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25 min read

Rocket Your Dollar Ep.12: Angel Investing with a Self-Directed Account

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Imagine your ROI if you had invested early in Apple or Starbucks...now imagine that ROI in a tax-advantaged account. That's the appeal of angel investing with a Self-Directed account. Chris Palmisano, COO/CRO and board member at Rocket Dollar, shares his passion for angel investing, as well as his strategy to investing in startups.

 

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Transcription

Thomas: Today, I'm excited to have Chris Palmisano on the podcast. I was fortunate enough to meet Chris while I was pretty fresh out of college, and even more fortunate enough to have him mentor me at the beginning of my career when I was at my first company out of college. And even better, though, today I'm glad to be able to continue calling him a mentor and colleague. Chris joined Rocket Dollar shortly after it was founded. He actually introduced Henry and I. Chris is our chief operating officer, and really, without him, the day-to-day operations of Rocket Dollar would not be what they are. So Chris, thanks for taking a little bit of time out of your day and hanging out with us and talking about self-directed investing and your experience as an angel. What brought you to Austin?

Chris: That's a good story. I had gone back to school after I had gotten out of the military. I was going to school at UNC in North Carolina and while I was there, I hatched this idea that ... I had this idea in my head that I was going to make a career shift and I was going to land in technology in the back of some technology company somewhere. I ended up going to a recruiting event that Google had sponsored, and there was a bunch of ex-military officers there that were working at Google. I thought, "Well if these guys can get a job there, why can't I?" Eventually, I connected with a few of them. One thing led to another. I had applied online. A few weeks later, I got an email about an interview. One thing led to another, I got a job offer, and I had accepted an offer to move to California.

I was about a couple weeks away from making the drive and moving out to California when I got a call, or an email, from the director I was going to report to, and he asked if there's any chance I'd consider coming to Austin, Texas instead. They were afraid to ask me. They're like, "Oh, this guy had just accepted an offer to move to headquarters. There's no way he'll want to come to Texas." But one of the managers had said, "Why not ask?" and so they did, and I said, "Yeah, I'd come here and check it out." So I came down here on a flight. Amy, my wife, came down with me. We looked ... We met the team. We saw the office. We drove around the city a little bit. I'd only been here once before, and I'm like, "Definitely, this is it. We're coming here." So we decided to come here. We accepted the offer for Austin. We came to Austin instead. And I guess that's really it. I mean, we've been here since then. That was eight years ago, and I don't really have any intent on leaving.

Thomas: Yeah, how big was the Google team in Austin when you moved here?

Chris: They had had this kind of a long road of ups and downs, Google's teams in Austin. At the time, there was probably 60 or 65ish people, and it was growing actually quite a bit. They had a bunch of different business units that had teams here. It wasn't all one big concerted or organized group. And then one thing led to another and a new team would come in, and then a few months later they'd move out. And then it'd start all over again. We changed offices three times. Now they're in a big building downtown. Austin has become actually a much bigger location for them. They're growing massively, from what I understand, in Austin, Chicago, and a couple of other outside the Bay Area and outside New York City.

Thomas: Yeah, now they have 60 floors of people instead of 60 people.

Chris: Right, yeah. Well, at one point we withered down to about 30, I think, if I'm not mistaken. And we were all like, "This is getting a little concerning." And then eventually their head of people ops decided to do some HR, staffing, back office-type functions here in Austin. And all it really takes is one executive sponsor to adopt a place and then before long word gets out that it's a good place to recruit and keep people and retain people. Employees in Austin, even though we had a small number, we were always the office that had the highest employee satisfaction.

Thomas: Really?

Chris: Yeah, in the group that I was in. Everybody loves it here. I mean, how can ... It's almost like how could you not. It took a matter of time, but eventually they figured it out. Now it looks like they're just growing like gangbusters here in Austin. Same thing with Facebook. Facebook just moved into that office on Third Street a couple days ago, and they're going to put thousands of people here.
Thomas: Well, and the new Oracle campus is a couple miles away and Apple ...
Chris: The new Oracle campus ... This is still Apple's second largest location, so yeah, it's good for us.

Thomas: Yeah, it's definitely the place to be. What was your role at Google, or what roles did you have at Google?

Chris: I managed an operations team for a little while. That was back when some of these enterprise or B2B products were relatively new. We were selling and competing with Microsoft Office, I don't know, which was a bit of a challenge, but it's an interesting business unit. And that's now a huge business for Google. And then later moved into a sales role and then the sales leadership role on the cloud team, which was then going head to head with, and still is, with of course AWS and Microsoft Azure, Oracle, IBM to some extent. So, those were fun jobs and I loved them. But the same time, actually, you know, I've always had interest in other things. One thing led to another and eventually I made the decision to go native, as they say, and join an Austin company.

Thomas: Yeah, I think that happens a lot. A lot of people move here for jobs with some of these big huge tech companies, and then they're drawn away by either a startup or their own startup or something else. Especially here in Capital Factory where we're sitting, it seems like there's a lot of ex-Googlers and a lot of ex-Facebook folks running around with their own startups and being successful.

Chris: Sure, yeah. That's an important part of it. If you want to call it an ecosystem, you have to have each part of the system. And so, big companies are a nice draw. They get people here. They pay them well while they're here. They can buy a house. They can get established. They can build a great skillset. They can learn a lot, build a lot of connections. And then, I mean, if they're smart, they keep their ear to the ground though on what's happening locally, and they start to meet people locally, even if their job doesn't really require to do that. And then one thing leads to another and you find yourself in a position to where you can afford or have the willingness at least, if not both, to take the leap and go do something on your own or join an early-stage company or whatever.

Thomas: Yeah, absolutely. Speaking about keeping your ear to the ground, you and I met because you were one of the first angels in a company that I was working at. How did you sort of end up becoming and angel investor? Tell us a little bit about some of what you've seen, the good, the bad, and what you look for.

Chris: Before working at Google, I spent a couple years in a innovation group in a big healthcare company. I probably looked at a couple hundred concepts or small businesses or companies that were doing interesting things in healthcare to see if it made sense from a partnership standpoint with the large company that I was working for, which was Humana at the time. So you start learning about how companies get started, how capital formation happens, how companies get funded, where these ideas come from, basically how do startups work, and how do you start a startup, which was an interesting exercise, because I hadn't never really don't that before, didn't have any business owners or entrepreneurs in the family. My parents weren't like business people or execs or anything like that. So this was a whole new world for me to learn about.

And then, really where this kind of took off for me, or I got deeply interested in it was when I was working at Google, because you'll ... I mean, Google buys companies all the time, and then everybody has either been at a startup or worked at a startup or wants to go to a startup. Even for a company that was already big at the time, of course, now they're much larger, there were all kinds of entrepreneurial success stories there. It had a very entrepreneurial culture even for a big company. So then you just find yourself immersed or surrounded by people that are also interested in this.

Then I started reading books about it and started following threads and getting on message boards and groups where people talk about stuff like this. And now, thanks to ... I mean, thanks to the internet and things like podcasting and blogging, almost everything you need to know is written down some place. And so, if you consume all of that content, whether it's Calacanis' stuff or Mark Suster's stuff, or even the First Round Review for First Round Capital, there's some amazing resources out there where you can really start to learn how investors think, how entrepreneurs think, how does the interplay between the two happen.

I also did go to a seminar that was put on locally here by CTAN, or the Central Texas Angel Network, where they talked about angel investing. This is probably right around the time Shark Tank started becoming a thing, too. Shark Tank is basically like an intro to angel investing for the entire country. Occasionally you'll see them put up a definition, like, "What is a convertible note?"

This information is now kind of everywhere. So, I got really, really interested in it that way. And then I said, "You know what, my financial situation is one where we can afford to take a little risk, and so that's the next step." And then you start kind of wading into the space, and I think a lot of people do it wrong. Also, I've met a lot of people who, for whatever reason, they get liquid or they have money or they made money some place, and then they decide they're going to get into angel investing because they've heard the survivor bias, the success stories, the, "I put 25 grand into Uber, and now I've got 180 million." And for whatever reason, everybody thinks that that's going to happen.

Thomas: That's going to happen, yeah, that's not normal.

Chris: No, that's outrageously far from the truth. So, I mean, that is like a once-in-a-generation kind of company.

Thomas: Sure.

Chris: Now, for whatever reason, some of the people that were in that company have been able to do the same thing with lots of others. That's probably a different conversation. So anyways, you'll see people jump into angel investing and then they'll write three, four, five, six checks of a large amount of money, 50K, 100K, whatever, 200K. And then they of course, most of the time, they all go to zero. And they say, "Oh you know what? I'm a terrible angel investor. I can't angel invest. This isn't for me."

Thomas: I'm going back to my mutual fund.

Chris: Yeah, I'm good. Or, real estate.

Thomas: Or real estate, yeah, sure.

Chris: Yeah, which is what people tend to do if they're going to do alts. It's either you go into investing in companies or businesses or real estate. And then because this is Texas, we have a lot of real estate money here. A lot of people have made money in real estate, and particularly in Austin before tech.

They end up saying, "I'm a terrible angel investor," and they stop doing it. I don't think that's the right way to go at all. I think the right way to go is to go in with a much, much smaller check. Maybe you can find deals where you can participate for 10,000 or ... You know, the average check is typically a $25,000 check, in which case maybe you can then afford to write 12 or 15 or even 20 checks. And then what the data from CTAN and what the data from some of the now research that's been done on startups in angel investing, in particular, will show you is that one deal you're likely to lose your money on. Seven deals or eight deals, you're starting to build a portfolio, and you're liable to get a return or two. And then can you get out towards 20, 25, 30 deals, now you've got actually a statistical probability of being more successful than if you were to just write one or two or even just a couple of checks.

If anything, it's another form of portfolio theory. You've got to start to build a portfolio, and so some people jump in and they write checks that are too big, too fast, and then they go up in smoke, and then they're like, "Oh, I'm no good at this." So my takeaway for people is to just think about it as where can you get started by writing smaller checks, and then spread your risk out across more of a portfolio, and then see how those companies perform. I

n some cases, you might have a pro rata, so the ability to put more money in and to participate in additional capital raises later on. And then your winners, or the companies that are performing well, are the ones where you want to put more money in, or at least consider putting more money in.

There's some strategy to how portfolios are built, and so that's one of the things that I think people do wrong. I actually learned that pretty early on, so now I do like to invest, but I don't like to write huge checks. I want to write checks around $25,000, and then if the company does well, and there's another subsequent funding round, then yeah, I'll look to do a follow-on round. And then now with Rocket Dollar and with what we've been able to do here, I like to do some of those follow-on rounds out of a retirement account because I have some information now. I now know that the company's doing better, that they've hit some milestones, and that they're likely headed for some sort of outcome, and then in that case, there's all kinds of tax benefits to investing out of a retirement account, and I'm willing to take a little bit of risk, whereas some other people might not. That's critical here, too, is that people need to understand their own risk tolerance, what can they afford to do, what risk can they afford to take.

Thomas: Yeah, I like the way Tim Ferriss talks about it, that he basically took what he was going to spend on an MBA and decided that he was going to become an angel investor, and he talks about the same thing, writing too many checks and getting excited, and then how he took a step back and then started writing smaller checks. That was sort of his angel investing journey, which he's now stopped because I guess he experiments and then stops.

But, he got into some pretty impressive ones, so I guess he did well, but-

Chris: Well yeah, for some people, too, once they make enough money, like I don't have a problem with that. You have a target or a goal in your head and you hit the goal and then you move on to do something else. If this gets you to your goal faster, great.

Thomas: Yeah. Do you think that writing smaller checks speeds up your decision-making process, or do you still go through ... Like, what does your due diligence look like when you're evaluating an angel investment?

Chris: It depends really on who the person is or who the founder is and then what the story is. But there's some minimum that you want to look into on each deal. So who is the founder, and is there a founding team? I've got some rules, like if it's a tech-based company, I don't want a single founder unless the single founder is technical. I meet lots of companies, especially here, that are two business people and want to start a tech company. I'm like, "Great, come back when you have a technical founder." Because it's tech and things are constantly changing and constantly innovating, you need a technical person on board from day one. And every vendor in the world, if you are able to raise money, is going to see you coming a mile away, and so then ... That's just a recipe that doesn't always work out well, so I'd like to see a technical founder if it's a technical company.

Then, from there, so beyond the founding team, there's of course the idea, what's the business, have they thought through this, and are they capitalizing on some major trend. And then you're also looking for a little bit of self awareness because if you're raising angel capital, there's the possibility that not every business becomes a behemoth or becomes a massive company. If you're going to raise angel capital, that might be okay as long as you're telling your angels, "Look, I don't think this is going to be a massive business. Here's how big I think I can get it, and I only need one round of funding from angels." That might look more like you're funding a small business than a tech startup that you're hoping has this massive growth story, which can also be okay. I've done a couple of deals like there where I believe in the founder, I believe in the products, and I believe in their vision, but they know what they're doing, and this isn't going to be a venture growth curve. They're raising capital to get a business off the ground and then their intent is to buy the investors out or to pay them back in some way or sell the company within a reasonably short time frame. Different story, but that's somebody who's thought through that, and so that's something I can buy into.

If they're coming in, talking a massive growth play, and if they want to go on and raise venture capital, then we start to look at some other things like is this a business that can grow very rapidly, that can scale very rapidly. Can this team adapt? Can they evolve fast enough and pivot fast enough? Are they in a place where they can recruit the talent that the need? There's a really good checklist from the National Venture Capital Association, so I tend to refer to that. I just keep a copy of it on my computer or in Drive, and then I'll pull it up and look at it before I do any deal. And then, I also like the model of working, or having relationships with venture capital firms that allow co-investing, which is an interesting opportunity because then you're working with some professionals, and you're getting the benefit of their platform and their ability to do diligence also,

Thomas: And their deal flow, which is usually higher than what you're going to get as an individual.

Chris: Yeah, totally. And their deal flow, yeah, totally. I mean, most angel, if you're going to be a full-time angel investor, if this is all you're going to do, yeah, you need to be looking at deals every day.
Thomas: So, if you want to be a full-time angel, would you suggest just becoming a LP in like a seed-stage fund, or even maybe trying to be a GP at a seed-stage fund, or would you do it as an individual?
Yeah, I think those are two different things. If you want to be a full-time individual angel, then yeah, you've got to be looking at deals, and you're doing your own deals. If you have relationships that you can bring to the table where deal flow is going to come in as a result of those relationships, I think you need to do that, too, so that you're seeing as many deals as you possibly can. Many of the seed-stage funds were started by ... or the GPs are individuals who started out as angels and then maybe they expanded from being an angel investor to being a syndicate lead or ran their own syndicate. And then once you start running a syndicate, eventually kind of the next step in that progression is to maybe raise a fund and start managing the fund. And there's something interesting that I want people to understand, of the difference between the math for an angel investor or a syndicate versus the math for somebody that's running a fund.

Chris: So, if you're an angel investor and you do 10 deals on your own, and nine deals go to crap and one of them goes to glory and makes you a fortune, you're going to keep all of the money that has flown back to you from that one company that did really, really well. Same thing with a syndicate. If you put a syndicate together, and now a syndicate is a group of investors led by usually one investor and then the syndicate lead will charge some sort of fee or a carried interest to then go and complete the transaction or do the deal, the syndicate lead ... Let's say you syndicate 10 deals, and you've probably got a different group of investors in each deal, you might have some that participate in several, but the syndicate, let's say nine of those deals just go to zero, but one of them really, really takes off and delivers an enormous return, again as the syndicate lead, you're probably going to keep 20% of the profits that have come back from the entire ... or the returns that have come back from the deal. And so, you're going to get your payday.

If you're running a fund, there's a whole different set of math that goes into the fund. You've got to be able to return the fund, meaning that your investors have to get their money back, and then some sort of return on their money, before the fund manager gets paid.

That's a very different story. I mean, that's why managing a fund is so much more difficult and really requires a professional investor. It's not an easy transition to make.
Thomas: Yeah. No, that makes sense, yeah. And for most people, they might not want to run. If you're already ready to be a full-time angel investor, why would you create another job for yourself if you don't have to? I guess everybody should decide that for themselves.

What ends up happening is, at least I've had people tell me that this is what happens. I've never done this. I've never run a fund. But, you build a network through the syndicate, and then eventually there are professional, or like professional money, or money managers, family offices, maybe pension funds, et cetera, that have an obligation to write much larger checks. They've got more money to put to work. They want consistency. And if people think you're a good manager, some of them might be willing to take the risk in seeding you to get a fund off the ground. And so, it's usually the demand for you and your skill as a manager that leads you to having the opportunity to run a fund.

Thomas: Yeah, that makes sense. Do you have any interest in ever running a fund?

Chris: You know, I ... I don't know. If things go well ... Like, I've got a bunch of stuff on my plate right now, so sometimes it's-

Thomas: Yeah, no, not today, but in the future.

Chris: Sometimes it's hard to see a year down the road or two years down the road. But yeah, I mean, I think I would like to run a fund, assuming that things go well with some of my own angel investments, and then some of the companies that I'm involved in as an operator. Should that all work out well, yeah, then if that's ... If the opportunity presents itself to run a fund, a seed fund or something like that, then yeah, I would very seriously entertain that.

Thomas: Yeah, no, that's cool. I think that would be fun. Let's pivot a little bit and talk about how you got into the self-directed space. The first time you and I ever sat down to talk about solo 401(k)s, you had one.

So tell me about how you got into your first solo 401(k), how you learned about them, and then we'll just sort of talk about how we got to today.

Chris: Yeah, well so, I mentioned that healthcare company that I used to work for. When I was working there, I was an employee. It was my first job out of the military, and I had, just like you would expect from most employees that work in a big company, I had a 401(k). We had a high-deductible health plan, so I had an HSA back then. Very early on we had HSAs. And then the company had stock, and if you got an award, you could get stock options. There was a number of ways to save money or to basically build wealth.

My wife at the time was trying to get her first sole proprietorship or small business off the ground. She's in the fitness business. And I thought, well, I can put ... At the time I think it was $17,000 into a 401(k). What does she have? What do you have if you're self employed?

I started looking around, and the answer is, there's not a lot of options. There was the simple IRA. There was the SEP, and that's really about it. I thought, "Well, couldn't someone have a 401(k)? Isn't there such a thing as a 401(k)?" And then you start looking into the fees for these things, and a lot of them are just very littered with fees everywhere. So, I made enough calls and did enough internet searching that eventually I came across the concept of a, at the time, it was called a Uni-k. So, the Uni-k, individual 401(k), solo 401(k), they all mean the same thing.

We found a lawyer who introduced us to that concept and then put me in touch with a company actually out of San Francisco. I think they're still up and running. I can't remember what they're called today. But they sold me a plan document. It was actually a super simplified plan document. It was a very basic solo-k that allowed you to just do pretax contributions. And then you had to take the plan document somewhere and open a bank account to go along with it. And so, like, "Oh." So, eventually we figured it out. We put all the pieces together, and so we opened her a solo 401(k) and I became the plan administrator.

Thomas: How many hours did you spend?

Chris: I don't know. I don't know how much time we put into that, figuring it out. I mean, that's why there's such an opportunity here for us, right.

Thomas: Sure, that's where I'm going.

Chris: Because that process was so hard.

Thomas: Yeah.

Chris: It was awful.

Thomas: Yeah.

Chris: Eventually we figured it out. We made some mistakes along the way, but now we know what we're doing, of course. So that was how we got started with it. And then and interesting thing happened when I was working at Google. And so anyways, we've had that account for her for the last however many years. And then I started working at Google, and Google had one of those 401(k) plans that, in 2014, when the IRS made it a feature that you can do these in-plan conversions or these Roth conversions inside your 401(k), their plan was set up for that. And it was a plan that was at Vanguard. I already had an account at Vanguard, plus the company 401(k) plan was over there. It was also where they held the differed comp plan.

Vanguard is a behemoth in the retirement space, and they made that process really easy, and so I started taking advantage of that. For anyone listening, what this really is, it's a way for you to put additional after-tax compensation into another bucket inside your 401(k) called after tax, and then at some point during the year, you can convert that, do an in-plan conversion, and that money all lands in a Roth bucket. Or you can send it out to a Roth IRA, which is pretty cool.

I'd had a bunch of experience on the 401(k) side doing kind of these exotic 401(k) things, and then we bumped into each other, and you were also looking or doing solo 401(k)s, which was cool. So that's kind of how I got started, and then bumping into you again is how partly what led to this all taking place and Rocket Dollar getting started.

Thomas: Yeah, it was pretty fast from that coffee meeting we had to Rocket Dollar getting started. You know, you obviously were the founding board member of Rocket Dollar, and pretty quickly became our COO.

What was really the thing that got you, that you were like, "This is what I want to pursue. This is what I'm passionate about, and I want to work on this idea full time"?

Chris: Yeah, so I think everybody wants to do ... Most of us these days want to do something that's meaningful and impactful and good for the career at the same time. You're looking for that magical overlap of all those circles.

I realized that this was an opportunity to do that. I love the idea of ... I mean, retiring and building wealth actually isn't that hard. You have to know what to do, and then you have to make it really easy to do it. We basically automated the retirement contributions for ourselves, one of which was in a solo-k years ago, and it's made our lives 10 times easier. We're in a position now in life where we actually can afford to go ... I can go join an early-stage company and not worry about whether or not it's going to be the most highly-compensated job I've ever had. So, I'm a big believer in it because we did it and it works.

Then, there is, you could call it, a looming retirement crisis in America, in addition to the rise of the sole proprietor. There were 20 million Schedule Cs filed last year. I have to look into that number, but I think that's the number that I read. It's the fastest growing work demographic in America. So people who have a side business, a side hustle, or own their own business, so basically everybody's becoming an entrepreneur.

Whether you like it or not, everybody's becoming an entrepreneur. And then this is the product that helps an entrepreneur save for retirement and then provides them with some tools along the way. You can take a loan from it. When you do take a loan from it, you're just paying yourself back. You're not restricted in terms of what you can invest in. You can invest in anything you want. And if your business brings you some expertise in a certain business or industry or real estate, crypto, whatever, you can go and invest in those things. So now you can invest in what you know.

Anyways, I saw Rocket Dollar as a really cool opportunity, one, to do something here in Austin, two, to do it with people that I know and that I like, and there, it was a really cool mission, something that I think solves a real, real problem. And this is kind of the niche of the financial services industry, so it's been under invested in from a technology standpoint, so this is also a cool tech play. So there was a lot of interesting things happening here. And then I also saw an ability to kind of bring the skillset to the table that the company needed. And so, when all those things line up, you owe it to yourself to look into it, opportunistically.

Thomas: Yeah, no, and we're lucky that everything did line up. So, talking a little bit about the solo 401(k) and obviously what what we're trying to do with it is really make it plug and play, very simple. You talked about automating savings and automating contributions. How difficult was automating contributions and setting it all up with the original plan document and what you couldn't do with it?

Chris: Yeah. Back then, it was really, really hard. And so, we would basically wait until the end of the year and then when you're doing your taxes, you figure out how much are you eligible to contribute and then you just write a check or transfer it in. As we've gotten further along, we've gotten better at it, and so now ... And plus, then the businesses started working, too, so then it was okay to turn on automatic contributions. As long as you know you're going to make above the, this year it's 19,000, if you're self employed, you've got to pay the self-employment tax, so you think 19,000 plus the self-employment tax. And so, as long as I'm going to earn above that, I'm going to be able to max out a 401(k). So then you can just do the math. Even if it's just a few hundred dollars a month, you start putting it away. You know you're going to have enough income to make those contributions at the end of the year, so you can start doing them right away.
Chris: Once you become an S corp, you can run it out of payroll, and so then it is absolutely automated, just like it would be if you were going to work for a big company, like if you went down the street and you were working for Dell or Apple or something.

It was really, really hard back then. It's getting a lot easier now. The kind of features that we're adding, that Rocket Dollar's adding, like the ability to manage the solo-k and see your balance that's in the bank account, those kinds of things, these are huge advantages. It makes life a lot easier. It's what this space always needed, so yeah, it's good.

Thomas: Yeah, it's time.

Chris: And frankly, it's about time. Yeah.

Thomas: Well, that's what we're trying to do. Well, Chris, is there anything else that you want to cover while we're here, while we have the time? Anything that you're working on that you're excited about in this space, that you're looking forward to personally, professionally?

Chris: There's probably a couple, and for people who are new to this, there's a lot of great information out there on how to become an angel investor. I really like Jason Calacanis' book, Angel. There's also a book called Venture Deals written by the team from Foundry Group, Brad Feld and Jason Mendelson. That's a great book. If you're going to start doing deals on your own, you need to understand what kind of documents you're signing. Get yourself a good lawyer. There are lawyers that specialize in startup funding and financing, and know how to work with VC and know how to work with angels. That's also extremely important.

Then today, this is a game that anybody can play. With crowdfunding and Reg CF, which was a part of the regulations that passed in the Tax Cuts and Jobs Act, I'm sorry, the Jobs Act, the first Jobs Act, and then we got some more out of the Tax Cuts and Jobs Act later. This allows anybody to be an angel investor with crowdfunding. Even if you're not an accredited investor, you can still invest in startups using crowdfunding. Now there's a number of websites out there were you can get started, where you can learn about this, and if you can afford it, to take a little bit of risk and add this into your portfolio. People should, of course, be very thoughtful about how much they invest in any particular asset class. But if you take a small piece of your portfolio and get some additional exposure to a different asset class, this high-risk asset class, that can be a good thing in the long run. And again, this should be moderate, and you should have some thoughtfulness that goes into how much you invest in these risky assets. But at the same time, I do think investing should be a little bit fun, too. And if it's an amount that you can afford, that you can afford to lose, or you can stomach if you lose, then great.

But at the same time, we're investing to back great companies and to see them succeed and to make money.

Thomas: Yeah, it's kind of a fun two-sided project, because not only are you hopefully making a return and improving your personal financial outcome, but you're also watching other people build businesses that are either going to do well for the founding team or for the employees or for the community or for whatever, and just accelerates the sort of the evolution of an ecosystem like Austin, which is really fun.

Chris: And then what you're going to learn, too, is priceless. I would say it's been better than an MBA, but in a different way. I mean, MBAs, today, they're very technical programs and you learn a lot of really interesting skills like function by function. But this was, learning ... Or getting involved in early-stage companies and becoming an investor and learning how to evaluate the business and then how to think about the financials, this was something that you couldn't even get in a couple of electives, right?

This is really hands on, and this is also an important part of kind of how our economy works now.

Thomas: Yeah, absolutely. Just a quick side note, we'll like all of these resources that we've talked about in the footnotes of this episode so that everybody can have them, including those books, because I've read a couple of them, and they are fantastic. And if you are considering angel investing in any form, whether it's crowdfunding, whether it's as an angel, whatever, you should probably read them.

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