. So I struggled with some of that. But look. But it sounded good.

A healthy soda? Like, come on. And they're delicious. I have some of them at home. I think some of them are delicious. Yeah. So if you just, but is it healthy?

Like, I don't know. I mean, like, you know, does it have prebiotics? To the point where it's actually impactful. I think they had to change their marketing. I think they had to change their marketing to because of some of the claims might, might not have been unsubstantiated. So I think it's difficult.

I think those ones are always tricky, especially because I think I have like a heightened burden by virtue of, you know, kind of having, you know, some, some, some of the medical community listening to me. So. Yeah. Sometimes I straight up miss out on some great. deals all the time by virtue of you know decision making you know but the medical community and these startups have kind of converged due to this holistic

biohacking society yes yes that we're in now and now everybody's claiming you know drink this you'll live longer drink that you'll live longer eat this you'll reduce your biological age drink that you'll reduce your biological age and everybody's just buying it all up like everything i do it like relates a biohacking to some extent and somehow it works I don't know. I think I'd look great for my age. I think you do. And I love all that stuff too. I've always been a quantified self kind of guy. I'm a big wearables guy. I actually had Gen 1 Apple Watch. I was like Fitbit and up band before that. I love the folks over at Founders Fund who supported Fitbit and all those things. I think that's fantastic. You should always be thinking about like at the end of the day time is your most scarce resource and if you can increase time like one an incredible opportunity. But I think to your point a lot a lot of folks are converging on that front though what I've been doing with my family is medical advisory. You have a actually love this. Maybe we can actually talk about this offline too, is having a whole slide dedicated to your medical advisory group. Medical advisors are incredible. Oftentimes these physicians for peer practitioners and go home and paint or whatever they enjoy, but looping them in on deals,

getting them small pieces of equity and getting them to promote to the medical community as a whole another strategy we've been working on. And I think it's really helpful. And it also helps you think about things early. I worked on a deal that is really cool. It's like a five-hour energy shot sized drink two ounces of like 10 to 20 grams of protein um and i think it's all of like 80 calories that has like nine ingredients in it really i heard about that 20 20 grams of protein in a shot so so so cool and actually that that went through you guys yeah protein quick big fan spoiler alert we support them we only know a piece i actually advise them outside of net capital as well um but we love the deal and it's super exciting because early on my brother was like what mark my words red five's got

to go soon. Like no one cares about the cup. If anybody's pouring out the two hour energy, everybody is pouring that out into a cup and they see that it looks like bone marrow, yellow that nobody wants is not appetizing. So be it. But Fruit Punch does not have to be red, no red five. And in California, I think six months or a year later, like band it. Yeah. So I think it's, you're so impactful for you to be able to go through, speak with these people early, get their feedback before somebody else gives you the feedback and you have to make changes anyway. So big, big fan of medical advisory. All right. What's more dangerous to a founder? A bad business decision or a legal decision that they don't even realize is bad five years later.

Oh, I'm so biased. But I think I'm trying to suspend my bias for a second. And I think the answer is still bad legal. We always say like an ounce of prevention is worth a pound of cure. I'm so disheartening because a lot of our clients, you know, they think that they're doing quite well. And a lot of them are. but a lot of them are a couple hundred thousand. You know, the runway is, you know, 18 months with, you know, a couple million dollars in there.

But, you know, a couple hundred thousand of legal fees dramatically decreases your runway. So I always feel bad. They're like, oh, you must be happy that this went wrong. And now we're paying legal fees. Like, no, absolutely, absolutely not. This is a nightmare. And the work that we could have done to prevent this would have been so much less than it's going to take right now to go retroactively fixed stuff. So, you know, most of the time an ounce of prevention is worth a pound of cure.

Good legal counsel is basically, in my opinion, early on. invaluable after you raise your first a little bit right first you got to kind of figure your sea legs right it's hard to do 600 an hour with zero revenue but but you probably want to think about pretty decent legal pretty early 600 hours what attorneys cost now I think that's that's good that's good value right there at this point I have I have partners at Kula that are $2,000 an hour wow I definitely have I have I have I have I have close friends that are banging people over and I always use 600 because it's just like it's just like a perfect example of just $10 a minute. But there are so many thousands of an hour attorneys now,

especially in venture. But they've done some of the coolest stuff and their expertise is kind of invaluable. But I will say if you can get a good kind of high value, kind of early supporter attorney, then I think that that's incredibly valuable. But I also will say that, you know, bad business decisions. I can't remember who had this framework. I always feel bad when I rip, I rip off so many smart people and it makes me feel like I'm smarter, but it's not actually even my thought. But somebody broke up their decisions into like haircuts and tattoos. I think there was actually one more element there.

They said most decisions are haircuts. You know, you've got a bad haircut for a while. Not great. Showing up on coffees looking like trash. Actually, my barber wasn't here today, so that's why I look like this. But it won't be the end of the world, right? But tattoos, those permanent, semi-permanent decisions, those are the ones you should put quite a bit of energy behind

and really think about those. But most decisions in life are haircuts, and you don't want to think too much about them. get through and move quickly execute and then those tattoo decisions though you should you should huddle up with friends and family and consider if that's the right decision that's true that's true and i like that analogy tattoo or haircut and if it's a haircut just pull the trigger if it's a tattoo lock in yeah i'm gonna use that for my business frameworks now especially with my partner you know because we got a lot of haircut decisions that we just sit here and like we're huddling over like dude

just come on it's a haircut Picking adapt. I like that analogy. Thank you for. I always learn. I'm the biggest student of my own show. Oh, yeah. And I always say, like, if anybody benefits from this show, it's me.

Okay, then comes the decision that really changes your story. Instead of staying on the prestigious path, you left Kool. You joined Net Capital. Then there are only eight people ahead of you. Yep. How did Net Capital first get on your radar? I know you mentioned your friend. And what made you willing, really what made you willing internally to leave Kooley?

Yeah. Because that was like, that's the bad. firm on the planet. I love, yeah. It's so true and it's such a tricky one. So for me personally, it really came down to, I, so it's funny. I like to say, when I look for founders, when we speak with them, you're considering investing, I love a sales CEO. That is the most important, the most important skills that you can have as a chief executive is sales. You're not only selling, you know, your company to users, but also you're selling it to investors and you are selling it to into your employees as well.

The opportunity to own was the biggest piece. And I think we'll probably talk more about ownership and how critical that is. There was really no pathline, in my opinion, to owning a piece of Kooley, right? It would be 10 years, ideally, if you're lucky, make partner, pull down a couple million a year. And that's really just based off of the profit share.

There's no Kooley gets bundled into another mega firm and I get a cut. There was no clear path to ownership there. And I do believe that ownership is the most, the single most important, especially business ownership. I love real estate too. I'm not cutting against e-mortgage. But I do think business ownership is kind of hands down the most important part of how you can get to your ultimate, you know, kind of dream, dream lifestyle. So the idea to be able to come in, own a meaningful piece, direct, you know, kind of drive the direction. Also,

you got to keep in mind. It's also purpose. It's not even about money. Exactly. For me, EMores, like, it drives more purposes. Like you take away e-mores. If I were to come in, like, I wouldn't sell the company. I was thinking about the other day, I'm like, as we get hit up with different people trying to buy us like what the hell am i going to do right like i have a plan like my son i want to be a you know take over he's like he's like he's already wants to be a CEO like right like i got like i got vision for my kids generational what am i going to do here like you know like i'm not going to start another company it's going to be a mega company right you know so there's it's true purpose for me it's outside of money it's like i i have fun but do you think

that that's really what what drove you that was the next part i was going to say was that you know i was so grateful for my time at coolly but especially as a first year and pretty much all the way through being a junior associate, you're fortunate to be on the call in the file, but I'm not really meeting and digging in with these entrepreneurs. I'm not really meeting and digging in with my clients. And so the idea to build actually roll up my sleeves, get involved and support my clients, that was unbelievable.

I went from, you know, very much being like the very lowest common denominator, like things would get crammed down to us to keep the file thin, to keep the cost down. And sometimes you get exposure with really cool people. I got to do some snaps with Evan Spiegel, which is still one of my coolest things on the Snapchat side. But realistically, a lot of these clients, they were my partner's client and I happen to be on the file versus being able to be, this is like my contact. I call them. They call me.

They need something. I'm their person. So, yeah, being able to actually be with them, meet with them, be part of their team and support them. That's kind of invaluable to your point. So you now have the opportunity to find the next snap. Is your firm equipped for something like that? That's exactly right. And so that's actually part of the funding.

So I love that you ask that question. Not only do we have the funding portal, that's helped a couple hundred do the couple hundred companies do the $100 million. But we also have our registered broker dealer. And this is something that most funding portals don't have. So pretty early on, we realized that, you know, reg CF, regulation crowdfunding, you can only do about five. You can do up to $5 million per year per company, which is awesome. That's way up from when I started. When I first started, it was actually $100,000 maximum, moved to a million, moved to five.

So we're proud that we've been able to get to be able to do more and larger deals. But realistically, a lot of bigger, better companies, they can't even use $5 million. So what we did early on was start building out our own broker-dealer. So we have our own proprietary broker-dealer. We own it. It's registered in all 53 states and territories. It could do every security exemption, every investment instrument. You could do $75 million under reg A.

You could do an unlimited amount under reg D. So pure private placements. There's actually a design where you've got a funding portal right here where your private deals could be behind a password and people will have to be a member of copies in order to log in, see the deal flow and invest in those deals. Full white label solutions. And so that I think is what allows us to be able to go get the next snap is that not only can we help you with the first one to five million, but we can help with the 75, the couple hundred million billion dollar financing so we could do it through the funding portal on broker dealer now. So we are a privately held mortgage company.

We got about a thousand loan officers. We entertained, you know, hedge funds. We've entered, but we never really like we're able to fund ourselves. Yeah, exactly. We've never entertained like funding. Yeah. For a company like, like, like ours that has a lot of market share, biggest independent mortgage company in California, banker, broker, but we're the first like broker of this kind of caliber in California. Is there any benefit like to seeking, because we're self-funded, but I want to dominate the nation. Yeah. You know, I want to just take over all the other. So my model is to attract other independent mortgage companies to come to our ecosystem because it makes a lot more sense.

They plug into a billion dollar infrastructure and they can leverage all. all of our technology, marketing, HR, onboarding, IT, legal, compliance, all, everything. Is there a benefit for a company like ours to go to, you know, private equity? You're basically structured deals or like keep funding it yourself? Two pieces. Can we grow faster?

Can we gain more market share quicker? It's probably that. You know. That one in control. So, so I think you're absolutely right. At the end of the day, I always say, you know, I'm in the equity preservation version of capital raising. If you don't need the money, then keep the equity generally.

But that being said, if you have opportunities to have access to kind of a meaningful amount of cash all at once. My friend did a SPAC, but he sold 7%. Right. And had a $5 billion valuation. Perfect. You know, so that was a SPAC and he only had let go of 7%. Yeah. You know, and now the stock's in the gutter, but because the industry as a whole.

The SPAC market, yeah. No, the mortgage industry is kind of tough, right? Right, right. So, you know, but I just, I don't understand enough of that world to really see any benefit to how we can benefit. Yeah, so if the terms are right, like you said, if you can get a meaningful amount of upfront cash and not have to part with too much equity,

I think that's incredibly valuable. You could start going targeting those medium or small sized brokerages, acquiring them, bring them into the fold. That could be a meaningful way to use the capital. I think on the other side too is that one of the things that we've always loved about these private capital markets is that you can keep control.

I've seen too many times where you try to go to the, and I love the NASDAQ. I mean, right now we're going after distress mortgage companies. We haven't ever approached like a company that's thriving, been like, hey, we'll just give you $5 million and roll under us. Right, right. You know, like that could be a play, but we don't have that kind of money. But that also could be, yeah, but your approach could be really valuable. Everybody wins there, right? People are kind of on the verge and you can get a good, get a good value. That's our

now. We just acquire companies that don't. Yeah, they're like, it doesn't make sense for us to operate. We'll never be an e-morgage. Yeah, yeah. We can't be. So like, we either face e-morgage in the ring. Yeah. And they're going to take our talent. They're going to take our talent or we just join them and then we retain our talent. Yeah. And we leverage all their ecosystem. Yeah. No, I think that's right.

Distressed assets are incredibly valuable, especially in the space. It sounds like that's a good move. There could be high performing assets that you could do merges with. Merge three goals and bring them on a whole. The play for us, if there's any value there would be like high performing companies to just roll underneath us to see that we're just a much bigger player. And we can give them some sort of upfront severance, you know, to just walk away from their ego.

Yeah. There's that. There's also a marketing dollars. We already talked about the value of marketing, you know, having some bucks ready to do national campaigns and attract the talent before it goes to competitive firms. That could be a good way to use the capital. But at the end of the day, what's nice about ours is we structure the deal. There's no bookmaker deciding what you're worth. We'd work together on that.

We guide and advise on value, but it's your company. You tell us what it's ultimately worth, and we'll go to the market and see if we can get our investors to support that. So I think there's a lot more control. There's no liquidation preferences, no prerated terms and no preferences, you know, that the investors are generally hoping that you go. and do something great with the money and then they get a return they don't get to really say if you want to go left they don't get to say you're going right yeah yeah that's a big difference on our public and not you know that's why we never want to go public like we don't need we have the regulators already up our ass yeah we don't need like more people yeah no no no no we're members of a regular

by the SEC i love my regulator partners i love you guys too every state including Washington Arizona Florida we love you all I hope you're all watching yeah we know we don't have the three territories. Puerto Rico, Guam, U.S. Virgin Islands. Now, if net capital had two years left after you joined, would you, would leaving Cooley have been the right decision? No. No, we didn't, we didn't, we reversed Burjel into a NASDAQ company in 2021. And that really was kind of the one piece that made it kind of super justifiable at that point. But, well, you know, that's hard to say. You know, honestly, no, well, I guess the theoretical thing, what helps a lot is that, you know, Legal practice is a relatively small community.

I went to a top 10 law school. I worked at one of the best law firms ever. I was very fortunate that I still do practice corporate insecurities law. I always wanted to keep that expertise with me. So theoretically, there's always an opportunity to go back and I guess, you know, no harm, no foul kind of thing. So maybe. But no, realistically, I think that as equity vests, you want to get the full, you want to get the full vesting term and ideally have an exit. And that's what makes it generally worth it for on the technology side.

And then, of course, the purpose side. You know, I cannot believe it. You know, I meet so many great companies doing great things that otherwise might have been unfunded. There was a company that only did about a half a million through the funding portal, but then they got back by Bill and Millinda Gates Foundation. Now they're off to the races.

But they wouldn't have qualified for that investment otherwise. So I guess, you know, come from a purpose side, sure, maybe, but from kind of like the next step in my career, probably less justifiable. Now, most people hear the term crowdfunding all the time, and they think Kickstarter, they think GoFund Me. Yeah. And you're talking about something like, which is fundamentally different, right? Yes.

People actually investing in privately held companies, which is, I don't know if that's, I mean, that's been around for a long time. Now, explain the regulation of crowdfunding to somebody who's never heard of it. And is this technically what you're doing now with net capital crowdfunding? Yes, both sides of it. So yes, on the funding portal, reg CF, regulation crowdfunding, that is the up to $5 million, bread and butter, about $100 million over there. The broker-dealer is more traditional institutional raises. Those are regs, regs, larger funds.

You need a broker-dealer on it, and that's kind of, that could be pure private placement or accredited only. So you're only hiring them for like $5,6 million. See, $5 million for like a mortgage company. It's like, we have that on the books. We have to keep that just to appease our warehouse lines. Yeah. Yeah.

So you're looking for privately held small little companies. Yeah, on the funding portal. And oftentimes they work together, right? You can have a reg CF right next to a reg D, private placement right next to a smaller raise. But what's cool about the funding portal is that you can do two really important things that you otherwise can't do. You can generally solicit your fundraise.

You can yell from the mountaintop that you're raising capital. You can do national TV ads. You could actually have a QR code at your restaurant. And everybody who loves your restaurant can scound the QR code and invest debit card, credit card, ACH wire transfer directly through the website. Or you can go on national ads. You could do digital ads. It could be on Facebook and Instagram, et cetera.

So you can generally solicit, which is big, and you can accept non-accredited investors. And that's about 90% of the United States, over 99% of the world. So allowing those smaller investors in the deal, and that's actually what I think is underrated, is that these retail investors, those are the folks that will go out of their way. We did a fundraise for a company. The ticket company I mentioned, court innovations came out of University of Michigan. They had a minimum investment of $100. They had a $100 investor who was a truck driver,

and he invested because he would drive along his route. And if he got a ticket on the route, he'd actually drive back to Kentucky to go to deal with the courts and pay the fines or whatever. So we got them into three different court systems along his route to avoid having to do all that. That's stuff that only the smaller retail investor does. $100 million investors don't do that.

Million dollar investors don't do that. Go out of their way like that. So you can have accredited and non-acredited investors, domestic or international, generally solicit incredibly powerful. But that being said, there's also the larger institutional stuff. We'd love to, you know, God willing, will be able to participate

on any expansion leagues for the NBA. Shout out NBA. Let's see if we can get this going on. You're working on the Vegas one or what? Ideally. So I think... Idea, but not yet. Yeah, I know. We're working towards hopefully inking something like that. I think that'll be a perfect

fit for fans in Vegas. Well, it's coming. Vegas will have an NBA team. Well, we want the fans to get in. There's never been a version. I saw the Packers where they don't have real true ownership upside, right? They would, these folks actually have upside where the company is acquired, right? Yeah, that would be, you know, it's going to be, well, you know, Vegas is like completely changing their entire business model.

Yep. Just because, you know, Gen Z, these guys don't drink. They don't party. They don't, they don't need nightclubs and they don't need all night after hours. Correct. They don't do any of that. Correct. So the whole industry is just pivoting.

Yeah. Yeah. Yeah. You have to be fundamentally different than the way that you're approaching the next generation of investors. You have to provide value outside of, like you said, alcohol and late nights. I think the other thing is really cool about this type of version versus Kickstarter.

And I love the folks over at Kickstarter Indiegogo, but that is always kind of charity-based crowdfunding. You're supporting something because you want it to become real. But this is equity crowdfunding. You're owning a piece of the company. There was a company really cool, small company at the time called Oculus Rift, right out of Oculus, right out of Long Beach. And they actually did a front, they did a Kickstarter.

From August that was purchased by Facebook. Yes, right. Yeah. They did a Kickstarter. They raised like $2 million dollars. through Kickstarter. And an $100 investor at the time would get a, I think it was a signed poster. And then I think a $1 investor, some sort of investor would actually get a Gen 1 Oculus Rift. And that's sick. Like, I would do it just for that. But I would much rather have owned $1,000 worth of shares in Oculusus

when they were required for a billion dollars. We actually did the math, actually, just off of like traditional kind of pro rata discounts over time. They'd done their raise, their $2 million through net capital instead of through Kickstarter. That $100 investor should have been anywhere between $20,000 or $40,000 on the return, just based off of what the security should have been worth at the time versus what they're required for by META, by Facebook at the time. So it's real. It's real.

It's like everybody, instead of throwing dollars out a lottery ticket, you can actually have a chance and own a piece of a company that you believe in and hopefully see the upside. So big difference than charity-based fundraising, for sure. Wow. That is pretty cool. What do you think? You ready to put your first $100 in one of his company? But he hasn't had anything like the hundred bucks is only going to get you 800 at best right now based on these stats

Now is is traditional venture capital doing necessary Filtering or has it become you know a form of like gatekeeping? First of all I love traditional venture I love all my friends and traditional venture I think the risk seeking that traditional venture is supposed to do is is largely gone. I think there's a lot. Why? I think it's larger because of the data.

The data came out, I think it might have been 2008, maybe, maybe until 12, and it kind of got reaffirmed over time. Generally, remember, these venture capitalists, it's not their money. You have to remember the whole structure of venture capital. They get their money from their limited partners, pension funds, other groups. So even the VCs that are deploying the capital, that's someone else's money. That's limited partners money. They're general partners, but it's limited partners money.

So they have an obligation to return the funds to the LPs, right? And the data said that if you put more money in later, you get a better return for your LPs. And so that's why everybody's chasing the exact same handful of deals. They'd rather put $100 million into the exact same AI company as everybody else than to put $10 million into 10 potentially promising AI companies elsewhere. And the data suggests that they get better returns. So I think there are great companies that are getting under, you know, kind of under exposure, not looked at, missing out opportunities. And then they use that to reinforce their decision making.

Like, oh, well, that company failed. Well, yeah, because they never got any investments. They never got any looks. They never had a chance. So they're kind of kingmakers, but they're using, but the data suggests that they should continue to act one way. But the data is reinforced by their decision making to begin with. So all to be said, I think we have lost the plot a little bit. Early stage venture is supposed to be at risk-seeking element, get the upside in the deals.

I mean, people used to do, although there's one exception. Are you guys heard about this pre-idea funding that's happening at Stanford? No. Oh, this will knock your socks off. This will knock your socks off. Pre-idea. So a college kid comes in with a smoking idea. You're like, I'm in.

Specifically at Stanford, they're a venture capitalists that are meeting up with these kids at these meetups, like coming out of like the kind of the entrepreneurship associations of Stanford. And they're basically saying, hey, I'll cut you these safe notes. The pre-idea safe notes. And I'll cut you a quarter million dollars and it just goes towards whatever the valuation is, whatever you create next. It's like it's on it's we have we have no idea what it will be. Yeah, we get we get our first year grades and then we that that discernments our future. Well I mean that's really betting on the CEO

entire. Exactly. So I do a form of that in my industry now where I just like scout a talent like dude you got great skills you need to go get your mortgage license. Yeah. I think we could start a mortgage company around you. So I kind of do that now. Yeah. Like I'll straight up find someone who's just talented because I you know I talked to them. I'm not, you know, they're my waiter. But even that, you have an idea, and I like that. But, you know, you can take transferable skills and bring them into something that you have,

but you have an idea what you want them to do. This is like, we have no idea what you're going to do. This is an open-ended. You're just betting on the person. Just entirely. No clue what the actual outcome will be. But the goal is that our quarter million will go into whatever, a discount on whatever rate is that the future investment is coming.

But you know, this kid's a genius. That's it. That's all sex. Like, this guy's a genius. I'm going to invest in this guy. I don't know what the hell he's going to do. Pre-idea finding. So it's difficult because it's two sides of the same coin.

One is like you have to prove me that you have a million dollars in ARR or else you can kick rocks. Yeah. Or you're at Stanford, you got these like incredible quant skills and I don't care what you do. Here's some money. Yeah. So that that is fascinating. That is fascinating. But I mean, it's going to work just because you're, you know, at the end of the day, despite

how far you are in the investment process, you're always betting on the person. Always betting on the team. Right, right. But Steve Jobs, you can't do it without. a was across the board and I think that's why you're betting on the wases because it doesn't really matter who the jobs is they're going to plug in a was yeah right right but I think someone will look for the jobs too of the world which is even harder to do those super big thinker you know creative types which is like one anomaly those are just like god bless them those

are incredible incredible skill says to have but but yeah like there's there's this whole new unique world which is basically I don't care what you're going to do I don't know what it is but I want to be a part of it and you can only do that and because because Stanford did the diligence basically Stanford already did the diligence. You're piggybacking off of. And that's what largely goes back to the same themes, is that most of venture is follow-line. It's kind of lemming-esque.

It's like a handful of Tier 1 VCs that are doing all the heavy-lifting adventure. They're the ones that are paying the lawyers like me to do the diligence on the deals. And then somebody cuts a check, and as soon as there's so many follow-on funds, which is actually a great business model. So many follow-on funds.

We're just like, if this group comes in, then they get a piece of my fund. Now, I got a question for me. Are there any really hot deals at your firm right now? And you're like, dude, this is a good one. You got to buy this one. I've been trying to, I know you want this question. I've been trying to dodge it because there's really no way.

I cannot make investment recommend it. I'm actually getting my Series 7 and 63 license and I can actually make it. But like, you know, what are a couple firms that really like caught your eye? Oh, my goodness. Make sure we, if you guys subscribe right now. But see, that's what you get to do, right? That's why you should, that's why you should license our technology and you could be a promoter. And you could recommend deals.

No. So we actually just wrapped up. This is what I'll do. I'm going to play a safe. If you guys are going to love this, I'm going to play it safe because I'm going to wrap up a deal that actually just closed. And that's what's going to work. They just sold out their $5 million offering. They've done about $15 million with us through the funding portal.

Really cool promising company led by Brad over at Avedane. And I'm not sure if you've seen anything in graphene, the composite material science graphing. I remember when he first described this to me. And here's the hard part. This is what I know it's actually a pretty promising company is when I'm like, either this is full of, can I say, can I say that's where? Yeah, yeah. This is full of shit. And I'm going to get off this thing and I'm going to look like an idiot

or I'm going to look like a freaking genius. And sometimes there's those dichotomy ones. But when it is dichotomous, it's a good thing, in my opinion. And just by the grace of God, it seems like it. So they have these incredibly high value, incredibly well-designed graphene flakes that are additive to anything. So imagine you're trying to make this, you know, military-grade aluminum.

You can add a little bit of graphene into it and then you won't need as much of these rare earth minerals that we always source from internationally. Like basically we have no rare earth minerals here. And so instead of having to go get, you know, pounds of rare earth minerals, you can add ounces of graphene and get like performed, similar performance.

You can do it to copper and alloys. Yeah, exactly. So we're talking about creating like, you know, aluminum that's stronger than steel and, you know, like incredible huge dispersions. It could be the most impactful deal that we've probably ever done, maybe. Yeah, graphing is expensive, right? Yeah, but they have their aluminum mill.

They have the technology. They're working with some great teams. members and I think so that'll be the one again I can I can say it now because they wrapped up their fundraise I would I would check out Avedane on that capital and see if they can if they do another raise I can't make investment recommendations but I'd consider it they they've they've seemed to have done a pretty impressive thing and I'm not even a material science guy I had to learn everything from scratch about what this looks like with that that might be the I mean you think about like

everything about like you know AI AI chip manufacturers heat dispersion like these data farms that are struggling with with heat issues and cooling problems. Yeah. Could be transformational. Alloys, materials. Like it could be military applications. It could be, you know, like, you know, yeah, it could be pre-interesting like aerospace, industrial. Like it could be pretty impactful. Like this is going to get Trump's year. Yeah. Yeah. Yeah, though they're already talking to DOD like at Department of Energy, Department of Defense, already conversations there. If it proves out, it could be the most impactful deal we've ever done like by a light year.

And it's crazy because I think people still think of that's a reg CF deal. They just did five million at a time. Sold out their first million. Sold out the next five million. Every time they sell out, they create a new wait list. The next badge comes in, do another couple million. I did a live Q&A a couple weeks ago. $885,000 investor came into a reg CF.

This is crowdfunding. $885,000 check. Just came in, cut the check, own a piece. I think people lose track of because the minimum investment's $250. You know, everyday people can get in and people are like kind of, a little distract him from the fact that this could be the coolest thing I've ever worked on. Could be. I mean, it sounds promising and it sounds really cool.

And it sounds needed. If we believe ordinary Americans deserve access to private investment opportunities, don't we also have to accept the risks that come with that access? You absolutely bet, Joe. Yes. Yes. This is not paternalism. We've always kind of designed it to where we want like a diverse group of deals. We had a, we've done two pharmaceutical fund raises, like a cancer immunotherapy, a non-addictive opioid.

We've done a gravity simulation. There was a pretty time to the pandemic. We're launching rockets every day. We did a really cool gravity simulation tech that raised over a million bucks with us. These are risky assets. These are high risk assets. So you have to do your diligence. You have to invest only what you're comfortable potentially losing.

And you have to be thoughtful about what you deploy your capital into. But I like the idea that's there. Like that's why I love. Like if you imagine that only, you know, you and I can get into deals by virtue of being accredited investors. there are so many people listening to this right now that are otherwise excluded from the deal. And it all goes back to like the 34 Act, 3334 Act. This is all back to like we're worried that people were selling snake oil. And so instead of saying that the company selling the securities has to do, you know,

kind of more disclosures, we decided, okay, a certain group of people just can't invest at all. You have to have $200,000, you have to make $200,000 a year or have a million dollars in assets outside of your primary residence. That's basically 90% of the United States-ish that cannot. invest in these startup deals. The largest wealth creation vehicle in the world is excluded to almost everybody in the world, which is tough. And so I've always felt like, yes, you have to be thoughtful, do your research, consider the opportunities, run it through AI if you have to, whatever. But I like the idea that you have the chance. And especially now, the argument against people having a chance at these deals is

just it's impossible to make the argument now with no offense. It's the prediction markets. You know, you could bet on the weather tomorrow. You could bet on how many times the president says a word in a speech, you could bet on who wins and what the over and the under are and how many points are scored. They'll let you do that with zero, with zero research, zero implications. Like they won't, they won't screen you at all. As long as you're 18 years old and you have the money, they'll take it. And that's perfectly fine. No concerns. But as soon as you want to invest in a startup, like, oh, hold on a second. We need to make sure that you did your research, that you qualify. We don't know if you want to let you get into this deal. So yeah, I think if you

If you can show up and roll dice and they're going to let you do it, then at least you should be able to invest in a startup and have a chance to win, you know, not betting against the house. That makes sense. Now, you know, our businesses are real different. In my world and yours ultimately, the deals are the same and the fundamental problem and the fundamental problem, somebody has an opportunity and needs capital to move on it. Now, how does an entrepreneur know whether they should be looking for debt, venture, venture, capital, private investors, or crowdfunding. I love that. It's usually, you know, I like to think of this like a, I think about it is like a

fundraising strategy. There's pieces to the puzzle. And a lot of the deals we see, there is a debt element and an equity element. Maybe it's, you raise through crowdfunding and then you do venture debt. Oftentimes I like to remind people, oftentimes the time to take the debt is right after you've done inequity financing. You're less risky. You have cash on your books.

You can get better terms. People lose track of that. They get the cash in their door. They're tired and they just turn off fundraising. Oftentimes, that's a good time to turn around and get some venture debt. It can just sit there. You're not even paying on it. You're not using it.

It's just available, but you have it at a preferred terms. So oftentimes it's a fundraising strategy where a lot of these elements kind of are coming together. And so, you know, each one has their own downsides, right? You know, debtors are, you know, oftentimes creditors kind of have worse terms because they sit on top of the capital stack. Common stock. If most of these companies fail on net capital, then the investors are just wiped out. There's no recourse. Debtors have incredible recourse. That's how its whole thing is designed. That's why a lot of debt instruments became more prevalent in venture capital because they could sit on top of the capital stack. And if there's assets, like, sell the assets and get paid back. But all to be said, generally speaking, there's pros and cons to every investment strategy. And generally, it's good to have like elements of each. A founder comes to you tomorrow with a good company. and he goes, and he's making 500 grand in revenue, six months of runway and no idea of how to raise.

Give me like a quick 90-day playbook. Yeah, oh, that's good. So this is going to be a pretty industry specific because a lot of these companies, well, let's say, so we have six months runway, 500K revenue. Generally, that's probably a pretty decent reg CF deal. I mean, you know, a lot of companies,

a lot of ventures going to see a million ARR, so a lot, like about maybe a third or, or 40%, of ventures off the table right away. A lot of lenders are we uninterested in that limited of capital or if they give you capital it'll be a little bit predatory on the terms. It probably depends on a little bit on

if you have a decent community. If you have people that enjoy using your service or enjoy buying your product, that could be a really strong indicator to run a reg CF opportunity through a funding portal. I think six months runway is always going to be pretty difficult.

There's a really good group called King's Crowd. They raised 100,000, with net capital and then did a million, but they are the kind of most recognized rating agency. They review every single deal on every single platform, and they grade them. And one of the big ones I always look for is kind of risk associated with burn rate. And so only a couple months left to execute on your vision. It could take a couple months to get the dollars in the door, at which case you might be

kind of right on the edge, knock on the door of lack of success. but I think a modest raise and in using some of that capital for marketing to drive more revenue could be a reasonable opportunity. Now, this is a question I ponder. It's like, can a company be incredibly successful and still the investors got a bad deal? Yep. They can't. Like, where would the money go?

I guess the CEO would take the money. I guess like we work. There's a lot more of that. There's obviously like things like that where it's just like bad, making bad decisions. I think even more than that though, it's just that you can you can, it just really comes down to the terms and that's what's so unfortunate. Like, you know, I remember some people, you know, there are some people back in the day there was a serious push towards liquidation preferences where somebody could have an

investment ahead of yours and they get like a 2x liquidation preference. So no matter what they get in there, they get double their money back plus participation in whatever upside there is in the deal. And then you come in after that at 1x or or kind of a normal liquidation preference. And now, you know, a lot of that value has already been associated with previous investors. You know, that's what's so weird about this world where a lot of the data says come in later

with more cash, but at the same time, you know, the greatest returns of all time are the earlier risk taking deals because you can get in there, you're not subordinated, you're not down the cap table, and you can actually get a meaningful return early on. But it comes down to the deals. It comes down to the specifics,

comes down to what your investment instrument is, what the terms are, you know, who's in control, And then here's the thing too. They take investment from one specific investment group, and that board of director comes on, and they have a very clear, strong vision of where they want to go, which might not be in the best interest of the company. That could be a problem.

Shareholders determine the directors, directors, to determine the officers, but oftentimes the shareholders, you know, are a kilometer of venture capital funds. So a handful of venture funds could control, you know, 50 plus percent of the company. And so they really can say, hey, I like where you're trying to go, but it's going to take me five or 10 years to get there.

I'd rather sell this off for scraps right now and get my cash right now. Especially timing. People don't realize this. A lot of these venture funds have a 10-year horizon. They have to return their fund by the end of 10 years. If you take money a year, eight, year nine, they might come in, especially if your hardware company, they bought because, hey, that little thing that you have in the corner that's worth a underground, time to sell that thing so I can get my money back and put it towards something else.

So, yeah, there could be great deals, but, you know, it's unfortunate. there can be specifics that can make them not great deals that makes sense that makes sense so how does like an investor like prevent like a like an issue like we work oh man which is so tough because i actually loved i loved my time working in we works i think it's a cool idea i think they made some interesting decisions over extended yada yada so i think if you're an investor well first of all most most investors didn't even get a chance to lose their money there but but let's say like you know when you're getting into the weeds there. I think having, okay, if you don't have an accounting background, have somebody on your team

that does. A lot of people could look at the books and realize that some of these things don't make sense. For example, I don't want to speak poorly about the most recent SpaceX IPO. And there's some people who definitely made money there, and there will be some people that will continue to make money there. I just couldn't miss out on it because I'd rather lose money than be wrong. So, you know, but, I mean, losing, you know, losing $4 billion in Q1 without, you know, And if you look at the data, basically their AI infrastructure was like a Neo Cloud play where they didn't even have demand for XAI enough.

They're just selling that extra demand to other AI companies. I thought a super promising vision for your AI company is if you don't even have the users to use your underlying infrastructure that you have to sell it to your competitors. And you can see it. You can kind of see all that from the financial statements too. So if you're not super confident in accounting, maybe you know, kind of do a Coursera class and get a little, you know, of decent understanding or loop in your kind of friends and family community members that can help give you some eyes there but sometimes you could peek at these s-1s and once they're filed you could you could feel pretty confident that some things are good or bad deals you could be as confident

you want but like if trust isn't in the picture i feel like any deal will fall apart how important is trust in a deal gosh trust is everything people move at the speed of trust i can't remember again i borrowed that from somebody way more way smarter than i am but people move at the speed of trust you have to you have to be able to believe in these folks, you know, good team members, look at the backgrounds of the founders, the directors, their officers. Yeah, trust is critical. And then you also have to trust that when the hiccups come, because inevitably there will be speed bumps in the startup space, just the nature of the business. You know, you really have to trust that these are the people to execute on it. And that's why it keeps going back to team. It's the team that you trust,

I can execute. You know, whenever they have to pivot, they have to be ready to be able to do it. And so that's why you really got to look at the team. So trust is everything. Now, in the next version of the American Dream, is it less about a great job and more about owning a piece of something? I think almost certainly. I mean, we've just seen, you know, kind of mass layoffs across the world. There was a period of time where, you know, having a six-figure job at a big tech company was like the most confident you could be in your future. And then we've seen, you know, tens of thousands of layouts across the board on those. There's obviously massive push towards AI and everything.

AI is designed to make companies more efficient. and efficiency means fewer humans. Like, let's just call it what it is. That's what efficiency literally is. That's exactly what it is. You know, they don't eat, they don't sleep, and they don't file for workers' compensation, right? These are the types of things that generally mean fewer humans.

So I think more and more people need to be able to creating their things. I think there's a world where people are either creating their own thing or advising and supporting other people's big thing, and that could be a place where they can have success. But realistically, if not owning your own thing is a kind of a precarious position, these days unfortunately. There's no there's no 40 years in a gold watch anymore. I still hear that thing. It just blows my mind. People would just work at the same company for 40 years and now the data shows if you're not switching jobs every year and a

half or two years you're actually leaving money on the table. Like I didn't take this to our obviously I haven't been a good proponent of this but the data suggests if you're not moving companies regularly you're not actively leveraging up all the time then then you're you're not maximizing for compensation. So I think you know people are definitely not there's no it doesn't feel like there's loyalty to the game as there used to be And so I think you have to do what's best for you. People are switching, you know, people switching teams. And I think companies are definitely not loyal to employees.

They're surprised when employees aren't loyal to them, but they've never, you know, they're not loyal to the employees. And as soon as there's an opportunity in that board and that, you know, that board meeting shows up and they're trying to figure out where the money comes from, it could be coming from you at any time. So I think you've got to be thoughtful about having your own thing, unfortunately, in this world. Now, we're still relatively early in this experiment, but private investing once happen largely behind closed doors specifically to accredited investors right now technology is

steadily pulling those doors open yeah right now 10 years from now how different do you think investing is going to look it took 40 years for mutual funds to become popular it takes a long time for financial instruments to become popular i can imagine a world where we just won't use something if you don't have a chance to own it. I really can. Like, why would I choose your product versus a competitor product? And that competitor product

has a permanently open investment opportunity and I can add to my position regularly. And as I use it, they become more valuable. And as they become more valuable, I get a larger difference. I mean, that makes a lot of sense to me. Right.

Why would you leave? The customer is the most valuable part of your business. Well, that's the stock market science now. Yeah. Invest in companies you use. Yes. Apple. Yep.

You know, Facebook, whatever. Meta. like invest in those companies. Yeah, because you use them every day. Exactly. But the issue is back in the day, they'd go public at a couple million dollar valuation. And now we just had a $1.5 trillion dollar IPO. Like where do you get returns?

Like, you know, how do you get returns when a company does go from $1.5 trillion to $3 trillion for you to double your money? You know, in order for you to three times your money, they have to become the most valuable company in the world. Like these are the types of things that people should be thinking about. Like I think that's the SpaceX. Exactly. The hype was real, but it is, you know, it's just going to, it's just safe. It's just like parking your money in the bank. Right.

And they changed, you know, they did a great job of getting folks to do things that have never been done before, getting included on NASDAQ 100 really early, usually at the wait a year. So outside of those types of like, you know, kind of. You're outside of those like, you know, some people could call it. Some people could maybe call it, you know, corruption or like, you know, or at least market manipulation or influence or whatever. But, you know, outside of that, like, I.

I mean, why would I use a coffee brand when I can own another one that I like? Like, you know, alcohol brands, we have a couple great investment opportunities that have been alcohol brands. Like, how cool is? I feel like George Clooney owning my own whiskey brand. Yeah, we did a tequila brand that was so cool. They wrapped up their offering. They're called ghost tequila.

It was a ghost pepper-infused tequila company. And they just realized that everybody who sells a margarita sells a spicy margarita, and the worst part is muddling jalapenos. And it was like one of the largest return drinks of all time. It's either too spicy enough, spicy enough, and it just comes back. And it's just like, why just not just normalize that? Institutionalize that, just make that the same all the day. We did a couple hundred thousand with them,

and then they took, you know, tens of millions from a Raptor group, like a big private equity group. So it's like, why would I use your product if you're not even like? You care so little about me as a consumer that you're not going to let me own a small. You won't let me give you money to own a small piece, but you expect me to use your stuff? I think 10, 15, 20 years from now, that would just be ludicrous. 20 years from now, do you think people find it strange

that access to private company investments was ever largely reserved for wealthy people? I think so. Every time I speak about it, people are surprised. People are just like, but why is it? And it's just such, because it's a weird approach to take. It's so paternalistic. There's no other world where we're concerned that you would,

you were worried that grandma is going to get swindled out of her pension. So what we said was no grandmas get to come in. That's really bizarre. And I think also it's kind of offensive too. The way they describe accredited investors is often, they usually conflate it with a sophisticated investor. They use those kind of interchangeably. I think people should be super offended.

You can make $100,000 a year and practice securities law, but you're not sophisticated enough to get into a deal because you don't make $200,000 a year. The idea of using wealth as a justification for your ability to access deals, I think, is pretty ludicrous. And I think more and more people will feel that way as well. Now, again, we do also have protections in place. You can only invest a percentage of your net worth and income.

By the way, on the platform, by law, there's no world where somebody can make $100,000 and invests $100,000 through the platform. You can't do it. So there's already precautions in place. And like I said, it should be a slap in the face, especially compared to gambling and prediction markets. Like you can't have it both ways. You can't say people can't put $100 in a cool startup, but you could put hundreds of thousands

of dollars on whether it's going to be warmer than 90 degrees tomorrow. 10 years from now, what would have to be true for you to look back and say, leaving the safe path was absolutely worth it. So I'm actually very fortunate that as of today, that's certainly true. As of today is certainly true that it was worth it. I mean, for me personally, one hand washes the other. Securities law and financings are inextricably linked, right? So what I do at net capital supports me in my legal practice.

What I do my legal practice supports me in my funding portal broker dealer. So no matter what, that's helped a ton. I've got to do really fun things like this. that I otherwise probably wouldn't do. But 10 years for me, for me to really say that's worth it, though, for me to really say that it's worth it, I would like to see more of a, you know, we partnered with an alternative transfer agent

that would allow us to have an alternative trading system, an ATS. It's a whole different registered group. And there's a world where all of these private securities are liquid, where you could trade your private holdings and private companies to other private investors. That is a very big nightmare right now. We've gone back and forth with Fender and the SEC to try to do more and more of it. They don't like that we control the primaries and the secondaries.

They want to do all sorts of things. So I think for me to definitely say this is hands down worth it, is that we can see an active liquidity market for private securities. There are so many people that are trading secondaries, you know, employees at big firms can't exercise their options. There are groups that are going in buying those options and flipping them, right? But again, that only happens through accredited investors. I think it would be so cool for me to like, you know, bank on something, support it, maybe a couple years later.

I'm ready to go on to my next opportunity and be able to have the liquidity to trade that. I think that would be like creating a private NASDAQ would be like my raison days of exons. Like why am I here on earth? It would be so cool. I like to, we like to end the show with a little quick game show. Uh-oh. Later on. Now, Eric, this is going to be a series of hypothetical companies.

Oh. I'm going to give you some basic facts. Okay. And you got five seconds to choose. Okay. So you have two choices. Mm-hmm. Take the meeting or pass.

Okay. So I just want to just answer with one of those and ideally explain why. Okay. AI start. Before you pitch one, can I say the caveat? Yeah. What's the caveat? I almost always take the meeting.

I think, I think 1530 minutes, like 15 30 minutes, I have a walking desk. Worst case scenario, I move like a mile just puttering around. I almost always, almost always, almost always. I'm the same way. Right. I'm the same way. But you know, for the sake of the game show, let's say, you know. Let's say it's in person, I have to drive to LA.

Yeah, exactly. Okay. Right. Let's add this caveat. In person, you gotta drive to LA. Deal, deal. That helps a lot. Yeah.

Because if it's the Zoom, I'm going. Yeah. But this one, this will be a lot of passes. Let's go. All right. This is funny. An AI startup, zero revenue, but one million active users growing. growing 30% month over month and founder wants a $50 million valuation.

I would still take the meetings. I think I'm pretty good at reasoning people in their valuation. I would help them understand why a potential down round is not worth taking that money at that valuation. I would take the meeting, but we'd have a lot of work to do. Okay. Now, a boring B2B software has $2 million in annual recurring revenue. It's profitable and it's only growing at 15% a year. Nobody has ever heard of the founder. Okay. If they don't have an AI plan,

I'd probably drive to L.A., skip the meeting. I think AI will continue to eat B2B SaaS. In fact, that's probably part of why the whole market might collapse on itself is that the same people financing the AI companies are the ones that already backed B2B SaaS and they're eating each other. So we'll see what the whole venture market looks like pretty soon, but I would probably pass on that B2B SaaS.

If there's no AI plan, thanks for the time. Now, a viral consumer brand, it has $5 million in sales, a huge social following, an incredible founder, but the company loses money on every order. I would take that meeting. Yeah, that sounds like a cool company. You could bring in, fortunately, I know a lot of people great distribution networks that can bring those costs down. Yeah. They're really thoughtful ways to bring those costs down that we can make that work. That one feels like a low-hanging fruit.

Take the meeting. Serial failure. Founder has already started three companies. All three failed. same founder wants you to hear his fourth company that's all nothing about the company or anything just that he just hasn't gotten it done yet i mean something to be said about being a resilient banging your head against the i mean i take the meeting let's see what this one is i mean sure yeah yeah in fact that ability to keep going nonetheless i mean it takes a little

it takes a yeah it takes a level of absurdity to be in this space already right that's that that's that kind of, that's that, that lunatic that gets the job done. Let's go. Let's beat up in LA. All right. Now, a genius solo founder. All right. He's got an incredible technology.

No sales experience. All right. No co-founder. And he doesn't believe he needs one. Take the meaning? I do take it. I would also think I'm pretty persuasive on that he does need fun. He absolutely does.

First of all, if you look at the data, solo founders are way underfunded compared to co-founders off the bat, especially depending on what, you know, demographic backgrounds that come from. I'm guessing technical founder is the way you're saying? He said no sales experiences. Yeah, no, he's just incredible technology. Oh, I'll drop a sales CEO in their heartbeat and not be pumped about it. Yeah, we drop a sales CEO in there. He won't buy it.

He will never do it. You know somebody like that? If it's a no-go, I'm going to do this without sales, then it's easy pass. Now, I know the answer to you for this next one, but you know, I'm going to say it. A celebrity startup, massive celebrity attached, millions of followers, almost no repeat customers. Oh, that's not good. We don't like that. Why is that?

I mean, that's the downfall. That's what happened with Prime. Yeah, they don't like the, they don't. So that, that is super concerning. Like, the churn rate is one of the first things I looked at. If people aren't, if people aren't reengaging with the product, that is a fundamental fall. I mean, how is Prime even doing it now? They just pivoted to, like, protein shakes.

I think they had, wasn't there, like, a concern about, like, the caffeine nation, their target demographic shouldn't be having that much caffeine early? Yeah, there's all, 10-year-old. Collectibles, basically, and that only lasts so long. No, no, they're killing it in collectibles. Right. Oh, no, no, I mean, like, people were collecting the bottles. Oh, yeah.

I were the kids were, like, hanging around their stuff. You know, oftentimes you can kind of, if maybe there's something that we could tweak about the formulas on that, people like, I'd take the meeting. I don't, I would really be concerned. I probably would not get the investment, though. If people are not coming back to the well, that's a problem. Yeah. All right.

These are good. Pickle Energy. A founder offers you 20% of his company for $1,000. Don't like that already. The company sells. artisanal pickle flavored energy drinks. Only problem, sales are somehow growing at 300% a year. So I'm definitely taking this deal.

I'll tell you why. One, I love pickles, too. This is just, it's going to remarked this to athletes. You saw the FIFA referee that pulled over had to do a pickle shot because he was cramping up during the World Cup. Yeah. Oh, this is going straight to athletes after this. Yeah, no, it's, sign me up, pickle me up. Great.

Because that's what we brought you here for. Is that the pickle bitch? This has all been in the lab rear of a lawyer. Oh, we got a pickle juice. Bring out the pickle juice. Bring up the pickle juice. I'm going to be so different point if I don't have that there's not a pickle back here now. Oh my gosh.

Yes. Now the career pivot. I offer you a million dollars to quit net capital tomorrow and become a mortgage broker at eMortgage Capital. So that's not crazy. I feel like one of my shortcomings is actually in real estate. We're in OC, big real estate network here. Yeah, that's not a crazy pitch. Is that a little bit?

Is that what I'm here for it? Actually, we just hired an attorney 350K a year. I do. I think one hand could, I think they could really go side to side. It's funny, I started to think about doing more estate planning specific because I would do deals with people

would be like, how do I state plan? It's easy for you become a mortgage. And there's a real estate side to that. So yeah, I mean, pick a piece. That's for 40 years. Yeah. We got you. Hey, that's what I do.

I set up mortgage companies. That's my job. I like it. I like it. I'm in the business of making businesses. Literally, I like to consider myself like the private hedge fund that funds small independent mortgage companies. They basically take small mortgage companies and make them big mortgage companies.

Yeah. It's a great model. Well, on the entity formation side, count me, call me a fan. Loop me in, consider me. I'm happy to do fun stuff on the entity formation stuff. Is they planning to look? I mean, look, if you throw in the pickle deal, sign me a free mortgage. Last question, bonus question.

A great founder plus an average idea or an average founder, but a good. great idea. Who gets the meeting? Founder always. Great founder always. Great founder always. I mean, so many things, these things started off as bad ideas. People don't realize that, I think. And sometimes they go from decent ideas to even better ideas. I mean, people remember, like people lose track of Amazon never became profitable until AWS. There were a public company selling books online before Bezos had his glow up. He was just flipping books online, which I think is a decent business. And it wasn't until Amazon Web Services that it was ever profitable, never profitable for that and a fundamentally different business entirely great great founder decent idea

hands out that's the easiest one makes sense you've been yeah so pleasure to have on the show if people want to connect with you how can they find you yes okay definitely LinkedIn my favorite for sure um and then you could just look for you know I'm not super okay I have to do my middle initial and suffix it's not because I'm fancy feast it's just that I have a generic name and Eric Cox and so you'll never find me so Eric A. Cox the second with the Roman rule's that's the way to find me or you can shoot me an email Eric at bluecoast VC.com. That's my personal one that goes with me everywhere. But also netcapital.com you can find me. Story. Dot law, you can find me. But if you want to go directly to me about anything fun, unique, it's inside law, inside

financing, whatever. Eric at blue coast VC.com. That's my, that's my everything one. Let's go. You're the man, Joe. Thanks for me. Don't lose checking me on that pickle deal. I swear to good. If I see that pop up about it. If I see that pop up about me, I'll be pissed. Let's go.