Darren Marble (Crowdfunding explained)
In this episode of the The Judgment Call Podcast Darren and I talk about:
- What lead Darren to become a serial entrepreneur
- The dilemma of choosing a career path and the emotional toll of being a serial entrepreneur
- Has the adoption of technology slowed down and what to expect in the next 20 years?
- How does crowdfunding work? What amounts can companies raise right now and in the near future?
- How do crypto based funding rounds work (and ICOs) compared to crowdfunding?
- What business do best using crowdfunding?
- What does issuance.com provide for startups and what’s the “Going Public” show?
- What is the role of religion in entrepreneurship?
Darren Marble is the CEO of Issuance.com, the leading provider of technology and marketing solutions for Reg A+ issuers raising capital in the US and Canada. issuance.com’ clients have raised over $250 million to date.
Darren is also the Executive Producer of Going Public®, a new original series that allows viewers to invest in IPOs.
You can reach Darren on Linkedin.
Welcome to the Judgment Call Podcast, a podcast where I bring together some of the most curious minds on the planet. Risk takers, travelers, adventurers, investors, entrepreneurs, or simply mindbogglers. To find all the episodes of this show, please go to iTunes, Spotify, YouTube, or go to judgmentcallpodcast.com. For more resources, including how to become a guest, how to advertise, and to see all the lectures, podcasts, and books I would like you to listen to or read, please also go to our website at judgmentcallpodcast.com. Like this show? Please consider leaving a review on iTunes or Like us and subscribe to us on YouTube that will make it easier for other users like you to find us later on. This episode of the Judgment Call Podcast is sponsored by Mighty Troubles Premium. Full disclosure, this is also my business. What we do at Mighty Troubles Premium is to find the best travel deals for you as they happen. We do that in economy, premium economy, business, and first class, and we screen 450,000 new airfare deals every day just for you and present the best based on your preferences. Thousands of subscribers have saved up to 95% on their airfare deals. In case you didn’t know, Americans and Europeans can already travel to more than 80 different countries again, South America, in Africa, and in Eastern Europe. To try out Mighty Troubles Premium for free, go to mightytroubles.com slash mtp, that’s too much for you to type, just type in mtp4u.com, mtp4u.com to start your 30 day free trial. Today, I have Darren here, and Darren is a studio entrepreneur. He used to be CEO of Crowdfund X and is now CEO of issuances.com, and Marketplace is the response for startups. Welcome to the Judgment Call Podcast, Darren. Torsten, thank you so much for having me. Happy Friday. It is a pleasure to be on with you. Thanks for doing this. I realize you had some technical issues, but I think we’re going to be a figurative job now. No, listen, I’m happy to be on, and this is great, man. Hey, I know you brand yourself as a serial entrepreneur as well, and I know that it takes a special kind of crazy to go this route in your life. What made you decide to become a serial entrepreneur and go for the ups and downs? You know, I’m a glutton for punishment. I think I was selling Oracle software for 10 years, and in the middle of that career, I realized that I didn’t want to be selling Oracle software into my 60s nor into my 50s, and there’s a lot of people that do that. They make a lot of money, and they got the golden handcuffs, and you can build a great life and career, and you can make a lot of money, but there was something about that that seemed very depressing to me, and I decided to start a business. I’ve been an entrepreneur now for about 10 years, and there’s something about the idea of being the master of your own destiny, and for good or for worse, right? For good and bad, obviously there’s no guarantees in the entrepreneurship game, but there’s something so fulfilling and the sense of freedom you have that it is a little bit addicting, and having been on both sides of the fence now as an employee, and having a career and working for others for over a decade, and now being my own boss, and having my own company and my own team, I wouldn’t trade this for anything. I would never want to go back to being an employee and working for anyone else, and I’m probably unemployable anyways. I’m a little bit of a misfit. I’ve been fired from jobs, I’ve been called a loose cannon by multiple managers, and so there’s a strong likelihood that if I tried to become an employee, I’d get fired again. It’s really the sense of freedom, the idea that my outcomes are a result of my own efforts, and it’s extremely rewarding, and at this point I think I’ve started maybe four companies. I’m not the guy that started 20. I forbid, I don’t think I’d ever want to start 20 companies. Why do I have to go to the podcast then? Okay, that’s it. No, I mean, this is hard. I know it’s more of a calling than a choosing, and I was really, that’s how it feels for me as well. Sure. It’s sometimes hard to explain. I don’t really have a rational reason myself. If someone asks me, I’m like, I feel like it’s a calling and everyone is like, yeah, but that’s weird. Right. And then I listen to George Peterson’s lectures about psychology and the big five traits, you know, they’re actually coming out of statistics. And what he’s been saying is most, once you have a certain personality type, you’re not happy if you do something that is against your personality type. So if your personality type predicts you’re an artist and you become a worker in a shoe factory, but you don’t do any art in your free time, I mean, art is always the problem that doesn’t make a lot of money because so many people are interested in it and there’s a lot of competition. But he says there isn’t much choice that you’ve got. Ideally, you find something that makes enough money so you are not hungry and you can raise a family. Yes. Beyond that, you really have to follow your calling. And I was like, man, this is great. I mean, I love you Jordan for this. It kind of makes these weird choices that we make and people say, oh, this is not going to make any money. And this is weird. Why don’t you have a real career? Well, I felt it’s hard if you have a rationality to do something useful and do something stable and they need to start completely different, you always feel a little bad. That’s right. People might not admit this, but a lot of times there’s always someone coming that gives you that conscience. It might be your wife, it might be your dad, it might be your mom, someone from you grew up with and you’re like, wait a minute, why are you actually doing this? No, that’s right. I mean, look, I think most entrepreneurs at some point in the journey, usually at the earliest points, there’s something inside them that’s telling them they want more. They’re not happy working for another company or person. And for me, that feeling took time to develop. It definitely didn’t hit me over the head with a brick when I was 20 years old or even 25. It was really in my late 20s, early 30s, I started to get that inkling that there was something else I was seeking and was unfulfilled in my current career. And it sounds like you felt that too. And I think a lot of people do. And the trick, of course, is to lean into that because it’s really a gut feeling and it’s a very personal experience, the desire to be an entrepreneur, to be a business owner. And I think that a lot of people may have this feeling and they actually do the opposite. They lean away from it because it scares them. It intimidates them. It generates feelings of fear or unease because it involves risk. It involves the risk of not knowing whether or not you will succeed if you leave your day job and go all in on your own business. It involves the risk of not being able to pay your bills, going behind on your mortgage, going into debt, taking out a line of credit and guaranteeing that line of credit. And these are things that scare the shit out of the average person. And they scared the shit out of me too. They should. You just promoted not being an entrepreneur, I feel. You had six arguments and I’m like, okay, maybe we shouldn’t do this. I know you’re right. I mean, this element of risk is the downside to it, right? But there is this incredible offside and the incredible offside is that you can kind of put something into being that you have control over. It’s something that is almost like a child, like a brain child that you put out there. Obviously, you also get proven right. Like your ego always is part of that. But you make a bold prediction. You go out there, everyone says you nuts. And then you’re like, okay, I’m going to show you guys. And five years later, 10 years later, now this cycle is actually not as bad anymore because a lot of startups take six months to know what you’re up to. So you don’t have to be this, you’re by strong, so it takes 50 years until you actually make money from this crowd. Yeah, look, you’re right. And despite all of these reasons not to do it, I encourage people to take the risk and you’ll never know what you’re capable of until you bet on yourself. And I think that a lot of people would be surprised just how capable they are. There’s something really interesting that happens when a person makes a bet on themselves and they have to succeed or else X or else there’s some consequence or some pain or suffering involved. And it’s hard to understand what you’re capable of until you’re put on the spot. It’s kind of like maybe fight or flight, the adrenaline rush, like you’ve got to win the fight or you’re dead or you’re toast or you’re going to get hurt. And I think people underestimate what they’re really capable of. And so the only way to find out is to take that risk. And look, here was the thing for me at the time that I made that decision. I had had a career for 10 years and again, everybody’s situation or circumstance is different. But for me, I had a successful career in software sales. I was very well networked. I knew a lot of people in my industry. And so what I realized is that in a worst case scenario, if my business were a total disaster, it imploded. I ran out of money. I could always make a call and go back into that industry. Maybe I wouldn’t have the same title. Maybe I wouldn’t be at the same company. Maybe I would take a pay cut from what I was at when I left, but at a minimum, I was a guy that had a reputation. And so I think a lot of people have to have some confidence that you are a capable person. You’ve been employed. You’ve had a job in the past. You can get a job in the future. And maybe there’s a gap. Maybe it’s two months, three months, you have to burn through some savings. But what if you succeed? What do you do then? What if your gut was right? What if you are capable? What if you can start a successful company? What if you could change the world? Imagine not knowing that because you were too intimidated to make the risk. And that’s the most unfortunate thing for people that want to do something. They have this inkling or inclination, but they never have enough confidence to actually make the move. And the first part of being an entrepreneur is to make the decision to start a business, to go all in on your own company. Yeah. I mean, I fully agree. It’s very much a necessary step to complete this conclusion yourself and kind of put yourself out there and realize you have a lot of things that you can control, but there’s a lot of things outside of your control. And I think that’s for sure. Or worried about that they do a great job, but it’s not the most kind of like having a bad boss, right? Yeah. You do something great. And your boss is like you, you’re terrible because acts. And that’s, that’s a very unfortunate situation I feel for a lot of people that think I have a certain idea about how this business works, especially if I’ve worked in another company that does something similar, but then I go out there and maybe customers won’t appreciate me because I’m so much smaller as a company, not Oracle, you know, you can’t sell enterprise software at the start of anymore. I mean, maybe you can, but you got to be as innovative as you are. It’s a tough marketplace for smaller companies. And I feel this kind of leads me into this, this theme I often have on this podcast. And I know we got to go into the crowdfunding soon because this is a wonderful topic I, I want to really dive into, which is one thing I wanted to get your opinion on it. What I, what I see out there is the speed of fields, big stagnation. And I think we’re just at the end of that. Hopefully it’s the end and it’s not just a false positive signal and what happened in the last 50 years since the 70s that there was relatively, there was entrepreneurship, but there was relatively little impact on society as a whole compared to technological progress that was there, which was pretty stunning and on a logarithmic scale. But the adoption cycles haven’t shrunken as much. So we, especially in the last 20 years, there was a lot of new technology video conferencing 20 years ago. There was a lot of things that they, that eventually now comes out as consumer internet, but it wasn’t really adopted. And that created a lot of havoc, I feel, for small, often enterprises, small ventures that really had to reach out to a large consumer base to pull this off and the consumers really weren’t interested. The consumers were like, okay, this is good, but we don’t care. And that was the answer. I’m not saying there was no success, but what I felt is, and that’s speed of deals and so as well, they’re very small islands of success, especially in software development, sometimes more B2B, sometimes more B2C. And there were other islands of success like in finance, which might be because of the leverage and it might be because of the Federal Reserve, but what I’m trying to get to is for entrepreneurs, it wasn’t such a great time, doesn’t mean it’s not hundreds of thousands successful entrepreneurs. And my question is a little, are we at the end of this? Do you think the next 20 years will be completely different? Will they more resemble what we had during the last 50 years, and if so, what changed? That’s a really good question, a very deep question. I’m hopeful that the next 20 or 30 years, we will see tremendous change. It certainly feels like there’s an opportunity for real breakthroughs to be made. One of the things that Peter Thiel, an analogy, he said, I think I saw a video of him saying this the other day, we talked about science and there’s this been a massive increase in the number of very well educated scientists in the United States and globally, but there’s not a lot of creative scientists, people that actually think about how to solve a new problem. So, it’s like you imagine you go to college, you want to be a scientist, physicist, and you go through these courses and you read books, and you follow a process, and you’re kind of like a, what do they call, book smart educated scientist, but it’s the 1%, it’s a very small minority of thinkers, created. I think this is a nice example of thanks to, how do you actually get it? How do you take that education and now do something new and solve a problem that could be solved differently or apply innovation? And so that, I think that innovation is what’s been missing in a lot of these industries and professions and certainly in higher education, but I’m optimistic, I feel like, and part of this is as an entrepreneur, I’m a little bit of an eternal optimist, maybe to a fault, but I think there are enough signs right now to point to a very bright future, and look, you could say the COVID and vaccine that came out within the last 12 months, the process to get that vaccine was incredible, the speed at which scientists and Pfizer and BioNTech out of Germany and Moderna are coming up with vaccines for something that a year ago this basically didn’t exist, wasn’t a problem, is absolutely astonishing. I hope we can see more breakthroughs like that, not just in science and health, but in technology, in energy, in climate change, there’s so much need right now. So I’m hopeful that we will see a lot of change in progress over the next few decades. Yeah. Well, the catalyst of COVID is absolutely clear. I almost feel like people kind of wanted what happened to COVID a little bit, they maybe wouldn’t admit it, but they kind of take out it so much better than going to restaurants so much more comfortable, and video conferencing so much easier, but you know, the other people don’t really accept it as much, so maybe I just kind of travel. So there was this subconscious leaning towards it, and COVID kind of forced everyone, especially the restrictions that we have in the US, everywhere, they kind of forced people in the newsstands of behaviors, so I think that’s great though, I think maybe next time we don’t need this bad a crisis, and one other thing I’ll always speculate about in my mind, my evidence is not as big as that, you know, the policy of the Fed to always inflate is a really dangerous one, because if you look at the last 200 years, there were periods of deflation, then there was inflation, there was inflation, deflation, and they both had a certain amount of, were around for a certain amount of time, often deflation was a little longer, and then inflation just jumped. Why is this important is the periods of deflation, so basically meaning there’s the amount of purchasing power contracts, what’s great about this, it forces you to come up with new solutions, and it pushes up often small entrepreneurs, it doesn’t keep the old zombie companies around, it gets rid of them because they basically have no way to pay the employees, and then little entrepreneurs can build a business and make it big relatively quickly, I mean, a friend of mine started catering company about 30 years ago, and it’s a billion dollar company, I mean, it’s been around forever, right, so it doesn’t have to be a technology necessarily, but this dying of the old zombies gives, just, you know, think about United American and Delta would have gone bankrupt, sounds terrible, right, because the US doesn’t have any flight capacity, and that would be a bad thing, but, you know, we still would still have the planes, we would still have pilots, there would be new names this thing, it would be definitely funded, it would be definitely run, maybe called, you could call it Spirit, but who I then lost her, and then it would be around a month later, like, people think that these big companies are the only way, like, Walmart is the only way to shop, it’s not, you can put a different logo on it, maybe have it half the size or double the size, whatever is better, and then start with something that’s, you know, organically grown, I think this is what hasn’t happened at least the last 30 years since the fact is this crazy, now we know, of course, I didn’t know that in the 90s, crazy inflationary policy, and I don’t know what happened in the 70s, but that seems to be part of the equation, and if this is still around the Fed policy, so as long as that doesn’t change, we won’t see this full amount of growth, it doesn’t mean we won’t see a lot more technology adoption, as hopeful as you are. Sure, sure, understood. Well, let’s go to funding, I mean, it’s a big topic I know very little about it, to be honest, I know the crowdfunding startups have come out of nowhere, and I looked into it 10 years ago, actually, I screened a couple of business plans to invest into it, and I always thought, oh, this is not going to go anywhere, I was that pessimistic, because it was such a long history in the United States of not being able to sell direct shares as a startup directly to investors, several, and maybe you can help us understand that there were lots of different intermediary steps, which made it almost impossible. Yeah, it’s really interesting, I mean, if we look at what’s happening right now in the realm of capital markets, there’s this retail investor renaissance that is taking place, and you’re seeing it in different ways. On the one hand, you see it with apps like Robinhood, that very quickly scaled to 12, 13 million users, 13 million new brokerage accounts, created on an app, because retail investors want an opportunity to use, and easy to use app, and buy stocks, and likely stocks who they can understand, and companies whose products and services they use in their everyday lives. Well, in our industry, which is really equity crowdfunding, I think there’s also a rise of the retail investor, there’s a renaissance happening, and the origin of this industry was really more than 12 years ago, in the 2008 financial crisis. The Jobs Act was really a response to the 2008 global financial crisis, and the concept was simple, was they wanted to make it easier for small and emerging businesses to access capital, to raise capital, and at the same time, they wanted to level the playing field for everyday Americans, and in fact, investors around the world, let them become owners in private companies at earlier stages. And so now, these exemptions took time, they’re called securities exemptions, and we happen to be experts in one of these exemptions called Regulation A+, and it allows companies to raise $75 million, they can market their investment broadly, and they can raise capital, the companies that use this tool can raise capital from anyone over the age of 18 globally, they can legally invest, and it’s incredible if you think about what that means for a company that has 100,000 customers, even 5,000 customers, a person that has an audience on TikTok, or a following on Twitter, or a popular newsletter, and they’ve got a big subscriber base. This is incredibly empowering for individuals and companies, it allows them to turn their customers into investors, it allows them to be creative in how they market investments and create awareness, not just for their investment opportunity, but for the company itself. And so what effectively happens when you run one of these campaigns is you’re marketing your brand while you’re raising capital, and for some companies, that means they’re actually acquiring thousands, if not tens of thousands of new customers all at the same time. There’s another exemption or tool I should mention, which is called Reg CF, it stands for Regulation Crowdfunding, it’s a little bit different than Regulation A+, it allows a company to raise up to $5 million, and they can generally solicit or market the investment. And so there’s a number of these new tools, and the common denominator to each of these is that they allow you to market the deal, and they allow the general public to legally invest. And so like you said, for 80 years, you couldn’t do that, a company couldn’t market their investment, and the average American or the average retail investor certainly could not invest their hard earned dollars into a private company, it was deemed too risky. And now that’s changed, and I don’t think we’re going to go back from here. I think the SEC has just increased the cap, now you can raise $75 million in Reg A+, now you can raise $5 million under Regulation Crowdfunding or Reg CF. So these tools are going to become more broadly used by companies, and the net effect is that you’re going to see better quality companies come into the ecosystem, companies that could have raised venture capital, could have gone to a family office, maybe could have even done a deal with a private equity investor, and they’re going to consciously walk away from those traditional investors, and they’re going to turn to the crowd, they’re going to turn to their customers, they’re going to turn to their fans and followers, and empower those constituents to become investors in the company, thereby creating the most powerful army of brand ambassadors a company could ever dream of. And that’s the future of capital markets, and it’s happening right now. That sounds awesome, I always felt the last 10 years have shown this to us that the venture capital process is pretty broken, it is broken in general outside of the US, there have been a ton of funds being able, VC funds being able to raise any money, even inside in the US I felt that has really bifurcated, either it was the pipeline deals, mostly driven by a vision fund, where you basically had money from the Japanese fat, and you were able to basically raise whatever you wanted. Sure. I still remember a call with Intel a couple of years ago, and they asked me how much do I want to raise, and I said, it’s probably a lot of money, I’m not sure you’re ready for this, and they were like, yeah, we have unlimited money. So if you say it’s 100 billion, we can make that available to you if the opportunity is thick enough, and I thought that’s what happened to the vision fund with the two 100 billion funds, is that it went into a very few selected opportunities, and only with the state of purpose, and I think this is the state of purpose for the venture capital in general, but it was oddly accelerated that you go into a pipeline into a very soon to be seen IPO, and given that you only invest in one or two companies in that sector, that would be immediately a monopoly, because nobody else can raise that much money, because there was only one investor around. And what happened is these companies are still able to go IPO if you have this nighting from the vision fund with a few exceptions, and I never felt that these companies were, and that might be my pessimistic view on this, they were long term growth stories. Some of them are, I mean, that’s obviously too general, but there was a selection to create a lot of crap companies that were blown out of proportion and went IPO, and under, which sounds like $2,000, but still. And listen, you make a great point, and I think that it’s accurate to say that in the past five years, there have been a lot of companies that used these tools as a last resort. They failed to raise traditional capital. They couldn’t attract angel investors or VCs, and so equity crowdfunding was kind of a last ditched effort to keep the company alive. That’s changing now, and what we’re seeing is companies that have every option of capital raising available to them. From a traditional Goldman Sachs led IPO to a $25 million series A with a big billion dollar fund, some of these companies, not all of them, but some of them are now leaning into a Reg A Plus campaign because they see the value of marketing their brand. They see the value of turning customers into investors. And here’s where this is really headed, and people, a lot of, I think, institutional investors don’t understand this or appreciate it yet. But what’s happening is there are companies right now that are raising their first rounds using regulation crowdfunding, Reg CF, or Reg A Plus, and these companies, some of them are going to eventually go public, whether it’s at NASDAQ or in the New York Stock Exchange or London or Canadian Exchange, and then the institutional investors will follow the crowd. Can you believe that? The smart money is going to come in after retail, and for, I don’t know, 100 years, it’s been the opposite. It’s been smart money comes in first. The angels, the VCs, the institutional investors get the sweetest terms, the best deals, all these kickers, warrants, this, that, and now they’re going to follow the crowd. And the guy down the street who put in 500 bucks is going to get a better deal than the Fireman’s Fund or some pension or endowment. That’s where this is going, and I honestly don’t think that VCs see it coming. I don’t think that institutional investors are paying attention because this is still a burgeoning industry, and these things haven’t totally been realized, but that is happening right now, and that is where the market is going. I think that’s really exciting. The way you just described it, it is the insider advantage that most of these VCs had. We think of them as these vice men that make great decisions about the future, but they are 15 years out, and what they do, they actually try and follow each other, and they go into, they try to predict who’s going to be the next buyer from me, and they don’t know the product, they don’t want to know the product that much, there’s very little influence. Again, this is generalization, there’s awesome VCs and there’s terrible VCs, and the way that we empower consumers who are not fully agree with you, who have the best idea of if this product is great or if it’s just anything else, just commoditized, they can be the best investors, and I thought it was a strong discrimination against the retail investors, especially in the early stages, because by the time they could get into these companies at the time of the IPO, they were basically extremely overvalued, and now you can get in at basically zero. Literally, it’s a guy with an idea, and you can say, okay, I like that, and I think that was happening in Cojoto, a couple of years ago, I think 2017, I don’t know if they share the way, or if that was, and I don’t even know what they think of the crypto space, it seemed to me from the outside pretty sketchy, it seemed to me, I never participated in it, but these coins, some of it was 100 times what they were the day before, it was very unpredictable from the outside, and companies were shady, but on the other hand, it seemed like, well, you can raise $100 million in crypto, and just like that, I thought that’s amazing, and it would create a firestorm of entrepreneurship in that sphere. I’m not sure it did, because I have never heard of these companies again, I’m lazy. No, it didn’t, and look, the crypto space is ultra sketchy still. I’m not a fan of it at all, and partly because I was a victim of a hack where I lost some coins, I lost a decent chunk of change, and my guy was actually caught, convicted, sentenced to 10 years in jail, and so I was actually lucky, and I got some of my money back. But look, here’s what we learned from the ICOs, and that kind of bull run. The first thing you see is that the little guy, the average investor has a deep desire to participate in investment opportunities that could be lucrative, and so was there a fear of missing out, was there a hype, was it a mania, absolutely, but it showed you the power of the retail investor, individuals coming into deals by the thousands, tens of thousands, and so there was a very tremendous demand for these investments that were purported to deliver incredible returns, of course, which they did not. The other thing I think we realized is that crypto and ICOs are a great example of what happens when there’s no regulation, and it’s an unregulated market, and so what happens, in case it’s not clear, is it’s rife with fraud. Markets that are not regulated draw bad actors. They draw bad people that have bad intentions into the space, and so it’s a safe haven for the worst of the worst criminals and shady people because they’re looking for a quick way to make a buck. It brings out all the con artists, and it creates what’s called a lemon market. It’s like the products keep getting worse and worse and worse, and the retail investor doesn’t have the same information that the insiders, the sponsors have. Hang on there. I’m with you to an extent. Do I have this libertarian dream, and I’m not sure if we can go to a more economic philosophy. I have this dream still, and maybe that’s just a dream, that given we have a lot of technology, we have a lot of transparency, and we have a lot of, at least potential transparency, we have a lot of data about people, companies, at least, not for startups, but for companies that have been public for a while. If we had enough data, do we still need all the regulation? That’s what I’m trying to get at, so isn’t full transparency, and we can have regulation to be more transparent? I mean, this is where it gets a little gray, but wouldn’t it be better to really go down the information route and enable this, maybe, through regulation, but keep regulation as low as possible? To be honest, I’m not sure what REC A plus involves. Maybe that’s exactly what it does. Maybe you can help me find out how to do this, or help me understand. But regulation, I feel, is just going to put us back into a place where we’ve been, and then I assume the laws that we had, they were created in the 30s, right, after the crash. Well, now we’re just reversing this, but there’s obviously the big risk, if we don’t do it right, that we get into the next loss of trust. Yeah, look, so here’s what I think. I think regulation and transparency go hand in hand. If you look at what regulation does in the United States, and let’s be clear, the United States has the most efficient capital market system on the planet, and it happens to be a highly regulated market. I think we already have an example of what works, and ICOs in my mind, that’s an example of what doesn’t work in an unregulated market. But regulation often requires or implies transparency, and usually it requires. What does that mean? Let’s use an example of a traditional private placement. This is the way that a lot of companies have raised money for decades. You go to high net worth accredited individuals, and when they sign the papers, you have to disclose the risks, and there’s usually two or three pages of risk, and it says, hey, this could happen, that could happen, this could happen, we’re uncertain, we may not have the cash, and the investor signs off on that and say, hey, I understand that I’m buying into a deal and there’s some risk. If you look at a traditional IPO, companies that go public here in the US, and there’s other exchanges, of course, globally that have regulations and disclosure, of course, but the company puts out a 300 page filing, 500 page filing, and maybe 200 pages of those are risks. These are all the risks. Here’s the things you should know as an investor. What happens is, if there’s not regulation, there’s no incentive for a company to disclose anything. In fact, it’s the opposite. The incentive is for them to disclose as little as possible, because the less the investor knows about the inherent risks with the investment, maybe the more likely they are to actually invest. Of course, it’s easier to raise money if you go out and say, hey, this thing’s a slam dunk. You put in a dollar, you’re going to get $2 out. Leave it right there. Hey, I’ll give you 500% in your money in a year, two years. What are the risks? This is how this usually ends. If you have this example with the Chinese companies, they’re all listed on the NASPEC, but they have completely turned this whole transparency idea upside down. They give you lots of paper, but it’s completely useless, and 90% of them are probably scams, and that’s officially sanctioned by the CCP who thinks we’re complete idiots. Why do we give them money if they are just a fraud story, and we take your money in China and invest it into something that actually works, that’s a factor. I don’t know if the Chinese leadership is in on this, but I can easily see that they might. Yeah, look, you’re right, Torsten, which is even regulated markets are imperfect. Even regulated markets don’t prevent fraud. They don’t prevent scams. Bernie Madoff was operating in a regulated market, and he still lied to people and executed one of the greatest Ponzi’s ever. It’s not a surefire guaranteed strategy to eliminate fraud, but it definitely I think is the best strategy. And yet, as somebody who’s now touting the value of regulation, I agree with you. I think regulation to a degree. And so if you look at Reg A+, and Reg CF, these are effectively a trended deregulation. The prior regulation required that you only talk to people you know about your investment, you only go to accredited investors, now that you can market your deal, now that you can let the average person put in $100 or $1,000, that is effectively a deregulated tool. It’s a deregulation, trend in deregulation. And so I believe in that, but I don’t think you can get away with a totally unregulated market because I think ICOs are a great example of that. And what I would hear a lot two, three years ago was, this is great, let’s keep running these ICOs and let’s raise $10 million here and $100 million there. And people would say, let’s self regulate. And unfortunately, it’s a fantasy. People won’t self regulate. We’ve seen it time and time again. And I think that 95% of ICOs were scams, were outright scams. And the other 5% that were legitimate were still absolute disasters for investors. And you said it yourself, you’re like, hey, how many hundreds of companies raised money for some game changing technology or blockchain solution? Where are they? Who did it? Where’s the next Jeff Bezos? Where’s the next? I don’t know. I’m with you. That’s why I’m digging in so much into this. And I know you’re not a regulation guy, 100%. But what I’m trying to get at is, is there something behind all this? Regulations are like, well, that’s why I made this example with China. On paper, it’s easy to fulfill a regulation, but in spirit, you might do it in the opposite. Maybe he actually didn’t know. He probably started and said, oh, it’s going to be better in two years from now. So why don’t we just nudge the numbers a little and then two years from now we’re going to be break even again. I don’t know enough of the case, but I think this is how most of those people start. What I’m trying to get at is, there is something behind that that creates a marketplace where people are honest enough to actually put in paper what is supposed to be there. And it doesn’t mean it’s 500 pages. Warren Buffett puts, I don’t know, maybe it’s 20 pages is the annual report. It’s relatively short. It still outlines a lot of stuff that Warren Buffett runs a really risky business when you think of it. He doesn’t have control over most, or didn’t use to have a lot of control over his business. Now he has more. What I’m trying to get at is, aren’t there values that we can prosper, identify, and then incentivize that actually make an honest marketplace? Obviously, regulation is kind of a bit of an outgrowth of this, but it’s like the first wall of defense. The actual wall of defense is you have enough honest people in the system who you incentivize properly and you have a way to identify the honest and the dishonest people to an extent. Obviously, it’s never perfect. And I was hoping that it’s like on eBay, it was the rating system, right? Remember, that was a big deal. We knew how to scam it, suddenly, we knew this guy is not a total scammer. So I got to send him my laptop. That’s changed by now, but also because eBay didn’t innovate anymore. What I was trying to get at is, when we create new marketplaces like this, it shouldn’t be also innovate on the trust, because this is what’s missing in the public markets right now, because they’ve been gained by the fed, they have been gained by the individuals, by a lot of frauds, Wirecard in Germany, it’s relatively easy to actually make all this up. And obviously, that attracts the bad people, but why don’t we come up with the rating system that is taking care of this headache on its own and scales away, so we don’t have to do regulation anymore? Look, if someone can solve it, it’s a trillion dollar opportunity. It’s enormous. And I think if there is a group that can solve for trust in capital markets, it’s a multi billion dollar, maybe a trillion dollar opportunity. And I hear what you’re saying. In the eBay example, I think it’s pretty good. I’m somewhere in the middle, and I think regulation ultimately is necessary. I haven’t seen a system without regulation that has been successful in capital markets and capital raising. And if I just look at the framework of tools and exemptions that exist here in the US, regulation crowdfunding is a good example, you have a shot at raising up to $5 million. Yet, you still need an auditor, and you need a lawyer, and you have to file a form called a Form C. But the good news is, it’s not a 200 page filing, and it doesn’t cost $100,000. Might cost you $5,000, maybe $6,000. That’s a fairly good trade for a first time entrepreneur that wants a shot at raising $5 million to have some rigor applied to the deal, an auditor take a look at the financials and provide an assessment, a lawyer to provide some disclosure about risk. And that to me is a nice, healthy middle ground. So I think the system is working. The exempt offering framework in the United States is exploding. There are hundreds of companies right now using these tools because they are relatively easy to do. It’s not a huge ask or burden to run a regulation CF or crowdfunding campaign. And Reg A+, where you can raise up to $75 million, is a bit more involved. There’s a bigger audit requirement, there’s a bigger legal requirement. The SEC actually reviews and has to qualify each offering. But hey, you spend $100,000, and you have a shot at raising $75 million, and you can market your deal. That’s a pretty good trade off too. And there’s been about… Yeah, going to all the VCs costs a lot of money too. And the problem is, even if you maybe can get some initial interest, getting to a term sheet and having a term sheet that isn’t like 99% in their favor and 1% in your favor is really hard because they’ve been doing this for 30, 40, 50 years and these term sheets are iron flat and you basically make no money besides your salary ever until the VCs made at least 10X. By the way, that’s going to go away in the early stage venture capital space. And honestly, those guys don’t know it. They’re not even paying attention here. I know. Yeah, they don’t care. I’ve talked to a couple of VCs lately. They’re like crowdfunding. No. They don’t get it. And it’s like, here’s the thing. The VC is going to put out a term sheet and says, all right, for a million bucks, we want 40% of your business in a board seat and 2X liquidation preference, that founder can go and run a million dollar campaign and maybe sell 20% of the company, sell common shares, no board seat, no liquidation preference, and what’s going to happen. And by the way, it’s going to be easier for the founder to raise a million dollars in a REG CF campaign. It’s easier. So what will happen, the leverage disappears. The leverage that early stage venture has on an entrepreneur is going to dissipate slowly, but surely suddenly that million dollars that the VC was offering is not as special. In fact, it’s easy to come by now because you can run a marketing campaign on the internet and you’ll still have the ability to raise that capital. So I think what that means is that these venture capitalists, they’re going to need to offer something beyond money. These guys are going to get hired by the founder. They’re going to have to go up and put up a resume and say, I’ll put my money in, I’ll be your chief operating officer, I’ll be your general counsel, because a million bucks ain’t going to cut it for 30%. So the leverage is going to disappear. So we have to be worried about the venture capitalists, they’re going to lose their jobs. The venture capitalists have to be worried about the venture capitalists. They’re going to have to innovate. They had a good run. It was great while it lasted. They’re going to have to innovate and change their business model to find something more compelling than capital because that’s going to be much easier to come by in the years ahead. I mean, this sounds awesome. This definitely sounds like an entrepreneurial dream to raise. You said the crowd fund was up to $7 million. I still don’t know the proper link. Reg CF, you can raise up to $5 million. Regulation A+, you can raise up to $75 million. And just to be clear, those changes were approved by the SEC maybe three months ago. They’re going to go into effect in sometime in early 2021 in the first quarter. They have to be published in the federal register. Once they are, they will be in effect, and that’s going to happen early next year. You run a company now called issuance.com, right? And you’ve helped how many startups so far? We’ve worked with probably 40 companies in the last five years. We’ve helped these companies raise north of $300 million almost exclusively through regulation A+, offerings. And we licensed technology that allows these companies to run the entire financing on their own website and bring in hundreds or thousands of investors into their deal very easily. And we also provide marketing services and administrative support to companies running regulation A+, financings. We were involved in the first regulation A+, financing ever in 2015, and the last and most recent regulation A+, financing and a number of regulation A+, or reg A+, IPOs over the past five years. So we’ve been in the industry really since day one, and we have a lot of appreciation for the companies and the founders who are really the pioneers in our industry. It’s the companies that are choosing to do these capital raises that are driving the growth of the industry. And we’re one of the service providers that are kind of humbled and excited to be a part of the action. But we’re a cog in the wheel at the end of the day. It’s really the companies that are doing the raises that are driving the growth. And we’re part of the solution to help these companies get from point A to point B. Well, it’s like a typical scenario. You mentioned that the one you’re involved in is slightly bigger. So I assume this company had been around for a couple of years. What do you think is the average venture, and where does the money come from? Do they put it literally in the newsletter? I saw wine.com raise some money. I’ve been using them, but that was probably last. I think there was 2 million. And it was oversubscribed. They told me, I have no idea if that’s true, but they keep telling me it’s oversubscribed. But give me an idea what the average startup looks like as a more lifetime startup. And how do they incentivize their customers? Or I don’t know who actually partakes in these rounds to be in the round. And then what is the typical investment? Like if you average it down, what is the 80, 20 role for this? Look, the average investment in this industry in the reg A space is about $2,000. So the average person who’s participating in a reg A plus investment is investing $2,000. They’re doing that by credit card, wire transfer, ACH transfer, even an IRA retirement account, or they’re mailing a check. The average company is usually an operating business that has two or three years of operating history. They’ve raised a seed round, and this is now like a series A financing or equivalent. That said, there’s companies that are pre revenue and pre product that have raised $10, $20, $30 million. There’s biotech companies that have raised $50 million. So there are a number of really neat and interesting exceptions to the rule. What I would say on average, the type of company that will do best in this industry is a consumer products company that makes a physical product that has an audience of paying customers. And if you’ve never seen the product, you don’t use it and you hit a website, you would get it right away. It would be easier for you to understand what the product does, what the business does, would also be easy for you to understand how the business makes money, how they generate revenue and profit. Those types of companies are usually very good fits for regulation A plus or equity crowdfunding in general. Is that something that Etsy already include? I just think of Etsy, like you’re the entrepreneur and you put this like, I’d actually know what the current model for them is, but you really thrive on physical products that you have unique edge over. You have a unique design over. They’re often made in China, but they’re coming out of your head, so to speak. And then they’re already shipped for quite some time and maybe you created a brand around this. Is that something that makes sense or is that there’s just too many of them and it has to scale up to a point to really be able to raise that much money? It’s a good question. What are the evaluations life? That’s what I’m curious about. The evaluations range. I mean, they range from 10 million to 300 million, really all over the place. It just depends on the deal, the company, where they’re at in their operational, their plan, their execution. Yeah. I don’t know if the average company that sells on Etsy is a good fit for this, but company doing 10, 20 million in sales and has 10,000 customers, maybe they would be. Not to say that company can’t sell something on Etsy, but I think on average, Etsy is a marketplace for kind of craft entrepreneurs, craft products. Now what we’re doing is we’ve created a television show where we’re putting these companies in the TV series and we’re letting the viewers follow the company week after week as they’re raising capital and some of them are even going public to NASDAQ. For the first time ever, the viewers of the show can invest into the deals. That’s kind of the linchpin of this industry. The real question for companies that raise capital like this is how do they market their investment? How are they going to get the right audience and the right volume of that audience to see the deal? It’s kind of a marketing conundrum. You either have a great way to market the investment, you’ve got to build an audience, you’ve got a financial publisher that will provide coverage and promote the deal. You go in this TV series, you spend $100,000 in Facebook ads, you’ve got an email list, there has to be some hook, there has to be some way for the company to create mass awareness for the deal. That’s the single biggest challenge and it’s also the single biggest success factor. Companies that can effectively market the investment to a strong audience of likely investors, they will succeed. They’ll raise a million, they’ll raise $5 million, they’ll raise $30 million. Companies that can’t figure out the marketing are going to fall flat on their face and they will fail. That’s kind of the excitement of what’s involved here is companies that are savvy marketers or can hire savvy marketers or come up with creative ways to market the investment, they have a good shot at raising capital. Again, at the end of the day, that puts the power in the control of the founder because they control their marketing and it reduces the dependence on the venture capitalist that’s going to try to get some traditional term sheets slammed in and take ownership, take over the company, buy the business or all these weird provisions that you don’t want to do or agree to as a founder, you can avoid that now and you got to figure out the marketing to be successful. So we are in the attention economy. If you have enough attention, you can do anything. That’s a fact. You can be the next president. That’s a fact. We’ve seen that. Yeah. We’ve seen that, right? It worked out at least once. That’s good to hear. And obviously for entrepreneurs, that’s a great message. It’s gotten harder and harder to get enough attention, but on the other hand, once a year, there’s a lot of avenues that co promote you that I think were around 20 years ago. So there’s a lot of saturation out there and I think it’s only going to get worse. But the good news is, if you say your video does well on YouTube or your podcast is very popular, where you go on Joe Rogan, I mean, there is avenues that are ready for you. It’s just shifting a lot. What I’ve noticed is we have these periods of startups go along with marketing innovations. And so 2000 was SEO when Google was there, where you could be on Google number one and you could hire someone who would say, okay, I promise you, you’re going to be number one. You don’t have to pay me. And then that went away. We went into AdWords and there were tons of cheap keywords to buy and this was very entrepreneurial for a couple of years. And then it went away. And then we went to Facebook and then we had free Facebook and incredible amount of traffic for really weird sites. And that went away and we had Facebook buying traffic that went away and we went to YouTube. YouTube still gives everyone free traffic, but it’s kind of at the end of that. And now we all went to TikTok and that seems to be a real problem for most people to make money of TikTok traffic. What do you think is the next marketing revolution? One is this, you know, what’s an 80, 20 role? I built businesses just of SEO and that was easy, right? It wasn’t hard. And then I built businesses of email communication, which was also easy, but now it’s really hard. These avenues still exist, but it needs to be more tied, no more better adjusted to your audience. You need to be more lucky. I feel kind of like going up and down Central Road and 30 people say no and one guy says I love your product, whatever you want, I’ll give you that term sheet. Do you have any tips for entrepreneurs? What is the next revolution in marketing? What are like safe paths out there? Well, look, I mean, for our industry, we have a very clear and strong opinion about it. And we believe that the future of capital markets is content driven, that companies that can create the right content and then plug into a network, CNBC, entrepreneur.com, Netflix, Disney, Amazon, that is the future of capital raising, content marketing, and that’s where we’ve made our bet. And I think a lot of people in our industry might not see that yet, but in a lot of ways it’s very simple to explain. You’ve got all these big publishers and platforms. They already have the audience. They already have it. Amazon has it. Netflix has it. You could be a no name filmmaker and you’ve got a great idea and Netflix is going to pay you $10 million, go make a horror film, suddenly you’re somebody because they’ve got the distribution channel. They’ve got the pipes. They’ve got the audience. The key is to plug in to a network or platform that already has the audience. That’s precisely what we’re doing with the Going Public show. We’ve signed a deal with Entrepreneur Media. They run the website, entrepreneur.com, 15 million monthly unique visitors. They have another series out that does 1.7 million unique viewers per episode. That’s how we create mass awareness for an investment. After that, we’ll go to Amazon. We’ll go to Disney. We’ll go to Netflix. This is how I think other people in our industry should be thinking about the future of capital raising. So I’m answering it very specific to capital markets and how we created it in our time. The reality TV or film driven content, which I think is wonderful, it’s at a certain scale. It’s not hard to do, but it’s hard for smaller ventures and less experienced entrepreneurs or maybe not. No, absolutely. Definitely not easy. Not easy. And listen, it’s a model that at the moment. You can’t call up Disney. You can’t go viral on TikTok, but you can’t call up Disney. You guys maybe can, but even then, it’s going to be two years before they say, oh, yeah, we’re going to put this into our back catalog maybe, and we’re going to do a little promotion. This is like, it’s kind of like going to VC. You have these 20 places on Central Road, and they have all the keys, and they can dictate the terms, and they know it, and they do it every day. You kind of shifting from, okay, we don’t have to talk, the VCs are not the gatekeepers anymore, but now it’s Disney or entrepreneur would come. I mean, there’s many brands out there. I’m just using this as an example. What I found so interesting with Google in 2000 is everyone, you could compete with everyone on the planet, but you could kind of show off your skills in this marketing battle. And if you’re good enough, you would be selected by your customers because it was easy to reach them. I mean, I liked the Netflix example, but it’s still not easy to get listed on Netflix, right? I mean, you would start with YouTube for a couple of years. Yeah, look, you’re right. And I mean, at the same time, I would say, look at Shark Tank, how many hundreds of companies have been featured on Shark Tank in the last 10 years? Maybe thousands of companies at this point. So it might have started off and it was like, oh my God, if I could only get on Shark Tank, now I feel like everybody knows somebody who’s been on the series. That’s what we aim to create. Now look, I do think that social media, there’s a lot of platforms there that are needing content. So if I’m a founder, I’m going on LinkedIn. I’m trying to create an audience on LinkedIn. I’m going to TikTok. Those are platforms where you have an opportunity to build an audience organically very quickly. You got to be authentic. You have to have an opinion. You’ve got to be active. You have to post often and aggressively, but those are platforms where great content goes to the top. Otherwise, you know, you’re going to be buying ads on Facebook and buying ads on Instagram and buying ads on other platforms, but there are platforms right now where you can very quickly amass an audience if you have a strategy for getting your message out there. I’ve been able to do this on LinkedIn. I’ve seen others do it. Gary Vaynerchuk talks about it. Right now I feel like LinkedIn and TikTok, obviously vastly different platforms and audiences, but those are two good starting points where you can build a surprisingly large audience quickly without a lot of money. What I heard, which I think is a great shortcut, and I’ve done this myself, I have to admit, so if you have a new product and you’re thinking of investing, it doesn’t have to be a million dollar investment. It can be relatively small investment. It’s a new product. You talk to a founder and they say, you know, we have this in mind, and you’re like, okay, so who’s buying this? They say, oh, we don’t know. Maybe consumers, I don’t care. We haven’t thought about that. It’s a really early stage, but what you can do on LinkedIn is literally just select the audience. That could be your connections. It could be new connections. Yes. Give them an opinion and say, do you want to try it for free, or do you think this is a cool product? You can basically be an honest questioner, you know, I’m thinking about investing. Would you buy this? And you realize people either give you an immediate reaction or you just usually on LinkedIn there’s no reaction, right? So like our most places, so if you get a lot of quick feedback back, you feel like, whoa, this could be something like, I think for founders, this is a real great shortcut and don’t spam LinkedIn, but just talk to like 50 connections and ask them, do you think this is a good product? And I think this is such a good shortcut, it’s a small sample size. If you select them properly and you screen them and you have those are people who would fit your audience potentially, you get a lot of value feedback. And I must say this anecdotal evidence for myself has proven very true. So things that even at an early stage, maybe it’s not the right product yet and there’s a lot of changes, but you get a message back and says, okay, tell me more. And that’s your future customer. If you get nothing back, then obviously you might have targeted the wrong audience, but even 50 people give you a really good idea. I know this is a wonderful growth hack. Listen, you’re spot on and by the way, like switching hats or switching gears to talk about like startup strategies, that’s one of the smartest things a founder can do is seek feedback from customers. It’s shocking how many entrepreneurs skip over this. They just launch, they build something, they think there’s a need. They don’t test it. They don’t audit themselves. They don’t engage. They want to be the key jobs. They just want to go. They’re like, I’ve seen the future and I’m going to build this. I think it’s really a big mistake, honestly. I think most entrepreneurs would be very wise to get feedback from customers and you hear this over and over again. It’s like, how did you build this great product? And someone’s like, I went on the street corner, I talked to 50 people a day for a week and I figured out there was a need for DoorDash, whatever it is. But that’s a really smart strategy and I think that more entrepreneurs would benefit from taking the approach you just talked about. Yeah, it’s free almost, or basically it is free, maybe it costs a few hours of your time and you save yourself the hassle a couple of years down the line. One thing I want to talk to you about is, so there’s this kind of a bigger topic, is the question of how, what kind of investments do we need in order to drive up this entrepreneurial process we talked about in the beginning? And there’s a lot of talk and I just read the entrepreneurial state and it’s an interesting book that basically puts out this thesis that government or state can be as entrepreneurially as a startup. And I was shocked to read that and it goes deeper and what the author claims, and I’m not fully agree with this, but I think it’s pretty relevant, she claims that a government likes, for instance, Singapore that takes an early stage investment into core technologies. So things that might be completely ridiculous right now have no practical application, but it’s core technology and puts a certain amount of money into it, kind of like what DARPA does, but there’s different ways of doing this. And it comes with this core research and she makes that claim that the iPhone is basically 99% funded by the government and it shouldn’t have been allowed because all the money is basically this taxpayer innovation. So there is this offset that you said that earlier without marketing we can’t raise anything. But if I’m saying, maybe that’s a bad example, but I want to do the space elevator. There isn’t a lot of people, I can show them a picture in a drawing, but beyond that, it’s not going to have a practical application for 10, 15, 20 years. And I can sell them some more science fiction, I can say, I want to have houses on Mars and then I can be Elon Musk or I can make a story, a narrative around this. But what’s happening is we are moving from a real company into narrative investment. We can say clean tech. I have to put, I’m a fund and I have to put 5% into clean tech because my voters said so. What I’m trying to say is what role can crowdfunding play into these long term investments that are often more fundamental? And a lot of people say this is actually what needs to be more of because these things have potential to change the world, not just by trillion, but by hundreds of trillions over the course of a decade. Is that something a crowdfund can do or you say that’s not going to happen? Someone else has to do it. Well, look, for a lot of these big ideas, they call moonshots, I think, a lot of these companies require substantial or incredible amounts of capital to have a shot. Maybe it’s a quarter of a billion dollars and at the moment, that’s a near impossible outcome from a crowdfunding standpoint. What’s more realistic is that company turns to the crowd at an early stage, maybe the beginning, and they raise $5 million, $10 million, $20 million to launch the business. They might not get the prototype, they might get more of a design who knows. So I do think crowdfunding can contribute as part of the lifecycle. I don’t know that equity crowdfunding will be the right strategy to fund some of these moonshot concepts that require substantial sums of money that there’s a handful of investors that are going to be able to do that in one fell swoop. And so yet I think there’s a role. And look, I happen to believe that the cure for cancer, there’s a high probability it will be crowdfunded, that it will be equity crowdfunded, and it will be a company that doesn’t fit the criteria for a traditional investor and yet may have success turning to equity crowdfunding to start. I believe that’s a possibility, and I hope that’s the case. So a lot of these causes and a lot of these moonshot ideas, they do have mass appeal. They have appeal, not just to big investors with deep pockets, they have appeal to people around the world that want to make a difference and believe in the cause, believe in the vision, believe in sustainability, a cleaner future, things that are environmentally friendly, things that have impacted them, their mom, their dad, their family, people, their friends. And so these are now you’re getting into kind of cause based fund raisings that I think are great fits for crowdfunding, whether that’s biotech, med device, energy, and so certainly crowdfunding can play a role, although it may not be the number one strategy to raise the ultimate amount of capital that’s needed for these companies to have a shot at success. Do you think the US especially should invest more in the basic research? So literally take, I don’t know what it takes, a trillion dollars maybe, a good chunk of money, 10% of GDP, 20% of GDP, and put it into basic research. Obviously enriching initially researchers, PhDs, professors, do you think that’s a good idea or this has to be market driven? Because the obvious issue there is that the long term research is potentially huge, but you might go in a completely wrong direction and you’ve just produced paper and nothing ever happens. And it’s kind of like a Chinese state run company. But on the other hand, it can make huge impacts that I feel we’ve been really stuck into more short term investments, social media, at least things that we’ve seen really, really hit the out of the park. What’s your personal opinion on this? You might not be an expert on this. Definitely not an expert, but I feel like Elon Musk and Tesla and SpaceX in particular are good examples of where the future is and where the markets are going. NASA is funded by the government for how many decades and look what a brilliant and driven entrepreneur was able to do, essentially leapfrog NASA from an innovation technology standpoint. And now it looks like SpaceX will be the first company to send a rocket to Mars, maybe in the next decade, maybe in the mid 2020s, I think, according to Musk, why wasn’t NASA able to do that? You know, they’ve got all these government resources and all this access to funding, but something that… Yeah, but I mean, he probably hired 5000 people from NASA. You know, I mean, this is like the NASA… It came only into being and had success in the 60s because it hired every single Nazi who knew about rocket technology and, you know, not just Mr. van Braun, there were tons of other people. So you can always trace it back, and that’s obviously the problem with this, because we have so many layers of innovation, you can always trace it back to some government funding. But obviously you need both, right? You need the government funding and you need the entrepreneur who actually makes it work. Well, a lot of people say, oh, we are in this stagnation because the consumers have not adopted or maybe the entrepreneurs haven’t built good products, or maybe there wasn’t enough research for basic research. You know, listen, it’s a good point. I still think that based on what we’re seeing, and again, I look at SpaceX as such an incredible example of what’s possible. I think it’s proof that, you know, government, there’s too much bureaucracy and red tape. There’s not enough out of the box thinking, and honestly, there’s a lack of leadership, and it takes a visionary individual. It takes a visionary entrepreneur to really shift the tectonic plates in an industry, which is what Musk has done in a very short timeframe. I think that is a model for where we’re headed. I don’t think it means that governments shouldn’t put money into research or into programs that are designed to do good. Maybe you’re right, Torsten, maybe you need both. You need funding and research that’s government sponsored, and you couple that with a visionary entrepreneur that is incredibly, insanely ambitious. To the point that they are destined to succeed through sheer will and perseverance, maybe that’s a better model. Yeah, it’s hard to draw the lines there. One thing we talked about before is, you know, you have your own entrepreneurial ups and downs, as we all have, and you mentioned the intensity, the way it felt to you, or I don’t know the specifics, but can you share some of those stories and how you have found an emotional way to deal with this, because I think a lot of people are scared by this, especially as you go through funding, you maybe raise $5 million, and then you realize what you wanted to build doesn’t work at all, so you either have to pivot, you kind of do something completely different, or you maybe throw in the towel. At what point do you decide, okay, this is just a low, let’s keep going, at what point do you decide, this is crap, we’ve got to build a new company, or I just got to do something. What’s kind of your gut feeling? Look, I think in my own experience, I think it takes a certain amount of time and experience as a founder to be comfortable being a founder. You can leave your day job and become an entrepreneur and be terribly uncomfortable with what’s happening in your business every single day. You can have sleepless nights, whether you raise money or not. For me personally, I guess I can only speak to my own experience. I think it took me five years, maybe six years, to finally settle into a comfort zone. What that meant for me is that I could get hit with anything, it doesn’t matter if it’s running out of money, investment not coming through, deals falling apart, lawsuits, you name it, and it’s just more shit I got to put out of the way and move on. It used to be incredibly stressful. I would lose sleep over it, my head would race every night, every single night. What if this? What if that? What if this doesn’t work? We only have two months of runway, we only have 30 days of runway. What if I can’t pay back this line of credit, as well as far we’re going to come after me and put a lien on my house? I think at a point, you learn as a successful founder how to manage those feelings and you compartmentalize. You realize that these are things that happen. In order to be successful, they’re going to happen. There’s no such thing as just infinite success and no obstacles. It’s a myriad of obstacles. For me, I learned how to compartmentalize those challenges on an emotional level and get them out of the way. There’s a problem, I address it, acknowledge it, figure out how to solve it or attempt to solve it, assign it, delegate it, move on to the next. I’m a much happier person now. I’ve kind of accepted things can work, things can fail, but it’s the ability to get back up and just move through these things quickly. That is most important. Again, it took me five or six years and man, those five or six years were brutal. They were terrible. The amount of stress and then that stress is visible. You see it on somebody’s face. My wife would see it. My kids would see it. Your team sees it. Investors see it. They sense your uncertainty. They can sense fear and people aren’t stupid. Now I’ve kind of learned to overcome that. To me, I think it’s just you’ve got to be in the hot seat for long enough. You have to deal with a bunch of shit and figure out how to solve it and solve it confidently and with a smooth attitude about it, a kind of even attitude because it can destroy you. It can eat you up. In some cases, kill you. There’s a high suicide rate with entrepreneurs because the stress is so intense. I think I’m on the other side of that and I try to make myself available to others who are going through this because there’s nothing like it. It will test you to your core. It will test you as a human being to your soul. Who are you really? Are you equipped to deal with all of the challenges and the uncertainty and the frustrations and the losses and disappointments because it’s a consistent battle. Even in success, there’s more things that come your way. It’s really tough. Time is the best, time and experience are the best teachers and so the longer you deal with these things, the more equipped you are to overcome them. I hear you. I think all of us, we have to go through this. This is insane sense of euphoria. It’s almost like it’s like being bipolar but not on your mats because these positive emotions can be as strong as the negative ones and you can feel, and I feel like Elon Musk is on this sometimes on TV, he’s in a different universe. You feel like you get this insane high, this maniac phase. It’s more stretched out so it’s not next week that you fall from it but it might be two years from now. It might be three months from now. You look back and you’re like, okay, actual difference, how much money I made, I mean those weren’t that big but the emotional differences were ginormous between the maniac phase and the depressed phase. I’ve been looking in the literature about people who are bipolar, how they manage without meds, how they go back, do they write diaries, how they start to reflect and that definitely helped me a lot. It’s something we see in children today because if you see how people interact with social media, it’s kind of a bit like an entrepreneur, it doesn’t have the same monetary investment but it has this emotional investment, 100%, teenagers have this emotional investment into whatever they do on social media and then they’re being tested to the core as you say because there’s so much negative feedback and there’s also a lot of positive feedback. Who should I listen to? Is the positive feedback my validation or is the negative feedback my anti validation? Should I change? Should I change tomorrow? Should I change the next six years? How does my time horizon look like? Do I have to block these people? Those are basic decisions but I think it’s the same attitude we talk about and a lot of kids have these today, they get really popular, get a couple million YouTube followers and you’ve got so much shit thrown at you every single day. How do you deal with this when you’re 25 but think about you’re 13. How do you deal with this and not go insane? I find this pretty pretty stunning that kids are able to do that. I think you’re right. It’s a type of pressure that I can’t even fathom and you see these TikTok stars with 30 million followers, it blows your mind but look, taking it back to founders and kind of overcoming obstacles, my biggest piece of advice which is not widely spoken about or recommended or even conventional but I think is an absolute superpower for anybody listening right now to this podcast is to try sobriety, go sober, stop drinking, stop smoking, stop taking drugs, quit all of it. I have been sober torsted for seven years and my sobriety is the foundation, the foundation, the bedrock to my success as an entrepreneur. Believe me, seven years ago I wouldn’t have imagined ever saying that to anybody and yet it was a game changer. The odds as a founder are against you, most businesses fail, most startups fail. So how do you increase your odds of success? Take out all the negative behavior, take out the hangovers, take out the loss of focus and quit, try going sober for 90 days, see how you feel, go six months, go one year. I’ve gone seven years, I haven’t looked back. Only after I quit drinking was I able to leave my day job and go all in on my own company because my own company started working when I quit drinking and it wasn’t failing, it just worked much better when I quit drinking. And so the best way for me to describe it is when I was drinking and I was a big Napa cab red wine guy, I would drink, I’d go through two bottles a week, three bottles a week with friends, with myself over the course of an evening, not black. Yeah, you know, it’s not insane, but I would say I was like at 95% effectiveness as a human and I had a great career and day job and I was making money and things were working, but I was 95%. I quit drinking and over about a two year period, I went from 95% to 96, maybe 97, right? Because you can always improve, people are imperfect by nature, but that one or 2% difference was game changing, life changing, it compounded over time, a little bit more focused, a little bit more productive, a little bit more effective, a little bit more persuasive, the words I would choose, I would get up a little bit earlier, put a little more time into my business and over time it worked and you read these things, you read TechCrunch or articles and people don’t talk about this, but sobriety is a superpower and I used to be a big drinker, a big smoker and I don’t have any shame in saying I liked the feelings of being high, I liked smoking weed, I liked being at a party, I liked drinking red wine at a steak dinner, I liked the social aspect, I liked all of it and so it’s scary for people because most people like these things too, they like the buzz, but there is a better future as an entrepreneur and if you’re serious, if you are dead serious about being successful, if in your mind you are destined to be an entrepreneur, you want to give it a shot or you are a founder and you’re looking for an edge, I am telling you right now, this is the biggest secret superpower on the planet and everybody listening should give it a shot, they should all try. It’s a very powerful statement and we’ve just seen the death of Tony Cia, who was the CEO of Southbos and worked last couple of years in his life and apparently it was induced mostly by drugs and by alcohol. He had a serious addiction issue and he wasn’t poor, he had all the money in the road, he didn’t have to work, he could just become a fitness nut or a philosopher, but he definitely succumbed to this and you can see as an entrepreneur, but it is so hard emotionally, we all have that problem, but how do you shut off after 12 hours of looking at your computer and then you have two hours of watching a movie and how do you make the brain feel that this is the relax and this is the work and vice versa and now you should relax, so drugs really help with this, I don’t want to promote drugs at all, but the drink at night, it starts with one, then it becomes two, the first drink is not the problem, it makes all of these things are addictive, otherwise people wouldn’t come back and then you go in two, then three, but you’re like, how do I fall asleep if I don’t drink and you’re like, I can’t, because I tried and then for a week you can’t fall asleep and you’re like, okay, let’s go back with sleeping pills, whatever that is, we all have that problem and it’s more emotional, it gets and it’s more stakes are involved as higher that is and I always felt that I don’t want to excuse bad behavior and then I always bring up the example of Warren Buffett because he might have terrible traits, I don’t know, I don’t know him personally, but he manages what 100 billion, 150 billion, I don’t know what it’s worth, so if you just extrapolate your own 150 million or your 50 million whenever you manage and say, okay, but if I manage more money, I should be more crazy and you’re like, no, you would be dead already, so you got to put this together and say to yourself, okay, if it’s just more money and he’s more responsibility, so to speak, but he still has the same problems, but he manages it on his grand scale without going crazy, at least from what we know, well, who knows what he’s been doing in this dungeon. I don’t think he has one, so. Listen, everybody should try it, everybody should try it and I just think it’s such an opportunity and you want to give it everything you have, it’s so hard to be a founder and to run a successful company and to really break through and I think more founders should go for it and give it a shot. One last thing that I want to be very conscious of your time, one last thing that I felt is I would predict definitely is how entrepreneurs interact with the religion and for a time religion was a big driver for people and then they would become slightly less strict in their roles, like what we’ve seen in the early 20th century, we’ve seen this back in the 12th century, so this is a recurring theme. I always feel that religion should play a bigger role in entrepreneurship, it’s kind of, they kind of have nothing to do with each other, there’s maybe one guy who is religious, the next guy isn’t, I would say 99% and I take the San Francisco experience, 99% of the founders in San Francisco never looked into religion at all, maybe they do some meditation, but that’s why. That’s a really interesting and like a kind of like out of left field comment or question and I think it’s actually really interesting. I feel like religion provides community, it provides a support system and a network and I got exposed to the Mormon community a few years ago on the East Coast and what I realized is that there’s a lot of Mormon billionaires, there’s a lot of very, very successful Mormon entrepreneurs and I wish I could tell you why that is, somebody out there listening probably knows it like, well, here’s why, here’s what they do and here’s how the upbringing works and they support each other like this, but it struck me like there’s something about that community and that culture and that network and upbringing that really encourages people to be self sufficient, to rely on themselves and I just have a sense that there are a lot of very entrepreneurial people in that community and look, you don’t have to be a billionaire to be successful, one of my friends is a guy who runs a publicly traded company called Love Stack, Sean Nelson, who lives in Utah, but there’s something about that that’s really interesting Torsten that’s probably worth looking into. Now you’ve got me intrigued and I’m going to look into it, but I think you’re right. I think there’s something about the sense of community or values that can play into entrepreneurial success that’s worth digging into. I noticed this when I went through all the old texts, that this value system and the way they envision the future, entrepreneurship is a self fulfilling prophecy, you create a better prophecy, you get enough people to buy into it, so everyone’s going to be better off and also GDP grows and the same is true for these values and I think this is why these religions are still around, otherwise we would never have heard of them because they create the same value system that makes everyone better off, so the pie is growing, kind of like Adam Smith, but he didn’t know that his values were basically the Old Testament. He didn’t realize that because it was so implicit in the times in the 18th century, but I think capitalism exists without religion, but there is a lot to it that comes from the Old Testament and other religions do that too, that just seems to be a winner, at least for us it seems to be implicit in culture as well. I think it’s a great point. Anyways, on that note, we have something for the next podcast. Let’s see here, you tell me. Yeah, no, I’m saying we can talk about religion in the next podcast and see what influence it really plays. Oh yeah, there you go, yeah. And by that time you’re going to be a billionaire and the show on entrepreneur.com is going to really take off. Thanks for doing this there, that was awesome. Torsten, it was my pleasure, thank you for having me on. Same here, looking forward to next time. Thank you.