Episode 6

full
Published on:

11th Sep 2021

Interview with Chris Grey, COO & Co-Founder of CapLinked

01:13

Debunking the mythical startup origin story

04:09

Why startup founders are not all happy - the fake narrative. The realities of raising money as a founder and what many founders often don't hear about the process.

09:05

The VC track, alternatives, and the most important thing in any company

12:47

One important lesson to be learned from Steve Jobs, Jeff Bezos, Mark Zuckerberg, and Bill Gates. Workplace culture and its role in attracting talent.

16:12

What we did wrong at CapLinked in the early days and what we got right eventually.

20:14

Revenue based financing and other VC alternatives

21:19

Importance of working backwards when building and financing a startup

23:41

AngelList, WeFunder, SeedInvest discussion. Importance of having right team and capital partners in place. around the Founder.

27:56

Hiring the right team and setting achievable and realistic goals

33:07

Discussion of concept of blitzscaling, burn rates, and hiring people at CapLinked given ARR and profitability

38:11

Angel investing and discussion of syndicates run well

44:33

Lifehacks and controlling your own time

46:51

Conclusion

Transcript
Andres Sandate:

Hello, everybody and welcome to another edition of the ATLalts podcast. This is your host, Andres Sandate. I am delighted to be joined today by Chris Grey. Chris is the Co- Founder and Chief Operating Officer of two companies CapLinked, which is a virtual data room provider that I look forward to hearing more about. And TransitNet, which is a company that's active in blockchain technology. Welcome to the ATLalts podcast, Chris.

Chris Grey:

Thank you. It's great to be here.

Andres Sandate:

Chris, you're based in Manhattan Beach, California. You've been active in the early stage, investing space, you run two successful companies, you have a deep background in real estate and in finance and the capital markets. So there's a lot of things we could talk about, but just always like to hear from people I've invited on the podcast, you know, where you, where you grew up? And how'd you get into the line of work that you're in today?

Chris Grey:

Yeah, well, I don't I don't like to spend too much time on the usually mythical narrative, origin story side of things. But I'll just say very briefly that I went to Stanford, and out of Stanford, I went into finance. I was in private equity for 15 years. I did a lot of things there that I don't really feel the need to get into much detail describing. I was also in corporate finance, after private equity for a bit. And, you know, about 10 years ago, I got into, I got into tech startups. So I've been doing CapLinked for about, and for about 10 years now. That also includes a lot of angel investing that I've been doing since I got into startups. And also, several years ago, I cofounded TransitNet, which is a is a blockchain-oriented startup. It's not it's not a cryptocurrency or technically, a crypto project. It is it is a blockchain related software for bringing title registry to blockchain. But yes, that pretty much brings you up to date.

Andres Sandate:

That's a well, that's, that's great. I mean, I guess as a launching off point, one of the things that's always fun to you know, to do on the show is to ask people kind of, you know, some of the things that they've done, and you've clearly done quite a bit like I have, and today you're running, let's talk about CapLinked because that's, that's a company that, you know, when you and I were preparing to do this interview, you shared with me, you know, the the fallacy of the mythical origin story that is often covered in the media and covered in the press. And a lot of times, you know, we often hear a very polished version of what a company looks like, today and what it looked like back then. What I was intrigued by is, you know, you talked about how you and your partner, you know, got your footing. And now the businesses, you know, it's clearly working, you've got great clients, you're, you have, you know, really impressive growth. But I thought it'd be helpful for the people that are listening to this podcast, which are people who are running companies, you know, they're thinking about doing a startup, or thinking about launching their first fund to hear about some of the challenges to, you know, to overcome. So I wanted to know, if you'll go back a little bit and talk about what was it like, when you formed the company? What were some of those growth challenges? And, I mean, you know, maybe looking back, it's easier, but I think that's a great point to start on.

Chris Grey:

Well yeah this is what I love to talk about. So I'm happy to get into detail. So I want to start at a high level with it, which is, and it may sound, again, too high level, but I think it's relevant to what we're discussing. And I do love to talk about this. So I may ramble on. At a very high level, pretty much everything that you're told in the media, not only about startups, but pretty much about most things is fake - is a completely fake narrative that's being fed to you. It is just fake. And so I'll get specific. And this is why so many Americans are unhappy, depressed, miserable. It's just, that's a fact. We take, you know, 80% of the world's opioids, 80% of the world's psychiatric medications. And this is because people are being fed a narrative of the world that doesn't fit the reality. And it's actually a fairly normal reaction for a human being to be unhappy and depressed when they're being told that this is their reality, when what they're seeing every day in their lives is totally different. And to get more, to get more specific, and sort of micro focused on startups, two thirds of all startup founders say that they're depressed. Two thirds. I mean, that's a ridiculously high number, right? Why? It's because the narrative that they're reading in the media every day, doesn't fit at all with what they're seeing happening in their own lives. And so they think there must be something wrong with me. I must be a loser, I must be a failure. There's some you know, I'm obviously, you know, doing all these things wrong, when, look at all these people who are being so successful, just yeah, you just have a good idea. And you throw it out there and you raise a lot of money, and then you, you know, you do an IPO or, you know, you list a cryptocurrency and that doesn't even need to have a product and just give it a funny name. And then you make a huge amount of money. You know, what's wrong with me. This is this is the narrative that people are fed. And of course, they see that that isn't happening for them. Unless you're one of a tiny, tiny, tiny, tiny fraction of people. You see, though, this isn't happening for me. And so that's really where it starts, it starts with all of the the lies and the propaganda and the media. And then you know, the reality is quite different. The reality unless you're, unless you're part of America's ruling class, which is a tiny sliver of people, sure you can go and you if you're good at good at selling yourself, you can raise a little bit of money for something, even if it's not a good idea, you can probably raise a little bit of money. But so what. That doesn't get you anywhere at all. Typically you burn through the money, and then you're out of money, and then you maybe have to go try to tell a new story to raise a little more money, and then you burn through that money. And then you still haven't accomplished anything. And this is why there's a lot of depression in the startup space is because people, there is the ability to raise money, even if you're not, you know, part of the ruling class, there is the ability to raise money, because there's a lot of money out there. So you can raise a little bit of money. But you're not going to be again, unless you have a truly great business or you're part of America's ruling class, you're not going to be able to raise $100 million, or you know, some enormous sum of money, which by the way, the reason so many startups are successful is often not because they had a good product or a good business. It's because if you have unlimited money, even a very, very mediocre business can be successful. I mean, if I give you a billion dollars, you would have to be pretty stupid to not be able to build a decent business with I mean, you'd have to be way below average, you'd have to be you'd have to be American involvement in Afghanistan below.

Andres Sandate:

I mean, no politics on my show now. No, but I think what you're saying is, I think what you're saying is that there's a there's a limited value placed on execution in the startup system, and especially where we are right now, there's a lot of capital chasing, you know, the next hot idea. And so if you call it crypto or NF T's or anything that's hot, you can and you've got some kind of a reputation or some kind of a network or some kind of a, an access or ability to get in front of people, you know, you can potentially raise money. So I think we've established that's happening. Yes. Bt you talk to me a lot. I'm sorry. No, I didn't say you and I talked about the unsuccessful or unhappy founders. So but you know, one of the things that I really want to hear from you, as you've painted that and laid that foundation, which I agree with a lot of. You, you have broken through some of that. And I want to hear as you get to it, I know you want to make some other points, but as you get to it, I want to hear some of the things that CapLinked had to overcome to get to the runway that you're on now.

Chris Grey:

Sure. So I think a lot more people would be successful in startups, if they focused on trying to build a real sustainable business, which is often not what they do, because that isn't, that is not the VC model. Yeah. So again, you can't really do this. If you're on a VC track. If you're on a VC track, you're either having to try to swing for a massive exit, or you're probably going to end up failing. Because they don't have a business model for singles and doubles or triples, it's all home runs. That's their business model is all home runs all the time. And if you're not a home run, they ultimately you're ultimately not a fit. So the good news is that there is a lot of money out there. And again, even if again, you're not part of the very tiny sliver of America, they can just raise unlimited amounts of money, even if they don't have a good idea. Even if you're just a fairly regular person who's pretty good at what you do, you can raise some money. And the important thing, then is to not waste that money to not waste that money going and doing things that are trying to put you onto a VC track for example, if you don't have a business that is capable of succeeding in that track, and very, very few businesses, very, very, very few businesses are capable of succeeding in that track. But if let's say you go out, and you're successful enough, either just because you're good at raising money, or maybe you have something that's a good business, at raising a few million dollars, which is actually pretty realistic in today's world, for a lot of people. It's not as crazy as it sounds, you don't have to go on Shark Tank, right? You know, or something like that. You know, there's a lot of platforms out there WeFunder, you know, Angel List, Republic, and many others, Repubic, there's many platforms out there, SeedInvest, there's many platforms out there where you can go, and you can raise anywhere from the six figures to maybe even a few million dollars. And the key is then deploying that money efficiently. And it really all comes down to number one, hiring the right people, which is the hardest thing. The hardest thing in startups or in really, in any business is hiring the right people. That's always the hardest thing. And again, it's again, sort of, well, yeah, of course, except, again, it's all about execution. So, it's not like that's such a difficult idea to figure out it isn't. But it's actually very, very, very hard to hire the right people to.

Andres Sandate:

Stop you right there. And I want to ask you a question I heard from a successful startup founder yesterday, he was talking about getting an employee early in your startup who was loyal. It didn't have to be a developer in his opinion. And they're a platform that that's like a two-way marketplace. It didn't have to be somebody that was deep and finance, like a CFO type. He said, You know, you're gonna have startups are hard. You think it's hard now you're trying to raise your your seed round, you're trying to get your first half a million dollars of capital, whether it's venture money or not. You think your life's hard now, wait, wait until you get some customers, wait until you have employees, wait until you have a board. Now, you know, you're only at the beginning. And I thought that was an interesting take. But he came back to this notion of, you know, very early on the team is critical. Like you said, Chris, but getting some was

Chris Grey:

It's not critical. It's Everything. It's actually it's actually everything. Yeah, it's actually everything. And and I think, you know, people look beyond, again, just media narratives, and they really dig into even what Steve Jobs would always say, you know, and Steve Jobs being an just an enormous narcissist, an egomaniac, obviously. But even he would say when you would really get him in a in a long interview where he would really talk and not just give people sound bites, he would always say, my skill, "The reason I'm here, is because I know how to hire and retain good people." And then even he would say that. I mean, this is someone who is the most narcissistic, egomaniacal person you could ever find. And even he knew that the only reason he was able to achieve what he did was because he was able to hire and retain great people. If he couldn't do that. He never would have been anything. And this is someone who again, thinks he walks on water. You know, and so really, anyone who is at the highest levels of success, no matter how egomaniacal they are, knows that this is reality. And I'm sure Jeff Bezos knows this. I'm sure you know, everyone at this level knows this. Zuckerberg. Gates. Anyone knows this. That is, that is everything. It's everything. So how do you do that? Yeah, I mean, you have to have a business and a culture that is inviting for for people to work. It has to be someplace where people want to work. And that could take that could take a variety of forms, though. I mean, you have examples of places that you here are very difficult places to work, but still, they attract people. You know, some people are attracted to money and power. That's what some people are interested in and some people that's what they want. And so you know, it doesn't have to be you know, a unicorns and rainbows and fuzzy animals kind of a workplace, although that's certainly one model that successful is, you know, you treat people very, very nice. That's one model. There are other models that also work. But whether it's a, you know, sort of a Wall Street, very money oriented environment or whether it's a, you know, again, a more cooperative collaborative type of environment. It has to be an environment where, you know, good people want to work. And and if you don't have that you really don't have anything.

Andres Sandate:

Yeah. And you talked about you like telling the stories and talking about the challenges because you, you want to break that notion and shatter it in pieces that, you know, that people are fed, that I need to go work at a VC or I need to do a startup or you know, I want to have I want to find, you know, build a unicorn, it's like, what I want to do on my podcast, selfishly is I want to find people who are willing to be a little vulnerable, be honest, and talk about all the shit that they've had to come through and, and overcome in order to build the business, the venture, the fund that, you know, is now having some success, you know, it doesn't have to be notoriety doesn't have to be fame. They're just breaking through and overcoming, you know, the odds because most startups fail. Most funds don't raise money. Most returns are subpar. Right. I mean, so

Chris Grey:

yeah, so that's right. Yeah. So specific, specifically, specifically for CapLinked, if you want to hear what we did wrong. Yeah. So initially, yeah, we were trying to build a, you know, a narrative story-based business. That totally didn't work. There were no clear metrics in place. We were hiring people who, you know, we're also interested in that type of business. And those are typically not the best people. And so, you know, as we were able to move away from focusing on a narrative and a story, and something that might, you know, sound good. And we focused on actually getting a return on money that we were spending actually seeing, you know, and again, this is not a mystery. I mean, you're really in a SaaS business, CapLinked is a SaaS business. In a SaaS business, if you're not seeing a 3x return on the money you're spending, that's generally not that good. A lot of these companies, frankly, aren't even seeing a 1x return on what they're spending, they're actually just losing money on everything. And, you know, which is why they don't ever go anywhere, you know, unless again, of course, they can raise a billion dollars, in which case, again, you can be fairly incompetent and actually succeed. But in the case of just a normal situation where you know, you can raise maybe a few million dollars, if you're not getting a return on that money, you're ultimately going to fail, and and you're just going to keep delaying the failure by maybe going and getting a little bit more money here a little bit more money there, if you can, if you have to get a clear return on the money. And that that limits, also the type of businesses that you can start. So look, if your idea is to start an electric vehicle company, and you can't raise $100 million, well, you just can't do an electric vehicle company. Sorry. You know, too bad. If your idea is to start the next TikTok, and you can't raise $100 million? Well, you're probably not you probably can't do that. You probably can't do that. So but can you start a SaaS business? Can you start a marketplace business? Can you start any type of can you start even an enterprise software business? Or a consumer subscription business without raising $100 million? Sure you can. You absolutely can. And I am personally invested in companies that got to $10 million in ARR. And they spent less than a million dollars to get there. Well, how did they do that they just good execution, good execution, it's, it's totally possible to do that. With good execution. If your business model is in SaaS, or an enterprise or in consumer subscription in any of these areas, or even an e-commerce. E-commerce is even another area with great execution. You don't need to raise a huge amount of money to become very successful. And then once you are at a certain scale, well, then you can raise money from anybody. Because you've already achieved a certain scale, once you're past $10 million of ARR for a subscription business, or if it's ecommerce, it's probably more like 20 or 30 million. You can raise money from anybody, everybody wants to give you money at that point. But to get to that point, you don't need a huge amount of money in those businesses. So I think that's the good news for people.

Andres Sandate:

There's been some alternatives to the venture capital track. I'll just pick up on that, what you're calling it emerge over. You know, whether the models have been around for years, like revenue based financing or cash flow based financing, you know. In a bank, they would call that factoring or they call that you know, accounts receivable. Yeah. financing. Now, if you have a revenue based financing start up, or your revenue based financing VC, you know, it's like people are throwing money at you. So I want to ask you about the venture track. I know you're smiling because you get where you get where I'm going, right?

Chris Grey:

It's so funny to me the way the same, the same things get recycled over and over again. And then they call it something else. I mean, it's absolutely hilarious. Actually, you know, how many times are we going to? How many times are we going to recycle factoring.

Andres Sandate:

But the specific question I want to ask you is, as a CEO, as a founder, like, you have to, you have to capitalize your business. And you know, people aren't free, not everybody's gonna sign up for, you know, sweat equity, and you can only bootstrap so far. Back to your point about, you know, if you're not one of the ruling elite, you know, nobody in it, not a lot of people that form successful startups came from much. So you've got to have some capital. But you do have options, if you don't want to be on the VC track. And I want you to talk about, you know, how you guys capitalized the company? You know, are we going to high net worth individuals? Are we going to a family office? Are you going out and taking out small business loans? Like, if you're trying to avoid the VC dilution? Fast Track?

Chris Grey:

Yeah, from my point of view, you're always, you should always be working backwards. In terms of how much money do I think I can raise? And what type of business can actually do based on that? And that's, of course, not how most people operate. Most people are like, I have this business, I have this idea. I'm going to go raise money for it. And then you know, it's usually not enough money. Yeah, it's usually not enough money, because you actually have to work backwards the other way. And figure out okay, how much do I think I can raise? And does my business model actually fit with that? So, I mean, factoring, you know, I'm not a huge fan of it, it works for some people. It's also called many other things, revenue based financing, which is hilarious to me. I mean, this is like, Come on, guys. It works for some people, it works for some people, and that's fine. I'm not a fan of any forms of of secure debt, secured debt, or other debt that would have kind of what I would you know, in the old days, before we adopted, you know, very woke language even talk about business used to be called, you know, having a gun to your head, which is what it is, yeah. Um, you know, that's like, that's, that's a huge trigger warning for a lot of people now, or you have to, you have to be very careful.

Andres Sandate:

I want to ask you, but, but you, but you have a SaaS business. And so I want to, I want to either dispel this notion, or I want to illuminate I love this alignment here. Because we get to talk to us, you know, a C-level executive of a SaaS company that's growing, you obviously want to continue to grow, you want to, you know, expand your business. So, here I am, let's say I run a startup. And my startup is to provide financing to SaaS companies that have MRR, and you want to grow, and I come along and knock on your door and you give me 10 minutes. And I say, Hey, I can convert your MRR to Arr. And therefore, you don't have to go get venture capital and dilute yourself and you don't have all these, you know, expectations and boards in your cap table. Nor do you have to go to your bank like what are you gonna say is no, I know you know what it is. But I want to address what are you saying?

Chris Grey:

And what it is, and I'm, I'm saying that that doesn't interest me. Sure. I do understand why some people like it, because it seems like easy money and it's non dilutive to the equity. But again, it is factoring. And when you talk about factoring, what you're really talking about is a very high interest loan. If that loan is unsecured, and doesn't have any what I would call hard triggers in it, which would then put you in a situation of insolvency or bankruptcy very quickly. If you couldn't pay it back. Then it then it's not terrible. It's okay. But what I strongly recommend to people is, in the early stages, yeah, of course, you want to start with friends and family with people, you know, with many of the different platforms for angel investing, whether it's Wefunder or Republic or SeedInvest or AngelList, or I mean, Jason Calacanis. I'm a huge fan of what he does at Launch. I definitely want to plug them as much as possible. Most of the angel investing I do is with Jason and Launch. I think what they have is a tremendous platform. I would recommend everyone try to join. Yeah. Jason's syndicate. He doesn't pay me anything to say this. No, no, the best. I think it's the best. I know, I think I agree. So Angel syndicate, I think I think it's the best angel syndicate out there. And I highly recommend it. But if you're an entrepreneur, you know, that's another option Launch. Obviously, there's Y Combinator, you know, there's not everybody can get into something like Y Combinator or Launch. So that's where you have platforms like we WeFunder and SeedInvest and Republic and some others, AngelList, where it's, you know, there's a lower bar to get accepted onto those platforms. And then it's just how good can you hustle? How good can you go out and sell your story to people. That's where, you know, it is like a, it is like a real world version of Shark Tank where you're going around, you're trying to pitch yourself to people. And here's the thing, if you can't pitch in today's world, where money is literally falling from the sky, terrible ideas, if you can't raise any money, for what you have, it either means that what you have is no good, or you're not good at raising money. And if it's the second one, maybe you need a co-founder who's better at raising money, maybe you need someone else on your team who's better at raising money, if it's the first one, frankly, the investors are doing you a favor. Because if your idea or your business is terrible, they're not helping you by giving you some money, they're actually making your life worse, they're putting you in a situation where you're going to be literally trying to run in quicksand. And you're going to be one of these people, one of the two thirds of startup founders who are miserable, because they're trying to do something that doesn't make any sense. And yet, they're still able to raise a tiny little bit of money. It's almost like the same concept of like, putting somebody on welfare. It's really almost like the same thing of like welfare, it's like, hey, look, I'm going to help you, I'm going to give you just enough money, so you don't starve to death. It's like, am I really helping you, maybe, maybe I am. But maybe I'm not, maybe I'm just putting you in a situation where you're always going to be poor. And that's kind of it's almost like analogous to a lot of these startups, where they have that they have a bad business, that doesn't make any sense. And they're able to raise just enough money to, to not starve to death. But they're actually just, you know, they're kind of just blow it throwing their lives away.

Andres Sandate:

I am continuing to, you know, dive deeper into the startup and technology space, having worked in alternatives, like you a lot of real estate, you see a lot of real estate deals, I mean, just to talk about it, you see a lot of real estate deals that don't don't have any business getting financed. And there again, I mean, a different asset class, but you know, we've seen lots of bad projects not work. So I want to ask you about this, this important. The importance of hiring, you've talked about and building the right team, and you gave the examples of some of these, you know, Steve Jobs and others, like when they're really being honest, it comes down to having a really A+ team. Do you subscribe, the idea that a high a player's hire a players and B players will hire C players because they're, you know that they have a inferiority issue, and they're they're worried about being challenged.

Chris Grey:

That's that's, that's, that's generally true. I, again, I will I won't say anything about politics, but I think anyone who follows politics can see that's obviously true. No matter what your political leanings are, I think that's fairly obvious that that's what happens. It's, it's on display for everyone to see all the time. But yeah, I mean, I think that is generally true. But here's another myth, though, that I would like to dispel if I can. Of course, not everyone's going to be able to hire A players, right? If there's only so many a players. And, you know, maybe you're not an A player. So yeah, I mean, you know, maybe, you know, a lot of people who start startups are not A players who they think they are, but of course, probably a lot of them aren't. If there's you know, any kind of a bell curve they're not but that the myth of like to dispel is that is that you have to have a player's just to have a successful business. Now, it is probably true that you need A players to have a an enormously successful business unless of course, someone's willing to give you a billion dollars because they just like who your family is, in which case you don't need A players. But for most people to be super successful, you know where you're getting a billion dollar exit Yeah, you need a players but to have a successful business that makes money and that maybe someday you could sell for enough money to retire. You actually don't need A player's and I've seen many situations in my life, where people who are definitely not a player's I have made millions and millions of millions of dollars throughout their careers. And and not just because you know, everything was handed to them either. No, because the reality is that, if you so many people they waste, they waste their energy, they waste whatever talent they have, they waste whatever resources they have, chasing after things that make no sense. Chasing what I would just call dreams, rather than go chasing their vision, achievable goals they, they chase dreams, yeah, vision dreams, things that are just nonsense. And even if you are a B player or any have a team of B players, if you have a dedicated, motivated team of B players, and you have enough money to achieve a reasonable goal, you could be successful again. Not the kind of successful, that's gonna get you, you know, a ton of media coverage, probably. But you can make enough money not only to have a good lifestyle, but probably enough money to retire on, which in America is actually a tiny fraction of the people, if you actually look at the data, most people will never earn enough money to actually retire. Or if they retire, they'll have to retire at a much, much lower lifestyle than they were living when they were working because things are so expensive. But I mean, if you can make enough money to retire, which today, retiring in a comfortable lifestyle, you're probably looking at at least $5 million minimum, right? I would say that's probably a minimum. You can make that kind of money to retire on. And, you know, raise a kid and whatever else you're trying to do. You don't have to be a superstar to do that. But you do have to work and you have to be focused, and you have to set reasonable goals for yourself. And you have to be, I think, honest with yourself, and with your whole team, you have a team of people over what you can actually achieve. Yeah, you know. What are we actually capable of achieving? Is it a unicorn? Or is it okay, enough money that all of us can retire someday. And I think those are very different goals. Those are very different, you know, situations for people. And you know, the situation where you're working towards a comfortable retirement is for most people, obviously more realistic. And it's also probably going to make them it feel a lot happier, because they're going to see that they can actually have a chance of achieving the goal, rather than just always feel like well, what Yeah, why am I such a loser? Because I don't have a unicorn,

Andres Sandate:

Not everybody's gonna have a unicorn, most won't. Back to the, so back to the the, we talked about hiring, we talked about leadership, we talked about execution. When you look at your business, and you have a lot of big competitors. But you have successfully carved out your niche, your basic customers, you know, across government, and, you know, corporate, you work with a lot of financial services, companies. When you're looking to bring folks on your team now at your level, and you're the COO, so you're, you're deep in the operational piece, the execution piece, like to sort of help us see inside of your company, like a little bit of your your thinking, what what are you hiring for? What are you bringing people in, what are those qualities and characteristics?

Chris Grey:

Well, we don't see one of the, again, one of the, I guess I could call it a secret, which is funny that it's a secret, because it is one of the secrets of running a successful business, which is very much the opposite of course, the Silicon Valley ideology, which is around blitzscaling, which, of course, is what you need, if you're trying to build a unicorn most of the time is this kind of blitzscaling idea, although even in some cases there, that's not true. You see, actually, there are a number of unicorns that grew, didn't didn't grow with that approach. But this idea of fast growth and fast hiring. It's a we definitely haven't done that here. When we when we did try that many years ago, it was an absolute disaster. And that's, that's one of the things that I was speaking of earlier, where, you know, we were briefly looking at a VC track, and we're doing this faster hiring was a total disaster. So we don't hire a lot of people. And we don't have a lot of people. And so we did hire just one person, recently, another developer but we only have eight people in our company. And we have eight people in our company. And, you know, we're we're at about a $4 million run rate, and we're profitable. And if I look at a lot of the companies that I invest in, that are say, you know, if there are $4 million dollar run rate, they're probably a series A, most of them have 30 to 50 employees. That's just the normal range 30 to 50. And of course, of course, they're bleeding a lot of money, obviously, right, they have to right at 30 to 50 employees for the same revenue run rate that we have, and we've been growing 45% per year for the last several years. But we're not trying to grow 200% or 300% per year because frankly, even if we had more money that wouldn't probably probably wouldn't happen in our space. And so for us, that's another reason why it really hasn't made sense to raise money for CapLinked for a long time. Because it wouldn't really help us that much, it probably would have made us worse off. Because, you know, we wouldn't have had an efficient way to deploy the money and get a great return on. Yeah. But yeah, well, what we look for when we do hire someone, and we don't hire many people, and we have had no turnover, by the way CapLinked for years, we've had no turnover, which is again, that's another great sign of a business. And so when there's very little turnover, when there's a lot of turnover, of course, that's a negative sign. But what we look for Yeah, is, is this person having the right fit with the position? And do they have the right cultural and personality mindset for our team? Are they going to get along with everybody. And I think that's fairly straightforward. There's no magic there, there's no secret there. But I think it is, it is a bit of a secret that maybe you don't need nearly as many people, as the industry tells you, that you do. And maybe a lot of that is built around an ideology of the venture industry. And actually also the self interest of the venture industry, where the more they tell you to over hire, the more capital dependent you are on them, the more of your company that they're going to own, the more you have no choice, but to be completely dependent on the VC model, because you're never ever going to be anywhere close to being profitable. And so some of it is ideology, and some of it is just pure economic self interest from the VC perspective of wanting companies to be very dependent on them. And of course, if you have no ability to get anywhere close to breakeven, that means you're more dependent on the VC model. So yeah, but yeah, so like, that's the only part I would say that's a bit of a secret is you probably don't need nearly as many people, as the industry would say that you do.

Andres Sandate:

Yeah. I want to, I want to pick up on something that you said. And that's, you talked about and giving a shout out to Jason Calacanis and his his his syndicate and activities. I'm also in the syndicate and big, big fan. I think he, as much as anybody I followed in the startup space, you know, really just throws a bucket of water on this notion that you got to be, you know, $100 million, you know, net worth to just participate and get involved. I mean, you know, there's different ways to do it. So I want to talk a little bit about your experience. When When did you start investing in in startups? And given your strong feelings that you have about, about how to do this? And there are your opinions which you're entitled to? But how do you approach investing in early stage companies? Is it through a relationship with a well known angel investor? And that's, that's not a failsafe model, but it's a model to do it. But how did you go about doing it? Since you've made you know, 60 plus investments?

Chris Grey:

Well, yeah, when I first started doing it, I was doing it through AngelList. And I was lucky that that didn't go very badly. Because in reality, I mean, you know, I, again, I'm strongly supportive of what Launch and what Jason does, I think it's I think it's the model that all these syndicates should have, but don't. The AngelList platform is more like the law of the jungle, eat or be eaten, kill or be killed. That's what it is, that's just what it is. And the reality of it is, um, you know, most of the stuff on there, you'll probably lose money, you'll probably lose money on most of the stuff you invest, invest in on AngelList. If they don't qualify any of it, they don't vet any of it. It's just a bunch of stuff put on there. And if you're lucky, you might make some money, but you'll probably lose money. Frankly, I was lucky. That overall, I did okay, on there. I'm really, I'll just say just lucky that I ultimately did, did make money. And I'm out of most of my investments that were on there, and one of them actually turned actually two of them turned out to be very good. But Jason is a completely different thing. I mean, he, of course, obviously, since he's investing in early stage startups, some of them aren't going to work out obviously. But what I love about Jason is he's very good about disclosures. He is very good about really showing you okay, here's the opportunity, here's the risks. He's very good about making sure that his entrepreneurs actually provide updates to investors. Most of the stuff on AngelList and these other platforms, you're lucky if you ever see an update from the company's ever at which is obviously frustrating. So if you don't even have any information, you don't even know what's going on. Um, so I mean, that's, that's where I would really again, give a very strong shout out to Jason not only for the curation that he does, for the vetting that he does, but for the, the, the way that he trains and conditions his his portfolio companies to provide updates, his team, the team around Jason is absolutely outstanding. He has a team of people who are great about getting back to investors. He has a Slack channel, which works incredibly well, for keeping investors updated and informed he personally is highly engaged with with communicating with investors. So I mean, that's the way it should be done. That's the way it should be done. But I guess the the flip side of that is because Jason's been so successful and because you guys have just have such a great platform, he has started to raise the minimum investment there. So as you were saying, you know, for people who only want to invest a very small amount, you know, they would still need to maybe go to places like, like, WeFunder our SeedInvest or possibly AngelList, as well, to do that, because I think, you know, because Jason can only accommodate so many investors on to his syndicate, there are limits to that. I think the minimum investment has been going up. But, uh, yeah, I mean, his is the gold standard, as far as I'm concerned, because of the way that he vets the companies, which is very similar to the way that I look at things, of course, he's going to take more risks than I do, because he has that as his business to make bets. And so some of the stuff he invests in, doesn't appeal to me because it's what he would call more like a moonshot. Moonshots are things that you know, are just lower probability of success. But better upside. Most of what I invest in, are things that have already met some minimum hurdles of traction. For the business, that's different depending on what type of business that it is. I also do a little bit of investing with a smaller syndicate, which I think is well run called Bioverge. They're really the only other one that I significantly invested with, and they specialize entirely in health care. And that's all they do. And and there are people who are deeply, deeply, deeply involved with health care and deeply involved as advisors with all the companies. They're not just a syndicator throwing stuff out there, which is what you get a lot of the time. So those are the only two that I significantly invest with. I tried a couple of others. I won't name any of the ones that I wouldn't invest with again, but I will say I would just say that the vast majority of stuff that you see from syndicators on AngelList, for example, is not good. So do your due diligence, the vast majority of what's out there on a platform like that, that doesn't that anything at all, they just let pretty much anything on there. I actually think WeFunder or frankly, where CapLinked has raised some money before and TransitNet has raised some money, our blockchain-oriented software has raised money. WeFunder actually does a much better job of vetting the vetting people and vetting the companies than AngelList does. AngelList doesn't do anything as far as I've been able to tell,

Andres Sandate:

Well, I've Yeah, I've I'm continuing to explore these equity crowdfunding platforms because you know, I like you came from the old school of, you know, raising money, you, you know, you'd have a PPM, you'd go do some road shows in four or five, you know, parts of the world, London, New York, San Francisco, you know, you'd call around to 200 of the wealthiest family offices and investors. And it's like, you know, you're walking out of the room as the next person is walking in. And that's like, just just the total meat grinder. So I do like the democratization, the fractionalization, and the access that technology and digitization has brought to, to companies, whether they be early stage investments, or real estate, or anything else. So as we wrap up here, I'm always interested in asking my guests, you know, you've got a high intensity type of role. It sounds like you've run it very leanly, but you got a lot of other things that you're doing in terms of investing, you've got a second business now, which we didn't get to spend a lot of time on today called TransitNet. How do you how do you strike the proverbial balance? You know, you're a West Coast person. So you're, you're out Imagine you're up early. But tell me a little bit about how you make it work for you.

Chris Grey:

Yeah, yeah. I mean, I I exercise an hour and a half to two hours every day. And again, just like the secret. The secret is, yeah, get up pretty early. Get a lot of stuff done in the morning and afternoons. I go exercise, play tennis, swim, do other exercise, like my son's in a in a big tennis training program. I take him up there and I go and exercise myself. And then in the evenings, I catch up on Some things. So yeah, I mean, I, I mean, I'm spending probably, you know, a decent number of hours working every day, but it's on my own schedule, it's on my own terms and lead a very healthy lifestyle. I don't feel excessively stressed at all, because because I control my own schedule. And because I'm setting, I think, very realistic goals for myself. You know, again, I'm not not trying to, to, I think achieve things that are that are just, you know, not realistic. You know, and so then there's not the disappointment. And I think that's, you know, again, I think for a lot of startup founders, a lot of them are young, they're inexperienced, even some of the ones who are more experienced, they've maybe just been so immersed in the industry, that they that they don't have perspective. A lot of them don't have kids, a lot of them aren't even in relationships. And and the ones who do are often even more stressed, because they don't know how to balance any of those things. And yeah, I mean, I think it really all comes down to setting realistic goals and having having some control over your own time, which is something that most people report, as the biggest source of stress is when they feel like they don't have any control over their own time. And so I think that's that's kind of the secret is find a way to control your own time, set your own schedule. And then I think your stress level is going to be a lot lower. And I'm going to plug my book at the end here because I am releasing a book. Please do. And it's going to be called Yeah, it's going to be called Life Hacks - simple steps to a healthier life. And I will be happy to come back on and talk about it. That's awesome. If you want me to at some point. All right. So So yeah, I mean, that's really what my life is all about, frankly, is, is that so?

Andres Sandate:

Well, Chris gray, I appreciate you joining me today on the ATL ults podcast.

46:57

Thank you. It's great to be here.

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About the Podcast

ATLalts
Alternative investments
ATLalts is a podcast for those interested in learning about alternative investments and alternative asset classes through interviews with investors, asset owners, and industry practitioners. ATLalts explores venture capital, private equity, real estate, credit, private debt, distressed, hedge funds, commodities, FX, currencies, infrastructure, structured products, digital assets, multi-alternatives, secondaries, collectibles, farmland, timberland, and more specialized alternative assets such as life settlements, aircraft leasing, royalties, litigation funding, and marine finance.
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Andres Sandate

Andres Sandate is the creator and host of ATLalts. Andres has extensive knowledge of alternative investments with professional experience working in asset management, capital markets, securities, and investment banking. He has held senior leadership roles working at several hedge funds, private equity real estate firms, multi-asset alternative investment firms, and placement agents. Andres currently serves on the Board of Directors of the Southeastern Alternative Funds Association (SEAFA), is the President and CEO of the King Springs Elementary School Foundation, is the past President of the Atlanta Chapter of ALPFA, and is a lifetime member of the National INROADS Alumni Association (NIAA). Andres earned an MBA and a B.S. from The University of Kansas and is a native Kansan. Andres is married and has three children and resides in the Atlanta area. Email andres@atlalts.com