Directed IRA Podcast

Investing in Startups and Venture Capital with Your IRA

• Mat Sorensen and Mark Kohler

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In this episode of the Directed IRA Podcast, attorney and CEO Mat Sorensen sits down with Ahmed Ahmed, Head of Funds at WeFunder, to discuss how investors can use a self-directed IRA to invest in startups and venture capital—an asset class once limited to Silicon Valley insiders and institutional funds.

The conversation explores how WeFunder democratizes early-stage investing through Regulation Crowdfunding (Reg CF) and Regulation D (Reg D) offerings, giving both accredited and non-accredited investors access to vetted startup deals, diversified venture funds, and even pre-IPO companies.

Mat and Ahmed explain:

  • How to invest in startups using your self-directed IRA or solo 401(k)
  • The difference between Reg CF and Reg D offerings on WeFunder
  • What the Orange Funds are and how they track Y Combinator companies
  • Real examples of early-stage companies that scaled (e.g. Eight Sleep, Replit)
  • Why diversification is critical in venture investing
  • How to evaluate startup founders and what signals matter most
  • What to expect in terms of risk, timelines, and exit strategies

This episode is essential listening for self-directed investors interested in private markets and early-stage innovation—and how to access it within a tax-advantaged retirement account structure.

Chapters: 

00:00 – Introduction to WeFunder and Startup Investing
 01:30 – What Is Reg CF and Who Can Invest
 03:16 – Inside the Orange Funds and Y Combinator Strategy
 07:40 – Risk, Return, and Realities of Startup Investing
 11:50 – Using a Fund Model to Diversify Your Startup Portfolio
 19:22 – How to Evaluate Founders, Traction, and Deal Flow
 24:27 – Getting Started with Startup Investing Through Your IRA


WeFunder Homepage: https://wefunder.com/

Directed IRA Homepage: https://directedira.com/

Directed IRA Explore (Linktree): https://linktr.ee/SelfDirectedIRA

Book a Call: https://directedira.com/appointment/


Other:
Mat Sorensen: https://matsorensen.com & https://linktr.ee/MatSorensen
KKOS: https://kkoslawyers.com
Main Street Business https://mainstreetbusiness.com



Speaker 1:

Welcome everyone to the Directed IRA Podcast. This is Matt Sorensen. I'm joined with a special guest today, Ahmed Ahmed from WeFunder. He's head of funds there. I'm going to have him introduce himself today. But what we're talking about is investing in venture or startups. This is an asset class your IRA can invest in. You can invest in, of course, with non-IRA dollars. We actually had some clients use their IRAs to invest on deals that are on WeFunder and there's a couple of different things that they do there. Ahmed will get into it. But, ahmed, welcome to the show today. I appreciate you being on.

Speaker 2:

Thank you, Matt. Yeah, happy to be on.

Speaker 1:

Yeah, tell us about WeFunder and kind of your role there.

Speaker 2:

Cool, yeah, happy to give a little bit of background. So WeFunder is Robinhood for startup investing. We are a YC company. We started in the winter 13 batch and for most of our time and efforts are spent towards the Reg CF side of the business. Time and efforts are spent towards the reg CF side of the business, so unaccredited investors can invest in startups through regulation crowdfunding, which was legalized during the jobs act in 2016.

Speaker 1:

And reg CF is for someone that's like, hey, I'm not accredited and you could still be accredited and do it, but like, unaccredited, basically, anyone could invest through reg CF offerings. These are not publicly traded companies, these are small startups, right? Um, how much is a typical investment in reg CF, though? Cause those are usually smaller dollar investments, cause that's that crowdfunding concept Get a lot of investors in at smaller amounts.

Speaker 2:

Yeah, so um, the median investment on we funder for regulation crowdfunding is $250. The average investment is around $1,000. And I'd say typically a company would raise around $250,000 total from RegCF on average. We have multiple companies that raise $5 million from RegCF, which is the legal limit. People add on to that through RegD and um and then yeah, so particularly it's for smaller check sizes on reg cf and the. I think the most successful cases on reg cf are companies that just have a lot of customers and they think it's cool that their customers can be shareholders. Uh, mercury has done that, substack has done that, replet has done that, substack has done that, replit has done that and they just had an overwhelmingly positive response and it's more like a cult following when you introduce that it's.

Speaker 2:

I think it's primarily the best form of marketing you can have.

Speaker 1:

Yeah, yeah. Have some people invest in you. They're like invested in your success, literally Um okay.

Speaker 2:

Now there's another side, though, of what we fundunder does, which is more of a fund, typical fund structure side. Tell offer you exclusive deals that would only be offered through Silicon Valley and easy for anyone to invest. It's the same checkout flow as RecCF. So you just see a deal you like, you put in your bank account information or your directed IRA and then you just invest straight through that. So my side of the business is particularly seed and series A companies. We have series Ds and beyond, so we offered, like Anthropic, OpenAI, SpaceX, XAI, a dozen more companies like that.

Speaker 2:

But we also offer something called the Orange Funds, which I particularly am really excited about and I spend a lot of my time at WeFunder on. So the Orange Funds the goal of it is to almost emulate and track the Y Combinator batches as an index. So for those who don't know, Y Combinator is regarded as the most elite accelerator in the world. Companies who go into Y Combinator have a much higher chance of succeeding than those who don't. I think the percentage chance of a Y Combinator becoming a unicorn so a billion dollars in valuation is at 5%, which is 5x a normal company, and the power law dictates that if you just invest in Y Combinator companies, you will make a higher return than if you invest in other companies.

Speaker 1:

Yeah, Going back, and some of the companies from Y Combinator I mean that's like Stripe, I think, is from Y Combinator- Stripe Airbnb.

Speaker 2:

What are some of the?

Speaker 1:

ones that are recent, yeah, the big ones everybody's used.

Speaker 2:

Yeah, I think the most recent ones that are there are different, so recent markups I guess that are in the news. We just got a markup for 8sleep.

Speaker 1:

Okay, I love 8sleep. I use 8sleep. You can get your promo code. Promo code Matt. Go to 8 Eight Sleep I use Eight Sleep. You can get your promo code. Promo code Matt. Go to eightsleepcom. I'm just joking, they're always advertising on podcasts, but I do love my Eight. Sleep bed. Yeah, eight Sleep. If you're listening, hook me up. I bought three of them for crying out loud Love the Eight Sleep bed. Okay, so what's their markup now?

Speaker 2:

I believe we're at 40X for Eight Sleep. Uh, we invested in their yc round at a 20 million valuation uh I believe they just raised at an 850 million uh valuation.

Speaker 2:

So congrats, eight sleep yeah yeah, but it was a nice little markup for us, Cool. And then most recent companies that have gone through the batches that are doing quite well. Corgi is an AI insurance company. We invested in them in, I believe, summer of 24 or 23. They just raised their Series A. Artisan if you're an SF native, you would have seen their billboards everywhere. They're the AI sales company avatar company. They just raised their Series A and we're seeing a lot more companies coming from YC raise their Series A much faster than normal.

Speaker 1:

So that's the orange funds though. So if I invest in you call them the orange funds, then that has allocation to some of these companies coming out of YC Y Combinator.

Speaker 2:

Yeah so the aim for the orange funds is. Yc will typically get 200 companies in every YC batch. It ranges between 170 and 200. Just between like 170 and 200, we try to pick the top 25 to 30 companies in each batch and we just go out and get allocations across the board. We usually do that through like I will split the work with two other yc alumni or three other yc alumni with domain expertise and that thing. So we currently we're running the s25 batch, which a couple of your users have invested in, and one person is focused on DevTools, for example. They've ran successful companies in DevTools, so I trust them more than anyone to decide what's a good investment on that. The other person is focused solely on AI research, large language models, um contexts, mcps those things that, like, I never understood until like three months ago. Their entire life's work is based on that, so they I trust them to decide.

Speaker 2:

And then I have a biotech research. So I was a cancer researcher for, uh, five years of my life and, um, I've been taking calls with anything that is remotely close to automating biological research. Um, and there are a couple of good ones this batch which I was really excited about, taking calls with anything that is remotely close to automating biological research.

Speaker 1:

And there are a couple of good ones this batch which I was really excited about- so we try to determine which ones are most poised to win and we just spread the board. So these ones let's talk about then, kind of like that seed, series A type stuff. I mean, these are really early stage investing. Is that what these are going to be? And like, let's see these orange funds, for example. These are like they may have a product already but they probably don't have sales. Do they have sales and revenue yet? Like, where are we talking here and help people understand maybe kind of what seed and series A is, how early that is.

Speaker 2:

Yeah. So I think primarily if you're not investing, they have an MVP, so minimally viable product. They like have hacked something together that is useful for companies but it's not really like at the standard for an enterprise customer, and that's primarily where a lot of the YC companies start the batch out. So if you apply to YC you're basically like the only chance you have to get in is if you're not X OpenAI, x Stanford, you have to have an.

Speaker 2:

MVP to get in, and that's where you start. You then have three months of the most intensive boot camp you can have for a startup. You have Sam Altman coming in to give you talks. You have the Airbnb founder, brian Chesky, coming in to give you talks, talks. You have the airbnb founder, brian chesky, coming in to give you talks.

Speaker 2:

Paul graham, who's regarded as the most elite startup investor in the valley. Um, he like advises companies and in three months, you are basically expected to showcase your product in something called demo day, which is used to be for investors to go in and decide which companies to invest in. Currently, companies oversubscribe their rounds before them, uh, but at that point, mostly they'll. They're starting to have revenue. They're starting to close these enterprise contracts and some of them are actually going really heavy and closing really big names. We invested in a company called I'm not going to say their name because I don't know if this is public information yet, but we invested in a company that closed, lovable, as a customer. Lovable is the fastest growing startup in history. They were first to get to $100 million in annually recurring revenue. So they're closing really big names and this is still pre-seed. So the orange funds or the YC funds in particular. I think accelerate faster than anything else.

Speaker 1:

Yeah, so and so why Comet? Or just for people understand. I mean, this is like if you're not familiar with it is like it is a pretty elite place for if you're a startup, particularly in the tech space, and you have a very compelling big idea where you go, get help and mentorship, and it's like it's very hard to get in. If you get in, it's like kind of like this badge of honor that you know we're in Y, we got into YC, and so venture and startup investors are like that's like a, you know, that's a diligence box checked for us. You know, it's like if, if the people at YC thought that this was good enough to get in, then, um, then there must be some validation to it.

Speaker 1:

Now, most startups fail right, and that's the thing we've got to understand in this category is the most likely outcome is that if you just invest in one company, it's going to fail. Ahmed, I mean we had a at our event. We have an AltAsset Summit that we do every year. By the way, it's October 16th and 17th everyone AltAssetSummitcom in Scottsdale, arizona this year. But we did one in California, in Southern California, two years ago, and we had a speaker.

Speaker 1:

She was the president of Tech Coast Angels. They do a lot of angel investing. I remember one of her comments was if you invest in 10 startups and this is as an angel investor, but this is going to be early stages the most likely outcome of nine of them will fail and maybe one makes it. But your hope is that that one that makes it goes 100x and it delivers a significant return. I mean, for someone that's new to investing in venture and startup, how should someone think about that and what's their expectation going in? And I know you have the fund model too we can talk about here but just as they're thinking about individual company investing and how should they look at this asset class, I think there is a different way to look at startup investing than Silicon Valley does currently.

Speaker 1:

Yeah.

Speaker 2:

There's a certain naivety that comes with being an angel investor in the Valley, but I think the advice I usually give to people is like diversifying your financials and your investments. If you're going through your IRA and you're picking, x amount goes to government bonds, x amount goes to real estate, x amount goes to ETFs. I personally put in 5% of my investment over the years. Over the year, uh, to go to startups, and I probably could increase it because I have insider knowledge and that is my job. So I I'm yeah.

Speaker 1:

Invest in what you know Exactly. Yeah, like I invest in where you know.

Speaker 2:

I totally believe the amount of capital that goes into these private companies and the timeline for these companies to go public being so much longer than it ever has been before. We recently saw Figma's IPO. Cerebrus' IPO has been, it has gone through, but it's been delayed so many times. Companies like Databricks is planning to IPO so many times. Companies like Databricks is planning to IPO. Anthropic just raised their next series B, I believe Sorry, series C. They're going to take some time to IPO SpaceX. God knows when they IPO. Companies are staying private longer. There is more money than has ever been before in these private markets. I do think people are missing out on money if they just rely on public markets.

Speaker 1:

Yeah. So if I'm going to invest in that asset class, though, should I be thinking of a fund model then? Because if I need to diversify, I mean I'm diversifying within all asset classes, I guess by putting someone to real estate, someone to stocks, someone to bonds, you know whatever the typical advisor advice would be. But if, like, all right, well, I'm going to put 5% into venture, let's say, like, how do I do that? I mean, this is what we funders, like you've kind of like have solutions for this and making it easy, and like smaller amounts. But also, what if 5% for me is, you know, 250,000, like you know? But I don't want to just buy one company at that amount, you know so. So how do I start figuring that out, how to invest in that? If I'm interested in that asset category and I want to start doing it, what are my options to do that?

Speaker 2:

Yeah, so we have different asset classes or different ways you can invest on. Wefunder in RIGD, primarily the Orange Funds, is a good way to diversify, but it's still very narrow in terms of how many companies are in an Orange Fund or in those funds. Usually it's around 26 to 30.

Speaker 2:

Okay, all right and YC only accepts tech companies, and if you think that's like a lack of diversification, there are other ways to go about it. Um, but the orange funds usually return around 30 irr. Uh, so I do think they're like a good class to diversify. The amount of the different companies we get or like are very random when you look at it in three months time. Yesterday I had a call with a biotech company. The day before I had a call with a drone company that maps how much bale and hay a farmer has collected. I think that's the true nature of diversification. But in general, we have different funds.

Speaker 2:

I launched a biotech fund a few months back called helix, and that was primarily just ways to accelerate research and anything that goes through fda testing, just accelerating that process. Um, we are are planning to launch an ai fund, a national defense fund, a, a robotics fund, and those are different asset classes that people could be interested in From historical research and context. People that invest in these specific funds tend to have specific domain knowledge in that technology. So we get a lot of requests for the biotech fund and that just happens to be the people that are trying to request for it are doctors and they believe that they know what they're looking at and they want something that's closer to home, so they're specifically asked for that.

Speaker 2:

Other people don't want to do the research on AI and it moves so quickly and new companies spawn every other day and competitors become obsolete. People win Um, and they don't want to have to keep up with that, but they know that is going to be the future. So they're just like someone like me to just grind through it and understand the market. So they want that asset class. So I'd say, if you're trying to diversify and you're a WeFunder investor trying to invest in Reg D, I would look at one of the funds and invest your money in that. However, I would keep an eye out on the individual deals that we get. We usually average around two a month. Those are the open AIs, the Anthropix, the SpaceX and, if you like, said company, and I think those companies are big enough where there's enough data for you to make a decision on.

Speaker 1:

I would save some money for those Right now on your guys' platform. I could invest into SpaceX or opening Anthropic.

Speaker 2:

We run rolling funds where they're only open for around two weeks at a time for that specific company. We closed Anthropic around two weeks ago and that was open for three weeks. Um. We before then we did another XAI round, um. So what we do is when a round becomes open, we get an allocation. We'll send it out to the people that are have invested in the funds before. First they get early access and then after that we open it up a little bit more before we get oversubscribed again and people usually have a timer of two weeks to fund their investment and then that's all the investments we're taking in.

Speaker 1:

Okay, are those individual investments typically? Are those reg CF typically, since they're not in a fund model? Or are those those, any of the Reg D or those are all Reg CF?

Speaker 2:

They're Reg D.

Speaker 1:

They're.

Speaker 2:

Reg D.

Speaker 1:

Okay, those are Reg D Okay.

Speaker 2:

Those are Reg D. If you want to invest in any company currently on Reg CF, you can go to WeFunder and then on our Explore page. You don't have to be accredited on that. There are, I think, over 180 companies currently open for investment.

Speaker 1:

Okay, so all right. So let's say I've determined the amount of money I want to invest and maybe I even want to use my IRA. Of course you can do that with your account here at directed IRA. You can invest in venture and startups. You can use we fund or we've had many accounts invest in that. I think we'll see more and more do that as this asset class is becoming more accessible, I think, to individual investors, and I think that's one of the missions that WeFunder has done is try to bring this asset class to individual investors instead of just the wealthy Silicon Valley or the venture firms.

Speaker 1:

I know there's a lot of people who like to kind of follow other prominent firms and investments and I've seen this on WeFunder too to see who else is invested in this. You guys typically will indicate if there's been a well-known venture firm or someone else that's invested in the company, and I think that's a nice thing to know right, kind of like this follow the leader, maybe type model, but what are those things people should look at? You maybe talk about that or some other things when in when they're analyzing these different opportunities to see what's a positive or a negative thing I should look at and I get there's different asset classes and things. Invest in what you know in those categories you like. But what should other people maybe be paying attention to is they're looking that you guys might have show in the diligence docs or kind of information for them to digest.

Speaker 2:

I think there's two different distinctions there. So Reg CF companies are required to file a form C. You get a bunch of it. You get a lot more information that's legally mandated to be there. So if you're raising up to five million, you have to file an audit. If you're raising up to 1.25 million, you have to file a financial review, so you get access to their financials, which is big for RECCF companies, for startups, it doesn't really matter that much because realistically, you're not investing, yeah it's a bunch of zeros.

Speaker 2:

You're not really investing in there. Oh wow, they made 30 grand of revenue this year. What you're investing in there like oh wow, they made 30 grand of revenue this year, uh, right, what you're investing in is particularly the founder um. And I think that's what a lot of people get wrong. They put a lot of emphasis on the company's current traction and the current product state and they don't look at the founder um.

Speaker 2:

Yeah, an analogy I give is Parker Conrad, who was the Zenith founder, then turned to Rippling. He was regarded as the best founder some people have met in terms of just sheer ambition and drive. And if you looked at Zenith at the time that they started so I believe they were winter 13, you would have not invested in them if you were basing it off traction and current product state. But if you had no idea what he was building and just had coffee with him for five minutes, you would have maybe sunk your life savings in him. And it's harder to do when you're looking at stuff on WeFunder because you can't call the founder, but there's enough that you can get in watching the founder video If it's a venture funds investment, look up YouTube videos on the founder.

Speaker 2:

We'll show videos on the profile when we're looking at pages and their current traction, obviously, and like the product state. But what I mostly look for is does this person have an inkling of what it takes to be the next Mark Zuckerberg? And that's something that Sam Altman has like repeatedly said he looks for at startups and I think that's the biggest differentiator.

Speaker 1:

Yeah, I mean you're you're investing in the person as much as you are in their idea. Right, they've been their idea or their product or concept or company. I mean the person that's going to execute that. You're investing in that as much as anything else. I totally agree with that. So, all right, so I can maybe see maybe some other you know, I know you guys will probably some detail.

Speaker 1:

There's been some like marquee venture investors that have invested um, look to who the founder is or maybe there's some co-founders involved to try to get a feel for them Obviously understand the vision of what they're trying to create. Is there a big you know? Do you see that breaking through? And you know you have to use your own judgment on this. This is, of course, this is the fun part of the investing. You know is able to make those types of decisions and analyze that for yourself.

Speaker 1:

And, of course, we're not giving investment advice here at all. That's not our role. We're not giving investment advice. I don't think you're doing that at WeFunder For us. We're just trying to provide access with your IRA to invest in what you know and what you believe in and to take control of your retirement account funds, and I think places like WeFunder are a great place to go because they're providing this opportunity for everybody. It's not just you have to get the right connection or you have to even be uber wealthy. You can even, through these reg CF offerings, it's open to everyone to have some type of allocation, even if it's 250 bucks, as we talked about, into venture or startups. So any other words of advice for people as they get on WeFunder or they're looking at venture startups that you'd want to point people to? I don't know if there's any getting started. Stuff sounds like registering to get information when you are like, let's say you're like, oh, I want to get the next xai allocation or the next. You know, you know what is the, because there's notices.

Speaker 2:

I guess you're sending out on that to people on the platform yeah, um, if you're interested in just joining we funder as a like investor to invest in reg cf or reg d? Um, that's really easy. Just go to we fundercom? Um and then you can sign up to get access to the accredited deals. You have to set yourself as an accredited investor as you sign up through the flow, which is simple to do? Um, and then the way we like notify people is just through email, so please make sure you read the emails you read your emails when they come from uh, me, uh or we've under uh, but yeah, um, awesome.

Speaker 2:

It is easy to invest, and that's the entire. We're not giving investment advice. The only job I have, and I'm striving for, is to allow anyone to have the same level of access as a Silicon Valley insider does.

Speaker 1:

Awesome. Well, I love that. Thanks so much for coming on and sharing this. Where should we send people to? Just to the main page? Is there any place we should send them? Any getting started place or just get to the main homepage.

Speaker 2:

Yeah, wefundercom slash home Good place to start. If you guys want any information regarding connecting your directed IRA account to WeFunder, feel free to shoot us an email.

Speaker 1:

We're happy to help Cool, all right, okay, we'll put that information in the show notes and provide that links. Ahmed, thanks for coming on. Thanks for everyone tuning in. We'll be back next week with another incredible Directed IRA podcast. Until then, stay calm. Self-direct on.

Speaker 3:

And thank you everyone for listening. A quick disclaimer and reminder this presentation does not constitute an attorney or CPA client relationship and it is always in your best interest to consult competent legal and tax professionals when conducting your own personal transactions.

Speaker 1:

We also want to make sure you know this is not investment advice or financial advice. We're just trying to give you education, ideas and strategies you can take to your professionals or conduct your own research on. We'll see you next time.