Horacio sat down with Ali Moiz, Co-founder and CEO of Stonks. Stonks is an online platform that allows founders to pitch their companies to hundreds of accredited investors and venture capital funds at the same time. Or as they put it: Imagine if Twitch, AngelList, and Shark Tank had a baby.
Ali previously co-founded StreamLabs which was a free software tool allowing livestreamers to overlay features on their content and procure donations and payments. StreamLabs was acquired by Logitech for a reported $120 million.
Discussion topics include:
- Defining venture capital and angel investors
- Going against your instincts as an investor to stay patient
- Being forced to hold onto an investment for 7 – 10 years as a venture capitalist
- His journey as a young entrepreneur to selling StreamLabs to Logitech
- Hitting roadblocks for several years at StreamLabs before finding success
- The corporate culture of Stonks to connect founders with investors
- High signal investors and thought leaders that garner followers
- Democratizing access to venture capital through Stonks
- Using the StreamLabs model as a vertical for venture capital
- DemoDays at Stonks with hundreds of investors watching a handful of founders pitch their companies
- Getting feedback to founders through the livestream process
- Examples of founders that have found success on the Stonks platform
- Startup investing as an under-allocated asset class
You can listen to the podcast through Spotify or YouTube.
[Horacio Ruiz]
Welcome back to the Alts podcast. I’m your host Horacio Ruiz. We bring you industry leaders and creators to give their insights on the rapidly changing and exciting world of alternative assets. Opinion expressed on this podcast by the host and podcast guests are for informational purposes only and should not be considered investment advice. Podcast hosts and guests may maintain positions in the offerings discussed in this podcast. Our guest today at Ali Moiz. He’s the co-founder and CEO of Stonks. Stonks is an online platform that allows founders to pitch their companies to hundreds of accredited investors and venture capital funds at the same time. Or as they put it, imagine if Twitch, AngelList and shark tank had a baby. We get into all sorts of topics, including his previous company Stream Labs, which was acquired by Logitech. What makes stonks unique and the huge upside of start-up investment as an asset class. I hope you enjoy my conversation with Ali. We are very excited today to have Ali. He is the co-founder and CEO of stonks. Ali thank you for taking some time with us today.
[Ali Moiz]
Yeah. Glad to be here Horacio. Thanks for having me.
[Horacio Ruiz]
Ali, there’s such a history that you have. There are so many stories that you can tell. I kind of wanted to start kind of with a general overview and it’s something that, if you’ll forgive me, I’m on Twitter and there’s all these venture capitalists and angel investors, and I’m like, what the heck is a venture capitalist and how do you become one? Right. So, I’m wondering if you can answer that kind of broad question, how do you get to become a venture capitalist and exactly what is that? What does that entail?
[Ali Moiz]
Sure, sure. So, the term – by the way I love this community. Alternative investing is actually one of the highest forms of ROI least talked about. And if you look at the portfolio mix of like the ultra-rich, the billionaires, they have a much higher proportion of their portfolio in arts versus traditional stocks and bonds. So, I love what you guys are doing. And I think educating and talking about this stuff is like a great, great thing to do for the community. So absolutely a fan, love it. Venture capital to your question, the term really is, you could call – it really comes from last century where early investing in technology companies started right with Fairchild semiconductor in the fifties or HP. And in that era where some of these technology projects were just too crazy for a bank to fund, right.
They were just too out there. There was no operating history, there were no profits or revenues. And that’s because with technology companies, a lot of the earnings happen in years five through 15, they don’t happen in the first five years of their life cycle. So traditional forms of capital like banks, JP Morgan, Wells Fargo, they’re not going to be able to fund these guys. There’s nothing to collateralise. There’s no loans they can provide. So, that’s where venture capital came in. It was just basically a bunch of financiers, crazy people, rich people who said, well, we think this looks like a good idea. This is a group or team or technology we want to bet on. And they did, and that worked. The returns worked. And other people started doing it. And that turned into an industry and that’s venture capital.
[Horacio Ruiz]
So, I would imagine that to become a venture capitalist, like you said the returns on your investment, you have to wait for those. I imagine that you would have to number one, be patient. And that the second thing is you got to have some pretty deep capital or some liquidity there to where you’re okay not seeing a return for anywhere between 5 and 15 years. Are these usually firms that are being set up? Companies? Or could you just be an individual who’s a venture capitalist.
[Ali Moiz]
Yeah. There’s lots of different ways to engage. Funds are typically what – when you refer to venture capital, it’s typically like a fund being set it up and then people can invest into the fund. And then there’s a fund manager or a firm. That’s the name on the door. And they’re going after a certain investment strategy. Maybe they’re investing in software, SaaS businesses, semiconductors, deep tech, science, crypto, FinTech, whatever the specialisation is, or strategy is. The other way to get involved, is individuals can do it as well. Right. They can write checks directly into start-ups and technology companies. And that’s what we call angel investing. It’s essentially the same thing. But when individuals do it, we call it angel investing. And when funds do it, we call it VCs or venture capitalists.
[Horacio Ruiz]
And so, then you’re definitely filling a need in the market. Because like you mentioned, the traditional banking system is not going to fill in that gap for people that or entrepreneurs that have this great idea, but that it’s just, you have to wait. And I know you’re a big fan of that. Like, you’re a big fan of seeing people wait it out. Of being able to build something. Because something, I imagine something that’s of quality takes time.
[Ali Moiz]
Yeah. You know, there’s this really fun study. I think this was fidelity that did it. They looked over like, a hundred years of operating history or whatever. And they said who has had the best returns? What group of people have had the best market beating or at least market equalling returns over many, many, many decades. And the answer they came up with, they were dead people [laughter] people who had died and then nothing changed in the account because they were dead, right. The next best category of people with the best returns over time, over like 50 years were people who forgot they had fidelity account, and never changed. It never touched it. [laughter] Isn’t that insane.
[Horacio Ruiz]
So, you’re saying they never even rebalanced it.
[Ali Moiz]
They never did anything. And it’s funny. But what that goes to show is often investors, we are our own worst enemy. We panic sell during times of crashes. We’re going through one now, where there’s a correction happening in the stock market, particularly in growth stocks and technology stocks. And so, people panic sell. They sell at the worst time, and they buy at the worst time. Right. And when you think about investing in start-ups, the typical holding period is something like seven to ten years. Right. And what I like about it is it actually forces you to hold onto your investment for that long, because there is no liquidity. And it protects you from sort of your own worst instincts as an investor, which is, oh my God, the sky’s falling. I going to sell, sell, sell, sell, sell, sell everything. But you can’t right. And so, it locks you in and your IRR can keep compounding without you interfering. So, I think it’s actually a feature, not a bug.
[Horacio Ruiz]
Yeah. Couldn’t say it any better, I guess, if you’re kind of introducing someone to the industry or introducing someone to what a venture capitalist does and how they’re able to stay the course, but it also takes a different mindset or maybe you need that mindset to even begin becoming a venture capitalist, right?
[Ali Moiz]
Yes. I think that’s certainly part of it. You also need to have some expertise in what you’re investing in, right. Like you wouldn’t become a real estate investor If you didn’t know anything about real estate. You wouldn’t be investing in art or wine or any form of – any kind of asset, even equities, if you didn’t feel you knew enough about it. You were sort of an expert or domain expert. So, the same thing applies here. Venture capital is often about investing in outliers in technology companies. And technology is a very broad term, right. It includes like deep science stuff, like energy, pure sort of biology, chemistry, but also just simple things like software tools that make people’s lives easier, that run on a simple revenue model and everything in the middle. And so, when we talk about technology and venture capital, it’s really, it is fairly broad. But you do need to be a domain expert to get in. You also need differentiated [Inaudible 00:07:58]. Right. You need to have access to the people, the groups that are starting, these companies that you’re going to be able to get to them before others.
[Horacio Ruiz]
Yeah, absolutely. Just thinking about all the knowledge and all the networking that goes into it. So interesting. And part of that is the story that I want to to have with you today. You have such an interesting background. I learned that you decided to take a chance. And if you don’t mind talking about how you kind of built your way up. You sold several companies and now you’re at Stonks. You co-founder Stonks. Could you take me back to that first big success that you had? When you were in college, you were offered this opportunity to move out west and you took it. Could you take us back there and all these decisions you’ve made to get to where you are or now?
[Ali Moiz]
Yeah. I guess I love tinkering from an early age, in like first grade at school, I made stickers and got them and drew them and I sold them to kids at school for lunch money. And in second grade I bought Pokémon cards and traded them at school. And eventually I figured buying them at wholesale, selling at retail was a better business than trying to trade them. So, I’ve been in start-ups almost 20 years. Have had two notable exits. First one was a company called Peanut Labs. Grew up in the social networking space and then turned into sort of a tool for gaming companies and social gaming to sort of monetise the users. Using virtual points was acquired by a company called Dynata. The second one was a company called Stream Labs. We raised capital from Sequoia and others, and eventually got acquired by Logitech for about 150 million. And Stream Labs built tools for live streamers on Twitch and YouTube Live. Right. We were one of the world’s largest sort of independent tool providers for that space. So, kind of like an Adobe for live streaming. And that was the most recent one.
[Horacio Ruiz]
How did you fall into that? You obviously saw a need for live streamers for content creators to use like the suite of tools, right? For what they’re creating. Like, how did you see that there was a need for that?
[Ali Moiz]
We’ve written a couple of blog posts about this. I think Stream Labs went through something like 30 different iterations of trial and failure sort of test and fail test and fail test and fail. And the key lesson was to not give up while you’re going through that, because it’s very, very easy to give up after your first idea or your second or third idea fails. Right. It’s very easy to give up, because think about what happens when you go through a start-up, you are not doing a job, you’re giving up income, right. So, you’re saying, okay, something I’m going to work on, super excited. You pump yourself up, you get your team excited, you work on something and doesn’t work. Everyone’s like, oh, well now what do we do? Right. It’s depressing. It hurts. It’s de-motivating.
And so, it’s very easy to give up. Most people do. And often it’s the folks who don’t give up and keep going that come out the other end. Right. So, Stream Labs went through a bunch of iterations. I was always a gamer interested in eSports and we kind of bumbled into the space by accident. We put together an eSports team that competed in the league of legends championships. The first season they had it back in 2013. And that’s how we got into the streaming space, because all things were streaming on Twitch. I used to watch StarCraft too. If there are any gamers out there listening. And yeah, all those things were like streaming on Twitch. And that’s how we got into streaming tool space. It was very adjacent to the previous iteration of that idea, which was in the eSport space, but ultimately, we grew with the market.
There’s a lot of luck and there’s a lot of market timing. I think those are really big factors in a start-up success, because a start-up is not like a small business, right. It’s meant and designed to grow fast. And you can be great at execution, but there is a lot of luck in timing and picking the right market that also plays into this. So, we were in the Twitch live streaming space that just absolutely went bonkers from sort of 2013 to now. And we grew with the market, and I think right around the time we exited, and I left Stream Labs at something like 20 million users, 25 million users. Most used live streaming tool by all of the live streamers in the space, paid out over 750 million in two content creators. And one of the most used live streaming apps on the desktop and on mobile.
[Horacio Ruiz]
So, it was a highly successful company?
[Ali Moiz]
The other way to phrase it Horacio, is the whole thing took like nine years, right. And for five years we were going nowhere. And then for four years it just went like from like nothing to the goal. Right. And that’s very typical of a start-up journey.
[Horacio Ruiz]
So, a couple things there right. Because you’ve kind of used that experience now to where you are now. And what I want to talk about, I guess, is at the beginning of that when you were raising money from Sequoia, right. How did that process of raising funds from them, and I know you had other big companies invested in Stream Labs, how was that process of fundraising there? How did that inform you in terms of what you liked about that process, what you kind of saw that could be better into what you’re doing now at Stonks?
[Ali Moiz]
Yeah. I think this is sort of a good segue as well is we could talk about investing all day long, but I think in start-up sort of angel investing in venture investing, there are a lot of high signal firms and people space that our thought leaders have really great track records that hundreds of thousands of other investors want to follow into deals, because they trust their judgment, they trust their track record. They like their thinking. And they’ve just been – these are essentially domain experts, right. So, Sequoia A16Z are probably some of the more well-known ones, but there’s tons of individuals as well as great firms in the space. Mayfield, GC, Excel, Insight Matrix, SV Angel, First Farm, Union Square Ventures, Floodgate, Mike Maples, Naval, who founded AngelList. So, there are lots of great really high signal people in this space that most investors would just blindly follow into a deal. I know I have as well. I’m also an active angel investor. And sometimes I’ve done deals, just following some of these names into deals, without looking at much else,
[Horacio Ruiz]
I guess like now that you have at Stonks, and what you guys are doing is you’re introducing entrepreneurs in their seeding and precede rounds. You’re introducing them to investors. I guess my question was, and maybe it’s not, maybe it’s too meta or I don’t – maybe it’s not even clear, but what you’re doing is you’re kind of taking this big thing of raising millions and millions of dollars and kind of being able to localise it and do it really quickly at Stonks. And correct me if I’m wrong, if I’m kind of not getting the whole picture, but it seems like you’re really democratising it and opening it up to where – and you mentioned it like to get access to a Sequoia or an AZ16. You really got to know some people and got to have some serious connections?
[Ali Moiz]
That’s right. That’s right. That’s exactly the part that I think Stonks helps with is start-up investing, I think for too long has been too closed. It is, if you look at a market that is entirely based on who you know, warm introductions and closed circles, really small, closed circles. And there are some reasons for that. There’s trust that comes with that, but the world we live in today, it doesn’t have to be the same way that it was 25 years ago, right. And investors everywhere are clamouring for access. They want access to great deal flow. They want access to great investors that they can follow into deals. And so the origin story for Stonks really from two things is just my background and hobby as an angel investor, I find it very fulfilling to fund early stage businesses because you get to actually hear from entrepreneurs, work with them, help them in their journey, whether it’s advice or intros or strategy, you can actually help the trajectory of the business versus just buying stock in Facebook or Google, right. Or Amazon. The other reason is because Stream Labs was in the live streaming space, right. And we generated hundreds of millions of dollars for content creators in the gaming vertical. And that was for shits and giggles. Like it was just for fun, there was no investing. And so, one of the questions for me was always like, could these tools that we’ve developed at Stream Labs that get people to build trust at scale between large groups of strangers. be used for other verticals that are more transactional and useful? Right. So, the two verticals we looked at were eCommerce and shopping and investing and live stream low and behold is already being used for a lot of eCommerce. In China something like 15% of all of eCommerce is going through live streaming, which is a crazy, crazy stat,
[Horacio Ruiz]
Like the home shopping network kind of thing?
[Ali Moiz]
It’s even better. So, it’s embedded right into all of the eCommerce apps and sites, right. So, you go to like Alibaba [Inaudible 00:17:34] or [Inaudible 00:17:36] sort of their equivalent of Amazon, if you will. And on the product page, you will see a live stream, somebody right there talking about the thing you care about buying, and you can actually ask them a question. You can see them doing a live product demo. You can see what everyone else is asking, and you can see them talking about related products, right. That just like massively increases conversion rates. So shopping was super interesting. Ultimately, I wasn’t as interested in it personally as I was in investing, because I was doing angel investing myself on this side. But angel investing has some of the same problems, right. Like it accesses fractured fragmented markets and lack of trust.
And these are things that live streaming solves really well. It’s a great medium for going deep. It’s not a great medium for going wide, if you will. Right. That’s what we learned at Stream Labs. So, we’re applying some of those lessons and tools to investing. And with stonks, we ate our own dog food. We started off organising our own demo day about once a month. And we started doing these on Zoom. And there was no platform, no team. We were just doing these events for fun. They blew up, we were moving millions of dollars from investors, to founders through like one hour long zoom once a month. Right. And so that was crazy. I’d never seen numbers like that in my career. Right. Like that early with nothing built. And so, it really felt like we were onto something.
So, we decided to productise it. We raised some capital from a A16Z a bunch of great investors in our community. And Stonks has also raised money on Stonks. So, we’ve dogfooded our own product. It works. And we got some great partners on board. So, we have Techstars 500 start-ups, Draper, SOS, We, Launch House, some of the world’s best well-known accelerators and incubators are using Stonks to host their own demo days. And for people new to the audience, what is a demo day? Our demo days is essentially a pitch session where multiple start-ups are pitching for five or ten minutes or two minutes, each two, a group of hundreds or thousands of investors. Right. Think of it like shark tank. Everyone’s seen the TV show, shark tank, but you’ve got hundreds of investors. You may have an investor panel, but you’ve got hundreds of investors watching, ready to invest in whatever they think is interesting. And a few start-ups pitching right sort of after each other in a one- or two-hour event.
[Horacio Ruiz]
Yeah. That’s what I’m so fascinated by that, demo day. And I have so many questions around that. I want to catch something that you said about the format that you’re using or the media that you’re using the live stream. And you mentioned something about, it’s a good platform for going deep, not wide. And you’re using this live stream to raise funds for founders because you see that it works because you have a true belief in the platform. Not because you’re trying out something new and cool, but I guess it’s sort of like part of your – I don’t want to say thesis, but one of your beliefs is that live streaming really can build that trust quickly. And you really can get to know somebody in a matter of minutes.
[Ali Moiz]
That’s exactly right. Right. Like put it in a different way. If you are going to invest in a private business, would you ever do it without talking to the founders? No. Right. You typically, if you’re investing tens of thousands or hundreds of thousands of dollars into like a private business that you’re going to be locked in for many years, you’re going to have one, maybe more meetings with the people who run the business, right. You’re going to dig in, you’re going to use the product, you’ll do some research. You’ll at the very least, you will talk to the people behind the business on a zoom call or in person. So, what we’ve done is we’ve basically productised that Zoom call. And instead of doing those one at a time, dozens of times over, you can now as a founder, talk to hundreds of investors in a few minutes and have your first meeting at scale.
[Horacio Ruiz]
That’s amazing. Now the – and the big show is the demo day? And so, then you’re building toward this. How often do you have a demo day? Once a month?
[Ali Moiz]
We do Stonks events about once a month. But nine out of ten events on the platform now are actually done by our partners. So, we have 12 demo days in the month of Feb. We had four demo days yesterday in one day. So yesterday was 500 global, Techstars, two of the most well-known names in the start-up incubator space, along with [Inaudible 00:22:22]. And there was an emerging markets incubator and Draper start-up house based out of Austin. So, they just did their demo days yesterday. These weren’t Stonks events, they were just hosted on Stonks because the platform is really fun. It’s cool. It gets people sort of all the features and tools they need to host a successful demo day, gets information to investors, things like pitch techs, sort of summary FAQs, all the information on start-ups in one convenient in place. And it gives you analytics before, during and after. Also gets more people to attend your event. So, most of our partners sort of double their attendance just by taking an event from Zoom or YouTube and moving it to stocks.
[Horacio Ruiz]
How do you become a company that is able to pitch on your platform? Or for other partners that use the platform? If you’re a start-up company and I know a number of our listeners are, they’re founder, or they’re looking to start their companies. How would they even get into that step where they can have this opportunity to present to hundreds, thousands of people at once?
[Ali Moiz]
It is extremely competitive. Not going to lie. I think in a given month, we receive over 500 applications and we’re only able to feature like five companies at the Stonks event. That’s one way to go. And you can certainly do it. You could go to stonks.com and there should be information for start-ups and where to apply. Also, information for investors or partners, if you want to host your own event. The other way to do it is to go through any of our other partners, right. When you go to stonks.com, you’ll see like dozens and dozens of events. So, you could contact the organisers for any of those events that feel like a good fit for what you are doing and apply through them, to pitch at their event. That’s also a very popular way.
[Horacio Ruiz]
So, when you have five out of 500 coming through, needless to say, you’ve done a lot of vetting there. I imagine you basically picked the five most impressive or the five that you feel the best about?
[Ali Moiz]
Correct. In that case, we do our own vetting. We pick deals that we think are going to be really interesting. And we can talk about what goes into making things interesting or exciting, but typically yes for our events, we pick our own deal flow.
[Horacio Ruiz]
Yeah. I was wondering, you have this great company and now they have an opportunity to present. I mean, and you know the business is good and I know you have your philosophy about investors, and it’s something that you mentioned previously, not giving up, having that grit where Stream Labs was going nowhere for four or five years. And then all of a sudden it took off, but you stuck with it. And I know that’s one of the traits that you look for, but what if a presenter bombs, right, and maybe they just get too nervous because they have – they’re in front of people and they have a short amount of time to present. What happens if maybe it doesn’t go as planned? Do you still feel like, hey, you know, you made it on platform, we chose you, we believe in you?
[Ali Moiz]
Yeah. Yeah. I mean it does happen. It’s rare. Most founders practice their pitches. We do a rehearsal event usually before as well. So, they have a chance to sort of familiarise themselves at the process and the format, but it can happen. Anyone can get nerves going up on stage. Even if it’s for two minutes and even if it’s virtual, right, this is all online. So, you’re not physically going somewhere, but it can happen. And that’s the challenge of being a founder or telling your story. You just have to practice and get good at it because this probably isn’t the only pitch event or fundraising meaning you’re going to do. You’re going to do dozens or hundreds more over the course of your start-up’s life cycle.
You’re going to be selling your story to employees, prospective employees, prospective customers, not just investors. And again, not every start-up on Stinks raises the same amount of money, right. Even with a good pitch, the process is entirely up to investors, right. What they find compelling and interesting. So often, we will have start-ups that raise several times more than other start-ups at the same event. So, to give you some examples of numbers, I’m just thinking about this one event a few months ago, where we had six start-ups, the lowest start-up got, maybe, I want to say like a hundred, 150,000 in funding interest and the best start-up at that same event out of that pool of six start-ups got about 2 million in funding interest.
[Horacio Ruiz]
Wow.
[Ali Moiz]
So that’s the spectrum. It can be very swingy. That doesn’t mean you’re doing a bad job. It’s just their investor tastes and preferences and sort of investing styles and you do get feedback, right. You get live feedback on like what people like, what people don’t like about your business or your pitch.
[Horacio Ruiz]
So, what are some of the traits? And I know that with Stonks, you like to keep it light, you use a lot of humour as well to kind of keep it entertaining, right. What are the traits of a successful pitch and a start-up? But more specifically, like a pitch, what would make the difference between that 2 million and that hundred thousand dollars presentation? I know there’s a lot of variables and you mentioned preferences and taste, but what are some things that you suggest for founder going in?
[Ali Moiz]
Look, even our name is like not very serious, right. We like to keep things light. There’s a lot of memes. There’s a lot of humour. I think, Elon Musk I think said, it’s one of my favourite tweets from him, is the most entertaining outcome is the most likely. And I think when you look at something like investing, it can get a little sort of dry, repetitive. Lots or deal memos and analysis and financial state, yada yada. Something that’s exciting and entertaining often will stand out more in that landscape. Right. And so, we certainly bring that flavour to a lot of what we do. Check out our Twitter accounts, stonks.com. It’ll make you smile every single morning. We do a lot of shit posting. Making fun of the industry in general, investors and founders, what goes into a successful pitch, from the few hundred deals we’ve done in the last six months.
And the events, the common patterns we see are, is there are a well-known lead investor already in the round? Right. So, this financing round you’re putting together, who else is in it, matters a lot. Investors often rely on other investors, they know to be high judgment, high signal to provide direction. Right. So, if there’s like a A16Z or Sequoia or a Naval in the round, that’s amazing. The other things, the founder’s background. Has this person, he or she, have they had a track record of success, are they domain experts? How have they done other start-ups in the past? What is their origin story? And then obviously things like traction, right. Is the business actually working? What stage is it at, how do we know it’s working? What’s the revenue, what’s the user growth? And then lastly, what market or sector are they in? Right. And that changes what’s heart changes every few years, currently FinTech and crypto are super, super hot and top of mind for most investors. And those tend to get more attention than other sectors for better or for worse.
[Horacio Ruiz]
Got a couple more points. And again, I thank you for your time. I really do. What about if I want to become an investor? Can someone with a couple thousand dollars join in one of the demo days, or are you – is this more for high level investors, accredited investors that get invited to do angel investing or to put their fund in there for founders?
[Ali Moiz]
Good question. I wish everyone could get in. I think everyone deserves to be able to invest in start-ups, but we have laws that have been laid out. The SCC and other bodies regulate this. And so, investing in start-ups is typically only allowed for accredited investors, right. So accredited or qualified purchasers, so larger investors. And I think their income requirements or net worth requirements, typically you have to be making either more than 200K year or have a net worth of a million dollars or higher to be able to invest in start-ups. So, unfortunately, that’s the sort of state of the industry today with some exceptions. We’ll talk about those. I think if you are a start-up founder or an early employee at a start-up, typically you will have appreciated stock in that start-up. Right. And you can use that towards the accreditation requirements of net worth, even if it’s not liquid. So, what do I mean by that? If you’re an early employee at like a start-up, that’s worth hundreds of millions of dollars, you’re doing really well, your stock is probably on paper worth more than a million dollars. If you’re a founder almost always worth more than a million dollars on paper, as long as the start-up has raised some financing and it’s been valued at a certain valuation by third party investors. So, given certain details, but you can usually qualify that towards your network. So that’s one way to do it. If you don’t outright meet the income or network requirements. The other way is I think some of the partners listed on your website are crowdfunding platforms, right?
So, Republic, WeFunder and others, do allow retail investors to participate through something called regulation crowd funding, Regs EF in start of deals or small business deals. So that is possible through a different law and sort of a different route. The challenge there, I think is you just have to be a little bit more picky and careful on what sort of – you’re investing in because there’s a much wider spread of the types of opportunities there that are available. So, you just have to be a little bit more careful and picky in what you choose, and you may not get the same deal flow that some of these top tier venture investors are getting, but you do get some good deal flow.
[Horacio Ruiz]
When you talk about deal flow. What do you mean by that?
[Ali Moiz]
The highest quality companies, I think over time, this will change. But today the state of the industry is the highest quality companies generally don’t want thousands of people on their cap tables. For simplicity, but also, just to make it easier to manage the deal, the fundraising and deal closing process, they would rather get fewer sort of highly curated strategic people that are typically either within their industry executives, at partners or customers, VCs or professionals in the space. But I think that is changing. A lot of folks now see value in getting more and more of their community on their cap table, who can become customers or brand evangelists for them. So, that is starting to change. I think in the next few years this will more and more high-quality sort of tier one start-ups are going to look at crowdfunding.
[Horacio Ruiz]
That’s an interesting development, I would say. And I think that, like you said, an evangelist, right? You see that in the NFT space, how people are so rah rah about their project or their community and how brands and companies have the potential to do the same.
[Ali Moiz]
Exactly.
[Horacio Ruiz]
And just to clarify, so if you are – if a listener is an accredited investor, will they have to go through a vetting process through Stonks? Or Stonks kind of just automatically accepts the accredited investor?
[Ali Moiz]
For Stonks, you can join, you can self-certify that you are an accredited investor. But when you actually do an investment before you can wire money, we do have to verify that you are an accredited investor. So, you have to show us something that meets either an income or net worth requirement, be it tax returns or your brokerage account or bank statements or something. And that’s typically reviewed by a licensed attorney or a licensed CPA, or you can have your own CPA. Look at it and issue you a letter saying, yes, I’ve looked at this person’s records, they’re accredited. And then you can use that letter on any platform including Stonks. But I should point out that like we’ve designed Stonks to be very approachable and open, so anyone can join an event and watch. Most of the events are open to everyone.
So oftentimes we’ll have other founders come in and watch other founders pitch, just so that they can learn how to improve their own pitches and sort of see what else is interesting out there. You know what’s on the cutting edge. So, there are many investors, there are many founders who are not accredited who do come to Stonks just to see the latest and greatest and just learn. There’s a fair amount of learning that has to happen even before you write your first check as an angel investor.
[Horacio Ruiz]
And you’re saying it’s open. Is it open to the general public even? I’m curious about how one of these events works, I can just go into the website and join in on one of the demo days.
[Ali Moiz]
Yeah. Some are private, but most of them are open. So, you can click around, you can RSVP, like this is the easiest way to learn is just go to pick three great events that interest you and just go to a few events and see what other people are pitching and how they’re doing it. And the questions that investors on a panel or judges are asking, right. It’s a phenomenal way to learn. It’s completely free. And it’s a great way to network. And just to like, kind of see who’s who in the space as well and be a part of events that you typically – most people wouldn’t have had access to. So, like by getting all of these partners to host their events on Stonks in one place, they’re easy to discover and they’re really easy to participate in.
[Horacio Ruiz]
I definitely got to join in on one. I see the quick stream on Twitter, and it just looks like a lot of fun and you – everyone looks like they’re laughing, presenting and getting money raised, getting the job done. I kind of want to leave with one last thing, Ali, and again, thank you for your time. I really appreciate it. And one of the interviews you mentioned, or one of your podcasts actually you mentioned that start-up investing is sort of an under allocated asset class, right. And then you started mentioning other avenues. What do you mean by that? Like, because when I think about start-up investing, I don’t think of it as an investing class, or I don’t think of it as a yeah, as an asset class, the way I would think of say wine or trading cards, what is the potential for the growth here?
[Ali Moiz]
I mean, I think this is the single greatest asset for us of all time. Something like 40% of market cap has come from technology companies that were at one-point start-ups, but the amount of funding that has gone into these companies that represent 40% of the market has been less than 1% of the total funding that has been deployed.
[Horacio Ruiz]
Wow.
[Ali Moiz]
Right. So, if you think about that. Like 99% of the funding goes to companies representing – call it half the market. And 1% of the funding is going to companies representing roughly the other half of the market. Right. Where should you be putting your money?
[Horacio Ruiz]
That’s your ROI right there?
[Ali Moiz]
Yeah. So, there’s this really great study that came out. I think this is Cambridge Associates. They looked at a really long term, like 30-to-40-year time horizon. And they compared the returns for venture capital net of fees to the S and P or other other benchmarks. And venture capital over like the extremely long run has tended to do really well as an asset class. It has outperformed the S and P it has outperformed other benchmarks and indexes, but it is very swingy, right. So, you have to hold for a long time, and you have to be willing to sort of hold onto things for 10 years until they mature.
[Horacio Ruiz]
It sounds like the ideal investment for someone that has that question, that proverbial question, I ran into some money, I got some money, I inherited some money. What should I do with it? Right. And they’re usually asking for investment advice, and I guess that would definitely be one avenue if you point them to those figures. And I guess I would be interested in, you guys are doing your part, right. Democratising it. And I wonder how it could become an alternative asset in the same way that I can invest in a moon rock or that I can invest in a Mickey Mantle rookie. As just a regular retail investor. How can I get access to that pool? How can I get access to these tech start-ups? I guess that would be my question for the industry.
[Ali Moiz]
There’s a bunch of great platforms. I think they’re a good place to start. AngelList is the leader in the space, right. Stonks is another great way. If you want to physically sort of, see and hear from the people, ask them questions, live interactive events. And then crowdfunding platforms are another way. We mentioned them earlier, WeFunder, Republic and others start engine platforms are a great way to start. Check them out and look at the deal flow, engage with each platform for a while, get a sense for the feel and flavour of sort of the deals you see. And what you’d like to commit to before you write your first check. The other thing I would recommend is don’t front load all your money and just do a bunch of deals like quickly, right.
Think about it in terms of an annual budget. I have X amount of money that I would like to deploy in sort of investing, add to my portfolio this year. I’m going to take, maybe let’s say, call it 40% and allocate that the start-ups in the other 60% is going to be stocks and bonds or other alternative assets, crypto or collectibles or what not. Real estate, that’s another big one. You take a certain dollar amount and then you break it down by quarter, right. You say this quarter, this is my budget. I have $10,000 this quarter, and I’m going to go figure out how to deploy this into start-ups. So, 10,000 you probably want to write ten $1,000 checks or four $2,500 checks every quarter. And you can do that. You can break your checks down into as little as a thousand dollars on Stonks. Right.
Super easy. We handle all of the paperwork and all that stuff for you. The other option is to go through funds, right. Professionals who will charge you fees to do this. Then they will handle the start-up sourcing and selection. But typically, you need larger check sizes. Tens of thousands of dollars at a minimum to kind of get into funds if not more. But that’s how I typically think about getting involved or getting started in the space. Start-ups are – some of them will go public, right. And some of them will get acquired for large sums of money. And that’s how you eventually get your liquidity and your return as an investor in this asset class.
[Horacio Ruiz]
We can go on forever. And I want to respect your time. Could you give me one company or one success story that stands out to you that’s gone through Stonks so far, or that’s on a trajectory that you think that they really benefited from being on your platform?
[Ali Moiz]
Yeah, absolutely. I mean, this platform is six months old, so it’s hard to have huge success stories when the average holding period is seven to 10 years and the platform is only six months old. But despite that we’ve had some start-ups that have actually been on Stonks more than once, even in six months because they loved it so much and their business was crushing it. So, I’ll give you two examples. One is a start-up called Loan Base. They’ve pitched twice on Stonks and both times they’ve raised more than a million dollars. Their business is growing really well, their democratising access to commercial real estate loans. You’re think about getting a mortgage on your house, right? It used to be so difficult. Now it’s a little easier. You can kind of shop different lenders online, right. For different rates and get a better deal as a potential homeowner, right.
That doesn’t exist for the commercial lending space. So, if you’re a commercial real estate investor, you want to buy an apartment building, or you want to buy a group of four houses and rental them, and that sort of thing. Loans for that are still like completely manual. You have to go bank by bank application by application. And so, they’re fixing that space since the first time they pitched on Stonks. I think their valuation has gone up significantly. I think something like three to four X, even in the space of less than six months. The other example is a FinTech savings app for India. FinTech and crypto are really popular on Stonks, but this is a FinTech app where it allows people in India to save small amounts of money every day. Like a few cents in everyday transactions, round it up, and then invest that into gold. Investing in gold and precious metals is like a big part of Asian culture, right.
It’s really big in China and India. And so, this app lets you automatically do that right without going through all of the steps in the middle. And it’s super, super popular. The first time they pitched on Stonks was I think was like July or August last year, even before we had a website, we were just doing these demo days on Zoom. And since then, six months later their numbers have more than 10X’d in terms of traction. They’re doing hundreds of thousands of transactions on a weekly basis. Now they have millions of millions of users just in the space of six months, right. Like that start-up has just been a rocket trip and their valuation has 10X’d in those few months, between the time they first pitched on Stonks and the second time they pitched. So, the investors who have gotten in first, their valuation, their markup, their money has 10X’d in like six months.
[Horacio Ruiz]
So, much to think about. Thank you for your time, Ali. Thank you for all the advice and the stories and what you’re building at Stonks. And you’re just so generous with it. And I look forward to joining in to one of those demo dates. I’m going to definitely check it out and because it just looks like a lot of fun.
[Ali Moiz]
Yeah, of course, of course. Happy to help. Look I think talking about this stuff is super useful because people deserve to know about these different asset classes.
[Horacio Ruiz]
I want to thank Ali for coming on the podcast and giving us an hour of his time with so much industry knowledge and so many insights. And there’s so much more we could have talked about. The Stonks platform is truly a step forward in opening up a world of investment opportunities. His bullishness on Alternative Assets, also encouraging to hear and a good sign that the industry is headed in the right direction. As always, if you enjoy today’s podcast, let others know about it. We find our guests so interesting and knowledgeable, and I know others will too. Or leave a review or hit the follow button until the next episode, take care.
