Asset Trip with Kyle Asman: Investing in Venture Capital, Private Equity and Self-Storage

And what is your investing strategy there? Why do you feel that venture fits your investing goals so well?

My strategy for the fund and personally has always been in smaller seed and series A deals. I like to look for companies with a million dollars in revenue and valuations under $20 million, just because there's so much upside to them. And I feel like companies are de-risked to a degree when they've already achieved a million dollars in revenue. I think that they're a pretty good benchmark for when an investment opportunity starts to become on the safer side versus the riskier side. And I see all these companies in this space now and the valuations are so frosty, in my opinion—companies that are $300 or $400 million valuation, they need to get to a billion dollars for an investor to make a good return for the risk premium. For me, if I invest in a company at a $5, $8, $10 million valuation, and that company sells for 50 million, which is an awesome number, I make a fantastic return.

Yeah, that makes sense. And I'm curious, why software companies?

Just the multiples. When I started the fund originally and I started investing in venture, I was kind of all over the place: hardware, software, healthcare tech. And then I really honed in on software because I was like, you know, I understand all the multiples and metrics. I understand what drives the industry. I understand what drives investment. It's so tough when you're just all over the place. And I don't really know that much about the healthcare system. I don't know that much about insurance payments. So it's tough to invest in things that you're not really an expert in and you don't know all the KPIs.

Yeah. Would you generally recommend for investors who are maybe interested in venture, that they kind of hone in on a niche that they're more familiar with?

I would say that for somebody's first time dabbling in venture, definitely do it through a fund just because it's tough to select investment opportunities. I mean, I have an investor in my fund, I could give him 10 deals that I've said no to, for a variety of reasons. And he would probably want to invest in 8 out of 10 of them. That doesn't necessarily make him a bad investor. It's just that people get excited by innovation and a lot of the companies are innovative. But you know, along with innovation, they need to be able to make money and sustain growth to be good investment opportunities.

How did you get started in venture investing?

I was always really interested in investing in private companies. Actually, my first investments were in US public equities, and I just got interested. I was like, man, there's so much upside in being able to get into any of these companies when they were private. So I got into a good circle of being able to invest in those opportunities and build from there.

Do you have any experiences from your early stages in venture investing, any lessons you learned that you can pass onto our readers?

I mean, there's so many lessons. You want to understand everything from start to finish. Cause, you know, you invest in the beginning and you want to understand the instrument you're investing in, right? Whether it's a convertible note, or it's a price offering and you're buying shares in the company, you wanna understand the exit process and what that looks like. You want to understand the company and how they make money and how they're gonna grow as well. I mean, there's so many parts to it. I'm trying to just stay high level because I'm sure there's going to be a lot of people reading this who aren't venture experts. But on a high level, you really want to understand what you're actually getting when you invest. And you also want to understand what the endgame for the company is and what the company does. If you can understand those three pieces and get comfortable with that, you have a pretty good investment thesis.

In terms of alternative assets, I know you've got some assets in venture and crypto. Are there any other alternatives that you've been curious about or eyeing that you haven't invested in yet?

So I've begun investing in some self-storage just because it's a really awesome, cash-flow driven investment, similar to rental properties except the turnover is a lot lower and occupancy is a lot higher. So self-storage is an awesome vehicle as well. I haven't gotten too much into real estate just because I've always kind of been a company investor, and I know there's so much to real estate and using debt and leverage. I really just haven't explored that enough to be comfortable with it. So self-storage is kind of as far as I've dabbled on the other side of alternative investments, but there are a lot of great strategies out there. And something different works for everybody, right? There's not one thing. A lot of my clients are people who are looking for alternative investments or are really looking for cash flows, similar to how equity would pay dividends. A lot of these private equity funds or real estate funds pay a quarterly dividend. And you know, a lot of these people are done earning. So now they just want to get a good return on their capital and get consistent cash flow so they can continue to pay their bills and continue to generate some income.

The self-storage is an interesting and unique one that we haven't gotten before. I'm curious if you can talk a little bit more about that for our readers who aren't familiar with that.

I mean, I know myself, we've moved several times. I would challenge pretty much anybody to go into their closet or their house and look around at the amount of stuff that they don't need. Think about what happens when people are moving, like they are now, all over the place, how much extra stuff you have. And a lot of that finds its way into self-storage. A high percentage of Americans are leasing a self-storage unit and they have stuff in there that they really just don't ever plan on getting rid of, and they stay customers forever. So it's just really a good business and really cash flow driven. You can service your debt on any investment in that space really quickly. I would encourage anybody who's looking for a passive income investment to look hard at self-storage.

Do you happen to remember how old you were when you first started investing and what your first investment was?

Yeah. So I grew up in New Jersey. I had a mentor who was a trader at J.P. Morgan Chase who passed away in 2012, but he left JP Morgan after 9/11. He was in one of the twin towers. After that, he never went back to the city. So I spent the summers down at the shore in New Jersey, we had a beach house, and I would actually stay with him. He was a day trader after that and I got fascinated by the movement of markets and how markets operated and flowed. So, I actually began investing some of the savings I had from working when I was a kid, and my first investment was in Ralph Lauren stock. That was the first thing I ever bought, back in 2008.

Can you name your biggest investing win and your biggest investing loss?

My biggest win is definitely Snapchat. My biggest loss... I hate to say it but I haven't had a massive loss. I have a lot of money out on deals. I haven't really had a massive loss yet. I'll say actually in public equity, a company called Warren Resources. They were a fracking company that I invested in. That was probably my biggest loss. I'm really fortunate in the alternative space, but on public equities, I got beat up pretty bad on that deal.

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