TRANSCRIPT: SE.Club – EP36: What Actually Works When Raising Money (11/12/21)



Very good. We are here on the serial entrepreneur hour and we run this show every Friday at two o’clock Eastern. We’ve now recorded probably about 50 shows and you can go to Thank you for pitting that. Jeff. I love this app, 

 it was good timing. As you, as you said it, that you are L appeared at the top of the yeah. And, uh, and let me tell you this, we’ve got some pretty big speakers coming on to this hour. We have a, probably one of the most famous authors in January coming on, uh, you know, business authors and.

We don’t have a date booked yet, but we’re pretty close. And if you’re not on the email list for, you really do to jump on that email list. Um, today we are going to be talking about, you know, what [00:01:00] does it take for an entrepreneur to raise money? Um, I had the opportunity to read an article in the wall street journal about a week ago and I’ll, and I’ll go through that in a minute.

Before I jump into that, we did a prior show. Jeff, do you remember we did one and we talked about paradigm shifts and I just wanted to sort of, you know, since we have a lot of interesting things happening in the business world this week, um, talk a little bit about that. Um, we saw a company go public. I think it was the largest publicly traded, uh, IPO of the year.

And it was a company called . They’re now worth more than GM. There were more than four. And in a prior session we talked about. Why these startups, why these small businesses can actually beat the large companies like Ford and GM and Toyota. And it just was another cool example of seeing that happen. I [00:02:00] do wonder though, Jeff, like, why is it that, um, they had that GM and Ford and Toyota didn’t learn from Tesla.

Like why couldn’t they get a, an electric. Well, I, I I’d say Colin, the jury is still out on that. You know, the reveal and story is an interesting one. They have some to the best of my knowledge, some good contracts in place, but they haven’t actually delivered many vehicles at all. So the, the valuation that they came out at, you know, in their public offering was pretty astronomical relative to the actual, um, business they have.

So it’s kind of a, kind of a bubble we’re in right now. It seems so, um, you know, Ford is, is announced that they’re coming out with a, an electric pickup truck. And of course, Ford makes I think the most popular pickup truck, the F-150 on the market. So there’s going to be, um, a lot of activity and a lot of.

Competition in this space. And as there has [00:03:00] always been in the automotive space, there’s probably room for more than one, um, winner more than one successful company. So I think it’s kind of early to make any, um, longer-term predictions about, um, where the different auto manufacturers sit in the electric space.

Of course, Tesla has led the way for 10 years now, or however long it’s been and sort of paved the way for the ribbons of the world. And, uh, the other electric vehicles coming out from traditional car manufacturers to happen. Well, if you find that topic interesting, uh, if you go to, you’ll see, there are two episodes dedicated to just talking about, uh, trends in the industry and how to capitalize on trends, but let’s jump to today’s topic.

Uh, I, again, I was reading the wall street journal about a week ago and I came across this article, which I’m going to read it as a head heading right now. Some humility can really help an entrepreneur win over investors. And the [00:04:00] article goes on to describe a study that they conducted, where two types of pitches were made.

One pitch was a very confident, slightly arrogance. I know everything pitch and the other one was, well, I don’t know everything. There are a few things I don’t know about. Um, and I think it was about the pitch was about droning and delivering products with drones and the pitch that had the humble entrepreneur actually was received twice as much as the pitch.

That was more of the arrogant sort of like the, the, I know everything entrepreneur and that’s. It was surprising to me because I have always thought, and I think we all do. We all think that there’s a stereotype around startups and entrepreneurs and their superheroes, and everything’s perfect about them.

But they mentioned that the VCs really liked the fact [00:05:00] that they would, they would listen to them and understand that they don’t know everything and that’s okay. But they were concerned about investing in companies where entrepreneurs, they didn’t think entrepreneurs would listen to them. Um, and I just thought that was a very interesting article.

And that’s what it sort of was the reason why we want to do the show today. We have tips and tricks. We have little Roberts joining us at, uh, two 30. She’s going to talk about the pitch itself, but if you’re a serial entrepreneur and you’re in the audience and you want to share some of the tips and tricks you use to raise money, or you can talk, tell us a story of how you raise money.

Um, That’s what we want to hear from you. Like, what is it that you did? Um, even if you’re an entrepreneur, you’ve done it once, but what is it that you did to raise that money? Um, w you know, what was your style? Like? What was your, what was your story? Tell us, please raise your hand. Come join us on stage Jeff.

You’re going to be our chief moderator today. So take it away. [00:06:00] All right. Well, thank you calling. And I think, um, I’ll just share a quick story of my own experience, uh, raising money for a company, and then we’ll, we’ll start, uh, and Rachel can bring people up while I’m talking and then we’ll get into other people sharing their stories.

So, you know, it’s. One of the ways to raise money. Of course, in Collin alluded to this, as you can go to venture capitalists and VCs and angel investors, but another way to raise money is to find a strategic investor or a strategic partner, um, who would have a vested interest in the success of your startups.

So a number of years ago, I was co-founder of a company called bar And, um, we were way ahead of our time, but we had a, a product where you could enter the barcode number for any product on your mobile phone. And this was before the smartphone. This was your regular flip phone. Uh, and you could get back on the mobile web product information, product reviews, comparative shopping information.

And even in [00:07:00] some cases, purchase the items through a select few retailers, right from your phone. And because we were tied to the. Code, uh, and the UPC number when we had our proof of concept technology, we thought it would be great to partner with a big company in the barcode space. So we actually reached out to symbol technologies back then.

Symbol technologies is the leading manufacturer of barcode scanning hardware. They’re now part of Motorola. Um, and we actually were able to get. Someone on the biz dev side at symbol, very interested in our concept because of course, if we were right and we could get lots of people to use this service, they would want to have a barcode scanners on their phones.

And at the time symbol actually had a barcode scanner that could snap on to certain phones and turn the phone into a barcode scanner. So that could be compatible with our. Product. So we made a partnership, kind of a business partnership with symbol, just to [00:08:00] have us develop our software, to work with their barcode scanner.

And through that, we were able to turn that into an investment and what we started raising money. We actually got symbol to put $3 million into the company which helped lead the round that helped attract other investors. So finding a strategic partner who would win if your product wins is another way to find funding outside of going down the traditional venture capitalist route.

So that would be a tip that I have looked for a potential strategic partner who would benefit from your service and therefore would have an interest in investing in it. Um, so that’s my tip. Uh, and obviously we have Andrea here on stage. Andrea, do you have a fundraising story or. Absolutely. So, um, for me, one of the things that I do is it’s mostly service related.

So, you know, I help, uh, celebrities, um, boost their social media. So, you know, when you see [00:09:00] social media accounts that go from 10,000 to a million, you know, they hire people sometimes to help get that done. So I do things like that, build apps, you know, so forth and so on. So there was a period of time where I needed an influx of, um, money to come in, not necessarily a lot, but I needed just that, that, you know, that, that infusion in order to grow and go to the next level in my business.

And one of the ways that I’ve found that fundraising is the easiest is when, and literally when you give things away. And what I mean by that is that I did a workshop and I’m actually getting ready to do another one. Um, I offered information in a particular area of my expertise, which in this case, that particular workshop was on social media.

And I offered it for very, very low prices. So I offered it for $7, $17 and [00:10:00] $77, which at first. You know, glance is not a lot of money, but what it wound up doing was it was able to reach a consumer market that people that were afraid of perhaps going to some type of masterclass or had had masterclasses in the past that they felt, uh, left them wanting and not knowing what to do well for a $7 investment or 17 or 77, each one of which gave a little bit more recordings and so forth and so on discounts for future services.

And not only, um, I’m, I’m built the website for that particular campaign in 12 hours. I literally only advertised on clubhouse and on social media and I was able to, I did, and it was very quick. I did the, um, the advertisement. I the schedule, the workshop for the following week and a produced me about [00:11:00] $2,900.

So, you know, and like, I guess that I didn’t, and I actually really didn’t put, um, as much into it, as I know I will, the next time around. So I, it was it’s a, that was a small fundraising thing, but it worked and it worked very quickly. And so I found that, uh, giving and sowing seed into others is always one of the best ways for you to fundraise because they’re they into you back.

And there were even people that had, um, you know, I had an area where they could also do a sponsorship for someone else and that encouraged, um, mothers. People that knew that they had someone in their family that had this dream that wanted to take their social media to another level. And they were able to actually sow seed into people they loved to participate.

And so it was quick, it was easy. It felt good because I blessed others. And, uh, thank you for [00:12:00] sharing that. Andrea, you kind of touched on something we talked about here in a previous session, which is fundraising through your customers, right? So as opposed to looking for investors, granted, it was a relatively small amount, but you were able to fund this business idea through the customers.

And I think you did that by, by looking at the pricing in an interesting way, by starting at that very low price level, which would be attractive to people and bring them on a, at a faster pace. So, uh, thanks for sharing that tip and sharing your story. Uh, Joe, do you have a fundraising tip or a story about your own fundraising experience that you’d like to share?

Joe, if you’re there unmute yourself, just tap that little microphone button in the lower right corner. All right. We’ll see if, uh, if you come back, Joe, flash, your mic calling, you wanted to say, yeah. I mean, I think [00:13:00] Andrea had a great story that I like. I like that. And I remember we did a whole episode on customer funded startups again on this show.

And so let’s get on the recordings. Um, there was a, um, a company that, uh, we raised money for. Um, it was dark club and it was about, I don’t know what 11 nine years ago. And we were heading into what was an auction to win the rights to dark club. And we had to raise $7 million. And we had 30 days to do it.

So we, it was a really tight timeline with no broker. We managed to pull it off. And what we did was we put together, I think, first of all, a compelling valuation and opportunity. And then we wrote a private placement memorandum, hired a law firm. We filed with the sec, the reg D filing. So we were able to take on sophisticated investors.

And I reached out to 37 of my LinkedIn contacts. And by doing [00:14:00] that, um, I did it one-on-one, I didn’t just send a blast, you know, out, I, I sort of selected the 37 individual contacts, but I was able to achieve about 28 shareholders or sign up about 28 shareholders and raise the $7 million. And it really was interesting in that, of course, there’s, you know, this reputation there and I’ve had that for a while.

And because of that, it helped me raise the money, but using your LinkedIn contacts, setting up a private placement memorandum. But the one thing that that did I think was make it intangible tangible. Now I know a lot lawyers will say that a private placement memorandum, you, you know, you set those up to avoid being sued in the future because you’re really listing a lot of risk factors, but you’re also describing your business plan and coming up with projections and really trying to show people that you have a vision for this concept or this idea.

And I, I say it takes the, makes the intangible [00:15:00] tangible around a business plan. And that’s something that we did, um, and it was successful. And, uh, I don’t think, I don’t think I would want to try that again. Cause I think it was a little too stressful to raise that kind of money and you know, 30 days, but had we not raised the money, we would not have won the, the domain in an auction.

It was a, it was an auction process whereby they put these GTL DS up for auction. Um, All right. So that was just sort of my story. Yeah. I think my calling, you raise a few good points there that, that we can stress for a moment. I mean, one of the other things, despite the fact that there is a cost involved with legal fees, et cetera, but by having that document in that order, it also sent a signal to those potential investors that this was a serious business that you were approaching it seriously.

Um, if you were able to pull together those documents for this fundraising, it was likely you’d be in a position to do the same if there was some sort of an exit or a public offering in the future. So it, it [00:16:00] just sends a signal that it’s a more serious. Approach to business than just, uh, you know, putting a business plan on the, on the back of a napkin and hoping that people will invest in it.

So there are some benefits to going down that path, even though it is a costly path, um, uh, you know, there are some benefits. And the other thing I think that you mentioned, which is important is you didn’t do a blast to your context, which you easily could have done. You treated each one individually. And that’s very important because I think.

You know, in business as with most things, raising money is all about relationships, you know, and developing that relationship. Sometimes you may develop a relationship with someone who doesn’t invest in you until years later, but because you’ve established that connection and that relationship, and you’ve kept them apprised of your activities.

And you’ve told them about your progress, even though they made no interest in investing sooner or later, they could turn into an investor. So approaching those potential investors, one by one, treating them [00:17:00] individually, tailoring your pitch to the things that would be of interest to them. In particular, I think probably went a long way in you successfully raising that money in such a short timeframe.

So I think that those are some, some very good points that you bring up with that story. Now I know that, um, you know, I didn’t use a broker. Um, I have been working now with a company called our crowd, um, to do some investments. I actually did two investments. This one. One with our crowds. Um, and that company was a company called beyond XR, sort of like increasing the conversion rate for online e-commerce companies.

And the other company, um, was moon pay, which is like a crypto company. And that one I did through a, a SPV, a special purpose vehicle. And it was really complicated to get into, but I managed to actually get into these two investments this week. And I noticed that the presentations, one thing I’ll say about the presentations is [00:18:00] that there were very simple and understandable even though their concepts are complex.

When I look at the AR crowd, when I look at all of the different options for investments, the ones that are just, I just don’t get, I just don’t understand. Um, I just can’t invest in those ones. So I think sometimes simplifying. Is important. And it also, uh, also, I, I also think that when you have too many buzz words, you know, like AI encrypted, cloud-based PLA, you know, whatever it is, I think it’s can sometimes throw me off as well on some of my investments.

Um, but any case, Andrea, this whole issue of, you know, do you, are you a humble, confident entrepreneur when you make a pitch or do you come in like just, you really know your stuff? Was it, you know, it was surprising to me that the article showed that the, it really biased the humble entrepreneur. What are your thoughts on that?[00:19:00] 

Hmm, for as, when I go into doing a pitch, um, you always, of course, want to go in confident. Um, but confident and arrogant are two different things. So one of the things that, um, I always try to focus on when dealing with things like that is, is basically the wind thing. You know, what is the problem that I’m letting these investors know?

I have a solution for improving that. I understand that problem. I know how to deal with it. I know how to correct it. And it’s going to be a blessing and a win-win for everyone. Um, and then the expertise and the experience that is presented either with me in the company or. You know what and whatever it is that I’m doing, because I’m in a couple of different areas of expertise.

These are the things that I try to actually really present forward. Um, so that always really less about me and more about that particular thing that I’m I’m doing and [00:20:00] that I’m showing to other people as being the best solution possible, because if it’s not, why would a person want to invest? Anyway, it has to be, there has to be something that is different about what you’re presenting than anybody in everybody else.

And that is a lot where reputation comes into play and, and also what you’re doing differently than everyone else. So that uniqueness, and sometimes in order to be able to present that you do have to be a little confident, especially if it’s something that someone has never heard of before. So I hope that answers the, no, I think it’s a great discussion.

I mean, is it, you know, there’s a fine line between arrogance and cough. And it’s, it’s those individuals that are confident, but I will also add who have the ability to listen. You know, I’ve been in pitches before one I’m just particular one that I’m remembering, and they were pitching this concept and I started asking questions and they were just cutting me off and they weren’t even really responding to my questions.

There’s like, no, no, it doesn’t matter. It doesn’t matter. You know, we’re just, we’re this [00:21:00] we’re that. Where are they? You know? And I, you know, I look back at those pitches and I see that there really was a lack of, of the ability for the entrepreneur to listen. And I think that throws off BCS that throws off investors.

Well, I think Colin, you, you know, you’re, you’re spot on because. You know, there’s the old adage. You don’t bet on the horse, you bet on the jockey. And I think many investors approach the opportunities to invest that way. Yes. They’re obviously very interested in the company. They want to believe in the concept.

They want to understand your business model. They want to understand what traction you have in terms of gaining customers and actually on a path to revenue or growing your revenue. But at the same time, they want to know that you are someone that they can do business with that they won’t mind speaking to that will pick up the phone and, and listen to them as Colin said and take their advice if they want to share it.

And a lot of times, even if you’re presenting [00:22:00] solid numbers, if you come off as arrogant as, as Andrew was saying, or if you come off as, as you’re not going to be the kind of person who’s going to have. Cooperate and listen to the investors. You could lose the investment. Even if your business on paper looks attractive to the investor there, they have to think about how are they going to feel having to deal with you for the next 3, 5, 7, 10 years, um, as the company grows.

And you’ve seen that if you’ve watched shark tank, you know, there’s a lot about shark tank. That’s not that realistic, including some of the deals that they throw at people, but there’s a lot about shark tank. That’s very realistic. And one of the things you often see on shark tank is someone will pass often.

It’s mark Cuban will pass, and I’ll say something like, you know, I just couldn’t see myself dealing with this person, right? Like, you know, I don’t really care about the business. I just didn’t want to be that that person was not someone I could see myself having to deal with. He wouldn’t listen to me or she wouldn’t listen to me or they wouldn’t, you [00:23:00] know, they would drive me crazy.

So, um, it’s very important. Call it, as you said that to come off as someone who is. Competent going to run and grow the business. But there’s also someone who is going to get along with the investors because it is you’re, you’re entering into somewhat of a marriage. It’s a longterm relationship sometimes.

Absolutely. Ironically, my godbrother one shark shark tank go figure. So he, and it was a lot of, it was his personality, uh, that did get the investment money. He was the one that, um, several years ago had a sweet potato pies inside of McDonald’s for a limited period. So, um, that is very true, but there was one time that, um, what Collin mentioned was exactly how I won a bid.

Um, it was, it was, it was ironic because the person that actually asked me to [00:24:00] do the presentation, um, was the primary person. And. I didn’t realize that what I was doing and presenting was a pitch to get the funding. I was a, was told that I was just going to lay out the plan if you will, after they already have been approved for it.

And when I went into it, um, you know, I, I listened and I did what Collin said and the main person that was, uh, the investor, he was a billionaire and he, he was on a zoom and his face was blocked. So you didn’t really see anything but his name and you only saw his first name. He was, um, you know, very, just really just wanting to be very incognito and almost mysterious.

And, and I can understand that. And, um, by the end of the presentation, because. But I found out later was that he was feeding questions to the president and CEO that was questioning me. And so [00:25:00] I wound up, you know, just, just speaking from the heart and from my expertise, but it was also about, you know, really caring about what they were saying.

And again, I had no idea that this was actually a pitch. I thought that this was an already approved scenario where I had just been brought on to help with marketing irony. Um, when it was all said and done, they wound up giving me the account as opposed to the person that brought me in, because the personality differences.

And even though I was able to bless that person and I asked them, um, you know, if, if I was allowed to third-party hire, uh, that person’s company for different aspects and they graciously allowed me to do so, it, there was no question that it was listening and having a heart that was able to procure those funds.

So. Yeah, I think personality is important, but you know, sometimes it does depend on the business you’re in too, because sometimes, uh, even if [00:26:00] someone, there are some industries where it may be a more aggressive CEO is going to be appealing to investors, you know? And, and um, if you’re going into an industry where you’re going to be fighting regulations where you’re going to have to go against a city and, and, and government officials with things like Uber had to do, you know, there are some people who invested in that company, who’ve spoken about, uh, the fact that they liked the aggressive nature of, of the former CEO, because they knew what he was going to be up against, uh, in going against those regulations and going against the big established things like the taxi industry.

So it does vary from time to time. Um, but let’s see. Um, Michelle, did you have a story or a tip about raising money that you want to. Yeah, I think it’s, um, there’s so much we can say right about this subject and it’s great because there’s really no right or wrong, but you know what you can be authentic about and what you can offer [00:27:00] as value.

But one tip, I guess you could call it a trick that I was thinking of is, you know, we’re all anxious to get funding when we’re trying to launch our company or grow it to the next level. But I think it’s also really important that the first people that you select to be your investors, you’re very strategic about them and not just, you know, taking money from anybody because a they could help you, right.

They could help you with the strategic direction. They can help you with contacts that can help you with distributors. They could help you with actually other investors. They could actually be. One of the linchpins that helps you secure financing, you know, at a whole different level that if they really believe in the company and, um, you know, they, they see there’s something there and the, um, um, the team they could actually bring in people almost alone [00:28:00] just by imparting that kind of confidence to others.

Um, we’ve had a lot of good experiences like that with the companies that Jeff Colin and I have been involved in. Um, also I will say a bad round of first investors, bad relative term. Obviously all money is probably not the same, but it’s good. Um, a bad investor could make your life a holy, you know what happens.

Right. If they don’t understand the business or the trajectory for us, it’s subscriber oriented, those businesses take a lot of obstruct cash and it takes a lot of time, a lot of cycles to get it to where it’s profitable. So I think it’s really important that, you know, And, you know, your investors, especially in the beginning and, um, that it’s something that’s going to be a win for them because you don’t want to be in a situation where they invest.

And then a year later they’re, you know, kind of in a panic mode that could just really derail things. [00:29:00] Um, that’s my thoughts. Thank you, Jeff. That’s a great point, Michelle. And actually I could, without naming names, I can recall a situation where, um, we had an investor that was more troubled than he was worth and eventually was bought out, um, you know, offered to buy them out so that you didn’t have to deal with them any long longer.

And that happened just like firing a bad customer. If you have a customer that’s just sucking the life out of your business and taking up too much time, you might have to fire a customer sometimes. Um, let’s go to Mr. NFT. I’m not going to say the full name there, but did you have a story or a tip you wanted to share about.

Uh, I haven’t actually spoken before, but I just wanted to say thank you for letting me come up. It’s been a huge honor to hear you guys speak for the last 20 minutes. And I enjoyed those stories. They’re really irrelevant to me. And if you guys are interested in [00:30:00] investing in our space, then, uh, feel free to message me or whatever.

I’ll tell you all about it. Okay. Thank you for joining and welcome to, uh, welcome to clubhouse. I see you’ve got your party hat and I think the NFP space is changing opportunities for investment too. So it’s something that we can talk about, uh, at another time.

Hey, just before you guys hear me there just before Lil arrived. I wanted to, uh, read his little coming in right now. Can you hear me, Jeff? Can you just confirm the audio because I’ve got all right. Um, well, listen, this Lil Lil they’ll pull, can someone pull a little on stage while humble entrepreneurs were perceived as being less innovative than, uh, their assertive counterparts?

Overall, the positive traits outweighed the negative in the end, the humble entrepreneur was [00:31:00] 1.7 times likelier to receive an investor’s offer than the other. And this is a study done by professor Villanova. Here’s here’s the quote that he uses VCs, appreciate operas who set high goals for their ventures.

And at the same time, they estimate that ambition without humility is a sign of arrogance, overconfidence, and stubbornness. Lil, welcome to the stage. I know that you are probably the S the most experienced pitch expert when it comes to raising money that I know. And I want to hear some of your stories and what you think is important, but before a little bit, well, before you start to just prove what Colin just said about you, how many different pitch fests have you won?

Presented? I witnessed like three. Thank you. And those are well, we we’ve been in three and we’ve won three. [00:32:00] Um, and, and, and, and, and, you know, and I speak to groups on how to prepare for a pitch and how to craft your pitch and all of that. And I’m like, I’m insane if I shared with you guys, what I go through to get ready for a pitch competition.

So the pitch competition is different than actually doing a pitch. Like right now, we’re in our series, a we’re actively out raising our series a, um, and so that’s a different kind of a pitch. Whereas a pitch competition is you’ve got three minutes and you better get it across, and they’re going to cut you off and play music at the three minute.

So three on that side, Jeff, and, but as far as pitching, we were in Jason Calacanis is, you know, 16 week, 12 weeks out of 16 weeks. And we were number one, we were number one, you know, came in first for all the 12 weeks. So seven weeks we were number one, the other five. We were the place that second and third only company in his [00:33:00] cohort.

And from what I understand cohorts after that’s ever been, you know, in every week score in the top three. But thanks guys, but Hey, so what do you want to talk about? How can I help and, and share, you know, some of our experiences? Yeah. So we’re talking about fundraising tips. So any tips you may have for fundraising or stories about your own experiences.

Yeah. Yeah, definitely. So, okay. Couple of things, um, you know, it, in order to get ready to go out and fundraise, you have to craft your story and it has to be based on the stage. So if you’re a pre-seed, um, uh, fundraising or a seed versus a series, a those are different stage gates. So for instance, we’re heading for our series a, so what they look for in series a is proven market fit.

So our pitch deck needs to be around, uh, that we can prove market fit. And what are the metrics around that? So first and foremost, make sure that your deck, [00:34:00] that you’re crafting is going to get across what the, what their milestones are for the VCs for that stage. Then. Treated as if it’s a game of numbers.

Right. And so how do you increase your odds when, when you’re going after this? So you need in today’s world, you need to have, uh, it used to be 75 VCs on your, uh, you know, that you’re actively sending your, your deck and talking to today’s world with it as frothy as it is, I’d say 50 to 60. So you need to find 50 to 60 VCs, that one invest in the stage that you’re out raising to invest in your, in that industry.

So if you’re a low code, no code, don’t go to a consumer-based VC. If you’re a FinTech company, you know, don’t go to a deep tech, necessarily a company go to somebody who specializes in FinTech. So you want to find. The [00:35:00] group of VCs for you to go out that fit your stage and fit your genre. And then from there you don’t want to just send your deck out.

That’s the absolute wrong thing to do is to send your deck out. Um, and the reason being is that when VCs start getting decks of the same company from everybody, they just think that you’re not getting traction. So you want to compress that time as much as possible. So. Uh, that you’re actually doing your active race.

So what does that mean? It means that you want to have conversations. You want to reach out and have conversations with everyone. You have an initial conversation or through email, you want to say, Hey, this is where our revenue is and we’re out. And this is the stage that we’re raising for. And then typically they’ll say, okay, well, we’ll set up a 30 minute call.

And then the calls are pretty much along the same lines. First thing that they do is that the VCs will tell you a little bit about themselves and their, and their firm, you know where they’re at and what [00:36:00] stage, what size checks. That’s another metric you want, you want to make sure that even if it’s in the right stage and it’s the right John Dre, that it’s the check size, that’s going to make sense for what you’re out racing.

And then from there, if they like everything, um, they’ll ask you to send a longer deck along because how it works with when you’re raising money, is that whoever you’re speaking with, they have to go back to the partners, even if they’re one of the partners and they have to go back to the partner and present on, do they want to dive in deeper?

And if they do want to dive in deeper, then you’re going to have a data room that you’re going to invite them into, you know, or you can use a Google, uh, you know, Dropbox or Google. If you’re going to send them a deck, highly recommend that when you send them a deck that you use a company, a platform called doc Sen doc send SCN D and it costs 15 bucks a month.

And when you use DocSend, you’ll know when they’ve opened up your deck, [00:37:00] otherwise you won’t know, did they open up your deck or not? Right then how many times have they viewed it? And doxing gives you analytics as to what pages, um, they’re spending time on. And that’s important because you’re doing just like software, you’re doing iterations throughout the process and you’re learning.

And so I keep a spreadsheet. We so far have gone out to 31 VCs we’re in some form of diligence diligence right now with 10 of them. So the reason why those odds are so good is because we targeted 31 that fit. That that’s right stage. Um, and then be prepared. You’re going to get a lot of notes. You’re going to get way more nos and you’re going to get yeses and, you know,

and keep adding to the top of the funnel. Don’t slow down just because, you know, you have all these people that are interested in doing diligence. Like right now, you know, I have five, six appointments already, you know, w working with [00:38:00] completely new VCs, even though we’re well down the path with several, um, because you have to keep doing that until you get term sheets and I’ll stop there.

Jeff. I can tell you what happens when you get to the term sheets and how that all works, but I’ll stop there. Wow. There’s so much to unpack in what you just said there one, you said let’s, you know, we need to pitch to the right audience. Right? Another thing that you said was that, um, it has to be. The right messaging for that audience, as far as I, if I think I picked out up correctly, um, you know, there’s just a lot of different components to it.

Let me ask you a question though. When you do a pitch though, how long should it be and what would be the key components in a pitch? Like what do you start with? Maybe you could do your pitch for your company in it. That would be cool. Put you on the spot Lil. No, no, no, no, no, no. Another call another call. I am so fried with all the diligence and meetings and everything this week, but happy to do a pitch on another call for you if [00:39:00] you like another week.

Um, cause we have a really tight three minute pitch. And I’d want to make it right for you. Uh, so, so what, so my three-minute pitch that I do, if I’m presenting is different than the pitch I do on it on a, get to know first time round VC call. So for everybody listening, you want to be buttoned up, you know, if you’re not buttoned up and if you’re not concise, um, there are, there are, besides what your business is doing.

There, there’s a checklist of the founders. Like for instance, anybody that’s reaching out right now for diligence items, my, my COO and myself, and she wears a hat. A CFO will work 15, 16, 17 hour days right now because we want to turn it as fast as possible because that’s an indicator to them that we’re going to get it done.

That we’re going to be true to our word. It, those are all little checkboxes, right? You know, what do you say to a VC? Don’t go into like a long, long, long detail [00:40:00] of, of anything. Give them tops of waves, give them know your metrics, know what your revenue is, know where you’re headed. No, you know, if somebody says, well, who’s your competitors, don’t go up.

We don’t have any like, like we’re the only one on this planet. That’s going to create this. Like, that’s probably the biggest, you know, misnomer. I see whenever I’m coaching things and they call in you and I are coaching for the innovation center and you see the same thing. Every single thing, everyone is on this clubhouse room right now that is building software or solving a problem.

There are a hundred other people minimum across the world that are doing the same thing. There is nothing that’s unique anymore. Right. And so when you’re on the call, be humble. When I came in, you were talking about humility, hugely important, have humility. The VC calls go exactly 30 minutes. If they come in four minutes late, because they’re finishing up another call, you’re going to get 26 [00:41:00] minutes.

So what you is, so, you know, have talking points written down for yourself. If that’s what you need, rehearse conversations with other people that you can before, if this is your first time talking to VCs, rehearse other conversations, you know, like rehearse it with somebody, um, and tell somebody to grow you.

But basically they want to know a little bit about you. What’s your background? Why are you solving this problem? Did you feel the pain firsthand was this, you know it, and if you get on there and you go, oh, I want to build the company to be really rich. Forget it. Hey, Lil, let me ask you a question. When I did the IPO for my company and we did a road show and I found that, you know, you practice, you practice, you practice had the pitch to.

But every meeting was different. Like I would walk into some meetings, they didn’t want to see the presentation. They want to just start asking questions right away. I walk into other ones where they want to see the presentation first. So [00:42:00] really it’s understanding right off the bat, the, you know, what they’re looking for, how they want to be presented to.

Is that, is that, has that been your experience with VCs or are they more, pretty much, you know, you do the presentation, then they asked you Q and a, or is it, or is it a combination of both the hybrid. Thousand percent Collin, you hit it on the head, know your audience. So here’s what I do when I have a meeting with the VC, even if I’ve researched it.

And I know it from a week ago, five minutes before the meeting, I’m thin slicing I’m in, I’m looking at their background and I’m looking at the, the, uh, company, the firm, the venture firm. And I’m looking at, you know, are they operate? Are founders, are they, um, guns that came out of Harvard and Stanford and financial analytics?

Are they a institutional investor? You know, came out of Google, right. That Google has where they, they set up one to invest in, in, in early founders. So the reason why you want to know that is that informs the [00:43:00] conversation they’re going to have with you. So if their founder mentality, if they came, if they were an operator, a founder and they had a big exit, now they, you know, went to the next logical step, which is you become a VC.

Right. Um, then they’re going to talk about different things. Then if it’s somebody who’s more financial driven, if they’re financial driven, they’re going to want to know, you know, what are the metrics? What’s your unit economics, which should lifetime value. So that will inform a little bit about the conversation that you’re going to have potentially with that.

Also look at where they stand in the range. If they’re a analyst, a junior analyst they’re new and their job is to go out and hunt deals and bring them in, but they don’t have, you know, they’re, they’re just bringing in deals. Like that’s what they’re supposed to do. If they’re a partner partners, time’s way more valuable and partners only going to chat with you.

If they really believe that there’s a fit and an interest, um, and then you’ll get to a partner. So that’s going to inform a little bit more. [00:44:00] Yeah, I think, uh, well these are all fantastic points. Um, especially, you know, early on doing your diligence, just like you said, you do the diligence right up until the meeting to make sure you know who you’re talking to.

But this idea is calling alluded to knowing what stage the particular company invest in, um, knowing the industry that they typically invest in. And also you mentioned knowing the check size, they typically, right. If you’re trying to raise $15 million, you don’t want to be pitching someone whose biggest check is going to be $25,000, right.

That’s not going to help you lead your round. So I think those are important points. And I think when we talk about the authenticity. Being transparent, you know, everyone can find out everything today, so you don’t want to hide anything. The worst thing that can happen is if, if, if you lie or bend the truth, because it’s going to get found out.

And I, I remember when we were raising money for bar point, the previous company that my co-founder and I had worked for had filed for bankruptcy. We went through first, a chapter 11 and eventually a [00:45:00] chapter seven bankruptcy. And instead of hiding that fact or, or, or waiting for someone to find it out and ask us about it, we went into our pitch meetings when we were raising money and we were very upfront about the fact that the last time.

We had, um, failed and went through a bankruptcy and we turned it into a badge of honor and something that was a benefit because we, we said that, you know, we learned so much from going through that bankruptcy, uh, process and that we weren’t, you know, kids in a garage, we were experienced business people who had experienced both successes and failures, and that ended up working to our advantage.

So you don’t want to hide anything cause it’s going to get found out. A hundred percent and, you know, Jeff, you hit on something really key that a lot of people are embarrassed because maybe they had a company that failed. But VCs know that the more that if you’ve had three or four companies that have failed, they know you’re going to hit one.

They know that that shows that you have resilience that shows that, you know, you’re, you’re going to go out there and [00:46:00] get it right. I mean, you have to have all the other pieces of the package, which means that you have to, you know, be buttoned up and, and, and, and have a great vision and, and understand, you know, MVP and you know, how you’re going to prove market and all that, but it doesn’t work against you.

And I love the fact that you guys wore it as a badge of honor. Uh, I don’t know about serial failure. I mean, if you’ve done it a number of times, um, I do think that if you, if when you present that failure, you share the lessons or you can describe how you’ve learned from that failure. That, that can make a difference.

I actually think Jeff and I’m putting us on the spot here and Lille, I think you were there at Atlanta when we pitched product com um, a year and a half ago, I think we were pitching to the wrong audience. Cause we were, this is a consumable brand and the audience there, they were investors who were looking for companies like yours, Lil, which has that, you know, monthly recurring revenue, [00:47:00] um, more of a platform play platform tech.

Exactly. So I think we, we were pitching to the wrong crowd at any thoughts of that. Lil, since we’re sort of looking back in hindsight, you know, and that particular pitch, we never did get funding on that pitch. So yeah. So, so, you know, there’s plenty, so timing, right? Timing is a huge piece of it and you’re right.

Colin. Um, there’s plenty of people out there now that are investing in e-com scaling businesses. So, so if you were pitching this year, you would already be funded. Um, So it’s the timing, timing of the market for that. And there wasn’t as many, there weren’t as many VCs there for the consumer side, like right now, you know, what’s the sexiest thing happening out there in the VC world.

Well, it’s low code, no code number one, software’s eating the world. Well, actually software is eating itself now. And then, you know, tech enabled sasses were where we were not sexy two years ago. All of a [00:48:00] sudden we’re sexy because future work disruption. And so, yeah, it just depends on timing. You gotta have a, you gotta be building a company.

If you’re looking to, to, to get funding on, on your company, it has to be relevant to. The timing has to be right. You know, what’s interesting to me is there’s this drone company that a couple years ago, Andreessen Horowitz invested $130 million and it went out two years ago. And now if you look at Lilium, uh, they have a drone for people like Palm beach is going to have, uh, a drone that can take you an electric, electric drone, essentially, or plane that will take you to Miami in 20 minutes in Orlando in an hour.

So it’s timing. It’s timing. Yeah. Little, you know, you mentioned that you were part of Jason’s, um, um, incubator, Jason Calacanis. He often talks about. The Tam, the total addressable market. And I think what he often says, and I’d love your opinion on it is one way a lot [00:49:00] of people could turn off investors right away is by having an unrealistic or an unthoughtful Tam.

And what I mean by that is, is just a ridiculous number that, you know, the market we’re reaching is, is 5 trillion, $5 trillion because there’s 7 billion people who are in this space and it’s way too broad. And it’s really got nothing. All you have to do is get 1%. All you have to do is get one. Yeah, exactly.

Yeah, totally, totally agree. Like, look, it’s about being realistic, right? So, you know, if you say, Hey, the addressable market is, is this big market and we’re folk, then the next thing you should say is, and we’re focusing on this piece of the market and with the, and then a small percentage, like people will go, oh yeah, we’re going to get 10% of the market.

You know what? Salesforce doesn’t have 10% of the market. Nobody has 10% of any market. Well, except for Amazon, um, You know, so you have to be [00:50:00] realistic. So it’s combination of both. You guys have a realistic total addressable, even if it’s massive, then, then narrow it down and say, we’re going to focus on this piece of it.

And, and with achieving a half of 1% of this piece of the market, we’re a hundred million ARR venture firms want to know that you’re there taking a bet on that. You’re going to get to a hundred million ARR. There are. So let’s talk for a moment about your raising capital. So who’s the right one for, for you to raise capital, are you best to go out and get debt?

Are you best to go to private equity or your best to go to VC? They all have different ways that that third business model works. They’re a business model, just like we all have business models. So VC. VCs want to take a bet on, you know, 10 to a hundred return, right? And they’ll tell you, they’re taking a bet.

They’ll say, yeah, we’re going to bet on this company. That’s how they look at it because they know that out of a hundred companies, they’re going to get a couple of winners. And those couple of winners are going to be so massive [00:51:00] that it pays for all the losers. Then private equity is different. Private equity wants to get three, three X from private, extra equity.

They’ll try to get up to five, but they really just want a three X. So if they throw 20 million in something, they don’t throw it in as many deals. They’re way more thoughtful about like, we’re only going to pick one deal where a VC knows that their business model is they got to go out and do a hundred deals.

They’re going to be super thoughtful, but they’re going to find a hundred thoughtful deals. So private equity, they’re going to say, okay, we’re going to put 20 million in. And their expectation is that they’re going to walk away with 60 million, 80 million. Um, and then debt, you know, debt’s always a great way to, to not give up equity, but you’re not going to get as much scale.

So I always say to founders. Work with the end end result first, um, they call in, you also look at it and Jeff, look at it the same way. What do you want the end result to look like? And then let’s work backwards and see how you get there. That’s great advice, Lil. And I think that the most important thing you could [00:52:00] show is that you really understand your business.

If you can show a logical path to hitting those numbers, it’s not a guarantee you’re going to hit them, but if you can show yes, the total addressable market and the industry is this we’re focused on this space and we’ve narrowed down that space to this type of customer. It’s much more important to show that you have a good understanding of your market and a path to the numbers.

Then to show a huge number that may or may not be realistic. It doesn’t have to be huge. If you can show a clear path to that a hundred percent, just show them how you’re going to get to a hundred million ARR. And if you’re not going to get to 100 million ARR, and if you’re only going to get to 10 million ARR, then VC is not to play.

Private equity. Yeah. I don’t know, a hundred percent. That’s the case. Cause it’s it. You always got to get to 10 before you can get to a hundred. Right. So I know what you’re saying. If you can, if you can paint the vision where it can go well beyond 10, um, are you familiar with the rule of [00:53:00] 40, um, Lil? No.

Share it with me. So that’s the idea that a software companies combined growth rate and profit margin should be greater than 40%. So for instance, you can have 10% growth rate, 30% profit margin, or you can have 40% growth rate, 0% profit margin at Hostopia. We were always focused on this number, the rule of 40.

And that was something that, um, a lot of, I don’t know, it’s sort of a basic rule that a lot of investors look at when they’re looking at companies and it made me think about, you know, the reality is you also have you talked about timing, your company has to time the investment, right. As well. So you have to have grown.

A certain amount. Is there a PR, is there a percentage, you, you think that when you’re making that pitch, is it 20%? Is it 30%? Like, what is the, what is the point where you’ve got something that’s investible? So here’s the deal when you’re a, um, when you’re a VC backed company and, and you’re on a path to a [00:54:00] hundred, what they’re looking for you to do is triple, triple, double, double, right?

So say you do $300,000 in your first year, right? So they want a trip. So the next year you need to do 900 and then the next year you need to do 2.7 and then the next year you need to do 5.4 and then the next year you need to do 10.4 and you just double, double, double, double. And then, you know, you go 10, four to 20, 20 to 40, 40 to, you know, 40 to 80, and then there you are.

Right. And so when you do that, it’s typically like a seven year. To the a hundred million ARR. So trip trip, double, double, double, double, um, is the way to go. And it’s easy in the early day, right? It’s easy in the early day. Uh, that’s huge growth, right? Like, so for instance, we’ve grown 400% from 20, from 2019 through, uh, through 2021, we’ve had a 400% growth.

Um, personally, I think it sucks. [00:55:00] Uh, we got caught in COVID we grew revenue 30% during COVID, but we should be further along the path. Um, you know, in order to, to get where you want to go.

Yeah. W could be your internet could be my internet. I don’t know whose internet it is, but we’re, we’re coming in a little choppy here. Um, no, this is great. Lil I think, uh, are you able to share with us right now? What, how much you’re looking for, what your offering is for your company and what you’re actually doing right now?

Yes, I can tell you what the valuation. So that’s another point is that the VC set your valuation, right? And so, um, we’re raising a 10 million series a and, and that’s where we’re at. It’ll come in on evaluation, we’ll get term sheets, you know, knock on wood. Right? Of course we’re having a great interest. Um, and we’ll have term sheets and they’ll evaluate at what they think.

Well, best of luck, Lil. [00:56:00] I know if anyone can do it, you can do it. I know I’m an investor in your company. Great news. You keep killing it. And, uh, we really appreciate you sharing everything that you have today. Any other questions here, Michelle or Andrea for Lil? We, we so special that we thank you. I’m always honored when you guys, uh, have me come on.

I love it. So anytime, Hey, little, one thing that I thought was really great that you. Is that you are constantly changing your pitch with what the environment is. So I think that’s something that’s really, really key here because we all know with COVID, you know, there’s some pretty dramatic changes happening right now and for businesses and workforces.

So that’s, that’s something that I, um, can really appreciate that you said really like, just keeping in tune with, you know, what the business environment is. Cause it’s changing [00:57:00] really rapidly. Yeah, totally. You’re so right. If so, right. And you know, like with everything you have to constantly iterate. And if you’re, if what you’re saying, isn’t resonating and you’re not getting further along the path, then evaluate what you’re saying.

And also listen to the questions they ask. You know, I keep a piece of paper handy because they ask questions and be sure that when you’re talking to a VCU, you answer their questions. I think that’s a great point, Lil, because it’s, you know, you can’t, you have to go in with an idea of your pitch, but you can’t go in with a locked script because if you go in with a locked script and you’re not listening, you’re gonna, you know, blow the whole pitch because you know, you can’t ignore the question and just go back to the next slide, because that’s a slide you had next.

Someone may ask you a question that’s unrelated to the script you had in your mind for the pitch. So you have to be present in the moment. You have to be listening as little set and you have to answer their questions. Thank you. Thanks [00:58:00] Jeff. A hundred percent. If there’s any questions, happy to answer any questions before I pop off guys, I thought saw somebody’s hand raise.

No, that’s that’s great. And, uh, what a great show, like thank you, Andrea, as well for coming on and really sharing with us a lot of your knowledge in this area. Next week, we are talking about ideas. Ideas are everywhere. What is it that serial entrepreneurs do to come up with their next big idea? Where do they get them from?

And actually, this is the title, uh, of the first chapter of my book. I announced a few weeks ago, we signed a publishing deal Lil with, with Forbes, for, to put together the book, start scale, exit repeat, and, um, yeah. Oh yeah. Oh yeah. We’re going forward with it. And you know, Jeff and Michelle have been helping me all the way to get to this stage.

And the first chapter is ideas are everywhere. So we’re going to use this, this, this series, this, this podcast, we’re now [00:59:00] we’re now I think going into apple, I think next week, right? Michelle, with the serial entrepreneur hour, it’s getting picked up by apple. So in either case, this podcast is show this hour.

We do every two weeks. Uh, it’s also turning into a book and we’re trying to pull. But trying to pull the learnings from this show and put that into the book. And next week’s all about ideas. Where do serial entrepreneurs get those great ideas and how do they do it? Thank you, everyone. This was a great episode.

Again, if you haven’t done it already. Check out, we have about a hundred recordings on the website and it’s becoming a phenomenal database of knowledge. I say often that if you want an MBA in entrepreneurship, you just need to go to that site. And this listened to some of those recorded sessions.

I’m Colin C Campbell, Jeffrey Sass. Thank you for moderating and Michelle van Tilburg, Andrea as well, Rachel and Lil have a good day.


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