 ThinkTek Hawaii, civil engagement lives here. ThinkTek Hawaii, don't forget to like, don't forget to give that a like, just drop a comment and share a button, and drop a comment if you've got questions below. But as always, I don't have a lot of time, and I definitely know you guys and girls don't have a lot of time, so we're going to jump straight into it. So as you can see on the title, and in the description box, this episode is going to be about why you shouldn't invest into startups. Now, I know you read this, I know most of you read this, they're going to say, what are you talking about? Why should I invest in startups? You know, I've heard great things about plenty of companies around the world, all of the great things like that. But in this episode, what we're going to talk about, we're going to talk about, one, what are startups? Two, why you shouldn't invest into them? Three, the alternatives. And four, we're going to give you some alternatives to what you can do, and also hit you with some statistical data and numbers. So first, let's start off with what actually is a startup. So most of the people, most of them already know. We've seen things like Shark Tank. You probably watched so many documentaries of something ventured, and so many autobiographies of different companies. How did Google get started? How did Amazon get started? How did Netflix get started? How did Walmart get started? And they all had that story of that one person or two people, a group of people that started out very small, and they became something great. Every big company was small. What could it mean? I'm 61, 280 some pounds. And at one time, I probably was this big, a loaf of bread, and I grew, right? Why do I say that? Because sometimes when we watch chocolate shows, like ABC hit show, the Shark Tank, and also when we watch television and documentaries, something ventured, like a documentary called Something Ventured on Netflix, it gives us the belief, like myself, I did the same thing. What gives you the belief that, man, I need to give a startup, you know, look at Google, look at Amazon, look at all these companies, they just started with an idea of Microsoft Apple. They started with an idea, and people invested into them in an early stage. Now with the new crowdfunding laws that have passed, you've seen a lot of people come out with ways that you can invest in the startups, right? But here I am. And it makes some contradiction because I created the app for the ones who really followed me back in 2014, called IABOH, IBOA, which is the Investors and Business Owners Hub, and I created that concept around pretty much putting Shark Tank on a app, right? Let's say if someone who wanted to start a coffee shop in North Dakota, or who had started a coffee shop in North Dakota, versus, and they wanted to get an investor in Hawaii, how do they find each other? How do they meet each other? If you want an investor, do you go on Investor.com? How do you find people? So that was my concept behind creating that. But that was over four years ago. And throughout that time, I've had a lot of experiences with small-cap, medium-cap, and large companies, and I've been able to meet a lot of people and to see, meet a lot of companies that were small, medium, and large, and I've also been able to meet investors from beginning to immediate to expert. And over that time, and also going and educating myself more and more, I'm always a student, and I learned something. I learned something, and I want to pass it on to you guys. So first step, mostly if you guys don't even qualify, excuse me there, don't even qualify to be a, to invest into a startup. What do you mean, for example? For prime example, most people that are tuned into the show will probably rough around the age of 20s to late 30s, middle 20s, 25s to about 40s, and some older. Thank you for the older listeners and the younger ones, right? But most of us are not even, most of us in the age range, and most of us have a network that somewhere probably between zero or negative, or what's between maybe a hundred, 200,000 dollars, right? Of course, if you listen to Black Prince, I got a quarter million, million dollars, I'm just speaking for the majority, right? So the thing is, when you look at companies, you, when you're looking to invest into a small startup companies, that's very, very, very over a high risk of you to do. Because first you gotta look at the statistical data and see how many companies fail, how many startups fail, especially how many companies even survived that five years. Most companies can't make it to five years. So with that being said, when you look at the data and you look at the standard deviation, the risk that you're taking, most of you guys do not qualify to take that type of risk. Prince, what do you mean? So what do I mean is, if you're taking that type of a risk, it should be no more than about 10% of your portfolio. If you only have $50,000 in your portfolio, if you have $50,000 in your portfolio, that means you only have $5,000 to invest into a new startup. Now, the thing is, of course, everybody has an idea. Your friend's gonna come to your idea, your friend's come to your idea, family's coming to you with the idea. You get people that DM you with that great idea. You get emails with people's great idea. And just like that, it is an idea. It's not been executed. Most of them don't have it written down and it has not been executed and it has no traction. What do I mean by executed and traction? I can type with a beautiful business plan, right? But execution and traction calls for, let's say if someone wanted to start a barbershop, if you wanna start a barbershop, you're probably gonna need certain licenses to start the barbershop. And have that person even, do they even know what they need to require? Does that person even know, hey, this is what I need with this barbershop, this is what I need with this barbershop, this is what I need with that barbershop, right? So the thing is, some people, do you have the education? Do you have the requirements? Do you have the manpower? Do you have the know-how? Do you have the building permit? Do you have a slew of things that can potentially go on with an investment that can go wrong once you put things into the execution phase? So yes, it looks great on paper, but the execution, when a person goes to execute, you're always gonna have lumps in the road. You're always gonna have, you also gonna have bumps in the road, you also gonna have hiccups you gotta overcome, whether it's funding, whether it's licensing, whether it's permits, whether the building that was supposed to be sold, at least to you, is still gonna be available, all sort of things. But most startup people don't have the resources to know-how or the knowledge to get through those very earlier things when it's time to execute. Now, we just spoke about execution. Now we're gonna move on into the next phase, the portion of your portfolio. When you see shows like Shark Tank, or you hear about venture capitalists, and they're talking about how they invested into so many different companies, it's because they know, for a prime example, they know so many companies are gonna fail. They know for all that. They don't invest in one company. They invest into 10 to 20 startups. Out of that 10 startups, for example, out of the 10 startups, they are expecting seven of them to fail. They're expecting one of them to break even. They're expecting, and the last two, maybe one or two, one to pay for the mistakes of the other ones, and the other one will become a big thing. So out of that 10, they're expecting 70, 80% just to not work for whatever reason. Hey, 70% of these things are not gonna work. And one of them is going to work. They may break even. And then another one is going to, another one is probably gonna take off and pay for the ones, all the money I lost in the first seven. And you may have one that can take off and be the next big thing, right? So with that being said, most companies spread their investment out of the 20, what you call it, 20 different companies. So when you watch this TV show like Shark Tank, that's why the show is still on the air. That's why people are still investing. They always highlight the great companies, the ones that they invested in became great, or the ones that they passed on and became great. But what about those failures? What about the companies that just didn't work to usually don't highlight those, right? So when you see people making an investment and a company does well, it gives the illusion that, hey, I can do that too. So the thing about it is, it's just like the lottery ticket, right? They never highlight the losers of the lottery. Because if they highlighted the losers of the lottery, it would discourage people from playing the lottery. People would then recognize like, whoa, 99% of people lose. Once in a million, a person may win. So, but if I constantly highlight the winners, like a lot of investors like to do, if I constantly highlight the winners and forget all of my losses, if I constantly highlight the winners, guess what happens? I start to think that, hey, a person who's not looking objectively, they start to believe that it's reality. Because every time they see, there's always someone who's winning the lottery. So they start to believe, man, you know what? Maybe I can win the lottery as well. So that's one of the things that you would think of. Two, the smaller the company, the higher the risk. Most people don't have enough money. If you let, hey, well, my friend, I still don't do some great things and they got some great momentum. So I want to jump on board because I think I'm going to miss out, right? When someone is in the startup phase, why would I take that high, high Uber high risk when someone just has an idea on paper? If I want to get into a startup, I want to get into something that's already established and it's just looking to get to the next level, right? There are startups out there like that and they're not really startups. They're more making an investment into a company. I would say, let's say for a prime example, I open up a barbershop and I'm doing pretty well. I open up a funeral home, a barbershop, or let's say a restaurant. And restaurant is doing great, business is doing great, but I'm looking to open up another location. I'm looking to expand my current location. That is less riskier. That would be something that I would have my eyes on more and that you, if I've been looking to it, something that you may have your eyes on more too. Now they're a little bit more difficult to find because usually they're a little bit more high quality. They require more intuition. I always like to see how much sweat has the person put into it. How much sweat equity they have. Can they just up and quit this thing tomorrow and not look crazy? Can they? Because I like to see someone who is, hey, I have placed too much time, too much money, too much effort into this for it not to be able to work. So with that being said, it's not as new as a start versus someone who just has an idea on paper. But someone who can show you, hey, I have a company, I have established, I have opened the doors, I have customers, I have sales, but my sales are not strong enough to keep me up. So I need a little bit of money so I can change my business plan, but they have execution of their plan and they have traction within their plan because they have developed sales, right? But the thing about it is, most people who are tuned into this do not qualify or should be looking into something like this because they don't even qualify to even think about something like this, right? Because you are someone who maybe have a job, you may have a 401K, you should be looking at the ground roots of investing first. Once you become a most invested one, it becomes successful or they quarantine or they make an investment group that now you have experienced investors that are behind the table that says, huh, my friend has a clothing line or a friend has a whatever and I'm looking to make this investment. Now I can do that because I can take something off of the ground floor. Most people don't have the money or don't qualify or not ready to that point yet. So let's think about it, you took $25,000 and you spread it over 10 companies. 25,000 times 10 is $250,000. For $250,000 to be 5% or maybe 10% of a portfolio, you're looking at upwards to like $4,5 million, right? You need a $4,5 million portfolio to be able to find 10 companies that you can give $25,000 if you decide to do that and for it to be just the 5 to 10% of your portfolio or 5% of your portfolio, right? So with that being said, if that's the case, when you're looking at different ways to invest, you're looking at ways to put money and you're looking at ways for things to go, that's something you need to be considered of. Do I even have enough money? Am I even at that point, a level to even start looking into those type of investments? And so I'm with you, which happens so good. So, okay. And the thing about it is, when you're looking at those types of investments, you have to ask yourself, what am I doing? Am I ready for that point? Then the smaller company, the higher the risk. When a company is that small, you know, when the smaller company is the higher the risk because the bigger the company becomes is just in the same thing on the stock market. When you have small cap, medium cap and large cap. When you have a large cap company, the likely of a large cap, large capitalization company, like a Walmart, the one on the business is very him compared to a small technology company. And that's the way you need to look at it. That's the way you need to think of it, right? So, when you're looking at making those investments, a lot of you guys may have been to that point yet when it's time to even look at that thing. So I hear, and the reason why I brought this topic is a lot of people always email, ask, comment and say, hey, Prince, I'm looking to make this investment into this new technology company. I'm looking to make this investment to my friends investment, things like that. And these are people who just started investing maybe a day or two ago. Like, do you strike gold? Of course, right? Can a person become lucky and strike gold? Of course, right? But many times they can't. So it's too risky, especially for the lower, for the lower level, beginning or intermediate investor to start looking into investing in the company. But what's gonna happen is everybody is Superman. Every company or every idea is great. And so the money is transferred. Once the money comes, once the money is transferred, that's when all the mistakes start to happen. That's when the old side didn't know this, this, this, this, and things like that. So you know how to draft with those contracts. What if a person doesn't pay? What can you do? What if a person doesn't contact you? What if you can't find the person as you transfer your money? So those are very Uber high risk that are probably made for the expert at the minimum intermediate investor who is well, well financially established and looking to different ways to expand their money. Okay? So that's gonna be my episode. I'm gonna wrap this up. But before I wrap it up, I wanna go over this thing. You talked about what is a startup? The risk associated with brand new startups, the different levels of startups, why you shouldn't be considering them at this point, at this time, if you're a brand new investor. Also, you need to be educating yourself and become more experienced and first. This should be one of the last things you should be looking at. And this is why you shouldn't be looking at them in the first place, but extremely high, high risk. Don't be fooled by what you see on television and radio and things like that. They don't tell you about all the venture capitalist companies and investors, don't tell you about all the companies that they lost. I won't say they don't, but they'll tell you like, hey, yeah, we had some fairies along the way, but you're playing extremely high risk. And if you're a personal finance person to where you're like, hey, I just wanna invest a little bit for my son, my wife, just to make a better life. This is probably one of the last things you need to be looking into, right? My friend, I'm not telling you what to do. I'm just telling you, laying out some ideas and laying out what makes sense and risk, all right? Well, guys, until the next video podcast, start soon on what I don't seem to do crazy around the globe. My name is Prince Dice. This is the Prince of Investing. Catch you guys the next week on Think Tech Hawaii. Thank you.