Women & Money: The Shit We Don't Talk About!
Women & Money: The Shit We Don't Talk About!
The Power of Compassionate Capitalism: How Women Can Build Wealth and Influence Through Investing with Karen Rands
Women have been locked out of investing for decades. Not because we weren’t capable, but because we weren’t invited.
In this episode of Women and Money: The Shit We Don’t Talk About, we sit down with Karen Rands, leader of the Compassionate Capitalist Movement and author of Inside Secrets to Angel Investing.
Karen breaks down why less than 2% of venture capital goes to women, how angel investing actually works, and why women are uniquely positioned to be powerful investors. We talk crowdfunding, angel investing, diversification, and why investing in women owned businesses can outperform traditional investing.
You’ll hear real stories, real numbers, and a completely different way to think about wealth. This conversation is about more than money. It’s about access, impact, and changing who gets to win.
If you’re ready to invest differently, think bigger, and build wealth with intention, this episode is for you.
🎧 Listen now and start taking your seat at the table.
Want to keep the conversation going? Join us for Money Talks on January 22, Annuities 101, where we’ll explain payout options and walk through a clear visual example so you can feel confident about your options. Click here to register for FREE and bring your questions!
Want to take this conversation one step further? Join us for our next Money Talks, a free 30 minute live session where we’ll dig into a question we hear all the time from women business owners: Budgeting for Businesses to Offer Benefits. Click here to register for FREE and bring your questions!
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Barb: [00:00:00] You know, Maggie went, I started purse strings. I was lucky enough to be in a cohort at 1871, which is the think tank down in the city of Chicago. And a lot of what we did there was prep to pitch our companies to VCs, for funding. And it was interesting because as you learn about VC funding, you learn that less than 2%, 2% or whatever, maybe three or less than three goes to women, and less than half of that goes to women of color.
Maggie: VC is venture capital just for listeners.
Barb: yes, So people who are investing in entrepreneurial or up and coming companies and things like that. I've even read read studies where a woman and a man have pitched the same company and the funding went to the man, but not to the woman and. A lot of that is because the people making decisions are typically men, and [00:01:00] so they see themselves as somebody who would be running a company, be being successful and so on, and they don't see women in that place.
Barb: It's what I've learned from the research. so women, they don't get VC funding and you know what? Unfortunately. That number hasn't changed. it's ebbed and flowed a little bit, but really we're back to those numbers, which is really unfortunate because every day women, like 1800 women are opening new businesses every day.
Barb: And more women of color are opening more businesses than anyone. And you know, we're being scrappy about it, right? We're figuring out how to get the money and get these businesses up and running and going through their credit cards. I've known people who've done crowdfunding, things like that and really trying to make it happen because they have a passion.
Barb: They see a problem, they wanna solve it, but they know VC funding is really a long game and one that they're never gonna win. So what's interesting, the speaker that we have on our guest as our guest today.
Maggie: Yeah, nothing there [00:02:00] surprises me and I wish it did. But it's also like these companies that we're working for don't really work for women either. You know what I mean? So it's like we have to go make our own source of income. 'cause I also can't be at work nine, eight to five and travel and, and do these things and run the house and do it all.
Maggie: And So we start our own business and now we're gonna learn how to find money and have people fund that, but also that we can help fund others, which I think is kind of very exciting because trust me, I would much rather invest in like any girl on here listening to this than any of the big back stores that I, you know, then like an Amazon stock, like.
Maggie: Let me go back. You girlies and shit, if we win or lose, I don't even care. As long as I know like you are living, okay, I do care. I would need to retire. Lemme take that back. But you know what I mean? Like, it's like, God, at least if I knew that money was like helping them make their dream, even if they didn't get it,
Maggie: it would still feel great.
Barb: On average, as she was saying. [00:03:00] If you were to put 500 a month into a woman owned business that was up and coming and you diversified over different women-owned businesses over the years, you would do better than the stock market. It was fascinating to think our mind always goes stock market, right?
Maggie: that's the only thing that's talked about in school and, and even with our financial advisors. I mean, that's their job though, you know? And so, we hear a lot about real estate, but it's just. In investment. We always think about stocks and bonds, but it is zooming out. You're investing in yourself, you're investing in the community, you're investing in their business.
Maggie: You know, like it's not just like, oh, we're reusing that word. It's like, no, that is an investment. You know? It's like, what are you investing? Is it time? Is it money? Is it energy? don't know, maybe I just have such narrow thought on it Sometimes, like investment is like you put money in into a money something and it grows, you know?
Barb: Yeah, like a, a savings bond or a stock or a certificate of deposit. Those are traditional savings and [00:04:00] investment vehicles. But when you think about the way the world is changing, we need to think about. More broadly about the opportunities for investments being more, you know, ESG investing, when you step back and look more broadly, we look back at, you know, real estate investing and what we learned about that is it's not just buying more homes or more apartment buildings, but we even learned about it's buying, you know, parking lots.
Barb: It's buying, you know, storage units, things like that. I mean, the, the vast diversity just in real estate is so, so interesting when you. Really get into that nuts and bolts. And what we learned today was all that you could do to really invest and help women own businesses. And just like any investment risk reward.
Barb: But when you think about where your goals, where your values are, and how you really can assess a good investment for an entrepreneur who's trying to make her dream and solve a problem, and look how much you know. Money [00:05:00] people have made for things that have been built and made going forward. And like Karen said, men have been doing this for years and years and years and years and, and become billionaires.
Barb: Why are women doing this?
Maggie: Because no one gave us a seat, but now we're taking it. So I'm excited to dive into this. I do wanna add a little disclaimer that she talks a lot about different forms, and that's because no one in the financial industry can actually name anything. They just do it at the line item, like a 401k is really just.
Barb: Or 5 0 3 C, or it's all in the technical tax code. But
Barb: don't let that throw you.
Maggie: Yeah, don't get caught up in that until you're actually filling out the documents, but until then, enjoy the show and let's go get Rich.
Barb: Let's do it.
Gloria Steinem once said, we will never solve the feminization of power until we solve the masculinity of wealth. Barbara [00:06:00] Provost and Maggie Nielsen are the team at purse strings that will help you navigate the ins and outs of financial independence so that you can be financially fearless. This is women in money, the shit we don't talk about.
Maggie: Karen, welcome to Women and Money, the shit we don't talk about. We are excited to have you here today. But before we dive into our, our wonderful conversation, I'm eager to have, could you share a little bit of who you are and what you do with the audience?
Karen: So sure thing, and I'm really excited to be on this call on this podcast. I think your title says it all right? Because you know, women don't talk about this shit very much, and that's part of the reason why this book that I wrote and you know, so my background is you know, I came outta corporate America in pursuit of, it was during the time when the .com bomb was about to happen, but in my corporate bubble of IBM working with innovative companies to get them ready to go get venture [00:07:00] capital idea, I actually didn't know that there was a.com bubble happening, and I teased that, because I was working with so much innovation, it was so exciting and I wanted to be in that parade, but I came to find out that the parade was sort of like the animal house parade where they were go down the alley into the dead end alley and they're all bumping into the road.
Karen: And that was, that was my parade because I left in January of 2000, right, to go help this company, this real, software that could change the world, solve lives, go get money, and I hit the wall. But it put me on the path and the trajectory that I am and where I am today. it's really kind of crazy sometimes when you see the twist and turns the doors open, the doors close that you go through.
Karen: And I remember walking into that very first angel investor meeting I had been invited to and going like, well, first of all, I had no idea that these kind of people existed. I mean, logically it made sense after the fact that, before somebody is [00:08:00] bankable, there's some form of money besides credit cards that gets them to there.
Karen: Because, you know, credit cards can only take you so far. Right? And, and that turns out to be angel investors. They're the ones that invest create the revenue. But then also bridge the gap when you know you need to, to wait for the revenue to come in and how do you pay the bills and how do you keep business going and keep developing and keep cultivating and generating new potential business and so on and so forth.
Karen: And so that was the first thing. And the second thing I noticed that, everybody in the room was a middle-aged white man, and they were the ones that had the seat at the table that were picking and choosing who was gonna be the next big thing. And I didn't really, I mean, I would have always been confident or at least outwardly confident.
Karen: And so I was like, you know, okay. And the founder of that, Jerry Martin, saw something in me and initially started in the group sort of as the Vanna White, you know, here's how you, you know, turn on the projector and here's how you register people at the door, and all that kind of stuff. [00:09:00] But I also had the opportunity to screen the deals that were gonna be in the room, and that gave me a great deal of experience in looking and and having the conversations with the investors on.
Karen: Why did you invest in this deal or that deal? Or you know, what did you learn? Why, you know, and learning from them what they were going through and as we'll get into the questions, I'll explain more about how I came up with this idea of compassionate capitalist, but it was really from that idea, and I ended up he nurtured me to take over
Karen: that organization mentored me, and I ended up you know, taking over or starting to run the net network of Business Angels and investors and rebuilt it to be one of the most active in this, in the country, top 50. And one of the most active, definitely in the southeast in the number of events we were having, the deals we were screening, the amount of money that we were investing until the great recession happened.
Karen: And in the, during the great Recession was [00:10:00] when I had always used the term compassionate capitalist as my, sort of like my identifier on my cards. But I changed, I started doing podcasts back then in and it was called the Southeast Private Equity Conference. We were doing this, a big event of companies pitching to a room full of different kinds of investors, and I called it Spec Talk Radio.
Karen: And it was really for SEO backlinks at the time, 'cause nobody was really doing podcasts and nobody was listening to podcasts. But it was a way for us to, you know, share with my audience of about 500 investors that had filled out their form telling me what they invested in, what they look, what their worth was, based on the eBooks that I had used to build that angel group back up and eBooks back then were just PDFs. You emailed people. There was no, no such thing as an ebook. Right. And and it became that series of eBooks was how to be an angel investor and then it was learned to be an angel investor and it became the [00:11:00] foundation or the, I guess the core content premise behind the first book, inside Secrets to Angel Investing.
Karen: And I wrote that. When the great recession happened, I realized a couple of things. First of all, angel investors are, you know, those early stage companies, those startups that are potentially creating a whole new market, they're inventing something that can, is gonna be new way to solve a problem.
Karen: And the ripple effect that has usually brings a lot of other commerce into the market. It creates jobs. It's where growth in our economy comes from. And I saw, you know, a lot of my investors with money just sitting on the sidelines and it's like, you gotta put this to work. We've got to invest in these early stage companies, these startup companies, so we can turn our economy around.
Karen: So I changed the thing and really started the compassionate capitalist movement, right? The, the idea that people would want to learn how to invest in entrepreneurs as an asset class. Because they, you know, wanted to see change happen. They wanted [00:12:00] to see problems solved. They wanted to be a part of that because that was what I realized.
Karen: These very, when I first met those angel investors, that was really what they were doing. That was why they were making these kind of investments. And so I started the compassionate capitalist movement. I wrote the first book as, sort of to launch that, to explain what angel investing is, to provide a how to, it's a deep book.
Karen: It's got, you know, footnotes and, you know, all kinds of stuff and a glossary and all that kinda stuff. and as women in particular tend to do. It took me, 'cause I was stuck on the old stuff I had written, I had to rewrite and it, it was, rewriting can sometimes be worse than writing from scratch, which is the difference with the new book.
Karen: The new book I wrote from scratch, it was a lot faster, it was a lot cleaner and I was a lot smarter about how to go about doing it. But it, but that first book, I sat on it for probably six months before I had the guts to put it out because I was like, oh no, all these men that are angel investors that are like these,
Karen: [00:13:00] these honchos that I know they're gonna be like, who does she think she is writing a book about angel investing, you know? You also learn over time as a service provider, you sometimes don't make as much money. You definitely don't make as much money as somebody invented something that the world wants, right. And so, you know, I co-invested with my, my Angels, but haven't really been a leader of, you know, building a portfolio of investments. But it opened up the doors, opened up the opportunity, and discovered a whole bunch of stuff about why people don't know about angel investing. I mean, I called it secrets at the time because I always felt it was sort of a secret that this was an asset class and the jobs Act of 2012 was a game changer in that regard,
Karen: but it was almost 10 years later before I really figured it out. And then building a course for people to be able to, you know, they, you know, the thing about a book is that it only takes you so [00:14:00] far and if you even get through it as much as you try to, like, take notes and do those things, if you don't really know and you don't know how to get the answer to how to do this, whatever is in, you know, is recommended, you just kind of freeze in your tracks.
Karen: And so, a digital course had to be made and I had no idea how to do that, the tools to do it. I really didn't wanna be one of those people that would be stand up in the front of the room and say, okay, now the first 10 people that run to the back of the room and, you know, throw your 10 grand down, you know you're gonna get another 10 grand worth of benefit or something like that.
Karen: I really never want, to me this topic, this empowerment, this ability to create wealth the way wealthy white men have for generations was too important to, to sell it like a used car salesman. I needed to be able to sell it as what it is. A life changing game, changing [00:15:00] strategy, and for your audience, for women to take control of their financial future and leap the wealth gap.
Karen: So every time I would be on a stage talking about angel investing in the first book, I would inevitably have a young woman. You know, raise her hand younger than me. So young, right? Young woman raise her hand and say, how do I learn how to be a crowdfund investor? And the first book wasn't, it was really wr written towards an audience of
Karen: high net worth people in corporate America, you know, with big Fat 401ks making 300, $400,000 a year that just didn't know about angel investing because they weren't in, they weren't invited to the room or geographically, or time-wise, you know, couldn't commit to the obligations that these angels do.
Karen: And so I had to write one that was, that was more digestible, that spoke to that person that was not really wealthy. I mean, although crowd to me, crowdfunding is the on-ramp to angel investing. So even if you have enough [00:16:00] liquidity and wealth to be an angel investor, the you still can get started to get comfortable with the process and gain your confidence with crowdfund investing.
Karen: And it needed to be relatable so that whether it's a, a middle aged, 50-year-old woman. That's trying to figure out how to like actually get ready for retirement and, you know, have enough money for the next 30 years, or the millennial that just says, God, this corporate gig is just, oh, is this what I'm gonna do for the next 40 years?
Karen: And how can they find passion and purpose in their life through crowdfund investing? And, you know, it's why the book is named what it is, you know, inside "Secrets to Crowdfund Investing" Follow Jane's Journey. See how a new generation builds wealth with purpose, passion, and profit.
Barb: Okay, let me stop you right there 'cause you've given us a wealth of information I'm taking this all in because I've been down this road around VC pitching and things like that, and we all know the stats, right? How much money goes to women when they pitch, less than [00:17:00] 2%, right?
Karen: Right around 2 or 3%. It got up to about 6% in 2021.
Barb: Yeah, not a lot.
Barb: women of color less than half of
Barb: that. Right,
Karen: Exactly.
Karen: So 95 aggregate at least 90% of all the angel investor capital and VC capital go to white male business
Barb: Exactly. And I've read up a lot on this because even when women and men pitch almost the same business. It goes to men. I mean, they've, they've done these studies on the pitch, right? And it's because of this group think or whatever it might be about who's gonna be successful and who's in the audience, who are they pitching to?
Barb: So. Nonetheless. What we do know is that women are opening new businesses every single day. More businesses owners are coming up and you know, women of color even more so are opening new businesses every day. So women are not holding back. We are still out there pounding the pavement and starting businesses and moving [00:18:00] ahead.
Barb: Whether we're getting VC funding or not. We're finding ways 'cause we're scrappy, right? Just like Purse Strings has done, right. Bootstrap, credit card, whatever we needed to do to really make sure that our mission keeps moving forward. But you've done what you've said is credit cards, then you talked about crowdfunding as the next step and then angel investing, right?
Barb: So there is kind of that crowdfunding step in the middle. For the listeners, can you decode what crowdfunding means and how it works?
Karen: So the thing that about crowdfunding is it is basically there's really five kinds of crowdfunding. The one that most people think about is reward based crowdfunding, and that is where you give money to a company in exchange for something like a product or some type of reward.
Karen: A lot of times movies are funded or get going that way because you know, oh, I can be on the, the red carpet or whatever, you know what I mean? And donation is a reward based type of crowdfunding. [00:19:00] And then equity based crowdfunding, being able to give money and get equity in the company like an angel investor.
Karen: Or similar to what people might relate to with stock market investing. Equity stocks in the public stock market is the same as the equity in a private company. It's just not public. It's not transactional, you know, the way you can't buy and sell it. Okay. And so there's four way fourth ways that in 2012 with the Jobs Act were legalized under crowdfunding, and the one that most people think about because the names of the companies, refunders, start Engine, MicroVest Republic, those kind of companies are,
Karen: our, our Reg CF primarily. Now, some of those platforms have expanded and they offer Reg A+, or Reg D 506C, but the main premise is Reg CF, regulation crowdfunding that allows founders to raise capital through general solicitation, and that's the big differentiation with the securities laws and how, reason why [00:20:00] angel investing was such a secret and such a closed society for so long was because of the security laws and how people were prohibited for being able to raise money.
Karen: And then what's end up happening with crowdfunding is there's a financial discrimination that happens. On association with wealth as being knowledge and smarts. Okay. And so, so you can raise up to five and there's this term accredited and unaccredited. Okay. And that's, you know, based on the amount of wealth you have, and it, real briefly, it's individually, household, $200,000 a year, past two years with reasonable expectation to continue that income.
Karen: And a household is $300,000 or a net worth of a million dollars that doesn't count for your primary residence. Doesn't say about liquidity, right? Liquidity is really, 'cause the bars are not that hard, but it's about how much money you have to invest. And so they say for Reg CF, $5 million, anybody in the country accredited or unaccredited, they amounts they can invest is based off of income.[00:21:00]
Karen: And Reg A+ is the same way, but you can raise up to $75 million. The technical nuances is that Reg CF is on a FINRA regulated platform, which is the regulating the work watchdog agency of the SEC. and they file your paperwork with the SEC and they manage, you know, the inflow and outflow of, information and, and.
Karen: Documents and, and capital and things like that. And Reg A+ you have to file SEC, audited financials with the SEC as the gateway on that. But you don't have to actually go through a portal, but it's up to 75 million accredited unaccredited. And then the real, sort of the wild, wild west area is the 506C.
Karen: So they took the regular offering that angel investors entrepreneurs have used forever, which is the Reg D 506, it's a line item in the regulations and so it's become this thing, but it's really just a couple
Karen: of paragraphs in the securities law, right? And so, 506C you can raise as much money, unlimited [00:22:00] amounts of money, but only from accredited investors that provide evidence that their accredited investor and it became B and C and B. Investors just sign a, they just self certify.
Karen: It's really easy to sign a thing saying I am, and you lie or not lie. But the entrepreneur is not on the hook for that. And it is a wild, wild west, I say because they don't actually have to file any kind of paperwork until they receive the first money. So you get a lot of people out there soliciting that really haven't done anything that's worthy of being investible and can waste a lot of people's times but that's happening. And then the one I love, which is the basis of my community based capital concept that is interstate exemption. They took the Reg D 504 and turned it into interstate exemption, and that is depending on the state, not every state does it, but in Georgia it's up to $5 million from accredited to unaccredited within the state of Georgia businesses, in the Georgia and things in this Georgia. You can raise money from your sorority, from your rotary, from your chamber, from your church, from your community, from your customers. [00:23:00] That's the big differentiator in the value of crowdfunding.
Karen: And so, you know, whether it's a hundred dollars, a thousand dollars, $10,000, you can play in a company at all kinds of stuff where angel investors, the typical average amount is 24K on a check. Although a lot of angel groups, it's much smaller amounts that gets aggregated to a bigger amount.
Barb: All right, so you do some crowdfunding. See if you can do that. Then the next level would be. Angel investors and how I heard you describe an angel investor is a woman who's typically, or we'll say women here making, you know, 2, 3, 400 k has a big 401k, so they have money to invest, and they could write a check for 25K, or five or 10 or whatever that could contribute towards some funding towards entrepreneurial, maybe a woman owned business like Purse Strings or something like that.
Karen: Yeah. Yeah, absolutely. Yes.
Maggie: So, Karen, is your side more getting women to invest in other companies or helping female [00:24:00] companies get investors or both?
Karen: Really both in a way because my bread and butter is helping entrepreneurs figure out why they're struggling to raise capital or start right, but, you know, a lot of times, I end up getting people knocking on my door when they're finally tired of getting nos and they want more yeses because it's hard enough to attract investors, but it's easier to attract it than it is to get them to write the check, of course, right? That's the top of the funnel, and so they don't understand how to build their funnel. They don't understand the follow up.
Karen: They don't understand the reasons why investors will reject them. Like at the very beginning of the process, when a company, an investor is going through their screening process, they're looking for reasons not to invest because they have to narrow it down. And that's a contrary concept to entrepreneurs
Karen: 'cause entrepreneurs are always like, look at me, look at me. I'm the most beautiful. Peacock in the room, right? So they don't understand that they could have, you know, warts that make them an investor not invest. For what we talked about, like you mentioned at the very beginning of [00:25:00] the gender bias in the room, right?
Karen: So women that are pitching to traditional angels in an angel room. You have to be able to become really comfortable in their skin. Like they got to be really comfortable. I learned this story or figured this out in a way that I surprising. 'cause when I was running my angel group, I really believed that money was green and that investors only saw green.
Karen: If they saw a company and they believed they could make money on it, they would invest. Right? And then I had this woman pitch her business, that was a real game changer. 'cause this was back before when mobile phones were first coming out and we didn't have mobile apps. We didn't have like this idea of looking at it on a computer screen.
Karen: And there, here's how it reads shuffles to be a mobile app. And so you had like, she was in the advertising industry and primarily in the garment industry and had a lot of these, like Macy's and stuff, clients that were trying to sell online, remember you had to [00:26:00] scroll way over and like scroll way over to try to like see what was on the screen
Karen: 'cause it wouldn't stack it. It would, right. And so she had a way to stack it and as a technology for these companies. And and she had presented her numbers. Which were good, but the investors weren't excited. And I was like, and I talked to him like, why are you not excited about her? She said, oh, the opportunity's so much bigger than that.
Karen: And that's what she thinks, then she's not the one to run the company that she needs a man that will run the company, that will see the vision of this, of where it's gonna be. I wouldn't trust her to be able to build this company because she undervalues her opportunity. I was like, oh my God.
Karen: And I told her that, and she'd stopped doing that going forward, but she was like, of this, which is what sometimes women say, well, I wanna be conservative. I don't wanna over state what the opportunity is because they won't believe me. But if you know your numbers, if you are comfortable in your skin and you know your [00:27:00] market, you can overcome that gender bias that they have because they can't deny the numbers and they can't deny that you know your numbers.
Karen: Right. And so, you know, that's a big part of it. So I do try to work on that perspective of it, but because there is such a shortage and the reason why the course, compassionless Academy, and this book was so important right now. People have sort of finally woken up to the fact that real estate is not as great of a solve all your problems for retirement as they thought.
Karen: Because if you have to own multiple mortgages, you gotta have enough income to cover those mortgages. And crypto is like, 'Hmm, what? Man, that's kind of complicated. And if I'm not in at the ground floor, and it's transactional'. And women in particular want to have invest with purpose.
Karen: They wanna have an impact. And millennials, they wanna have an impact with their money. And so what better way when there's a huge shortage of capital across the board, bring more women into the marketplace to [00:28:00] learn how to invest this way, to leap the wealth gap and reach out and invest in those women-owned businesses.
Karen: We can all rise when more women are able to get money because more women that have the means or investing in them, we can change the world, we can change those numbers, we can move the needle. That's really what I'm really passionate with the message that I'm trying to put out there right now.
Barb: Well, you are preaching to the choir. I'll tell you that much. We are a hundred million percent behind you.
Maggie: And it's so funny that like, when you were telling that story, that's something I would so feel like if I was getting an investor, I knew I would need to hit that mark. Where I've had plenty of men who I know who are like, well, I was pretty close, I was 80% there. Where to me, like, you know, if I was 80% there, I'd be like, I failed my investors.
Maggie: You know what I mean? I didn't achieve on my promise. So it's so funny how they didn't do that investment because they kind of, she was being conservative, which I could also see 'cause you don't wanna over promise and under deliver, but I know you've helped a [00:29:00] lot of women move past this investing exclusivity or risk kind of story.
Maggie: So what's like a simple tip you would recommend for women who wants to start but feels intimidated?
Karen: It kind of goes back to like the know your numbers thing, right? You overcome being intimidated with confidence. And the way you get confident about investing this way is to do some basic things like what Jane goes through, right?
Karen: In the book, in her process, right, it's figuring out, how much do I have? Well, how much can I afford to invest? So you don't have the anxiety of, am I am investing too much? Is this too risky? You can only invest what you know you can afford to lose. Because as with any investment, there is risk.
Karen: There's always a chance that you'll lose it. Right. So the first thing is, is how much? And then and then the next thing is recognizing that we don't give ourselves credit for what we know. A lot of times, we know things that we don't know. So like in the case [00:30:00] of, in Jane and the story that I roll out in the book, she's a nurse, so she kind of knows healthcare. She knows stuff, she knows problems that are going on in healthcare. She's a mother, so she knows things that you know that about products that mothers want or problems that, you know, new mothers have or whatever. She had family issues. She knows things, you know, child education, she's had her kids struggle with learning stuff or whatever.
Karen: You know, things from life experiences and in this case, she's a outdoor enthusiast. One of the things that she looks for is somebody that's solving a problem with portable kayaks. Okay. So the first step is how much to invest and then figure out what you're doing.
Karen: And I have a tool that's part of the Compassion Academy that helps you figure that out. You grade yourself on these different topics and things that, so it's learn knowledge. You know what you went to college for, right? And you've learned this stuff. And a lot of times we're working in a field that's different or we have interest and life experience.
Karen: That's our earned knowledge, things that we've [00:31:00] learned. So give yourself credit for those two categories of what you know. And then it's really the biggest thing, and this goes to any kind of investor, really resisting emotional investments and women, we tend to be emotional. And so we will, and we love something and it, and I've made this mistake every investor, right?
Karen: Where I kind of came up with a compassionate capitalist name was because investors that were just learning by losing, right? But I was like, you gotta be, you're passionate about something that you wanna invest in. So you've got to have this objective thing. And so I created this angel profitability blueprint to help people sort of go through that process of being very specific.
Karen: So the idea is you're going to first invest in things and make some money so you feel comfortable. Like, 'oh, okay'. Even if it's a small check, it works right? Because it can take a long time to get to an exit on something that's a private company. And then it's sort of like figuring out the things you're interested in.
Karen: What are problems [00:32:00] that you wanna solve? So you look for companies that are solving those problems. You subscribe on all the different funder or the different kind of crowdfunding platforms. So you get alerts of companies that are doing stuff, and then when you find a company that's solving something, a problem, and I give examples of this in the book, but whatever it might be, then you go find two other companies that are trying to solve the same problem in a different way.
Karen: Because I guarantee you, there's a problem out there. There are multiple people trying to solve that problem and they're approaching it in different ways. So you figure that out. And this is one way that crowdfunding has an advantage over angel investing because we can see lots of things that are going.
Karen: On with angel investors, they typically only get to see the deals that walk in the door that got screened by somebody else and maybe word of mouth of something else going on in their community. But they're really looking in like, I'm in Atlanta. They're really looking for something that's going on in Charlotte or something that's going on in Phoenix or Chicago or something like that.
Karen: They're not flying up to Chicago to go to a meeting. Right? They don't know about [00:33:00] those deals. Crowdfunding, you have an advantage and you can discern and then find the one. And then if you're still nervous, and then you make, if you use a tool and you make a decision, you know, I just love what this person doing.
Karen: I love this thing. Then you know you're making a conscious decision that you're putting your finger on the scale of emotion. And then you start small, right? I call it the West Coast mentality. You start with a small investment, see what they do, and then you can, so, ah, you know, as a crowdfunding platform, you might say, oh, I'm gonna put 500 in, and then I'll see what they do.
Karen: 'cause they actually can go raise that 150 K that they're trying to do. And then they do something with that because they're gonna come back around. And if they get to the end and they look and they're giving you regular reports and you're hearing about 'em and you see their progress and you're developing the trust on them, then you throw, come back in and maybe throw $2,000 at too.
Karen: Right? You know, you can do that and just be patient in the process as you develop the relationship with the deals that you wanna invest in and wanna support.
Barb: So cool. And what can the investor [00:34:00] expect back and when, when they're making this investment?
Karen: So part of what I teach in the Angel Profitability Blueprint is diversification, and that is if we just look at the rate of return of angel investing over other investments. It's usually three times as much. And they, you know, have comparable size portfolios and that's because it does have this potential huge upside potential on some of 'em.
Karen: But not everybody does that hub side potential. And the companies that you know of that do 10x 20x that are the big IPOs, the big name brand IPOs you hear. For every one of those, there's probably, you know, dozens that just sell their company for 2 or 3x, 5x kind of a thing, a multiple on the money.
Karen: And then there's the ones that might have a base hit or something like that. But a diversification is really the key. And so that's why I start with some form of revenue share or debt so you can find the really good deals. And then it's diversification by industry and by stage. [00:35:00] So you can get in on a startup that might have, 'cause it's earlier you invest the riskier It is, but the biggest potential there is.
Karen: Okay. And then if under Reg A+, because those are usually companies that have a strong track record already. They're raising capital, but to bring out a new product or to make acquisitions or to do something that helps them expand in such a way that will lead to them being able to have a good solid market cap to be a public, they're gonna be an O-T-C-B-B or gonna be, you know, like a small cap.
Karen: They're not gonna be, you know, huge, you know, cap companies like a traditional IPO, but they'll be fully trading. and then you might only get two extra money because you're at the end of the life cycle before that company exits. But you want to be able to diversify like that. I use at the end of the book, I use an example of comparing to a 401k and I put this in there because I talk about it, but I did not realize, wait, I didn't even say this in the book.
Karen: And part of what I am is trying to give hope to [00:36:00] millennials and I got this idea and then I did the math on it from it Jason Kanis was one of those. He wrote a book called The Wings of Angels Sim at the same time it came out same time my first one came out and his claim to fame is that he's in Silicon Valley and he invested in some of these big name things like Uber and and so it was really about the angel culture and his experience in that.
Karen: And mine was more of a how to but on his podcast, he was interviewing the founder of Seed Invest and he said at the time 'if I could go back and talk to my 20 something self, I would tell myself to not go start that first company at 20 or 25 or 26 or whatever. I would've gone and gotten a corporate gig because then I would know how companies work'.
Karen: What's the good and the bad of corporate practices and how do you team and how do you do that stuff that I didn't really have experience and I failed my way forward learning that he says, but instead, and I knew I wouldn't have my 401k, but instead I would throw $500 a month in [00:37:00] a Reg CF company and I wouldn't overthink it.
Karen: I would just start doing it and watch what happened. Learn their business models, look at this stuff, see what kinds of things, and learn from all these other startups and founders and stuff. He says, and at the end of the day, I would have four or five times the amount of money than I would if I had done my 401k.
Karen: I was like, is that real? Right? So I did the math and I verified it with AI. And uh, you know, so if you think about that, if you go through the math on that, it's five years would be 60 companies. So you do six sets of 10, and the VCs out there kind of created this everybody uses it.
Karen: The portfolio of 10 companies, even though you know, you wanna have a lot more in your portfolio than 10 over time. But start with that. And so you'll have one 10 x, two that are two x two that break even, and three that go out of business.
Karen: Okay, so out of that thing, so this is, you know, for 60 companies, [00:38:00] so if you add that up, and of course this is just for an example and it does take longer than five years, you know, that kind of a thing. And, but if you had invested in your 401k, a typical type of return. 9% or whatever, you know, not counting fees or any of that kinda stuff.
Karen: You're gonna end up with $36,000 roughly. Okay? If you do the math on the 10, 5, 2, and so on, you're gonna end up with $78,000.
Karen: And and even with 18 failures. And so that says that the compounding diversification and building up a large of like 60 companies, your odds of success grow with diversification of stage industry and type of offering and you can, you know, outperform any other asset class.
Barb: I love that. I love that way of thinking. It's so. Let's get out of the standard protocol of everybody putting their money in a 401k and really think out of the box and how can we really help others. You know, [00:39:00] as women always wanna do, invest and grow other companies, right?
Barb: Especially women who are trying to grow their companies. I think it's brilliant.
Maggie: It's another form of that value-based investing we talked about a lot. It's another form of, you know, supporting those people that you believe in building the wealth. You know, it could just be more local communities, how you're also impacting your communities. It seems like it's like a little bit more maybe risk tolerance to get started.
Maggie: It kind of a different education curve, but still is like just like regular investing. You know, there's not beating the market, it's just small and consistent. Like he bought $500 worth of company every month. You know, it's not just like, oh, this looked like a good deal and putting all your eggs in one basket, but you know, the same, like, you just do it consistently. You gotta give it the time. Some are gonna go up, go down. You can't be too emotional, you know, pull in, pull out all these different things. It's interesting and such a great opportunity as being one of those millennials.
Maggie: Some of that retirement does seem so far away, so you're like, wow, if this opportunity instead could double my money versus the [00:40:00] 401k, you know, growth or whatever. And again, maybe you do some of this, some of that. So it's not even just all investing in companies, but some is real estate, some is 401k, some is companies, you know, and then diversifying the diversity from there.
Maggie: So you're just abstract piece of art.
Karen: Yeah. Well, and, and also the thing to keep in mind, and this comes back to the, the purpose and passion part of it, right? The impact part of it, you know, the capitalism buy low, sell high, right? It is transactional stocks, real estate, crypto, they're all transactional. But when you're investing in a company that's solving a problem, or in the community based model, it's a business that you love that says, you know what?
Karen: I wanna open up a second location. I don't wanna let my investors, my customers have a piece of helping me do that. Right? You are investing money that founder is gonna put to work growing. So in theory, it is always gonna be at the ground floor growing up, or at least this way going up.
Karen: Now there's, you know, things that happen that make businesses go [00:41:00] sideways and things like that, but you know, the biggest reason why most people fail and the biggest reason why they're those base hits in a portfolio that I talked about that'll break even is because of the scarcity of capital. If they had capital to, you know, to bridge that gap and to grow, they could be the successful entrepreneurs that would have the exit that we would all win from.
Barb: Yes, exactly. My question for you is, so when you wanna invest your money, you go to a financial advisor who helps you diversify, invest all these different funding options, so on and so forth, who can help you look at these different companies and do this research and look at this onward investing every single month in these smaller startups, women led companies.
Barb: Who do you go to or do you do that independently on your own through some kind of website that captures this information?
Karen: Great question, Barb, because one of the [00:42:00] big challenges and why this type of investing has been a secret for so long, or has a bad reputation. If you, you know, you can ask somebody that you would think would be an angel investor and they'll say, oh, no, no, no, that's gambling. And the reason why they say that is because their financial planner told them that.
Barb: All investing is legalized gambling.
Karen: Well, yeah. Outta way. Right, right, right. Because of this thing called selling away, FINRA being the watchdog, it is a unlike real estate where they can say, yeah, we'll carve out a hundred grand or 200 grand or half a million for you to invest in real estate.
Karen: And they won't touch. Traditional wealth managers and financial planners won't touch an equity deal, a private equity deal that's not through their broker, because of this selling away, they, they should be the ones that are, you know, saying, you know, giving you financial advice on allocations and things like that.
Karen: So registered investment advisors, although are not held by that same level because they're not getting [00:43:00] paid commissions on the products that they're selling. You know, don't invest in this, but invest in these things, right? They're just giving you a holistic approach to meet your criteria, what you want outta life.
Karen: But they don't always, because it's not for themselves. They don't really learn this either. So they may not be as skilled at it. So, if you need to ask. I have a friend of mine who has lots of money. She goes, oh, I'm gonna go ask my advisor. And I'm like, well, they may not know.
Karen: You know what I mean? So take whatever they say through that filter of how they respond to you. Because if it's good enough for the most wealthy men for generations since the 1930s when it was first legalized for, you know, that pathway. For them to continue to do this over and over and over again, it must work.
Karen: Right. And you know, if you think about like, all of the tech billionaires that you know. Did not do it alone. They became a billionaire by few thousand people becoming [00:44:00] millionaires. And so, you know, you have to look at that and, and from that lens, and part of the reason the jobs Act passed was for both sides of the equation.
Karen: The government agreed that yes, entrepreneurs need to have a better way to raise capital from their customers, from all over. Not just, you know, because you went to MIT and have rich friends, right? That you, anybody could raise capital from anybody, but also on the other side of the table for those investors to be able to catch up in the wealth game.
Karen: Because if we recall at the great recession we had, everybody had lost a lot of their retirement, whether it was in real estate or stocks. And it took like a, a decade for it to come back. But when you think about things that came out during that time under reward base, crowdfunding and all, you know, digital watches, smart watches, 3D printers, drones, but even like VR headsets.
Karen: If you could put a thousand dollars into Oculus, a kid in his [00:45:00] garage that was inventing these things and you got a, a headset that you could do virtual reality to. And then years later when Zuckerberg paid $800 million for that company, what did you have? You had an obsolete piece
Karen: of equipment. If you had a thousand dollars of equity, would it be $2,000? Would it be $10,000? Would it, what would it be worth if it went from where it was to 800 million acquisition? Right. And so we don't know because we weren't allowed to do it at the time. So I also will be offering as part of the Compassionless Academy.
Karen: And so they have the training a step by step for intro level with workbooks and worksheets and samples and up to advanced level, you know, but also a mastery class where people can, like a mastermind where. A group of people will come together and, and compare notes on deals that they're looking at and help them discern and learn the skills of discerning how to invest and even one-on-one coaching and do helping,
Karen: I do due diligence for Angels. I've been doing that for decades, [00:46:00] and so that'll be part of the offering of the Compass Academy as well.
Barb: That's fantastic. And when is this academy opening?
Karen: Well, at this moment in time, when this goes live, it should be available. People wanna go to compassionate List Academy. They'll get a popup that gives them a ebook. The four Ws of crowdfunding, but also puts 'em on a list for when it's announced and they'll get 25% off the, the fees at that time for early sign up.
Karen: And it's all done for this phase of the launch of the content. It's just getting all of those
Karen: this cash register stuff and the checkout pages stuff
Karen: and not so fun stuff that I have to like, okay, Karen, it's time to take some Excedrin and sit down and figure this out and put it together.
Barb: You need a Maggie. She does all that.
Maggie: This has been super interesting and it is really just got me thinking of like a new perspective of ways to invest, ways to help the [00:47:00] community, like ways to make money. And then I'm thinking of like the guy who made like the VR goggles. I'm like, wow, you know, if he raised, I dunno, $25 ,000. I could see how that would still not be enough sometimes for different companies.
Maggie: And like it could be a failure only because you didn't have enough money. So it's such a great opportunity for us to go out there and invest more money and help. So I'm glad we had you on Karen. I'm glad we had this conversation. I'm learning so much and I feel like it's just the tip of the iceberg.
Barb: Especially as a great wealth transfer comes through and if we're educating women on how to really leverage and invest that money for women in the future because women are not getting this money and investing in women-owned businesses, it could be a super cool way to invest instead of just putting it into the market, which is a great return for the most part, but it's a black hole unless you really know what you're investing in.
Maggie: and there's so many of these
Maggie: companies, I don't wanna fund some of these companies that are out there, you know, so I'm like, what? What else is there?
Karen: Oh yeah. Yeah. And one thing too, women tend to do better raising capital on crowdfunding platforms. I think [00:48:00] partly because we're good storytellers and we also tend to want everything to be just right. So the content that goes up there, you have to think about for your entrepreneurs and your potential investors listening, that a good crowdfunding offer has a lot of detail in it.
Karen: Because like you expect when you're going to go and look at a public company and you wanna know what their numbers are, what the industry perspective is, what their comp, you know, things like that. You wanna have analysis. You know, private companies do that because you odds all, you're never going to meet the founder face to face.
Karen: And so it takes out that filter that sometimes come from the emotion of the charisma of the person that is presenting it. And it's just, does this business make sense? Do they know how they're gonna make their money, put the money in the register and how they're gonna grow and scale?
Maggie: I Love
Maggie: it.
Maggie: So, Karen, we do have one more question, this question we ask everybody before we wrap up here, and that [00:49:00] is, what is your own definition of financial freedom?
Karen: Oh real. Wow. To me, financial freedom is not worrying about money.
Karen: Part of it is living within your means, but also have enough money, enough capital to know that you can go the distance, particularly since women do tend to live longer than men.
Karen: But we also don't really think about that. So we sort of, particularly if we're married, we, you know, sort of plan our life based on our husband and so, in getting out, embracing the idea that you have the smarts to figure it out. As a woman, we have the smarts to figure it out.
Karen: We have the life experiences, we solve problems, right? We like to plan, we plan. Like we cook, we plan meals, we plan vacations for the family. We plan, plan, plan. So why not plan our financial future and do the things you need to do that plant the seeds that you will be able to harvest [00:50:00] as you go forward into the twilight of your years.
Barb: That's beautiful.
Maggie: It's kind of poetic. Well, thank you Karen, so much for coming on today and sharing your expertise. We'll have links to your books and all your programs in the show notes. Till then, be financially fearless.
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