133 | The Investment Game Is Rigged… Here’s How to Get On the Right Side of It with Mike Collins

Patrick: What if the most powerful wealth-building investment in the world has been sitting right in front of you, and someone else has been quietly getting rich off it while you waited on the sidelines? Welcome back to the Vital Wealth Strategies Podcast, the show where we cut through the noise and hand you the strategies, tools, and insider knowledge that the ultra-wealthy actually use to build and protect generational wealth.
I’m your host, Patrick Lonergan, and today we’re diving into a conversation that I genuinely believe could change the way you think about your portfolio forever. My guest today is Mike Collins, founder of Alumni Ventures, one of the most active venture capital firms in the United States, and a man who’s been inside the venture capital world since 1986.
Mike has spent the last 12 years doing something that frankly nobody thought possible, cracking open the door to elite venture capital deals and making them accessible to the accredited investor like you and me. We’re talking about how to get into the same deals as Andreessen Horowitz and Sequoia in the [00:01:00] same companies under the same terms.
The velvet rope is gone, and Mike is here to show you exactly how to walk through that door. In this episode, we’re going to pull back the curtain on how venture capital actually works, why a diversified portfolio of startups may actually be less risky than you think, what sectors like AI, defense tech, and nuclear energy mean for your wealth right now, and the tax strategies including QSBS Roth conversions that can lead to your biggest wins compounding almost completely tax-free.
Now, here’s the old way of thinking. You wait for the IPO, you buy in on the public market, and you ride the wave everyone else is already riding. Here’s the new way. You get in early, you invest where the value is actually being created, and by the time the rest of the world is buying, you’re already winning.
That shift in thinking is exactly what today’s episode is all about, and it’s going to pay dividends quite literally. Before we jump in, if you haven’t already, head over to vitalwealth.com/resources. We’ve built out a vault of tools, guides, and strategies around tax planning and wealth building that you can [00:02:00] start using today, and it’s completely free.
That’s vitalwealth.com/resources. Now, if this show has been bringing value to your world, it would mean the world to us if you took 30 seconds and left us a review. It helps us bring on incredible guests like Mike and keeps this content in front of the people who need it the most. All right, let’s get into it.
I’m excited about our conversation today.
We’ve got Mike Collins on the show, and, uh, we’re gonna be, uh, looking into venture capital. Uh, it’s gonna be exciting. Uh, oftentimes venture capital is very challenging to, to break into. And, uh, Mike and his team through Alumni Ventures have created this opportunity for, for people, and I think it’s gonna resonate with, uh, with all of you.
So Mike, thank you so much for joining
Mike Collins: Great to be, or Patrick.
Patrick: Yeah, so I, I, I think about some of the problems that are out there and. Access to top tier venture capital deals has been, has been limited. Most entrepreneurs are stuck investing in private markets, real estate, even some fragmented private [00:03:00] deals. But, uh, they don’t have the institutional level access or diversification. they, they feel like they’re late to the game. Uh, they see massive wealth being created in startups, but they’re not sure how to participate intelligently without taking outsized risk. And then it shouldn’t be that the best wealth building opportunities are reserved for the few, uh, entrepreneurs who are creating value in this world should have access to the same caliber of investments as elite. Venture firms. So, um, Mike, I, I’m, I’m really looking forward to, to this, but can you give us a little bit of your, your background and, and how you got started in this, uh, this arena?
Mike Collins: Yeah, I mean, I, I started in venture capital in 1986. So some of your listeners can get a sense of, you know, it’s been a while,
Patrick: Yeah.
Mike Collins: with a firm in Boston called TA Associates and, you know, really have been moving between venture capital and investing and being an entrepreneur
Patrick: Mm-hmm.
Mike Collins: my entire [00:04:00] career. And so, you know, I probably consider myself more of an entrepreneur than a vc, but, um.
Uh, you know, I’ve seen a, a, a number of waves with technology and disruption for sure,
Patrick: sure.
Mike Collins: started alumni ventures. Basically, Patrick, to address the problem that you described, which is, on one hand, this is in a really important asset class where huge wealth is created. Really, society has been transformed and will continue to be transformed.
Of technology and entrepreneurship and capitalism. Right.
Patrick: Yep.
Mike Collins: you know, there, there’s, there’s probably three companies gonna go public in the next 12 months with, you know, somewhere around a trillion dollar valuation that didn’t exist. You know, when I, you know, 20 years ago,
Patrick: ago. Right. And
Mike Collins: you know,
Patrick: know,
Mike Collins: tele go public, it’s kind of an insider’s [00:05:00] game of who gets access to that, which is, you know.
You know, from a societal perspective, not great, not fair. I don’t think a lot of us love that, that you can go to Vegas and put a hundred thousand dollars on red, but you can’t, uh, put a hundred grand into a Sequoia startup.
Patrick: Right. So,
Mike Collins: you know,
Patrick: you
Mike Collins: this is really what I’ve spent the last 12 years, um, building with a, with a simple idea that we can get better access together than any of us can do on our own.
Patrick: Yep.
Mike Collins: And venture capital, if there’s any asset class where access to the best versus what your kind of friend, your brother-in-law shows you over the transom
Patrick: right.
Mike Collins: and where you have to have a large and diversified portfolio because, you know, there there’s, there’s winners and losers in this asset class that are really spiky.
Patrick: [00:06:00] mm-hmm.
Mike Collins: That, that it’s really, that this is a category that really calls for kind of banding capital together, uh, to get into the very best deals.
Patrick: yeah. Yeah. And I, I think that’s, that’s important. I’d like to talk a little bit about that because, um, I think one of the things that you’re, you’re doing is, uh. The, the, the fund opportunity is so interesting where if me as an individual investor go, oh, I’ve got, I’ve got a hundred thousand, I’ve got 200,000, I’ve got a million dollars.
A, I probably am not even in the conversation with those, those amounts of money. But let’s, let’s pretend for a second that I, I take a million dollars and I, I invest in one of these companies. Uh, I better be really, really lucky. You know, my chances of going to Vegas and putting it on red are probably better
Mike Collins: Yeah, that’s Cam. Yeah.
Patrick: the one, uh, venture, you know, that’s, that’s going to, to take off. So can we talk a little bit about, uh, how important it is to have access to a lot of opportunities?
Mike Collins: I mean, [00:07:00] this is what I would tell my friends or kids or or anyone, is if you’re gonna play in venture capital, you should be targeting a portfolio of a hundred companies or so. Okay? Because out of a hundred companies, 50 of them are gonna go to zero, you know? 30, 40 of them will do okay. They’ll make a little lose a little.
But five or 10% of your portfolio is gonna make it all worthwhile. You know, you can only lose one times your money in vc, but you can make 20, 50, a hundred times your money if you get into the right company and you get in early.
Patrick: Mm-hmm.
Mike Collins: number one, build a big portfolio. Don’t time the market. So it’s like if you’re gonna, if you’re gonna try to build a portfolio of a hundred companies, do that over three or four years, right?
Is, is kind of the way to go. The other kind of hack is the very best companies end up with the very best VCs.
Patrick: mm-hmm.[00:08:00]
Mike Collins: It’s not that folks at, uh, Google Ventures or Andreessen or Sequoia. Are that much smarter than anybody else. It is because if you’re a
Patrick: because if you’re
Mike Collins: entrepreneur and your startup is crushing it, you have your choice of capital sources.
And believe me, that does not include somebody with a $300,000 check who’s an individual. To an entrepreneur, that sounds like a potential pain, and I don’t need it. So you’re not gonna get access to the tier one deals. You’re gonna, there’s huge adverse selection.
Patrick: selection.
Mike Collins: So
Patrick: So
Mike Collins: the average individual investor, their portfolio is too small and they’re not.
Patrick: not,
Mike Collins: Um, with tier one deals, but by banding together with a bunch of people like you, I mean, we have 25,000 individuals who are part of our world either investing in our funds or part of, you know, looking at deals on a more individual basis. [00:09:00] And, you know, we invest, you know, five, 10, $20 million into certain companies.
We get, and we have a full-time staff of 40 VCs in the, in the major venture hubs. We’re just getting access to things that one individual has no shot, mostly won’t even hear about it, let alone have an opportunity to invest in it.
Patrick: yeah. This is, uh, is great. Um, I. One thing I think is also worth mentioning is, um, you know, when we think about the, you know, the, the, the key organizations that are growing and they have access to capital, you guys are sitting right alongside some of those big players, right?
Uh, can you talk a little bit about that? You know, when, um, people are taking funding, you’ve got the andreessen’s of the world, that you’re, you’re, you are investing alongside like that, right?
Mike Collins: I mean, there are [00:10:00] about 3000 venture firms worldwide,
Patrick: Mm-hmm.
Mike Collins: in the United States, but there are, there’s probably a hundred to 150. If you’re a really good company, you’re gonna have on your balance sheet soon, you know, maybe not at the pre-seed round, but by the Series A if you’re really doing well.
Patrick: Yep. So
Mike Collins: there’s really strong correlation.
So, you know, we’ve done 50 plus deals with firms like Cossa Benchmark, you know, that’s, that’s the world we live in. And so the key question is, well, how are you getting into those deals? Right? And the, the way we get into those deals, the moment of truth is when we’re talking to the entrepreneur and they’re raising their series A, and it’s maybe being led by, you know,
Patrick: know,
Mike Collins: USV or some
Patrick: some
Mike Collins: NEA or some really top tier venture capital firm.
What what we say is [00:11:00] basically your lead is your lead, right? And you need them, they’re on your board, they’re gonna price you round, you’re getting married to them for the next five or 10 years. But every entrepreneur also brings into every round of financing a second or third vc. You know, some employees, it’s a syndicate every time, and that’s where we really compete.
We say we, we strive to be the co-investor of choice and that is where the network and our community of 1500 portfolio companies, 25,000 individuals, corporate relationships, government relationships around the world. We have an office in Tokyo. We have an office in London. Beyond the, the five cities we’re in the United States.
If you’re an entrepreneur, that Rolodex is incredibly valuable. We say, you know, we’re like your favorite uncle that we leave you [00:12:00] alone, but if you need help, we can be really helpful to you because we are really connected. And so that gets us into the same deals as those tier one VCs are leading under the really the same terms and conditions.
In fact. Frankly, cheaper from a fee and carry structure than these tier one,
Patrick: Mm-hmm.
Mike Collins: tier one firms charge. So, you know, that’s kind of the, that’s been the secret sauce in our kind of growth and expansion and why this just makes sense for so many people. Mm-hmm.
Patrick: Yeah. I, I love it. And, and we see a lot of our, our clients being acquired by private equity. And, uh, and, and one of the reasons, like a client would select a private equity firm over another, is one of the things you were just talking about was, Hey, their, their team can help us in ways that, uh, we don’t have access to, and they can help us.
You know, they’ve got people on their team. You know, we’re, we’re currently a hundred million dollar company and we wanna get to [00:13:00] a quarter billion, and they’ve got people that have done that a half dozen times. And so it’s like, all right, great. We’ve never done it before, so we, we need that, uh, that experience. But I think it’d be good to talk through the difference between what’s the difference between private equity and venture
Mike Collins: Yeah,
Patrick: I, I think they’re,
Mike Collins: that’s a great question. Yeah. You know, it, it’s, they’re two actually, they’re both alternative asset classes. They both can make money. Um, but they’re very, very different. And I think there is actually a lot of confusion, uh, that. With the two terms, venture capital is really investing in growth of a new company and you make your money because the company just grows and gets more customers and its value goes up and is eventually kind of bought or goes public.
Um. Huge, you know, wins and losses. You know, uh, you know, debt is really not part of the MI mix, but it is really, you know, it’s [00:14:00] the story of like,
Patrick: like.
Mike Collins: or an NVIDIA or, or these kinds of companies where you try to get in early, you put more money to work behind the ones that are really getting traction.
Private equity is really more about an established business. Usually, um, the investors there are looking for some kind of roll up. They’re looking for efficiency. They’re usually acquiring the company with debt.
Patrick: mm-hmm.
Mike Collins: Um, it’s a little more financial engineering,
Patrick: Yep.
Mike Collins: uh, typically lower growth, um, kinds of situations.
So
Patrick: So again.
Mike Collins: um, different flavors. Just the, you know, they’re both dealing with private companies. It used to be, it used to be venture capital in like the LBO business, but it was like, it, it kind of private equity kind of rebranded a bit after, you know, some bad publicity. But private equity technically in, when you’re in the [00:15:00] space really is about, you know, let’s go roll up
Patrick: off.
Mike Collins: a bunch of, uh, vet clinics and use some debt and we’re gonna get some efficiencies and consolidation and, and those kinds of things.
Which is very different from venture capital, which typically think of as like a tech startup. Mm-hmm.
Patrick: yep. Absolutely. And I, I, I, I that a hundred percent. When we think about our clients and the, private equity world, there’s so much focus on EBITDA and that, that cash flow that’s coming in, and they’re like, okay, cool.
Right now. You know, we can make acquisitions at a, uh, a five x, a six x and we know once we hit certain thresholds of ebitda, now we can exit at a 10 x or a 12 x and, and they’re gonna use lots of leverage to get there. Uh, where this is like, Nope, we’re, we’re gonna not that cashflow’s not important, you know, we, we,
Mike Collins: Don’t run outta cash in any business. Right.
Patrick: [00:16:00] Right,
Mike Collins: But yeah, but it’s a totally different, a totally different game. And you, you know, there.
Patrick: Yeah.
Mike Collins: They’re saying like, oh, we’re gonna, um, we’re gonna consolidate some of these costs within a larger footprint, so there’s gonna be efficiency there. Now this is more about kind of, um, a RR and growth and new customers and, and different game.
Patrick: Sure. Yep. Absolutely. Great. And, and one thing I think is also, uh, I like to just acknowledge from a, um, a wealth building standpoint, and I think this was, this was made. Popular through, uh, Yale Endowment. But, uh, we, we’ve started to look at the, the value of alternative investments in a portfolio. Uh, and what happens to, uh, that, and that that can be everything from venture capital to oil and gas investment to real estate. Like, uh, the, the interesting thing about that is when we start adding alternatives into a portfolio, we, we see that the, the volatility starts to come down, [00:17:00] uh, of the, the overall portfolio.
And we. And the reason that’s important is when we, we think about, uh, our assets and, and I like to just review this ’cause it, it, most people, the math doesn’t click until you hear it. But, uh, if my, my portfolio is down 10% and I get 10% gain, I’m back. I’m only at 99%. Right? Uh, so if I got a hundred dollars and I go down to 90 and I get a 10% gain, I only get $9, right?
Uh, so now I’m back to 99. when I’m at. A hundred dollars and I drop 20%, I need 25% to get back to even. And when I’m at a hundred dollars and I drop 50%, I need a hundred percent gain to get back to even my $50 has to double to get back to, uh, to break even. And so when we think about that, the, the value of adding alternatives in the mix is, uh, just so important because it, it starts to dampen that volatility because things like real estate and oil and gas and venture capital like they are. They’re going to move differently than, uh, I’ll say the [00:18:00] rest of the, the economy. You know, something like right now we we’re seeing oil and gas be a really interesting opportunity because of what’s going on in, uh, the Middle East. And so, uh, I think those things are, are important to acknowledge. Like this has a very, uh, strong position in somebody’s portfolio because it’s not going to act like the rest of the portfolio.
Mike Collins: I mean, diversification, compounding over time. These things, you know, just are true.
Patrick: Yeah.
Mike Collins: And
Patrick: Fried.
Mike Collins: you know, and that’s just the math, let alone the psychology of. You know, if you’re just in a very narrow portfolio
Patrick: Mm-hmm.
Mike Collins: and it goes down, you know, that’s really, you know, that wakes you up in the middle of the night and you feel like garbage,
Patrick: right. Yep.
Mike Collins: But, you know, I, I tell again, diversification is like a superpower.
Patrick: Mm-hmm.
Mike Collins: know,
Patrick: You know
Mike Collins: and having some of these other asset classes, these alternatives [00:19:00] appropriately sized, right? I mean, again, you know, you need to be mature and just say, you know, what is my slice of emergency cash? What is my slice of public equities, international equities, fixed income?
There is absolutely a place for alternatives, and you can
Patrick: you
Mike Collins: slice that even into subcategories, but this is the way you really need to think about it and you know, it’s the get rich slow strategy of diversification and compounding and investing in good quality people and good quality assets over time.
And you know, spending less than you make. You know, these,
Patrick: Yeah.
Mike Collins: is just how it works. It’s not sexy. But you know, if I were to argue that there needs to be some. Myth dispelled is that some somebody hears venture capital and they view it as risky,
Patrick: [00:20:00] Mm-hmm.
Mike Collins: it is risky if you do two deals that your brother-in-law sends over to you every year.
But if you take it as you know, this is a form of equity that is just companies that are not yet public.
Patrick: Mm-hmm.
Mike Collins: Um, and you get a adequately sized portfolio. Of what I would argue is a hundred companies all led by tier one VCs. I would argue that that is a very prudent diversification even compared to, you know, oh, I’m gonna wait till all of these things IPO, and then I’m automatically gonna own them because they’re part of the index.
So, you know.
Patrick: Right. But you’ve missed out on so much opportunity. You talked about those
Mike Collins: Yeah.
Patrick: trillion dollar valuations and then hitting the markets. It’s
Mike Collins: You’re,
Patrick: let’s get in now.
Mike Collins: you’re, you’re buying when guys like us are selling,
Patrick: Right?
Mike Collins: you know, kind of thing. So, you know, what is, what is that telling you?
Patrick: Yeah. Yeah. [00:21:00] Uh, so this is really interesting and I, I think about the, the space that you’re in, and I’m thinking about AI and how it’s, uh, it’s exploding, right? We’re, we’re seeing it everywhere. It’s, uh, it’s a fantastic tool. I’m, I’m. Uh, also seeing the data centers that are going up all over the place, which is, uh, also another really interesting piece, but I, I’m curious how you are seeing, uh, AI in this venture space and where you see some opportunities and, um, yeah, I, I, I think it’s just an interesting topic.
Mike Collins: I mean, you know, AI is, um, another huge technology wave. And, you know, again, I’m old enough to have seen the personal computer and the cloud and biotechnology and the smartphone and you know, I, I will tell you, I think AI is, um, big and, but it is another technology, which means you can’t lose the sight of fundamentals [00:22:00] of there are particular companies that you look at and you just can’t get comfortable.
With evaluation, but it really is, I mean, that’s the job of, of being a VC, is to identify these opportunities and to evaluate them on a case by case basis and invest in the ones where you think the, the upside on a risk adjusted basis is, is, is worth the investment. But you know, when I started out in the industry, you know, there were pockets of innovation.
Um, where, you know, entrepreneurs were trying to do new and great things, but in 2026 you take almost every sector of the economy, whether that be energy with things going on with, uh, nuclear,
Patrick: Mm-hmm.
Mike Collins: whether you with that space where you’re really seeing, you know, with space communications, huge potential there.[00:23:00]
You know, defense tech, which was an area where, um, Silicon Valley did not play in the defense industry at all. And now you have companies like Palantir and Andel, and it is a legitimate place where there are more great startups than ever before. Obviously we’re talking about AI potentially disrupting health tech.
Patrick: Mm-hmm.
Mike Collins: know, we’re looking, we have a whole portfolio of companies related to AI to help with drug discovery. You know, I’m incredibly excited and optimistic that some of the major scours that face all of our families can get eradicated in the next five or 10 years. So it’s just.
Patrick: Yeah.
Mike Collins: think you get a sense of my enthusiasm that, you know, listen, there are companies overpriced, there is going to be backlash, there is gonna be unintended consequences, some of them negative.
Patrick: Yep.
Mike Collins: That is the [00:24:00] nature of technology and innovation. And that has been true really since the invention of fire. You know, and
Patrick: Yes.
Mike Collins: this is just a new one and this is a big one. And. You know,
Patrick: know?
Mike Collins: you know, I tend to be a tech optimist that is not diminishing the pain that it will cause certain individuals and certain companies and certain things are gonna be disrupted.
But,
Patrick: Right.
Mike Collins: I studied with a guy, um.
Patrick: um,
Mike Collins: Uh, Clayton Christensen who really invented, you know, the whole study of kind of disruption in technology and it’s creative disruption, destruction of capitalism. This is just how our system works. Um, but it nets positive
Patrick: it,
Mike Collins: that, you know, yes, we can lose toll booth operator jobs.
But the fact that you can just drive through [00:25:00] now without stopping with a packet of tokens is better, you know, kind of thing. So, um, I just think it’s a really exciting time and again, it’s our job to kind of winnow through the garbage and the overpriced and the hype to the, the businesses that are really tackling a big problem and are gonna change the world.
Patrick: Yeah, I, I think this leads us to the, maybe the next phase of this conversation. ’cause I, when we look at, investment opportunities, um. Uh, for me it always boils down to a, let’s, let’s think about the, the marketplace and does this product sort of fit there? And then maybe more importantly, is the operator, like who’s, who’s the person behind this thing? Do they have experience, have they had successful, um, enterprises in the past? So can you tell us a little bit about how you’re evaluating these opportunities on, on those fronts?
Mike Collins: So [00:26:00] our company has 10 investment teams that run like little venture capital firms. Um, and they all have their own experiences and their own areas of focus and their own networks, but we use a common scorecard at Alumni Ventures and I don’t think people would look at it and find anything that was like, whoa, you know?
But we put a lot of stock in the team. You know, if you look at the people who have really created great companies. They can be controversial, but they’re very strong.
Patrick: mm-hmm.
Mike Collins: So, you know, we put a lot of, a lot of stock in the, in the team because you know, there is gonna be huge adversity requiring pivots requiring.
Attracting capital, attracting new customers, attracting employees. So you’re really looking for, uh, we put [00:27:00] a lot of stock in the team to answer your question, Patrick. And then frankly, we really look at the pedigree of the lead investor.
Patrick: Mm-hmm.
Mike Collins: know them? Have we worked with them before? Are they gonna be loyal and strong supporters of the team?
And then we just like,
Patrick: like,
Mike Collins: you know, we like big problems.
Patrick: Yeah.
Mike Collins: we, we like things that are hard and things that are gonna take a long time,
Patrick: Yeah.
Mike Collins: where there’s opportunities to create, um, new companies that solve problems. And, you know, um, you know, one of our favorite questions to ask
Patrick: ask
Mike Collins: a founder is what do you think the rest of the world has wrong?
Because by definition, and this is a Peter Thiel. Question too, I think. Um, but it’s like if you’re gonna create something new and different that hasn’t existed before, it’s obviously not conventional wisdom or would’ve been [00:28:00] done before. So it’s like, you know, you have to learn through a lot of experience and a lot of apprenticeships and frankly a lot of mistakes, um, for that pattern recognition.
So, you know, our 10 teams. And we’ve designed it that way because, you know, you can have two amazing kind of Midas touch VCs who can look at the same deal and come up with totally different conclusions. That is, again, very different than kind of, you know, evaluating a later stage
Patrick: Mm-hmm.
Mike Collins: public company or evaluating a real estate scenario where there’s metrics and numbers and you can.
You know,
Patrick: You know?
Mike Collins: reasonable people will generally reach consensus, but you know, VC is really more at the tip of the spear,
Patrick: right.
Mike Collins: and that’s where you’re really counting on, you know, the judgment of the, of the people that are, that are scouring the world for you [00:29:00] to get access to these amazing companies.

Hey, real quick. We’ve been hearing Mike talk about venture capital, tax strategies, and building a portfolio that actually works for the long game. And I know some of you are sitting there right now with a specific question bouncing around in your head. Maybe it’s about how alternatives fit into your portfolio.
Maybe it’s about qualified small business stock or Roth conversion strategies we’ve touched on. Or maybe it’s something completely different that you’ve been waiting and wanting to ask an expert for months. That’s exactly why we’ve built vitalwealth.com/questions. We want to hear from you. Seriously, the questions you’re asking are the same questions hundreds of other listeners are wrestling with, and we want to bring the right experts on the show to answer those.
The topics we cover, the guests we bring on, the deep dives we do, you have more influence over that than you think. So if today’s conversation sparks something or if there’s a topic you’ve been dying to get into, tell us about it. Go to [00:30:00] vitalwealth.com/questions. It takes about two minutes, and it shapes the future of our show.
We read every single one. Again, vitalwealth.com/questions, and let’s keep this conversation going. All right, back to Mike.

Patrick: So I, I think it’d be worthwhile to also understand a little bit about the alumni venture, the, the funds that you’ve got out there. So let, let’s say, uh, I’m going, Mike, this is incredible. I, I’ve got money, I’m ready to invest. Can you walk us through what, what does that process look like?
How do I decide, like is there one fund to go into? Is there multiple opportunities? Can we, can we talk through some of those
Mike Collins: Yeah, the, the, the simple answer is go to AV vc,
Patrick: Mm-hmm.
Mike Collins: check us out, look at our portfolio. You can go to our products page and see what funds might be a good fit for you. But the best advice is just get on the phone with one of our people and kind of talk through this, live with a human being. And it’s because we’re all in kind of different [00:31:00] phases of life.
You know, we have a different mix, a different risk tolerance.
Patrick: Yep.
Mike Collins: some people really want to just kind of, you know, Hey, put me in a good diversified fund and I wanna forget about it and I’ve got this asset class covered and I’m gonna give you whatever number every year and I’m gonna get another portfolio of 20 to 30 companies and I’m good.
There are other people who really want to be, to learn about this and we wanna see some individual deals and make some.
Patrick: some
Mike Collins: Decisions on their own, and maybe they’re already in a fund and want to compliment it.
Patrick: Mm-hmm.
Mike Collins: we allow our investors to kind of join and look at deals on an individual basis.
Patrick: yep.
Mike Collins: We also have people who really want to lean into certain segments that maybe compliment again.
Of their portfolio. Maybe they run a really swing for the fences and do more really early stage stuff, or you know, they’re just big believers that this is [00:32:00] a once in a lifetime change coming with ai and they wanna be in an AI only fund.
Patrick: Yep.
Mike Collins: So like a public menu. The best way to think about it is, do you wanna just be in an ETF?
Do you wanna be in some vertical. Mutual funds. Do you want to just pick individual public stocks? There is the equivalent of Alumni Ventures options for you. Regardless how you want to play. I would say the, the, the, the middle of the fairway is to go into a well diversified fund. Just to be sure you’ve got this covered.
Patrick: Yep.
Mike Collins: Take your budget, spread it out over.
Patrick: it.
Mike Collins: Three or four years, don’t time that you know, there are good vintages and bad vintages, so you really want to spread it out. And then most of our investors then like to also look at individual deals. They, they like to learn. A lot of our people like to use this as a family [00:33:00] discussion point.
Patrick: Yep.
Mike Collins: You know, with with Next Generation, you know, we have kind of a family deal. You know, a group chat
Patrick: mm-hmm.
Mike Collins: and it’s like we as a family look at deals, talk about deals. I, I, I, I think this is really, there are great life lessons here about the importance of working with good people. The importance of diversification, the focus on your wins as well as, you know, what can go right is as important as what can go wrong.
You know, different buckets for different. Needs in your life. All of those things, you know, as a, as a society, I don’t think, uh, we need to talk more about money and investing as families. So, you know, venture capital is a way that will, you know, get your kids involved a lot faster than saying like, let’s, let’s sit down and look, talk about bond yields tonight, kids, you know, [00:34:00] kind of thing.
Patrick: absolutely. Okay. This, this is leading me lots of different directions, so, uh, I, I think this is great. One thing I, I, I want to also comment on is, uh, uh, I’ve got a comment and a question, so I’ll start with the question and then I’ll, I’ll comment on that. But when we think about these, these venture opportunities, this is not something that I’m putting my money in today. And I am, I’m going, Ooh, I’m up. I’m gonna sell tomorrow. Right? Like, this is, this is something that I’m, I’m investing these dollars and I have a, a, a 10 year time horizon or something along those timeframes. Can you talk us through, uh, what my time horizon should be? And then also just generally interested in liquidity and how that that comes
Mike Collins: Yeah, I mean, and, and you raise a really interesting point, Patrick, which is, I think one of the reasons venture capital does so well is nobody day trades It. You
Patrick: mm-hmm.
Mike Collins: know,
Patrick: Yeah.
Mike Collins: and [00:35:00] so, you know, I was talking to somebody who actually ran a, just a, an enormous kind of money management firm.
Patrick: Mm-hmm.
Mike Collins: And I asked him like, who are your best customers?
Who does, who does best with you? And he goes, um, funny you should ask. We just did an analysis and we found out the dead ones.
Patrick: Yes. Yep. We’ve seen that same thing. People that, that, that don’t. Uh, there there’s similar research that says people that get annual statements outperform people that get monthly
Mike Collins: Yes.
Patrick: and you’re like, how could that
Mike Collins: Yeah.
Patrick: Well, the way it matters is I get my statement a year from now.
I’m like, oh. Cool. I’ve got more money. The monthly statement people go, oh, I gotta go fix something. Right? Like, I, something happened in the market, then I’ve gotta go fix it. And they break it, right? They’re, they’re doing the exact opposite of what they should do. So, uh,
Mike Collins: Where, where when you go, when you go through an Tilly’s estate and you find she went into some mutual fund in 1967 and it’s now got
Patrick: killing it.
Mike Collins: million in it. It’s like, so anyway, venture capital is in the. [00:36:00] You know, we’re building companies with entrepreneurs and that takes time. Venture capital funds are typically 10 years long.
They’re illiquid, so a lot of people will choose to match. You know, retirement funds or, you know, Roth money,
Patrick: Yep.
Mike Collins: with, with, you’re just matching the term of this kind of thing. Or some of our families, a lot of our families have trusts and so they’ll put money into the trust as a way to kind of marry that.
This is a long-term illiquid asset class.
Patrick: Yep.
Mike Collins: And so again, you know, one technique we see is to use those kinds of instruments. You allocate money on an annual basis, and then by year four if things are, you know, going well, they’re, you’re starting to now. Get some returns that can just kind of be rolled in and it compounds and it compounds and you, [00:37:00] you build an enormous amount of wealth if you can kind of take that kind of patient approach.
But
Patrick: but
Mike Collins: absolutely, you need to put this into the right sleeve, the right mental bucket, have a large and diversified portfolio. These are also things that have pretty good tax profiles if you do it this way, right. Kinda thing. So, you know, you, you, I think you, a lot of your listeners will have heard about, you know, people putting money into, you know, backdoor Ross with this kind of appreciating asset and then.
In essence, you know, they’ve made an enormous amount of money with their winners kind of without kind of, you know, um, a huge tax burden. And, and even, and even if not, this is at least in the capital gains bucket kind situation. So it’s, um, and then there’s again for, you know, your, some of your listeners who work with you, [00:38:00] there’s even more sophisticated QBSB.
There, there, there are parts. The tax code that make being a tech investor if done right.
Patrick: Him
Mike Collins: a pretty tax advantage. Way to go.
Patrick: yeah, yeah. We do like the, the 1202, the QSBS where you get that, uh, capital gain, tax free, uh, treatment. And, and one thing that I, I, I’m curious about, ’cause one thing I, I could see Peter, Peter Thiel has, uh, a multi-billion dollar valuation in his Roth.
Mike Collins: Yeah.
Patrick: And he did that by making early bets in. Facebook and some of these, uh, early, early companies that have just blown up. And, and so one question I do have is we, we, one strategy we’ve worked with clients on is, we’ll, we’ll make an investment, uh, a private investment in our IRA. Okay. So it’s, it’s pre-tax
Mike Collins: Mm-hmm.
Patrick: and then, um, because of, well, let’s call it 12, 18 months, two years from now, because of. Lack of a marketability, lack [00:39:00] of control, uh, I can get a valuation done on that, that investment. And, uh, oftentimes it’s, it’s discounted down from where I, I put my money in, then I’ll do a Roth
Mike Collins: Mm-hmm.
Patrick: Um, so I, I I’ll pay tax on that discounted amount and then 7, 8, 9, 10 years from now, uh, when that, you know, that that investment hits, it blows up in a good way.
Um, all those dollars come tax free into my Roth. I, I don’t know about this, but is, is there any way to, uh, value the investment? Um, is there, and, and sometimes this is gonna be really good that I can’t see on a day-to-day basis what the value of my investment is. But is there, is there any way to come up with a value?
Can I have a third party value at, uh, I’m just asking
Mike Collins: I think it’s very tricky. I think that’s very tricky to do. And again, Patrick, you’re playing. Three dimensional chess when most people are playing checkers. But yeah, I mean this is one of the things, the reality of kind of, you know, these are [00:40:00] private companies there, these are illiquid, we value companies priced to round.
Meaning if there is a new round of financing up or down and there’s a third party that has come in and valued the company and equity, I think that that is the standard. And I think price to round is really the way to go with kind of private, I mean, that is a buyer and seller coming to an agreement about a a, a company
Patrick: Sure.
Mike Collins: uh, is I still think the gold standard.
I think having some group going into a private company that you know is very volatile and may not be even have revenues yet is just, you know, that’s performative in a lot of cases in my opinion.
Patrick: Yep. Yeah, no, but I, I can already see a scenario. Uh, I, I just, we like to stack tax strategies. Okay. So I, I could see a scenario where somebody, [00:41:00] funds a cash balance plan. They get a few hundred thousand dollars a year into this. Um, over a period of time, it has a few million dollars in the plan. They shut it down.
Mike Collins: Mm-hmm.
Patrick: They make some investments into Alumni Ventures and then convert those to Roth. And with the thought process of, cool, I’ve got a 10 year timeframe for this thing to, um, you know, multiply the, the dollars that are in here, uh, it could be, it could be a fascinating
Mike Collins: definitely have some of our customers do those things for sure. Yeah.
Patrick: Great. Yeah, no, this is, uh, this is fantastic.
And I also think there’s something to highlight too, like the, the. think there’s a, a premium people pay for liquidity, you know, so for me to go invest in an ETF or the stock market in general, like I, I, I’m paying a premium for liquidity there. And so many of our, our clients and listeners, they don’t need the liquidity.
They, they’ve got sort of two different buckets of money they’ve got. Uh, and we, we like to build out this. I’ll call it invested investment matrix. And it’s like over here we’ve got our, [00:42:00] our dollars that are gonna support our, our lifestyle and our family’s lifestyle and do all the things we wanna do. And then we’ve got the money that we’re never gonna have to touch because we can do all the cool things we, we want over here with this lifestyle bucket. And then we’ve got legacy dollars and it’s like, all right, cool. You know, you, you were talking about, you know, that that family group chat, uh, talking about new opportunities, it’s like those are legacy dollars that, uh, we can start to. Um, think of from a multi-generational point of view and go, okay, let’s, we’re okay with some of these hitting, some of these not hitting, but, uh, let’s, let’s, um, get invested in some of these opportunities that, uh, can continue this, uh, this wealth on
Mike Collins: Patrick, I mean, you’re very, you’re very astute. I think there is, um, I think there is a liquidity tax.
Patrick: mm-hmm.
Mike Collins: For sure, which you point to, there’s a lot of pressure in society to be noisy and frankly to be extreme. And
Patrick: Mm-hmm.
Mike Collins: know, that’s just the [00:43:00] society and world we live in. So this, this is hitting you every day
Patrick: Yeah.
Mike Collins: usually that is not reacting to that, um, costs you.
And that’s just being human. That is not a character flaw, but that is just the way we’re wired and people that have been able to turn that on its head. A Warren Buffet is obviously the, the, the kind of case study for that, you know, think long term and turn down the noise if you can, if you can find ways to invest.
That allow you to think longer term than the person next door. And to think about ways to just not
Patrick: not
Mike Collins: react to what seems like, um, you know, oh, you know, everybody’s freaking out about the Harry trade to this week, or the price of oil [00:44:00] or something. But over the course of a life, those really don’t impact, you know.
Patrick: you know.
Mike Collins: Amazon going from three people to, you know,
Patrick: know?
Mike Collins: what it has become, right. You know, our companies aren’t sitting there, they’re just trying to find customers, build technologies, build value,
Patrick: Mm-hmm.
Mike Collins: you know, our job is just like, in a way we shield. Um, but I think a, as we started the conversation, I think one of the beauties of this.
Asset class is, it is by definition keeps you from day trading. It keeps you from, you just have to match it with a good discipline of, put it in the right vehicles, have the right bucket, have the right allocation. It’s the same reason, you know, people do really well with the kind of retirement accounts where the money is just kind of automatically pulled out every [00:45:00] month.
Right.
Patrick: Yep.
Mike Collins: is just. That is a hack
Patrick: Yep.
Mike Collins: keep, to, to keep our brains, which are, you know, very short term.
Patrick: Sure.
Mike Collins: You know, loss aversion, wired
Patrick: Yep.
Mike Collins: do stupid stuff with money.
Patrick: Yeah, yeah. You know, oftentimes our portfolio balance, when we can see the value of that going down, it feels like to our brain, like a bear’s
Mike Collins: Yeah.
Patrick: and we’ve gotta run away from that. We’ve gotta
Mike Collins: Yeah.
Patrick: that thing. And it’s like. The opposite is actually true. We should double down in those scenarios.
You know, it’s like things just went on sale. I should be putting more money into the
Mike Collins: but that’s not, that’s not how it works. People buy high and sell low.
Patrick: Right. They, they sure do. Mike, I, this, this conversation is, has been wonderful. I, I think, uh, like you highlighted, everybody should go to AV VC alumni ventures, um, which the website is av vc, so that’s the website.
Uh, check it out. They, you got a ton of great resources there. I think [00:46:00] booking a call and just learning a little bit more about, um, uh, what you have going on is, is absolutely worthwhile just to help figure out. know, for each investor, like, hey, what, where, where do you need to be? Uh, I think that’s, that’s good stuff.
We’re also happy, uh, if you’re listening to get you plugged into, to Mike and his team. ’cause, um. like we’ve talked about on this show, uh, the, the alternatives out there, they, they do worlds for your, um, your portfolio from a, uh, alternatives point of view. They, they, they really help. Uh, but there needs to be an appropriate size, uh, for that.
So, uh, is, this has been great. Um, Mike, any last comments before we, before we wrap up?
Mike Collins: We just, I’ll. We also have a lot of free educational material. We do, we do. Um, we have a bunch of videos explaining venture capital and J curves and how it works. We also have free webinars where we actually have some of our venture capitalists go through individual deals and how do we look at [00:47:00] them. Um, and we have in real life events, so, you know, and especially in major cities where you can kind of come and meet us and, you know.
We’ll have sessions around specific technologies you get to meet some of our entrepreneurs, which is really fun. Um, or just get to know us. So, uh, again, we think an educated customer is a good one. So, um, we encourage people to get educated and, and, you know, we wanna be your venture partner. You know, you’ve got, you’ve got a pool guy, you’ve got a tax guy.
You, you, you kind of need a, you kind of need a partner to help you navigate vc and we, we, we would love the opportunity to do that with you.
Patrick: Fantastic. So Mike, here’s what I see the stakes. I, if you don’t take action, you’re, you’re staying confined to traditional investments with capped upside. You’re missing the most explosive growth phase of innovative companies, and you’re watching others build generational wealth in the, in the private markets.
And, uh, where what success looks like is almost the converse of that, right? [00:48:00] Um, we access the high growth startups before they go public. You’re building a diversified venture portfolio. You’re not having. All of your eggs in one venture bucket, uh, or one, one particular startup hoping it hits, uh, you’re participating in innovative economy at a meaningful level, and you’re accelerating wealth creation beyond just linear market returns.
And, and I see the transformation that takes place, right? Like I invest in what’s available. You know, that’s, that’s what, you know, the, the entrepreneur listening this has access to now. To, they, they transform to I’m investing where actual value is created. You know, those, those companies before they become trillion dollar company.
So, uh, Mike, this has been fantastic. I appreciate, um, the good work you’re doing. This is fantastic. You’re democratizing this opportunity for people, uh, and it’s, it’s, it’s great. Keep up the good
Mike Collins: Appreciate it.
Patrick: And that’s a wrap on today’s episode with Mike Collins. I hope this conversation opened your eyes to what’s possible when you stop playing small with your portfolio and start thinking like investors who are actually building generational wealth. [00:49:00] If you got something out of today, do me a favor and share it with somebody.
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