Jamarlin talks to Score 3 Angels founder and investor Rashad Moore about his transition from engineer and employee to boss of his own software consulting company, which he sold to a subcontractor for a U.S. intelligence agency. They discuss Moore's experience growing up geek and the benefits of angel investing in a group.
This is a full transcript of the conversation which has been lightly edited for clarity.
Jamarlin Martin: Today we have Rashad Moore, entrepreneur and investor. We're here in D.C. What's up Rashad?
Rashad Moore: Hey, how you doing?
Jamarlin Martin: Tell us a little bit about your background and how you got into a private tech investing.
Rashad Moore: So how far back do you want to go?
Jamarlin Martin: Let's go back to high school.
Rashad Moore: High School? All right. So so I was 5.6. I'm about 6.3 now. So when you 5.6 and you're a computer nerd, you tend to get stuffed in a lot of lockers at school.
Jamarlin Martin: Man you look like Hakeem Olajuwon. You were getting stuffed in lockers?
Rashad Moore: I was definitely getting stuffed in lockers. Because I was a nerd man. At the end of the day, I was the type of kid growing up that, I don't know if you remember, you could go into a bookstore and you can buy a program, like books programs, like you go to Waldenbooks, I don't even think Barnes and Noble was around then, and you get a book, it was about 200 pages and you take it home at night and it just has lines of code and I would just sit there and type them in this little TI99 computer that my mom bought me. I was probably about maybe 10, 11 or 12 and that's what I did, and that's how I learned how to develop. That's where my interest in technology came from. And so I just probably did that until all the way through college. And to be quite frank, I never really stopped to this day.
Jamarlin Martin: When you say that you were thrown in lockers, are you seeing that folks would bully you because of your geekness?
Rashad Moore: Oh, absolutely. Absolutely.
Jamarlin Martin: Give me some examples. How much torture did you experience and was it primarily from black folks?
Rashad Moore: Well, so I grew up in a black neighborhood, right? A black working class neighborhood. So it was all black. I only grew up around black people.
Jamarlin Martin: So they were like, 'man, this guy's into computers, something's wrong with him. He's weird.
Rashad Moore: Yeah, exactly. Not really into girls, and even if was, I had no game. So it was just like...
Jamarlin Martin: You're just a nerd and you love computers.
Rashad Moore: Absolutely. That was my life. And yeah. I just did that forever. I don't remember. I was probably about 10 years old when I first started. My Dad brought home a computer.
Jamarlin Martin: He was an accountant at the oil company in Oklahoma. He brought home a computer and it was basic programming. So he used to have to write basic programs and punch cards and all that good stuff. And so I just said, 'hey, what's this?' And then he showed me a few things and it just kind of went on from there and I just kept doing it. But yeah, you can imagine, man, the football team, everyone...
Jamarlin Martin: In our community, do you think getting picked on because you're into math and science and computers, do you think that's a black thing or there's no real difference, meaning that the white geeks are getting picked on too. So there's not a big cultural delta.
Rashad Moore: That's a good question man. I don't know because to be quite frank, I didn't grow up around a lot of white people. I don't know what the white nerd experiences, but if I'm watching TV it seems like it's probably the same. I think it might be pronounced in the black community just because of our sense of male machismo and the sort of images or stereotypes that I think that we all kind of have to try to live up to that are sort of forced upon us by just external entities, if you will. Right? So yeah, I definitely think it's probably pronounced, but I couldn't, I couldn't say either way.
Jamarlin Martin: We don't have any data to back it up, but if we had to guess there's a higher frequency of harsh attacks and bullying on black and computer geek, black and math geek, black and you're really into serious things as a kid. I do think that there's a material cultural delta and part of that is just, our frequency of cool is really messed up.
Rashad Moore: Yeah. Our sense of what's cool. Our sense of style. But I think that's, that might be changing though. I think technology as it's become more pervasive, it starting to become cool with the jocks.
Jamarlin Martin: Jay-Z's investing, Nas is investing in tech.
Rashad Moore: Exactly, and rappers are rapping about tech. It's a whole thing. I think it's probably, hopefully it's gotten a little better. I mean with my kids, I sent them to nerdy schools, man, I specifically picked schools where the kids were nerdy because I wanted them to...
Jamarlin Martin: You're not getting extra points for being a thug as a kid.
Rashad Moore: Exactly. So I was like, all right, well what's the nerdiest school I can send my kids to? And so my oldest is eight, so that's where I send them and all their friends are kind of quirky, a little geeky with air quotes around and I think it suits me just fine. But yeah. But you're right, growing up it was definitely a lot of...
Jamarlin Martin: You were getting bullied. Take us through your story.
Rashad Moore: Well, so. Okay. Bullying is a strong word because I would get bullied, but when we grew up it was, I guess technically it was bullying, but you play the dozens, that was just part of the culture. So, definitely as of today's standards bullying. But, I don't really feel like I was emotionally scarred or it was something that was out of the norm, you know what I mean? Yeah. I definitely wasn't traumatized and it feels good now that you got Facebook. I can look back and be like, yeah, they still in wherever and doing whatever. And I'm like, okay, I'm doing okay. Can't complain man. Life. I'm blessed. Life turned out well. But yeah, so went to high school. I'm still a nerd. Went to Oklahoma State, studied electrical engineering, started to find my tribe. I met my wife. So I went to Oklahoma State University in Stillwater, she went to Oklahoma University in Norman, Oklahoma, probably about 60, 70, 80 miles away. We met during her last year of school, so we started in the same year, 93 out of high school. She graduated a year before I did because she's much smarter. She's got a lot of family here in D.C. and so she moved up here, still my girlfriend, I was like, all right, we spent a year apart.
Jamarlin Martin: You met her in college?
Rashad Moore: Yeah, met her in college. Because remember I had no game because I'm still a nerd. And she was the first person to give me her phone number. So I just said, all right, well we go together.
Jamarlin Martin: She was smart, forget all this short term stuff, man. I need long term play and that's getting with a geek.
Rashad Moore: Yeah. You talk about it. But I've had plenty of conversations in high school with women, black women who were like, 'Hey, look, this is my scene, this is my senior year of school. I mean, it was cool to date the football, the baseball players, the cool guys,' but they started looking at job prospects. At some point you start getting real serious about the future if you will. And who do you want to be with? Right. I'm not saying I've got plenty of friends who were football players and they are awesome people and awesome founders from a career standpoint. But you know, it's just one of the things that, yeah, I think people start to get more serious toward the end of college, which is I think the purpose of college as well.
Jamarlin Martin: And do you think there's any racial disparity there in terms of how males are evaluated at the college age in terms of, hey, maybe this community puts a lot more weight on swagger than another community that's says, hey, is this guy going to be a good husband, a good partner long term?
Rashad Moore: That's a good question. I don't know if I think there's much of a difference because you're also talking about a small subset of the world anyway. You're talking about college educated people, right? So if you say, okay, everyone who is in the small minority of people who are college educated because it's a big world out here. I think in the beginning, if I look at my college experience, most of all the women were just like, you're just fresh out of high school, first taste of freedom. It's like everyone is just doing whatever. But I think I definitely know that as you get older and you try to mature from that time when you're 18 to when you're 22, I think everyone got real serious because it's at the end of the day, it's like, look, I've got to do something with my life. And so what I will say is that I don't think there were girls that I could have dated as a senior, because I was pretty good in high school, I was on national boards and the national society of black engineers. I was doing pretty well, right. But when I first came in it was just a nerdy guy who's always in the computer lab. So even though I didn't have a whole lot of game, you could definitely tell if I started to achieve in college, then a lot of the sisters came around, and they were like, hey, who's this Rashad, how you doing, I started getting dates, hence my wife. And then we met and then she moved up here to D.C. And she's got a lot of family here. She's originally from Jamaica and I had a decision to make, it was my last year in college and I was like, I really love her. And so I decided to move up and it's been the best decision I made because I love Oklahoma, I mean the people are awesome, I've got tons of family there, but just the opportunities that are here in D.C. are just head and shoulders above what I could ever expected.
Jamarlin Martin: Do you think that it's fair to say that cultures and communities that are more anti-geek pre-21, those cultures and communities will be more in trouble?
Rashad Moore: Oh, absolutely. As people of color, we've got to start to instil a value education very early. Right. I know we don't have a lot of means as a people, right? There are reasons why we have southeast slums and we have southeast D.C. And we have north Philly and Baltimore. There's reasons for that that, that are just aren't our fault. Right. But at the same time, it's one of those things where we can do better in advocating for ourselves with respect to educating our children and educating even our adults if you will. Right. I mean it's like gonna be key if we have a plan to do anything and get out of our circumstances.
Jamarlin Martin: In Baltimore, I was driving through the hood the other day and I got lost. I lived in Harlem, I lived in Watts, Linwood, I've been in a lot of hoods, south side of Chicago, but when I was driving through Baltimore, and it's not the first time I've been there, but this time I was like, man, this looked like fucking Vietnam or something. It's on another level.
Rashad Moore: Yeah. So when I was going to Johns Hopkins on campus, I would commute from Reston, Virginia all the way over to Baltimore. Probably about an hour and a half or so. And yeah, Johns Hopkins is hood adjacent, it's right there in the hood. They're pretty much buying up all the hood, but that's a different story.
Jamarlin Martin: It's up there. In terms of hood frequency. Baltimore is like man!
Rashad Moore: It's high on the megahertz, got lots of Gigahertz. But I mean it is, it kind of is what it is and I think that there's a reason for that.
Jamarlin Martin: Yeah, sure.
Rashad Moore: It's systemic and if you think of Freddie Gray there, who got murdered in Baltimore. It's just systemic. Even though black people run Baltimore, black run city, but yet it's still systematically racist. Do you see when I'm coming from?
Jamarlin Martin: Yeah. You got black faces, but it's all kind of the same system.
Rashad Moore: The same system and I don't know how to fix that, hopefully we can find some option to entrepreneurs that can help fix that.
Jamarlin Martin: So continue on your story.
Rashad Moore: So once I moved up here, I got a job as a software engineer at a small startup called Localize. I was originally supposed to go work for Andersen Consulting, which is called Accenture now, but I moved up and this was during the tech boom, right? So this is the tech boom of 2000 or 1999 back when Netscape and the precursor to Amazon, Google, etc. And so I was just enamoured, I was like, oh man, it was huge. There was a huge tech scene over in D.C., you gotta think AOL was there, all the telcos were there. It was a lot of wealth being generated. And so I joined the startup, there were six of us, we hired a couple more people. We then sold that to AOL. I made a total of $2,000 and you know, we got bought for many millions, but that's how I learned about equity and how that works, stock options, etc. So I worked at AOL for a little bit, for about a year. Loved it.
Jamarlin Martin: They were based in Virginia at the time?
Rashad Moore: They were based in Virginia. I did like working there for couple of reasons. But then I'm not a big company guy so it got real old real quick. But I liked working there because the developers there, the talent.
Jamarlin Martin: Did you see a lot of politics from an engineering perspective?
Rashad Moore: I was only there for a year, a little bit. Mostly what I saw was sort of complacency to be quite frank, because if you remember AOL was like at this point in 1999 to 2000 when we bought, it was at its height.
Jamarlin Martin: 'You've got mail'.
Rashad Moore: Exactly. They were doing movies about it. And there was just a lot of really smart people, really talented people who were just waiting to vest. And if you don't know what that means, it's like, hey look, they started AOL when It was like maybe halfway or when it first started, they might have $10 million or $20 million worth of unvested stock options. So at that point they just wanna stay there long enough not to get fired until their options vest and they can pull the rip cord and they can leave. Right. And so...
Jamarlin Martin: Rest invest. Have you heard that term, rest invest.
Rashad Moore: I've not heard of that. That sounds exactly like it. So when big companies get too big, it's kinda like...
Jamarlin Martin: Man, once I invest my stuff, man, I'm out.
Rashad Moore: I'm out and I don't blame them. I mean, there were secretaries that had $4 million or $5 million in stock options. And I'm like, wow, okay, the parking lot was really awesome, lots of Lamborghinis, Ferraris, etc. Surprising, the level of consumerism, because it wasn't a majority, it wasn't a black company. And so sometimes we get tagged with that sort of materialistic monica, I think it's just rich people in general. So worked at AOL, but then we all got laid off, so they bought our company for so many million and then they laid us all off during the tech bust, and then I was like, all right, well what I want to do with my life. So I went back to grad school because what I did learn at AOL is what world class developers look like, right? So remember, I'm a developer, I'm a software engineer, I want to be the best, right? So I'd never seen the best. And so I was like, okay, these guys are really, really good. Right? And so I started taking a look at where did I not match up? Right? And so I just figured that out. That's when I went to Johns Hopkins, studied computer science focused on artificial intelligence.
Jamarlin Martin: Is this a graduate program?
Rashad Moore: This is a graduate program, a master's in computer science, and then I was working at Mitre Corporation, which is a research and development company. So I was doing research there and I was like, I'm going to dedicate myself to getting as good as I can get at this, at what I do, which is software engineering technology, and so that's what I did. So I probably spent the next 10 years just a every day. Remember when I was eight years old, I'd just come home and copy lines of code. I would come home and I was just writing code, writing software. I did that, worked at Mitre for about four years. Got two graduate degrees at Hopkins. And then I was like, hey, I want to start to do something more entrepreneurial, because I've always been an entrepreneur. And then went to work for a small defense contracting company, there was about four of us there. A year later I was like, hey, look, I've got to start my own thing.
Jamarlin Martin: How did you find them? Or did they find you?
Rashad Moore: Just through a mutual friend out in northern Virginia, just a friend of a friend who said, hey, I've got a buddy that's starting a defense contracting company, he's looking for people. And I was like, hey, I'm ready to leave Mitre. I want to make more money, because researchers don't get paid as much as I thought they might have, and then I learned how defense contracting worked, at the next company Clear Solutions. And then I was like, hey, look, I can do this. And so I about a year after that I said, all right, I started a company and I went and I created a couple of powerpoint presentations and I went down and went to General Dynamics, I went to Booz Allen, I went to Northrop Grumman, everybody I can even think of, I was just talking to anyone who will talk to me. And then and I was working in the intelligence field, I was good at what I did, and I was in the intelligence field, so that makes it a little easier to to find work because they're always looking,
Jamarlin Martin: Define for our audience. You're in the intelligence field, it's just that fact that, hey, I'm doing stuff for agencies...
Rashad Moore: Three letter organizations without getting too, because I still you can't be precise. You've seen Jack Ryan, you've seen those.
Jamarlin Martin: I have a buddy. I spent a year at Syracuse University college of law and one of my good friends when he graduated, he just dropped off. A lot of us, we couldn't communicate with him and to this day he's super ambiguous about what government entity or what he does, but we've concluded where he works, but he can never just tell us like, what's up. But go ahead.
Rashad Moore: Yeah, no doubt. And likewise, I try not to share too much. So I finally got the first contract with Northrop Grumman, and that was because the customer that I used to work for that I was actually working for at the time, he really liked what I was doing and when I told him I was going to go work on this other contract, he was like wait, I'll hook you up with a contract. And so he called Northrop Grumman and said I really need this guy, Northrop Grumman called me like two or three hours later and said, hey, we've got a contract for you. And the next day I was on a contract, two weeks later gave two weeks’ notice. Two weeks later I was in business.
Jamarlin Martin: Nice, so you got your own contract?
Rashad Moore: Yeah, absolutely. We were subbing through Northrop Grumman because in this space, the big guys, your Northrop Grummans, your Booz Allens, those folks, they suck up all the work, but they need people to help fill in the gaps. Right. So we filled in all the gaps, right? So Software Theoretic is the name of the company that I started. That was the origin of it. That was 2007. Just worked really hard, talked to as many people as I could, recruited as many people as I could. Got as many contracts as I could and anyone who would listen to me, I just sat down and told them, hey, this is Software Theoretic, this is how we work, this is what we do, this is why we're the best. No one's ever going to be, this company is offering you this, I promise you we can do better. We just can't lose and that sort of hustling mentality that we grew up with, which I think is a good thing, right. It's just like Jay-Z, I cannot lose, right? That sort of mentality. I've got to win and whatever I gotta do to win. That's what we gonna do.
Jamarlin Martin: So you just have a dream, a vision and you just start pitching to the groups out here that do contract work.
Rashad Moore: Yeah, absolutely. You got to provide value, right? So it's one of those things where, why would Booz Allen bring you on as a sub versus the other 100 or thousands of people who are pitching them as well. Right. So being good at what we did was a plus right? You know, so when you were walking through the halls of these government organizations and someone was from Software Theoretic, it was always a positive response, right? Because we were just going to be better.
Jamarlin Martin: When you're dealing with the intelligence community in the United States, I gotta think folks in our community, you'll get some voices that be like, he's connected to intelligence agencies in the government, he's hot, I'm skeptical of him. Have you ever encountered any of that?
Rashad Moore: No, not really.
Jamarlin Martin: That's culture out here, a lot of people are doing contract work.
Rashad Moore: In D.C. that's just kinda like everyone, your next door neighbor is working for the same people. But I mean we can understand that because, I'm not trying to speak for any particular agency, but there's a lot of very critical theories about agencies and the black community and yada, yada yada, that goes back way back. But this is what I will say though. There are a lot of people in a lot of these agencies that are good, hardworking folks that also put their lives on the line for us. Right? And the whole purpose is that if we do our jobs, if we build the right technology, then we can save lives, right? We can stop wars, we don't have to go to war, that type of thing. But yeah, I can definitely see that in the black community that some people would be kind of skeptical.
Jamarlin Martin: You find a partner and what happens next in terms of subcontracting work?
Rashad Moore: So basically the way it works is, Booz Allen, they'll pitch these really large contracts, so my biggest contract, there's was like 1800 people on it. And so there's several primes and they'll need software engineers, they'll need testers, they'll need program managers to build certain applications and products and things like that. And our goal is to go out and find the best software engineers in the world, the best testers, the best IT professionals and then compete on skills and price. And for example, we were the largest, so General Dynamics, who was the prime on this one contract, they had about probably about 70 or 80 different subcontractors. Some large companies like BAE, I think was a subcontractor to them. We were GDs largest or third largest subcontractor just on that contract, period, of about 1800 people. So we just went out and competed and so that's just how that works in there. Of course there were other types of government contracting that people can get into that that require less clearances and things like that. But I think at the end of the day you still have to have that drive.
Jamarlin Martin: How did that work in terms of security clearances. What level did you need to go up to and can you explain that for the audience?
Rashad Moore: You need to go all the way. Yeah. So I when I was working at Mitre, an interesting story, how kind of fate and luck intertwine and work. I was working at Mitre and I was a researcher and I was building genetic algorithm models, or building genetic algorithms to sort of solve problems for this group at the customer site. And I didn't really know, because I wasn't cleared at the time, I didn't really know what they were doing with it. I was just like okay, I need to build this. And so I was building it and then they were like, 'hey, you want to get a clearance and go work on site and actually see what we're using your stuff for'. And I was like, yeah, sure. So you fill out all the paperwork, it's like a stack of paperwork 40, 50 pages, and they just look at everything in your life. Everywhere you lived, all your family, your friends, they look at all of that.
Jamarlin Martin: The sister who stole a pair of shoes or their brother breaking into an amusement park when he was a teenager, does that disqualify you for all the way up?
Rashad Moore: No, not really. You'd be surprised what you can get away as long as you're not...
Jamarlin Martin: I got caught with a sack of weed. Let's say someone got caught with a sack of weed when there were 17. Can they go all the way up?
Rashad Moore: Yeah, you can go all the way up with that. That's not going to disqualify you. If you got caught with a sack of weed last week, that would disqualify you, but you got to think about it. Right? So think about it, because there are people, let's just say white guys that are in their fifties now, right? They grew up in the sixties and seventies. Right? So maybe even 60 years old at this point. I mean, they get clearances, and you can imagine what the sixties and seventies were like. So as long as you're not doing it now you're good to go all the way up. You just have to find someone to sponsor, and around here that's pretty straightforward, but it takes about a year.
Jamarlin Martin: Okay, got it. So the level of clearance you need. Are you at the same level as a secret service, or a little bit different?
Rashad Moore: I don't know. That's a good question. I don't know. I mean if someone felt I had the need to know which to be quite frank, I do very mundane things at these agencies. So I actually make a specific effort not to know anything. I just build software.
Jamarlin Martin: You get your partner and what happens next?
Rashad Moore: You just show up to work and you find people, you convince people to come to your company and show up to work as well. And it's all time and materials.
Jamarlin Martin: For your company, are you the founder or do you have a team?
Rashad Moore: For Software Theoretic, I was the CEO and founder, so that was just me, but we sold it about three years ago to a private equity-backed firm.
Jamarlin Martin: So let's talk about building it up before you sell it. So the growth trajectory and what went on there.
Rashad Moore: So you grow it. So we probably got to about maybe 25, 30 people that's six, seven, $8 million a year or something like that. Decent margins, not like enterprise SaaS product margins, so you just kind of grow it. It's just a recruiting game, because there is no unemployment line for cleared developers. So you're stealing them from somewhere. So if you're making $120,000, $100,300, $140,000 at General Dynamice, and Rashad comes up to you and says, 'hey, do you want to come work at my company doing much the same thing', I've got to have a better opportunity for you. Right? So either it's going to be more money, more benefits, gotta be a better work culture, a better work environment. And I think we provided all of those, right? So we were voted one of Washingtonian's 50 best places to work at because culture was very important to me.
Jamarlin Martin: How's the transition, where my engineering game is tight, but now I have to step into another role as a boss, as a CEO, as a manager. How was that transition?
Rashad Moore: Yeah, that's a good question because when I started Software Theoretic I was a software engineer, like I wasn't VP of General Dynamics and I had all this experience leading people, managing people in the real world if you will. But back since college, I'll tell you, I started studying leadership in college so when I got out of high school and then I transitioned to college, that was a pretty tough transition because I was getting really good grades in high school and you're doing great in the AP tests and I had all these credits going into high school, into college and I hit a wall around sophomore year because although I was smart and I can get good grades in high school, I didn't really know how to study. I didn't know how to process all of this new information that was coming to me super fast. So I hit this wall until I had to really sort of figuring out how to learn, right? So I really practiced learning how to learn and part of that was I also started getting involved with the National Society of Black Engineers at the local level and then at the regional level. So when I was in college, and this is what it was kind of referring to back earlier, I started to achieve things in college, so I chose the National Society of Black Engineers to get really involved with. Right. And it has been the best thing that ever happened to me. And so I was on the chapter board when I was a sophomore and then I got on the regional board where it was in Texas, Oklahoma, Louisiana, like 10 states where I was a geek, remember, so I was the telecommunications chair, and this is like being the telecommunications chair when the internet was being invented, right? So it was like, we were all just getting email addresses the world wide web became a thing. So I came up in sort of this National Society of Black Engineers leadership structure, leading, bringing the national black engineers onto the web and really being able to leverage these new technologies regionwide first.
Jamarlin Martin: So you're developing a operational management skills, outside of coding and developing with this organization?
Rashad Moore: Absolutely. And so that's what we do at the National Society of Black Engineers, we build leaders. Right. And then I ran, you had to campaign and all that good stuff for the national telecomm chair. And so I was that, and so I had the whole nation and it was about 100 chapters or so, if not more, someone will fact check me in the comments or something. But I had a whole, what we called the Nesbinet or the NetGs, which is about 40 or 50 black computer scientist, engineers that formed my sort of committee. So I really started studying leadership then and so some of my contemporaries were like Randal Pinkett, you've heard of him, S. Goron Moore, tons of people that I look at now, Adrian Mitchell, who I think, he was at McKinsey and now he's the CEO of Crate and Barrel I believe, right? So he was my region five chair when we were on the board together. So I really studied and just looked around at all of this black excellence and all of these black leaders, and I just studied them. Right? And I read books, John Maxwell, all of them. Right? So it was sort of a natural transition to leadership because i've just been practicing and I failed a lot in college and I failed a lot at these sort of outside organizations with respect to leadership, so when it became time to make that transition into being someone's boss responsible for someone's mortgage payment and their kid's tuition and all that good stuff. It was pretty natural. But I put in the work beforehand though.
Jamarlin Martin: So before you sold your company, I imagine you had to terminate folks.
Rashad Moore: No, because the people are the goods. So we are time and materials. So we were a revenue stream. So anyone who left was like, oh man.
Jamarlin Martin: So you didn't have to encounter that problem.
Rashad Moore: No. And then plus on top of that, I mean, because I believe in people and I believe that we have to take care of people. So I wouldn't have sold it if it was going to be a big bloodletting or something like that.
Jamarlin Martin: But you never had performance problems on a 30-member team, meaning like it got to the point where if you don't step it up, man, you gotta go?
Rashad Moore: Not at Software Theoretic, because we screened for that. We really did screen for that. So we've been fortunate. I'm not saying that in other startups and things that that's not the case, but I would say we were blessed and fortunate that we didn't have a lot of those issues.
Jamarlin Martin: Okay. When it was time where you thought about selling your company, was it a kind of folks coming to you or was it like, hey, it's time to push the cash out? Did you hire a banker?
Rashad Moore: No, bankers are expensive too.
Jamarlin Martin: Or in this case they'll call it, I believe, a business broker.
Rashad Moore: Business brokers or sometimes they call them investment bankers, etc. So once you start getting a company of a certain size, 20, 25 people or so those folks come looking for you. Yeah, sometimes. But I mean it's a whole, D.C. is this whole economic engine that is just ridiculously big. And to be quite frank, it's even bigger than Silicon Valley. Right? So we're talking about, look at Andreessen Horowitz or some of the biggest venture capital funds that are out there are like a couple billion, maybe $10 billion, right? There are private equity firms, I can see him right here across the bridge, right, that are doing hundreds of billions of dollars in funds and private equity and they're buying companies like CSRA and then CSRA buys a bunch of companies and then those companies buy a bunch of companies like my company and it's just like they vacuum it all up.
Jamarlin Martin: A lot of slush funds out here.
Rashad Moore: There's a ton of wealth.
Jamarlin Martin: There's a lot of money out here in D.C., the hoods may look like Vietnam or Afghanistan, but there's a lot of money out in D.C.
Rashad Moore: Yeah. But that's a different story where we are, it's not a bad living, but there's a ton of money out here and there's a ton of opportunities and I didn't really even know about that until we got offered to be bought, you start to learn about who the private equity firms are.
Jamarlin Martin: So how did the inquiries come in? Do they knock on the door, like, hey, are you open to being acquired? How does that develop for you?
Rashad Moore: You're not buying someone's company, you don't buy someone's company via like some kind of drip campaign or something like that. It's just like more social. It's like, okay, I know John, he works wIth some small boutique investment banking firm, and in deals my size it's more of the boutiques that you'll find.
Jamarlin Martin: So it's very informal.
Rashad Moore: The way we got bought was through a guy named Jay, he had a company roughly about the same size, slightly bigger, he was actively looking for someone to buy his company, right. And you got to have friends in this space. So he was a real good colleague and we would work together on a lot of things. And he found a company that was backed by a private equity firm to buy his company and then he was like, hey Rashad, for about a year or two he was talking about it. And then I was making good money and I was like, man I'm having fun, this is awesome. And then I turned 40, so I'm 43 now and I was like, you know what, I've done this for about eight years and I wanted to do something different from the standpoint, I absolutely loved running Software Theoretic, it was a blessing and everyone who has ever worked there, I just adore tremendously and have the most respect for. But it was one of those things where as a creative, because I'm a creative, I'm an entrepreneur, I'm a creative, I build things. I wanted to build something different. I didn't know what that thing was, but I was like, all right, I needed to make room in my life for whatever that next thing was going to be. And if you own a company, the only way is to sell it. Right. And then I was like, okay, well I'm about 40. I started to think about my dad, he passed away, he was 60. So I was like, all right, well I don't want to stop at 60, but let's just say I only get 60 years, just like my dad. Then I'm like, okay, well, how would I like to leave the world? Right. What contributions can I make that will make the world a little better place than when I arrived? And so went ahead and decided to sell the company, just talked to the wife.
Jamarlin Martin: You wanted a lifestyle change and you want it to do more good, sounds like.
Rashad Moore: Yeah. And I wanted to be able to see what else was out there in the world. And so we sold it. I worked at the company for a year as I told him I would, and then I rode off into the sunset and took about a nine-month sabbatical.
Jamarlin Martin: Yeah. So you're one of the few folks that have an exit that looked like us, where you sold your business. It sounds like it wasn't just about the performance of the business, meaning that you guys were generating a profit, you guys were doing the work, you're growing your company, but that's just part of it. It sounds like a lot was riding on your reputation, your networking, your social circles, how you interact with people. That was a big component of getting a deal done.
Rashad Moore: Yeah, absolutely. One hundred percent. Yeah. It's who you know and making intentional investments in building authentic relationships with people around you and people that might look like you.
Jamarlin Martin: The relationships that really helped you to get to the point where you complete a deal, you sell your business. Are those relationships mostly with white folks? Meaning you need to be able to, in your case, you need it to be able to interact kind of in a comfortable way with white folks.
Rashad Moore: Oh, absolutely.
Jamarlin Martin: That was a big piece of it.
Rashad Moore: Yeah, and to some people listening to it, it sounds weird to say, 'oh, you got to learn how to act around white people', but it's true, right? It's one of those things where it's like if you are a person that grew up in an all black community, went to all black high schools, went to PWI or predominantly white institutions for college, but then you come to D.C. and to be quite frank, there's a lot of black people doing really well. And that was one of the reasons I liked coming here is because I wasn't the first black person in a boardroom and typically I wasn't the only one and that was very comforting. Right. But yeah, I think you just have to be able to work with all different types of people
Jamarlin Martin: And you weren't changing up like Stanley with the pink shirt on Friday, meaning that when you're networking and you're building these important relationships that could have a future pay off, are there any noticeable change ups?
Rashad Moore: Of course.
Jamarlin Martin: So you do go Stanley.
Rashad Moore: Yeah, sometimes, of course, I mean I'm one of those things where if I'm at home or around my boys and friends...
Jamarlin Martin: But I'm just saying from a professional perspective. So let's say you're doing deals with black CEOs, professionals and you're doing deals with white professionals and CEOs, you're self aware enough to know that you go kind of Stanley in those circles?
Rashad Moore: Of course. And to be quite frank, a lot times when you're working with other black professionals you want to be even more Stanley because sometimes you just never know. We, as in black people, sometimes don't trust us as much as we trust others. Does that make sense? Do you see where I'm coming from. I mean I will use the queen's English and I'll talk properly if I'm giving a presentation.
Jamarlin Martin: What's up Stanley?
Rashad Moore: I'll put my suit on even though I hate wearing suits, I've got two suits, but when I need to, I'll put my suit on and tie and we're going to make it happen. And that's just how it is, you know? And then even in the angel investing circles, this is predominantly all white, all wealthy. It's the same type of thing.
Jamarlin Martin: What do you say to folks who criticize Bob Johnson or criticize a black business owner when they sell their company? 'Man Black black folks, man, they sell their companies. They don't keep their companies like other people'.
Rashad Moore: That's actually a very good point because if you even think about Shea Moisture, they sold, and there was a lot of people, 'oh man', you know exactly what I mean. I think that's because we don't know, and to be quite frank in college, I would've said the same thing, right? 'Oh man, BET sold...' I'm being dead serious. We need black owned whatever, whatever. Right. But what you don't really realize is that once you build a billion dollar, first of all, if you look at BET, that was one of the biggest black companies around back then. So there wasn't another black person that had a couple of billion or whatever, for dollars in their pocket to write the check, right? It just didn't exist. Right. But now you've got Robert Smith he's got billions of dollars in the private equity fund who mIght be able to take that off the table. But back then there were no other buyers, so you were going to sell to, I can't remember who it was, but they sold to some media network because they're the ones that had the money, but now these exits allow black people to be able to do things like fund other companies, right? Philanthropy, right? Fund nonprofits to give back, because if it's all locked up, if you've got a billion dollars but you can't spend it, right...
Jamarlin Martin: It's not liquid and you can't do anything with it.
Rashad Moore: So I've got $2 billion in the bank account now. Not me, but I'm Bob Johnson and I got whatever they sold for, right? I got all this liquid cash and now I can start to do some things right? I can start to make the hood better if you choose to
Jamarlin Martin: Or in the case of the brother who purchased Essence, who started a $50 million fund for black women.
Rashad Moore: Exactly.
Jamarlin Martin: Just like you need to go to the bank sometimes and get cash for certain things. An entrepreneur who's taking a lot of risks, they don't have access to the cash of the enterprise. Right? And so you push the button with a buyer that leads to a lot of flexibility. So now you have cash, maybe you go invest and you take $1 billion and you make it $50 billion because now you have the flexibility to go out and do things. Jay-Z started flying when he started pushing the liquidity button on Rocawear, on Rockefeller.
Rashad Moore: Absolutely.
Jamarlin Martin: He unlocked his value.
Rashad Moore: Yeah. And I mean if you look at Jay-Z, that's sorta like the blueprint literally and figuratively, right? He started with a business that had very low capital needs, making music, and then just parlayed it into bigger and better things.
Jamarlin Martin: With you selling your business, in our community, we need to appreciate that part of selling a business is offsetting risk. So it seems like when people have these views, like, oh, the black business should never sell to another company. That part of selling your business, what happens when the magazine industry collapses? What happens when you lose your contracts with the government? What happens if a recession happens? So the political aspect is like, hey, always keep it a black, black, black. That would force the black business owner to really hold all the risks. When you're running a business, things could happen where the business has to close down. They're smart, they're trying to adapt, but maybe someone has a bigger wallet. Maybe someone has bigger connections.
Rashad Moore: Yeah, absolutely. And that's a key. That's a key point. I mean, one of the things is you want to sell at the height, just like anything you want to start low and you want to sell at the height of the market so that you can unlock the most cash, and risk is actually a really important thing. And you can do that in other ways. You can also sell portions of the business, so you might say, okay, I own 100 percent of the company, so maybe I'll sell 40 percent of the company, right? And then so have you got this big nest egg in the bank and still run the company. I'm still doing what I want to do. So you can kind of take money off the table that way or take risk off the table. So that's also very important as well. But at the end of the day, in my opinion, companies are built to be sold or monetized, right? You start a company, you build value, you unlock it, right? And then you rinse and repeat and then that's how you build wealth, right? You have some anomalies like Zuckerberg and Gates and that type of thing.
Jamarlin Martin: I would argue that they have monetized in terms of most of the company is owned shareholder-wise by others so that they have pushed the liquidity button, maybe not all of their personal stock.
Rashad Moore: Yeah, they sold off big chunks of it. So now you can go buy the Washington Post and save journalism, because we need good journalists.
Jamarlin Martin: Okay. So you sell your business and you and you becoming an investor.
Rashad Moore: Well, I started investing before because now you start to make a little money, you starting to meet people and then people will offer you these deals like, hey, there's this company that I'm talking to, they are doing X, Y, and Z they're trying to raise a round, would you be interested, yada, yada, yada. And so you say, okay, I'll take a look. And then you start to get introduced to people who are now sort of in angel groups and you get invited to the meeting and you show up, okay, this is all right. And you start meeting people. And then one of the things that I want to always do is I try to add value, whatever group that I'm in, I try to add value. So I was like, hey, I'm really good at technology.
Jamarlin Martin: So you start angel investing. Did you get scammed in a deal where somebody miss-resented something or something new?
Rashad Moore: No, I'm a due diligence fiend, man.
Jamarlin Martin: Okay. That's interesting because essentially with angel investing, that's one of the, I believe less appreciated risks is that a venture capital firm, they have the due diligence platform and resources to do extremely well at due diligence. They may miss some things, but they have the due diligence platform where if I'm investing as an individual that becomes a problem in terms of scaling that.
Rashad Moore: Absolutely.
Jamarlin Martin: Do you have any advice in terms of, if you want to get into angel investing how should you think about due diligence and making sure that you're not hustled out of your money?
Rashad Moore: Yeah, that's a good question. So the first thing is you've got to join groups, right? So if you're going to invest, it's always best to join an investment group. In this case, if you're invest in startups or private deals, they typically call that an angel group. And for example, my angel investment group is about 60 or 70 accredited investors, who all come together, we meet every month and we look at a couple of deals a month together. And then we all decide, do we like this company well enough or enough to go into due diligence.
Jamarlin Martin: So you're not going in and thinking I'm smarter than everybody else. I'm going to do my own thing. You're saying, I got a role with other folks who are smarter than me with more resources to de-risk my investment. I'm not parting what my capital until this stuff is checked out properly.
Rashad Moore: Absolutely, and I've actually been saved a whole bunch of times from getting over exuberant about a particular company. I'm like, 'this company's going to be awesome, it's gonna be awesome'. And then when you bring it to the group, people start to point things out that I didn't really think about and then it's actually saved me. Those companies have gone to zero because of forces that I didn't necessarily see or I couldn't see because I just don't know. Right? In the group we've got doctors, lawyers, we've got finance. We've got the whole range of folks and if you're in that room, you're going to be good at something, right? Whatever that thing is that got you into the room, that got you to become an accredited investor or whatever it is, you're going to be good at that thing. And then most people bring that talent to bear for the group. So for instance there's myself and a couple of other folks, we understand technology, we know how it works. So if you're an AI company, you come to us, then I'm going to grill you about okay, well how are you setting up the models, yada, yada yada? Whereas my colleague who's the lawyer might not have a clue what questions to even start to ask. Right? But from a regulatory framework, if you were trying to do something like bird scooters or whatever, there are folks in the room that will know exactly what questions to ask to make sure that this company is doing what they need to do. So we've been fortunate that the power of due diligence, I learned that very early in my angel investing career, which started probably about six or seven years ago, that you've got to do the due diligence. And when I do solo deals, I run through the whole due diligence. I even teach due diligence to other angel groups and colleges and entrepreneurs and things like that.
Jamarlin Martin: Interesting. And so where can our audience connect with you? Let's say, I want to learn more about due diligence. You teach it. How can we connect?
Rashad Moore: Just send an email to firstname.lastname@example.org.
Jamarlin Martin: Okay. So you go from angel investing to launching Score 3. Can you talk about that transition where it's time to scale this up a bit?
Rashad Moore: Yeah. So remember we talked about selling the company, I was like, okay, I'm 40, what do I want to do with my life? How do I want to make the world a better place? Right? So before I sold the company came up with this concept of Score 3.org, right? I was like, okay, I'm going to create a nonprofit foundation that's going to do something. Four years ago, we didn't really know what that something was going to be. But the genesis of it is, if you think about your life in scores, so like 20 years. So if one score is 20 years and you start to say, okay, in the first score in my life, I'm growing up, I'm just born, I'm becoming an adolescent, I'm going to college, I'm becoming an adult, if you will. The second score of your life is all about your profession, it's your professional life, I'm hustling, I might be having kids and I'm trying to build a set of achievements, right? And then when I think about score three, and then I was like, okay, well my dad got exactly three scores. Obviously I want more. But I was like, okay, in this third score of life if you haven't already, you should really start focusing on giving back. Right? And making the world better with whatever resources, whatever means you've been able to amass during scores one and two. Right? And if you're lucky enough to get a score four, God bless you. But I was like, okay, I want to do something. I didn't know what was going to be, but I know that I have an absolute love for helping founders, and I got really good at it.
Jamarlin Martin: When you say helping founders, are you talking with an emphasis on black founders?
Rashad Moore: Black, brown and women.
Jamarlin Martin: You wouldn't prioritize black founders in that?
Rashad Moore: No, but I'm black so black people tend to gravitate to me just like if I were a woman then women would tend to gravitate to me, but in general I'm about all people that are underrepresented. Right? So it's one of those things where we all have our institutional bags or institutional oppressions to work through. Right. Whether you're black, whether you're black and a woman. Right? I actually, to be honest, if I had to think about it I do have a stronger bias towards helping black women founders. If I had to pick, if I had to be really real about my biases, I would say it would probably land there.
Jamarlin Martin: Yeah. So when you say that you want to help disadvantaged groups, you could live and be comfortable with your group. Let's say if the data showed that you guys invested in 50 percent of white women, could you live with that?
Rashad Moore: No, because that's not how it breaks down.
Jamarlin Martin: But I'm saying based on the deal flow and what looks good, that sounds like a stretch?
Rashad Moore: Yeah, no, I would probably say, and I actually did write this down, so I might have the numbers off a little bit, but if it were 20 to 25 percent of white women, if it were 20 to 25 percent black women, maybe a little more, maybe 40 percent black women, brown, Latino women because you can't forget about the Latin community, and so a good mix across all of them. Right? So I think if we ended up with 50 percent white women, I think we probably didn't look hard enough for deals in the other and the other areas and I'd probably over index on black women, from a Score 3 perspective. But from a personal Rashad investment perspective, I invest in everyone. I just want to make money.
Jamarlin Martin: What do you say to some brothers who have shared with me that when folks are creating these funds specifically for black women, that the black pot for both genders is so small, so subscale, it's silly to start dividing pots specifically for black women? So if a brother said that, hey, you're dividing the community, the pot is not even big enough, why are you guys already dividing pots and excluding black men?
Rashad Moore: Yeah, that's nuanced. So if you look at it at a very high level, any black and brown fund is going to be so small that it's in the grand scheme of the billions that are invested, it probably won't make a dent in moving the numbers. Right? As far as representation, right? Ideally what we want to do is we want to make sure that the people who are writing the checks at all of these funds start to look more like the rest of America. Right? And I think that's how we solve the problem. But I think you have to have. I think if a fund manager wants to create a black and brown fund or a black women fund or a Latin x fund or what have you, then I say they should go do that because there's also an arbitrage there that people are playing as well, right? Because if through institutional racism and biases, etc, the mainstream funds and fund managers are overlooking this awesome pot of awesome entrepreneurs, then you could make a rational economic case that by investing in all black women, you're going to get lower valuations, which you will because there's not going to be much competition for the deal because of all the institutional racism. But what we have found is that if you look at companies that aren't techie like Shea Butter and some of these others, they get valued on exit just like everyone else because they're starting to use real metrics and real numbers, right? So the valuations are low and you give them a chance and anytime we've been given a chance, black people, brown people have been given a chance and the rules were all the same we, we excel, right? Just like everyone else, right? All we look for is a chance. So if this fund gives 60 black women a start because at the end of the day, the black and brown funds that are being created, you're still going to need capital from the majority funds to get to exit velocity, right? So you might get a million, you might do a million dollars for a seed or an A round from a black and brown fund, but that B round and a C round, you've got to go to the regular gatekeepers of capital, and so you'll have to perform there as well. So it's complicated, it's nuance. I think there's an argument that can be made for it. But at the end of the day, it's not enough. And to be quite frank, I watched Arlan Hamilton raise her funds. And I saw what it took to raise her first couple of black and brown funds and it was tough. And she's got some of the best VCs in the business in her funds, and it was a very small fund, so I just don't think there's a lot of appetite from wealthy people to invest in a black and brown fund. But hopefully that'll change in the future.
Jamarlin Martin: Give us a few names of some startups that you have invested in through your network or yourself. What have been some success stories?
Rashad Moore: So I'm still a little early, so I wish I could say that I've got a Facebook or big assets.
Jamarlin Martin: On paper it's doing well.
Rashad Moore: On paper there are a couple of ones. So Mars Reel is doing well. So Mars Reel is sort of the ESPN for millennials, they're doing really well.
Jamarlin Martin: Shout out to the brothers from Mars Reel, great to see you guys moving the needle.
Rashad Moore: Absolutely. Brandon and Bradley are doing awesome things. Co-invested with LeBron James and a bunch of other folks, Nas, just tons of people on the Mars Reel cap table that are going to be very instrumental in pushing them forward. Right? Let's see. So my longterm favorite is Pay Your Tuition, Stacie Whisonant is a phenomenal entrepreneur. Let's see. So Mars Reel and then also StreetShares, an online lending platform. They've raised a significant amount of money, after we invested. I led the due diligence through the New Dominion Angels in one of the earlier rounds, when we were really focused on fintech. That's majority company. Mark Rockefeller and Mickey Konson are the CEO and COO of that company. Yeah, I would say those are sort of the top ones. I've also invested in a company called Foodhini, which I really like. Shout out to Phil Vang, met him at Halcyon House. And Foodhini, in my opinion, is going to be the largest restaurant in America probably in the next six or seven years, right? And we're leveraging last mile delivery companies like UberEats and DoorDash and centralized kitchens and so forth and so on and more to come. I don't want to talk out of turn, but more to come. You'll be seeing and hearing a lot about Foodhini over the next year or so.
Jamarlin Martin: One underappreciated area of angel investing that brother Rashad is leading the charge on is for the investor you're getting a non-correlated return or a return that's not as much correlated with what the stock market does, what the real estate market does, what the bond market does, and so it adds diversification, value to your wealth creation portfolio, and to Rashad's point, you just got to start the game with a group and learn, and make sure you get your due diligence right, because there's a lot of scammers out there. So the entrepreneurs who pitch to you and you, I'm sure you've seen a quite a few deals. What are some bad things that you've seen where it's a pattern where, hey, I see quite a few people who get this wrong when they step to me?
Rashad Moore: A lot of them don't know their numbers.
Jamarlin Martin: When you say don't know their numbers, you're talking about industry, forecast, what are you talking about specifically?
Rashad Moore: I'm talking about all of the above. I guess not knowing your numbers is another way of saying they don't really understand how their business works economically.
Jamarlin Martin: They haven't thought about it enough, not at the level where Rashad is going to part with his money.
Rashad Moore: Or just anyone will part with their money, right? A bank or your sister.
Jamarlin Martin: In a bubble market, I would argue, people do part with their money. When you're at the end of the economic cycle right before the fall that, due diligence starts to collapse, as we saw in the mortgage market. We saw that back in the 2000 market. Crypto, people are parting with their money.
Rashad Moore: Yeah. Fair point. Fair point. Rational, sane people. They just really don't think through how their company works economically. So when you actually start to try to explain it to you, they step through it, it's like, okay, well how do you do this and how you do this? And they make just weird assumptions about all manner of things. I would say just have a good sober understanding of how you make money, right. That would be one of the biggest ones. Some of the other ones, to be candid, some of them just aren't that good as far as the talent.
Jamarlin Martin: When you say not good, are you measuring by knowledge, intelligence or how are you measuring whether they're good or not?
Rashad Moore: So from an investor standpoint, how do I know if someone's good? That's a tough question to answer right? But either they're not ready for what they're trying to do, right? Meaning, they haven't put in the work to get good at something or get talented enough at something such that they could potentially build a team because remember, teams win, right? Talented teams win hands down, right? You talk about a A team with a B product is going to mop up a B team with an A product every day. Right? And so we're trying to find the teams that are gonna win. And so you got to find the ones with the most talent, right?
Jamarlin Martin: So you're kind of a GM for the Bears or the Redskins. You're just saying the talent, a lot of times, that steps when I start digging in, it's just not up where I'm gonna put this person in as my right receiver or quarterback?
Rashad Moore: That's a good analogy. Very good analogy. It's like, there's only so many people that can play in the NBA. Right? There's only so many people who have actually put in the work to get to that level. I mean, obviously on the periphery, there are people who just barely didn't make the cut off to make the NBA, but they're still good football players or basketball players. Right? It's almost the same thing. The same type of work ethic that you need to become an NBA or NFL player is the same kind of work ethic you need to become a high flying startup CEO or CFO or CTO, is that work ethic. It happens across no matter what race, it's just that we need to get better. We're not on average, so I'm going to be very clear. There are awesome African-American business people talent. There's talent out there that just isn't being rewarded and being recognized and that's why you have some of the black and brown funds and some of these other things. Right? But if I said if I just took 100 random folks, what I am personally seeing is that the African-Americans, we tend to be not as far along professionally and or...
Jamarlin Martin: Experience-wise in terms of knowledge of the game.
Rashad Moore: And that's for a lot of reasons because I don't want the whole audience to get upset at me, that's for a lot of reasons...
Jamarlin Martin: It's called go hard or go home, we gotta keep it real here. The chips gotta fall where they may.
Rashad Moore: Absolutely, so a lot of those reasons are out of our control. But I think the response to that is inside of our control, right? So if you come to me and you've not done anything of note such that you can make me believe that another person will want to join you in this quest, right? Because if you think about it, remember teams win, and there's also another principle that I truly believe in. It's, a leader will only follow a stronger leader, right? It's John Maxwell, 'The 21 Irrefutable Laws of Leadership', right? I find that to be true, and so if you're going to build an A team, you've got to be an A person, right? And you've got to go out and you've got to put the 10,000 hours in or the 20,000 hours in, you've got to study, you've got to become good at your craft at something so that a group of people who are also super talented and super driven will want to come follow you. Right?
Jamarlin Martin: When black entrepreneurs come to you, do you get some kind of complacency or an expectation where, hey, he's black, I'm getting extra points? Do you see that type of element creeping in?
Rashad Moore: Not really.
Jamarlin Martin: One sister shared with me that she pitched to someone and she thought the white guy was asking too many questions and she was offended and she thought it was racist for him to be digging in so much into her story.
Rashad Moore: So she was pitching an investor, and she was upset that he was asking so many questions?
Jamarlin Martin: He's asking so many questions, possibly digging into some of the numbers that you're digging into. But from my perspective in a broad sense, white folks are racist. Okay. That's my personal view, not putting on you, this is me. So if if I'm looking at this situation I do have to recognize that part of this, it's related to legacy, not necessarily what people are doing now, but what has happened before. And so when we enter new markets that are foreign to us in terms of venture capital investing, angel investing, we come without a lot of knowledge. We read a couple of articles online and we think everybody's a racist but we don't have a complete set of information. Let me give you an example. So founders, they may get a couple of rejections and they may say, man, these founders have a bias of women, race. However, I have met white founders were they share with me that I was rejected 70 times. I went to go pitch 100 times.
Rashad Moore: Absolutely. That's the norm.
Jamarlin Martin: And so when we go out, some of us may not even have a reference of, hey, the white folks who are getting funding, they may get rejected 80 percent of the time, meaning that you're making all these assumptions and accusations, but you don't know what's market. You don't even know where the market is averaging out on some of these things. And so, I just wanted to share that.
Rashad Moore: Yeah, that's very key. And it's very interesting, particularly once you start talking about valuation. So as an investor, I see all the deals that come through, right? So I see hundreds and hundreds of deals a quarter. So there's a pitch and there's a valuation, right? And I have this larger perspective of, okay, you have to do this. I know what market is, most investors will know what's the market, right. What should I expect from my valuation, right? Entrepreneurs, they only know their's or maybe they know some of their friends or they hear antidotes about, 'hey Bobby, he just raised $20 million', yada, yada so forth. And he only had these numbers, this amount of revenue, etc. So, you're right, I mean I think one of the things that I try to do is provide a broader perspective to the entrepreneurs about where they are in the market, right? So for instance, if I'm talking to a black, brown or white founder, right, and they're like, hey, I want a $10 million valuation and I've got $200,000 worth of revenue. Then I'll usually sit down with them, especially if I'm trying to make a deal, I'll sit down with them and say, 'hey look, I've got seven deals over here that we're getting ready to fund at and let's say New Dominion Angels and they're all at $1 million worth of revenue and they're four, $4.5 million dollar valuations. Right. Whereas you might want that and you might hear about the one company...
Jamarlin Martin: 'I read it on Tech Crunch'
Rashad Moore: Yeah, exactly. That got that deal.
Jamarlin Martin: 'Why can't I, because I'm black!'
Rashad Moore: Sometimes people will think that and because they don't have that complete set of information, it's easy to sort of slip into 'the man', you know what I mean? 'Oh, I'm not getting the deal that I want because of the man'. But if you look at it statistically, let's be very clear, if you look at it across the entire economic or the entire population of black and brown deals, they are being done at lower values.
Jamarlin Martin: Yeah. This brings up something, Arlan Hamilton, the founder of Backstage Capital, tweeted about the other day, and what she said is when she's talking to entrepreneurs, this is not verbatim what she said, but she said that, 'sometimes I may know more about the or the industry than them and that if you don't have money and you want money, motherfucker, you got to be money',and you know, you can't step into the game without going around four bases in terms of acquiring a lot of knowledge, information, knowing your numbers. You don't do what you're supposed to do in terms of being money. You may not have money, you may not come from money. But being money means you're going to have to bring straight up excellence to the table. You gonna have to bring up a lot of discipline and investment to the game. You've got to do your part.
Rashad Moore: Absolutely. And that's what I was referring to when I say they're just not ready sometimes, is that they just haven't put in the work. And this is all online. You can just do this...
Jamarlin Martin: Some of the simple stuff is not there in some cases.
Rashad Moore: Start with the simple stuff. So, what does a valuation mean? Okay, they're askIng for money but they don't quite understand what a valuation means. And so you can literally go and there's a thousand videos on Youtube that will explain that to you. Right? So I need you as a professional to do your homework and if you do your homework, and I'll take you a little rougher, because I get it right. So I'll point them out and say, hey look, check this out, I'm not going to write a check but this is what you need to do. I'll let them know this is what you need to do. And by the way, you should go talk to Melissa Bradley at Project500, or if you're in Atlanta, go talk to the folks down there or go see NewMe or whatever. Right? Then come back.
Jamarlin Martin: How many black entrepreneurs I had the maturity, character and knowledge where you rejected them, but they still said I want to remain, I still want to have a relationship with you, I still want to learn from you a where it's not like, 'I'm dissed man, forget that'.
Rashad Moore: The vast majority of them.
Jamarlin Martin: So the majority of the entrepreneurs that you're seeing, they're leaving the rejection with a positive attitude and they want to continue the relationship?
Rashad Moore: Because you never know where they're going to go. So it's always more of a, 'hey not right now'.
Jamarlin Martin: I'm talking about their attitude, not necessarily your attitude.
Rashad Moore: Outwardly to me, no, I haven't seen anyone. I mean who knows what people are saying in the hallway, but I don't really care.
Jamarlin Martin: But they generally want to keep a relationship with you.
Rashad Moore: Absolutely, and it's a good strategic move anyway. Right? So you pitch an investor. They're not ready to invest now, but you just keep them on your update list, you keep showing them that you're making progress and then at some point you might turn that no into a yes. And that's just a good way to do it. I usually give homework, so if someone comes in I'll say, all right, well, if they're at $10,000 of revenue, I'll say hey look, I need you to be around $300,000 in AR because that's generally where I'm able to get deals done via syndicating it with angel groups and other high net worth individuals as well, right? That's sort of the bar for me, but a lot of us aren't there yet. So part of the Score 3 mission is we want to help get you there, and we help get you there by partnering with other folks that that provide those types of services.
Jamarlin Martin: How do you think about early stage valuation? First, can you clarify when you like to come in?
Rashad Moore: I like to come in around that angel stage, that C stage. You've got a product. I mean it's just pretty straightforward. You've got a product, you've got customers...
Jamarlin Martin: You're not investing in an idea, you want to see something.
Rashad Moore: Yeah, I want to see traction. I'm not an idea investor unless it's me, right? Or I'm like, okay, here's $20,000, I own 30 percent and we work on it together, maybe with a partner or something like that. Right? But no, I'm typically okay, I want to see around $300,000 in revenue AR, if it's monthly recurring revenue or something like that, bare minimum. Or you've got to have a ton of traction. Like Mars Reel, they were, before I invested, I didn't really invest until they were at like 30 million views a month, right? They were killing it before I even wrote a check. And so, they weren't making revenue at that point and I was like, 'Brandon, you gotta start making money, you got to turn the revenue on'. And he was like, 'Rashad, we've got to grow scale first, yada yada yada'. And so I took a leap of faith that that was the right choice because as the CEO, I mean as an entrepreneur you got to stay on the path that you're going. So it's like, okay, so we wrote the check and they kept doing well and so you gotta have a ton of traction for me personally, or you've got to have a ton of revenue. So, a ton of users or a ton of revenue.
Jamarlin Martin: On your due diligence for Mars Reel. You saw traction. Did you ask the question of, hey, how many of those views are paid for?
Rashad Moore: At that point, none.
Jamarlin Martin: Did that come up under due diligence?
Rashad Moore: Yeah. It was all organic because at that point they didn't really have paid marketing. I mean they'll put like a few bucks, five, six bucks on a post just to kind of get it going. But most of their stuff, the market they're going after, and I actuallt learned a lot from them as far as like the dynamics of social media. It's like mostly these 18-year-old high school basketball players that have 40,000 followers, right, and you make a video of them and you tag them, they're going to retweet it and boom, you're going to pick up millions of views just off the retweet of the high school student.
Jamarlin Martin: Yeah. I brought that up because a VC shared a company he was looking at and he wanted me to analyze their traffic, and I looked at the deck and what I thought at the time was, you gotta be careful where it looks like on the traffic trajectory that somebody may have been spending some money right before the raise and he ended up investing after that. But then there were some allegations that they misled the investors on the traffic.
Rashad Moore: Absolutely. You gotta think about it. What I look for is if you spend $100,000 on marketing and you drive $300,000 worth of revenue, then I'm like, okay, let's spend $600,000. So you gotta look at both sides.
Jamarlin Martin: Is that part of your standard due diligence where hey, I see these sales, I see the revenue, I see the traffic, but how much are you paying for that?
Rashad Moore: In the group, there's always someone that'll dig into that. Typically most of the deals at the seed stage, they're raising money so that they can try to do some of that stuff, right? The biggest issue with the seed stage metrics are they'll say we can raise or we can acquire customers at a dollar a customer. And what that really means is they spend $100 on Facebook ads and maybe they got 100 leads or maybe they actually got 100 sales, but they didn't include the labor to create the Facebook ad and all the things that you have to do up to that point. Right? And then it's only a hundred people. It's only $100 worth of spend. So does that scale. Right? So those are a lot of the issues that we're dealing with at that seed stage. It's not a machine. It's not a money-making machine yet. Whereas in the A round it's like, look, if we spend $100,000, we're going to make $400,000, so give us $5 million so we can make a $20 million. Do you see what I'm saying? So those specific types of examples, we generally don't get into those just right away. But to your overall point of just making sure that you aren't fooled by vanity metrics, is something that we really have to pay attention to.
Jamarlin Martin: All right. I want to thank Rashad Moore for coming on the show.
Rashad Moore: Thanks for having me.
Jamarlin Martin: Let's GHOGH!