This Week in Startups - Arlan Hamilton on raising $5M in crowdfunding, empowering & educating underestimated founders | E1205

Episode Date: April 27, 2021

Arlan Hamilton of Backstage Capital discusses her $5M crowdfunding raise on Republic (04:16​), what's "popping" in her current portfolio (20:06), her founder education course (49:46), and more! Check out the pod notes here: http://bit.ly/1205podnotes

Hey, everybody. We've got a great show for you today. Arlen Hamilton back on the program on the heels of her, raising $5 million, I think in under a week on Republic.com. We had Kenna from Republic on the podcast previously and Sahil. Many of you know equity crowdfunding, which is where non-accredited investors can invest in startups is booming right now. And it went from $1 million to $5 million. Arlen took advantage of that opportunity and raised $5 million. We're going to talk to her about that raise and Angel investing overall. her plans to increase the number of women and underrepresented founders, people of color, uh, in technology, which is amazing. And she's done such great work and it's such a great leader and a

friend of the pod. Um, speaking of ways to increase diversity in the industry and to help founders, we are accepting applications for founder university. It's a free two day program where I get to meet with founders, uh, 250 of them, I think is what we're doing on Zoom now. We do it four times a year. The next class is May 3rd and 4th. If you are a founder, if you've gotten your product to the beta stage, maybe you've got a couple of customers or some beta users, that's good enough for us. Apply, come.

I will hear your pitch if you get in line and you're one of the lucky ones to be able to pitch. I'll give you candid feedback with my friend Charles Hudson from Precursor VC. He's awesome. And we've got a ton of speakers coming who give us their time to help founders learn new skills and basically, you know, just build your talent stack and sharpen your blade, as it were, how to build a great sales deck, product market fit, benchmarks and metrics that drive your growth, how to create a million dollar campaign to raise money, marketing strategies for early stage startups, fundraising advice on how to pick the right investors and keep them on your team

and keep them engaged from a founder perspective, setting up your finances for success, and you'll get some free legal advice from my great attorneys at Wilson, Cincinnati Goodrich, and Rosati on negotiating term sheets and other legal issues. This is the 18th time, to kid you not, 18th Founder University, and it's our fifth remote one. You can join us from anywhere in the world. And it's a great way for you to meet another 250 founders, and we have a little secret slack room for you to hang out in and get to know each other. plus you get to know my team at launch, which is a 16-person team. It's not just me anymore. And we're doing about 100 investments.

I think we're on track, you know, maybe in 2021. We do 100 investments, put 100 million to work. That would be a really great stretch goal for me. And we're looking for founders to invest in. So this is a great way to get to know our team. Founder. University slash apply. Founder.

Dot university slash apply to apply and learn more. And thank you to my partners on this. Vanta Pilot 97th floor, and I previously mentioned Wilson, Cincinnati, Goodrich, and Rosati. Some people refer to them as WSGR, but now you know the full name. And they let us make this free for founders. And everything we do, free for founders, free for founders, so join us for founder university. And then in June, we're having meet ourfund.com. Meet ourfund.com is another free event, a month later, for you to meet 50 venture funds.

So I want you to apply to both, actually. And again, free for everybody. And here's my conversation with Arlen Hamilton. Enjoy. This week in startups is brought to you by LinkedIn Jobs. A business is only as strong as its people. And every hire matters. Post your first job for free at LinkedIn.com slash twist.

Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a sock two report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. And Linode is the leading independent public cloud provider. Join Linode's startup program and receive infrastructure credits and a free consultation. See if you can cut your cloud bill in half today by going to linode.com slash twist. Hey everybody. Welcome to another episode of this week. startups for the fourth time for the fourth time in the last four years or so arlin havelton

2017 in october yeah you were on an investor panel uh one of our events uh this is in the bc time before corona arlin was on that with uh zach colus and ben narrows in that was october 2017 then you were on in 2018 and recently june last year of 2020 where we're in the middle of How are you doing? Is it like SNL where you get like a jacket in the fifth time? Fifth time you get a jacket. Yeah, you're right there. And then we'll give you the location of the secret club.

Yeah, well, I don't know if I want the location, but I do want the, I want the jacket. I feel like, yeah, that's pretty cool. That's actually would be a really fun idea to get a five with a twist logo on it. That'd be hilarious. Or a hoodie. Yeah. You've been doing great with your podcast and you have your partner on your podcast. Yeah, we do.

Yeah, Anna, my wife and I will do weekend episodes and then the rest of the the episodes are my interviews. And it's called your first million still? That's right. Your first million. So everybody look up your first million. That's Arlen's awesome podcast. And since we've spoken, you have set a record and a very interesting, unique offering of an equity crowdfunding on Republic.

Five million dollars raised in, I think, five days or three days. I'm not sure. Tell everybody what you did on Republic. We just had Ken on from Republic. Yeah, Ken. So it's actually not exactly five days, but it was, we did a regcia. March 15th, you know, the amount went up from 1.07 million to 5 million. That was the cap that can be raised there.

And we took advantage of that. And so we did do the fastest on Republic first million, ironically enough, because that's the name of my podcast. So the first million was the fastest that had been on the Republic, which was eight hours. hours. And then there was a waiting list that had about a million on it. And then March 15th, in about seven days, we raised three million to be a total of five. Incredible. And in talking to Ken, it was a unique structure because this wasn't to be an LP in your fund to invest in black founders or founders of color. How do you like to say it? Is it women? They're not the same necessarily. They can be the same, but they're not. So black founders can be people of color,

but not all people of color are black. So it's depending on what you mean, what you'll think. What's the mandate of the fund? So we invest in women across the board, people of color, and LGBTQ founders. Perfect. So I strike out on all three counts. Yeah. Yeah. Well, you know, we've been overrepresented as a white dude in the industry. We have a standard. We have a sandbox for overrepresented and we rarely use it. Yeah. So this was an interesting thing because what you actually sold was not to be an LP in your fund, which unfortunately in the United States is still not allowed. If you're poor or even middle class or upper middle class or even affluent, you're not allowed to be an LP

in a venture fund. It's crazy. Yeah, you can be making 180K a year by all by no means is that poor. And you're not allowed because you don't reach that 200K threshold or 300K with a spouse. It's bonkers. And hopefully the SEC works on it. But you sold 10% of backstage, which is, I guess, your holding company. So it's for backstage capital or backstage crowd. Explain what you sold. Sure.

Our reg. CF was for backstage capital. And I do hesitate because we do have kind of a mirror to entities. but it's in exchange for a 10% total carry of our, sorry, 10% total share of our carry and management fee. So carry retroactively for funds that were retroactively built and management fee moving forward. And of course the carry is where we hope that the real money comes from. Management fee will be nominal, especially at that amount, but it's part of it.

And that's a big deal, you know. Yeah, I mean, it would be the equivalent of, you know, I don't know, pick a fund, my fund or whatever. And you're on your second fund, I think, or a third fund. So we have, we just kind of look at it, the first few, we have small funds that were like technically SPVs. And so we are, we have about $14 million raised over across a couple of those. So Mark Cuban put in almost $6 million. And then the rest of it were these like nano funds. And then moving forward, we are starting kind of over at Opportunity Fund 1 because it is, it gets really confusing for people.

Because they hear Fund 4 and they think, oh, you have a lot under management, are you, you know, very, you have very seasoned. But it really is like we put together that first real Angel fund and now we're going out for the bigger fund. Amazing. And so how, I just broad strokes, how have things changed for you? in these past five years. Because you and I met, obviously, your story is very famous, and people can watch the previous episodes, came from nothing, hustled your way in, sleeping at the airport, great book.

You can go get Arlen's book. And here in the whole history, it's super compelling. But what's it like now? I'm curious, because you've been on a bunch of magazine carvers. You've invested in over, I think, over 100 companies now at this point? 180. 180. Wow, what a pace. So tell me, what is it like in year seven or six?

I don't know what year it is for you. 2016 was the first fund, I think. Yeah, 2015 is when it officially kicked off. I had worked on it for about four years prior to that. So about a decade into this experiment and about five and a half years into it being a real-life boy, if you will. But today, I mean, do you mean personally or do you mean the fund itself? The way I was thinking of it was how are you, how do you feel you were receiving? early in the middle and now.

Yeah. You as a person. Yeah, I think, sure. Go ahead. No, it just was interesting to me, sort of the perception of a black woman starting her own venture fund and how that might have changed over time because you were so early to this. Yeah.

I think at first people really didn't know what to make of me and what I was doing. And in the first two or three years, really thought, you know, a lot of people kind of got solidified in some ideas they had about it not being a good idea. Being too topsy-turvy, it's too many companies, it's too early, it's too small. All those things were said. And I just kind of, like I said, I put my hoodie up and I walk towards the wind. You know, I walk into it and I just don't listen to all of that. And then I think in 2018, when I was on the cover of Fast Company, a lot of people, it was very, it was very, very polarizing. A lot of people said, oh, my goodness, she's getting that so soon. It's not,

she's not worth it, worthy of it, et cetera. There was a lot of that backlash. And then there were a lot of people who became really strong in their opinion of, wait a second, there's something here. And we better keep a close eye on it because it's very interesting and it's inspiring. And so since then, that really was where a line in the sand was drawn, in my opinion, when I look back. That's when people started calling me rather than me chasing them down, right? Ah, very nice. And so over the past two and a half years since then, so much has happened in this country and terrible things have happened.

You know, we talked right afterwards on our last conversation, but so many horrible things have happened with people getting murdered in front of our eyes, with black lives and black bodies not being valued the same as others in this country. the president we had, all of those things. And people are really faced with a reality that they probably felt was going to get glossed over for longer. And you can't be complacent or too comfortable these days if you are wealthy. It's the noise is there whether you choose to listen to it or not. And so for just like everything in the past, I think all these things have made either people like not like me more.

because they're like, oh, she's making all this noise and I don't want this noise, or they're made them like even more so like, wow, this is inspiring, and this is for the people, and, you know, this is what the future might look like. And so I just spoke at hbc u.c., which is a nonprofit. It's a nonprofit, but I wouldn't think of it like a charity. There's two different things. and they're training historically black college and university students to be venture capitalists and angel investors. And it's powerful.

It was very powerful to be in front of that crowd because I do think that's the future. Just like we talk about crowdfunding and why should only a few people get to be LPs, I think, you know, there's something, there's a flood that's about to happen in a good way. So it feels great to have seen that early. And, you know, I wish it didn't take such horrible things to make it so evident. Hey, everybody, small businesses have always shown an incredible ability to adapt, innovate, and survive even more so in this past year. It's been tough for a lot of companies, I can tell you that.

And now, another way you can adapt and grow is by finding the right people to help you grow your business. LinkedIn Jobs helps you do that for free. That's right. At the end of the ad read, I'm going to give you a call to action with a free job post. Hiring something I have been hyperactive with. I think we've hired five people for launch this year and maybe six or seven over at Inside from a curriculum designer to researchers, analysts, associates, all kinds of amazing people we have coming to work for us. The way we get it done is with LinkedIn jobs, because that's where everybody is. 740 million professionals are on LinkedIn. And people can work for me anywhere. I have opened up to an entire world of talent across this country, Canada, just everywhere. And the reason it's working is because we put these jobs up on LinkedIn and you just get this nice flow of consistent, high quality applications. You have it all organized in the beautiful LinkedIn interface. So here we go. All those filtering and management tools are included and you can get a free first job posting here so you can post a job right now for free at LinkedIn.com slash twist.

Do it like J-Cal does it. LinkedIn.com slash T-W-I-S-T. Terms and conditions apply because LinkedIn is being super generous in giving you that first job posting for free. LinkedIn.com slash twist. It's really strange. I was talking to Paul Judge

and then the Harlem capital founder, Pierre, Henrique. It'll come to me in a second. There's Henri. Henri. Is that? Henri. Yeah. And he said it's really interesting. how the murder of George Floyd has really made everybody just take stock of this.

It's actually very interesting as well. You have this perception, things are getting better. Or maybe you don't. I should say, I have that perception. Or I had this mistaken perception. I think things are trending in the right way. And then you see video after video after video. And I think it's worth pausing on the video in Virginia of the Army officer who got pulled over for driving while black and while drive here.

a really brand new, nice car with plates on it. And did you, you must have seen this video. What are your thoughts when you see that? I've seen bits and pieces of all the videos, but I don't watch most of them all the way through. It's incredibly traumatic to watch these things over and over again. Because it's real and it's really happening. And every time it happens, every single time it happens,

I just imagine my brother, who's been in that situation multiple times in his life, multiple times, including a time where he walked out of a grocery store and multiple officers held guns on him without explanation, made him get to the ground, drop his groceries, and had him there to the point of he could have had a heart attack or anything. They pick him up after 10, 15 minutes of this and say, sorry, man, we got the wrong guy. And then they let him go without anything. And so anybody in that situation who had a trigger finger or my brother, Alfred, if he had sneezed. Yep. Right?

He could have been gone. And so it's, I want you to get to your, you know, do your point there, but I just have a hard time watching this. I know so many of us do. Yeah. It is very hard to watch. And I think it's important, too, for these conversations to happen. Hard for people to have these conversations sometimes. But if we don't talk about it, I don't think.

see how it moves forward. And then this mistaking a taser for a gun, or a gun for a taser, rather, is just another horrific tragedy to have to witness again. It's like these things just keep happening. And I don't know how we get to the other side of this. You have thoughts on it? Oh, many thoughts.

I don't know if this is the time for me to talk about it, only because, again, it's, I recently gave the, analogy of if someone passes away in your family and you have an, you know, either at the funeral home at your own home, you're in mourning. Yeah. People come by to visit and they're asking questions and wanting you to have the answers for everything.

Why did they die? How could this happen? It's a bit difficult to do while you're in mourning, you know? And so I absolutely, I hope everyone agrees. I don't think I'd have a conversation with someone who didn't agree that this needed to be different. And I think there are so many people who have been saying it over and over and over and over again. These steps, people have written manifestos of steps of things we could do that don't include

completely defunding the police because you still want to be able to pick up that phone and know that someone's going to come and help you. But there's so many things in between that are so obvious right now. And there are answers. The good thing is that there are answers if people would just listen and if people with power would just listen. They don't even have to do the hard work. Yeah, I love this solution of sending the right person to the right call. Absolutely.

And people have been testing this and it's working in so many different instances. So we just have to really accelerate that, you know, hey, if there's a domestic situation or if there is a, I don't know, somebody who is suffering a mental breakdown. Like a gun is not what you need in that situation in all likelihood. It might be, but it's probably not. 99% of the time you probably can resolve this issue without a gun and with talking and words and de-escalation. So let's get to what you're investing in today and how you're looking at investing in this crazy market. Market is going bonkers right now. You must be seeing a bunch of markups in your portfolio.

What's going well for you? I know you were in career karma. I hear that's going really well. Yes, it is. I mean, this is all stuff that we predicted. So it's, it feel, I think from the outside, it feels like, oh, my goodness, I can't believe all these companies, especially companies led by underrepresented founders are doing so well. Pre last May and post last May, it's starting to, it's like popcorn. It's like I can't wake up without some sort of email saying, you know, your convertible note is converting to this and, you know, we'll announce in two months or whatever.

And it's just, it's great. It's exactly where we want to be. Career karma is exciting. Explain what they do and why you invested. They match people with coding camps for the most part and other type of tech camps. And so instead of trying to compete with coding camps, they say, let's be the bridge to coding camps. So they have a friend on both sides. And I think that's really exciting.

Obviously, it's working. And Rubin is a fantastic CEO to that. company. Yeah, it's it's over 100,000 people from what I understand now, and you can go in there and find all these people talking about their careers, and then actually it's kind of like Yelp in a way where like you get a read on which of these schools, what people actually think of the schools before you take the ISA deal, income sharing agreement, etc. And, man, it looks like it's doing really well. What else is popping? What other popcorn is popping for you? It's so weird. I mean, this is your first time going through the cycle.

Yeah. So this is your first time seeing it get like red hot like this. Yeah, but it's, again, we predicted it. And so we're not like freaking out internally. We're just like, great. Because we just as many things that are going well, we also have to put out fires and we also have to work with those companies every day. And we've been doing that as if we put in a million dollars each, right?

That's kind of been the secret of it is to be really steady along the way. So this is exciting for the founders and for the companies, but we're on track here. You know, Partake Foods is another one that popped into my head just now because they're all over Target and I think Whole Foods. But definitely Target, and Target's asking for more and more and more, which is hard to do, is to be in that position. And they just have an incredible lineup of things in the next two months that are about to be announced. And it's just incredible. And I remember meeting Denise and what was it, 2017, I think. That was a really good year for us.

But 2017. And she was saying that, you know, she had this Coca-Cola background as an executive. She knew she had a daughter who had the pain point of needing allergy-free food and vegan and this and that. And just nobody was biting. Nobody was really listening to her. And now you look at it and you and I know from personal experience her her latest round was incredibly competitive. Like silly or competitive, you know, some of these rounds where it's not like can I get at the last 50,000. It's like, oh, we're like 400x over subscribed.

So we're only taking 100, right? 100x. It's really interesting. They make cookies and baked goods that are safe for people with allergies and have great, you know, superfoods in them. for people who don't know and you can go see it at partakefoods.com. Hey, everybody, I thought I would bring Christina Casiopo. I pronounced it correct. I'm hoping, Christina.

You got it. Yep. All right. You're the founder of Vanta. People have been hearing your ads on the pod for the last year. And I thought it would be fun to have you on and you to explain why you created Vanta and what SOC2 is and why it's important. People get it right. So let's start with what is SOC2 for people who are just realizing they have to become sock too compliant?

For sure. Sock two is at a high level. It's sort of a customer asking you to prove your security. So if you've heard about one, it probably comes, you're probably a B2 company and you're doing sales. And somebody asks you, hey, can I have your SOC2 report? Or, you know, hey, can you go through security review? Or they usually don't phrase it like this. But hey, I'm going to put a bunch of data in your product. And I want to know if you're actually going to be secure or leak it over the internet. So they ask you to get a SOC2 report. We know it's 20,000, 50,000, maybe even 100. thousand, you know, if you roll your own, you do it manually. What does the average Vanta customer spend?

Yeah, so the average Vanta customer spends less. So kind of 10,000 on up from there. But then even in terms of the cost savings, it's a ton of time savings. So rather than kind of giving up an engineer or two for a year, which is just super painful, no matter how large your company is, it cuts it down to can be 20, 40 hours on the low end. All right. Fantastic. Well, thanks so much for coming on. And you've been very nice to our audience, giving them $1,000 off, which is a really significant and generous offer. Go to vanta.com slash twist, V-A-N-T-A-com slash twist to get $1,000 off your stock, too. Thanks, Christina. Appreciate it.

Thank you so much. I'm noticing this trend a lot. People are really getting into food, direct-to-consumer food, and direct-to-consumer products, which I think a lot of our contemporaries are like, direct-to-consumer. It doesn't scale, like, you know, it doesn't scale the same as software. What are your thoughts on that? It's still really difficult to do. We just have, we just, wherever we are, like, we are agnostic.

And so it doesn't matter if it's a food company, a toilet paper company, or, which by the way is doing really well, Bippy, or a satellite company. What we do is we bet on the founders and we bet on what the secret sauce that they have and that unfair advantage that they have. And it's almost like they could be doing anything. could have chosen any line of work, but we bet on their ability to, and that chip on their shoulder that they have. That is what's really appealing. And so, yes,

it's very difficult to have a CPG company direct to consumer at any point, but we just happen to have found some people who are just kicking butt. Another good example of that is curl mix. They're raising a reg CF right now for the $5 million. They're already, I think they're about to hit three months. million. They just started last week. And I met them in 2017 when they were mixing hair products

in their kitchen and doing less than 10,000 a month in revenue. And now they did $6 million last year 2020 and then they'll do more than that. They're already like over this year. Wow. Yeah, it is we have three or four investments in direct to consumer the sip, which is doing champagne, tasting, uh, boxes, nude bar and, um,

Ruby Love, which is doing undergarments and all three of them, doing great in terms of growth and a little, getting a little crowded in that space in terms of buying ads and trying to acquire customers, so many people competing. So I've been thinking about that space and we, we, we,

I basically made a two, I made one of those four quadrant matrices and I was like, X axis, how unique is the product, Y axis, how growth minded. What's the growth scale of the, founder and I said if we're going to do any of these it has to be like really in that top

right a really unique differentiated product and the founder really loves doing growth because if you don't love doing growth and you're trying to sell toilet paper or underwear or hair products whatever it is it's just not going to work right I mean it's good you're going to it's going die on the vine no matter how good the product is you need to have marketing there what do you think about valuations right now are you seeing valuations go way up um for the Well, we were always always discounted. So I'm seeing them kind of catching up to what had been, quote, unquote, normal in the past about three years ago. And now black people and women are being so bold as to say what they're worth.

And, you know, so I think I'm seeing it from a different purview. I'm not seeing the inflated ones. You know, there's some exception to that every time, you know, to the rule. but by and large, it's okay now. And we got in so early and so many of these companies and still do. And the more we work with people, as you know, Jason, this is what you've built. The more you work, the more founders say that they love working with you. And then the more people really want you in the cap table.

And so they're saying, you know, what does it take to get you in? Yeah, that is the amazing thing that can happen when you get past 50 or 100 investments when you get into year six, seven, or eight, as you and I both have, you start to have, your founders are now marketing you and people want you on the cap table. So you're not chasing deals as much as sorting through them. How do you tell me about the composure of the team now. How many people do you have and how many deals do you have to sort through? And I also know you did your own syndicate now, so I want to get an update on that.

and then just how do you sort through all the inbound? And is there a moment in time you most want to meet somebody when they have an idea, when they have a mockup, when they have a business plan, when they have five customers, 50 customers? Tell me about your Goldilocks zone. We have seven people officially on the team with a couple of freelancers who are very helpful.

We have three, four check riders, three decision makers for now. So it's myself, it's Christy Pitts, who is a partner, formerly at Verizon Ventures, came in four years ago, I think. Brittany Davis, formerly a founder herself. She went to Harvard Business School,

and she's worked at Village Capital and Angels, hashtag Angels. And she came in about three years ago. And then we have Chachio Valadez, who is a principal. And so the partners can make autonomous investing decisions. Chacho has co-led two deals in the past year. So he's more and more going in that direction. And we just work as a unit usually. And a lot of times I will bring in companies and ask the team to take a look at it.

But for the most part, we're working as a group. And then we have, I have Arlen was here team at backstage because the inbound that I get is just out of this world. Again, you would relate to that. So we just have that going. And where do I want to meet? So we get thousands of applications a year. We have an application process that makes things easier. And we also, we're going to be introducing a program that is,

you can think of it as an apprenticeship program. You can think of it in some ways like a scouting program, some ways like a, like I said, an apprenticeship or internship program. But that will be kind of a new iteration that you'll see later this year. because we just get so much inbound now. And our team is the smallest it's been in years, which is on purpose. And so I like personally, so everybody has their own tastes and, you know, ask everyone else, too, because it's varied. I still like to, I've still loved the early, like, the early exciting part of things.

That's how I love coming up with ideas and, like, sparking things and catalyzing people at the right time. so I need you to have done some stuff like I need traction even if it's not like you have a bunch of money that you've raised or that you know you're the going into your fourth year at Stanford or anything like that

but just something what have you done with with very little if that's the case and today I may have said this last time but it's very strong it feels very strong right now it's like if you if it would take me a decade or more to do it myself, to figure out what you're doing myself, then I'm very interested,

because that means I can live longer through you, kind of, you know, live bigger through you. So instead of, kind of helps me kind of decipher between the, the vitamin peel thing, medicine thing. It's like,

is it kind of okay and mediocre and, like, cool, but like, what is it really going to do at the end of the day? Or is it, is it going to change the world? possibly. And I just feel that way the older I get. And how is the syndicate doing? I know you had started to do some deals there. You were over-subscribed

on the first two. You got two or three thousand people signed up in the first two or three months. It was pretty impressive to see how quickly it grew. And obviously, there's unprecedented interest now from the public in syndicates. It wasn't always like that. People were like, what is the syndicate? I'm not interested. Now everybody wants to be in them because they're seeing all these syndicates hit. home runs. But tell me how that's going. It's going really well. We did it from June to November to to kind of just see data and try to learn what we could about the behavior of the syndicate. And then we did our first deal of this year. I think we kicked it off at the beginning of April, the end of March. And so we have two deals going. So we've done about a dozen deals.

Oh, wow. About two million total. So it's anywhere from 100,000 to 500,000 per deal. And Now with our new fund, that is a 506C, so I can talk about it. With our new fund, we are going to be, at least for the beginning part of it, matching or putting a certain amount in to kick things off. Because before we were actually, it was our fund. It was our, like everyone else was our LP. I'd put a personal amount minimum in to everything just to be part of it. But we didn't have all this extra capital. Yeah.

So now that's part of the model. And I think that that just shows people even more. Obviously, if you want to be in, we should be in, you know. So it's exciting. You have skin in the game, right? Like if you were putting in some amount and then the, that was one of the original criticisms on Angelist. When I started, there were people who maybe had rich networks, but maybe not, were not rich in terms of capital yet. And they would be putting in 5K or 2K a deal.

Yeah. But then there would be 500,000 would come in and people were like, oh, that's, that's the not right. incentive structure, whatever, and then people start raising funds. And in fact, that's what I do. I have a fund. 100% of my deals go through the fund. And then maybe 40% or 50% wind up getting syndicated if there's room for the syndicate. And if the founder wants to do it, not all founders want to do it. Absolutely.

But it is a wonderful approach because people get to what I love about doing it. I don't know if you've had this experience now that you've done a dozen of them. When you write the deal memo, you're like, okay, this better be a good company. I wonder what the reception is going to be. And sometimes I have like five times as much interest in a company. I think this is a risky one. I'm really, you know, I'm really, you know, swinging for the fences here. And then other ones, I'm like, this is a no-brainer to me.

And it does, you know, just whatever. 80%. Yeah. Yeah. So absolutely. It's at backstage crowd.com and you can sign up. But every time we do it, it's so important and so special because things are moving really fast to your part about earlier.

before we were making $25,000 investments in companies and at the time absolutely was so significant to us. It was the best we could do. And now we are, you know, we'll put something to the syndicate and wake up the next morning

and there's 100,000 that's been committed and you really just start to really play in the big leagues. And ultimately we'll be making million, $2 million, $5 million out of the fund, but I'd love this part of it. I don't ever want to just skip this part of it because it just feels like, can you believe it? Six years ago, people were laughing at this idea. And now everyone sends their deals to us and we have to like stop people at the door. It's like a very

surreal situation. Yeah, it really can get heady. Are you getting sick and tired of this cloud wars, aren't we all? It's time to forget about credits and cut your bills in half and get amazing customer support. It's time to grow your business with Linode. If you've been in the industry for over 10 years, you know Linode, because you're old school and you know how great their service is, and you know that they're going to save you a ton of money. They offer simple, affordable, and accessible cloud computing solutions, no matter what kind of business you're running, whether it's streaming apps or e-learning platform or anything doing machine learning. You need reliable infrastructure and you need great hosting.

There is no lock-in with Linode. You can change your services as you go and pricing is predictable. They don't charge you based on your bandwidth usage. You can cut your bill in up to half. They've been doing this for 17 years. We use it for hosting this weekend startups files and it's fantastic. When you use Linode, you're going to get 24-7, 365 day a year, human support without tears or handoffs, regardless of what plan you have. And regardless of what size, that's why they're the leading independent public cloud providers.

Let's see if you can cut your bill in half like many of their customers have. Just join Linode's startup program and receive free infrastructure credits and, most importantly, a free consultation. Visit linode, L-I-N-O-D-E dot com slash twist to apply and start growing your business today. Cut that bill in half and redeploy that capital on another developer, kind bars, or new laptops, whatever you need. Okay, let's get back. to this amazing program. We've had a hard time keeping up with all the deals. And we now have 7,500 accredited investors, 600 joined last month.

Wow. That's great. And it's bonkers. Like how quickly these things can fill up. The issue I have now is we have to get bigger allocations because when you send a $400,000 allocation now and 1.2 comes in, that means, and 300 people want to invest, not just, you know, the max is 250. You got a lot of bad feelings, right?

Yeah. Yeah, that's tough. We're not there yet. We don't have that problem yet, Jason. Well, I mean, as I told you. We're going to track to, yeah. Yeah, as I told you personally, you started off much further along than we did. And our first deal, Com, I put 50K in from our fund and $328,000, if I remember correctly, from the syndicate.

So you started thinking about that as a fund manager. Okay, I had $50,000 in there. It's a $5 million company, got 1%. Okay, now I put another $300 in. Okay, now we've got 7%. to the company becomes worth $2 billion. Oh my lord, now you got $100 million plus position. Again, isn't your book called like the,

it's like how you took $100,000, turn it to $100 million? And you do that twice. Yeah, twice. And yeah, we'll probably, we'll see with Robin Hood or some of the other ones if that happens again. We didn't get to syndicate Robin Hood, unfortunately. We just got to put her 50K check in. Yeah.

Tell us about this 506C for your new fund. And how are you raising the new fund? Are you doing it with a shift? Shore Fund Management or you're doing it with Angel List or just with a law firm. Yeah, it's internal law firm. This is a $60 million target. And, you know, things get out of hand very quickly and people get a lot of opinions about stuff. So just everybody calm down.

It's a $60 million target, just like every favorite white man you've ever heard of in venture. They have a target. They go after it. Sometimes it happens, sometimes it doesn't. Sometimes it takes a week. Sometimes it takes two years. We're going to hopefully have our first close by the end of May. We have a very structured, what we're going to invest out of that, what that will be.

That's what we're telling founders. And it could take 18 months to raise this. You know, life is what it is. In the meantime, what's been so rewarding is to be able to tell LPs, you know, we're going to the crowd for a lot of things, and they're listening and they're reacting. And the crowd is now the biggest competitor to early stage VCs and to LPs in a way. See, this is something that I think nobody has really caught on to yet. It's really starting to happen in a major way that, you know, if doing your republic is different than I think the startup's doing it.

But when a startup does that, what people don't realize is when, what's Sahil's company called, Gumroad? when Gumroad goes out and raises $5 million. And they could do that every year, by the way. And they give that opportunity to their users or to the public. There's no fund manager involved in that. There's nobody taking 20% of the gain. That's the founder going to the public or their users. And so it disintermediates the venture capitalist who would have put in that $5 million,

which is super disruptive. But you can actually, with the 506C rule, do general solicitation. So we can talk about you raising your fund. And just so people know is when you put in your form D or whatever and you're going to, you put a number that's, you know, like a very aspirational target. I think I put $100 million and our third phone was $44 million. We weren't even trying to raise $100.

I was trying to get to like $20 or $30 and we wanted to $44. And the first two funds were 10 and 11. So we did $10, $1,44. But somebody said, CaliChan is raising $100 million. I'm like, no, they just ask you like, what are you going to raise? and then they say triple it, just in case you never know. It's exactly right. And it just gets out of hand.

That's what I'm saying. In the past, people have been like, oh, she failed. She didn't get her fun. And like, this happens all the time behind the scenes that people are out there with a quote unquote, $50 million fund that's not really there yet because it's being built behind the scenes. But in the meantime, you are making investments and you're building up what you're doing. And, you know, we could deploy a lot more than $60 million with our follow on and all sorts of

things, growth funds that we'll have in the future. What's most important to me is not the headline of I have a $60 million fund. What's most important is where are we able to answer the phone when the founder 47 called us at night in the middle of my favorite TV show and said, hey, I'm having a problem with the board member. Can you help? That's really what it's all about. And everything else, even now, you know, I've been saying it and maybe people, some will believe it and not. But you can see, even now with all the popcorn, all the great stuff that's popping up,

the bigger rounds coming. We are just as focused and excited. Like, we'll say in Slack, so-and-so raised $10 million. Great, cool. And then you're back to work. And so that's what's going to continue to happen. Everybody's going to have their opinion outside, but we're really just going for it. And, you know, it's so far, so good that that structure is working out.

Yeah, you do get a little bit of shade from other folks in the industry. when you announced that you were going to try to raise that $30 million fund. It didn't work out. People were dunking on you a little bit. Oh, yeah. And then I got the back. I mean, I got basically two back channels.

I'll share them with you because we're friends or I consider us friendly. I don't know if we're friends. We don't have friends. We don't hang out. We're good. We're good. We're what? We're good.

I feel like we're good. We enjoy each other's company, I think. Yeah. I mean, I'll still yell at you online if you say something dumb, but you know, you can do this thing for me. Yeah. I mean, a lot of people have to yell at me.

for saying dumb stuff on Twitter. You don't have the market corner on that way yet, but the two criticisms I got were people looked at the Republic thing and was like, what is this about? And I was like, do you think that the people who are investing are confused? I don't think they're confused. I think they want to support Arlen and they understand the risk. And so what's the big deal? You know, like if Sequoia was selling 10% of itself or whoever, benchmark or Excel,

like, why would anybody care? And they're like, ah, you know, it's confusing. And I was like, a lot of new things are confusing. Republic's confusing. Angelis was confusing. Yeah. And then somebody else was like, oh, you're going after these coaching scammers and course scammers. Arlen charges for a course.

And I was like, I do. I charge $1,000 at arland.capital if you want to learn about investing. And I do not have any shame about saying that. I mean, it's like Harvard is, go to Harvard Business School. What does that cost? I don't know, but I do know that I was. I think it's a quarter million dollars. Let me tell you, I know that I was charged.

I went to a two-week course that would cost. $18,000 at Stanford. What? I got a half off. You were there, Jason. It's something you were That was 18. They didn't tell me that. $18,000. And everybody in the room could afford it, except for who? Me. So a thousand dollars is a

deal. I also charge for my entrepreneur academy, $10 a month or $100 for the year. Come at me. Arlandsacademy.com. If anybody has a problem with that, I'd love to talk to you about why. Yeah, that is a good. Minimous amount of money incredibly fair. I didn't know they were charging that for that Stanford L. Phing. $18,000. I got a discount because they gave discounts to women at the time, so I did half off. But I

$9,000 is someone who slept, I slept at the airport a week after I finished that course, Jason. Oh, my Lord. But I found my way there. And I also found my very first investor there. So you find your way. And as you were going to say before I jumped on it, you were saying, you know, higher education costs money. And so whoever has an issue with me charging what I am worth and sometimes, most of the time, at a discount, you're going to hate how much it get paid to speak. Oh, you're going to hate it. I know how much you get paid to speak. Do you? How much do I get paid to speak, Jayes?

I would say you get 30 to 50K. Good, yeah. My domestic rate is 50,000. My international rate is 100,000 starting. That's incredible. The most I've ever gotten paid is 50. I'm worth every penny. I think so.

I mean, Tony Robbins just, yeah, I mean, my feeling on speaking gigs at this point in my career is if it's anything corporate or whatever, you know, pay me. And if it's like a college or a friend or something, I might do it. But I have my own events to do. So like I can't be doing everybody else. I got four podcasts a week. Like my time is valuable. Yeah. And I just did the HBCU.VC.U.V.C.

I believe I did that for free. Like I will, I do free stuff all the time. Yeah. But when people are charged. $1,200 for a ticket and 2,000 people are showing up and they want me to go there for exposure. Oh, you're going to see some exposure, but it's probably not the kind of you're looking. Well, I mean, it really depends on the nature of the event, right? Like, so Tony Robbins people are like, oh, we're doing something on Angel investing.

We want you to be the keynote. I was like, all right, I'm not sure how I feel about that guy or not, you know, like, it might, you know, some people are like, oh, he's problematic, whatever. I'll put that aside for a second, separate issue. But then I was like, how much you charging? And they were like $3,800. So how many people are going $4,000? I'm like, okay, so it's $12 million.

And they weren't going to pay you? And I said, okay, great, make a, and I knew they didn't pay. I knew they didn't. So I thought I would troll them. And I was like, would love to do it, make a $50,000 donation to charity of my choice. Yeah. And I was going to just give it to a scholarship program in Brooklyn where I grew up. And they were like, yeah, no, sorry, you can't make it this time, whatever.

And they just totally blew over it. Yeah. Wow, that is so whack. Yeah, I get that a lot. I get a lot of people who are like, why would we ever pay you that much money? And they're not necessarily the people that I need to be speaking in front of anyway. I mean, it's very much so to price people out, you know. If it was Davos, you know, or the TED conferences, and I get it.

Yeah. You know, that is an opportunity. But like, like, what's the opportunity for a person like me or you? We have books. We have podcasts. We reach out in an audience. We got followings on Twitter. And you're rich, Jason.

You're rich. Oh, that's right. I forgot. Yeah. But I still like to get paid for my speaking gigs. What I do now is I just get my squad and I'm like, hey, I got a speaking gig in whatever, Tokyo, Australia. Who wants to come to Australia? I got 50 grand to pay for your tickets and I just get my squad and we go to Tokyo and have fun, you know?

Yeah. Fuck it. I blow the money on that. That makes sense. I mean, I have, I just was having this conversation with my wife this week. And, you know, I was saying that I work hard, play hard. And I, there are so many people who are at school, at a school right now are some sort of trade because my mother and I have a scholarship for them beyond the headlines, the ones that don't get talked about. And as long as that's the case, as long as I'm paying for at least half a dozen people's rent right now, I'm certainly going to charge what I want to charge and I'm going to spend what I want to spend without anyone's opinion.

I do appreciate you all, though, having the opinion. I, you know, keep doing that. I guess it's fun. No, I mean, listen, it's very interesting. When I had Ken on last week, we were just talking about how people are deriding equity crowdfunding. And I was like, this is exactly the conversation seven years ago when we did com.com. People were like, no legitimate companies ever going to do an angelist syndicate. and we're up to 175 syndicates now in seven years.

Wow. And we're on track this year. I'm not even telling anybody, but I set a target of 60 deals. We might hit like closer to 100. We might put $100 million to work. Like we just did a $3.2 million syndicate. So we're like talking series A level.

So that's when we were talking offline. I was like, I think that's going to be your superpower is just the syndicate deals. And then we added a fee to it just to pay for, because that's the other thing that people don't realize when you do syndicates. you don't have any operating, there's no management fee. So I talked to my syndicate members,

I was like, do you want to have VIP level service, you know, for the syndicate? Like we get back to you in five minutes or same day. And they're like, yeah, that's what we want.

I was like, great, it's $2,500 in due diligence fees for deals under $500 and $5,000 for deals over $5,000. And so that gives us, you know, if we do 60 deals a year, I don't know, maybe it gives us $100K, $200K to hire customer

support folks, right? And really do this well. So when you hear people say, like, if somebody hears that and says, I can't believe you're charging a VIP, who do you think you are? What do you think, Jason? Well, in the case of the syndicate, it's, I tell everybody, this is my, you know, the syndicate.com is my investment club. And the key in that sentence is my. This is my investment club that you are a member of, which means you could start your own investment club, which you did. You have Arlen's investment club. Yeah.

And the people who are in your club, you decide who's in your club. You know, just like you would decide who comes to your dinner party. And if somebody's obnoxious or monopolizes a conversation or is rude, they're not part of the club anymore. And I remove somebody every month who freaks out at a founder or, you know, gets chippy with my staff because the document's missing or something. And I just have a very simple approach to it, which is if you're that type of person, I just ghost you. Boop. Yeah. Like I never dated in the age of like smartphones or whatever, but I understand people ghost each other and like that's like a thing.

Like you just, oh, I got ghosted, you know, that's my approach to the investment club. If somebody, we had somebody who was just lashing out because paperwork was lost or something and their K1 wasn't ready on time, just a tax document. And I just didn't like the way they were talking to the women on my staff. And I felt it was inappropriate. And it's like, beep, gone. you know and it's you know it's pretty pretty straightforward um and to have access to the deals you have access to is a privilege for those people so if they're in your syndicate they um get to have access to your deal flow that you work on that you built a career you know that is the

the culmination of your life's work or some portion of your life like yeah just fuck off man who has time honestly yeah i mean i appreciate every every single person who's an investor and the Republic, the Republic raise, or who is on backstage, backstage crowd.com, and Arlen.com, the investor course we're doing, investing as a catalyst. I appreciate everyone, and we're doing our thing. We're fine. Yeah. So everybody with the, with the opinions, who, again, if you build something similar that has the same traction, I will sit down with you, and I'll even pay for dinner, and you can criticize me. But until that day, I don't really have any use for the anonymous or not opinion.

Yeah, the back channel and like people throwing stones. It's always some amount of jealousy or some amount, this is what I always feel. It's like some amount of jealousy. As you said, you were on the cover of a magazine. I was never on the cover of a fast company. I'm stoked you're on the cover of fast company. For me, it's like, yeah, that's great.

Good. Like we need more female, lesbian, black, people of color. investing like adorable yeah we've got enough like fat white guys like Pacey white guys like it's increased the let's increase the ratio

the other thing I'm finding that's really I don't know if you're seeing this but because your deal flow is very specific but just across the board I'm seeing so much more diversity in the industry and that you know as heartbreaking as what we're seeing on CNN you know at the Floyd trial

and just instance after instance it feels like every week then profession I'm seeing such a great mix of people coming in with great ideas. And it's, it's just, it feels to me like we've made great progress. And I think you're, I mean this sincerely, I think that you're like the tip of the spear. I think you're just like, you cracked it open. And to that, for that, you have my respect. Thank you. Really for cracking it open. I mean, think about how hard it is, too, to crack it open when everybody's like, oh, you know,

who is she? Like, who is this first? person. Who is she? I still get that. I still get who is she? Who? I still get it, but I like that sometimes. So for people who missed out on doing the reg. For people who missed out on doing the reg CF, since you can do it every year, are you thinking like every other year you do it or something? Yeah, we don't know yet. We're just going to kind of live with it. We have some runway. We're going to live with it. And we love having the option. And it seems like really cool. And I think they're be a few things that will happen to us and round us that'll that'll indicate what we should do. And because, you know, we're still raising from traditional means, we may not ever do it again or we may do it every year or two. If people are interested in your new fund, which you can generally solicit for under Rule 506C, which I'm thinking about for my next one, is there a cap because of that? Because your 506C, do they cap the amount you can raise?

Not the amount, but I think it is the same. It's the same as the 100 versus 250 because of it. It's 506C. So, you know, we have 97 or so, like not including us. There's like 97. And we already have LPs in it. Great. Well, congratulations.

How would somebody contact you if they wanted to be an LP in the new fund? You can write to me personally, Arlin, A-R-L-A-N at Backstagecapital.com, and I will read it. You got a follow-up book coming? You got a follow-up book coming? I do. I had two ideas for books, and then my publisher was like, these are very like specific narrow ideas. I like tactical narrow ideas, and they want me to do something big.

So I've been just trying to like, you know, they want a bestseller, right? So they don't want something that's going to sell 50,000 copies. They want someone to have 500,000 copies or something. So I'm kind of figuring it out. Do you announce what the topic is going to be? No, it's going to be your bio. I have not yet. Not yet.

All right. Well, listen, continued success. Congratulations. on the reg CF, congratulations on the 506C new fund, and backstage crowd. Congratulations on hitting a dozen deals. I have my best advice to you. Stay focused on that syndicate. Oh, it's so, I'm thinking I may never raise a fund again.

Yeah. The syndicate is going so well for me that I'm like, I got my own chip stack. Maybe I'll just put the bet on everything personally. Yeah, put $100,000 on every deal. Every deal, do 100, you know, do whatever, put 50 to $100,000. deal and just do 50,100 deals a year. That would be like a retirement for me. It'd be so easy to do.

And then if people want to invest, they invest. If they don't, they don't. That's one of the things. I love how pure the syndicate makes the deal flow, because I write that deal on that one. I really have to think, why am I investing in this company? Did I do good diligence? Is this a good bet or not, right?

When you have a fund, you don't really answer to anybody. You just answer for, okay, cash on cash, how did you do? Two times, three times, four times, five times. That's it. You know, the individual decisions are not under any scrutiny. But in a syndicate every time we send that email, I get that little, you know, butterflies like, oh, I wonder what people are going to think. I wonder if they're going to like this one. I love that about the Q&A that happens because it's just, it's just really, really cool to see the founder shine.

And you just get reminded of why you're in because most of these deals we've already invested in in the past. And you just get reminded. And you're like, yeah, this is the right. So I will take that to heart. Yeah. You do webinars with them, yeah. Yeah, we do the Q&A. We do a lot of your playbook.

We're not. I gave you the playbook. Yeah, we're not shy about that. Noval gave it to me. I added a couple of things. I gave it to you. And, you know, your job is to give it to the people in, you know, historically black colleges or Arlenz Academy and just pay it forward.

You know, that's one of the great things about our industry is that, you know, at least in the early stage, it's not very competitive. It's collaborative, you know. It's like we're all trying to get that first million or two million dollars into the company and and just hope their product gets some kind of traction. So it's just, it's wonderful, it's wonderful for me to be in a team sport, right? When you're later stage, it's just like, how much of the round can we get? Who can we beat?

You know, we, you know, and Drison Horowitz gets 100% of clubhouse. Nobody else gets anything. You know, it's like a, it's kind of like a zero-sum game. Yeah. Yeah. I like it over here. I like it over here too. All right.

Good knowing you. Good knowing you, Arlen. Thanks so much for having me again. Yeah. I'll get that jacket next time. Don't forget it. Yeah, five times. Something to look forward to.

I'm literally going to do it. I'm going to do it. P hoodie. Hoodie would work. I would go forward. I want to get like a, it has to be like a really dope hoodie. It can't be fancy. Yeah, it got to be a fancy one.

I need to get like a prodder or something. There's got to be some kind of like $300 or $400. Yeah. I can just have somebody embroidered. Yeah. You know, put a number five on her or something. Twist five. Cool.

All right. All right. Thanks so much. Be safe. I can't wait to see you. Maybe we can go on a double date sometime when I'm in L.A. And our wives can meet. Go get dinner. You're still in L.A. Yeah. Sushi will do. I still am in L.A. and we'll be here for at least the next couple of years. All right. Be safe. We'll see you all next time. Bye-bye.