I'm John Henry.
At 18, I started my first company, and within two years,
I successfully sold that company.
Now, I'm working with small entrepreneurs
to help them navigate the world
of building their own businesses.
When you invest in a company, what do you look for?
How do you look at deals?
As a venture investor, see venture capital
is very different than other kinds of investing.
I own real estate, every month, I get rent checks,
you get residuals, if you're in private equity,
when you buy cashflow in businesses,
I owned a dental practice and a cafe,
so every month, you get distributions.
In venture, you don't make a lick, you don't make shit
until the company gets sold, and so it's a very different
kind of investing, it's higher risk, you get a lot
more potential for zeros because everyone's swingin'
for the fences, but what you do get, you get the opportunity
to potentially invest in the company that ends up shaping
the market as a whole. Correct.
Right, so... A disruptor could be...
Let's say Gary Vee, for example, he invested in Uber
and their series A round.
Uber, as massive as they are, he hasn't made a single dollar
off that investment, he won't until they go public.
They're going public this year, they're filing
a 120 billion dollar valuation, Gary's gonna make
a lot of money, so anyway, so what do we look for then,
now that I've painted a picture of what venture is,
well we look for okay, can I get in at a good enough
valuation early on so that we don't need
a very massive exit to make our money back.
If we can invest in a five to ten million dollar valuation,
if that company sells at 50 or 100 million...
That's a good return.
We're makin' our returns. Yes.
So we look for that, we look for...
They not looking necessarily for you to coin on it.
Exactly.
If it happens, it happens, great.
Exactly, but you want to be more strategic about it.
The other thing that I will say
that I think will help founders
is this is a very reverse engineered kind of approach.
'Cause what we'll say is okay, most companies in,
we invest on cross sectors, let's say beauty or hemp
or legal let's say, most companies are being acquired
at this valuation when they're making
this amount of revenue.
Yes. Right, so the sweet spot
right now is once you start making 10 million
to 20 million in revenue, your likelihood
to be acquired for a nice number goes up.
So then as seed stage investors, we say okay,
they're making one million right now in revenue,
what do they have to do to go from one to 10?
What can they optimize, right?
Exactly.? What can they refine,
got it. And if we see a clear path,
and we understand that the founder kind of gets it,
then things start lookin' like we're gonna invest,
and that is a glimpse that I've never offered before.
This is more the science
of venture capitalism. Nice.
Do you also talk to the founder ahead of time,
hey, I know maybe your big dream, you wanna build it to
a billion dollar company, but really, as an investor,
we're looking for that sweet spot when you get
to that 10, 20 million, we're gonna sell.
That's a good point.
The answer, unfortunately, is no, I don't do that
as much as I'd like because when we're valuating
for investment, we need a founder who's already there.
Got it. So what I want to do
and what this show and my show helps me do
is actually educate entrepreneurs,
so before they go fundraise,
they're ready to have that conversation.
Got it. So content ends up being
a really nice play here. Got it.
And when you invest, what else do you do to add value
as a VC, do you coach them, do you help them
with maybe give them some exposure, what do you do
to add value?
Yeah, that's a great question.
One thing that we do have as a firm is we have
a lot of visibility for a venture capital firm,
so we have a nice brand that people want to have
on their cap table, they want us invested in them,
and as our brand grows, we become more marquee,
more and more people want that stamp.
So people know that you're in, then, right.
Exactly, so we signal the market, right so our goal
is to kind of be the premiere diversity focused firm
so that we get the best deals in the space,
and as you said, the moment we stamp them,
then if a founder is raising, let's say,
two million dollars, and we write them
a million dollar check, just because we invested a million,
our hopes is that other people flock around
and fill their rounds out.
Right. So that's one of the areas,
we do a bunch of other more technical stuff,
but I think we're still young as a firm,
so we're staying open to okay, what are gonna be
the real areas of value, 'cause I'll tell you somethin',
it's really easy to have a really good answer on paper.
Oh, we'll add value because we'll do portfolio management
and this and sales and marketing, but then when you invest,
and the company says hey, let's do this, you gotta be ready
to go, so we're takin' our time with it.
Are you stay in certain sectors or certain industries
or you're pretty open to any...
Cross sector. Okay.
'Cause remember, only 2% of all venture capital
is going to 70% of the population.
Correct. If we slim it down
and get industry specific, we're gonna leave
so many deals You're limited, that's true,
that's true. So we wanna be everywhere
right now, and then eventually...
How many deals on average you're looking on, say,
on a monthly basis?
We're lookin' to do about one deal a month,
so venture capital... Okay, how many deals
come across your table?
Last year, we saw 378 deals year to date,
and we have roughly,
we had a roughly a 1-2% investment rate.
So we have to increase that a little bit.
Kind of look at 100 and then 10,
do the regions, and then pick one, right?
Correct, so that's the way that the map works out.
In venture, it's funny because the numbers work against you,
as you saw. Yes, that's right.
Until the numbers work for you.
That's right.
'Cause if you have a big enough portfolio,
somethin's gonna pop.