October 19, 2023

Insights from Entrepreneurial Visionary, Daniel Idzkowski

In a recent event hosted by SVRN, Daniel Idzkowski, CEO of Sidepocket Financial and Partner at LvlUp Ventures, took us on a compelling voyage through his entrepreneurial experience.

Insights from Entrepreneurial Visionary, Daniel Idzkowski

In the ever-evolving landscape of entrepreneurship, every journey is unique. We often find inspiration in the stories of those who've walked a different path and achieved their dreams. 

In a recent event hosted by SVRN, Daniel Idzkowski, CEO of Sidepocket Financial and Partner at LvlUp Ventures, took us on a compelling voyage through his entrepreneurial experience. 

He shed light on the importance of innovation, the benefits of investment, the changing dynamics of financial management, and the significance of community events in Los Angeles.

The Catalyst for Entrepreneurship

Like many great tales of entrepreneurial success, Daniel's journey began with humble beginnings. During his youth, he started with small entrepreneurial ventures in school. His initial motivation was quite relatable — a desire for the "nice things" he saw his friends enjoying.

As he grew older, he began helping his parents at their small 8x8-foot flower shop. This experience offered him insights into community and the importance of treating people well. This early lesson in community building would stay with him throughout his entrepreneurial career, and this early exposure to business ignited a spark within him. 

It's worth noting that Daniel’s parents were immigrants, and he rightly pointed out that immigrants have often played a significant role in the world of entrepreneurship, creating jobs and adding immense value to society. To him, these immigrants are the superheroes he admires, the Supermans and Wonderwomans of the world.

The Entrepreneurial Mindset

Entrepreneurship is more than just a career; it's a personality, an identity. At Sovereign, we call people who embody this "Sovereign Individuals." They are people that cultivate a mindset around a commitment to autonomy and purpose.

Daniel exemplifies this definition perfectly.  As he shared his life experiences, it became evident that entrepreneurship is a way of life for him and that he desires to be a human being who is free from the conventional mold. 

Bicycle Locks: From Setback to Breakthrough 

Daniel's first truly successful entrepreneurial venture began with an unexpected product: a bicycle lock that released noxious materials. Although he had initially invested in expensive, high-quality locks, he faced numerous thefts. 

This setback led to a breakthrough — the invention of the SKUNKLOCK. It was not a straightforward journey, as he had to overcome numerous regulatory hurdles and public relations challenges. He managed to navigate these by incorporating warnings and disclaimers on the product, ensuring safety and regulatory compliance.

In one of the most memorable quotes of the evening, he emphasized the opportunity in regulation: “The best opportunities for startups are those that develop in gray areas where there are vague legal frameworks. Because if you can figure it out, you’re the only one solving that problem.” 

Transitioning into the Broader World of Finance

A remarkable transition unfolded as Daniel moved from consumer products to the complex world of finance. 

When he founded Sidepocket Financial, Daniel set his sights on addressing the looming retirement crisis, a $7.1 billion challenge in which social security is running out. 

His deep understanding of the financial industry revealed a surprising fact — the lack of foundational knowledge. Most people are unaware that there are three distinct categories of financial professionals: registered investment advisors, financial planners, and financial educators. Of these, only registered investment advisors can manage assets. Sidepocket Financial bridges this gap, enabling thousands of financial planners and educators to help people manage their assets.

One of the catalysts for Sidepocket is misconceptions about value investing. The modern investor doesn’t want to see losses on investments. But 99% of money managers use modern portfolio theory, which was created over 70 years ago. We’re moving into a different economic regime, which includes high inflation and interest rates. So it’s naive for modern investors to think that this strategy still works today. 

We find ourselves in a new economic environment that could present a rude awakening in 30 years for people who follow the status quo. To thrive in this evolving landscape, we must recognize that adhering to the status quo may lead to future setbacks. In the world of finance, standing out from the crowd and adopting alternative strategies is often the key to long-term success.

The Journey into Venture Capital and the Traits of Successful Founders

Beyond his entrepreneurial initiatives, Daniel stepped into the world of venture capital. His criteria for evaluating startups are built on adaptability, experience, innovation, and longevity. 

He shared his favorite question when assessing potential founders: understanding their end goals. The best case scenario is building a private company that becomes ultra successful. Second best case is an IPO. Third best case, which is the most common, is an exit. 

A successful exit is not necessarily a green flag for him when looking at founders because an exit is not always the most ideal outcome for shareholders. For Daniel, It's not a successful exit that sets a founder apart, but rather their passion and expertise.

Daniel proceeded to point out the red flags he often encounters in his investment journey. 

The first red flag: Founders who lack passion and expertise in their chosen field. Daniel believes that the best startups are not necessarily the ones that win, but the ones that outlast, and it always takes more than 2-3 years to start a successful business. As an investor, you need to believe this founder is in it for the long haul.

The second red flag: The most expensive characteristic is ego, which can hinder a founder's willingness to listen to those with more experience. Coachability is a critical trait in successful founders, especially for an investor’s ability to provide value-add to the company.

Advice to Venture Capitalists 

In the constantly evolving entrepreneurial landscape, staying ahead of the curve is vital. 

Daniel highlighted the need to find the top 1% of founders and the importance of starting a company, even if it means failure:

“To be a VC, you have to start a company. Because even if you fail, you’ll be more interesting to the top 1% of founders than somebody who has never done it before.”

He also emphasized the significance of maintaining cash flow for investments:

“If you can’t write 10-12 checks per year, you probably won’t survive as an angel unless you’re massively lucky. Figure out how to make sure you have enough cash flow to write this many checks per year.”

Finally, he mentioned the importance of risk management. He recommended that venture investors use a specific strategy, such as exiting at series A or B and take some money off the table with a third of their investments. 


Key Takeaways

Daniel's insightful journey left us with several key takeaways. 

First, talk to a professional who can help you get your finances in order. Social security is going to run out, so we’re going to need better investment strategies moving forward. 

Second, the dynamism of Silicon Valley and Los Angeles offers numerous opportunities. AI, self-driving cars, and scooters are all examples of technological advancement and proliferation. According to Daniel, if you’re not participating in some way in the innovation here, you’re missing out on the party. 

Acquiring exposure to quality deal flow can be a challenge for angel investors. However, it begins with building a community of like-minded individuals who share common goals. Fortunately, numerous angel syndicates are available to facilitate this endeavor. Additionally, SVRN offers a valuable platform to initiate and nurture initial connections.

Lastly, the message was clear: don't shy away from starting a company, and remember that you don't have to be a CEO to be a founder; there are countless roles in which you can make a significant impact.

Check out the SVRN community to advance your entrepreneurial journey and become the Sovereign Individual.