Expert Dojo is the international accelerator based in Southern California. Founder Brian Mahon and team look for great founders with profitable businesses that can grow. Brian’s a delightfully articulate guest. Don’t miss this outstanding interview.
Click here for transcript of this interview with Brian Mahon.
Highlights:
Sal Daher Introduces Brian Mahon of Expert Dojo, the International Accelerator in Southern California
“…we’ll invest as easily and as happily in Boston, as we will do in Bosnia…”
“…we wanted to be able to give ordinary people the ability to be able to grow extraordinary companies…”
“Actually, we have 70 investments in our companies now. Being part of that journey and watching them while they're at that stage is just absolutely beautiful…”
“…I'm over in our location, which is 10,000 square-foot facility on top of the mall in Santa Monica…”
“It cost me money. So, I'm not falling for it again.”
“…we copy the people who I don't necessarily admire what they do, but I admire how they acquire users.”
AdLaunch – Squarespace for Videos
Irish Nun Stories
“This is my point about entrepreneurship. It grew here. I could reread and re-watch the movie about the great Edison and Tesla battle a hundred times because this is where virtually all of it began.”
Making Mass Spectrometry Easily Accessible
“…these people have actually built an entire machine learning algorithm that goes deep into the scans themselves, it's not looked at by the naked eye…”
“…tuberculosis is a killer, but it's a stupid killer. This should have been eradicated years ago.”
“They're fighting the mutation day by day.”
Sal Daher Does a Pitch for His Investment Syndicate
“I remember two things with my dad. The first thing is he never complained.”
“It meant that you had a beautiful office right on the corner. You made it, no matter what you were working or how many hours you were there.”
“To the investors, they are incredibly fortunate to be part of your syndicate group. This is not a solo sport.”
“Suddenly, their foosball tables are not quite such enticing as a recruitment offer because they've just fired 30% of their staff.”
Transcript of Expert Dojo
Guest: Investor Brian Mahon
Sal Daher Introduces Brian Mahon of the International Accelerator Expert Dojo
Sal Daher: Welcome to Angel Invest Boston, conversations with Boston's most interesting founders and angel investors. Today, we have the privilege of having with us Brian Mahon of Expert Dojo in Los Angeles. Welcome, Brian.
Brian Mahon: Thank you very much. Great to be on the show.
Sal Daher: Brian is an investor and a tremendous cheerleader for startup companies. He comes from a career of consulting to helping companies grow. So he's very, very knowledgeable about how to get companies to grow very fast. I should do a shout-out to my buddy, Sam Bogoch who told me I should connect with you at some point.
Brian Mahon: Yeah, and my buddy too.
Sal Daher: Yeah. He's a great guy. So Brian, please tell us about your investing and what Expert Dojo does.
“…we’ll invest as easily and as happily in Boston, as we will do in Bosnia…”
Brian Mahon: So, we are based down here in Southern California, but cover, to your point, we’ll invest as easily and as happily in Boston, as we will do in Bosnia, as we will do somewhere in India or anywhere else in the world. So we are 100% pure international program. Probably by the end of this year in 2020, we would have invested in around 50 companies this year, and next year we intend to double that. We'll invest in around a hundred companies. The following year, our intention is to double that again.
Sal Daher: Always your 50K, is that your [crosstalk 00:01:30]-
Brian Mahon: Oh, 100K. 100K checks is our normal.
Sal Daher: Oh, no. So you're up now, okay.
Brian Mahon: Yeah. 100K checks are normal. What happens is this, we're an accelerator, which means that certain folks will come in. Like many other accelerators, a company might be valued at, in their mind, $3 million, $5 million, or maybe even a little bit more than that. But they'll come into an accelerator because of all of the inherent benefits that come with an accelerator. But our valuations will set that we do as an accelerator, very similar to the other accelerators, which means that we're valued between $1 million and $2 million for companies that actually come through.
So many times, we will have a company say to us, "Brian, we love what you're doing." Especially international companies is kind of a no brainer. But we love what you're doing. We love the fact that you're focused on growth, working with our company, on building our brand, on building our personal brands and all those things. But we don't need 100K from you. We'll take 50K, and we'll take half the amount of equity, which actually we don't mind.
Sal Daher: Because they think the valuation is too low. It’s not flattering enough.
Brian Mahon: Yeah. They believe they can get more. Actually, that's great. They're the kind of founders we want. What we don't want are the people who are desperately in need of money to try and survive till the next day, because we know that there are inherent problems there. So for me, I'm as happy if we do 50K or 100K, and then we have the ability internally to do up to $1 million in follow-on investment into those companies as well.
“…we wanted to be able to give ordinary people the ability to be able to grow extraordinary companies…”
As I say, what I believe makes us really, really different is our knowledge of the world and our focus on the world. So we've really looked... When we wanted to start off as an accelerator, we wanted to do it because we wanted to be able to give ordinary people the ability to be able to grow extraordinary companies, and we are extremely aware of the fact that the current system is not for ordinary people to build extraordinary companies. It's for people who happen to be in the right circles to be able to build extraordinary companies.
But we wanted them to do an accelerator where people would not look at us and say, "Oh, you guys are good guys and that you know that you do a very nice thing. But you're never going to catch a decent unicorn." So well, how can we actually use what we're strong at and what we know, and at the same time, be able to have a proper strong competition with any other option that anybody would want to do if they're raising early stage money. So we focused on the world.
I've lived in 40 or 50 countries. So I have a very strong knowledge of the world, and there are some unbelievably advantageous things happening in the world that makes certain countries extremely attractive for investment, and I'll be happy to share on your own because I think it would be really interesting for your listeners to see where we're fishing. Out of all of the countries in the world, where we started fishing and then where we started then moving our attention to, because it was a surprise even for us.
Sal Daher: Yeah. Oh, listeners should be aware that Brian has a podcast, Expert Dojo, where at the season, he's interviewing startups that he's invested in, that Expert Dojo has invested in, and I can attest that there's a tremendous range of where these startups come from. The latest one that I'm listening to of Finland, I remember listening to a founder who, she was half Chinese, half Japanese. She had sort of worked in Japan and then was starting her company in the US. Basically, I think the only thing they have in common is that they're tremendously energetic founders. They are just amazing.
Brian Mahon: It's true. I got nothing for you.
Sal Daher: They're giving me [crosstalk 00:05:11]. They're giving me [crosstalk 00:05:13].
Brian Mahon: It's very true. Our last accelerator program, we had one company from China. We had one company from Japan. We had one company from Korea. We had a company from Egypt. We had two companies from Africa. We had three founders from India, of which two of the founders were still in India. We had one company from Argentina that was launching in India, and then we had a company from Spain. Yeah, they're all over the world, and we have a very, very, very strong outreach program around the globe. We really do. It's really fascinating when you put all of these people together from all of these different countries, and what you realize is actually, if you just separate, if everybody in the world just focused on startup, we wouldn't have any more wars. We wouldn't have any more conflicts. People would just work together because the outside difficulty of actually being able to break through is so high that you don't have any energy to focus on anything else, and everybody has to work together to make it work.
Sal Daher: That would certainly be true if we could get everybody to become startup founders. That would be awesome. The reason that I just love startups so much is that they throw off so much benefit, so much social benefit. Nobel prize winning economist, William Nordhaus did a study of how much of a value of a tech startup is captured by the shareholders and the founders and how much of it is "wasted" on other people, on customers, on employees and so forth, people who are not founders or shareholders.
Basically, in these tech companies that he looked over, I think over a 15-year period, or maybe it was 25 years, basically 5% of the value was captured by the founders and the shareholders, and the other 95% was captured by customers, the employees, and all these other people who are around, probably vendors as well. Any one of these massively successful enterprises generates a huge multiplier effect of value creation around it. We also underestimate how frequently these enterprises fail so that there's a survivorship bias when we look at the data. We only see the hugely successful companies. We never hear about all the thousands of thousands of startups that fail. I just liked the fact that it just throws off so much social benefit.
Brian Mahon: It's so wonderful. If I can, I just like to just bring up two separate and very important points. The first one is that, what is it that's so wonderful about an early stage startup it's that you have this liveliness that when you see them, when you see most people, especially when we get a little bit older, and I feel more angered by the day, right? Then as life just grinds you to a halt, and if we take most people, especially folks who've had a job for a long period of time, and they've just had one day too often of being told that they were five minutes late coming into the office, and they wanted to just scream out, "I'm 40 years old. Give me a break. I should be beyond this."
Startup is kind of the absolute opposite to that. It's this wonderful place where somebody has realized their purpose. The weird thing is it's not about money, I mean, that you can make tremendous wealth from it, and I don't diminish that, and it's tremendously important for the community. But for the person themselves, they find this purpose of being able to bring something to the world that would not have existed if they hadn't been there.
“Actually, we have 70 investments in our companies now. Being part of that journey and watching them while they're at that stage is just absolutely beautiful…”
Actually, we have 70 investments in our companies now. Being part of that journey and watching them while they're at that stage is just absolutely beautiful, and it's just a-
Sal Daher: It is, it is.
Brian Mahon: ... great, great journey. I also love what you said not so much about the 95% of wealth for the community, because that's just absolutely true, and it's a no brainer, and it's why we should always want startups in our community, but more about the point of the amount of failure that there is within early stage startup, because that was actually the genesis. The genesis for a starting Expert Dojo was not, we want to find unicorns and build unicorns into it. That's fine. It's inherent within what we shouldn't expect if we're investing money into companies. But what we really wanted to focus on was if we have an endeavor, which we all agree is one of the most purposeful things that people can do, and we all agree that it brings massive financial value to the community, then we shouldn't allow a 98% failure rate and we should try and at least understand what's causing the failure rate. That's what we did.
“…I'm over in our location, which is 10,000 square-foot facility on top of the mall in Santa Monica…”
I mean, right now, I'm over in our location, which is 10,000 square-foot facility on top of the mall in Santa Monica, and I took this facility five years ago, and it was specifically for the purpose of just studying failure. Nothing else. There was no business plan, no model, no accelerator, no anything. We literally just came in here. I brought in a couple of buddies who are great entrepreneurs that had some really good successes, and then we brought in startups, and we said to the startups, "Listen, guys. Here's what's going to happen. We're going to bring you in, and we're going to study you, and we're going to give you absolutely nothing. If you ask us for help, we're not going to offer it to you. But you're not going to have to pay rent." Everybody's like, "Okay."
Sal Daher: Like a controlled study, like lab rats here. You have cameras observing them.
Brian Mahon: Even very funny, happy to be here, lab rats. They got really free rent. No problem. We're staying. We watched those companies that came through and-
Sal Daher: What was your selection protocol?
Brian Mahon: Oh, we didn't have any. We didn't actually have any. We didn't actually have any. We didn't know what we were doing. It was a very emotional reaction to a logical problem. I had gone to all of these co-working spaces, and I would see all of these startups, and they would all say the... The same three things would happen in secret. The first thing would be the startup would say, "Hey man, I've got this great product. We're going to blow up the world. It's going to be awesome, and we're going to be a unicorn." Then the next thing that would happen is that that startup would then go about trying to find money from everybody who would listen, and then the final thing is the startup would disappear and never be seen again.
It was like watching Children of the Corn, the movie, over and over and over again, where these startups just go into a field, and then they disappear, and they never come back again. I thought, "I want to understand why." In the same way that I wasn't doing a controlled study with the people that I was asking or meeting, I just wanted to find startups. I wanted to find early-stage startups that just happened to be working on something which was difficult, and they had not raised a lot of funding, and that was all it was. A bunch were products, and a bunch were tech, and a bunch were other things.
Then we just studied them for a year, and then we came out with them with a bunch of conclusions, which were really, really actually fascinating and a tiny bit scary as well.
Sal Daher: Yeah. My experience, I've invested in about 60 startups over... My first startup check, I wrote back in the early '90s. A lot of it tilted towards post 2010. I've been much more active since 2010. One of the observations I have is that failures tend to happen because the founders give up. They run out of steam, and they give up. While the founder still is pumped up, there's always a way to keep the company going until they can discover the thing that's going to put them on the map.
So for me, I think as an investor, I try to look for founders that are really, really exceptional and are unlikely to give up on any situation, and they're really, really committed to the thing, and then I try to make their lives easier, figure out what I can do to get them the resources they need and the advice to get them to the next step.
Brian Mahon: Exceptional.
Sal Daher: Do you invest across all disciplines? What I've found in my portfolio is that the companies, most of the value now is in a handful of life science companies that invested along the way. I've discovered the profile which works for me, being where I am here in Cambridge, Massachusetts, which is just full of biotech companies, I'm just investing in biotech companies now.
Brian Mahon: Very smart.
Sal Daher: I don't write checks for anything else. A particular type of biotech company, I invest in biotech companies that are relatively capital efficient and have a founder that is just tremendously... or a founding team, even better, tremendously motivated to get to the really important inflection point where they can convince a strategic player, a big pharmaceutical company, somebody like that to take them on to the next level and to provide resources for them to go, a company that with $4 million or $5 million or $6 million can get to a stage where they can have a big inflection point with a strategic player, that's what I'm looking for, and preferably if they have a platform, meaning many different uses.
Cambridge is full of companies like that. I'm lucky to be able to choose, but also the rhythm of investment. I have to slow down my investing. I have to become really, really focused because I'm realizing that these companies, they're not going to get VC funding. As a matter of fact, the podcast that I'm going to be launching this Wednesday is all about this sort of diseconomy that exists with these scrappy biotechs that will not get VC funding. Because the VCs increasingly are funding their own startups, creating their own startups. It's like a virgin territory for me. There's a lot to be done. There's a lot of new stuff to be done here.
Brian Mahon: So, we just invested in a bio. I think, again, it's a huge point that you... We just invested actually three of them. You bring up a really important point, which is as an investor, we need to invest in things that we understand that we're good at. Right? We almost have to do. If I look at our first few investments, we made some terrible investments. Then if I look at the last couple of investments, genuinely, I sometimes pinch myself because I can't believe we've made such good investments. It's just because we, like founders, get better the more they try something. We get better the more we invest. I'll see somebody coming in, and I'll be like, "The perfect pitch. He said all the perfect things. He or she looked absolutely perfect." I'm like, "No. No." I've seen this-
Sal Daher: I've seen this story before.
Brian Mahon: ... movie before.
Sal Daher: I've seen this movie. Yeah.
“It cost me money. So I'm not falling for it again.”
Brian Mahon: It cost me money. So I'm not falling for it again.
Sal Daher: Your memory is very sharp when you've lost money on a particular movie.
“…they should try and get the most experienced angel investors they possibly can.”
Brian Mahon: Yeah. It's true. We just give better as angel investors, and I think founders looking for investment should try if they can. It's not always possible, but they should try and get the most experienced angel investors they possibly can. Because that experience also means that if I'm investing in a bio company now, now that we were friends, we know each other, if I'm investing in a bio company and I know that you've invested in it, I'm going to be 20 times more likely to invest with much more minimal diligence, because I'll know that you've gone deeper than deep to make sure it happens. You want to build a team of investors around you as a founder in the same way that you build up a board and the same way that you build up your own internal team.
Sal Daher: In the space that you've come from, it's marketing and all these things related to it, growth. Somebody can explain the business to you, and you can create an opinion about the space very quickly because of your experience. But in the life sciences, it's a little bit like driving in a fog. Even if you turn on a really high powered light, you can't see very far because life science is so massively complex that it's a highly specialized field. So what you're talking about is particularly important in the life sciences. You have to kind of put together a team that has particular knowledge in that field, in that particular field.
Brian Mahon: Absolutely.
Sal Daher: But commercial knowledge. They have to have the scientific knowledge and all of that stuff. I've observed that the groups that I've seen be successful with choosing really interesting startups in the biotech space, combine all of that, because a person cannot from the outside, you cannot have someone who's an expert in biotech investing. You can only assemble a group of experts to look at a particular company and see if it could work or not.
But anyway, Brian, would you like to talk about some of the really interesting companies, I mean, that I've listened to recently on your podcast, for example, the Finnish company. I'm really excited the guys were using AI to help you edit videos, to create video content, which can be very attractive. Would you like to talk about some of these companies?
Brian Mahon: So yeah, absolutely. I'll throw in some life sciences one just as a hobby for you. Right? Just come on. I got to be respectful. So we have over, and you know this as an investor as well, we have over 70 companies. So they're all our babies, and some of them are always going to grow up to be PhDs, and the others are going to grow up to maybe being in a gang. Okay. So we know that.
Sal Daher: Maybe they'll be like PhDs with tattoos, who knows?
Brian Mahon: Yeah. So when we first started investing, we brought people through, and we said, "Okay, great. We're just going to put money into you, and then we'll be a support, and we'd be a help, and we get mentorship for you." What we realized was that if we let them go their way too early, then they're not benefiting from all of the resources that we have. So we put together a very fixed program very quickly, and then we kind of looked at the other programs and said, "Well, most of the programs are really very focused on finding investors." So we don't want to do that. I have a really deep belief that here in America, we are at the biggest risk of our entire existence of losing the mantle of the entrepreneurship nation of the planet.
Even though Israel has come up with some amazing technologies, and they're a friend friendly nation of ours, so we don't mind them so much. But we do mind the fact that everybody else, and we talk about China taking our manufacturing like that horse left the stable 20 years ago. They're now a better technological power than we are, and that is the horrible and realistic truth. India are going in that direction right now, and Taiwan went in that direction a while ago, and Japan went in that direction a while ago. What we've started to do is we've started to forget the thing that really makes us great as a nation, right? That is our storytelling. It is our brand. It's the brand that we build around the stories that makes everybody want to do it. It came from the movies, and then it turned into all of our products.
We're at a stage where we're with lean startup and everything that's being introduced. I personally started to see a lot of founders who were just releasing things out to the market extremely quickly and then letting the customer tell them that it was terrible, and then based on learning that, and I'm just like, "Okay, Sherlock. Why don't we just make something great?" I don't know. I'm not the smartest guy in the block, but this hurts me deeply inside in the same way that it hurt me when people said, "Well, rather than actually spending the $500 on that beautifully couch that was handmade and hand-carved and will last for 25 years, why don't we just bring something in from China, which is just rubbish, and it's going to break two weeks, but it's okay because we're making the decision based on today.
“…we copy the people who I don't necessarily admire what they do, but I admire how they acquire users.”
This became the core fundamental piece of what we represent, and it's what we found out when we brought everybody in here. It's what we saw When we made our early investments, then we said, "Okay. We're going to disguise ourselves as an accelerator, but really we're a launch platform for both international companies coming into America and American companies that want to build phenomenal, personal, and business brands and then adopt great marketing techniques." What do I mean by great marketing techniques? I mean, we copy the people who I don't necessarily admire what they do, but I admire how they acquire users.
So, I'm talking about internet marketers. I'm talking about from the Tony Robbins all the way across the board, right? The way they get users is genius. Their use of HubSpot and marketing automation systems and predictive systems and nurturing systems makes tech entrepreneurs looks like a bunch of klutzes.
Sal Daher: It's a truism of the internet that the yuckiest businesses seem to be the most genius, the greatest geniuses at promoting themselves, and-
Brian Mahon: They do.
Sal Daher: ... they don't want to get it to any particular, but it's no secret that a lot of the payment protocols and all that were developed by particularly a yucky business. I mean, it's of... That trades on images.
Brian Mahon: And they [crosstalk 00:21:27]-
Sal Daher: On human images, if you know what I mean.
Brian Mahon: They're brilliant. But if you watch how it's done, a great internet marketer would probably have seven to eight variations of messages and responses and messages to deal with those responses already built into an incredibly elaborate system, which has got one intention, and that is to replace that person having to do with themselves, but never, ever, ever, ever, ever letting the customer leave, keeping them forever. So anyway, so we really liked that, and we thought, "Wow, if we could bring those techniques into tech companies as well, wouldn't that be pretty incredible?" So we built our whole program around that.
AdLaunch – Squarespace for Videos
Then the folks that we bring in now, you mentioned AdLaunch. I mean, that company, we love them over in Finland because they're building the Canva for videos. It's just that simple. What did Canva do for being able to make just really great images? It just made it really simple for us to make beautiful things, for normal schmucks like me to be able to make beautiful images using off-the-shelf software, which was the same thing that Wix did when they were doing it for websites or Squarespace did it when they were doing it for websites and now what AdLaunch are doing for videos, and they've done this phenomenal deal with Shutterstock. They have got millions of video images, which are fantastic. They then have got their own proprietary technology, and it means that I can literally build a video for 20 or 30 books, which is revolutionary within a space. They have tens of thousands of users, and they've got more coming on.
I mean, you mentioned that earlier on, but that word execution is really important. We really look for people who are able to execute in a strong way, and we know you do that. The killer of every company is money. When they run out of money, it's all over. It's very, very hard to come back. So the key becomes, how do they make sure that they keep going until they find the ultimate solution? Amazon, we're brilliant at being able to raise money. I mean, they lost what, $5 billion or $6 billion before they became a company that was successful. But because he was incredible at raising money. Other people are incredible at being able to get and hustle some consultancy money in while they're building what they're building, are working in the evening job on doing it, are continuing to iterate, are finding better product, fit people so that rather than the taking them 36 months, it takes them 18 months to be able to hit that fit.
But you need to have that entrepreneur where in their mind, they know that their battle is a battle with time. There are no competitors. There are no bad products. There's no, we got up too late this morning. Our marketing didn't work. There's one war, and that war is against time, and they have a specific plan how to win that war.
Irish Nun Stories
Sal Daher: Yeah. I see that, and I think it's very perceptive of YouTube to see that that is such an important thing. They're not competing with external competitors. They have to have a vision of where they're going. They have to be internally driven. They cannot be externally driven. Looking back, they have to be looking forward. Do you want to talk about your life science startups?
Brian Mahon: Yeah. I'd love to. I'd love to. Because we actually got in. So you have the benefit of an experience in this space. I'm just a normal, random, Catholic, repressed Irish guy who gets guilty even if we don't make [crosstalk 00:24:46].
Sal Daher: I'm personally a Catholic. Brazilian Catholics are not so repressed.
Brian Mahon: Listen, their nuns in Ireland have a lot to answer for. Let me tell you, I should have gone in Brazil.
Sal Daher: My mom was educated by Irish nuns in Brazil. Can you believe that?
Brian Mahon: Wow. Wow.
Sal Daher: They came after World War II. There were a lot of Irish nuns. There was rationing of food all across Europe. Okay? Her grandfather brought over a bunch of young Irish nuns-
Brian Mahon: Wow.
Sal Daher: ... who saw the opportunity. Their order had a house in Brazil, and he said, "Oh yeah, I'll sponsor them." I'll get both tickets for them to come over because there was no shortage of food in Brazil. There was no rationing-
Brian Mahon: Beautiful.
Sal Daher: ... after World War II. So these young nuns, my mother was educated by some of these young Irish nuns. They were very strict.
Brian Mahon: They're very strict. I'll tell you that the good thing, if we're going to take something good is that you learn a humility on how to approach life, and I have that. So I know all the things I don't know, but I also know that I'm very good at making friends with people who have got common interests.
Sal Daher: The one thing that nuns will not let you think is that you're too full of yourself. They'll always tell you. It's not about you. Okay? It's not about you.
Brian Mahon: They will take that leather strap out fast. Let me tell you, you won't sit down for a week. So I knew that here at the Dojo. Look, I've lived in a lot of countries, and I've had a bunch of different companies myself. When I came here, I thought, "Okay, we're not going to solve all of the problems of entrepreneurs on our own." But if the greater whole can look at what those problems are, maybe we understand those problems, then possibly we can make a dent in it.
So right at the beginning, my objective was, A, we want to make an impact, B, we want to be able to make a profit. Our end goal is to make entrepreneurship or success within entrepreneurship, the same everywhere in the world, no matter if you're poor, if you're rich, if you're woman, if you're man, if you're black, if you're white, wherever you are. That's our goal, which is an impossible goal, but that's a great place to start.
Then we just thought, "Okay, great. Let's do an accelerator so we can make a couple of hundred million dollars so we can really attack that goal and do really well." Then as these companies started coming in, it was just myself and my partner. As these companies started coming in, I said to my partner, "Look, I don't have the expertise beyond a few of the industries that we have here. But we know a lot of people who have the expertise." So we built a band around us, a band of very, very, very smart people and people who had exited in AI and exited and cybersecurity and exited a blockchain-
Sal Daher: Good, good.
Brian Mahon: ... a bunch of other places. One of the final areas where we got the experts in was in the bio space. Actually, because it's really been fascinating, Boston has dominated forever. But San Diego and Orange County has quietly come on the map in the last 10 years, right, with just some sneaky little unicorns that they pushed in.
Sal Daher: Well, I've just been working on launching a podcast interview with a founder. We're in a board together here in Boston and so forth. He was a CEO of a company founded in San Diego. Why they ever moved to Boston, I don't know. If I were a company started in San Diego-
Brian Mahon: Stay, right?
Sal Daher: ... I'd stay there. Oh, it's so beautiful. Because I have very fond memories of San Diego. You see that I'm an immigrant to America. The thing that astonishes me, my business partner, Bob Smith, my late business partner, he was a big supporter of Bowdoin College. I drove up to Bowdoin College. Brian, it's like among the moose up there. Okay? It's the middle of nowhere. They have this fantastic university with a gorgeous art collection. Okay? In the sticks, in America is a country full of these institutions. It's so fantastically rich. People have no idea.
I mean, in Brazil, there's a handful of these places. Okay? America is like you stumbled them everywhere because in 19th century, there was so many rich benefactors that set these places up and so forth. So you have this amazing explosion of knowledge at places like UCSD, the California systems, Stanford. But then there are lots of other universities in the South, in the Midwest, and so forth. There's no lack. I mean Pittsburgh is just full of a lot of innovation and so forth. So this is the thing about America. America is a vast, this 320 million, 330 million people with this vast infrastructure of knowledge that draws in people from all over the world to come and create new things here. America kind of invented invention. This is one of the facts that people don't know. I mean, as a foreigner-
Brian Mahon: Oh, exactly.
Sal Daher: ... you understand that.
“This is my point about entrepreneurship. It grew here. I could reread and re-watch the movie about the great Edison and Tesla battle a hundred times because this is where virtually all of it began.”
Brian Mahon: Yeah. This is my point about entrepreneurship. It grew here. I could reread and rewatch the movie about the great Edison and Tesla battle a hundred times because this is where virtually all of it began. We had our first industrial revolution, but where it all came to, brilliant people that were here. When you speak about the institutions, what really makes America great is that the institutions understood how it worked. We listened to all the rhetoric right now about immigration is bad, and we shouldn't allow people, and things are really tough, and everybody's fighting on one side or the other. But the institutions always got us. They always knew as long as we bring the most brilliant people from all over the world, and we bring them into our institution, heck, we'll fly them over. There'll be no charge. We would bring them for drinks on a Friday night. But we want the most brilliant, not the second, not the third, we want the top person. Because we know that if we have the top 5% most brilliant people in our school, then that will attract everything around that that makes the school phenomenal.
Sal Daher: Yeah, it does. It does.
Brian Mahon: We believe the same thing within entrepreneurship. It was how America was created, and it's where find them.
Sal Daher: Absolutely. Tell me about your biotech startups.
Brian Mahon: Okay, fine. Okay. So number one-
Sal Daher: So, I'm at the edge of my chair. I want to hear.
Brian Mahon: Number one-
Sal Daher: Number one.
Making Mass Spectrometry Easily Accessible
Brian Mahon: ... I'm going to start with mass spectrometry, right? Some people will understand it. You will, of course. It is the measurement-
Sal Daher: Sure.
Brian Mahon: ... of the molecules, right? So we know we have a major issue in the world, and a major issue in the world is our drug development is just all messed up. It takes way too long. It's way too expensive. It's like $3 billion or something to develop a drug. But more important than the fact that it takes 12 years and it costs so much money to actually do this, and the bigger thing is it doesn't actually need to. We don't need to waste 20 drugs to get to one drugs. By the way, this has become startlingly obvious based on the situation that we're in right now with COVID-19.
So, mass spectrometry has in itself the ability to be able to reduce that. But we don't have a center of innovation for mass spectrometry, and we don't have enough people who are good enough and actually being able to understand that, because it's the measurement of molecules. This is not the counting of how many markers we have on our whiteboard. This is one of the most challenging things that faces the world. So we had, to your point, a brilliant, brilliant, brilliant entrepreneur, Lysa, who has got 25 years as one of the leading world experts in this space. She got three other co-founders, one who's exceptional at investors, another one who's exceptional at logistics, and another one who's creatively, extremely strong, and they said, "We're going to create a center of mass spectrometry, and then we're going to take our machine learning skills that we have, and we're going to build it into it so that we can make this technology available to everyone."
At the beginning, and they already have the clients, they already have the people, the company can do $100 million a year just based on the existing need for this technology to be implemented properly within the laboratories who are crying out for experts to be able to do it. So on that side of it, we weren't looking for a huge, incredible... It doesn't need to be a flying car. It needs to be a huge problem that's facing us right now that everybody wants to get fixed. When I was a younger guy, I used to always look for disruption. Now, I want frictionless innovation.
Sal Daher: What's the innovation here? Because mass spectrometry is a very, well-established a way of sort of separating by mass, molecular mass different components in a sample. What's the new thing that they're doing that's disruptive?
Brian Mahon: Number one, it's only used in a tiny minority of drug development cases. That's number one, because they don't have experts to be able to actually use it. So that's the first thing. Just on a really, really, really base level, we have great technology, and we don't have the expertise to be able to use that great technology. So it's actually used in a single decimal number of the drug development, and it's only used by the large laboratories, not used by the small ones, because nobody can actually afford to be able to do it. Number two, the actual innovation within mass spec hasn't moved on in the last five or 10 years.
Sal Daher: No, no. Yeah.
Brian Mahon: It's exactly the same thing that's been actually done within that space. Number three, and I'm going to use another example of another life science company, which I love, but it takes something which is existing, and it's been in place for a long time and changed it.
Sal Daher: Okay. So that's sort of like popularizing making accessible a technology that's only now accessible to the really huge player?
Brian Mahon: Yes. Yes. Yes.
Sal Daher: Great.
Brian Mahon: And adding to it using machine learning. Right now, I'm going to go back to it after I go to my Belarus company. The Belarus company is a bunch-
Sal Daher: Love these companies. Are there Argentines in the Belarus? I liked the Argentines in India.
“…these people have actually built an entire machine learning algorithm that goes deep into the scans themselves, it's not looked at by the naked eye…”
Brian Mahon: Listen, I would say if it's in Belarus right now, they're probably hiding somewhere because Belarus is in a whole world of hurt. But these people are brilliant. What they recognize five or 10 years ago was that the entire way that we look at scans doesn't work. If you take a doctor, doctors are the most brilliant people in the world. I've got nothing but respect for them. But sometimes they're just stuck with silly tools that should be better. So right now, we say I have cancer or something terrible. My doctor will take a scan, and then he will look at my scan with a naked eye and give me or she will and give me a diagnosis of what they see. But how is it possible to give me an accurate diagnosis using the naked eye to be able to do it?
So, these people have actually built an entire machine learning algorithm that goes deep into the scans themselves, it's not looked at by the naked eye, and allows patients to be able to get a second or third opinion using digital imaging and being able to go deeper than ever before. Right now, it's being trialed by three hospitals, including La Paz over in Spain, which is a truly awesome hospital. This is something that could be made available to consumers for as little as $300 or $400 a scan to be able to do second and third things.
So, we want to do the same thing within mass spec. First of all, we want to create the center of innovation which will have a sufficient amount of machines that we can actually be able to do more tests. Then we want to be able to bring in more machine learning people so they can look at the actual data that we're taking from it and be able to dig deeper into that data so that we can start to replace a lot of the things which within drug development just have never made sense to me, such as even animal testing.
There's so little relevance between the data that we get from animal testing and what we actually need to be able to tell that something's actually good or bad for us. There's just a lot of parts within the entire system which can be changed. So we've got the Belarus guys working on the digital imaging over there using machine learning. We've got the mass spec people who are actually looking to build a center of innovation in Boston, by the way, whereby the whole world within then look to this as the future of innovation, which you as a buyer, I mean, it would be so exciting.
Sal Daher: I think I might've heard of that. Maybe it was on your podcast. Were they interviewed on your podcast?
Brian Mahon: They were [inaudible 00:36:36] and her name is Lysa.
Sal Daher: Yeah. Lysa. Okay.
“…tuberculosis is a killer, but it's a stupid killer. This should have been eradicated years ago.”
Brian Mahon: But they're so exciting. Then I'm going to cross-reference it with our third company. Well, I'm going to give you four actually, because we have another one, and the next one is tuberculosis over in India. As you know, tuberculosis is a killer, but it's a stupid killer. This should have been eradicated years ago. It's just ridiculous that some of these poor people diseases are left to exist in the world. But one of the biggest problems with tuberculosis is that it mutates. But because it mutates, you've got to 10 or 12 different medications that people can take, but the problem is you're given one medication, and then the disease is like, "Oh, this is bad. We're going to mutate." Then that medication is no good for them, but then it takes a couple of months to realize it, and then by that stage they get worse and then the patient dies.
So, we have one of the most brilliant PhDs in India that I've ever met in my entire life, and we literally begged her to come in to the accelerator. At the end of the day, they're looking to try and build it again, using machine learning, which actually just looks at the individual medications, which the medications are fine. It's about fighting the mutation, and they've provide combination medications and then continual testing. So they can tell as the mutations are happening and then they change the combined medications, how simple is this?
Sal Daher: Oh, wow. They've tried to stay ahead of the mutation. Interesting.
“They're fighting the mutation day by day.”
Brian Mahon: Yes. They're fighting the mutation day by day. Then I have another company which is over in Africa, and these guys are out of Yale using a license from Berkeley. This is in the sickle cell. Again, it's another stupid, stupid disease that should not be killing Africans. It's just ridiculous that this is allowed to happen. The only reason that so many people die and just for folks listening, sickle cell is something that just sits in Africans more than anybody else in the world, for whatever reason and-
Sal Daher: Sickle cell anemia, it's a genetic variation that actually is theorized that had survival value. Because if you have sickle cell anemia, your malaria does not affect you as much, and sickle cell anemia is not as debilitating as malaria's. So a lot of people who had this genetic variant seem to have survived in that population because of this. But now that we've eradicated malaria, it's about time to get rid of sickle cell anemia, which can be painful.
Brian Mahon: By the way, and kills. It kills. And again, this is where it's silly. It only kills if you don't diagnose it. That's the only reason. If you diagnose, it is very treatable. But why is it not diagnosed? Because the current diagnosis philosophy or how it's done, it's too expensive. You've got to pay 50, 60 bucks to get it done. A lot of Africans can't afford to pay that, and it also takes a little bit of time to get it diagnosed. So these particular geniuses who've come out of Yale have come up with a... It's almost like a George Clooney coffee machine. It does a very quick diagnosis, and it cost a dollar per diagnosis to be able to do. So we're going to be able to save hundreds of thousands of lives. I will give you my final one.
Sal Daher: No, no. But hold on a second. On sickle cell anemia, I remember just a couple of months ago was the one-year anniversary of the first patient who was treated with a gene editing therapy for sickle cell anemia. She was still free of sickle cell anemia. So treatment is on the way. It's great that they have a really quick diagnostic that's easily available, and it's a hope that it is a lifetime treatment, will change the phenotype, will change her, in this case, it's a woman who has it, and that she will no longer have sickle cell anemia, so genetic cure. Editing of the slight variation in the genetic makeup. So number four.
Brian Mahon: My last one, and for everybody listening, this is why we love startup. I mean, who else has a job as much fun as this?
Sal Daher: Nobody.
Brian Mahon: Nobody.
Sal Daher: This is... Yes.
Brian Mahon: We meet awesome people who are coming at... The details of what they're doing is less important than the awesomeness of why they are doing this. We get to have ringside seats. We're like Linda McCartney taking pictures of the Beatles when they're playing their first gig, and we get a free entry into every single place that they play. Thank you. Right? So it's awesome.
Sal Daher: That's excellent. Yeah.
Brian Mahon: My last one is actually one of the more interesting areas, which you alluded to it there. It's in the genomic space. We have two companies in the genomic space. One of the companies is G3, which was started by a very brilliant specialist, a cardiovascular specialist by 6 to 7 years ago. This was at the time where to actually take people's genomes was super expensive. I think it was like seven or $8,000 per person. For people who are listening, we've got like six billion letters in our body. Only three billions are mom, and three billions are dad, and that's about 25,000 genes. That makes up our bio makeup, right. That's us. That's all of us right now.
The thing about our genome, most people will know 23andMe, and they'll know ancestry.com. That's just a very small sampling, maybe 100,000 of that six billion. So they'll tell you where you come from, but it's a hobby. It's not serious, right? So I'm talking about the serious part of this that looks at our biological makeup. Now, the outcome of knowing of what our biological makeup actually is only seven or 8% of where we're going to be in the future. So it's not like you can just look at my internal biology and say, "Okay, Brian. I'm going to tell you're going to have cancer at the age of like 37 and cardiovascular problems."
But it does give me a 7% indication. Then a huge amount of what's going to happen to me for the rest of my life are my behaviors and my habits, right? So I've always been of the belief, and I've always been massively fixated with the space of, crikey, wouldn't it be amazing if at birth, every single child had a full checkup, a full gene check, where we go through the entire thing, and we're like, "Okay." Maybe it's hard to catch cancer because that's very difficult to see a very complicated. But cardiovascular, we can see. We can see a lot. Alzheimer's, we can see. Parkinson's. We can see a lot of the things that could potentially happen in the future.
That means that we can actually set very specific roadmaps as to what people should do and things. Maybe that you say, "Hey, you're super prone to diabetes. You're really prone to actually putting on a bunch of weight." If you don't do this, this is what's going to happen. So you got to start doing this now, and then you build it for the future because right now, everything we're doing or most of what we're doing is reactionary. It's nice that Fitbit would measure our steps. But I want to be told when I'm born. I want my parents to be told, you tell this guy what to do.
So, Dr. Szilard Voros decided to do exactly this. He took a sample of 8,000 people at a cost of around $8,000 per person all over the world, the largest sample ever done. They spent $50 million putting this together. Then they decided, "Well, now we're going to use this. It's going back to drug development. We're going to use this to try and actually develop drugs that will speak specifically to our biological makeup." So massively interesting. He now has two huge partnerships with monster companies that are in the space, two big joint ventures, and they're working on Alzheimer's. They're working on cardiovascular, and the entire intention is to build a drug pipeline that would be able to actually speak to the biology of a very specific group of people using that sample of 8,000 people they started with." What's really exciting actually about that space, and he's now actually got a separate company, which is specifically focused on coronavirus.
Sal Daher: Well, he has that huge data set. They can apply it to many different... How do they make money? What's the business model for these guys?
Brian Mahon: The idea would be a little bit of drug development.
Sal Daher: Just basically help for drug development.
Brian Mahon: Yeah. It's a long play.
Sal Daher: Fascinating. Fascinating.
Brian Mahon: It's a long play. But it makes a lot more sense because if we know it costs $3.6 billion to develop a drug-
Sal Daher: Well, if they can generate sort of drug targets that are very appealing, they might have a business there just sort of providing targets that the companies can then experiment and try, particularly in areas like Alzheimer's where failure is the norm. There's still nothing they can do.
Brian Mahon: Absolutely.
Sal Daher: Yeah. I mean, they're at a point now where there is a technology where they can tell you before you're dead, if you have Alzheimer's, but there's still nothing that can be done. Around the edges, they could do something, but there's no cure.
Brian Mahon: It's been very elusive. We just need to look at things differently. I'll just add two very interesting side points on him. He actually was in very late stages conversations with a country that are looking to incorporate this as soon as children are born. I'm so encouraged by the fact that the cost of actually doing a full genome check on the entire body is now coming down from the tens of thousands of dollars into the late hundreds of dollars, and I think that's going to keep on reducing, and we're going to get to a stage very soon where it's going to make sense for governments to start actually doing this when kids are born and then saying, "Okay. Rather than worrying about how much healthcare is going to cost in the future, we're going to try and prevent us."
They have actually done G3 themselves, have actually done this. We're one of the companies that just spun off, where they're now looking at predicting the probability of viruses like corona or anything like that using genome sequencing.
Sal Daher Does a Pitch for His Investment Syndicate
Sal Daher: Interesting. Fascinating. Brian, we talked about your investing. We talked about some of your startups. Okay? So, my thought here is that I would do a little promo for my syndicate, and then the second half we'll come back and talk about your biography, how you got to be Brian Mahon, Expert Dojo the sensei of the Expert Dojo.
Brian Mahon: The self-proclaimed sensei. But I'll take it.
Sal Daher: I think you get a lot of seconds on that. So the first reason I do this podcast is to learn because every time I talked to someone, an investor or a founder, I'm learning stuff. Even a young founder teaches me stuff. So, this is an amazing learning vehicle, and the fact that it's a podcast, it's available to everyone for free, I think it's a hugely valuable thing. I think that 95%, maybe 98%, maybe 99% of the value is being captured by externalities, by people other than me.
But I also capture a little bit of the value via an investment syndicate, meaning this is meant to attract people who want to be angel investors to sign up to a list that I keep at angelinvestboston.com. They qualify themselves as accredited investors, and then we can have a conversation about interesting companies that I'm investing in if they want to invest alongside with me or some of my-
Brian Mahon: That's very smart.
Sal Daher: ... angel colleagues here in Boston. So that's the pitch that I put in for my investment syndicate. I consider my investment syndicate as sort of an on-ramp to angel investing because not everybody can be... Let's say you're working a gazillion hours every week. You're pulling down a really great salary. You can't be investing full-time because you cannot be there for the due diligence meetings. You can't be there for subsequent meetings to support the company. But you can't from time to time, give some ideas about things, and you could provide some money initially, and maybe in five years, you're going to have learned a few things about angel investing. You might be in a position to be a full-time angel.
So, this is why I have the Angel Invest Boston investment syndicate. So I invite listeners who are credit investors that come in, sign up. But anyway, Brian, I really want to know, you were born in Ireland. Were your parents entrepreneurs? Anybody in your family entrepreneurs? How did you come by this entrepreneurial vein?
Brian Mahon: I was fortunate. I was very fortunate. I was brought up in Dublin, Ireland. My dad was an accountant. He probably wouldn't have classified himself as an entrepreneur, but technically he was. He had his own accounting practice. I needed to come up with small clients. More importantly, he had absolutely terrible, terrible rheumatoid arthritis. So his rheumatoid arthritis, he got it when he was about 20, and he was promising tennis player and all those wonderful things, but he got it when he was 20. I say it not because I want anyone to feel sorry for my dad, because my dad was a very happy guy throughout his entire life. Anybody who knows rheumatoid arthritis knows that there is no more debilitating disease. It just chips away at your body and just destroys you, and then it goes after everything. Then you have nothing left, and the drugs are even worse than the thing itself.
“I remember two things with my dad. The first thing is he never complained.”
I remember two things with my dad. The first thing is he never complained. He said, "Listen, I got two great kids. I got a great life. Everything is fantastic. What am I going to do? Am I going to complain about something which was given to me, and I was stuck with when I've got all these other wonderful things out there?" So that mindset stuck with me, that you can go through life in one of two ways. You can either go through life and say, "Hey, you know what? I got to make it to the end. I got to make sure that I keep paying my mortgage until I get through, I stay in my job until I get through, I just don't get dinged by too many things until I get through."
Or you can say, "Life is great, and bad stuff's going to happen, and bad stuff happens to a bunch of other people." But if I don't embrace every single part of this and enjoy the really wonderful things rather than being that guy who complains about the stuff that went wrong, then I'm going to have missed out on an incredible life. That was a huge, huge, huge lesson for me when I was a kid, and my dad said to me when I was 17 or 18, he said, "Just go and explore the world and find out for the world what it has for you." That journey for me took me through about 50 countries and 25 years by the time I got there, and I lived in Russia, and I lived in Mexico, and I lived in England and Spain and Italy and Thailand and China and just so many places.
Every place that I went to, it was either with one of the companies that I had. MR, it was on behalf of one of the companies that we'd been acquired by. So I was tremendously fortunate, and every place that I went into, the first thing that I would always do is I would get to wherever I was going to, and then I would just go running, and I'd just run around the cities, or I'd run around the places, and I'd discover it, and then I would try and get to know the people, and then I would build up connections with the people. I suddenly realized I had this huge global connected connection network.
Sal Daher: So, the industry that you were in, was that in advertising, in marketing? What was that?
Brian Mahon: My very first job that I had was as a developer, was as a terrible developer of houses over in the United Kingdom.
Sal Daher: Was that a job, or was that an entrepreneurial venture of your own?
Brian Mahon: So actually, it turned into a job. It started off as an entrepreneurial venture, and then it turned into a job afterwards. It was the greatest thing I ever did because it taught me the true meaning of supply and demand. I suddenly understood the world. I understood that something is worth a certain value, but in time, it will definitely be worth more. You just need to know how much time it's going to take. You can increase the value of what that specific thing is by adding to it. But to add to it in a really important way, you need to understand the human-centric experience of the people that are going to want that similar thing.
Sal Daher: What people want. [crosstalk 00:51:54]-
Brian Mahon: Right? That's it. I make it sound very flowery and nice, but really, it was that simple. So I think everybody should try and be a property developer. But they should try and do it in a very gradual way. I built up to having about 12 or 13 properties. I think I still have about three or four, a couple over in Spain or in a few other places. But it was wonderful. I took them on. I suddenly got a little bit bigger. I took on a little bit more, and it went very well. Then I took a job with a company called Christie's over in the UK. Christie's were the auctioneers folks, and that did really well. I learned more about buying and selling with them. Then after that, I started getting into the consulting world and about how to reduce the cost of workspace, and that was at the time when everything... If you didn't have a thousand square foot office, then you weren't anybody, right? The mentality was all messed up.
Sal Daher: That's right. [crosstalk 00:52:47].
Brian Mahon: It was offices [crosstalk 00:52:47]. Yeah.
Sal Daher: It was still the Madmen era.
Brian Mahon: It was exactly right.
Sal Daher: Yeah. [crosstalk 00:52:51]-
“It meant that you had a beautiful office right on the corner. You made it, no matter what you were working or how many hours you were there.”
Brian Mahon: That was the era. This was 30 years ago or 25 years ago, where success does not mean that you had a great life, you had a great home. It meant that you had a beautiful office right on the corner. You made it, no matter what you were working or how many hours you were there. So I actually started a company that did the opposite to that, that actually tried to advise companies on how they could reduce the amount of space, which would inherently reduce the second largest cost that they had. We introduced everything from hot desking, hoteling, mobile working. This was right at the time. It was actually about 15 years ago. It was right at the time that Regus and HQ over here and way before WeWork, but when the executive suites were really coming into the market and companies could literally save millions of dollars.
Then we got swallowed up by Regus, and I became very friendly with Mark Dixon and everybody else over at Regus and helped them expand throughout Europe. Then I started another technology company which was over here in the US. That technology company was an aggregator. So people were able to find specific services on it, which was bought out by my partner. Then that took me all the way down here in Santa Monica, and I thought, "Great, okay. I've done property development. I've done consultancy. I've worked within larger organization. I've started off a tech company, and I've lived in 50 countries. So I have skills."
“…I have lived my life up until this point pretty selfishly.”
I would say most importantly for that entire time, I have lived my life up until this point pretty selfishly. So up until about five years ago pretty much everything I did was I'm earning a ton of money from whichever one of the endeavors that I have. I'm traveling around the world. I'm hanging out with some really nice people. I'm enjoying life. Now, I don't mean necessarily opulent, but I do mean that it was relatively selfish. It was all about like, how can I make Brian's life better?
Then just when I came down to Santa Monica, and I had lived in New York for a long time, which is still my favorite city in the world. I actually had-
Sal Daher: Fantastic. Yeah.
Brian Mahon: I lived in Boston before they filled in the motorways, before. When was that? 12 years ago?
Sal Daher: Yeah, yeah, yeah, yeah, yeah.
Brian Mahon: So back before, it was as beautiful as it is right now, and I didn't even live in Boston. I lived in Cambridge, which is the beautiful part of Boston. Right?
Sal Daher: Yes, it's.
Brian Mahon: So, I had my funny aha moments, and I loved it, and it was great. So I had my four parts of America fail. I had Texas, which I still believe doesn't really... They're humorous in the rest of the United States, but they don't really believe there's anybody else in the US except them. So I had Texas, which was great, and I had my first experience with guns, and then I had Boston, where I had the best clam chatter on the planet, and then I had San Francisco and San Diego, and then I had New York. There was just something about New York. I don't even know how to put it in words. It's a thing. Even now, when I fly in, I'll go straight to Grand Central Station, buy a coffee or a tea, and I'll just sit on the steps of Grand Central Station inside at five or six o'clock in the morning, and I'll sit there for two hours or three hours, and I'll watch it turn into just mayhem.
Sal Daher: Oh, the energy. Oh my gosh. Yes, Grand Central, all that stuff that's happening there.
Brian Mahon: It's like a Duracell battery charging-
Sal Daher: It is.
Brian Mahon: ... and you watch them do their stuff. So all of that was part of my pre-startup life. That was part of my, Brian is just living an awesome life, and I've been incredibly fortunate in life, and I'm grateful to everybody and everything that allowed me to be able to do this. It was then that I arrived in Santa Monica, and I suddenly started noticing what I truly believe now is one of the greatest travesties within America, which is the failure that's allowed to happen within early stage startup and the amount of especially government officials, but even other folks that stand by and let it happen. I think it's akin to watching homeless people on the side of the streets-
Sal Daher: And not stepping.
Brian Mahon: ... and stepping over them to pick up the poor cat that looks like it doesn't have a home to go to. So for me, I had an epiphany moment. I don't even know what else to say. It was a moment where I suddenly realized that startup will save the world, and people need to step in. I'm not the solution, but I'm part, I hope, of the solution, and more people need to step in.
Sal Daher: Well, as startups, I mean, it's a bit of an experiment. You're trying something that you hope will get people to move in the direction that you're hoping to go in. You don't claim that your efforts are going to save the world, but you have a hunch that helping startups work better will definitely move the world towards being a better place.
Brian Mahon: It's more about even rebalancing startups because the challenge right now is that the entire endeavor of early-stage startups on many levels is a Ponzi scheme, on many levels. I don't mean by the angel investors who come into the start. I mean, by the late stage venture capital investors who are there at the brands, because they know extremely well that you can put a company like Uber, and you can make Uber worth 40, 50, 100 billion dollars, even though Uber has never, ever made money in its existence. By the way, it's unlikely that it's going to make money in the next five years. Maybe not even-
Sal Daher: It doesn't seem to have a model where it can make money.
Brian Mahon: Right? But it's still worth. It has still made tens of billions of dollars for the people who put it in that place. You could argue the same almost happened with WeWork. If the whistleblowers had not become too loud for people to ignore what they were saying, WeWork would have been $100 billion company without any question, even though it made no logical sense. It's competitors and me knowing the space, it was even more obvious to me. I'm looking at Regus here, and Regus are a billion dollar company, or they were. They have thousands of locations. They have shareholders dividends for the last 10 years. They have 30% profit margins. They have the most de-risk strategy on the planet, even allowing for COVID and everything that's happening, and they're worth a billion dollars.
Then you have WeWork that was worth $40 billion, that had a few hundred locations, that was losing billions of dollars every single year, that had no openness you'd ever make money. But the reason they were worth more is because the people who had all of the money to keep on funding them would say to their friends, "Hey, Jimmy. If you can just invest at a higher valuation, then the valuation will keep on increasing up. If we can keep doing this until we put them onto the stock market, then we can get the heck out of dodge before."
So, it's a broken system. Look, I don't mind a slight amount of unfairness. I'm Danford. I think if your parents work really hard, and you are in a better place in life than the person beside you whose parents did not work really hard, you deserve a little bit of unfairness. I just think we've gone too far, and now ordinary people, it's even poor... People talk about, "Oh, this is awful because it's racist and it's sexist." No, it's not. It's the elitist. The problem with elitist is the other don't even matter because it doesn't go down that far.
The people who get hurt is America as a country. Because what happens is we end up making worse companies, and our competitors out there who are playing in an entirely different rules, and they are building great companies, those folks are building better entrepreneurship ecosystems. So I want to be part of a movement that's just building great companies, that is helping reduce the amount of failure within startups and that's getting the right type of technologies and companies through versus what's been happening for the last 20 years.
Sal Daher: I've heard you enthuse many, many times on your podcast about companies that start up profitable from the beginning.
Brian Mahon: I love that.
Sal Daher: They have a profitable business model from the start. They know how to make money. So those guys, I know they bring smile to your face. That's great. Brian, as we wrap up our conversation, are there any parting thoughts that you want to leave with this audience of angel investors, people who'd like to be angel investors, founders, people who are thinking about starting companies?
Brian Mahon: It's no point in me saying that I really like startups, because I think everyone gets that, right? This is my-
Sal Daher: It's like me with my grandson. I'm telling him all the time, "Oh, it's so much fun to be a grandfather." "You tell me that all the time. You tell me that all the time, it's fun to have a startup." So what else do you want to say?
Brian Mahon: So, here's what I will say, which is much more important for your listeners. I'll speak to the two different audiences, one who are investors.
Sal Daher: Investors.
“To the investors, they are incredibly fortunate to be part of your syndicate group. This is not a solo sport.”
Brian Mahon: And especially people who are part of your syndication group and then maybe, two, founders. To the investors, they are incredibly fortunate to be part of your syndicate group. This is not a solo sport.
Sal Daher: Interesting.
Brian Mahon: You cannot do this alone. Everybody's got a great pitch deck. Everybody's got a great idea. Normally, the people who orate that idea, the best are the ones that you do not want to invest in. Even if there are levels of incompetency, right? The unconscious incompetent is the worst one. As a new investor or somebody who doesn't understand this, it was not... Actually, forget about understanding this system. If you are not ingrained in the system where you know every single player and who's going to invest at the subsequent rounds, then you will lose because you will be making your decision based on the fact of, if you think this is a good idea or a bad idea.
If that was the case, that all of the stuff that I've been saying for the last hour would have no merit whatsoever. So you desperately needs to be part of a strong syndicate group who are hunting together and overtaking the spoils together. So be grateful that you're part of this group and never, ever, ever stray. Okay. That's my first bit of advice. My piece of advice to founders is, and it's going to sound a little bit, but right now, we're in the heart of the storm of COVID. For the larger companies that you're competing against, this is the worst time of their existence. They will never have a worst time, which means it's the best time for you. Everything is better. The staff you're hiring are cheaper. Your competitors are hiding in their castle.
Sal Daher: So true.
“Suddenly, their foosball tables are not quite such enticing as a recruitment offer because they've just fired 30% of their staff.”
Brian Mahon: They've had their budgets slashed. Suddenly, their foosball tables are not quite such enticing as a recruitment offer because they've just fired 30% of their staff. Advertising is cheaper than it's ever been. Investors actually are looking for great companies for the first time. Before, a lot of companies could make it through. Now, only great companies are going to make it through. So this is your time to be an absolute beast. If ever you are going to work 16, 18 hours a day to make sure that you brought your dream to fruition, this is the time. Reach out to investors, build your product, grow your company, overachieve every single expectation that you set in the market, and you have the ability to build one of the fastest successful companies of the last 10 years or the next 10 years.
Sal Daher: Well, said. Brian Mahon, that is really eloquently and very, very true. This is a time. The resources are there. Actually, I interviewed last week a venture capitalist who's just raised a small fund, and he's doubling the size of the fund now. He was saying that as a VC, it's a great time to be investing because-
Brian Mahon: The best.
Sal Daher: ... the vintage, you come in... VC returns are very tied to vintages, and this is a great time to start investing.
Brian Mahon: The best. I should've said that to your investors as well. Alternative investing. Listen, forget the stock market. You got no control of that sucker. Nobody knows what's going on there. Forget the housing market because we are over leveraged right now, more than we were in the subprime market. We're over leveraged now in the business market, which is way worse. So we don't even know what's going to happen. Alternative investments, early stage startup, like never put more than 5% of your money into us, but-
Sal Daher: Never. Yeah.
Brian Mahon: ... put that 5% in.
Sal Daher: That 5%, diversify it well. But what you're looking for is to capture the idiosyncratic risk. Investment experts talk about this. That's sort of company specific performance that in startups can be highly positive. This is the kind of stuff that it doesn't correlate with the stock market or anything. I mean, somebody figures a really awesome solution for something. It doesn't matter if the stock market is crashing and so forth. Those guys are going to be printing money because they're really, really helping people who may be suffering from all the dislocations that we have at the moment. So Brian, once again, I want to thank you for making time.
Brian Mahon: Thank you, Sal.
Sal Daher: Continue to enjoy the beautiful weather there in Southern California.
Brian Mahon: Thank you, my friend.
Sal Daher: Awesome. Awesome. This is Angel Invest Boston. I'm Sal Daher.
Thank you for listening. I'm glad you were able to join us. Our engineer is Raul Rosa. Our theme was composed by John McKusick. Our graphic design is by Katharine Woodman-Maynard. Our host is coached by Grace Daher.