How do sex toys and the Air Force relate to each other? I’m doing Air Force Service for a couple of days. And in the evening, I headed over to the Amorana office for their annual General Assembly. I took the opportunity to talk a bit about how I started investing in startups at the age of 26.
Video Transcription
So today is one of those days when I have to do Air Force service. Military service is mandatory for males here in Switzerland. And that’s what I’m doing today!
Now, our annual service usually has two parts. One is preparation for the training. This is what I’m doing today and tomorrow.
Another 3 and a half weeks spent in the army or Air Force training for the troops.
Just because of the confidential nature, I’m probably not going to be filming much today, except for the evening when I’m headed to Amorana for a board meeting. It’s a company that I’ve invested in 4 years ago. It was the first investment of Tenderloin Ventures. And what Amorana does is they sell sex toys in a very fun, mainstream and clean way. And it’s been pretty successful in Switzerland with that approach.
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So today we got quite a bit of stuff done. We’re preparing all these training courses that will happen over the past… or over the next 6 months.
I’m gonna do service at the end of the year in December. So it’s great to already be here and meet the other officers and sergeants and discuss how we’re gonna approach stuff – who’s doing what – so that we have a pretty good idea of what needs to be done until half a year from now.
The Swiss “Militz”
I think the Swiss system is quite unique in that it has… well the German term is called “Militz”, meaning basically civilians who also have jobs that do service once per year. And I think it’s a pretty good system because you don’t have to have a huge professional army. At least in my unit, I feel they’re doing everything to make it work.
So, for example, this General Assembly and board meeting that I have tonight with Amorana – I’m able to attend that even though I’m doing service. Because there was no high priority item for me to attend tonight here. I think that’s a good way for the military and private life to not interfere too much. And now, I’m headed to Amorana.
What Amorana does
Getting closer to the office and looking forward to hearing the updates. What’s interesting about this company – Amorana – it’s one of Switzerland’s largest e-commerce companies for sex toys. And so it’s always interesting not just to hear the numbers but also all kinds of fun facts from the world of sex toys.
What kind of toys are new, which ones are doing well. What’s also always interesting is to hear what people search for or interesting customer support requests. So these board meetings are a bit more lively than others, typically.
How I became an investor
Alright, so I just returned from the Amorana board meeting and General Assembly and I’m now back at the barracks.
This is where we’re staying – a room for 4 people. It’s very nice. If you’re an officer, you get a more private setup. This is where I’m gonna be for the next 2 days.
And today I want to talk a bit about how I became an investor. What my thought process was.
We started – when I see “we”, that’s Fabian and me – we started Tenderloin Ventures back in 2014. We started thinking about it and kind of building it out in 2013. But at the beginning of 2014 is when we made our first investment.
To become a startup investor, I think there’s different sizes or different chunks that you can take out of a financing round. We set up Tenderloin Ventures to do 10 investments with 500,000 Swiss Franc investment per company.
How we got the money to start investing in startups
Here’s how we get there and how we got so much money.
So in total, we set aside somewhere around 5 million Swiss francs. Right now, we’ve invested less than that – probably like 2/3 roughly of that money is currently invested in some of our investments. And now some money starts coming back as we sell companies.
How did I get there, how could I invest so much money roughly 4 years ago when I was 26?
There’s a number of different aspects to that. A) I did not have that much money laying in my bank account but I did have some cash flow from businesses that I’ve built previously, I had some savings and even more importantly – I knew this was what I would like to do and learn about. And I was so eager to get more exposure to more companies and learn in parallel – that’s why I also use this term “Parallel Investor” because the way I invested was not just putting money into a company and then seeing it grow or fail over the next few years but during the 3 years when I was mostly an investor, I spent about 80% of my time with one of our portfolio companies. The remaining 20% on either Mediasign and other companies or on startup pitches and meeting new companies and potential investments.
What would you do if money was not an issue?
But back to the money question because I think that’s probably interesting for a lot of you. So I could not afford to invest those sums of money into single companies. But I knew I wanted to invest so every time I asked myself the question “What would I do if money was not an issue?” What would I like to do if I had 10 times as much money as I had or a 100 times even? And the answer for me was always invest in young companies, be influential in the first couple years of the company’s growth, share my experiences, share my learnings that I’ve made in my companies. And even more importantly – learn from those companies.
Because I always knew I wanted to go back and be an entrepreneur afterward. But I wanted to go through that phase where I could learn from companies in parallel, not just one company after another. So learn in parallel versus in series.
And so once I’ve realized that that’s really like – if I had more money – that’s actually what I wanted to do with it, it would not be investing in real estate or buy a plane or whatever, I wanted to invest in companies and contribute to their success and also learn from them so that later on in life like now when I go back to the entrepreneurial side, I would have a large backpack filled with experiences that I could apply when I build a company myself.
So Fabian and I, we started working together in 2002. So it’s been 16 years since we’ve worked together. And we’ve worked on numerous projects together. Typically, we feel that we have a very complimentary skillset. For some projects, he would take the lead and I would stay more in the background and then vice-versa on other projects.
So I approached him with the idea – also because we had gotten offers or he had gotten a lot of investment offers and he sometimes asked me for my opinion as well because he knew that I spend a lot of time looking at companies and figuring out what are the success factors and what leads to failure.
And so I approached him. And Fabian is in the fortunate position that his family has a certain wealth. His dad was an entrepreneur in the finance sector and he’s done really well. He’s a very smart and busy guy. He’s worked incredibly hard from what I could tell from my perspective. So now they’re looking for great investment ideas.
So what I did is I imagined in my head “what if I had the money – what would I do?” And I thought about this for probably like a year before I first talked to Fabian. By that point, I had already virtually assembled a portfolio and see how those companies did and learn from that. And so when I first approached him, I had this really strong pitch. And I was telling him how we should select companies and what our thinking process would be and how we could support them, what I would spend my time on. What our investment philosophy could be and so on and so forth.
And of course, I was also in a fortunate position because I had someone like Fabian that I could easily approach and just bounce ideas off. But on the other side, it also adds a ton of extra pressure. Suddenly your business partner and best friend also becomes your investor.
On one hand, of course, it adds more areas where you can succeed but it also adds more areas where you can fail, right.
So looking back, I’m extremely happy and grateful for how this has worked out. And I think we’re on the right track. But it does take some time to invest in startups and make real profits.
Crypto vs Startups
If you compare this to the crypto space like a coin usually becomes liquid months or most likely a couple years after the idea was coined and money was raised. Whereas in the startup world, a liquidity event might not come that soon. It could take – our assumption – is that it takes 5 to 8 years on average for a company to become liquid. Meaning when you can get an actual return on your investment. Before that, you might invest and other people might invest at a higher valuation so on paper you’ve made a profit. But it’s not a profit that you can actually transfer to your bank account. Until the company sells or there’s a larger investor that wants to buy out all the previous shareholders or the company goes public. Which is – the last case is definitely the rarest in Switzerland.
So the last few years as a startup investor have been extremely valuable to me. I’m extremely grateful. The amount of experiences that I’ve gone through and that I’ve been part of are extremely valuable. I feel that I have a very large backpack of experiences that I carry with me now that I’m going to an entrepreneurial role while I was building Sendtask or now building DFINITY or building Glimpse. I feel there’s a lot of profit that I’m making day-to-day just because I’ve accumulated all these experiences.
The learning I want to share with you
And so what I wanna share as a learning with you is: if there’s an idea and you feel that’s really what you wanna do but the money’s just not there, you feel like you might have to wait until a later stage in life until you’ve accumulated a certain amount of wealth or experience or whatever it may be, I challenge you to think about how you could get there quicker.
Do you really have to wait those 10-15 years until you can make that investment or can you leverage the fact that you’re so passionate and enthusiastic about an idea and get someone else’s money? Someone who might be looking for someone like you with ideas on how to invest and is willing to put in their time. And then get a small share of that investment. And then hopefully if you do well, that small share will still equal a large amount of money and then you can start using that money to reinvest and slowly build out your profit share.
That’s the idea I wanna leave with you guys. If there’s something that you’ve always put off for the future because you thought maybe you could not afford it right now or you don’t have enough experiences, I just challenge you to think about if there’s a way how to get there quicker or if you actually have to do it all yourself. Or if you can leverage someone that you know or don’t know and just start talking about it and see if it succeeds.
And with that, I’m gonna go back to the Air Force life. I have a bunch of stuff to do tonight. A couple more calls and meetings. And with that, I’m off and I’ll talk to you tomorrow!
You can listen to the audio version here:
