AI + Energy: Will Smart Money Investors Move Here Next?

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Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller, and today I have my dear friend Daniel Nikic. 

Daniel is a global investment research expert and founder of Coherent Research. He's analyzed more than 15,000 companies in sectors like AI, software and data, helping venture capitalists and high net worth individuals and entrepreneurs to make informed investment decisions. 

So what does this mean? Well, it just means that Daniel is a leading expert who is highly sought after to help venture firms to stay ahead of the economy, and he's about to share his opinions to help you and I do the same.

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[THE GUEST]: Daniel Nikic is a global investment research expert and founder of Coherent Research.

[THE HOST]: Ryan is an Angel investor in technology and energy.

Transcript

Ryan Miller  

My name is Ryan Miller, and for the past 15 years, I've helped hundreds of people to raise millions of dollars for their funds and for their startups. If you're serious about raising money, launching your business or taking your life to the next level, this show will give you the answers so that you too can enjoy your pursuit of Making Billions. Let's get into it. 

Ryan Miller  

Picture this a global investment guru who's dissected over 15,000 companies, spills the beans on where the money is headed. From AI's seismic shift in energy and healthcare to India's manufacturing boom and Minas region untapped potential. Daniel unpacks trends that could 10x your returns. Want to know the red flags, like aggressive accounting that could tank your next deal, this conversation will be your edge. All this and more coming right now. Here we go. 

Ryan Miller  

Hey, welcome to another episode of Making Billions, I'm your host, Ryan Miller, and today I have my dear friend Daniel. Nikic. Daniel is a global investment research expert and founder of Coherent Research. He's analyzed more than 15,000 companies in sectors like AI, software and data, helping venture capitalists and high net worth individuals and entrepreneurs to make informed investment decisions. So what does this mean? Well, it just means that Daniel is a leading expert who is highly sought after to help venture firms to stay ahead of the economy, and he's about to share his opinions to help you and I do the same. So Daniel, welcome to the show man.

Daniel Nikic  

Well, thanks for having me, Ryan, big fan of Making Billions, and also a fellow Canadian eh?

Ryan Miller  

Yeah, the chosen frozen, or whatever we might be, but it's good to have you, brother, and I'm really excited to have you and your analysis on the market. So let's jump right into it man, you pay attention to the market, you've analyzed 1000s of companies, you're really getting a good feel for this. I'm curious, just from your opinion, what are you seeing in the market right now? Where are some nice investment opportunities that are popping up? 

Daniel Nikic  

Okay, well, I would first see that investment market has changed a lot since 2021. That's, I think tragedy really hit the market hard in terms of the industry as a whole, with venture capital and also startups and I think we're going back to a lot of necessities. So I think energy is always going to be important when you look at investments, especially with AI because you need data centers, and of course, who's going to back up these AI companies, because it takes a lot of energy. I always will say necessities such as water, I think water is always going to be a part of if you look at countries such as Australia, they have a big need for water. Or if you look at the Middle East and even Africa, we look at the populations, there's a huge market there. And as mentioned, AI, of course, that's the big word today. And I would say healthcare, as we know, healthcare, is always going to need to be innovative. We like it or not, that's just how it is and we've seen how much it's changed with technology. And I think in all sectors in related to healthcare, could be patient care, radiology, med tech, it could be hardware, everything. I think that's going to be ever growing market and I think that's definitely a market that if someone has a good company in that can succeed. It can be amazing. And I would say the world's changing quite a bit from, let's just say 30 years ago in terms of economics, because 30 years ago, let's be quite open America and North and Canada. And I would say Western Europe was pretty much the center of growth and economics. And I would add Japan, let's not forget Japan. But lately, we've seen a change in the past 30 years, with China, India, of course, I would also say even the Middle East, especially, what's going on with Saudi Arabia as Saudi vision 2030.

Ryan Miller   

You mentioned that you're looking at AI. There's been a lot of changes over the last 30 years. What are you seeing, as far as some of the larger impacts that AI is making? Maybe you can unpack that a little bit.

Daniel Nikic  

In my opinion, I think AI is replacing bot work. So what I mean the repetitive work that doesn't include too much insight, so it could be the copy paste work, and yes, it is going to get rid of a lot of jobs, but it's also going to create a lot of new jobs, because someone has to audit this AI. And I would say we're in the augmented AI stage, so it still needs human interaction. So it's not like I have an AI tool that can do whatever I'll need to manage it, right, no, we're not at that stage, in my opinion. That's my opinion, I don't think we're so there but I also will say it's a hot trend in a way, and there's a lot of fear missing it. So some companies are like their AI, but it's like, I'm pretty sure that's not AI, it's just an Excel formula that could have done in 20, 2002, in high school. So I think that's one thing that a lot of investors have to be careful about and I think that goes back to when investing in company, you have to do the due diligence to really know, what is this tech.

Ryan Miller  

Brilliant. You help a lot of venture capital and private equity, you help a lot of these companies, how are you seeing the evolution of VC business models, what's going on there? 

Daniel Nikic  

I would say that it's going to be less employees within the front, in my opinion, because I've talked to a few companies that are dealing with analysis, finance, research and etc, just with chat GPT, which is generative, AI, which isn't which is a great tool, it's not the most amazing, or place a human totally but you just see how much of an impact it had in several industries. And I think VCs are going to be smaller, but I also think startups are going to be smaller. We're not going to see a 10 member startup team that's going to be seed stage. It could probably be five or four. But I also think that VCs, if they're going to deal with something really innovative, especially with AI or deep tech or even quantum, even though I think we're really early in terms of quantum, they're going to have to be patient. You're not going to get returns probably three to four years, because there's a lot of R&D, and with VCs, it's changed a lot. We've seen that we see a lot of VCs to get established, and it's their first fund and then a second fund. They usually fundraise right after, but we see if they're really successful with their third fund, if they can raise a third fund, because that's where you see the return on investments. So I see smaller teams with VCs, but I also see that they're going to use more and more technology to analyze their potential companies that they want to invest in, so pipeline companies and assist their portfolio companies.

Ryan Miller  

Brilliant and so, so that's what we're seeing right now. Now, a lot in especially in this industry, a lot of people come to us and folks like yourself to help extrapolate where you see the current trends going. So from your opinion, where do you see all the market opportunities? Where are you seeing the bright spots?

Daniel Nikic  

Well, let's start with manufacturing. I'll go start with manufacturing because I think we're talking a lot about software, but manufacturing is always important. And I think I see a big shift came from China to India, as you see a lot of negotiations there. I think India is a hot place, especially with IOT and if you see, probably in the past 40 years, I'm just gonna use say Canada as an example, I remember we're dealing customer service, you're dealing with someone in Bangalore or New Delhi or somewhere. So already then you see trend going on with the tech capabilities. So I definitely see in terms of India being a manufacturing powerhouse with time. And why I see a trend there, I think hardware is going to be more and more important we see with semiconductors, AI chips, hence Nvidia, whoever invested in Nvidia the past few years make good money, for example. And I also see in terms of geography, I would say the MENA region. I was in Saudi Arabia and the UAE, and they're pushing government initiatives to diversify their economy. When, initially, when we think of Saudi Arabia, we think of oil, right, but they're investing in sustainability. And I remember I was talking to a local city, I'm like, you guys are the last person who should be thinking about solar energy. And they're like, we got so much time, I'm like, true, but you guys got oil. So I see them looking into that healthcare, education, and they're really trying to push AI. But what's really interesting about the MENA region, I would say also Africa, is demographics. They're having a growing population and the youth. So when you think of it, when children are born in today's world, they already know what technology is. It's not like say, for example, I'm born in the 80s. We're used to playing outside and stuff. They already know, like they're getting stuff, quick technology and stuff. So I would say, AG, tech for sure, is always going to be hot topic, for sure, because it's true. And how to innovate in terms of production data centers, hence AI and energy, as mentioned before.

Ryan Miller  

Brilliant. What are you seeing as far as some of the local companies I know there was formerly known as Facebook, we're now at Meta, what are you seeing as far as a lot of the local competition as well.

Daniel Nikic  

So in terms of, I think these big companies, they're always going to try to innovate, like Meta is a public company, I'll take them, for example, and they've acquired WhatsApp, Instagram to always keep on growing. But I think with Metaverse, some people might have think they released it too early, I think it's the beginning of something, because, in my opinion, a lot of people want to escape, hence, video games. Why was it so cool, video games? Or we look up to athletes, if you're into sports, because you fantasize, I cheer for this team, even though you're not playing for them. It's like an escape. And I think with Metaverse, it's like another world. And I think that's going to be very popular, hence social media. So I think what they're doing at Meta is something for the future, I think that's going to be very impactful in the next few years. Because, in my opinion, yeah, social media is very popular, but it's not going to be the same in the next 20 or 30 years. But I also think authenticity is going to be important too with a lot of these companies more and more, what's the source, what's this? We saw with these generative AI search engines, what's the source? What really everyone wants to know, is it true or false, hence deep fix. We see with AI, you see videos, you're like, did this politician, did this celebrity, say this? And they're like, no, I wasn't even in this country when this happened. I was in it says this. They said it happened in London, UK, but like, no I was in Miami, Florida, here, here's a picture. So I think cybersecurity is definitely going to be trending. So the companies that deal with cybersecurity is going to be more and more important. And I think overall they're going to be a continuation of these I would say Magna seven companies, or Samta, as someone would like to say they're going to continue acquiring companies with innovative technology to keep on growing, as you know, with public companies. But for example, there's interesting companies such as Careem, diagnosed in the Middle East, which is like Uber Eats, like deals with everything, like, you need someone to help clean your apartment. Well, you can order someone there, and it gives you ratings like, and I think right now it's popular there, but it's gonna expand huge. 

Ryan Miller  

Brilliant. And obviously we do your own homework, this is just opinion based, and we obviously can't guarantee whether we own or not own any of these, but we're just letting you know the things that we're paying attention to. Is that fair? 

Daniel Nikic  

Yes.

Ryan Miller  

Awesome. So you know, as we, as we round third base, I absolutely love this is just the quick formula. I'm curious, just from all of your experience, if you have maybe three or four different unfair advantages, just from your experience on analyzing companies, what are you seeing as far as what they should pay attention to, maybe some cautionary tales and maybe some other ones. 

Daniel Nikic  

Okay, this is based on my opinion in terms of what's important to me, I would say finance, accounting is very important because when deal, when it's an investor is investing in a company, they have to understand, once you give someone money, you don't have control over it. There's no guaranteed and I think you should definitely look into their finance, how they do their cash management, pay attention to how they expense your stuff. And for example, I saw one company they put immigration costs as R&D, and I remember doing due diligence on them. I'm like, hold on, I'm an immigrant too. You can't do your immigration papers as already, as much as everybody would like to expense it, you really can't put it as R&D. And I think that's very important, especially if you're going to deal with AI deep tech companies, what is the actual R&D cost? Because someone could be like R&D cost is marketing, which isn't so I and I think that's important also, for a founder, you have to know your finance, just basic accounting. Why? Because at the end of the day, it's a profit business, it's not non profit. I think that's very important.

Ryan Miller 

Yeah, you bring up a good point. You know, I've seen, and I'm sure you'd agree that when, if you get an entrepreneur or somebody that is asking for capital, and for those of you who may not understand accounting, I was shocked when I started, thought it was black and white science. It's not. There's a lot of gray areas that allow you to estimate, but you can push it too far and get your wings clipped a little bit, as you should, I think. And so if you see someone just pushing redlining, we'll say, like an engine, they're just pushing it to the limit, if not breaking it over the line into illegal areas, just be careful of aggressive accounting. It's not even illegal, but just aggressive accounting. That's why in startups, and Daniel, I'm sure you would agree, is when someone throws up a financial model, we know, especially early stage, they're just your best guess, right? But, but really, what we want to know is, I want to understand and have the opportunity to review your model and ask you questions of where, I want to explore your assumptions and see how aggressive you are. If you're too aggressive, then it's probably not good aggressive in accounting. Be aggressive in the pursuit of your goals, but not in your accounting. And so, I mean, talk to your financial advisor and your accountants to do that, but it is a little bit of a yellow flag when I see aggressive accounting and as long as everything rolls out perfect, we'll be able to be the next Amazon in 2.5 months. And you're like, I don't know man, that's a little aggressive, anything to add to that?

Daniel Nikic  

I think when it comes to financial modeling in general, if a founder or someone from the team is presented to investors, they have to be prepared for a devil's advocate. So someone's always going to question each assumption, and you should back it up with research. So someone says, why do you think this is going to grow? Well, the market is growing this much, say 12% per year. We think we can get that 1% growth or etc. Or, for example, if they say, why you think your sales is going to grow so much? Well, these are my pipeline customers, let's just say, worst case scenario, 25% are definitely going to sign a contract with us, boom we can reach this at least. And I know for sometimes, when dealing with financial models, maybe this goes back to being a very, let's just say conservative. It's good to have, I would say optimistic, realistic and a pessimistic driver. So in other words, if someone can, just like, alternate or pretty much use a sensitivity analysis to adjust the financial model. So for example, say they can put in the financial model, I'll go with option A, it gives the optimistic and all the capital issues are done automatically. And then they can go with option B. It's automatically done to make it more realistic option and then C could be pessimistic. Just explain a bit simpler terms, I think it's better to play safe, because when you're dealing with finances, a lot of times investors, they can get turned off very easily if they see something they don't like, because they're getting bombarded with so many potential investments and at the end day, I think yes, finance is very important. It's not the key to make a decision yes or no, because obviously it comes down to other aspects, which I'll discuss in the I'll discuss in a bit. But I also think it's very important in making the final decision. 

Ryan Miller  

Brilliantly said, man, you know it's it's been said before on this show that it's okay if an investor has finds fault in your conclusions, but they should never find fault in how you arrive there. That echoes or adds credence to what you said, is doing your own research and actually showing and backing it up, not, you know, hands to the heavens, praying that you'll get best case scenario or optimistic scenario, but you're actually saying, hey, we strongly stand behind this. We've really done our homework and whether you agree or not, that's your prerogative, but you won't disagree that we really did some sound research on getting there, and that tends to really turn a pessimistic investor around. Would you agree? 

Daniel Nikic  

Yes, I agree. 

Ryan Miller   

Yeah and so I'm curious, what are other aspects when analyzing a company, what are some other things that really tell a lot in the early stage?

Daniel Nikic  

I would say in the early stage, it's very important to look at the team, because sometimes the companies do not have much revenue to base an analysis on to invest, or it might be as key of a factor in terms of because might be just potential pipeline, right? So team and I would say management. Sometimes investors want to see if the founder is a zero entrepreneur or is the first time and interesting enough if they have failures, because some might say, if they've gone through a failure, they know how to deal with stress. If I think the most inspirational people in any industry it could be, from art to sports to business, are those who know how to manage stress. If you've gone through failure, you know how to manage stress. It's usually like, oh, I've gone through this it can't be any worse the second time, at least, I know what to expect, and I think that's important. And also is a team good, what's their experience? And I would also say the idea, how did this team come with this idea for this product and service? Is it just a copycat? Because if the team's very passionate about the idea of the product, the service that they're selling, they're gonna be able to deal with the volatile, let's just say, lifespan of building a successful company.

Ryan Miller  

Brilliant and what about, say, more of the things that can't be measured? I've heard it says that not everything that can be measured counts, and not everything that counts can be measured. And so I'm looking for those things that count that can't be measured. I mean, what would maybe be a third one that you can add for people to explore?

Daniel Nikic  

I think purpose. I think the, does the idea have a purpose to make something better innovative? So I know, based on my experience, a lot of founders, if they say they came up with this idea due to something personal that's happened to them, or could be from work or personal life, an investor is very intrigued, because if you can tell your story, well it's going to intrigue people and hence, that's why, in today's world, why do we like movies? Why do we like TV shows? Because of the story that they're telling most of the time and if founders has a purpose, they're going to push it so much just to make it succeed, no matter what. Their goal isn't money, their goal is to make this product go into the market and make a big difference in the global world. 

Ryan Miller  

Brilliant. So before we wrap things up, is there anything else you'd like to tell our audience, any ways to reach out to or anything at all?

Daniel Nikic  

Sure, I will say this, always do your own research first, because everyone has their own way of looking to things, for example, some people might be really intrigued by crypto. Some will be like, I don't care you can never get me into it. So everyone and you have to go with your gut, I think too, that's one thing, I would say, kind of instincts. But to reach out to me, feel free to check me out on my website, at danielnikic.com and you can contact me there, or check me on LinkedIn. I'm quite responsive. And I would also say that in general, in terms of research, you have to be curious if you want to invest and grow. It's kind of addictive, in a way.

Ryan Miller 

Brilliant. So just to summarize everything we talked about, just be careful of aggressive to even fraudulent accounting when you're doing your analysis, really make sure that you have someone a CPA, someone that really can understand what are you looking at that can make sense to say, all right, this one smells funny. I always think of the matrix with the green things, and it looks like gibberish to some, but others, they can see everything. And so you want to have that person, if that's you, but either way, make sure that you have someone that can sniff out any type of aggressive to fraudulent accounting before you do any of that, the other one is explore the team. Daniel mentioned that you just got to understand, is this personal for you, what is that? How did the team come together? How did you overcome issues? Really explore the dynamics and test that relationship because a lot of times that relationship is going to come. That's one of the main reasons that causes businesses to fail other than the inability to raise capital. And then finally, just your purpose. Is there something that pulls people in, customers, new employees, partnerships? Is there a compelling reason for this company to exist other than just making money? Yes, I believe you can have purpose and profit, you do these things, and you too will be well on your way in your pursuit of Making Billions.

Ryan Miller  

Wow, what a show, I hope you enjoyed this episode as much as I did. Now, if you haven't done so already, be sure to leave a comment and review on new ideas and guests you want me to bring on for future episodes. Plus, why don't you head over to YouTube and see extra takes while you get to know our guests even better. And make sure to come back for our next episode, where we dive even deeper into the people, the process and the perspectives of both investors and founders. Until then, my friends, stay hungry, focus on your goals and keep grinding towards your dream of Making Billions.