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🎧 New on the Podcast: Tax Strategies and Wealth Management
In this episode of the It’s All About Everything series, we break down the financial essentials every founder should understand before—and after—a liquidity event. From QSBS and 83(b) elections to trust structures and the family office mindset, our expert panel shares real-world strategies to help you protect your upside and build long-term financial stability.
Whether you're preparing for an exit or just getting started, this episode will help you make smarter, more informed financial decisions.
Featuring:
- Todd Saunders – (Moderator) CEO at Broadlume (recently exited)
- Tres Evans – Managing Director & Private Wealth Advisor at Morgan Stanley
- Robbie Shattuck – CEO & Founder of Athos Private Wealth
- Aaron Bedrick – CEO & Founder of Symphony Strategies
- Max Sabert – Private Wealth Advisor at UBS
Creators and Guests
Guest
Guest
What is Very True by Verissimo ?
Brought to you by Verissimo Ventures, The Very True Podcast features candid conversations with early-stage founders, operators, and investors shaping the future of tech. From behind-the-scenes startup stories to hard-earned lessons on fundraising, scaling, and staying resilient, each episode offers a window into what it really takes to build something bold.
Tax and Wealth Management - Its All About Everything Series _Recording
[00:00:00] Thank you everyone for joining. Excited to, uh, talk to everyone today about some different wealth management and tax strategies. Um, I think it'd be good to start here if everyone kind of did a, a quick introduction before we dove into things. And I'm happy to start being one of the guest moderators here.
Um, my name is Todd Saunders. I was formerly the CEO of Broadloom. We were a vertical software company for um, SMB flooring retailers. Um, long story short, we raised about $90 million. Uh, we were backed by PE and VC and we just sold the business in December to a Genstar and TA associates owned business. Um, so that's me and I've been through the whole gamut of learning wealth management and tax strategies as a founder.
Um, but I think there's a lot smarter people on this panel that can talk about it. So why don't we do some quick introductions. Aaron, you wanna go first? Sure. Yeah. Um, I started off inside a single family office, healthcare [00:01:00] based family office in New York outta college. I worked there for over 10 years and I've started off focused on investments and I realized there's just so much more alpha that you can add beyond investments if you focus on structure.
Um, we implemented a lot of those strategies by interviewing other multi-family and large family offices, bigger than us, and we implemented them in our family office. I decided I wanted to become a consultant with other. More up and coming families to implement them. So that's what I do now. Awesome.
Thanks Aaron. How about Robbie? Yeah, sure. Uh, great to meet you everyone. Um, I, uh, I'm the founder and CEO of atos Private Wealth. We're, we're based in, uh, salt Lake City and I split my time in Palo Alto as well, which is where I'm at right now. Um, prior to this, I founded or not founded, I, um, was at Iconic and JP Morgan, I joined Iconic in the early days in 2014, ran about 10 to 12 family offices within their, their setup.
Um, a lot of the kind of big tech names you would [00:02:00] know, um, and my firm today, we focus primarily on early stage founders in emerging gps. And we are also a big investor in a lot of funds, SMO being one of 'em. So, um, we leverage our relationships across kind of both, both areas to, um, help founders understand using my background of working with kind of the who's who tech billionaires.
Now you're an early stage founder, what's the pathway forward? Um, what are the mistakes a lot of people make? So we do work with a lot of individuals generally in that space, and then scale with them as they need it. Got it. Awesome. And, uh, let's go trace then Max and round this out. Hi, Trey Evans, part of, uh, the Chase Group here at Morgan Stanley.
So we're a team here. Been around going the Andy started in the eighties. Um, been working with founders venture partners, uh, corporate executives, really around how to plan efficiently for concentrated equity. Uh, we can run, we have a partner who focuses just on trust tax and estate. So really lining things up, [00:03:00] focusing on capital markets, tax efficiencies around how to, you know, diversify when appropriate and set up the right entities for your concentrated equity.
So we work with a number of families from different small to, you know, large now public companies on these topics. Awesome. Max. Yeah, max Sabert. I work at UBS, um, similar to all these guys, work with founders, early employees, corporate executives. We've worked on 50 different client transactions, whether that's mostly liquidity events, but you know, being purchased IPOs, you name it.
Um, you know, we try and take the role as a personal CFO and take a lot of the things off of busy founders' plates and make their life easier. And, you know, the most important thing is probably the structuring of what they're gonna do up until liquidity events. Once you have the assets, we kind of think [00:04:00] that generally becomes the easier part.
Um, so we're heavily involved early on. Um, yeah. And uh, you know, it's a lot of working with a lot of great people and a lot of great founders. Awesome. All right, so, um, I have a list of some questions and these are come mostly for me. Like personally, I went through all the way from early stage to exit and I'm gonna try to tie in some of my experiences here and I'll kind of ask you guys individual questions, but please, uh, use the hand raise.
So I, if you have something really interesting to say on one of these questions, um, I can just kind of bring you up here. But Max, just because you segued into that, why don't we start with you? Um, you know, when a founder sells the business is not the right time to start planning. Generally. You should start planning early.
But if you're a really early stage founder, like someone of recent of venture is just gonna started, it's almost hard to think about like, oh, cool, I'll get acquired at some point. That'll be awesome. But yeah, not worry about this stuff. [00:05:00] Um, looking back, it's really important. What advice do you give to someone who's just starting out, who obviously at some point is gonna get acquired?
What are like the three or four things that they need to think about now, um, to help start planning themselves for the future? You said that part's like the harder part per se. Yeah, I mean, I think there's it particularly, and I'm sure all of us will talk about this at some point. When you think about planning and structuring of QSBS, there's, I tend to think an inflection point as to when to do that.
It's really hard to recommend start doing that planning unless you're probably a multi-time founder with a lot of assets already. To do that at seed or pre-seed or even sometimes series A, just because you're gonna go through a lot of cost and legal work to do something that may or may not come to fruition.
I think early on it's about having partners that are really throughout the whole process, but early on bringing things to you so that. [00:06:00] You know about them, you know that they exist. As you're having conversations with your board, possible investors, your employees, you know where to go to navigate some of the things that might be going on, um, early on.
It's, it's simple stuff that someone should be helping you out with as it relates to 83 B elections and setting up a maternity leave policy and having somebody that is helping you with payroll and are you gonna use ramp? Are you gonna use Brex? How's that all gonna work? And those are all things that I think a lot of people in our shoes, and by ours I mean the whole panel may not want to get involved in.
They kind of just wanna manage your assets. And as an early founder, it's hard to find that type of advice because most people want you to have the liquidity. Um, so, you know, I think. Partnering with somebody that can at least bring things to your attention, whether you do them or not, is the most important [00:07:00] thing.
Got it. And I know, um, listen, I've seen, I've seen people forget about QSBS and then they're trying to go get acquired and then they all of a sudden have to scramble and try to figure out a whole list of solutions. Um, has anyone here on the panel seen, um, any of a, you know, any type of complicated QSBS situations and something that the founder could have done early to kinda solve that and not get into that issue as they actually go to get acquired?
I mean, I'll, I'll comment here. I mean, Q-Q-S-B-S obviously it's a nuanced thing and it depends on timing when the company was founded, a big thing that, that we've found. And, and max, you, you, you put this eloquently and kind of set it up Well, it's just, as we think about structuring, a lot of it comes down to the estate planning and.
So when I work with a founder, I never, I tell 'em it's never too early to get started, but to match this point, it's expensive. And so [00:08:00] if a founder's paying themselves 70 to 120 K, do you wanna spend 20 K doing an estate plan? Probably not. Um, you, you want to pay rent and, and cover those expenses. So we, we have seen companies too where if you're at the Series A, sometimes the company will then cover that cost for the CEO because it's important for the CEO to be all in and committed.
And if they can remove those personal stresses. And so those are the things that I focus on is, okay, if we can't do everything now, what can we do to remove those personal stresses outta your life? And sometimes it's not the personal stuff, it's the business stuff. Is your cap table structured appropriately?
Is it messy? Do you have all these early founders? How can we clean up the cap table? I think is probably a, a really big top priority. The other is too, if you haven't raised venture funding, if you're an LLC still. That's a fun one that I've seen with Qs BS, where I, I have a, a client I work with who, um, they were structured as an LLC, they hit some valuation.
There were two founders. They then split that. Now your [00:09:00] QSS benefit is significantly larger, but they had to bootstrap. And so those are fun ones that I think are, that are worth looking into if they're, you know, um, uh, you know, portfolio company, you should be a C corp at this point. Um, so it kind of, it's a moot point.
But those are, those are the things that I think are, are really interesting worth diving into. But it's, you know, case by case, it's, it's really hard to drill down. So like, this is the one thing, or here's like the tip and trick that you should be doing. Yeah, that totally makes sense. And Craig, I'd love to hear your thoughts.
I just think the key thing is having the right advisors, like especially on the CPA, to help make those calculations and designations, whether it's at the personal or corporate level, because if you can do it at the company level, it's gonna help your other investors as well, so you can kind of justify it at that level.
We generally run into it for early investors on our side where we're trying to track down what qualifies and what doesn't, uh, and getting that math done even for funds, individuals, et cetera. So I think it's really goes down to that network effect as we've been talking about, of having the right partners that can bring you the right part, uh, [00:10:00] members of the team, if you will, from the legal, accounting, et cetera.
Yeah. One of the things that roll in with what Robbie said is getting an opinion letter that your equity does qualify. And that's a good way, 'cause all the board, all the investors, all their LPs are gonna want that at some point. And bringing that up sometimes allows you to slide in your own planning within that conversation.
Um. So that everyone is on the same page and understands that when there's a liquidity event, we, you know, are of the opinion and we have it in writing from a, you know, reputable law firm that does this all day long, that this equity at the point in which it was received qualified for QSBS. Yeah. And I think what a lot of founders don't necessarily realize is that when you go to sell the business, the liquidity comes in a lot of ways, right?
It can come on bonus, uh, like bonuses. It can come on, you know, [00:11:00] multiple payments. It can come in a lot of ways. And what I have found from selling our company and seeing a lot of my friends sell their companies is that the buyer and company is spending X amount of money. They don't care if you're getting taxed on it or not getting taxed on it.
So they're willing to help you structure the buy most of the time in a way that sure, if we hope you get as much money as possible, they're still only giving you whatever it is, 50 million or a hundred million dollars. But they're willing to work with you, but you need to also have set yourself up for success or else you're gonna be kind of put into a, a tough situation.
Um, I wanna go to Trey and then Aaron on this. Uh, Trey, you mentioned something about a CPA. Um, a lot of founders early don't have a CPA one and two, they have a lot of their like personal finances and company finances and all of that kind of mixed in. Um, what advice do you have for early founders who are like using their own credit card?
They don't really have a CPA, they're trying to figure it out. Like, when is too soon and when is too late to actually start cleaning that up and [00:12:00] calling this thing a real business? I mean, I think as soon as you're trying to operate it as a real business as opposed to a hobby, you wanna formalize things be, and especially as soon as you're starting to take outside money for sure.
Um. Formalizing accounts, separate credit cards, tracking all that. And I do think having a, you know, CPA that can help you either at the corporate or both personal and corporate level is gonna be very helpful, uh, to help divide that, make the most efficient setup of your salary, your, um, tax situation, running through your expenses.
And you can, you know, you don't have to go to the most expensive guy on the street to do that. There's plenty that can work with you at an early level and then you can upgrade as needed if you get to that point. Um, but I do, you know, a big fan of as soon as you, especially if you have outside capital, you to formalize that and really track that appropriately, um, to manage the capital and just be a good steward of capital.
Yep. And Aaron, I assume that you guys work with, a lot of, you seem to work with a lot of family [00:13:00] offices. You probably see a lot of different types of businesses. Like do you agree with that or what are other types of things you think early founders should think about when they're kind of going through their finances and company structure?
Yeah, so one of the, one of the things that can push deals backwards when you're gonna sell is if your books aren't clean. So a lot of my family office or, or my clients that are up and coming that will have a family office are going into the market, they are usually more like an S corp structure. They haven't taken a venture capital money, more like private equity type deals.
So they're usually cash flowing and um, uh, it's different. So when they're, usually they have been running it kind of mixing their personal financials with it. It's something that you could solve for. You do add backs, you do a quality of earnings report. So you can unpack that later on closer to the deal.
But the cleaner your books are, the better your data room is gonna look, the easier the Q of E is gonna be, you're gonna [00:14:00] save a lot of money down the line. A lot of complications. Yep. And I, I wanna ask you something, 'cause you really talked about family offices, like there's a difference of working with venture.
PE and family offices. I have my own opinion on when you should raise from which, and what the advantages are of each. But I'd be curious, um, since you work so close with family offices, I think a lot of founders, like they raise from venture, they raise from eventually from pe but I don't think they necessarily know what the advantages or disadvantages or even how to find family offices.
Like can you give some advice on working with family offices and how that differs or doesn't differ from per, you know, normal venture? Um, sure. I mean, family offices, if they've been investing for a while, a lot of times they're a bit leery of venture 'cause they've usually been burned in venture or they have their money tied up in funds for a really long time and they haven't gotten it out.
So I've found that unless there's a really close connection or a, a passion for whatever your business is [00:15:00] doing, the family office might be hesitant to invest. That being said. High net worth individuals or people who, they're not a fam, not family office size, but people who are looking for alternative investments that might not be, that haven't been burned, they haven't been investing in alternative assets, illiquid assets for a long time.
Um, they might be looking for something more exciting. Um, uh, what you could look for if you're trying to raise money from family offices like that are, there's a lot of times there's groups of investors that will invest together, you know, high, high net worth people, you know, between 10 and $50 million in net worth that are always looking for deal flow.
And they don't necessarily get it all the time. It's not, not a formalized process for them. They don't necessarily have a, uh, these certain hurdles that they have to achieve to pass like a, a board, anything like that. The office might actually have governance, so that might be a more approachable if you're, especially if you're a seed stage or series.[00:16:00]
I can't hear you. Sound's coming through. You can't hear me now? We can't, no. Okay. Uh, I, how I first met, how we first got into family offices and to be honest, like family offices did like two of our important rounds. Um, we went to one of our LPs, no, we went to one of our investors LP dinners, and they had a lot of family offices as LPs and I got to meet a lot of them.
And what I generally understood was that, like you were saying, um, Aaron, they don't have certain hurdles or numbers and they're generally long-term holders in these types of businesses. So they're more willing to do convertible notes or more creative deal structures that a normal venture fund or PE fund won't do because they have LPs.
Um, and what I found is that the family offices that have invested with us are [00:17:00] generally really good silent partners. They hold for the long term. And when we needed a convertible note that no one was willing to give us, the family offices were all about it because sure, they're willing to take the interest payments and it's better than being in the money market.
And all the VCs said, yeah, that's a good deal, but like, I need a 10 x to invest. I don't need a 9% gainer and maybe I'll make 40% at the end of the game, which is the family offices. We're all about it. So I really think family offices are a great avenue to help fund your business when the time is right, but I think they are hard to find a lot of the time.
Um, just kind of pivoting off family offices, you guys all kind of work with high assume, high net worth individuals. And I'll open this question up. Who wants to answer this one? Um, Robbie, maybe you haven't got to you in here in a minute, but when is the right time? I just sold my business. How much money do you need to start your own family office?
[00:18:00] What does it mean to have your own family office? Is that only for people that are worth billions? Or like when should they, after liquidity, should a founder, do they now have a family office? Like how, how do you approach that? Yeah, I'll, I'll, yeah, I'll, I'll jump in and, and add, I mean, working with running and working with multiple family offices and it's, I mean, family offices is such a loose term.
Um, I, I have a client who has less than a million and he's like, Hey, I, like, I wanna run my family office. And I, I explained to him, well, family offices is just a term, meaning you're having your own, your own families running your own company, and you're choosing your own investment strategy, and that is your business.
And the more complicated you want it to be, you can. So there's the, you know, being in Utah, there's a couple families there that have several billion and they have teams of several hundred running their family office, but they're buying. Sports teams and they're doing a lot. Whereas there are family offices that I know of that have two people and they've got maybe 50 to a hundred, but they truly run it like a [00:19:00] true family office.
And I think that like the term family office, meaning means you want to do nuanced investing beyond what I'd say a traditional advisor would do. And I don't think anybody on this call is traditional in that sense. Um, you're not looking for a retail advisor doing stocks, bonds, and maybe a few alternative investments.
You're looking to lead deals, you're looking to go do the convertible note. Um, the general rule of thumb that I've always seen, and I I know UBS puts out, uh, has historically put out some good reports and um, I dunno if Morgan Stanley has as well, but I've seen there's some good ones out there that show the numbers of it's really if you wanna run your own family office, it's the cost that you're thinking about.
Do you wanna have your own CIO Chief investment officer running this thing and doing diligence. Or do you do like what a lot of family offices do, which they say, Hey, we are our own family office and we're gonna do our stuff on the side, but they still partner with one or more advisors. Um, uh, without saying the names, there's, I'd say top five wealthiest person in the world who lives here in Palo Alto [00:20:00] has two adv advice, two banks that they work with that and do their public investing.
But then on the private side, it's a friend of mine who, um, we used to work together at another firm. He does all just the venture investing and they have a very niche strategy. They don't invest in funds, they do zero funds. They only do direct deals, and it's very specific and nuanced to an area that they are passionate about.
So there's no right or wrong answer I'd say as far as starting a family office, it's really just, well. What's your lifestyle? What's your budget? If it's you and you have $10 million and you can live off a hundred KA year, you could run that all yourself, but you know, you're doing it yourself versus hiring employees and treating more like a true family office.
So I, I, I generally say north of a hundred million is good, but ideally three, you know, a hundred million to three, 3 billion, you can partner with any of us here and do that. I'd say above 3 billion is when you can really just start doing this yourself in-house and hire your own CIO south of that you really should be partnering with somebody generally.
Got [00:21:00] it. Yeah. Aaron, you wanna chime in there? I think you gotta unmute.
Um, yeah, I, it's not on the sizing. I think Robbie's spot on, on the sizing. Um, one interesting thing that I didn't know about until I worked inside a family office is that most family offices and family offices, like you said, are very loose term. I'd say I. If you have around 40 to 40 to $50 million net worth total all in, that's where you can start thinking more like a family office.
And I think the family office, the definition in my mind is you, you treat your wealth as a business that is now your business. You're trying to maximize the bottom line. You're gonna bring in advisors to make sure that it's optimized instead of just that, that's your account and you're outsourcing every, all the roles you're actually building, you're building a team.
Um, so if you are structured like that and you, and it really is a business now and you're looking to create and, and maximize wealth for the shareholders, which are the family members, then, and this is a technical [00:22:00] term and this like, you could qualify for this, it depends. It's, it's a nuanced thing, but there's something called a, uh, virtual family office structure based on the lender's family, like the lender's bagels.
Um, they created one, or they were actually, it was, it's a, a case in, uh, the IRS case law. Um. You can actually structure yourself with a management company on top of your family hold holding company, which owns your assets. And you can move fees. I'm gonna get into the details of it, but you can actually deduct the fees and expenses related to investment.
So if you invest in a lot of hedge funds or private equity funds, venture funds, the two of the two and 20 can become deductible through the structure as well as different traveling expenses and stuff like that that go into, uh, you know, investment related fees, expenses. Interesting. Uh, max looks like you have something to say about the family office.
Yeah, that last point that Aaron made was the one I was gonna comment, uh, well, a couple different comments. Um, [00:23:00] the fee like there is economic benefits no matter how much money you have as Aaron just kind of alluded to, to structuring your wealth as a family office. But to answer your question, I think it is in a 50 plus range where you generally see it happening the most.
But I work with. Billionaires that don't have a family office and have a very simple investment strategy and other billionaires who have a family office and lots of employees and are, you know, trying to buy and sell MBA teams. Um, but one thing, um, you know, that UBS did that Robbie kind of alluded to is they kind of saw where at least the business was at UBS and they brought in a whole team of, and this point it's probably a 40 or 50 person team of outsource family office professionals.
Well, not outsource, I know insource, and that's people from family office structure into philanthropy to family advisory to direct deals. And they're [00:24:00] doing a lot of research and. Stuff on that. So, you know, it's been nice just from our perspective, um, having that resource for clients that wanna get that level of touch, um, or throw an idea off of them and say, Hey, should I set up a family office?
Like, what does it look like to have to do that? Um, so that, that's been cool and I think that is where a lot of higher net worth people are heading towards. Sure. Andre, you wanna run us out here? Yeah. Uh, kind of to fall on Max. I mean, our firm's done a good job of creating, uh, we have a number of clients that we are the investment advisor for the family office, and we've actually onboarded the asset reporting side of things to provide that context to the client of where everything lays.
Uh, you know, some of these guys ran hedge funds and they saw on the institutional platform, they could see where their hedge fund was every day. They said, I want that for my personal wealth. So we have that tool where you can kind of provide a balance sheet every day, um, you know, depending on the assets, of [00:25:00] course.
And then combine that with philanthropy, lending, unique investments. 'cause you know, Morgan Stanley's actually doing more direct investments into companies as well these days. So we have a platform where we have access to that, to different sizes from a slug of a sports team to, uh, you know, an AI startup or whatnot directly for the right families to invest in and get that exposure.
Uh, so I think it's a really, you know, a, a good part of our business. But the definition of a family office, Aaron, I'm gonna borrow your definition of how you structure that, because I think that's way better than any way I've tried to say it. It's really up to the individual, but focusing on your investments and your assets as a business is, I think, the right way to think about it.
Um, beyond, you know, whatever else you're doing. Yeah, no, that is a really good way to think about it. And I, I, I think something that early stage founders also struggle with and I'm, you know, um, curious your guys take here. Um, I. You all have worked for great companies, have lots of things to offer, got alternatives, access to whatever you wanna invest in, sports teams wanna invest in equities, commodities, [00:26:00] whatever it is, we'll help you.
Um, I think that's great, but I think that becomes very hard for a founder to delineate the difference of, well, how do I choose Morgan Stanley? How do I choose UBS? Oh, this guy emailed me. Oh, everyone has a guy. So like, how should, how I did it personally was it wasn't about the company, it was about the individual, right?
Because you have to trust that the individual is gonna go in above and beyond for you, that one time you need it and that one time you need it is not, you don't necessarily know when that time is. Um, and that's kind of the route I went through, but I guess I'll open this up to anyone that wants to take this first.
Like you all offer, in a nutshell, very similar things. Maybe there's some nuanced differences, but for an early stage founder, like how do they decide? Who is best for them and how, and how they should pick, you know, their advisor, uh, to start working with. Wants to take that one. We're all gonna probably agree on this.
It's, is what you said. I think it's a relationship [00:27:00] thing. Everyone on this call is, I would imagine more than qualified. I would encourage any founder to, you know, ask some hard questions to whoever it is. Um, I would ask your peers who have maybe gone through this, um, I, yeah, these other guys might disagree.
I think the investment part of this is so commoditized. You're gonna need somebody, as you said, Todd, that's gonna partner with you, you know, when you need something, um, and gonna bring you things that maybe you don't need at that time, but it's just good for you to know about. Um, and ask 'em, you know, what other clients do you have that look like me?
And kind of talk to them. Um, you know, and I think asking to get. Like, references from current clients is important. Um, and, and Max, lemme lemme just double click on that for a second. So I'm an early stage founder, um, and I, I, liquidity is not 10 years away, so I reach out to [00:28:00] you and I say, max, yeah, I got a reference to you.
Like, and, and I'll ask everyone this question, like, what are you doing with that? At this point with the founder, is no money, can they still work with you at this point? Or is it a relationship building until they have money? Like what really is a seed stage company doing, reaching out to someone like yourself at this point?
And what value can you add to them versus like, is it just relationship building until something really happens? Every firm, I mean, UBS will even tell you the minimum, like account size is 2 million, but I built a business and I'm sure these guys have different ways to deal with this. Um. Working with early founders, and to me it's almost like I'm building a venture portfolio and myself, I spend a ton of time that I may or may not ever ultimately get compensated for.
It's not billable, I don't charge for it. Helping them think through, you know, what are you gonna do with your venture capital while it sits there? Are you gonna get a venture debt line? How do, who are you gonna use for a cap table provider? Like, [00:29:00] those are things that we don't really get compensated on.
Um, so I think it is building a relationship. I think any founder, you'll talk to somebody, a couple different people hopefully, and you'll be able to pretty quickly tell who's done this before or who hasn't. Um, these are very like, nuanced topics that I would imagine a lot of advisors that aren't sitting on this call probably don't know much about.
Um, so, you know, I, I answered it how I did. I think e each firm has different ways they wanna handle it, and it's a, for us, it's a business decision as to who we work with. Um. So, but we do spend the time with even seed founders. Yep. Anyone else have, I know that's kind of a, probably everyone might feel the same way.
Uh, all right, let's go to Aaron and then Robbie. Aaron, you're muted. There you go. I'm back. Um, yeah, there's, there's different types of advisors. So there's financial advisor for managing assets and wealth. That's [00:30:00] one type of advisor. There's also like a tax advisor and that, and that comes in different flavors too.
There's like, there's a attorney tax trust and state's attorney. They mostly focus on estate tax. Then you have, you could have a corporate tax attorney. You can also have a income tax focused personal attorney. You can also have a CPA and there's different flavors of CPAs. There's some CPAs that are just looking to file your taxes.
There are some CPAs that are more strategic, and so like, I think when you're, when you're looking for advisors, I think it's good to build a team even before you're so big. When you see that things are, you get, you're getting traction. I think it is a little bit silly to, to build up a real team before you see that you're gonna be successful and you're gonna need it.
But that's, that is, you know, kind of throwing money out the window. I think Robbie alludes to that, uh, just doesn't make so much sense to spend a lot of money up front on that. But once you see like, you know, this is gonna be some, become something real. But I think a major principle of tax planning is you want to [00:31:00] take an asset that's worth not that much today, move it into a better structure that has better tax characteristics and let it balloon and value there.
And so there, that's a fine line. Like, I need to put the team together when I see that that's gonna happen and my assets still arguably not worth that much money and I can move it. So that's, uh, that's kind of a principle. I have to just mention the most famous story, which is the Peter Thiel, like Roth IRA, um, where he put a bunch of his like angel investments in it and now it's like $10 billion.
Uh, tax free. Yeah. That goes back to the, uh, ballooning in the right structure. That's a, a balloon in the best structure. Um, uh, Rob, you wanna take it and then we'll go to Trey? Yeah, sure. So, I, I'll, I'll kind of agree and disagree with the group and I, you know, I built my whole business around the point of it's never too early to get started.
And I think Max said it right, like, you, you build a relationship, but there's actually a lot you can do. And as an advisor, are you getting [00:32:00] paid on this? Maybe not. That's not the point. The point is building long-term relationships and giving the best advice. You know, if I was working with Jack Dorsey at Iconic and met him when he took Square Public, his second company, like, what's the point?
The guy, like, you can do some estate planning, but it's, you're way too late. You're 10 years late, you need to meet the guy and meet him at the coffee shop. And he says, Hey, I've got an idea on a napkin. Maybe you can't do all this structuring then, but when you have the relationship on day one, you're already thinking through these things.
And that's what this call is for, is they give the ideas and like get the kind of percolating there. Where, where when someone is ready, the advisor knows rather than you having to reach out. And so that, like, that's one thing that I focus on a lot. Like another thing too, and I agree with Aaron, where um, you do need to find that advisor that does specific things.
So like I personally am a GP of. 13 funds within my business. And so as I do that, I know every little nuance and detail and tip and trick as a GP on what you need to be [00:33:00] thinking about. What are management fee offsets think about, I'll carry, et cetera. Um, whereas not everybody knows that. But if you ask me a nuance about maybe a specific small business owner that does X, Y, or Z, I'm probably not the right guy for you.
And I'm very upfront about that. And I think most advisors are where they know, Hey, this is my skillset. We focus on X, Y, or Z. We don't necessarily focus on that, but I've got a friend or a partner or someone else who does. And that's, I think the important thing, um, for any, any founder generally is you really just like, you gotta have the relationship and you also gotta find the right fit.
Um, and those, those things make a big difference. Yep. And, uh, Trey, why don't you run us out here? Yeah, I agree with the rest of the team here, but, uh, one thing I'll add, so we start working with clients fairly early and just, it's really having that coffee, keeping in touch, going through these different things.
Hey. What is an 83 B election? Understanding that should I early exercise, should I, you know, what's the difference between ISO and a non-qualified option if I have that in my company? And, and how [00:34:00] is that structured? Just so you can understand the implications of those and that valuation. Um, and then on top of that, I mean we actually help with the companies as well, especially after Silicon Valley Bank.
We actually are opening up corporate accounts and doing the treasury for some of these companies as well. So they have an operating account, but moving some of that cash out of the bank into treasuries and other things like that. Um, just to help provide that blocking and tackling for the company level.
And I think it's a really big help to be thinking about not only your individual, but getting this company to grow and helping just deal with those operational items. Yeah, and I wanna make sure like this is, we're talking about founders, but I'll say like even early stage employees at, at businesses that are growing also need to think about a lot of this on when to exercise and you know, like for all you know, you're at the next Facebook or Brex or whatever it is and or ramp and you know, that could be a huge liquidity event for you as well.
And what I'm surprised about a lot from like, or I'll say from early employees, is [00:35:00] like not knowing the value of your options when you're getting hired and how long you have to actually, um, exercise those options. And I'll say just like for founders, try to be transparent with your early employees and for early employees, make sure you understand what you're getting.
It was always amazing to me. We hired 150 people and I rarely got questions and we weren't trying to hide anything, but we rarely got questions like. How much are these options worth? How do I only have 90 days when I quit to buy them? Is that really how this works? Can I get 120? Like, there's negotiating points there.
Founders may not want me to say that, but if you are a valued employee, you can negotiate to have six months if, if you quit, have six months to exercise those options or whatever. So I'll just say early employees, this is also all, all things we're talking about here are also useful for you, not just founders themselves.
Well, I mean a lot of founders aren't even equipped to have that conversation. Um, you know, and understanding and explaining, hey, we're about to raise 55 million. [00:36:00] Anybody who has ISOs might wanna consider exercising them or you're not gonna be able to utilize QSBS. I mean, I, from the amount of times I've talked to founders, I tend to think 80% of first time founders don't even know what QSBS is.
So it's hard for them to even explain to their employees what it is. And, you know, getting back to Trey's point, like. The difference between ISOs and NSOs is, you know, for us it's probably second nature to talk about it, but to have a founder who, honestly, a lot of times the founder's acting as like the outsourced human resources person early on.
Like it's, they're just not equipped to have that conversation. So I would lean on any of these people or whoever you decide to use as an advisor, they should be the ones, A lot of times, you know, we're coming in and talking to the employees or the founder about all of these things so that, you know, they don't have to put themselves in a spot they don't wanna be put into.
Um, and I would imagine anyone on this call could have that same conversation and are having those, um, but it's [00:37:00] not fair to the founder to have to be that person to explain all those terms either. I think, yeah. I'll tell my real quick, like, I had an interesting QSBS situation where, I can't remember when it was, I think it was when the BB was helpful, but having an advisor for me was when the, the original bb b bill was kind of put up.
A lot of founders didn't know, I mean, certain people in Silicon Valley knew, but within that BBB bill was like getting rid of QSBS and my, you know, I only knew that because, um, of the folks that I was working with and my situation was interesting, we had agreed to sell secondary of our business. I can't remember when the BBB was, but let's say it was in October.
We had agreed to sell secondary in our business in September, but the secondary, the, um, the secondary didn't close officially until November and technically the vote happened or whatever it was in October. So I was getting ready to be like, am I gonna be like the most interesting use case up to the Supreme Court of like, do I get [00:38:00] QSBS?
Is it when we agreed to sell? Is it when I put in my tender or is it when the full tender was done? And I will tell you, I was up all night the night of that bill and I celebrated it was probably the most. Drinking. I've done a long time celebrating that, and people are like, you're celebrating the BBB bill.
I'm like, I'm totally don't care about that. There's just like one line in there that I do care about. But the reason I say that is like a lot of, without having an advisor, like you wouldn't even know that, that like nuance exists and is in all these other places and you think it's so straightforward and it's really not.
Um, let, let me ask another question here, um, around post liquidity. Um, and maybe I'll, I'll start with you Robbie. Um, what are the mistakes founders make post liquidity? I see some founders, they, they sell the company and immediately like bought a house, bought a car, and did everything else. I see other founders who, like, I got great advice once was do nothing for six months.
Like you need to just figure out your life for [00:39:00] six months. And then there's the third kind of founder thing, which is like. I'm gonna open a coffee shop and a restaurant and like this is gonna be the easy life. And those are kind of the three paths I see a lot of people take. Robbie, what is, what are some mistakes some people make, or like what advice do you give to someone who just got a lot of money day one?
Like, what should they do for the next three or six months? Yeah, yeah. I'll, I'll preface this with, um, if you've gotten an advisor or if you've gotten good advice and you've planned ahead, by the time the liquidity event happens, it's less of an event. It's more just like another day where, oh, great, now the money's in my account.
It wasn't before, but I've already planned for it. Maybe I'll pick on the individual who, oh shoot, last minute. We're planning now it's happened. I want to go celebrate. Um, the biggest advice I say is the say no to everybody on everything, at least for the first six months. Or it could be a month, it could be just a period of time where you grow accustomed to just seeing the money in your bank account.
It's there. Um. It's [00:40:00] the biggest mistake I see in time and again is, Hey, my friend has a startup. Oh, buddy's got this new real estate thing. I can't say no to them. And they verbally commit some amount, 250,000, a million dollars to some project, some investment, um, and it's their friend, and now they can't back down.
And often what I do, I say, I will be the bad guy all the time. Pull me in and you say, my advisor says I need to run it by them or talk to my advisor and they'll to help decide for me. And then we'll still look at it and give it like a full, thorough look through. And occasionally there is a yes in there, but generally that is probably the biggest mistake is, is uh, you're gonna end up highly illiquid, very cash poor, and then forget that, oh yeah, I still have this tax bill that hopefully you've set aside for, but then some individuals want to borrow against it or something.
Don't borrow for your tax bill. Don't spend too early. Like I think those are the biggest things. No, there's nothing wrong with barring for any of those reasons. Um, but there's gotta be a plan behind it and structure, and I think often those pieces are [00:41:00] missing. Got it. Anyone else have a, uh, interesting story where they've seen a founder do this the wrong way?
Aaron, I'll go to you. Yeah, I, um, so one of my clients' partners, he, um, they, they sold a staffing business when they were in their twenties and they, each, it was, they sold to pe they both had probably, probably 10, 15 million each. And they, one partner buckled down and he did his, he made his own mistakes. He, he ended up kind of trying to diversify into, he started a tech company.
He started a few different other things that were not in his expertise and he lost money in all of them. And he came, he eventually came back to staffing. He's doing great. But the other partner, um, he took all of his money, he put it into a concentrated portfolio of stocks and he went to India. His wife and the backpacked around India and it was 2008 and I think he did margin some of the account and he wiped out almost everything he made and he hadn't checked the [00:42:00] markets and he got, when he got back from India, almost all of his money was gone and he moved into an apartment and he had to start over.
It was, uh, it was, um, that was probably the worst story I've heard. Wow. There, there is a happy ending. He started another company and was what, much more successful than the other one. Yeah, that's, that's a tough one. Listen, I, I get the feedback all the time that it's much harder to make the first 10 million than it is to go from 10 to 15 or, or to stay wealthy.
However, like I think that first few months, like you can make some emotionally rash really bad decisions as long as you can get over that first few months. It's a lot easier to stay wealthy and increase your wealth than it is to get there. But yeah, I've seen some emotional, um, purchases or things that you maybe wouldn't have done that were a little bit foolish.
Trey, how about you? Maybe you have a, a story there. Yes, I have an interesting one. They actually set up a family office and, um, this goes to finding the right people. [00:43:00] Uh, the team at the family office was thinking very yes, and not actually, like, we had done cashflow analysis and were kind of providing that analysis that was needed and was kind of overdone into private companies and had a very, you know, unfortunate liquidity issue for a period of time.
Um, because the family office was not able to say no, and we were not brought in on those private investment conversations unfortunately. Uh, and so I think it's really important to add the right people. But to, uh, Robbie's point and Elle's, like, I think having that cash flow plan. In advance or even at the time and pausing and having somebody you can say no is important.
Um, 'cause otherwise you get in a really bad liquidity crunch and, you know, private companies, as we've seen recently, can stay private for a lot longer than we want. Um, so it can be problematic. I, I wanna take this conversation just in a different direction before we kind of round this out here at the end.
Um, we've talked a lot about [00:44:00] QSBS. I mean, that's always on top of my mind, but I don't know the international equivalent to QSBS. Um, I know there's some international companies that VER Simone invests in. Um, I don't know who here works with international founders, so I'll have to kind of open this up to everyone.
Um, so raise your hand if you have some insight here, but like if you're an international founder, um, not based in the us like what, are there other things available to you such as QSBS? Like what can you do to also take advantage of some of these things? Um, looks like Robbie, I'll start with you and.
We'll see who else has an an insight here? Yeah, I mean, it, it it's, it's such a nuanced question. I do work with a few international founders, um, and it's country by country, case by case. But the reality is most founders are setting up their company as a Delaware C Corp. And so the multi no, in Delaware, what, even still in Delaware or wherever, whatever state you choose that is, you know, friendly, um, [00:45:00] you know, you're setting it up in the US and rarely are you gonna see the offshore entity or maybe you have a, you know, the sister entity that's offshore.
Most founders that I am seeing are still setting up some sort of US entity. So your wealth is being created then in the US and so it's staying here. And so very few founders are actually offshoring to another country unless they're in crypto. And I work with a handful of crypto individuals and yeah, you see the move to Puerto Rico, but you're also seeing a lot of BVI and Cayman Island type stuff going on.
Um. That's, that's, I'd say nuanced, but I'd say you see this more in the crypto sphere generally than you see it with founders. Um, I personally don't know, so I'll say, I don't know, you know, what, you know, for Israel or you know, for France or Spain or wherever, Germany, you know, what are the specific, it's kind of case by case I'd say.
Got it. Aaron, how about you? So I have some experience with founders who either they have residents in Israel, uh, like Robbie was saying, almost [00:46:00] always the company's based in America. That's where the demand is. Um, the problem with Israel, and I don't know about other countries, but Israel doesn't respect or acknowledge trusts.
So if you have a trust and it's American trust, you set it up for whatever purpose you did in America. Um, there's lot, there's different rules. So if you have a trust, which most founders probably will, if it's the company becomes successful, any beneficiary of that trust is considered taxable. So just because you're a beneficiary of that trust now when the, the underlying asset of the business starts making money, you have to pay tax on that.
And so it's, it's very difficult if there's distributions from the trust, those are taxable. So it's, it's a very complicated question, ISRA, and you need real specialist advisors for that one. Yeah. Actually, you, you had a topic that I wanted to hit before I got to one of my last topics, which is, um, uh, let's talk about trusts and [00:47:00] QSBS and how trust, how do trusts, um, become a factor, not just with QSBS, but uh, like, um, you know, uh, other ways that you can use trust as a founder.
I think that's like a, a concept that founders hear about, but don't really know the purpose of a trust. I know there's some purpose around QSBS and there's some other things, but Trey, why don't you kick us off, like what are trust and why should a founder think about trust and leveraging them? Yeah, so there's a variety of different definitions and we can spend an hour on this topic.
So I'm gonna kind of be brief, so, and we can go from there. But you know, it really depends. Like in California, if you're an individual founder, you don't wanna have your assets and your individual name just to avoid probates. You're not doing yourself any favors. It's really just for your wife, kids, et cetera.
If something happens to you. Um, however, if you're getting into more advanced estate planning, 'cause your revocable living trust is really gonna be your asset that goes with you for your [00:48:00] lifetime exemption, uh, which is from the estate tax irrevocable trust, where you can gift assets during your life out of your, uh, estate.
So move them now while they're at a lower value and there's grantor trust and non grantor trust and a grantor trust you can continue to pay the tax, which is basically gonna help you grow that gift without taxes outside of your estate and shrink your estate. Ironically, you wanna make it smaller, in this case to avoid taxes.
I know that's counterintuitive. Uh, and then you can do a non-grant or trust. If you have QSBS stock, you would utilize the non-grant or trust because then you can move that stock to your heirs or whoever you decide is deserving of it, and they can stack that $10 million, uh, benefit. Uh, so there are legal entities that allow you to move assets as a simplified way to put it.
And you wanna be cognizant of your state. Moving assets outta your state if it makes sense, and the [00:49:00] correct tax structure for those trusts. And then you can get more complicated with LLCs, which states you wanna do the trust in. Sometimes you wanna move them to, if you can think your heirs won't live in California, you wanna avoid California tax.
There's strategies around that. So there's a lot of moving parts, but trying to keep it brief here, but definitely find a good estate planning attorney and a team that knows how to set up these structures. We actually have a partner who is a attorney and are still an attorney, but doesn't practice law currently.
Um, leading this for our clients. Um, and then we actually have a team of more global specialists from clients outta the US that we can then bring in the right people to handle those situations. Yeah, trust. It's like foreign concept. I think founders don't even know what to do, but I know it's a vehicle for you guys to kind of use.
Max, I think you was unmuted. Do you wanna chime in there? Oh yeah, I mean, re pretty much hit the nail on the head, you know, it's. Asset protection is a big piece outside of, you know, tax savings. Um, [00:50:00] you know, when you do get the liquidity event, most people know about it because it's public. Um, a lot of times you, well, not always public, but most people know if you sold your company for hundreds of millions of dollars.
Um, so there is asset protection, uh, strategies involved with trust, um, and even removing, if you're, A lot of founders that we work with are in California depends on who you use from like a, uh, council perspective, but there are still ways to remove some of your equity out of the state as well, which, you know, saves you anywhere from eight to 15% depending on where you're at.
Um, so a lot of tax strategy, a lot of asset protection. Um, and it's, there's two, there's two taxes really to think about The trust can help with. There's one is the income tax. Mostly jurisdiction. The other is your, uh, lifetime exclusion, which is estate taxes. I find that one generally hard for founders to think about.
Um, most of them are young and aren't thinking about [00:51:00] how much money they pass onto their kids, just given that most of them may not have even kids at this point. Um, but QSBS and, you know, asset protection trust and, you know, state tax related type of structures tend to hit home because those are all relevant stories that founders kind of understand.
Yep. Um, Aaron, you wanna run us out there? Yeah, just, I, I thought that was great. Between, between, uh, Trey and Max. That was, that was perfect. Um, one thing I think that you could think about when you're getting ready to sell is, um, charitable vehicles, charitable strategies. A lot of times what people could do, um, more of a, just a way to maximize your charitable giving.
Right before a sale, what you can do, they call it a double deduction. And there's, there's nuances to all these things. This is not advice, but you, you could give away part of your company right before you sell and you get it appraised. And so you, let's say you give away [00:52:00] 10% of your company or whatever you, you own 10% of what you, you own, um, you'll get a deduction for that 10% and then you're only gonna pay tax on the 90.
So really you're gonna end up paying tax on the 90 and then you get another 10% or so deduction. So that's a way that you can maximize that charitable giving. Yeah, I think this is just a good example of like find a good, um, partner, find a good, um, investment advisor. And there's probably, like you said, you guys have gone for hours about different vehicles and ways to use trust and other things.
Um, it's a very broad topic. I wanna get to two more questions. There was one from, um, in the audience, and then I want to ask my favorite question here. Um, but what happens if I've been running this company for five years, I'm coming to you guys. I'm like, Hey, just sign a term sheet ready to go. And you're like, awesome, you came to me late, but we'll figure it out.
And you realize that we didn't sign an A D three B. Um, I didn't sign an A three B. Am I totally SOL or, [00:53:00] um, what can I do now? Um, looking back, um, has anyone had an experience with that? Like, what can I do as a founder if I just never did it? And now we're selling and I'm just staring at the wall. I see a lot of head shaking.
I think that means like your SOL, um, I, I, go ahead Trey. I would say, I think we're all gonna say we have to bring an attorney to figure some stuff out because no one wants to, to jump on that grenade of the, uh, the legal idea. Um, pardon the, uh, analogy there. Um, but I think. The number one thing I'd start thinking of is while you're getting an attorney involved to see if there's anything can do.
I would be looking at the most, whatever we can do tax planning wise to, you know, with the situation as is to get it right sized. Um, but it's not the end of the world. You're just gonna have a higher tax rate. Yeah. You're just knocking, gonna have as much money. Hey Robbie, how about you? Yeah, yeah, I was, I was gonna say it's, I mean, [00:54:00] it's never quote unquote too late.
I mean, yeah, you're late on, on the filing. You just gotta get really creative and that's where your, your um, your attorney bill's gonna get really expensive. But maybe that attorney bill being really expensive is still gonna help you end up saving money in some form or another. And it might not, you might not be saving money on the transaction and taxes itself.
You might have to save money somewhere else. Kinda like with estate planning, someone asks, oh, is it too late? I'm selling my company now and I'm starting now. Should I set the irrevocable trust and do my QSBS stacking and all these things? Uh, it's not too late. I mean, you could be 80 years old and start your estate planning.
Just, we're gonna get really creative in trying to get as much out of your estate as possible, and there are ways to do it. You can set up the LLCs and you can sell different pieces in discounting. So with 83 v eights, yes and no. Sorry, I'm giving you the non-answer, but that's, that's kinda where it's at.
No, I, I totally get it. I know we're, we're coming to time here, so I wanna ask one final question of each of you and you can feel free to, um, take it whatever direction you want. And feel free to [00:55:00] end with, if anyone's watching this, how they can reach out to you. Max, you're on my rights. I'll start with you.
Um, you know, I think when a founder sells their business, they have a hard time understanding, I have $5 million. Uh, let's pretend I live in New York or a big city. I have $5 million. Like, is that enough? Like, is there a difference between really five and 25? If, if I could take secondary, is there really difference between 10 and 30?
Is there really difference between 40 and 60? Um, how should a founder look at that and like a founder coming into. You know, kind of wealth, like how do they know how much is enough and how much is marginally different? How much is 10 versus 20 really change my lifestyle? Should I not sell the business?
Um, so Max, I'd love kind of your thoughts on that and then, you know, feel free to end it with however anyone can reach here or some final thoughts and we'll just kind of go down the line here. Yeah, I mean, I'll start on the secondary piece. No one really talked about that, but I think that's something, I mean, I advocate for it all the time.
I think founders are wary to approach their board as [00:56:00] they're doing a raise on that. I think the best way I've found to help founders think through that is if you kind of tell the board as you're going through series B, series A, whatever it is, when you think a secondary makes sense, is figuring out what number is an egregious, but also explaining to them.
You know, you have nothing in the bank and you want to take the risk to make your company a billion dollar company. And it's hard to do that when you could sell it now for $300 million and walk away with, you know, a hundred million. Whereas if you take $5 million, $10 million and put it in the bank, your incentives are now much more aligned with all the investors.
So I always advocate for it. I know it's delicate and sometimes hard, but I think that's a good way to position yourself so that your incentives are the same with them. And then I think the answer to your question, clearly there's a difference between five and 25, but it really comes down to kind of what Trey was talking about with the cash flow planning.
Um, I think before any [00:57:00] investments are done, you have to have modeled out. What it's gonna cost to live your life. What are the things that you want to do, you know, with the upcoming liquidity? Do you wanna upgrade your house? Do you wanna buy a new car? You know, your kids are gonna have to go to school at some point.
Do you wanna buy a second home? And just really figuring out what that looks like. Um, you know, and then the investments should come after that. They should backfill whatever it is you really want to accomplish and, and compliment that. Um, but it depends on the person. You know, someone that's gonna stay in their apartment and keep renting and not spend much money.
You know, $5 million is life changing for someone that wants to, you know, really upgrade and has lifestyle drift. $5 million goes pretty quick. Um, so I think it totally depends, um, on the person. But I mean, I tell people the tiers, you know, up until I would say I 13 million, when you're dealing with like the lifetime [00:58:00] exclusion is one tier.
When you start to get in the. 25, you know, you're pretty much making three to your portfolio is generating a sizable, you know, one to $2 million a year, then you get in the hundreds of millions and it's generational wealth, um, in a lot of instances. So, but that's just very vague and I, I'm sure Alex is gonna distribute all of our contacts.
My email is my first dot last name@ubs.com, so I'm happy to help whoever. Yeah. I know we're running up to time, but, uh, Trey, Robbie, Aaron, and you guys have some final thoughts here on any of that? Trey, we'll go to you and then just kind of go to the line. Yeah, no, I think you're exactly right. And I think that cash flow plan really helps side us set up, okay, what are our goals of this money?
What is our lifestyle gonna do? And you know, it's a little different if you're getting acquired privately versus if you have a company goes public and now you're trying to make that decision to push the sell button. And it gets hard depending on the trajectory of the stock market. If it's on a positive [00:59:00] skew, you're like, oh, I maybe I can get another dollar, maybe another $5.
And that seems silly, but it's true. And that's the experience people have and then have sellers remorse. So, uh, or goes down and you're like, oh man, now the market's down. How should I handle this, um, day to day? So it, it works on both elements, but I, I deal a lot on the, uh, selling strategies once public, um, because I think there's a lot more of a emotional tie to that just 'cause you have to actually push that sell button for, for clients.
Um, and so I think really that cash flow plan of deciding, okay, what do you need to, to make your lifestyle today done so you can take time off or are you gonna go start another company and plan that out? Uh, and same I tradeEvans@morganstanley.com, so, or Morgan Stanley pwm if you wanna. It doesn't matter.
They both work. So would love to help anyone ask questions. Awesome. Robbie. And then Aaron round us out. Yeah. Yeah. So nothing to add on the, the lifestyle piece. I mean, max Trey hit the nail on the head. You make, you have a certain amount of cash, you can only spend whatever [01:00:00] the portfolio's gonna spit off in reason.
And I mean, if you're selling five, you're gonna net a lot less than that. And if you upgrade the house, you're gonna net and even less a million dollars doesn't make a difference On the secondaries piece, uh, I have strong opinions here. 'cause often what I'll do is I will meet a founder and we'll first look at do we want to invest in their company?
And that's part of me running several funds. And we often do secondaries over primary round. And so the question is, and I always tell if you're a CEO founder, it's different than if you're a CTO founder or someone who, who's not running a CEO. You can sell 2% at every round and just ask for an option grant of 2% as part of that fundraise and.
You're gonna end up as a wash, you're not selling anything. Yes, there's dilution. Um, whereas if you're the founder but you've left the company, it's a whole different equation. Um, so I mean, I think you can sell secondaries. I wouldn't sell 'em at a seed round ever Series A TVD. And I think it's always a size thing.
You know, series A sell half a million at most. [01:01:00] Um, you really shouldn't do more unless, and, and the only reason I'd say you sell, sell secondaries is because your company is crushing it and everybody's interested. Then there's appetite. You can push the valuation up, or you won't even take a discount on the secondaries.
Um, so anyway, p you know, we can happen to chat more about that. It's obviously a very nuanced thing. Um, but yeah. Thanks, thanks for including me here. Yep. And then Aaron, why don't you round us out here? Sure. Um, yeah, I know we're over time, but I, I agree with that, what everyone else said. Uh, don't have anything to add on secondaries or cash flow?
I think emotionally, a lot of times when people sell their business. That was their baby. That's where they're spending all their time and they kind of lose their identity there. I think you have to be emotionally ready for that and, and you're moving into a new phase of life. Get prepared for that. And if you're not ready for that, don't sell yet.
As, as long as things are going well and there's not too much risk and staying it. Yeah. And you just find me on LinkedIn, I think that's easiest. Got it. And I'll echo that. You gotta be ready not just to sell the company, but [01:02:00] to go work for the larger company and probably an earn out perspective. And that's a whole other topic I'm happy to talk to you about, but that's not the topic of it is today.
Um, but anyway, thank you all for joining. Um, I think this was super useful. And um, Alex, I don't know if you have any last words, but I think we're good to go here. Thanks all of you so much. Um, we'll put together, uh, a great summary, um, shared video and maybe even some highlights, but really thank you all so much.
Great insights. Really actionable takeaways in a lot of cases and looking forward to, uh, sharing it with the portfolio and making sure that they. Make what they earn. Earn what they make. I don't, well, however you wanna phrase it. All right guys. Thanks everyone. Thanks. See you guys. Appreciate it.