Why Venture Capital Works For The Sharks But Won’t For You

Back in August of 2009, the show Shark Tank debuted and suddenly everyone became an armchair venture capitalist. The idea of investing some money in a brilliant idea, with some determined founders, earning huge returns captivated the attention of anyone with half a business hubris.

And now 8 years since the first investments were made, we can easily see the positive results and success each investor is having.

But Silicon valley caught on too and everyone with a checkbook is a venture capitalist and the cash is flowing freely. Goldman sachs reports a record 121 billion of ‘Dry powder’ (aka cash ready to be invested) in venture capital funds. Meanwhile the total annual value of all venture capital deals closed in the US since 2008 has more than doubled from just under $30 billion to just over $61 billion.

Infographic: Venture Capital: More Money, Fewer Deals | Statista You will find more statistics at Statista

Perpetuating it all is solid growth in the US stock market as a whole which has risen by 202.97% (S & P 500 total return 8/9/2009 – 10/21/2017) since the launch of Sharktank, and kept optimism high in the VC world

And now venture capital comes to the masses with companies like Seedinvest, and Republic. No need to even step foot in the valley. No Mark Cuban size wallet need to get started. All you got to do is open an account on either of those platforms, spend a few minutes inputting your information and you’re free to start picking great idea’s and making winning investments for as little as $1,000 (I think it might even be less for some opportunities). Seedinvest will even make it easy to diversify your bets and passively invest you into 25 start-ups for as little as $200 each.

I have to admit, the concept wowed me. I’m a business guy. I’m an investor. I’ve always been an armchair VC and now’s my time to get in on the action. Here’s one company caught my attention: Keenhome, a company that makes air vents that you to control temperature by room. It solves a problem I’m personally familiar with. Sometimes one room in my house is hotter than another. Fortunately I live alone, so climate control is at my sole discretion, but in a household with multiple people the thermostat can cause wars. Keenhome’s product solves it. It’s also in the smart home category which is trending right now, with an expected revenue growth rate of 21.8%. I own a home service company which has done rather well, and a friend of mine owns a wildly successful HVAC business which is very closely related to this product niche. They’ve also done $2,600,000+ in sales and have a slew other pitch facts indicating success. Certainly it must be a good investment.

But I’m not convinced any of these investments on crowd capital platforms are going to work quite as well for you and me as they have for the sharks. Here’s why:

    1. Why do they need crowdfunding?

      As I mention above cash is flowing right into the venture capital world. Seemingly anyone with an idea, a little business acumen, and a little charisma can easily get a deal. There are large scale venture capitalists following all the funding syndicates… reserved for accredited investors. They aren’t idiots, and they aren’t short on cash.

      If a business is truly a good ‘opportunity’, there’s no reason why they need to go to the little fish in crowdfunding. Established venture capitalists bring more to the table than just cash (more on that below), and there’s less headache dealing with a few large professional investors than dealing with the masses.

    2. The sharks invest more than financial capital?

      Mark Cuban, Kevin O’leary, Daymond John, Laurie Greiner, Rob Herjavec, Barbara Corcoran, all the other sharks, and all the other sharks, and all the professional venture capitals swinging 8 figure bankrolls bring more to the table than just their wallets. They’re bringing copious amounts of personal capital, and sweat equity. They’ve got the experience, resources, and connections to make businesses happen.

      Sure you might have a ton of business experience, but does your few thousand dollar investment get you a seat on the board of advisors — nope. Don’t even bother making a squeak. If you’re Cuban or anyone else with an amount of capital and credibility your voice gets heard.

      What if the company has a great marketing campaign but just can’t pull it off in operations? What if the company needs an effective website live in 12 hours? Every venture capitalist has a team behind them they can call to make things happen. No searching , no hoping, just action. In many cases the founders, become little more than faces of the company while the venture capitalists use their resources behind the scenes to make things happen.

      Connections…. Lets just ask how many business journalists follow established venture capitalists? One twitter post is all it takes to get the company featured in a forbes article about how “XYZ Company is going to reshape an industry?” Can you get that poole?
      While the Sharks and other Venture capitalists can make things happen, you’ve just got to sit with your fingers crossed.

    3. What happens when the market tanks?

      Seriously. We’ve been in a long bull run now. Rags to riches stories are abound. If there’s a bear market blue chip equities will take a hit, but venture capital will go to 0. Venture capital funding will slow and that bottomless pool of money many startups are relying on to grow will dry up.

      While not optimal that works out for the venture capitalists who are able to plunk in more of their personal equity, sweat equity, or personal capital to keep these ventures afloat.

A Better Choice

If you have the capital, look for a venture capital fund that you can invest in alongside, well known venture capitalists. These funds exist, but they do require minimum investments of generally, at least $100,000 and are illiquid. That’s a far step above the $1,000 minimum investments in a single company on SeedInvest. BUT they do provide a better shot at likely returns as you get access to the premium deals that would never make considering taking on million peon investors from crowdfunding. You also ride on the coattails of investors who have the personal capital to make businesses happen. On that note, make sure the investor has a significant amount of their own capital in the fund. I should probably write a whole nother post on that relative to venture capital, but for now just checkout my post on manager investment in mutual funds.

Now if you don’t have $100,000 to piss away, and you’re practical enough to not get into gambling with your money, a small cap index fund would be your next logical choice. Small cap stocks have been shown to have a premium over market beta (market cap weighting significantly tilted to large caps). From 1926 – 2012 small caps returned a 1.8% annual premium over large caps (that 1.8% over a couple decades is huge). You can get into small cap exposure for nearly nothing by opening an account with vanguard and buying their Small Cap Index Fund ETF (VB) or the mutual fund that tracks it. Just set it to reinvest dividends and dollar cost average into investment.

Follow Up Post 10/25/2017: What if Mark Cuban was never a venture capitalist and just invested in index funds?

It Still Seems Fun

Yes it does. That investment in Keenhome seems like a good idea. I think it can beat the small cap index. I want a horse in the race. I want a company to cheer for. I want to be part of the cool kids. Maybe I will invest in it, for the same reasons I go to casinos (for the record I don’t go to casinos).

The bubble room captiva

The Bubble Room Captiva. The End.

Outback, PF Changs, Cheesecake factory (for those mac & cheese balls), those are the typical places I dine.  Call me boring but I don’t venture to alternatives much because well I’m generally let down.  That trend started after I ate at an expensive South Beach Steakhouse packed in with other people so tight that a trip to the bathroom involved a lot of wiggling.  But this weekend my sister was in the hood and was heading to the Bubble Room on Captiva Island for lunch.  Like a could bro, I was joining.  I’d heard about the place before… I think I was lurking on trip advisor and found many good reviews… I’m not really sure but somehow the name was familiar and I knew it was a local place that everyone regarded highly.  So off I went on the long, sloooooow journey to the tip of Captiva to the Bubble Room.

The first thought is different.  It just seems out of place in a location populated by vacationing mid westerners and Germans.  For Captiva Island, which is occupied largely by a relatively high end South Sea’s Resort I tend to expect the restaurants to be an upper end casual.  Not the Bubble Room… well it was, but it wasn’t.  It’s an eclectic place, a house turned into a restaurant that filled with all kinds of relics from the 50s and the Golden area of Hollywood.  On the outside its bright and cheery and kind of reminded me of a fairy tale house, or toy store.  Not particularly my interest but certainly unique.  And while the place doesn’t fit the traditional upper end of casual restaurant, it is in terms of quality of food and price.

This thing comes around at the end of meal but it is clearly the highlight.

Anyhow when you walk in the uniqueness of outside continues.  There’s a bakery of sorts with several awesome looking cakes on your left which clearly says “fuck all” to your diet.  As you walk to your table you see servers bringing an assortment of cakes on a trey to tables ready for desert which instills that  “fuck all” to your diet.  At this point, the rest of the food doesn’t matter, only that cake trey that you know will be coming around.

The table I was seated at, along with all the others was filled with all kinds of little knick knacks, mostly small toys that would pique the interest of my parents, now in their 60s.  Beyond your tablesight view is a ton of further trinkets to grab your attention and depending on where you are seated even, maybe even an aquarium built into wall complete with ornaments of 10,000 leagues under the sea.  The best way I can explain it all is to imagine an antique toy collector took everything out of his storage unit (s), dumped it into a house, and turned it into a restaurant (a good restaurant of course).

Mango Tango Description Smack Dab In The Middle.

We skipped the appetizers, because of the cake.   There was no way in hell we could’ve ate the cake after appetizer.  Like it just wouldn’t have fit.  Straight to the lunch entree’s, and I got a chicken burger… I know that sounds basic but there was more to it that than.  It had some mango and avocado and I think even some ham.  It was a very awesome burger.  I’ll just find the menu online and post a picture with the proper description.

The drink menu, the drink menu for adults, had 8 speciality drinks, all made from real fruit but 2 of them were ‘out’.  I ended up with a Pink Flamingo, which was a concoction of rum, strawberry, and banana.  We can all agree though, that Pink Flamingo sounds like something else (haha).  It was tasty, and we down easily at a cost of 8 bucks.  BTW my chicken burger was about $15.

Once the burger was down, and it was expedited to my stomach so I could get to the cake, the cake tray came around.  The pic should be be self explanatory.  I went with something chocolate and my sis went with a secret cake, not the menu, or the tray, which is an ice cream cake with an Oreo crust and Butterfinger in the ice cream.  Talk a bout a foodgasm.  It was rad.  The slices are big too.  Practically speaking its 2 people to a slice.  But if you have 3 ppl you definitely need 2 slices — don’t skimp.

In restaurant reviews, everyone likes to talk about the service… and well I will too.  I’m not really that picky,I don’t need a blow job with the meal.  All you gotta do is feed me quickly and be decently attentive.  At the Bubble Room checks off the box here.

Some Photo OPPs from around the place…

 

filterbuy overview

Filterbuy: Simplifying The Purchase & Getting You What You Need

One of the many things I delay all too often in my life is replacing air filters in my home a/c unit.  They’re out of sight, out mind, and not exactly the most attractive item to purchase.  It had probably been 9 months since I replaced mine, when I noticed it wasn’t getting cool in my house and the a/c was chugging hard.  I opened up the closet door to my condo a/c unit and found a dirty filter with ice on it.  Fuck.  Time for new filters.  I turned the a/c system off and zipped to Lowes.  The aisle of air filters wasn’t exactly consumer friendly.  There’s several different brands of filters, with different certifications, specifications, ratings and prices, all trying to grab your attention.  Gold, red, 1085, 3m – I had not clue wtf it all meant.  It was kind of like one of those tacky, old school, gas stations with colorful ads plastered all over that make little effect on your purchasing decisions.  I consciously though about buying a bunch of them, so I wouldn’t have to worry about it for a while, but with no idea of what anything meant, what the differences were between them all, or what I needed,  I grabbed the 3 pack for $11.  It was the paradox of choice at its finest.

I kind of like to take care of things, and my A/C system is new (like 9 months old lol), so I wasn’t convinced that $3 air filters were up to par, and I wanted to order in bulk so I wouldn’t have to buy air filters for a long long time.

When I got home, I hit Amazon.  The mess of choices, and pricepoints was just as confusing as the home improvement store so logically I went to Google for some education.

Hmmmm which one should I pick???

 

A few minutes later I found Filterbuy.  Filterbuy’s website lets you select your size, and then the type and quantity you need.  Rather than having a dozen different choices, like you have on the aisle in the home improvement store, you have 4 choices based on MERV rating, which the website explains the differences between.  It seems, that like many other things, there’s a lot of marketing hype in front of it all and once you pull away the baloney, its relatively straight forward.

The 4 options of air filters that FilterBuy lets you choose from, and their info.

Order as a subscription or just a single order.

 

 

 

 

 

 

 

 

Filterbuy gives you price breaks on quantity so 1 filter might be $19.95 but an order of 6 is $5.95 per filter.  They also give you an option get it set up on auto delivery, so you get them at intervals as you need them.  There are competitors in the airfilter subscription space, like FilterEasy but you must do a subscription — no one off orders.  Call me old school but I’m not too into the auto delivery thing, I like to pay, and have a stockpile, so I bought 6 of them.

While it certainly isn’t a radical new tech platform, Filterbuy takes a relatively complex and unfriendly purchasing process, and makes it clear, simple, and consumer friendly.

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Costa Rica & Dirt Bikes: My Riding Trip WIth Costa Rica Unlimited

I love dirt bikes.  I love Costa Rica.  When I found out about a tour company doing dirt bike tours there, I decided it was on!  I was doing it, no matter the cost.  So I gave them a buzz and started making arrangements.  Their tours are predominantly intended to be used as a tour with a group of 4 or more riders, but getting 4 people on the same wave length, at the same time, who could afford the trip was not an option.  So the guys that operate the tour, Terry Beal & Chris Killbride, told me about a tour with Ronnie Renner the first week of April 2017.  I was a sold.  It was $3,000 for 5 nights and 4 days of riding.  It included lunch and breakfast, bikes, accommodations at their compound, gear cleaning, pick up from the airport in San Jose Costa Rica, and some cookies.

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A Review Of Sakura Hawaiian Grill In Naples

Today I am officially making this a food review blog.  That will contain stuff about investing.  And motocross.  And Business. And other cool stuff.  Anyhow yesterday evening my girlfriend was telling me about Poke Bowls.  At first I thought it was some type of Pokemon thing.  Turns out, she was pronouncing it wrong, and it was actually pronounced ‘po-kay’ (not poke like Pokemon).  We googled Poke Bowls, and they looked tasty.  We were hungry and looking for a dinner options so we next googled ‘poke bowls Naples‘.  That lead us to Sakura Hawaian Grill.  Important to note: this is not a review of Poke Bowls, but you can see more about them below! Read more