Big promises with this one… here’s the intro to Jeff Brown’s latest promo:

“This is a rare chance for you to get in on the ground floor of an AI private deal that could become the next giant on Wall Street, giving you a chance to shrink your entire wealth journey from decades down to just 24 hours.”

That’s how these “private deal” stories are pretty much always sold, and the ads usually get into the language later on about how these are “high risk” and “you shouldn’t invest more than you can afford to lose,” but readers often get numb to those kinds of disclaimers… so before we go any further, let’s be clear, with private investments you will probably lose all your money. And you very well might not ever even have the option to try to sell or impact the outcome in any way, because your money is locked up — this is not an area where you can ever count on an “exit”, so there are no “stop losses” or no “changed my mind” trades to get your cash back.

Sorry, don’t want to completely cool your jets before I even tell you which company he’s talking about — but I’m so sick of pundits promoting private investments and hearing about readers who lost tons of money on those kinds of deals. They’re not all frauds, like the ones that the Palm Beach folks were promoting a few years ago, where someone’s bribing a pundit or analyst to con folks into investing in a private deal… but they’re all high-risk — most startups burn through money and never become real businesses, even if they’re sold to you by an honest pitchman and try their hardest to build a real company.

So disclaimers up front this time… but what is Jeff Brown pitching?

Well, a little back story first — Jeff Brown spent a few years writing newsletters for what is now Marketwise, with his own Brownstone Research business under the Legacy Research Group division, which also published Teeka Tiwari’s stuff (Palm Beach Research), as well as newsletters from Bill Bonner, Doug Casey, Nomi Prins and a bunch of other folks. He left about a year ago, reportedly because of disagreements with the publisher, and Colin Tedards took over his newsletters for six months or so… but then, earlier this year, the whole Legacy Research Group got shut down by Porter Stansberry and Marketwise management, a decision they blamed largely on the fact that not only had Palm Beach been recommending private investments fraudulently, without disclosing that at least one of their analysts had taken kickbacks to steer investors to those deals, but that the rest of the Legacy Research division managers had failed to take appropriate action even after that sliminess came to light. A lot of the websites still exist for those old Legacy Research newsletters and publishers, including Brownstone Research and Palm Beach, and some of them still regurgitate free articles from other pundits from across the Marketwise universe (Navellier, Eric Fry, Stansberry, etc.), but many of the old pundits have gone on to other publishers or disappeared entirely. Lots of folks were angry about the way that everything went down regarding Legacy Research, and I covered that as best I could hough most of it centered on Teeka Tiwari’s Palm Beach operations.

But a couple months ago, Porter Stansberry announced that he was bringing Jeff Brown back, to start another tech research newsletter again. Brown has resumed his free Bleeding Edge letter, but it’s not clear to me whether they’re restarting the other Brownstone Research letters, or are starting fresh with new letters that will be launched over time… Jeff did start yet another new publishing imprint called Brownridge Research late last year, and that’s where this new ad comes from, but the service he’s pitching, Day One Investor, has the same name as his old “high end” newsletter at Brownstone, even though they’re clear in the small print that this is Jeff Brown selling research on his own, independent of Brownstone Research (the letter also carries the same price, $5,000/yr, “discounted”, as those high-end titles almost always are in promos, to $2,000/yr).

So I guess it’s not “Brownstone,” at least for now, it’s “Brownridge” selling this Day One Investor subscription… and now, finally, after you’ve been so patient with my blatheration about the back story, we’ll get into what he’s teasing…

“Imagine, one day, you’re living your normal life…

“Then 24 hours later, everything changes and you now have complete financial freedom to do everything you want for the rest of your life.

“I know that sounds like an impossible dream…

“But that could actually become a reality IF…

“And only if you get in on the ground floor of what’s known as a unicorn in Silicon Valley.

“That’s a tech startup that goes from virtually zero to a billion dollar valuation.

“No other market event creates more overnight millionaires than a unicorn going public.”

It used to be very rare for a startup to reach a billion-dollar valuation while still private, which is why they were called “unicorns” by some VC folks a couple decades ago… though that’s no longer even close to being true, and unicorns are everywhere. There’s been such a deluge of venture capital funding over the past 20+ years that there’s enough money for promising companies to stay private for much longer — Facebook went public as a $50+ billion company a dozen years ago, Palantir went public as a $15 billion company after being the most-watched private investment, often trading privately at a higher valuation than that, for years, you get the idea. You don’t have to go public to get big anymore.

But yes, IPOs do generally create lots of millionaires — even though that’s primarily because of the employees who have accumulated a bunch of stock, not because of lots of small investors.

And there’s certainly another venture-investing mania going these days, with the fuse lit by the release of ChatGPT in late 2022 and exploding into a manic funding panic, as every VC firm desperately had to get in on whatever the next AI startup might be, even if it was only two or three folks who quit their jobs at Google to start something that didn’t even have a name yet.

He gives some get-rich-quick examples, as usual:

“Early investors who got into Google before it became a unicorn…

“Had a chance to turn a small stake of $1,000 into more than $362,000 in its first 24 hours of trading….

“Same thing with investors who got into Facebook at the pre-unicorn stage.

“They had a chance to turn $1,000 into more than $1.2 million on IPO day.”

Well, sure, but those weren’t regular folks like you and I, investing in a crowdfunding platform… they were friends and family of the startup’s founders. The folks who bought Facebook when it did become available as a private company, with enough shares circulating that you might be able to buy it on one of the private trading platforms, probably actually lost money on the IPO, since the private valuation was very high and Facebook had a terrible first year or so as a public company. Once it became clear that it was a successful company that could be very profitable and grow fast, which for both Google and Facebook was years before they went public, there was no more “$1,000 into $1.2 million” — those “$1,000” buyers got in when Sergey and Larry Page were negotiating rent for a garage to house their startup, then called Backrub, or when Mark Zucherberg was still trying to come up with a way to meet girls at Harvard… way, way before either the company was real or had a business plan.

So that’s what you want when you’re buying into a new idea — you want to buy the next big thing, but you want to buy it way before anyone realizes it’s worth anything. Which means you’re betting on your ability to judge the virtue of a founder and the prospects of a private company, often one that barely has a business or any revenue, and sometimes you’re just backing an R&D project that only exists in the slides of a PowerPoint presentation. That’s fun, but it’s also like hunting for mosquitos with a rifle — you’re going to have to be really good, or really lucky, to hit a winner. And you can improve your odds by using a shotgun, investing in 50 startups instead of just one… but still, the odds of hitting a mosquito with a shotgun probably aren’t that great, either.

Man, I got back into the disclaimer again, and yet we still don’t have a specific investment to be snarky about (or delighted by)… back on task, Mr. Gumshoe…

“For decades, these unicorns were reserved for insiders and the Silicon Valley elite.

“Everyday folks like you were locked out of these exciting pre-IPO deals.

“But that changes today…

“Because I just found an AI startup that I believe will become the next unicorn on Wall Street…

“And I found a way for us to get in without having to be an accredited investor.

“I’ll give you all the details in the next few minutes… and I’ll show you how you could take a stake with as little as $100.”

OK, finally some specifics. So what’s this little AI startup?

“The only way a startup can go from virtually nothing to a billion dollar valuation is to completely disrupt a massive market…

“That’s exactly what I believe this startup is about to do.

“It’s using AI to disrupt an industry that’s projected to reach $13.1 trillion in the next year.”

And we get an endorsement from someone else…

“The CEO of investment research firm RiskHedge agrees with me. He said:

‘This is one of the most lucrative opportunities I’ve come across in my entire career. Fortunes stand to be made.'”

If you’re thinking that saying something “is one of the most lucrative opportunities of my entire career” sounds like it could be a quote from pretty much any teaser ad, you’re off to a good start. And I don’t actually know if RiskHedge has a CEO, though I guess Stephen McBride is generally the “in charge” name at that publisher — that quote comes from Justin Spittler, though, another RiskHedge guy, and it’s just generically about “AI in healthcare”, not about any specific company.

So that probably narrows our focus a bit, but we’ll need more clues… back to the ad for a little FOMO:

“There’s not many shares available.

“And once investors grab those private shares, the deal closes.

“The door slams shut and it’s done.

“And you’ll have missed the opportunity forever.

“That’s how private deals work.

“So we need to act fast here because there’s a mad rush right now to put investment dollars to work into this type of AI startup.”

You know what happens in a mad rush? People stop being critical of their potential investments, and buy junk. Even the experienced venture capitalists. But I digress. More from Brown:

“Virtually all the largest VCs in the world are in a mad rush to allocate tens of billions of dollars to AI startups…

“Like the one I’m recommending today.

“Just to give you an idea, last year, investors pumped $29.1 billion into about 700 AI deals.

“That’s more than 3 times higher than the previous year.

“Earlier this year, they already invested almost $10 billion into AI startups.

“And that’s big problem for us.

“With all these massive players investing in this space…

“They are circling around looking for the next best idea to put their money in.

“I’m afraid there’s not enough shares for everyone…

“… if one of those VCs allocate just 0.2% of what they’ve invested in the first half of this year into this deal…

“That’s it….

“The deal would close.

“0.2%!

“That would be enough for them to take all the shares.”

If a startup founder is looking for VC money, or if a project is likely to attract big venture capital firms who can provide tens or hundreds of millions of dollars, and also provide expertise and put industry veterans on the board of directors and help the founder make connections… then they’re really not likely to be raising money $100 at a pop from shmoes like you and I.

But still, hope persists… what else does Brown say about this one?

He gives us his bona fides as a private investor…

“I’ve been investing in private placements and private deals for more than two decades now.

“As an angel investor, I’ve done more than 450 private deals myself….

“I’ve made more than 10 times my money multiple times in some of my best deals.”

More hints and FOMO:

“This company is only raising $5 million in this round.

“That may sound like a lot of money to you, but like I just showed you…

“VCs with deep pockets are investing billions in startups like these.

“$5 million is just a drop in the ocean for them.

“So it’s very likely that this deal will close by the end of the day.”

And eventually, Brown confirms that we’re talking about a healthcare-related AI company…

“We’re about to see a revolution in medical devices, imaging, robotic surgery and AI-developed drugs that I predict will treat many diseases.

“AI is about to turn the entire healthcare industry into a tech industry….

“And this startup I’m recommending today is at the center of this revolution.

“It’s a company that’s using AI to simulate how our bodies would react to potential new drugs.

“And it can run this simulation to predict how the drug would interact with our bodies.

“That has never been done before.

“Our bodies are too complex.

“And we just didn’t have the computational power and data to do that kind of complex simulation.

“But with the recent advancements in AI, now we do.”

OK, so it’s sort of similar to a bunch of the sometimes-hot AI story stocks which are working on drug development — a lot of that means using AI systems or other supercomputing muscle to figure out which molecules will work best to fight a particular ailment, with the least side effects, to help speed up the selection of potential drugs (and therefore hopefully shave the first year or two off of the 10-15 year drug development timeline)

More from Brown:

“With this AI startup’s technology…

“Drug companies would be able to predict early if that drug candidate is likely to be safe and effective.

“That kind of simulation could end up saving billions of dollars.”

And like many of the “AI drug discovery” firms we’ve talked about before, this is a company that’s not trying to develop its own drugs…

“This startup is NOT a biotech firm.

“It’s very important to understand that.

“They’re NOT developing drugs.

“This is an AI company that licenses its technology to biotech and pharmaceutical companies.

“It is a classic picks and shovels play on the entire biotechnology and pharmaceutical industry.

“So we don’t have to worry about the typical risks associated with drug development.”

What else are we told about this secret private stock? Brown says it’s at the “seed” stage:

“… for me, getting in at the seed stage is the sweet spot.

“Because you’re getting in before the disruption happens…

“And right before major venture capital comes in…

“Pushing the valuation much higher.

“You see, after the seed funding…

“We normally see other rounds known as series A, B, C, D and so on.

“And if everything goes according to plan, the valuation will increase with each round.

“That’s why I’m recommending you get into this AI startup now, at the seed stage.

“I predict in the next round of funding, major VCs will come in and will help push this company’s valuation a lot higher.”

OK, so that’s most of the clues — but we also get one other key one:

“We could see the valuation explode from today’s $20 million up to $1 billion or more, as the company potentially becomes a unicorn.

“That’s 50x upside.

“And that could be just the beginning.

“If the company goes public, all bets are off.”

So we know it’s a AI healthcare company, doing something with modeling the potential interactions of drugs with the human body, and trying to sell that software, presumably to drugmakers… and we know it’s trying to raise $5 million at a $20 million valuation, and if Brown thinks it’s going to close soon then it’s probably an offering that opened up fairly recently.

So what’s this “Next AI Unicorn?” Thinkolator sez its Syntensor, which is currently trying to raise $5 million at a $20 million valuation through the Republic private investing platform at https://republic.com/syntensor (they say they’ve raised $3.5 million so far, so they are closing in on their goal — the deal launched and started accepting funds on August 1). Their deadline is October 1, but they’ll probably be fully funded pretty soon if they keep up this current pace.

In terms of where they are as a business, they say that they’ve “completed one validation project and are currently entering a pilot phase with multiple firms with ~$50B in AUM.”

And here’s the part where I get annoying: If you’re going to invest in a private company, you really gotta read the fine print. You will probably not have the opportunity to change your mind and pull back your cash next week or next year, and it might be many years before it’s clear whether this company will continue to develop, or are fortunate enough to grow to the point where they get a buyout offer, or have the potential for an IPO, so you need to be very comfortable with the plan — or enjoy gambling and letting it ride, without worrying at all about losing that money. They might also dissolve in six months, but usually even failure takes longer than that.

They have to file with the SEC just like a public company would, since they’re soliciting money from the public, so they have filed a Form C, which is a little bit like a public company prospectus, just not as long and complex. Try to rely on that a lot more than on their presentation materials and big picture dreams.

A couple of the tidbits I picked up in quickly skimming the filing: Shareholders don’t have any voting rights; they have a million or so in debt and don’t have any revenue, so if things fall apart quickly the debtholders/preferred shareholders and other seed investors would be the only ones likely to get anything back (they probably won’t, either, if we’re being honest); they started work on this project in 2019, but it sounds like it might have been just one person prior to 2021; the founder, Clayton Rabideau, has 85% voting power; they were dead broke before this offering, having spent all their previously raised capital; they’ve raised about $4 million in previous seed rounds, which has all been spent, and have reported no revenue yet; and they’ve filed a couple provisional patents. They might have cash they’ve raised separately using SAFE agreements, since the date of the SEC filing (those are agreements to buy future equity, usually at a discount, sometimes that’s really considered a “Series A” raise, though there’s not much official about technical venture investing milestones like that.

And with all of that said, you’re on your own — you can invest in this AI healthcare stock, which is a very early stage deal with a startup that might turn out to have a good product that companies want to use (or might not). I don’t know enough about the market for AI-powered modeling of the human body and immune system to know whether they’ve got something special brewing, or are just an also-ran idea chasing the same potential as hundreds of others, so I’ll leave it to you and Jeff Brown to make the call. The odds of success are low, even if the product is a hit, since they’ll have to raise a ton of money to get there and there’s no guarantee that they’ll raise money at higher valuations in the future… but the odds of success are at least not zero — and everyone’s got a different level of comfort with those kinds of deals.

Love the idea? Have great or terrible private investing experiences you’d like to share with the group? Excited or enraged to see Jeff Brown back pitching ideas again? Let us know with a comment below… thanks for reading!

P.S. Jeff Brown is also pitching a second “AI healthcare” company that he thinks is worth owning, but he does so as “free pick” to reward folks for listening to his presentation — that turns out to be Schrödinger (SDGR), another company using AI and technology for drug discovery. That might ring a bell, because he was recommending it widely for his old Brownstone newsletters back in 2021, and it’s also in our Lock Box portfolio from back in those days, though it has never really caught the full AI mania as a stock, and it remains a long term percolator, dependent on the pace of drug development to hopefully earn drug royalties someday, but currently just selling its physics-based modeling and testing platform to pharma companies — the “picks and shovels” part of what they’re selling, which is essentially selling access to software and compute time on their system, has not grown as fast as I expected when I bought shares more than three years ago, and their customers haven’t ramped up their spending on the platform as dramatically as hoped, but they’re still plugging along.

Disclosure: of the companies mentioned above, I owns shares of Schrodinger. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.