Million-Dollar Investment Insights: Strategies, Risks, and Lessons from Experienced Investors

In this episode, the group of seasoned investors shares invaluable insights that can save you from costly mistakes and enhance your investment strategies. From learning how to trust but verify, the importance of pattern recognition in founder behavior, to understanding how to navigate multiple rounds of funding, the discussion is filled with strategies that can turn small investments into major returns. 

Panelists discuss the nuances of team dynamics, due diligence, legal structures, and the importance of connecting with local experts to streamline the investment process. Whether you're an angel investor or part of a family office, these insights will guide you in making informed decisions and optimizing your investment journey. Tune in for real-world advice, cautionary tales, and tips on working together as a group to maximize success.

Transcript

Let's move on to what's a $100 ,000 or maybe even million dollar insight that you
can share with the group that might be able to serve the group or maybe help the
group members possibly serve you as well and I'll just start here with Manny and
work our way down.
President Ronald Reagan once had a saying trust but verify and you don't need to
tell him that you're verifying it. Founders are very ambitious, founders are
salespeople, and some cases they forget things or they say certain things,
so looking into that, I think that's important from my experience. Also,
you know, you trust your gut, the more meetings you have with founders, if I know
you may be here raising money, but more meetings you have, you start to have a
good pattern recognition of asking questions and seeing their results. I remember the
first, I have a mentor who was an early investor in Google. They invested in this
thing called the internet in the 90s and he invested in PayPal, Google and a few
others. And he was kind of coaching me behind the scenes. And there was a startup
that had a great pitch deck, great everything. He's like, look, this is worth the
meeting. I think it's a go. So I went with this founder, talk with them,
ask him questions, watching body language. Guys, check out body language type videos.
It's pretty good. It's better than what comes out of a person's mouth.
So there was a hot gaming company, and he talked about all these people that
invested, which they did. And I'm like, okay, where does the money flow then? Oh,
it flows through that to PayPal. Oh, great. So show me the PayPal, show me the
numbers. What are you talking about? Everyone else doesn't ask for that. They just
invest it. Oh, you're offending me. Well, just trying to understand I'm so offended.
He was offended by the way wanted our money and I caught that early and I was
really
Seeing that he got past someone that was so experienced But then again when you're
sitting there talking to multiple people you get a good pattern recognition And don't
be shy to ask a question And if you have a hard time In the beginning stages,
being this business young, sometimes I had a hard time asking a question. So I had
one of my colleagues ask a question for me so it don't look like the bad guy,
especially if it was referred by someone within the group. And oh, by the way, I
forgot to mention, I started my career as a single family investor. We still buy
single family homes and multifamily. I love real estate as where the wealth primarily
comes from. We're in multiple
We all we also do invest in certain project. We just completed a hundred plus unit
in North Bend, Washington Ground development so for free to remind yourself.
I'm in real estate not just a tech investor and
But there's successes beyond just writing the check So if you write a check the
success could be the company fails or goes up But you're gonna have follow -on You
need more money beyond just the first check if you decide to invest. The company
does well, you need more money. I've been what you called crammed down, meaning I'm
not pointing out this big venture firm, but they wanted to call clean up the cap
table, get rid of the smaller investors.
And so you pick a winner, you expect it, hey, this is the next big thing. And
then they, because they have a lot of financial power, A lot of the angels don't
see that. Fortunately, I've seen the cycle now, 14 years in it. Now I've seen the
cycle from here to there to IPO and what happens in between and what people don't
talk about in the news. So my over suggestion is, if you're gonna make an
investment, also look into who could the next money come from? Because it's not one
check only needed. What round of funding? There's gonna be another round that's gonna
support them if they're in a tech world. So thinking about that, making relationships
with other investors that a little bit later stage, share notes, make relationships,
and then you can massage a few things, especially if things don't go well. You'll
figure out how to have what you call the soft landing, have it sold to another
company for you don't lose too much. Thank you. Thank you. So Karitsu Forum,
we have an angel network. We also have a family office, and we also have curriculum
capital, so there are multiple opportunities for individuals to connect with us. Some
of the million dollar insights that I have, because we do have a family office, we
have a network of, I mean, it's amazing, the group that you have, Richard, I've
been talking to some of the people and you've got entrepreneurs, so I have a few
things that would apply to everyone, and I say long -term focus with exits, clear
vision and purpose, diverse membership, you talked about the expertise that we each
have individually, surround yourself with individuals who have expertise in other areas
so that you can communicate with them as you do due diligence. You can bring in
those experts and they can share their information with you. Legal structure and
governance is very important. Strong communication, risk management as well as
networking and partnerships. I know as we all leave here we each have our own
groups. We need to connect more with each one of us. We're not competitors.
I know when I first started 20 years ago everybody saw us as the competitor to
them and that's not what we are. We're not competitors. It's all about getting these
companies fully funded and creating returns for us as investors, so I say let's all
work together and see how we can communicate better after we leave today.
Yeah, I'm going to actually start by just echoing the two before me, Manny,
exactly trust but verify, related to the last story I gave and Connie, my million
-dollar insight is if you're going to be a part of an investment group, Be a good
team player. It's in a team sport. You're not out to belittle other people. You're
not out, you know, treat everyone with courtesy, with respect, listen to what they
have to say, and have an intelligent discussion as to the merits of what you're
talking about. Help each other. The reason I joined my group is that I've had some
mentors within the group and they've been giving. Don't try to make money off other
people in your group. Don't try to promote yourself. I mean, that's a ground rule
in any investment club group. Don't try to promote yourself, make money off of
others. The thing that got me angriest was, I'm not gonna say who, but somebody who
I thought was really trying to scam people at this conference.
And do you remember in the graduate where the person says, I'm gonna leave you one
word, plastic?
One one word, Roth.
Thank you, Dr. Kerwin. Awesome. The we know the value of doing due diligence on on
your investments on people that come in and out of your life. Please don't do those
things in a silo. Jennifer and I love getting phone calls from others that are
investing in businesses, in funds, in opportunities. If we know the person,
we can help you out, we can give you an idea, please share. The worst thing you
wanna do is make an investment that was ill -advised and you realize it and now you
feel shame and you pull in. Please reach out, we are here to help. We have created
organizations for just doing that. So that's what I would love to share with you
all. - Yeah, I would say to start with investors local to where you live or
investors local to the deal you're acquiring. If you're in San Diego and you're
buying a deal in Austin, then start with one of those two locations with investors
and then start with people that are industry specific, no matter where they are in
the nation. So if they made their money selling their med spas, then maybe go to
them first for a med spa deal. We've found that during due diligence, if you bring
in like an OBGYN doctor to look at buying an OBGYN Clinic well then it's going to
help with the due diligence and if the deals one out of a thousand or one out of
a hundred You know Michael might lean forward and say oh was there a room for
another investor in this deal? And there's a saying in the investment club world
They're like if you ask for advice you might get capital and if you ask for
capital you might just get advice and If you start with an anchor investor who made
all their money in the exact niche That you're going into and they take half the
deal or a quarter of the deal all the other investors will come in and you'll
sleep better at night because you know another brain with 30 ,000 hours has dug into
that deal and they're risking their money in it too and it just shortcuts the whole
capital raising process very quickly I think. Last thing I'll say and then we'll
we'll stop here and give a round of applause to our our panelists is as someone
that gets pitched a lot of deals so representing a trust company. We have a lot of
people that approach us and are pitching deals, whether they're real estate
syndications or private direct deals, real estate transactions. And what I'll tell you
is in some instances, not that we're the investor, but our clients are the investor
and I personally invest a lot. I ask a ton of questions. I'm the most annoying
buyer or the most annoying investor to anyone. I'm very annoying to the people that
borrow my money. They're required to send certain things to me on a consistent
basis. That's just the way that I manage my money. And if they get frustrated or
annoyed by it, I'm moving out of the next person because there's another opportunity.
And what I have seen and witnessed is where it might be someone that has a team
of investor relations folks, and they don't know the answer to all the questions. So
they either try to do the fake it until you make it and then really get themselves
into trouble or they get annoyed by the questions and they get frustrated and that
frustration comes out in their tone and then they totally lose that sale or lose
that opportunity. And I've seen that time and time again, especially as folks grow
in organization and they move out of the capital raising efforts and they put that
into the hands of investor relations folks. I'm not saying that's with folks here.
I'm just saying I've seen that happen before. So that would be my wisdom to share.
It's actually really not my own wisdom. It's also wisdom that I took from people
that are much older than me that have gray hair. So when I'm at conferences like
this, I try to find the people with gray hair or no hair and I try to talk with
them. I should say men and women. So thank you with that. Let's give our panelists
a big round of applause. applause.