Crypto Investing #4 – How To Invest In Bitcoin & Cryptocurrencies Like A Silicon Valley Venture Capitalist

Tai:

Hey guys. This is Tai Zen again. We’re broadcasting from the biggest Starbucks in Dallas here. This place is massive. It’s like a hundred people doing their homework in here. The most important homework that they’re not doing is doing research on cryptocurrencies and Bitcoin. Now you guys saw in the previous video here, where Leonfu.com and I got kicked off of the Dallas Federal Reserve property.

We’re sort of building a track record of getting off by security guards, but hey in this video Leonfu.com’s going to share with you guys how the Bitcoin in Silicon Valley, in Northern California, around the San Francisco area, how they invest.

And after that I’m going to share with you guys how to take that same approach and how this is the best time in human history for the little guys like us on the Main Street to do the same thing. So how they invest on Wall Street, the venture capitalists?

Leon: Okay so all around Silicon Valley on Sand Hill Road, there are approximately 300 and change VCs (venture capitalist) all around the Bay area. I think most of them are… the famous ones are out on a road called Sand Hill Road. That’s where like Anderson Horowitz, big names like Kleiner Perkins you know, they control, I’d say if not hundreds of billions, trillions of risk capital.

Tai: Just to give you guys an idea how much a billion is. If you tried to spend as much money as you could every day of your life and you try to spend… If somebody gave you a billion dollars and you tried to spend millions of dollars every day, you could not spend it all in your lifetime, no matter what you try to do. That’s how much of a billion dollar.

Leon:

That’s a thousand million. So it’s really impossible for anybody to consume that much money. It’s possible to waste that much money. It’s possible for you to give away that much, but there’s no way for you to actually consume them. I don’t care if you’re doing drugs, hookers, you know, there’s no way.

You’d be dead you know if you did try to do that. But the idea is that if you are a tech entrepreneur, you could go to Silicon Valley and pitch your idea, you could talk to 1 VC fund every single day, five days a week and over an entire year, you still would not have spoken to everybody that could potentially fund your idea.

Tai: And if they agreed to fund your idea, they’ll drop a few million dollars on it.

Leon:

Like a million dollars to them… let’s say you were one of them, then I could come to pitch you and you worked for one of these VC firms, you could write a check out for a million dollars on the spot without any approval because a million dollars is rounding error and typically it doesn’t work that way.

It typically would be, you would get three of these VC firms and then there would be like a lead investor and if you could convince one of them to invest, then two or three will follow. They follow too, they’re not any different than Main Street. They just want more money, but having more money doesn’t make you smarter.

Tai: So you were saying that they were willing to risk in different ventures, different businesses, ideas.

Leon: So I work for a start-up so that’s how I get paid. I’m an iOS developer and people, these entrepreneurs, they would go and pitch an investment firm and then would raise money and then that’s how I got hired, I got paid to actually try to build the idea that they pitch to their investors.

Tai: But you were talking about how they have an appetite for risk, how they’re willing to spend money on all kinds of different funds.

Leon: You have to understand that if you get a Facebook, a Google, an Airbnb and Uber, the return on that investment is 10x, 100x even a thousand time, even 2000 times.

Tai: How about Peter Thiel?

Leon:

Okay, that’s a classic example, right. So Peter Thiel was part of the PayPal mafia, right. People don’t realize that he’s a billionaire, but he’s not a billionaire for the hard work he did at PayPal. He, along with Elon Musk and a bunch of other guys are the founder of Tesla and SpaceX right now.

So in the 90s, this is pre-Bitcoin where the idea you could send money electronically, the way you send an email. There were about half of a dozen start-up, including Elon Musk, including Peter Thiel, about 5 or 6 guys, they realized that they’re all doing the same thing and while it would benefit if they pooled their resources together and form a company we now know today is PayPal.

PayPal was bought out by eBay after a few years, I don’t recall exactly the year, you can Wikipedia the history. And it was a billion and change. So that the 5 or 6 co-founders walked away with between a hundred to two hundred million dollars, right.

So they literally made, just on that deal alone, hundreds of times the money. The founders who actually did the work, and the investors who backed them when eBay was bought them. So then you know, this is then known as the PayPal mafia because you have 5 or 6 of these brilliant guys who among them is Elon Musk and Peter Thiel, probably the most well-known, then walked away with 100 to 200 million and of course the most famous one of those guys was Elon Musk, that was where the capital for Tesla, Solar City and SpaceX came from.

So you know, that’s typically how when the Silicon Valley investors invest, let’s go back to Peter Thiel. So he had 100 or 150 million, right. It’s a big number but it’s not a billion, still 10 times less than a billion. I mean you know, a billion is a thousand million, so he then meets a kid named Mark Zuckerberg. He was one of the first outside investors. He writes a check to Zuckerberg for $500,000 which if you have 100 million, it’s like us putting $5,000 in Ethereum or something like that, I mean that’s equivalent.

Eight years later, Facebook goes public an IPO went out in 2012, and I think he cashed out about a billion dollars okay. A $500,000 investment goes to like I think one or two billion, and I think he cashed out about a billion dollars. And then he’s invested in other stuff. That’s when he became a billionaire.

So the moral of the story is that he did not become a billionaire because he was smart. He a smart guy. He’s brilliant…

Tai: But the thing that he did that a lot of people were not willing to do is he was willing to take a small risk and use a small portion of his capital and the resources that he has an investment is something that he saw that had a potential for lots of growth. And when we talk about lots of growth, we talk about 10x 100x 1000x.

Leon: He made 2,000 times his money. That half a million investment turn into a billion, 2000 times return in 8 years.

Tai:

Okay so this is what I wanted to talk about, was that in order for someone to make that kind of investment into Facebook or Yahoo or Google, they have to be what’s called an accredited investor. In America, that means that you have to have like $250,000 in cash, right.

There are other stupid laws that they put in place to prevent the little guys like us. They say to protect us, however, imagine if you were able to put a thousand dollars into Facebook when Mark Zuckerberg was trying to raise money, then that thousand dollars could have been two million.

Because the guys on Wall Street, what they did was they put their stupid laws called accredited investors in place and now you have to have $250,000 in cash and a bunch of other stupid restrictions before you are allowed to invest in these startup companies like Facebook or Google, Yahoo, anything like that.

And this is the reason why we take the same approach as a little guy on Main Street. We take the same approach with Bitcoin and cryptocurrencies because it’s the first time in human history where you have an investment that can grow 10x, 10x means 10 times.

So you put in a $100 investment, it can grow up to a thousand dollars so that’s a 10x return. It can go to a hundred extra times or even 1000x return, right. And no one else on the planet right now can you put your money into something that has a 10x or 100x.

Leon: There’s a reason why the government… it’s not just keeping the little guys out, even Mark Cuban said that 95% of the Silicon Valley companies are crap. They’re worth nothing, so you got all these VCs throwing a million here, a million there, and most of it goes to zero, okay. And that’s kind of why the government is trying to protect the public.

Tai: Yeah but that should be up to us. If I have the money, it should be up to me to decide, not the government.

Leon: It should be, but the government fails, they have a responsibility. That’s why we have the SEC, that’s why we have the insider trading laws to prevent the average… Basically, what an accredited investor means is you’re telling the government I am a big boy and I can take care of myself, and I have enough money to take a risk. Leave me alone.

Tai:

But with the Bitcoin world, you don’t have to ask anybody for permission, there are no restrictions and there is no loss. But the risk is still the same, but it’s up to you to do your due diligence, and if you’re smart, you would listen to the oracle of Austin, Texas here.

Ok guys, so we want to share that with you guys about how the venture capitalist invest on Wall Street and how the little guys like us should invest on Main Street. Be willing to take that small risk where you put $100 $500 or $1,000 at risk, but the potential rewards can be 10 times that amount or 20 times or 50 times that amount.

But you know, the worst case scenario, you lose a hundred bucks, 1,000 bucks. But if you would invest in, for example, a thousand bucks into… let’s say that you invest one Bitcoin which was $600 into the Ethereum back in the middle of August, a year and a half later as we’re broadcasting this video from Starbucks, you would have made 40 times your money.

So that $600 times 40 would be 24 thousand dollars. So you’d have made $24,000 on your money for an investment that you made where you didn’t have to do anything and you just have to do the research and make sure that this guy Vitalik Buterin was smart enough and was capable and experienced enough. And it’s still a huge risk, don’t get me wrong, you could have lost that $600.

Leon: Let’s just be fair now. Many products did fail so we have invested in Ethereum but that’s not all we invest in. We have NXT, I invest in a master coin, CounterParty and a bunch of that did not work out. I knew that was ok…

Tai: Because you don’t have to be aware of all of them, you just have to be aware of one of them.

Leon: I knew I hit that one – Ethereum, I didn’t know it was going to be Ethereum, but I know that if my thesis was right, that will cover everything else. The return would be so huge that I wouldn’t care if they all went to zero. They didn’t go to zero, I think we lost like maybe 50% here, 33% there you know. But we came out way ahead. It’s not going to be 40 times our initial capital, but it could be 3 to 4 times.

Tai: So hopefully this video guy, helps you guys out to understand how to take risk as a venture capitalist would on Wall Street and then that would give you guys some more information on how you manage your risk by taking a small amounts of risk in projects that have a potential for big growth and you don’t have to be right on all of them, you only have to be right on one or two, and the profits that you make from that is sufficient for you to pay for the loss of all the other ones.

Leon: You also manage your risk as it went up 40 times but we took profits at 10 times, at 5 times, you’re not going to make all 40 times.

Tai: And we’ll talk more about that in detail in future video guys, alright. Thanks for watching this video guys. And if you guys like these videos that the oracle of Austin and myself are putting out you know, give us a thumbs up, don’t like it you give us a thumbs down and if you haven’t subscribed to our channel then make sure you do and see you guys in a future video.

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