This Week in Startups - E1080: Arlan Hamilton on launching Backstage Crowd, disrupting VC with syndicates, how the tech industry can be better for underrepresented founders & more

Episode Date: June 26, 2020

Follow Arlan: https://twitter.com/ArlanWasHere Join Backstage Crowd: http://backstagecrowd.com Follow Jason: https://twitter.com/Jason https://linktr.ee/calacanis

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Qualifying startups can join the Zendesk for Startups program and get six free months of Zendesk products. You'll also get access to an exclusive community of startups for advice and connections. visit zendesk.com slash twist today to get started. Hey, everybody, hey, everybody. Welcome to this week in startups, the podcast where we talk about investing in creating and otherwise helping nurture startups grow. And it's been a heck of a year 2020. We had this insane pandemic.

And then we had the murder of George Floyd and the protests that followed. And now here we are in the summer. of 2020 or just about to get into it. And we're wondering what the world's going to be like. Well, in the last couple of years, I've gotten to meet a really interesting person. She's just like me, except she's black, a woman, and a lesbian. But other than that, we have the same purpose in life, Arlen. We like to support founders and invest in them.

And welcome back to this week in startup, your second appearance. Hey, thanks for having me, Jason. How are you doing under quarantine? How has it affected you, just start with the personal basis and then go on to, you know, on a business basis. Yeah, quarantine. I'm following it to a T. Even before coronavirus started being a thing, I was fist bumping. I would not shake hands and people laughed at me for two and a half years.

I thought I was really weird. But I said, I'm not shaking your hand. Same here. Yeah, fist bump all the way. Stickler for it. So it's been okay. I mean, I've thankfully been quarantined with my wife and she's very entertaining and interesting and we never tire of each other's company. So that makes it really, really nice. And also we are really good about boundaries and space and like we're in two different lanes and careers and it's just all of that works really well. I have to say though, I am

finally after almost four months I am finally getting to the point where I'm like I gotta figure out how to get out of here like I gotta do something I don't know what that is safely but some sort of thing so we'll see it seems like oh and by the way congratulations you're recently married right in the last year of last August 2019 August

congratulations thank you it does seem like being outside is low risk now they've determined social distancing walk so I have played tennis with two individuals. I've gotten tested twice myself. Our kids are back in camp as of this week, but they're doing pods. So only 10 kids per pod. All families are agreeing that they're in basic quarantine and, you know, agreeing on certain measures. So that's been amazing the first week back. And I can see the change in the kids immediately. Like they're happy again.

And, you know, it's just so much better. So thank God that's happened. How are you doing business-wise? because I know, like myself, we do a lot of speaking gigs. We get paid for those. It's a part of the revenue stream. And then I know you talked about on your pod. Your first million, correct? Is the pod? That's right.

Your first million. I know there's another one about your first million or something, but I don't know who does the other one. There is a your first million, but he started like two weeks after mine. I know. I saw that. And I was like, wait, you named your podcast after Arlins? And they were like, no, no, no.

It's kind of a misunderstanding. Anyway, typing your first million. Arlenz podcast is great, by the way. I listen to your podcast. Thank you. You really do. You don't just say that because you do write to me and you'll tell me if you liked a certain thing that's deep into an episode. So that's real.

That's a real deal stuff. Well, you know, I have like an overcast. I have all my subscriptions. And what I'll do is at the end of the night, I'll be working or working out. I just hit play at the start of the playlist, like an RSS reader. And then all of a sudden I hear your voice. And you know what I like about what you're doing and that I was going to crib is these like in between solo. episode you do where you just have feelings or something comes on your mind and you say, I just

have some feels and I got to just get it out. And you have one where you, you know, during this whole the protests, I guess, yeah, you were, you were, it's pretty raw, you know, and I always appreciate that about you that you'll just sort of say it like it is. I'm curious since you and I have always been very candid with each other. We, we have real talk on this program and I really enjoy that because a lot of people don't like to talk about race, you know, especially when it's, when you're different than each other, right? It's a hard thing for people to talk about these days on Twitter, but you and I always have productive discussions. So I was curious, I wanted to ask you a question that I'll just cut to the chase. You know, you got rejected a lot. You talk about it

in your new book. It's about damn time, which I have just started listening to. And it's great, by the way. Really, you do a great job also. I don't know if you stopped talking. Do you, you, you read the whole thing. Oh, yeah. Okay, because I'm only like two or three chapters in. And some people... No, it's on me. It's on me.

Some people read the first two chapters and stop. And, you know, you go through in the book, you know, exactly how hard it was for you to break in, but all your different techniques were breaking in. But let's face it, like, not everybody wanted you in here. Not everybody gave you the support. And now we see all these protests. And Twitter is a virtue signaling, like, machine with all. these white VCs, non, you know, underestimated founders. And I'm curious if your phone is ringing off the hook now where people are like, you know what, I should have backed you before and I kind of

fucked that up and now I need to back you now. So during these protests, you get all this white guilt and people saying, I got to make up for this and they call you as the route to get to this deal flow. Yeah, it's happening. The last few weeks have been very, very interesting. I've been watching it unfold when it comes to people reaching out, a lot of scrambling going on. There's a lot of scrambling on. That was the word I was looking for. Yeah. Yeah. It's going on. There's also a lot of sincerity, in my opinion, going on where some people who have been in the past wanting to work with us but didn't have the power within their organizations to do so, are now, they have more leverage internally now to say, look, you all have, we have a problem.

I know where to go and not reaching out. So it's a lot of that inbound and sussing out what is worth our time, what is valuable, what is worth the founder's time and what is not. Because I just don't play the game of like holding out the buckets and just taking any money that will fall. That is just not interesting to me. The autonomy, I think you're talking about how we have a lot in common. And I like to talk more about that too, if you don't mind too. I think it's interesting.

But that autonomy is really important, and that integrity is really important to me and to our team. And so we are highly protective of our company, the companies that we've invested in that have allowed us to invest in them, and we're highly protective of our own brand and integrity and reputation, most importantly. And so, yes, coming out of the woodworks, you know, people are just all of a sudden so woke. And so I knew it all the time, and I felt this all the way. but every once in a while you'd get something sincere that is worth taking a look at. You know, and even at a cynical approach where it's like, oh my God, you know, it's so hard for people to say all black, you know, black lives matter. Right. And when I first heard the term black lives matter, I was like, well, everybody's life matters, right?

Like that was my initial reaction too. And then because it's, and it's like a, I think a very interesting test to at what point you realize that all, When people say Black Lives Matters, they're not saying they matter more than other lives, but that they have been, they have not mattered. And all we're asking for is to catch up and make them matter as much as anybody else's. I will freely admit, I had the same reaction. But to hold onto that reaction now, after you get through the mental exercise of saying, what is the person's point in saying Black Lives Matter? Oh, their point is not to exclude everybody else.

it's to let you know that they're just trying to reach up to have it for parity, right? Yes, 100%. 100%. And people are getting there. And I think you could be cynical. One could be cynical, and I would understand you, especially being cynical about it, having, you know, knocked on doors and gotten turned away. But in another way, hey, late to the party, fine, but you're here.

At least we have to, you know, get you on board so that maybe you will have a black partner in your, you know, partnership or you will syndicate a founder from a black deal, you know, who's a black founder, a person of color, an underestimated founder. Yeah, I'm not here to be anybody's savior to kind of make them feel like they've caught up. I'm definitely someone who you have to start, you start with 100 with me. You have to lose points. You don't start less than 100. You know what I mean? Like you have to, and so I'm a fair person. And I'm a person who feels like, I feel like what are we fighting for if not for us all figuring, getting it, getting it and working together.

At the same time, as Rihanna says, you know, don't mistake my kindness for weakness. There are, there is a difference between someone getting it and then really getting it and then saying, oh, I've not got it before, but now I want to be part of this. And I'm going to go back to the people I know are working on it and talk to them. how do I help and someone who is like, oh, I don't want to look bad or I don't want to lose these other resources that are dependent on me like being in this in this field. So I'm going to, I'm going to claw my way or, you know, there's the group that's just doing these crumbs, these little, you know, it doesn't take anything for them to, to, to, it falls out of their

pockets as they're standing out of their car, you know. To me, that's insulting. And it's not that I will never get to you. I agree with you and I like you and I think you're doing a good job, but it's just that a lot of them are not there yet. And that's okay to say too. Hey, everybody. We all know that working remotely is very different. And a lot of us are getting an education ongoing fully remote, fully work from home. And you've seen the headlines. Everybody is moving to work from home or remote first work. What this means is things like whiteboards and brainstorming sessions, well, they're just not even. easy to do until now. With Miro, you can get to work with your team and you can do it collaboratively

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and it's impactful and it's effortless. It's really just one of these no-brainers. It's really great for brainstorming. Okay, let's get back to this amazing episode. Yeah, you know, and I do a lot of self-examination about this because I think that the leak I had in my game was I thought that because my experience was as an outsider I had to break in, that I understood exactly, you know, how to do it, therefore I thought everybody could do it. And yeah, you know, my wife sat me down when I wrote my book and her friend Lisa Randall, who was a famous physicist from Harvard, they said, you know, you wrote here as you're such an outsider. Are you really like that much of an outsider? I was like, yeah, a kid from Brooklyn, mom's a nurse, dad's a bartender. I'm the

outsider's outsider. They're like, what the person with a single parent? Did they have it harder than you? I was like, well, of course. And okay, what about the black lesbian from the South with a single parent, right? And then I'm a you, right? And I was like, oh, shit, I'm not as much of an outsider's Arlen is. And you had to work harder than me, even though my experience might have been that I work really hard to get here. Yes. It's undeniable you had to work twice as hard, 10 times as hard. Yes. And I think so what you're doing right now, Jason, is such a, I'm not going to throw your parade, but it really is such a breakthrough compared to what you might have said two years ago. You know what I mean? It really is. And to me, it's it's where I want people to

find them. We don't know what else, you know, there is left to figure out. But that is so key because so many people, I'll speak on a stage or I'll write something and somebody will pull me to the side either in person or online and they'll say, I'm a straight white man. And I didn't come from money. I didn't go to the Ivy League school. And you're just putting us all in one bucket and saying that we're wrong and you're right. And I'm like, I'm not saying that. In fact, I've made every, every trance I've had, I've said, a fluent white man, every chance on top of that I've said, not all a fluent white man. You know, everybody, I'm going to be the first person to protect everyone's rights for themselves, right? But it's almost like saying, like, is it taking any of my privilege away to say that,

yeah, it's harder for someone in a wheelchair to get on a plane? Does that mean that I didn't earn my way onto that plane? I didn't pay for the ticket and I didn't, it wasn't, you know, I didn't get out of breath when I walked. It just means it's a simple fact that it was harder. And then you have more power in that. And you can say, well, what can I do as someone who's not in a wheelchair to make it easier? Can I speak up and make sure that they get heard? Yep.

Cool. So we're all on board. Yeah, you know, and it takes talking to each other and talking this through because I think, as a white person, you are constantly on guard to be like, I'm not racist, right? Did I do anything racist in my life? Did I say, tell an inappropriate joke at some point? Did somebody else tell an inappropriate joke? And I was there. I can tell you, I was in the room when people were making inappropriate jokes. And I didn't say anything in the 80s and 90s because I was up and coming. I don't want to be, you know, with my bosses and they say some inappropriate joke about

a Mexican or an African American. And I get fired because I, stopped him and say that's racist bullshit, even though I knew it was happening because I was 20 years old. I was like, what do I do? Right? And it's, you, you spend this time on being defensive and concerned. Am I, am I a racist? Did I think racist things? Have I told a racist joke? Have I, have I been in the room which somebody told a racist joke? And I think you're constantly in your own head trying to do that. And you have to have empathy for the other person, just like you have empathy for the person in the wheelchair and their experience. you take a little moment and say, yeah, you know, that must be hard. But there could also be somebody who's, you know, in a wheelchair,

and they didn't have a hard time getting into Harvard because their parents are a legacy and they gave a million-dollar building. A hundred percent, they may have a privilege over me when it comes to a topic, when it comes to a job they have. It's just the point of it all is that recognizing and saying a privilege in a room is not putting the person, putting some, someone down. It's like saying you are six foot tall, you are five foot tall. It's just the color of your eye. It's the, it's the how much you can bench press. It's literally a fact. It's just like

something we can all agree on. Oh yeah, you know, in this country, I guess, you know, with the 400 years of history we have, a black person might have had a harder time getting the same resources that I got. It doesn't mean I'm, you've worked any less hard in your own life. And, and competed. And it, but it doesn't take away from that. It just means you're accepting and you're, you're like saying,

yeah, you're recognizing, man, that must have been hard. Because I know how hard it was for me, man. How hard was it for you? That makes all the difference in the world.

Because then you're like on level of playing field. You're like both eye to eye. And then you can just kind of go, okay, let's do what we can do. Are we competing with each other? Are we working together? Either way,

let's go. At the end of the day, what do we think, I think we want as a species, as Americans is we don't want everybody to have essentially the same outcome. We want everybody to have the same opportunity, right? Like, 100. You might have better results than me. I might have better results than some other investor. But we just want to at least have the ability that we could all start a fund and be treated the same when we met with LPs, right? Like, you know what, Jason,

what I would love to be able to do and what most founders, black founders and other founders would love to be able to do is just to simply wake up and start working on their thing. And I'd have to spend 80% of my time talking about how I'm black and I'm gay and I'm a woman and defending myself and doing this. And, you know, I was talking to someone a little earlier and we were talking about numbers. And over a however seven year, a period or something, I raised like $7 million, six or $7 million, right? 25K, 50K at time, that's a lot, but it's a drop in the bucket. So if you think about the last five years,

this experiment of backstage capital has been the same amount of money that it goes into many like low ball series A's or high Cs. In total. In total. Right. So as much progress, it's still a drop in the bucket in some ways. Yeah, but so much has happened because of it.

So it's really interesting to, like, it's also interesting, though, to see how nervous people get, people in power. Because you said earlier, some people didn't want me to be in this. Some people don't want me to be in today. I think that's why you and I, I consider us like friends on a level, even though we don't hang, I feel like we have a certain camaraderie because people didn't want me in the industry either because I didn't come to go to Stanford and I'm not a developer. And I'm not like particularly, you know, I'm a little cantankerous, sharp elbow and opinion. It might sound familiar. I think what it came down to with you is that I had to listen to a lot of your interviews to kind of read between the lines beyond your persona.

Right. Because a lot of our early conflict was in, you know, your reactions or your statements of things. And I would be like, I would just take you at face value and think, you can't be serious. You're saying that you're going to lower your standards to let women in. Like what? But if you actually watch an hour of you talking, it is simply, there's an earnestness there, there, there. And as soon as someone tells you, no, that's not what we meant, you're like, oh, well,

let me investigate that and learn. Can more white men do that? Can more so-called genius investors or visionary investors? Can more of you all please do that? and like investigating diversity inclusion, the same way you investigate cryptocurrency and autonomous vehicles. And in fairness to you, that was the worst tweet I ever did because like right after I tweeted it about 50 people were like, what?

And I was like, oh, sorry, that's literally the exact opposite of the Ted. And to catch people up, somebody was like, I'm not seeing enough. We're having the whole pipeline discussion, which I'm very interested in hearing your thoughts on the pipeline and if it's changed. Because it's, I, in my objective experience, is pipeline is changing in a major way. But pipeline as a word is a very triggering and loaded word.

And we'll get into that. But I said, you know, the problems, a lot of these VCs have this like benchmark. I'll only meet with people when they hit a million in revenue. I'll hit them with the two million revenue. And I said, you know, you're going to have to lower that bar to when you're willing to take that meeting. And they were like, are you saying lower the bar from black people?

And I was like, yeah, I was leading that charge, Jason. I was just like, oh my God. I lit the torch. 140 characters is not getting it done. And I was like, no, no, no, no, no. It was an unfortunate choice of words for sure. But no, it did take a few, you know, me looking at a few things and just, eventually I just started forgetting about, I started peeling away from all that and saying,

okay, yeah, we really do have a same philosophy on investing. We really do. And I, in fact, I even think that I'm going to, end up mimicking a lot of your pattern. I'm just about five or six years after you. Twilio is the cloud communications platform that's used by Uber, Airbnb, Shopify, and so many more, including inside.com, I use it in lunch. And they're partnering with this week in Starves to bring their Twilio and SendGrid

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Thanks again to Twilio for supporting founders with the $3,500 offer. Well, done, Twilio. Well, I agree with that because I've been watching. watching like a hawk what you're doing with your backstage syndicate. Is it backstage syndicate.com? It's backstage crowd.com. Backstage crowd.com. Right, because you're anticipating non-accredited investors. And you and I had a great talk. I don't know, a couple weeks ago when you were getting ready to launch your syndicate or relaunch it. So explain to people what you're doing. And then we can get into sort of the best practices around that. And we could circle back around race issues, etc. Sure. So we,

we've done everything. You know, Ed, backstage. We've tried everything. We've had multiple, multiple large investors promise the world and then back out and all of that. Has LPs in your fund? No, well, not in. The ones who are in our fund have followed through, you know, but there have been many outside of our fund who have promised the world and just backed out last minute or whatever, and that's a whole other story. But it's been, it's been pushing a boulder up a mountain for however many years, right? And in top of that, we've, in spite of that, we've been able to invest in more than 100 companies. We have now several of the, you know,

pre-seed mostly, usually 25K to 100K, starting off with small checks, but really making a huge impact on this ecosystem. And now you're starting to see it, finally see some of that, you know, come to bear where you have these series A deals, you have people behind the scenes with these stealth companies that are going to come out and just blow everybody away. You have that. And with the current climate, with everything, I am just, I've reached a point where I don't don't want to be beholden to these larger institutions. Now, they're invited to participate. They're invited to come back and we can talk about it. But right now, what I want to do is go to the people who I talk to every day and backstage talks to every day, who are these operators, who are,

some of them are founders themselves, some of them work at these major tech companies and they make $250K a year or whatever. And they just want to be part of something. So you know this very well. I'm sure your listeners do too. The syndicate is a very interesting way of pulling those, pooling those resources together, like-minded people, and offering them some really interesting deals and yes, diverse-led companies, but that's even a bonus, and really great negotiation terms, negotiated terms that I've been able to do, and let them come in with us. So if we're going to put in 100K or 250k. Well, actually, here's the real cool part. Like, we've been putting in 25K to 100K. And 100K was only last year when we started our accelerator in four cities

in two countries. Okay. We're moving. But those are still small checks. Now we can put in 250K, 500K, maybe a million. Yes. We can change the whole narrative for our backstage and we can continue the work we're doing, but have a bigger punch, packer big. or punch with the syndicate. And so we're doing that at backstage crowd. And we have, we have, it's about half half. So half the people who sign up are accredited and half or not. And we have today about 1,200 people signed up. Fantastic. So yeah, it's exciting. And we have our first two deals out there right now. And it's just, I got to, I'm not signed up. I didn't get the deal memo. I got to get the deal memo. I got to sign up. Yeah, you got to sign up. It's good stuff.

It's really good stuff. What's really good is, and you're right, we did, you, you, you are like but five years behind me. It's like year five, I did start doing the syndicates. I think 2014 and I started angel investing in 2009 and I was doing the 25 50K C checks. And in fact, when I had my first little fund, I put 50K into calm and 328,000 came from the syndicate. That was the first syndicate I ever did. I saw that. I saw that. That calm deal is a great case study for what what is going on here because now what are they, I don't even know. They're 1.4 billion. Yeah, just a little bit, right? Yeah, and we were $5 million around.

We won't 5% of the company. And I saw the interview you did when you, when you, when you kicked that off. I just saw that recently. Oh, you watched the old one where I had Alex on and I offered him 25K in the program. Yes. That's a good strategy. Use the pod to get the deal flow. Yeah, it worked.

Yeah. And we have, let me tell you, we have monster deal flow, monster deal flow. Well, I, I, the thing I've noticed about underestimated founders, aka underrepresented founders, a.k.a. Black, brown. Women. Is it Latinx? Is that the right term now? Yeah, Latinx. So that we consider that brown. Latinx and LGBTQ as well. That's what we invest in as a mandate.

Yeah. And if you look at those groups, the valuations will be lower for higher performance. Well, that might have been true a few years ago. And I understand what you're saying. I just want to be very clear. I'm not saying it should be that way, but I think they are still underestimated. The valuation itself might be back to almost. Here's the thing. It's not the valuation. It's where they are.

Let me see. How do I put this? Because if you say that just directly, if somebody were to take that sentence out, they may say, okay, where they're just not as good a company. Right. We're talking about amazing companies. We're talking about, I want to give an example because I think it'll be helpful. Can I do that?

Yeah, I'm pack. Okay. So I'll give an example. And I'll try to do it blindly because I can't say too much about it. But there is a company that is a telecon company. And so they have satellites that they're putting together, that they put together. The blackmail founder, and you may recognize this, but the blackmail founder, 16 years ago, developed a technology that lets these satellites go into space

or lets objects go into space for longer because the technology cools the objects. faster, right, for longer. So he sold that to a major company 10 years later, and then a few years later started this current company that we're invested in in 2017. And he uses the same technology that he built and invented 16 years ago sold to a major company, uses that same technology now for the telecon company to send in satellites. The same, and I know you're friends with Elon Musk, and I think this founder drives a Tesla, so there's no, you know, know there's love there. Yeah.

But the same 12,000 satellites that it takes Starlink, Starlink to put into orbit, 12,000 in this constellation, they can do for 12 satellites, 12, and have more coverage. So all of that is to say, and they're backed by three major funds. We were in before those funds. Right. And they're going to most likely be a nine figure valuation next year. And so given that, and you have that early relationship, when you go to them and say, hey, you got another round, I know you're over subscribed or, you know, it's going to be tight. Can backstage get an allocation?

They're going to, for 250 or 500. They're like, well, you gave me 25 when I needed it. 100%. You don't get boxed out of deals, which is exactly the experience I've had over the last 10 years, which is, you know, if you're the first. check-in or early check-in, the founder's always got real love for you in a special place, I just think, you know, the, still to this day, I see companies with less performance get higher valuations or the same valuation than an underrepresented founder with more performance. And that to me, a cynical way to look at it would be arbitrage, but, you know, like, you literally

invest in two female companies for the price of a male company with the same performance. just to be real, I can tell you, I objectively see that, not universally, but I see it often. And it's bizarre to me. I would have to just argue, what I would argue there is what you're saying is not wrong, it's not inaccurate. Right. But the way I would say it is because you have to understand 60%, 70% of your audience is going to hear that. And automatically, just because of an unconscious bias is going to think, that means that those

women have a worst-case thing. So instead, we say those two women, their companies are properly priced, and the other people are being overvalued. Overvalued. I like that. I like the framing of that. Because that means that you're paying too much and you're throwing money away. Like it. I like it. I like the framing. We, and, you know, the thing you, also the great advantage you have now is now that you've built this brand, I would suppose in year five of investing, you're probably have a similar experience to what I have, which is instead of chasing and looking for deals, going out and hunting,

you've become a sorter of deals. People just email you all the best deals, and you're on the top of the list. If you're an underrepresented founder, of course you want Arlen's money. Of course you want that checkbox because she knows the space and she's going to help validate what you're doing.

So is your life chasing deals now or sorting through them as they come in? If I didn't want to, I would never have to go seek source a deal for the rest of my life at this point. Just crazy. We have insane deal flow. And we have deal flow, we have people who pitch us who are white men who are doing well.

Because they think they can convince us to like, you know, change our minds for a second. No, our deal flow is out of this world. And it's also, it's quantity and quality, you know. So it's, we do a lot of, I think a lot of that is in the work that we do with the 98% that we don't invest in, because that builds up a certain character and a certain reputation. And it's a lot of work, especially when you're under, you're under resource like we are. But it's so worth it in the long run. Well, in a way, when you think about it, it makes sense, although a lot of investors miss what you just said, which is your reputation is defined by the people you say no to more than the people you say yes to.

The people you say yes to, of course, love you. You gave them money. You supported them. You validated them and you went on the journey with them. The people you say no to, well, they're hurt, right? I didn't make the cut. But if you're kind to them and supportive of them, then they go out and say, you know what? It wasn't a fit for Arlenne or Jason, but we did, you know, they were particularly helpful in these ways.

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Go ahead and get to Zendesk.com slash twist. So how do you try to be helpful with the nose and the 98%? We built a lot of content. That's one of the reasons we kind of see my face everywhere, but it really is to bring people in to understand that we have these podcasts. We have online courses. We have free and paid. We have meetups all the time. We do investor weeks with our portfolio and outside of our portfolio.

We do all sorts of ad hoc connecting all day long, very collaborative. And then we have office hours. Like our office hours are for people to kind of learn about us. And these are things that we literally, like we really don't have to do. not to we don't get a parade either like don't send us a parade we literally don't have to do but here's your cookie yeah but it's it's almost like we understand how valuable those companies are right even if we couldn't invest or we didn't invest we understand how valuable they are so we will like with our accelerator 2019 we got 1900 applications in a five-week period we chose 24

to give 100,000 to over four cities in two countries okay we did all of that and a three or four a year program, we put it into nine months, like building it. It's an insane amount of work. The top 100, we put into a Slack group and said, you know, there's just no way to express to you how difficult this decision was, but we want you to keep talking to each other. And there's so, and we do our mixtape, our newsletter that I encourage everybody to sign up to at backstagecapital.com. So many people get grants and all sorts of, they meet co-founders and they do this and that. A lot of a lot of what we're doing. So we overlap a lot. Like, you know, you

have launch and you have your summits and you have your accelerator and we have our stuff. So there's a lot of overlap because you understand that by doing well, by doing good to other people, by other people, you're also kind of making sure that

you are still seeing those outlier deals. That's what it's all about, you know, like the more, the reason I wrote my book was and you did the same thing in yours, which was, hey, listen, I, I figured it out, like, how to get here. Here's the roadmap, because by the way, I'm here already. Like, getting to here, I already did. So, me telling you how to get here and get in the room, that doesn't kick me out of the room.

And then if you actually figured out and you get here, well, you'd be like, oh, wow, that's kind of dope. Jason got help me get to the room. He helped me get my deals. And you're incredibly generous on your last two or three podcasts talking about the syndicate of, hey, you know, Paige, Craig has been helpful. Jason's been helpful. And the book's good. Except, you know, you might need mine as a pallet cleanser. You might need it as a pallet cleanser. I said in that you, two years ago, three years ago when the book came out, there are certain things I think you would not say today. Go ahead. Like there are times where you said, you kind of, you really talked about, you leaned in that this was male kind of oriented. You also leaned in that Silicon Valley had to

be the place you started. There's no other way to do it. I just don't know if that's true today. Well, it's definitely not true after the pandemic. That's for sure. Before it, you know, that chapter five was meant to be a little cheeky, but I said, you know, hey, in order to be a, you know, a great angel investors you need to be in Silicon Valley, I said, yes. And then I explained in the next chapter, because this is where the deal flow all goes through, right? Like everything routes through here, even if it's not based here, it routes through here at some point. The founders come in to raise money. Now that's, I think that's off the table given the pandemic. Like, I don't know. I think it was before. I just, just is my opinion. Yeah, two thirds of our companies

are outside of Silicon Valley land. Um, um, um, purpose and a lot of them are doing even better than the other. I agree with that. I'm talking about where the investors are. So to be a great investor, like to miss the deal flow here means you miss the outlier traditionally, right? The history shows the biggest outliers have been here. Now that's changing. Sweden's had a bunch of outliers. Australia's got two or three. Like Atlanta. Like Atlanta is fire right now. A couple. Yeah. Yeah. It's on fire. A couple. A couple. I'm talking about like $10 billion companies, but they haven't had that yet. Go to go to Atlanta hang out for a couple weeks. Go to Atlanta. Like set it up. Well, bubbling up, yes. I'm talking.

talking about the $1 billion exit mark, right? Like, that's the hard one. But we're starting to see that happen now. It's happening, you know. I'm telling you you're already missing it. It's in Atlanta. It's in Atlanta. Then it'll be in Dallas and then it'll be in Philadelphia. If you see a great deal and it's a cis white guy, I'm not saying like a Greek kid from Brooklyn or something. Would you consider in the next couple of years syndicating a non-underestimated founder if it was like a great deal and you just thought this or are you going to stick to the mission and just say that's it we're just under it's not it's not even a mission man like you understand you understand okay let me see if i can do a quick analogy go if you were just the if you were just

you just had the best deal full of your life when it came to um uh any anybody in silicon valley we'll take it back there we'll do two things two birds one stone sure anybody in silicon valley that was in five mile radius of you you just had everybody picked up the phone and called you, which probably happens anyway. You just had that. And then I said to you, and this is going to be, people are going to be confused by this analogy. And then I said to you, there is, uh, just to, you know, I'm going to do it opposite. Let's say you were only, you were just only, only doing cloud, cloud deals. Right. You're doing cloud deals all day. And someone said, man, I have this great real estate over here. Yeah. You got great real estate. You don't

understand. This real estate is going to three X in a year. Yeah. This is a 10x in two years. you might, you know, throw a little pebble at it. You might say, oh, I'll see what happens, but you're not going to put everything into that. Right. You're going to, you're going to become, you're going to dominate in cloud. Right. I don't, I don't, I get requests from white men to invest. There's a couple of times in the last 12 months where I've asked a couple of white men,

can I put in 5,000 or 10,000 personally? And I do that because it, it, it absolutely, that money is in a certain account that any money I make, I invest in other people. So I say that, but I've invested in 130 plus companies. I've looked at 6,000 that were by underrepresented, underestimated founders. I've been asked every day of my life almost to invest everywhere else. And I have the discipline to say, no, I am so bullish on us. I couldn't, I couldn't be more. Well, I always tell people, if you have an advantage to, like, you have to press the advantage you have. And so for you, for you, to close a deal with an underrepresented founder would take you half as long as anybody else, right?

They want you on the cap table, right? Yeah. And that's, people don't understand how different that is from buying public equities. Anybody can buy a share in Netflix. But imagine if, you know, the CEO of Netflix was like, well, who are you and why do you want to buy shares in my company? And can I get some references, right? That's the world we live in, which is, you know, your reputation matters in getting you on that cap team. Yeah.

Because I'm sure when you were, when you were, like, had those couple of hits at first, yeah. I'm sure you had a lot of distraction where people were like, why don't you put your money in this? Oh, God, I get it all the time. And they were trying to guess your bank account. And they were just, why don't you put your money in this? Movies.

I'm here. Restaurants. Like, I'm here. I'm here. So I'm here. I, if a company that asked me to, you know, I got the deal flow and it was by a white man and he did really well, I would just be like. Like, great, you know, you got a coupon code for it?

Like, I'd love to check it out. You know, you and your yacht and on your billions, I'm happy for you. That's not the game I'm in. I don't want to win that game. What was it like meeting with the big LPs? I know you met with some of the big LPs out there. I've met with them over the last couple of years because they all come knocking because they're fascinated by me.

But they're fascinated. I feel like in somebody like me and a very cautious kind of like, isn't that an interesting side show over there. We need to know what he's doing because he hit all these home runs. But, you know, those big LPs, they still haven't wanted to, I'm on my third fund.

They still haven't wanted to write me the big checks either. What do they say? Like, what is the, I mean, what's the pushback there? Single GP is one. Oh, please. Exactly.

Oh, please. I agree. That's ridiculous. It's totally ridiculous. It's like, you know, like Kevin Durant puts the ball in the basket and like, is the MVP.

like you could put four players right I mean that is ridiculous that's just a straight up excuse right but I can still raise tens of millions without them so but the other thing is I told them like this time around I was like listen guys and I say guys for a reason because I think guys like 20

it was like two women at these big ones big LPs I said listen I'm not gonna probably I'm not gonna come around for the fourth fund because I really don't need you guys anymore and this syndicate thing is getting so big that

I can come beg you for a $10 million check every two years and you guys make me jump through hoops or I can write 10 emails about the companies I'm passionate in and have a million dollars come in or do 20 emails and 500K come in and those people actually, those LPs really appreciate the deal flow in that I'm including them. And you guys are making me fly to Boston and New York and everywhere across the Northeast corridor to try to get this old money.

And I got to put a suit on and then I pitch you and then you ask me these, let's be candid, like questions that don't matter in a lot of cases, and we go to this whole formality, and then you're like, yeah, maybe like in your fourth or fifth fund, and what I like about the syndicates that I love about you doing it is I think you're going to be very dangerous

because by the time they want to give you the $10, $20 million check for your fund, you're going to be like, yeah, don't need it. Bye, which is kind of the point I'm at now where I'm like, I'm not coming to your, big endowment office again and doing my tap dancing for you and jumping through hoops and answering questions like, tell me about these three companies that went to zero. It's like 80% go.

80% went to zero. Like, what are we talking about here? So what was it like for you to go to those rooms? Did you feel like they were pandering to you or just? It's like you just described for yourself. And then on top of that, imagine that they ripped your clothes off and looked at every piece of your body and said where you were fat. Oh, fuck.

You know what I'm saying? Like it is, you, even your description was triggering. It's triggering, right? It's triggering because that happens, that happens,

that's what it is. And I don't understand. So explain to me this. You have like a unicorn every year basically, or like an average of one a year that, since the first one. Correct. How can they justify that their job

is to make money for their client, right? So how can they, these fund of funds, etc. How can they justify? But basically what it is, is venture is 5% or 10% of their mix. Yeah, and they want to be in these legacy funds.

They got all these legacy funds. The legacy funds keep coming back to them. They don't like to add new managers because that's work. And, you know, when you try something new, if it doesn't work, you did something new and it failed. Whereas if you do the 10th, you know, vintage of a fund that's existed since 1970, 80, 90, whatever, and you were in the last six or 12 and it fails. But who cares? They had that fun that Google was in.

in or Apple was in or Atari was in. They already hit the home run for you. So you kind of forgive them. But they don't want to take a chance on the new. And then like, again, you know, I have that experience, you know. But why would you want that? Is it because you want to be able to like go into another round and have like five, $10 million checks to do?

It's a good question, Arlen. You know, like I did it originally because my mentors were like, hey, this person wants to meet you. or hey, you should meet these people. So people in my circle, who my mentors are, you know, wanted to help out their LPs and help me out, right? Because that's how Silicon Valley is. The favors might not be equally distributed to everybody,

but it is a favor bank of a place. And you experienced that because you had some people like Saka, whoever, who helped you out, Sam Altman help you out. Yeah, I have an entire chapter in my book about not being self-made for sure. Right. And so, you know, people will help each other here. So I was doing part of that. And I think to a certain extent, I was like, well, this is how it's done. And there was that. And then if I'm totally honest with myself, I think as somebody who couldn't get into Harvard or who couldn't get into those places, maybe in the back of my mind, I was like, well, if I get Harvard's endowment or, you know, whatever Ivy League endowment to back me, then I will have arrived. Then I will be. Then it will be legit. And then I realized like, wait a second. I already. made my money. Yeah. And I started watching, you know what was my inspiration was I watched Axe Capital on billions.

Okay. I don't watch. You should watch it. I don't watch it. I get scared to watch those types of things. I think I'm going to be mad. No, you would actually like it because there's a non-binary person in it. I know.

I'm aware. And she's awesome. They are awesome. They are awesome. They are awesome. And there's just a lot of like, it's not our version of investing, but there's a lot of the kind of dynamics and shadows of it, but there's just a point at which acts as like,

you know what, I'm using my own capital, I'm going on a heater, I'm not wearing a suit, I'm going to go in with my ACDC T-shirt and jeans. I'm going to tell people, this is your opportunity. You're in, you're out. And boom, and that's the way I'm approaching it now. You're in, you're out. Here's the deadline.

Here's the paperwork. Got any questions? Happy to have lunch. Happy to run you through the deck if you want, but you're in, you're out. Totally cool. If you got other opportunities that are better than this one, Mazel Tov do it.

And I was just like, I don't need anybody. I got here, you know, through a series of some, you know, lucky events, of course, and some hard work. And I'm just, I don't feel the need to get their money. If I were you, I mean, I know you just said it and I hope you believe it. Because if I were you, if I had six or seven unicorns and I was still in my, what, what are you? 49. 49.

Still in my 40s? Yeah. Or my 50s? Yeah. I had six or seven unicorns. I know, it's a career. It's a career. Like, they would have to, I mean, the fact that you don't use a curse word in every sentence

and tell them, you know, it's like a gift. No, you don't need them. And also it's like life is more fun without worrying about what these, you call suits. And that's what I realized the last time around, because I did it and I thought, you know what, the first time I went around, my second fund, I was like, okay, my expectation is zero. But then I was like, you know, third fund. I met with them before. They told me like, yeah, we'd like to get to know you over a couple of funds.

Okay, well, here we are. It's a couple. And hey, by the way, last time I had two year, and Chris, now I got six or seven, like, hey, let's talk. And I do this whole tour. And like, you know, I don't know. I was just like, come on. I understand, though. I understand that whole thing of like, you know, after I had some weird press last year about my fund.

I was like, man, I'm going to get, you're going to see a 360 million. You can't see a 36 million. you're going to see a 360 million tech, you know, headline. So I feel like you're looking for like that tech crunch. I told you so headline that like, F you guys, but deep down you really wouldn't care about that money. You just need that a little bit. So what I would do is like repurpose that because you have all these, you have all these

tools at your disposal and you're something about your, you know, your nose can find these deals. And it's about the process. And I think it's about like the same thing we do or we talk. talk to a lot of companies. Talk to a lot, make a lot of small bets, 10x on the winners. I mean, what we do in the early stage is incredibly simple. If you just pick great founders who have delighted customers and have some modest amount of traction, just a modest, five customers, a thousand people using free, whatever it is, at least you have a customer to talk to, and you make that small bet,

2550k, then you make that $250 bet, then you make that $2.50 bet. If you just do that, That playbook is so simple that people overthink it. And that's what I try to tell people, is don't try to, like, figure it out too much because you'll talk yourself out of it. Like, it's pretty straightforward. But, you know, I think the world's changing because of these syndicates. You had a quick call with one of your investments. It's a trucking company.

The name, what's the name of it again? Fleeting. Fleeting. It's such a great name. How did I forget it? But I was, you know what it was. It was like, I was like 1 a.m. Death scrolling and listening to your pod, doom scrolling, the end of the world.

And it was a really interesting. Tell us about that company. Tell us when you invested. And then tell us what's happening. It was either Republic or Seed Invest they were on. It's Republic. They're on Republic.org. Republic.com right now.

Don't know how long they'll be there because they're almost reaching their million dollar 70 limit. So that, like if you had joined the, if anybody joins the Backstage Crowd.com, syndicate that we have, we have an accredited lane and a non-accredited lane. This would have been in the non-accredited lane because it's open on someone else's platform for a non-acredited deal. So $100 is the minimum. This is a company. I met Pierre in 2018, I believe, maybe two, two and a half years ago. And I met him at a fireside, actually. He had a question. He asked a question. And the best way I can say this is that... You remember the question?

I don't, he was just asking about he had had some predatory, um, uh, web design. And they've kind of taken advantage of them. And, and, um, and he was wondering about a couple of things there. But what, what I noticed, what I realized was like, man, you know what? I hate it, but he probably wouldn't, he wouldn't be taken as seriously as he should be in other rooms. And that pissed me off, you know? Like, I was like, I know that he wouldn't be, but I know he knows what he's talking about. And I could tell, so I talked to him afterwards, and he knew what he was talking about.

And he had been a trucker himself. He had done all these things. And you learned later that he wanted to be a doctor and all these things happened. Anyway, he is perfectly fit for this type of company. They just help match truckers with trucking companies. It's like a, you know, they recruiting, yeah, finding truckers. Because they have massive turnover. Yeah, and also like helping them with with, with, um,

with scheduling to make the turnover not so bad. And when I met him, it was like an idea and it was like kind of a new start because they just had a rough time with an old developer. And now they're, I can't remember exact numbers, but they're more than a million dollars and revenue and thousands and thousands of matches. And people's lives have changed. And you invested two or three years ago? Yeah.

So a nice little upround for you. Yeah, definitely, especially. I mean, there's always something happening in the background, right? So it's going to be, it's a beautiful little story here. And it's also, my brother and my mom made their first investments this month because they invested in fleeting on the platform. Well, you like me, like I think we index for people with grit. And what I loved about the fleeting founder's story, and he's on republic.com, which is a great crowdfunding site, by the way. The two crowdfunding sites, equity crowdfunding, we're non-accredited.

investors, 96% of the country can invest, the only two I recommend seed invest in Republic. I have deep relationship with them. I've had many of my companies go through both of those. I think those are the number, I think probably tied for number one. I think Republic's newer, but they're both pretty great. They put a great outcomes. But he had to drop out of school to become a trucker, and then he started making 90 grand a year, and he felt bad about himself. And then, like, his advisor was like, you realize people are graduating and they're getting $40,000 a year jobs. you're making more than double what everybody else is making. Like, don't ever be ashamed of hustling to get where you are.

And I think that grit and hustle is just such an obvious indicator of venture worthiness of investing worthiness, right? Yeah. And people do overthink it. And it's insulting because, like you said, eight out of ten companies are going to fail anyway. So. If you're doing it right. Yeah.

So if you're, that's, you know, there's a whole thing there. But if you're, if you're throwing up all these excuses of why someone like Pierre, someone like all of these other founders that are just going to make me so incredibly wealthy that I can't stand it. If you're, you know, there's a way to find any, any old excuse for them. You really, it's really have to like think about a bias that you may have, you know? So it's great to, to have these, these conversations with the founders and the more syndicate deals we do, the, the more. Like if we can go from writing a 50K check to writing a 500K check overnight, it's huge. You'll get there. It's huge. Because if think about it, like, I could go out and try to raise $100 million fund, which I have.

It's impossible. I can go out and try to do that. But what am I going to do? I'm going to deploy it over about five years. It's going to be two thirds of it will be follow on. I'm going to write $250K to a million dollar checks at the first and then follow on greatly there. I could do that exact same model with the syndicate and having a really good relationship with downstream investors.

And one of the things I like about the syndicate as well as a format and I think it's really going to be disruptive to LPs because folks like us who really represent the future of the industry in terms of, you know, fund managers because we're getting in early, which means we have a disproportionate amount of influence on what happens later, is once you do not need those big funds anymore, and you have this great relationship

with a group of people, it's more fun to do it with the syndicate members. It's a lot more fun because they love to be involved, right? Yes, it's so much fun. And you get to bond with them and they turn out to be super helpful,

whereas like some giant LP is not going to help your company, you know, get a meeting at Disney, right? Which we had, one of our companies got like seven introductions to people at Disney by emailing the people who had invested, right? That's where the syndicate can be really helpful.

that's what I'm working on for my 2.0 of the syndicate is knowing the syndicate members skill sets and knowing them better and trying to bucket them and say like, okay, these people are sales, these people are attacked, these people are whatever, product, you know, and they It's like, I don't think anything could have been more tailor made for us in this moment than syndicates. I really don't. Well, and it also, what I like about too is it keeps you super honest, where you and I might be frisky and like make some like crazy bets because we have that nature. When you, when I do a syndicate, I only put up the stuff that I feel has like real revenue consistency

and I try to like protect the downside a bit which means like some wild stuff may not get in there some really crazy stuff but I've been trying to reduce the like we invested in six months later it went away to like

at least you got a year or 18 months of runway out of this and so to clear that's something angelist added too was like the funding has to last 12 months so at least you have some chance you don't want to be like catching the knife in all these things

So everybody should sign up for backstage crowd, by the way, dot com right now. And you're going to try to do a deal a month, 12 deals, you said, eventually maybe go to two or three. Let's try to experiment with. We're going to be very open to it because our deal flow is so robust and we have really great, interesting terms that we can put together. It depends on the appetite of the syndicate. So if we can do two a month, we'll do two a month. We just won't go crazy and do anything for vanity. We'll just do what's really organic.

Yeah. The quality is the key because you know what I did was I shared with the top 10% of our syndicate, the last update on metrics we have. And that was a little bit scary. Like here's all 130 deals. Here's all 40 or 50 million we deployed. And here's the outcome. And, you know, out of the first 50 deals, you see a lot of red. You see a lot of shutdown companies. And somebody was like, oh my God, this is so depressing. And they had invested in both rounds of com. I was like, so you're a. up 10x cash on cash or whatever it was. Yeah. But this is depressing for you. And they're like, yeah. And I was like, okay, I told you this in my book. And you know this, don't you? And they're like, yes, I know it.

But it still makes me feel bad. I'm like, okay, you have to get through 25 losses to have the five that win actually mean something. If they all won, that would be called publicly traded companies already. Like, this is high risk investing. There will be Netflix or Uber in 10 years, not now. and then one person was like, I did your first,

I did eight of your first 11 deals, but I didn't do common density. And so I literally picked the anti-portfolia. And I was like, yeah, that's bad luck, but, I was there a thesis there? He's like, not really. I just didn't like them. I was like, okay.

Somebody's like, oh, you're just a bad picker. I was like, no, I don't think it's that. I think you, you know, you just have to understand the power law is you've got to hit 30, 40, 50 investments. So make small investments. You're also doing a course now, I see. So tell everybody about that.

I have an online course. It's called How to Raise Capital for your startup from scratch, or for anything from scratch. It really is, though, a Trojan horse to bootstrapping, mostly. Because I do teach you how to raise capital. I've raised millions of dollars myself. I've generated millions in revenue. I've invested in 130 companies and seen more than 6,000 all in five years.

So I have some insights into these things so I can help there. But I also know that 80% or so of the companies that I meet could do without any sort of outside funding, including Angel, and could bootstrap their way. And you want to have the investors chasing you and not the other way around. So I do a mixture in that. So you go to it's about damn time.com and click on Arlands Academy and it'll take you right there. It's where you can also pick up the book. Yeah, everybody buy the book. It's about damn time.

And get the audio book is my best advice. because Arlen reads it and she's got a very soothing voice. Her podcast is your first million and that's very good as well and the syndicate is backstage crowd. As we wrap up here, I know you've got to go

and I appreciate your time during quarantine to carve out an hour for us. When we look at race relations, when you look back at your five years, one way of looking at how hard it was for you is, man, the tech industry is totally fucked up and crazy that, you know, it's so hard for somebody to break in. A charitable way to look at it was, oh my lord, she broke in. She got meetings with all these people. So how do you reconcile your

amazing success with hard work and the industry, which is, you know, kind of like a nebulous word, but the industry, has our industry in the five years that you've struggled through it to get where you are, do you see meaningful change that makes you hopeful for the future? I see it on the horizon. I think that the first four or so years, no. And it was very true and it's, it's, it still needs a lot of work. I see it on the horizon, maybe not from the inside, but from from the people who have been oppressed, just making it so and making it undeniable. And the way that I kind of say that, You said that I did break in. That is a charitable way of saying it.

But think about it. I put, I am not, I'm an outlier. And I have a way of thinking that most people don't have. And I have a, like a way of doing things that most people don't have and shouldn't, in most cases. This is like a, this is insanity what I've done. It's insanity work, right? This shouldn't have to be this hard to get this far. So that's where I said.

So I did break in, but I was, who I tell you what, if we all had to do what I had to do, it wouldn't be worth it. Not sustainable, not worth it, sleeping in the airport. So the lesson is, even though I threaded the needle,

that doesn't mean that the problem is solved. Don't look at my success and say, mission accomplished, because the mission hasn't been accomplished, right? And we even see it with successful founders. Was it Angela Benton, who did the Tweetstorm, recently about she had a bad experience with Cowboy Ventures and it was just that they

Oh really? No, I didn't hear about that. Yeah, she tweeted about it and she was just like, you know, I went to the first meeting. It was great. The second meeting like, I guess it was Ted Wang was the person she was talking about and he was kind of like, oh yeah, next slide, next slide, I get it, I get it, I get it. It was kind of dismissive, right? So it wasn't the, you know, we're not investing in this kind of thing. It was more like a little bit of a subtle she felt bias. I wouldn't necessarily say racism. There's a bias, as a prejudice.

Those are all bad things too. Yeah. And so it's like this bias. And she also respect, right? Which I think is like a very interesting word because there's like outright racism. There's bias. And there's just like being respectful

during a meeting with the founder. And like using your brain, like if you've dedicated the 30 minutes, like just give them the 20 minutes to talk and then ask a couple questions. You're good. you don't have to rush them through the deck and, you know, she didn't wind up feeling very good about it. But that's good that you feel like we've made progress,

but still a ways to go, and the change will be from outside. Yeah, I think there's more work to do 100% more work to do. We were just getting started. But if I didn't feel hopeful, I wouldn't be able to wake up every morning and work on this. There's just no way. Yeah. And on that note, I'll just say, it's good to know you, Arlen. It's good to know your story and to watch you do it.

And it's good to know you're waking up every day doing the hard work for the founders who need you, right? Yeah. And you have my respect and my support. You know that. And I can't wait to share some deal flow as well. Yes. You get going. Everybody, you hear my voice.

Stop what you're doing. I want you to do three things. Number one, you go to backstage crowd, you sign up. Credit it or not. Number two, you buy the goddamn book. cheap skates. Buy the book right now. She couldn't go on book tour because of Corona, unfortunately.

But when you do your book tour, let me know if you need an interviewer or something like that. I'm happy to help. I'll have some tips for you too on that, on the book tour. I'll give it to you, though, privately. So that's number two, by the book. Number three, sign up for the podcast where

you know, sometimes on a Sunday night she may drop something raw and entertaining. Your first million is the name of the podcast. podcast. Arlen is, Arlen was here and she's still here. I can tell you based on my experience, she ain't going anywhere. We'll see you next time on this week and start us. Bye-bye, everybody.