How do you take your idea from napkin drawing and turn it to reality? Why you find a business investor, or even better, a business incubator. In this episode, Dr. Diane Hamilton sits down for an interview with Jared Yellin, co-founder of 10X Incubator and SYNDUIT. Jared discusses his start conceptualizing and developing a product that didn’t exactly go as planned, and what he learned from the experience. Jared talks abut founding SYNDUIT, and his partnership with Grant Cardone that gave birth to 10X Incubators. He also gives advice for entrepreneurs with an idea. An episode you need to listen to if you are developing a product and want to know how to get it off the ground.
I’m glad you joined us because we have Jared Yellin here. He is the co-founder of 10X Incubator that he co-founded with Grant Cardone. This is going to be a fascinating show. I hope you stay tuned.
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From Napkin Drawing To Reality: Incubating Business Ideas With Jared Yellin
Thank you. What an honor to be here. I love what you’re doing, what you stand for and I can’t wait to share with your wonderful readers.
Thank you. I’m excited to hear about what you’re working on. I know that Grant Cardone has done a lot of amazing things in what you’re working on as far as an Incubator probably is very timely. I do want to know a little backstory on you before we get into that because you’ve done a lot of amazing things. Those are three pretty interesting companies. Can you give me the backstory of how you got into all of the things that you’re doing?
When I was twenty years old, I had this realization that I’m going to eventually be a dad. I knew it wasn’t when I was twenty but I don’t know many twenty-year-old young men that think about being a dad but I did. The reason I was is I was reflecting on my past. My parents went through an intense divorce when I was younger. I’m sure there were worse divorces scenarios than there are but it was rather intense. When I was reflecting on my past, I declared that by the time I have kids, my life has to be distinctively different because if anybody were to ask me, what was your childhood like? I would have said it was loud. There was nowhere to go for peace.
I wanted to create a different experience for my children. As I was thinking about that, I thought to myself, “What does that even mean? What does it mean to create this different experience?” The word freedom kept showing up for me. That’s a cool word. What does freedom mean? I started defining it deeper. For me, freedom meant time freedom, career freedom, financial freedom and geographical freedom. There were fourteen different freedoms that I defined when I was twenty. I’m like, “That’s amazing.” My only problem is I don’t know anyone that has that life. There’s no one for me to model. How does someone create something that they’ve never seen before? I realized that the only path was entrepreneurship.
Fast forward to 2021, I have two beautiful children, Taylee and Ryker and a beautiful wife named Lindsay. I have that freedom and it’s because I chose entrepreneurship. I’ve launched tons of companies since 2005. I’ve had a few great runs. I’ve also had some beautiful learning experiences as well. I’m what you call a non-tech tech founder. What that means is I don’t have an engineering bone in my entire body. I know how to write marketing copy and how to sell. A few years ago, I launched a company called Synduit. The vision for Synduit was to build a SaaS product which is called Software as a Service.
Specifically, the simplest marketing software in the world for the everyday small business owner that was pre-populated with content for every major industry and that sounded cool in my head. I didn’t know what I meant by it and I didn’t want to start throwing money at the concepts. I’m like, “Let me buy some time to figure out what this means.” What I did was started selling myself as a copywriter and I had two high-profile entrepreneurs who gave me a chance. We did a performance relationship. I performed well and they told everybody about me. Fourteen months later, we had 400 clients like those two. We built this big digital and creative agency for thought leaders. It was fun. It was exciting. We had the who’s who of every industry as our client. For me, this was a means to an end. I wanted to launch this tech product.
In 2013, I have the clarity of what the product was going to do. I was ready to pursue it. I went out and hired a software development firm out of Boston, Massachusetts. I shared the vision and they said they could do it and it would take ten months and $750,000 to build the first version of that software. I went all in. I funded it myself. At the end of 10 months, they delivered the product. They said, “We have great news. What we’ve built so far is amazing but it’s going to require another $1.5 million to finish it.” I became one of those statistics. The statistic of non-tech tech-founder that gets taken advantage of but there was so much silver lining in that experience for me. I wouldn’t be where I am if I didn’t have that experience because there was this one person on our team, one of our engineers, whose name is Mani.
Before Mani was working with me, he lived in India. When he lived in India, he started his software development firm out of a little tiny apartment that his entire family lived in. Three years later, that little firm grew 100 employees and they did some extraordinary work in India. He ended up selling that company in 2011 because he wanted to move to the US with his wife to start their life here and have a family. When he moved to the US, he’s living on the end of my street from my original office was. We were meant to collide. He could have been anywhere but there and I would not have met him. He was less than 30 seconds from my door.
In 2014, I ended my relationship with that vendor. I said, “Mani, stay with me and be my CTO,” and he did. It gave me a chance to do the company right. We went out and hired our software development team in the US, in Canada and then also in India, as well. For anyone in tech, if you can crack the code on India, you’re in great shape. It has the best talent. It’s hard to figure it out. For Mani, this was easy. This was like his friends and his family. We hired the team and they were wonderful. The only downside was they were all contractors. It’s hard to retain contractors anywhere but especially difficult in India because their income is not recognized by banks.
In 2017, I launched a company in India that I owned so that I can employ our team. We doubled our team in India that same month because it was easier to recruit employees versus contractors. That was my catalyst for Synduit. In 2021, Synduit is well over 40,000 active paying users on the platform. Little over 40 people on the team. We got remote five years ago so they’re scattered everywhere. The real magic and the beauty of this story and where it gets interesting for your readers is what happened to me in April of 2020. I woke up one day and I realized I’m officially obsolete in this company which should be every entrepreneur’s dream. I was happy about that. I wanted to declare it. I didn’t want this to be a secret. I want everybody to know that I know that I’m obsolete.
I called a meeting with my top four people. I said I have an offer you can’t refuse. I gave them meaningful equity. That’s the day that I’m officially obsolete. They worked hard to make me obsolete quickly. I am now officially obsolete. I spend less than ten minutes a month on the company. It completely runs itself with our team driving it. For the first time in a decade, I had a clean slate. I had the bandwidth to figure what the chapter was. I was thinking to myself, this is the time of my life where I need to go after a moonshot. Synduit is creating a great life for myself and my family but this is moonshot territory.How does someone create something that they've never seen before? The only path is entrepreneurship. Click To Tweet
This is the time to do something that that either shakes the world up or I’m going to go down trying. As I was thinking this way, I realized what I feel called to do is what I did with Synduit but 10,000 more times by 2031 and that’s a ridiculous number. That’s a moonshot. That’s what it should be. I called up Mani who’s still my CTO and I said, “Mani, I got an idea for us. Let’s launch 10,000 tech companies in ten years. Are you in?” His exact words were, “I’m in because it’s you but I have no idea what you’re talking about.” I said, “Let me explain. We’re going to launch a tech incubator but this is not going to be like every other incubator or accelerator where we invest a little bit of money and provide a ton of mentorship. That’s awesome but that’s not this. This is a place for people to come with their napkin ideas, their business plan/pitch decks or their minimum viable tech products and presents them to us.”
When they present it to us, there are four things we look for. The person, the idea, the competition and how quickly can we scale. If all of that is positively validated, we will cofound a company with this person. We will both take equity in the company so our values are completely aligned and we build the entire company at cost. Software development, go-to-market sales, customer support, legal fundraising and financing. About 99% of the initial MVP cost in India is at cost. It’s a fraction of what it takes to launch tech companies. That led to the birth of CILA Labs. CILA stands for Create, Innovate, Launch, Accelerate. In our first year, we had over 6,000 people submit ideas, of which about 450 of them had a chance to present their ideas to us, which is like their Shark Tank moment. We said yes to 54 of them. We have 54 tech companies with cofounders and then another 10 of our own ideas.
Over 60 companies in the first year. This is the most rewarding thing I’ve ever done because our cofounders are wonderful and special people but they never would do this if our worlds didn’t collide. They didn’t know where to start. They wouldn’t want to be burned in. They didn’t have a ton of resources and now we’re building these disruptive technology companies. Grant Cardone comes into the story. We cofounded a company called 10X Incubator. We’re doing what we’ve always done with CILA but we now have the power of Uncle G himself as our emotional partner to build massive awareness around these emerging technologies that are evening the playing field for people. Supporting people with eliminating inefficiencies and doing a lot of good in the world as well. It’s been a fun and exciting journey.
As you’re going through those, I was thinking, it did sound a little like Shark Tank. I had Kevin Harrington who wrote the foreword of my last book The Shark Tank effect is a scary thing to put skin in the game. I’m curious if you’re saying you’re a non-tech tech-founder, what part of that do you find the most challenging? You’re not risk-averse. Is there some other issue at all that you find scary?
When I met Grant, this whole thing happened in 30 days. When people are clear on their values, they can make decisions quickly. Grant’s clear on his values and as am I. It was more about our personalities mesh to do something like this. I was quoted saying and I’ll say it here again, “This will be the biggest thing that Grant has ever done, what he is doing with us,” and he’s done a lot of big things. When you can deploy what he’s been able to do in real estate and in the world of personal professional development into technology, it is the ultimate accelerator.
The moment that Grant said yes, for the first time in my life as an entrepreneur I felt a little anxiety. It wasn’t because of Grant saying yes and it wasn’t because I didn’t even feel ready to do what we were about to do. To me, it was positive anxiety around the number of people that we were going to be able to create success for faster. I know what I’m best at, I can just get the deal flow. I have never had a concern with somebody coming to me with an idea and them not seeing that we’re a better partner and doing it by themselves. There was never a concern with deal flow. There’s never a concern with our ability to build a product.
In 2021, we have over 200 people on our team in India. We hire 10 to 15 every week. We’re scaling quickly in that domain and those are all employees of ours. It’s a top talent in the country that we’re recruiting. I know we can build the brand and develop the go-to-market strategy. We have incredible finance and bookkeeping team. Our legal team is off the charts. There’s every piece of that journey from a napkin to a launch we’ve dialed in. The one variable is I don’t have an audience as Grant has. The fact that we can take a product and drop it into the morning to tens of millions of people, that’s interesting. One of our products just launched and in the first 24 hours, we had 1,000 people sign up, which felt heroic for me. That was extraordinary but you can put that into his world which is so much larger. We’d have 10,000 people signed up or more.
To your question, there’s nothing about what we’re doing that’s scary or overwhelming because we control all those variables. There was this positive anxiety when Grant and I shook hands, which was where any of the 10,000 companies faster. It’s not about getting there, they’re going to be even more successful. It’s positive anxiety of like, “What does it mean?” From a personal responsibility perspective, from the perspective of power and influence. I recognized and we all know this. These are those clichés in life that you’re never provided with more than you can handle.
This was one of those moments for me. To expand what I even thought was possible and then I went and seized the opportunity. I don’t have risk aversion. I set up systems and teams to control variables that would lead to potential potholes or barriers or points of friction. This is a universe-driven company. I’m not a religious man at all but the universe is driving this. If Mani did not move from India to the end of my street where my official office was, none of this will be happening. There are a lot of those sequences of events that took place to get us to exactly where we are.
It’s interesting to look at the sequence of events, the things that lead to different things. I like your description of your moonshot. I remember attending Genius Network that Joe Polish had put together years ago, where that was the theme. Everybody was putting together their moonshots. Naveen Jain was there. He was going to the moon with his company. Some of the people there were doing some amazing things. You were saying how you got together with Grant. I’m curious what made the two of you get together? What was the impetus for that?
I always tell our cofounders, you’re always one relationship away from a positive explosion. It’s easy to know who those relationships are so that you’re ready for them. Who connected you and me was also who connected me with Grant, Mike “C-Roc”. He is one of our cofounders for one of our portfolio companies called Blooprinted. It is an extraordinary tech company that goes live very soon. Aside from being a cofounder of a company with me, Mike has become a dear friend of mine. He is active in the Grant Cardone ecosystem. He’s part of his highest-level mastermind group. He knows Grant a little bit but he knows the president of Grant’s company, Jarrod, well.
He was at an event with Jarrod and he was talking about the product that we’re building together called Blooprinted. Jarrod Glandt said, “That’s an awesome idea. When that’s live, tell us about it so we can support you and build awareness around it. Grant shared and said, “We’re also going to be building a tech product ourselves. We’re excited. We’re looking for a software development company as we speak. We’re going to invest pretty heavily in this.” Mike “C-Roc” said, “Before you do that, talk to Jared because they have a different way of working in tech. I know it’s what you are looking for.”
He connected the Jareds and we had our conversation and we hit it off personally because he’s my age. We both have kids that are the same age. I then started talking about how we do things and what makes this different. Within five minutes, he goes, “You got the deal. You’re perfect. You are exactly what we’re looking for to build this one tech product.” I said, “That’s amazing. How about I come down and meet with you there in Miami. I’m right in Naples, Florida. It’s a two-hour drive and let’s see if there’s anything else that we can do.” He said, “Great. Be there at 10:00 AM.”
I went out that next morning and we sat down. When I got to his office, he goes, “You drove four hours round trip for a one-hour meeting with me and I’ve already said yes. There’s no way you’re here for a second yes. What’s your agenda?” I said, “Jarrod, I got no agenda but I’m genuinely curious. What are you doing in tech? What are you doing there because what you’ve done in sales and personal development and real estate, you’re in the top 00001% club but not do anything in tech, you’re leaving billions of dollars on the table?” He said, “It’s funny you asked. We had meetings all the time with a desire to get into tech. We have people that pitch us on their ideas and their visions. Sometimes we get close to doing some of it and then in the last note, we’re like, ‘It’s not the right person. We don’t want to have a reputational risk to what Grant has done. We haven’t done it but we want to do it.’”
I said, “What’s interesting, Jared, is I see there’s a huge opportunity for you. Imagine if you were able to incubate people’s ideas, take equity in these companies. Have these companies get built the right way from the start with support and fundraising. When they’re ready, do what you do best. Promote and build awareness.” He’s like, “That sounds pretty cool.” I’m like, “What if we were to do that 10,000 times?” He’s like, “You got to talk to Grant. You’re talking Grant numbers here.” I’m like, “Great. Ask Grant if he wants to meet with me.” Three days later, Jarrod calls and he goes, “Can you come in tomorrow? Grant wants to meet with you. He’s very excited.”
I went into the office and I knew the deal that I was going to put on the table that Grant would say yes to because this was a win-win. Hell’s yes. Let’s do it. I was curious about them when I was going there. He said, “Who is Grant Cardone?” I know Grant the way that billions of people know Grant but who is he as a leader? Who is he as a dad? Who is he as a husband? Because that’s what I cared about more than anything else. A deal that I presented to Grant, we could have presented to any thought leader and they would have said, “Let’s do this.” When I went in, I was deeply curious like, “Is our energy a match? Are our values aligned? Is our force for good going to be something that we can both get to faster by working together?”
The big takeaway for me is I shared my story with Grant the same way that I share my story whenever I meet somebody for the first time. There are people that I meet with that aren’t that accomplished yet and I know that when I’m sharing my story, they’re half-listening. Whereas Grant is extraordinarily accomplished and every word I said, he was listening. He was asking questions, he was laughing, he was acknowledging, his level of the intentionality of listening was special, it made me feel heard and understood. We spoke for hours and at a point in the meeting, he said, “I have people every day trying to sit in the chair that you’re sitting in. With ideas not like yours but look close enough and different opportunities, the things they want me to promote or invest in. Every day, they’re trying to sit in that seat. Sometimes they even get in that seat and we never do anything when people are sitting in that seat. If you had a piece of paper to sign, I would sign it. Since you don’t, I’m going to shake your hand and this handshake is stronger than any operating agreement in the world. Let’s do this.”
I just think this was the right person to do this with. In that timeframe, we went from that to launching a company, building the brand, the website, operating agreements and then announcing it to the world. We have created a surge of opportunity for people that have ideas that are sitting on their ideas that don’t know where to go with their ideas and they found their homes. That’s the journey of my relationship with Grant.
You had mentioned pitch decks. I had Guy Kawasaki on the show and I’m thinking, did you have a pitch deck? I know that Guy Kawasaki does have a lot of opinions on what should be in one and did you bring one to that meeting. I know you’re probably looking for those on your site now with your incubator. I would like to know or did you just go in and chat?
Yes, I went in, chat and I drew him a picture. I doodled a picture of what this relationship would look like so he could see the level of vertical integration. Even that, in the end, way after he shook my hand, I’m like, “I have a gift for you.” It was a doodle. I’m like, “I’m giving this to you so that we can look back years from now when we did it and we’re like, ‘That was the doodle that initiated all of this.’” This is the only area in business where I say, “Do as I say not as I do.” I don’t ever create pitch decks but I do believe people should. I have the ability to help people see a vision just by what I say. I know that most can’t do that which is why it’s important to have a deck that can guide somebody through their vision.
I’ve raised incredible amounts of money. I do it with my words and maybe a Word document that has something that they can read. I don’t but I believe everybody should. We encourage it. We teach it. For all of our cofounders that are in the fundraising phase, we coach them through how to create pitch decks so they’re able to paint the picture of where their idea is going and they’re successful. They do, they tell a story. What they accomplished are two things. They engage people on what we call an emo-lectual level. We’re combining the emotion, which is, “This feels right.” You also engage them intellectually, which is, “This makes sense.” We intentionally help them set up their decks that way so that when they’re presenting, people have that response, “This feels right,” and, “It also makes sense.”
It’s such an interesting field. I’ve worked in different parts of the business, everything from startups to technology firms. They taught so much entrepreneurship. I’ve had to deal with some of the things you’re talking about. I remember having Steve Forbes on the show and we were talking about how he had to save Forbes and making it go digital because of the changes and things that had happened in the magazine field. The tech aspect is such a huge part of the focus for a lot of my students. When I teach the entrepreneurship courses, we talk about crowdfunding, the Kickstarters and the options in the world. I always put things like this in my courses and they’ll probably read this. For those who are thinking of creating a tech startup, what would be their first step? Do they come to you? Do they go to crowdfunding sources first? Where does that fall in the process?
One of the things that motivate me with this is I want to prevent what happened to me from happening to other people. When I outsource the software development firm, it ended up taking two years and $2 million and then I threw it away. There was what we call so much technical debt that was accumulated by bad code shortcuts that it made more sense to start over from scratch and to try to build on top of and fix. We did an assessment years ago to find out how much technical debt we had. The assessment came back and said that it would take us nineteen months and $1.6 million to get it whole again. That’s how poorly done it was versus if we were to start from scratch, we’d have a better product like the be-all, end-all vision products, in nine months and about $600,000.
What I stand to do is to prevent the pain associated with trying this because two panes will emerge. You will give it a shot, you’ll get clear on your idea. You’ll either have some money or you’ll ask friends and family or you’ll somehow use some form of crowdfunding to get a little bit of capital. You’ll hire a software development firm that is completely misaligned with your desired outcome. All they care about is building a product, charging you as much as they can, getting it done as quickly as possible so they can get paid in full. What you care about is having the right product built on time at the lowest price. They’re always going to win if you are non-technical. That’s the typical pain for the non-tech tech-founder.This is the time to do something that either shakes the world up or go down trying. Click To Tweet
Even the technical founders, they go and they outsource their development. The other pain is they sit on their idea. I’m sure you’ve heard this but most ideas in the world reside in a graveyard. People just die with their ideas inside. Without trying to sound too biased, what I’d encourage everyone to do is to submit your idea at 10xIncubator.com. It’s completely free. The process of submitting, the way that we’re going to come back either with questions or an invitation for you to present. Even if we don’t move forward, your idea will be in a better place going through the process than when it started.
We do see such idea flow that we’re able to quickly help people see what they don’t see within their idea even if it ends up not being right for us. If it is right for us, it means you’re cofounding a company with Grant, myself and our entire team as well. Without trying to sound too biased, the best step is to submit your idea. It’s free, it’s not obligatory but we’re obligated to create value for you and to help you see what you don’t see within that idea that might make it more feasible or not making it a good idea and you can pursue some other direction as well.
It reminds me of what I was going through when I was creating my software for my assessment for the Curiosity Code Index. I remember I picked the software company that ended up farming out parts of it to Indian groups. It was a mix of this and a mix of that sometimes. When I got it back, I started over again because I thought, “I don’t want it, the way it is. I’d rather start from scratch.” I started from scratch in a new way with a good situation and it was wonderful. For example, a smaller company like what I was trying to do, comes to you saying, “I need software development.” I’m trying to see if I understand how you do this. You’re taking a percentage of whatever that company makes. You do all the software development for something, whatever their product is whether it’s a SaaS or whatever company that they have. Do you also mentor them? I’m trying to figure out the whole picture.
We are true cofounders. When somebody goes through the process with us whether it’s a napkin idea, maybe if they have a pitch deck or maybe you have a minimum viable product already. When we say yes, we are a cofounder. We set up either LLC or C-Corp, depending on the direction of the company that I go. Once that is set up, we take them through our ideation process which is these four proven and consecutive meetings to get clear on what we’re building, what the economic model is and how we’re going to launch this product. By the fourth meeting, we’re crystal clear on what the minimum viable product is and how much time and money it will take to get there. We have various funding sources through Angel investor networks and funds we’ve set up.
Also, we work with our idea cofounders if they want to do friends and family experiences. Most of them do, initially. They want to invite friends and family to come to an experience to learn about the opportunity. If it’s a great idea, we never have fundraising issues. Funds are then invested into this company and then we build the entire company at cost. Such as the cost of the team to build the product. To build a tech product, to build a brand and go-to-market resources. It’s just all done at cost. We make no money in that step at all. It’s like getting a world-class team for a fraction of what it would take and this team is not going anywhere. This is your team, your CTO, your front-end engineer, your back-end engineer, your QA team and your sysadmin. This is your copywriting and your graphic designer.
We even build a dedicated team to support this person’s tough idea that we now have morphed into a company. Once the products are ready to launch, we develop a ton of energy around it through relationship capital, digital marketing, with this relationship with Grant, he has a huge ecosystem that we’re able to drop these products into. We are involved in supporting the growth of the product, building up the business development team, the onboarding processes and customer support. We set the company up for an exit on day zero. We document the entire journey. By the time the company is at a point where it’s sellable, we have everything present to make that sale frictionless. We’re a cofounder within every one of the companies in our portfolio.
Let’s go back to my example. Somebody has a software idea, they come to you and you get them all the way. You said sellable at the time when it’s launching. Now, are most of these people flipping their idea or selling it off to somebody else? Are you involved with them as they’re running it from that point forward? What happens then?
We go on the journey. Whether that journey is a couple of years or many years. We will be part of that process. We set up the idea cofounder to do whatever they’re best at. Some of our cofounders now are good on the product side. If they know what that product should do, they’re deeply involved in the product discovery sessions and the demos and the testing but they can’t sell anything. They can’t be the face of it, they can’t market it, they can’t do business development and that’s perfectly fine. We keep them in their flame. We then build the infrastructure around them with our team to support them.
We have other cofounders that have no idea at all what the product should do but they’re good on the promotional side, the business development side. We take care of our products. If they’re still involved and provide their inputs but where they’re strong is when the products are ready to go live. There’s nothing transactional about this. We set up a new LLC or C-Corp. We have equity from day zero, they have equity on day zero. We are cofounders and we are cofounders until that company has some form of a liquidity event in the future. Whether it goes on the path of going public or gets bought or it rolls off into a few other companies. We are going to be on the journey from day zero to day exit.
How big are these companies? My daughter, my son-in-law and everybody all work for startups. I’ve seen a lot of the seed funding, the Series A and Series B. Where are they leaving you to get to the next level? As far as what you’re helping them to achieve initially. You’re a partner all the way through but when do they get to the accelerator level?
Now, we finished our first year doing this. We’re all still at that stage of driving these companies but they’re all going to be different. There are several companies, we are confident that will break free that will become multi-hundred million dollars to even potential unicorn type exits. Those individual companies might have 3,000 or 4,000 employees. At that point, they’re going to have grown out of what we’re doing. We’re going to build dedicated executive teams to run those organizations. Others will stay small from a human resources perspective forever. Not necessarily from a revenue perspective but they’re simple businesses. They’re not going to need that level of complexity. They’re all different. Our responsibility to the company is that we do right by the company.
When the company is ready to spread its wings and no longer have us intimately involved, we’ll start building out the management team to achieve that outcome. Those that stay underneath, our tutelage will potentially stay in it forever until their exit depending on the nature of the business. We’re diverse. We have business technology, Software as a Service. We have live streaming technology and AR/VR technology. We have something cool like social technology that we’re building. It’s extraordinarily diverse. Some super simple solutions to complex problems. Other complex solutions to complex problems are the ones that will probably eventually outgrow us at a certain point. Our fiduciary responsibility is to do right by the company. All the shareholders are involved in each of those companies. They all have different journeys within our process.
The income you get from the first few companies then becomes income you can invest in the next company. I’m trying to figure out how you get all the money to help with all this.
We set up an Angel investor network. That was our first solution. That’s been great. We also launched our own crowdfunding platform that we own, which is revenue-based crowdfunding. It’s like an Indiegogo style pre-sell, which has been very effective. We are setting up a fund. The motivation for the fund is our Angel investor network loves the fact that they’re getting exposed to these emerging technologies before anyone else. What they don’t love is reading about them and having them make investment decisions when for the most part these are napkin ideas.
They don’t know which ones are going to be the home runs versus the ones that are mediocre. What they’ve been asking us to do is can you create a fund where we’ll put $100,000 or $200,000 or $1 million of investment capital into a fund and then you can diversify it for me. The fund will go live. We’re excited about it because it’s a unique fund in the sense that they’ll be 50 to 75 early-stage companies in there, very early-stage companies. Because of that volume, I can’t say there’s no risk but there’s little risk because there’s no way that every one of those companies is going to work.
Most likely, a handful will extremely work. A few won’t and the majority will cashflow very well and provide strong distribution for all the shareholders. To this point, it’s an Angel investor network, crowdfunding platform and then an invitation to friends and family night. Those have been the three strategies. We have this fourth opportunity which is almost live, which is a fund that we’re launching for early-stage tech investing.
Is any of it similar to how a SPAC works in terms of you’re waiting for the next big idea?
Not really because we have such idea flow. For example, it’s our idea review day and we reviewed about 100 new submissions. Of those 100, I want to say about 40 of them made it to the next step. We are pretty intense in the application process. About 75% of those, we’ve noticed the numbers have changed drastically since the early days when we first got this going. That 75% of those will be good and viable opportunities. In 100 deals, we might get 25 new companies that emerge. We’re going to be spinning up funds quickly because each fund can only accommodate 50 to 60 companies. It’s not waiting for that one. This is a diversified early-stage company. As an investor, you don’t know every holding in there. Although it is public for you to see, you’re not doing due diligence on each one. You’re just investing in it. It’s diversified across all of the investors that are in the portfolio.
For Angel investors who are reading, is there a minimum investment?
That’s what we’re defining now. It’ll probably be around the $100,000 to $200,000 mark. It will be the minimum investment for the fund. We will define every final rule for the fund. Here’s what’s interesting. Let’s say it’s $250,000 is the minimum investment and there are 50 companies in the portfolio. What’s cool about that is if you put in $250,000, it’s like you’re putting in $5,000 to 50 companies, which you couldn’t do anywhere. No one wants a $5,000 investor on their cap table. Whereas you can and it creates such incredible diversification. The other thing is this, in early-stage technology, there are six-core risk factors that show up. One of those risk factors is the tech. Is the tech can even be built the right way? Another one of those risk factors is fundraising. Are there going to be enough resources available?
Another risk factor is the team. Is the right team going to be present? Another risk factor is scale. Are the right systems set up for onboarding and customer support and sales automation? Another risk factor that will often show up is the exit. Is the exit present? All of those risk factors are risk factors that we take responsibility for. Our team takes the responsibility for those risk factors. We’re building a product, we are the go-to-market team and we’re setting up systems for scale. We’re setting up the fundraising and everything from day zero for that future exit. Because of that, it doesn’t eliminate the risk but it makes it significantly lower for these ideas to become companies that are viable in the world.
They’re giving up a percentage for this, which anyone would anyway when you’re getting an Angel investor. Are you’re giving up more doing it this way? What’s the downside you’re going to have to explain to people that they might find hard to swallow at the beginning?
Here’s what’s interesting. Jeff Bezos owns 10.7% of Amazon. He’s totally good. He’s fine. Often, people are so intense with that equity. What they should be intense about is how big is the pie going to get? Because for me, if I value on 10% of a $100 million company then 100% of an idea that’s never going to become anything. We often have this conversation with people when they’re going through the process. They’re trying to figure out if this is right for them, which is how big you can get this on your own. Usually, they’re like, “I can’t get anywhere. That’s why I’m here.” I’m like, “Alright.” If you can’t get this anywhere on your own and if what you have is a zygote. It’s not even an idea yet. It’s just a concept.
There are about 9 million miles between where you are and launching this thing, let alone going for an exit. Having anything and this is going to be exciting because you’re an entrepreneur for years. The vast majority of the people that were cofounded with, the idea we built is not the idea they submitted. Because once we got into the trenches with them and started doing more research on the industry or the opportunity, you’ll realize their original submission was missing the mark but we now figured out what the mark is so now we build that. It’s maybe more like their idea.You're always one relationship away from a positive explosion. You need to know who those relationships are so that you're ready for them. Click To Tweet
Every deal is exactly the same in 10X Incubator. We do this intentionally for two reasons. One, it makes the administrative process feasible. We have so many companies. Every company has its unique deal structure and it would be somewhat impossible to manage and organize them. The second is it is great when you’re talking to somebody and they’re about to make a decision. There’s nothing to negotiate. It’s the same deal structure, same operating agreement and everybody has the same terms. It’s a third of third of third. A third for the idea person, a third for the tech partner and the third for the promotional partner. 10X Incubator owns 2/3, the idea cofounder has 1/3. What you’ve just done is cofounded a tech company, which most likely was a concept initially that we’re turning into a company with myself, with Grant and all of our teams as well. We build that pie to be exponentially larger together than it would have been if that person attempts to do this on their own.
For somebody who has a great idea for some software, maybe they liked the idea part but they hate the sales part. They don’t want what comes next. You mentioned a lot of the aspects that you can do. You have agreements of who does what, how much and of all that stuff that goes on. Do you have a situation where they come in and they go, “This is my idea. I want to partner with you but I want it to be on cruise control. Somebody else handles it once we create it.”
Yes, we do. In those scenarios, when they feel that way, they’re very fair, we will bring on another person to support them who will get Class B stock based on hitting specific KPIs. If somebody is like, “I have a napkin, here you go.” They don’t have 1/3 of a napkin because they need to put in the effort to make that a company with us. We’ve yet to have a scenario where someone fought us on that. We have several people that came to us with ideas and they were upfront about it and they’re like, “Here’s my reality, I want to use this more than I want to found it.” We’re like, “Cool.” We give them a little bit of something saying, “Go on the journey with us,” but we would only build the team around what’s missing so that there is somebody sitting in the seat as an active cofounder.
Often with fundraising, that seat is a salaried seat and they earn equity over some time so they’re motivated to perform for the company. The whole premise of this is the deal structure. That is the case. That 1/3 is for somebody sitting in the seat as a cofounder. If the person with the idea doesn’t want to sit in that seat, based on the expectations, it’s fine but we’re going to find somebody to sit in that seat. We need somebody to drive it and to want it. We want it too. We are in this thing to win it. We’re not motivated by equity. We’re motivated by cash-flowing tech companies that are going for an exit. We’re going to play our part to every degree. We would like somebody to sit in that seat, become the face of that company, make those decisions with us and also on their own. If that’s not the idea-person originally, we will find somebody that cares about what we’re building.
What time commitment do these guys or gals who run these companies are looking at? When you talk about this, are they working 40 hour weeks, 100 hour weeks? What are you seeing as their commitment?
Initially, it’s very minimal because when we’re building a product, it’s a tech experience. The way that we build a product is we will have some form of a minimum viable product between 90 to 120 days from the first line of code that is written. We keep on building on top of it at that point. Let’s say in the first 60 days they have a meeting a week which is usually about 30 minutes long and it’s around the product. They’re reviewing what’s been done, demoing what’s been done and answering any questions. It’s about 30 or 60 minutes a week. It’s minimal.
After that 60th day, they get more involved. Probably about 4 o 5 hours a week. That’s where they start getting involved in the go-to-market side. They start making decisions on branding and messaging. Our team is creating all of this. Writers, designers, web admin and digital marketers. They’re more involved in ensuring that we’re going to deliver on the voice and the messaging. We then start to integrate business development. Usually at around the day 90 mark. That’s where we teach them if they don’t know how.
We also do the business development, starting to set up meetings with strategic partners. We want them at those meetings. At least initially, it’s their involvement. That work will take a little bit more time. It doesn’t become a full-time thing until it’s meant to be a full-time thing where the company is now cash flowing and it makes sense for them to either stop what they’re doing or create the space to make this something that’s full-time. We don’t believe in the whole 100-hour thing. I don’t believe it should have to be that way.
We talk a lot about this internally. One week within our company is like a year in the real world because of the speed that we move but it’s not going to have lives. At 5:00 PM every day, I completely stop and I’m a dad. I leave my phone in my office and I don’t even look at it. I’ll never take a meeting after 5:00 PM. That’s the standard. Everybody has to be who they are as either an entrepreneur or intrapreneur but also who they are in life as well. We set that standard for everybody. They learn how to make the most of the time that they’re working. This never becomes the 100-hour a week for the first three years, eating ramen noodle type of thing. We stand against that.
We want to set up a structure to become sustainable, healthy and fund the entire time. That’s intentional because that wasn’t my reality. When I decided to self-fund, the first version of Synduit, it was the darkest period of my life. I’m a health-conscious person. Personal development is at the foundation of everything I do and I still did those things. It was so dark because I had no one to talk with about this journey. I was engaged so my fiancé definitely couldn’t handle it. Now I’m married but back then I was engaged. I know that my friends understood it. My family, if they knew the amount of money that I was burning through would have health challenges. I have nowhere to go.
It was dark and uncomfortable then all of a sudden, they come back. The software development firm and they’re like, “It’s another $1.5 million.” I’m like, “Who do I even go to have this conversation?” When we started doing this, it was just me, Mani and our Director of Operations, Katie. There were the three of us and then we grew fast. I’m like, “I want to make this fun from day zero because I never had that.” I went through pain and suffering to get to the fun but I don’t believe you have to. If the right team is present that has the right track record, it could be fun. That’s what we’ve done. Every one of our cofounders is having so much fun building their tech companies. I don’t know anyone that has gone to a software development firm and can say the experience was fun. It is riddled with unknown, disappointment and frustration. That’s isn’t what it is with us.
Let’s say that you get together and you signed an agreement. You are working together and you say you stay together until you sell it, IPO or whatever that arrangement is. What if for some reason they just aren’t happy and they want out?
That’s part of it too is that we only want people present that want to be present. In our operating agreements, we have the ability for us to buy back their equity. We have different scenarios that can happen. This hasn’t happened yet but I’m sure this will. There’s a chance that they’re going to say and we feel the same way, “It’s the time to sell the company.” We don’t want anyone doing this if this is not where they’re at in their life and where they want to go. One of the early exercises we do to see if we’re aligned is what is their goal with this company? What do they want like, “I want to put in my fees in five years.” Everybody has different aspirations financially, “Once I make $3 million, I’m good for life, that’s all that I need.”
That’s cool. We want to know where they’re at. Not that they’re wrong or right but if we know where they’re at, we can then maybe help them get there faster, set the company up to grow beyond that. We don’t bring on investors if that’s their goal because that’s not an interesting investment opportunity. The more that we uncover initially, it creates that healthy relationship. We also have a rule, which is a rule that I think every couple should adopt and my grandparents taught me this years ago which is to never go to bed angry with your partner. If you’re ever angry, disappointed or frustrated with anyone. Maybe you’re angry at your lead engineer in India because of something they said. It’s very different times for you. Make sure you call them before they go to bed so that you can resolve it because no one should ever go mad at each other.
This is the culture we build. The other cool thing is we built an ecosystem of people that are all doing the same thing, just different and that’s special. We have this whole mentality inside of our cofounder shift, which is together we achieve more and they all feel that way. We have a monthly mastermind session with all of our cofounders. Quarterly in-person immersions where we all get together for three days. The energy that is produced from the group with regards to joint ventures, strategic alliance, support and friendship is off the charts because they’re all doing the same thing. There are different products, different services but they’re all early-stage tech founders. It gives them a chance to connect and unite so they’re not feeling lonely on the journey.
What’s the smallest size company you’ve taken on and/or that you’re interested in? For projection, are any of them one-person type of companies that the software runs itself and you can have one guy running it? Is your minimum a big company that has quite a bit of people and could lead to a unicorn situation? There’s a scale.
Both extremes. Probably not one person as technology does need a life. When we set up teams, the team starts with 5 engineers and they’ll scale to about 12 to 15. Once we’re at our velocity and then they can scale back down and two to three people can run it forever. This is in India. It takes a few thousand dollars a month, very low and that’s well-paying in India. They’re happy and there’s that cofounder. That’s probably the leanest that it would get. Usually, there’d be some fractional customer support that we need as well, if not a full-time support person. In a lot of instances, a lot of them can stay. A handful of them will eventually outgrow us.
There’s one live streaming technology we’re building that has limitless potential. It’s like Twitch, the video game platform but just not Twitch. It does different things. Twitch has 3,000 employees now. The reason they’re heavy is that what they’re doing is heavy. They built their own life from technology. They have servers around the world. They need a team to upkeep all the servers. There’s no third-party they’re using. They built everything from scratch. The trajectory for that one is they will outgrow us. That’s also one that we have to raise tens of millions of dollars over the course of time because there’s no true economic model. It’s more of a data, an eyeball play.
You need to keep on paying as much money as possible to get enough data and eyeballs when somebody wants to buy it but they’re all different. We diversify intentionally. What we care about most is the person with the idea. There have been several great ideas that have come through the process that in the end I said no because I didn’t like the person. They may be fun but I didn’t feel aligned with them. I didn’t want to get married and get divorced. There’s no right fit. You have a great idea, just not the right fit.
There are other times that the ideas are just okay but the person is darn good that we’re like, “Let’s make that idea great with the person.” We then keep them involved and make the idea great together. The key with all of it is because there are four criteria. Person, idea, competition and how quickly can we scale. The person is the absolute non-negotiable. If they are not something that we want to partner with, that we want them to become wildly successful. If we don’t have those desires for him, it’s not worth moving forward.
Let’s say you like the person. How much money do they have to come in? Do they have to come up with any money?
$5,000 initiates the relationship. We set up the LLC, operating agreements, service agreements, stock documents like investor documents and then there’s that innovation process which takes about four weeks where we go deep to feel what we’re building. That’s the only financial expectation of the idea-person. From there, we fundraise. We do encourage the idea person to do friends and family experience. Once the fund is set up, we’ll just drop it into the fund and that’ll make that even smoother.
We do like the whole friends and family concept for some of these people because we always tell this story, which is what happens when this works? All of a sudden, your napkin gets sold in four years for $174 million and we’re celebrating. We rent a beautiful restaurant in Miami. We’re having a great time and at the party, it’s like, “I wish Uncle Bob was here.” If you wish Uncle Bob was at that party then just invite Uncle Bob to make a small investment initially so we can go on that journey with you. We do these friends and family experiences. We always tell people, “Don’t assume that someone can or can’t, assume they want to learn what you’re doing.”
Invite them to come to a non-pressure environment. We are presenting what you’re doing regardless of their involvement. Inviting them if they want to go on the journey and they can invest $25,000 to get in or whatever the number is that they set is the minimum. As a result, people are getting people they care about to go on those journeys with them and I do like that. These are early-stage, give them an opportunity they wouldn’t have otherwise and it’s not big numbers. If they lose all the money, which they’re not going to. Let’s not ruin their lives. They’re very attainable numbers to invest in.Everybody has to be who they are as an entrepreneur, but also who they are in life as well. Click To Tweet
You’re helping them set up the LLC. At the end of the year, when they’re doing taxes, who comes up with the 10-Ks and the different things that you have to tax?
We do it all. We have an in-house CFO and bookkeeping. We do the whole thing.
This is fascinating. A lot of people reading this probably want to know a lot more. I thought this is an interesting idea and I think you are onto something big. I was looking forward to talking to you about this, Jared. Thank you. A lot of people are going to want to reach you. Is there some site or something you’d like to share?
Yes. I would invite anyone with a napkin, a pitch deck or minimum viable product to head over to 10XIncubator.com and you’ll see right there. Submit your tech idea. Go through the process. It takes about twenty minutes to submit it. It’ll go into our idea review experience and then we will be in touch with the next steps once we have a chance to review everything.
Thank you so much, Jared. I wish you a lot of luck with all that you’re working on. It sounds like you’ve got some exciting things. This was fun.
Thank you. I appreciate and love what you’re doing, love what you stand for. I’m here to support you in any way, as well.
I appreciate that. Thank you.
I’d like to thank Jared for being my guest. We get so many great guests on this show. If you’ve missed any past episodes, you can catch them at DrDianeHamilton.com. If you’re interested in taking the Curiosity Code Index or the Perception Power Index, everything’s there on the site. I hope you enjoyed this episode and I hope you join us for the next episode of Take The Lead Radio.
- 10X Incubator
- CILA Labs
- Change Maker Ventures
- Kevin Harrington Past episode
- Genius Network
- Naveen Jain – Past episode
- Mike “C-Roc” – Past episode
- Guy Kawasaki – Past episode
- Steve Forbes – Past episode
About Jared Yellin
Jared Yellin is the Co-Founder of 10X Incubator with Grant Cardone as well as CILA Labs, SYNDUIT and ChangeMaker Ventures.
SYNDUIT is the first marketing platform with content that is currently supporting over 40,000 small businesses from around the world.
CILA Labs is a technology incubator that builds technological ideas with and for non-tech entrepreneurs AT COST and then focuses on massive acceleration and positive disruption.
He recently launched ChangeMaker Ventures, an Angel Investor Network that has over 100 members and climbing.
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