Welcome to the Accelerated Investor podcast with Josh Cantwell. If you’re looking to retire early with forever passive income, you’re in the right place. This podcast is the go-to destination for real estate investors, both active and passive. And multifamily apartment investors, both new, intermediate and advanced. Now sit back, listen, learn and accelerate your business, your life and your investing with the Accelerated Investor podcast.
Josh: Hey, welcome back to Accelerated Investor. In this episode, I am interviewing a good friend of mine. His name is Dinesh Gauba. Dinesh has done hundreds of investments. He is a lifestyle investor. He’s invested in early-stage tech companies. He’s invested in late-stage biomedical companies. He’s invested in real estate syndications. He’s been an angel investor. He lives in Silicon Valley. I met Dinesh over two and a half years ago at the capitalism conference sponsored by our mutual friend, Ryan Moran. By the way, if you haven’t bought Ryan’s book 12 months to a million, you’ve got to do that. Go check that out. Dinesh and I were fortunate to be both keynote speakers at the Capitalism Conference, and we were on stage together during a panel. And so Dinesh and I made friends. We stayed in touch. And he has since invested in numerous real estate syndications of mine. And in this interview, you’re going to hear from Dinesh about a few things. Number one, you’re going to hear about his philosophy on the power of collaborative investing, using his networks, my networks, our friend Justin Donald’s networks, Ryan Maran’s networks, how we’re able to find bigger deal flow, better deal flow and sometimes share resources.
Josh:So you hear about collaborative real estate investing, collaborative investing and the power of that. Number two, you’re going to hear from Dinesh about his philosophy, about what he calls asymmetric risk reward. And we’ll talk about strategies where you can risk a little with tremendous amount of hockey stick upside, which Dinesh calls asymmetric risk reward. And then finally, number three, and you’re going to hear a step-by-step process that Dinesh uses to optimize his cash flow and his liquidity in his investments so that he can immediately, not immediately, but very quickly reinvest the capital from one deal into the next deal and then to the next deal and creates multiple streams of income from his various investments. So whether you’re an active real estate investor, a passive real estate investor or a passive investor looking for new opportunities in tech or biomedical early stage startups and technology, you’re going to love this interview with Accelerated Investor and Dinesh Gauba.
Josh: So, Dinesh, hey, listen, man, good to reconnect with you. Thanks so much for joining me on Accelerated Investor. How are you, my friend?
Dinesh: I’m doing great, Josh, good to see you and get to connect over here again. I know it’s all virtual now that we’re in COVID. So, yeah, nice to see you.
Josh: Absolutely. Absolutely. So I were just talking getting ready for this. We met about two years ago. We were both actually speaking on the same stage. We were at the capitalism conference. That was a lot of fun. And we’re talking about investing for that whole group of entrepreneurs, ecommerce investors. And we struck up a relationship. We’ve done a couple of deals together, which has been fantastic in a lot of fun, and those are working out really well. So, Dinesh, why don’t we just kind of start by talking a little bit about what you’re doing today? So is there some things, some investments that you’re making today, right now, or deals that you’re underwriting right now and reviewing? What are you most excited about kind of kicking off this first year 2021. What are some things that you’re into that you’re really excited for, even though that we’re still in the middle of covid? There’s been a presidential change is a lot of good things going on. What’s going on in your world that you’re excited about?
Dinesh: Great question. That’s a loaded question. There’s a lot of stuff that I’m excited about. I really do try and focus on filtering a lot of the noise out. So I’m not a big news watcher. I try to just focus on what I can do rather than what’s going on around me. So as far as my excitement, I would say is a big part of it is in the area of technology and the future of technology. And I guess that’s natural given my background is in tech and engineering and the fact that I’ve been in Silicon Valley for the last 20 years.
Dinesh: Yeah, it’s pretty amazing to see how the convergence of technology is happening and how fast it’s happening and all the amazing opportunities that are going to come out of it and how it’s going to change changed our lives as we know it, probably faster than we know it in the next 10 years and faster than it’s ever been, even though we always think it’s been so fast. It’s even it’s going to be even bigger and faster. Yeah, yeah. That’s a big kind of high level, exciting thing for me to see what’s happening in that field and trying to find the right kind of opportunities, companies, disruptive business models, technologies, all of that kind of stuff.
Josh: Yeah, Dinesh, since you look at so much different types of deal flow and you get your start in real estate. You’ve invested in both the public and private markets, doing a lot of angel investing, private investing today. People that I talked to that see technology and how fast these companies grow scale and how big their valuations are if they don’t understand the benefits of technology sometimes can be very scary. So for the average investor who looks at technology is a great thing, but also something that’s a little bit in the shadows, almost like shadowy stuff that we’re not really sure how it’s going to impact. What benefits do you see, like real applications for technology to them making the world better? And also, are there applications for technology that might make a company better but that are at the same time maybe getting rid of jobs, people’s livelihoods, because technology is taking over things that humans used to do? So what are some of the positives and negatives of the technology that you’re seeing?
Dinesh: That’s a great question, Josh, I mean, technology is a pretty broad topic, so I guess it depends on the industry, right, and how they adopt the technology. So I see technology as a tool for growth and efficiency because it just makes a lot of things more efficient. If I can get a robot to do something that’s repetitive and needs precision, then there’s no way a human is going to be able to do that. Repetitive and precise task thousands, thousands of times. Right, without having some variation. Whereas with the robot you could. So it’s the precision, the consistency, the efficiency as an example, and that applies generally in technology. So, I mean, I would say health care is a big area that’s I see a lot of positive things happening in health care technology, and that’s both on the biotech and also in diagnostics and robotic surgeries and things like that that are it’s just game changing stuff. We’re understand because of technology, we’re able to understand a lot more about how the human body works and all the systems in the body.
Dinesh: And that just leads to better options for treating all kinds of diseases and all kinds of chronic problems and things that are that are just haven’t been really addressed so far. And it’s all because of the power of computers and chips and basically the processing power that we have that is coming together and allowing us to do things such as A.I. and machine learning that have been in the works for a long time. But it’s kind of like the convergence of everything happening at the same time. So because there’s enough processing power and it’s been building up over decades now using Moore’s Law, then it’s now reached a point where it’s exponential in terms of how much processing power we get every 12 to 24 months. And so that allows us to do a lot more, a lot more difficult math and basically processing power for applications such as genetic testing, genetic gene editing and things that are just super exciting that we’re not really possible, probably even 10 years ago. So a lot of breakthrough is happening right now. And even in the area of covid, I mean, the fact that we were able to get a vaccine going in like a one-year time frame because time is a record breaking normally takes five to 10 years to get a vaccine.
Dinesh: So, yeah, this is all the benefits and hence why I’m so excited about technology, future of it and all that. You know, it’s just like if you think back 20 years ago, you know, when the Internet just was starting getting going and starting to gain some momentum, people had no idea how things are going to change. And look at what’s happened in 20 years with the Internet changing people’s lives as a technology tool. It’s made so many new possibilities, opened up so many new possibilities that that just never existed. Right. I mean, one company like Amazon has created so many businesses around it. One company like Apple has created so many businesses around it. So I’m excited for the future of other the future. Apple’s in the future, Amazon’s and the future of Facebook’s that are coming up or being developed as we speak, that are going to create entire ecosystems of opportunity and businesses around them.
Josh: Yeah, what would you say and I know I know a lot of your philosophies around learning about always be learning. And for those people who are scared of technology, scared of growth, that, you know, the jobs, the average American job, the American worker is going to lose jobs to overseas. Companies are going to get boxed out by technology. What kind of advice would you pass along to people that have that more? You know, I know you’re an abundance thinker and so am I, but some people have this scarcity mentality that the growth is happening too fast. People are getting too wealthy, too rich. It’s happening too quickly. And the average American is getting boxed out. My philosophy my response to that is they’ve got to constantly be evolving and learning and being flexible to what’s coming. What are your thoughts on that topic?
Dinesh: I think I agree with you. One hundred percent. I mean, it’s all about your attitude and where you choose to be where you are in life. It’s a lot to do with the decisions you made and the choices you made. And it is a decision whether you want to be learning it is a choice. I can wake up every morning and watch TV all day or I can sit there and read or learn. Watch webinars. That’s a choice to have, right? So I literally immersed myself in reading and learning different things every day, and I think that’s the only way to keep up and to stay excited and also to look for where the opportunities are or to look for problems to solve. Right. Is if you’re always with that, going in with an open mind and a curious mind and you’re trying to learn, you’re trying to build relationships. That’s kind of my approach. And I don’t know of too many other approaches. I mean, if an industry is going to get disrupted, I want to know where is it going? So as an investor, I look for where is it going to go? How is it going to get disrupted? And then I want to be in that on that side of the disruption, not on the wrong side of it. Right. So I don’t want to go into a business that I know is going to be disrupted five or 10 years from now because of where the technology is going. So this is all stuff that there’s so much free access to information available. Right. There’s YouTube videos, there’s blogs, there’s newsletters, services, there’s email list.
Dinesh: There’s so much the beauty of this time is that there’s so much abundance of information around us. Right. And I know it can be overwhelming. So you have to make sure you choose your sources. Right. And pick the information from the right place. But there’s just such a vast amount of information and knowledge available for you to learn. And I think one thing that’s I would say it’s very valuable for someone that’s starting out their careers and something that’s going to be disrupted is really start to look at where is your industry going and how can you develop the skills that you need to stay relevant. And one skill that’s probably going to be relevant for the next several decades is just understanding software better and understanding if you have some ability to learn how to code or skills that will never go, will never grow old or become stale because it’s a fundamental skill set. Right. I mean, I started my career with software. So whenever even though I don’t write software code at right now, but I still know the concepts and it’s kind of develops your brain a certain way when you learn to do that. So I would suggest highly recommend people that are at a point where they can do that, even if you’re just reading and understanding the concepts or taking a coding class or something like that, just to expand your mind and to get you more comfortable with technology and how it how it’s working, or you start to see some of the inner workings of stuff. It’s it gives you that confidence to keep learning more. Yeah, absolutely.
Josh: So, Dinesh, as an investor, obviously a lifelong investor, I know some about your background starting basically trading and investing in stocks in college and then moving into real estate, being a part of multiple different bubble cycles up and down. Lots of wins and definitely some bruises along the way like we all have. What are some of your thoughts around the public markets versus the private markets? Most of the world operates in the public market sector, the stock market, what they see on Squawk Box and MSNBC and Fox News and their 401k. But as we both know, most of the best deals that you either get to invest as an early-stage investor, whether that’s in a real estate syndication or development, whether that’s in a technology company, a lot of this is happening in the public markets, new startups, businesses that have some of this technology that can scale, that can disrupt an industry. None of that is available in the public space until it’s hitting some level of maturity. So what are some thoughts around how you’ve been able to put yourself in the middle of so much deal flow of so many deals, create relationships to get access to some of these early deals that are a lot of the friends and family or the off market private stuff that many people don’t hear about. How do you get access to that in your world? What are some things that you do on a regular basis to see some of that deal flow that other people maybe never get access to?
Dinesh: Sure, yeah, that’s a good question and it’s a work in progress, always, always trying to expand that sphere of where I can get deals from and relationships that I build. So a lot of it is based on relationships. It’s people that you know or I attend a lot of events. Mastermind’s right now, it’s all virtual. But, you know, there’s like webinars almost every day that I can be on. And so I try to get myself in the flow of stuff. So there is deals everywhere. It’s just getting in the flow of them. And that way, you see, the more you are in the flow, the more I attend stuff or I, I listen to stuff, the more stuff comes to me. And then it’s kind of like a snowball effect. The more deals you’re involved in or the more you expose yourself to different groups, then the more stuff shows up. So. So, yeah, that’s basically what I’m constantly doing is just expanding my network, you know, trying to connect with like-minded people. For me, a big part of it is just having the right kind of people around me and the right mindset people around me. So that’s what I focus on, trying to expand that. And then things that I enjoy learning about are things that are I’m curious about or that are interesting to me.
Dinesh:So I kind of try to use that as a gauge of what sort of opportunities I want to look at or what sort of relationships I want to develop. And abundance mindset is a big part of it. So I definitely want to look at stuff that’s disruptive, that’s going to make things better. It’s going to make an industry better. It’s going to solve the problem better. It’s going to make things more efficient. There’s so many kind of gauge as to how to source stuff. And you have to have some level of guidelines or ways that you’re going to filter stuff because it can get overwhelming. And I never say no to anything until I look at it and I understand it or at least take a quick look at it so that I can see what it’s about and if it’s something that interests me. And also who are the people involved?
Josh: Well, you and I had our first couple of conversations after that Cap Ed event we didn’t know each other when we spoke up on stage together, but we got to know each other in the hallways and in the back room, the green room, whatever it was, and kind of talking. But I remember coming back and you were back in Silicon Valley. I was back in Cleveland, which is kind of the opposite of Silicon Valley. But we were, that’s my hometown. But I remember when I you and I talking for several conversations, we didn’t talk about really deal flow at all. We want you and I, we’re kind of just feeling each other out. New relationship. We were lucky to have been kind of jointly introduced by Ryan Moran. And then we’ve got other joint connections like Justin Donald and other people that we know lot of very much the first maybe two or three conversations was around, hey, we both only got so much time. We both got plenty of money. But time we only want to spend our time with people that we like doing deals with. Right. Or people that we’re going to enjoy being around.
Josh: And that conversation was probably the first two or three meetings we had on the phone was around. That concept was just more is the guy that I want to hang out with is Josh a guy that Dinesh wants to hang out with and we want to share ideas. And then it came, OK, we have a pretty good feeling for each other. Then we started talking about some real estate deal flow after that. And I often find my best friends, some of my biggest investors. The conversation is almost always at the beginning, not about a deal. It’s about the people. It’s about the relationship. So just talk to that for a minute. And if you were to get introduced to a new operator or a new company or a new opportunity, how much of your time at the beginning is really just getting a feel for the people versus getting a feel for the rate of return?
Dinesh: Sure. I think it really depends on how it comes to me. Right. Sometimes it’s organic and sometimes it’s very specific, like here’s an opportunity. And in those situations and sometimes it’s a there’s a time horizon to it. So it’s not always the case where I have the luxury of getting or knowing the person before getting a long time to know them. So it is kind of all over the map. I mean, if it’s something that’s obviously I always prefer to do business with people I know already like and trust, it’s much, much better and easier. But when you’re talking about some of these earlier stage or technology companies, it’s not always the case. The opportunity may come from a third source or it may be especially the private deals. I mean, public markets are a whole different thing, but private deals.
Dinesh: They come from so many different places, so you’re lucky if you happen to be able to know the people or know, I try to at least have a trusted source that I can get the information from, and that comes by just building relationships over time. But I have found opportunities where I’m in a in a group or I’m on and on someone’s list, and then I’ll attend a session or a webinar and maybe they were talking to a particular company. And that just interested me. And then I connected with the company and that that led to a bunch of other stuff. So it really comes from so many different sources. And it’s not in an ideal world. Yes, I would definitely love to do it the way that you and I connected where we don’t even talk about business at first and just kind of organically happens that, hey, I’m in this. And once we know each other, then there’s a trust factor there, then it becomes easier. But it’s not always the case.
Dinesh: Yeah, absolutely. So when you look at investment, one thing to add to that is, you know, even you asked earlier about public markets. So one thing I want to comment on the public markets is I’m sure you’ve noticed that companies are going public a lot later. And so twenty, twenty five years ago, you know, companies like Amazon were going public at a much earlier stage and the public market was a way for them to give access and to raise capital and to grow and to give average everyday investors more access to those kind of companies already. Right. So I was on went public under like under a 500 billion dollar valuation, I think. And they’re now at almost two trillion so that a lot of the growth happened in the public markets, whereas in the last 20 years, more so starting probably 12 years ago, things started to shift a lot more from the public to the private market.
Dinesh:So there’s a lot more money going into these companies while they’re still private. So they actually keep postponing or delaying going public because they don’t need to because they’re getting VC money or private equity money. There’s so many more sources of funds coming in to these companies that they don’t need to go public. And so a lot of that game comes very early on in the private face of the company. By the time they get public there, like, you know, some crazy valuations and sure, they can go from there. But you’re not going to get the 100x growth from a company. That’s time. But the higher the valuation they go public at, the less likely that is to happen.
Josh: It’s interesting you said 10 or 12 years ago, the Jobs Act, which was signed by President Barack Obama, maybe one of his people talk about the Affordable Care Act, has been his signature legislation. But honestly, I feel like it’s a jobs act because the Jobs Act and all of the 506C the ability to do crowd funding and crowd funding platforms. There’s so many more private deals that are happening that was signed, I believe it was 2010, 2011. Remember that year. Exactly. But around that time and there’s no question that more deals are happening in the private markets now than ever. And a lot of that leads back to that legislation, which allowed people to raise and recruit money and do things in a general solicitation way with accredited investors, but not actually have it be through an IPO or the public market. So just what I recognized I don’t care if you’re left, right, Republican, Democrat, that is a signature piece of legislation that many people overlook. They think it’s always been that way.
Josh: Frankly, prior to that, the only way to really get public exposure and massive amount of scale with investors was to go IPO. And so what you just write that story you just told perfectly lines up with that legislation. And I think that’s a big deal. Now, you see so many more opportunities with cannabis, whether it’s e commerce companies, whether it’s real estate, so many more offerings kind of floating around. And then I think back to your comments about really focusing on who the operator is and doing your due diligence. So because now there are more deals than ever, especially you, because you’re constantly hunting for deals. Sounds like to me, if I’m new to this interview and don’t know who Dinesh is, I’m like all this guy does is learn and look for deals. And that’s probably all you do.
Dinesh: It’s a big part of it. I mean, we have other business that I’m involved in the operating business. But I don’t I mean, yeah, what’s excites me is, is really that finding the new deals and making that building the new relationships that lead to those and just good people that I enjoy. Working with so, yeah, that is a big part of what I spend my day on.
Josh:Definitely a fun life for sure. I like looking at deals and meeting new people, if I could do that a couple of times a day. That’s a that’s a full day. And I feel like it’s been a fun, fulfilling type of time. So let’s talk a little bit about some of your investing philosophy, some things that have to, I guess, check the box for you to invest in them, whether it’s a real estate offering, like some of the stuff we’ve done together, whether it’s an e-commerce company. As I was buying, a lot of businesses that used to be very large, had both retail strip centers and an online presence. A lot of them have come off of retail, gone exclusively online. I’ve know you’ve invested in those, but what are some of the boxes that have to be checked for someone like you to take a look at that and says it makes sense, is it a quick return of capital? Is it tax benefits? Is it the upside scale that technology is going to allow that business to be disruptive? And what’s the blend of things? Because you probably have a blend of things that are kind of tried and true, kind of boring, that just are constantly working, maybe don’t have a huge amount of upside, but they have great cash flow. And then there’s other things that might not have the cash flow but have massive upside. What’s sort of the underwriting box look like for you? What are some of the things that you need to hang your hat on in order to make an investment?
Dinesh: That’s a great question. It really depends on what type of investment it is. So if it’s a real estate investment, I’ll have a totally different approach to looking at it. It could be in real estate, but then it could be a tech company that’s working in the real estate space. And I’ll have a totally different way to look at it. So in general, I would say I like to look for obviously a good operator, a strong operator or CEO or founder, that sometimes they have the track record, sometimes they don’t. But it’s really finding the person that I think can take this to the next level. And if they have a track record, that that helps a lot. So I always try to I trust but verify as much as you can. Right. When whenever you’re looking at anything, that’s something that I try to do as much as possible in my due diligence piece of it.
Dinesh: And trust can come from even if it’s coming from a trusted source. So a lot of times the deals that I invest in, there’s some very notable investors already invested in there or there’s VC funds or institutional money in there. So that’s another form of trust. I may never know or meet the founder directly, but because I have that trust in the other folks that are involved and they’re credible and they have a track record, that can be another way to verify as well. So it really is pretty broad. The other thing I would say is I always try to make sure that the company or the business is in line with the future trends. If it’s if it’s not, I know it’s going to struggle and it’s going to get disrupted at some point. And that’s not going to be good. So that’s something I always have in mind in the back of my mind is, is this something that I can see surviving five years, 10 years from now?
Dinesh: And if it’s not that or four, it’s questionable, then that’s probably one of the big factors that I look at. And the third thing is the market size. How big is this market? Is it an ever-growing market? Is it a global market or is it just a niche player? And that’s not to say that you can’t have great investments in certain niche markets if it’s a category leader. But, you know, those are some of the criteria that I look at. And obviously, I, I always like to find stuff that’s more disrupting an entire industry or a business model. Some of the stuff you mentioned earlier that the e-commerce feels that’s something where I can see where the trend was going even before covid and then it just accelerated that trend. So it made sense from a trend perspective. And then you could see that the market is growing. There’s more people coming online right now. Maybe only 50 percent of the world is actually connected online. There’s still another probably four billion, three or four billion to even talk about. Yeah, they’re not even online yet.
Dinesh: So, I mean, if you just think at a macro level in the next five to 10 years, another three to four billion people coming online, you know, you put two and two together. OK, so things are the number of transactions and the volume online is going to grow whatever business that is. So if you’re not set up to have a good chunk of your business online, if you’re in a category that that’s where it’s going, then you’re going to you’re going to be disrupted big time. Right. So. So, yeah, those are three kind of big things that I look for. And track record and success in the past is always a good plus. If there is any way to find companies where the CEOs have done it before they’ve taken a company public or they have in Silicon Valley, it happens a lot. There’s serial entrepreneurs. They’ve done it once, twice, thrice, and they get bug and they keep doing it. And if you can find those kinds of entrepreneurs and find a way to connect or invest in their companies when they’re second, third, fourth time round, that’s pretty exciting because, you know, at least they have a track record. So that’s a big indicator. And the other thing that I didn’t mention earlier when you were asking the question was about all the Jobs Act and all the opportunities there.
Dinesh: There’s something called Reg A plus, which you might be familiar with, which is basically a fantastic way for non-accredited investors to get involved in earlier stage private companies. Right. And with much, much smaller dollar amounts than are possible as an as an angel investor, for example, as an angel investor, you can invest five hundred dollars into a company, but. As a Reg A plus offering, which is basically a company going out and, you know, putting all the right documentation and getting all the right approvals from the FCC to be able to offer it in general. So a solicitation offering to the public. And, you know, those deals you can put in five hundred thousand dollars sometimes and, you know, just leave it there and see what hopefully they’re good companies, obviously looking at the companies themselves to make sure that they check some of the boxes that we discussed. Right. And if they do, then you have those opportunities to get in earlier and don’t have to risk a huge amount of money. So that’s kind of goes back to my asymmetric investing concept. You invest five hundred dollars. Well, the most you can lose is five hundred dollars. But if it goes up 50 X, hundred X, thousand X, sometimes if you get in at the right time, then the gains can be life changing.
Josh: Dinesh, you touched on this asymmetric I know because I’ve talked to you about it and I’ve listened to you on other podcasts as well. Explain what is asymmetric investing and then touch on the risk reward scenario there. Obviously, we want things that are low risk with tons of upside. How do you find something that is asymmetric value?
Dinesh: So, I mean, my approach to asymmetric is really looking at how much are you risking? Right. So there might be more risk inherent in investment. There’s so much talk about crypto right now and there’s people that consider crypto very risky and there is all kinds of opinions on it. But the way to look at investing in crypto, for example, is if you do your homework, you find something that’s that the project looks interesting. The way I look at some of these cryptos is basically like early stage tech companies and getting in their stock before they went public, except now the terminology is different and it’s tokens. And basically it’s a it’s a whole new model that’s being built right around technology and block change. So if you invest, basically the asymmetric part comes in as if your loss can be limited. To something that’s not going to change your life if you lose it, but the game can be life changing and the game can be five, ten, fifty eight hundred X, thousand X like there’s no limit on there. But your loss, you don’t put in so much money that if you lose it, you’re going to really be hurting or you’ll lose sleep over night, then that’s one form of asymmetric investing. Right.
Dinesh: But the second the second is basically investing in enough of those because it’s probably a long shot for you to pick a needle in a haystack and just pick the one that’s going to do that. Right. So finding ways to get access to more opportunities like that and make smaller bets I’m talking about are really like the earlier stage stuff that has those kind of astronomical return potential. Right. Whether it’s a crypto or it’s an early-stage tech company or biotech company, those kind of companies, they do have potential to go up 10, hundred, thousand X, sometimes more. So you want to try to build a a basket of those, obviously, based on the criteria we discussed before and understanding what the project is doing or the companies doing. But if they make sense, you build a nice basket of them and put some amount in each one. That’s not going to change your life if you lose it.
Dinesh: And if it does do well, then it could be like cheating the other way to get access to that in a more conservative way, which unfortunately right now I think is still mostly for accredited investors, is to do it through private funds. Right. Like whether it’s a real estate fund or it’s a tech fund or, you know, any kind of fund where they are doing that. A lot of that is that they’re making that diversification for you and finding fifty hundred five hundred companies to put small amounts. And of course, the upside when you have that money may be limited, but again, it’s a form of asymmetric because you’re reducing your risk on each particular investment and the upside is much greater than the downside of it. So you have the dollar amount really makes is what makes that difference, though. If you if you go really big on something and you lose that now, you lost your base capital and it takes a long time to build that back, even just from a financial but also from a mental and emotional standpoint, money like that. It really hold you back. And I’ve experienced that before, you know, in the stock market and the craze of the nineties when I made a lot of money very fast and then just all got taken away very fast in the dotcom bust. And it took me a few years to get comfortable to get back into the public markets. It was not an easy thing to recover from.
Josh: I wanted to ask you about that. So it’s often in our losses that we learn the most. So you don’t have to tell me specifically about the losses. But do tell me specifically what did you learn from them? And we’ll kind of wrap up with this question. So I think then I think this is probably kind of some of that advice that you might give to other investors, whether they’re syndicators or active investors in tech and real estate and things like that. What advice would you give them? And probably using your losses probably as the basis of probably some of your best advice is things that you wish you wouldn’t have done or things you would have done differently, deals that you would have underwritten, better questions you would have asked that you didn’t ask. What are some of those things that you think now that you’ve we’ve both got a few gray hairs, right? So now that we’ve learned a few things, what are some things that you’d pass for, things that you wish you had done differently?
Dinesh: You’re making me day into an area that definitely painful feel it’s good, it’s good. I think it’s important to learn from those experiences. And part of what my learnings were is, first, you don’t want to put all your eggs in one basket, right? So no matter how great an investment loads, you definitely don’t want to bet the farm on it because things could go wrong and you don’t you definitely don’t want to be losing sleep overnight on it. So spreading it out is a good idea generally and finding different types of diversification that are not necessarily correlated to each other. So I want my portfolio when I look at it across, it’s got a mix of everything, right?
Dinesh: Public private equity stage, late-stage time, diversified, geographically diversified, industry diversified. So that’s from all the kind of lessons that I’ve learned. I’d say that is probably one of the biggest things is that don’t make don’t be super aggressive. And I’ve done it myself, so I know. And there’s probably still some stuff in my portfolio that I’m super aggressive on, but it’s a smaller piece of my overall pie. So as you grow your pot, you can do more stuff like that and choose to be more aggressive on things because you’ve got enough other things that are working right. So you can take some of that extra risk. But earlier on when I invested, for example, like very early and some startups, it was it was a real long shot. And if I lost it, I lost the capital. Or the second thing is, is really like in real estate deals where I invest in the wrong operator, could be fraudulent. Could be you just didn’t deliver. Right.
Dinesh: And so my learnings from there are just again, trust to a certain extent, but verify as much as you can. And again, you’re not always going to be able to verify everything, right. If someone if an operator decides to lose their mind and go crazy in the middle of the project or starts to do fraudulent stuff, that’s not really something you can predict. So the way to review the way to reduce that risk is to not have all your eggs in one basket. Don’t bet everything on that up. You can put an amount of money that if you lose it, it’s not going to change your life. That’s generally how I try to look at things on a bigger picture, because for a while it was it took me a while to get over this like, oh, I lost on one thing and it’s so painful to recover from it. And I just get stuck in that energy of, oh my God, I got screwed on this thing. Or I, I was expecting a much different outcome. And then a lot of the time that was out of my control. And so when I go back and look at it, what did I do wrong? Well, I’d probably be too big of a bet there, right? Sure. And so I start over time to spread it out more so than any one project that goes bad. It’s not going to take me out. And yeah, in the big picture, as long as I’m a net positive and moving in the right direction, the curve is going to the right and upwards then that’s what I’m really looking at.
Josh: And since nobody can be 100% every time, you don’t get it right every single time.
Dinesh: No, you can’t. And that’s why you got to move on from that when you do get it wrong and focus on finding the ones to get it right on so that you don’t get stuck in that in that energy and that mindset and get the fear factor, which then paralyzes you from doing anything else right. To recover from it. And that’s a big part of your psychology. And what I had to overcome. And in my own experience, yeah.
Josh: I have to tell our audience as we kind of wrap up here about one of the things that sticks out about my early relationship with you and you investing in some of our deals. I remember being at a volleyball tournament two years ago, and I’m going to be at a volleyball tournament tomorrow. I remember I wasn’t coaching back then, so my daughter had about an hour in between games. This is on a Saturday. I was on the turf football field on the phone with you for the entire hour between her games. And you were peppering me with questions about refinancing risk specifically for real estate, because we had bought this apartment building with some JV partners. We were going to improve it and then refinance it. And you kept asking, well, what about the risk? What about if you can’t refinance? You’re using a bridge loan when you price. What if you can’t refinance? And I kept thinking in my head like I liked Dinesh a lot, but that’s never going to happen. And then.
Josh: Now we laugh because we’re like everything that you had asked us about and you were basically underwriting us, underwriting the deal and primarily talking about, well, what if something happens that you’ve never seen? And now I think, oh, my God, COVID. Right. So like the thing that you talked about well over two years ago that we thought could never happen happened and. Right. The good thing about that is, is now when we look at deals, I’m constantly baking in to my underwriting things that you brought up to two and a half years ago of, well, how do you make sure that you can refinance from a bridge loan to a permanent loan or move into that deal?
Josh: We’ve actually sourced some funding now that allows us not on those past deals, which those are re-fi-in order. We could talk about this another time, but we’re in good shape there. But on future deals now, we’ve secured some funding from some various lenders that actually have kind of a hybrid bridge to perm product where we can buy a deal. In fact, I have a deal we’re closing on at the end of March that we’ve already fully syndicated, but we’ve specifically secured financing for that based on some of the things you brought up two years ago, because it’s a deal. It’s already 90 percent occupied. It’s already cash flowing. We could get Fannie Mae financing on a permanent from day one. But we’re going with a product from a local regional bank that allows us to give us some dollars to improve the building, turn the units and upgrade them. But we don’t have to reify out of that product. We can actually almost make a second application. It’s already a permanent product.
Josh: But the second application is not to get rid of the bridge financing to go to Perm. It’s actually to remove the personal guarantee. OK, and so for me, it allows me to remove the personal guarantee once the property is stabilized. But for investors who are passive guys like you, they don’t have to worry now about that re-fi risk. Right, because you already can go right into it’s already a twenty five year and permanent loan at three point twenty five percent. So some of the things that you’ve talked about two years ago that I thought, oh my God, what? That’ll never happen. Right? It happened. We worked our, we never dodged the never say no holy smokes with covid especially. But I want to thank him for that publicly because you talk about your winners in your losers. Now, we haven’t lost any money. We’re not going to lose money on those deals. They’re performing great. But you still have to learn and ask questions on the next investment and the next investment in the next investment. You can’t just keep doing what you’re doing because you said something’s going to come in, disrupt your system, disrupt your process of being a great CEO or a founder has to involve.
Josh: Even people think that the financial markets don’t have a lot of necessarily innovation. But that’s a form of innovation. That’s a form of being creative. That happens even in the financial space, the financial markets. That is maybe not as sexy as technology or as sexy as biotech. But the banks are coming up with and we’ve been we’re constantly thinking of ways to reduce risk. And one of those was refi risk. So I want to thank you for pointing that out and also the fact that we’ve been able to come up with some things. So I’ve learned from those conversations that we had years ago. So thanks for that, my friend. Appreciate it.
Dinesh: And I’m glad that one hour on your on your daughter’s practice time. Yeah. It paid off and you remembered it. That’s good. And my one way that I simply summarize that in my own head is just hope for the best plan for the worst whenever you can. Right. So if you kind of ask yourself that question every time you’re doing something that’ll give you some guidance on where, where, where is the worst that could happen and how do you manage that. And that could be as simple as, OK, I’m just going to reduce my exposure here. I’m going to not put as much capital here. And that could be a simple approach. Or like you said, it’s digging deeper and find other solutions to manage that that risk making the case that we were talking with the re-fi and stuff.
Josh: Right. Right. Fantastic stuff. Listen, Dinesh, I know we’ve got to run. I want to thank you, my friend, for jumping on. I’m going to give you a call. I’ve got some other stuff I’ve got to knock out this afternoon. I’ll give you a call in a few hours after we’re done here with the recording. But thank you so much for joining me today on Accelerated Investor.
Dinesh: Thank you, Josh. It was fun. It’s fun catching up and sharing ideas. Always good to connect you, but thank you so much.
Josh:So there you have it. I hope you enjoyed that interview with Dinesh. I always love catching up with friends of mine who are doing amazing, amazing things. Dinesh and I talking about some of our step-by-step process for looking at deals, looking for better cash flow and more liquidity, looking at asymmetric risk reward and how to find deals through collaborative investing, through collaborative networking, and really how to be a little bit more technical about your networking, how to be a little bit more strategic. Tactical about when you’re on a podcast or you’re at an event or you’re at a meet up or at a tech conference and always kind of being on the lookout for the next opportunity, when you’re into Dinesh’s shoes and you’re constantly just looking for investments, that’s all that you do is network and try to meet people and find opportunities in different investments. I also hope you enjoyed our discussion around both public and private markets, the public markets and the private markets, and how getting involved in private investments can often way outperform the public stock markets. If you enjoyed that interview, please leave us a five-star rating and a review in iTunes and YouTube. And don’t forget to subscribe to catch every episode of Accelerated Investor.
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I met Dinesh Gauba at a Capitalism.com conference, and we’ve invested in a couple of projects together. Dinesh loves investing in early stage tech companies and late stage biomedical companies. He’s been an angel investor and a real estate investor because a core part of his investing philosophy is what he calls asymmetric risk reward.
It’s often in our losses that we learn the most, and Dinesh’s core philosophy is to always be learning. These two ideas mesh well so that a loss is always turned into a positive growth experience. As an investor firmly entrenched in Silicon Valley, Dinesh embraces abundance thinking that isn’t afraid of the change that technology promises to bring to the economy, investing, or the world.
Dinesh shares some of his thought process as he works through the risk and reward of a new venture, like:
- Where is your industry going and how can you develop the skills to stay relevant?
- Can this industry or this company survive disruption?
- Is the business in line with future trends?
The more deals you’re involved in and the more you’re exposed to different groups, the more that deal flow will come your way. Dinesh and I have both embraced this method of investing that opens us up to collaborating with other investors so that we can tap into their networks too.
- How Dinesh judges if a business will stay in business for the next 5-10 years.
- Dinesh and I both believe that we find bigger and better deal flow when we engage in what we call “collaborative investing”.
- Diversifying your potential losses also makes it possible to improve your odds of choosing a winner.