How I Pitched My First Fund For Entrepreneurs

Hey, what's up everybody? Ryan here and I'm taking my own advice in this episode because I'm just sharing with you me documenting the experience. So I recently had a chat with some interested parties who are considering backing the capitalism.com fund. I'm raising a fund right now to invest in some of the deal flow that comes from my students. And the overall idea is we have these students who have built successful businesses or businesses that I think could be really exciting and successful. And most of the people in this Internet e commerce world don't have financial backing and don't have strategic advice and don't have all the resources that exist within my, my partner Sam's network. And so we decided to combine resources and raise a fund and bring our network and our opportunities to make available for entrepreneurs that we want to support. And so I've never done a fund before. I've never pitched investors on why they should invest in other people's businesses. I've only ever done one raise before and it was for a business I was buying. So this was really new to me and this was kind of my first go at, I guess you might call it, pitching investors. Although I don't feel like I pitched it. I was just kind of explaining our thesis. So I just thought it would be fun to share with you so you could see that I didn't, you know, I didn't plan for this. I didn't have notes. It doesn't have to be complicated. So I just wanted to share this experience with you. If you listen to this and you want to participate in this, you can just submit an inquiry form over@capitalism.com fund. All that does is put you on our radar and let me know that you're interested in having a conversation.

All right.

I hope you enjoy this and I really hope this gives you permission to just go for it, even if it doesn't feel planned because we had a lot of fun talking about a fund. All right, enjoy.

So welcome to everybody who's here. So today we're going to talk about the Capitalism Investment Fund. I've got Ryan Rand joining me here and a few other people as well. Looking forward to going through it here today. We're going to keep things pretty brief and to the point here. I think we have about an hour or so locked off for today and we have a few questions that have been submitted via a few different forms here. So today we're going to go ahead and start off kind of high level and just talk through what the fund is going to Go over, let Ryan go through a little bit of the vision and then get into Q and A. So on that front. So let's just jump into it here. So we're building the capitalism fund. Ryan, I know you've got a lot of stuff you want to talk about here. Let's just jump right into it. Tell us what you have on your mind.

Cool. So first of all, for those of you who are on and watching later, I just want to thank you for being interested in our crazy ideas. So.

Like some of you who are on, I started my first E Commerce business with a few hundred bucks, six hundred bucks. You're led to an eight figure business, had an eight figure exit. And Daniel, you were saying you discovered our work because we shared that journey. And I can't tell you how many other stories there are like that of someone going through the process, bootstrapping their way to the first million or to the first few million and then having an exit. And in, in that time, there's been a handful of companies that have done just extraordinarily well, that have gone from nothing to $25 million or there's a couple that made it to $50 million, but universally all of them bootstrapped. There's almost no one who had outside funding. There was almost no one who had partnerships. There was basically a group of solopreneurs who went and figured this out by themselves, did all of the hard work, built a seven figure business and a lot of them had an exit. And that's amazing. I mean that is just absolutely amazing that people have done that. And it doesn't have to be that grind that it was doing it yourself with no funding, with no advice. So I don't know if you guys know my book 12 months to 1 million comes out May 5th, endorsed by Gary Vee on the front. The board's written by Russell Brunson. Putting all my eggs into this and the secret plan behind all of this. Why I'm leaning on this so much is I know that as a result of the right entrepreneur reading this book and going through the process, they're going to be building a business that is exciting. Now, whether or not they hit the million, we shall see. But the whole point of what we are doing here that Sam and I decided this was worth taking our attention away from. All of the other exciting things we could do is we know that there's going to be a pool of people who make it to that million dollar mark that then go, WTF do I do now? And there's hundreds of them that have come through our network over the last several years. And I would say there's maybe 10% of them are interesting enough for us to say we could help with something like this. But those businesses, those companies that would benefit from some capital, some advice, some exit planning, some promotions from strategic audiences are very, very special companies. Sam, is it okay if I talk about some of the deals that we're talking with?

Yeah, absolutely. I think that'd be wonderful.

Okay, so I did a podcast with one of the individuals from our audience. Her name's Courtney. And Courtney has this business called Primal Coffee Creamer and it's a keto. And she's not a keto company. This just happens to be Keto Friendly Coffee Creamer. And so she's built a sugar free company essentially. And what's different about her Is than the 90% other businesses that come from our pipeline is a good percentage of most entrepreneurs get in this for the money, look for the market, build it to sell it, and that's awesome. But then there's like 5% of them that really have a shot at doing something really special. So Courtney is a really good example of this. Courtney put in the grunt work to get to the first million, but we know that with some capital, some strategic advice, some introductions, some professionalization of the business, she is freed up to go build a much bigger business than just your traditional Amazon based company that sells chargers and iPhone cases and other knickknacks. And so our plan is to create partnerships with those types of entrepreneurs who have crossed the first million or at least have it in sight. And we know that it's going to get there and then giving them the backing and the advice and the opportunities to grow way past that. And in our kind of rule of thumb is we're able, because of our relationship with these entrepreneurs and what we bring to the table, we can get much more favorable valuations than if they were to go do a round on Angel List or to go to a fund that did not have this as their expertise. So as a rule, we're looking at about a 25% stake in the business, maybe more, depending on the opportunity. And we're valuing the companies at about 1x revenue, which in the type of businesses that we're going after is a very favorable valuation. And then we bring in our board of advisors and our network and our opportunities and that has the potential to go really, really quickly. Now, full disclosure, I would love, love to be the type of fund that partners with entrepreneurs before the first million because I know like there's a girl in our pipeline right now, her name's Yasmeen. I love her. I totally want to back this woman. I know that 10 to 25 grand radically changes her life and her trajectory in her business completely. And she has the product line and the audience to be able to make that work. But to start, I know that there's a higher failure rate before the first million. And so that first million is really where we're looking to have provability in the marketplace. The entrepreneur shows that they're going to go through ups and downs. The entrepreneur shows that they're willing to put in the grunt work to be able to release those four products and get them 25 sales a day. They're willing to bootstrap and be lean and to go all in and to have sleepless nights to get it to the first million. That's the point at which I think we can really do a lot of damage eventually. I hope we're even more early stage than the first million because I've developed an eye for knowing when something is going to break out or not. But to start, we're giving preference to those businesses are right at a million, taking about a 25% stake. So I mean your rule of thumb is 25% for about 250,000 and then growing that towards a meaningful exit over the next several years. So my plan is to go all in on that demographic, that target market, the people who are starting businesses and scaling to the first million position, capitalism.com and ourselves, Sam and myself and Inez in front of that group of people so that we have the pick of the litter of the best companies that are right at that inflection point of the first million so that we come in, buy at the best possible valuation, be a part of that business as it has that hockey stick growth, that 100% year over year growth for that three to five year window that is so magical. Going from 1 million to 2 million to 4 million to 8 million. That percentage is the biggest meat on the bone. Prepare it for an exit and have a great return. So that's the overall thesis and what's really exciting about it is the fact that we're in the position to have our pick of the litter and to be able to bring our resources available to be able to make those businesses grow. And because of the network that's been built over the last decade, I have, I have people who reach out. Like there's, there's a one. I don't know if you'd be comfortable with me sharing who he is. But I have one friend in particular who says as soon as this is ready and I can mail it to my list of a million buyers, please let me know if it fits my audience. And so those types of relationships and opportunities exist where we can take that stake in the company. The investors have a network themselves and we can kind of incubate this company, ensure that it has the backing financially and with strategic advice to be able to scale from there. Sam, have I said anything that will get me into legal trouble yet?

You haven't? No. I want to just add on real quick there, Ryan. So this was kind of something as we were visiting the other day, I was visiting with one of our strategic partners. So one of the unique things about this is obviously Ryan's audience that he has with his reach here is phenomenal. So that's the single source deal flow. We have all this deal flow that comes in where we can access and buy at attractive rates. But in addition to the deal flow, there's also a pretty good resource list of strategic partners that we have on our side of relationships that we can use to help these brands that we acquire build infrastructure. And so as we go through and build this infrastructure out, that's the whole game plan here, is you buy them these attractive valuations in the early stages, we then build them the infrastructure to help them grow as quickly and rapidly as possible. I was actually visiting with one of the brokers the other day and one thing that we can do is we can potentially get the brokers involved earlier as opposed to getting to the end and saying now we want to sell. Taking our foot off the gas pedal and starting to prepare things, we're going to make sure that these brands have the infrastructure built, all the way down to weekly reporting of financials so we can make up to date decisions and really stay ahead of this game. In addition to deal flow, I think we have some really solid infrastructure strategic relationships to bring to the table that will help these brands grow and be as profitable as possible, which means we get the high ups, multiples in the future.

And to be fair, on the back of that, these are all pieces that I and most entrepreneurs wish they had as they were scaling, but couldn't afford to have it because they were bootstrapping the whole thing. So I think most of us would have loved to not be focused on Amazon pay per click in the middle of the night managing your cost of goods versus the sale price. And so with some funding and with the relationships that we have to be able to negotiate better rates, we can now go in and do that ahead of time. So the entrepreneur can be focused on building audiences, building team, leading vision, creating amazing products. And those end up being the businesses that have the best shot of breaking into eight figures and beyond. And so that infrastructure liberates that entrepreneur to be able to build a really valuable company that it can be. And our job is to stay in the position of giving advice to that entrepreneur and bringing the resources that they need to be able to lead that charge.

I love it. So, Ryan, is there anything, Because I know a lot of the questions we had that came in that maybe we can hit on. Just a little bit of a conversation here came in around kind of our criteria. But before we jump on that, is there anything else you want to cover on the deal flow? Because that's one of the biggest things here is obviously you bring a lot to the table when it comes to acquiring deal flow that the average investor fund would not be able to get to. Emil's going to talk to you about the pipeline of deal flow that you think would be good to use here.

Yeah, sure. So, I mean, I always thought it would be fun if I just went on a podcast tour on all the Amazon based businesses and said, hey, I just raised money, who needs it? And we'd have all the deal flow that we need. Unfortunately, if you go with that approach, you end up getting a lot of bad deal flow. And so my criteria for businesses that we're going to invest in are much less on the Amazon E Commerce side and much more on the brand side. Because I know that we can bring the resources to the table that help the brand grow into something special. But if you have an entrepreneur who is just in it because they're trying to make more Amazon sales, it's hard to get that person out of their own way. So our criteria that we're looking for is, is someone who has a vision that is bigger than just one platform, has a product that is really easy to sell and talk about. So you listen to someone like Courtney talk about her business for more than about eight seconds and you want to buy whatever it is that she's got. So she has a story that makes everyone cry and she's just very easy to support and to back. And you're looking for the audience and the market size to be able to do something unique and different in that space versus trying to sell another widget. It's just not exciting to us. I know that there is money to be made and just backing like the product that will rank for a keyword. But that's just not the game that we're here to play. Inside the fund, we're backing brands that have the ability to break out, which means that our wins are gonna be probably bigger than average. And it means that we might strike out a couple times too, because there's a little bit more risk in something that is less predictable than just ranking for a keyword. So our goal is to have the brands that we really believe have a chance of breaking out, working with our advice and using our capital to be able to have the type of scale that they could, to be able to create a meaningful splash in a big industry.

Perfect. That's exceptional. So as far as the reason why we target the million dollar brands or a million dollar annual revenue and those kind of things, what are some of the thought process behind that? Is there any variation to that or what does that look like?

Yeah, so when you have a business that has crossed the million, they have at least passed the sniff test. They've at least said, okay, we have an entrepreneur who has shown that they're willing to take a risk, they're willing to do the brunt work, they're willing to go through periods of uncertainty, they're willing to launch products on their own dime. And so you have a certain mindset that is crossed off when you hit that first million. The downside is you don't get that early stage valuation. But the upside is you have the business that you know, at least has proven that they can take, they can take an idea, bring it to market and get it to their first million.

The other piece of that is it allows us to focus on 10 to 20 deals that we're really excited about, rather than backing a bunch of different ideas and throwing 25 grand here, 10 grand here. And so we have the focus for our advisors and our board to be able to bring what they do best to the table to that specific group of businesses. It allows us to focus in on similar types of businesses that might have crossover promotion opportunities, who might be at have a shared network that will benefit one of one another. The one exception that we might make is a business that has a really big audience or has one product that is just absolutely killing it, but they do not have the Runway or the meat on the bone to be able to release that next product or to fulfill demand that they're already getting from the existing audience. So if someone's doing half a million bucks in a product that is that their audience is loving, but they keep running out of stock and they keep hitting those hurdles that prevent you from scaling. Then we might make an exception because there's a very clear indicator if we pull this lever, we're going to get over the million dollars and then we're going to be able to do what we want to do from there.

So.

So some exceptions might exist. There's one deal that I kicked around a couple times that is a startup with a very, very sizable influencer that is very well known that wants to stay a media personality but is willing to throw his audience behind the business. And the CEO of the company has built businesses like this in the past and is doing a raise and we're the only person funding it. Something like that we might consider because I know that we can do our magic and take that to the level that we want it to be, for it to be a really meaningful win. And so much so that if it was a total failure, the fund could be in the first lean position to foreclose on the business and then we'll run it internally because it's such an obvious move in that space with that person. So there are exceptions that we might make to that criteria, but kind of the bread and butter stereotypical business is going to be that million dollar business that needs the advice and the financial backing to be able to scale, to have a meaningful exit.

Gotcha. So just kind of recap on that a little bit is that the game plan is buy the million dollar business, looking to buy brands that we think have a strong brand to relationship, which is important there because that's one of the strengths that I think that you specifically bring to the table is phenomenal audience nurturing and just saying like we have the teams and capability put in place to go and build and utilize that brand's relationship to help grow it rapidly. So we're looking for strong brand consumer relationships, strong entrepreneurs to work with and then we're looking to say, hey, we're going to come in here, we're going to help you build infrastructure, we're going to throw gas in the fire with capital, then try to grow that as rapidly as possible. Is that a fair summary?

I would say that's a fair summary, yes.

Awesome. So anything else you want to talk about as far as underwriting criteria? I have a couple other questions we wanted to get to here today. Any other thoughts you want to put in place on that?

I mean, our primary challenge and opportunity is creating a filter to which only the brands and businesses that we're really excited about that. We really believe and we can impact make it pass the sniff test and into the fund. And the opportunity there is we have an audience of entrepreneurs that is doing this stuff and the opportunity further one layer down is we have the eyeballs and the experience to be able to filter that out. And so that's really where we have a strategic advantage. All businesses need to have some sort of superpower or secret advantage. And ours is the pipeline of deals that come from this audience. And the more we talk about it, the bigger that pipeline gets and the more that we Doc. Do you have any idea how excited I am to be able to document a business that we invested in? And so somebody sees that and goes I want to be like that. I mean it is Internet shark tank.

That no one has done before. So if we do a great job for one business.

Then the entire capitalism.com audience for the next decade is saying I want to be like that. And it puts us in the position to be able to create meaningful financial returns for the entrepreneur and have breakthroughs in that business that did not exist before and have a whole lot of fun in the process documenting it and bringing it into the opportunity for other entrepreneurs. So I just want to be clear that's like that's the superpower that we have versus just we're going to be angel investors in a bunch of different companies like you would on AngelList and I invest on AngelList Angels is awesome. But that's our superpower that we bring to the table that is different and unique than everybody else who is just investing in businesses.

Awesome. No. 100% no. And that is one of the things that when it comes to this is being able to actually run the business in the first place is one of the challenges to be able to actually grow and provide value and a win to the brand that we're invested in. But being able to acquire those deal flow on the front side is huge. So that's one thing I like about what we've done here. We'll transition over to some other conversations here. Some of the other questions I wanted to make sure we got to is I feel like we've done a good job creating a win, win, win for both the brand owners that we invest in for the investors and for the fund operators to make sure that everybody has enough meat on the bone to want to be involved and grow these things to the high level and to the potential that I think is on the table there. So on that note, as far as from the brand standpoint what the brand is getting is they're getting an investment from a strategic partner who's going to help them bring infrastructure to the table. Now there's obviously there's a lot of strategic relationships that you bring to the table. There's connections, there's audience, there's influencer strategy. There's the fact that you've been down that road before where you've built a business from 600 to an eight figure exit. You've been down that road before. So you can hopefully accelerate their learning curve in a way that is really, really huge. And so brands, I think, see that they value that strategic partnership, which is why they gravitate towards that. That's why our deal flow is high and our acquisition cost is low. That's a huge, huge piece in this puzzle for creating their win on the investor side. They know that they're investing, they're able to invest passively. We'll talk a little bit about deal structure here in a minute as far as what the splits in capital and like requirements, those kind of things are in a second we'll go through some of the logistics just basically. But on that front we're able to participate passively in this upside. And the fund managers have where they participate and they win. We structured this in a way I know when you and I talked you said, hey, I want to make sure my heart behind this is that I want to be involved in these businesses growth. I want to be able to participate, help them grow, be involved in their upside. But I want to make sure that investors win first and then investors have their first piece of the puzzle when it comes to being paid for the risk that's taken and investing here. And so I know that that's created a real good win, win, win across the board. And that's something I think a lot of funds miss that I really like what we've designed here on our side. So that's as we go forward.

And the other side of that, Sam, is in a lot of funds you have things like advertising fees to go out and make sure that you have more investors or advertising fees for the businesses or the opportunities that they're investing in. We don't have those costs, we don't have the cost of advertising ourselves as a fund in order to get more deal flow because that happens on the capitalism.com side we spend a lot of money on advertising to entrepreneurs and the fund doesn't foot that expense. Capitalism.com does that in its customer acquisition processes. So the fund itself, the dollars that are Invested a much higher percentage goes into the actual work than it is to maintaining operations or going and getting more deal flow. So that frees up a lot of meat on the bone that is not normally happening in funds of this type.

You're muted, Sam.

My apologies. I agree 100%. Good run there. So let's go ahead and go over. I have a few questions that are submitted here. Let's go through some of these. I think this will open up some additional dialogue on that. So there are some questions here. The first one I want to go through here is when it said we went through what kind of brands we're targeting, they said what are some of the ways that we'll build value for a brand? So we get a brand in, we've made the investment. What are some of the ways that you see us as we operate the fund, building value for this brand going forward.

Capital product rollout, strategy, connections with influencers, strategic advice, connections in retail, connections in Amazon best practices, ways to monetize and grow the audience that they are not doing right now. Relationships when it comes to hiring, exit planning, management of numbers, we have a relationship with someone who is going to be in charge of ensuring that the books are clean, that they're transparent and that they're honest so that we're getting it from a third party vetted source rather than from the entrepreneur who's going, I don't know. So that was 10 that I thought of in 10 seconds.

Absolutely, yeah. And one of the things, the last one you mentioned is actually the one that I probably pay the most attention to because from a funds reporting side we want to know, know that we're in a position to know what our investments have done. So we're able to actively track what's happening. So having that third party financial reporting is phenomenal. And you think about what, what most brands do is they, they are very reactive in their game plan of how they approach their finances. If we can turn them into a proactive state just by adding that alone is a huge value to it. So I think that that's a big relation that's brought to the table.

I'll add in, I'll add in one more. And that is.

One of the kind of fantasy scenarios that we have is you have a brand you're really excited with. And we actually, we did this with Courtney, for example. Capitalism.com goes out and buys a whole bunch of inventory, takes the inventory, puts it into our monthly box inside the 1% or it's quarterly box. It gets shipped out to Entrepreneurs and influencers all over the country. Then she comes on the podcast, talks about the brand and all these people who are sitting there sipping while they are drinking Primal Coffee Creamer, talking to the audience are now much more excited and much more likely to reorder that same product. Plus half of them have audiences, have some influence, have some money, have some expertise, have knowledge on Amazon and other Internet marketing channels. And so you are influencing the influencers to get excited about the brand that we now have equity in. So that is another value add where we get to basically mini incubate the companies that we're most excited about.

Outstanding. Another one here that I thought would be a good one to cover is this is a little bit of a gear shift. Is one of the questions that came in here was are there any thoughts on how Covid in the recent months I know that's part of one of the reasons we're all here remotely and whatnot, is that Covid has impacted the way that we're doing business. Any thoughts on how Covid in the recent months will impact our strategy, the brand strategies? Any thoughts on that as far as going forward and the fund's relation to Covid?

Yeah, so I mean, the answer to that is it widens the number of opportunities that I think are going to be on the market over the next few years. And I am of the opinion that it is going to make it harder for commodity driven businesses to succeed, but it will open up new opportunities for very specific brands that are connecting and serving very specific audiences to succeed. So I was on Mike Dillard's podcast yesterday and I was telling him the story that there's an individual in our pipeline who has an audience that is breastfeeding moms with children who have skin issues. This is a very specific market. There's no data to suggest that breastfeeding moms of children with skin issues is a multimillion dollar market. But she has the audience in that specific space. She launches a probiotic to that specific audience. And if you were to look at the market of probiotics, you would say, well, average price point is like 12 bucks. There's a lot of competitors already in that space. Well, she can come out with a $50 product with amazingly healthy profit margins with an audience that is ready to buy it because it serves a very specific audience. And that is going to happen across food, it's going to happen across coffee, it's going to happen across supplements, it's going to happen across medical supplies, it's going to happen across all of the industries that we are used to going out and purchasing outside the home. So I think we might see an increase in ad costs. So there's going to be more of a demand for funding from businesses that succeed. But I think that Covid is just accelerating the pace that we already saw, which is micro brands going digital, going heavy into Facebook and Instagram ads, going heavy into partnerships with influencers. And influencers just got a lot cheaper, by the way, because they're now hit up for cash. And so I think it has just accelerated the opportunities and the challenges that.

We knew.

Coming into this structure. They're just now faster than we anticipated. And so I am not concerned.

Perfect. Good deal. So one of the questions that I'll take over and answer on this one is the question was as far as like deal structure and those kind of things, and then that's going to lead into a little bit of how the returns return might be on these kind of investments. But one of the questions was related to what is the fund deal structure. And so basically, it's a very simple. I know, Ryan, when you and I talked about this, we kind of came up with a very simple structure for this fund as opposed to getting into too much detail on it. I've just said, basically the way we're working with this is we're working with investors to allow them to invest passively into the e commerce companies. We're going to have a 5050 split on all profits that come from the business. So investors get their return of capital first and then we're splitting profits 50, 50 with an 8% preferred return to the investors. That way, if we do anything over 8%, we split anything less than that, we are at where all capital goes back to investors. So what that does. What I like about it is that puts enough meat on the bone to make sure that, you know, you, your team, our team and whatnot want to stay as involved as possible and growing these brands as big as they possibly can. Because the benefit of growing these brands big is that you participate more. We participate.

You just muted yourself, Sam.

My apologies.

Come on, man.

I was making sure we didn't have any more mutes than what to do. Yeah, so that's the idea behind us. That's the structure of it. So let's talk through just a little bit of what the lifecycle of a business that we invest in looks like. So let's just take an example business and say we invested at a million dollars of valuation, what that life cycle would look like, what we might see an exit for. Because I know that we buy it at one valuation, we have the potential to exit, potentially pairing brands together and having exit multiples increase. Let's talk through that just real briefly. Another question was basically in summary, if we buy a brand, what is our life cycle? How long do we hold it at time of exit? What do we kind of anticipate in an ideal world?

So, Sam, before you do that, I just want to comment that it was really important to me that when we structured this that the split was really simple.

Sam knows that he can make things really beautiful, but I will glaze over in confusion. And I think our kind of common phrase together is I'm going to need to eat carbs after this conversation because my brain can only handle so much complexity. So for my own sake, I have to keep things very, very simple. And so just to reiterate, the structure is we are equal partners. This is a shark tank and we are equal partners in it. Investors put up the capital, we bring the infrastructure, the advice, the deal flow and the time. And that is the structure between the two. Investors get paid first and investors get paid a minimum before we make anything. So the risk in terms of performance is 100% on us. So if we don't do our jobs, we don't make any money. We are not taking salaries, we are not taking fees, except for a placement fee. We have basically waived all things that take any risk that put any of the undue risk on investors. And so that was for two reasons. One, to make it irresistible, but two, because my own brain needed absolute simplicity in order to move forward. And we've done it.

I like it. Very good. So as far as kind of going through the life cycle of a business or a brand that we invest in, let's talk that real quickly just so we can kind of get a framework on what that would look like. So we invested a million dollar valuation. What does that look like going forward?

Yeah, so we might take a 25% stake in a million dollar business. From there we're looking at, okay, where's the best return for this 250 grand that we put into this business? Usually that is going to start as inventory and new product development. I was really surprised in 2015 at the first ever event that we put on, I asked Robert Herjavec, where do most people deploy the capital? And he said, money for inventory. Which I thought was really weird because to me the greatest return is in new product development. You can fund new inventory with debt. Anyway, I can talk about that for A while, but we'll put some into inventory and we'll put it into new product development. And then we might look at other strategic areas like partnerships with influencers or bringing on certain management teams because we can negotiate low costs for YouTube advertising and Amazon advertising and Amazon pay per click management. So we might look at building some of that infrastructure so that the brand owner can go spearhead new product lines. The goal, if you have a company that is growing on pace, we kind of expect that doing that work allows them to go from 1 million to 2 million, if not more, and then from 2 million to 4 million, 4 million to 8 million. And at that point, we've had the biggest bite at the apple. So we might look at professionalizing the business and packaging it up to get ready for sale at that point. Or if there's still a lot of meat on that bone, then we'll continue to run those processes into the eight figures and then take the business to market later.

Awesome. Very good. So a couple new questions just submitted here from some of the audience here. So we've got approximately how many brands do we anticipate owning partial stakes in within the fund?

I mean, our target is 10 to 20.

10 to 20. Yep. And that's. And the reason behind that is what we're looking for when we own these partial stakes is we want to. One, our goal is to diversify within the fund because diversification allows us to kind of mitigate the risk. And so the fund has a two pronged approach to what we're doing. One part is we're buying equity in these brands. Secondly is we're keeping reserve capital available where we can, if needed, we can offer through the fund our own offer of line of credit to the business to help them grow more rapidly. So we buy equity and then we may use fund capital to loan to that business to help them grow, to buy inventory and to fund advertising, those kind of things. The beauty of that is we're going to primarily lend when we are being collateralized by inventory. So our risk is a lot lower on that front. So we have a stake in the actual assets, the real assets of the company that are going forward. One other thing I want you to hit on real quickly here while we talk through this, because this is how we're able to, I think, really throw a lot of gas in this fire is. Can we just discuss, just real briefly, one of the accesses to capital that we have in addition to the fund capital to grow these brands, the line of credit access for funded inventory.

Yeah, so we have a relationship that came through our backroom, which is funding for inventory on a debt basis that is essentially faster and bigger Amazon lending, but with not the connection to Amazon. So it is debt capital for the purpose of buying inventory that is fast and flexible and is basically an infinite. It's a very large company. And this is kind of something they do on the side. And they're giving priority and better rates to both the backroom and businesses that come through the fund. So the way that works is if you have a business that is doing a million dollars in sales and they need to go make a $300,000 inventory order, we could take the money that we put from the fund to buy that inventory, allowed to grow, but that's not the best use of capital. Instead, we have this relationship with this outside funding team, who will then loan at the cost of the inventory. And so that inventory is free for the business. And free is a terrible word for this, but it has no immediate cost and then comes out of future sales of that inventory, which frees up all the capital that we put into the business for R and D, product development and growth of the business. And so we have that relationship that we have been able to negotiate better rates on the debt, and they're giving priority access to the businesses that we fund. And so we have that relationship to be able to bring to the table as another source of capital for growth.

I like it pretty good. That's one of the things that allows us, I think, to scale this quickly, is we can go acquire that equity in the brand. One of the things that we do is when we go build these brands up is by giving them that access to capital that's attractive in that light, as we make the brand itself, the business, a lot healthier and a lot more bankable as it goes forward. So year one, as we're in that growth stage, we're going to help them grow up to be very tax efficient, help them be as profitable as possible. And that process in and of itself also makes them bankable for other sources of capital as well. Because our goal on our side is we want to have the brand be as healthy, as viable, and as profitable as quickly as it can, where our equity is just growing inside of there, where as little input is needed as possible going forward. And we can just be in the strategic partnership role of helping them grow that brand as quickly as possible once it's viable.

I also want to comment. The original question was how many. How many brands are we hoping to take here and make no mistake. When this goes well, we plan to go bigger and do a lot more brands, and we'll have a lot more deal flow, and we might have more infrastructure at that point. And that will probably require the development of a new fund with different terms to be able to fund that infrastructure and to fund those operations. But the first pass is this core group of businesses that we are very highly incentivized to do a great job in doing, because our success on that determines whether or not the $50 million fund happens, which we want to do. And so the best terms and the leanest operations happen in the first go at this. And in order to do that, we're putting 10 to 20 brands as the target to be able to do it lean, to do it quickly, and to do it in a way that we're really confident that we can hit the numbers that we want to hit.

I like it. Pretty good. So here's a good question here, because as we work with brand owners, obviously every brand owner has their own vision of how they want to go forward and how they want to operate their company. So one of the questions that came in is what happens if a brand owner decides they don't want to exit when the Capitalism fund does want to exit? So I'm gonna let you go ahead and jump in and answer that in a second, but my thought on that is so one on the front side, part of the due diligence process we look at is when I mentioned the things we look for is strong brand to consumer relationship, but also strong entrepreneurs is when we do our initial due diligence is we're looking to see.

Do we click, do we mesh with this entrepreneur's approach to how they do business. And so we're up front and obviously people's minds change and things can change over time. But our goal is to make sure that we look and say we're looking at partnering with a business. We want to make sure, are we partnering with somebody who we want to partner with and they want to partner with us. So where our visions and goals are aligned, part of the due diligence is getting business plans written where we say, here's our 3, 6, 12, 24, 36 months game plan. Do you like this overall game plan? If we're on the same page, then we work, we partner, and we think we can grow this faster together, that we can grow it separately. So part of the risk there is mitigated in the way that we do due diligence. But additionally, there's other ways obviously where we can be bought out or whatnot. But, Ryan, what are your thoughts on if a brand owner goes separate monetary.

Sources where we can mitigate that risk? One is if the company is spitting off cash, we might not want to sell either. If the economy tanks and the valuations on businesses go down, but we have a very highly profitable business, then we might decide to hold onto it and take dividends from the company, and our investors will share in those dividends. And so this is a very legitimate question of if they don't want to exit, what if we don't want to exit? And if that's the case, then we're going to take profits in the form of dividends and pay them out in the form of cash flow. And that's number one. And number two, if we decide, no, we really want to cash this in, we can always sell our shares and we can sell them to other investors. We can sell them back to the entrepreneur, and we're in the position, since it's our company, we can negotiate the valuation of those shares. And so if we have control of those shares, then we don't have to wait for the entrepreneur to sell because we have the ability to sell them either back to the entrepreneur or. Or to another investor.

Very good.

Sam, there was a question that was posted that could get awkward, and so I just want to come out ahead of it and pop this pimple. Is that okay with you?

Absolutely.

So the question is about Sam and Mai's financial investment in the fund.

Absolutely.

And so there's two things that I want to address here. First of all, yes, we are. We are both putting money into the fund, but number two, we are putting other costs into our own pockets that are not being passed onto the fund. So team advertising, things like when the brand owner comes to my backroom events and they're here and we're working with them one on one, those costs are not passed into the fund. Those are passed on to Sam and myself. So, yes, we are putting money into the company, but as investors on the exact same terms. But also we are funding the other operations. The majority of those operations, legal, will be in the fund. The things that are necessary to do the deals, that will be from the fund. But our costs of the value that we're bringing to the table and the advice, the time, the opportunity cost, that's all on us. And it is not being passed over into the fund. And there are hard costs associated with that. There are hard costs associated with the team that has a stake in this to the development of the documents that will be passed on to you, to the organization of the events that we are putting together to help the entrepreneur, to bringing in some of the board advisors that are investing in these entrepreneurs. These are all costs that we're footing, not that are, that are not going into the fund. So yes, we're putting in our own money, but there are other costs that are not just the dollars we're putting into the fund because there is operational costs that we're eating that would normally get eaten by the fund.

Good answer. I agree 100% no. And that's something that's important to me. With any fund that I've ever been a part of, there is always a participation where there is skin in the game from the gps. And so we definitely will have skin in the game on that front of it. And I think that's important to say that all people are in the same ship, so the same water that rises, rises all ships at the same time. And that we all have skin in the game, but we also all participate and wet our beaks at the same rate. And so that way people, our goals and interest as operators are aligned with the brand's interest, are also aligned with the investors interest, where we all have the same goal and are heading towards the same, same direction as we go forward.

One of the other questions here, Ryan, is what are some of the operations that we would take off the shoulders of the existing owner? And I like that question the way it's phrased. I think that's going to be a good insight into how the fund operates. What are some of the operations we've taken off the shoulders of the existing owner?

So they're going to be different every time. But some of the ones we can take off always books, always sleepless nights, and then some of the other optional, the options, packages, Amazon influencers, audience monetization, going out and finding team. Now, does this mean that we're going to be doing this work for them? No. Does it mean that we have the resources, the knowledge and the network to be able to make that easier or to take it off their plate? Yes. And so we'll be able to have a custom package for each person. The most important ones though are the brain space of the entrepreneur to be able to go spearhead amazing products and delivery for the customer. Because that's what we all know is what determines if a business is valuable or not. And so if you've ever run a business, you know that the majority of your brain power goes to is there enough money in the bank for me to be able to run my systems and processes. Do I have a clear plan to be able to pick and serve an audience with amazing products? We answer those two questions first by providing capital, infrastructure and advice and all of the other extra accoutrements like Amazon pay per click and working with influencers. And the technical side of things can all come from our network and the relationships that we have. Will all of them need it? No. But the primary thing is to liberate that entrepreneur, to be able to cast and lead a vision to build a valuable company.

Awesome. So one other one is one of the primary risks that a lot of people think of when they think of E commerce is platform risk. So if your distribution channel is primarily Amazon, for example, of course algorithms can change, they can delist you, they can suspend your account. There's a variety of things that happen there. What are some of the ways that we mitigate platform risk? What is the approach to that? Let's discuss that a little bit.

By not building Amazon based businesses.

That's simple and I think that's part of the whole value that's created here is when we go work with a lot of these businesses, typically when you're at a million dollar valuation, these brands may have one really good vertical or two really good verticals of things that they do really, really well. But there's a lot of the infrastructure that needs to have framework built out towards it. And so one of the things that I think that we can do in building our valuation app is if we can go in and help them diversify sales channels and say, okay, maybe you're strong in one area. So like for example, maybe you're very strong on Shopify, but your direct to consumer, your Amazon is lacking. If we have the ability to go in and help build each of those channels up using the resources of Sam, we use your brand to launch products to build this infrastructure up. When we go, not only will we be more profitable as we operate, but when we go to exit, that's going to increase our exit multiple as well as we go forward in the future. And so that's a big key piece behind that as well. So as far as mitigating that risk, the way to mitigate that risk is of course not to concentrate is to diversify across different sales channels and platforms, which I think is more or less what you said there, 100%.

Last couple questions here. Let's see here.

So this is one here. So one question which I like here, it says what amount of dedicated times will the Companies that are investments get from Ryan, Sam and team besides board meetings, and then are they naturally going to be a part of the backroom? So that's an interesting question. Go ahead, Ron. What are your thoughts on that?

The short answer is yes. The short answer is if we're funding a company, they'll be in the back room.

Asterisks. That is subject to change because we might discover that a different structure is better for the entrepreneur. So the question is, how do we ensure the entrepreneur has the advice and the resources that they need? We might find that being a part of the backroom isn't the best way to do that. We may find, like for example, and forgive me, this is. I'm now in idealand here. We may find that it is more valuable to create a separate group just for the companies that we fund and the advisors and the investors, and use that as its own group that is self sustaining, fly them in and work with them directly as to not have. To not have conversations that are unrelated to one another happening. And so the. So the short first answer is, yes, we're gonna put everyone in the back room so that we have those resources available. The long answer is we're not 100% sure that that's the best way to serve them. And there might be better ways to serve them, and we'll cross that bridge as we. As we figure that out.

Perfect. No, that's great. I think that that is the majority of the questions that we have listed out here. Is there anybody else? Before we wrap up here, anything else that anybody else wants to ask?

There's a couple things. First of all, the quiet person on the call I need to brag on, and that's Inez Manziano. She is my right hand. She is my chief of staff. We have two rules@capitalism.com they are always do your best and don't fuck with Inez. Those are our two rules. She's a rock star, she's a badass, and she makes me look great. And so she is also involved in the operations inside the fund, and she does way more than she will take credit for in terms of ensuring that things go smoothly and that the entrepreneurs who are in our pipeline are served and treated well. And so it is not just Sam and myself that are a part of this. My entire team.

Has an influence on the entrepreneurs that are here. When Chris does a video on one of our entrepreneurs and he does it really well, it has the potential to grow that business. It looks good because it's on capitalism.com and on our platform. But it makes the entrepreneur look really good and open up new opportunities for them too. Our project manager, Teresa, is a rock star. We have our podcast, our blog, and our YouTube channel, all which perform well and can give exposure to those entrepreneurs. So it is not just Sam and myself that are a part of this. There's a lot that happens behind the scenes. I almost say that there's a third owner and it's capitalism.com, the team, the assets and the resources that are there. And so there is this silent partner behind the scenes that is also involved in that and that there are risks associated with that and there are benefits associated with that. And that should factor into the analysis as well. Because if capitalism.com says and does something stupid, if we get sued by the Bernie Sanders Political Action Committee.

If there is trouble at the business that can influence whether or not the fund has the deal flow that it needs in order to perform, and there's advantages to that too. It means there's more exposure, it means that there's better deal flow. It means that there's more of a network of advisors will come to the table to back these businesses. So I just want you to also fully understand that it is not just Sam and myself. There are other people who are involved and there is a company involved in terms of the operations that will ultimately influence these businesses. Of course, the goal is to make capitalism stories, is to have entrepreneurs that you highlight, that you celebrate, that are the representatives of capitalism. You have investors who help fund them, and you make great success stories that we're all proud to be a part of. That's, of course, the dream. But I want you to know that there's risks associated with Sam, myself and the company as the silent partner. And so I want you to factor that in as you're evaluating this.

A hundred percent. Yeah, that was one of the things that we'll kind of wrap up on is talking a little bit about some of the return modeling and those things. So when we went through this, the first pass we made at modeling out how these things, you know, businesses and things could grow. And what that looked like was, was almost a little bit, because we went based on, on past experience, you know, what these companies have looked like growing from the time of a million dollar valuation to the next two to three years. That growth rate, even with, with attrition, you know, was, Was kind of a ridiculous rate of return. So we kind of like worked our way backwards and we kind of got down to the numbers that I included in the Executive Summary we're basically saying if half the businesses we invest in from day one 50 fail, and then the other half grow at 50% per year on average. So basically day one, half the businesses fail right off the bat, we get nothing out of them, lose all the money that's invested. The other half grows at 50% a year. We still target close to an 18% return on these businesses because of the way that we're able to buy on the front side, because we make a lot of our money on these businesses with our way to buy on the front side, then we grow and build that infrastructure along the way forward. So it's a good attractive model for the return from that side. What I like about this is just.

As you think about our goal is not to lose half.

When we ran the numbers or like if we struck out completely on half of these and then we hit half of what we thought we could do on the remaining half, we still have a very respectable rate of return. Correct.

And this is where so to talk a little bit about this just and give a little bit more of the infrastructure of what this growth plan looks like. Because on these calls we always try to make sure we temper excitement, enthusiasm with making sure we answer all the due diligence type questions and so try to make sure we have that tenor. One thing I want to make sure I'd be remiss if we didn't get to is some of the excitement of what can happen with this. So as we go and invest in these brands like Ryan mentioned, so here his audience and reach is phenomenal. And so the ability to go in and buy into these brands and have the capitalism have an ownership stake in this, so be able to have that influence there. Now what takes place with this capitalism fund ownership is now there's an incentive to grow that brand as quickly as humanly possible. So when we go put this content out, we go like Ryan did and featured a brand on a podcast or something, in addition to the brands already in place growth, they are able to benefit from that leverage, that bump that happens from being exposed that audience. So we kind of have a secret sauceness mix. We're able to buy, able to instantly provide growth to the business because of just the reach there, all these strategic connections that's in place to go in and say we're going to take this brand, we're going to go plug it into these other strategic partnerships and other strategic audience relationships to go grow and accelerate there. That whole feeder system and model is what allows us to have A high degree of likelihood of taking an already successful brand that's proven itself to a million dollars and growing it rapidly, then plugging them into the infrastructure where we keep accounting on track, we get them connected to a broker where we make sure we know as they're building, they're building with an exit in mind, we're able to help take things off the brand owner's plate so they can stay in their zone of genius and be able to grow the brands as rapidly as possible. These are all part of the things that come in play where I believe that our likelihood of growing and building these brands is very, very solid. When we underwrite and do due diligence, we're looking at rule number one. As Ryan likes to say, it's rule number one of Warren Buffett's rule of investment is not to lose money. So we look at every deal in that light of saying, are we able to put capital into this and see how our capital is going to come back out to it? So as we go and do this evaluation, by being strict with our due diligence and then having this feeder system and model to really throw infrastructure onto a business and then be able to build it quickly with capitalization behind it, gives us a really high degree of likelihood of succeeding as we go forward at this.

And Sam, to piggyback on that, there's also just the question of if the company does lose money, are you happy taking the business over? Because you do. One of the risks is the risk of the entrepreneur. Someone who has built a million dollar business does not make them an amazing entrepreneur. They might be one, but that does not mean they are one. And so if they don't perform, if they have a death in the family, if they cannot perform to the expectations that we think they're going to have, there's also the question of, okay, we're now going to be a minority owner in this, which puts us in one of the first positions of taking over the rest of the business. And are we happy with that or are we betting on this being like Bitcoin, where we just hope the valuation is going to go up and that's not the type of business that we want to be in. And so there's that question of in the event of this not going how we thought, do we like these assets? And once again, that has its benefits and has its risks as well.

Awesome. Very good. I think we can wrap up on that. Unless there's anything else, Ryan, if there's anything else you want to add in, anybody else in the audience wants to add a question and anything else we want to wrap up on there.

I had a really good one and it'll come back to me in a minute. So I'll turn it over to those who are hanging out with us if they want to wrap at all.

If anybody wants to submit any questions, you're welcome to. I think we've covered the great majority of it because this is something that I know we've gone through a lot of different. You know, we've bounced around quite a bit here, but really this is a unique opportunity because one of the challenges in today's marketplace is finding the deal flow. We've solved that with the fact that Ryan has a significant audience who not only it's created a micro shark tank within the capitalism community where there is a. There are entrepreneurs who want to work with and then create a strategic partnership. So they're looking to get that deal. So we get pick of the litter. Those deals that come through, especially for fund number one, we get to really be choosy and cherry pick the ideal deals that come through here along the way. So we're going to cherry pick deals that we say we have a high degree of likelihood of these deals having success going forward. We see a vision for an entrepreneur. We want to partner with a brand that we believe we can grow. And we say if we pair our resources and infrastructure with this brand, we see how it can grow. We, we then bring in either fund capital or outside capital to go throw gas in that fire and really help it grow quickly. We're just going to accelerate the process. We make sure we find proven entrepreneurs, proven brands. We build the infrastructure, help them diversify their sales channels and build that out. And then we accelerate that as quickly as possible once we have a proven model and we scale that rapidly. Because unlike the entrepreneur who's doing this for the first time, we have the experience level of having done this before. So when we see that that's kind of one of the things that we always prepare for is we want to be prepared for what opportunity is there. And so by building this structure here, when we have a brand where we see opportunity, we help them build the infrastructure, we get a proven model, and then we have the capitalization to accelerate and take over a market in ways that other brands aren't going to be able to compete with. What that's going to do is we're going to buy attractively, we're going to add value on scale in a way that's very efficient and effective and Then when we go to exit this company down the road, when we go to exit, we're going to have all the tools that exit because we've again been down this road before. We have relationships with brokers, we have relationships with buyers. Additionally, one of the other leverage points is we have relationships with other sellers. So Ryan has got a significant reach here. So when he goes out, when we go out to sell these brands within the fund, there may be three or four other brands that are in the audience who say we're in the same process of selling. We may be able to bundle and get higher multiples. We've got a lot of different ways where we have extra levers we can pull to increase profitability returns in addition to just the good business management along the way. So that's kind of some of the thoughts behind us from start to finish soup to nuts is buy attractively, rehab that, add value on scale efficiently and then look to exit for the max multiple possible being exit minded in place.

Sam, is it worth talking about risks and disclosures or is that more of a just addressing concerns thing?

If you have any you want to go over, if there's something that came to your mind, we can cover them now. Otherwise we can.

I mean, just like in the spirit of full transparency, I mean, it's easy, it's really easy for me to get excited about something that I'm confident in.

Right.

So the fact is, at the end of the day, you're really betting on Sam and myself and then logically justifying it with the model that we have. So I think it's only fair to also talk about where this could go terribly wrong. There's economic risk. There's this thing called Covid. We have no idea what's going to happen and we can't predict it. And so we have our reasons for why we think we're in good shape and what might happen. We have things that we can make assumptions about, but we have no idea. There's liquidity risk. You're gonna have your money tied up for a while because we're going for a long term play. We are not buying dividends.

On the stock market. I love buying dividends, but obviously the returns are lower because you have high liquidity. We're the opposite. So we're gonna have much lower liquidity and hopefully a lot higher upside. We have entrepreneur risk like we talked about, backing an entrepreneur who we're going to stack the deck for them. But you might have somebody who is not qualified to run a $10 million business. And so they plateau at 4. And we're going to have to decide what to do about that if and when that happens. You have operator risk in the sense of. Sam and I have never worked together in this capacity before. We've done other stuff together, but this is the first time that we're doing this. Sam has a lot of experience running different funds. He has multiple funds. It's why I wanted to partner with him. And I'm the crazy entrepreneur who has deal flow. And so you have risk of the people that you're doing business with. And all those things come with positives and negatives. You have PR risk because I own capitalism.com and some people don't like that. And sometimes I say things off the cuff on the Internet. I don't know if you've ever heard me do that. Sometimes that happens, and that's not going to stop. So you have those types of risks. And all those things have an upside, too, because the economy is uncertain. We're going to be able to have attractive valuations of these companies, and we're going to be the calm, stable voice that grows these companies in chaotic times. You have new entrepreneurs, which means you have the highest upside. You have less liquidity, which Tim Ferriss says is one of the secrets to why he's been successful, because he hasn't had the temptation to look at or touch things. So that has an upside, too. Sam and I are new, fresh partnerships. And so to overcome that, we put together a structure that is more than fair and very simple to understand and. And gives a lot of benefits to investors. I say things off the cuff and capitalism.com is polarizing, which means that the people who work with us are raving fans of us and want to do business with us. And the people that we attract are bought into the mission and the message of what we're trying to do. So there are plenty of risks associated with it. Just like if you were to. I mean, hell, right now there's a risk of putting it in the bank because we're printing trillions of dollars and we're going to have inflation. So there's risks to everything. We have ours, too. And there's positives to that risk alongside the downside.

I think that's a great place to wrap up right there, Ryan. That was excellent, guys. For those of you that joined, I really appreciate you joining here today. Looking forward to going forward on this. As far as next steps, what will happen next? So if you have an interest in this, many of you may have already received or downloaded the executive summary. The next step, step after this would be as once you reviewed that as we can forward you over disclosure documents that go through in detail all of the operations of how the fund works. So disclosure documents go from soup to nuts. Every aspect and every detailed question you may ask and wonder about a fund. And so those are all covered there. Of course we're available for answering additional questions provided you like what you see and you say I have an interest in investing in this. The next steps is to submit a investor agreement or subscription agreement. What you're doing is you're saying I want to invest X number of dollars of capital into the fund. You're then going to go through a process to verify that you are an accredited investor, which you can look at those terms on the you can just Google accredited investor. You go to find those terms and you'll be able to see if you qualify for that. We'll send you through a third party service to verify that you qualify to invest in this fund because we are running it for accredited investors only going forward. So that being said, if you do qualify, qualify, once that's completed, you'll be able to forward funds. We'll get you locked in and then we plan to start this operation here. I believe we'll probably make our first investment somewhere in the time frame, hopefully of June is what our time frame is. Behind that we have a cutoff and deadline for subscription agreements of middle of May and then we'll be going forward from there. So that's the next steps is if you you want to proceed forward with this, we can provide you with disclosure agreements as well as the subscription agreements going forward from there. So that's the next steps will be following up with different people here as you watch this. If you have questions, feel free to reach out to me. Happy to spend time individually going through with you because one thing I know is important to me from my background is being able to make sure that anybody who invests in this fund understands the timeframes, the risks, the possibilities, all those things. I believe this is a phenomenal investment. I wouldn't be involved with it if I wasn't excited and didn't believe there's a lot of upside and opportunity. But I also want to make sure that the investment is right for you. So as we build out your wealth and build out your model, making sure that this is the right time for you to go forward. So anyhow, that being said, that's what we'll wrap up here for today. Looking forward to getting to visit with some of you on an individual basis. And for those that are watching this, thanks for joining on.

Thanks, guys. It's great to see you. Talk to you soon.