From Rocket Racing to Venture Capital: Granger Whitelaw on Building Wealth and Changing the World 🏦 E170

0:05Dan Fleyshman:Ladies and gentlemen, welcome to a special edition of the Money Mondays podcast where we cover three core topics. How to make money, how to invest money, how to give it away to charity. As you guys know, these episodes are 32 to 36 minutes for your listening pleasure. Why? Because the average workout is 45 minutes, the average commute to work is 45 minutes, so we're going to keep this episode under 40 minutes. That way it's nice and easy for you to listen to, very useful information. Also, keep in mind, these podcasts are not just for you. It might be for someone from your past, present, or future.

0:38Dan Fleyshman:You might hear something from this guest today or on other episodes that might apply to someone that you might bring up to them at lunch or dinner a month from now or a year from now, and you want to forward them this episode. The reason this podcast is so important and so useful is we grew up thinking it's rude to talk about money. The The reason this podcast is so high up on the charts and people listen to the whole episode, like hopefully you will today, is because it's not just for ourselves. It could be an employee, staff member, friend, child, parent, etc. that might want to learn about the topics that we cover on Money Mondays.

1:11Dan Fleyshman:So without further ado, Granger Whitelaw, give us the quick two-minute bio so we get straight to the money. Good morning. Hello there. How you doing, man? Let's go. Tell them. Two-minute bio. So I am a venture capitalist, investment banker, and operator. I have built companies all around the world from the United States, Vietnam, Saudi Arabia, Singapore, Bermuda. My first big business I built was in Bermuda. It was actually a company that I built around a piece of legislation that I wrote to make clarity for digital transactions. So this is back in 1998, way before anybody did it. And we didn't have any law on digital signatures.

1:54So you sign DocuSign now every day, but we didn't have that in 98. So how do you bind a contract? How do you settle that contract? Where does it settle and where does the money settle? So I actually wrote that piece of legislation. It was the first piece of e-commerce law that ever addressed those issues. We did it in Bermuda under Commonwealth law. And that was an incredible business that we ended up selling to London Telecom. So that's a company I built and operated. I've also built think tanks, rocket companies, other technologies.

2:28Dan Fleyshman:Keep going. I want to hear more. Many, many, many things. So, yeah. So anyway, my background is a venture capitalist and an investment banker and also an operator. All right. So let's break down some of the things you said because there's a wide array of things. What is a venture capitalist? Walk us through venture capital. Give us the main idea. Okay. So really on Wall Street in my early days, in my mid-20s and my mid-30s, I have focused on early stage venture. So I've had guys sit down with me literally at lunch on a napkin and write a business plan. So a guy named Steve Humphries in Miami. It was back in like 2011 or 12.

3:07We went to lunch. He's like, Granger, I got to show you this idea I have. I'm like, okay, Steve. So he sits down. and we're having salad. And he had done couponing in London and given out coupons, like Groupons, et cetera. He was one of the first guys to do that. And he said, I don't want to do that. I want to do digital now. I want to build a platform that we can give away music and media instead of coupons so that you can get merchandise, et cetera. So if you think about United Airlines, Right. You get points and you can use those points for upgrades. You can use it for hotel rooms. You can use it for car rental and merchandise, basically.

3:46So he wanted to build a platform that we could do digital assets, which we did. So that was a company that I invested in and I partnered with him on. We built the first digital platform, launched it on United Airlines for downloads of music and TV and film. and I signed all the major labels, all the movie studios in about 10 months. And we were the only company in the world other than Apple and Amazon that had direct same day release. So, you know, when a movie comes out and it goes to Apple or Amazon, they're the only ones that get same day release. We got it because we were using points, not cash.

4:24So they pay hundreds of millions of dollars to get those rights. We paid like two million bucks. And it was because we were converting points instead of cash. It was a loophole I found. So anyway, that's a venture capital deal, right? It was literally a napkin, idea, funded, built the business, and then sold it. And in venture capital, I will look at many different deals, 30, 40 deals at a time, and I will find good management teams. And generally, I look at technologies that can change the world, right? How they can affect people in a positive way. So that was a cool technology that was new and no one did it before, a new application technology.

5:02and that was a long time ago, right? 15 years ago. But the same thing with rockets, right? When we built Rocket Racing League, it really started with the XPRIZE Foundation. So the XPRIZE Foundation was a foundation that was started by Peter Diamandis. And Peter had the idea to give a$10 million prize for the first team that was privately funded that could go suborbital twice in two weeks with a payload of three men. So why? reusable rockets. Bring down the cost of rockets, right? So therefore, it translates to NASA and other people being able to do private rocket flight. So anyway, myself and about 100 guys were the benefactors, original founders of the XPRIZE Foundation.

5:48And that was won by Bert Rutan and Paul Allen from Microsoft. He funded it on October 4, 2004. If you know Richard Branson, in, he put his name on the spaceship, right? Spaceship one. It said Virgin, right? But he didn't have anything to do with the business. No, two months before he put like$4 million in, put his name on the rocket. Anyway, it won the XPRIZE and it changed mankind, right? The technology from that changed mankind. It has accelerated technologies in many different ways. So Elon is a part of that. Elon Musk was a part of that. And I've known Elon for like 26 years now. So right after he sold PayPal, we met.

6:32And when I started the Rocket Racing League with Peter, that was another thing that we were looking at changing mankind with technology, right? So I had a bunch of cool investors. Elon Musk was an investor with that. Jeff Bezos from Amazon. Bill Koch, Peter, obviously. Bob Harari, et cetera. So these are all guys who want to see technology that they can use to change mankind. And if you think about, and I'll back up, race cars, right? So I've raced IndyCar for 20 years. I was lucky enough to be a partner in two winning Indy 500 teams. The technology that comes out of IndyCar, the technology that comes out of F1, that technology goes into your car or other applications, right?

7:17So I'll give you an example of another application. You get better brakes. You get faster shifting. You get better performance on the engines. Those are obvious, right? Here's a non-obvious one. In 1996, Buddy Lazier and I were doing the Indy 500 together. Buddy and I grew up together in Vail, and we had done Indy car together for years. In 1996, we were racing Indy, and he got into a major accident nine weeks before the Indy 500. He broke his back. It shattered in 16 places. So on the bottom of your butt, if you drop an egg, it just shattered, like what an egg looks like when you first crack it, right?

7:52Yeah. Well, we didn't think he was going to race Indy. So the guys from Lear, which is a seat company, came over with Dr. Brock, and they designed a seat from his neck down to the bottom of his foot, right above his foot and ankle. Custom molded the seat, poured him into the car. So he was able to actually, with a cane, walk up and get in the car. Come on. And we strapped him down. This is a fact. This is a history fact. We strapped him down and we won the E500.

8:26Dan Fleyshman:No. It was, dude, I mean, I'll cry right now. It was the most amazing feat. What? How he didn't win the ESPN award for the greatest athlete that year. He almost did. I think Tiger won it. But it was amazing. So that seat now, that seat technology has translated into aerospace as well as IndyCar and other automobiles. That technology, right? So you have to really look at, you know, wow, it's cool. They're racing cars or they're racing planes. But the technology from that translates into helping save your life and affect other people. And that's what I invest in. So Rocket Racing League, we built the first rocket-powered plane that was manned in the world in history, approved by the FAA.

9:12Actually, the FAA certification is a rocket-powered glider. So two-seat, 32-foot wing rocket plane, a delta wing canard. And I had to create speed in the air. It was a big problem. What problems were you to solve? Turning on and off a rocket engine. How do you turn off a liquid rocket engine in flight? Because if you have a liquid rocket, it's either on a missile hitting a target, right? Or it's on a rocket shooting something into space. You don't want it to stop. You want full power all the time. So we had to figure out how to turn it on and off. That was our first technology to overcome, which can be used for other things, if you think about it, right?

9:54Then we had to figure out speed in the sky. So I took the first down line in football. Everyone watches football. You see that little yellow line they paint across. That's the next first down, right? Every 10 yards. First down, there's a yellow line. I took that technology, and I said, wait a second. That's a superimposed graphic. Why don't we create triangles, squares, circles, etc., that we can make a racetrack out of in the sky? So instead of driving a car, you turn 90 degrees and race the rocket plane in the air and have the pilots racing through these different colored rings so they know what their line is, right, for situational awareness so they don't crash.

10:37And you also can put the rings close together. So as they're going through the rings, you see speed, right? So watching a plane in the air, it looks like it goes very slowly. But if you watch a race car on a track and you see the red and white lines on the track, when it goes by those lines, fast. Or if you're driving your own car, you drive by a bunch of poles on the highway close together, wow, you feel the speed, right? So we took that. out of that we created a video game and we created a heads up display application called Ritz racetrack in the sky now you can take that same technology and you can link it with gps coordinates and radar and you can have safe return to an airport so that if you have a problem in the air you can't see you lose situational awareness because of clouds or what have you you can hit autopilot or you can fly the rings back to the runway and land safely.

11:34Another technology that came out of that. So venture capital, looking at technologies for me that can change mankind, investing in them and then supporting those companies growth. Okay.

11:46Dan Fleyshman:Explain an investment banker. What's the concept of if someone wants to go raise capital, why would they ever need to hire an investment banker? So investment bankers, and I have a company called Faithstone Capital Partners, my investment bank here, as you know. So investment bankers help structure deals for people who either need to raise money to scale their companies, to buy a company, or to sell a company, right? So a traditional banker doesn't do that. You go to the bank, you get your credit card or your debit card, your savings account, maybe a mortgage line or something at your traditional bank.

12:19But for more sophisticated structuring, you need investment bankers, right? We go in, we underwrite the deals, We look at the risk profiles. And then we go out to the market, hedge funds, private investors, or those banks we were talking about, who have allocated capital for different ventures they are interested in investing in. So maybe oil and gas, maybe real estate, consumer products, what have you. So the investment banker goes in and qualifies the deal, underwrites the deal, has access to the capital, is registered, right? It's a registered agent so that we're fully compliant oversight by SEC and FINRA.

13:00And then we go and do the transaction. That's why you need investment bankers.

13:05Dan Fleyshman:So what if someone listening, they built up their company, now they've got some money saved up, and they want to do their first 100K, 200K, 50K, 500K, whatever type of investment. How did they decide when there's so many options what they want to invest into? How do they research it and kind of figure things out for themselves? Well, there's a smart guy I know who says invest in the things that you use, right? So I grew up, and my parents would say, invest in the things that you like and that you use. So when I was a kid and I was in college and I was working at Top Tech and I was selling Apple computers and Seagate drives, that was back in 1987.

13:4287, 86. Nobody knew what that was, right? Well, I did. And I called my mom. I'm like, mom, buy Apple. Buy these companies, right? And another guy I know, you, when you talk about your 40, 40, 20, you talk about, hey, man, are you driving a Tesla?

13:59Dan Fleyshman:Buy Tesla. You're using the iPhone? Buy Apple. I mean, that makes common sense, right? For the$1 ,000,$2 ,000,$5 ,000 kind of investment, that's what you should do. I agree. So let me explain what Granger was referring to, which is called 40-40-20. It's 40 % low risk, where you want to make between 5 % and 9 % for the year. 40 % medium risk, where you're trying to make 10 % to 30 % for the year. And 20 % is the high risk. It's the shot at glory. And if you get it right, 7x, 12x, 15x. But if you get it wrong or it takes a long time, hopefully the medium risk and the low risk will cover the high risk.

14:33Dan Fleyshman:Quick 60-second examples are, on the low risk side, you can look at what's going on. with at your bank, Wells Fargo, Bank of America, Chase, etc., called a CD. CDs at your bank used to be like 1%, 2%. Now you can find 4 % and sometimes even 5.4 % as a CD at your bank. Doesn't sound like a lot, but if you go get a compound calculator, it'll blow your mind over the course of time. Also, the S &P 500. The S &P 500 sounds like it should be meeting risk, but actually has returned on average over the last 93 years, 11 % a year. The recessions, depressions, COVID, shutdowns, wars, etc. It has averaged out 11 % a year.

15:12Now, in the medium risk

15:14Dan Fleyshman:side, there's real estate, stock market, and cash flowing businesses. On the high risk side, the shot at glory, is cryptocurrency and angel investing. Some of the angel investing we're going to talk about now. Someone wants to do an angel investment. It's called a high risk investment for a reason. Oftentimes, there's these statistics that are thrown around that venture capital or angel investments, nine out of 10 fail. We hear nine out of 10 of everything fails, really. A musician, a clothing company, a record label, a restaurant, nine out of 10 of everything theoretically fail. That number can change obviously.

15:47Dan Fleyshman:But on the angel investing side, when someone wants to go out there, how do they vet a deal? Someone comes and says, hey, Granger, I want to start a new clothing line called High Level, or I want to start a new water company, whatever. How does someone pitch you and then you vet that deal? Yeah. So for me, as a venture capitalist, that's different. So I live in all high risk, right? So I don't invest in real estate. I don't invest in long term bonds. I don't do that. I'm a high risk guy always. So it's probably not comfortable for my wife. But that's where I'm at, right? So for me, I look at management.

16:25It's always management for me, 100%. So if I think that the founder knows his market, not just thinks he has the coolest technology, right? Because everyone thinks I have the best thing since sliced bread. Every deal is a billion-dollar deal. But they have to know the market. And I remember Malcolm Forbes who would talk about this. And even Branson was really good at this. Knowing your customer. You have to know your customer. the guy in the seat on your plane, right? The guy who reads your magazine. You have to know your customer clearly. If you can know your customer really, really well, and you know how to service them, then I'll invest in you.

17:04Dan Fleyshman:So someone gets pitched. There's a regular person. They're excited. They're making$180 ,000 a year. They've saved up a quarter million in the piggy bank. They can make their first investment,$25K,$50K, et cetera. They got a quarter million set aside. How do they vet a deal since they're not an investment banker, but their friend pitches them the clothing line and they say, hey, I want to start this clothing line. How do they vet that deal? Well, don't invest in your friends. No. I mean, you have to be very careful, right? Again, I go back to things that you know. If I'm an engineer and I'm building different things, engineering computers or auto parts or whatever it is, and a guy comes to me in that space that I have some familiar area with, then I should be able to vet it pretty well.

17:48It's an engineering play. But if some guy comes to me with a hot dog stand he wants to build, I would say don't buy the hot dog stand. And certainly not until he has five or six hot dog stands.

17:58Dan Fleyshman:Yes. which is your mantra. I'm about to get into it. Right. But yeah, I think that's very important. You have to invest in things that you know. The smartest guys I know, and I talk to investors all the time, and they say, hey, Granger, I just don't know that industry. I'm not comfortable investing in it. So I know this industry. And maybe I want to break out of that, but not until I have a million dollars that I can lose, not$50 ,000, because that's a lot of money to risk when you only have$250 ,000 in the bank. For sure. Yeah. Okay. So when someone comes to you with a clothing line, there's a big difference between the idea of the clothing line or someone that's already doing$5 million in revenue.

18:38Dan Fleyshman:So Elevator Syndicate, we do angel investments. We round together a bunch of investors. There's 2 ,200 investors in the Elevator Syndicate. But we only do deals with companies doing at least$5 million in revenue. Why? Because$0 to$1 million, super, super, super, super hard. It's very rare someone goes from$0 to$1 million. You might be thinking, what do you mean rare? There's tons and tons of, 100 ,000 of companies doing a million dollars of revenue. That's true. But tens of millions of companies try and only a few hundred thousand at a time really do it each year. So zero to 1 million, super, super hard.

19:14Dan Fleyshman:Going from 5 million to 11 million, it's not hard at all. It's people, systems, processes, marketing, scaling. Zero to 1 million, it's like, I don't have enough fingers to say all the things that need to happen for zero to 1 million. So if someone comes to the clone line, zero to 1 million you can do it but just know that you're crossing your fingers it's not just high risk it's super super super super super high risk so many things have to happen to go from zero to 1 million your friend is doing 5.2 million revenue that becomes interesting now they go to medium risk or maybe even low risk they're definitely not zero percent risk because no matter what a brand's doing there's humongous companies that can still fail or go bankrupt however they've reduced their risk a lot because they've proven to you that people want to buy their product.

19:57Dan Fleyshman:They know how to do sales. They know how to do shipping. Hopefully they've shown you their financials, et cetera. So you can vet that deal. I focus on companies that are doing that. If someone brings a restaurant, zero to one restaurant, not just hard. It's so rare that someone is successful in zero to one restaurant. When I invested into Everbowl, there was 13 locations. I threw in 500K and there were 17 locations. I raised them 5 million bucks. And there was 25 location. COVID happened. The whole world shuts down. Me and Cole Hatter, we buy 23 locations from them to help the company. A year later, they raised$15 million.

20:34Dan Fleyshman:And now they're worth over$200 million. There's 104 locations. Yeah. The last round was 175. Amazing story. It's actually more, I think now. Last round was at 175 million valuation. And the food's good. And the food's good. And we have right down the street from here in Las Vegas, actually. there's 104 locations one new one every six days however i invested when there's 13 locations so jeff fenster already went through the hard stuff his first location cost$345 ,000 to build now 120 ,000 160 140 ,000 103 ,000 think about the difference of 345 ,000 versus 105k 145k that is a massive difference that came from efficiencies and so i got to skip the first three or four years of his hard stuff that Jeff had to go through.

21:20Dan Fleyshman:So he got to 13 locations. And then even though I invested at a higher valuation, because I didn't take the risk with him at the very beginning of the journey, it lowered my risk for my friends. Then when he got to 17 locations, I raised 5 million. Notice I didn't raise money right away. It's because I wanted to vet it. Now that I put in money, I wanted to see what was going on. I saw how good he was as an operator and boom, here we are 104 locations later. Let's talk about the investing side, you as a person, is there an investment banking hat versus a Granger hat? Because you mentioned you don't do real estate, but you actually have some real estate, right?

21:53Dan Fleyshman:That you don't, when you say like your wife gets nervous, maybe the concept of it, you don't go all in on any one company. You're not like, Hey, guess what, honey, we're putting a zillion dollars in this one deal. No, no, no. I'm diversified. Yeah. So no, I mean, I do a lot internationally now. Right. So, you know, I had businesses in Vietnam. I was in Vietnam for seven years and, And it was a great place to kind of be an entrepreneur and redo that again, because I stopped really doing startup in early stage. But in Vietnam, that's all you're doing is startup in early stage. So that was fun and is fun to do.

22:23And in Saudi Arabia, I'm doing much larger transactions, right? Multi-billion dollar deals, mostly infrastructure plays, that kind of stuff. So, you know, any of those I'll invest in. Some of them have real estate components, don't get me wrong. But it's just not my it's just not really where I look, right? I look at technologies that can really change mankind. Right now I'm working with a company called Tevachi, and they have built an incredible company. They have an AI machine that's 20 stories tall that prints food stock for animals, so for cows, pigs, et cetera. But they can program the actual grass to be superfood.

23:07So over five days, it prints this stuff. It's a closed-loop ecosystem. And the cows are in a building next door. And they actually take the feedstock, goes right over the cows. The cows eat it, reduces the water consumption by 98%. Wow. 98%. Oh, my gosh. They can feed the cows. The meat that comes out of it is up a full grade. Wow. The milk, perfect. And it reduces methane output by significant. get so you're actually helping save water in a massive way you're doing this in the small uh building where you can have 10 of these machines at a time instead of 10 000 acres right so you're grazing on 10 000 acres all the issues you need the cows go to watering holes it's a massive technology that helps mankind and i'm working with the the um some people the white house right now about trying to roll out this nationwide and also in saudi arabia and the gcc because each of those countries needs food sovereignty.