Welcome to Billion Dollar Startup, where we bring you visionaries and disruptors who have started scaled, sold, or invested in a billion dollar startup, also known as a unicorn. We also feature tech founders who are building the next billion dollar startup. Billion dollar startup is a unique podcast sponsored by Dragon X Capital, the venture capital firm that concentrates on seed and early stage tech companies with the X factor.

Dan Lok:
I haven’t shared a, a war story with us that our audience can learn from.

Ivan Nikkhoo:
Uh, there are so many, but, uh, we

Dan Lok:
Can probably do a series on

Ivan Nikkhoo:
This. Yeah, we could probably share.

Dan Lok:
It’s the first one.

Ivan Nikkhoo:
The, there is one that always comes to mind, um, because it, uh, brings together some of the mistakes, many of the mistakes that one should make, all in one, um, in one entrepreneur, there’s a gentleman that I met over 15 years ago that claimed he had the best tech of whatever you can imagine. And I kept asking, so what is it? What’s the problem you’re solving? And he goes, we just have the deepest technology. And I said, okay, what does it do? Well, I can’t tell you because we don’t want anyone to know, but we want to raise $25 million. Well, do you have any revenues? Well, I can’t tell you. And whatever I said, he responded by saying, couldn’t tell me I was secret and this and that. But he goes, but we have IBM as our client. We have this CIA as our

Dan Lok:
Client, but do they actually have clients?

Ivan Nikkhoo:
Well, I’m getting to that. Okay. So I said, you know what? Uh, I appreciate it, but I’m not interested. And he kept calling. He goes, you don’t understand what you’re passing up on. And this is, this is the most important company in history. We’re gonna be the next unicorn. We’re gonna be doing hundreds of millions of dollars in revenues, and so on and so forth.

Dan Lok:
So you talked him 15

Ivan Nikkhoo:
Years ago? 15 years ago. Okay. Five years later, I saw him another conference. I said, how’s it going? He goes, we’re doing amazing. We have all these, uh, clients and we’ve raised money. And I said, so what does the company do? We can’t tell you. We don’t want anyone to steal our ideas, so on and so forth. And this continued every few years I would see him at a conference and he would repeat the same story, um, until, uh, about a year ago. And, uh, I saw him again. This time he’s raising money except for he had talked to someone that we both knew about that. And it turns out he still doesn’t have revenues. All those customers were unpaid. They were just, um, service. He’s zoom consulting for them. He’s pissed away over, you know, 10 and a half, $11 million. Wow. And he’s still telling everybody it’s the most, he still doesn’t want anybody to know what he’s doing. The reality is he doesn’t have anything. Hmm. The reality is he doesn’t know what he’s doing. Mm-hmm. <affirmative>, the reality is he can’t even tell me what, that’s the problem he’s solving. And he’s just gathered around himself a lot of people that he calls senior advisors to the company and all of that. So it’s a very common thing. Mm. And if after 10, 15 years, you still cannot show any traction, you still cannot demonstrate product market fit.

Dan Lok:
But isn’t that also very, being very irresponsible extremely to, to, to investors?

Ivan Nikkhoo:
Extremely. Yeah. And, uh, which is why, uh, I’m hugely against it, but there’s always people that believe it and put more money in. I’ve seen this so many times. Yeah. Yeah. I’ve seen a case like this with 28 million in, I have seen a case like this with 36 million.

Dan Lok:
It’s almost like, I guess in some way the, I don’t know if I shouldn’t say it’s an investor’s fault, but they have a little bit of gambling mentality too. Right.

Ivan Nikkhoo:
You know, they believe the entrepreneur and they think, but they don’t know the questions to ask.

Dan Lok:
Yeah. They don’t even know how,

Ivan Nikkhoo:
They don’t know stupid diligence. They don’t know how, if this is, but they don’t, they say, well, I like this guy. He seems smart. Or they say, I like his idea. He

Dan Lok:
Saves

Ivan Nikkhoo:
Smart <laugh>. And I’m like, which is why I say, who are the other investors? How many investors? Does he have a clean cap table? What does the balance should look like? How long has he been in business? If he’s been there for more than 10 years and he still doesn’t have revenue, something is wrong. Mm-hmm. And, uh, most individual investors that have recently come into money and are now looking at investing in tech all fall into this category and they lose their investments. It’s a very, very common scenario. And it happens all the time, which is why we really believe in the implementation of institutional institutional capital into these companies. Because there’s ivy leave diligence. And I tell my friends always, if someone is coming to you to raise money and you’re in the business of real estate, that means somebody like me has said no, and that’s why you shouldn’t do it.

Dan Lok:
Yeah. And, and then for, for this guy, chances are you’ll meet him again a few years. And, and he said same shit. Same, same, same story again and again.

Ivan Nikkhoo:
So, uh, unfortunately this is such a common thing I get very sad

Dan Lok:
About, but they’re almost like, I don’t know. I, I’ve also met a number of these founders. They, they live their own little fantasy world,

Ivan Nikkhoo:
You know?

Dan Lok:
Uh,

Ivan Nikkhoo:
They’re like, they keep going at ghosts, they’re, I call ’em.

Dan Lok:
Um, but they’re not, they’re not enterprises. They’re not actually building anything.

Ivan Nikkhoo:
If you, it’s off fluff. If you are working on something for over 10 years without any results. Yeah. You have to step back and say, either I’m doing the wrong thing. Yeah.

Dan Lok:
Or I don’t have to

Ivan Nikkhoo:
Am the wrong person

Dan Lok:
To do it. I don’t have what it takes to do. Which

Ivan Nikkhoo:
Is why if you come to ABC who is experienced, they will ask you, why are you solving this problem? Yeah. Why are you the right person? Yeah. And why’s not the right time. Yeah. And that’s how we assess it. But most people don’t do self-assessment and they’re unwilling to accept that either what they’re doing is not worth doing or the wrong person to do it. Yeah, yeah. Yeah. Because they’re so smart, they everything, and the rest of us are dumb. By the way, this is far more common than you could possibly imagine. Yeah.

Dan Lok:
Yeah. And, and I think in this case, the the worst enemy for, for any tech founder, entrepreneur, it’s the ego.

Ivan Nikkhoo:
Yeah. But the ones that are smart, the reason I like people going to VCs early on is not just for the capital, but for validation as to whether what they’re doing is worth doing. Yeah.

Dan Lok:
Or maybe even they get a little bit of money. Not that even a time. This is

Ivan Nikkhoo:
From the beginning. No, not, but no, nevermind. Just the money. I’m saying the capital is important, but is even more important is the validation of knowing are we going down the wrong path or the right path? Is this the right thing or the wrong thing? How many other,

Dan Lok:
They don’t, they don’t, they don’t wanna take feedback.

Ivan Nikkhoo:
No. Because sometimes people are unwilling or unable to take negative feedback or rejection. Yeah. And a lot of people who don’t want VCs because they hate rejection. Yeah.

Dan Lok:
But, and somehow they kind of demonize VCs too, right? Oh, these guys are voucher.

Ivan Nikkhoo:
Some of them deserve to.

Dan Lok:
No, no, I do agree. I do agree. I do agree.

Ivan Nikkhoo:
But, uh, again, so this instance is one that I want to bring up because it is such a common one, uh, that people need to be cognizant of it.

Dan Lok:
Mm-hmm. If you enjoy the stories, make sure you come below or leave a reveal on our podcast so we can share more war stories with you. Right? Yes. Until next time, happy, happy unicorn hunting.

We appreciate you joining us for this episode of Billion Dollars Startup. Be sure to rate, review, and subscribe to the show and visit dragon x.com for more resources based on today’s topic, as well as for access to previous episodes. That’s dragon x.com. Thank you for listening.