Joe Phoenix founded Givinga to democratize philanthropy. After a luminous career in investments, he is turning his fruitful energies and network to build a new space he calls philantech. A dynamic chat with a remarkable founder.
Highlights:
Sal Daher Introduces Joe Phoenix
Givinga’s Mission
How Givinga is Helping Portfolio Company Meenta Build its Non-Profit Effort, Curesology
Givinga's Founding Story
Joe’s Transition to Putnam
“...Funds have been around for a long time, but it was like a breakthrough in financial technology that enabled the creation of mutual funds…”
Cryptocurrency Versus Mutual Funds
“...take your return, divide it into 72 and it tells you how many years it takes you to double your money…”
Change in Money Value Over Time
The Growing Biotech Industry
Advice to the Audience
ANGEL INVEST BOSTON IS SPONSORED BY:
Transcript of, “Democratizing Philanthropy”
Guest: Joe Phoenix
Sal Daher: I'm really proud to say that the Angel Invest Boston Podcast is sponsored by Purdue University Entrepreneurship and Peter Fasse, patent attorney at Fish & Richardson. Purdue is exceptional in its support of its faculty, faculty for its top-five engineering school, in helping them get their technology from the lab out to the market, out to industry, out to the clinic. Peter Fasse is also a great support to entrepreneurs. He is a patent attorney specializing in microfluidics and has been tremendously helpful to some of the startups in which I'm involved, including a startup that came out of Purdue, Savran Technologies. I'm proud to have these two sponsors for my podcast.
[music]
Welcome to Angel Invest Boston, conversations with Boston's most interesting angels and founders. Today, I'm really proud to say that I have with me a very unusual founder.
Sal Daher Introduces Joe Phoenix
Joe Phoenix: [laughs] I've been called a lot of things, unusual. [laughs]
Sal Daher: Exceptional founder.
Joe Phoenix: There you go. I like that.
Sal Daher: An exceptional founder in a way. Unusual, not just--
Joe Phoenix: Unusual positively. Right. [laughs]
Sal Daher: An exceptional founder. Today, get ready, we're going to be talking about Philantech. What's Philantech?
Joe Phoenix: You got it. [chuckles]
Sal Daher: That's why we have Joe Phoenix with us. Say hi, Joe.
Joe Phoenix: How are you doing? Sal, great to be here.
Sal Daher: Joe Phoenix is not your run-of-the-mill founder. He was head of global institutional management at Putnam Investments. He was with Putnam for 25 years. A highly experienced person, but he decided seven years ago to create a startup, and not just a startup, an entire category. Joe, tell us what Givinga, which is your startup, what problem it's solving. Let's start with that then we can talk about how it came about.
Givinga’s Mission
Joe Phoenix: Sure. I'd answer that I think by just telling you what our mission is. The mission's really simple, which is to redefine what philanthropy is today. I think that if you think about what redefining philanthropy means; you have to think historically about what giving look like and looks like in the United States. I throw giving into three categories. There's donating. Almost everyone has donated at one point in their life or another. It's very reactive. It's typically based on something, an event that drives it, something that causes you to make a decision to give money to a charitable organization or a cause.
There's philanthropy, which is this big, long word that is typically denoted with the very wealthy. It's been around for a long time. When you think philanthropy, you think very large sums. You think exclusive. You think a marketplace that is not very--
Sal Daher: That's what John D Rockefeller started.
Joe Phoenix: Exactly. When I say redefining philanthropy, what we're really all about is building a platform that enables modern giving to occur. What modern giving is, is it's taking all these cool tools that exist, in both the donation world and the philanthropy world, and then wrapping them with technology. When you do that and you think about BioTech, FinTech, HealthTech, InsurTech, when you put tech behind one of these categories that hasn't had tech in it before, it does some really interesting, remarkable things. It opens the market.
It democratizes the market. It introduces that market to people who haven't had exposure to that marketplace. It provides them access to products that they didn't have access to. When I say redefine philanthropy, I'm saying combining everything that exists in the marketplace right now with technology, put it on a platform, and then allow individuals, corporations, platforms to get creative in how they're defining the verb "to give". That's really what we're seeing happen right now.
Sal Daher: Excellent. Can you give me some typical use cases?
Joe Phoenix: I'll give you a few because I think that one of the most important things for people to pull off of a discussion like this is that the traditional definition of things is changing, and technology has done a phenomenal job of assisting and aiding that change. My thesis is that the verb "giving" is changing. If you think of what your traditional giving definition is, it was take money out of your wallet, put it into a kettle at Christmas, donate to the United Way, give through giving platform, your matching platform.
Sal Daher: United Way at work or whatever.
Joe Phoenix: Exactly. That's exactly right. What this does is this gives you those tools and then it allows you to be creative with how you're using those two. I'll give you a couple of examples. There's a great technology company here in Boston. They're a partner of one of our partners. We'll just call them a great technology company here in Boston. They use the technology in 2000 to create COVID relief campaigns. They first did a COVID relief campaign that they pushed out to various charities that were supporting COVID and then they moved to COVID relief for their employees.
They created a campaign that was designed to raise money for individual assistance for employees that were suffering from COVID. They moved to social justice campaigns right after the George Floyd murder and then moved from there to create an entire platform of employee matching campaigns, employee matching functionality. From there, they then created this disaster relief platform that allowed the company to give to specific victims of disaster relief. This is all enabled--
Sal Daher: Microtargeting.
How Givinga is Helping Portfolio Company Meenta Build its Non-Profit Effort, Curesology
Joe Phoenix: Exactly. This is all enabled by technology. Where you and I met was we were talking about this super-cool biotech company in Boston, right? They are a direct partner of ours. Their name is Meenta. They are a super interesting biotech company. Meenta identified a problem that their grantmakers were having in connecting with researchers. There are some 6,800 different diseases that Meenta tracks and only 5% of those diseases are getting donor traction, they're getting grant money from specific donors.
Sal Daher: I should mention here, Meenta has been on the podcast several times.
Joe Phoenix: Oh, they have.
Sal Daher: Stephan and Gabor have been on.
Just for those who have not listened to the podcast, the original idea of Meenta when I first sat down with Gabor, even before he had met Stephan because I've invested in Gabor in a previous startup, it was a summer day, we met for coffee at Darwin's near Harvard square and he said, "I'm going to start this company that's called Meenta. What it's going to do is it's going to use software to provide access to the high-end sequencing and all these tests because there's massive amount of waste of high-end testing equipment that sits idle. There are a lot of researchers that don't have access to startups and so forth, that may not have access to these high-end machines. We're going to create that."
Flash forward several years, he brought Stephan on as a co-founder. They really built the whole thing out. They raised several rounds of money. It was a two-sided marketplace. On one side, you had institutions such as The Broad or labs that have very high-end equipment. On the other side, you had individual researchers who needed to run some tests. They were ticking along and then COVID happened. They said, "Wait a second, we're testing. What if we provide COVID tests?" The whole thing exploded.
They're past the COVID phase and now they're in a gazillion different things. Along the way, I guess, Stephan got the idea, "Wait a second, we have all these researchers, why don't we sweeten the pot for the researchers coming to our platform and figure out a way to provide funding for them?" I sat down with Stephan when he was thinking up with this thing that's called Curesology.
Joe Phoenix: Curesology, that's right.
Sal Daher: Yes. Curesology. Anyway, that's the background.
Joe Phoenix: Yes. Actually, the story's even more relevant to being an entrepreneur than that because there are these Boston startup get-togethers that occur throughout the city and they're sponsored by a bunch of groups. We use Gesmer Updegrove as our attorneys, and they've got this phenomenal startup support network. They throw these functions every quarter or so and there are a variety of people that show up. I always say to myself you've got to go to the functions. When the function comes, the day that's the function, it's invariably perfect outside and there are a million other reasons than to get in the car and go downtown to Boston, go to these functions.
Sal Daher: Right.
Joe Phoenix: I always tell myself just get in the car and go to the function because something always interesting happens at these functions. I walk into The Still; I grab a beer and I turn around and I run into Stephan. Literally, I've got a beer, he's like 6'3, whatever. It was like, "Who are you and what do you do?" About 30 minutes later, we were like, "I think that there's something here." Being Stephan with the mind that thinks about six steps ahead, he took off and thought about it. I took off and thought about it.
Sal Daher: Even while drinking a beer.
Joe Phoenix: Even while drinking a beer. The end result was literally the first tax-deductible path to donating to specific research projects, to connecting researchers with grant money. It's so simple, and it's so easy, but it's impossible to do if you don't have the platform and you don't have the technology because it's all about being able to track, monitor, report, do all of those things that are important to a platform like that. Without Philantech, is the engine, it just wouldn't happen.
Sal Daher: Now, the thing that Meenta and Curesology, Meenta and its different in instantiations and Curesology now, the problem they're addressing, imperfections that exist in the research process.
Joe Phoenix: That's correct.
Sal Daher: Patrick Collison of Stripe fame, this is one of the things that he's really passionate about, is the fact that the inputs to research have exploded but the number of breakthrough discoveries remains flat. This massive amount of money going in and discoveries are flat. Some people think that reason for that may have to do with a research funding system that is just too tied to the tried and true to funding researchers that are well known and not taking risk on the people who are up-and-comers.
Primary investigators that get funded are typically well into their 60s or 70s. Katalin Karikós are not getting funded. I'm trying to remember the name of her collaborator at the University of Pennsylvania who was just about to be kicked out of the faculty when she wrote this brilliant paper which made possible the mRNA vaccine. They're not funding those people. They're funding the people who are salami slicing stuff in a well-established lab.
Curesology is an attempt to do a little bit of a short circuit around this, in a sense that we need to fund the people who are the established labs. They will still continue to make discoveries and so forth, but what is it that we can find if we focus the giving, focus the funding through different channels in addition to it? If people feel particularly strongly about a certain gene mutation that has affected the family, they can give money to-
Joe Phoenix: Specifically to that.
Sal Daher: -the research that's doing work in that particular field.
Joe Phoenix: What you've just spoken about to the audience is completely above my pay grade. [laughs]
Sal Daher: Am I speaking out of turn?
Joe Phoenix: Not at all. You're spot on. I know that Gabor and Stephan would be nodding in agreement.
Sal Daher: Okay. Yes.
Joe Phoenix: What's interesting is they had a problem and the coolest thing about these philanthropic vehicles-- We stood up a foundation right next to the for-profit Givinga, Inc. The foundation is a 501(c)(3) public charity. What it basically does is it's a donor-advised fund creator. The coolest thing about public charities and specifically donor-advised funds is their unbelievable flexibility in how they define giving.
Once you understand that, you can sit down and say, "Giving to a researcher through a public charity is allowed, and here are the steps that you need to take to ensure that you can do that." The technology takes care of the steps; the tools and the charitable vehicles provide you the avenue to do that. You just then got to go find the geniuses and smart people that have a problem and they just don't know that this thing exists.
Sal Daher: Yes.
Joe Phoenix: It's really neat.
Sal Daher: Very cool. This is very, very cool. Some episodes ago I interviewed Jeremy Neilson of Assure.co. Assure.co stands up special purpose vehicles for investing in certain areas. They also stand up funds. They don't do the philanthropy side because it's very specialized. In a certain way, you complement each other. I wonder if you shouldn't talk to them at some point.
Joe Phoenix: Yes, I'd love to. I'll talk to anybody. [chuckles]
Sal Daher: Oh, that's right. You always turn up.
Joe Phoenix: That's exactly right.
Sal Daher: Yes, absolutely.
Joe Phoenix: I'll tell you, I don't know, 90% of this is showing up. It really, really is.
Sal Daher: That's even higher than what Woody Allen said. He said 80% was showing up. You discovered that it's actually 90% is showing up.
Joe Phoenix: Yes. It's going to things, it's talking to people, it's getting outside of your comfort zone. It really is. If you do that consistently, just really interesting things happen.
Givinga's Founding Story
Sal Daher: Well, would you care to talk about what is the founding story of Givinga? How did this idea pop into your head of creating a philanthropy platform where you can have pop-up philanthropies super cheaply, something that used to be massively expensive before?
Joe Phoenix: I'll condense the story down, but I spent the majority of my career in financial services. I spent 30 years in asset management. 25 of those years was with Putnam Investments here in Boston. Awesome company, a wonderful place to not only begin your career but to build your career. Because of Putnam, really, I was able to step away and do this on my own. Once the kids were taken care of and out of college, I was able to make that next step.
I think that when you look at entrepreneurs, we're on two sides of the spectrum. We're either 25 years old with a great idea and no experience or 55 years old with a whole bunch of experience and we think a great idea. You've got one or two of those things, those attributes. The thing with leaving Putnam was I'd been there for 25 years and it literally had been the only thing that I'd done in my career.
It was fulfilling in so many ways, but it wasn't spiritually fulfilling, I guess, is the way that I'd put it. I really wanted to spend this last part of my career doing something that mattered to me and that, hopefully, mattered to the environment that I was in, something that my kids would not only understand but they'd actually be proud of and like to talk about.
I was interested in donor-advised funds from the beginning. That market is super interesting. It's 85 years old. It's $300 billion in assets. It's never been disrupted ever. It's dominated by large financial firms. It's exclusive. No one understands how they work because no one owns a donor-advised fund. The 1% of 1% own donor-advised funds in the United States, but they were really created for you and me. They were created to give you a place to really organize and structure and be thoughtful and strategic with the way that you give money away.
Once I learned that really anybody can create them if you have patience, time, and perseverance, then I knew that we had the catalyst and we had really the North Star of the company. The North Star, with the donor advice, when the company started it was completely different. It was, "Hey, we've got this idea. Every individual will love to have one of these. We'll just go out and talk to a bunch of people and it'll be easy." That's not how it works.
What I found early on is the company today is a spark of an idea that I had but then the business is this combination of feedback from investors, the marketplace, current employees, competitors, friends. It's taking all of that guidance, good, bad, or otherwise, then following it and letting the company really blossom into where it should be in the market. You stick with your North Star, but then you let the rest of the company get chewed on in the marketplace. If you're smart and you're patient and you're not arrogant about it, you listen to what the market tells you. I don't really feel like we pivoted, but we iterated like crazy as we got feedback on where we needed to be.
Sal Daher: The quality that you're illustrating here angel investors like to call coachability. You listen to advice. You don't necessarily follow advice, but at least you listen to it and you think. It's good that you know that you don't know everything,
Joe Phoenix: Right. That's part of the real benefit of being an older entrepreneur is that you know what you don't know, right?
Sal Daher: Yes.
Joe Phoenix: It just is what it is, right?
Sal Daher: Yes. Exactly.
Joe Phoenix: You can either pretend that everything or you can just go hire a bunch of people that do know that and surround yourself with really smart people that help you move it forward.
Sal Daher: You can just hire 16-year-olds who know everything.
[laughter]
Joe Phoenix: Exactly. The real evolution came when we put this into the corporate space and the corporate marketplace told us, "Hey, we love the idea, but we've got to be able to plug this thing in because we need to have a single sign-on. We need to have an API plugin. It needs to look and feel like it's our own product." Once we went from, "Hey, we have this platform," to starting to think about this company as an engine that plugs into things and makes giving easier, then we just fell right on top of the marketplace that we wanted to connect with.
That's where the fun began because then you start iterating around the real idea that you have. You get that real idea into the hands of real users, then it gets fun.
Sal Dahar: Tremendous. Oh, at this point, we should also express our gratitude to Justin Klosek, our buddy, our comic friend who put us together. Justin and I used to be squash buddies at the now defunct Boston Racket Club.
Joe Phoenix: Right. Justin and I are friends from-- We've been friends for 10 years. I play golf with him. I also play platform tennis with him. I can only imagine what it's like playing squash against Justin Klosek.
Sal Daher: Small court, and the reach the guy has.
Joe Phoenix: The guy has a wingspan of 10 feet.
Sal Dahar: 6'6 or something. He's huge. I used to be about 6'1. I'm down to about 6 feet. I have pretty long arms, but let me tell you, I never ran around so much as playing a younger player who's got way more reach than I did. Whoo.
Joe Phoenix: The whole deal with paddle tennis is just the lob. You try lobbing Justin Klosek. Talk about an exercise in futility. It's unbelievable.
Sal Dahar: [laughs] I can imagine. Yes, that's the thing. Squash, originally, you're supposed to be able to lob, but just playing in an enclosed court, theoretically, a squash court has no ceiling.
Joe Phoenix: No ceiling.
Sal Daher: In most squash courts, there's a ceiling above, so your lob is really limited, but if you're playing outdoors, I can imagine. Because the ideal shot is a lob. You lob it, and then it just drops. You can't respond to it, so if there's no ceiling, he must be deadly. He could see way up there. [laughs]
Joe Phoenix: It's just unbelievable. [laughs]
Sal Dahar: Amazing. Anyway, he was very kind to connect us. Shout out to Justin.
Joe Phoenix: Justin, thank you. [chuckles]
Joe’s Transition to Putnam
Sal Dahar: Let's turn now to-- As I say, Joe Phoenix is not your usual founder. He's someone who's had tremendous experience, 25 years. Putnam Investments is one of the top investment firms here in Boston. They're very large fund managers. They have institutional business. They have individual retail business, and--
Joe Phoenix: They've got it all.
Sal Dahar: They've got it all. It's a big, big firm. 25 years there means that you really understand how the investment industry works. Just tell me, how did you connect with Putnam?
Joe Phoenix: I got a job.
[laughter]
Sal Dahar: Straight out of business school.
Joe Phoenix: Yes. That's the first thing. No, it was actually straight out of college. There were a few things that I was certain of as I was leaving college. Not a lot, but there were a few things.
Sal Daher: Where did you--
Joe Phoenix: I went to school in Virginia.
Sal Daher: You're from Virginia?
Joe Phoenix: No. I'm from Colorado, actually. My whole life is this circuitous route of stopping in places and moving on and doing other things, which is why the 25 years at Putnam was so amazing. When I graduated from college, I knew one thing, and that was I wanted to move to Chicago. I wanted to live in that city. We have a history. My family has a history there. We have a house in Michigan I spent a lot of time as a young kid. I started my career with a firm called Kemper Financial, which is no more, but they had a super-cool office. It was right down on LaSalle Street, right at the end of LaSalle Street. I started in the telephone marketing department with two dozen other people my age.
Sal Daher: Unpack a little bit, telephone marketing.
Joe Phoenix: Yes. This is mutual funds back in the late '80s. Were like donor-advised funds today. No one really used them, right?
Sal Daher: Right.
Joe Phoenix: They were these vehicles that were used by wealthy individuals. Then the Fidelitys, Vanguards of the world, Putnams of the world came in and really changed that landscape.
Sal Daher: You were calling Dr. so-and-so? Dr.--
Joe Phoenix: The broker of the customer of Kemper would call in with questions and it was my job to sit there and answer questions with my massive amount of experience [laughs] in the investment world, but it was just this trial by fire. The light lit up at the beginning of the day. When that light was on, somebody was waiting. That thing stayed lit until the markets closed. You were just thrown into the middle. You just learned the business as you answered questions. From there I went into sales at Kemper.
Then it was this fortuitous event. I ran into somebody. I heard that this firm in Boston was looking for people. I had an interview with a guy now who is a great friend of mine, John Bartlett. I don't think I was Bartlett's first choice. [chuckles] I know I wasn't, but his first choice, for some reason, said no. Luckily I was his second choice and he came to me. I then went into field sales at Putnam. I was what they call a wholesaler. I had a territory. I worked out of the Midwest. Then I went into sales management.
Sal Daher: With that situation, you were stationed out of the Midwest somewhere.
Joe Phoenix: Chicago.
Sal Daher: In Chicago. You were calling on individual brokers in all the different towns. The guys who have the doctor and the lawyer as a customer and selling, "Hey, we have this mutual fund." In those days, before the days of ETFs and the days of funds and all that stuff, there was quite a bit of gravy.
Joe Phoenix: Oh, yes. Back in the day, we were selling mutual funds with 8.5% sales charges on them.
Sal Daher: Wow.
Joe Phoenix: It was a completely different deal. I had the great fortune at Putnam to work with some really innovative, thoughtful people. One of the first, he wasn't my direct boss; he ran the entire organization, was a guy named Bill Shiebler. Bill is widely credited with creating what was then called the B-share, which was deferring that sales charge until you sold versus paying that sales charge upfront.
Sal Daher: Okay.
Joe Phoenix: It was an innovative structure like that. Then Putnam's decision to really make a move into the banking channel, that set my career path on the trajectory that it was. I sold out there for a dozen years, then I ran the Midwest part of the country. Then I think it was like 2006 that the wanderlust started taking over again, and just out of the blue, this opportunity to run the overseas businesses out of London popped up. They'd been looking for Europeans, Englishmen, all of that to kind of fill the role. I just walked in one day and raised my hand.
They gave me an indication of interest, said, "What you need to do is go home and talk to your wife about it." I came home, talked to Catherine, and I said, "Look, there's this thing. It's kind of overseas. It looks kind of interesting. It'd be in London. She went, "You go back in and ask for that job right now."
[laughter]
Sal Daher: Wanted to go to London.
Joe Phoenix: Literally like that.
Sal Daher: How old are your kids at that time?
Joe Phoenix: My son was six, my daughter was nine. One of the reasons that we did that was for those two kids
Sal Daher: At that age?
Joe Phoenix: Yes. They lived in a bubble like we did, and they needed some perspective, both of us felt. We thought that getting them into a city like London with its unbelievable level of diversity, the fact that you're going over there as a guest and you're completely outside of your comfort zone would do wonders for them. My son doesn't remember much. He remembers us forcing him to climb a lot of church steeples. That's his fond memory of Europe.
Sal Daher: You never know how kids are going to react. In 1993, I spent a year in Singapore. Our daughters were eight and four. My older daughter, she used to love Chinese food. When we were in Singapore, she would not touch Chinese food. It was amazing variety of all different types of Chinese you can imagine. The only thing she would eat was Japanese food. She wouldn't be eating the food either. It was the time when the yen was extremely expensive. The Suntory Restaurant was the place she wanted to go to, and it was blindingly expensive. The yen was so strong. Then she gets back to the US, she likes Chinese food again.
Joe Phoenix: It's crazy.
Sal Daher: It's unpredictable.
“...Funds have been around for a long time, but it was like a breakthrough in financial technology that enabled the creation of mutual funds…”
Joe Phoenix: You just never know. It really positively affected my daughter. She was over there in really formative years. She absolutely loved it. What the international piece gave me was-- The cool thing about Putnam was Putnam was a variety of companies. When I started it was a very dynamic startup feel, almost. Had a very dynamic CEO. A guy named Larry Lasser, who was just legendary in the business. He was young.
Sal Daher: That was for mutual funds, right?
Joe Phoenix: Yes. He ran Putnam Investments. He ran the whole company.
Sal Daher: Let's unpack a little bit for younger listeners that may not be familiar.
Joe Phoenix: Yes.
Sal Daher: Now, trading of individual shares of stock in companies has been around a long time in the US. Well established in the 19th century, and then in the early 20th century, a lot of people owned shares and so forth. Eventually, a technology developed where people could buy funds, which is a bundle of shares that someone would select.
Joe Phoenix: That's right.
Sal Daher: These were the mutual funds. The mutual funds were like a popularization of more high-end investment vehicles that existed for wealthy-- Funds have been around for a long time, but it was like a breakthrough in financial technology that enabled the creation of mutual funds.
Joe Phoenix: That's right.
Sal Daher: They provided a great service, which is diversification.
Joe Phoenix: Totally.
Sal Daher: Not owning just three or four shares but owning a lot of different shares --
Joe Phoenix: For $1,000 you could own a piece of 250 different companies.
Sal Daher: That has a tremendous benefit long-term for the investor and it also generated very robust fees. Keep in mind that brokerage fees before had been really, pretty significant. Those have been shrunk down, so financial firms are looking for the next thing, and the next thing was mutual funds. Then since then, there have been a lot of different iterations-
Joe Phoenix: Iterations. That's right.
Cryptocurrency Versus Mutual Funds
Sal Daher: -of that and the whole index fund, the movement, ETFs. That's been going in a different direction. What happens--
Joe Phoenix: Now we have Bitcoin. [laughs]
Sal Daher: Now we have Bitcoin.
[laughter]
Sal Daher: No, no, excuse me.
Joe Phoenix: Those are two completely separate things. For all of you out there listening--
Sal Daher: Bitcoin is in a different family. It's more like the beanie baby Iraqi dinar in my book. Look, I am a crypto skeptic. Even though I know people who have made unbelievable fortunes by investing early in the stuff, I think that it is basically a waste of electricity. I have yet to see a use case that says this thing is so compelling. I know what product market fit looks like, and when it happens, you can't keep it on the shelves. I've yet to see that kind of product market fit that is so compelling that it can only be done with a distributed ledger. I remain a skeptic.
If you want to call in and tell me you're out of your head. Because I've seen in my time the best thing. I've seen so many crazy delusions. This thing has all the signs of it. I've never touched it. People have lost a lot of time, wasted-- This is why I'm so focused on biotech. Biotech is real.
Joe Phoenix: Yes. Biotech is real. I agree 100%. I just feel like cryptocurrencies are a coin toss. It depends on when you got in. They're been called an asset class. They're not an asset class.
Sal Daher: It's like tulip bulbs. Read Popular Delusions and the Madness of Crowds. Look, I remember I was doing emerging markets and at one time I ran into a lot of people who were very big on the Iraqi dinars. These are Saddam Hussein's Iraqi dinars after Saddam Hussein was found in a rat hole somewhere and executed. People thought, "Oh, it's going to come back someday." Before that, I remember Czar's bonds. There were people that thought that somehow the Soviet Union and then Russia was going to honor the Czar's bonds. People have these delusions.
Joe Phoenix: I'll tell you, the coolest things about mutual funds and about that industry is, as I said earlier, that industry opened a market to people that didn't have access to it. I'll give you an example.
Sal Daher: It was a real innovation.
Joe Phoenix: Totally.
Sal Daher: That was unbelievable compelling innovation.
“...take your return, divide it into 72 and it tells you how many years it takes you to double your money…”
Joe Phoenix: It allowed people who were just starting out with limited means to start contributing and growing their investment portfolio. I'll give you a great example. When I left Putnam and started thinking about this, I had two kids, one was going into high school and one was a junior in high school. I went 73 months without a paycheck. [laughs]
Sal Daher: Wow.
Joe Phoenix: My wife reminds me of that. I have the deal in there. I went 73 months without a paycheck as we got Givinga up and running. During that time, Putnam's 529 college plans paid entirely for both my daughter and my son's college educations. I contributed to those plans when they were born. I put a couple hundred bucks a month away every paycheck. Lo-and-behold, one of them went to USC. The other one went to Chapman. As I went on my little merry way of trying to build this company, those plans basically allowed my children to do what we had been saving for all of our lives. It's just a super, cool story.
Sal Daher: For a sense of perspective. You're talking about 8% upfront fee in the mutual fund. You say, "Oh, that's scandalous," but if you were back in the early '90s until now the average annual return of the US stock market is 7% a year.
Joe Phoenix: Right.
Sal Daher: 6%, 7% a year. After about a year, you've paid for that. Eventually, over the long-term, there's nothing that can beat being long in the stock market or global stock markets in the long-term.
Joe Phoenix: Power of compounding, that's one of the most powerful things in the investment world, obviously. For all the new investors here, my favorite rule of investing is the rule of 72, right?
Sal Daher: Exactly.
Joe Phoenix: Take your return, divide it into 72 and it tells you how many years it takes you to double your money. It works, it's mathematical, and you can really start thinking about the power of putting things away early enough.
Sal Daher: If you're earning 2% a year, it'll take 36 years to double your money. 72 divided by 2.
Joe Phoenix: If you're earning 8% a year, it takes you nine, right? There you go. That's why mutual funds exist right there.
Sal Daher: The point I was trying to make is that it may sound like it's a rip-off that 8% upfront.
Joe Phoenix: It's not 8% anymore, right?
Sal Daher: No.
Joe Phoenix: You get these mutual funds for nothing now.
Sal Daher: Nothing. Yes, that's true. The whole point is that it enabled people to invest in a broader basket of stock than they would've before because typically it was you work for IBM, you had a bunch of IBM stock.
Joe Phoenix: Right.
Sal Daher: You ended up with a huge overrepresentation of IBM in your portfolio. Over the long run IBM they'd do really well, but if you have bad luck, you worked at Polaroid.
Joe Phoenix: Right. Exactly.
Sal Daher: SOL or Eastman Kodak or whatever, but the stock market as a whole did extremely well during all those periods. Anyway, this is an unusual thing to stay 25 years at an institution. Tell us a little bit about that.
Joe Phoenix: Well, the way that I explain that is that I feel like Putnam was a variety of different companies. It didn't feel like 25 years punching the clock doing the same thing. What they did while I was there was they gave me opportunities to broaden my perspective, broaden my career, broaden my knowledge base. When I started at Putnam, Larry Lasser was running it and it was a startup mentality. It was a small company at $18 billion or so, something like that, assets under management. Which he grew to over $400 billion. It was just this really, really strong period. Then there was a period where the firm went through some difficult years.
Sal Daher: I remember that.
Joe Phoenix: Some things that hurt the company's brand. We were in the front lines of that. What that basically taught me is how fragile a brand is. You can spend 75 years working on it and you can destroy it in two weeks, really. It's pretty brutal when that happens. It's hard to recover from. To the company's credit, they've done a phenomenal job in recovering from that. The first phase was this very fast-growing entrepreneurial phase. Then it was this trial-by-fire phase, and then the overseas deal was really this entrepreneurial piece.
They gave me the opportunity to go over there and think about where the company should be, how we should distribute across the world. We had offices in Europe and Asia, in the Middle East and Australia. We were linking investment products to that. We were working with the investment teams. That really gave me this sense of what it felt to create something. I think I threw those three things together and then I woke up and I was 50 and I'm like, "God they're going to take me out of here feet first. This is all I would've done for my career." That's really when the epiphany hit that I needed to go out and try and do something else.
Sal Daher: You are like a surfer who hits a perfect wave and you're just surfing it and it's like you've been looking for that wave. Most of the time-- My eight years at Citibank, Citibank was also a very dynamic company. It was an entire world, and it went through many iterations, but I suspect if I had entered Citibank perhaps 10 years earlier, I might have stayed there a lot longer because it was a more dynamic company 10 years before.
Joe Phoenix: Like those Sandy Weill years and all of that, I'm sure.
Sal Daher: No, no, no, way before Sandy. This is Walter--
Joe Phoenix: Don't date yourself. Don't say it. [laughs]
Sal Daher: Walter Wriston and Tom Theobald and those guys.
Joe Phoenix: Oh, okay.
Sal Daher: Way, way-- I'm older than you are.
Joe Phoenix: Yes.
Sal Daher: When I was there, Citibank had hit an iceberg. They had lent too well, if not too wisely to Latin America. They were basically, if they had mark-to-market rules in those days, they would have been on the water. Can you believe that their bottom line was less than a billion dollars in those days?
Joe Phoenix: Incredible.
Sal Daher: They had, if I remember correctly, something like $5 billion of their portfolio in Brazil, $2 billion in Argentina, like $3 billion in Mexico. I think their equity was about $5 billion at the time. If they wrote those down to 20 cents on the dollar, basically their equity was gone. The Comptroller of the Currency looked the other way and those banks were allowed to stand. Walter Wriston's dictum that "Countries don't go bankrupt" got revisited.
I went in at the time when the whole crisis hit. For me, it was trial by fire. It created a career for me. Emerging markets. That's how I ended up in emerging markets because Citibank wouldn't trade their own assets, but they traded other people's assets. They made lemonade out of lemons, and eventually, they grew out of that hole. If I had been there in a time when they were the go-go years, investing the petrol dollars, even more dated, I might have stayed a lot longer.
Joe Phoenix: Yes. It's interesting. I don't think great companies can get great without a trial by fire at some point. We're in one right now. We're in this very unique environment that nobody's really seen since the early '70s. Some would argue that this is actually even different from that. I just think that you almost have to go through this because this is really-- It's these times, it's the difficult periods that Putnam had back in the early 2000s. It these periods where it's bumpy. Your plans are dashed and now you have to sit down and literally iterate on the fly and think about what your core businesses are and figure out how you're going to manage through it.
I think what these periods do is they really separate the companies that haven't thought about that from the companies that have, and it really forges you. It's just like anything. It's like forging steel. It's not the same unless you put it in 3,500 degrees of heat and then take it out and let it cool back down again. People ask about how are we feeling in this marketplace. I tell them this is like the sixth one of these that I've been through.
They're all different, but they're all the same. It's over-exuberance at the beginning. Now the sky is falling and we're all going to hell. Invariably it's somewhere in between that, but it does focus you on what are the fundamental things that you need to be doing with your business, how do you need to be driving it forward, and how can you push all of the panic pieces to the side and just focus on executing and getting through this period where the plane's going up and down a little bit. If you're in the investment world, you learn that lesson repeatably, right? You learn it on six, seven-year cycles. Something like that.
Change in Money Value Over Time
Sal Daher: Exactly. Banks it's a cyclical industry, they get overextended, and then they have a retrenchment period. There's one striking thing. My family came to America in 1966. My dad had a scholarship to do graduate work. Ultimately he got a PhD in math, went back to Brazil, set up a PhD program down there. I was a boy. I was 11 years old. At that time we went to parochial school. We had to have a uniform. It was a long sleeve shirt. A black and white shirt. It was wash-and-wear. I had two of those shirts. My mom used to wash one shirt and have it hanging to dry and the other one I'd be wearing it.
I always thought, "Why did my mother have only two shirts? This is stupid. She should have had seven shirts. Take it to the laundromat on the weekend. Was she stupid or something?" I went back and I did a calculation of what the equivalent shirt today-- If you were to buy a kid's wash-and-wear shirt at Target today, it's $24. I went back and I looked at the median income of Americans in those days. I adjusted for inflation. I adjusted for purchasing power. I adjusted for consumer inflation and all of that. Basically, the reason my mom had only two shirts for each one of us is that a shirt cost the equivalent $250 today.
We were four. [chuckles] It would've been $500 per kid times that, so $2,000 in kids wash-and-wear shirts. That was just beyond the budget. Today, anybody can afford $24 for kids. People can't afford $250. Americans have unbelievably more purchasing power-
Joe Phoenix: I agree.
Sal Daher: -but life seems more difficult than it did then. Life was a lot simpler.
Joe Phoenix: We're so much more connected. I think the connectivity--
Sal Daher: It was different then.
Joe Phoenix: The inability to shut down now. You could shut down back then, right? You could get on your bike. You didn't have social media pinging you constantly.
Sal Daher: We lived over Boston, and then in Belmont. I was going to school in Cambridge. Now I live in Cambridge. Cambridge today and Cambridge back in 1966 was very, very different. Cambridge was a working-class town. Now, it's upper-end town. Then, all these little houses here were packed with a mom, a dad, and four or five kids. Usually, the mother was at home; the father went to a factory job somewhere and paid some money.
Not every family had a car. People's standard of living were just like, "Cars?" Actually, cars is one of the things that have gone up in price. They have not gone down in price a lot because cars today are much more involved than they used to be. Every other consumer good you could imagine, people can afford it a lot more, but people had more time to themselves.
Joe Phoenix: There's a kid on my block, his family had two TVs in their house and no one could understand why. [laughs] Why would you have two televisions in the house? That doesn't make any sense.
Sal Daher: Yes.
Joe Phoenix: It's just different times.
Sal Daher: Comparing the inflation in the '70s till today, I think you're going to find that it's very scary. I've been in the sovereign debt, country debt business for a long time, and the fact that the United States has $30 trillion in debt, the ability to carry interest rates could come into question. If interest rates go up significantly, refunding this $30 trillion of debt becomes really, really heavy. This is the highest indebtedness the US has had in peacetime.
Joe Phoenix: Right.
Sal Daher: Japan, of course, is even higher.
Joe Phoenix: A poster child. Yes.
Sal Daher: Is a poster child for this, but who knows where that's going to end with their population crashing and so forth. Yes, the situation in the '70s, in those days we could afford to make massive improvements to productivity and make the economy so much more efficient, everything. That's how we got so much wealthier.
Joe Phoenix: Yes.
Sal Daher: I don't see that potential right now, to get out of the situation that we're in, in terms of government indebtedness and so forth, so it worries me a little bit.
Joe Phoenix: Yes.
The Growing Biotech Industry
Sal Daher: On the other hand, I'm tremendously optimistic on the biotech side, in the sense that, in the next 10 years, we're going to do stuff in the life sciences that will make what happened in the last 10 years look like child's play with all of cell therapies. CRISPR is 10 years old this year. Cell therapies are 10-year-old this year. We're just beginning to ramp up. The stuff we're going to be able to cure is going to go through the roof, which brings us back to Givinga.
Joe Phoenix: Well, I know, but if you don't live in Boston and you're visiting Boston and you want to get a view for what the future looks like, just go over to Cambridge right now and look around there. It's a completely different-- It's a city unto itself. It's unbelievable how biosciences and life sciences have just-
Sal Daher: Joe-
Joe Phoenix: -exploded over there.
Sal Daher: -everywhere you go they're setting up shared lab spaces, okay?
Joe Phoenix: It's crazy. Yes.
Sal Daher: My wife and I took a walk down Mount Auburn Street. If you ever get a chance walk down Mount Auburn.
Joe Phoenix: Yes, it's cool.
Sal Daher: From the cemetery, down to Watertown. It is gorgeous. It's beautiful, but along the way, there's this old Sears Roebuck building, does it ring a bell for you? Have you driven by it?
Joe Phoenix: Yes, it does.
Sal Daher: Well, that whole darn building has been turned into shared lab space. I couldn't believe.
Joe Phoenix: There you go.
Sal Daher: I was, "What are they doing to their offices?" They're all leased up.
Joe Phoenix: Yes.
Advice to the Audience
Sal Daher: You cannot get enough lab spaces. Something really amazing is going to happen. Anyway, let's think about wrapping up our really delightful conversation. Joe, is there anything that we didn't touch on that you wanted to communicate to our audience of founders of angel investors and of people who are in the technology start-up space?
Joe Phoenix: Oh, I don't know. I feel like we've covered a lot. I would say that if you're in this space and you're doing something that you love, just keep doing it. We talk about perseverance, you're persevering right now. If you've got a great idea, then you just need to figure out a way to get through the period that you're in. I would tell you that our investor groups-- It's funny, you always hear founders and entrepreneurs lament the amount of time that they have to spend with investors.
Sal Daher: [laughs]
Joe Phoenix: So I went in with this tainted view. It's like, "Oh, god. I got to go fundraise, and I got to go talk to these investors and all that." I just have a completely different view. Maybe it's because of my background, but I love talking with investors because, A, they give you feedback that is unvarnished [laughs], right?
Sal Daher: Oh, they're all in. These guys-
Joe Phoenix: Yes. They give you--
Sal Daher: -they're not kibitzing.
Joe Phoenix: They don't have time to tell you that they're happy for you and they like your concept.
Sal Daher: No, no, no. No BS.
Joe Phoenix: Yes. They give it to you straight and quickly. If you're smart and you listen to them, you can save yourself a ton of time, but once they're part of your company, what I've found is that they actually are part of you. They're not this investor that's kind of floating around out there shooting arrows in your idea, they're engaged. They want you to succeed as much as you want to succeed. Just literally in the last four to six weeks, our investor group has been hugely supportive of making sure that the company has the resources that we need. Capital that we need to move ourselves through this next phase.
I'd say that make sure that you're engaging with that investor group. Make sure you're talking with them. Keeping them up to speed. Good news is fun to give to investors, no one wants to give the bad news, but I've been amazed at when we've had misses or something go wrong that it hasn't been, oh, the panic button gets hit. It's been almost the sound of sleeves rolling up and you get this, "Okay, so what are our options here? How do we navigate through this? I've got some ideas on that."
I think that there's a great use case for getting back to those investors in a really meaningful way right now. I just think that if you're not an entrepreneur and you're thinking about doing it, it's hard, [laughs] and you lose a lot of sleep at night, but the last five and a half years of my career have been literally the most fulfilling. My only regret is that I didn't do this earlier, but as my wife said, "Well, when would that have been?"
[laughter]
It's not like you were smart enough coming out of college to do this, so that doesn't work, right? Then you had kids.
Sal Daher: That's true.
Joe Phoenix: She has a point, but it's been really good.
Sal Daher: Absolutely true. What you're saying is as an angel investor, and I've invested in about 70 startups, one of the things that I tell founders all the time, engage your investors.
Joe Phoenix: Yes.
Sal Daher: Yes, you have to engage your customers, okay, but your investors are really-- You have to occupy their mindshare. You have to be putting updates in front of them on a regular basis. You have to break bad news to them. Because you'll be surprised when you break bad news, they're on your side because they have a stake in your company. They're not going to be grumbling, "Oh," they're going to be coming by, "How can I help?" This is really valuable that you're saying this to founders because I find that founders are just-- There's so much going on when you're starting a company.
Joe Phoenix: Yes.
Sal Daher: There's a temptation to let reporting to investors slide, let engagement of investors slide, but what you said, it really pays. If you keep people up to date, if you break bad news to them a little bit at a time, the last thing you want to do is run out of money, call your investors, "Sorry. I haven't talked to you in nine months. We're out of money-
Joe Phoenix: We're out of cash. [laughs]
Sal Daher: -it didn't work out. Give us more money." Let me tell you, that's not going to work. Okay? If six months ago you had said, "Look, things are not going the way we had expected. I can foresee that eventually, we're going to have to raise, we're going to have to do a pivot, and this is what we're thinking of doing." It'll put you in a much better light and people will have a chance to help you-
Joe Phoenix: Exactly.
Sal Daher: -before you're frantically asking for funding,
[music]
Joe, I thank you very much. I thank Justin Klosek for putting us together.
Joe Phoenix: Likewise.
Sal Daher: Joe Phoenix, founder of Givinga. Highly experienced investment executive who has taken the challenge of going out in his 50s to start a whole new business, and it's really taking off.
Joe Phoenix: Yes. Well, we're excited and I can't thank you enough for having me on, Sal. I know that we don't fit the traditional mold of the companies you talk to but it's been a real pleasure talking to you. This has been great.
Sal Daher: I think it was a very, very instructive podcast. Thanks a lot. This is Angel Invest Boston. Thanks for listening. I'm Sal Daher.
[music]
Sal Daher: 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.