Invest Like the Best with Patrick O'Shaughnessy - Joanne Wilson - Angel Investing and Trend Spotting - [Invest Like the Best, EP.65]

Episode Date: November 28, 2017

My guest today is Joanne Wilson, a New York City based angel investor, writer, podcaster, trend spotter, and self-described “woman around town.” Joanne has had a multifaceted and winding career, and began angel investing a decade ago when she put money into NYC-based media company Curbed media which we discuss in detail. Since then, she’s invested in more than 90 companies and been pitched by countless more. She is an instantly likeable person, you can literally tell in 10 seconds you are going to have a great conversation, so it’s no surprise that part of what makes her unique among angels is a very close relationship with many of the founders she backs. We cover a lot of ground. We talk about the personality traits of entrepreneurs, Joanne’s evolving investment style, her focus on female founders, fashion, business models, restaurants and a lot more. Please my conversation with the Gotham Gal, Joanne Wilson.   For more episodes go to InvestorFieldGuide.com/podcast. To get involved with Project Frontier, head to InvestorFieldGuide.com/frontier. Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes 2:12 - (First Question) – How does Joanne orient herself towards what’s new, in the context of food in New York city 4:10 – Can that mindset of forward thinking be cultivated 5:18 – Latest thing that got Joanne excited before everyone else 6:57 – Why the new frontier is going niche and local 10:23 – Joanne’s first investment 11:48 – Why do VC’s typically stay away from media 12:55 – How Joanne got into her first investment as a customer 14:11 – What is the skillset of making money that Joanne as 14:45 – Can you sense if a founder has that innate ability to just make money 17:04 – Are there common traits in founders 18:07 – Joanne’s progression into angel investing after her first investment 19:58 – Red flags when looking at investments 20:40 – Impression on growth without goals 23:30 – Trends among Joanne’s investments 25:56 – How much knowledge is transferrable between different industries that Joanne invests in 27:06 – The dichotomy and unique challenges between raising capital with female founders vs male founders 29:07 – How does Joanne balance her time and stay engaged with all of her investments 30:50 – Time when Joanne has helped a founder side step a pothole 31:35 – Most memorable first impression Joanne experienced 35:05 – How often does someone not have the right idea but is still worth investing in 37:19 – Why Joanne won’t start a fund 38:22 – Data on female founders returns and time 40:38 – Criteria for identifying emerging trends, especially in the more creative/artistic fields  43:29 – The changing costs of launching a brand, in the contest of fashion 47:11 – What has Joanne most excited right now       48:11 – Interesting facts about the fashion business  52:01 – Kindest thing anyone has done for Joanne   Learn More For more episodes go to InvestorFieldGuide.com/podcast.  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub Follow Patrick on twitter at @patrick_oshag

This podcast is sponsored by CFA Institute, the Global Association of Investment Professionals whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals working to build an investment industry where investors' interests come first, financial markets function at their best, and economies grow. The chartered financial analyst credential is the most respected and recognized investment management designation in the world.

The views expressed in this podcast do not necessarily represent the views of CFA Institute. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com. Patrick O'Shaunisee is a principal and portfolio manager at O'Shaunisee Asset Management, All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy asset management.

This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shawnessly Asset Management may maintain positions in the securities discussed in this podcast. My guest today is Joanne Wilson, a New York City-based angel investor, writer, podcaster, trendspotter, and self-described woman around town. Joanne has had a multifaceted and winding career and began angel investing. a decade ago when she put money into New York City-based media company, Curbed Media, which we discussed in detail. Since then, she's invested in more than 90 companies and been pitched by countless more. She's an instantly likable person.

You can literally tell in 10 seconds you're going to have a great conversation. So it's no surprise that part of what makes her unique among angels is a very close relationship with many of the founders she backs. We cover a lot of ground. We talk about personality traits of entrepreneurs, Joanne's evolving investment style, her focus on female founders, fashion. business models, restaurants, and a lot more. Please enjoy my conversation with the Gotham gal, Joanne Wilson.

So in preparation for our chat today, I was reading some of your website, listening to some things, listening to you, talk to some other people. And two things really stuck out. I thought they'd be a fun way to frame this whole thing. The first was on the investing side. And I think the quote was something like, I invest in survivors, so a personality trait of the entrepreneurs that you like to back. And the second was, I'm not quite the New Yorker you are.

I only lived here for eight years with my wife. if we live in the suburbs with our kids now. But I think share a lot of the same passions around the scene in New York, art, food, culture, et cetera, and that you're always on the lookout for what you call it the new new, the new thing, maybe sort of a trend spotting type thing. And I thought those were two almost opposite ends of an interesting spectrum

because the new new thing is always rotating, and Survivor means you last. So I'm curious. Well, survival also is about constantly to evolving and rethinking. That's right. So I thought we'd start with kind of New York. Okay. It's a shared passion of ours and your love of trends.

Maybe we can use food as an example because it's an easy one that people can relate to. So what is the process? Do you just follow your nose? How do you constantly reorient yourself towards kind of what is new, let's say, in the food scene in New York? I think it's multiple things. First of all, you have to read as much information that is absolutely ridiculous for your head. I always call it cocktail fodder. So it's blogs, it's magazines, it's getting out there, it's seeing what's happening.

And I don't read as much as, let's say my daughter does, who does the same thing. I mean, good God, you know, she reads the stuff all day long. But I also think it's about nose. And I think a lot of it is innate. My grandmother was really good at, like, seeing things coming down the pike, was always on top of things. And I've always been that way. I mean, I've said things that have been from furniture to fashion to food to neighborhoods. And I was like, and then I'll go back and say, remember five years ago I said this?

And it's just like, I think it has to do with a gutter role of having your finger on the pulse. Do you think that there's a mindset that can be cultivated? You've written a little bit about how entrepreneurs are just like a, it's just a certain personality type. Like they just need to be their own boss and make things. I'm always interested in early stage investors, how much they think that's kind of inborn versus something that can be cultivated. So what do you think?

the kind of nurture nature debate of entrepreneurs and creators of the new, new thing. I think it's a mixture because certainly you have to be a risk taker and feeling very comfortable around risk to the point you don't even think of it as risk. And you're looking at the world in a very big picture sort of in the cloud way that you look at everything that's going on around in the world. And so when I look at investment in companies and I meet people, many times I think, wow, that makes so much sense. That's filling a void in something that I've been seeing that you're looking to fill.

I totally get it. Or other times people come with ideas like, God, there's 300 people doing this. It doesn't interest me whatsoever. And so it has to do with looking at things broadly in order to focus on something really small that you see that this makes sense to me. What's the most recent example of a finding like this? It can be in any field, you know, art culture, investing, what have you? What's the last thing that got you really excited?

where you feel like you've identified, either it can be a very specific thing, a company, a restaurant, or a trend in one of those fields. Well, certainly the food industry is changing. And it is an area that there needs to be a new paradigm in. Because in the regards to the restaurant world, you know, you're seeing these restaurants where the real estate is ridiculously high. They need to pay the person washing the dishes $15 an hour. Now there's a family leave.

And so you really can't afford to survive in New York City. And so I think all the interesting new restaurants are coming in Brooklyn, not in New York City. And you're also seeing the next generation of people that maybe started in the restaurant industry when they were kids. And so in order to actually get inexpensive and not too expensive make money on the food, you really have to make things that are ethnic sort of foods that have a different way of the way that they're cooking, that you're not giving someone a big slab of beef that you need to make certain margin on. So I think we're going to see a lot of that. and we're going to see a change in regards to how restaurants are run. You know, I remember thinking all the small is coming back, all the big is out. We're going to see more and more of that.

I think we saw small happen a couple years ago, but I think it's going to be, again, more intimate. We're also seeing these huge expensive restaurants. So it's like the great Gadsby era. I don't know how they're going to actually survive because you're seeing real estate in New York City. You can't sell anything over $10 million because it was all built for foreigners who weren't coming to invest in New York City anymore. So it's all sort of connected. This reminds me so much of actually the conversation I had with the person who introduced us, Dave Tish, he was talking more

about startups, but this idea that you've now got these crazy large incumbents where it's very difficult to compete with the big tech giants of the world. If it's something that's scalable. But maybe the opportunity is this kind of niche small, local market. And that's true in like any industry where if you can really tailor to some specific set of preferences and you can't scale it up, naturally. It kind of sounds like the Brooklyn restaurant, right, versus the $10 million plus. Yeah, completely. Mega restaurant in New York where it's about the business plan and, you know, making a splash. Well, also as an angel investor, going back to investing, is that I'm okay if a company's only

going to do $30 or $40 million. And maybe I just get money every year back in regards to it's tax differently. How old fashioned? How old fashion? Like, I'm the new bank. But I certainly would like to see companies become huge. but based on this generation of millennials, the next generation of entrepreneurs, the ability to create companies that are global that might only have a very niche business that only 40 million people want to be part of, not 300 million. And so I think we're going to see many more

businesses that are not going to be the billion-dollar businesses, but they're going to be the $100 million businesses. And so that changes the perspective in regards to venture money and investment thesis is. Yeah, it's kind of contrary to that idea that seems pervasive in venture capital funds. I'm sure it's less so in the angel investment community that if you're going to swing, it needs to be a hard enough swing where the market's massive, right? So the investment can make the whole fund is the common line that you hear, whereas it sounds like the angel investing mentality is very different than that. It's completely different. I mean, I know there's a couple companies that I've invested in, first round, even first dollar in, they move forward.

Some of them I continue to put money on it every single round until I feel I have enough at risk and then I'm done. Whereas others, I look at the term sheet on the next round and I'm like, okay, this is ridiculous. It doesn't make even sense for me to put money into this next round because the amount of money I'll make in that next round is irrelevant. So I'm just going to stick with the first round because that could easily be a big hit, but the rest of them won't make any sense. Before we leave restaurants, what's the last,

there's a lot of New Yorkers that listen to this, what's the last great meal that you had at somewhere relatively new? Selfish question. No, I mean, you know, I have to say that I've been having a really hard time in Manhattan restaurants. I love, I'm going to, I like to spend more time out in Brooklyn eating.

But, you know, I have to say, like, I'm not on Tuesday night, at 630 or 7 o'clock, then let's go out to Brooklyn and eat, you know, because it's going to take. me 40 minutes to get there, 40 minutes to get home. And so, you know, I don't participate in those restaurants as much as I'd like to, but more on the weekend. I will say is the food isn't like, oh my God, but the grill, I loved the experience.

Where's that? The grill is the new four seasons. Okay. Fantastic. I mean, it's really an insane, over the top, great Gatsby experience that you walk in there and you're like, I am in New York. I mean, even if you just go to the bar and have martini, it should be experienced. What was your first investment and was it a New York based company? My first investment was a New York based company. My first investment was

curb media. And so I was watching curb media and I was watching Eater and I was watching racked and I was reading these posts at least two or three times a day. And I was fascinated with them because to me, who loves and consumes media, this is how we were going to take in media in the future. I mean, that was over 10 years ago. And I didn't think that we were going to have the deaf magazine, but I did think what made them really unique is not only where they be to see,

there were also B2B. So if you're in the industry, you were reading these publications online at least a couple times a day. Maybe pick one of those three of the verticals, and just for people that I'm familiar with it, just describe kind of, describe the model. So curbed, eater, and rack.

Curbed is real estate, eater is food. and racked is the fashion space. And what they would do and still do, now they're owned by box, is they post, at that point, four to five times a day articles around what is happening in, let's say, the food business that was eater,

the restaurants, you know, what was opening new, who were the gatekeepers of the restaurants? I mean, if you were into food in New York, you were reading this a couple times a day. And so were the people that running the restaurants. Interesting. Yeah, that's how my wife and I used to always,

the Eater 38 was a, And now any city I go to, that's right. It's all about the Eater 38. So media sometimes is a model that a lot of ECs aren't pursuing. No, they don't like media. So maybe describe why do you think that is? Why do traditional venture capitalists not like the media business model? And what's appealing about it to you?

Well, it's hard to make money in media because the only real way to create capital in media and revenues is ads. And so you are beholden to the ad industry based on where they are and what's going on in their world and how much they want to buy that year. And so it's very, it's hard to make money in that particular industry. But I still think if you have enough eyeballs, there's other ways to translate that. I mean, a lot of them are selling commerce and, you know, you can get sponsors. Events are really big. But in general, I think if you build a really interesting media platform with the right amount of eyeballs, there is an option for you to sell to some of the large media companies that are in need of a new audience. I am friends with one of the business guys at Fox.

and I was blown away by how much money some of these verticals make on events. I couldn't believe it. Well, events are great because you make money before anyone shows up. Oh, yeah, Float financing. Exactly. It's a beautiful thing. It's a beautiful thing. So talk a bit about the progression then from that first investment.

How did you get access to it, I guess? You were already, it sounds like you were a customer of theirs to begin with. I was a total customer of those. You were reading. So then what was the flow like to get involved as an investor? And then we'll go kind of to the journey since then on the investing side. Well, I mean, I knew Locke. and I had met him peripherally, and I knew Nick Denton, who was an investor, and Locke had worked for

Nick before he started this company, and I did not know that they were looking for money, but actually my husband came home one day, and I think I said to him, it's really unfortunate that you would invest in a company like this because it's not part of your investment thesis, but I'm telling you this is the future of media. And he literally came home the next day, and he said, I happened to see Nick today, and Lockhart is raising money for Curb Media. And I was like, wow. And he said, you should go talk to him because you should invest in that.

You'd be really good investing. You understand how to make money. And this could be your next career. And so I called up the phone. I emailed Locke. We got together. And I was like, I'm in. I love this.

And I sat on the board for literally the entire time that the company was around until it's old. Can you describe what you mean when he said, you know how to make money? What is that skill set or experience? I think that's innate. I mean, God, I was, you know, I had lemonade stands when I was like three years old. I had a cinnamon stick business when I was in fourth or fifth grade. You know, I created concerts in my backyard and I charged everyone in the neighborhood money to come. I mean, I just always had this guttural sense of how does this make money? And so I just think that business is something that's always been part of my DNA. Is that something you can sense when evaluating,

let's say, a founder or an idea? I don't know if you're like, you said sometimes some first money in, so maybe pre-revenue investment sometimes. Is that something you can sense or suss out in a founder? We use the word survivor earlier. That's maybe a different part of this, different side of the same coin. But someone's innate ability to understand a market and set up a business model in that market. Is that something you can find or ask questions to suss out? Well, it's sort of like the William Gladwell theory, right? I mean, do you know how many people I've met at this point in that business? I mean, at this moment, you kind of get a vibe for.

But, you know, I will even say as an angel investor, I remember years and years ago, this had to be at least seven or eight years ago. So I'd been at it for a couple years. And this woman came to see me. And she had won an award, one of those, you know, I think Stern School, they, someone wins like the number one new idea. and then everyone wants to fund it. And they get really great people to judge it that year. And she had won one year. And everyone came rushing over her because they wanted to put money into it.

She didn't take the money. Very female thing. I'm not ready for the money. My company's not ready. We're not quite there yet. You know, the guys would be like, just make the check. Right here. Right here.

Here's who you make it out to. And so she head down year later. She's like, now I'm ready to raise money. She came to see me. and I didn't give her a penny. But I remember when she was sitting there talking to me, I'm thinking to myself, wow, you have zero fire in your belly.

Like what you're doing is actually a really good idea, but it's too bad it's yours, because you are never going to be able to be successful as an entrepreneur. I mean, maybe this is the wrong business, but she just didn't have it. And so, I mean, I've seen them all. I've seen, you know, men come in,

with these great ideas and their chest popped out and they don't know the answer to simple questions, but they answer them anyhow because they want you to believe they know everything. And so I really, now I'm also better at who comes through my, you know, door just because I only have so many hours in the day. But you do. You meet these people and you're just like, wow, these people are going to figure it out no matter what comes their way. They're going to evolve their business in the right way and it's going to work. Are there any common traits, whether it's background or personality type, or experience or anything that you've seen, I think you've made 100, you know, 100 angel investments.

That's a lot. God knows how many you've looked at, not alone made the investment in. So a huge sample. Are there things, little markers that have risen to the top or is it less tangible than that? I just feel like you know when you meet these people. I don't know what the markers are.

Most of them are unemployable. That's a good one. They just, they could not work for someone. They need to work for themselves. And you can just tell. by the fact that they're trying to, you know, disrupt everything and rethinking the way things are done. And they have an attitude about how they do things. I mean, I remember once doing a panel, I was the moderator for four women.

And I asked all of them what they would do if their businesses didn't succeed. And they all were hysterical. They're like, we'd start a new business because I'm unemployable. Right. And so I think that a really good entrepreneur is probably a very interesting human being that is not employable in a large company. So what were the next couple stages after the curbed initial investment? It sounds like I guess you just got the bog and figured this is something you could be really good at. So what was the progression?

Well, I think when you have money, people come looking for you. Well, that's for sure. Yeah, people have the way of finding you. So did you put it out there that you were open for business as an angel investor? Or was it kind of just organic? It was pretty organic. I mean, everything I've done is very organic. I mean, I really have never been, I mean, even when I started blogging, I didn't do that linking to everyone and all this stuff.

I just sort of put it out there. and saw what happened. I just had other things in my life that I found much more busy that I didn't have time to really promote myself. But I started hearing from people, I think more through my blog, that particularly women who were interested in talking to me, and they found it really hard to find capital. But I understood their businesses, and I also understood them.

And so I really made this conscious decision to invest in women and to be a supporter of female founders. and then everything just started coming into my box. I mean, from people like Tish who would say, hey, I'm looking at this, what do you think? Or I'd be like, I'm looking at this, what do you think? Or meeting people and I'd say, wow, what an incredible business idea. Or like, I met a woman at a party. And I was like, this is really interesting what you're doing.

I would love you to come in and talk to me. She came in and talked to me and ends up I knew four of the investors. So I think that the cream sort of always rises to the top in any industry. And I've also learned a lot that just because there's really good people in the investment doesn't mean it's a good investment. And so it's really about following your own gut in regards to what makes sense to you. I think where I've seen red flags, I've gone back to my own self and say, you saw those red flags. You knew those are red flags. You ignored those red flags.

And now I don't. I'm much better at pulling back and saying, okay, what were the red flags here? What's an example or two of a red flag, kind of like the, you know, lack of fire in the belly. Any other common ones that have either hurt you or helped you sidestep things? People that have all over the place that have a hard time focusing. That is definitely a red flag. People that you just think they're too calculating that the way that they think about things,

almost like too MBA-ish, that's a red flag. Because at the end of the day, as much as entrepreneurship is being even taught in graduate school, no good idea. You're not an entrepreneur. I mean, I know plenty of people I think would be amazing entrepreneurs, but they don't have great ideas. I mean, so they would be a great number two. Yeah, I'll help people execute.

I'm curious if you agree with this philosophy of mine. So I call it growth without goals. Very specifically, it's kind of the same idea of like bottom up organic growth versus some big lofty long term goals that some, you know, five year roadmap that a company has that they're working towards. I've always felt that really specific big goals may be good in the sense that they're self-fulfilling, like the increase of the eye. odds of the goal happening, but that you crowd out kind of weird other side things that

might happen because you've got blinders on looking to achieve that one big thing. I'm curious if you agree with that. I totally agree with that. I totally agree with the general idea and whether or not you see the entrepreneurs that are successful with a similar mindset or a more goal-oriented mindset. I think there's a balance. Yeah. Many times when people come and talk to me, I think I put up an aura that I'm very open

and honest and I want to talk big picture. And so many people, I mean, even I had this woman here this morning, she's like, you're the first person I'm telling this to. And I'm thinking to myself, that doesn't surprise me. But she was surprised. And many times we'll get into these big picture conversations. And I've said to many of them, don't share that with other investors because they'll think that you're not focused.

You have to think big, but you've got to start small. And you also have to be able to realize one day, after four weeks, if it's not working, put everything aside and shift right or shift left because there's something there but you're not getting it you know sometimes it takes a while for the industry to get it i'm in a business that the she finally got what she always wanted to do but it took three years for the industry to wake up and embrace what she's doing and so i think that you have to have some kind of long-term goal but you might find yourself you have to be very aware of the white noise around you that if it's not working just because you think it's going to work, it's going to work.

I just got off the phone with someone who I was the first dollar in the business and, you know, they're valued at like $200 million at this point. They're doing really well. And I remember I said to them on the phone, this is a really interesting business. I understood it because I was in the retail wholesale business. And one thing that you have to do more than anything else when you start this business is figure out your customer. You might think your customer is this 35-year-old hipster woman who is going to rent your clothing because they want to wear it on the weekends.

You might find out if you pay attention to your data, it's really a 45-year-old woman who's using that clothing to go to work. But once you figure it out, then you cater to her and then you can grow your business. So I think some people go into business thinking, yeah, I'm a business for 30-year-olds. Well, guess what? Your business for 50-year-olds. Right. And so you have to be able to listen to what's happening to your business. So you started with a media company. I'm curious from like an industry standpoint, how that's evolved since. So of the 100, you know, plus investments that you've made,

are there common themes in terms of, is it consumer facing things, you know, B2B companies? Are there any trends that have emerged among that batch? My assistant will say I invest in really strong women and really quirky guys. No, I'm all over the place. And I think from a pure intellectual curiosity point is why I've done that. I mean, like we were talking at the beginning of seeing trends, I mean, what's happening in New York, to me, particularly in the last decade, and I want to take two years off of that. So in the last two years and before that decade is that there was this opportunity that there were so many things starting. It was like technology and the ability to build businesses for very little money.

Like, it will look back in the time of like when everything changed, when all the new businesses has started. Not that there won't be new businesses coming now, but I don't think it's fast and and furious, and I think in different areas. So I am in fast food casual places like Blue Bottle or Numpeng or Mexico, but I'm also in SaaS businesses and I'm also in B2B businesses. So I'm kind of all over the place, but it is interesting to see that they all, at the very beginnings, have the same damn problems, every single one of them. And it's interesting like being in the fast food casual, they all have the same issues at the very beginning.

Namely? You know, just in terms of they want to create a place where they make all the food and then they distribute it. And it doesn't work that way because it never makes money in the long run. And then you have to figure out how to make them in all the different restaurants and starting them up and getting people to stay on staff and what you're valued at.

And then you see consumer products businesses where the hardest part is capital. It's all about capital. Your people come in like, oh, I got in a whole four whole, foods. You're like, okay, whoopee. You know, I'm telling you there was a huge long line ahead of you. And then you see, I'm seeing trends in the consumer products business is how you almost have to be a mixed media business. You can't just be selling your consumer product to whole foods, but also online and also to restaurants and also in your own store. So it has to be multiple different ways to create a really big brand. And, you know, we're seeing that in CPG as well.

So it's, it's fascinating to have these little pockets of different businesses. and sort of see what's happening in them and how they're growing and changing. How much like cross-pollination is there in terms of like maybe knowledge that you can bring to a portfolio company, let's say, or a company you're an owner in, where you've observed these trends in CPG businesses and then port some lessen there and bring it over somewhere else? How much of that is there or is it pretty siloed where the lessons that you're learning are observing in CPG are very distinct from what you're seeing in a SaaS business or something like that? I think they're always crossover.

I mean, one thing nice is I have a list. and all my companies talk to each other. And so it's really great to talk to another entrepreneur who's a peer that might have a completely separate business. But I do think that there are crossovers, particularly the constant crossover, is building out your senior team and using the right products

and raising capital. Because at the end of the day, no capital, no business. And so I think one of the things that I provide, besides being a consigliary to every single founder that I'm invested in, is that navigating the world of how you raise capital and how you should be thinking about that. That is, I have found to be the most difficult and frustrating part. Can you talk about maybe the dichotomy on the capital raising side

between female founders where you spend so much time versus the more traditional bravado-driven male founder maybe and unique challenges that present themselves there? Well, I think the challenges are not so cut and dry because women, in this as a generalization, tend to build businesses that fill voids in their lives. Now, men could do the same and their voids are different. But years ago, VCs weren't necessarily investing in the type of businesses that women were building. Now they are. And there's all different capital out there now to get. So it could be institutional money from VC.

It could be from a smaller mid-sized VC. There's some incredible family offices out there that are fabulous because if you're in the real estate market and you're building a really interesting real estate platform, you might find three family businesses that understand better than any VC you're ever going to meet in a million years. So I always tell people find people that understand your business that are going to help you grow it

because they're just as interested in your success as you are. And I do think that there is something about sitting in front of someone on the other end of the table, regardless of how great your business is, as a BC who needs to have returns to their LPs. You really do want to connect with that person on the other side of the table. You spend a lot of time with them. I mean, for me, someone comes in who's an asshole. I'm not going to invest in them. I don't need to be involved with assholes. I mean, I've met some big assholes and I'm like, these people are going to be amazing entrepreneurs.

that could make me a shitload of money and I don't care. Because I don't want to deal with an asshole, you know? And so, but if you are a venture capitalist, you have a very different expectation. Right. That you might have to invest in some assholes. And so, you know, I think that you have to really like who's on the other side of the table because you are going to spend a lot of time with that. How do you strike a balance?

So if there's a hundred, I don't know how many of the 100 are still in existence, probably a lot of them. Well, yeah, it was 110? almost 100 and maybe 11 or 11. Okay. And 10 or dead. Okay. So that's still a lot of companies. So how do you balance that same?

You mentioned earlier not wanting to be spread too thin and then be able to be the consulari and have time for them all. How do you balance that? Like how do you manage your schedule? It's probably insane. How do you think about your time? Well, they're all in my brain in some respect. Some of them are much more engaging.

Some of them I try to engage more with and they don't want to be engageders. And so, okay, maybe wasn't the best investment. because I like to be engaged. I want to know that I can help them avoid potholes. I can help them think about things in strategic ways. And so I sit on way too many boards. I'm very involved at the very beginnings. I mean, even when I put money into a company early on,

I really like them to speak to me at least once a month. And I make sure that if I don't hear from them once in a while, I hit them up and say, hey, what's up? Because I want to know what's going on. And I have enough connections that if I don't know the answer, I could probably find someone who does know the answer. Like I had a company that emailed over the weekend. He has a SaaS business.

He has some major meetings this week. Needed some advice and wanted to talk to some other people that actually had sold SaaS products before. I was like, well, there's three companies on the list that you should talk to. Send an email to the list. I guarantee a couple people on the list will be like, I'm happy to give you half hour of my time. But this particular one I think is really important for you to talk to.

And so she was like happy to talk to you for an hour and give you some advice. And so, you know, I think that is part of the network. But, you know, I manage to, I'm always there. You know, if they need me, I make myself available. What's a fun example of a time where you've helped someone via advice sidestep a pothole? Oh my God, I can't even think of it. I mean, there are so many potholes. I think a lot of the potholes, too, is investors.

You know, you don't want to be in business with bad investors. As in taking on the wrong investor. Yeah, I think that's a really important pothole. Putting money into things that make no sense early on. hiring an agency to spend a ridiculous amount of money you're not ready for rebranding yourself early too early on makes it no sense bringing on a senior person that you don't need at one point makes no sense although I do tell people who are about to break into the next

if you find the right person that you know is perfect for that COO job and you are six months before you're going to go looking for it hire them now yeah what's maybe your most memorable pitch or initial meeting with an entrepreneur where you thought, you know, this is something that I can't wait to invest in. What's the most memorable first impression? Wow. You know, I'm sure there's tons that you love. So a memorable impression.

Yeah. I mean, there's this one guy. I mean, it's a worthwhile story. I don't know if it was memorable. I mean, like Gene from Sweden, I remember where I met her, when I met her. We sat down. She told me her idea. I was introduced from someone who I knew who would use the product.

And I was like, this is genius. What's the product? It is a marketplace between contractors and homeowners. That is genius. So you want to redo your kitchen. You put it up. They connect you with contractors. They help you follow the process through to make you more at ease.

And it's an incredible business. They work so far. They're doing New York City, outlying suburbs. In Philadelphia, some of those outlying suburbs and soon to be in L.A. as well. It's a great business. And I was the first dollar in in the conference. companies just, you know, booming along. So that was a pretty memorable.

But there was this one guy out of Toronto who emailed me in art business. I thought it was interesting. And, you know, I said to him, I don't know about this. I went back and forth in email. And, you know, please, please, you know, just give me half an hour of your time to talk to you. And I talked to him. I liked him.

I thought he had, you know, he was just a real hustler. And I said, you know, this is not an interesting business to me. But keep me, you know, keep me posted. What was the just of the business? I don't remember what the original business was, but it made no. no sense to me. It was like, this is not going to work for the art world. Like, I spend enough time in the art world to know this makes no sense. And he said, okay, fine. But he kept me up on what he was doing, what he was doing. He kept hitting me up and hit me up. And he changed the product. And he

figured out what the business model was. And he had started raising money. And weirdly enough, I'm in L.A. and I'm having lunch with a investor. And he's like, you know, I've been looking at these companies. And he tells me three of them. I was like, first, of all I've talked to all three of them. I talked to them all two and a half years ago. And he's like, well, this one guy is really doing this, something is interesting. And I was like, oh, that's really interesting. I said, you know what? I'll reach out to him again. And so I reached out to him again. I got the whole pitch. And then I was like, you know what, this is really interesting. I'm going to invest in you now. And literally, he couldn't have been happier.

I mean, he was like screaming in the phone. And it's great. And fast forward, he is a serious hustler. And what I'd like about him and talk about seeing things, this guy grew up in Toronto, single mother from Jamaica, two sons, figured out how to get them into the best private schools in Toronto. He went on to get undergraduate and then, I think, a master's computer science. His mother made money as a house cleaner for all the wealthy lawyers in town. And he's like, I am my mother's retirement fund. And I'm like, okay, this kid, he's going to figure it out. Like you know, and he's not a kid like at this point.

You know, he's in his mid-30s. And it's just like he, he needs to succeed. And that's a great entrepreneur. I'm dying to know what the business model is or the new business. Well, it's basically a CRM system for galleries. Okay. And software. You would think they don't have.

They would all have one. But guess what? They don't. I'm amazed by the, I always bring up the open table model. where it's useful even without, even without supplying them with customers, it's just a useful, you know, CRM system or a system to make their lives easier. Yeah. I'm wondering how often it's a question of the entrepreneur kind of like this. Maybe they have the wrong initial idea versus the idea itself.

So if you had to, if there's a pie and you're putting X amount of weight on the person versus X amount of weight on the market versus X amount of weight on the business model or the idea, how does that kind of pie generally look or does it move around? For me, that's a tough one because I'm an age. investor, right? So I'm not the person writing a half million dollar a million dollar check. But as a VC, if someone comes in your office and you're like, this is not really the right, I just feel there's not something, you're not on to something, but you are amazing. If I was a VC, I'd write that person a half million dollar check on the site and say, you know what? You're going to figure it out. I'm going to give you some money to do it. And I think that is the responsibility of a really good VC. Not many, I think, have the balls to do that.

But I think that there should be a little pool of money in every VC fund for the people that come in the door that are, you just have something in your gut. You're like, these people are hustlers. How much different, and I don't want to assume that your returns would be worse, but I often see this where someone's personal portfolio versus their business, the product that they're holding out to an investing public, the fiduciaries, are different, right? Maybe it's a different risk profile or whatever. Do you think you could ever be a VC where you took LP money? And if you did that, how much different would your portfolio be? First of all, I would never do it because then I have to report to people. So that would suck.

Back to that idea again. Not that I haven't been asked many, many times to take money. One person I know who actually has a fund that gives capital out, he kept trying to introduce me to other people that he was like, you know, you could do the fund with them. I was like, I'm not doing a fund. But I also treat my fund like a VC does. I'm very involved. It's a full-time job. I expect returns on my capital. And I know what I'm good at

and what I can help and what I can. I think what's great about VC partnerships is you might have one partner who, and they all sit on different boards, invested in different companies, but as a partnership, you might find one who's really great at helping acquire businesses for one business. And you have one, you know, who sits on that board, but that's not their sweet spot. But they get their partner to help with them. So, you know, I think that is a wonderful thing about a really solid working together VC partnership. But in regards to returns, I mean, so far all the businesses that I have had exit, which aren't a lot, and I think one of the reasons I haven't had a lot yet is that when I started really ramping up, it was probably six or seven years ago, and I think women

take longer to build businesses. And so when the majority of my businesses are female founders, it takes time. Also, when you're the first dollar in, you're probably, want to discount the first two years. So, you know, the ones that have exited so far, the returns have been off the charts. And I guess, and if you, you can look at my, what things are valued at, and I'm doing really well. But valuations are kind of worthless until they exit. So to me, I'm much more interested in the exits that I've had. Is there any good data set on comparing, say, the returns of female founders or the length to exit of female founders? Is there a good, uh, good data set out there? And if so, what are the, maybe highlights?

I mean, I've read certainly, you know, from a variety of different places that gender balance companies do better. Yeah, I've read that as well. Shocker. I mean, come on. That doesn't take a rocket scientist to figure that out. You know, everyone comes from a different place to the party. Diversity works. That's number one.

Number two is that the ROI on female founders is much higher than men. Now, again, numbers are so fungible. I mean, it could be because there's less of them and they had really good valuations and exits. so it ends up that they do better than the multiple of men out there who had started businesses. I mean, who knows how these numbers were done. There's really good data, really good data, that women are far better traders. And in many cases, investors, like if you track brokerage accounts, and basically that can be traced back to the fact that they're more patient and trade less often

and make fewer the dumb psychological mistakes that doesn't surprise me whatsoever. That men make. But that's really well documented and certainly lines up with the, let's say, longer time to exit. Oh, yeah. I think women tend to cross their T's and dot their eyes. which is a great thing and a bad thing. Yeah, Perfect can be,

searching for perfect can be bad, right? Searching for perfect is terrible. Yeah. But women will take their time to build the business in a slower clip and build that foundation super solid

before they step their foot on the gas. That's what I have seen. What percent of the portfolio is female founders of your 112 investments? 65? Yeah, pretty big majority. Yeah.

I mean, I consciously, want to invest in females. But I will say, you know, if I see a really great deal and, you know, a really smart man, I'm going to do the deal. But I do push very hard that their C-team must be a mixture of females and men, that I will not, and I've said to some of them,

you know, they're like, it's really hard in this business we're at to find women. And I was like, just make a couple. conscious decision. You are not going to interview anyone but women for this job. That's it. And you will find one. We're sitting in a room that's kind of full of really neat art and objects just a cool environment. Talk a little bit about art and fashion. Maybe they're kind of two similar things in terms of back to this idea of trend spotting. I'm really interested in this idea. I apologize for always trying to ask for criteria or markers. I'm a quant. So I can't help it. But I've been trying to, you know, we were talking before. a little bit about some of the weird fringe stuff that I've liked to explore more recently.

And I'm trying to come up with like a list of criteria to help me better identify what's great about those things. So the closest I can come is it's new. I think that seems obvious for Asher different. It's got some momentum. So it's not like really new, like brand spanking new where I'm the first person to see it. And it has some very strong underlying community. I keep falling back on that community. Like if there's a group of hardcore fans or even fanatics at the base level, of this thing, whatever that trend might be, that might mean that it's on to something and it can have some inertia and some momentum that lasts. So in any of these worlds, anything you might opine on in terms of that sort of criteria, if someone's out there and they want to,

they're a VC investor or they're an artist or an entrepreneur, be better able to identify emerging trends. What do you think about that? It's interesting. I think about the art and the food world. And as you asked earlier, are they all connected? And I do think that, particularly in the building businesses in the fashion world, or the desire for more people to collect art or go to these art fairs and how that has changed the industry, is that if we just even just look at the fact that we're on our phones all the time and you go to community, it's like, I think that has to do. do with also the desire for people to be more in their homes and to create the brands around themselves, which means the environments that they create in their homes and the art that they put on

their wall and the food they have in their refrigerator because they want to have more of a connection to people because they're on this phone all the time. I think that is all connected and because of really the long tail of the mortgage implosion and even the last you know, banking crisis is that people in their 20s are looking to find something that they really care about and that they love, that they are enjoying what they're doing. And so you're seeing all of these fashion brands being built. And you don't need tons of money to start a fashion brand anymore. You know, in many ways, that's the long tail of Etsy. You can create a fashion brand. You can put up a shop on Etsy. And before you know it, you've created this community of people that like what

you're doing. Maybe we could use fashion. I know virtually nothing about it. So it would be edifying for me as a little bit of a history lesson for how things have changed. So you also mentioned earlier how much cheaper it's gotten to start a business, let's say, less capital to, you know, there's all these great pieces of infrastructure, Amazon Web Services, et cetera, that allow you to scale up a, let's say, tech business, or really any business with less capital at the beginning. Very, so much less capital. And I read an interesting article recently, I think it was called Naked brands. The idea being that brand now is much less about effectively advertising and like brand awareness and buying Super Bowl ads and making everyone see your name all over the place all the time,

you know, Tide or whatever. And much more about personal stories, like very authentic, transparent personal stories, even for big companies, right? That if you can create stories that people can latch to their own identity, that's a much more powerful way of reaching people these days than than the kind of old way of doing it. Do you see that as true in the fashion business? Like how, what did it used to be like? Sounds like it was expensive to launch a fashion brand. Like what made that, what made that the case and why is it cheap now? And is that the kind of the way that people brand themselves? Well, it's multiple things. One is, is that years ago in order to make a shirt, in order to make it the price that people wanted to buy it at,

you probably had to make 600 to 1,200 units because it's not only about the fabric, it was about the pattern, it was about the run, it was about putting it together, in an order for you to beat a certain price and then sell it to a retailer that would market at a certain price

that they knew that they could sell it out, you had to make something in those kind of units. Now, with technology, you can make one pair of shoes for you individually that are made, just for your foot, you don't have to make 1,200 units. For the same exact price is making 3,600 units, one pair.

And so that has changed dramatically. And, you know, they call it fast fashion. And so that is one major piece that has changed in regards to building brands. So you can build a line and you can make a product and you could get it to market in a couple weeks and you don't have to make thousands of them, you could make 12 of them. And so that's a different change in the fashion world. The other thing is e-commerce, is people want to buy things online. There's not a reason to walk into a store.

There's not an experience that's happening in the store. People that are millennials want to have less products in their home. They don't want to spend a lot of money on things. They want things that they can buy enjoy for a couple weeks and onto something else. They don't want to own a lot of things. So all of these things have changed the fashion world. And so you have a brand like Noah, which is a male brand, which I think they've done an incredible job. The guy came out of Supreme.

And, you know, he does these small groups of 12s or 24s. They come out. That's it. You don't, you know, you buy it? It's cool. You miss it. It's done. Scarcy is powerful.

It is powerful because instead of creating these 3,600 units that you sell to Macy's, and everyone knows they're eventually going to go on sales, so you're not going to buy it at a whole price. You're going to wait until, you know, it's marked down 70%. That is not a way to make money. And so all of these changes that goes directly to technology and also a new generation of thinkers is changing the fashion industry. And it seems like that's true everywhere, right, in food and fashion.

Everywhere. You already mentioned. Yeah. Delivery. What has you most excited right now? So it sounds like you've slowed down, the broad investing. Early stage investing has slowed down. Certainly the numbers would indicate that maybe it peaked a couple years ago.

Although I probably last year did 12 investments, but yes. I think mentally I believe I'm peaking. So even if it is slowing down a bit, what is the vanguard today? So what is sort of the edge of your interest, places where you think there's opportunity industries or whatever trends to build interesting companies? Well, I think there's a couple things, is that I have a hard time putting money into fashion businesses because I was in that business. So I know so much, you know,

that's probably bad. What did you do in the business? Well, I was a buyer and then I ran a company in the garment center. So when you know that much information, it kind of is a bad thing. You're better off not knowing that much when you invest in a business. What would be like the most surprising thing for people obviously that don't know that business to know about that business, like a bit of insider knowledge? I mean, making a product in that business, it's just, I mean, I know all there. I don't know if there's anything in, it's just a hard business, you know?

I mean, I think the, I'll tell you what the one thing is when people realize and they're in it, in SaaS businesses or just software businesses or marketplaces or those type of businesses that are very tech driven. You get to a certain point and the business just takes off and your margins are fantastic. You just got to get to that point, right? There's that point. Everyone looks at and goes, that's when the business really scaled. Yeah, operational leverage, yeah. Right.

In the fashion business, you never have that. Every season repeats itself. It's always hard. And the other thing is, once you have a business, like Vince, I believe, who's in trouble, is you have to anniversary your numbers the next year. So if you did $1,000 next year, you have to do $1,500. And the next year, you have to do $2,000. And so you always have to grow.

It seems to be in that business. You're not happy with just repeating yourself and being a really solid good business. And you have to put out a new line every year. So there is not that point where it just becomes easy. It's the same thing every single season. So you're starting from scratch. I think that makes the business extremely hard to scale.

So the answer is certainly not fashion. It's a place where you're deciding to put your next. No, no, no. You know, I think that the businesses that are going to be very interesting to invest in in the next 10 years, and I think we're going to see a lot of acquisitions, particularly with large enterprise businesses that have capital, but have not figured out how to change with where things are going. Yeah.

Is they're going to start acquiring more of these really interesting businesses? So buy instead of build, they kind of buy instead of build. And I also think we're going to see a lot of people that are going to be going to graduating from college or in their 20s that had this 10 years ago, those people were all going to be entrepreneurs. I think a lot of them are going to see going to work for those big businesses because they want a paycheck and they want health care. And they've seen so many of them fail with all those options that were worthless. And so I think we're going to see a bit of a shift. But the companies that are interesting is certainly anything in the Bitcoin space, right?

That's really interesting in cryptocurrencies. And that's not something I'm going to invest in. But I do think that's a really interesting space. So why? Why do you think it's interesting? My husband is the king of cryptocurrencies. I'm not touching it. And so you know what? That's fun. But I also think that businesses that can provide very smart applied technologies to the companies that are building today are also going to be winners. So how do you make a billion dollar enterprise company run better. You don't need to build a brand around it to the rest of the world, but to the back end, if you can really help some other companies, almost like Oracle-type businesses. Though I think that's going to be a lot of interesting plays. It's time for those businesses.

Far less sexy from the outside looking in, but those kind of nitty, gritty, like B-to-B-type companies can print money. They can print money and they really make a big difference. So I think we're going to see, those to me are very interesting. But those are really hardcore technology-based business. businesses. And I'm not so sure that's necessary an area that I would invest in. But there's always interesting consumer products and interesting things that are out there that are filling voids in the market that perhaps we didn't even realize was a void. So the last question I ask everybody is for the kindest thing that anyone's ever done for you. Wow. The kindest thing that

anyone's ever done for me. That's a really hard one. I mean, that's such a broad question. And people do bring, you know, kind things all the time. In general, I think people are pretty thoughtful. And particularly in the startup world, I think most people really want to help others succeed. It's one example. It's just one example. I've had companies give me shares out of nowhere just because of my being an advisor. Wow.

That's pretty cool. It is amazing. And it's so nice. To be acknowledged in that respect, I'm definitely being bolder about asking for more than I would have years ago. And then when I asked, they're like, of course. I'm like, oh, okay. Yeah, what have I been missing?

That's okay. But the kindest thing, wow, that's such a great question. It usually takes people this long. Does it? Oh, yeah. Sometimes it's really long. I mean, God, the kindest thing. I honestly, I mean, I feel like I do acts of kindness all day.

What's the last really kind thing that you did for somebody? I mean, I'm always there for all these founders. Yeah, it sounds like it's constant. You know, I mean, so, and I do think that in the last year, maybe a little more than a year, I had an epiphany that I can't fix everything. And I think that that's one of the things that made me a really good investor, is that if things got bad, I always felt like I could figure it out. I could figure it out and get in there and fix their businesses because I saw what was wrong.

And then I realized at one point, you can't. You can't fix all these businesses. And if you lose one, it's okay. Yeah. And that took me a long time to get there because I don't like to lose. I don't think I could do what you do because that would kill me too. It killed me. Like I did, like, you know, I'm like, I get out of that chair, you know.

And also I'm not the number one investor. So I had a company that there was no doubt that we should have moved the founder out, brought someone else in, It took me a year to convince everyone else on the board. But if I had been the major shareholder, I would have done it. Acts of kindness. God. You're going to be thinking about it all night now, aren't you? I'm going to be thinking about it for days.

I mean, I'm going to use that question. That is just a great question. People send me things all the time out of nowhere. Really? You know, like I'll give someone advice on the phone or something will happen and then something will show up at my door, which is just so nice and so not necessary. Yeah.

But certainly very much appreciate. I find a handwritten note, which you get every so often. It's like the nicest thing. I wish I had the discipline to do it every day. Yeah, which is a really nice thing to do. It takes a lot of time. It takes a lot of time. You know, I think some of the kindest things that happened to me.

And again, this is a broad example because I have to think about one is that it's always so nice when I get emails from people that they end up introduced me to someone, which you should always ask first. It's amazing how people just introduce you to random people and say, go for it. It's like, I don't want to meet this person. I don't have time to meet this person. Why are you doing that to me? Is that how people will describe me in an email?

That's always like, makes you feel, like, makes me feel like, oh, my God, that's, like, so nice. Like, I, like, wow, that's, like, so nice you think that about me. That totally resonates. Yeah, that's a great feeling every time. It's a great feeling every time. And, or people that I hear from, that I'm always honest with people. I've had people come through my box and say, you know, this is not a business that makes sense. Don't talk to VCs.

Like you're profitable. Just keep being profitable. Like you can build a really great, you know, lifestyle business and you're going to make a lot of money and don't do it. You're wasting your time or that is not for me and this is why I don't like it. I've had multiple people come back to me years later on the same thread and saying you're the only person. that said no, and here's why, or this is what I should be doing, and you were right. So that is always nice and gratifying. But I think that being honest is really important.

Very great. Well, this has been really, really fun. I've learned a lot. I really appreciate all your time. Happy to do it. This is great. Good conversation. Hey, everyone.

Patrick here again. To find more episodes of Invest like the Best, go to investorfieldguide.com forward slash podcast. If you're a book lover, you can also sign up for my book club at investorfieldguide.com forward slash book club. After you sign up, we'll receive a full investor curriculum right away, and then three to four suggestions of new books every month. You can also follow me on Twitter at Patrick underscore Oshag, OSHAG. If you enjoy the show, please leave a quick review for us on iTunes, which will help more people discover Invest Like the Best. Thanks so much for listening.