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Crowdwise Founder Brian Belley Reveals His Investing Strategy

Introduction

Brian Belley has dual mechanical and aerospace engineer degrees. He worked in aerospace for 10 years and really enjoyed it. In 2018, he decided to take a one-year sabbatical and travel the world with his wife. During their journeys, Brian became very interested in all kinds of investment opportunities. Eventually, he discovered equity crowdfunding and was excited to find that he could invest in startups. 

Brian started by just investing a little bit to get some skin in the game, figuring this was the best way to learn. However, he realized there was a huge lack of education. So, even for someone like himself — who had been looking at investing in alternatives for more than 10 years — this whole private market space was just completely new. “What is a SAFE? What is a convertible note? How do you look at an early stage deal when there is not a lot of information?” So, Brian started a blog that eventually turned into Crowdwise. That experience led Brian to discover that this combination of technology and investing is his passion. Ever since then, he has been trying to help investors by sharing his own experiences and lessons learned.

Inez Sanjaya
How did you get into startup investing? How long have you been investing?
Brian Belley

I was already starting to invest when I was in college in the early 2000s. I had a little — not a lot — invested during the 2007-2008 financial crisis. I think that really set a lot of my psychology around investing because I realized diversification is a real thing. There’s always going to be  unexpected events and uncertainty in your portfolio, so you want to diversify. As far back as that, I was like, “okay, how can I invest in alternatives?” Then, I actually kind of dabbled in crypto in the early days — I got into bitcoin in 2013-2014. I was doing some peer-to-peer loans that were through websites like Lending Club and Prosper. I also got into crowdsourced real estate through Fundrise. I actually invested in my first Regulation A deal in around 2014 without knowing it was Reg A. I didn’t even know what  Regulation A was. My first Regulation Crowdfunding [deal] probably was in early 2018. 

Now there are a lot of education resources from the crowdfunding platforms themselves and other sources like KingsCrowd. But when I got into this space, education was really, really scarce. So, I ended up consuming every angel investor book, venture capital book, and angel podcasts that I could. I read a whole bunch of books. I especially got a lot of value from Jason Calacanis’ Angel: How to Invest in Technology Startups and Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups by David Rose. Some of those lessons are still extremely applicable and relevant to Regulation Crowdfunding, but some of them not so much — it doesn’t always translate. From that, you at least have the lingo and you can start going. I just started looking at deals and investing slowly at first and then learned from there.

Inez Sanjaya
How many companies have you invested in so far?
Brian Belley

Since 2018, I am up to 159 investments now between Regulation A, Regulation Crowdfunding, and Regulation D. 

Inez Sanjaya
What is your strategy for building your portfolio?
Brian Belley

Since I’m an engineer by training, I am very focused on numbers and data-driven. I read a lot of white papers from AngelList because they have tons of data. What you come to realize is that as much as there are some investors who can consistently do pretty well or outperform, there’s always this element of luck and there is no way of getting around that. No one knows which startups are going to be the successful ones in the future. The most important thing is not whether your overall strategy is trying to minimize risk — if you minimize risk, you’re probably going to miss out on some of those opportunities that end up being those one or two really extreme returns in your portfolio, I am talking not only 100x but 1000x or more. When it comes down to overall portfolio return, pretty much the only thing that matters is whether or not those one or two companies are in your portfolio. Because of that, I’ve basically based my whole strategy on this. This isn’t anything new — if you read a lot of writings from Peter Thiel (who can be pretty polarizing), he has this rule of venture capital that you can only invest in those companies that have the potential to generate enough returns, that it would be like that huge outlier. Because if you’re in it for financial reasons, you really need to make sure you expose yourself to those types of opportunities. 

My strategy is not pray and spray — where some people invest in every single deal that is out there and maybe the blind squirrel will find an acorn type of thing. If you read a white paper by AngelList, it is really investing in every credible deal because again, no one knows the future. Anything could happen — regulatory changes, market changes, or consumer preferences — and you can’t predict these things. So what you do is, as long as it’s a credible deal, as long as it’s a deal that has a potential to give that 100x or 1000x return, trying to diversify as much as possible. That’s why I have invested small amounts, and now I have 159 companies in my portfolio.

Inez Sanjaya
Is there any industry that you are keeping an eye on currently? Why?
Brian Belley

I am personally industry agnostic. I don’t really only focus on software startups or anything else. I will say in the early days of Regulation Crowdfunding — when I was just starting — it was pretty easy to look at every single deal that was out there because there were maybe a dozen new deals across all the platforms each week, so you could kind of manage that. Now, there are just such a huge volume of deals that as an individual investor, it’s really hard unless you’re doing this as a full-time job, which I don’t know if anyone’s doing. So, you have to find a way to kind of cut through the noise. 

I move towards deals that I have an interest in, or I’m passionate about, or I could maybe see myself as a potential user of the product/solution — these have become the initial filter for me. However, I definitely invest in a lot of software startups. I do a lot of health tech as well — different things in terms of wellness or disease prevention. It’s not always these huge companies that are trying to invent the miracle or whatever cancer curing drug. There are some really cool health tech-like devices that are business-to-consumer and also have business-to-business — I find those interesting. I have invested in a few of those as well because of the perks, which is another interesting thing, right? Like it’s this item that I would also want to have anyway, so not all my investments are purely for future returns. It’s a cool blend of experiences where I’m getting something out of this and I’m getting some equity. Also, obviously, I do aerospace related deals — I’m also very excited about that. I’m actually an advisor to Spaced Ventures — who just launched its first deal. It is a brand new Regulation Crowdfunding platform, and it is going to be focusing specifically on the space industry. And I’m kind of helping them to get off the ground, no pun intended. 

All in all, if you look at my portfolio of investments, it’s all over the place as well because every now and then there’s just a company that sounds really cool or something that has a lot of momentum. So, I try to be pretty diverse in my exposure.

Inez Sanjaya
Is there any criteria that you always focus on when you’re picking a company to invest in?
Brian Belley

Team is always super important because, again, no one can predict what’s going to be successful. But the one thing that you can ask is, is this founder someone who is going to persist no matter what? Because there are going to be obstacles and hiccups, and they’re going to hit some tough times at some point. Is this founder in it because it’s something cool or for their ego or they want to make a lot of money? If any of those are the reason for why they are doing it, then I don’t really have a lot of faith that when times get tough, that person will persevere. On the other hand, if it’s someone who’s in it because they are trying to solve an issue that they have experienced, they have some mission, or they want to see this change in the world, then that is the type of person that I want to invest in. I know that even if their current business does not work, they are going to keep pushing, iterating, and sticking with it. 

To know more about the team, I would love to get on a call with the founders. But since it is Regulation Crowdfunding where people have hundreds — if not thousands of investors — that is not really possible. But you know, to plug KingsCrowd a little bit, this is why KingsCrowd is such a great product. Because the analyst team is often able to hop on calls, do these interviews like the Founder Profiles, and you can get these insights that you can’t get as an individual unaccredited investor on these online platforms.

Aside from places like KingsCrowd that can kind of almost crowdsource that experience and pass along an interview, there are other ways to evaluate the founder. You can learn a lot through how they answer the Q&A on the raise page, and that is something super critical. When I look at a company, can you tell if this is someone who is trying to hide something or is this someone who’s lashing out? The people who handle the tough questions really well and who are super transparent, those are the types of founders that I like to invest in. 

I do find myself getting more narrowed into certain niches now. Because of that, the potential market is obviously very important — you have to be going after something that has the potential to be huge. But this doesn’t mean that I haven’t invested in a microbrewery or a restaurant. My portfolio has a lot of focus on the financial returns, but there are still companies that I invest in because I think that is a cool idea or a cool founder that I want to support. This is something that is super cool about Regulation Crowdfunding. Unlike venture capital that is purely return-driven, you can be like, “you know what, I think this is a cool founder. I want to have this restaurant in my community.” It allows both possibilities for the investors and for the entrepreneurs. 

Inez Sanjaya
What do you think of the online private market and its future?
Brian Belley

Obviously, I am very very optimistic about the future given that I left my cushy aerospace engineering job to go off and jump into this industry of investing in startups, which I had no prior experience in. Given that I’m someone who has kind of come from outside the industry (I’m not from a venture capital nor startup background), I can’t necessarily speak from experience about the previous state. But if you look at a lot of the trends that are going on today — the whole GameStop thing or DogeCoin — you’re seeing retail, smaller investors banding together in a lot more ways. I think what it’s showing is that, yes, there’s some batch of people who just want to get rich overnight, but I think there is also this feeling of community and being a part of something. With crowdfunding, I think people feel better sense that their dollars are directly contributing to that thing that a person is building. They’re a part of a mission, a part of a small community. 

I think that we’re really just at the cusp of where this is going to go. With the regulation changes in March, there are a lot more people coming into it. But I’m sure that 99 people out of 100 still don’t know what equity crowdfunding is. So I think we’re just getting started. And yes, it’s very risky, but at the same time you’re being a part of a unique product in the world, you’re helping a founder really realize their vision. I would love to see crowdfunding become as popular as 401k plans, stocks, bonds, or ETFs today. 

I think eventually the retail investing crowd is going to catch up and realize that there is more than just the public markets. If you don’t have stocks, bonds, and real estate, you try to get exposure. And I think crowdfunding is going to do that. On the founder side of this, the ability to get capital from all these different people of diverse backgrounds and no longer have to go through these gatekeepers of venture capitalists who determine who shall or shall not get money, how does that not lead to more innovation and a better world? There is going to be more diversity of ideas, more people being funded. Eventually some of those will go on to be funded by those venture capitalists who maybe wouldn’t have even looked at them early on. 

I’m sure we’ll hit some rough patches. We haven’t had any huge instances like fraud in the industry. But anything that involves money does eventually run up against bad actors who come in and screw over investors or have a bad outcome or try to take advantage. So, it will really be a signal of maturity for the industry to see how we deal with that.

Inez Sanjaya
What advice would you give to those who just got into online startup investing?
Brian Belley

Based on my own lessons, first is take your time — don’t rush in. On every deal, you’re going to read that every founder is selling you the next big thing, like this is the one company that’s going to change the world. You may want to invest in every single company. So be patient, invest a very small amount to start because it is very, very risky. You should really treat most of these investments as money that you’re probably never going to get back — and if you do, it’s not going to be for five to seven years at a minimum, so don’t invest anything that you’re going to need ever. 

Read and consume a lot of content as well — that’s relevant to equity crowdfunding, angel investing, and venture capital. There are great podcasts like the KingsCrowd podcast or This Week in Startups. Some of the books I mentioned with Jason Calacanis and David Rose, or even some non-investing specific books — I really recommend Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts by Annie Duke. It is basically about poker, but all the analogies you can draw between poker and investing are totally applicable. You could invest in the company that was the best decision at the time and that might still have a bad outcome, so you need to realize as an investor that just because you had a bad outcome doesn’t mean you made a bad decision. 

Start to understand that risk and uncertainty is huge for anyone who’s getting started. To avoid potential scams, definitely make sure you’re going through any of these FINRA-registered funding portals even if you’re an accredited investor. It’s because those platforms are going to do some of the basic compliance checks — bad actor checks, making sure it’s not like blatantly fraudulent upfront. Then, it will present the information in a way that you’ll know what to start looking for and how to ask some of these questions. If you look at the Q&A and see what other questions people are asking, that will teach you and give you your training wheels. Even for investors who have a lot of money to allocate, I would recommend starting small and just really being patient.

Many thanks to Brian for his insightful answers! Brian’s AngelList profile can be viewed here, and his LinkedIn is available here.

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About: Inez Sanjaya

Inez's background is in the startup ecosystem, which she is very passionate about. Inez has experience working in a startup, a Google-backed accelerator, and lastly in Plug and Play Tech Center. Prior to this, she was a part of VU Venture Partners doing deal sourcing and conducting due diligence. Inez graduated from the University of California Berkeley with an Economics degree.

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