TRANSCRIPT
slava (00:01.864)
Hello and welcome back to another episode of Smart Humans. I am very excited about today's guest. We have one of the CEOs of one of the largest platforms in equity crowdfunding, Howard Marks. Welcome to the show.
howard (00:15.926)
Thank you, Slava. Happy to be here.
slava (00:18.672)
Absolutely. So we always start with the same question for everybody. How did you personally get into alternative investments? Where did it all start?
howard (00:27.754)
Well, I got very lucky early in my career. I was able to start a company and start earning, you know, decent salary and the ability to sell some stock. And with that, I put some in the stock market and I was not too excited about that investment because it would fluctuate and it would frankly not go up as much. I was hoping. And I think that, you know, that was in the eighties. And
It occurred to me there are other opportunities. And so one of the opportunities I went into is real estate in terms of limited partnerships and other startup investments. Frankly, that was my early career journey where friends were starting companies and I would put some money in their companies. And all of this put together was extremely risky as I look at it today. But at the time, I didn't think about it that way. I thought about it as a.
Decent investment. I didn't think about the exit, how long it would take me to get out. None of that really mattered. What mattered was that I thought these investments had potential. So I made them. And looking back, you know, 30 plus years, these are probably the better investments I made compared to the stock markets and the financial advisors I've been using.
slava (01:49.704)
So today, as part of your net worth, how do you think about alts as part of portfolio allocation? Are you 3% in alts, 30% in alts, 90% in alts? How do you think about that?
howard (02:04.446)
I'm probably 80% in alts. I just don't like, and I'll tell you exactly why. I don't like the stock market for many reasons. The stock market over 10 years typically returns seven to 8%. That's not so bad, but hold on a second. What about the fees? Ah, if you count fees and you start taking out fees.
slava (02:08.177)
Oh wow.
howard (02:32.274)
It really isn't that great. You're probably looking at probably 6%, 5.5%, 6%. Now, we understand that inflation over the last 20, 30 years has been pretty low, you know, in the 2, 3%. So you would argue, well, that's a pretty good investment. And I would say, no, I don't think it's a great investment. I think once you look at the stock market, less the fees and all of the different intermediaries, you're looking at a much lower number.
And that's assuming that they beat the market, which may not be true. A lot of the advisors don't beat the market. So then you're even worse off. So ordinary people did not have the opportunities I had, such as, hey, hey Howard, let's go buy some real estate through a limited partnership. So you have a promoter who would come to you and say, look, put in $100,000 in my partnership. I'll work hard, buy some real estate.
put some debt on it and return 14, 15% a year. And it's not always true, but they had a hurdle. These promoters don't make any money until you make your 8%. That's way better than what the stock market can return, but it's higher, more risk. Why is it more risk? One, it's not liquid. You can't just get out of it instantly. And frankly, you have to have faith in one person, the manager, right, the promoter. So...
It's a different instrument, it's a different product, but I think you probably will find a lot of the people who have a lot of wealth will probably favor alternatives.
slava (04:11.712)
So when you say 80%, do you have a sense if that was like 100% pie, that 80%, how that 100% pie, your 80% is split up across different types of alts? How much of that is real estate? How much of that is your start engine type early investments or other startups versus other types of alternative investments?
howard (04:35.498)
I would say right now for me, it's mostly real estate. I'd say probably two thirds of it is real estate. I like real estate for many reasons. One, the word real estate, the word real comes to in mind that there's something of tangible value. Secondly, it provides income. So you get income, but you also get appreciation. You get two things. A lot of outs only would offer you appreciation. So for example, a trading card.
a painting, you'd get appreciation, but there's virtually no chance of any income coming in. So you get income, you get appreciation, but you get also some other amazing things. One of it is this concept of tax deferment where you can buy a property, invest in it, earn income, get appreciation. And when you want to sell it, you put it into a 1031 escrow account, which means that you pay no taxes on the gain. You wait.
You have about 45 days to identify some new properties, six months to close on them. And then magically all that money you have goes into a new property. And you keep carrying that basis, which is your investment and your gains, with no tax implications. You can't do that with stocks. It's not permitted. Stocks don't have that feature. And you can keep going. And then when you die, you have a step up basis. So that means you've never paid any taxes.
How about that? Now you're not gonna be around to see it, but your heirs will be, it's very efficient. That feature does not exist. The step-up basis exists with stocks, by the way. You will have that basis for people who have an estate, but you don't get the ability to take an investment, get a liquidation event, and then keep the whole amount and not pay taxes on it. So.
The real estate has features that have been designed over years that I think make it very attractive.
slava (06:35.336)
And then how are you setting up that 1031? We haven't spoken a lot about that on this show. Can you just share more about that?
howard (06:41.814)
Yeah, it's a pretty simple thing. It's not very difficult. There are third party escrow companies, they're banks and you contact them and you say, Hey, I'm going to sell a property. Whether it's you, you sell it personally or through your living trust, either one doesn't matter. And they will set up an account. They'll charge you a fee for it. It's usually in a thousand, a couple of thousand dollars. And when you sell the property, let's say a house, you will transfer that money. The escrow.
of the sale will transfer money directly to the 1031. So you don't take the money into your own personal bank account. That money goes to that escrow account. So you go from escrow selling your property to another escrow. And then when you identify a property, let's say you purchase it, that 1031 escrow account will fund the property moving forward. So it really never comes into your own hands. You're not supposed to touch the money.
as you have made the sale. It's still your money. No one's disputing whose money it is. It just goes through a third party process.
slava (07:51.572)
So just to be more specific, let's say you bought a million dollar house, it's now worth a million and a half. So you made a $500,000 gain, you get the million and a half, and the full million and a half goes into the escrow account, is that right? And then for that reason, that gain between the million and million and a half, there's no taxable gain because it's in that escrow account.
howard (08:05.602)
Correct.
howard (08:13.29)
That is correct. So you're not paying any taxes on it whatsoever. As long as you follow the rules, which is to identify a property within the 45 days, and that's not so difficult. You just go pick a dozen properties that you think are interesting, and then you have six months to close on it, which is plenty of time. I've done multiple of those 1031s, and I have to tell you, I think it's great. Most people don't know about it. They don't have that concept in their mind
slava (08:17.693)
Got it.
howard (08:42.402)
there is this ability to have a tax-free exchange. It's in a way, it's an exchange. Like imagine if you own Apple stock for the last five years, you've tripled your money and you have the ability to, when you sell the stock to put it into a separate account, not pay the taxes, buy now Microsoft and keep doing this forever without paying taxes. Now that's possible today with your IRA, absolutely. There's no question with your IRA, you can do it.
But most people have not thought about it when it comes to real estate. And IRAs have limits on how much you can put in there. I mean, unless you're Peter Thiel, where you figure out how to use the Roth IRA better than anybody, most people have a limit of how much they can contribute every year. But with real estate, you don't have that issue whatsoever. So in a way, it is an IRA without being one. It's unbelievable. Again, it's not very well known.
slava (09:19.336)
Yeah, I think that's all.
slava (09:41.704)
Well, they know more about it now since you talked about it. And then you said two thirds real estate and one third is not real estate. Can you zoom in? What's that other one third for you?
howard (09:50.378)
It's mostly private equity, mostly private equity.
slava (09:53.748)
So this is into other like funds or individual investments or how do you think about that?
howard (10:01.418)
mostly individual investments. I haven't been a good limited partner in a fun person. I'm not that interested in that. I have my own deal flow, friends who start companies, and I get approached by people who say, hey, I'm starting a new company, it's exciting. Now I'm starting to see my kids, my son is 20, and his friends are starting to think about their startups. And guess who's gonna be investing in it? I am, why?
Well, because hold on a second, that's what I did when I was their age. You know, I started a company, you know, that was Activision and then I did this, I did that. These are exciting moments. Now, is it risky? Oh my God, how risky it is. I would say probably two thirds of my investments went to zero. In that private, let's write a check for 50, 100,000. I would say at least two thirds went to zero.
but one or two of them did so well that it didn't really matter, right? It doesn't matter because you have to look at the whole pie. You can't say, well, it's risky, I'll lose my money on this one and therefore that was bad. No, how many investments did you make? Which ones did well and what's your overall return? And is it better than the stock market? Really, I think that's the way to gauge it. The stock market will return six or 7%. Can you do better?
Now for risk adjusted, you have to do a lot better. You have to probably get into the 20% percent.
slava (11:34.453)
How many individual investments for those venture investments do you think you've made over your career?
howard (11:42.306)
Probably in the 3040.
slava (11:44.112)
Okay, great. And then so some other categories they haven't really mentioned, what's your point of view on it, which is like crypto, art, collectibles, do they show up into your personal basket at all? And if they don't, why not? And what's your opinion on them?
howard (12:01.262)
So I've been investing in crypto for many years. I now hold Ethereum, for example.
I've had before Bitcoin, Litecoin. The reason I like Ethereum, because I see it as an operating system bet, Ethereum has a use. Bitcoin does not have as much use, it's more for storage, I would say, storing money somewhere. Where Ethereum, you're betting on that the network is gonna be successful and be used by a lot of companies, which I think it will be. I also own other alternative coins.
that came out and I came in and sold them just for fun. That was not, I would say it was not a significant investment. Outside of cryptocurrencies, I have not been a big investor in collectibles. That's not what I do. Although I purchase art, I've purchased different things, but it was not a collection kind of behavior where you keep trying to buy.
the next thing to complete your collection. That's not something I've done.
slava (13:12.252)
Got it. So appreciate you sharing more about your point of view and how you personally invest. Let's move on to what your point of view is on the market. So what do you think, and that's an open-ended question, you could take it wherever you'd like, which is what do you think about today's economy, today's market, public, private, you name it, take it wherever you'd like.
howard (13:34.402)
Well, today we have an extraordinary circumstance where we have inflation is pretty high. So what does that really mean? That means that money sitting in a bank account is gonna lose value over time. And we're talking about what, 7%, 8% inflation, some people say eight and a half. That's a significant amount. You have to go back into the late 70s to when there was the oil embargo to see numbers like that where at some point you...
you know, as interest rates, the banks were paying more interest rates, people didn't wanna invest it. They'd rather just keep it in the bank and earn interest. That's very bad for the economy. I hope we don't get into that situation. Overall, I think the economy is strong. Inflation is high and it's much higher than it should be. The only way they're gonna bring it down is either you, you know, tighten the supply of miners significantly, which will tighten our growth, which will probably lead us into a recession.
which is not always good. Sometimes recessions are great because it cleans up the economy. For example, companies that are weak fail and they go away. And sometimes it's the best time to start a company in this environment because you have to be really efficient and focused, which is always good for an entrepreneur. But I would say my outlook is actually positive. I think there are a lot of opportunities. I think the US...
dollar is very strong and the economy is strong. It's not true for some other countries out there. But for us in our own economy, I think we've seen a resilience that is unique. There's more money in the hands of the consumers because of the pandemic, there was a lot of money put into circulations, a few trillion dollars appeared out of nowhere. That probably created some of the inflation. But at the same time also increased the economy overall. You have more money.
in the economy. So there's more things you can do with it. If you look at what's happened recently in the last year and two years, the idea of alternative investment has gone up in people's portfolio. People are collecting trading cards, they're collecting comic books, art, all sorts of things. Art has always been collected, but now from consumers. The idea you can fractionize a painting or a painting.
howard (15:58.19)
trading card that has high value is pretty new for consumers. So consumers have access now to things they didn't have access to before, only reserved for the very wealthy. I think that diversification is good. It's unfortunate for someone who is an ordinary citizen, not wealthy, the only thing they can buy outside of stock market is a home. It's kind of weird. You're allowed to buy a home, which is expensive and risky, but you can't buy anything else of
of alternative value. Well, you can buy gold, I guess. You can buy gold, you can buy home, but you can't invest in a startup until recently. You couldn't be part of these partnerships, fractionalized assets. You couldn't. And that was something I was personally very frustrated with because I thought it's just fundamentally unfair to give some of the better returns to the ones who don't need them.
slava (16:57.492)
So that's a perfect transition. So you created StartEngine. Can you give us some background on exactly what that platform does?
howard (17:06.73)
Yeah, so just to go back in history, I'm an entrepreneur like you are. I started companies. So I got lucky with one of them called Activision, but I I've done other companies that failed by the way. And.
slava (17:19.492)
Most, most, most good entrepreneurs fail. That's just part of the process.
howard (17:22.206)
Yeah, you have to fail. And I think it's actually a good thing to fail. It puts things in perspective. Anyway, I started StartEngine initially as an accelerator. It's an investment company that would invest in very early stage startups and help them grow and introduce them to investors. It's like a small school. It's not really a school, but it's a kind of a, I would say, program that you come in, we invest money, and then you...
grow your company over the next 90 days and then we throw in front of investors and if you survive, congratulations. That model was great, I did it for a few years. Was probably, we were investing in about 20 companies a year and the observation I had was, it was very hard for those entrepreneurs to raise money. Now, of course, those entrepreneurs who went to Stanford,
who had the right pedigree, they would raise money. I get that. But their idea was not necessarily better and their skills were not necessarily better, but they had the right pedigree. And I found that fundamentally flawed. And I was looking for a solution. Being an investor was not a place I felt comfortable in. Even though I was running the accelerator, I didn't feel like that that's my calling. Here, Howard, you're going to take me
raise a little fund, you put money into entrepreneurs and watch them go. I felt frustrated because I wanted to be the one making it happen. You know, I wanted to be on the other side because my whole career was on the other side. I was never on the side of the investor. I was the side of the entrepreneur. Now I've been investor personally, but not an active investor. I was not telling people what to do. I was just putting money and forgetting about it. So then...
I started looking for solutions and learning about this whole world of securities, which is complicated. It goes back to the 1930s. And what I found was that fundamentally the system was designed to help wealthy people create more wealth, and it was not designed to help ordinary investors. It was designed to protect them from making stupid mistakes. And that was the idea.
howard (19:43.334)
protect from stupidity because that's how we operate, but not necessarily give people the opportunity. Well, I was reading a bunch of articles on securities and I fall on this thing called the Jobs Act. It was around, I would say April, 2012. And I was very curious about what that was. And I couldn't understand that it was very, I would say,
underplayed in the press, not very visible. So I read it and started reading it. And the more I read it, I was like, this is amazing. This is amazing. Now for the first time, an ordinary investor can invest in a startup. I found that fascinating. So I figured, okay, all the big companies, the Kickstarter and your company, Indiegogo, they're going to jump into this. And even if I start one, there'll be a hundred platforms and I'll be just one of a hundred. It's going to be
painful, you know, when I started Activision, in fact, we bought it out of an investor took control of it, we were number 34 on the list of video games. So, you know, number one was Electronic Arts, number two Acclaim. I mean, we were number 34. Now we became number one over time, but, you know, I knew what it meant to be a small player. So I figured, you know, what's a big deal? Let's do it. So I started Start Engine.
was the notion that these rules will come into law. And so we started in March, 2014 and waited and waited and waited more to wait two years. Can you imagine waiting two years for your business to start? How crazy. Anyway, we launched it and right away we were lucky. We had entrepreneurs come over to us and say we wanna raise money and it worked.
But it was very hard at the beginning because you have a two-sided marketplace. So which side is your customer? And I had to think about it a lot. My conclusion was the entrepreneur was my customer. So I focused all my energy on finding great entrepreneurs to raise money. And I figured the investor will show up and it actually happened. So today, you know, StartEngine is one of the leaders in the marketplace and we're...
howard (22:10.811)
we feel that we're just at the first inning of the game. We just got started.
slava (22:16.36)
That's great. And so can you give a sense of scale as to give me some numbers as to, you know, how big start engine is now?
howard (22:23.838)
Right. So last year we did almost 30 million in revenue. We raised close to 200, 270 million in capital last year. We have a community around 800,000 investors of which probably 300 to 400,000 are active and committed.
howard (22:49.934)
We launched, one of the concepts I had from the very beginning was great. So now we allow these investors to invest early stage companies, very early. They don't wait to the company going public, they come in super early. That's great, except that for a consumer, if you say to them, look, it'll take you seven years to get a return, they may not understand that length of time, it may be a little too hard. I've had one investment, it took me 20 years to get it.
That's kind of weird. So, but you don't control the exit, right? So one of the things I decided was we need a trading marketplace. We need to replicate what exists on the NASDAQ-New York Stock Exchange. We need to be similar to the global markets, but yet cheaper, faster, better than the global markets. What comes to mind is cryptocurrencies in a way. They are similar to stocks.
They trade very quickly, instantly, unlike stocks which takes a couple days to clear, and the behavior is similar. So they issue coins, then they trade coins, and people seem very excited to participate in it. But it has no regulation, so they can do whatever they want, and they do. In our case, we are highly regulated, highly regulated by the Secure Exchange Commission, by FINRA.
and the state administrators in all states, there are 50 of them. So we're, and treasury, add the treasury to that. So being highly regulated, we decided we're gonna find a solution, we did. So we launched last year our secondary trading platform where you can actually trade the things. And we're, this year, hopefully, I cross my fingers, we'll be able to put dozens and dozens of companies and collectibles, you know.
trading cards, wines on this platform and allow investors to not only invest, but if should they choose to get out, should they want to get out, they might be having a possibility to extend or someone on the other side was willing to.
slava (25:05.768)
That's awesome. When is that going to launch?
howard (25:09.086)
Um, the trading marketplace is alive today, but in a, I would call it in a beta. So it's alive, but not yet popular or functioning. I look at this as probably the most important, uh, thing we're doing as a team is to get this to a place where I think it will make an impact on the market. Um, today, if you buy private securities, um,
For example, in Silicon Valley startups, there are companies that will allow you to trade them. But it takes weeks to make a trade. You have to wake up the lawyer. There's a lot of complexity because those securities are highly, I would say restrictive. You have to give the right of first refusal to the company before you can sell them. It's really complicated. In our case, it's instant.
we start looking like crypto. So if you buy, for example, we have this case where we were selling some wine, the Cheval Blanc wine, great wine from Bordeaux, from Pomerol. And so I think we maybe sold $50,000 worth of that wine and those investors now can trade it. Down the road, they can trade it as we put more and more things.
But we're restricted as to how to advertise it. We're restricted on how to make it known because of all these regulations. So what we're gonna do is create the marketplace, put the things on there and let the market come. To the extent they come and they like it, great. To the extent they're not interested, too bad.
slava (26:51.112)
So yeah, you mentioned the wine and I saw that you've been getting more into collectibles recently. Can you give some color as to why you've been getting into that and what your goals are there?
howard (27:02.39)
Well.
Again, part of our mission at Start Engine is to help entrepreneurs achieve their dreams and investors. So when you start looking at the investor side, I felt strongly that a lot of the investment opportunities that exist out there for wealthy investors should be available to the ordinary investor. And that includes art and collectibles. In the last two years, these collectibles
have exploded in value. I think partly because inflation, I think it's a great inflation hedge. And also because people are interested in their own pop culture. They grew up maybe in the video game era, they grew up reading comic books and they wanna have that nostalgic feeling that finally they got to purchase something unique and rare.
collectors out there who are very interested. But now the idea that you can fractionalize a collection, that's pretty big.
slava (28:12.68)
That's great. And then back to your entrepreneurs, is there a criteria? Like what are you looking for in terms of at least this much revenue or this size of organization or, you know, if there's a listener out there thinking about using your platform, what are the filter criteria to be able to be using it?
howard (28:31.054)
So that was one of our, I would say, most difficult strategic decision as to how do we decide which entrepreneur gets to live on our platform.
howard (28:46.674)
Our mission is to help all entrepreneurs. So in many ways, it might go against our mission to say, well, you don't look like the right entrepreneur that we want so you don't get on it, even though they might be good. In my career, I remember there was one game that was passed around called Tetris. Everybody passed on it. Every...
Every game company didn't decide this is not a good game.
And yet it became one of the biggest games in the world. As soon as Nintendo put it on their Game Boy, it became ubiquitous. Everybody played Tetris. But why would everybody pass on it? And then another company that everybody passed on was Twitter. Everybody thought Twitter was such a dumb idea. And yet Twitter is important. So the question is, who is to decide which entrepreneur is great, which one is not, which idea is great?
So we decided to use a different criteria. Our criteria is the following. Is it a company, properly incorporated? Are the people behind the company good actors? Is it properly formed? Are the shares properly issued? Is the company financials in good shape, meaning formatted correctly?
All those factors is what we use. What we don't do is editing and decide, well, this entrepreneur looks great, this one doesn't look great. From a potential perspective, oh, this entrepreneur is gonna be the next Bill Gates. You know, come on, really? I don't think anybody can predict that. So we are trying to tell the entrepreneur, look, you may be a good fit for equity crowdfunding, or you may not because of...
howard (30:46.466)
Do you have a good community behind you? Do you have the ability to market yourself? I talk to entrepreneurs constantly who don't wanna do any work when it comes to equity crowdfunding. They wanna come on, put the thing under and then hide in the corner. And I'm saying to them, hiding in a corner, that doesn't build a business too. I mean, if you wanna build a business, you better be a hustler. Not everybody wants to hustle. I get that, I understand that. So what I love about StartEngine is that
The entrepreneurs who do best on our platform are the ones who are best equipped to build their companies. They're hustlers, they're promoters, they are working so hard and they are never stopping.
slava (31:29.312)
So the preliminary jobs act was a $1 million cap for a raise on regulation crowdfunding, but that's been raised recently to now $5 million. How have you seen that change the dynamic with the investors or has it changed?
howard (31:45.57)
With the investor, it has not made a big difference. With the entrepreneur, it has been a phenomenal difference. I think when the limit was one million, people looked at it as not enough money. A lot of entrepreneurs thought this was just a waste of time. Spending all this time to raise one million, why? When it raised to five, they look at this as real money. It's interesting how between one and five, it makes a big difference. And one or below...
It's not that important. I know a lot of entrepreneurs who, if they could get 50,000, they would super happy. They're like, oh my God, I got $50,000. So a million, I felt was a lot of money for entrepreneurs. And it turns out a lot of companies were not satisfied with the limit. And so now that it's five, I think it's opened up the market tremendously.
slava (32:41.576)
What's the like average raise now?
howard (32:44.65)
On start engine, the average rage last year was one million.
slava (32:48.094)
Okay.
That's great. And then outside of the move from 1 million to 5 million, are there other things that you would lobby for or that you want to see changed to advance equity crowdfunding even further?
howard (33:03.318)
Absolutely, I have my list. The most important thing for me is to preempt what we call the blue sky laws. So blue sky laws are individual state regulations. Each state has its own set of regulations for issuing shares and for trading shares. Now it turns out that regulation crowdfunding, the one that you can raise up to five million, preempts all blue sky laws.
Unbelievable. No extra paperwork in every state. You don't have to file, you don't have to do anything. Great. Well, regulation A where you can raise up to 75 million, you still have to send notices to every state and some may have to be approved. So it's extra work, extra legal work. And then when you want to trade any of these securities, the blue sky comes in very strong and every state will have a different view on it and it makes, ultimately it makes it hard and expensive to do.
So my hope is with the next legislation, which is being proposed, you will have that preemption. The second thing I think is important is to reduce the amount of paperwork necessary to raise the first few hundred thousand. I think it's being proposed now at 500,000 or less and make it just absolutely easy. When people go and raise money from wealthy investors, they use a thing called the safe, which is,
Frankly, not very safe, but it's called safe because it's a two page piece of paper and you sign it and you get a check. Done.
slava (34:36.632)
Right, that stands for simple agreement for future equity.
howard (34:40.074)
Right. And I don't like safe for consumers because it's a synthetic derivative. It's not an investment in stock. You're buying a concept that's not on the balance sheet, not on the income statement. You're buying a concept that says, when I raise money from another big investor, I will give you shares. And you can't trade it. You're locked, blocked forever.
It's kind of weird, but anyway, it's okay for wealthy people. I guess they know what they're doing. So the idea would be you can raise up to $500,000 in stock with the limit amount of paperwork and that reduction of paperwork and requirements. I think it's going to make it explosive, frankly, explosive.
slava (35:28.601)
What would you reduce from the current CF regulations for a sub $500,000 raise?
howard (35:34.178)
So I think the requirement to have a CPA review the financials is pretty harsh because it's expensive to get a CPA to put your financials in the right place. I think that's one of them.
slava (35:49.244)
I guess the counter argument then is if it's a small raise, there could be more fraud if it isn't legit in terms of the financials.
howard (35:57.214)
Right, but you know, at that level, the financials may not be meaningful. It's not like you're showing that the company has a lot of income or a lot of assets. It probably doesn't have much. So yeah, exactly. So like, what are you going to lie about $110,000? Why would you do that? I mean, it's not going to help you. I mean, if you're going to lie, 10 million would be a better lie, you know? So I think when you get to the early stage, I'm talking about early stage.
slava (36:07.42)
Right, right, it might be so light anyway.
slava (36:20.832)
Ha ha ha!
howard (36:25.694)
It doesn't really matter to financials. Like, let's be honest. You put money into a company early stage. The financial is not going to be your motivation. Your motivation is going to be the entrepreneur and the division, the mission, what they're trying to accomplish. I think that's important. The ability to accomplish the mission for an entrepreneur is really critical. And what you need is two things. You need capital and you need a team. And.
I think that if you could reduce the amount of paperwork for the first 500,000 to allow capital to come in and build a team, I think it'll make a huge difference. So it's my opinion.
slava (37:03.324)
I think that'd be great. So one last question in this segment. So there's a bunch of equity crowdfunding platforms out there, some that are quite big as well, whether it's Republic or WeFundr, SeedInvest, and obviously you're right up there with them. How would you explain to somebody who's trying to choose between why they should choose your platform and what you're particularly better at?
howard (37:31.606)
Well, each platform has its strengths for sure. I'd say for us, where we're going is we wanna tell our investors that when you invest in StartEngine on a company, you will be able to trade within a year. You'll be able to trade. Doesn't mean you have to trade, but you'll have that liquidity. So I think that's our, I'd say one differentiation factor, but also recently we just got the right to
hold the cash and securities on behalf of investors. So the other thing is the StartEngine account is real. It's not some other bank, third party place. You can go and see where your money is at. We will control the experience for the consumer from beginning to end. From the time they go to our place and make their first investment, we'll carry the shares on their behalf. And it's insured. SIPIC is like the FDIC for...
for brokers so we have insurance. It's pretty cool, frankly.
slava (38:34.296)
Awesome. So you obviously have a wealth of experience, super smart guys, super knowledgeable. What is it that you're listening to? What is it that you're reading? What is it that you're watching that's making you smarter or as knowledgeable as you are? Can you share some of those examples so that our listeners can try to follow your path?
howard (38:57.302)
Well, I'm 60 years old, so I would say it wouldn't come to a surprise that I read the Wall Street Journal. It's so well written. It's very well researched and you can mostly rely on the information. So I think that's something that I hope listeners would consider. I'm also using information, the information which is a newsletter, Silicon Valley newsletter to read.
what's going on there. There's a lot of gossip, frankly, which is fine.
I'm a curious person by nature. I like to read a lot. So when I read the news, let's say on Google News, for example, I'll pick stories that take me in a direction that is unique. Entrepreneurs doing something differently than others, new legislation being considered by the Congress. I like...
to read about those things. I like to read what the SEC is doing. All the new legislations. One of the things I did that I never thought I would do in my career is I took these security licenses. I don't know if you know what those are. There's a thing called series seven. That's for a broker. Series 24 is for a manager. And the 79 is for a banker. I took all those things and I passed. It passed. So, you know, thick books, very thick books. You have to read.
slava (40:23.085)
Now, nice. Good job.
howard (40:30.038)
But guess what? What an education in the financial world I got. It was amazing to read. And out of those experiences, a lot of new ideas came about. A lot of ideas came about.
So I'm not suggesting that everybody tries to do this. This is pretty daunting, but it also shows you the kind of person I am. I'm very curious. I wanna learn. I'm part of a group called YPO, it's called the Young Presidents Organization, which I recommend for entrepreneurs to do when they get to a certain size, because the whole mission of YPO is to educate. Educate once you feel you already educate, you haven't even started.
So we learn a lot more through our careers and I continually to do that.
slava (41:25.736)
That's great. And even though you have your Series 7, I'm gonna ask you a question that is not gonna be investment advice, but we wanna hear your opinion, which is what would be one investment you would make today, any investment that is real, that if our listeners want to follow with you, they potentially can do it as well, that three years from now we would look back and see how it did that you feel strongly about. What would be one investment?
howard (41:55.486)
I think that's a difficult question because personally, I invested in things like Ethereum because I believe in it. And I know the value right now is half what it was. So everybody would say, well, that's a bad investment. I don't think so, but okay. Three years from now, startups take a long time to realize themselves. So I would say startup would be a...
a difficult three-year exercise. I think crypto has the ability because of liquidity to change in price more frequently. But I'm not thinking that everybody, most of you listeners probably have crypto already because a lot of young people like crypto because it's fun. That doesn't mean it's a good investment. But unfortunately, I can't give you a name of a company that I'm following right now that I say, oh my God.
I mean, I would say I'll give you some categories, virtual reality, absolutely. I think there's a big potential there. The metaverse, virtual reality, all of this, I think is gonna be humongous and starting from zero, frankly, at this point. We've had several companies on our platform that do virtual reality and they've all done very well.
I would say in the world of biotech, biomedicine, all of that, I think the idea that devices are going to measure how we feel, what we do over time is going to be great. I think that's a big area of opportunity for the next few years.
slava (43:40.644)
Awesome. So if I just ask one more time, is there any name that you would say or you want to shy away from that?
howard (43:45.67)
Well, I'm not able to give you a name based on, I can't give you a name of something on my platform. I can't do that. And if I had a private investment that I was doing on the side, your listeners wouldn't be able to make that investment. So it frustrates.
slava (44:06.416)
Well, it could still be interesting. Any last thought? All right, well thank you very much Howard for being on the show. You've given us a whole world in the discussion points. I was amazed to hear that you're 80% into alt. You taught us about the 1031 escrow account, which seems to be a great takeaway from this discussion. You obviously jumped in and got excited about the jobs act. And I loved your phrase. You said, you know what, let's do it.
Who cares if I was number 34 in video games? I'll take us up to number one. And you had the same mentality for equity crowdfunding. You have ideas about how to improve, you know, equity crowdfunding for everybody, maybe remove the limitations for smaller raises. And I love your two words at the end, which is everyone should just be curious. So thank you, Howard. We look forward to having you back.
howard (44:53.41)
Thank you, Slava. Take care.
