Selling a Business For $268,000,000... | Tom Wallace Interview

All right. Welcome back to the show, everybody, to Investment Fund Secrets. Today, we have with us Tom Wallace. Tom Wallace is a 40-year veteran in technology startups. After selling Vector Learning for $268 million, he's now the managing partner at Florida Funders. Manages, you just mentioned too, Tom, a number of funds. We're going to dive into those today. Has done a lot of angel investing, has a number of portfolio companies, and we're gonna dive into Tom's story today and what he does. Tom, welcome to the show. How you doing today?

Great, Bridger. Thanks for having me on. I'm very excited to be here and to be talking to you.

Yeah, it's gonna be fun. First question though, I gotta ask. You're in Florida. I've heard just crazy stories about Florida the last 6 months of the market and everything. Is it true? Is Florida really booming like they're saying?

It is. I mean, it's really exciting coming out of COVID I would make the argument Florida's better positioned than any other state. You probably know our governor. I had dinner with him. DeSantis. He's been very open and very, very pro-business. He's a young guy, very impressive guy, military background, went to Yale, Harvard. I mean, super sharp guy. And I don't have a political party or talking that way, but he's done— and then he's done a great job. And Mayor Suarez over in Miami, Francis Suarez, and I had a meeting with him about a month ago. He is just lighting up Twitter and really venture capitalists and heavy hitter tech guys out of the Valley and out of New York to come to Miami instead. And so Peter Thiel has moved to Miami, David Bloomberg of Bloomberg Capital, SoftBank has announced a $100 million fund just for Miami. So there's a lot of really exciting Things going on in Florida and tech. And, you know, COVID in many ways helped us because people were able to work from anywhere and a lot of them left New York and they left other places. And a bunch of them decided to stay, which is great for the state.

I've actually— I was in Orlando and Miami the last 2 months and it was awesome because that's— you can't travel to Florida. But I think that's so smart. I just— kudos to your governor and Miami's mayor. For taking advantage of that opportunity and saying, come, we'll take you. We'll give you tax incentive. We'll give you great things here and come check it out. So, that's awesome. I'm happy it's blown up. Yeah.

Well, Florida has always, you know, as many people know Florida, we've always had great, you know, great tax structure because we know people don't like tax. And, you know, we have great weather and it's affordable vis-à-vis San Francisco and New York City and places like that. But what a lot of people didn't know was how pro-business, you know, the state is. And then secondly, how much technology, uh, is going on here. And, and, uh, and that's, that's really happened. There's been a bunch of us working on it for a couple decades, but it's really taken off in the last 5 years. Um, I'm gonna guess off the top of my head, we're up to about 15 unicorns in the state.

Wow.

So Chewy, Guardant's headquartered here. Those are companies your listeners might know, but there's a lot of other ones like KnowBe4, the unicorn in the cybersecurity space. That's a Tampa company. We've got a lot of cybersecurity companies. And, you know, so it's really an exciting time to be in Florida and protecting Florida, which is obviously where I focus my efforts.

Well, yeah. It sounds like you're all over the place, do a million things. What right now do you spend most of your time doing? If you want to give the listeners a little overview on at least currently what you're working on and what you're doing and what you've done a little bit in the past. Give us a little bit of your story.

I'm a lifelong entrepreneur. I started my first company when I was 23 with my best friend, and we had an exit of years, the last one being Vector Solutions. So, I've always been an entrepreneur, but like a lot of other tech entrepreneurs along the way, I started angel investing, and I made a lot of mistakes, and it's easy to do with angel investing. But after my last exit, I got really involved as a full-time investor. My partners and I took over this company, this fledgling crowdfunding platform called Florida Funders, and we're a hybrid between a crowdfunding platform— we call it an angel network.

Mm-hmm.

Crowdfunding confuses a lot of people. And we have our own venture capital funds. So we're on our second fund. And we have a third fund that we manage for the state of Florida. So there's a $25 million early-stage tech fund that we do all— only early stage. There's a $25 million early-stage tech fund that we manage for the state of Florida. So we've got 50 companies we've invested in, in our portfolio, and then we've got another 50 roughly that we manage for the state of Florida. So what we're spending our time doing is trying to change Florida from Sunshine State to Startup State. And as we've We say we're trying to find, fund, and help build the next great— the next generation of great technology companies.

I love it. Well, and let's dive into that a little bit. You mentioned at the beginning you made a lot of mistakes early on. What were some of those mistakes?

Oh, gosh. Well, we have kind of a thesis around that because a lot of what we're doing is trying to educate accredited investors. These are people with a net worth of $1 million or more. In this asset class? Why would you invest in early-stage tech? Why would you take, you know, 2%, 4%, 5%, 10% of your asset allocation and put it into this asset class? And the reason is, if you do it right, and you're disciplined, and you follow what we call our 5 Ds, and I can get into those, which I'd made all those mistakes not following the 5 Ds, then this asset class can outperform every other asset class in half. So I prefer private equity, venture capital, public markets, all that stuff. But the big mistake a lot of people make— let's start with diversification. If you're going to be an angel investor, you need to build a portfolio of— there's different research on that. We say roughly 15 investments. So if you go do— My brother, you know, said to me one day, and, you know, he's a very successful business guy, he said, hey, I did 2 or 3 of those, they went to zero, I'm not going to do that. Well, you can't do 2 or 3. You need to do 10, 15 to get the diversification. So that's the first big mistake. Second mistake is deal flow. They look at one deal to do one deal. So they're not looking— we're looking at 50 to 100 startups to invest in one. So we can be very selective. We're getting the best of the best. That's the other D. So it's diversification, deal flow, due diligence. A lot of— I told my brother, my brother's— he's 3-0, said, how much due diligence did you do on these companies, their founders, their early customers, all that? Not really any. Well, there's a lot of research. Once you exceed 20 hours of due diligence on any company before you invest in it, your probability of returns goes up significantly. If we do 80 to 90, sometimes 100 hours of due diligence on any company before we invest. And domain expertise. So investing in— this is kind of a natural, Bridger, and I'm sure you would relate to it— is invest in what you know. You know, if you don't have domain expertise— so, you know, as an example, a simple example, if you're a doctor, you know, it would make sense for you to invest in medical devices or pharmaceuticals. But at Florida Funders, we do all that for our investors. We have about 1,700 investors. So we do all the due diligence. We do. We have the domain experts, whether it be cybersecurity, edtech, digital health, whatever we're investing in. We get experts involved to help us evaluate that deal. So those are the basics of angel investing. And, you know, again, I learned it the hard way. And I would say the hard way and the costly way too.

Yeah, yeah. Learn by experience. I love it. Well, and I love the point you just made, Tom, was, and I've heard this from a number of— We don't look at 5 deals and do one. We don't look at 10 deals. They usually say, we look at 100 deals to do one deal. That's how much deal flow we have and how meticulous we are on who we select to work with or invest in or take on these certain projects. I think you're spot on in that aspect. I want to ask you too, So, it sounds like you take a little bit of an active role in your investments. Do you guys try to be more of an active player or more of a passive player when you invest in a new company?

Yeah, good question. So, we do both. So, we do really early-stage deals where our check size is about $100,000 to $250,000, and a lot of those will be passive in. We call them flyers. We're kind of placing a placeholder, and if the company takes off, then we'll potentially do follow-ons with them and get more involved. But when our typical investment, our check size is about $1 million, between $1 million and $1.5 million, and we will lead that investment. We'll take a board seat. We'll get very active. As soon as we make the investment, we do something called a deep dive where we sit down with the team and we go through their business, every part of it. You know, what's their go-to-market strategy? What's their sales strategy? What's their business model? What are they doing for financial reporting? What's their technology stacked? What's their roadmap? You know, what's their hiring plan? Where do they need help? And we look— we don't just write checks. We're looking to, you know, if you look at this, a fair number of these companies are going to zero, right? We kind of plan on a third going to zero, a third we'll get our money back, and we'll make our other third. And the top third, the wins should be big. We don't invest in anything we don't think has potential for a 10x or more return. And we're really looking for exits in the 30, 40, 50x. You don't have to have a lot of those to make up for the losses. That diversification thing. But yeah, we get very involved in— we coach and mentor the CEO and founders. And almost all of us at Florida Funders, me and my partners, are all entrepreneurs. So we've all run businesses, we've all been in the trenches, we've all got our teeth kicked in. We all know how hard it is. And hopefully we can help these founders and add value to the relationship.

Yeah, I love that. And it seems like, and I've had a number of VC seed people on the show, and they mention at least in today's day and age, there's a lot of angel investors out there, there's a lot of capital. And a lot of these founders, depending on the founder obviously, depending on their company, but they now, I feel like a trend to this is they are more selective on who they allow in. Based on what you just said, Tom, of do they have the experience? Do we actually want them to have a board seat? Can they help our company grow? Yeah, a lot of people can write a check, but can they actually help our company go to the next level? And I've seen a number of founders mention that they've actually— and maybe it's just supply and demand, but there's a lot of supply capital and they are selecting. It sounds like you, you've hit that right on the head with your team and your expertise, be able to hit with founders and be able to help them do that. Would you say that's, that's an accurate statement, or do you not think that?

No, you're absolutely accurate and you're dead on. There is capital out there like we've never seen. I mean, you know, it's totally unprecedented. It's everywhere from early stage all the way up to private equity and later stage stuff. I mean, we've just never seen this amount of capital. And it's a great time to be an entrepreneur.

Mm-hmm.

And, you know, it's also a great time with all the incubators incubators and accelerators and different options founders have to get advice, to get help, to get mentoring. But absolutely, we are looking, and many of the companies that invest with us are looking for us to do more than write them a check, and we're looking to do more than write them a check. And so you're always looking for that fit. We pass on a lot of deals. You know, some— we're going to miss some big ones. We know that. I mean, that's the nature of the beast. Um, we, we can't, we can't invest in them all. We're not going to get it right every time. No investor does. It's a very common question to ask, you know, VCs, what's, you know, what's your big miss?

Yeah.

Have you been asked this today? Anytime? You haven't? But, you know, the chances are that if you focus and you do your due diligence and you really have a great And you find good founders. And deal flow is great from an investor's side. We've never seen deal flow like this too. So it works both ways and it's just an exciting time.

I love it.

To be in this game.

Well, and I want to ask, I want to go a little bit deeper here, Tom. I'm going to switch it up on you here. So you mentioned it's the best time ever to be an entrepreneur. I totally agree with that. What are you, what's your, I'm going to ask you, what's your crystal ball question? I'm sure this is the, every fund manager gets asked this question, but I'm going to ask it again here. What's your crystal ball? What do you see on a macro level right now. We've seen unprecedented amount of money printing. It looks like it's not stopping. We see interest rates at zero right now. What is your crystal ball on a macro view of the United States, of entrepreneurship, and the world in general? Are we in a big bubble? Is this— are we going to see hyperinflation? I want to hear some of your thoughts on economic trends. And again, I know we're listening, none of us have a crystal ball, but Tom's a pretty smart guy, and I think he maybe has some insights that we haven't seen yet. So, what are your thoughts, Tom?

All right, well, let me just take technology, the macro world of technology first. If you think about it, about every 10 or 15 years, game-changing— something comes along that changes our lives, every one of us. Happened in the late '70s, early '80s with the invention of the personal computer, the microcomputer. It went from only universities and large companies could afford computers, and you had to have a geek—

Yeah. I do.

Now, every small business back then, every small business, every person could— you could run really easy software like VisiCalc and Lotus 1-2-3, and you didn't have to have programmers. That changed everything. Then that happened, the internet came along, and then it happened again in 2006 with the smartphone and the cloud. So if you look at when the most successful companies on the planet started, they all came out of those. So back in late '70s, early '80s, you had Apple and Microsoft. Then in '95 with the internet, you had Amazon and Google. Then 2006, 2007, you know, Facebook and all the social media giants and Netflix and all that came out of that. So as we sit here today, Bridger, we're not on the edge of one game-changing technology. I would argue we're on the edge of 5, 6. You have artificial intelligence, augmented virtual reality, autonomous vehicles, blockchain. Chain, 5G, quantum computing. And this is all coming together at one time. So the opportunity for founders to build the next great tech company is just unbelievable. And the opportunity for investors, the wealth creation that's going to come out of the next 5 to 10 years in technology is just unprecedented. It's an opportunity again for founders, an opportunity for investors to participate in that. So that's kind of how I look at that side of it. And that's not that cyclical, even if there's a bubble, you know, is there a SPAC bubble? I would argue that there's some SPACs out there that remind me of 1999. I know you're not old enough to remember 1999. Yeah, dot-com bust. But, you know, you had Pets.com and companies like that that had no revenue, you know, delivery services that were just too far ahead of their time. They had no customers, no revenues. And we all know how that worked out. It seems like there's some of that in the SPAC world, you know, but I also see SPACs that are, you know, real companies and good companies. So, you know, that, that's already slowed down. I guess the SPAC market's really slowed down quite a bit. But as far as technology as a whole, valuations are a little high. But aside from a few outliers, like maybe you could argue Tesla, maybe you could argue Zoom, people, some companies that have really benefited from COVID Maybe they're, maybe they're overpriced, but they're real companies with real customers adding real value. You know, I, but I mean, I think so when something becomes a verb, you know, it's here to stay. Yeah.

Well, I want to ask you a little bit deeper on that too. You mentioned those 5, 6 sectors of technology. Do you think all 5 are gonna take off and have their own category king leaders and are gonna be huge? Or do you think of those 5, I mean, do you think some are gonna get crushed? Like a VR, augmented reality just might get crushed by another sector. We just, we, like you said, we haven't seen that many tech sectors take off at the same time at once. Do you think they all will take off in the next 10 years? Do you think there's gonna be 1 or 2 clear winners? Maybe some better than the other. Any thoughts there?

Well, I think there's also like, for example, artificial intelligence. I mean, it's going to happen. It's going to— it's already happening. But it's not really like— I don't know that there's AI companies. There's software companies using AI. AI is being applied. It's applied to autonomous vehicles. It's applied to everything. So that kind of spreads across where, you know, blockchain and crypto, that's kind And we've been watching that closely for 3 or 4 years and it's evolving and coming along. Some will be slower, some will be earlier. And by the way, a big part of this from an investor standpoint and a founder standpoint is getting the timing right. You can be too early, you can be too late. And so Pets.com didn't make it in 2000, right?

It failed.

And then Chewy.com 16 years later, 5 years, gets started by a 26-year-old kid named Ryan Cohen and sells it for $3.5 billion after 5 years.

Yeah.

So, you know, that's a big part of this too. But it's hard to say. I mean, all these things are going to happen. 5G is going to happen, you know, augmented virtual reality. We're going to see more of this. Which ones the biggest companies are going to win at— and the game's changed a little bit too because you've got, you know, Google and Facebook, You know, the FANGs, and they're buying up companies earlier now because they, they're, they've gotten so big they can't be very innovative, right? They're not, they're not going to disrupt innovation anymore, you know, for them. So they're, they're, they're out there buying a lot of these early, you know, early companies to say, hey, that's, that's, that's how we're going to continue to innovate. So I hope I answered your question.

No, no, I think that's spot on. I want to ask you a little bit deeper too on— you mentioned cryptocurrency a couple times there. Cryptocurrency and blockchain technology. Actually, I want to focus on cryptocurrency as a currency in general. Are there any thoughts on the future of crypto? Do you see it being— I mean, there's this war between the— I mean, every country, their dominant fiat currency versus crypto now, and it's on their radars. Do you think the US is going to outlaw cryptocurrency? Do you think they can do that? Do you think the US will launch potentially their own cryptocurrency? Any thoughts there on the future of crypto?

Well, I think crypto is here to stay. And I think when you have our Federal Reserve printing money and just doing whatever they want, and that it just— it makes me wonder how many trillions we can be in debt before our currency starts to come under some serious pressure. So I do think crypto is here to stay. I don't know who the clear winners are going to be. I can't tell you that. I think there's going to be more than one, but I think having a frictionless way to move money and you don't have all these middle people involved like MasterCard and Visa taking 3% and all that, where you can do that really with, with very little friction and no cost. You know, I think cryptocurrencies offer that opportunity as well as not being controlled by a central bank like the Federal Reserve. And the Federal Reserve is a, you know, that's a, I don't know if you've ever studied that, but that's kind of a whole, it's not part of the US government. Nobody knows who owns it. It's like a, like in, you know, I don't know. So I did—

It's wild. I did a whole episode on that previously. It is absolutely insane. Like, it's a private entity run by the 12 largest banks in the world. And They— yes, the president elects the chairman, but it's a private company. I mean, it seems like it's just as weird. It's just like, how is this actually a real thing? And they control the most powerful— they're the most powerful organization on the planet, the Fed. I mean, they really are. Think of somebody more powerful than the Fed right now in the world like that. It's absolutely insane. It's a racket.

Yeah, absolutely. But so I think it's, you know, I think the public markets You know, one thing, you know, obviously tech's been super hot in the public markets and who thought Apple was going to be worth $3 trillion? I mean, let's talk about 4 years ago, what's going to be the first trillion-dollar company? Now they're worth $3 trillion. But that's been good for— that's trickled down to us, the early-stage tech world, in a good way and bad way. I think it's, you know, more angel investors are realizing, hey, I got to get in private investing because companies are waiting so long to go public. Airbnb went public with a $35 billion valuation. Uber. I mean, the days of buying Amazon or buying Apple when it was a couple hundred million dollar valuation. Andreessen Horowitz has killed that game. These tech companies can wait, raise so many billions of dollars and wait so long to go public. Not saying you won't get, you know, 5, 10x over, you know, whatever number of years But the days of 1,000x that you could have made on Amazon and Apple, you know, they're gone. But that's helping us on the private side, but it's also hurting us because there's more investors. So the valuations that we're paying for the early-stage tech companies just keeps rising. Hopefully, that'll— but it'll correct itself.

Huh, interesting. I want to shift gears again and ask, I know there's a lot of people listening that would love to have your job. I've heard a lot of people, I'd love to be an early-stage VC kind of person. They would love to be Tom Wallace right now. Walk us through a day of your life. Is it— are you personally, are you getting a lot? Are you the one going through pitches? Do you have analysts that look at 100 deals and bring you the top 5, and then you hear those pitches? How does it actually— and I know every organization is different, but how does your organization work to look through, vet deals, and then finally to make a decision, we're going to write a check for a company? How do you guys do that?

Yeah, so it's a whole workflow. So, it starts with our deal team, and we have analysts that are combing everything, looking for deals. And we, we have 50 companies a month go onto our site and just apply for funding. So, you know, we're sifting through all that, vetting the deals and narrowing it down. There's a mini investment committee that's a subset of my partners, and the deal team has to make it through that. Then it goes through all these levels of due diligence. And so I'm on the investment committee, and makes the final decision. So I, to your latter example, I only see, you know, 4 or 5 deals a month, maybe a few more than that. So we're at the very last stage. They made it through our whole process, you know, and probably half the companies make it that far we end up investing in. And a lot of times when we don't invest, we say, hey, well, maybe it's not a binary yes or no. It's a no, not now. Why don't you go get some more traction? get some more customers, you know, come back to us, and we'll start following them. And we may end up making an investment 6 months later, a year later. So, you know, that's kind of, you know, but how the— a day in the life, I mean, we're constantly, you know, we have 2 customers in this world. You have investors and you have the founders. And the fun part is working with the founders, and I love doing the deep dives and trying to help these founders. And I get I like to say I get to go to work every day and work with some of the brightest, smartest, hardest working, talented people in the United States who are trying to change the world. What could be more fun than that? So that's the part I really like. The investor side I like as well, but that's more raising money. And my guess is a lot of people wouldn't like Tom Wallace's job that much on that side.

On that side of things. So, it's not just sitting on a yacht all day drinking piña coladas and then coming in the office once a month and looking at deals, or is that right?

Yeah, no, no, it's not that at all.

That's awesome. No, I—

I'm too tired to do that anyway.

So, you mentioned you guys have an online— do you guys use like a funnel to have people opt in, and that's where you get a lot of your deal flows? People come to your website and look things up, is that right?

Yeah, so we have floridafunders.com. Any founder can go out there and apply in our application process. It's like 10 minutes. I mean, it's real simple. And, you know, we try to— one thing we try to do with founders is we try to get them through our process fairly rapidly to a yes or a no. You know, so we don't want to waste their time.

It is.

On the other side, being a founder, it's hard to raise money. It's a lot of work. I always tell founders, if you think running a startup is a full-time job, you're right. If you think raising money is a full-time job, you're right. Your job is a Figure out how to do both at the same time.

Yeah.

And it's hard work, it's a lot of work.

100%. What are some of your favourite, from, you know, if a founder is listening to this show right now and they're going to come pitch Tom or your team or just another VC, what are some things that you love in pitches and in founders? And what are some things that you always are like a red flag? Like, hey, I just don't, I never want to see that on a pitch deck or I never want to see What are a few things that maybe a founder listening to this could take, you know, as they're preparing for a pitch or preparing to raise money?

Well, the number one thing that we like to see from a founder is that they are just all in, all in, that this is, you know, they've got skin in the game, whether they put their own money in and working for a fraction of what they used to make and have for years, that they are just 100, 1,000% 100% committed. You know, we ask them, what do you, what do you like to do on the weekends? You can guess what we'd probably like to hear. We'd like to hear work. We don't want to hear that, you know, they're a golfer and they spend weekends, or sailor and they're sailing their boat on the way. That's not— we want people who are— because you know as well, Bridger, from your experience, that building businesses and founding and starting tech companies is really hard work.

Mm-hmm.

I mean, there's many stories. Uber almost went out of business 3 times. I mean, countless stories. It's going to happen. Adversity is coming. They're going to get kicked in the teeth. They're going to get punched in the face. Are they going to quit when the going gets tough, or are they going to— are they just going to keep fighting and fighting and finding that— You know, we want to see that grit, that determination, and that, you know, whatever it takes, I'm going to be successful. So that's the number one thing we like to see. Again, we'd like to see them have skin in the game and we like to see— one of the things I personally like to see, I like to see some sales ability from one of the founders. You know, the classic perfect founder team to me is Jobs and Wozniak. You had Jobs, who was a brilliant sales marketing guy, and had Wozniak, who was the brilliant genius. I mean, that's ideally— now sometimes there's only one founder, sometimes there's 2 or 3. We like teams better than individuals, but we invest in both. But somebody's got to sell. Somebody's got to sell. They're going to— business is a team sport. They're only going to be as good as the team they put together. So somebody's got to sell really talented people on why they should leave Google or Facebook and come work for this little startup. So they've got to be able to sell. And then somebody's got to sell those early customers.

Mm-hmm.

So if one of those founders doesn't You know, isn't articulate, isn't doesn't have have a good a good grasp of communicating and persuasiveness and charisma. Isn't that sales person? That that's that's that's that's something that we really like to see. On your second question, the red flag.

Oh my gosh!

There's so many red flags. But don't. One of the things we're always looking at is you know I always call my BS meter. I got my BS meter on, right? And founders can be excited and we expect it and passionate and we love the exuberance, but there's a difference between maybe embellishing things a little bit because you're so excited and flat out misrepresenting things. So we're constantly looking for, are they passing the smell test and can we trust— we're going to give this person a $1 million, $1.5 million, whatever it is. That's our money, our hard-earned money, and our investors' hard-earned money. And we want to make sure we can trust them to spend it like it's their own money, to be wise with it, to be frugal with it. Now, we put safeguards in the documents, and, you know, when we put them— when we give them $1 million, they can't triple their salary. I mean, we have safeguards against that. But we still want to make sure sure that they're, you know, that they're people we can trust and that we want to be in business with. So anything that they do that throws that off, um, or that, or, or that looks like they haven't done their homework, you know, especially if they're in a space that they don't have domain expertise. It's a lot easier to invest in somebody that's, you know, I, I was a doctor and now they have this, you know, this, this digital health solution because they saw a problem.

Yeah.

And somebody who really doesn't, never worked in the healthcare field, but they have a solution. But I'm not saying we don't ever do that, but we do, but they really have to have done their homework and got the right people on their team.

Well, that makes sense. I love the no golf example, I love that. But the BS meter, I was actually on a call with somebody yesterday, we were talking about marketing in general, and how it was actually, there was a study that came out that says Gen Z, so Generation Z, is the most least trusting generation in the history of the United States that they can track. And it makes sense. I mean, you look at the last political cycle, right? And then everything you see on TV, you just don't trust anything right now. Nobody trusts anything that they hear, especially the next generation of consumers, Gen Z and a lot of millennials. And even, I mean, everybody's at that point. And I think that we were talking about that, how in marketing, you know, you see the old not old, but a couple years ago, everyone had a Lambo and hot girls behind them and this whole, that was like this fake thing that sold well, and all of a sudden it's like, no, everybody has their BS meter so high that transparency is the biggest key to win in, you see that in online marketing and digital, in every type of marketing and sales, transparency goes a very long way, and even when selling investors or selling founders, when you can be transparent with them, At least the people I brought on, we've seen a huge shift over, even over the last 18 months, 2 years, to we need to know, just see right through everything that's going on. And even if to a fault where it's gonna make you look bad a little bit, but being transparent, being honest is better than trying to fake.

Yeah, absolutely. In fact, you know, I think sometimes founders fall into that trap. Like they have to have all the answers. They have to come across as super smart.

And that's not true.

What we're more concerned about is, do they know? Are they committed? Are they all in like I talked about? And also, are they learning? And for them to say, hey, you can talk to this customer. They may not give us the best reference because they were our first customer, but we learned a lot from them. And like you're suggesting, just being totally open about that, that— And seeming human, you know, not trying to be Superman or Superwoman, you know, like, hey, yeah, we tried that but it didn't work. Or, you know, um, you know, another thing is, you know, where we need help. Like, we ask them, well, where do you need help? And then, you know, we want to hear where they need help.

Yeah.

And if they say, well, I don't need any help, unless they're, uh, Mark Zuckerberg doing his next company, they probably need some help. And that's how That's not a good sign either.

That's wise advice for someone looking to found. Now, I want to— I keep switching gears on you, but we'll keep moving this thing along. So, you mentioned at the beginning crowdfunding. Do you guys do, when you raise capital from investors, do you do a crowdfunding style where you're raising money from non-accredited investors, pooling it together? What did you mean by that for when you said crowdfunding? Is that how you're structuring your funds right now? Or do you guys do a typical Reg D, you know, 506 offering? What do you guys do?

Yeah, so we do, we only do accredited investors, you know.

Okay.

What's it, CF? Reg CF?

Reg CF, right? Yeah, crowdfund.

Yeah, we're not totally open on the crowd side. We have 1,700 investors who are accredited, who once we, once a company, a portfolio, potential portfolio startup makes it through our vetting process, then we put it up on our portal. So that's samefloridafunders.com. There's 2 sides, one for investors, There's one for founders. And then our fund will put in, say, $500,000 to $750,000, and then we'll put it out to our angel network, and those folks will look at it, they will invest, choose to invest or not invest, and they can invest as little as $5,000 or they can invest as much as what's available. And, you know, again, we've done all the hard work. Interesting. We've done— I mean, we have a whole data room on the company. They can look at their financials, their projections. They can look at the notes from our analysts that called their customer. Their customer is Coca-Cola, what the CTO of Coca-Cola said. So we make it really easy to be an angel investor, unlike when I started, when I didn't have access to any of that. You're just kind of winging it. And so, and it's fun. And it's really fun.

So I love the model, but I want to ask, why do that? Why not just, if it's a million-dollar check, that you want to raise, why are you only putting in $500 grand and trying to, you know, syndicate or source from other angels? It just, do you want diversification? Do you want more other people involved? Why do that method? Or how does that work?

We do take a fee and it's, we take a fee on both sides and that works out to be about the same fee. The fee is, you know, where we make, where Florida Funders makes a profit is on carried interest. For the most part, our fees just cover our expenses of running the business. So, and carried interest, I think most of your listeners probably know what that is, but we get 20% of the profit after we give the investors back all their money, all the fees and everything. And we split between the investors and us, 80/20, where we get 20% of profits.

Yeah.

The reason we have the crowd is, is again, if you look at why any area becomes known for a technology ecosystem, it always comes down to 2 things. I mean, there's other factors, but it comes down to capital and talent. You know why Silicon Valley? Silicon Valley, capital and talent. Sand Hill Road, all the big VCs. You know, then you got Stanford University, Caltech. You got all these really brilliant people. You got people come from all over the world to go there because they know it's a mecca for building tech companies. So as we look at Florida, we have 350,000, 400,000 accredited investors more than any other state besides California and New York. But unlike California, most of our investors did not make their wealth in technology, so they're not prone to early-stage tech investing. They made their wealth in insurance, hospitality, construction, real estate, you know, you name it. So part of our mission in really driving the ecosystem forward is to get more and more of our accredited investors doing early— doing this asset class, doing early-stage tech investing. That's how we're really going to make a difference and change Florida for decades to come. We say we like— we want Florida to be known, as known or more known, for technology, for technology and innovation instead of tourism and oranges. So we're trying to awaken that sleeping giant, if you will. And the more we can do that, the more companies we can fund, the more startups And we do invest outside of Florida too. We don't just do Florida companies, but over 50% of our companies are headquartered and located here.

Interesting. Okay, so it's, it's to grab, to give access to more people to get into this game. Probably helps marketing too. The more names, more people are talking about a certain business that they certainly invested in. You guys make fees on both sides. I love it. I think it's a really cool platform. 1,700 investors on there. And for people listening to the show, if you, if they want to sign up, can they just go to To your website and join as an accredited investor on there? How does that work?

Yeah, they just go and sign up. Just, you know, they can go through. It's a very, you know, takes a couple minutes, and then they can look at our deals and decide to invest or not.

And see what's going on.

With this accredited investor, it's unlike most venture capital funds where, you know, it's a handful of people. You know, we've got our 15 full-time employees, but these 1,700 accredited investors, they have domain expertise. They They get involved in helping our companies. We have this tremendous network. If a founder needs an introduction into Home Depot or JetBlue or pick a company, we go out to that network and we leverage them and they're happy to help. And so that's a big value add that we can provide our founders that really nobody else can.

So Tom, you guys are on your 3rd fund right now, is that right?

Correct.

So on your other 2 funds, And well, to be on a third fund, you've obviously been up and running for a while now. Have those ones come to fruition? And what's— I'm asking, the point I'm getting to is your exit strategy. What is your exit plan on these portfolio companies? Do you like to get in seed and get out on an A or B round? Or do you like to get in and you want to ride this puppy until an IPO or something crazy? What is usually your exit strategy on these companies?

Typically, we want to ride it to We want to ride, we're going to do, we're going to get in early. We're going to do follow-ons when the company's performing and doing well, try to keep our investment from diluting and really ride our winners, as we call it, and have an exit either at an IPO or most of the companies won't IPO, they'll get acquired. And that's usually 4 to 10 years is that time period. We've been at this about 5 years. So in our first fund, we've We've only had 3 exits so far. So, yeah, you know, this is a long— the only downside to investing in this space, it's not liquid. It's not like buying stock on the public market that you can sell tomorrow.

Yeah.

You know, that may change in the coming years. There's some people working on some private marketplaces to trade private companies. But for the most part, these are liquid investments and we're in it for the long term. And again, we want— we're looking for the 40, 50, 100x.

Yeah.

You know, and it can happen sooner, but that's unusual. Typically, it's going to, you know, take somewhere in that 5 to 10 year and that for the exit. And we will sometimes take some chips off the table. One of our companies— and exits are funny too— one of our companies They sold during COVID they sold the Peloton, they sold their whole technology team and staff, and we got 2 or 3 times our money back. But they only sold part of the company. The other part of the company is still there and running, and we'll eventually have a second bite at the apple, and who knows where that'll come from.

Yeah, interesting. I think what I think that's good to note for people listening too is, I mean, the jury's still out, right, on your guys' fund overall performance, and you're on your third fund. I think it's a lot of people that recognize, Sonny, you'll launch your first fund, especially in the VC space, you're going to invest those first 18 months, 24 months, and then you're going to launch a second fund and keep raising money, and the jury is still out on how good of an investor you are, right? Even to a third fund, usually by— from a lot of founders I hear, a third fund is usually when it's either kind of boom or bust, and that's when you make a lot of your money as a fund manager, right? It's usually your third, fourth fund is when A lot more capital comes in and you really can take off. It's cool to hear your guys' story as well. That's awesome.

Yeah. Well, we did our first fund, we set out to raise $10 million, we raised $18 million. We did a little seed fund in conjunction with a university. That was our second fund, which was only a couple million dollars, very small check size, pre-revenue deals. And so, really, our first fund's $18 million. Our second fund, we're shooting for $75 million, our third fund. I'm sorry, we're shooting for $75 million to give you an idea. You're right, the jury's still out on Fund 1. Now, a lot of the companies we invested in Fund 1, first of all, we've only had out of 40 companies, I think we've had one go out, one restaurant tech company during COVID And then a lot of the companies have done raises at significantly higher valuations than our investment. So we can show investors in our Our most recent fund, hey, you know, we haven't exited a lot of Fund 1, but you can see these companies are doing well. And, you know, they've raised money at higher valuations. And, you know, we anticipate down the road a successful exit.

Yeah, it makes a lot of sense. Yeah, where you can show, yeah, that actually you're— so it's on paper, yeah, they've done very well. And you can show that. That's obviously why you can go out and raise $75 million now when your first one was only $10 million. I love it. Tom, we got a few minutes left here. I know you're an incredible entrepreneur, and I know we talked a lot about FundZay, but I want to talk about entrepreneurship for people on this call who want to get into entrepreneurship or just starting out, maybe their first business. What are some pieces of advice that you could share with a young entrepreneur, even maybe yourself back when you were 20 years old? What are some things that you love to leave with this audience in the realm of entrepreneurship of things to look at?

Well, first of all, I'm probably the biggest fan of, one of the biggest fans of entrepreneurs. Entrepreneurship on the planet. So I would say go for it, take the risk, do it while you're young if you can, but if not, do it, just do it. I mean, you will learn more from this than going and getting an MBA from Harvard, I guarantee you. Or, you know, not to pick on Harvard, pick your school, Stanford, I don't care who it is. So it's, it's just a tremendous learning and growing opportunity. And, you know, take the risk and go for it if it's your life's dream. But be prepared, it's going to be very, very hard, difficult, hard work. Be prepared to work hard, be prepared not to play golf on weekends, and put your life and soul into this business. And it'll be your baby. And, you know, but it's fun. I mean, I miss running a company day to day and, you know, building a team I always said I was very lucky. I found my passion in life very early on, and that was putting together great teams of people and building great companies. And it's so much fun. It's just a blast. So I couldn't encourage them enough. But, you know, realize what you're getting into. I do think there's a little bit like your Lamborghini experience or story you were telling or whatever the car was.

Yeah.

A lot of people look at entrepreneurs and Elon Musk and Zuckerberg and, you know, Jack Dorsey, and they look, oh yeah, I want to be like them. I want to, you know, have all this wealth. And, you know, it's a lot of hard work. You've got to be prepared for that. And it can be extremely rewarding. And I really— the thing that I was— I never built my companies to make money. I built them because I wanted to build great companies, and we made money as a I'm not saying we weren't focused on being profitable. You need to, and that's a big part of business. But if you do it because you love it, you're working a lot, but you're enjoying it, so it's not really work. So, to me, that's the best thing.

I love it. And I think that's great advice. I think entrepreneurship is— I'm in the middle of it right now, building 2 companies right now, and it's a blast. I totally agree. I want to ask you, Tom, for maybe— I know you got to go here in a second, but Follow-up question on that, the risk. A lot of, you know, from your last statement, it sounds like, man, it's going to be risky. A lot of fear stops entrepreneurs. What would you say if someone's a little bit scared of the risk, of the fear to get in the game?

Well, the definition of entrepreneurship, I think it's a French word, is one who assumes risk. So, you know, no risk, no reward, right? I mean, you got to take risks to get the reward. You know, I think that, you know, fear is a great motivator. And I know when I started my business, you know, I didn't— you know, I come from a blue-collar family. Neither of my parents went to high school. I didn't have any money. And I, you know, I started it a couple of years out of college and left a really good-paying job to do it. Yeah, there was risk. But, you know, that makes— I think that's half the fun of it. If it's a layup, if it's easy, easy, everybody would do it, and that would take something away from it. I enjoy risk and I enjoy getting out of my comfort zone, and I think most entrepreneurs do. They actually end up thriving on that. So risk is a wonderful motivator, and fear of failure is a wonderful motivator too.

Absolutely.

I mean, I'm sure you're getting people telling you you're crazy, you could be doing something else, and Bridger, You know, you don't know what you're doing. And, you know, those are all, to me, those are all great motivators. Tell me I can't do something, just one.

Yeah.

Most entrepreneurs are wired that way.

I think I love that advice. That's spot on, Tom. The last question I love to ask all my guests on the show is, I'm going to give you the mic, you got 2 minutes. I would love for you to share what you feel like is most valuable if this maybe was your last breath or dying word, whatever you want to call it. If you want to leave something with this audience for 2 minutes, you got an open mic. You can talk religion, politics, business, entrepreneurship, whatever you'd like. I'll leave it to you. But what are some things that you feel like is most valuable that you'd love to leave with this audience today? So, we'll give you the mic right here.

Well, I would encourage them to be entrepreneurs if they have any thoughts about doing it. I believe entrepreneurship is the backbone of this country and our economy and capitalism. I'm a big fan of it. I think it's what drives us. drives our nation and makes us arguably the greatest country in the world. And then so if you're at all thinking about doing it like we were, go for it. Go for it. You will not regret it. You'll learn a lot more from your failures than your successes. Keep going at it. Don't give up. Don't quit. Just keep going and going. You'll figure it out. You'll pivot. You'll work it out. The other thing I would say is enjoy the journey. I mean, Business building, getting in— I got to work with my— I built all my businesses with my best friend. How many people get to work with their best friend every day of their life for 40 years? And that, you know, we had a blast. And so have fun, enjoy the journey. There's no place to get to at the end. Just build a great company. You'll have plenty of exit opportunities when the time comes. You can do that. But just really focus on building a great company. And the one thing I would tell founders too is be obsessed with your customers. I mean, just really listen to your customers, spend time with your customers. They're the lifeblood of your business. I grew up working a lot with Microsoft. I was on their advisory board for 2 years, spent 15, 20 years working with them, with Cisco and companies like that. And, you know, it's not best technology that wins, even in the technology It's really sales and marketing. So you listen to your customers, they'll tell you what they need, they'll tell you what they want, and just stay super focused on them and them and your team. And put together— surround yourself with people a lot smarter than you. Just, you know, get the best people you can and check your ego at the door and hang on and have fun.

I love it. Tom Wallace, thank you so much for coming on today. Florida F— Is that the way people can connect with you guys?

Yes, and I'm tom@floridafunders.com if anyone wants to reach out to me directly.

Okay, so tom@floridafunders.com, floridafunders.com. If you guys want to— if you're a company looking for money or an investor looking to get on their platform, go check them out. Tom, thank you so much for coming on today. It's been a pleasure.

Thank you, Bridger. The pleasure has been all mine, and all the best. Continue your good work.

Okay, have a good one.

Okay, you too.