Episode Transcript
[00:00:00] Speaker A: Everybody is missing something in life. I felt prisoner to my own success. Change is hard. Change is hard. I get it. Change or die.
[00:00:08] Speaker B: I'm gonna change things.
[00:00:09] Speaker A: So what the hell can we change? If we can see things differently, we can have some different results.
[00:00:14] Speaker B: Only on NOW Media Television networks.
[00:00:22] Speaker A: Welcome to Be the Giraffe. I'm your host and guide, Chris Jarvis. If you are looking for ways to stand out and reach higher in business, with money and in life, then you are in the right place. On Be the Giraffe, we meet the innovators who dared to be different and stick their necks out. We learned how they broke free from the herd and used their long necks to find better paths. Today we have an exciting show. My guest is my good friend, Josh Chodnowitz. Josh is an entrepreneur's entrepreneur. He started allposters.com and art.com where he sold a little over $2.8 billion worth of product to over a million customers. You buy stuff at Walmart. Josh sold his company to Walmart. What did he do with his money? He invested in over 50 startups. So he knows a thing or two about startups, about money and about a thing or two. Now Josh has an exciting new company, Fundify. He is democratizing startup investing so you can invest in those future unicorns with as little as a dollar a month. If you want to learn how to build a big company without a silver spoon or want to learn how to invest in tomorrow's big companies without a big war chest, we have the man who will help you elevate your perspective and see a much better path for your life, for your business, and for your money. Josh, welcome to Be the Giraffe.
[00:01:33] Speaker B: Good to be here.
[00:01:34] Speaker A: So, Josh, you did all these great things. You run in these great tech circles because you've been so successful, I assume because you've built a company that did a billion dollars and you're running this great tech, tech startup. You must have been born with silver spoon and gone to Harvard and had tons of money and you just had a great, great on ramp, right?
[00:01:54] Speaker B: Yeah. An overnight success, I suppose, right? Overnight success that took decades, decades.
I grew up many, much like many other people. All right. I grew up in a home where my dad put me to work on the construction site picking up trash and debris for 25 cents an hour kind of thing. Right when I was, I don't know, seven, eight years old. And so we learned the meaning of hard work early and we've been blessed to be where we are and good things have happened. Along the way.
[00:02:23] Speaker A: So there's a lot of story between 25 cents an hour and being very blessed. But you like big family, like, tell it like some of this story. There's a lot of people out there who have great aspirations. Sure. But what they don't realize, because I know you, they don't realize that their stories today are probably a lot like your story then. So I think there's a lot of inspiration to tell us about you being kind of a kid and you did not grow up privileged and you didn't have this long Runway.
You were given great gifts, but not the way people might think.
[00:02:59] Speaker B: I'm first born of an immigrant or my dad was born in Argentina and came here when he was 16 years old.
I'm the oldest of seven kids, and we grew up in New Jersey and trying to stand out from the crowd you talk about. I think about my family trying to stand out from 6, 7 siblings to try to grab a little attention, wherever that might be. And. And I think my parents did. Did a great job with us. We had a. We had a good upbringing, good life, and. And still challenging, right? Still lots of challenges in there. A lot of hard work. I watched my parents, who are entrepreneurs, work hard to make a living and to make good things happen and put us in a situation where, you know, where we could work hard as well, and we could learn and work through that. So, yeah, I don't know. You know, happy to kind of share any part of that.
[00:03:52] Speaker A: Well, you're the oldest. I'm the oldest. And so when you're the oldest, oftentimes you take some responsibility, you know, being the man of the house, so to speak. And so for you, that meant, like, you took on some roles and you. You did some things that other. The other siblings didn't have to do.
[00:04:08] Speaker B: That's true. I mean, I suppose when I was nine years old, we had. I had six siblings younger than me, so there were a lot of us together. And I suppose there were times where I was watching those kids, right. And my brothers and sisters, and so there is some responsibility. I don't know that I did a good job at that, but, you know, you do.
[00:04:25] Speaker A: They might argue.
[00:04:26] Speaker B: Yeah, exactly. They would all argue. I think that that's the case. But the reality is we're put in situations. We do the best that we can with them. We.
But we learn from them. We learn and we. We eventually, you know, grow into who we are and making those decisions. So, sure, we had often, we made our own fun when we were kids. I remember running fairs at the house together for the neighbors. Right. So the neighbor. We'd sell tickets to the neighbors to come and play games that we made up in our yard, things like that.
[00:04:56] Speaker A: And you're like the original Kearney.
[00:04:58] Speaker B: Yeah, I don't know about that. Well, we collected quarters. Yes, we did.
And had fun doing it. Right.
For prizes, we gave away the things our parents owned in the attic, which later we learned that wasn't a good idea. We gave away some heirlooms, which was not smart, but we gave what we had.
[00:05:22] Speaker A: So next week, we'll talk about parenting advice with Josh and Chris.
So.
So you made the best of the situation you had because you didn't know any better. But then later on, when everybody else was going off and many of your siblings were going off to college and do other things, the world had different plans for you too.
[00:05:44] Speaker B: You know, my siblings were younger than me.
I went to college just for a teeny bit, meaning I went to check it out and then left. It wasn't checkout. Yeah. Then check out. It wasn't for me. I, I never really enjoyed that part. I thought there was always more for me, at least. Right. I think it's great. I think about that for my kids. I think about college, and they may very well go to university. They may not. I don't know. Right. I don't know what, what's in store there. But, but for me, that wasn't for me. And I, I, I worked with my dad and his business. My dad also, at the same time I had gotten sick, and so he had, he had stage five cancer, which, thank God he's okay now. And he still. That was.
What was that, 30 years ago. And so now he's still going, which is fantastic. But at the time it was much more serious. And, and we were, you know, living through that area, much of which has, you know, kind of gotten us to this spot, the frailty of life and understanding that, but, but also had aspirations to build something bigger than just an everyday business, if you will. I always, I thought about ideas, and that was around the time where the Internet came around in the mid-90s. And, and the buddy of mine called me up, Mike Marston called me from Virginia Tech University and told me about this Internet. And I said, what's that? And, and that's how we born, you know, the art.com story.
[00:07:13] Speaker A: So dad gets sick, you're working. College doesn't work for you. You start working to make ends meet and help the family and do what you do, and Then your buddy says, I've heard about this thing called the Internet, and imagine that. So all of you living on the Internet, watching this on the Internet, and he's doing a business when.
So tell us about that story, because I know there's some really funny stories about you having to convince people of what the future is going to look like, which the audience will find very funny. But Mike calls you, he has an idea.
You don't have money, don't have a formal business education by any stretch, and you guys decide to do what? Like what happened there? Because I think this is fascinating.
[00:07:55] Speaker B: I think it started with the idea of the Internet. Knowing that.
So he explained, what is the Internet? Well, it's this D1 that's coming through the university there. And this is what it will enable people to do one day and will have connected computers that can speak to each other, meaning people will have personal computers and be able to talk to now to the other computers. And so the thought was that commerce would eventually get there. What happened is my buddy and I got together at a diner in New Jersey and we sat there for a handful of hours thinking through how could we monetize that? Right? Knowing this, we thought we knew something that the future had in store that the world didn't quite comprehend or understand.
Maybe today that might be kind of similar to AI and we can talk about that if that comes up. But it's this new evolution of we saw the Internet kind of changing the way the world lives, and then we wanted to be a part of that. So we brainstormed on the different things we could do using that sort of model or that backdrop of the Internet.
And that's how that started.
[00:09:00] Speaker A: So you had the uncertainty of we don't even know what this thing is going to be, and you had no experience in it because it didn't exist. It's impossible to have experience in an uncertain future.
And how did you fund this?
[00:09:15] Speaker B: Well, back then, I mean, we only had. We didn't really have much money ourselves. And, and so we tried to raise money because that's what we would read about other entrepreneurs starting businesses and raising millions of dollars. And so we thought, heck, we'll do the same thing. And, and, and the question we kept getting asked was, well, what's the Internet and why would I ever use it? And, and so you, you go through the process of discussing that and talking to them. Ultimately, nobody gave us any money initially at least.
And so with, I think we had about $35,000 of our own capital or borrowed Capital from family. I think it was mainly Mike's parents. And, and we, you know, and then we, we bootstrapped it from there. A lot of blood, sweat and tears sort of thing goes in that. And, and eventually you build that up, right? You sell your first item, you sell your second, you rinse, repeat. Right.
[00:10:09] Speaker A: So how many people did you ask for money, do you think?
[00:10:15] Speaker B: That was a while ago, but it was dozens for sure. It might have been, it might have been 30, 40 people back then that we tried to raise money from. I also didn't know how to raise money. Right. That's a whole nother master class, I suppose, that you probably can read about. But it's, it's, it's a difficult process because cash is king. It's tough to. Once you part with it, it's at a startup, it's. That company now runs with it and is doing something. You own equity in that. So. And when you have cash, you can put that anywhere. So if you're an investor, it's smart to be thinking about where to put that, because if you, once you put it there, it's sitting there for a while maybe, right? Yeah.
[00:10:52] Speaker A: So you had an uncertain future. You had a life that wasn't enough. You had a vision of something more for yourself. You said you wanted to build something that came from imagination and wonder, not from seeing it. Then you noticed there was change in the world coming, but you weren't sure where it was going to go. You had a vision of something you wanted to try. You asked people for money and they said no.
And with all these stages of uncertainty, you kept going forward.
You guys kept moving in the. We're going to keep pushing, even though we don't know.
Important lesson.
[00:11:29] Speaker B: We certainly thought about quitting a lot and we debated it because we had lack of signs initially showing the results that were coming from. At the same time, there were continued convictions happening around us in other businesses that we saw, wait, the Internet is starting to infiltrate that area or we're seeing it happen there. So in those ways, it would give us more confidence that somebody will build what we're doing and what we're thinking about.
So we persisted, right. And continued to press on saying, hey, listen, if we can just make it another day, another week, another month, how can we get to this spot, to that spot? Right? So we, you know, we continue to push forward. I was fortunate that to have a business partner that was fantastic and that also worked his tail off and to make things happen and to do his part and maybe more than his fair share.
And we ended up getting to subtraction, which then now you start proving things out. Someone's bought something, right? Look at that. And oh, no more people are buying and that sort of thing. So you kind of work through it.
[00:12:33] Speaker A: So check this out. You're living in a life where you may want something more you would like to get to. There's some uncertainty on what that looks like. Josh did this when people didn't know what the Internet was. There's a lot going on in technology, in the economy with AI. It's going to be really exciting. Don't miss the next segment when we come back and talk about what he did, how it worked, how you brought it to the next level. And it's going to be invaluable information for you to elevate your perspective and see your better path. We'll see you after the break.
Be bold, be curious, but most importantly, be patient. We'll be right back with more BE the Giraffe.
This is Be the Giraffe with Chris Jarvis. It's time to evolve and elevate.
[00:13:33] Speaker B: Foreign.
[00:13:41] Speaker A: Welcome back to Be the Giraffe. Today's guest, Josh Chojnowitz. He's telling us the wonderful story of how he invented the Internet and, well, how he, how he invented a business at a time when nobody knew what the Internet was. So if you're in a situation in your life where you're, you have visions and you don't know what they are, you just know that you want more.
You're in a situation where you want to create a better path for yourself and there's some uncertainty. This is the place for you. So, Josh, in the last segment, you talked about trying to raise money and failing, visualizing something that might happen. Not I'm going to do what this person's doing, but I'm going to do something.
And you guys stuck with this thought about quitting.
Why did you stay with it when it. And then when it started to turn, the challenges change. So one success brings a different challenge. So for people who are on this journey to get more, it's not just immediate. There's a process. So tell us about you guys pushing forward.
What does that mean and what happened as you progressed?
[00:14:44] Speaker B: Yeah, well, for us, it was always we saw this aspect where in our product line we were selling posters and prints online.
And we knew that the Internet or we felt at least at the time that the Internet would be a good venue for people to purchase prints.
They may have a, you know, a Mickey Mantle poster up in their. In their home or in their college dorm. But if they wanted a New York skyline, that would be tough to find, or a Seattle skyline, or who knows, Mount Rushmore, whatever they might be passionate about, that would maybe be hard to find in a local store. So we knew that the venue worked well.
And so for us, it was more about this long tail. How could we get. We knew if we continued to bring more product on to our platform, the more we would deliver a superior selection value to the end consumer so that when they came to us, no matter what they were looking for, they would find. As a matter of fact, today, and we don't have art.com anymore, but just a couple days ago, I think it was on Monday or Tuesday, someone was telling me, oh, I just went to art.com and I couldn't find this. They couldn't find it. They were looking for an autographed something. I said, I always thought about doing that and adding that, but so far no one's added that right to the, to the product mix. And that would have been another evolution of the product and, and more work to be done. I was, I'm often surprised that even 20 years in the making of Art.com, we had things that we had thought about doing early that we still had not done 20 years later. And yet we had much success. Right. There was a lot of success in between there.
And, well, we took it step by step. We knew in the vision. We had the vision for what it could be and, and then just put in the time and effort to make that happen. And so when we kind of enter challenging circumstances like when we, when we launched framing services, so we knew our customers were asking for framing services, we created all kinds of. What we did is we hired custom framers to. And designers to choose and select how each picture should be framed. And then we offered it to everyone, said, listen, this is a beautifully framed picture that you wanted. And we spent months building this and then launched it and nobody bought it. And yet everybody was telling us they wanted it. As we thought, how did this just happen? How did we miss the mark? And what we learned was that we kind of had this thought that said, wait a second.
I think some people actually want. They want the joy of picking out their own frames and just putting a little bit of personalization into it, choosing maybe the color or the shade of the matte and deciding on some of those aspects. So rather than having a designer make the choices for them, they more wanted someone to guide them and help them make Their choices. And when we did that, we instantly started selling more. And, you know, that year we grew even a little bit more. Right.
[00:17:32] Speaker A: And so I want to go back to something before I'm going to come back to the customization for sure, because I think it's really important. But your idea that you said art.com sold billions of dollars of product and there were things you wanted to do 20 years ago that they still haven't done to this day, that for a lot of people who are trying to go out on their own and do something, there's the risk of leaving their job or the risk of borrowing money or the risk of using their own money, their nest egg. And so I find that the challenge a lot of people have is they want it to be perfect.
They try to make something perfect or they make something.
They want to have the whole thing built out, the whole suite of products.
And you had a very different experience. Like the idea of getting to market and getting something out, not waiting.
You still wanted to do things, but said, we'll get to that. And I know from working with you with Fundify on some projects that there's a. We got to get something out. It doesn't need to be perfect. We've got to get the first thing going.
Talk about that. Of, like, getting your foot out there and how important that is for people who are either investing in startups or people who want to run a startup, start a company. How important that is to just get out there and not worry too far.
[00:18:45] Speaker B: Yeah, it's.
There's a. There's a story that was told or some. A college class that went on, and you may have heard this before about a. Think it was a pottery class.
And. And. And they had, you know, one. The teacher split the class into two groups and said, this first group, I want you to create the best piece of pottery. You're going to create one piece of pottery, and at the end of the semester, you're going to submit that one piece of pottery, and you'll be judged on how beautiful it is. That's what you'll be judged on. And so go off for the semester and do that. And then the other half, they.
The professor told them, you're going to also make pottery, but you are going to be judged on how many pieces of pottery you create. Right. So all you have to do is create another one, as many as you possibly can the entire semester.
And however many you create, that's how you'll be judged, not on the quality. Well, at the end of the Semester, you had one piece that was okay, that came from the one group, and then the other group created thousands of pieces of pottery. And their. Their pieces were. Almost all of them were better than the other piece that was created with the goal of creating something quality. So really what that talks to is the speed of getting out there and executing and delivering something to the world and getting it, you know, and then learning from that process and iteration, right? So it's this continuous iteration, continuous, evolving, learning from your own experiences. And so we had some of the same thing, right? We've done that. I'm a big believer in running that way, trying to run as fast as possible. I also struggle with kind of the. The challenge of trying to make things perfect because you're judged on this or something like that now that people are going to think, oh, what a piece of. You know, that's a terrible product that you've just built, and that's who you are. Right? And the reality is, if you launch a perfect product, you probably launched it too late. And. And that's the challenge that I think many entrepreneurs struggle with.
[00:20:42] Speaker A: So if you launch a perfect product, you probably launched it too late. I think that's brilliant. And you get the perfect piece from repetition. And you just have to try and have to fail. And I heard somebody ask a question of Gary Vee about handling failure, and he said, well, how do you handle failure? He said, well, I go and do it again.
So what do you mean? And. And Gary Vee's interpretation was the struggle you have is you're so afraid of failure that you want everything to be perfect. So you're only gonna do three things where I'm gonna try 40 things today, and I'm gonna fail at 21 of them, but I'm gonna accomplish 19 things. You're gonna be 3 and 0. I'm gonna be 19 and 21, which you would say, I have a losing record, but I have 16 more successes than you today because I'm not afraid of that failure. And I think that's a big part of this, where people are so afraid of, especially for the young people watching this. This. I don't want to be judged. I don't want to be cringe. I don't want to be embarrassed. I don't want to be whatever it is that you try to be something to everybody, you'll be nothing to anyone kind of a thing. And so really interesting that it's. And then you learned another lesson, which was you thought you had the framing thing down and the difference between getting feedback versus actually collecting money is a big difference.
[00:22:04] Speaker B: Right.
[00:22:04] Speaker A: So tell us a little bit about. Because I know you have a bunch of lessons around that too. So that whole idea of people say they want it, but until they don't really want it until they're willing to pay for it. That's right, yeah.
[00:22:14] Speaker B: It's one thing for people to say they want it, it's another thing to part with their wallets and, and open up and trust you enough to purchase that product. Also, we dealt with a product that aren't. That was.
People weren't always buying it. Right. You're buying something for your wall in certain instances in your life.
And so you're not necessarily always purchasing something for your walls. But when that event comes, how do you become the trusted source that someone would know and remember to go to, to purchase and to believe that they're going to get what they want? Right. That's a challenge. And I think just like the framing issue that we had, I remember at the same time running out of cash, spending everything that we could have that to launch the product that failed and thinking, oh, how do we launch this now? We've got to change it. I think we, we made our next iteration in six days and we had to do it quickly because we, at the time we weren't smart thinking. We've got to iterate fast. The reality was just because for the sake of iteration, we needed to, we actually iterated fast because we're gonna have to lay everybody off if we don't actually see some successes coming from this. So we did it quickly. We were fortunate enough to start seeing the revenue come in from that.
And, you know, and, and then we continued to press on that. Right. Then that turned into another problem or another one that we'd have to solve and go through that.
[00:23:31] Speaker A: So that's also. You had so many orders. How many orders did you take? How many orders did you fulfill? Products did you fulfill at art?
[00:23:39] Speaker B: Why through the lifetime, we had, I think, 23 million paying customers.
And you said a million earlier, but it's over 20 million and just shy of 3 billion in total sales. And I think at our peak, we were filling a tractor trailer filled with product every 45 minutes and getting it out the door 24, 7. So there was a lot of product being moved.
[00:24:03] Speaker A: So this wasn't a Sotheby's auction where you sell one thing and then you turn around and carefully move it with the white glove.
I think that goes to the point of you got really good at these Things because you had a lot of practice, but then because you had so much value, it necessitated you having to streamline. I don't know. Did you guys envision doing 23 million customers when you first did this?
[00:24:24] Speaker B: I think we always envisioned a bigger business. We always tried to, you know, we knew we were building something that could be very large, and we thought the Internet gave the possibility for real scale.
But I think we envisioned it actually happening faster than it did. And then it became more challenging. It just, it was always a struggle. It was always difficult. It was. There are very few years that just continued to grow and continued to grow all on its own.
[00:24:50] Speaker A: There were all.
[00:24:50] Speaker B: There was always work involved in making that happen. So I think the fallacy of thinking you're just going to do this one thing and then print money. Yeah, print the money and then frame it. We used to joke. Yeah, frame it. We used to joke we'd sit on the beach and just refresh how much money we had in our bank account. Right. And that never happens. We never did that. We just, you know, we're always on to the next thing.
[00:25:12] Speaker A: So that's great. So, so many great lessons about, about growth and repetition and trying and adjusting and evolving before you elevate that. This, it is an iterative process that goes on and on with the feedback loop that happens that's actually running the business. Then there's some other challenges that you have. So I know. We'll talk about it in the next segment. Once you get this figured out and you have the business going, it's like having kids. You get them through the hard part of little kids, then they become teenagers and they get even harder. So going to come back after the break and talk about what happens when you have a successful business and how that completely changes what you have to do next. So don't miss it. Come back after the break.
We're just taking a quick detour through the savannah. Don't wander off. We'll be back with more Be the Giraffe.
[00:26:04] Speaker B: Foreign.
[00:26:08] Speaker A: This is Be the Giraffe with Chris Jarvis. It's time to evolve and elevate.
Welcome back. I'm Chris Jarvis and my guest today, Josh Chodnowitz, the founder of art.com, allposters.com and as you're soon to find out, Fundify.
So, Josh, you sold 23 million customers, almost $3 billion worth of art. You made it. You guys did it. You started this company in an age of uncertainty. It was doing great. And then all of a sudden, different sets of Challenges happen. Now you're running this really big company. It's not the same talk about that. Just the mindset of going from this high energy startup, solve every problem to for growth to management. Because that's something a lot of people are going to have. Once you prove you have a concept. There's a whole, there's a whole new set of challenges with managing a company and people versus just oh my God, where's all the money?
[00:27:12] Speaker B: Yeah, managing different levels of people, meaning now levels of organization. Right. That you have, where you have managed. You have people who are reporting to you who have people reporting to them who maybe eventually have people reporting to.
[00:27:25] Speaker A: Them who you may not know.
[00:27:27] Speaker B: Who you may not know. Exactly. And I, I remember the first time walking around our warehouse and, and meeting someone who I had, who had told me he's been with us for almost a year and I had just met him for the first time and I thought to myself, you know, I'm a terrible boss because how did I not meet this person? We, I think we had about two or three hundred people at the time. So it's harder to meet everybody that comes through the system. But anyhow, that was.
Those are some of the challenges and you have to. It's totally different than when you're a small company with a few people. You know everybody, of course, and you're in touch with everybody. It's a very flat organization. And you not only know them, you know exactly what they're working on, what they're doing.
You're able to have lunch with them if, if you have, you know, if that kind of works itself out, obviously bigger the company gets. Now you're doing group lunches, which is different and different, you know, like you said, different types of challenges as the company grows and certainly, certainly different learning experiences and growth and that you have to go through.
[00:28:26] Speaker A: And then how is that transition from going from.
It's really hard to go from. I know everybody and it's close fit and it's a family to all of a sudden it's, it's a very extended family.
And then you get to the point where there's a moment where you decide it's time to leave. So you like this is your baby. Like this thing. You guys built this, you conjured this from nothing and you have all that emotional attachment to it. What's that story of when do you know it's time to leave?
[00:28:56] Speaker B: Well, you know, it differs for everybody, I would say. And our situation. We had, we had just raised, we finally did raise venture Capital years down the road, and we raised money. We knew that that was the start.
[00:29:10] Speaker A: Of, beginning of the end.
[00:29:11] Speaker B: Yeah, Kind of the changing of the guard, if you will. Right. We knew that money was coming in, big money was coming in.
We also were able to have liquidity come from that, which means we personally have more cash coming in. And what are we trading for that? We're trading equity, we're trading ownership, or eventually trading structure and power and how you can execute the vision that you have. I quickly learned that not everything that I wanted always happened anymore.
Which those are really challenging, I would say circumstances, because that's a dynamic that I was used to making the call with my co founder. Right. We were used to making the calls. And eventually you realized, wait, that's one of the consequences, if you will, that come with capital, with large capital raising. And you know, and often those are not the right decisions. And so we, we live through the challenges that, that, you know, that that brings.
[00:30:05] Speaker A: So you had, you have the founder challenges, you had the operational challenges, you had the investment management, the sharing or the turning over of power, which may feel a whole lot like working for somebody else.
Then you sell and you move on and you have this whole basket of knowledge.
And then what happens? Like, what happens with that? Was there an identity shift? Was there a challenge of I used to be, I used to run these companies and now I'm not that.
How did you deal with that and like that change? Because people who are watching this, who are thinking about going out on their own or partnering or investing with somebody, the dynamic changes. And most people don't like change.
So how did you handle that identity shift of Was there any or were you just so relieved?
[00:30:50] Speaker B: No, it definitely was a challenge for me because some of it happens abruptly. Right. And. And I wasn't the CEO of the company ultimately, when we sold it, we had already put other people in charge through the time and.
And the company's growth trajectory changed and challenges happened. And I think a lot of change happens without founders running companies. It's different. It can be good, it can be bad. There are pros and cons to all of that.
And so I definitely had an identity sort of moments where I had to think about the fact that at one point I was running this, and then the next moment you're not. At some moment in time, you're just instantly not doing that anymore. And so I think that changes because now you're thinking, what do I do now? Right. And you take a little bit of a hiatus and some time off, which is what I did. And then really quickly you realize that's not what I want to do forever. I want to build something else. For me, it was like playing video games. I loved building business. I loved making things. I loved the challenges that came each and every day that we got to talk through and say real life challenges and say, well, if we change this, if we do this, maybe we could generate more revenue, if we could build this channel or try that out. Right. I enjoyed all of that challenge that came with it. And so I knew that I wanted to do that more. Right.
So I eventually started investing in companies and that's kind of how I got into my next sort of set.
[00:32:18] Speaker A: So you did that. So you sold the company, you had some money from the liquidity event that took place there, and then you went and took the knowledge that you had from running, operating, being challenged, evolving, and selling and working with private equity. You'd seen a lot of that, so you were pretty sought after.
When you have money, people generally want your money to invest. That's not uncommon. But you found some companies to invest in and now it's how many that.
[00:32:45] Speaker B: We'Ve worked with about 80 now.
[00:32:48] Speaker A: So 8, 0 companies.
What do you find for people who are going out there to raise? We'll talk a little about your experience, but I think right now is a good time to tell the audience what you learned. Having you said yes to 80 companies, which means you probably said no to 8 million companies or something.
[00:33:05] Speaker B: Thousands. Over a thousand, for sure.
[00:33:08] Speaker A: Over a thousand no's, 80 yeses, which goes to your don't. Just because you got one no doesn't mean you're not going to get a yes.
What have you learned from that process of meeting a meeting founders? Like when you pick a company for these 80 companies, I know they're all different, but there's got to be some thread of things that you look for that make for a good investment from your experience.
[00:33:31] Speaker B: Yeah. There are a handful of things that are more important than everything else.
And in my eyes, they come down to the people that are running the company. And you don't have to have them all. So because you have, you can show stories, you can find history that shows many different instances where you could have a college kid that builds something extremely valuable. Right. So that means he didn't have a tremendous. He or she didn't have a tremendous amount of experience, for example.
But ideally you're looking for founders that have done things before. That would be one of the things you're looking at. The founder side, you're also looking at the idea itself and, and what it could become. And you have to have your own gut and instinct on whether that's going to happen. Right. It's kind of like the Internet coming, coming of age. We saw this happening. We, we knew that that was, that we were building that about four years, five years prior to the Internet boom in 99. And so if you can see things a few years ahead of time, hopefully we can do that in the future and see things that are growing, then we can reap the benefits of making investments in those best companies.
I find that the best founders will find ways to modify their ideas if the ideas aren't good enough along the way, whereas the vice versa, if you have a great idea and you have a B team that's running that, they usually find ways to ruin the idea and not execute that A plus idea. Right. So really you want great, great people at the helm, but you do want ideally big ideas that have scale and optionality to them, meaning where you can make the risk reward situation. Early stage investing is a lot about risk reward.
You're making investments with lots of risk. There's lots of reasons that something could go to zero.
And, and yet you take that in the context of, well, how big could this be? Is this the type of thing I could make ten times my money. This is not a, I'm trying to make a 10% return this year. That's not the investment types that we're looking at. How are we making, you know, the small ones that we're trying, how we're making 5x, how are we looking to make 50 or 200x? Right. And if you have some optionality that, and I haven't had these yet, but this 1000 or 1000x returns, right, those are also ones that you're looking for. How do you, how might you get into something that could be really large? Because then that outweighs the risk that you're taking, you know, at the beginning stages.
[00:35:47] Speaker A: So for people that's an important lesson, that for folks who want to invest in a company, they need to get their money back. And if they just want very little risk, you could invest in things that are already making money.
So you need to expect more and you want good people with good products that are taking advantage of some type of change.
Change is good generally that when you have disruption in an economy and whatever it might be, there's opportunity in uncertainty and in that type of volatility, if you will. And so they're looking for big upside. Which means is it fair to say that the person, the founder, doesn't need to figure out how to scale it? That's more what the investors are going to help them figure out how to scale. But there needs to be an opportunity to scale. You don't need to be a distribution expert, but you need to have something that could reach a lot of people or a lot of markets or have a lot of applications.
[00:36:41] Speaker B: Yeah, I don't know that I would think that investors help scale you other than the money that they bring in now. They can bring stories and some connections of things that happen which can help along the way. Ultimately those founders have to execute the scaling of that business and understand the channels that will work for there. But investors help to understand sometimes, you know, what could you do? What are plausible real world ideas?
Why might you want to think? It's just like having a good coach or good advisors.
It's a good thing to have somebody that's thinking about you from the outside a little bit, thinking about the business, able to give you some perspective on, on what's there and what might be. If you execute this way, might it look like this or that way and help you model out the scenarios.
[00:37:25] Speaker A: And so you've been successful. You understand this.
You looked at thousands of companies to find 80.
So you've done a lot of research and had a lot of experience and you're very thorough in your process. I know this.
How many of those 80 do you think are going to end up being successful? Like the range? Because.
Well, good answer that.
[00:37:51] Speaker B: Probably 80.
[00:37:51] Speaker A: How many you think will be successful?
[00:37:53] Speaker B: Maybe around 20, 20.
[00:37:55] Speaker A: So even. Yeah, so with money, with money, with experience, with a thorough process, it's still one in four.
[00:38:02] Speaker B: Yeah. And I think we're, we're dealing with earlier stage businesses, so we're going to see more risk that's coming that we're taking on and we're looking for higher returns that come from that later state. You can get better results with companies going, you know, less companies going to zero or invest in the stock market. If you invest in Apple or Tesla today, less likely to go to zero. You might lose a little bit. You might make a little bit, you know, might make a bit, but it's not going to go to zero likely. Right. Certainly not overnight and certainly if you invest in 10 of them, they're not all going to go there.
In the startup world, you're taking on a lot more risk early on.
[00:38:37] Speaker A: And so I know you, I know you've done the numbers as a mathematician. I appreciate it. So we come back after the break. I want to talk about the research you did and figured out how to help people invest in the stock market. So after the break, learn how to make more money with less risk. Don't miss it.
We're just taking a quick detour through the Savannah. Don't wander off. We'll be back with more BE THE giraffe.
This is BE the GIRAFFE with Chris Jarvis. It's time to evolve and elevate.
Welcome back to Be the Draft. My guest, Josh Chodnowitz, founder of Art.com, allPosters.com and Fundify.
We were talking at the break about family and you telling the stories earlier about you having all the fun with a big family, all the fun things you did with the other kids. I know you're still very close with your siblings.
My younger sister has given me when she was little, she was just my annoying little sister. But she's given me some of my best advice. And sometimes you get good advice and insights from people when you weren't looking for them. And you had a story, you were investing in these companies, you were doing well. And you told me a story about your sister that completely changed your trajectory as a very successful entrepreneur and then a very successful investor. A conversation with her completely changed your path in life to where you are now. So I think this would be interesting to the people who are watching.
[00:40:28] Speaker B: I think at the time, to set context, I was thinking through whether I would start a venture fund perhaps, or start to raise money. What that means is I'd raise money from accredited individuals, wealthy people and then invest that capital. And my sister had asked me, well, how do I get invested in these companies?
And I thought to myself, well, well, you can't because you don't have enough money to make a difference in an impact where that would make sense from a viability standpoint for a venture firm. And there's also laws and regulations that prohibit unaccredited investors from investing into startups.
[00:41:07] Speaker A: So let me step back. So your sister, you told your sister that you were investing in some of these companies and they were doing really well. Some of the ones were doing really well.
And she was a teacher, correct? Is that what you told me or no?
[00:41:19] Speaker B: No.
My sisters are one's an entrepreneur. They're both really entrepreneurs in their own way. They've done different things through the years.
[00:41:28] Speaker A: But lower didn't make as much money.
[00:41:31] Speaker B: Yeah.
[00:41:31] Speaker A: So the thought was she wanted to get better returns and liked what you were doing. And said, great, how do I jump on the bandwagon and do the things that you're doing, like big brother, I want to be like you.
And the response is, you can't.
[00:41:44] Speaker B: Yeah. Some of the venture firms, you know, require massive minimum investments. Right. So it makes it nearly impossible.
[00:41:51] Speaker A: Some are a million dollars, some are $10 million.
[00:41:53] Speaker B: Exactly.
[00:41:53] Speaker A: More than that.
[00:41:54] Speaker B: Exactly. So huge minimum amounts of money to get in. And yet what I did know through the years and through the data that we collected in startup investing is that startup investing is actually incredibly lucrative. Incredibly lucrative. You have many people, the wealthy are moving money out of the public markets into the private markets because the returns are double digit, 15, 20, 25, 30% a year. The earlier you go in the stages or the earlier, more risk you take on the actual higher rate of return you're getting. And if you look at startup investing across the board, we looked at 16 to 18,000 companies, and if you had invested across the board, you would have returned 27% on your money historically.
[00:42:39] Speaker A: Which you're saying even though these startups where 60, 70, 80% of them fail and you get none of your money back, that the top 10, 20, 30% of those companies return so much that the average return is 27% when the stock market is 8 to 10.
[00:43:00] Speaker B: That's exactly right. It's a. You're getting significantly better returns in the private markets. Again, this is why the wealthy individuals of the world are moving there. Yet there's not a method in which you can actually put small amounts of money to work. So maybe if you had $1,000 even there, it's really difficult to find companies that will take your thousand dollars. What if you had $100? What if you'd had $10? Right.
That's the kind of the, the genesis of this sort of thought that said, why couldn't we help everyday average people that wanted, or even maybe we have, some people who are very wealthy are saying, hey, I want to invest a dollar. That's our minimum. You come in for a dollar and people are coming in and saying, I'd like to put a dollar. And maybe, maybe some are, because the dollar is what they want to do, others want to do it, to try it out and see what kind of investments they get. Maybe eventually move to a dollar amount that, that matches their kind of life and where they are. But the idea being build a product in a way, in a method that everyday people could invest into this asset class and reap the rewards that the ultra wealthy are reaping.
[00:44:06] Speaker A: Okay, so I did. I want to connect this for the audience. So your sister wanted to find a way.
You started thinking about how can everyday people invest in startups when they don't have the minimums and the laws. I used to own an investment firm. The laws were that if you're not an accredited investor, you don't have annual income of hundreds of thousands of dollars that you can document. You don't have a million dollars liquid. You can't invest. Like, you were prohibited from investing in these things. So this wasn't just a situation of, well, for people who complained that the rich are getting richer. In this situation, that was certainly the case. You had the highest returning asset class completely unavailable to average everyday people. From both a legal standpoint and from a functional standpoint.
[00:44:51] Speaker B: That's right. And even. And we looked at lots of ideas on how to solve that issue, because even if you, many accredited individuals don't really have access to this asset class as a whole. So even if you're accredited and have this wealth, well, maybe you have $100,000. Well, how would you choose which company to get into? Are you just going to talk? Are you going to invest in the next person that comes to you and says, hey, I want to raise $100,000?
Are you set up to make those decisions and how might you make those? And as we talked about it with a few of my, a couple of my brothers, maybe over time, and my sister, we talked about how might we create a fund or something of that nature that we could do something as a family to make investments. But it became difficult to kind of figure out a solution like that. And that's where we learned about equity crowdfunding and what that enabled, what the laws were changing that enabled people to start making investments into startups and then eventually built our product from there.
[00:45:50] Speaker A: Okay, so crowdfunding, the law did change. So there were two things. There's the practical angle of how do I have enough money to invest in companies.
Well, I guess there's three parts. One is that the second part is, do I have enough money to invest? How do I access these things? And then there's the time to figure this whole thing out. There's a lot of variables. So the law changed allowing people to invest in these crowdfunding platforms. So it's almost like the GoFundMe for starting a company or Kickstarter or something like that became very popular.
But at the end of the day, you still don't have.
You still don't know what to do.
You're still Stuck with this. I'm still randomly selecting companies when most of them are going to fail.
That was the challenge you were solving for, is that if I'm going to do this for people who are everyday people, he said, I don't want to create. These people can't afford to fail with 80% of their money. They need, they need something with, they want the upside, but they need less risk.
[00:46:45] Speaker B: Right? Just like the wealthy go to venture capital firms and say, listen, I want to, I want to pay somebody. Because with a venture capital firm, you pay a fee, a management fee for those firms and those people to work all day for you. That's really what's happening. They work all day, they work for years to find those few investments a year that they make for you.
Just like that. We, the, the unaccredited also need people to do their work for them, the investing work. Because during your 9 to 5, you're working a job or, and when you come home, you want to be with your family and your friends and you want to have, you want to have the weekend. Now you can take a hobby and start reviewing companies, but you need to look at many, many companies to make, you know, one single investment.
And that becomes the challenging aspect of kind of delivering. Even if you had the wherewithal to make the decisions and knew the questions to ask and knew how to build it, our approach was how could we solve that for the everyday person, right? How could we build a group of people that would be what we call pro advisors, that would be available, that could research deals, that could look at deals that we, that match their areas of expertise, that we would eventually build a product that was so easy for someone to join and then really easy for us to deliver, eventually for us to deliver the results that they were looking for.
[00:48:03] Speaker A: So, like, the story of this genesis could go on for a whole other episode of all the things that you went through and all the steps. But I think it's really important to tell people what is Fundify like in a nutshell, because I think it's something that everybody who's watching this is going to find interesting at some level or another. I've invested money, I've invested my friends money, money, my son's invested money. Like this is. We love what you're doing. So tell people what is Fundify, you know, from you versus versus me, what it is and how they can, how they can jump on this bandwagon of this thing that you created.
[00:48:38] Speaker B: Fundify is a way for the average, everyday person to get access into the startup asset class. And to reap the rewards of this, of the, hopefully the historical returns, 25, 30% historical returns that we hope to achieve going forward as well. Right. So the way you get involved is you download the Fundify app, you, you go through a step of answering a few questions, you connect your bank account, you agree to X amount per month. We have people joining literally for a dollar a month. We have some people in for thousands of dollars a month. We, what we, what we then do. Your job is done at that point every month we will draw down your account for your investment amount. We then take that capital, pool it together, negotiate with hundreds of startups, vet them. Most of the, most of the time we're telling startups that we're not making investments there. Right. We're doing that work for them. We have a team of people doing that. And then we negotiate terms with the very best startups that we can find and invest your capital along with all our Fundify members into the, into the specific deals on the best terms that we can, hopefully alongside expert investors, hopefully alongside other venture firms. Even at times, is what we're looking at, like I've done in the past, we would look to do the same sort of thing here with Fundify to eventually garner the same types of returns for everyday people.
[00:49:59] Speaker A: So people can go to fundify.com or they can go to Fundify on their app store or on any of their devices, log in, connect their account and then they're going to invest. And everybody who invests gets access to the startups at the same price.
[00:50:12] Speaker B: That's right, the same price. You just get your pro rata portion. Right. So you're getting this number of shares are based on how much you put in every month. But it's an equal playing field. No matter how many dollars you come in with, you're getting in, no minimum.
[00:50:25] Speaker A: Stop anytime, restart anytime, all of that works.
[00:50:28] Speaker B: That's right.
[00:50:29] Speaker A: You do the work, I get access and then you notify me of the companies and then I know these companies that I'm following and I can.
It's fascinating. And so the people who do this, then all these people in the Fundify world find out that they bought whatever company they bought.
Now you've got a situation where this whole crowd can then promote the company they all invested in.
[00:50:49] Speaker B: Yeah, the idea is eventually we'll have millions of members that are investing and also becoming essentially potential consumers of the products, knowledgeable about the products and the companies that were. It's kind of like creating a shark tank effect for each company that we end up investing into.
[00:51:04] Speaker A: It's fascinating. I love it. I think it's Josh Chodnowitz. He saw what was gonna happen with the Internet before the Internet happened. They did great work with AllPosters.com and Art.com now they're seeing how to democratize the financial services space to invest in startups so you can get access. So definitely check out Fundify, download the app. It's going to be worth your time. And for your next lesson on how to elevate your perspective and see a better path, come back for the next episode and and also check the website so you can see a little bit extra bonus coverage with Josh and I talking. Josh and me talking about some different ideas and some cool stuff. Fun to find is doing. Thanks again.
