2026-05-09_brainforge_holdco_structure_discussion

Meeting Title: Brainforge Holdco Structure Discussion Date: 2026-05-09 Meeting participants: Robert Tseng, Uttam Kumaran, Clarence Stone

WEBVTT

1 00:01:55.500 ⇒ 00:01:56.350 Uttam Kumaran: Yo.

2 00:01:59.050 ⇒ 00:01:59.730 Robert Tseng: Hey!

3 00:02:01.850 ⇒ 00:02:02.520 Uttam Kumaran: Edit.

4 00:02:04.260 ⇒ 00:02:05.240 Robert Tseng: You look like a farmer.

5 00:02:05.240 ⇒ 00:02:08.120 Uttam Kumaran: Still driving.

6 00:02:08.310 ⇒ 00:02:12.100 Uttam Kumaran: I went to, Georgetown to get some wine, and then…

7 00:02:12.470 ⇒ 00:02:18.159 Uttam Kumaran: I just, like, sat and called my mom for a while, and then… I left my AirPods at…

8 00:02:18.540 ⇒ 00:02:21.230 Uttam Kumaran: Jess’s parents’ place, so then…

9 00:02:21.570 ⇒ 00:02:28.529 Uttam Kumaran: I went there, but then I was like, let me get some flowers, so I went and left some flowers, and then I got the receiver.

10 00:02:28.990 ⇒ 00:02:31.210 Uttam Kumaran: Well, I got the subwoofer, it’s in the back.

11 00:02:31.410 ⇒ 00:02:32.530 Uttam Kumaran: So…

12 00:02:32.530 ⇒ 00:02:32.880 Robert Tseng: Nice.

13 00:02:32.880 ⇒ 00:02:34.940 Uttam Kumaran: I’m gonna set that up when I get home.

14 00:02:35.710 ⇒ 00:02:39.209 Uttam Kumaran: I had a nice day today. Just, like, roaming around.

15 00:02:42.740 ⇒ 00:02:43.430 Robert Tseng: Good.

16 00:02:56.090 ⇒ 00:02:59.080 Robert Tseng: I’m probably not gonna stay too long, cause, I gotta…

17 00:02:59.240 ⇒ 00:02:59.680 Uttam Kumaran: Okay.

18 00:02:59.680 ⇒ 00:03:02.549 Robert Tseng: Gotta go into the cave, but okay.

19 00:03:02.550 ⇒ 00:03:03.060 Uttam Kumaran: Okay.

20 00:03:03.060 ⇒ 00:03:08.060 Robert Tseng: When he comes, I’ll give him the… I’ve been putting together a deck, though, so…

21 00:03:09.410 ⇒ 00:03:15.059 Uttam Kumaran: Okay, you’re like, I can’t go too long, and then you’re like, I’ve been working on it all day. I know, but…

22 00:03:15.060 ⇒ 00:03:16.679 Robert Tseng: I was,

23 00:03:17.480 ⇒ 00:03:24.310 Robert Tseng: I was like, if I don’t think about it earlier, I’m not gonna think about it later, so I just thought I should do the most important thing first.

24 00:03:24.510 ⇒ 00:03:25.440 Uttam Kumaran: Okay.

25 00:03:26.390 ⇒ 00:03:30.829 Uttam Kumaran: I called Lisa, and I gave her, like, all the Rundown, so…

26 00:03:34.890 ⇒ 00:03:35.650 Uttam Kumaran: Cool.

27 00:04:03.970 ⇒ 00:04:05.970 Uttam Kumaran: Let me, let me see if I can give him a call.

28 00:04:06.700 ⇒ 00:04:07.770 Robert Tseng: No worries.

29 00:05:12.860 ⇒ 00:05:17.970 Uttam Kumaran: straight to voicemail. I don’t know if it’s, like, I’m just not calling fast enough to get to the Do Not Disturb, or what.

30 00:05:18.150 ⇒ 00:05:18.810 Robert Tseng: Okay.

31 00:05:21.440 ⇒ 00:05:25.040 Robert Tseng: I mean, to try to… FaceTime him, let’s see.

32 00:05:25.650 ⇒ 00:05:26.210 Uttam Kumaran: Yeah.

33 00:07:30.640 ⇒ 00:07:36.300 Uttam Kumaran: Wait, dude, are you talking to… are you on with Clarence, or are you… Are you talking to me?

34 00:07:36.460 ⇒ 00:07:39.170 Robert Tseng: Oh my goodness, I’ve been trying to talk to you.

35 00:07:39.370 ⇒ 00:07:49.250 Uttam Kumaran: Oh, okay, because I was like, oh shit, am I… are you guys on the FaceTime? Okay, sorry, I just missed, like… I saw you talking, I’m like, oh, maybe he picked up on the FaceTime, let me go over there.

36 00:07:50.050 ⇒ 00:07:54.930 Robert Tseng: I guess I, like, I hung up on the phone, I forgot to unmute myself, and I started talking.

37 00:07:54.930 ⇒ 00:07:55.580 Uttam Kumaran: Okay.

38 00:07:55.780 ⇒ 00:07:58.109 Robert Tseng: Okay, okay. All right, well… Okay.

39 00:07:58.110 ⇒ 00:08:00.109 Uttam Kumaran: I missed… I missed the entirety.

40 00:08:05.290 ⇒ 00:08:14.469 Robert Tseng: I guess I didn’t… the Zoom wouldn’t even have recorded it, because I was muted. So, oh well. I mean, basically, I was just saying, I wish I could show you this deck that I’m working on.

41 00:08:14.610 ⇒ 00:08:19.750 Robert Tseng: Yeah, it’s pretty much just, like, a prospect-facing, like, M&A pitch deck.

42 00:08:19.890 ⇒ 00:08:20.340 Uttam Kumaran: Okay.

43 00:08:20.480 ⇒ 00:08:25.929 Robert Tseng: So I kind of broke it out into a few sections. It’s kind of like the macro, like, why now, kind of…

44 00:08:26.400 ⇒ 00:08:39.559 Robert Tseng: why… why… why… like, why Braid Forge? Like, what, what Brave Forge is, is, out, like, what, what are we, what are we going for? Then there’s a few educational slides about, kind of, just how businesses like ours are valued.

45 00:08:39.610 ⇒ 00:08:58.830 Robert Tseng: then I put together this, like, deal structure calculator thing. It’s a Google Sheet, so, like, if we… if you wanted to pull it up with somebody, they wanted to throw in some basic numbers about their business, we’d be able to give them a sense of, like, what their valuation would be if they were to, like, kind of come under us and, like, what kind of… what type of…

46 00:08:58.870 ⇒ 00:09:04.249 Robert Tseng: And it was like… it’s like a deal structure thing, so cash versus equity, and…

47 00:09:04.250 ⇒ 00:09:21.649 Robert Tseng: If they were to stay on with us until our exit, like, what would that… what would that look like for them? So, it… it just kind of shows, like, the payout multiple increases, from, like, them trying to just, like, work on their business versus, like, joining with us at our higher kind of, like,

48 00:09:21.650 ⇒ 00:09:33.719 Robert Tseng: you know, EBITDA kind of number now, and, kind of what happens if we get to our goal. And so, I think that’d be a cool way to kind of just transparently show, like.

49 00:09:33.900 ⇒ 00:09:35.540 Robert Tseng: I mean, yeah, this is really just…

50 00:09:36.100 ⇒ 00:09:40.510 Robert Tseng: It’s just, like, enterprise arbitrage, so… Yeah.

51 00:09:41.370 ⇒ 00:09:43.140 Robert Tseng: Yeah, and then…

52 00:09:43.610 ⇒ 00:09:56.760 Robert Tseng: you know, the rest is just kind of, like, some more outlining, like, how… how Brainforge does this process, and, I just kind of ripped that from what I learned last week. So… Okay. Anyway, should be, like…

53 00:09:56.890 ⇒ 00:10:02.750 Robert Tseng: You’ll get to a place where, if you ever meet somebody who’s a prospect, prospective seller, like.

54 00:10:02.850 ⇒ 00:10:04.959 Robert Tseng: We could… we could share this with them.

55 00:10:05.500 ⇒ 00:10:06.110 Uttam Kumaran: Okay.

56 00:10:06.400 ⇒ 00:10:19.199 Robert Tseng: Yeah, and I’ll… and I’ll run this with the next… I have, like, another… I want to talk to your buddy that you… that you mentioned, last… early last week, and then I got another guy in… in two weeks that I’ll talk to. So, we’ll get… we’ll get good reps on this.

57 00:10:19.310 ⇒ 00:10:20.320 Robert Tseng: Hey, Clarence.

58 00:10:20.560 ⇒ 00:10:21.730 Clarence Stone: What’s up?

59 00:10:23.410 ⇒ 00:10:24.600 Robert Tseng: Just came back from Hawaii.

60 00:10:24.600 ⇒ 00:10:25.220 Uttam Kumaran: And then…

61 00:10:25.410 ⇒ 00:10:26.460 Clarence Stone: Nice!

62 00:10:27.470 ⇒ 00:10:28.849 Robert Tseng: No, I was asking you.

63 00:10:29.190 ⇒ 00:10:32.600 Clarence Stone: Oh, me? Oh, no, I’m just… I’m just having a chill day.

64 00:10:32.600 ⇒ 00:10:34.560 Robert Tseng: Nice.

65 00:10:34.560 ⇒ 00:10:36.920 Uttam Kumaran: This is Saturday, this is Casual Saturday.

66 00:10:36.920 ⇒ 00:10:37.560 Robert Tseng: Yeah.

67 00:10:38.510 ⇒ 00:10:43.189 Clarence Stone: So I… I did some volunteering today, and

68 00:10:43.330 ⇒ 00:10:50.819 Clarence Stone: like, for charity, they dumped, like, 8,000 ducks, into the San Antonio River.

69 00:10:51.660 ⇒ 00:10:52.330 Robert Tseng: Oh.

70 00:10:53.110 ⇒ 00:10:53.580 Clarence Stone: Hello?

71 00:10:53.580 ⇒ 00:10:54.650 Uttam Kumaran: Oh, wow!

72 00:10:54.670 ⇒ 00:10:55.410 Clarence Stone: Yeah, there’s.

73 00:10:55.700 ⇒ 00:10:56.250 Robert Tseng: species.

74 00:10:56.720 ⇒ 00:11:02.590 Clarence Stone: Duck Derby Day. It’s like a little… you know, like the bathtub duckies.

75 00:11:02.850 ⇒ 00:11:05.180 Robert Tseng: Oh, I see, I see.

76 00:11:05.680 ⇒ 00:11:06.440 Clarence Stone: Thank you very much.

77 00:11:06.440 ⇒ 00:11:06.830 Robert Tseng: Yeah.

78 00:11:06.830 ⇒ 00:11:12.119 Clarence Stone: The first one that made it down, like, this part of the Riverwalk, got, like, 200…

79 00:11:12.250 ⇒ 00:11:19.320 Clarence Stone: $2,500 and a bunch of, like, free things, you know, so it was, like, more of a lottery driven by…

80 00:11:19.440 ⇒ 00:11:21.750 Clarence Stone: Ducks. Yeah.

81 00:11:21.750 ⇒ 00:11:22.510 Robert Tseng: That’s cool.

82 00:11:22.700 ⇒ 00:11:23.400 Clarence Stone: Yeah.

83 00:11:24.960 ⇒ 00:11:27.399 Clarence Stone: So this is my duck day outfit.

84 00:11:27.400 ⇒ 00:11:28.040 Robert Tseng: Yeah.

85 00:11:28.180 ⇒ 00:11:30.030 Robert Tseng: It seems appropriate.

86 00:11:30.030 ⇒ 00:11:33.220 Clarence Stone: So what’s up? What are you guys up to? What are you guys talking about?

87 00:11:33.790 ⇒ 00:11:47.730 Robert Tseng: Well, I guess he froze, so I’ll kind of kick it off, but, like, I mean, we were just kind of chatting, I mean, I showed you that diagram, you know, yeah, we’ve been trying to… giving kind of what we discussed maybe a couple months ago more thought of, like.

88 00:11:48.770 ⇒ 00:12:03.659 Robert Tseng: yeah, like, kind of how could we structure this, especially since, you know, things are… things are moving… you’re moving quickly, thanks for getting us into EY, and obviously, like, you and Utam are going after other stuff, too. So, I think Utam was telling me, like, hey, look, we need to…

89 00:12:04.010 ⇒ 00:12:22.999 Robert Tseng: you know, maybe there’s an MSA from EY coming soon, but it… or is it going to be with Brainforge, or is it gonna be with a different entity? And we had talked previously about this, like… I mean, you pitched this Holdco idea, so I’ve kind of been mulling on it, went and educated myself a lot more, and yeah, so I kind of was drawing it out today.

90 00:12:23.090 ⇒ 00:12:26.139 Robert Tseng: And, this is kind of what I, what I put together.

91 00:12:26.250 ⇒ 00:12:28.219 Robert Tseng: So yeah, we’d love to just kind of…

92 00:12:28.420 ⇒ 00:12:33.850 Robert Tseng: chat about it with you, and I know that you guys have already talked a lot about, kind of, what

93 00:12:34.110 ⇒ 00:12:46.900 Robert Tseng: what this could look like, but, so this may not even really be new to you, but I guess, do you have any… do you have a starting point, or do you want me to just kind of walk through what I put together here?

94 00:12:48.510 ⇒ 00:12:53.909 Clarence Stone: I’ll let you walk through it. Okay. Yeah, but yeah, I’d love to see what your take is here, yeah.

95 00:12:54.270 ⇒ 00:12:56.510 Robert Tseng: I’m assuming that you have

96 00:12:56.630 ⇒ 00:12:59.139 Robert Tseng: Do you want me to share my screen, or do you have the… my little…

97 00:12:59.140 ⇒ 00:13:01.260 Clarence Stone: You don’t have to share it, you’re good, man.

98 00:13:01.260 ⇒ 00:13:10.189 Robert Tseng: Okay, cool. Yeah, I mean, it’s a pretty simple drawing. Well, I mean, like, kind of, the idea is to put a Holt Co. above, above… oh, cool, thanks, whoever did that.

99 00:13:11.060 ⇒ 00:13:27.380 Robert Tseng: Yeah, so Brainforge right now is what I call data. And, yeah, I mean, we’ve been kind of talking to you and, you know, a few other people who kind of have interesting businesses that, like, you know, beyond just a partnership, like, feel like we could really integrate more with.

100 00:13:27.380 ⇒ 00:13:41.610 Robert Tseng: And obviously, with our current structure as a C-Corp, it just doesn’t really work out. So I’ve met other agency founders, other hold co-owners, and this is kind of like a basic framework that they had given me that was like, hey, like, just have this…

101 00:13:42.160 ⇒ 00:13:47.470 Robert Tseng: HoldCo on… on top, and like, you know, you can… it can function as…

102 00:13:48.440 ⇒ 00:14:04.090 Robert Tseng: I mean, yeah, it’s either, I mean, mostly a capital allocator structure, similar to how PE firms operate. Then you put all the personnel in a separate entity, which is, you know, just called a payroll company, and, you know, that just kind of runs at,

103 00:14:05.130 ⇒ 00:14:21.789 Robert Tseng: at, it just, it just nets out. It’s, like, not a profit-generating company. Anything that’s, like, margin gets captured and moves up to the holdco. But that kind of signs MSAs, and they can distribute kind of services to all the other hold cos. And so, obviously, this is kind of just more of the vision for, like.

104 00:14:21.790 ⇒ 00:14:26.699 Robert Tseng: 3 years from now, where do we kind of see Brainforged being? And, you know, I think…

105 00:14:26.710 ⇒ 00:14:43.100 Robert Tseng: the AI Labs concept is kind of what you had pitched last time, and, you know, just thought we could just kind of put it there. And so, just to kind of share that, it’s like, okay, so the Holdco would be, like, a majority owner in that thing, and then, like.

106 00:14:43.100 ⇒ 00:14:48.999 Robert Tseng: You know, if you get kind of tucked into that as a… as an owner, and…

107 00:14:49.120 ⇒ 00:14:59.999 Robert Tseng: Yeah, and then you also… and you can run it as, like, CEO, like, that’s… that… I mean, that… you as… I guess that’s… that’s, like, just the basic, kind of, bones of it,

108 00:15:00.090 ⇒ 00:15:09.749 Robert Tseng: That way, like, if you decide to raise money, then, like, yeah, the… we can change the equity structure of that particular entity, without it…

109 00:15:09.750 ⇒ 00:15:24.429 Robert Tseng: I mean, like, it’s less complicated, doesn’t actually have to impact any of the other businesses, which, yeah, and then if it ends up, you know, blowing up and it wants to spin off, do its own thing, or if you wanted to sell it off separately without being attached to the Holdco.

110 00:15:24.570 ⇒ 00:15:28.669 Robert Tseng: Yeah, like, this… this structure supposedly makes it easier to kind of…

111 00:15:28.690 ⇒ 00:15:40.240 Robert Tseng: move… move in and out of. So, yeah, I was just kind of walking through a few different… few other scenarios with Utam, of, like, other folks that we’ve talked to, and kind of how I felt like it could be all

112 00:15:40.240 ⇒ 00:15:52.910 Robert Tseng: kind of put together under one umbrella, and yeah, that’s kind of what we thought. And then at the upper hand corner, I wrote, like, a buy box. This is kind of just, like, some criteria I thought about for where we are in our business. What…

113 00:15:53.040 ⇒ 00:16:03.960 Robert Tseng: I… you know, what we’d be looking for, like, you know, under the hood. Like, how… in order to… in order to, like, the criteria for an acquisition or a merger.

114 00:16:03.990 ⇒ 00:16:13.329 Robert Tseng: And yeah, I guess, like, that’s… that’s just, like, finances and stuff, so we can… I mean, not that important to talk about, unless you’re interested.

115 00:16:15.250 ⇒ 00:16:16.449 Clarence Stone: Yeah, this makes sense.

116 00:16:16.450 ⇒ 00:16:16.990 Robert Tseng: Yeah.

117 00:16:17.970 ⇒ 00:16:18.930 Clarence Stone: Okay.

118 00:16:23.240 ⇒ 00:16:28.820 Clarence Stone: So… In the payroll code, are you saying that, like.

119 00:16:31.270 ⇒ 00:16:35.810 Clarence Stone: this company actually, like, Hyrule Co. actually has

120 00:16:36.560 ⇒ 00:16:39.059 Clarence Stone: The hiring for every single person.

121 00:16:39.700 ⇒ 00:16:41.390 Clarence Stone: Yeah. Okay.

122 00:16:42.090 ⇒ 00:16:47.630 Robert Tseng: So, oh yeah, all non-equity holding employees are basically under this payroll code.

123 00:16:48.750 ⇒ 00:17:00.489 Robert Tseng: So, like, they don’t get any of the upside of… of the… of the Holdcos, because the hold codes could grow, right? But they don’t really tap into that. And it’s completely owned by the Holdco,

124 00:17:00.580 ⇒ 00:17:15.690 Robert Tseng: but they don’t really have a stake in the holdco. Like, it’s just, like, we run it at, like, net zero. Like, all the… yeah, it’s just, like, purely as, like, a tax… tax instrument, and, like, just makes it cleaner, because when people buy… want to buy pieces of the Holdco.

125 00:17:15.690 ⇒ 00:17:24.150 Robert Tseng: oftentimes, they don’t want to pull the team with it as well, that’s just, like, liability that I have to shed anyway. So, like, you know, that way they can just get, like, the key…

126 00:17:24.150 ⇒ 00:17:29.199 Robert Tseng: Yeah, I mean, it’s a cleaner… it’s a cleaner, cleaner thing to buy, I guess.

127 00:17:34.630 ⇒ 00:17:51.099 Robert Tseng: It’s like, at minimum, each of the hold codes needs to have, like, an officer, and that has to be a CEO. So, like, it’s at minimum one person. I mean, obviously, there could be more, kind of, like, as, you know, as needed, but it’s… yeah, I think that’s… that’s kind of how we were thinking about it.

128 00:17:52.020 ⇒ 00:17:53.659 Uttam Kumaran: Yeah, and then for me, I also think there’s, like.

129 00:17:53.660 ⇒ 00:17:54.460 Clarence Stone: So, opportunity.

130 00:17:54.890 ⇒ 00:17:57.720 Clarence Stone: Actually, well, I take my words back. Yeah.

131 00:17:58.690 ⇒ 00:17:59.839 Uttam Kumaran: No, go ahead, go, go, go.

132 00:18:00.970 ⇒ 00:18:01.860 Clarence Stone: It’s super.

133 00:18:02.080 ⇒ 00:18:03.500 Clarence Stone: Yo, you’re good, you’re good.

134 00:18:04.130 ⇒ 00:18:14.209 Uttam Kumaran: I think, like, one opportunity for people that… that fold under… sorry, I just did a little lag, maybe because I’m dry. There’s… so fold under the… the hold toe is also, like.

135 00:18:14.410 ⇒ 00:18:24.920 Uttam Kumaran: One of the pitches we’re gonna make to companies where we’re trying to do, like, an acquisition is that recruiting, ops, legal, finance, like, it’s all kind of, like.

136 00:18:24.950 ⇒ 00:18:43.069 Uttam Kumaran: taken care of. And so one thing that I told Robert is it’s, like, really attractive, because as someone who started this organization, the moment you move from, like, 20, 30K a month to scale, those… all those things, like, have to turn on, and, like, you can’t… you have to basically, like, those are all decisions that now have to get made, and…

137 00:18:43.190 ⇒ 00:18:59.519 Uttam Kumaran: you can’t… like, it’s really actually helpful for those orgs to split those resources across every company in the portfolio. Like, I’m really confident that, like, one person or one team can recruit everybody, like, so those are some things that are more like shared services layer.

138 00:18:59.540 ⇒ 00:19:08.129 Uttam Kumaran: Versus… and so I’m also thinking about, like, okay, like, engineering, like, the AI platform, like, all those things. I think it really allows for…

139 00:19:08.330 ⇒ 00:19:09.440 Uttam Kumaran: People to, like.

140 00:19:09.730 ⇒ 00:19:16.409 Uttam Kumaran: For those executives to sort of lean on the broader ecosystem for those services, but then also, like.

141 00:19:16.550 ⇒ 00:19:21.819 Uttam Kumaran: they just, like, go out and market and sell and run a lot of the front. So, yeah, just, like, one point there.

142 00:19:26.930 ⇒ 00:19:28.100 Clarence Stone: So,

143 00:19:28.510 ⇒ 00:19:42.019 Clarence Stone: My thought is, Robert, that this structure makes it a lot easier for management, but when you’re looking at it from a taxable income perspective, you’re pretty much creating a corp that everything rolls up to.

144 00:19:42.650 ⇒ 00:19:48.100 Clarence Stone: And it has all the tax liabilities of All your subordinate entities.

145 00:19:50.060 ⇒ 00:19:56.160 Robert Tseng: I think… I mean, you may know this better than I do. So, I mean, I think…

146 00:19:57.010 ⇒ 00:20:15.649 Robert Tseng: part of this was to kind of, like, de-risk AI labs from data as well, for example. It’s like, maybe each of the whole… each of the portcos is, like, de-risked from each other, but yes, the hold co… I mean, there’s… yeah, it’s not, like, a riskless thing, I guess, like, yeah.

147 00:20:15.790 ⇒ 00:20:26.530 Clarence Stone: It’s not a risk position, but, like, tax exposure. So, so what I’m saying is, like, let’s say, like, just for, like, easy notional numbers, everybody made $1 million.

148 00:20:26.700 ⇒ 00:20:27.640 Clarence Stone: Sure.

149 00:20:27.810 ⇒ 00:20:32.860 Clarence Stone: And if every single one of these port codes Made 1M.

150 00:20:33.750 ⇒ 00:20:38.829 Clarence Stone: And, I mean, obviously, they’re gonna pay the same amount to the payroll.

151 00:20:39.570 ⇒ 00:20:42.839 Clarence Stone: Right, so let’s say everybody did 0.1.

152 00:20:45.150 ⇒ 00:20:46.040 Clarence Stone: Right.

153 00:20:46.420 ⇒ 00:20:55.480 Clarence Stone: The liability, like, the tax that gets paid at the hold code level

154 00:20:55.930 ⇒ 00:20:58.739 Clarence Stone: Isn’t going to be equal because

155 00:20:59.320 ⇒ 00:21:05.619 Clarence Stone: all of these will have different expenses. And basically, your payroll co. has to balance that out.

156 00:21:06.480 ⇒ 00:21:08.989 Clarence Stone: In one unit, as a whole.

157 00:21:10.090 ⇒ 00:21:12.639 Robert Tseng: Yeah, actually, I was thinking,

158 00:21:13.820 ⇒ 00:21:30.579 Robert Tseng: Yeah, I guess you, yeah, you could rely… well, well, maybe this is… I put the management fee there, so, like, the hold codes only pay management fee directly back to the hold… or the port codes only pay management fee back to the hold code, so that’s just, like, a percentage of revenue. It should be pretty clean.

159 00:21:30.680 ⇒ 00:21:32.720 Robert Tseng: And then…

160 00:21:33.200 ⇒ 00:21:51.749 Robert Tseng: Yeah, I mean, they will each kind of actually paste, like, they’ll each pull from the payroll close separately, because, like, it’s not gonna be the same amount to them, because, let’s say, like, AI Labs is, like, 3X the size of, of, of data. You’re gonna obviously rely on it more, so it kind of just, like,

161 00:21:51.950 ⇒ 00:21:54.180 Robert Tseng: Yeah, like, I feel like there’s.

162 00:21:54.180 ⇒ 00:21:58.250 Clarence Stone: So, let me show you how I would be able to give you complete tax…

163 00:21:58.460 ⇒ 00:22:11.600 Clarence Stone: write-offs, while if one is bigger than the other, you can just offset it. I don’t know if that works if it rolls up to the same payroll cost. That’s what I’m, like, kind of thinking through right now.

164 00:22:11.790 ⇒ 00:22:16.119 Robert Tseng: Well, the payroll call is actually a separate hold… it’s like a… they don’t roll…

165 00:22:16.120 ⇒ 00:22:17.330 Clarence Stone: Or another entity.

166 00:22:17.330 ⇒ 00:22:24.959 Robert Tseng: Which is not our… yeah, the Piracle is just, just, like, they only… it has MSAs, it’s only servicing, like, the other, like,

167 00:22:25.140 ⇒ 00:22:27.420 Robert Tseng: Like, the other, the other Holt Coast.

168 00:22:27.420 ⇒ 00:22:29.649 Clarence Stone: Is this Manco, management company.

169 00:22:29.650 ⇒ 00:22:30.869 Robert Tseng: It’s like a mango, yeah.

170 00:22:30.870 ⇒ 00:22:35.050 Clarence Stone: Yeah. So, let’s say we have VF, and we have this million, right?

171 00:22:36.460 ⇒ 00:22:50.389 Clarence Stone: let’s say, like, Brainforge has an amazing year, right? Like, you guys are at… I don’t know, let’s… I’m just gonna pick some really easy notional numbers. Like, $10 million in net profit that year.

172 00:22:51.070 ⇒ 00:22:52.090 Clarence Stone: Right?

173 00:22:52.460 ⇒ 00:23:03.459 Clarence Stone: At… and that probably means you guys made, like, $20 mi l l i o n, r i g h t ? B ec a u se, l ik e, y o u r l a s t y e a r w a s, l ik e, 50$ 10 million, you should not be making this.

174 00:23:05.070 ⇒ 00:23:05.630 Robert Tseng: Yeah.

175 00:23:05.810 ⇒ 00:23:16.310 Clarence Stone: Right? So, so one of the ways that you can carry this throughout, like, this portco structure is to say, I gained 10 million.

176 00:23:16.770 ⇒ 00:23:22.760 Clarence Stone: But I also spent X amount on this company, and X amount on platform, X amount.

177 00:23:22.760 ⇒ 00:23:31.209 Robert Tseng: Right. That’s why, like, kind of, like, from a capital management perspective, like, most of that’s gonna be into reinvestments and acquisitions. Like, we don’t want, like.

178 00:23:31.340 ⇒ 00:23:36.930 Robert Tseng: It’ll just… the only people that are really attached to the hold code, like, if, you know, in this scenario, it would be…

179 00:23:36.930 ⇒ 00:23:55.350 Robert Tseng: me and Uten, we’re at the local level, we take a salary out of that. That’s the only, like, cash we should be pouring. Everything else is a capital expense, or, like, or not a capital expense. Should be… should be, like, a business expense, kind of reinvested back into the business. We’re buying more businesses, or we’re paying on… paying down debt, and, like…

180 00:23:55.350 ⇒ 00:24:07.329 Robert Tseng: if there is, like, another… like, yeah, I mean, obviously, if we outperform significantly, like, we can take, like, some capital returns, or if a family office wanted to invest in the Holdco, because that’s a cleaner…

181 00:24:07.330 ⇒ 00:24:22.809 Robert Tseng: it’s, like, it’s a more stable structure, because there’s, like, consistent, I mean, it just… we’re able to aggregate, kind of, the bumps from all of the, the port codes, like, it… it’s… the cash will… the cash inflows will look

182 00:24:22.840 ⇒ 00:24:36.539 Robert Tseng: cleaner at the Holdco level, and I feel like that attracts a different type of funder that would be more, like, hesitant to invest in something like a Brainforce today because of how, like, how lumpy it can be.

183 00:24:42.330 ⇒ 00:24:45.979 Clarence Stone: Wait, so do the… so all the employees are gonna sit…

184 00:24:46.440 ⇒ 00:24:50.370 Clarence Stone: In Manco, though. And that is the problem that I have, I think.

185 00:24:50.990 ⇒ 00:25:08.259 Clarence Stone: Because then you don’t have units to move around to adjust your books, actually. So let me explain to you why, right? Like, Brainforge made $10 million, but let’s assume Brainforge didn’t, like, didn’t allocate their entire team into Manchin. Like, you guys have the team you have in Brainforge.

186 00:25:08.460 ⇒ 00:25:09.000 Robert Tseng: Yeah.

187 00:25:09.160 ⇒ 00:25:09.870 Clarence Stone: Right.

188 00:25:10.160 ⇒ 00:25:15.649 Clarence Stone: you can just say… and Vicinity has the team that Vicinity has, right?

189 00:25:16.160 ⇒ 00:25:20.859 Clarence Stone: I, like, Brainforge can then decide, I would like

190 00:25:20.990 ⇒ 00:25:24.389 Clarence Stone: Facinity to make version 2 of Work.

191 00:25:25.170 ⇒ 00:25:30.320 Clarence Stone: Right? And we will accept a fee structure of X amount.

192 00:25:30.440 ⇒ 00:25:36.349 Clarence Stone: So, Vicinity now is… is picking up, like, let’s say, $1 million worth

193 00:25:39.410 ⇒ 00:25:40.420 Clarence Stone: of work.

194 00:25:41.120 ⇒ 00:25:42.070 Clarence Stone: Right.

195 00:25:42.250 ⇒ 00:25:48.989 Clarence Stone: Now you have a new… you now have a investment that you’ve done on innovation.

196 00:25:50.230 ⇒ 00:25:52.889 Clarence Stone: Yeah. Actual income becomes annulating.

197 00:25:53.160 ⇒ 00:25:53.740 Robert Tseng: Right.

198 00:25:54.720 ⇒ 00:25:58.780 Clarence Stone: Right. And this is a wash, because all of it does roll up the whole car.

199 00:26:00.580 ⇒ 00:26:04.120 Clarence Stone: But you have now washed away a million dollars of taxable income.

200 00:26:04.120 ⇒ 00:26:04.680 Robert Tseng: Yeah.

201 00:26:05.270 ⇒ 00:26:16.539 Clarence Stone: Right? But you can only do this movement if, like, I actually have people here, or else I’m just going back to Manco and borrowing the same people. That’s not gonna be clean.

202 00:26:17.190 ⇒ 00:26:18.920 Clarence Stone: Iris is not gonna like that.

203 00:26:23.280 ⇒ 00:26:39.010 Robert Tseng: Okay, I mean, I… I mean, we could… I mean, I would like to… I mean, I’ll probably ask the… I mean, I know a couple people that are running the structure. I want to know, like, how they… how they deal with that. Like, I… I was told that this was a… this was cleaner for taxi… for taxes, so…

204 00:26:39.010 ⇒ 00:26:48.330 Clarence Stone: This is the absolute cleanest for taxes. It’s actually the cleanest so that you can’t fucking cheat on taxes. This is not what the PEs that I work with do.

205 00:26:50.170 ⇒ 00:26:51.000 Clarence Stone: Right.

206 00:26:51.400 ⇒ 00:26:59.380 Uttam Kumaran: You guys were saying the same thing about, like, the spending, but I think, like, yeah, I think we need to iron out, to your point, Clarence, whether

207 00:26:59.520 ⇒ 00:27:01.040 Uttam Kumaran: If the people, like…

208 00:27:01.210 ⇒ 00:27:06.980 Uttam Kumaran: Yeah, whether you could actually just, like, be like, hey, actually, I’m just gonna put… move the expense here, move the expense here.

209 00:27:07.480 ⇒ 00:27:12.290 Uttam Kumaran: like, at tax season, right? It’s kind of like what we talked about. Yeah, that’s interesting.

210 00:27:12.710 ⇒ 00:27:16.640 Clarence Stone: Yeah. But that has to be structured from the beginning of the tax year.

211 00:27:17.120 ⇒ 00:27:20.629 Clarence Stone: Because, like, you can’t just do this at the end of the year and say, I’m just gonna.

212 00:27:20.630 ⇒ 00:27:21.449 Uttam Kumaran: Yeah, yeah.

213 00:27:21.990 ⇒ 00:27:22.760 Clarence Stone: flag.

214 00:27:22.860 ⇒ 00:27:23.900 Uttam Kumaran: Right? Yeah.

215 00:27:24.250 ⇒ 00:27:29.089 Clarence Stone: So, okay, Robert, I’ll give you an example.

216 00:27:30.740 ⇒ 00:27:32.450 Clarence Stone: I have Stone Family Office.

217 00:27:34.620 ⇒ 00:27:37.490 Clarence Stone: So, Family Office actually has, like.

218 00:27:37.740 ⇒ 00:27:40.140 Clarence Stone: All the random properties that aren’t my house in it.

219 00:27:40.800 ⇒ 00:27:49.510 Clarence Stone: Right? In our vicinity. Well… I just found a pretty cheap, like, $250K office.

220 00:27:49.760 ⇒ 00:27:53.059 Clarence Stone: Right? Stump Family Office buys that property.

221 00:27:54.140 ⇒ 00:27:56.940 Clarence Stone: By the way, I own both of these, right?

222 00:27:57.120 ⇒ 00:27:57.790 Robert Tseng: Yeah.

223 00:27:57.790 ⇒ 00:28:04.149 Clarence Stone: And then it leases to Vicinity… I wish I could write stuff. This Apple note thing kind of sucks, okay, so… so…

224 00:28:04.150 ⇒ 00:28:08.840 Uttam Kumaran: Leases, and you can kind of just fluctuate that, like, yeah.

225 00:28:09.340 ⇒ 00:28:15.220 Clarence Stone: So, I have decided that $2,500 was the number, and the bank had no problems signing

226 00:28:15.510 ⇒ 00:28:18.049 Clarence Stone: Giving me a, a, a, a loan on it

227 00:28:18.860 ⇒ 00:28:25.310 Clarence Stone: on that, that quote. So I actually wrote the entire contract already, right? So now…

228 00:28:25.470 ⇒ 00:28:34.740 Clarence Stone: Stone Family Office has a negative like, $250K, position.

229 00:28:36.200 ⇒ 00:28:41.600 Clarence Stone: Right? And all of these, like, earnings end up being minus.

230 00:28:42.020 ⇒ 00:28:45.840 Clarence Stone: Right? Because it’s just being paid back into the debt.

231 00:28:46.300 ⇒ 00:28:50.230 Clarence Stone: So this entity is operating a net negative forever.

232 00:28:53.100 ⇒ 00:29:01.869 Clarence Stone: Right? Which means I can now never, like, lose out on any of this money. This is not taxable on the side, ever.

233 00:29:04.160 ⇒ 00:29:05.790 Clarence Stone: Because I earn nothing.

234 00:29:06.440 ⇒ 00:29:15.910 Clarence Stone: everything I use, I use to pay it back to the bank, right? But what happened by doing this is, if you take a look at this $2,500, right.

235 00:29:16.450 ⇒ 00:29:19.820 Clarence Stone: Times 12, would be $30K.

236 00:29:22.200 ⇒ 00:29:25.710 Clarence Stone: If I was not spending that $30K in vicinity.

237 00:29:26.320 ⇒ 00:29:34.549 Clarence Stone: Right? I would have $30 K m or e in t a x l iabi l i t y h er e . S o f or c l e ann u mb er s, I^{'} m s a y in g, l ik e, l e t^{'} ss a y v i c ini t y e n d s t h ey e a r a t$ 100K.

238 00:29:35.830 ⇒ 00:29:42.230 Clarence Stone: Right? And let’s say I’m not doing this lease process, I have $100K in tax liability.

239 00:29:43.850 ⇒ 00:29:44.730 Clarence Stone: Right?

240 00:29:46.040 ⇒ 00:29:46.590 Robert Tseng: Yeah.

241 00:29:46.930 ⇒ 00:29:52.700 Clarence Stone: I have self-defined a payment to myself, To, like, entity to entity.

242 00:29:53.690 ⇒ 00:29:56.970 Clarence Stone: Right, which ends up being an annual 30K,

243 00:29:57.910 ⇒ 00:30:04.560 Clarence Stone: Which means now, because it is a expense to this business, my tax liability is $70K.

244 00:30:09.340 ⇒ 00:30:11.910 Clarence Stone: I just disappeared 30K of tax income.

245 00:30:18.720 ⇒ 00:30:19.330 Clarence Stone: This is…

246 00:30:19.330 ⇒ 00:30:19.720 Robert Tseng: Yeah.

247 00:30:19.720 ⇒ 00:30:20.839 Clarence Stone: peas are doing.

248 00:30:25.210 ⇒ 00:30:30.099 Clarence Stone: Now, obviously, because this is on a 5-year loan.

249 00:30:30.250 ⇒ 00:30:32.880 Clarence Stone: This $250K will be paid off pretty quickly.

250 00:30:33.280 ⇒ 00:30:34.200 Clarence Stone: Right.

251 00:30:34.860 ⇒ 00:30:40.119 Clarence Stone: Then, we have a problem, because all of a sudden, some family office is making $30K.

252 00:30:41.570 ⇒ 00:30:44.450 Clarence Stone: Right That’s not good.

253 00:30:44.870 ⇒ 00:30:53.289 Clarence Stone: It’s now revenue generated, but what would have happened, Robert, is 5 years of consistent lease income.

254 00:30:54.030 ⇒ 00:30:59.579 Clarence Stone: And it now has, assets worth $250K.

255 00:31:00.740 ⇒ 00:31:08.280 Clarence Stone: You take that asset, you fucking leverage the shit out of that, and go into your next loan, go to a $500K million dollar property.

256 00:31:08.890 ⇒ 00:31:09.540 Robert Tseng: Hmm.

257 00:31:09.960 ⇒ 00:31:16.440 Clarence Stone: Right? And all of a sudden, I have a million dollars in liability here, and this position is still

258 00:31:16.800 ⇒ 00:31:18.210 Clarence Stone: Untaxable.

259 00:31:20.840 ⇒ 00:31:37.040 Clarence Stone: Do you see what I’m saying? And when the bank looks and thinks about, like, can we give him that million? Well, he has consistently made $30 K o v er 5 \dots e a c h y e a r f or 5 y e a r s ina r o w . S o t hi se n t i t y d oes mak e m o n ey, i t^{'} s a g u a r an t ee d$ 30K every year.

260 00:31:37.430 ⇒ 00:31:42.360 Clarence Stone: Right? And this entity has a $250K, like, asset.

261 00:31:42.850 ⇒ 00:31:47.949 Clarence Stone: Yeah, I mean, that’s enough levers to say, I can give you a $1 million loan.

262 00:31:48.210 ⇒ 00:31:50.050 Clarence Stone: It’s only 4x multiplier.

263 00:31:52.690 ⇒ 00:31:56.549 Clarence Stone: So I… you can literally ladder up to a million dollar property in 5 years.

264 00:31:57.120 ⇒ 00:31:59.489 Clarence Stone: While getting your tax write-offs here.

265 00:31:59.750 ⇒ 00:32:00.989 Clarence Stone: Everything’s best.

266 00:32:04.460 ⇒ 00:32:15.000 Clarence Stone: Right. So, like, for this to work, entity to entity, there must be an asset exchange, or a employment exchange.

267 00:32:15.120 ⇒ 00:32:22.609 Clarence Stone: Right? Like, you can’t just move the numbers on a book. This double entry has to be a substantive transaction.

268 00:32:24.870 ⇒ 00:32:27.230 Clarence Stone: Right. It could be that, like.

269 00:32:27.940 ⇒ 00:32:33.849 Clarence Stone: you know, I’m doing these, like, executive sessions, right? Like, okay, Brainforge goes, well, Cindy to you do it.

270 00:32:35.340 ⇒ 00:32:38.639 Clarence Stone: Right. Cool. Well then, you know, I’ll… I’ll…

271 00:32:39.310 ⇒ 00:32:44.590 Clarence Stone: you’ll… you’ll pay me that 30K, I would have made that 30K,

272 00:32:45.280 ⇒ 00:33:01.710 Clarence Stone: Right? Now we have… you push down your tax liability by $30K by doing that. Now, the problem is, if you say the employee that renders this service on both ends of this entity structure comes from the same management code.

273 00:33:02.030 ⇒ 00:33:03.540 Clarence Stone: We have our problem.

274 00:33:04.920 ⇒ 00:33:10.000 Clarence Stone: Because IRS will say, why did you move that $30K to vicinity?

275 00:33:10.330 ⇒ 00:33:13.889 Clarence Stone: When Vicinity can get it from the same pool as Brainforge.

276 00:33:17.490 ⇒ 00:33:22.130 Clarence Stone: You see how, on a tax basis, like, This is very clean.

277 00:33:22.420 ⇒ 00:33:24.639 Clarence Stone: A tax person would love this!

278 00:33:25.620 ⇒ 00:33:28.700 Clarence Stone: But you cannot hide money this way.

279 00:33:29.490 ⇒ 00:33:30.819 Clarence Stone: If you do it that way.

280 00:33:37.630 ⇒ 00:33:38.719 Robert Tseng: I guess, like…

281 00:33:38.720 ⇒ 00:33:46.879 Clarence Stone: right here is literally what Oak Tree, Brookfield… this is the playbook that they use all over the place for all their reads.

282 00:34:17.989 ⇒ 00:34:24.479 Robert Tseng: Okay, I mean, I, yeah, I guess I… I mean, I’m not… I’m not the… I’m not the text guy entirely. I… I guess, like…

283 00:34:24.929 ⇒ 00:34:31.159 Robert Tseng: I thought that, like, having the… the purpose of having the,

284 00:34:31.790 ⇒ 00:34:36.309 Robert Tseng: the payroll co. is so that you can have… you can just…

285 00:34:36.739 ⇒ 00:34:45.700 Robert Tseng: Yeah, I mean, maybe I’m, like, don’t understand the nuances of, like, what you’re saying means, like, what you mean by sharing, like…

286 00:34:46.270 ⇒ 00:34:57.170 Robert Tseng: human… like, the human resources, I’m only viewing it from, like, a contractual perspective, where… like… the payroll company…

287 00:34:57.800 ⇒ 00:35:04.120 Robert Tseng: structures MSAs with each of the pay… with each of the hold codes.

288 00:35:04.580 ⇒ 00:35:22.530 Robert Tseng: Just, just in a way so that there’s no, like, there’s, like, little to no, like, margin on, like, what they’re paying out. So, like, even if it’s, like, one person’s time, 50% in vicin… like, in labs, 50% in Brainforge.

289 00:35:22.710 ⇒ 00:35:29.449 Robert Tseng: I mean, those are two separate MSAs with… with those… with those entities, and…

290 00:35:29.640 ⇒ 00:35:48.420 Robert Tseng: like, yeah, the… the margin is going to be… it’s gonna be, like, it’s basically… basically gonna be… be zero. And so, because it’s at cost only, that means the… the income from

291 00:35:48.550 ⇒ 00:35:58.329 Robert Tseng: like, you’re basically not getting taxed on the margin, is what I think that entity is trying to accomplish. Whereas, like, before.

292 00:35:58.790 ⇒ 00:36:07.719 Robert Tseng: Yeah, I mean, the… the… The margin doesn’t get, like.

293 00:36:09.980 ⇒ 00:36:28.019 Robert Tseng: doesn’t get hidden through a structure like this, and so that becomes taxable… taxable income, but you’re hiding, like, the margin that you would charge through the MSAs that you have between the bill, like, the bill… like the… like, the payroll co. and… and the other hold co’s.

294 00:36:28.020 ⇒ 00:36:30.280 Robert Tseng: So, yeah.

295 00:36:30.280 ⇒ 00:36:32.209 Robert Tseng: That’s… that’s how I thought it worked. I don’t…

296 00:36:32.630 ⇒ 00:36:33.760 Robert Tseng: I don’t know how it works, but…

297 00:36:33.760 ⇒ 00:36:41.429 Clarence Stone: You are right. Like, the reason why this structure is very clean, accountants and lawyers would love it, is because it’s very straightforward.

298 00:36:42.500 ⇒ 00:36:43.060 Robert Tseng: Yeah.

299 00:36:43.210 ⇒ 00:36:48.900 Clarence Stone: And the fact that it’s… and from an accounting perspective, you will have no double entries.

300 00:36:49.180 ⇒ 00:36:54.140 Clarence Stone: Like, this $30,000 from one side to another, that’s what we call a double entry.

301 00:36:54.140 ⇒ 00:36:54.700 Robert Tseng: Yeah.

302 00:36:55.140 ⇒ 00:36:55.850 Clarence Stone: Right.

303 00:36:57.170 ⇒ 00:37:07.990 Clarence Stone: So you wouldn’t have a double entry because you’re not offsetting something from one another using NANCO as the mechanism to always be at margin zero.

304 00:37:08.880 ⇒ 00:37:09.430 Robert Tseng: Yeah.

305 00:37:09.820 ⇒ 00:37:10.580 Clarence Stone: Right.

306 00:37:11.650 ⇒ 00:37:22.959 Clarence Stone: My point is, the whole point of double entries is so that you can use it as a lever to decide which entity is actually paying how much of your total taxes.

307 00:37:23.190 ⇒ 00:37:23.840 Robert Tseng: Sure.

308 00:37:24.360 ⇒ 00:37:29.460 Robert Tseng: Right. Yeah, I mean, you could just, like, take out the payroll co, and, like, we don’t need to need that.

309 00:37:29.870 ⇒ 00:37:46.640 Clarence Stone: Well, the reason that my only question about this was, like, do the people actually, like, do the staffers, like, people who aren’t equity holders actually sitting in here, like, you should keep your consolidated management company.

310 00:37:47.250 ⇒ 00:37:49.130 Clarence Stone: Like, you should definitely have, like.

311 00:37:50.300 ⇒ 00:38:01.020 Clarence Stone: your legal services, accounting… Yeah, the back office, yeah. …centralized, right? Yeah. That’s fine. But if it’s a, like, a data engineer, data engineers should live in the data bucket.

312 00:38:01.020 ⇒ 00:38:01.660 Robert Tseng: Sure.

313 00:38:01.900 ⇒ 00:38:05.430 Robert Tseng: Even if they’re going to end up being used on a different, like, porco, sure.

314 00:38:05.430 ⇒ 00:38:12.550 Clarence Stone: Right, because then this… you see these loops that I threw in? Yeah. Then you can do that.

315 00:38:12.550 ⇒ 00:38:13.120 Robert Tseng: Yeah.

316 00:38:13.550 ⇒ 00:38:16.359 Robert Tseng: Okay, yeah, so I mean, there’s some division of, like.

317 00:38:16.360 ⇒ 00:38:16.950 Clarence Stone: entry.

318 00:38:16.950 ⇒ 00:38:18.109 Robert Tseng: Yeah, okay.

319 00:38:18.190 ⇒ 00:38:19.519 Clarence Stone: Right, where, where…

320 00:38:19.690 ⇒ 00:38:20.440 Robert Tseng: Yeah.

321 00:38:20.820 ⇒ 00:38:31.270 Clarence Stone: like, let’s just say, like, you guys had such a good year, holy crap, you’re gonna spend $10 million in revenue-positive taxes. Like, that’s gonna be…

322 00:38:33.190 ⇒ 00:38:36.230 Clarence Stone: Probably, you’re gonna end up paying another $4 million.

323 00:38:36.610 ⇒ 00:38:37.160 Robert Tseng: Yeah.

324 00:38:37.480 ⇒ 00:38:38.220 Clarence Stone: Right.

325 00:38:39.150 ⇒ 00:38:42.049 Clarence Stone: You have to… you have to really spend $4 million.

326 00:38:42.420 ⇒ 00:38:43.840 Clarence Stone: On… on book.

327 00:38:44.120 ⇒ 00:38:44.620 Robert Tseng: Yeah.

328 00:38:44.620 ⇒ 00:38:45.849 Clarence Stone: Somewhere in the book.

329 00:38:46.720 ⇒ 00:38:59.110 Clarence Stone: Which means you push $4 mi l l i o nh er e, y o u p u s h$ 1 million here, you push $1 mi l l i o n t o pl a t f or m, y o u p u s h$ 1 million to GTM, you push $1 million into vertical.

330 00:38:59.740 ⇒ 00:39:00.300 Robert Tseng: Yeah.

331 00:39:00.630 ⇒ 00:39:04.170 Clarence Stone: And all of a sudden, you’re… You’re at 6 mil.

332 00:39:05.480 ⇒ 00:39:06.060 Robert Tseng: Yeah.

333 00:39:06.430 ⇒ 00:39:16.749 Clarence Stone: Right? So think about, like, the Layer 2, the core benefit of what’s happening is that you can use gains in one to offset losses in another.

334 00:39:16.750 ⇒ 00:39:17.280 Robert Tseng: Yep.

335 00:39:17.510 ⇒ 00:39:21.499 Clarence Stone: Right? And you can always spin up new companies that are always showing losses.

336 00:39:21.910 ⇒ 00:39:22.430 Robert Tseng: Yeah.

337 00:39:23.670 ⇒ 00:39:32.019 Clarence Stone: So, even at a $10 million, like, revenue-positive position, because you’ve spent it all on maybe, you know, acquiring a new company.

338 00:39:33.610 ⇒ 00:39:35.430 Clarence Stone: Oh well, we made no money.

339 00:39:35.960 ⇒ 00:39:36.490 Robert Tseng: Yeah.

340 00:39:38.360 ⇒ 00:39:49.289 Clarence Stone: Right? But where is the value going? It’s in the true value of the assets, or, like, the value of the organization. And you’re able to pump these companies in an artificial way.

341 00:39:49.600 ⇒ 00:39:50.150 Robert Tseng: Yeah.

342 00:39:51.210 ⇒ 00:39:58.410 Clarence Stone: Right? Like, you know, new vertical gets popped up, we just feed… we all feed it.

343 00:39:59.520 ⇒ 00:40:07.130 Clarence Stone: We just become a feeder to… like, there’s literally a type of entity structure, is a feeder. We feed this.

344 00:40:07.660 ⇒ 00:40:15.720 Clarence Stone: So that on the IRS books, this is a… you know, like I’m… That $3 million company.

345 00:40:15.960 ⇒ 00:40:17.129 Clarence Stone: In one year.

346 00:40:18.170 ⇒ 00:40:24.610 Clarence Stone: And then we could say, oh, well, like, look at all the kind of, you know, revenue that it drove.

347 00:40:25.140 ⇒ 00:40:29.060 Clarence Stone: Well, now there’s a $3 million vertical that you can just offload.

348 00:40:32.110 ⇒ 00:40:48.500 Clarence Stone: So when PEs buy a company like Jersey Mike’s, right, like, they’re using all the logistics capabilities and the operationalized capabilities to pop into it, and then say, like, oh, we’re gonna put it back on the public market, because it’s worth more than what it was when we bought it. No, nothing changed.

349 00:40:48.940 ⇒ 00:40:49.490 Robert Tseng: Yeah.

350 00:40:50.570 ⇒ 00:40:52.660 Clarence Stone: Right? But the valuation changed.

351 00:40:52.660 ⇒ 00:40:54.529 Robert Tseng: The evaluation, yeah, they’re just playing the Arbor.

352 00:40:54.530 ⇒ 00:40:58.979 Clarence Stone: And this secondary loop, I think, is the most important mechanism.

353 00:41:01.390 ⇒ 00:41:04.110 Robert Tseng: Yeah. No, I agree. I think,

354 00:41:04.380 ⇒ 00:41:15.360 Robert Tseng: Yeah, I think that that’s what this is, like, this is like a mini PE firm, and I think, yeah, you understand the mechanics probably better than we do, but yeah, I think we’re at a place now where, like, doing this makes sense, like.

355 00:41:15.600 ⇒ 00:41:16.700 Robert Tseng: I mean, frankly, like…

356 00:41:16.700 ⇒ 00:41:22.860 Clarence Stone: an opportunity to see that, see all of it again, too. So you should, you should, as soon as I get him the data, he can

357 00:41:23.360 ⇒ 00:41:24.560 Clarence Stone: Sure.

358 00:41:24.560 ⇒ 00:41:25.710 Uttam Kumaran: Yeah.

359 00:41:26.140 ⇒ 00:41:39.340 Clarence Stone: More interestingly, since we’re on that topic, lone Star Funds?

360 00:41:40.170 ⇒ 00:41:41.970 Clarence Stone: This is where the P sits.

361 00:41:41.970 ⇒ 00:41:42.500 Robert Tseng: Yep.

362 00:41:43.330 ⇒ 00:41:47.779 Clarence Stone: Actually has an equal… top-level corp.

363 00:41:47.890 ⇒ 00:41:49.610 Clarence Stone: To their management company.

364 00:41:50.210 ⇒ 00:41:50.740 Robert Tseng: Hmm.

365 00:41:51.550 ⇒ 00:41:54.290 Clarence Stone: It’s Hudson… Advisors.

366 00:41:56.950 ⇒ 00:42:03.920 Clarence Stone: And… They will use this as another Holdco-level entity to wash money.

367 00:42:06.010 ⇒ 00:42:08.729 Clarence Stone: It’s another really great method.

368 00:42:12.050 ⇒ 00:42:19.379 Clarence Stone: But yes, essentially, like, our goal is to always tell the government we have no taxable income.

369 00:42:19.850 ⇒ 00:42:20.430 Robert Tseng: Yeah.

370 00:42:20.700 ⇒ 00:42:28.580 Clarence Stone: Right. And in this structure, we will always have the cleanest taxable income. That’s my… that’s my problem with it. Yeah.

371 00:42:29.400 ⇒ 00:42:32.080 Clarence Stone: It is actually the right way to do things.

372 00:42:36.610 ⇒ 00:42:41.220 Clarence Stone: Which, like… If that is the right way to do things, Right?

373 00:42:41.750 ⇒ 00:42:54.910 Clarence Stone: Like, I encourage you to, like, just redo all the calculations on if you actually had all of these assets into one company, payroll was one company, like, pretend Holdco is just one company.

374 00:42:54.910 ⇒ 00:42:55.310 Robert Tseng: Yeah.

375 00:42:55.310 ⇒ 00:42:55.960 Clarence Stone: Bye.

376 00:42:57.260 ⇒ 00:43:02.030 Clarence Stone: Did your top-line capital, like,

377 00:43:02.580 ⇒ 00:43:09.790 Clarence Stone: tax impact change. If the answer is no, and it shouldn’t, because, like, all of these are actually just getting balanced out.

378 00:43:09.950 ⇒ 00:43:11.730 Clarence Stone: At the management co-level.

379 00:43:11.730 ⇒ 00:43:12.350 Robert Tseng: Yep.

380 00:43:12.350 ⇒ 00:43:14.360 Clarence Stone: Then you don’t need this structure at all.

381 00:43:14.710 ⇒ 00:43:21.549 Clarence Stone: is sort of my point. If you’re not getting any benefits from being able to move money around in this secondary layer between your.

382 00:43:24.450 ⇒ 00:43:37.430 Robert Tseng: Okay, yeah, no, I think what you said makes sense. Like, yeah, I think there is, like, a back office function that you can keep in… in the payroll company, and then, like, you know, the… yeah, kind of pushing the rest of the…

383 00:43:37.740 ⇒ 00:43:44.720 Robert Tseng: the labor in… the specialist labor into, kind of, the proper… the proper hold codes that they should be in. That makes sense.

384 00:43:44.720 ⇒ 00:43:51.389 Clarence Stone: Yeah, and I love this exercise, Robert, because it’s so creative. For example, like, we… like.

385 00:43:51.830 ⇒ 00:43:57.739 Clarence Stone: just spitballing here, like, it doesn’t have to be this way, but, like, TCM could always be at a net zero.

386 00:43:57.860 ⇒ 00:44:03.729 Clarence Stone: We can say TM staffs, like, 5 people, its total net operating cost is, I don’t know, a million dollars.

387 00:44:04.050 ⇒ 00:44:04.550 Robert Tseng: Yeah.

388 00:44:04.550 ⇒ 00:44:10.770 Clarence Stone: We can force every single one of these hold codes to spend… Twitter…

389 00:44:11.260 ⇒ 00:44:21.059 Clarence Stone: 200K, so it always just hits a million. It doesn’t make money, it doesn’t lose money. There’s no tax impact here. You pretty much have a tax-free GTM engine.

390 00:44:21.060 ⇒ 00:44:21.600 Robert Tseng: Yep.

391 00:44:23.180 ⇒ 00:44:23.950 Clarence Stone: Right?

392 00:44:24.460 ⇒ 00:44:33.289 Clarence Stone: And yeah, you still need that Manco. The Manco’s gonna create those contracts for us and say, that’s $200K, 200K, 200K, 200K… oh!

393 00:44:33.470 ⇒ 00:44:35.480 Clarence Stone: You have no tax liability.

394 00:44:35.480 ⇒ 00:44:36.070 Robert Tseng: Yeah.

395 00:44:38.750 ⇒ 00:44:39.460 Clarence Stone: Right.

396 00:44:40.370 ⇒ 00:44:46.559 Clarence Stone: that’s… that’s the structuring that could happen, right? You can even say, like, hey, we expect platform…

397 00:44:46.860 ⇒ 00:44:56.699 Clarence Stone: to keep itself afloat by, like, actually charging all of these subordinate entities a management fee. Like, I’m sorry, licensing fee to use work. Sure.

398 00:44:56.980 ⇒ 00:45:05.410 Clarence Stone: The work product’s great, everyone’s gonna use the work product, that’s $200 K . O h, w e l l, w e^{'} v e t ak e n t ha t$ 1 million, that’s zero. That zeroed out.

399 00:45:05.490 ⇒ 00:45:18.510 Clarence Stone: Okay, now we have to manage, like, what did the advisory team do, and, like, what does data do? How do we balance out the income and expenses here? Like, we can create our own expenses now, is what I’m saying.

400 00:45:18.670 ⇒ 00:45:19.240 Robert Tseng: Yeah.

401 00:45:22.420 ⇒ 00:45:23.020 Clarence Stone: Yeah.

402 00:45:24.820 ⇒ 00:45:26.790 Clarence Stone: It’s fine.

403 00:45:26.950 ⇒ 00:45:30.780 Robert Tseng: Cool, yeah, no, I think we’re on the same page with this exercise.

404 00:45:30.780 ⇒ 00:45:36.209 Clarence Stone: Yeah. And, and since you’re on that note, and, you know.

405 00:45:37.130 ⇒ 00:45:42.269 Clarence Stone: This is a fun thought exercise I’ll leave you with. Have you been following the,

406 00:45:43.050 ⇒ 00:45:45.599 Clarence Stone: the Elon v. OpenAI?

407 00:45:45.900 ⇒ 00:45:47.220 Robert Tseng: Yeah, lightly.

408 00:45:48.090 ⇒ 00:45:51.000 Clarence Stone: Here’s.

409 00:45:51.000 ⇒ 00:45:54.479 Robert Tseng: I was more interested in, like, how he bought Cursor, and that is, like.

410 00:45:54.480 ⇒ 00:45:54.830 Clarence Stone: Jesus.

411 00:45:54.830 ⇒ 00:45:58.190 Robert Tseng: It’s made-up math, which is, like, fun. Yeah.

412 00:45:58.230 ⇒ 00:46:02.200 Clarence Stone: We’re not gonna buy it now, we’ll buy it later, but the deal’s already made today.

413 00:46:02.200 ⇒ 00:46:09.200 Uttam Kumaran: Really, dude, that’s the le- that’s the easier thing. The complex is the charity. I don’t… I still am like, what the fuck?

414 00:46:09.200 ⇒ 00:46:09.700 Clarence Stone: The Robin…

415 00:46:09.700 ⇒ 00:46:16.090 Uttam Kumaran: The cursor… the cursor thing and the Anthropic thing is, like, a purely, like, compute… constraint.

416 00:46:16.650 ⇒ 00:46:18.540 Uttam Kumaran: And they want all the data.

417 00:46:19.490 ⇒ 00:46:21.669 Robert Tseng: No, no, but I’m saying he paid for it with nothing.

418 00:46:22.730 ⇒ 00:46:24.880 Uttam Kumaran: Yeah, because he saved so much.

419 00:46:25.050 ⇒ 00:46:28.830 Uttam Kumaran: Their option is, like, $50 bi l l i o n, d u d e . T h ey l a s t r ai se d a t$ 9.

420 00:46:29.100 ⇒ 00:46:33.250 Clarence Stone: It’s a future purchase at a current value, though.

421 00:46:33.250 ⇒ 00:46:33.890 Robert Tseng: Yeah.

422 00:46:34.900 ⇒ 00:46:43.979 Clarence Stone: You know what I mean? Yeah. It’s interesting. But what’s really interesting about that trial, though, is I was telling you, Tom, this, this is what I was telling him on the phone, is

423 00:46:44.860 ⇒ 00:46:52.620 Clarence Stone: What is on trial is the question of, in this hold code structure, Robert, can we have a 501c?

424 00:46:52.930 ⇒ 00:46:53.540 Robert Tseng: Yeah.

425 00:46:55.960 ⇒ 00:47:01.879 Clarence Stone: Because if you can, right, like, if OpenAI structure is allowed.

426 00:47:02.280 ⇒ 00:47:08.040 Clarence Stone: every single bit of innovation we are doing should just be… Should just go out.

427 00:47:08.040 ⇒ 00:47:08.600 Robert Tseng: Yeah.

428 00:47:10.180 ⇒ 00:47:19.620 Clarence Stone: 501C, right? And here’s an even more interesting structure, now that you’re talking about, like, acquisitions. Imagine that 501C says.

429 00:47:20.610 ⇒ 00:47:25.970 Clarence Stone: We will accept donations for a future conversion of value in this vertical.

430 00:47:26.120 ⇒ 00:47:26.730 Robert Tseng: Yeah.

431 00:47:27.700 ⇒ 00:47:31.660 Clarence Stone: Right? So, we’ll take a million dollars right now, thank you for your donation.

432 00:47:32.640 ⇒ 00:47:33.540 Clarence Stone: Right?

433 00:47:33.960 ⇒ 00:47:37.620 Clarence Stone: So, investor had just got a million dollars washed.

434 00:47:37.930 ⇒ 00:47:38.550 Robert Tseng: Yeah.

435 00:47:39.100 ⇒ 00:47:39.870 Clarence Stone: Right?

436 00:47:40.570 ⇒ 00:47:46.079 Clarence Stone: That, and let’s say we’re looking to flip this vertical. So we say.

437 00:47:46.200 ⇒ 00:47:58.089 Clarence Stone: In the contract, at the moment of sale of this vertical, we will distribute that million dollars back to you and give you a preferred option purchase into this before the sale occurs.

438 00:48:01.360 ⇒ 00:48:04.879 Clarence Stone: Or, and I double-check this in tax regs.

439 00:48:05.570 ⇒ 00:48:16.379 Clarence Stone: you know how, like, individuals can actually, give stocks and bonds as a charitable donation, right? It works the same way around.

440 00:48:17.510 ⇒ 00:48:27.900 Clarence Stone: So the 501C can give a like-kind distribution of stocks or bonds or shares in this vertical.

441 00:48:28.120 ⇒ 00:48:29.209 Clarence Stone: As a gift.

442 00:48:29.650 ⇒ 00:48:30.080 Robert Tseng: Yeah.

443 00:48:30.080 ⇒ 00:48:34.200 Clarence Stone: Well, thank you for your million dollar donation, you now got 10% in vertical.

444 00:48:34.620 ⇒ 00:48:35.240 Robert Tseng: Yeah.

445 00:48:37.340 ⇒ 00:48:40.390 Clarence Stone: Tax-free. Investors love that shit.

446 00:48:40.390 ⇒ 00:48:40.960 Robert Tseng: Yeah.

447 00:48:41.610 ⇒ 00:48:47.730 Clarence Stone: Right, so if, if, if that is why I’m actually really watching What happens in this ruling?

448 00:48:49.680 ⇒ 00:48:53.430 Clarence Stone: I don’t think they can say that that structure is not allowed.

449 00:48:55.720 ⇒ 00:48:59.590 Clarence Stone: Because it brings into question every single PE structure, then.

450 00:49:01.200 ⇒ 00:49:10.249 Clarence Stone: So, what’s going to matter is, at what threshold are they saying you really didn’t mean to run this as a 501?

451 00:49:10.770 ⇒ 00:49:14.290 Clarence Stone: Because that’s the risk layer that you can say, okay, like.

452 00:49:14.450 ⇒ 00:49:19.470 Clarence Stone: His 501 can only take a million dollars of actual capital investment from external investors every year.

453 00:49:19.470 ⇒ 00:49:19.950 Robert Tseng: Yeah.

454 00:49:19.950 ⇒ 00:49:23.349 Clarence Stone: Before, you know, like, we hit the OpenAI clause.

455 00:49:23.350 ⇒ 00:49:24.010 Robert Tseng: Yeah.

456 00:49:24.010 ⇒ 00:49:24.840 Clarence Stone: Right.

457 00:49:25.800 ⇒ 00:49:32.200 Clarence Stone: I think somewhere in there is a product that we can actually sell as a financial instrument.

458 00:49:32.470 ⇒ 00:49:36.930 Clarence Stone: It’s like, let me take a look at your structure. Are you using 501Cs?

459 00:49:37.070 ⇒ 00:49:39.520 Clarence Stone: In the right way to maximize your income.

460 00:49:43.240 ⇒ 00:49:50.019 Clarence Stone: Yeah, it’s gonna be interesting, because, like, at that point, you might as well actually make GTM, like, a 501C as well.

461 00:49:50.870 ⇒ 00:49:53.200 Clarence Stone: It literally does make no money.

462 00:49:55.560 ⇒ 00:50:05.179 Clarence Stone: It’s charitable donations at $200K, the focus of GTM is… we have to make it philanthropic, right? Yeah.

463 00:50:05.480 ⇒ 00:50:13.559 Clarence Stone: to promote the success and use of AI and data services for middle market and small businesses in America so that they succeed.

464 00:50:16.160 ⇒ 00:50:18.230 Clarence Stone: Robert, I believe in that.

465 00:50:19.180 ⇒ 00:50:19.900 Robert Tseng: Yeah.

466 00:50:20.220 ⇒ 00:50:25.220 Clarence Stone: Right? I will donate from City Labs $200K.

467 00:50:25.590 ⇒ 00:50:26.170 Robert Tseng: Yeah.

468 00:50:26.680 ⇒ 00:50:33.740 Clarence Stone: You know, what are they gonna do? I mean, obviously, they’re gonna do marketing, they’re gonna hold events, and they’re gonna hold, like.

469 00:50:33.910 ⇒ 00:50:40.119 Clarence Stone: Yeah. Sessions. And who’s gonna be sitting in there? Everybody that works in one of these portcos.

470 00:50:42.190 ⇒ 00:50:46.070 Clarence Stone: We’re not selling any of our Portco services, we’re just helping.

471 00:50:46.690 ⇒ 00:50:51.919 Clarence Stone: you know, small and medium-sized businesses success, succeed in using AI data services.

472 00:50:52.060 ⇒ 00:50:53.460 Clarence Stone: Because we want them to win.

473 00:50:55.450 ⇒ 00:50:55.990 Robert Tseng: Yeah.

474 00:50:57.250 ⇒ 00:51:01.770 Clarence Stone: this hoping AI thing, like, totally changes structuring to me.

475 00:51:01.880 ⇒ 00:51:08.030 Clarence Stone: It’s fresh. Like, they have to say, yes, we’re just gonna figure out what the risk tolerance is.

476 00:51:08.290 ⇒ 00:51:08.890 Robert Tseng: Yeah.

477 00:51:09.270 ⇒ 00:51:10.330 Robert Tseng: That’s interesting.

478 00:51:10.800 ⇒ 00:51:16.540 Clarence Stone: Yeah, so that’s… that’s the, I guess, like, the Rubik’s Cube layer of… of this. Because, like.

479 00:51:18.330 ⇒ 00:51:20.549 Clarence Stone: Just run the model, like…

480 00:51:20.960 ⇒ 00:51:27.310 Clarence Stone: Pretend that WholeCore is just one company that had all these pieces in it already, and look at tax… taxable income.

481 00:51:28.020 ⇒ 00:51:32.789 Clarence Stone: Right? And then put your layer in, and say, did that change? It shouldn’t.

482 00:51:34.450 ⇒ 00:51:37.670 Clarence Stone: Okay, then why do we spin up all these entities?

483 00:51:43.500 ⇒ 00:51:45.350 Clarence Stone: For that. Yeah.

484 00:51:48.110 ⇒ 00:51:48.720 Robert Tseng: Okay.

485 00:51:49.110 ⇒ 00:51:54.029 Clarence Stone: Something to think about. But yeah, I mean… This, I’m doing already.

486 00:51:54.520 ⇒ 00:51:56.429 Clarence Stone: This was signed off by the bank.

487 00:51:58.570 ⇒ 00:52:01.600 Clarence Stone: Like, the loan structure actually says.

488 00:52:02.720 ⇒ 00:52:10.210 Clarence Stone: Stone Family Office must lease the vicinity at this amount. I didn’t make this number up, this is how the bank wanted it.

489 00:52:10.970 ⇒ 00:52:13.839 Clarence Stone: They willingly let me wash 30K every year.

490 00:52:20.450 ⇒ 00:52:24.630 Clarence Stone: Yeah, and oh, even better, this is a triple net lease.

491 00:52:26.960 ⇒ 00:52:34.159 Clarence Stone: So… Building maintenance, insurance, everything else comes from the income-generating entity.

492 00:52:35.640 ⇒ 00:52:42.699 Clarence Stone: Right, so I’m not actually just doing minus 30, it’s probably closer to 40, if you think about, like, all of those other things.

493 00:52:43.410 ⇒ 00:52:47.439 Clarence Stone: So my taxable, you know, in this simple math, is $60K.

494 00:52:49.540 ⇒ 00:52:50.100 Robert Tseng: Yeah.

495 00:52:52.270 ⇒ 00:52:52.880 Clarence Stone: Yep.

496 00:52:54.030 ⇒ 00:52:54.740 Robert Tseng: Nice.

497 00:52:57.110 ⇒ 00:53:05.900 Clarence Stone: But that’s… I guess it’s an example of those levers. Like, you can exchange employees, you can exchange services, right? Just think about what those moving pieces could be.

498 00:53:06.750 ⇒ 00:53:07.410 Robert Tseng: Okay.

499 00:53:09.470 ⇒ 00:53:25.780 Robert Tseng: Yeah, well, so, I mean, I think some of this will shake out. I mean, I gotta… I’m gonna wrap it up for now, because I gotta… I gotta go, but, yeah, I mean, I think for the purposes of… for you, I mean, I think, sounds like you know how to make this structure work. I… I think it was… it was good to hear, kind of, like, how you use… how you use it.

500 00:53:25.830 ⇒ 00:53:40.939 Robert Tseng: And how you would use it. So, I think, like, obviously we’re still trying to find a way to, like, fit vicinity into this, and right now it’s kind of labeled as labs. So, I mean, I would like to…

501 00:53:41.590 ⇒ 00:53:47.350 Robert Tseng: actually consider, like, what… you know, we can go form this hold code tomorrow, or, like, Monday.

502 00:53:47.350 ⇒ 00:54:03.819 Robert Tseng: The payroll company can come a little later, whatever, but, like, to actually start to spin this off so that, like, you know, two months from now, if EY does sign the MSA with us, it’ll be with the Holdco. And then, also, you know, at the same time, we want to see, like, what would it take to have

503 00:54:03.820 ⇒ 00:54:23.599 Robert Tseng: you know, vicinity be part of… be a part of this. So, at least for now, it’s just, like, some sort of equity structure around, like, the vicinity being part of the Holdco. Obviously, if you want part… if you want in on the Holdco as well, then we should… we should discuss that next time as well, but I’d like to, like, actually drive towards, like, getting…

504 00:54:23.720 ⇒ 00:54:26.839 Robert Tseng: some, like, I don’t know, like…

505 00:54:27.150 ⇒ 00:54:36.430 Robert Tseng: more… more under the hood of, like, what… what this… what this… what this… what this should look like, because I think, from what Utam’s telling me, like, we… we should…

506 00:54:36.490 ⇒ 00:54:54.140 Robert Tseng: we probably should get this figured out within 60 days. I think, like, yeah, 60 to 90 days feels, like, pretty… that’s what I’m told is, to be expected. So, yeah, I could… you know, we’re talking to you, you know, we might… we have… I have… I have a guy who might come in, be able to lead data.

507 00:54:54.140 ⇒ 00:54:59.610 Robert Tseng: And we want to buy his business. He’s, like, a million dollar business, doing about, like.

508 00:54:59.610 ⇒ 00:55:14.750 Robert Tseng: 300, 400K EBITDA, like, it’s a good fit in my buy box, so, like, I think there’s… there’s a few different options where I feel like we… we could… I think we are moving towards wanting to make a couple… a couple of these transactions, in the next…

509 00:55:14.890 ⇒ 00:55:28.490 Robert Tseng: 6 months. Like, I feel like, for where Brainforge is positioned, and, like, I’m still building the story, but, like, you know, the gap… yes, there’s still a gap, and we’re still kind of ahead to some extent, but, like, yeah, I mean, being able to actually

510 00:55:29.500 ⇒ 00:55:34.360 Robert Tseng: get funding for an initiative like the Vicinity, I think would definitely make that

511 00:55:34.830 ⇒ 00:55:49.470 Robert Tseng: make that go faster. And then, like, for us, like, we have leverage now. Like, we are at a place where we are getting offers from other, other, like, basically SMEs still, and…

512 00:55:49.470 ⇒ 00:56:05.910 Robert Tseng: you know, there are plenty of, like, other… I mean, yeah, there are plenty of smaller, kind of, agency consultancies that, like, are… that fit in one of these buckets right now, that I think we can already tell the story that if they joined

513 00:56:06.020 ⇒ 00:56:25.149 Robert Tseng: with us, like, they get the… they get the benefit of, like, a multiple premium from being under Brainforge. So, I… like, those… those are some of the learnings that I’ve had over the past few weeks that, like, I’m really interested in testing on, like, some of the opportunities that we’re pursuing now. It’s like, we’re… yes, the… our…

514 00:56:25.150 ⇒ 00:56:27.900 Robert Tseng: You know, growth motion will continue, but, like.

515 00:56:28.100 ⇒ 00:56:39.949 Robert Tseng: growing inorganically, trying to, like, look at, like, transactions as a way of growing, I feel like we’re at a place now where we can actually do that. So, anyway, like, I think that’s kind of why we’re bringing all this to you now.

516 00:56:39.950 ⇒ 00:56:45.340 Clarence Stone: management product as an app here, I have family offices that would buy it.

517 00:56:46.630 ⇒ 00:56:50.560 Clarence Stone: If you guys need an app that helped manage this type of structure.

518 00:56:50.560 ⇒ 00:56:51.190 Robert Tseng: Hmm.

519 00:56:51.400 ⇒ 00:56:53.359 Clarence Stone: Shit-ton family officer by it.

520 00:56:56.610 ⇒ 00:57:05.530 Clarence Stone: Right, this is a… it’s a challenging thing to keep track of all the double entries. Yeah. To maximize your tax deductions.

521 00:57:07.010 ⇒ 00:57:07.520 Robert Tseng: Yeah.

522 00:57:08.540 ⇒ 00:57:09.950 Uttam Kumaran: Yeah, so part of this, I think.

523 00:57:09.950 ⇒ 00:57:11.579 Clarence Stone: Some of you guys offers, right?

524 00:57:13.530 ⇒ 00:57:14.180 Robert Tseng: Sorry?

525 00:57:14.330 ⇒ 00:57:16.670 Clarence Stone: You know why they’re sending you guys offers, right?

526 00:57:19.100 ⇒ 00:57:20.699 Uttam Kumaran: I mean, it’s a trick question.

527 00:57:20.700 ⇒ 00:57:24.480 Robert Tseng: Yeah, I mean, they want to do the same thing to us, so…

528 00:57:24.480 ⇒ 00:57:25.230 Uttam Kumaran: Yes.

529 00:57:25.230 ⇒ 00:57:26.180 Robert Tseng: Yeah, I think that’s what.

530 00:57:26.180 ⇒ 00:57:27.950 Clarence Stone: I mean, I think about my…

531 00:57:27.950 ⇒ 00:57:28.690 Robert Tseng: be on the other side.

532 00:57:28.690 ⇒ 00:57:38.180 Clarence Stone: Because, like, they, like, in this situation, I said, hey, you guys made 10 mil, well, like, you washed 1 mil with vicinity, but, like, you still have to spend $9 million, or else you’re gonna pay taxes on it.

533 00:57:38.180 ⇒ 00:57:38.970 Uttam Kumaran: Yeah.

534 00:57:39.900 ⇒ 00:57:45.989 Clarence Stone: like, if they could buy Brainforce for $9 million, it zeroes out, and they get into an asset that has really great metrics.

535 00:57:45.990 ⇒ 00:57:46.530 Robert Tseng: Yeah.

536 00:57:46.870 ⇒ 00:57:47.610 Clarence Stone: Right.

537 00:57:47.930 ⇒ 00:57:50.529 Clarence Stone: Like, the goal is you just make no money.

538 00:57:50.920 ⇒ 00:57:51.520 Robert Tseng: Yeah.

539 00:57:51.520 ⇒ 00:57:53.650 Clarence Stone: Make no money, then you have to pay taxes.

540 00:57:55.520 ⇒ 00:57:56.110 Uttam Kumaran: Yeah.

541 00:57:57.460 ⇒ 00:58:13.579 Uttam Kumaran: I mean, part of this also, Clarence, is, like, I feel like we could go… part of the decision also to make is, like, if we want to go get money, I basically think we could go get money pretty fast. I mean, your contacts… I basically texted, like, a couple people today, and…

542 00:58:13.640 ⇒ 00:58:29.170 Uttam Kumaran: like, yeah, the reception was really good, so… and we could do that based on, like, kind of, like, a plan that this is the attack. I also know that you’re sitting on, like, a book that… that… not only the stuff you’re actively executing on, but the stuff that’s coming your way.

543 00:58:29.260 ⇒ 00:58:30.250 Uttam Kumaran: And…

544 00:58:30.530 ⇒ 00:58:37.969 Uttam Kumaran: all that aside, we’re in AI. So, like, we have a lot of leverage on the market to go raise money. I think, like.

545 00:58:38.160 ⇒ 00:58:40.460 Uttam Kumaran: I mean, I’m kind of full forward.

546 00:58:40.470 ⇒ 00:58:51.999 Uttam Kumaran: on this, and I think immediately, like, our kind of order of operations is, like, I mean, we’re gonna… we should get, sort of, like, lawyer, CPA, we want to execute something with you.

547 00:58:52.000 ⇒ 00:59:00.830 Uttam Kumaran: And then we want to basically see if we can, you know, raise a little bit of money. And then the next immediate operation is, like, can we get somebody to lead

548 00:59:00.920 ⇒ 00:59:05.460 Uttam Kumaran: Brainforge, like, Brainforge Vanilla, which is, like, all the data stuff.

549 00:59:05.750 ⇒ 00:59:09.319 Uttam Kumaran: And then at some point, see if we can get someone to lead platform.

550 00:59:10.640 ⇒ 00:59:14.230 Uttam Kumaran: And, like, those are kind of, like, my immediate, like, next steps, in addition, just to serving.

551 00:59:14.230 ⇒ 00:59:16.729 Clarence Stone: as much business as we can. What are you gonna be doing, then?

552 00:59:16.940 ⇒ 00:59:18.720 Uttam Kumaran: No, no, no, this is like…

553 00:59:18.900 ⇒ 00:59:23.969 Uttam Kumaran: Sometime… well, there’s a lot of work to be done, dude.

554 00:59:24.290 ⇒ 00:59:30.949 Uttam Kumaran: There’s a lot of… I mean, we’re still billing for clients, but also, like, for example, we can spin out, like, a content

555 00:59:31.260 ⇒ 00:59:36.959 Uttam Kumaran: company, we can do more of that. Like, I called you, told you about, like, the services and the software.

556 00:59:37.260 ⇒ 00:59:41.539 Uttam Kumaran: Style thing, so there’s a lot of opportunity for us to go do more things.

557 00:59:46.450 ⇒ 00:59:48.950 Clarence Stone: Yep, that makes sense.

558 00:59:53.990 ⇒ 01:00:01.569 Clarence Stone: I think it’s too complex to dive into, but, like, Robert, think about the macro trends of each of these portcos as you’re designing.

559 01:00:02.070 ⇒ 01:00:04.519 Clarence Stone: Are you one or doing financial balancing?

560 01:00:05.160 ⇒ 01:00:13.039 Clarence Stone: Because, like, for example, like, right now, there’s huge data demand. Are you seeing the long tail, like, is that gonna be there?

561 01:00:13.240 ⇒ 01:00:13.790 Robert Tseng: Yeah.

562 01:00:14.180 ⇒ 01:00:21.120 Clarence Stone: Right? Yeah, so we’re gonna have to balance out in different ways as… Yeah.

563 01:00:21.700 ⇒ 01:00:25.069 Clarence Stone: Income changes and opportunities change for each of these forecasts.

564 01:00:27.520 ⇒ 01:00:28.160 Robert Tseng: Yeah.

565 01:00:30.620 ⇒ 01:00:43.210 Robert Tseng: Well, I mean, I was in a room of people who run businesses smaller than us, and they were buying businesses, and they’ve grown a lot since then, and I was like, we are three times the size of this…

566 01:00:43.270 ⇒ 01:00:56.619 Robert Tseng: this guy who started his journey, and he’s been buying, like, 4 or 5 businesses a year, and I mean, it’s just, like, it’s kind of crazy. Like, I mean, it’s a different world. He was more in, like, PR. PR firms don’t really grow that.

567 01:00:56.620 ⇒ 01:01:10.740 Robert Tseng: grow that large. But, like, yeah, who’s doing this in our space? Like, I just don’t really think there are that many people doing it. I’m 5 for 5 with, like, my initial conversations with people. Like, nobody has turned us down, because we’re not a PE firm.

568 01:01:10.740 ⇒ 01:01:28.740 Robert Tseng: we are… we are… we are owner-operators right now, like, people like the story that we have, like, we are, like, really… we have a… we have an end in mind, like, people… I mean, none of these… these are all early conversations, but the story that we’re crafting is, like, yeah, I mean, you… you get… you get to…

569 01:01:28.740 ⇒ 01:01:30.429 Uttam Kumaran: This story is just damn fucking hard.

570 01:01:30.430 ⇒ 01:01:31.559 Robert Tseng: up, and also…

571 01:01:31.560 ⇒ 01:01:44.729 Uttam Kumaran: Yeah, exactly. And it’s like, it’s damn hard, and you’re gonna fail, probably. Yeah. And so, this is an out, and you… this is an out that isn’t the other enemy, you know? Yeah. And

572 01:01:44.900 ⇒ 01:01:45.740 Uttam Kumaran: Yeah.

573 01:01:45.740 ⇒ 01:01:48.970 Robert Tseng: Well, yeah, I mean, I think the pitch with you is different, because, like… Yeah.

574 01:01:48.970 ⇒ 01:01:49.390 Uttam Kumaran: Yes.

575 01:01:49.390 ⇒ 01:01:51.749 Robert Tseng: It’s not like… yeah, you’re not like…

576 01:01:52.460 ⇒ 01:02:05.789 Robert Tseng: Yeah, it’s just… I mean, every person has a different situation, but, like, in… in… yeah, I guess, like, so I think that’s why I want… want to actually better understand, you know, if we are gonna, kind of.

577 01:02:05.940 ⇒ 01:02:07.699 Robert Tseng: Find a way to, kind of.

578 01:02:09.260 ⇒ 01:02:19.190 Robert Tseng: fit you into this, like, what your motivations would be, and, like, if they… if they really, like, align with what… of what… of where we’re headed. Because, yeah, I mean, obviously, you’ve been a great help.

579 01:02:19.190 ⇒ 01:02:24.490 Clarence Stone: You guys tell me what you need from me. I want to participate in Hoko, because…

580 01:02:24.900 ⇒ 01:02:32.760 Clarence Stone: like, I don’t think I ever told either one of you, one of the products that I made at EY was actually deciding on the buy decisions.

581 01:02:33.050 ⇒ 01:02:36.290 Clarence Stone: Like, it is a financial instrument that actually decides.

582 01:02:37.230 ⇒ 01:02:37.860 Clarence Stone: Yeah.

583 01:02:41.170 ⇒ 01:02:41.530 Clarence Stone: And the.

584 01:02:41.530 ⇒ 01:02:45.010 Uttam Kumaran: Sorry, not a laughing matter, but yes, that’s awesome.

585 01:02:45.010 ⇒ 01:03:00.450 Clarence Stone: to back it, right? And, like, how do we structure it deeper than this, for the purchases? And, like, they just don’t want to pay for it. It’s really expensive, but, like, it is worth doing. I know that, like, Top 10 PEs have their own systems doing that.

586 01:03:00.520 ⇒ 01:03:01.400 Robert Tseng: Yeah.

587 01:03:01.400 ⇒ 01:03:08.000 Clarence Stone: So if you’re able to, like, if you want to shift that strategy, I’m definitely down for that game, I’m familiar with it.

588 01:03:08.500 ⇒ 01:03:20.389 Clarence Stone: And, we can play it at a much smaller scale with higher efficiencies that were not possible until, like, we can supercharge these companies with AI platform and data set.

589 01:03:20.390 ⇒ 01:03:21.419 Robert Tseng: You know what I mean? Yeah.

590 01:03:23.460 ⇒ 01:03:24.410 Clarence Stone: Yeah.

591 01:03:24.410 ⇒ 01:03:37.360 Robert Tseng: Like, for me, as, like, kind of somebody who’s been doing a lot of, like, kind of the selling, and just the Brainforge entity, I view it as just that, like, when I’m going, my target is, like, just shifting. I’m, like, going after…

592 01:03:37.620 ⇒ 01:03:38.490 Robert Tseng: like…

593 01:03:38.640 ⇒ 01:03:51.360 Robert Tseng: Yeah, I mean, it’s… it’s gonna be quite… it’s like the… I mean, I’m sure it’ll… I’ll need reps to… to get it under my belt, but, like, it’s… it’s… it’s quite similar to just, like, selling for a single account, but instead.

594 01:03:51.470 ⇒ 01:04:10.770 Robert Tseng: trying to find, like, we’re just getting book… like, books… books of business at a time, and that’s immediately, you know, at least from what I’m… what I’m aiming at, at least 200 to 500K of straight EBITDA to our P&L with every transaction, rather than having to go and sell, like.

595 01:04:11.000 ⇒ 01:04:30.230 Robert Tseng: plan 5 clients at a time to get there. So, that’s why I think this is attractive to me right now. Because I know that a lot of consolidation is happening. I agree that data consultancies overall are kind of fading away, and… but for now, like, there… there’s… and there’s plenty, there’s plenty of them that we can try to go and get.

596 01:04:30.930 ⇒ 01:04:34.999 Clarence Stone: Okay, I’m gonna leave these other tools in the toolbox for you.

597 01:04:35.000 ⇒ 01:04:35.610 Robert Tseng: Sure.

598 01:04:36.190 ⇒ 01:04:43.299 Clarence Stone: Wolco can pull resources. It could be either, you know, people, or buildings, or…

599 01:04:43.600 ⇒ 01:04:46.529 Clarence Stone: Vehicles, whatever you want to pool.

600 01:04:46.860 ⇒ 01:04:52.629 Clarence Stone: And it could just be a pool that’s managed for these two companies, because they, I don’t know, maybe…

601 01:04:52.920 ⇒ 01:04:54.669 Clarence Stone: PoolCo has a data center.

602 01:04:55.410 ⇒ 01:04:56.050 Robert Tseng: Yeah.

603 01:04:56.050 ⇒ 01:05:03.690 Clarence Stone: Right. So there’s a lot more instruments of feeder, in parallels.

604 01:05:10.410 ⇒ 01:05:22.420 Clarence Stone: These will be things that… I think pool cone feeder, you might have a use for it immediately. Parallels are interesting, we’ll talk about that in the future, but there’s things that you can do to

605 01:05:23.320 ⇒ 01:05:26.940 Clarence Stone: Make sharing limited to certain companies.

606 01:05:27.730 ⇒ 01:05:28.660 Clarence Stone: Right?

607 01:05:28.930 ⇒ 01:05:34.430 Clarence Stone: And, you can use just a single company to just continue to feed another.

608 01:05:34.830 ⇒ 01:05:35.390 Robert Tseng: Yeah.

609 01:05:37.950 ⇒ 01:05:38.580 Clarence Stone: Yeah.

610 01:05:38.890 ⇒ 01:05:41.800 Clarence Stone: It’s fun. I really like structuring. I don’t know why.

611 01:05:41.800 ⇒ 01:05:44.329 Robert Tseng: Yeah, I mean, you should be doing the… or maybe, yeah, it sounds like…

612 01:05:44.660 ⇒ 01:05:58.009 Robert Tseng: There is a… I mean, sounds like you want a piece of the Holdco. I mean, I think there’s a clear role, you clearly could do the deal structuring. I think I’m interested in going and finding who these folks are, and like, I think I’m maybe front, like, kind of front…

613 01:05:58.400 ⇒ 01:06:05.299 Robert Tseng: front line, I think, is kind of what my role has been framed for as well as well. And then, yeah, like, Utah is kind of…

614 01:06:05.300 ⇒ 01:06:07.829 Uttam Kumaran: But for me, it’s just to get us in the door on whatever.

615 01:06:07.830 ⇒ 01:06:08.170 Robert Tseng: Yeah.

616 01:06:08.170 ⇒ 01:06:11.939 Uttam Kumaran: I will get us… For me, it’s the innovation, and it’s the.

617 01:06:11.940 ⇒ 01:06:18.500 Robert Tseng: Yeah, I think Utah kind of leads innovation, I feel like it’s kind of… you know, they think that’s how the roles are kind of…

618 01:06:18.500 ⇒ 01:06:29.760 Uttam Kumaran: Like, I’m gonna go call… I basically said, Claire, I’m gonna call, like, kind of the richest people I’ve ever met, and make the first call, and then pass them. Like, get them interested and pass them. And, like, that’s what…

619 01:06:29.940 ⇒ 01:06:32.340 Uttam Kumaran: like, I’m gonna be able to do.

620 01:06:34.840 ⇒ 01:06:35.270 Robert Tseng: Yeah.

621 01:06:35.270 ⇒ 01:06:38.650 Uttam Kumaran: And I think what we’re finding, and I mentioned to Clarence, is, like.

622 01:06:38.900 ⇒ 01:06:43.240 Uttam Kumaran: I have, like, a broad, like, ribbon on this conversation is, like.

623 01:06:43.850 ⇒ 01:06:59.339 Uttam Kumaran: I just feel like opportunity’s coming at us, like, left, right, and center, and I just want to be in a position to take advantage and exploit as much of it as possible, whether it’s, like, investment, whether it’s buying the company, whether it’s, like, executing on work, whether it’s…

624 01:06:59.520 ⇒ 01:07:04.089 Uttam Kumaran: partnering, like, I don’t know, I feel like Clarence, even my, like, short…

625 01:07:04.520 ⇒ 01:07:08.149 Uttam Kumaran: like, week at UI so far, like, it’s incredible.

626 01:07:08.270 ⇒ 01:07:10.830 Uttam Kumaran: And everybody’s self-dealing, also.

627 01:07:11.330 ⇒ 01:07:15.000 Clarence Stone: Which is… Yeah. In the worst kind of ways.

628 01:07:15.000 ⇒ 01:07:17.070 Uttam Kumaran: Yeah, I know, which I’ve never really…

629 01:07:17.370 ⇒ 01:07:19.920 Uttam Kumaran: you know, I didn’t know it was, like, this extreme.

630 01:07:20.340 ⇒ 01:07:23.429 Uttam Kumaran: But, like, everybody’s spending for themselves.

631 01:07:23.590 ⇒ 01:07:40.299 Uttam Kumaran: which… and we’re, like, some of the only people that are, like, doing… able to put the whole story together, from data to, like, from deep roots in data, to all the AI stuff, to, like, having a… being a… not, like, some random startup, like, actually being done work.

632 01:07:40.580 ⇒ 01:07:44.270 Uttam Kumaran: And then just being well-connected, so, like, yeah, I think this is great.

633 01:07:44.480 ⇒ 01:07:46.430 Clarence Stone: Claire has a port code for you guys.

634 01:07:47.880 ⇒ 01:07:50.780 Uttam Kumaran: Yeah, that’s why it’s… Yeah.

635 01:07:51.410 ⇒ 01:07:55.090 Uttam Kumaran: So we just need to be in a position to capitalize on as much of it as we can, so…

636 01:07:55.690 ⇒ 01:07:56.280 Uttam Kumaran: Brilliant.

637 01:07:56.280 ⇒ 01:08:03.439 Clarence Stone: Yeah. This management company’s gonna have a lot of paperwork to do. That’s all I’m gonna say.

638 01:08:03.440 ⇒ 01:08:06.290 Uttam Kumaran: Yeah, so that’s why we need a CPA, we need a good lawyer.

639 01:08:06.470 ⇒ 01:08:08.270 Clarence Stone: Mikey Johnson.

640 01:08:08.270 ⇒ 01:08:13.819 Uttam Kumaran: I know, so, like, I think we have someone in LA, I don’t know, maybe…

641 01:08:13.940 ⇒ 01:08:15.290 Uttam Kumaran: Robert, for you to come.

642 01:08:15.890 ⇒ 01:08:17.519 Uttam Kumaran: To basically go meet at some point.

643 01:08:17.529 ⇒ 01:08:18.109 Robert Tseng: Sure.

644 01:08:18.479 ⇒ 01:08:19.109 Uttam Kumaran: Yeah.

645 01:08:19.639 ⇒ 01:08:22.909 Uttam Kumaran: I already… I met him, like, yeah, I feel like…

646 01:08:23.329 ⇒ 01:08:26.239 Uttam Kumaran: But this kind of gives us, I think, a good path forward, so…

647 01:08:28.290 ⇒ 01:08:33.239 Robert Tseng: Okay. Thanks, guys. You gotta let me go. I gotta… I gotta… I gotta study for my final.

648 01:08:34.729 ⇒ 01:08:35.249 Clarence Stone: Two more days.

649 01:08:35.250 ⇒ 01:08:38.910 Robert Tseng: then I will have more of my attention here.

650 01:08:38.910 ⇒ 01:08:40.239 Clarence Stone: I’m head down, you got this, man.

651 01:08:40.240 ⇒ 01:08:40.800 Robert Tseng: I am.

652 01:08:41.390 ⇒ 01:08:42.590 Robert Tseng: Okay, cool.

653 01:08:42.590 ⇒ 01:08:44.269 Uttam Kumaran: Okay. Thanks, Cliff, I appreciate it.

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