In this episode of Get IN., we talk with Gerry Hays, the founder and CEO at Doriot Venture Labs.

Gerry discusses the importance of developing an ownership mindset in an uncertain future, the significance of education in venture investments, and introduces Doriot’s innovative products like Fantasy Startup and Venture Capitalist in a Box.

We also explore the strategies of venture capital, angel investing, and the opportunities presented by crowd equity funding, alongside an in-depth discussion on the power and potential of retail investors in the startup ecosystem.

Gerry emphasizes the need for every individual to see themselves as potential investors and the importance of taking small steps towards understanding and participating in equity investments.

  • 01:57 Diving Deep into Doriot Venture Labs
  • 04:56 The Fascinating History of Venture Capital
  • 07:35 Exploring the Strategy of Venture Capital
  • 19:26 The Rise of Crowdfunding and the Future of Investment
  • 23:34 Navigating the Changing Landscape of Startup Investing
  • 28:12 Navigating the Investment Landscape: Seed vs. Series A
  • 28:39 The Power of Angel Investing and Mentorship
  • 28:56 Unlocking Pre-Seed Opportunities: A New Frontier for Retail Investors
  • 29:40 The Collective Investment Model: Betting on the Future
  • 31:37 The Ownership Mindset: Transforming How We Invest
  • 33:36 Building an Ownership Culture: Education and Mindset Shift
  • 36:25 The Future of Ownership: Expanding Horizons and Breaking Barriers
  • 38:47 Resources and Recommendations for Developing an Ownership Mentality
  • 41:39 The Ownership Economy: Time, Money, and Data
  • 46:24 Joining the Movement: How to Get Involved with Doriot

Get IN. is the show focused on the unfolding stories and most extraordinary innovations happening in the heartland today. The show is hosted by Matt Hunckler, CEO of Powderkeg and Nate Spangle, Head of Community at Powderkeg.

By listening to this episode you will learn:

  • How to think like a VC
  • How to have an “Ownership Mindset”
  • How to create a culture of owners

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Episode Transcript

Matt: From the crossroads of America and the Hoosier state of Indiana. This is Get IN the podcast focused on the unfolding stories and extraordinary innovations happening right now in the heartland.

I’m Matt Hunkler, CEO at Powderkeg, and I’ll be one of your hosts for today’s conversation. I’m joined in studio with co host Nate Spangle, head of community at Powderkeg and on the show today. We have serial entrepreneur, finance professor, and good friend of mine, Gerry Hays.

Gerry: You had parents, they told you how to be, you had friends, they told you, teachers, professors, all of this, you’ve been told who you are, and all of it is not necessarily who you are.

And, you know, to come to that sort of agreement with yourself. Gives you agency to reinvent who you are and what you can accomplish.

Matt: Gerry has been an entrepreneur for over two decades. He has started two venture backed companies that were both acquired. Also bootstrapped a chicken company that also got acquired more on that later.

And he’s also currently the founder and CEO at Doriot Venture Labs. Gerry’s also a practicing professor of Venture Capital and Entrepreneurial Finance at Indiana University, which is where I met him. I was a student in the classroom. Most of the time I made it to class. And on the show today, we are going to dive into all things funding.

And how it applies to you, even if you aren’t an investor or an entrepreneur yet. Uh, do you think that there are some hypotheses on maybe everyone is going to be an investor entrepreneur in the future? We’re going to talk about things like VC crowdfunding, angel investing, and the biggest opportunities for wealth generation.

And I’m sure so much more. I always have a great time talking with Gerry and learn so much every time. So I’m really excited to share this with all of you, Gerry. Thanks for being on get in. Thank you very much. We are really excited to talk to you and I’m just going to dive right in with questions if you’re cool with that.

Yeah, let’s do it. Um, tell us a little bit about Doriot. Um, what is the idea? What’s the big vision for the company? And then, uh, I’m also curious where the name came from.

Gerry: Sure. Well, Doriot is our sort of motto is win the future. And so we’re looking at those strategies and products and tactics to help everyone thrive in a future that’s becoming increasingly uncertain.

And our sort of mantra is one of those. Paths to success in an uncertain future is ownership and ownership can take multiple forms. But what we’re looking for is You know, we’re, we’re thinking about is how can people have ownership in the future in terms of what companies are getting developed and, and when those companies get developed and those companies use AI to revolutionize an industry, how can we create a bunch of owners that benefit financially from that versus a small select few, which we have right now.

Matt: I freaking love that. Uh, tell us about the business model.

Gerry: Well, uh, it’s a first, it’s an education for business to be sure because, um, right now, when you think about. Venture ownership. It’s really in the hands of like 1 percent of the people out there. You’ve got your institutional venture capital, uh, structure, which we can get into what that looks like.

And then we have maybe 350, 000 angel investors around the country. Um, and then maybe a handful of smaller retail investors because crowd equity funding has come up. So most people don’t understand what it really means to own, you know, a, a stake in a high return, high risk, uh, opportunity. So we have to do a lot of education.

So we came out with our first product called fantasy startup, which we are training people all over the world, how to actually make startup investments. Um, we can go and geek out on what that looks like, but thus far, we’ve had over 6, 000 people around the world that have played the simulation. We’re getting inbounds from all over the world to, to, to create competitions.

Like we just had an inbound coming in from France for 400 angel investors to do this. Um, and, and so this is the, sort of the first step for us is like, yeah, just start making investments. You don’t have to do it for real, do it for fun and see what this is all about. And then we are, our second product is called qualified accredited investor, which is we call it venture capital in a box.

So within six months, six weeks, we can, we can get you to the level of the highest level of VCs and understanding how venture capital works.

Matt: One of the things I love about you, Gerry, is that, uh, you actually know what you’re talking about when, when it comes to VC, angel investing, there’s a lot of people who have just gotten into it in the last five years, uh, since it started becoming cool, uh, quote unquote, cool, uh, debatable whether or not it’s cool right now, just given what the market has done in the last couple of years.

Um, and so I’d love to just learn a little bit from you. Knowing that you’ve been doing this since before it was cool and not only doing it, but studying it, the history of it, and I know it has a direct correlation to the name of your company. Uh, can you maybe tell us where the name Doriot came from and a little bit of the history of venture capital?

Gerry: Sure, sure. Venture capital is still a relatively new marketplace. Um, not even a hundred years old. Um, a man named Georges Doriot. Um, he was a Harvard professor who taught a class like i teach at IU Kelly. Um, he’s, he actually was working in the army. He handled all the technology for World War II for the U. S. Army. Oh, wow. And then he saw all this amazing technology go to the shelf after the war. And these entrepreneurs, the inventors couldn’t go to a bank and get those technologies commercialized. So he, he thought, well, what if we created a, a new form of, um, of finance and, and, and back these high risk, high return technologies and see what would happen.

And he had a theory that one or two would be very, very big and pay for all the losses. And so he started the first venture club, uh, venture fund back in 1946, American Research and Development Corporation. And he started making investments and the entire world, including the sec, they’re like, you can’t do this.

This is wrong. You’re, this is a, a faulty business. And he struggled a lot trying to prove this out. And people like Mark Andreessen basically has been quoted to say, Georges Doriot carved this industry out, out of sheer will. And it’s true. And, um, but by the time he was done, when they shut down American research and development corporation, he had earned 22 percent annualized rate of return.

Since 1946.

Matt: Wow.

Gerry: Beat the S& P 500 by like 13 points.

Matt: Wow. Which,

Gerry: if you know your sort of time value of money and interest rates, I mean you, it’s a gargantuan difference in wealth. Between just one percentage point.

Nate: How long did Well, American Research and Development Corp, how long was that in business for?

Gerry: Um, he started the fund in 1946 and they shut the fund down in 1972.

Nate: Oh, 22 percent annual. I’m not a math guy, but that math is mathin That math is mathin Totally

Gerry: mathin

Matt: Well, so you’re telling me that he was a Harvard professor when he did this. So you’re saying VC didn’t actually start in Silicon Valley?

Gerry: It did not start in Silicon Valley. Wow. Yeah. So there’s the East Coast, which is Boston. Yeah. Um, and then sort of moving into New York and guys like Fred Wilson, he’s a disciple of Georges Doriot. Is that A V C? Yeah. Fred. And so the, who taught the person who taught Fred the business learned from Georges Doriot.

Oh, wow. So, so if you look at George, uh, Fred’s model of investing very much like Doriot and, but he’s been incredibly successful, right? Um, then you go to the West coast, which is a little bit, you know, it’s a different style and there’s no judgment. It’s just, uh, it’s just a different approach to venture.

But. They both have been successful.

Nate: Can we just talk high level real quickly about like the strategy of VC, right? You say high risk, high reward. We’ve had an episode or two about PE, private equity, and the safer kind of return there. What is just like the overall strategy when you think of a venture capital fund and the investments that they make?

Gerry: Private equity, let’s be clear, you’re raising money and you’re buying a business and you’re levering that business up with debt. And, and so you’re going to go on there and make operational changes, find growth, make it operationally perform better, and then flip it back out into the market. So it’s an existing business.

And maybe with some warts and things like that, but it’s an existing business. You get into the startup world where you take something from nothing, and there’s a lot more risk. It’s a lot. You know, there’s a lot more trap doors. So when you put capital to these kinds of projects, you have to expect that 80 percent of them are going to fail.

Now there’s nothing wrong with that, but the ones who do the projects that do win will end up paying for all of your failures and you’re going to make an outsized return. And so the target for venture capital is still that 22 to 25 percent annualized rate of return. But that can only be accomplished through diversification and gaining, gaining access to a number of credible deals and putting a little bit into a number of credible deals.

Matt: So it’s not about finding the one or two Ubers or Googles that are just going to, uh, you know, take off and placing a handful of bets thinking, okay, one of these five is going to be the one.

Gerry: Yeah, it, that is a very dangerous investment strategy. It’s no different than being in the public markets. I mean, There’s lots of people getting paid to navigate your capital in the public markets, but if you just buy the S and P 500, you’re probably going to outperform 90 percent of the stock pickers on wall street, same thing is going to be happening in venture.

If you are going to be a stock picker, your risk profile goes way up. If you become unbiased and you start taking a look at the, the, the things that matter, like can, you know, do you, do you trust this idea? Does this idea make sense to you? Does the founder feel right to you? I mean, these kinds of things where you can like use your gut.

Um, and then you understand if the structure makes sense to you, is the valuation correct? And then that all comes into, is this a credible deal? And every time you find a credible deal, you just kind of have to like, okay, I’m in.

Matt: So enough people got into this between 1946 and let’s rewind maybe four or five years ago that we saw, uh, Silicon Valley and unvalued tech companies around the country around the world start taking off, uh, rates, uh, we’d never seen before.

How do we get to there and how did we get to the point where, um, it almost like overshot because we obviously saw a big market correction a couple years ago. Um, and, and maybe just giving us a little context there would be really helpful before we start, uh, digging in even more into like the fundamentals of good investing.

Gerry: Sure. I, I, so venture capital has become, you know, the sexy business, right? Everyone VC. I have more and more students who want to be in venture capital. You know, because who wouldn’t want to be walking around with a checkbook and then like, get to say yes or no to entrepreneurs.

Nate: I thought you were going to say walking around in their Allbirds with their Patagonia vest, you know.

Gerry: I’m not, I’m not going to go there. Eating some sweet green. I spent, I spent my time out in, you know, San Francisco. I’ve seen it, but. Gotta have the VC starter pack. Yeah. It’s become a, um, uh, a, a career. Okay. So what, what, what you do is you go raise, you go raise a hundred million dollars. Okay. And you could charge a two, two and a half percent management fee.

That’s 2. 5 million a year that you can pay salaries, have an office, travel, go to conferences, whether you make the right investment or not, you know, that’s going to be a different story. You got to be really good at what you do and you got to work really hard. And, um, most people don’t understand. I, I, I’m not throwing any shade on anyone, but most people in the venture markets don’t understand what they’re doing, but the ones who do.

Are doing exceptionally well in good times or bad times.

Nate: I think that’s super interesting. Um, you say work really hard and it’s like, I don’t really know what hard work looks like in the, as a VC, like you’re an analyst or you’re whatever at a, at a venture capital fund. What does hard work look like there?

Gerry: You got to be open and you got to be willing to take some risk with other people’s capital while being a fiduciary and balancing all that is a lot of work. Okay. It just, it really is. What most VCs do is they’ll wait for a signal, like if Andreessen Horowitz is in this deal, they’d want to like lop onto that or, hey, we’ll just going to invest in the best companies coming out of the Y Combinator cohort.

And. We’re willing to pay 20 million in valuation per deal because that’s just where the market is. That’s lazy VC making. I’m sorry. It is. It’s just lazy. It’s the lazy approach to VC. But those who go a step deeper and are not trying to compete in those waters where all the other capital allocators are.

And they’re, they’re, they’re, they have theses, or their thesis, and they’re going out to conferences, and they’re, they’re meeting people, and they’re, they’re developing a network in a particular area, and they’re really working on their trade, and, and they’re, they’re really trying to prognosticate about what the future’s gonna look like.

That’s a lot harder to do than just to go around and say, I got a checkbook and I’m into this deal and I’m into that deal.

Matt: If, if we were to start a venture fund today, which funds are, let’s, let me reframe the question. If you were to start a venture fund today, uh, which funds would you be emulating at the seed stage?

Um, you know, if you’re starting a seed stage fund. Which ones do you see doing it right?

Gerry: Okay. Well, clearly Y Combinator is doing it right. Yeah. And so. Why, why do you say that? Well, they have developed, there’s two models out there that really impressed me. Y Combinator, no question. So, but what you got to understand, Y Combinator has built a game for them to win.

They don’t, everyone else, they can like, Hey, you guys can do your own thing, but we’re going to get the best companies in the world, the best founders in the world. I don’t care if you have an idea or not, we’re just going to pick the best people to win. And then we’re going to throw, we’re going to invest 150 K for 7 percent of the business.

Okay. Then we get most favored nation rights. So when you go out, can you raise more money? We get to participate at the same deals as everyone else. So we get to continue to ride that horse. If. It’s doing well. If it’s not doing well, we don’t, but they’re buying into the best companies in the world at 1. 9 million.

Matt: Yeah.

Gerry: The best, that’s how you win the game. That’s incredible. You’re getting, you’re getting great valuations.

Matt: And they were able to do that largely because of Paul Graham’s, uh, personal brand early on and just being there early.

Gerry: Yeah. I mean, they, they, they invented sort of the model of how you can bring.

You know, enough people into a room and create that sort of competition. Iron sharpens iron. Yeah. So the interesting thing about Y Combinator is that it’s, yeah, you could say, hey, can you make an appointment with this person, that potential customer, and that kind of thing, and they’ll do all that. But really what their, their, their basis of their value is they bring everyone to a room, and it used to be every Tuesday night for dinner.

And then every Tuesday night, every team had to show up and talk about what you did last week and then what you’re going to do next week. And then the next week I do, what did you do last week? You said you were going to do this. Did you do it? And then we need to do this week. And then what they found is that over time, over the 90 day period, less and less companies that showed up to do that, but the ones who did ended up winning really well, winning really big.

Matt: So accountability,

Gerry: not everyone is going to want to get onto that cadence and you know, dry, but. They found the five to seven companies that are really driven every cohort, and that’s all you need. Wow.

What about funds started in the last decade? It’s not a fund, but I’m highly impressed with, uh, the Thiel Fellowship.

So Peter Thiel has a sort of a, it’s a, I don’t know if it’s a political commentary or just a commentary in general about going to college. You know, just go become an entrepreneur. Don’t go to, don’t waste your time in college. That can be argued and disputed in a number of different ways. Sure. Okay. But he will offer, if you get a, you can apply and you get, um, 100, 000 for a two year period, 50, 000 a year, you have to figure something out.

And, and so if you take a look at the metrics, Y Combinator mints four unicorns per hundred. The Teal Fellowship mints seven unicorns per hundred.

Matt: Unicorn being a billion dollar valuation company.

Gerry: Yeah.

Matt: Yeah. Wow. Yeah. So they have two years to come up with a startup idea.

Gerry: Yeah.

Matt: Launch it.

Gerry: Yeah.

Matt: And they’re 7 out of 100 are becoming billion plus dollars.

Gerry: Not to mention a bunch of others that have reached like multi million dollars. And it Like Figma, like Figma.

Matt: Yeah, absolutely.

Gerry: Figma was a, a Thiel fellowship. Wow.

Matt: Those kind of numbers give us an idea of sort of like how the game is played, right? You’re, you’re, you’re placing a lot of bets. Mm hmm. And hoping that In, in the best possible case scenario, you’re getting four to seven out of a hundred that are really hitting it big.

Gerry: Yeah.

Matt: That’s, that’s the math.

Gerry: That’s the math.

Matt: Okay.

Gerry: But if you get one of those four out of a hundred, I mean that, that could be 150, 200 X return on your hundred dollar investment. So the thing about it, if you put 10, 000 into a hundred credible startup deals and four ended up becoming unicorns and you’re getting them on balance, you’re getting somewhere if the pricing is right, you’re getting in at 5 million or below.

You’re earning anywhere from between 80 and 100X on those 100 for those particular deals. You’re going to turn your 10K into 35 40K.

Matt: Yeah.

Gerry: Math, Maths. Yeah. And if you get one deal that just blows it out, then maybe you turn it into a 100k. The numbers don’t lie. We’re going to be releasing a white paper here at the first of the year that everyone should be putting 8 percent of their net worth into startups.

And you can, you can actually achieve three to four percentage points higher and an overall return when you’re looking at a 30 to 40 year timeframe. Wait,

Nate: but Gerry, what if I, I’m sorry, I’m Uh, I just know there’s a lot of restrictions, right? And accredited investors and like all of these things that, that make it the barrier to entry into investing in startups really hard.

Right. And like, I don’t know very, very much about this or like friends and family rounds versus institutional investment. But I know that I can’t just go out, I don’t think anyway, and write a check into. Whoever the fastest growing Silicon Valley startup is. So the question being is like, how could, how could I as a retail investor start investing 8 percent of my net worth into startups?

Gerry: You want to learn to drive before you get behind a Ferrari? Fair. You need to be in a position, maybe in your position right now, you don’t have the money to, to stroke big checks. And I get that. I mean, even at my age, I don’t cut massive checks, right? I do small checks. But I’m very early, right? I’m very comfortable being very early.

What you need to be doing is learning the business and you, and you, you need to make a decision first and foremost, that you’re going to be in this economy. Starts with making a decision. Now, once you’ve made a decision that you are going to be in this, this ownership economy, now. You come to us and we will show you, okay, we’ll get you into playing fantasy startup, lay the game, see, you know, is this really your cup of tea?

Get QAI certified, right? You may start a company at some point, either side of the table, you should really know what you’re doing when it comes to how equity works, private equity works, right? And then even with us for Doriot, you can join Doriot Venture Club, where we bring one deal that’s available to the public.

We look at, we scour hundreds of deals a month that are on the regular reg CF platforms and we bring one deal that we think has true venture potential. And then we break it down, do a 25 page analysis. We do an hour conversation about it. And then you can make a decision. Does that deal make sense to you?

And you could go put a hundred dollars into it.

Matt: Can you break down what Reg CF is for those of us who aren’t down the rabbit hole as far as you are?

Gerry: Sure. Okay. This would be a good time to talk historically, contextually, going back to how So Doriot started the business. It was a publicly traded company and then the entire market went private.

So all the subsequent venture capital firms set up this limited partnerships, which basically meant they only could bring capital in from wealthy individuals. And then eventually institutional investors. So it became a cottage industry. Okay, an institutional venture has now morphed into what we have today, where you want to raise bigger funds because you get the management fees because you can get salaries and, but you’ve got a big problem.

It’s deployment of that capital. And our part of our thesis is, you know, when AI comes into the fold, we’re going to see billion dollar companies built with 10 people or less. Yep. That’s cool. That’s absolutely going to be the case. That’s awesome. You won’t need 10, 000 people like you did. I absolutely believe that.

The other piece is, is that everything’s going to go on chain. There’s not going to be this idea. Well, Hey Matt, let’s go set up a special purpose purpose vehicle and let’s get a bunch of people together and try to invest in this startup. Everything will happen by the click of a button and you will have a security token that you own for that particular company.

And if there’s a payout, it immediately comes into your bank account. It’s going to be frictionless and seamless.

Matt: And that’s how the blockchain is like actually applicable. Provide utility as a technology.

Gerry: That’s exactly right. That’s exactly right. So the ideas of having a bunch of SPVs or LLCs that you’re members of, that’s going to go away when I don’t know there’s going to be custodial services around helping people manage their equity.

Matt: And just for those that maybe haven’t raised a round of funding or participated, SPV is like a special purpose vehicle that is kind of a company basically that is created From a group of individuals, high net worth individuals who pool money together. And the purpose of that company is basically to invest in another company.

That’s right. And that’s just because the old tools that we had and still kind of have as like the de facto way to invest. That’s right.

Gerry: That’s what’s happening today. And, and so what crowdfunding is and what I’m, what, what crowdfunding represents to me, it’s the dawning. Of decentralized venture capital.

Okay. Right now, I would have to say that reg CF regulation crowdfunding, which was a law passed by the SCC, by the, by the jobs act when Obama was, was president still rules were promulgated by the securities and exchange commission that allows entrepreneurs to go out to the public and pitch their startup to raise money from the crowd.

So think about we funder or start engine or. Um, Republic, these are three platforms that right now that you could go to and you could look at a bunch of offerings that are available. It’s kind of a petri dish right now. The reg CF market is because there’s a lot of people going there with frankly not the best offerings.

Like I would not invest in these deals, right? So what we do is we’re, we’re creating a filtering service. Or our members that we will look to see which deals, you know, have the most legs. And then we’ll talk about those as opposed to like, Nate, you going to Republic and saying, I’m just going to invest in startups and you’re just like perusing around.

Like a candy store, like, I don’t know what I’m doing,

Nate: you know what I mean? Kind of like my Robin Hood, right? Where I’m just like, I like this, I buy, I buy stuff from Kroger, I want to be an investor in Kroger. Right. I’m retail Joe. Yeah. For sure.

Gerry: Okay, yeah, so exactly. That’s what regulation crowdfunding is, but I think it’s going to be, it’s going to be, there’s going to be next iterations of this, where it’s all going to be on your phone.

You’re going to have trusted, whether it’s AI empowered or trusted advisors that are like bringing deals to you. And then you can make a decision whether you’re in a deal within, you know, five minutes or less, and then it’s just added to your portfolio. And because you know, what you were in the business of is acquiring a chip in the game of a number of companies that are going to transform.

Our industries and they will get transformed with AI machine learning. Every industry’s up for, you know, transformation.

Matt: This, these last couple of years in particular seem very interesting. When you look at the world of startups and, uh, private equity investing through venture capital, reg CF type offerings, we saw an explosion of activity over the last decade of investing in startups, can you break down kind of what happened from your vantage point when you look at.

just how much the market has changed in the last 18 months and the lead up to that. Because it seems like if you look at 2019, 2020, even 2021, all kinds of new funds coming onto the scene, everyone’s thesis is we’re going to invest in places that people aren’t looking underrepresented communities, areas outside Silicon Valley.

There were some early players in the game, you know, the, the M 25 groups, the flyover capitals that were rise of the rest that were doing this kind of before everyone else. But now I mean, there’s like hundreds of funds that have spun up over the last decade. And then all of a sudden it’s like. That capital dried up.

Um, well, it didn’t dry it up, but still, I know it’s still there, but check stopped being written. Can you just break that down for people that maybe, maybe they’re an employee at a startup, they don’t exactly know why their CEO wasn’t able to raise that round of funding, or they don’t know, uh, maybe it’s a CEO or entrepreneur that’s in the trenches and they’re like, why is this taking four times as long as it did before?

Can you give us a little bit of context?

Gerry: I think there, there’s a lot of euphoria with. Raising capital, being in a venture capital world, that entrepreneurship has been, uh, you know, just sort of celebrating entrepreneurship, but we’re seeing a lot more programs at the university level, come online, more accelerators, all of that activity creates more opportunity to, you know, aggregate capital and deploy capital.

I think it goes back down to the same challenges. VC fund, you know, but to actually deploy that capital, capital in a way that is going to work and smartly do it. It’s a different matter. And, and I, again, I think too many people got into this game that really don’t understand the economics of venture. And I, again, I’m not trying to dunk on anyone.

I’m just saying that this is what we have seen. And as a result, they’re not going to raise follow on funds. They’re considered sort of zombie venture funds, and that’s all going to go away. And you’re going to still have your mainstay funds that are here for the longterm and they are continuing to drive value.

And I say there’s an amazing opportunity for anyone still in this space, but you have to, you have to really go back to first principles of venture, not just celebrating yourself because you cut a stroke of check and, uh, You know, a secondary round from, you know, space X, you know?

Matt: Yeah. So talk to us about the, the, the founding principles.

We covered a couple of the, the really important principles of venture. You know, it’s, it seems to me that education is a key component. Diversification is a key component, truly like researching the companies and deal sourcing, uh, having access to the deals. Um, when there are so many places entrepreneurs could raise capital from and take meetings from and.

Uh, everyone’s kind of competing for time on the, on the calendar. What are some of those other things that if you’re an institutional investor, or even as an angel investor that wants to participate. And get in on something early on as you’re building out your portfolio.

Gerry: So this is really an interesting question because you’ve got, uh, venture funds that are set up to be traditional series a, which if I, I think it’s important to just define what series a means.

Okay. It’s sort of like a point in time with a company. It is the point in time where. You have product market fit and you’re ready just to throw a bunch of money into scaling and growing. Okay. So you’re talking about adding on team members and, and, um, you’re generating a burn, but your acquisition and your growth acquisition is so strong, right?

Because you know exactly your customer and you know how You can actually profit from this. Okay. Pre series A being in that seed stage is you’re still trying to figure out product market fit. Okay. And then pre seed is you don’t have any product market fit. You probably don’t even have a product and market.

And so I think everyone sort of starts off that we’re going to set up a fund for the being in the traditional series, a space that space becomes highly competitive because everyone wants the company that’s making money and ready for like rapid scale. Okay, you have to be really good to go find those deals.

So you come to the Midwest, right? There’s deals to be had in the Midwest, right? You go into places that they’re not looking or you go to, you go to China back in the day or Singapore now. I mean, you’re. So you have those that we’re going to go look for those traditional deals. And then if you’re not getting that, then you try to go upstream, go into seed.

And now you’ve got a bunch of company or VCs competing in the seed space and they’re overvaluing these seed companies because they’re thinking that this is. This is the next series. Hey, yeah, it’s, it’s, it’s almost like a series a and it’s not. When I think about where institutional should be, I think they should stay in the series a space.

I think that’s what they’re really good at. They’re good at series a, B, C take them to an exit. Okay. If you’re an angel investor, you’re not going to be that you’re, that’s not what your job is. And you are in the seed stage and you’re trying to mentor. If you want to be an active angel investor, you’re mentoring, you’re helping them think about things, right?

Higher risk, but you get, you know, lower valuations for the rest of us. When I think about like the retail, where we can absolutely dominate is precede. We can, we absolutely can get, if we. So for example,

Matt: um, we, as in the royal, we, or we, as in Dorya,

Gerry: we, we, as in, you know, everyone, everyone, when I think about all of us, retail investors.


Matt: let’s imagine this 8 percent of your, your income,

Gerry: let’s, let’s just be audacious. Give us 25, 000 people. Okay. Each with a budget of 500 to invest in startups in a single year. Okay. I do the math on that. I don’t know how big that cal a UM is. Okay. Assets under 25 20 5K. 120 5K or 2020 5,000 at 500 people.

Is that 125 or 125 million?

Matt: Uh, I don’t like live math.

Gerry: Ah, public math is so hard. Yeah, let’s talk. But anyways, you get my point. Okay. You’re not investing that money, but now you have a filtering service where we go out and we find. You know, these really strong teal fellow type individuals that they’re coming in like, okay, we’re just going to give you a couple hundred thousand bucks for two years, figure it out.

And we’re doing like 50 of those deals a year. I guarantee you that. And then you could decide individually. Do you like, you want to put a hundred bucks into this one? You want to put 50 bucks into this one, right? And so basically you’re making bets across the board of a number of founders, not only here in the U S but globally, and all of the equities being managed on your behalf.

Yeah. All you have to do is say I’m in or I’m not and then you get to watch their journeys unfold over the next, you know, ensuing years and I guarantee you that we’re going to find a unicorn plus and that, you know, every year we would find a unicorn plus if we could back 50 young kids, I’ve been around these kids for, you know, since 2004 and I work with them and I can tell, I know which ones, you know, We’re going to, we’re going to crush it.

And I, and we could bet on these kids, you know, heck, we could bet on a 28 year old, right? We could bet on a 32 year old, right? Just, I don’t, they don’t have an idea or they haven’t fully formed it. You know what? You’re just coming in. We just, let’s aggregate and everyone’s putting in 25, 50 K or 25, 50. But in the aggregate, we’re investing 200 K zero risk on everyone’s part.

But if he, yeah. Right. If it blows up, you know, we can hundred XR money or a thousand XR money.

Nate: Yeah. It’s a, a night out on the town. Like it’s a night out. 50 bucks, a hundred bucks, Indianapolis. That might be two nights out on the town.

Gerry: No, no, that, that’s, that’s Chipotle being delivered. That’s shit. Yeah.

Come on. Let’s be real. Yeah,

Matt: yeah. That’s true.

Gerry: That’s,

Matt: it’s, it’s like he reads your credit card. Uh, statements. Nate. Yeah.

Nate: I got my Chipotle wrapped. I’ve got a 15-year-old man. I know. . Yeah. Right. I think, I think that’s so interesting though. Cause you talk about like the knowledge and the research and like, as you get to like seed and right series a, it’s all about doing all this research and knowing so much about the company, but what you just said in the definition you just gave was find the person you’re a pre seed investor, find the person you want to bet on, find the kid, find the 32 year old, whoever it is.

And I think that there’s a lot of people I’ve just like met through the days where it’s like, dang. If I could buy stock in you, I would, you know, it’s like, if I could just have a, just a small little slice, cause I think that you’re going to do something crazy. I think that’s, that’s a really great way to think about it as like the retail, but throwing a hundred dollars.

Gerry: Yeah. And, and there’s another little, uh, secret here, so I’m going to like share the secret with the world.

Matt: Give us all the secrets.

Gerry: Here’s the secrets. Everyone in that sort of investor group has what’s called pro rata rights, which means when that individual who’s winning and they need to go raise another 500.

And we could all pony up to our ownership percentage and keep investing in that particular deal.

Matt: The one that already has momentum.

Gerry: That already has momentum.

Matt: That already has product market fit.

Gerry: It’s getting product market fit. And we become. You get more ownership. Right. You get more ownership. And still, maybe it’s a hundred dollars this time.

But it’s not going to break the bank, but you know that, okay, this 100, I, I think I can get 50 X on this hundred bucks, right? Because that’s what it really comes down to.

Matt: Yeah. That makes a lot of sense.

Nate: Interesting. And it’s like the part that you talk about, like risk, it’s like, it’s 50 bucks, you know, like, especially with the rise of things like draft Kings or all this, like you can lose 50, like not even trying to lose 50, right?

Matt: This is a fun game because you can actually get returns and you’re adding, you’re helping shape the future, right? You’re shaping the future. You’re adding to the economy, but there’s less jobs,

Nate: Less of that immediate hit, though Like the immediate dopamine of like did the Colts win on Saturday, you know,

Gerry: So Nate and that’s what gets back to okay owners versus renters Okay, so when you think about what’s the definition of a renter versus an owner a renter is someone who’s an instant gratification So unfortunately a lot of young white men You are into betting, right?

It is a non productive use of their time. They’re going, they’re losing a lot of time and they’re losing their money. The house always wins. Day trading, again, a non productive use of their time because it’s not, it’s eventually the house is going to win. So, but an owner is, okay, I’m willing to, to plant this tree today.

And let this ride for 10 years and see where it takes me. But in the meantime, I get to watch this tree grow or die. Either way, I get to learn something. And along the way, you can help water it, right? Along the way, you can help water it and nurture it, right? Now, can you imagine in a kind, what would you rather have?

Let’s, let’s, let’s fast forward 20 years from now, okay? The institutional economy where you get a salary, you get paid every two weeks and we all know that’s going to be a diminishing path to wealth creation, right? Just AI eventually, I mean, 50 percent of all people hate their jobs. AI is going to wipe that out immediately.

Let’s just agree with that, right? People don’t love what they do. In this new world, what if you owned a hundred different companies that were each generating a thousand dollars of income for you a year? I’d be pretty happy. No complaints out of my corner. And then you’d, and then you’d be buying, then you’d say, okay, you know, I want to, I want to own a thousand companies that are paying me a thousand dollars a year in profits.

Nate: And imagine as the founder, all right, I’ll, I’ll play the game, right? Imagine as the founder, you had a thousand people that had a share of your company that you could like put out your blast of like, Hey, I, your investor update. It goes out to like, I need an introduction to so and so or so and so, or I need some help with this.

And it’s like, they get the chance to help you water your idea and your vision. I’m bought in. That’s exactly right. Take my money.

Matt: Well, the, I mean, the beauty of it is it’s, it’s not even take my money. It’s like, use my money. And if it pans out, Return the money with it.

Gerry: Join the movement, Nate.

Matt: Yeah.

Gerry: That’s it.

Just join the movement. Join the movement. Nate’s

Matt: Chipotle budget is going to go down. He’s going to carve some out for Doriot. Gosh,

Nate: I already just closed out my DraftKings account. It’s done. Gerry says it’s a waste of

Matt: time. It seems to me that, um, one of the biggest barriers for this economy, really getting to a flywheel motion.

Um, I, it feels like very much early. Early innings still, uh, we’re not at the exponential growth curve yet, although exponential growth curves are shorter and shorter these days with new technology, uh, the internet AI. But it does seem to me that the human psychology is probably the, one of the bigger barriers because of what you exactly said.

Not everyone thinks of themselves as owners. Have you thought about how people can start to, um, this muscle of thinking of themselves as an owner?

Gerry: Well, that’s a really hard, deep question.

Matt: And it’s what I’m here

Gerry: for. And it’s the, and that is the, that is the quintessential question, right? How do we start preparing everyone to have that sort of ownership mindset?

And it’s a combination of, of making decisions, combination of taking actions, right? You have to build skills. You’ve got to build your confidence. I mean, you’re not, if you wanted to run a marathon, you’re not going to run 26 and a half miles or what I was 26 and a third miles or whatever, you know, on day one, you may only be running.

Matt: Don’t tell me that because he’ll.

Gerry: I’ll try. Right. So there’s that piece of it, there’s, so we’re, we’re creating those tools just to get people like, okay, I can do this. I feel comfortable. But the whole other mindset of this is. Um, and interesting you say that I’m recalibrating my class this year, it’s entrepreneurial finance and venture capital.

We are going to, and, and they have to pass the QAI exam. That’s how they’re going to get scored in the class, right? That’s a

Matt: qualified accredited investor program that you developed. Here’s

Gerry: your book and here’s, here’s your practice quizzes and all that, but you’ve got to pass that exam. Okay. That’s on you.

Yeah. In class, we’re going to be learning about other things. So we’re going to be learning about, for example, sort of consumer versus cultivator approach to life. You know, what’s consumption, what’s cultivation. We’re going to learn about how our personal identities are impediments to our future opportunities to create prosperity.

When we say we can’t, or I can’t, or I’m not an investor, this really bothers me more so. Um, I like to see more young ladies in my classroom. I always ask them, do you see yourself as an investor? They say no. I’m like, no, you can’t exclude yourself from this economy. I don’t care if you’re black, white, I don’t care male, female, it doesn’t make a difference.

You cannot exclude yourself from this economy just basically because you think, I’m not that this or I’m not that when we say we’re not this or that, it’s only because we have an identity for ourselves and we have to like sort of unravel the identity a little bit and say, okay, let’s we have an identity, which is cool, but there’s more.

There can be more facets to our identity. We can expand. Are our breath of focus beyond something sort of linear or myopic?

Matt: Are there any books, um, podcasts or blogs that you’ve read or consumed that have helped you develop an ownership mentality over the years?

Gerry: There’s not a whole lot on the ownership, the ownership mindset.

I think this is a new and emerging, you know, and I think there’s a few people out there using those words, but it’s not anywhere near sort of mainstream, so we’re not getting that. But if you look at some of the mindset stuff, which I think is equally as important is to re engineer your mind, re engineer your human intelligence around where the puck is heading and where the success is, where people are succeeding.

That is, um, there’s a number of different places you can go to. I like listening to Tom Bilyeu, for example. He’s really gone very deep into the psychosis of success, as an example, and how we really have to think about ourselves.

Matt: Is that the Impact Theory podcast?

Gerry: Yeah, that’s a good one. I listen to a lot of old school stuff.

I listen to Alan Watts and Neville Goddard, for example. These are old school. Mystics, if you will, they have all their lectures on YouTube and I’ll go for a run and I’ll listen to Alan Watts talk for 45 minutes. And a lot of that he talks about, look, you can peel back the onion, let’s just peel it back.

And what you’re going to find at the very bottom is that your identity is a construction of your parents. They told you how to be, you had friends, they told you, your parents, teachers, professors, all of this. You’ve been told who you are and all of it is not necessarily who you are. And, you know, to come to that sort of agreement with yourself gives you agency to reinvent who you are and what you can accomplish.

Nate: I love that. That was like a mind shift, mind shift change, mindset shift that I’ve had this year. And it was like, when I saw people doing these like crazy cool things and like before, probably, yeah, before this year, 2023, right? I was kind of like. Oh, that could never be me. I could never do X or Y or Z and now it’s like just switching the vocab of my internal dialogue from like, no, I don’t, I don’t say I couldn’t be me.

It’s not me right now, but like waking up at 5 a. m. or running a marathon or doing all these things. I’m like, I could do that if I like, how could I do that? And it’s like figuring out the steps you have to take. To become the investor to become the marathon or to become whatever that is you want to be, but it was just the subtle shift in vocab in my internal conscious of like, never saying, Oh, I couldn’t do that.

Or that could never be me crazy. It was just like you’re saying this and I’m like, Oh my gosh, is he like, is he like reading what I’m thinking in my head right now?

Gerry: It’s really smart because you’re giving yourself again, agency. To take your game to a whole new level. And we all have that ability now, the counterbalance to this, you guys, and this is where it gets really rough.

Okay. When we talk about being an owner, what do we own as individuals? We have money. Okay. Maybe some more than others. We have our time, we have our data. These are the three things that we own. What are we doing with our money? What are we doing with our time? And what are we doing with our data? And there are companies out there in the centralized system that we have today, the institution that we have today, is that there are companies who want to get your money, they want to get your time, and they want to get your data.

And they’re making boatloads of money off of it, right? Meta only cares if you’re staying on meta, right? They’re going to do everything they can to keep you on one of their channels. Um, TikTok, the first trillionaire is they expect him to be a trillionaire by the age of 44. Okay. Ahead of TikTok. Okay.

Because he has monopolized people’s time and their data, right? Um, and so, but as an owner, we have to look every day, okay? We own our bodies too. Like what investments are we making in our body?

Matt: What

Gerry: investments are we making in our mind? What investments are we making with our time? What investments are we making with our money on a daily basis?

And so where the, the world around us, the businesses around us, the algorithms, which what the thing I fear most about artificial intelligence is that I don’t mind AI. It’s the algorithms that they’re learning off of because everything’s like doom and gloom today. We’re all tribalized. We’re all haters.

You know, it’s all, I mean, I don’t want AI to learn from those algorithms. I want AI, AI to learn from algorithms of the most uplifting parts of us as humans, That is, you know, empowering for, for everyone, but that’s not what keeps people on a page. That’s, I mean, and so that’s, that’s the scary thing. So you, you, you have to make daily decisions whether you’re going to give your time to tick tock or you can give your time to reading a book for an hour.

Matt: It seems to me that, uh, one of the other things that we own is our results. Um, if what we want to do is learn. And that was something I remembered from your class, which was, um, Oh, that’s okay. You know, it, this is not what your class was like, Oh, that’s okay. Let’s not worry about that loss. Let’s just go on to the next thing.

It was. Okay, how do we, how do we learn from this and how do we get better at what we’re doing? And rather than blaming the system or blaming the, the game is rigged or, you know, blaming the entrepreneur. Uh, you know, which all of those things might be the case. What that does is, um, gives away your ownership of your participation in the game of business.

Um, how can people reclaim their ownership of their results and use that to develop some of the things that you talked about?

Gerry: Um, I think the first step again is like, um, kind of something you did Nate, right? You just sort of said, Hey, I can do this. Okay. That was just basically, um, a decision that you’ve made about yourself.

You can do way more or you can do that thing over there, that thing over there. Open your opening yourself one self up to doing more. It flips this idea that everyone else is to blame because I think ultimately our biggest competitor is the mirror, right? We just have to look at ourselves like, are we giving our best?

Are we doing our best? Is this where we want to be? Because we are exactly where we are because we put ourselves there. Sure. And, um, we only delay the process if we blame others. And we’re just pushing, you’re kicking the can down the road to, you know, a realization that eventually most of us will make.

Unfortunately, some of us make it a little bit later, too late, and some make it earlier. Um, ultimately, ultimately you will be able to achieve anything you want to achieve in this world. If you make the decision and you’re willing to put in the time. And you’re willing to focus on that as opposed to like wanting to have, you know, sort of all every, you know, the instant gratification, like, Oh, let me, let me just take it back.

Easy days, hard life, hard days, easy life. If you’re willing to do the hard things every day, your life is really easy. If you’re going to do all the easy things every day and kick the can down the road, your life is going to be hard. You’re always going to be chasing your tail. Financially, you’re going to be struggling.

You know, you’re always sort of fragile in a lot of ways, ego and otherwise. And so, Making those investments every day, but making that decision and then just saying, I’m going to, I’m going to make my days, you know, worthwhile. I’m going to invest, even though I don’t have any of the returns yet.

Matt: Can you tell us a little bit about how people can get involved with Doriot?

Gerry: Sure. Um, so you can go to. Doriot. com. There is a, um, um, free book you can get first time founders equity Bible.

Matt: And, and that is spelled D O R I O T. D riot. D riot. D riot. D riot. D riot. Yes.

Gerry: And, uh, you can, you can download that book. It’s free in partnership with elevate ventures, which is cool. Um, and, uh, if you could just read the book, just as a founder, first time founders equity Bible, like, okay, here’s the journey of a founder going through raising capital and how you deal with boards and how do you deal with.

Equity and how does equity work and valuation and it’s like a

Nate: hundred pages, right? I think I’m on page 40. I think I saw an elevator email come out and I was like, Oh, I’ll start reading this. And the nice part about it is you don’t have to be super plugged in or like know everything because it puts it in a very digestible manner.

It’s not like speaking over my head. It’s like, Oh, okay, this is super interesting. And I think I’m, yeah, four, four tenths of the way through. And, uh, it’s not too bad. It’s actually really good.

Gerry: Thank you. Yeah. And, um, and, and so you can also sign up for our, we, we do a weekly newsletter, um, with Doriot Venture Club, which is free.

Matt: Very interesting deals in there.

Gerry: Yeah. And, and, um, and if you want to continue on with our journey, um, we’re again, building kind of this first venture fund where people can like, let’s all come together and let’s go like take Peter Thiel’s model. It’s proven and let’s go create our own and it’d be so awesome if we were like even funding a bunch of people in the Midwest.

Go start companies. Yeah. Um, cause I’m, I’m super bullish on the future. I believe trillions of dollars are at stake and I, dang it, I want to get a little bit of that. I think probably everyone else does too. Um, so join us on that journey. Um, and if you want to get even to a higher level of understanding, then, um, get QAI certified.

Um, I that’s available. I, I really feel strongly that founders should be QAI certified.

Matt: Um, I’m in the process.

Gerry: Yeah. Lawyers should be, uh, QAI certified financial advisors. Um, frankly, VCs, if you can’t pass this exam. Maybe, maybe don’t manage millions of others. Put it this way. If I was an LP, I would say, are you QAI certified?

You want my money. I want to know that you know what you’re talking about.

Matt: Yeah. Right.

Gerry: Angel investors too. So our first cohort we just did last, uh, last, um, Quarter, we have 50, basically the 50 top startup ecosystems in the United States. Someone is getting QAI certified. That’s great. And we’re also in India and Oman.

And, and so now we’re going to, we got our next cohorts coming up. We got a few folks from Singapore. Um, you know, we’re, we’re making inquiries into Nigeria and UK. I mean, we want QAI to be the standard. Um, in the market and this will get spun out of the, uh, of the lab, Doriot Venture Labs into its own sort of educational, uh, cooperative where staying in true, uh, sort of an alignment with, uh, owners that everyone who’s QAI certified will get to be able to own part of the stock of QAI.

So as more people get educated, the earlier folks that get in, get to financially benefit from that.

Matt: I love it. That’s a great call to action. We’ll link it all up in the show notes for everybody. We are almost done, but, uh, Nate has his favorite part of the show.

Nate: So we have three questions for you. Quick, rapid fire answers.

Uh, there are no wrong answers, so don’t feel, uh, don’t feel the pressure there, but we’re gonna need to start with the lightning round. Outside the amazing entrepreneurial ecosystem, what is Indiana known for? Hospitality. Ooh, I love that answer. That’s great. What is one hidden gem in Indiana? The people.

Yeah, well, hey, that segues us perfectly into this. Um, who is someone we need to keep on our radar? Someone who is doing big things?

Gerry: I think about thought leaders right now, I’d say, uh, Noah Yuval Harari. I would pay attention to what he’s saying.

Matt: Is that, uh, the guy who wrote Sapiens? Yeah. Yeah. Absolutely.

Gerry: He’s a thought leader in what’s happening in the transition from AI into, and what’s happening to humanity. I think everyone should, everyone should, Should listen to him.

Matt: Ooh. I need to, I need to follow him cause I’m just waiting for the books. And by that time it’s probably too late.

Nate: Yeah. All right.

That’s a great answer. Yeah. That was, I did not see that one coming.

Matt: Yeah. I’ll be honest. I love that.

Nate: We’ll have to link that up in the show notes.

Matt: Gerry, this was awesome. Thanks for coming on the show, man. Thanks guys. This is great. Congrats on everything. And thanks for helping create a better future.

Thank you so much. Yeah, man. All right.

This has been Get In, a Powderkeg production in partnership with Elevate Ventures, and we want to hear from you. If you have suggestions for our guest or segment, reach out to Matt or Nate on LinkedIn or on email. To discover top tier tech companies outside of Silicon Valley in hubs like Indiana, check out our newsletter at powderkeg. com slash newsletter. And to apply for membership to the Powderkeg executive community, Check out powderkeg. com slash premium. We’ll catch you next time and next week as we continue to help the world get in. Since you just listened to this podcast, you might be thinking about starting one for your company.

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