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As an entrepreneur, Neil Patel has created and scaled a group of businesses that generate massive monthly cash flow. Along the way, he re-invested much of this income into alternative investments to grow generational wealth, and create a legacy for his family (all before the age of 35).
On this episode, Neil Patel joins WealthChannel’s Andy Hagans to discuss the keys to his unconventional investment style, plus his advice to entrepreneurs who want to build their own legacy wealth.
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- The story of how Neil and Andy originally met at a marketing conference in 2006.
- How Neil got his start as an entrepreneur, in his teenage years.
- Neil’s first business that generated truly “life-changing” cash flow (and how this business grew organically even during the Great Financial Crisis).
- Why Neil prefers making private investments in angel, venture, and technology (rather than real estate).
- Neil’s advice to entrepreneurs who want to build their own legacy wealth.
- What kind of car Neil drives (this might surprise you).
- How Neil and his wife are building a legacy for the next generation, while ensuring that their family values are passed on.
Today’s Guest: Neil Patel
About The Alternative Investment Podcast
The Alternative Investment Podcast is a leading voice in the alternatives industry, covering private equity, venture capital, and real estate. Host Andy Hagans interviews asset managers, family offices, and industry thought leaders, as they discuss the most effective strategies to grow generational wealth.
Andy: Welcome to the show. I’m Andy Hagans, and today I’m taking you inside the family office of my friend Neil Patel, who is 37 years old. And if you’re watching or listening to this, you may wonder, how does a 37-year-old have his own family office? And Neil, normally I ask guests to introduce themselves, but I’m not gonna do that. I’m gonna introduce you myself, because I love this intro that I wrote out in my notes. Neil Patel is a “New York Times” bestselling author. “The Wall Street Journal” calls him a top influencer on the web. “Forbes” says he’s one of the top 10 marketers, and “Entrepreneur” magazine said he created one of the 100 most brilliant companies. I’m not done. Neil was recognized as a top 100 entrepreneur under the age of 30 by President Obama, and a top 100 entrepreneur under the age of 35 by the United Nations. Neil, that’s gotta be an all-time best introduction on my show. Welcome to the show.
Neil: Thanks for having me.
Andy: I just had to read that. And to let my listeners and viewers in on this, I met Neil, I wanna say it was back in 2006, so at a conference. Yeah, we’re dating both of ourselves here. I’m thinking, how old was I then? I was whatever, I was 23 or 24, and you’re couple years younger than me. And the reason I loved reading that intro, I feel like when I met you, it was at a marketing conference, you were kind of, like, the new kid on the block, if I can say that. And then, a year went by, and, like, at the next marketing conference I saw you, you were already huge. And I remember thinking even then, like, “What the heck is going on with this guy?”
Neil: I’m thinking back then, you used to work for Patrick, right?
Andy: Yep. I worked for Patrick Gavin. That’s right. Yeah. And he…
Neil: Was it Texting Ads or Position One? I forgot what the company name was back then.
Andy: He has had so many companies that I was involved with. And honestly, I learned so much about entrepreneurship, and private equity, from Patrick. Yeah.
Neil: Yeah, that’s right. He likes raising money for his deals. And then he tends to flip to private equity and then flip again. And yeah, good for him.
Andy: Yeah, Patrick, for me, was a great role model, and I learned a lot from him implicitly, just by watching. I’ve also learned a lot from you, Neil. Like, as we discussed before I clicked record, I stalk you on social media, just because I wanna kinda soak up, you know, how you do things. I think that’s sometimes the best way to learn. Like, you can Google “how to do marketing,” you know, and get tips, but you can also just watch people that do it well, and, like, see what kind of content marketing they do. How did you get your start, though? So, we’re going backwards now, back to the beginning. Walk us through those first couple years of your career.
Neil: So, my first couple years of career, and, similar to you, I started really young. So, there really wasn’t any corporate jobs. I started when I was 16, so there really weren’t any corporate jobs. But I started creating websites, getting traffic, got good at it, wasn’t good at making money, was just good at getting traffic to a website, right. And the more people that go to a website, the more likely to make money. Although I couldn’t figure out the money portion. And eventually, I got really good at the traffic part, frustrated about the rest. Every day I got home from school, I would call all the people that were placing ads on Google, because you could see if it was labeled, like, a sponsored, or paid ads. I don’t know what verbiage that they used back then.
And I would call them, they’re like, “I’ll do marketing for free. I’ll get you traffic. If I get you traffic, pay me. If I don’t, don’t pay me.” It wasn’t really, like, a guarantee pitch. It was more so, like, “If you’re happy, pay me. If you’re not, don’t.” When you’re a little kid, you’re wasting hours watching TV or playing basketball, so, I’d waste hours on websites. Most people ended up paying me. Got a good start there, built a agency. The agency started making a few million bucks when I was a kid, but it crashed really hard in 2008, during the financial crisis, right? With all the subprime mortgages and stuff like that. But luckily, before the crash, a few years before that, I started creating software, and I created a analytics company. And during the 2008 crash, the analytics company was continually growing month over month. It didn’t really see any pullback.
Andy: And was this Crazy Egg or Kissmetrics?
Neil: This was the Crazy Egg.
Neil: So, then I shifted resources, and I didn’t shift it by choice. I shifted by, more so, had no choice, because the agency was continually declining in revenue and profitability, and the software company was growing. So, stopped doing agency work, kept doing software. The software companies, I think Crazy Egg is, like, 16 years old now. We still have it. But when businesses just get old, and if you create a good enough product or good enough service, you don’t have to be the best. It kinda just grows through word of mouth, if you do it long enough, and continually adapt, and listen to the market, and give them what they want…
Andy: It has to be good, though. You’re not gonna grow by word of mouth if it’s not good, right?
Neil: Yeah, yeah, yeah. You have to have, or create good product or good service, and you have to continually adapt and keep up with the competition. But that’s worked out well for us. And some of it did really well, some of the software companies. And overall, the winners made up for the losers plus more. And then my latest company, NP Digital got back into that space, because we were just getting so many leads, and had a fun time doing that. I think we’re now at 750 employees. I think we’ll be maybe 1000 by next year. So, that’s growing really fast.
Andy: Only 750 employees, Neil? I mean that’s huge.
Neil: Our competition has, like, some of them have, like, 60,000 or 100,000 employees, right? So we still feel really tiny.
Andy: Wow, wow. So, you know, we’re talking about your family office today, and so many family offices do actually have their genesis not only in entrepreneurship but in that software or technology world, where you have an entrepreneur who builds up a successful company in software, technology, or some kind of startup, and then has a liquidity event. And that liquidity event is, you know, the genesis, or the external event that leads to the creation of the family office. So, for you, obviously, you’re, you know, earning a lot of income, having a lot of success early in your life, in your 20s. Was there a liquidity event, like, looking back… So…
Neil: There wasn’t. So, I had small liquidity here and there. I’ve been doing angel investing for 16 years now, so I’ve had some wins from that, and then just kept recycling the money. I’ve been a LP in a lot of angel funds, then venture funds, then private equity funds. And then again, you recycle the money. And then, my businesses spit off millions a month in free cash flow. So, when you’re making millions and millions a month, it adds up. I’m 37, but when you’ve been making that for a while, you kinda have a lot of money to invest over time, right? So, then, just like, how many homes you’re gonna buy. I’m in a rental right now. I was telling my wife, I’m like, “You know, the ideal thing to do is just never buy any homes or real estate.” We do have homes, but, you know, I don’t know how much we have in homes, but let’s call it $20 to $30 million liquid in real estate, right, that is our equity value, cash, in real estate, and bought it all recently. So, it’s pretty much cash. There’s no gains, really.
But I was telling my wife, I’m like, “You know, renting a house for $20, $30 grand a month, whatever you want, is so much cheaper than just buying. Because even if you make 10%, 15% on the money, you know, rent doesn’t cost that much.” And everyone’s like, “Oh, your home and real estate goes up in value over time.” And I’m like, “I’ve made more money in the stock market or angel investments and entrepreneurship than I ever have in real estate, and I’ve done quite a bit of real estate. I just hate it as an investment class.” It’s illiquid. You know, it’s a pain to manage, and the returns suck compared to a lot of the other asset classes. But it is steady.
Andy: Yeah. And, you know, while, Neil, it’s hard to argue with the guy who says that, you know, I’m earning several million a month and I have trouble deploying it fast enough. Hard to argue with that, but I would say, real estate, I think, can be a good investment. But what you’re pointing out, the difference between I’m buying homes for myself and treating those as an investment…
Andy: …versus I’m investing as an LP, or co-GP or whatever, in an external fund. It’s a fundamentally different animal, right?
Neil: It is. And it’s, how do you put a price tag on having a home that you like, right? And the reason I don’t know how much I’ve put in a home is we’re building a home here in Vegas, hence I’m in a rental. It’s almost done. And then we’re building one in Beverly Hills, and I don’t really know how much money I’m in, because every month you get bills, and then you just pay your bills, right? I have a rough ballpark, but either way, I look at it and it’s like, one, you don’t need two homes. Two, you don’t need, you know, homes that are that expensive. Three, it’s just cheaper to rent. Because when you start parking it into home that you’re living, it’s not really an investment anymore. You can say whatever the gains are, it doesn’t matter, you’re still living in that, so you’re not realizing the gains.
While, on the flip side, just putting it in the S&P, let’s say it clocks 9% a year, compounded, it’s just better because you can take the gains and start living off a portion of it, versus having your money tied up in real estate. I could also start getting mortgages and stuff like that, although the rates are really expensive right now, but just not a fan of real estate for living in and buying it. I don’t mind real estate as an investment class. I still don’t prefer it. I still prefer tech. Like, a great example is, we bought a business last year in February for $8.6. Right now, conservatively, made some changes to it, added it into one of my businesses as a tuck-in, and it’s probably worth, conservatively, in this bad market, $20. So, like, I look at that as, like, I’m not gonna make those kind of returns on real estate, right? But we’ve been able to rinse and repeat tuck-ins, investments, and stuff like that when we have expertise.
Andy: So, that, already, I’m pulling out this theme, which, you know, I talk with a lot of family offices, and to me, this is a recurring theme. DJ Van Keuren says, “If you know one family office, you know one family office, right?” And a lot of times, when you look at the patriarch, and it’s funny, Neil, to call you the patriarch, but you’re the patriarch of your family office, right? A patriarch oftentimes, or matriarch, a family office will have an investment philosophy that reflects the skills, personality, life experience, career experience of that patriarch or matriarch. So, you’ve generated enormous income and enormous success in marketing and technology. So, it sounds to me like that’s kind of a theme in your family office, then, is…and why wouldn’t it be? Because you have expertise, you have access to deal flow, you have connections and insights in those sectors, right?
Neil: That’s right. I literally invest in what I know. Like, a great example of this is my buddy Andy. He created a venture fund called Unlock, I think, Venture Partners. I call it the Andy Liu Fund. I don’t really know the fund name. I think it’s “Unlock.” And I did angel deals with him, and a ton of them over time. And I believe, if I’m not mistaken, I could be quoting inaccurately here, but the numbers around here from the last time I had a conversation with him, his cash return as an angel investor, not paper returns… Forget paper returns. Everyone talks about paper returns. What really matters what’s your cash returns and what you’re seeing in your bank account. And it takes a while with angel investing, but it’s around 40% a year, which was amazing. Even if you drop it down, let’s say he’s not having as good of a year, and just drop down the average to 30%, right?
So, I think he did, like, something like 90-plus deals. I was co-investing in a lot of the deals. I don’t know how many, but let’s take a guess around maybe 10 deals. And I had good track record with him doing the diligence, and him hitting me up, be like, “Hey Neil, do you wanna put it in a check?” And I’m like, “Yeah, that sounds good,” right? And that’s typically what I look for because I don’t wanna go through the legal docs or anything like that. You want someone else to lead and figure out the deals and you just wanna, you know, ride along the journey with them, and give them checks. And I look for people with really amazing track records, because then, you know, you don’t really have much to lose there.
And yeah, maybe not every single deal works out. Some work, some don’t. But it’s a numbers game. And I did really well with my angel investments with him. And then he was just like, “Yeah, I’m gonna do a fund.” And I was like, “Yeah, sounds good. You know, I’m in.” And I don’t know what I put into the very first fund. This was a long time ago. Maybe like $250 grand. It was a small fund, so I couldn’t put in too much. Technically I could have, but typically, as an investor, you don’t wanna be a really big portion of someone’s capital, right? You don’t wanna be the sole person. You want them to have money from a lot of people. And then his second fund, it grew a little bit in size. It was still small. I think I put in a million bucks in his second fund. But yeah, he’s done a really good job. And I just look for people who have continually done really, really well, and I just keep betting on the same person over and over again.
Andy: Yeah. That makes sense. I mean, that’s another theme from the family office world, regardless of sector area focus, whether it’s real estate, venture capital, private equity, you know, family offices, they like long-term partners. They’re very collaborative. At some point, you know, an issue, if you can call it an issue, it’s not a problem, but an issue is you need to start recycling capital. And we’ll get to that later, Neil. But I kinda want to rewind a little bit. So, you’re in this ramp-up in your 20s, you’re earning tremendous income. Do you mind sharing, like, what age at which you were actually an accredited investor, and you were like, “I’m now able to invest in these kind of private equity deals, private funds, kind of where you started your journey LP?”
Neil: Yeah. Maybe 20, 21, 19, somewhere around there. I’ll probably say, because 20, 21.
Andy: That’s pretty young. Okay. So, you started doing alternative investing at age 20 and 21, kind of…
Neil: Yeah. 21 makes sense. I’ve been an angel investor for more than 16 years, so 20, 21, somewhere around there. I’m almost 38.
Andy: So, for you, it was kind of, you’re entrepreneur by day, and then your income is growing, and then you’re basically recycling your income into a variety of investments, including private investments, doing that by night, or kind of in parallel with your entrepreneurship. So, you know…
Neil: Well, not even by night. Here was the key to my success as an alternative investor. I still spent almost all my time as a entrepreneur. So many of my friends are entrepreneurs who are older than me, right? Like, we both know Patrick Gavin. He’s older. Now, I’ve never done a deal with him, but they’re, like, that age. I don’t know how old Patrick is, but I’m guessing he’s at least 10 years older than us, right?
Andy: Oh, maybe five. Maybe five. He looks very wise and distinguished, but he’s a young guy.
Neil: Okay. So, most of my friends, and I haven’t seen him in a very, very long time…
Andy: You know what, Neil, he’s got a great beard. I think maybe just having a great beard makes you look… But no, I think Pat is maybe three or four years older than me, so, five or six years older than you. But I get it, and…
Neil: So, yeah. But most of my friends are, like, in that 50-plus range, right? So, they’re at the tail end of entrepreneurship. They’ve been investing in ages. So, one, I’ve invested in a lot of their companies and made money from that. Two, as they do angel investments, they’ll be like, “Hey, we’re looking to fill up this round. I put my money in. Can you throw in some money? It’s a good deal.” And with a lot of them, because I’ve known them for so long, I don’t really get that much details of the company. It’ll be, like, five minutes or, like, just a email with a few paragraphs. And I’m like, “Sounds good.” And I usually just ask them, “How much are you in,” right? Because I usually know some of my friends’ net worth. So, based on that, I can figure out, “All right, if, like, someone’s putting in $25 grand and they’re worth a half a billion dollars, it’s like yeah, whatever,” right?
Andy: And Neil, no, can I stop you there? And just thank you for being honest, because, you know, I’m a big proponent of due diligence, and I encourage LPs to do diligence. I do due diligence. But in my experience, most LPs don’t do due diligence, or their due diligence process kind of is like yours. It’s more gut feel, relationship, trust of the other party. I just wanna thank you for just, like, being honest about that, like, not BSing me and saying, “Well, I put them through due diligence process,” when you’re like, “No. It’s based on relationship and trust.”
Neil: Yeah. Like, if one of my buddies has a similar net worth, and they’re like, “Oh, I’m in $3 million, and I really believe in this. I spent, you know, months and months.” And they’re like, “Okay, cool.” And I don’t even have to get that much into detail. The moment they tell me they’re in $3 million and I know how much they have, roughly, it’s easy, right? I’d be like, “Well if you have, you put $3 million. All right, here’s a million or $2 million check.” Because they wouldn’t have put that much money in it unless they believe in it. Now, it doesn’t…
Andy: Skin in the game. Skin in the game. You’re asking what’s your skin in the game? And that’s a big mover for you.
Neil: It’s usually the biggest mover. And here’s the thing. The skin in the game is how much skin into the game do they have percentage-wise, right? Like, if they’re worth $100 billion, I’m making up that number, I don’t have any friends who are worth $100 billion, and they put in a million dollars, it’s like me putting in 50 cents or a penny in something, right? Or a dollar or whatever the ratio would be. That doesn’t mean anything to me. But most of my friends have been entrepreneurs for a long time and investors for a very long time, and we all share a lot of the deals. So I’m just writing checks. And over time, it’s added up, and it’s the easiest way I’ve found my deals. And when I put money in with my friends, if they lose my money, it’s not like I get off. The key is not to be upset that the deal went south, because a lot of them will. The key is to know, “Hey, when you do a lot of these deals that you’re putting your money in, let me know,” because this is a numbers game, right? And the ones that hit usually hit hard. But there’s different asset classes as well. I tend to focus a lot on tech. Well, my friends like…
Andy: Tech is gonna have more, you know, unicorns. Like, in real estate, you’re more gonna, you put your money in, you get 2X back. You know, a deal goes bad, you might get 1X back. You know, sometimes you get nothing, but, like, real estate, there’s gonna be, like…
Neil: It’s hard to lose it in real estate. It’s hard to have a zero.
Andy: Well, well, people have found a way, Neil. Yeah, using leverage, yeah you can find a way. Trust me. But there’s…
Neil: No, you’re right, you could have a zero. But typically if you buy a property, and let’s say you’re just buying it with cash, to keep it simple, for $10 million with a group of people. In a bad economy, it’s hard for them to go from $10 million to 0. Right, with the mortgage and stuff, yes, you could lose your money and be wiped out. But typically, if you’re buying the whole thing outright, with real estate, just generally speaking, unlike tech, it’s very rare for something to go up from like $100 million and then to 0, which…
Andy: But tech, you have the power law distribution, which is where some of these are unicorns, you know, 100X or 1000X returns, and then you’re less flapped by, you know, the strikeouts. It’s a little bit more like baseball, right? Where even a great hitter is batting 300 and you’re happy. You’re like, “Well, this guy’s a great hitter if he’s batting 300.” So, to kinda continue on this journey though. So, you’re in your 20s, you’re earning more income, your businesses are very successful. You know, you’re starting to earn millions a month, or at least a year, eventually per month. And you’re recycling this money with some of your entrepreneur friends that you trust, into angel investments, into private deals, into, you know, venture capital, tech-type investments, and other private investments. You know, was there a point, I guess, where it all just got to be, like, too much? Like, where you’re getting, you know, 25, 50 K-1s every year, and where you kinda go, “Well, wait a minute. I need to professionalize this.” Or, I guess, what was the kind of that first milestone, or was there a point where you were like, “I need an advisor,” or, “I need a full-time CPA,” or…
Neil: The first part was, I was doing a lot of these, like, $25 grand checks, because that’s where I started off as an angel. I think I had maybe one or two at $12.5 grand or somewhere small like that. But I was starting off typically at $25 grand, then started increasing to $50 grand and then $100 grand. And then it kept growing from there. Then I got a bookkeeper named Beth. And Beth would just keep track of it because I would have a spreadsheet of, “Here’s an investment I made, you know. Here’s when it sells,” and that would just be gain or a loss. And it started getting messy after a time, a bit. And then I realized this is a lot of work to start going through all these angel deals.
So, then I started writing bigger and bigger checks, doing less of them. And then I started just becoming an LP, because I had friends who were doing a lot of them, and I would try to push them, like my buddy Andy. I’m like, “One day you should create a fund.” And he sold his first company to, I think it was called aQuantive, which then aQuantive got bought out by Microsoft. That was I think a multi-billion dollar acquisition. His portion wasn’t, but he still did really well for his investors. And then his second company he sold to, I believe it was Vizio, the TV company. So, then he had a good track record there. He had a better track record as an angel investor. And I’m like, “Dude, you should just create a fund. I’m tired of writing all these checks.” Like, it’s just easier to be like, “Here’s a lump sum. Just go and do whatever you want.”
Andy: Give me one K-1, dude. Don’t give me 20 K-1s, right?
Neil: And it’s a pain in the butt, right? Like, I’m doing my taxes literally this week, and I won’t get them done. But like, I don’t know how many K-1s I sent my guy, but I think I probably sent him 50 to 60 K-1s. No joke. Right? Like, I have a lot of K-1s. Like, I’m just sending tons and tons of them. And eventually, you wanna consolidate and have less and less, but, you know, the amount of documents I sent him for, like, interest, and 1099s and all this kind of stuff, because of wages and W2s or whatever they’re all called, I probably sent him over 100-plus documents of investments and gains and losses, and he’s like…
Andy: So, yeah. So, I think now we’re kind of transforming to the present day, which speaks to, actually, my next question was gonna be, so, like, I kinda get it. You’re making these smaller investments, you had a friend, you said, “Hey, just create a fund. I’ll make a bigger investment.” Now you’re kind of in the middle of this evolution. And you get a little older, into your 30s, you’re more mature, you know, you’re married, starting a family, all this stuff. And now, you know, you mentioned your income numbers now, you’re generating a lot of income, and it’s like investing the income, and recycling it as investments, come to fruition and liquidate. At what point did you say, “You know what? I really need a family office. I need something more structured to just manage our family wealth, our legacy wealth, our generational wealth.”
Neil: Yeah. So, it was never a moment where I thought, like, “Hey, I need to actually create a family office.” And I don’t really consider it a family office, even though…you could say it’s fractional. It was more so, “Hey, I need help, and I need people to help me with some of these tasks, like the taxes, and there was some legal stuff, and I have tons of trust and grantor trust and dynasty trust.” And, like, this is all starting to add up, and then it just becomes a real headache from the management perspective.
Neil: And then, my wife manages our philanthropic arm, and there’s not really a arm. I call it a tear factor. Me and my friends, we joke around, we call it a tear factor. The more my wife cries, the more she donates, based on the foundation pitching her. And I’m very logical. You know, like, there’s food banks and all this kind of stuff. And my wife focuses on a lot of, like, things for children, like education, poverty, and all that kind of stuff. And I’m more like, “Well, we’re funding this program to help fight poverty for children. What were the stats and the data on how many less children went hungry because of our donations and all the donations they got?” And my wife said, “It’s like, well, you can’t think like that, you know?” Like, they’re making…
Andy: Well, you know, Neil, in my experience, you need, okay, in a family office, this is actually a discussion I had with Dany Roizman, who manages a family office for a lot of ultra-high-net-worth investors. You kind of need both in a family office, the right brain and the left brain. And managing the money, and then, to your point, the philanthropic arm, you need the more creative and human-centered, heart-centered stuff because that’s the heartbeat of a family. Families don’t run on dollars and cents, or even logic. Like, let’s be honest, Neil. Families don’t run on logic, right? But at the same time, you’re an entrepreneur, you’re numbers-focused, you’re very logical. I mean, obviously, you’re a super intelligent guy, but my point is, like, it’s not good or bad or better or worse. You kind of need a system, or way to organize it all, and kinda get it all running and humming, and to that, you need external help, right? And you said you don’t consider it a family office. It might be a multi-family office or a shared family office or whatever. I might call it a family office, just because it’s a better podcast title. But so, you know, you kind of mentioned, you and your wife, you kinda have different roles, which is good, right? Complementarity. What kind of external help or what kind of structure do you use to kinda help guide you, and to cut down on the headaches? Can I call them headaches, involved with all this?
Neil: So, we have a team. Let’s just say there’s one person that I talk to who deals with everything, right? And he deals with the headache. And then from there, he hires people and deals with everything, from lawyers to accountants, to people who deal with trusts, to people who are analyzing some investments, like stocks, and, you know, our angel investments, things like that. Although, I don’t really deal well with people who are giving me angel deals or private equity deals. I like more so doing them myself and being involved in that. I don’t like dealing with a lot of the mundane stuff or dealing with stocks. Although I will do some of my own trades. Like, I called up one of my guys and I’m like, “What do you think about First Republic?” And this is when all the banks were crashing.
And I remember, the weekend, right then and there, it was, the government said, “We’re gonna backstop some of these stocks.” Or the banks, they were gonna backstop SVB, and I forgot. I think there was one other that were going under, and be like, “Look, don’t worry. You guys won’t have to worry about your money.” At that point, I was like, “All right, the government’s gonna bail out these banks.” And then JP Morgan did a deal with First Republic, right then and there, on the weekend announced. So, I’m like, “Well, they don’t need the money if the government is gonna create this program that’s gonna give people the money in case they’re short for some time and they don’t have to liquidate, let’s say, their treasury or whatever. Maybe.” So, then in the morning, right when I wake up, I could already see the stocks, and a lot of the bank stocks are just tanking.
First Republic was getting hit one of the hardest. So, then I remember right when the market opened, I was like, “Huh.” Few minutes were going by, it kept going lower and lower, and I remember it hit around $18 or $19 or something like that. And Colin, one of my guys, I was like, “What do you think about buying some First Republic?” And I’m not too risky. I won’t do tons of options and stuff like that. And I was just like, “You know, I think people are overreacting.” I’m not saying the company is actually worth $19 or $30 or whatever. It was a $100 company before. I’m not even saying it was worth $5, but I’m like, it’s just all going down based on emotion. And I was like, “Once people realize, like the consumer, that they don’t need to go to all these banks and start pulling out their money, I believe that the market would rally.” Just, because a lot of it is sentiment, right? No one knows the financials of First Republic at the time. They’re just reacting, and…
Andy: Like a bank run. It’s the beginnings of…
Neil: Yeah, exactly. So, then I tried buying $3 million worth of shares at $19. I think I got a little bit under $900 grand got filled. And then the price, when it started, it kept going up and I was too cheap to pay.
Andy: Neil, you were probably moving the market, you know? I mean, I don’t know if that amount of money moves the market.
Neil: I don’t think I was moving the market. Really, $3 million worth of shares isn’t a lot. So, I was just like, I was clicking buttons, and I was just buying myself. And then, at $19.5, I was like, “Oh” Then I was just like, “Oh, I think this thing’s gonna go up.” So, you know, I started going to, like, $19.85, or .83, and I was trying to buy it at $19.8… You know, I was penny-pinching, and I shouldn’t. And I didn’t get any more of a fill. And then I didn’t sell it that day. The next day I sold it. I think I made, like, around $1.4 million. I would’ve been happy if I got $3 million worth. And I could have bought more, but I also didn’t wanna buy too much of it, because if I lost $2 million, $3 million worth, it’s not the end of the day, and I was willing to take the loss.
And I believed I was gonna make something. How much, I didn’t know. But, like, $1.4 million in 24 hours, right? Sold it the next day. And I think it was going to, like, $50, and then it started going down, and I’m like, “Ah, let me just sell this thing. I’m up enough.” And I didn’t buy any more after, even when it kept going down lower, and then it went back up. Because at that time, you know, people are starting to trade, they’re getting more data, and all these financials. Maybe they’re not releasing financials, but people are doing their own back-of-the-napkin math. I’m like, “Hey, what’s happening? How much of their money is in treasuries or whatever?” And people are trying to do their own calculations. I traded purely on emotions, not my emotions, but I knew the market was illogical on their trading on the first day. And I knew that you’re gonna see crazy rollercoasters. I was like, “Ah, there’s a opportunity to day trade here.” And I took it. And I didn’t get too greedy. I could have made more money. But it was a good enough.
Andy: So, I hear you. You’re opportunistic. I mean, you’re an entrepreneur, you’re an investor, you love technology, but you also, you love ideas. You love, you know, the game. Could we call it the game? And you now, I would call it a family office. You know, you have a manager who’s delegating tasks to other experts, so you’re interfacing with him. So, he’s taking a…
Neil: Correct. But we split some of the costs, right? With other rich individuals, right? That’s why I call it multi-family office, but yeah.
Andy: Sure. So, yeah, it’s a shared family office or a multi-family office. So, you know, you don’t, obviously, I’m not asking for their names, but are these other individuals that you know through business, that you decided to do this together? Or how did that process start?
Neil: Yeah. So, the guy who I have helped me run a lot of stuff, he was a finance guy, and he did really well managing other people’s money, and started working with him.
Andy: Okay. And so, he has…
Neil: And he was pretty much doing in the past, right? So, he did it both for himself, in which raising funds, and deploying it. And then eventually he went into the family office route, in which he was just like, “Hey, I’m gonna just work with a lot of the rich families I met.” And then, you know, said, “All right, let’s work together.” And that’s how it got set up. Because he’s like, “Hey, how about I alleviate some of your pain?” At first, it wasn’t called a family office. He’s like, “How about I alleviate some of your pain?” It was a business model for him. He was like, “Hey, I’m gonna create this and make some money by charging some rich families.” He’s like, “How about I alleviate some of your pain?” And then it just kept growing. And then he pretty much was just like, “Yeah, I have a service.” You know, if you want a fractional family office, that’s what he offers.
Andy: So, how is your experience, you know, is working with this multi-family office and, you know, it sounds like, you know, your assets, and you, are a big part of it. Has it freed up a lot of time for you? I mean, has it, you know.
Neil: It has. It doesn’t make a ton of money. I’ll be quite honest. I have better luck picking on my own than going with money managers. You know, there’s a saying that one of my buddies told me a long, long time ago. If you work with money managers and wealth advisors, they won’t make you rich. They help you stay rich, right? So, none of these guys get the returns that I want. That’s why I still do some of my own trades, and that’s why I’m pretty aggressive.
Andy: Well, but Neil, family offices, I mean, this is known. They’re focused on capital preservation. You are totally correct, because, you know, a family office manager, you know, the downside is way worse for you than the upside is good, in the sense that if you make, you know, 12% returns versus 9%, yeah, your client’s gonna be happier. But they’re gonna be happy if you make 9%. But if you lose…
Neil: Hopefully 9% returns a year, by the way. What they keep trying to remind me is, Neil, you know, if you lost all your money, how sad would you be? I’m like, “Yeah, I would be bummed out. My life would really suck.” And they’re like, “If we got you 5%, 7% returns, 5% to 7%,” and we’re clocking way better than that…
Neil: They’re like, “How much better would your life be if it’s 5% to 7% versus 12% or 20%?” There’s no difference in lifestyle, from flying, I can buy a jet. Like, there’s no difference in lifestyle. Now, there’s certain things I can’t do. Like, I can’t just go keep burning money on, like, I can’t just say, “Hey, let me go buy a $100 million house here, a $50 million house there, a plane there.” Like, I’m gonna go broke, right? Like, there is a limit to how much money I have, because I have a good amount of cash, but most of my net worth is still tied up in my corporations. If I sold them, sure, I can start buying bigger purchases, like a $100 million house there, a $50 somewhere else, or a jet and all that kind of stuff. But for me…
Andy: You don’t want a jet, Neil. Nobody really wants a jet. The goal is, you ride on other people’s jets, isn’t it?
Neil: That is. That is. The best thing you can do as a rich person to have a friend who has a jet versus having your own jet. And I have so many friends who have jets, and then they complain, being like, “Man, you know, my microwave went out on my jet. It cost me $30,000 or $40,000 to replace this stupid thing.” Or like, “Oh, I’m stuck in O’Hare, and it’s really snowing, and they charge me, like, $20 grand to defrost my plane, or, like, something like that.” Like, those kind of things would just really irk me, and I just can’t do it.
Andy: So, you’re kind of a minimalist, I mean, in your own way. I know you live in a nice…
Neil: But minus the real estate. Minus the real estate. Like, still have a Honda Odyssey for a family car, drive that around. My wife has a nicer car than me.
Andy: Yeah. I was gonna say, Neil, Neil, we gotta get you a Bentley or a Ferrari or something. Come on, have a little.
Neil: My wife has a Bentley. I have a Maybach. I have a driver. I don’t use them that often, but when I go to meetings, because I have a laptop table in the back. Maybach just looks like a normal Mercedes. It’s just a little bit longer. I have my iPad with Wi-Fi, or cell signal, and I just work in the back, instead of dealing with traffic. I don’t use that that often, but maybe, like, five, six times a week. But to me, that was worth it because I work too much, and when I would drive, I get into too many car accidents, or I did when I was younger.
So, I tend not to drive too often. Just more so mentally tormented by driving, not that I’m… I’m probably a decent driver, but still, like, too paranoid. And, yeah. Like, I am a minimalist to some extent, and I still want the returns. So, I just keep going and going. And when I look at all these money managers that are, like, I look at their stock returns versus my stock returns. Buy, like, HubSpot in the early days, and Shopify, and Google, and Amazon, and some of those…not too early, because I’m not that old. But buying them early enough, and just holding, I’m like, “Well, my returns are better than your guys, and you guys try to do all these complex things, and try trading, or just buying the S&P.” I’m like, “I just buy companies like Apple, that I believe in, and I hold because I understand technology.”
And my biggest diversification into non-tech, for money I manage personally, right? Not talking about the family office, but I manage personally, my only outside investment outside of tech was Disney, because they got into streaming, and eventually I ended up selling the Disney stock. But I’m all in tech. You know, some of my other guys do non-tech, and I took a beating last year, and they’re like, “See, this is why.” But if I look at my average returns from when I got in, I’m crushing all these money managers. I’m not saying, like, I’m a better trader than Ray Dalio or anything. I have a small amount of money versus some of these guys are dealing with, like, $100-plus billion. But just buying Apple stock back in the early days gives you amazing return, or a HubSpot stock. I don’t really look at, “What did they do this quarter?” I’m like, “Believe in the operators, believe in the business model, buy, don’t look, and 10 years from now you’ll see where the stock’s at.”
Andy: Totally. And Neil, one thing I love, everything you’re saying is just, you love the game. I mean, I can tell that you, this passion that you have for entrepreneurship, you have that same passion for your investing, and it’s almost an entrepreneurial attitude to your investing too. It’s, you kinda know what you know. You know what you’re passionate about, technology and marketing software, these sorts of things. And, you know, you’re not in the game to amass as many yachts or private jets or whatever.
Neil: No, no, no.
Neil: We’re gonna end up donating almost all of it. We have money in trust for our children. It is, I think they call it blind trust, where they don’t know about it, whatever you wanna call it. I think it’s blind. One’s a grantor trust. One’s a dynasty trust. The money’s only there, like, if you got cancer and you can’t pay for treatment, gladly pay for it. If you’re on the street and you have no roof over your head, we’ll gladly help you out. But if you have a job, you can figure it out on your own. Or if you wanna be a doctor, and volunteer all your time in Africa and just help people in, like, these third world countries that have no money and no health system, that’s that great. And you need money to survive, but you wanna volunteer all the time, I will pay for your life in a normal way, right?
Andy: So, Neil, what you’re talking about, and so this is another, I think, common theme with family offices, is you’re figuring out, maybe you have figured out, how you transmit your values to the next generation, right? Because that can be a challenge for ultra-high-net-worth investors, ultra-high-net-worth families, is, you didn’t start, you know, with a Maybach and a driver when you were 17, or however old you were when I met you, right? You had incredible work ethic and drive to succeed in life. And you wanna make sure to pass on that value to, you know, your children, and sometimes giving them too much wealth too early, or with the wrong structure, can actually impede your ability to pass on your values, right?
Neil: Yeah. And for us, we believe they don’t need it. Like, if our kids wanna buy a Ferrari, I don’t care what place you’re in life, you figure it out on your own, or if you wanna go take a vacation to Italy, go figure it out on your own. Now, if they’re with me, I will gladly do it. Or another bias thing I have when it comes to wealth is, you know, we probably will retire in… We’re from Southern California, Los Angeles. Technically Orange County, but it’s close enough to Los Angeles. So, we have a home in Beverly Hills, and not a crazy, fancy, like, $100 million home or anything like that, but it’s expensive enough and nice enough. And let’s say, you know, my kids, if I’m getting older, and, you know, I can get them to live next to me, but they can’t afford a house in Beverly Hills, I would gladly buy the house next door to me if my kids live next to me, and I get to see them grow up and their kids and all that kind of stuff.
So, for certain things, I’ll make a sacrifice, but it’s like, for me, it’s just like, if I’m gonna live my life, I wanna enjoy it, and not enjoy it from, like, going on a yacht. I don’t care for yachts, or even private aviation. You know, like, I was going to New York. I could afford a private flight, but one of my buddies is raising money for kids in New Jersey, for inner city, you know, like, a lot of the young kids there, and even their parents, they don’t even have money for things like toilet paper, feminine products, and, you know, give them $100 grand check. I’d rather spend the $100 grand doing that, and go fly on JetBlue, lay flat, which costs me maybe 1000, 2000 bucks, and donate the money than, you know, have a convenience of saving a few hours and being in the private aviation, right? Like, the money I just believe is just being wasted, and it’s also not the best for the environment. But yeah, I don’t believe future generations of my kids need the money. I believe it’s better to just donate everything.
Andy: So, you’ve set up your family office, you know, around your values, which makes sense. And I think that’s the goal of every family office is to have that mission-oriented and values-oriented outlook. I know we’re short on time, Neil, but, kind of to zoom out a little bit, and to think about, you know, you have a very inspiring life story as an entrepreneur and kind of your journey, where, you know, you’ve built up these successful businesses, and leading to this shared family office. Is there any lesson or tips that you could give entrepreneurs that are more toward, you know, they’re more, like, the 20, 21, 22-year-old Neil Patel, just getting started? Their businesses are beginning to be successful, they’re beginning to write those checks to angel investments or private equity funds, or private real estate funds. What advice do you give them to get to that next level of success?
Neil: So, there was a wise man in Seattle that gave me this feedback when I was first starting off. And he said, “Neil, you don’t need to figure this out.” He’s much older than me. His name is John. I’m not gonna say his last name. And he invested in some telecoms and a few other things. And at that time, when he’s giving this advice, he was in his late 50s and I was in my early 20s. And he’s like, “Neil, if you wanna succeed in life, you already know a lot of successful people. Just ride our coattails.” So, and he didn’t mean it in a bad way, to, like, leech or not provide value, but he was saying, “If you know other successful people, and you’re friends, ask them. Ask them to include you in their deals. You’ll learn along the way by just co-writing checks, and you’ll avoid a lot of the mistakes because they’ve been through this many times.” And that’s how I started, and it was a great lesson for me, and it helped me avoid a lot of mistakes, and it also helped me produce better returns.
Andy: I love that, Neil. I think that’s a great note to end on. I really appreciate you sharing your story of entrepreneurial success, but also your investing mindset. You’ve been so transparent about your process. I always love when a guest is honest. It’s rare for us to have someone, you know, just share that whole story from the beginning all the way to the current day, how you manage your family office. So, thanks again for joining the show today, Neil.
Neil: Sounds good. Thanks for having me.