259: Should You Invest in Wine?

Catch the full episode: https://www.wealthformula.com/podcast/259-should-you-invest-in-wine

Buck: Welcome back to the show everyone. Today my guest and Wealth Formula Podcast is Anthony Zhang. Anthony just turned 26 but has already successfully built a couple of companies secured funding from Mark Cuban and Mark Burnett and also received a Theil fellowship grant so all really good stuff there. Not only that but you know he’s worked hard to overcome a devastating accident that left him paralyzed from his neck down. The Los Angeles Business Journal recently described him as the epitome of a dogged entrepreneur and Liz Clayman described his story as one of the most inspiring she’d ever heard now Anthony is the founder and CEO of his third company called Vinovest which is a platform that has been described as the Robin Hood of wine investing and he’s making it easier for people to access this wealth-building asset class. Anthony welcome to Wealth Formula Podcast.

Anthony: Thank you so much for having me on. I’m excited to chat with you.

Buck: Yeah great so you know you’ve done a lot you’re only 26, tell us a little bit about your background, I mean how did you get to where you are today.

Anthony: Yeah so I was born in the States but I actually spent most of my life abroad so but spent most of my time between Beijing Hong Kong sometime in Europe as well and I came here for high school and college and really I think that entrepreneurial spirit was in me pretty much my whole life because I got trouble with teachers a lot, didn’t really do well with authority and I just like doing things my own way. so I think it was something that I’d always wanted to do and when I went to college at USC I applied there specifically for their entrepreneurial program with the goal of being able to start a company right after college.

Buck: Right. So then what was the first company?

Anthony: So my first real company was a food delivery app called envoy now and I started that freshman year first semester at USC like a lot of college students I was just hungry and lazy and wanted to have a better solution for food delivery on campus that was the one where we had 100 student network which meant that students could really get into the buildings where other students lived really saw that last mile that last few hundred feet that made a deliberately that much more convenient and you know we were able to pitch Mark Cuban and Mark Burnett when they came to our campus as guest speakers and that was really the night that completely changed the trajectory of the company and also completely changed my belief in terms of if I needed to even complete college or not to be able to have a good business.

Buck: Sure and then you sold that I presume or what happened?

Anthony: Yeah so we worked on the business for almost four years grew it out to 22 campuses nationwide we had a couple hundred thousand students using the app and eventually got acquired by a company called Joy Run I mean last year Joy Run was acquired by Walmart.

Buck: Cool and then there’s a second company after that right?

Anthony: Yeah so the second one really started more as a side project it was called Know Your VC and it was founded in late I’d say summer of 2017. So back then you know it was just coming out with stuff with Harvey Weinstein the whole me too movement and the same thing was happening in the startup and venture capital industry a lot of really really brave entrepreneurs from maybe minority backgrounds or female entrepreneurs were coming out with these terrible terrible experiences with VCs that were completely abusing their power you know either racially discriminating or sexually harassing these founders and it just made me sick because you know as an Asian guy I didn’t really have any of those problems. I really felt lucky and privileged to have gone through the fundraising process for the investors not having too many other troubles like that pretty straightforward but these other founders a lot of them which I knew a lot of the investors I knew were turned out to be bad actors and I thought there should be a little more accountability in space so Know your VC is essentially like a yelp or a glass

Buck: So what happened with this if you don’t mind telling us a little bit about the accident that seems like it sort of made a big difference in your life and some paralysis when did that happen?

Anthony: So this was I’d say about two or three years into building envoy now so this was back in 2016 about five years ago so just kind of celebrated that five-year milestone of being alive from that injury but essentially I broke my neck diving into a pool which instantly you know severed my spinal cord at the C5 vertebrae. So I’m a quadriplegic. I cannot move anything really below my shoulders. I’m lucky to have regained a little bit of motion back in my arms but yeah that’s a permanent and devastating injury that has a lot more implications than just the paralysis.

Buck: Tell me about how that’s affected your entrepreneurial spirit.

Anthony: I think the main thing that that injury has taught me is that you really need to have perspective right like I was really felt like I was flying high you know nothing could really touch me type of mentality and suddenly not being able to move you know being on a ventilator not even able to breathe or eat or drink or do anything really really kind of brought me back to ground zero. I really had to decide what I wanted to do with my life and I think it was pretty clear to me that if I could go through this rehab and stay alive and be able to persevere through a lot of really really rigorous physical therapy and occupational therapy really gives you perspective on like what real problems are and wanting to dedicate the rest of my life to be able to solve real problems for other people.

Buck: Right absolutely so when and how did wine come up into your life?

Anthony: Yeah so I’d always been interested in wine but really like most people it was pretty intimidating to me. I didn’t really know much but I think it was back in 2016 I was just reading an article about alternative assets and how you know they’re really rising and a lot of platforms were making it more accessible for people to access alternative assets that were traditionally only for ultra-wealthy people and one of them was investing in wine and I learned that the returns were better than the S&P and in terms of looking into the fundamentals it just really really made sense right a lot of wines you know they age they get better with age they get more expensive with age then you also have just a pure supply and demand dynamic where people are consuming bottles as time goes on so not only is it an asset that appreciates in value it also has less and less supply as the wine gets older which makes it more rare and you know also then props up the demand. So it was a very simple dynamic that I could understand and maybe want to get behind it.

Buck: So I’m curious about it were you like a wine guy yourself or was this more just looking at you know as we discussed every entrepreneur I talked to and myself included we all kind of see a lot of these businesses as really just solutions to problems or inefficiencies and systems was there an interest in wine I’m curious were you really into it or was this just purely you know a solution or an inefficiency in the system.

Anthony: I have always been really really into wine so growing up in Beijing in Hong Kong it was really during that era where like Bordeaux and burgundy wine were really sweeping through you know that the country in the continent right like I’ve always kind of been familiar with the fact that like all right you know to go to someone’s house really how nice of a bottle of wine you bring kind of determines how much you like them or want to oppress them. So I kind of saw that like value culturally that wine always had and this kind of almost brought everything full circle for me when I was looking into just a place to put my money but I was like hey if I can learn more about wine and make money it’s kind of a home run for me.

Buck: Yeah for sure so tell us why fine wine now why is it a compelling investment obviously you talked about beating the S&P 500 but you know in the alternative space we can say that about a lot of stuff right? Why wine? Why now?

Anthony: I think right now we’re at this really interesting point where investors are just becoming a lot more active in terms of what they wanted their portfolio right there’s the 60 40 stocks and bonds is gone right everyone is like trying out new things allocating more and more into alternative assets and a lot of them are very very speculative right you’ve got crypto you’ve got these kind of short-term loans you’ve got maybe other things that are very very speculative in nature but wine has been something that is not a new asset class. It’s been around for thousands of years longer than gold probably right yeah right it’s like even during like the roman times right the soldiers they would fight they win and whether they get paid it they get paid in wine so it’s something that I think needs to be unlocked especially with the shift of so many retail investors wanting to be more active with their portfolios and here we have this asset class that has only been kind of available to ultra-wealthy and we just want to bring it to the masses.

Buck: So you know I’m not a wine guy. I like wine. I have no idea you know I’m like oh that tastes good, that’s good, that’s bad, that’s about all I know and traditionally wine has been the domain of the wealthy. So you know obviously what this is an attempt in some ways to democratize that. I mean if you’re investing in wine you probably got to know a little bit about it how do you identify an investment-grade wine and you know what kind of resources are out there to help people learn more?

Anthony: Yeah that’s a great question because you know when I came into the space I knew what I’d like to drink but that’s not necessarily the same thing as like what you should invest in. So our team, we take a very very quantitative approach. We’re looking at price history we’re looking at factors that impact price so supply and demand we also look at critic scores for newer wines we look at harvest reports as well to be able to predict and determine future price appreciation and we use those algorithms but on the customer-facing side you don’t need to know all that you don’t need to know why we’re why we’re buying wine from 2018 versus 2019 all we need to know from you and I think any sort of investor looking into a new asset class is a how much you want to invest right say a thousand dollars five thousand dollars be how long you’re planning on holding it for so what your time horizon is and then the final is what’s your risk appetite right are you really wanting to go aggressive with this investment because your other investments are you know maybe relatively stable you feel good about them or are you really using this as a hedge and you want to be a little more conservative to counter the volatility of whatever else is in your portfolio. So I think those are three things that any investor should consider before going into any market and for us we take those inputs our algorithm then is able to output a recommended portfolio for the customers and boom you know they’re in the market.

Buck: So you know I like to kind of give people an idea exactly what it looks like. So is it vinovest.com?

Anthony: Okay so vinovest.co

Buck: So say I’m interested in this I go to that site. What am I going to see? Is it like a platform or is this just where you were talking about where you start inputting what you’re interested in.

Anthony: Yeah so once you sign up we take you through a quick onboarding quiz right then we ask those three questions right say you’re like all right I want to invest ten thousand dollars I want to hold it for say eight years and I want to be pretty aggressive with it so once we get those inputs put in ten thousand dollars and what our algorithm will do is start identifying wines in the market that match that criteria we’re then in the background actually going and buying those wines putting them into our warehouses and then we are insuring those. So we’re the ones that take care of the wine for you you don’t need a wine cellar you don’t need to worry about shipping and then you get this really easy online dashboard where you can view what bottles of wine they are why we pick them for you you know their price charts over time and you know really learn about your investments after that but essentially what we’ve got for you is like a virtual wine cellar that’s completely secure you know we want to be able to replicate the ease of experience as most people are expecting today with stocks so when you go you suggest some onboarding questions do you have to be an accredited investor to participate you don’t so the cool thing is that you’re just buying wine you’re not buying a security you’re not buying it into a fund anybody who’s 21 years old in the states can be a universe investor.

Buck: Got it okay so you know some suggested stuff pops up on the screen and you can decide I’ll buy this so I don’t want to buy this or do you just kind of just say okay I’m gonna throw 10 grand at it and then you guys go buy it or yeah it’s a ladder so like you’re like hey I want to throw 10 grand at it and then boom we just buy it for you got it okay so now the wine that you bought you guys buy it and you put it in the warehouse. Where’s the warehouse and tell us about the warehouse because this is no simple task.

Anthony: Yeah right one of the biggest risks of investing in mine is proper storage right so we’ve got warehouses all around the world most of them are in Europe since the world’s best wines are still in France and Italy and stuff like that and these are really top-of-the-line bonded professional wine storage facilities so perfect climate away from sunlight away from vibration perfect temperature and we’ve also got really robust insurance in case you know someone drops it there’s something crazy that happens at the warehouse and like for example in our UK our storage in the UK the British royal family actually uses the same company that we use so it’s really really the best that you can get.

Buck: Got it okay so now you’ve got this stuff sitting in and presumably you know how do you track your investments?

Anthony: So we have an easy dashboard that you can log into anytime and our prices are live so you can see at any given moment what the value of your wine is today and what it was three months ago six months ago and stuff like that now obviously not as volatile as the stock market so you know we won’t have people day trading wine just yet but it is something that people check in you know every month or every quarter to see how their investment is doing.

Buck: Okay so you had your 10 grand in it a couple years later it looks like it’s 20 grand you’re like you know what I think I’m I think I’m done I want to sell this now do you just push the sell button or how do you do that because you got to find a buyer too right?

Anthony: Yeah so we’re essentially a marketplace right we’re buying from people every day we’re selling to people every day so we’re able to then just dynamically through our platform match you up with the highest buyer boom you know we’ll handle the logistics after the sale that’s really something that the buyer really takes care of but for you you know you got your exit so you want to sell half your portfolio or your whole portfolio and you’re you’re good to go so we want to really make this as simple as possible.

Buck: The next question I have for you out of curiosity because you know I’ve had some platforms like similar ones but for things like luxury cars you know or race cars or art at one point or another can you actually take delivery of what you bought?

Anthony: Absolutely so I think that’s the coolest thing right like wine is actually a tangible asset with utility right someone at the end of days got to drink it and if you decide say in that same scenario five years later you’re like all right I have 20 grand worth of wine maybe I’ll drink 10 grand a bit we’ll ship it to you that’s literally taking it’s literally taking it off the table

Buck: right I mean exactly that is literally drinking your profits.Yeah it’s called depreciation and unfortunately I don’t think you’d be able to write that off.

Anthony: Yeah that would be hilarious right? Drink a bottle. I’m sure people have tried. It’s depreciating.

Buck: Right cool. Tell me how is it going right now with this business? You just launched it?

Anthony: It’s been out for a while yes, we’ve been out for almost two years now and you know really I think the pandemic has absolutely accelerated our growth to pretty crazy levels you know we’re getting thousands of investors coming in every month and wanting to not only just test it out but put in more and more because they’re seeing great returns they realize that the stock market is getting more and more volatile when they’re seeing this as a safe place to be able to park some funds for the long run and that’s really what wine is right it’s not gonna be the most volatile asset it’s stable you just let it age let other people consume it let the supply go down and your assets gonna go up.

Buck: How does Vinovest actually make money? Are you just basically a retailer at this point?

Anthony: So we make money through our management fees so in order to cover our storage our insurance and just you know the algorithm being able to make decisions for you sure it’s actually just like a traditional fee.

Buck: Got it very good okay. What am I missing? There’s got to be a lot to this business that I have no clue because I don’t know much about wine. I know more about bourbon. You should do this with bourbon.

Anthony: I’d be in but bourbon because we have a Whiskey Vest because a lot of our wine investors you know they also like to drink or scotch.

Buck: Although there’s not much of an aging thing with the whiskey stuff though I mean it’s in a barrel over a period of time and once it’s there boom right. Is there more than that?

Anthony: There is a little more than that. So like with you’re right with the cask or the barrels right like the age of the barrel and how long it’s been is a huge difference right between an eighteen year or twenty yeah yeah huge price difference but then a lot of these bottles you know they’re coming coming from distilleries that are discontinued or you know special edition there’s still that same like supply and demand rarity factor where yeah you’re right in that the whiskey doesn’t really change much after it’s bottled but people are still drinking it right and people still want it and if you can’t make it anymore it becomes that much more special. So whiskey investing is definitely something we are going to get into and we’ve started piloting with a few customers that you know they already own like a big cask of whiskey.

Buck: So I’m curious one other thing I guess when you talk about the buyers right if somebody’s trying to exit out of this type of platform actually might be a good place for people who are interested in buying some rare wines that sort of curated already that’s rare whiskey and that kind of thing too. Do you have people who just go there just to buy stuff to drink it?

Anthony: So I think on the buy side it’s definitely people looking for consumption right it could be an importer looking to bring it to a new country and just sell it to retailers it could be a retailer it could be another asset manager that thinks the wine still has more life to go to appreciate or it could just be you know really great collector. They’re like hey this wine is really appreciated it’s really nearing its peak drinking window and I want to drink it. So a lot of people are buying for different reasons. At Vinovest we welcome them all as long as we’re matching them up with the highest price, we’re doing the right thing by our customers.

Buck: Sounds good man. So again it’s vinovest.co and is there other things that we can go to to learn more?

Anthony: So we’ve got a pretty great resource center on our website and you know anyone that listens to this podcast they just mention you we’d be happy to give them their first month for you to try it out so zero management fees on their first month.

Buck: Fantastic. Anthony Zhang everybody. Anthony, thanks for being on the program and we would love to have you back in the future to see how this thing’s turning out for you.

Anthony: Absolutely thanks a lot and cheers.

Buck: We’ll be right back.