[00:02:35] Nick King: Absolutely. Yeah. Everybody seems to have the quintessential lemonade stand story. For me, there are two things that when I think about what I’m doing today, like what were some of these things that I was doing that may have foreshadowed where I am today as an entrepreneur.

[00:02:53] Nick King: One is related to Pokemon cards, trading those in the neighborhood, obviously pretty inefficient, pretty small market when you’re just trading with the neighborhood. And that I think was my introduction to markets, which is really what I find to be interesting. The second instance of trading and markets was on this video game called FIFA.

[00:03:17] Nick King: It’s the soccer video game. And there’s. Effectively an open market with fairly low transaction fees for players that you can trade for the currency of the game. What I set up was basically the system that would buy low sell high if a player was listed on the market for what was below the kind of fair market value of that player.

[00:03:42] Nick King: would buy and then subsequently sell at a higher price. So that’s the one where that’s quite similar to how I just think about markets and the various inefficiencies of them. 

[00:03:58] Patrick Donley: Did that lead you into Investing in the stock market at a pretty young age? 

[00:04:03] Nick King: Yeah. I was a part of the Robinhood crowd back when you would refer somebody and get a free stock.

[00:04:10] Nick King: I don’t know if they still do that, but I can remember when Robinhood was released, investing personally through that app. But going into, and that was in college, I was actually pre med. My father was a dentist and it Is one of those things that it’s it’s in the family. Mom was healthcare consultant, and I’m just going to go down this path.

[00:04:34] Nick King: I took an economics course in my first semester paired with the standard science courses and learned about opportunity costs, which it was one of those frame breaking concepts that I think you stumble across every now and again, that gets you to think about. Okay. Like, why am I doing what I’m doing and applying this principle to it?

[00:04:57] Nick King: And ultimately opted to go down a financial economics path instead of the medical side. 

[00:05:04] Patrick Donley: Were the science classes just not that interesting to you? Or were you just naturally drawn towards economics and finance? 

[00:05:11] Nick King: It was a natural inclination, probably the market side of things that showed itself in my earlier years.

[00:05:19] Nick King: So yes, there was a passion element, but there was also. A logical element, or I remember when I was deciding where I wanted to go to college, it was a spreadsheet that had scores for every single thing that I cared about, weighted in a certain manner. And I, yes, there was passion, but there was also. The logical element of this is going to be another four to eight years of school plus residency and can go down a different path.

[00:05:48] Patrick Donley: I had a similar experience. I was considering med school as well. And I remember sitting in a chemistry class, I want to say, and doing a pro con list on medical school. And at the end of doing this pro con list, I walked out of class and. I was done with pre med studies. It just yeah, like you said, it’s an opportunity cost and it is a long road.

[00:06:09] Nick King: Yeah, I do think it has to be like your calling in a way. Like my wife is a nurse in the emergency department and that is her calling, our job. But she really enjoys it. For me, inefficient markets was what got me the most interested. 

[00:06:28] Patrick Donley: So let’s talk about what happened next. You went to UVA, you got your degree in, was it econ or finance 

[00:06:34] Nick King: Financial economics. So not the traditional business school, actually, but this financial economics degree, I credit it to going down the entrepreneurial path because I think for better or worse, business school teaches you a certain way to think it teaches you. build this business plan. It teaches you a lot of technical skills that make great bankers, great consultants, but I would say fairly in the box type of thinking.

[00:07:01] Nick King: So the course that I found to be the most interesting was behavioral finance and learning all the kind of biases that happen in markets that disprove that rational consumer or investor that economics is based on. 

[00:07:17] Patrick Donley: Upon graduation, we were talking earlier before the interview started, you work for a value fund, and we are based on Warren Buffett, Charlie Munger, Value Principles at We Study Billionaires, so I wanted to hear a little bit about that experience working at the value fund, what you were up to, and then how you were able to apply what you learned to what you’re doing 

[00:07:38] Patrick Donley: now. 

[00:07:40] Nick King: The value fund, in college I read a lot of books specifically on. On value investing, I actually don’t know if I could tell you why it was that approach, why I was drawn to that approach, but that’s where I read a lot of books. So I reached out to somebody at TSW, a value firm that has a Domestic equities, fixed income, international equities product, and got a job on the domestic equities team.

[00:08:09] Nick King: That was a great job. I got to work with really smart people, learn from my direct boss, got his MBA from HBS, had been at T Row, TSW for a number of years, and a really smart and thoughtful investor. My day to day. Basically looked like 80 percent reading and thinking and 0 percent in PowerPoint. Doing some modeling, but it was taking in a lot of information and trying to synthesize that into three pages of here’s my understanding of this business, why we think it’s a good business, why it might be overvalued, why it might be undervalued.

[00:08:53] Nick King: And it was. So much learning, which, for me, being fairly young, always optimized for learning as the number one thing in terms of my career. 

[00:09:05] Patrick Donley: It reminds me of the Warren Buffett adage or his saying of reading 500 pages a day. It sounds like you almost were Maybe doing that, if 80 percent of your time was spent, were you reading annual reports or were you reading all kinds of stuff?

[00:09:19] Patrick Donley: I’m curious what your reading looked like. 

[00:09:22] Nick King: Sure. Annual reports, earnings call, earning calls, transcripts, sell side research, deep dives on industries, really anything that I was able to get my hands on and with somewhat of an emphasis of trying to find different angles of information, because everybody gets the same South side research, everybody’s reading that annual report, but by the end was also looking on Twitter for interesting insights, different blogs of thoughtful investors, just trying to learn as much as possible about a business or industry that I was studying.

[00:10:00] Patrick Donley: I wanted to hear, aside from Warren and Charlie. Were there any value investors that you really looked up to or wanted to model your own thought process after 

[00:10:10] Nick King: The concept of margin of safety is really interesting to me. So Seth Klarman is another one that I think is a bit more under the radar, but that concept in general is one that I’ve taken today and use.

[00:10:27] Patrick Donley: Did you read his book, Margin of Safety, I think it’s called? 

[00:10:31] Nick King: I have skimmed it. I have skimmed it. I have not read the entire thing. I saw it on 

[00:10:36] Patrick Donley: Amazon and I think it’s like super expensive. Original hardbound copies. There are not that many of them. I want to say it’s over a thousand dollars, like for one of the books.

[00:10:47] Nick King: There’s a PDF you can find out there. 

[00:10:51] Patrick Donley: So I wanted to hear then. What was the genesis? Were you stewing about like different entrepreneurial projects that you wanted to consider? As you’re reading, doing all this reading and research, was it creating the spark within you to start your own thing?

[00:11:07] Patrick Donley: Or how did that come about? 

[00:11:09] Nick King: It’s a great question and it just came about, it was, I had some downtime prior to starting at TSW, I was really just reading about different industries, different markets and saw a chart that showed alternative asset returns with wine showing some really interesting long term returns and it led me down a rabbit hole.

[00:11:32] Nick King: of exploration, did the business plan thing. This is I was at TSW just spending my time at night thinking about this and I look back on that and I did it all wrong from the beginning in terms of how I thought about it, just the entrepreneurial journey, I like to talk about this thing like entrepreneurship, effectual reasoning, and I was speaking at Emory earlier this week and.

[00:11:59] Nick King: I posed the question to these business school students. I posed, start a business. What do you do? And people go start an LLC, raise some money, create a business plan, do some market research, get your business licenses. And in preparation for asking that question, I went on the small business administration website and they list 10 steps to start a business.

[00:12:22] Nick King: And it was basically everything that they said. And I said I think you’ve been taught totally wrong. But I did everything that you just said. So start the LLC, raise a little bit of friends and family money, do a bunch of market research. What’s the competitive landscape of this wine and spirits investing industry, 50 page business plan.

[00:12:45] Nick King: I didn’t talk to a single person who was like, Oh, I really want to invest in wine. It was totally backwards. But I don’t think everybody has it figured out when they start something, you just learn those things, you look back and it’s Oh, I did it wrong. But as I go forward and introduce new concepts or ideas, I have this framework that I think is very interesting in terms of effectual versus causal.

[00:13:13] Nick King: In terms of business creation, 

[00:13:16] Patrick Donley: I want to get into what you may have done differently, like looking back on things. But first I want to just get in specifically to Vint. Can you give us just if you, if I’m sitting next to you on an airplane, how do you explain Vint to somebody and what you do? 

[00:13:31] Nick King: Yeah.

[00:13:32] Nick King: Vint is a wine and spirits asset management company. We curate investment products that investors can get exposure to. Wine and spirits as an asset class, which has a historical track record of pretty strong returns. 

[00:13:48] Patrick Donley: Roughly what percentage wise, what would you say historically around 8%? I think I heard you mention.

[00:13:55] Nick King: Yeah, about eight and a half percent. A professor at Cambridge ran a study dating back all the way to 1900. It’s titled the price of wine, looking at the data in the wine market, comparing it to equities. bonds, art, stamps, bills, and it was the closest to equities. I think equities came in around 9 percent and wine was right around 8.

[00:14:17] Nick King: 5 percent from 1900 to 2012. 

[00:14:21] Patrick Donley: So prior to getting into this and creating the business plan and everything, did you have much background in wine and spirits? Did you know that market very well or was this something that came on board later that you learned about? 

[00:14:35] Nick King: I didn’t know the market at all.

[00:14:37] Nick King: which was a big advantage. Look at a lot of wine investment businesses that had been created in the past. They were always started by these people who are very passionate about wine. I’m the least passionate person about wine on our business team. And. It’s been an advantage ever since day one, because I looked at this industry prior to starting Vint, the primary ways that you could invest was either basically cut a check, call it 50 grand to a merchant in the UK, and they’d buy you wine and kind of manage that portfolio for you.

[00:15:14] Nick King: You didn’t know what transaction fees were being paid, and you didn’t know what assets you were getting. Or you could start your own seller, which obviously you need space, a lot of capital connections, and you end up having to sell through an auction house, which is 20, 30 percent transaction fees. Every time I talk to somebody who had been in the industry for a long time, I like why are these products the way they are?

[00:15:38] Nick King: And their common answer is, that’s just how it is in the industry. By being somebody with no industry expertise, it allows me to look at the industry as a blank slate. If we were to build better products from the ground up, how would we do it? 

[00:15:53] Patrick Donley: Did you consider any other asset classes outside of wine?

[00:15:57] Patrick Donley: There’s a lot of Liquid markets. So I just wondered if you considered other asset classes 

[00:16:04] Nick King: On that chart that I saw I was looking at real estate, looking at art and looked at, and this was 2019 when I was looking at these asset classes. The thing that I found to be most interesting. Was wine would trade for a hundred dollars in the UK and that same wine would trade for 125 in the US and then 130 in Hong Kong.

[00:16:32] Nick King: It reminded me of the early 19 hundreds equities markets where you would have an identical stock that would trade on the New York Stock Exchange and the London Stock Exchange. entitled to the exact same earnings, yet they would trade at a different price. The quintessential example of that was Royal Dutch Shell that traded at a discount on one of those markets and nobody could understand it.

[00:17:00] Nick King: And that is what got me most interested in wine. And to this day, the economic inefficiency. You go to buy Apple stock, it doesn’t matter if you’re in the us, in the uk, in your basements, if you’re buying it on Robinhood or public, you’re gonna pay the same price. Wine and Spirits is not like that. 

[00:17:23] Patrick Donley: So I wanted to hear how you tested the initial idea, and I wanted to hear about iterations of event.

[00:17:30] Patrick Donley: I’m curious if you had different iterations of what the company started it. As versus what it is now, 

[00:17:38] Nick King: 2019 timeframe, the insight that we had was that this is an inefficient market. That was the main insight that we had from an economic perspective. There were a few concepts that we were tossing around a data driven hedge fund called the Renaissance technologies for wine.

[00:17:55] Nick King: We were tossing around the idea of stock X for wine, a peer to peer marketplace, which would. Improved liquidity and transparency in terms of pricing, ultimately where we landed was an investment product that we qualified under regulation a of the jobs act, which is like an IPO light.

[00:18:19] Nick King: It was established. for businesses to raise capital from both accredited and non accredited investors, yet not go through as cumbersome of a process as filing an S 1 and going public. So that’s where we iterated to, and we’ll talk about where Vint is today, but some of those concepts have actually re emerged over time as we’ve grown as a business.

[00:18:46] Patrick Donley: Walk us through what it was like Working with the SEC. So you had to work with the SEC eight or nine months, I believe, to explain to them what you wanted to do. Talk to me about that process. I had Ben Miller on of Fundrise, who I’m pretty sure you’re familiar with. And he shared a little bit about what his process was like.

[00:19:02] Patrick Donley: I wanted to hear for you what it was like working with the SEC. 

[00:19:06] Nick King: Sure. Yeah, very familiar with Fundrise. I remember diving into their defilings in 2019, just learning about how they do what they do. It basically starts off for a Reg A offering with a document that reads very similarly to an S 1. A hundred to two pages outlining risk factors, use of proceeds, MD& A, filing audited financials.

[00:19:33] Nick King: All of that is your starting point that here’s the business model. We’re going to curate collections of wines and spirits. Each are going to be their own series LLC, and we’re going to take them public for both accredited and non accredited investors to purchase. interest in these collections. So that was the starting point from there.

[00:19:55] Nick King: It’s an iterative process with the SEC where you get comment letters. It takes anywhere from 15 to 30 days on average to get a comment letter back from the SEC. So you file this, you get a comment letter, you address those comments, you get another comment letter, you address those comments, and ultimately.

[00:20:16] Nick King: To receive qualification for your offering, which for us took nine months and the thesis for going down this path was our goal has always been to create a financial asset class. There’s been plenty of fraud. across the wine and spirits industry over the years. This is the most transparent you can be in terms of 200 pages on Edgar audited financials.

[00:20:43] Nick King: And if we’re going to create a real financial asset class, this is the way to do were you working at the value fund while you were getting this started? I wanted to hear about that process. Cause I heard you mentioned something about the importance of. Burning the boats in an interview. So I wanted to get into that, like what the process was like of actually leaving your W2 job and going whole hog, 100 percent into 

[00:21:09] Nick King: Vint.

[00:21:10] Nick King: Yeah, I think burning the boats, you force your own hand in a way. When you have that opportunity or job that you can fall back on you, it’s always sitting back there in the back of your mind, even if, okay, I’m not going to go back, but the burn the boats decision was made December, actually right around Thanksgiving.

[00:21:32] Nick King: of 2020. We had recently filed our 1A we had been going through that process nights and weekends. It was mostly lawyers doing work and we decided, okay, my co founder, who’s our CTO and a friend from UVA, okay, we’re going to burn the boats and we’re going to leave our jobs and credit to both of our employers.

[00:21:58] Nick King: Like they were supportive of this and. In March of 2021, we were both full time, on vent, unpaid, and we’d raised a little bit of friends and family money to cover the legal bills of this securitization process, and at that point, we basically bet on ourselves to figure this out. 

[00:22:21] Patrick Donley: So would that be your recommendation, is for anybody considering something, maybe just go Burn the boats and go whole hog into what you’re wanting to do.

[00:22:31] Nick King: That used to be my recommendation. I think there’s something to be said about risking of your thesis or insights. I used to recommend, okay, if you just have an idea. Quit your job tomorrow and then force yourself to figure it out over the next year. I’ve actually changed my stance that I think you can.

[00:22:52] Nick King: So first off, startups have millions of risks. You can’t de risk them all. You have to be comfortable that’s just the nature of it. You can poke a million holes in most businesses. So the main thing is for us, we were confident about this asset class. We were confident about our ability to source. The assets, the demand side was the thing for us that we were de risking by building a wait list.

[00:23:18] Nick King: If you have this business idea prior to burning the boat, say talk to 25 people who might be customers and figure out, is this a problem or is this something that they want? And then burn the boats. And something is to be said about having limited resources, being constrained, forcing creativity. 

[00:23:38] Patrick Donley: Did you give yourself a certain time period to see if the idea was going to work?

[00:23:43] Patrick Donley: And then did you have a plan B if things didn’t pan out? Unluckily they have. But I wanted to hear was there a plan B? 

[00:23:51] Nick King: Luckily, they have. There’s never a plan B. I’m persistent to a fault, I would say. So I was going to make it work once the boats were burnt. So plan B is a bit like having the boat.

[00:24:03] Nick King: It’s okay, if plan B is in the back of your mind, it’s going to be, it’s going to limit your ability to fully commit. Yeah, it’s still a boat. Yep. Smaller boat. Maybe it’s a rowboat, but it’s still there. 

[00:24:18] Patrick Donley: What were the biggest hurdles that you had to overcome to get the company off the ground? 

[00:24:23] Nick King: So part of Regulation A is you have to identify assets that are going to be in one of these series LLs for people to invest in when you’re filing.

[00:24:32] Nick King: So you think about that. We had raised about 200, 000 in friends and family money. A lot of that went to legal because this is quite a process. We had limited capital to go and buy assets. You also think about this business most investment businesses, they don’t front the capital and then go raise it from investors because that turns into a pretty asset heavy business and investment businesses, certainly an asset light one.

[00:25:00] Nick King: So we had to get creative. We went to suppliers and basically asked for an option agreement on their wines. So you have this 50, 000 parcel of Bordeaux. Would you give us a three month option on it? For three, 4 percent and we’ll pay you sometime in this window if the offering sells out. So that option agreement really helped mitigate risk of our first 10 offerings where it was truly a shot in the dark of, okay, is this going to work?

[00:25:36] Nick King: Yes, we’ve built a wait list of about 800 people, mostly friends and family. We didn’t have any marketing budget. But if it doesn’t work, it’s not like we’re on the hand. We’re not caught with 500, 000 of wine and spirits because we had to buy all of this. So that was a problem that I remember we were discussing raising a fund to source the assets or debt capital to do but the option agreement was, I think one of those. scenarios where you have these constraints, you must be creative to, to solve that. That was the big one in terms of the early days. 

[00:26:17] Patrick Donley: At that point, it was just you and your co founder, his name, remind me again, is Patrick, right? Who was taking the lead in terms of learning about wine and spirits.

[00:26:29] Patrick Donley: Like, how do you identify what wine you’re going to buy? What is the wine that’s mispriced? That’s under that’s selling below its intrinsic value. Who decided that? 

[00:26:41] Nick King: It’s a great question, especially because 15 minutes ago, I said, I’m the least passionate person about wine on the business team.

[00:26:48] Nick King: So we had put together an advisory board of a few masters of wine. One individual, his name’s Adam Lapierre. He’s actually our COO now. So started as an advisor who was providing some guidance on the sourcing front and pricing. An individual named Miles Davis over in the UK. The UK is the home of fine wine trade.

[00:27:09] Nick King: The biggest fine wine trading businesses are over in the UK as a result of lower regulation over there, as well as some favorable tax treatment of wine as an asset class. And then two other individuals here in the U S that we would take collection ideas to them and pricing to them to get some feedback.

[00:27:28] Nick King: It was also supported by our first employee, Billy. He was working unpaid. That was one of the great stories of the stroke of luck. where we were looking for someone to write wine content and went on Upwork, found this individual, Billy, and he had written a book on wine and ebook and disintermediated Upwork reached out to him on LinkedIn, connected with him, thought it was really interesting.

[00:27:56] Nick King: Actually ended up investing in our friends and family round and working three months unpaid and helping with those first Sourcing activities. So we were looking at UK markets and presenting ideas to this advisory board to get feedback regarding pricing and asset selection. 

[00:28:16] Patrick Donley: So for Billy, it truly was a labor of love since he was working for free, right?

[00:28:22] Nick King: Yes. A lot of credit to him. Set up a lot of our original marketing infrastructure, creating content on the wine. building those wine relationships and doing a lot of the sourcing in the early days. 

[00:28:35] Patrick Donley: So at what point did you realize that you had a viable business that was going to make it? What was the moment in your head you were like, This is going to work.

[00:28:45] Nick King: Yes. The moment was early May, 2021. We had gotten qualification from the SEC the last week of April. So we had our first collection. It was a 46, 000 collection of California wines. Harlan Estate Opus One. Patrick had been coding 15 hours a day for the last three months to get the platform to a point where investors could purchase shares in these offerings.

[00:29:15] Nick King: The KYC AML, the bank connection, the portfolio page, all of that. He got the product from zero to one. So I believe it was March 12th when we were launching our first offering. Four days after getting engaged to my now wife, we were launching our first offering and it launched at noon. Leading up to that, I had mentioned this waitlist that I’d grown to 800 people, all really word of mouth.

[00:29:41] Nick King: And every week I cut the time in half where I thought this offering was going to sell out. First it was, I hope it sells out in two months and then one month. And then two weeks and then one week and then three days and then two hours. That two hours was that morning when we were pacing around my apartment because it’s 1130.

[00:30:00] Nick King: There’s nothing that we can do other than sit here and wait the products ready. The marketing emails are ready. And when we pushed the button to turn it on, half of the offering sold out within the first three minutes and ended up selling out in under an hour to 80 investors and that to this day, I still think is one of my favorite days we’ve had since starting the business, watching that happen and all the time and effort that we had spent getting the product live and having it in market.

[00:30:31] Nick King: So that is the moment. 

[00:30:34] Patrick Donley: Yeah, that’s awesome. So you initially did fundraising through family and friends. At what point did you reach out to VCs and start with that process? I want to hear about that. And I want to hear about your sidewalk pitch that I heard you mentioned. 

[00:30:50] Nick King: Yes, that’s a great story. I was down with Luke this past week, actually, who I pitched on the sidewalk.

[00:30:58] Nick King: Started reaching out to VCs after that first offering. Once again, I didn’t know what I was doing. This was cold outreach. And actually six months prior, I had cold emailed 200 VCs, 10 of them responded, and I’ve got them on a monthly update list. I’ve been sending monthly updates now for almost three years.

[00:31:21] Nick King: So pre product pre everything. And that’s where I started to curate a list of investors. It’s actually really funny to look back at the original updates when we were talking about our waitlist, how many customer interviews we had done that month. So today it shows just how far the business has come. But yeah, so basically started with 10 VC calls, realized very quickly that I needed to start a process and get as many people into the pipeline as possible.

[00:31:51] Nick King: A lot of startup growth is sales. All of fundraising is sales and you have to hit your numbers. Everybody, like most people are going to tell you, no, 99 percent of the time it’s going to be a no, but hitting the numbers is really important. So we started fundraising in that May timeframe. We actually got a term sheet in August and ended up passing.

[00:32:13] Nick King: It would have been for more money than we had ever raised, but we thought we could get better in terms of evaluation. That was a tough decision. Given we at that point had two additional employees who were being paid and Patrick and I took money from personal savings to cover payroll that last month because there was cashflow related to the wines.

[00:32:33] Nick King: So we ended up passing on that and where this first pre seed fundraise started clicking was when some of our investors on the platform had reached out to us and they’re like, Hey, are you raising any money for the company? And I was like, yes, we actually are. So we ended up getting. three or 400, 000 committed from our community of investors who had invested in, say, the first 10 offerings that I would say is probably the second point where I was like, okay, this thing might work when you have people who are that passionate about this product that they want to invest.

[00:33:09] Nick King: It’s very helpful to have some momentum going into venture conversations. So at that point, we had some. money committed. I was traveling up to New York. This was the second time I had ever been to New York. First time in kind of my adulthood. So I was going to pitch a number of investors, but the main one was FinTech Ventures.

[00:33:33] Nick King: I did the natural card that I think every entrepreneur has pulled is I’m going to be in New York this week when in reality I’m booking the trip to meet with you. But I get on the subway, I go the wrong direction, end up in Brooklyn, turn back around, get to the meeting spot, my phone’s dying because I’ve been navigating all day, make it on time, sweating, and I am pitching in a hotel and five minutes into the pitch with FinTech Ventures, Luke and Sergey, the fire alarm goes off in the hotel.

[00:34:06] Nick King: I try to pitch through it, but it is quite loud. And what ends up happening is we end up on the sidewalk outside of the hotel. And I pitched for 45 minutes, sweating late August, early September in a suit jacket. And later that day, Luke let me know that they would lead the pre seed round. Great story. Once again, another stroke of luck that it all worked out.

[00:34:31] Patrick Donley: So you had mentioned effectual entrepreneurship, and I wanted to jump back into that and revisit that idea. Was that a book that you read in college? And can you talk just a little bit about how it affected your creation of Vint? 

[00:34:46] Nick King: Sure. So it’s actually a paper that was passed on to me by a UVA business school professor, the, an MBA professor.

[00:34:55] Nick King: And I believe the paper is titled what makes entrepreneurs entrepreneurial. And she studied 20 or 30 entrepreneurs, everyone from say single digit millions in revenue up to public company founders. And the common thing that this professor realized. was that none of them took this business plan causal reasoning approach.

[00:35:20] Nick King: The causal reasoning is I’m going to create this five year plan, detailed financial models, and I’m going to go out and execute on this plan with predetermined steps along the way. Based on what I had mentioned about Emory, it’s still taught that way. Business creation is still taught that way.

[00:35:38] Nick King: And a lot of universities and the small business administration as well teaches this causal approach. I looked at that and I was like, every time I’ve created a plan, nothing actually worked. And it’s always been this going with the flow in a way, and this constant sense of uncertainty. And reading this paper really resonated with me about an effectual path.

[00:36:02] Nick King: That these entrepreneurs have taken, which basically means you have this certain end state and it’s not like super well defined, but for us, it’s always been creating this asset class of wine and spirits. That is something that exists, but. Along the way, you’re going to have people who shape that direction.

[00:36:27] Nick King: You’re going to have challenges that shape the direction that you get there. That direction might change as well over time as you bring in additional means to reach this end goal. The quote. That I think succinctly summarizes causal reasoning versus effectual reasoning is basically with causal reasoning.

[00:36:51] Nick King: We’re trying to predict the future with effectual reasoning. We’re trying to create the future because we can control that today. That’s still been core to the path. Of Vint. The great examples of that are, I mentioned the iterations of Vint, a data driven hedge fund, StockX for wine. And ultimately we decided down this path with Regulation A collections.

[00:37:14] Nick King: Those two concepts have, it wasn’t a part of the plan to do this, but we hired Adam, who was our advisor that I mentioned, who is, a one of a kind talent who has seen businesses, wine and spirits, e commerce platforms in a very in depth manner. So he went to us and we’re like, we have all these assets today.

[00:37:37] Nick King: We’ve done about 90 offerings on Vint. We need to sell them to return capital to investors. The best way for us to do that is going to be to own our own platform. So over the last six months, he’s built that and it’s become a material part of our business, this stock X for wine, if you want to call it that.

[00:37:56] Nick King: So that was not a part of this five year plan. Sure. An idea of we have must sell these assets, but the form at which it presented itself. We had no clue, but Adam being a really strong member of our team brought it to life and it’s so core to building and scaling a startup. You must be comfortable with this uncertainty.

[00:38:20] Nick King: In fact, you just should try to control your own future as much as possible and not predict it. 

[00:38:25] Patrick Donley: Explain to me in our listeners that aren’t familiar with StockX, like what the platform is that you’re doing and how it’s been of a huge benefit to you. 

[00:38:35] Nick King: So StockX is a sneaker marketplace. People buy and sell sneakers.

[00:38:39] Nick King: It unbundled eBay in a way by providing authentication services. So what we’ve done, we have this investment product or products, the reg A collections, and then also a data driven fund across that. There’s about 10 million worth of assets that we’d like to turn over and return capital to investors. The VIM marketplace is from a pricing perspective, direct to consumer in the U.

[00:39:06] Nick King: S. is typically the highest price that you can get. If you’re going B2B, they’re going to sell to the consumer. They’re going to take a margin. If you’re going through auction houses, you’re going to pay a 30 percent transaction fee. So combining these assets with an e commerce platform, it solves what is one of these common problems for marketplace businesses is the cold star problem.

[00:39:26] Nick King: I don’t have supply or I don’t have demand for us. We have this supply, which is. assets that investors have invested in. And we were able to generate demand because these assets are very sought after. So the way that it functions is we are turning over assets that are either in the US or the UK to collectors, consumers here in the US via the Vint marketplace and any assets that are owned by Vint investors, they get that return of capital.

[00:39:54] Patrick Donley: So you had mentioned that each collection is its own LLC. If I’m a person listening to this, I’ve got, I don’t know, three or four or five thousand dollars that I want to invest, how do I do that? And then, how do I decide what makes for a great wine investment? If I don’t, let’s say I’m certainly intrigued by wine, but I’m not super knowledgeable.

[00:40:16] Patrick Donley: How do I decide what makes for a great wine investment? 

[00:40:19] Nick King: Yeah, I’ll start there and then talk about the products. What makes for a great wine investment? We take a two pronged approach when it comes to sourcing, based on fundamental analysis and then quantitative analysis. On the fundamental side, we’re looking at regions, brand power.

[00:40:38] Nick King: Production quantity, critic scores, weather, all of this to understand is this a quality business to use like stock analysis as an example, the value investing approach. Is this a good business? So is this a good asset? Then we’re looking at the quantitative side, which is how is this asset priced? Is it mispriced to its intrinsic value?

[00:41:01] Nick King: That intrinsic value is derived via UK data, US data, and auction data. And if we can find assets that are a quality asset that are trading at a discount to their intrinsic value, we’ll source those into collections. However, you as an investor, you go on the Vint platform, three collections, a Bordeaux collection, a Burgundy collection, a Kask collection.

[00:41:26] Nick King: How do you decide between the three of those? We do a write up very similar to a sell side research report on each offering to outline here is our thesis. What we notice with a lot of investors is that they typically diversify across a number of offerings to build this blended portfolio of collections.

[00:41:47] Nick King: So that is, in the investor’s view, like their way to mitigate against regional risk. If you include multiple regions, wine and spirits, maybe wine futures or casks, you’ve additionally, we have fun style product that is accredited investors only those who are sold on the asset class and trust us as a manager and we’ll run a product based on a theme.

[00:42:17] Nick King: Raise the capital, source the assets, and turn those over. Two options depending on your preferences of self direction. 

[00:42:26] Patrick Donley: Are you actually, when you’re making a purchase and doing a collection, are you taking physical delivery of the wine or the spirits or the casts, or, like, how does that work? 

[00:42:38] Nick King: We take physical delivery.

[00:42:39] Nick King: Once that sourcing process is complete, Investors have invested into an offering all of the wine and spirits are stored in specific storage facilities for these assets. Primarily in the UK is at scale. As I mentioned, less regulated and tax benefits over there have led to storage facilities that hold hundreds of millions or billions of dollars worth of wine.

[00:43:04] Nick King: So we cover the storage. All of the assets are insured. Over the life of the offering, we guide towards a medium to long term hold on the investment. And then once we notice an opportunity to exit these assets, so every day we’re looking at US and UK data, is there an opportunity to exit? We’ll handle the transportation of those assets likely into the US because of the premium price that is applied to then sell the assets and return capital.

[00:43:35] Patrick Donley: How do you determine when to exit? Cause I was looking at some of the collections and the holding period. It was definitely over a year, but how do you decide at what point we’re going to exit? Is it when a certain return has been hit or how do you think about that? 

[00:43:50] Nick King: We’re targeting to beat the historic market returns.

[00:43:54] Nick King: That’s what we’re looking for in terms of opportunities to exit. If someone comes to us and they are looking to purchase assets and their price is above what we estimate the fair market value to be, we’re likely going to take that offer. And beyond that’s a, an automatic trigger of, okay, they’re looking to acquire assets above the fair market value.

[00:44:16] Nick King: Other kind of thought process really revolve around that target. low double digit type of return. So what we do is list our assets on a number of exchanges, marketplaces, including our own at a dynamic IRR type of calculation. So every quarter that price is going up to try and hit these target IRRs by selling these underlying assets on different exchanges.

[00:44:43] Patrick Donley: So I know Past performance is no indication of future performance, but what are some of the returns that you guys have had on some of these collections? 

[00:44:52] Nick King: Yeah, so we’ve done 90 we’ve returned capital from about 13 of them and the net IRR on those exits is 28. 5%. All that’s been within the last nine months, which has obviously been fairly volatile in the equities markets.

[00:45:11] Nick King: Testament to our ability to identify assets that trade at a discount to their intrinsic value. 

[00:45:18] Patrick Donley: Yeah, I heard you mention that. You love volatility, that volatility gets you excited. 

[00:45:23] Nick King: Yes. Volatility creates irrationality. Irrationality shows itself in price, which creates buying opportunities. That’s where volatility gets me excited, is that it makes the market even more inefficient than it already is.

[00:45:38] Patrick Donley: So when a collection is sold, at that point, is the LLC dissolved, the funds are returned to investors, and then they have a choice at that point, whether they’re going to do another collection, or do you see that most investors are, once the liquidation happens, they’re reinvesting in Vint? 

[00:45:55] Nick King: The number one product feature that investors have asked for is an easy way to reinvest once they have capital returned.

[00:46:02] Nick King: We return capital in two ways. One is. Sometimes it’s a dividend. Say we sell 10 percent of the collection and we’ll distribute that 10 percent creating kind of a cashflow stream for investors, which they like. And then second is a total liquidation where they receive all the proceeds. But we recently rolled out a wallet feature that allows people to keep the distribution on platform and pretty easily reinvest.

[00:46:25] Patrick Donley: What other asset classes would you say wine and spirits is most correlated with? 

[00:46:31] Nick King: We’ve done a lot of work on this. One of the early things that we did was buy a lot of data, historical data on the top 1000 wines that trade. So that’s built the kind of foundation for some of the studies that we have done on the correlation front.

[00:46:48] Nick King: The number one thing that we’ve actually seen it correlate with is oil about a 0. 5 correlation to oil. We’ve seen a negative correlation to the S& P, very low correlation to bonds, to real estate, a low correlation to art as well, which I thought was interesting because one of our investors, he’s a professor at Stanford as the CEO of Wealthfront.

[00:47:14] Nick King: He’s done a lot of work on collectibles, particularly wine and art. And he said, the number one thing that this asset class correlates with is the wealth of the 1%. If that is increasing, the asset class tends to increase. So obviously over the last hundred years, that’s been a decent bet. But yeah, I. As I say that, I like, I would love to run maybe a correlation against LVMH as like a luxury index versus wine.

[00:47:43] Patrick Donley: How do you get financial advisors to know about the product and to suggest it to their clients as part of a diversified portfolio? Is that something you guys are working on? 

[00:47:54] Nick King: That’s something that we’re very actively pursuing at the moment. We’ve done these 90 deals. We’ve built a track record and I’m thinking right now is a pretty pivotal time in our business to cross the chasm into larger pools of capital advisors is that space that we’re focusing on.

[00:48:13] Nick King: I think the way to get access to them is really a distribution. You need partners. You have these platforms that have a number of RIAs on them that you can unlock distribution. You have independent broker dealers who have hundreds of financial advisors and reps underneath them. So the approach that we’re taking to get in front of them is the one to many approach.

[00:48:40] Nick King: It’s also built on social proof where if this platform has approved you. Me as an advisor, trust the platform. So there’s a hurdle that we’ve overcome by being on the platform. Beyond that, which is more tactical, it’s really education, telling the story of the asset class and how it fits into this alternative asset portfolio, which there’s real estate, there’s private credit, there’s art, there’s private equity, hedge funds, there are all these things that.

[00:49:12] Nick King: People can diversify into a lot of these the Black Rocks, the Blackstones are promoting alternatives, telling the story about how wine and spirits fits into that portfolio. And the only way to do that is to keep putting content out there, keep having conversation, doing webinars. Those kinds of things are how we’ve gotten education out about the 

[00:49:33] Nick King: product.

[00:49:35] Patrick Donley: I wanted to hear before we wrap up about. long term plans for Vint. If we were to talk in five to 10 years from now, where do you want to see the company? What do you want to be doing? Tell me about that a little. 

[00:49:45] Nick King: I would like Morgan Stanley, their investment strategist, to say a 2 percent allocation to wine as part of your portfolio makes sense.

[00:49:56] Nick King: There’s only one platform out there that’s created a financial asset class to get exposure to it. And that’s Vint. I would mean we’ve. educated the investment community about this asset class, because we’re not really focused on people who are passionate about wine. We’re focused on people who are investors who think eight and a half percent uncorrelated returns are pretty interesting from a portfolio construction perspective.

[00:50:21] Nick King: So if that’s something that happens, I’ll say we’ve done it. We’ve created this financial asset class and we’ve been able to return capital to investors at, and that is first and foremost. what we need to do for this business to be successful, which is why that marketplace business is very exciting to get capital back in the hands of our investors.

[00:50:42] Patrick Donley: Yeah, it’s definitely intriguing. I I’m going to look more into it. One of my favorite classes at the university I went to was called the geography of wines, which was a three hour class every Thursday night, my senior year, just learning about all the different wines throughout the world.

[00:50:58] Patrick Donley: And it was, We got to drink it too, so it was pretty fun. But was there anything that we didn’t touch on, Nick that you wanted to before we close out here? 

[00:51:07] Nick King: I think we covered it all, Patrick, and I think what I said there at the end is where I would love to leave it. This is a financial asset class, and that’s that’s what we’re trying to do here at Vint.

[00:51:21] Patrick Donley: I wish you luck. What’s the best way for our listeners to learn about you, to learn about Vint, to get in touch with you guys? 

[00:51:29] Nick King: Yeah, you can learn about Vint and the various products at vint. co. You can reach out to me, emails nick at vint. co. 

[00:51:38] Patrick Donley: Okay. Are you active on any of the social platforms at all?

[00:51:42] Nick King: You can add me on LinkedIn, but not really on anything else. 

[00:51:47] Patrick Donley: I wish you the best of luck. This has been a lot of fun and thanks for your time. Thanks Patrick. Okay, folks, that’s all I had for today’s episode. I hope you enjoyed the show and I’ll see you back here real soon.

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