Pre-IPO investing lets you buy into proven companies before the public stock market ever gets a chance - and the returns can dwarf traditional assets.

Neil Kayal, founder of Grain Ventures and senior M&A executive at a Fortune 10 healthcare company, breaks down how late-stage private market investing works and why it belongs in a diversified portfolio alongside real estate and public equities. You will learn how special purpose vehicles let you invest deal by deal without blind pool commitments, how institutional due diligence filters separate real opportunities from hype, and why the biggest mistake private market investors make is simply waiting too long. Neil brings 15-plus years of evaluating acquisition targets at the highest level, and he has built Grain Ventures to democratize that same institutional rigor for accredited investors. If you have been looking for a growth allocation beyond syndications and index funds, hit play and discover a new asset class you may have been missing.

What You'll Learn

• How late-stage private market investing differs from early venture capital and why it carries a fundamentally different risk profile
• Why 90% of the world's companies are privately held and what that means for investors who only access public exchanges
• The exact due diligence framework Neil uses to evaluate competitive moats, revenue flywheels, and exit probability for pre-IPO companies
• How special purpose vehicles (SPVs) let you invest deal by deal without blind pool fund commitments or multi-million-dollar minimums
• Why the biggest mistake new private market investors make is simply waiting for the next opportunity instead of acting when windows are open
• How to think about sizing a pre-IPO allocation using a barbell investing strategy alongside real estate and public equities
• The real fee structure and alignment model behind deal-by-deal pre-IPO investing, including carry, minimums, and SPV costs
• Why real estate investors already think in the frameworks that make private market investing intuitive - location timing equals market timing

Time Stamps

[00:00] - Introduction

[01:12] - How late stage private investing works

[04:48] - Barbell investing and wealth creation

[07:22] - Accredited investor misconceptions

[10:15] - The institutional due diligence process

[13:30] - Evaluating competitive moats in defense tech

[18:05] - Reading fundraising signals and exit thesis

[21:40] - Public vs. private market analogy for real estate investors

[25:10] - How SPVs work and why deal-by-deal matters

[30:45] - Fee structure, minimums, and alignment

[34:20] - Biggest mistakes new private market investors make

[37:50] - Sizing a pre-IPO allocation in your portfolio

[40:30] - Book recommendations and how to connect

About the Guest

Neil Kayal is the founder of Grain Ventures, a curated investor network providing accredited investors with access to late-stage pre-IPO companies in sectors including AI infrastructure, energy, aerospace, and defense technology. By day, he serves as a senior mergers and acquisitions executive at a Fortune 10 healthcare company, where he has spent more than 15 years evaluating hundreds of acquisition targets with institutional-grade diligence. He built Grain Ventures to democratize the same deal access and underwriting rigor that was previously available only to billion-dollar pension funds and endowments.

Website: https://grain-ventures.com

LinkedIn: https://www.linkedin.com/in/neilkayal

Books & Resources Mentioned

Disclosure: Some links below may be affiliate links. We may earn a commission at no cost to you. As an Amazon Associate I earn from qualifying purchases.

• Sidecar (SPV administration platform)
• Canopy (SPV administration platform)
• EQ Applied: The Real-World Guide to Emotional Intelligence by Justin Bariso
• Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne
• Anti-Fragile by Nassim Nicholas Taleb (referenced by Neil Henderson)

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90% Of the world's companies today are privately held.

Most investors only see the 10% that make it into a public exchange.

And they do that oftentimes only after the best growth has already happened.

The people who build real wealth in real estate aren't buying finished homes in established neighborhoods at retail price.

They are buying land before the neighborhood develops or properties before the renovation.

Welcome to Truly Passive Income.

I'm Neal Henderson.

I'm flying solo again this episode.

Clint is in St. Louis at a self storage conference and I decided to keep our scheduled interviewer because I wanted to have this conversation today.

Our guest is Neil Cayell.

He's the founder of Grain Ventures, a show curated investor network offering access to late stage pre IPO companies in sectors like AI, energy, aerospace and defense.

By day he's a senior M and A executive at a Fortune 10 healthcare company and he brings that institutional rigor to private marketing investing.

What makes his approach interesting is the deal by deal model.

He doesn't do blind pool funds, just high conviction opportunities structured through individual special purpose vehicles.

Neil, welcome to Truly Passive Income.

It's great to have you.

Thank you.

Thanks for the warm welcome Neil.

I appreciate it.

It's not every day I get to talk with somebody with the same name.

So.

I know and like we said we've joking beforehand that we spell it the correct way, not the sociopath way.

That's correct.

So I will never, I'll never pass up an opportunity to tell that joke anyway.

So you know I've got a little bit about your background here.

I'm not going to do the bio dump that often happens so I just want to jump right into it.

For listeners who have mostly invested in real or traditional alternative assets, can you walk us through how how late stage private market investing works and why it sits in a different risk category than earlier venture stages?

Yeah, thanks for the question.

So just to kind of ground us ourselves real quick, you know, I have been working in you know, sort of the areas of investments for a long time where I've been doing it for large institutions.

The the reason kind of, you know, think about it is throughout my journey doing that is I kept noticing something that is the most extraordinary returns in investing weren't happening in the public markets.

They were happening years before a company ever went public.

And access to these opportunities was almost entirely blocked or locked up, locked up with large institutional organizations.

And the interesting part is I work with those organizations on a day to day basis.

So I built Grin Ventures to as a way to bring that you know, my experience in the institutional underwriting mindset to a, you know, group of investors who are already investing, but they're usually getting into really interesting technologies that become available in the public market as retail investors after a lot of the upside is already gone.

So the core idea is the majority of value creation and great companies happen before they go public.

By the time, as I was just saying, retail investors buy in, most of the growth is already priced in.

SpaceX is another great example.

It's been all over the news.

I'm sure everybody sees it these days.

It's one of the most actively traded names in the private secondary market for years.

I mean, SpaceX is not a new company.

They've been around for 20 years.

And sophisticated investors or buyers understood about this, what the full AI infrastructure long before SpaceX filed their filing with the SEC, which was a couple of weeks ago.

So by the time it's on the New York Stock Exchange, edge is almost gone.

And the interesting fact is 90% of the world's companies today are privately held.

Most investors only see the 10% that make it into a public exchange.

And they do that oftentimes only after the best growth has already happened.

I know, I looked up the listeners that tune into this podcast.

From a real estate analogy standpoint, the people who build real wealth in real estate aren't buying finished homes in established neighborhoods at retail price.

Right.

They are buying land before the neighborhood develops or properties before the renovation.

Right.

So private markets of the same concept is you are generate, you are getting in before the crowd shows up and the prices the opportunities efficiently.

So public markets are where you go to preserve wealth.

Private markets are where you go to build it.

A great analogy and thank you for that explanation.

You know, there's two world class investors that I, I love to follow and they both have fairly different mindsets, but both kind of pursuing the same value creation.

One is Warren Buffett, I don't think he needs any introduction.

And the other is Nicholas Nassim Taleb, who wrote the book Antifragile.

Highly recommend it.

And, and I'll use Talib's explanation of what he calls barbell investing, which is you invest in those sort of wealth preservation vehicles on one end of the barbell and then you make a Bunch of smaller bets in these early stage ventures that have the potential to pop at a very high multiple.

Now they also have the potential to, to pop completely, which is why, you know, it's sort of, you know, it's a, you have to have some sort of downside protection.

Whereas Warren Buffett is sort of on the other end of the spectrum.

Again, you know, people are like, well Warren Buffett's such an am investor and, and he, but he mostly invests in the public market.

I know he does in the private as well.

But he's also, he's looking at that value create creation that happens after a company has been around for a long time, has been beaten down by some, some external factor, but still has value there that he can buy into.

And a lot of times force or ride that appreciation wave that happens.

I love what you're talking about and I think your analogy is so great in regards to real estate is that yeah, there is a place to be had for buying into public market real estate.

That sort of, you know, wealth preservation asset that's going to, you know, make you 10%, 8%, whatever, just regularly, you know, there's not a huge amount of risk to it.

But if you really are looking for a wealth creation vehicle, there is, there's a heavy lift involved and you need to be in at an early stage.

And mostly in private markets.

Yeah, I mean, you know, the barbell.

So by the way, that analogy or that you know, explanation of how people should think about investments or even just strategic planning in a sense of how do you think of sustainable differentiation that can be defended for long periods of time and how do you apply that mindset to things you do on a day to day basis?

Whether it's understanding where your goals are today and what it needs to be in five years or it's in your individual business, in your individual private lives.

There's, there are edge that you're always looking for to keep the mindset of continuous improvement.

So the core idea if I think about it is the barrier to private markets hasn't been money isn't.

It's not capital, it's awareness and access.

Most people don't invest here because they didn't know they could.

The biggest misconception has been for me when I talk to our network of in our syndicate is it's only for people with tremendous amount of capital.

That is not true.

You need to have a accredited investor status but that is more accessible than people think.

You can be as part of the SEC regulations, you can have $200,000 in annual income, not just by yourself along with your spouse and you are accredited investor.

The second risk I always hear is it's risky, right?

Investments are always, always come with a disclaimer, right?

You know, invest with knowing both the upsides as well as the downsides that come with it.

But the late stage profile, private companies have already proven their business model, right?

These are not Neil and Neil starting a company in our garage, right?

Or we have started the company and now looking to scale by hiring a sales team.

That's not it.

These are companies that are late stage private companies who have already proven their business model.

They're not early stage startups, they're mature companies which are weeks or months from a public liquidity event.

They're at that stage where they're trying to understand, hey, should I go public or should I start a sales process to sell myself to a bigger entity?

So that's the second thing I always run into.

And the third misconception is hey, I need to understand venture capital.

The answer is no you don't.

You just need to understand the opportunity that is being presented, which is exactly what, you know, people that are interested in, you know, dialing deep and understanding what they're getting into is the type of investors that I really enjoy talking to.

As I think about this, most people spend like 40 years working to save enough money to retire.

A smaller group spends 10 to 15 years deploying capital intelligently in the right asset classes like public markets, real estates, private markets.

But they achieve the same outcome in half the time.

The difference isn't luck, it's access and information.

You give the example of Warren Buffett and the things he does.

If you look at Berkshire Hathaway, Berkshire Hathaway has an entity called Berkshire equities where they invest in late stage proven concepts.

Similarly, the companies that we invest in aren't just financially interesting, they're doing things that matter.

SpaceX is building interplanetary infrastructure.

Neuralink is working on a brain computer interface that can help people restore their function if they, if, let's say they're paralyzed.

Xai Claude open OpenAI GPT they are actually serving humanity.

They're simplifying things.

So when you invest in these companies early, you're not just building wealth, you are participating in the construction of the future.

That's a different kind of return.

Love that.

What does your diligence process actually look like when you're evaluating a pre IPO company?

And how does your, your day job running a large scale mergers and acquisitions and I glossed over that in your intro to make sure that people understand when you're an M and A executive, your mergers and acquisitions.

We were chatting about this before we got started is that your day job is to find companies to acquire and do the due diligence on them.

Correct.

So I want to emphasize that.

And how does it, how does all of that experience shape the way that you underwrite these deals?

Yeah, so that's actually kind of goes to why Grain Ventures kind of came about.

I have a institutional background that has.

I'm very fortunate that this institutional background that I have has given me a lens that a lot of retail investors don't get access to.

The genesis, the reason why I started Grand Ventures was how can I democratize that idea for my friends and family?

That's how it was born.

So yeah, I know, Neil, we were talking about this.

I've spent 15 plus years evaluating hundreds of acquisition targets not as a passive investor, but as someone doing deep operational and financial diligence.

A framework that is built around first principles, thinking unit economics, and how do you deploy capital in a disciplined way.

It's the same framework that we apply to every deal that we do at Grand Ventures.

Most retail investors are evaluating companies based on headlines stock charts these days, probably looking at Twitter or TikTok.

Institutional buyers are looking at entirely different signals.

They are looking at customer retention, market margin structure, leadership qualities in the executive leadership team that's running the company, their backgrounds, and most importantly, what we are looking at is.

I know we mentioned this briefly.

What is this differentiation that you have?

What is the value of your differentiation and how defendable is it?

Because if you don't have moats around your value that you are providing, then you're not going to be able to go after a large, serviceable, available market.

So market defensibility is one of the key things we look.

Green Ventures extends that mindset to our curated group of investors who want access to the same opportunities, but on their own terms.

I kept sitting in just to give you a personal thing to share.

I kept sitting in rooms evaluating private companies for my day job.

Businesses that are extraordinary that I know and I knew were going to be defining, you know, those companies over time.

And I kept thinking the only people who get to participate in this, in this stage are, you know, big pension funds or big endowments with billions of dollars to deploy.

That felt wrong to me.

I wanted to build a structure to change it.

And that's how Grain Ventures kind of came about.

Give me an example of how you would go about evaluating a company's competitive moat.

Sure, I can give you some real world examples.

So one of the things that we are spending a lot of time these days based on everything that is happening in the world is defense technology.

Okay.

And the reason why we are looking at defense technology is a lot has happened in recent times that has kind of pushed the button on like for example, the Ukraine, the Russia Ukraine conflict.

Right.

The currently happening conflict in the Middle East.

So as you think about those, you know, you know, area things that are happening, one of the things that we are interested in is the next generation of defense and warfare.

So I think Anduril is a name that comes up.

I don't know if you're familiar Neil, but it's a company that comes up quite a bit where they're doing autonomous warfare.

So that's a pretty hardware based infrastructure and play.

Defining defense tech is I think a big bet of this decade.

So first we look at the technical moat in how some of the production happens in these companies.

I'll give you an example.

There's a company called SHIELD AI and they are building a technical moat in their production which is, it's an autonomy stack with live combat validation.

They have flown across 26 classes of vehicles deployed by Ukraine in the Ukraine Russia conflict.

They're the number one autonomy provider for US Air forces program in, in, in the, in the Anduril program for our air combats.

We also look at revenue flywheels for both hardware and software.

So technical mode is important, but then you have to also look at economic modes.

How do you gets specked into all the top defense primes that exist in this, you know, ecosystem like primes like Airbus or Kratos or General Atomics, Lockheed Martin, they all need software for their products.

So how do you apply, let's say a Microsoft or Google style SaaS subscription model that they can subscribe to to fly their, you know, technology hardware.

And then the third thing we also look at is the growth.

Growth is very important and you have to understand what are the rules of the game, what are some of the external drivers and then what a winner looks like.

And in that, in that order.

So technical mode becomes very important for technology startups especially as they go from a startup to a mid state to a late stage entity.

And we look at companies that have a head start in technical modes that are around production grade defense autonomy.

So yeah, you know, the diligence starts from the market.

We start with the market first.

We try to break down the market in as Many ways as we can segment that market to understand who's playing, how are they playing, who's winning, who's losing.

We try to understand the external drivers in that market and then we try to form a thesis around what a winner looks like in that market.

Once that market work is done, only then do we look at assets to back into the market.

And how does the assets affect your underwriting evaluation?

So there is quite a few things we look at.

So valuation is for these type of companies, they're usually going through several rounds of fundraising, right?

You look at the total debt that they have raised.

You look at what the valuation of the company has been from the last time they raised their funds.

And then you try to look at what is their annual run rate in terms of revenue that they're projecting and how much of that is real versus just, you know, intents.

Right.

You know, letter of intents versus actual revenue.

So you look at their valuation based on their fundraising activity, their debt profile, how leveraged they are in the market.

And then you try to understand, okay, how much of the revenue from last year versus this year are they seeing any incremental growth?

Not just year over year growth, but incremental, how much is that?

And you try to understand what's driving their growth.

Is it software as a service?

Is it a new market expansion?

They're going from US to, let's say in terms of defense, all the NATO countries, what is their US program of record like, how are they doing with the Department of Defense or Department of War?

How are they winning those programs?

And then what is their manufacturing scale?

Let's say they have all kinds of capital available to them, all kinds of resources available to them, how much can they truly manufacture from a unit economic standpoint to give those scale of economies to be able to grow and, and be able to meet the target, which also goes into the valuation piece.

And then the other thing we look at, well, couple of other things we look at.

One is what is who has invested in this company thus far?

When they first was, you know, when they were first raising their capital, when it was not a company, it was just an idea who are the investors?

And then as they went along their journey, those investors being repeating their investments, are there new investors coming in?

Are they repeating their investments?

Especially when you see signals like JP Morgan or Blackstone, you know, these type of large institution, Anderson Horowitz, when they are putting their money into the same company repeatedly over multiple rounds, that is a category defining consensus that builds.

That's also goes into the valuation.

But then you need to kind of.

For us, we also look at the exit thesis.

Let's say this is a late stage company and you know, they're at that cusp of figuring out what they should do next.

So we look at signals.

Give you an example, there's a company trying to, it's trying to define a new asset class.

I don't know if you're familiar, Neil.

Companies like Kalshi are, it's an outcome driven prediction market company.

Right.

If you look at Kalshi, you will notice they have had three rounds of funding in less than five months.

They've went from series D to E to F inside of five months.

And that is a signal that tells me, again, Neil's opinion of one is that they are probably looking to go public in the next 12 to 24 months.

So for us, the exit thesis is also very important.

We try to understand what is this exit probability.

We understand what is the opportunity score for them if they do go public, meaning how successful are they going to be.

We look at their current valuation and then we look at proxies or comparables.

When was the last time a similar company went IPO or got acquired and what valuation did they get acquired or go IPO at?

So we look at a series of signals and try to deduce the exit thesis as well, to formulate our underwriting investment thesis.

It's, it's very interesting to me as, I mean, I know enough about stock evaluation to be dangerous.

I've got a, I've got a good friend, sharp as attack, who's, you know, has developed an entire system around researching stocks the way that Warren Buffett does.

Brilliant guy.

And you know, you, you talk, Warren Buffett often talks about the competitive moat.

And it strikes me as, as interesting that, you know, and you talked about, you know, sort of the social, the social research investors, the guys who are, you know, basically just momentum trading off of news good and bad on Twitter, on C Span, on msnbc.

You know, you know, I mean, they're just the sort of momentum traders.

I don't even know what it's called.

And it's such a different, you know, and you're not just looking at the P and L. You know, you're, you're looking, you're having to look at, at all of those what you call signals to show that one, they've got a competitive moat, two, they've got good management in place, and three, I'm not saying these are the, your three categories, but also, you know, that they are entering a phase where there's likely going to be an exit soon, which is an opportunity for you to jump on.

And I guess I'm trying maybe asking you.

There's a question in here somewhere, Neil.

I'll get there eventually.

That help me sort of analyze that metaphor.

Create a metaphor, someone who's maybe used to evaluating stocks on the public markets like that in the various different ways and create an analogy for them to understand what you're doing.

Does that make sense?

Because you, I think you did a great job explaining it, but I want to kind of tie it up and make sure people understood it.

Yeah, no, that's.

I think that's probably the most important question.

Right.

So.

So like, you know, when you buy a stock, you are buying a company that's already been priced by millions of other investors.

You are participating in a market that's already efficient.

In private markets, you are buying before that pricing happens, which is where a lot of the upside lives.

Maybe this, this would be a good way to think about it.

For folks that are into.

In real estate, there are two worlds of investing, right?

So public markets, you have your stocks, ETFs, they're easy to access, easy to trade, very efficient.

That's great.

But it also means most of the information, as I said, is already priced in.

Then you have private markets, which is less liquid, harder to access, less transparent.

That's an.

And that's exactly where the opportunity comes from because you are getting paid for being early, being patient and having access.

So another way to think about it is, I was thinking of this analogy is public is like buying off Zillow.

And private is getting the deal before it ever gets listed.

Right.

So, you know, if you look at a company, how a company grows is pretty straightforward.

It starts small, raises early money, figures out what works, what doesn't work, then the company scales and then the company eventually goes public.

Most people only invest at that last stage, but by then the business is already proven, the story is already widely known and the valuation reflects that.

So that returns.

That's why it tends to compress.

So you know, where we focus is right before that, companies that are already working, already scaling, but still private.

So you're not taking early stage risk, but you're still early enough to benefit from the growth ahead.

I actually, Neil, I actually love speaking to real estate investors because they already think this way, right?

If I ask you, if I ask your audience, like, how many of you try to buy before an area fully develops?

Almost most of them are going to raise their hands.

Right.

Because the real estate investors are already doing this.

You are thinking about the location, you're thinking about the timing, you're thinking about cash flow, you're thinking about exit value.

Private markets are exactly the same idea.

Right?

Instead of location, you're evaluating market size and competition.

Instead of rent, you are looking at revenue growth.

Instead of comps, you're looking at valuation and deal structure.

And just like real estate, the best deals don't show up publicly.

They come through the right network.

So, you know, I kind of think about it the same way.

You know, maybe another way to think about it is let's say you form a real estate syndicate with your friends and families to buy one property.

But instead of buying a property or building, you're buying into a company.

Got it?

Got it.

Okay, I think we've run that analogy down.

I think if anybody's listening, doesn't have a clear picture of what it is now, we've lost them anyway.

So you structure each one of your investments as a standalone spv, which stands for a special purpose vehicle, rather than a blind pool fund, which is a deliberate choice.

What drove that decision and what are the trade offs?

Investors should understand when comparing the deal by deal access versus committing capital to a fund.

Yeah, so on a day to day basis, I work with some of the largest private equity companies, venture capital companies in the world.

Let's say, Neil, you want to invest money into, let's just pick one.

Let's say you want to invest money in anthropic cloud, everyone seems to love it these days.

Or you want to invest money into, let's say SpaceX before they go public in the next couple months.

You have to have a net worth of like ten plus million dollars for some of this large investment venture capital to even take your money.

And then they hold it and then they take your money and they break it up into multiple tranches and invest in multiple businesses that they're interested in.

So essentially you're, it's a blind pool that you hand over to them and they, you're trusting their diligence, you're trusting their track record to take your capital and deploy it for them, which is great for folks that want to do that.

That's still a vehicle that they can pursue.

I believe that single purpose vehicles or SPVs in my mind, the first time I thought about it is like, it's like starting a LLC with your closest friends and families and you're investing as a LLC into one particular asset, one particular company that you are interested in.

So SPVs are the most investor friendly structure in the private markets.

But the crazy part is most people have never even heard of them.

You know, which is such a shame.

We operate on a deal by deal basis through these SPVs because these are single legal entities that are created for one singular investment.

And you get to review each opportunities individually.

You yourself get to decide if it makes sense for you and if it does make sense for you, you invest only if you want to.

There are no, you know, blind commitments, there is no fund lockup and There is no 5 to $10 million minimum investments either.

I say this, it's like as I was just giving this example, it's like the natural question is like, you know, why doesn't everyone do it?

The crazy thing as I said is people have never even heard about SPVs because at its core SPV is very simple.

You know, it's a single purpose entity for one investment.

You invest into it, it buys the shares in the company you are interested in and you own your position.

It's like, as I said, it's like a real estate syndicate for one property, but instead of buying a property, you're buying a company.

And we focus on large stage private companies.

And think of it like being offered a seat at a table that's previously, that previously required invitation from a hedge fund.

Right.

Most investment funds are like a, it's like a tasting menu.

You commit to the whole meal before you even know what's being served.

Right.

What we do is more like ordering a la carte where you see the dish, you decide if you want it and you only pay for what you choose.

And the best thing, Neil, is that we focus on sectors that are shaping the next industrial cycle.

Right?

Infrastructure, not AI in general, the infrastructure behind AI, like you know, the water that you need to cool down, data centers, you know, energy source.

Like how are you going to power this?

Like there's only so much energy in this world, right?

So we focus on AI, infrastructure, energy and compute defense technology.

And these are not speculative bets that we are taking.

These are areas where the government is spending, where the corporations large corporate corporation capital expenditures are flowing.

This is why the next generation of category defining companies are being built as we speak.

These are areas where you are moving the civilization, you're moving ourselves.

So yeah, it's how we think about it.

And the SPVs give us the best shot at engaging because we also want people to engage, we want them to learn about the technology.

Why is it important?

Is it really going to solve A valuable problem.

And then when you get the answer to that, that, yeah, it is going to solve a valuable problem.

The next question you ask is the valuable problem in an attractive segment.

And if the answer is yes, then you should feel confident in investing.

And my job is to help you understand if it is those two questions are being answered right or not.

I'm not gonna just ask someone to invest in it because yeah, you should trust me because I do this for a living.

But I also want you to trust your own judgment and why you think this is important because we should all be learning about new technologies before we get disrupted blindly.

As far as mechanics, you know, there's a very common SPV provider service called tribevest.

It's very, very well known in the syndication community.

Is that, is that what you're using to create your spv?

I mean, how are you typically creating your spv?

Yeah.

So the SPV administrators are all CC compliant, Regulation D compliant companies.

We interchangeably use two different SPV providers, administrators.

One is called Sidecar S Y D E C A R and the other one is called Canopy C A N O P Y.

And these are regulatory bodies that handle legal compliance, paperwork, banking, everything for you.

And that's what we use.

And it's typically you're going to get the similar sort of documents that you'd get with a real estate syndication.

You're going to get a ppm, an operating agreement, a subscription agreement, exactly the same.

Got it, Got it.

Nothing, nothing changes there.

Yeah, that's the SEC for you.

Yep.

So for, I want to start wrapping this up because we're going long on time, but I've really, I've, I'm fascinated by this.

So my curiosity has kept us going long and I've got no problem with it.

It's my show.

So for high net worth investors who already have a diversified portfolio across real estate, public equities and maybe some private credit, how should they think about sizing an allocation into these pre op, pre IPO opportunities?

And what mistakes do you see these new investors in this space make often?

Most often.

Let me start with the mistake first.

The biggest mistake I see investors make is waiting.

People who say I will look at the next one are the ones who missed SpaceX at $50 a share.

Right now, I think in the secondary market, SpaceX is going at $850 a share.

They missed OpenAI before the ChatGPT moment they missed on Claude when they were lagging behind not because they couldn't afford it, but because they didn't act when the window was open.

Private markets are not patient infinitely.

You know, it's, it's patient, but it's not infinite.

Allocations fill up, companies go public and the opportunity is gone.

So that is one of the biggest things I've seen.

Now how should the investors be thinking about it?

I think the investors should start by understanding what do you own today?

You own real estate.

You own ETFs, stocks, bonds.

Most people have all of their investable assets in a 400k or a brokerage account full of public stocks and mutual funds.

Some folks that have come out of that cycle also have a lot of real estate portfolio.

Now what does true diversification really mean?

True diversification means that you're not concentrated in one asset class.

I think the first step is education and the second step is finding a partner you can trust to help evaluate opportunities.

And that's exactly what we try to do.

That's why we exist.

That's why Gren Ventures exists.

So yeah, you know, I think when we built Grenventures it was intentionally very simple.

We want to focus on bringing a small number of high conviction, late stage private opportunities one deal at a time.

What really matters is for us it's not, you know, it's not a volume thing for us is what really matters and how do we get there.

Every opportunity goes through a pretty disciplined filter.

Is this a market that's actually going to matter in 5 years or 10 years?

Is this a company that's already proving that it can scale and are we getting in a price and structure that makes sense or is it just a great nameplate?

So mistake, you know, going back to mistake.

One of the biggest mistakes people also make in the private market is chasing logos.

They hear a big company name and they think it's automatically a good investment.

But the reality is that the entry point and structures also matter more than the company itself.

So the goal here for us is not to do a lot of deals, not at all.

It's to do a few really thoughtful ones where the upside and the setup are equally aligned.

Again, I, you know, we talked about this at the very beginning episode of about the Barbell.

Thinking about it as a barbell.

And that's kind of when we talk about allocation, that's kind of how I think about this pre IPO allocation.

If I, you know, if I was an investor to, to decide to put some money in there, I've got, you know, the safer investments, you know, the stocks, the bonds, the, the real estate, things like that.

And this is this is a growth bucket, very much a growth bucket with the inherent risks, you know, caveat that's there's a risk in every investment.

What does this look like for the typical investment investor?

You know, most of our audience have probably, you know, we've talked their ear off about syndications.

You know, you typically have an investment minimum.

You've got an investment window.

You know, there may be, there may be a pref, there may be no pref.

You know, I imagine that a lot of this stuff, there may not be cash flow coming off this.

It's maybe just a growth play.

What does it typically look like for an LP investor?

Yeah, the minimum we have is very accessible.

Our typical minimums and again it's deal by deal, right?

The way we structured this is our minimums are usually $25,000.

And the way we kind of settled on $25,000 is look, you know, returns are returns, right?

If I am bringing something to my network, my thesis is usually conservatively somewhere between let's say 4x to 5x ROI.

This is not a promise.

That's what I conservatively strive for.

And the ones we pick based on all the different signals we see and the areas of interest, that's how we try to go about that route.

Then there's a K1 fee that comes in.

Usually you are not paying the K1 fees up front later two or three years holdout.

Now let's just do the math, right?

So we, we decided 25 to be minimum because let's say 22, you're in, you end up spend, you end up investing 23,000.

My goal is to make sure that you are able to multiply that in terms of your return of investment.

And the way we work is that it's alignment.

I invest in, I invest alongside every SPV that launch.

So I'm not just bringing in opportunities, I'm making the same decision with my own capital.

And if it works, we all win.

And that's because when let's say that 20, let's keep it simple, let's say that $20,000 4 x's to $100,000.

In that $100,000 you first get back your $20,000 first and then the rest $80,000 have a carry that I get which is 20% of your profits and the rest profit is your.

That's why the alignment is there because it's in my best interest to bring in opportunities that I have high conviction because then I know the returns will alignment is going to be there because we both have an opportunity to maximize on our contribution.

So usually for us we ask for anywhere between 6 to 8% fees upfront one time upfront to cover for the SPV fees and the sourcing and then that's about it.

There is no ongoing maintenance.

There's nothing that comes with it.

When the liquidity event happens Ventures gets to keep a 20% carry on the gains after the principal is returned.

So that's usually how we work.

Our minimums are 25 and then we have some large institutional investors that invest based on the opportunities at hand.

Got it.

All right, let's talk.

And we don't need to go into every detail of every feat like if people have interest about with investing.

I encourage you to reach out to Neil and understand the fees involved and where the promote happens and all that.

But I want to finish this up and just to understand timeline and cash flow.

This is clearly not, this is not a cash flow play.

This is a growth play.

Correct.

You're not typically, you know, if someone's putting the money in, they're not expecting oh we're going to get an income, you know, right away.

This is a growth play.

You're looking at an exit.

You're trying to get an equity bump, an equity multiple.

Correct?

Yes.

You know, so it's a good question because I know this is the topic that the truly passive income and how that's how it kind of goes into it.

Right.

Look, I look it's a growth play.

I look at it as do I want my company, let's say any company that anybody runs.

You want the returns to compound over time.

Correct.

So it's the similar concept here.

However, I also have a duty since we are picking late stage companies that are at the cusp of deciding whether to go public or start a sales process.

Usually it's anywhere between 12 to 24 months is our liquidity horizon.

That's the way we are picking.

So sometimes we are getting in a little later than getting in a little bit Maybe a little bit more early, but that's intentional.

But we are also picking it where, yeah, we might be getting in a little late, even though they are still private.

But we are timing it in a way where we still are able to maximize on the structure.

So when I find these deals, it's a combination of institutional relationships that I have, a network that I've built over 15 plus years of doing M and A merchants and acquisitions and corporate development at the highest level.

And these deals are not coming into my inbox from cold emails.

They're coming from trust and track record and we are getting access that I know.

These are people I trust that are getting us pricings or the strike prices.

That still leaves enough room to get that 4 to 5x.

Sometimes there's a larger upside, but that's not what we promise.

Got it?

Got it.

All right, final question we ask every guest before we talk about how people can get in touch with you.

So what is a book that you find yourself recommending again and again to friends and colleagues?

The one.

So can I.

It's two books.

If I, if I.

It's fine.

Shoot.

I love, I love books.

More books.

This one book that really changed my leadership style is we all know about intelligence and, you know, iq, the intelligence quotient that everybody has, how you get measured.

One of the biggest things that has made a pivotal, you know, difference in my life is understanding emotional quotient or emotional intelligence.

There's a book by Justin Bariso where it's EQ over iq.

And that book has made me rethink my leadership strategy.

How I think about it.

I'm very analytical.

I mean, it's part of my, part of my DNA.

But if you are very analytical, that is great.

But you need to be able to be connect with people, to relate to them, to draw out information that is going to be help in your analysis, but more so than that, to be able to bring everybody along the journey.

So highly recommend EQ over IQ by Justin Bariso.

And the other book that has made a meaningful difference in my life is Harvard Business Review recommends this book.

It's called the Blue Ocean Strategy.

Not sure, Neil, if you're familiar, but Blue Ocean Strategy is why I do what I do.

How I have been able to think through complex structures and problem solve within those complex structures.

Two great recommendations.

I don't think we've had either one of those in the podcast yet, so thank you for that.

So, Neil Kayal, this has been fantastic.

I've really enjoyed it.

This has been outside the box of our typical asset class that we explored and I've thoroughly enjoyed it.

And if any of our listeners want to explore more with you and get in touch with you, what would be the best way for them to do that?

Sure, if anything I've said today resonated with you or the audience and you're curious about private markets but don't know where to start.

I would love to connect.

The best place to learn more is you can go to our website which is grain ventures.com you can also find me on LinkedIn under Neil Kael.

You can send me an email to neil@grain hyphen ventures.com as a as we've been talking about, we share opportunities on a very infrequent deal by deal basis, so there's no commitment required just to start a conversation just like the one I had today with you Neil.

Come learn how it works and we'll take it from there.

Very good.

Well, thank you once again.

It's been a great conversation and I hope you have a great day.

Thank you Neil, you too.

Good talking to you.

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