Jay Clouse [00:00:14]:

Hello, my friend. Welcome back to another episode of Creator Science. I hope you're having a great week. I hope you're having a great month. The end of September near at the end of the Q3 is near. We're moving into the Q4 of 2023. It feels crazy. It feels like we just started this year, not that long ago, but I am coming here to share some big, big news with you today.

Jay Clouse [00:00:35]:

Something I've been working on for months in the background. I am so excited about this. I have launched the creator science syndicate to connect you to the companies that you use and love. If you're not familiar with the word syndicate, That's an investing term. Don't worry. I'll explain that here in a minute. But the goal of this is to give creators like you The ability to actually invest in the tools that you use and love. This is something that I've had the privilege to do as an individual.

Jay Clouse [00:01:03]:

As creator science has grown, as our ecosystem, our footprint has grown, different companies have come to me to get my perspective on their customers, get their perspective on creators. This has given me the opportunity to invest in some of those companies individually. At this point, I've invested in about 10 companies. I'm an adviser to a couple of more. That includes companies like Maven and Intros dotai. And the great thing about this is not only can you be a customer of these companies when you invest in them, But you actually have a vested interest in their success. You get upside if the company or the product is a success. Now I first announced this last Friday through my newsletter, which if you have not signed up for the Creator Science newsletter, you should do so.

Jay Clouse [00:01:45]:

More than 40,000 people read that. So just go to creator science.com, but I also shared it on social media. And since then, I've had literally hundreds of creators join this syndicate. There is a lot that I'm gonna try and cover in this episode. I'm basically gonna try to give you a crash course in financial education to understand what a syndicate is if this is new to you, how investing works, how you can get involved in the creator science syndicate. And I'll tell you right now. You can go to creator science.com/syndicate. There's also a link In the show notes, I'm gonna try to explain why we're doing this, why I think it's a compelling opportunity, and why you should consider it.

Jay Clouse [00:02:22]:

But I should also tell you that this is not investment advice. This is for informational purposes only. You should take your own situation into account, work with a financial adviser, if this is something that is right for you. I'm not, advocating for it. I'm telling you about a project that I am doing that you can get involved in if it makes sense at your discretion. If it's not obvious why you care about investing, then let me explain. Investing, the term generally, is the idea that you put some money into some financial vehicle, and over time, that gives you a return on that investment. Maybe it's, 3% from a high yield savings account.

Jay Clouse [00:03:00]:

Maybe it's 10% from a private investment like I'm describing here. Private investments are highly speculative. They are risky because you're investing early into companies that may not have a Ton of traction yet. That's not always true. You might be investing in companies that have a long track record, but a lot of times investing in private companies is risky. Investing can also be highly lucrative. If you invest in a company early, that becomes very, very valuable later down the road. That investment that you made is worth more in the future by A large factor than it was initially.

Jay Clouse [00:03:33]:

Imagine if you're able to invest in Uber or Facebook or Instacart or something pretty early on in their existence. So that is why I invest. I invest a very small amount of my overall net worth into speculative High risk, high reward type opportunities like private companies. Sometimes. Not all the time. Sometimes. Now as I've grown the creator science brand, I have gotten unique opportunities to invest in companies in the creator economy space, and that's awesome. That's a competitive advantage to have those opportunities rather than Some VC firm or some other investor.

Jay Clouse [00:04:08]:

That is the opportunity, and that's why we are creating this syndicate because I believe I have unique Opportunities and deal flow is what it's called, deal flow, to invest in creator economy companies, excellent creator economy companies. And not only that, I believe as a creator myself, I have a unique lens to vet which companies I think have real potential. Now before I get into what a syndicate is and why I think this is a compelling opportunity for you, I want you to know that I'm not doing this alone. I've actually partnered with somebody on this effort. His name is John Gannon. His business is called Venture5 Media. He's one of the original creators focused on the venture capital base. He's been an active angel investor for a long time.

Jay Clouse [00:04:49]:

He also cofounded Going VC, a leading VC venture capital Education program with 500 plus alumni around the globe. Now, I personally read John's blog at johngannonblog.com for years before he actually became a member of the lab because he started going down the creator path, and now he's become a personal friend. I'm really excited to work with John on this. Like I said, I've been reading his blog for literal years. He has a bunch of experience in the venture capital world. He has a global Network of hundreds of venture capital firms. It can really, really help our deal flow, the companies we invest in. It's Just a wonderful one two combo, a real one plus one equals 3 situation with my reach into the creator economy and his reach into the venture world.

Jay Clouse [00:05:37]:

Okay. So what is a syndicate? A syndicate is a group of investors that pool their capital together to invest in a company that the syndicate leads, the leaders of syndicate, in this case, me and John select. So if we choose a company that we think is interesting, where John and I have the unique opportunity to invest in a company, We can bring that to the syndicate and say, hey, we can invest as a collective into this company if you would like to. And this really highlights what I love about the syndicate model. The syndicate model allows all of the investors as part of the syndicate to decide individually on a deal by deal basis if they want to invest their funds into that specific company or not. That means that There is no commitment to invest in any deals when you join a syndicate. If you join the creator science syndicate, if you say, hey. I'm interested in being a part of the syndicate, You are not actually committing to anything upfront.

Jay Clouse [00:06:30]:

You're not committing to any amount of investment. There's no specific deal that we're saying if you join the syndicate, you are investing here. Join the syndicate simply says, I am interested in hearing from the leads of that syndicate, me and John, about different opportunities, investment opportunities that become available. And Again, you can decide on a deal by deal company by company basis if you think that investment is interesting, if the timing is good for you, if you actually want to invest in that particular deal. Let me give you a specific example here. Let's make up a company name. We're going to call it, NewCo. NewCo is often the name of the company that people make up in financial examples.

Jay Clouse [00:07:06]:

So let's say that we have the opportunity, John and I, to invest in NewCo. We would go to the syndicate. We would say, hey. You have joined our syndicate. We have the opportunity as a group to invest in NewCo. We have some specific parameters that we are given at that point. We know that, hey. NewCo is allowing our syndicate to invest a total of $100,000, we'll say.

Jay Clouse [00:07:29]:

And so we'll go to the syndicate and say, we, the creator sign syndicate, It is able to invest up to $100,000 into NewCo. Would you like to be a part of that? Would you like to invest in NewCo? Here's details about NewCo. Here's why we're interested in NewCo. Here are the things you should consider. And if you decide, yes, I want to invest in NewCo, then we'll also have investment minimums and maximums for you to choose from. Basically, we can say, okay. If you wanna invest in NewCo, the minimum investment is $1,000. The maximum investment is $10,000.

Jay Clouse [00:07:57]:

We wouldn't let 1 person invest all of that. We wanna get multiple people from the syndicate involved. So that's what it looks like. If you join the Creator Signs Syndicate, you will get literal emails from us with periodic opportunities to invest in different companies. They'll give you information. It's called a deal memo, a memo about why we are interested in that deal. It'll give you minimums, maximums, the total allocation, even financial information on that company, and ultimately, a timeline to say, If you want to invest in NewCo, here are the steps you need to take and by what times so that we are able to help NewCo close on their fundraise on the timeline that they require. And those timelines can be pretty quick.

Jay Clouse [00:08:33]:

A lot of times, those timelines are fast in general, but for a syndicate to wrangle all the cats say, okay. We've got everything we need. We are now going to place this total investment into NewCo. It can move pretty quickly. Now I wanna take a minute to contrast This model with another financial model you may have heard about before, which is a fund. Venture capitalists often raise a fund. Sometimes angels have a Fund. There are things called rolling funds.

Jay Clouse [00:08:58]:

A fund is different because a fund requires financial commitment from the investors, the limited partners upfront. Basically, when you have a fund, you say, our fund, we're trying to raise a total of $100,000,000, and so you go to investors and say, will you invest in our fund and that pitch is predicated on trust that, yes, I will give you some of my money towards that $100,000,000 total but after That happens. It's really on the managers of the fund, the general partners, to decide what companies to invest in. There's no voting mechanism. There's no deal by deal Cision for the investors. You are fully entrusting the managers of that fund, the general partners, to make good investment decisions on behalf of the fund. The economics are different in a fund as well for a typical fund there is what's called a 2 and 20 model basically 2 stands for 2% 20% When a fund is raised, the general partners maintain 2% of the total for management fees. So if we use the same example, a $100,000,000 fund, $2,000,000 of that would be reserved for management fees that goes towards expenses for the business.

Jay Clouse [00:10:06]:

It also goes towards salaries for the fund. And so what you see happen a lot of times in venture capital organizations, they are incentivized to raise larger and larger funds because they get a guaranteed 2% of whatever they raise which can be lucrative the 20% is what's called the carry when the fund is returned basically if we deploy $100,000,000 10 years from now, if all of those companies have exited or had some event, whatever is returned to the fund in terms of the total value that you capture the return on investment the GPs keep 20% of the carry that is also true for a syndicate that is basically the incentive for people to do the Operational work of running a syndicate is you get 20% of the carry the upside of whatever the fund returns. Now, of course, you want to perform your job well as the syndicate lead and pick good companies that have a high return so that even after that 20% is Capped by the syndicate leads, the 80% that goes back in proportion to the individual investors is a huge return on their money as well. That is the game at hand here. If you are still listening at this point, bravo. You are working through what I know is not necessarily the most fun, entertaining thing in the world of creators. We're talking finance here. And finance is often engineered to be intentionally boring and difficult to grasp Because the people who have incentives to keep finance in their grips make things difficult.

Jay Clouse [00:11:34]:

But I'm trying to make this as Understandable and accessible to you as possible. After a quick break here, I'm gonna explain more about where this came from, why we're doing it, how it works, and how you can get involved. So stick around. We'll be right back. Alright. Welcome back to my overview of the Creator Science Syndicate. Now you may be asking yourself, how did Jay get involved in this? It seems like Jay understands some of these financial things, and you're right. Before I started Creator Science, the business, before I started the Creator Science podcast, I was running another podcast called Upside.

Jay Clouse [00:12:10]:

I started that podcast in the middle of 2018, and Upside was focused on startup companies that were not based in San Francisco. We spent years publishing sometimes twice weekly episodes talking to startup founders and also investors in startup companies So I spent years studying investing before I did the creator thing. That's why I understand these terms. It's why I'm doing my best to explain it to you as well. And it took me a long time to grasp a lot of this. So I'm really trying to distill this into a format that you can grasp yourself. Now I first learned about syndicates in 2020, which is right about the time actually that I was starting to launch this podcast. But I I interviewed a guy named Peter Livingston.

Jay Clouse [00:12:55]:

Peter Livingston was running a syndicate himself called Unpopular VC, and he had a very, Very interesting insight that I want to share right here.

Peter Livingston [00:13:05]:

The biggest thing is that when you actually raise a fund, all those LPs that you raise a fund from are, they become your bosses, and you're beholden to them. If one of them is not happy or if you deviate from the strategy that you promised them in the beginning, You you end up with, conflict and friction. And what's really cool about the syndicate model is that I'm more of, like, a professional blogger than I am a, Metro capitalist.

Jay Clouse [00:13:29]:

That was Peter. I apologize for his poor audio. I actually remember he was taking the interview from a Starbucks outdoors, And it was challenging. But that insight is something that really, really stuck with me because right when we interviewed Peter, I was actually getting disinterested in venture capital and getting more interested in being a full time creator. And for him to say, actually, the syndicate model positions me more as a blogger than as a venture capitalist that's Stuck in my mind because what Peter was saying was he is writing as the predominant function of his role. Basically, when he creates deal memos, when he Explains, hey. Here's an opportunity that I have, and here's why it's compelling. He's essentially writing a very well structured thought out blog post and sending that to The syndicate of investors that he works with, and he doesn't have a boss.

Jay Clouse [00:14:19]:

You know? He just has the opportunity to talk with great companies, great founders, and bring those opportunities to his audience, people who trust him. And now Peter has one of the most popular syndicates on the planet. He typically invests $143,000 per deal according to AngelList, he's done 35 deals in the last year through the syndicate and more than 2,000 individuals have invested into his opportunities through his syndicate. So anyway, that's the backstory. That's where I originally heard about syndicates, where I originally got interested. And what makes Me unique and John unique, and what we're able to do here is we have audiences. We have people who are paying attention. So we have people who trust us, who we can get involved in these deals.

Jay Clouse [00:15:02]:

We also know that our audience is interesting and useful to specific companies, Creator economy companies, companies who serve creators are well served to work with people like us because we represent their customers. And it's a really powerful thing to say, Not only do we serve this customer, but we even have investment from our customers. It's really powerful. And they can say that by taking an investment from a syndicate and from the syndicate taking investment from their customers. We have covered a lot of ground here, my friend. Thank you for Sticking with me now. I have a couple rapid fire, questions that I think may be common that I wanna answer in case you're thinking about them. One of them is, How does this work exactly? How do we get money back out of a syndicate? So when investment happens, if If NewCo again, we'll go back to NewCo.

Jay Clouse [00:15:50]:

If NewCo says, hey. We are raising $1,000,000 at a $10,000,000 valuation, meaning our company is valued at $10,000,000, and we are looking just to raise $1,000,000 in total. If you invest At that valuation, say, you are in the syndicate and you say, I'm gonna put in $10,000 when they're valued at $10,000,000. If they are someday valued at $20,000,000, then your $10,000 is now worth $20,000. Their valuation doubles. Your ownership in the company is now worth double as well. That is how that works. Now having ownership that is worth more than it originally was does not mean that it immediately goes into your pocket.

Jay Clouse [00:16:34]:

The way that you receive funds back from an investment is there has to be what is called a liquidation event, which is most frequently a company being acquired where the acquirer says we're gonna pay this much money, we're gonna buy your company, and as part of that, we're gonna pay off all your investors their proportion of ownership right then and there. It also happens when companies go public and do an IPO. There are other liquidation events that are a little bit less common. You can search those and learn more about them, but liquidation event is what needs to happen. That's why investors get excited about IPOs or why they get excited about acquisitions. Those are kind of the most common scenarios. So if and when we invest in companies on behalf of the syndicate, part of the deal memo is looking at How does this become liquid? How do you get your money back out of this? Do we think this is something that can IPO? Do we think that it's likely this could get acquired? Acquisitions are common. It happens all the time.

Jay Clouse [00:17:30]:

But there are other ways that funding becomes liquid. They're just a little less common. So if you are interested in learning how that happens, feel free to Google around, figure out how to do that, but that's that's kind of the gist of it. Now the next question is, who can participate? Who is eligible to join the syndicate? Is this open to everybody? And, unfortunately, the answer to that is no. This is Private market investing. These companies are privately held. They're not listed on the stock exchange. And according to the SEC, the Securities and Exchange Commission, You must be what is called an accredited investor in order to participate in private market investments.

Jay Clouse [00:18:05]:

That includes joining the syndicate and investing through the syndicate. Accredited investor is an individual who meets at least one of 3 criteria. They, 1, either have a net worth of $1,000,000 or more, not including their primary residence, and that can include your spouse, by the way. 2, they have an income that per, exceeds two $100,000 per year for the prior 2 years if you filed as a single individual or a joint income with a spouse of $300,000 per year for the prior 2 years. Or 3, you have a series 7, 65, or 82 license that is active and in good standing. That basically means that you are in finance. You have taken testing and gotten a very specific license. If you don't know those terms, then you likely don't have that license.

Jay Clouse [00:18:50]:

You could also be called what is a qualified Purchaser, an individual or entity with $5,000,000 or more in net assets. So you have to meet one of those Four criteria essentially to be an accredited investor and to be eligible to join the syndicate and take part in the The the deals that we are bringing to you. If you're not sure if you pass one of those bars, consider speaking with an attorney or a financial adviser to find Out. Because if you want to join the Creator Science Syndicate, we have a very simple form that you can fill out. One of the questions is, are you an accredited investor or not? That form is at createrscience.com/syndicate. That's where you can learn more about what we just covered here. The form takes 2, maybe 3 minutes to fill out, and that basically gives us the ability to communicate with you with specific investment opportunities. I think that just about covers it.

Jay Clouse [00:19:42]:

That tells you what the Creator Science Syndicate is, how you can get involved if you are an accredited investor. I should note that these these opportunities will be available to anyone in the Creator Science universe. If you're listening to this, if you read the newsletter, If you're aware of the greater science syndicate, you will have the opportunity to invest in the companies that we bring to you, again, assuming you're accredited investor. But I will give priority to folks who are in the lab, folks who are members of the lab, including our basic membership, which is available still right now at join dotcreatorscience.com. Sometimes, we have a limited allocation that we can make into these companies and we have more interest that we can actually take on in terms of investment. And in those cases, We will prioritize folks who are members of the lab. If this is interesting to you, I hope you join the Creator Science Syndicate. There's a link in the show notes or you can visit creatorscience.com/ syndicate to do so.

Jay Clouse [00:20:35]:

You are listening to this. If you are listening to this on the day it's released, Tuesday, we're actually releasing our 1st deal memo this week. So The sooner you get on the list as an accredited investor, the better off you will be so you can learn about that opportunity. There is no pressure. There is no expectation. Once again, I feel compelled to tell you this is not investment advice. This is also a highly speculative form of investing. So you should only do this If you understand and acknowledge the risks, and this is something that is part of your overall investing strategy, which you might wanna collaborate with a financial adviser on.

Jay Clouse [00:21:08]:

So thank you for listening. I hope this has been educational. I hope this is something that at least you've learned something, if not getting involved in The syndicate. I wanna thank John for being my partner in this effort. Again, if you haven't heard of John, you should check out his blog at jonghan blog.com. If you wanna learn more about, syndicates generally, John's team at Going VC wrote an excellent overview about syndicates, which I'll Also link in the show notes. If you have any questions, you can tweet at me, email me, find me online. Let me know.

Jay Clouse [00:21:38]:

I would love to work with you on this. Otherwise, I will speak to you again next week. Thanks for listening.