Why i started blogging about equity crowdfunding into startups

Why I started this blog about angel investing: how our generation is financially screwed (and what you can do about it)

I started this angel investment blog as a regular joe as I see angel investing, or startup investing, as the best way to secure your financial future for the majority of the new generation. What once worked in the past, unfortunately, may not work now. Back in previous generations, a man (or woman) could have no education, get a factory job out of high school, then get married and have four children, while living in a good sized house with a multi-car garage with a large yard and the white picket fence. Now, if you’ve been kicked out of the house and paying your own bills, in some expensive places rent can cost nearly 75% of your income. And this with some form of post-secondary education after high school. That American dream now seems more like a pipe dream. As George Carlin would say, you’d have to be asleep to believe it.

In prior generations, one could buy a home in their early to mid 20s. Now, in the 2020s, this average has moved to 33 in the US, and 36 in Canada. By the way, the long-term projections is that the age will slowly increase for first time home ownership. Soon, the average buying age will be getting into your 40s. Not exactly a great way to start life, paying rent for nearly two decades while in questionable living conditions and possibly a few stories of bad roommates. Yes, there are new industries that you can look for to become educated in and earn a high salary, at one of the lucrative tech companies in the US, aka FAANG. This doesn’t apply to the vast majority of people as most do not work in these industries.

The stock market historically returned ~8-9% per year over the last century, and this might be viewed as a good investment now. But that was last century. The conditions for this century are now entirely different, so using a past number may not be relevant today. What’s worse, since the US dollar was taken off due to the gold standard in 1971, now the US and every country has effectively an uncapped limit to print money and every incentive to do so. Inflation being reported in the high single digits would eat away at all your gains in the stock market. You would actually be in a negative position once you paid your taxes too.

Long-term interest rates have been rising, and we have no idea where those would go in the future. If money is being printed at an ever-increasing rate, each dollar becomes worth less and less. The founder of Bridgewater fund, Ray Dalio, has predicted long-term interest rates to move in a pendulum, slowly moving from low to interest rates and vice versa. But this pendulum, in its complete cycle, could take 50-75 years to take full effect. So if pandemic interest rates were the low point, and Ray Dalio is correct in his prediction, then now young adults or soon to be young adults could be looking at an entire lifetime of climbing interest rates, further preventing the ability to access to capital, ability to buy a home, etc. Yikes.

This isn’t even mentioning the ~10 year durations mix in the middle boom and bust economies, with each recession making the majority seemingly poorer and poorer. The dot com bust was one of the worst that was seen by the Nasdaq, losing 77% of value from peak to trough, in only two years. Then just a few years later, the 2008 financial crisis marked the most severe recession since the era of the Great Depression. With millions losing homes, their entire livelihoods, never to recover. Then the next pandemic induced recession in 2020 was the worst health crisis in a century, not seen since the Spanish flu at the tale end of World War I. This leading to 40% of all US dollars printed in just two years in 2020 and 2021. Looking at the three most recent recessions, it seems each time they are of absolute devastation to the average joe.

Now you might be thinking, well, I’m just going to stay in safe investments in government bonds and/or blue-chip corporate bonds. Well, as we’ve seen, even countries are now starting to go bankrupt and default on loans, including bonds. If even massive countries are not safe, are bonds really considered safe? If inflation continues to be in the single high digits, buying a bond is effectively guaranteed to looking in a small loss. I thought the point of investing was to lock in long-term gains, not small losses.

In starting a business, you face immense amount of stress, increased amount of work hours, and statistics that says you are doomed right from the start. The majority of businesses started without funding go under within 10 years. That is 90% of small businesses gone after 10 years. Even the ones that are funded by professional angel investors or venture capital firms, still go bankrupt on a 10 year timeline, approximately 75%. I’ve seen it myself, peers working their behinds off, only to go bankrupt, have sustained permanently bad health, and be so behind on corporate related work experience that now entering the corporate workforce at an older age as if they are a junior. Some will succeed on a decent level and some on a grand level. But even the ones on a decent level actually underperform employee equivalents on a pay basis, given the extra amount of time put in to work.

Some will then take a slightly lower risk path by working at startups, so they have less skin in the game, and could find another job if the startup fails, yet also be rewarded handsomely if the startup were to succeed. This involves taking on average a ~20-30% pay cut, while being rewarded equity that may or may not turn out to be anything. Given the overwhelming odds, the equity is going to be worthless and those extra hours put in for the “mission” will not amount to anything, while again, working significant number of overtime hours.

The other ways to become wealthy could entail winning the lottery, getting a large inheritance, becoming a athlete, model, influencer, singer, or actor. I don’t know about you, but once I reached adulthood, I had a pretty good idea that I wasn’t the most attractive guy, I couldn’t run past 7 miles without getting cramps that hurt and wouldn’t go away, have trouble singing even in karaoke amongst those I know, and can’t act to save my life. Those lucky few who are in those professions are unlikely to be you. And I don’t plan on waiting until old age for inheritance, and most of us don’t have that luxury either. Lottery tickets, when you look at the statistics, are like the equivalent of becoming a prime minster or president; it’s a tax for those bad at math.

Side hustles, which seems to be the new popular thing, often pay less than your full time job. So in some cases, if you get paid overtime, it’s optimal to just work more hours at your job. And, it takes a hobby that you liked and now makes it into a paid chore. While it sounds good on paper, in practice, if often ruins the hobby that you liked to begin with.

I may have a habit of repeating myself in some form or another in these blogs, but I just don’t see an answer to these financial issues that I have brought up. Indeed, the projections for gen z and millennials is retirement in your 70s, or never retire for the vast majority. Imagine trying to work after a long life of hard work, only to realize you have been lied to and screwed by the system, and now don’t even have the energy to get up for the day, let alone work a full shift with more work and title for equal pay, to have your work taken credit by your superiors, and then to get passive aggressive negative performance reviews, all in a way for your superiors to exert their ego on you and to trick you into staying for an amount of pay that you clearly deserve more given your hard work and skills. Working on your weaknesses to further boost the corporation’s profit. Ok.

Angel (startup) investing was limited off from the average job retail investor until the JOBS acts reformation in 2016. Now, any average person regardless of ethnicity, race, age, religion, sexual orientation, free of discrimination can pick startups to support and hopefully reap the rewards many years down the line. If you’ve been following my line of thinking, you’ll know I’m going to say that these previous regulations weren’t in place to “protect” the average investor, but rather, to build guardrails preventing the average investor from getting in early on generational wealth from life changing companies. The Uber’s, Doordash’s, Etsy’s, Airbnb’s, of the world. Now you can participate in the next one. With the internet and other technologies, the gates are taken off, and this form of investing is still in its infancy. Several years from now, you will look at your decision to get into this new form of custodial wealth, and be thankful (and beyond lucky) for hitting one or multiple of these rare unicorns.

It is my hope that my blog will provide you value into making better informed startup investments, and provide a unicorn or two that will set you up for not just decades to come, but your whole life and even children’s life.

Disclaimer

This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.