The Truth About Money No One Taught You - Marcia Dawood

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1:47If you really do want to be the change you want to see in the world, These are some of the things that you can do to help these entrepreneurs to get ahead. I needed you when my kids were younger, right? Because I needed you to give them some coaching about this stuff. How do you coach a younger person? Give me the pitch. What would you say to a younger person? I talk to people who have the money, who can invest. And they say to me, oh, me? No, I can't invest because I don't have enough money or I don't have the background. I wasn't invited. I don't have a finance degree. But that's just simply not true anymore.

2:20Knowing that this is out there, that there are so many entrepreneurial things happening around you that you can be involved in it for as little as$100. Just that ability to know that maybe if I invested in something now, somebody who's 20, 25 years old, they have a long time horizon. So it's actually better for people to invest earlier. In the past, you needed to have a lot of money. So that meant that you had to wait until your later years in a lot of cases in order to do that. Nowadays, you can get started earlier and you can learn a lot along the way so that once they have more wealth in order to invest, then they can do it in a bigger way.

2:55Welcome to Open Book. I am your host, Anthony Scaramucci. Joining us today is Marsha Dawood. She's the chair on the SEC Small Business Capital Formation Committee, but she's also an author, a podcast host, and a speaker. By the way, I listened to your TEDx talk. We're going to talk about that as well. I thought that was a brilliant speech, Marcia. So thank you for joining us. But before I get to you, I got to give out the title. The title of the book is Do Good While Doing Well, Invest for Change, Reap Financial Rewards, and Increase Your Happiness. What a great book, by the way. We both enjoyed it, Holly, my producer, and I.

3:34So congratulations on this incredibly empowering book. Welcome to the show. Thank you. Before we get to the book, though, let's have a little bit of your background and how you first got involved in angel investing. Of course, I, for some reason, every time I invest like an angel, my money goes straight to hell. But we'll talk about that on another podcast. You seem to have done very well as an angel investor. So tell me how you got there. Yeah. So I was working in corporate America, and I was living in Pittsburgh, Pennsylvania at the time. And somebody invited me to an angel investing meeting.

4:07And I remember thinking, cool, what is that? No idea. I thought maybe we would be picking stocks that night. I had no idea. Anyway, I go to the meeting and I see these entrepreneurs, local entrepreneurs who are talking about these incredible innovations that they're working on. And I'm thinking to myself, where have I been? I think I've been living under a rock. I have no idea that these innovations are going on right in my own backyard in Pittsburgh of all places. I'm thinking, this only happens in New York or San Francisco or things like that. Well, I come to find out that there are innovations happening with amazing entrepreneurs all over, in every city, in every country, in every town, everywhere.

4:46And I was just so incredibly fascinated because I was living in corporate America and I was kind of doing the same thing and expecting different results and I wasn't really getting them. And then I discovered angel investing and discovered entrepreneurship. And I thought, wow, if you really do want to be the change you want to see in the world, these are some of the things that you can do to help these entrepreneurs to get ahead. Okay, but it comes from something because there's a, I mean, you could have been, I mean, I'm just telling you, you could have been an unbelievable teacher. I mean, there's something else going on.

5:17So tell me a little bit more about your background. It's one thing to be a good investor and a great networker, but you're didactic. You're a teacher. I feel like I left your book and I left your TED Talk inspired, and I felt like there were things I needed to be thinking about that I didn't think about prior to reading your book or listening to you speak. So where's that coming from? Well, between 2010 and 2020, because of my husband's job, he works in finance, we ended up living in Pittsburgh, New York, San Francisco, Dallas, and Charlotte, North Carolina. Those are five very different places, although they're both, you know, they're all pretty big cities.

5:55But I ended up learning so much about entrepreneurship, about the fact that underrepresented founders like women and people of color really don't get very much funding. And when I say not much, like practically nothing. So I just thought to myself, how can we change this? How can we do something to be able to make this different? And I had this perspective of living in these different places that most people didn't have. And I thought, well, OK, I unfortunately am not, you know, a lottery winner, a billionaire. So I can't be writing check after check after check. And I even talk in the book about how, you know, you need to have like buckets of money and you want to diversify your portfolio, all those good things.

6:33But I really wanted to make sure that I could use the knowledge to maybe help other people do it. And could I amplify the message? Could I multiply my effect by helping others to learn that they could make an effect and they would make a difference too? So that's really where all of this has come from, the podcast and then the TEDx talk and then the book. Okay. TEDx talk. I have a little bit of TEDx envy, if you don't mind me saying so. I've never given one. I'm fascinated by it because you've got to get a lot of information into a very short period of time. So give me some TEDx talk preparatory tips and tell me what you were thinking about.

7:14And we'll make sure that the link to your TEDx talk goes out with all of our social media when we promote your book, which I thought was great. But tell me how we get prepared for this, Marsha. What do we do? Yeah. So I ended up writing the speech and I refined it so many times because I made pretty much anybody I knew, neighbors, friends on video, whatever. I'm like, you have to listen to this and tell me what makes sense, what doesn't make sense, you know, all those types of things. So writing it is one thing. The thing that makes a TEDx talk a little bit different than other speeches, and I've given lots of keynote speeches and things like that, but you really have like one shot.

7:52This TEDx talk is like, you're standing there, you're being recorded, you're live. And in a lot of cases, the TEDx people aren't necessarily going to be like, oh yeah, she kind of messed up that one word. Let's edit that. Or wait, She forgot her train of thought, you know, like, no, you have to be like on, you have to really know what you're talking about, make sure you don't miss anything. So I found it, you know, really exhilarating and rather terrifying all at the same time. but really the idea of getting like you say everything in those my in my case 11 minutes to to get across a message to say hey this is something that I really hope you'll walk away with feeling inspired by and maybe you'll actually even take action because I'm going to tell you a little bit about how to do that I think it's brilliant you you you bring up the concept of of charity and sort of rethinking charity.

8:46And basically, I agree with you, actually. You're basically saying that charity is a way to make a difference, but it may not necessarily even be the primary way. You can be a great investor. You can create social good through your business and hiring great employees and creating a great culture. Take us through that mindset and take us through that counter, I'll describe it as counterintuitive because most people don't think that way, but you've opened my mind to it. Yeah. So in the TEDx talk, I actually say that, you know,$475 billion on average are donated to charities per year here in the U.S.

9:24And that's a lot of money. I mean,$475 billion, lots of money. However, that is equivalent to, depending on the day, about 1 % of the U.S. stock market. So think about that. That's a very, very small amount of money to ask all of these charities to basically, what, save the world? Like cure cancer, cure heart disease, all of these things that make the climate a better place, all of these things that we're asking charities to do, but they are so incredibly underfunded. And if we really start to look at the amount of money that is going to these charities and the type of burden of the things that we're asking them to do with such a little amount of money, it's kind of crazy.

10:05And then you look at for-profit companies and they're able to pay their people what they need to be paid. They're allowed to market. They're allowed to do all these things. And they're not necessarily lambasted the way that a charity might be. It kind of doesn't equate. So I started to realize, wow, there's a lot of small companies, small businesses around the world, around the country that are doing things that could really help and kind of be in unison with charities. Imagine if we all started to kind of pool everything together. So I'm certainly not saying people should not donate to charity.

10:37I do. Everybody should. But let's just think about the big picture. We want to see change in the world. We want to see real innovation. We cannot put that type of burden on charities. They just don't have the resources. So the SEC, they're making changes. You know, we unfortunately for me, you probably don't want to hear my opinions, but I'm going to share them anyway. I feel like we have hard left regulation from the SEC and then the Republicans win and we have hard right. What I love about you, if you don't mind me saying so, is you're not about that. You're about what's right or wrong for the country.

11:11So I guess how do we get there? Is it ever possible? You know, you go to a country like Singapore, they don't care about the politics. They want to do what's right for the consumer, what's right for the end user. I would say the UAE is like that. Can we get there in this country, Marcia, or we're just going to have tribalism in our regulatory process? Yeah. I love serving on this advisory committee for the SEC because we get to talk about things that really matter. And it's a long title. It's the Small Business Capital Formation Advisory Committee. But what I love about it is we represent all of small business.

11:47We're talking about everything from like a mom and pop shop to startups to really any type of business in the U.S. that really is creating jobs, which to me is like a super, super important thing. So I love the fact that this committee can get together and really talk about things that are real and that we can start to make a difference with. You know, in a lot of cases there are and I don't even know that I knew this before I was on the committee. So I don't know how many people do, but some things have to go through our Congress in order to make change in laws and things like that. But some things can be actually done at the SEC with the commissioners.

12:22And so that's really what we're doing. We're trying to be those boots on the ground, talking to the commissioners, talking to people saying, hey, this is what's happening in the real world. let's make sure that whatever legislation is being looked at, whatever type of thing is going on in the world, can we actually start to narrow that down and make sure that we are not hurting the little guy, essentially, the small business, the entrepreneur, and make sure that what we are doing is really making, yes, we want to protect the investor. That's more of the left side of this. And yes, we want to have capital formation.

12:56That's more of the right side of it. But how can we kind of all come together to make sure that we're really helping the small businesses in the country. Okay. Well said. So give me the message now. You're on the board. Give me the advice that you're giving. Infuse for me your angel investing experience, your understanding of the regulatory process. How do we make this better and easier for people to get the capital that they need for their great ideas and innovations? Yeah, that's a good question. So actually, the upcoming meetings that we're going to be having over the next few months, we're talking a lot about finders.

13:35So finders are really not necessarily allowed right now. You have to be a broker dealer and there's a lot of rules and we won't get into all that red tape. But a finder is somebody who can help a smaller business or even a startup to be able to find the capital, hence the name Finder. But in a lot of cases, they can get either in trouble or really put themselves in a bad position if they are not registered as a broker-dealer, but the amount of red tape they'd have to go through. It's kind of like they're stuck in this middle ground, but the small businesses really need the help. So what we're trying to do is figure out, hey, can we make something like, I don't know, maybe we'd call it like a broker-dealer light or a finder's advantage or something like that so that they can help these startups and these small businesses to be able to get the capital that they need.

14:24Because a lot of these entrepreneurs, they do not have the connections. They don't have the network. So it's like, how do we get that to all kind of come together? And they're not allowed to go on social media and talk about it either, because that's also a no-no. So for listeners who think angel investing is only for the ultra wealthy and just for the insiders. What does it look like in practical terms, like to invest small, do the equity crowdfunding, that sort of thing? How does somebody get started? Yeah. So, I mean, back in the day, that wasn't that long ago, maybe 10, 15 years ago, it really was harder to break in.

15:02You needed to be invited. You had to have a lot of money. But in 2016, the SEC changed the rules to allowed equity crowdfunding, to your point. Now, anyone, I always preface it with anyone with an internet connection and a bank account, can invest as little as$100 in some of these startups. And so what I usually tell people to do, and this is also a fun activity for families, is create a mock portfolio. Just start, you don't even have to invest any money. You could go on to any of these equity crowdfunding platforms, a site like Republic or StartEngine, WeFunder, those are the big three that have most the market share right now.

15:38And you could actually just create a mock portfolio with your family. It's actually really funny. I used to do it with my stepkids. We used to just look at different companies and say, hey, what do you like about this? What don't you like about it? Start some really interesting dinner conversations. But that's one thing that people can do, just reading through what it takes for a company to put what we call a pitch together or when they're asking for funding and when they're building their company, what does the company look like? What's the problem they're solving? What are the solutions that they're trying to bring to the table?

16:05And I think that's a great way for somebody to get started. Okay. I mean, the theme in your book about financial return and social impact, how should investors structure their approach to achieving that? Well, there's a lot of ways to diversify your portfolio. And when I say portfolio, I mean like everything that you would invest in, real estate, stocks, all those kind of things. So when you think about angel investing, that would be the alternative asset. That would be that little bucket of money that you think, well, hey, I could go out and do good in the world and I could potentially get a return.

16:46Now, the risk is higher for sure. And I go into that a lot in the book about how to diversify that risk. But at the end of the day, what we're trying to do is to do good and do well. And I think that there is a balance for that. It's also going to be cyclical with the economy. If you think about 2020 and 2021, they were heyday of capital formation. There was capital flowing everywhere. And I personally had a ton of exits. I got a lot of money back that I had invested in years prior. But then since 2022 until now, it's been a little dried up. So we're starting to see the M &A activity come back.

17:24We're starting to see the liquidity. But liquidity is truly the main key here. If you are investing in an alternative asset like angel investing, you are not able to just turn around and sell that asset like you would if you bought a share of Apple stock. So that's just something to be cognizant of. Don't use your kids' college money if they're 17 years old, you know, things like that. I needed you when my kids were younger, because I needed you to give them some coaching about this stuff. How do you coach a younger person? Give me the pitch. What would you say to a younger person? Yeah, I wish, oh, I wish I had something like this or knew about this at age 20, 25.

18:08Just being able to learn about this, knowing that this is out there, that there are so many entrepreneurial things happening around you that you can be involved in it for as little as$100. I mean, these are things that didn't exist when I was 225. But just that ability to know that I can see that maybe if I invested in something now, what could possibly happen? You know, 10 years, 15 years, somebody who's 20, 25 years old, they have a long time horizon. So it's actually better for people to invest earlier. In a lot of cases, in the past, you needed to have a lot of money. So that meant that you had to wait until your later years in a lot of cases in order to do that.

18:49Nowadays, you can get started earlier and you can learn a lot along the way so that once they do become a little more, they have more wealth in order to invest, then they can do it in a bigger way. Talk about the personal rewards, not just the economic return, but there's some like psychic energy that comes from all this. It's not just the financial rewards. Can you share a story of something that captures that feeling? I mean, you write about some of it in the book, but just give me a... Yeah, like one of the things I'm pretty passionate about is investing in women's health. That's one thing that really doesn't get very much funding, very underfunded area.

19:31And there's a company in particular, I talk about it in the book, it's called Joy Lux, and they are a women's health company. and there's so many other things that I've gotten out of being an investor there. And one of them is that I've gotten to know the CEO quite well and learned a lot from her about how to pivot, how to build a company, how to really think about things in a different way. For example, they're a women's health company and some of the algorithms as they've been trying to market on, you know, various platforms have really hurt them. And, you know, just thinking through like, wow, I had no idea that all of these different things existed.

20:07So it's not just the things that you learn. It's the people you meet, the way that you get kind of a first look at what's going on and get to know some of the things that are happening in the world. I was just talking to somebody the other day who was talking about some pots and pans. And I'm like, oh, I know the founder of that company. I mean, just over time, it's just some really cool stuff and really neat people that you meet. How is angel investing going to be different in the future? Well, I would love to see the private markets democratized more. And when I say that, I mean that there would be a secondary market.

20:43So imagine, like, if you think back to even the 80s or the 90s, buying a public stock was extremely laborious. I mean, you had to have a broker and you had to have an account and then you had somebody on the trading fly. There's a lot going on, right? Now we can go into E-Trade, Robinhood, and we can do trades in seconds. And if we want to reverse the trade, we can do that in seconds too. It's like amazing. Who would have thought that that would have been possible back in the 80s and 90s? So now I think about it and I think, oh my gosh, the private markets are so much bigger than the public markets.

21:14There's so many companies out there. Imagine if we could have a secondary market, if we could let this be open to so many people, and then we would really start to see the change in the world, I talk to people who have the money, who can invest, and they say to me, oh, I can't, not me, me, I could, no, I can't invest because I don't have enough money, or I don't have the background, I wasn't invited, I don't have a finance degree. But that's just simply not true anymore. And if we could really start to harness everyone getting involved in the change that they want to see and that innovation they want to see in the world, imagine the type of world we live in.

21:49This is another question I've been dying to ask you. You could have like a huge venture capital fund if you want it. So give me the Marsha Doward life plan, if you will. So tell me what's going on in there and tell me the different buckets that you get your psychic and economic rewards from. Yeah. I mean, well, I have a venture fund, Mindshift Capital with Heather Henyon, who's the founder. And we've done some amazing things. And so, and I, you're, you're right. If that was the path I wanted to take and have it be all about Marsha, sure. But you're less greedy than me, Marsha. That's what I'm getting at.

22:29Okay. And I'm enjoying that about you, but go ahead. Let me hear this. Well, I also think about it. Like there are so let's just use women-focused funds for a minute. There are so many female GPs that are out there trying to raise funds, and they can only get to$5 million,$10 million, very small dollar amounts compared to what they really need, which is the hundreds of millions, the billions of dollars. So I feel like where can I take the knowledge that I have from all of the things that I've done? Because I was one of those people that just decided, I don't know how to do this, so I'm just going to do it and try it.

23:05Let me be on an investment committee. Let me try diligence with this. Let me run this angel group. Let me like start this venture capital fund, like all of these things, just because I was like, I just want to try to do it. So if I have all this knowledge and I'm just working on Marsha, you know, Inc, to me, that doesn't really fit the bill. And what I really want to see is more people coming together, democratizing this whole private market so that then we can start to see female founders get funded more, female GPs get the money that they need in order to build the funds and that we actually start to see the innovations that we want to see in the world.

23:38And if that's the part that I can play, if I can write the books and do the podcast and start to get more and more people inspired, then I feel at the end of the day, like I did what I wanted. See, I absolutely love that. And I got that from the book. I got a feeling from you that you're on a mission. This is, it's not charitable the way we would define charity. It is doing good through the process of profitability. And it's almost like, you know, it's a big message about capitalism, Marsha. Okay. And the message that I heard was you can have a for-profit venture that could lead to positive externalities for people in terms of innovation, quality of life, helping people through employment, but then using your profits for whatever social good that you'd like to deploy them in.

24:33Did I get it right? What did I miss? No, that's it. That was very well said. Okay. I got to tell you, I'm looking forward to now following your career. So what's the future look like? Well, since you asked, when the book came out, Do Good While Doing Well, I talked to a lot of people, especially women, and they would say to me, oh, they still were like, okay, you got me. I'm really interested in this. But you know what? I finally got them to admit to me, I don't really know where all my money is. My husband does a lot of that. I've got a financial advisor. It's kind of all over the place. And I feel like you're asking me to do something that's at like a 501 level.