Human Connections as the Road to Raising Capital

Serial Entrepreneur EP119 (8/25/23)

[00:00:00] 

Welcome to Startup Club and another show, Serial Entrepreneur Secrets Revealed. Today we’re going to tackle money raising. Oh, it’s a tough time out there. Really is pretty tough for startups. I don’t know how we got here, but we got here again and it’s tough. It’s tough for startups to raise money. In this environment, and that’s where we’re gonna go into deep today.

And we’ve got a an expert coming on to help us with that. Uh, that challenging topic. 

Now, I do know that as part of the formula for a successful business, it takes story, people, money, and systems. You can have a great story, you can have great people, and you can even have great systems, but if you don’t have the money to fund your venture, You’re dead in the water. That is the number one reason why [00:01:00] most startups do not succeed.

Uh, there’s actually a statistic which I’ll pull out in a few minutes. It’s in the book. Uh, that’s coming out. Uh, and there’s a statistic that I’ll pull out, but it’s basically. Uh, something like 80% this was for actually from us bank. I’m sorry, I’m, I’m doing my memory. Okay. I’m human. Uh, 81% of startups that fail fail Tej because they don’t have enough money to go forward.

So think about that. They’ve got a great concept. They got great people. They got great systems, but they don’t have what it takes from a funding perspective. And we are in a very. Challenging time. Michele, you’re gonna, you’re gonna lead us today on this conversation. First of all, what are your thoughts on this environment and raising money in tough times?

My gosh. And, oh, thankfully we have tesh with us today. ’cause [00:02:00] I don’t think, I don’t think I could, I, I don’t think I could do as well as, uh, in this show without him. I don’t know, but I’m going to tell you, like, members, we’re so, uh, fortunate to have Tej Brombat here. He has an amazing amount of experience, and I’m going to tell you some really good advice that even at all levels, that we can all use, and we should all listen to, quite frankly.

Because this guy has over 20 years experience. He’s negotiated over 16, 000. Um, deals, right? Tej and he’s closed over 10 billion, not million, but billion worth of funds. So Tej, you know, I, I love what he has to say. It’s a very pragmatic, simple, easy to follow formula. You know, he’s not trying to overcomplicate these things, but he has an [00:03:00] amazing amount of experience and wisdom to impart on us.

So we’re super excited. To have him. And I just want to give also a big call out to Colin as well. Colin just got off of a very cool, um, Sirius XM. Interview for Wharton business daily with Dan Loney. And, um, you know, we’re starting to promote, you know, we’re, we’re very transparent here on startup club.

We’re starting to promote a book that he’s been working on for gosh, over 10 years, Mimi and I, and the team been working on for several years. It’s about to come out. Um, you know. We’re going to be sharing information about that because, you know, everything we do here at startup club is to help the members.

We’re giving back. We don’t charge for coaching. We don’t charge for sessions, every bit of, you know, experience or questions we give for free. It’s all on www. startup. [00:04:00] club as well as in his book, start skill X and repeat. And part of that whole ecosystem. It was not just us, you know, pontificating, but bringing amazing people like Tej here to the stage that actually have experience and they want to help us.

So you know what? I’m all for it. And Tej, like, tell us, tell us, give us a little background about, you know, how you approach getting money. Like, you know, that’s like one of the toughest things that many of us ever face and our entire professional life as well as personal life. And I know you have a lot of experience on that and you want to share it with our members.

So, Tej, the stage is yours. Thank you, Michele. Thank you, Colin, Mimi. You guys are awesome. I love the value that you bring to everyone, and that’s exactly what I love doing, giving people access to things that they otherwise wouldn’t have access to, um, which is the [00:05:00] best way to be, right? Paying it forward.

So, this is a really, really critical topic for everyone right now, especially we’re in a, Some call it recession, some call it not a recession, but it’s tough times for sure, right? Um, think about Well, Tej, I would call it a startup recession. I mean, 100%. Yeah, I mean, big corporations and billionaires are doing well, but what about the startups?

Exactly right. Um, and especially for startups because your runway is so short, right? Big corporations have three years worth of cash flows, two years worth of cash flows. Some startups, they can’t they have a runway of 60 days sometimes, right? So everything you do is critical. But as it pertains To raising money, right?

Just before anything else. The first thing I always talk about is I’m going to dumb this down, not say dumb in a bad way, but I’m going to make this simple as possible. People say, well, we have a good company. We have financials. We have everything ready. We’re just going to go raise money itself. Raising money is an entire process.

If you have never raised money. You can’t [00:06:00] just go into raising money if you think that, uh, well, I’ll just figure it out. There’s so many things to think about, so stop me at any time. But the first 90 seconds is what I talk about. Let’s call the elephant in the room, right? Which is not prepping your hard assets, right?

The hard assets are the company, the financials, client contracts. You know, if you’re a SaaS company, it’s easier if you have AR, MRR, but not everything SaaS. If you’re not a SaaS company. You have to think about, do I have annual recurring client contracts? Do I even have client contracts? Or if you have transactional revenue, have you articulated that somehow into your deck?

Or do you have an index that you can show an investor? If they say, well, we see you’re making whatever in revenues, show us how you arrived there. So there’s so many things you want to think about, but the elephant in the room is the easiest way to think about it. Selling your home. Everyone can relate to when you think about whether you’re looking for a home, buying a home, selling a home.

Just because you have a beautiful home and you have the high, high end appliances, you have everything you [00:07:00] need doesn’t mean if someone wanted to buy your home, uh, that you could just be ready. They come through and they’re going to give you top dollar. Yes. They might give you something for it. Like in our world, it’s called discounted cashflow on evaluation.

They might say, well, you say it’s worth 2 million. I’ll give you one for, for these reasons. That’s what would happen to you if you didn’t prepare. Now, someone who’s very well prepared, and I’m a big fan of over preparing, if you’re a startup listening, if you’re an entrepreneur, you can’t over prepare. One of my favorite quotes from Sun Tzu is, you know, most wars are won or lost well before they’re ever fought.

Because of the fact that if you think about selling your home, right, it’s not just about the asset itself. It’s about the presentation, making sure you have the right audience coming in to buy your home. Like in other words, if you have a big corporation coming in to buy the home and there’s buying a block of homes, they’re not giving you top dollar.

That’s not your audience. However, you want someone who’s moving into the area, someone who likes the architecture, the certain style of your home, the effects in your home. [00:08:00] That’s the way you think about your company. And your audience, two things, right? Are you positioning your company? Not just in a pitch to the investor when you’re raising money, but on paper, right?

The paper or the deck that’s important. That just is the wedge in the door. But once the investor says, I like this, let’s go have a conversation, that’s where the magic really starts and the work really starts. So think about that, of correlating it to selling your home, have everything ready, not just in your speech, but on paper.

Um, and that’s the biggest alpha in the room that I see, is the smartest company, some of the most amazing companies. We just sold a company, uh, Q1, and we got an eight figure exit. It took us what I tell you, six months to prepare this company, CEO, brilliant technology, proprietary IP SAS company in the beverage alcohol space.

But guess what? When I asked him the questions that the investors would ask. He fumbled. He didn’t know what to say because he spoke from a technical standpoint. He [00:09:00] spoke from a standpoint of someone who stacks tech. And I said, the investor doesn’t want to hear that initial conversations are going to be, tell me your vision.

What does it look like? How do you get to revenue? What’s your profits profits? Not as important, but how are you? Um, what’s your runway look like? What are you doing? Et cetera. So I want to start there to think about that. We’re raising capital now, we’re thinking about raising capital, make sure the house is in order before anything else.

That means you, as the CEO or founder, the executive team, everyone should be on board with what you’re doing because everyone should help push the boulder up the hill. Because sometimes… CEO might not or the founder might not be the best person answer question. Maybe they need a co founder Maybe they need the tech person.

Everyone should be on board. You have to prepare everyone It is a lot of work and it’s arduous work So I want to make sure I throw that out to you to start the conversation there. Yeah, I mean Wow. There’s so much in what you’re saying so much good information. [00:10:00] And, you know, I, I, I just want to like back up and just, so Tej, you said, know your audience, right?

So you need to be speaking the language of your investors and you threw out some really great terms here. And I want to just make sure everybody. It’s got that. So you said ARPU, right? Basically average revenue per user. I, I think that I, I would concur with you and, and, you know, I want to hear Colm weigh in here too.

That’s such a important metric, but the whole concept around really knowing and understanding what the financial lovers are in your business is absolutely critical. I know we’re talking a lot today about financing or exits, but I would say, like you said, from the very beginning, we need [00:11:00] to be engaging and monitoring and having these conversations as well with our investors.

We need for them literally. To be quote, invested because, um, as you very succinctly said, when we’re pitching these things, you know, most often, and in my experience, more than, you know, 100%, if there’s such a, such a thing is it always needs to be a team behind this. So I’m interested in your thoughts, Colin, you’ve obviously grew and exited a lot of companies.

So what is your advice for the members here? Colin Yeah, I think I like where you’re going with this test around preparation. I think a lot of times startups say, Oh, I need to raise money and don’t realize that they need to really prepare for it. And there’s sort of a series of things that you can do to do that.

And I know we’ll get into the details and a little bit of the meat of that as we go forward, but the fact of the matter is, I think the first thing is, [00:12:00] whether it’s ARPU or a lifetime value of a customer or whatever it is, depending on your business, uh, it’s really all about having your KPIs, your metrics, your numbers, your balance sheet, your income statement straight, you don’t even go into this process, Tej, what do you think?

You don’t even go into this process until you got your house in order. Cause if it’s, if it’s disorganized, people see that right away. Right. That, well, that’s exactly right, because what you’ll do is two things, you will get disenchanted. Listen, when you have an amazing company and you’re at, um, you know, you’re doing 30% year over year for the first couple of years and, and you’re getting partnerships and you’re blowing up.

It’s hard enough to raise money when you’re doing that or to look for a buyer, um, and exit. It’s hard enough. But for most companies, everything doesn’t go that smoothly, right? For every 10 startups, you know, you know, that is in within one year, 70% of them don’t make it. And to get to the 10 year mark, you’re in the top 10%.

So for most people do not go to market for [00:13:00] anything until you are overprepared and semi confident because you’re never going to be confident, but you’re semi confident, so you cannot overprepare because two things will happen simultaneously, you will get disenchanted with the process. You are not going to want to do it.

If you do it once, I know companies that have done it once, they’ve been so battered and tattered by industrial questions and not being able to have the grit to sustain for six months because it’s a tertiary job, right? You’re the founder, you’re the CEO, you’re doing that, right? You’re running your business.

Then you have your personal life, then you have your tertiary life, which is, it’s a full time job, which is why you need a team. Uh, Michele said it best. We get involved because they need a team to run, as it called, the process, right? From the initial due diligence, uh, the, the, the white, uh, white boards to the white room, to, to everything, looking for the investors.

And by the way, If you go unprepared, your potential investor that may have invested in you, if you properly went to them, um, with a proper deck, with [00:14:00] financials, with a good story that’s compelling, et cetera. Guess what? If they say no, a no is never a no for into perpetuity, but once that happens to you three, four times, and until you have this experience, you don’t know what it’s like until five, six, seven, eight, nine, 10 different investors.

say no to you. 90% of founders will start to give up. Absolutely will. Because when you hear no, that much, unless you come from the sales world, like I do a no, you’re closer to a yes. But if you’re not in the sales world, you don’t understand that when you get a no, you should take that data. And every week we, we update decks for our clients every single week.

Why? When someone says no to one thing, We tweak it, we go back in a, in a month, we update them, et cetera. So that’s what you want to think about. If you’re listening, be prepared and only go to market. In other words, you want the highest batting average. You don’t want to just, I’ll figure it out. There’s very little second chances, especially in this market for the next six months to raise money.

So if you’re getting in front of an investor, it’s hard enough. [00:15:00] They want to descale risk even more. The fact that you’re getting in front of them, if you are, you want to be over prepared because it shows them the difference between you. And your competitors and everyone else, you came over prepared. No one, and I think Colin kind of like how, when I called you, I said, Hey, I want to go over a few things.

No one will ever say to you, this guy’s too over or this team or this gal, they’re too over prepared. Don’t know if I want to write him a check for 7 million bucks. Never said nobody ever said that. However, if they said, I feel like they need more prep work. I feel like they need more seasoning. I feel like they don’t understand their numbers.

I feel like they haven’t been through this process and I don’t know if they can handle this check. That happens all the time. So that’s what I wanted to answer with that is just make sure you’re prepared. So you don’t put yourself into a hole and then you don’t burn potential investors because in the upmarket, there’s hundreds of investors out there writing checks right now, there’s 5 trillion sitting and guess what?

They’re still not writing checks right now. So they’re extremely discerning. Right. Yep. Um, [00:16:00] it’s interesting. So the other thing too, is to save time is to really make certain we’re pitching to the right. Let me tell you a little story. When we did our IPO back in 2006 for Hostopia, we had 34 meetings. We had 6 in the United States and 28 in Canada.

We pitched to 28 institutions. You know, the entire thing was a two week process. It was quite a lot of travel, and it was very intense. It was called a road show. We pitched to 28 institutions in Canada, 6 in the United States. 50% in the United States and 11% in Canada. It’s interesting because when we were pitching in Canada, they tend to be a lot more generalist.

We were a SaaS based company and when we went to the United States, we focused on SaaS based investors and we had a much higher hit rate. So I think the very first thing to intention, I want to get your thoughts on this one is just make certain you’re pitching your products or your [00:17:00] services. To the right in type of investors.

Cause there’s different profiles. Just because someone invests in a company doesn’t mean they invest in a startup. Doesn’t mean they invest in, uh, an environmental company. It doesn’t mean they invest in a SAS company. Doesn’t mean they invest in e commerce. Everyone has their specialty. And I think doing a little due diligence on who you’re going to pitch to can help you save a lot of time.

What are you thinking? Absolutely. The one of the things in sales, your key tenants, KYC, know your client, uh, in the investor world is, you know, know your investor because you can have the absolute. Now let’s take it up a notch, right? We talked about over preparing. So you’re preparing for a battle. You’re preparing for whatever it is.

And you feel like you’ve trained, you have the pitch down your co founder, the team, they have their pitch. You have the deck, you have the financials, you have your client contracts, everything you possibly need. You have the cap stack ready. You have everything you possibly need. Thank you. And then you realize, think about like in, in, in the, the, the quote I used [00:18:00] the, in the battle, you go to a gunfight with a knife, you are absolutely, uh, useless, right?

So if you go to investors, for example, if you’re a SAS company and you’re looking for the. Early stage check a million two million bucks and you’re going to the larger feces That that is that doesn’t move the needle for them simply because you thought oh Well, they invest in SAS companies and I got myself in there, but the chances of them Investing in you because it doesn’t move the needle for them is very rare that they’re going to unless they know you very well.

So two things I like to break that down into Colin, which is I call it EQ and IQ. And I, I platter this everywhere across the internet, which is IQ is the assets, right? That’s your revenues. That is your, um, ARPU, that is your AR, MR, everything. But the EQ, right? The delivery of it, the how. The why the story, if there’s anything the last five years have shown us, it’s, you don’t need Ivy league degree and you don’t need that [00:19:00] asset to do things anymore.

Now it’s about building relationships, the emotional intelligence deliver it. And more importantly, like you said, not just researching and knowing you could do so much due diligence on your investors, even if they’re private. You can find out through, through whether it’s LinkedIn, whether it’s Hoover’s, whether it’s linked to IQ, you can find out who your investors are, but then more importantly, what they invest in.

So you’re not only investing with the right people or pitching the right people, you’re doing it in the forum that they like, because I know individual investors, they’re very informal, right? They want to get to know you. They don’t want to run the process the way a big VC or an Andreessen would run the process with you, right?

So knowing your audience. Is mission critical and you’ve just now eliminated probably 20 or 30% of your stress of going to market by over preparing so you know what you’re doing, but then knowing your audience. Once you have those things aligned, the rest. Is almost, I can say almost nothing’s guaranteed, but it’s a matter of time and effort.

If you have everything you need to move [00:20:00] forward and you have the right audience and enough of an audience to pitch due, whether that means for you five pitches or 50 pitches, if it’s the right audience, it is a mere matter of time before someone writes you a check and you’re off to the rigs list, if that makes sense.

Fantastic. Alright, so. I’m just going to summarize here a little bit. So we’re going to know and thoroughly understand who we’re talking to. We’re going to over prepare. I love that. Even rehearse it, right, Tej? And then, yeah, go ahead. And then we are going to. And I love the 3rd point, especially is like, after every pitch or presentation or feedback or response, we’re gonna like, you know, we might not like what people said.

But we’re going to sit there and we’re going to think, what is the truth in this? What is it that we [00:21:00] need to adjust? And, you know, for me, and I think that principle applies in business and life across the board, that’s like absolutely critical. So. You know, we need to be very self aware, we need to listen to other people, whether we like it or not, and just get ourselves out there, you know, in a very honest and transparent way.

But Tej, like, kind of like, where do I start? So I’ve got, you know, a little bit of a profitable product, I’ve done my proof of concept. I’ve got, you know, a basic deck together. Like, what would you suggest that I do next? Sure. Um, one thing I want to touch on when you said about the over preparing, let’s call it the four P’s.

Uh, it’s just easy to think about, right? Plan. Everyone has to have a plan. It doesn’t matter how good your company is, whether it’s a brand new startup, whether it’s a seasoned company without a plan, you will [00:22:00] not be successful and you might get lucky over the long run. You will not be successful. So think about this plan.

then you, then you, as I said, prepare the hard assets, prepare the team, prepare the paperwork, et cetera. And then you, you brought it up, which I love, which is something I’m a big fan of. Um, practicing. I literally, even for this, I have two pages of notes here in order of, so if I lose my space, I know where to go.

1. Took all my notes I’ve had over the years. I put them into two pages. So therefore I am prepared. I even sometimes before a speech or a keynote, I’ll go over and over for hours because of the fact that when you’re in front of someone, it’s easy. It’s normal to get nervous. If you’ve done it so much, it’s a conversation.

Like right now I’m reading some of my notes, but it’s a conversation because I’ve practiced. And the last one is pivot. Um, and I say this to everyone. Most people think. Everything is an event. It’s not. It is an ongoing. And when I tell you, um, I’ve been doing this for now 20 years, everything is an [00:23:00] ongoing journey, not a one time event.

A capital raise, that one check might be a one time event, but that’s just one stop along that journey. So the plan, the prep, the preparation. The practice and then the pivot. So every week, if you’re going to pitch another investor, if someone says, Hey, by the way, we’ve noticed that your, your MRR looks strong, but we’re noticing that your CAC is just way too high, you know, uh, 7 per, um, is that, that, that’s too high of a cost for your industry.

Go back, listen to the data. Reiterate, figure out how you can lower it. You might not be able to, but the next time you pitch an investor and you say, now I know what you’re going to say, and I’m going to give you the red herring example, which is one of the things that we’ve noticed from the previous, one of our previous investors, our CAC was too high, right?

Here’s what we’re doing about it. And we’re noticing now that it’s coming down slowly, but by pennies that we’re hoping by the end of the year, our CAC is going to be 5. Instead of seven things like that, you pivot. The last thing is [00:24:00] pivot, constant pivot, whether it’s your first raise or you’re into, well, we don’t get involved our firm till around day and beyond your exit, but whether it’s your first friends and family raise and your friends and family are saying, we love this, we’ll give you a small check, but how are you going to do this?

Or isn’t it, uh, the, this concentration too high for Wolf for, for your revenues, et cetera, any feedback. is superb feedback. Remember that it terrible feedback, good feedback. You take all of it in stride and you’re incorporated into the next one. So that’s where you want to start. But if you have a company, your past, your past proof of concept, whether you’re pre revenue or you have revenues, your plan should be, I always think five years out, right?

Cause everyone wants to know. So what’s your ultimate plan and reverse engineering? And I know it might be much, it might sound like over daunting of a task for a startup to think about five years out. No, just more of a wish list, right? One pager, five years out. The goal is we will grow to 50 million top line with a [00:25:00] profit of 15 net.

Per net 15% profit of net income, et cetera. And then maybe it’s a 10 years out. We go public or five years out. Maybe we exit. We’re just doing this for the big check in the exit. If you start there and then reverse engineer year over year, when you get back down to your first year, then you’re going to say, okay, we’re in our first year, we’re going to raise capital in three months.

What does that look like from the investor in your mind? Think about what an investor would do. What would they say? How would they look at this, right? They’re going to think about strategy. They’re going to think about, and I always say this, In the business is how you got here in the business is the technology.

It’s your first client. It’s the, um, infrastructure, it’s your HR, et cetera, right on the business is why they’re going to give you a check in the businesses. You have a good model, uh, et cetera, et cetera. It’s good. Can we scale it or can you scale it? That’s on the business. So when you’re in the infancy stage of capital raising, think about these things, but not just think [00:26:00] about them.

Articulate them, share them with the co founders, share them with your tech team and say, Hey, here’s what we’re thinking is our assets. Here’s our areas of improvement. And I’ll tell you right now, everyone knows what your assets are because they speak for themselves. Most people shy away from their area of improvement.

Think about a red herring. And for those of you listening, if you don’t know what a red herring is, is anytime you’re making an investment into a public company, they will send you a red herring saying, here’s the reasons why you don’t want to invest. Here’s the risks. Think like that. And then you’ll build a case around your areas of improvement and reverse engineer it that way.

Think about that. Does that make sense? Yeah. And you know, I just want to draw attention to something you said is you really talked about how important it is to just like be very forthright about what’s going on. And I love that you don’t, I don’t know how else to say it. Just like stand around the If somebody calls out something that is a flaw in your [00:27:00] plan.

Just, like, address it directly and honestly. And, um, I truly believe that investors want that. They, I know it sounds weird members to some people, but they’re looking for somebody that they can trust and work with as well. And we’ve heard time and time again from Colin and Tej and other people on the show.

It’s like they understand that, you know, things happen. You don’t meet expectations in terms of projections. Things happen, things go wrong. But if you can be that good partner, that goes a long way, right? Guys. Descaling risk. I say it right now, every investor there’s there it’s conflicting, right? Because they’re getting pressure.

From where they’re getting the money from investors, right? They have to deploy this capital because the IRR IRR is not happening because it’s not being deployed. It’s sitting on the sidelines. So that’s the good thing is they [00:28:00] want to write you a check. The bad thing is they’re only going to do it because the GPs and LPs are going to say, well, how do we de scale this risk?

And the easiest way to de scale it is a humble approach of, I know where you’re going to say, Mr. Mission investor, you’re going to say these three things. The industry is, uh, over exaggerated. We’re going into a recession if we’re not already in there. Um, and the turnaround is not going to happen for 12 months.

You know, yes, I understand that. And because of that, here are the things we’re doing to mitigate that risk and descale it for us, which in essence descales it for anyone that writes us a check. So absolutely spot on the humble approach because let’s be honest, these investors, they are much smarter than any startup founders ever going to be.

No offense to any startup founder, but the investors, especially the ones that have written hundreds of checks, you’re right. The average investor is in 15 active investments and they know the questions I ask and that’s Not the questions itself, they can smell, they can feel when [00:29:00] something doesn’t align right.

Because I’ve been in this business 20 years, I don’t even need to know all the facts. I can just tell by what you don’t say. When someone pitches me by what they don’t focus on, what they don’t say, I already know what they’re up to. Or when they answer a question and I can tell when they’re just in circles, etc.

So be a hundred percent forthright. And if you start with, here’s our company, listen, and I’m going to be honest, I’ll give you a piece of our pitch. I’m not going to sit here and brag about our company because we already sent you the deck. You know what our trajectory is. We’re going 28% year over year.

Here’s what we’re looking like. And we are going to be a hundred million dollar company on our own. But with your investments, this could be a major nine figure exit for all of us. Let’s talk about. What’s stopping you from writing the check? And I’ve taught this before. Every time I’ve pitched, or whether I’ve been pitched, I’m like, let’s hold on, stop a second.

Before you pitch me about how great you are, I already know what, what you’re great at. Tell me what’s stopping me from writing the check. If everyone who’s a founder creates their pitch deck and their pitch based [00:30:00] on what is stopping your investor, From writing their check right now. If you start there, your life is going to be so much easier.

Ask any investor on the planet. If you start with what’s stopping me from writing the check to you right now, if you start there, the rebuttals drop precipitously, if that makes sense, Michele. Yeah, absolutely. I mean, That’s what a relationship is, right? It is very tightly intertwined, but Colin, I want to hear your thoughts on, um, you know, what Tez just saying.

I know you’ve invested and had investors in a lot of companies, like is the, you know, honesty and relationship important, or are we just trying to like, tell them how much they’re going to make? Yeah, so it’s interesting that this idea. And I’m trying to do this from memory, but I know this is in the book as well.

There’s a study that we quote out of the book around arrogance versus confidence. Ironically, [00:31:00] it’s a fine line between the two. That the close rates for VCs was double that of those pitches where they were humble Versus, uh, arrogant, uh, someone who’s perceived going into a pitch where they, uh, they think they know it all.

And again, this is very tricky because this is about confidence versus arrogance. But if a VC feels like they’re not able to impart information or help out or, or be listened to by the investor, the VC tends to pull back. Uh, but then there’s a fine line, right? Where if you’re too humble and you’re too nervous or too whatever.

That’s a different, that’s a, we’re not talking about that. And Tej, I want you to, maybe you can help me, help me with this concept. But the fact of the matter is the typical we work CEOs don’t actually do that well raising money. It’s the [00:32:00] ones who are authentic. And by the way, anybody comes on stage who’s who’s been in clubhouse who’s come on stage.

All you can be is authentic. You know, Tej, he spends hours online. Michele does. I do too. And Mimi, like all you can be is yourself and everyone who you’re pitching to sees that now you want to be crisp. You want your message to be crisp and you want to You know, you don’t want to be, you know, just dragging things out.

Uh, you know, you want to really be, be practiced like Tej says, but at the same time, being authentic is very important and being humble yet confident. And I know that’s an oxymoron. What do you think Tej? I love that you brought light to this point because I will say it this way, and this is, I don’t know where I got it from, um, and in my investment banking world, there’s a lot of arrogance, more than there is any kind of humbleness, um, or kindness.

And I will tell you, one of the reasons for why I feel like I’m successful and why I, I’m a good mentor to people is because the things that you know well. Right. There’s whatever you [00:33:00] are an expert at, it could be anything, but if you know, you’re, you’re doing it well, and you’re basing that on not what you think you’re basing it on what the market’s telling you.

So if the mentors, I meant mentor twice, three times a year over the years, the 15, 20 people I’ve mentored come back and say the same exact feedback that tells me a lot. So therefore I am extremely confident in what I know, but here’s the trick. If I don’t know something, I am very quick to say, I’ve heard of this.

Please educate me because I not, I have not played in that space. I don’t know that industry. Um, I’ve not worked with that DC and people immediately, you think you’re you in your mind, you feel like, ah, it’s a stupid question. The people who have real money appreciate that because as someone who is, whether it’s Warren Buffett, whether it’s, uh, you know, Andrew.

Andreessen, whoever it is, they don’t know everything and they rely on their team. So you said, you said it best humble confidence. It is not about knowing everything. [00:34:00] It is about knowing what you know and why you’re going to raise money, why you built your company, knowing it so well that you will put a hard boundary around.

I am the best at what I do and this is a hard boundary and I’ll defend it. Everything else that which I don’t know, I’m absolutely going to ask questions. And by the way, I was, um, at an event and I had, uh, I got six or seven minutes with Damon, John, um, personally one on one during this event. And I asked him if there’s one thing you can tell entrepreneurs right now, um, what would it be?

And we got into a side topic and he said. The most successful people that he knew, the wealthiest people, the smartest people, the people that he goes to for advice ask the absolute most questions. And isn’t it ironic that the people that someone who’s worth, you know, four or 500 million goes to for, uh, for questions and they’re the ones that have the most questions.

So the more you understand, the more, you know, more, you realize there’s still yet more to learn. So that’s the way to think about it. That’s the easiest way to be confident. But within [00:35:00] boundary. All right, so I got it. I just I just looked up, looked it up. It’s actually in the chapter perfecting the pitch in the book.

I’m talking about start scale exit repeat, and I apologize. The book has not come out yet. It comes out on October 3rd, so you can’t buy it now, but you can actually Pre order if you like, but here’s what, here’s what we say. But a note on this, confidence is not the same as arrogance. In a 2021 study, it was found that entrepreneurs who showed humility in their pitches ended up almost twice as likely to get funded.

As it turns out, the stereotypical picture of a boastful entrepreneur who presents as if they have all the answers ends up being more of a turnoff to investors than the entrepreneur who’s willing to admit that they don’t have everything figured out yet. So I, I knew I could remember it. Like it’s a, it’s a pretty big book and there’s a lot of details, but even studies show that there’s this concept of humility in your pitch, but confidence is, is, is definitely not the same as [00:36:00] arrogance.

All right. I want to ask shift gears here a little bit. Oh, Michele, you got, do you want to jump in on that one? Yeah. I mean, we’re, we’re kind of halfway past this, like, you know, I’m learning so much and I, you know, we’re so, um, grateful that you came on Tej, you know, I’m curious. How do we get in touch with you?

We have a lot of folks here, members in the audience that may want to reach out to you. Can you, can you give us that information just so we can reach out to you, please? Yeah, absolutely. And I do a poor job. I hate Self promotion in any way. So thank you for doing that. Um, listen, I like putting out free education.

I started, I literally started my social media handles after COVID. Um, and I’ve got a lot of good feedback. So easy. Tage, my first name, T E J takeaways. That’s my handle for everything. It’s kind of like one of my clients said, every time I’m with you, I take away something. So he said, once you create Tage Takeaway, so Instagram is my social media handle for non, for anything, education, [00:37:00] business, et cetera.

My main handle is on LinkedIn. So that’s just my name, Tage Brombach. So if you put in Tage B in New York city, I’m the only one that comes up. Um, but Tage takeaways, I’m on pretty much anything, um, social media, but Instagram is the main one I use for education purposes. And. Some business, but, uh, if you like what you hear here, um, that’s why I tend to post some of the stuff I’m talking about.

We do a deal, I have a mistake, and I use a mistake to turn it into a lesson. I post it on usually Instagram or LinkedIn typically, but thank you for that. Yeah, absolutely. So I encourage everyone to follow Tej here on Clubhouse and Colin and Startup Club. Um, you know, it’s, it’s our mission. We don’t ask for anything.

Like we said, just, you know, give us a follow. We. Greatly appreciate it and reach out to either one of them with any questions you want. And if you have questions or you’re interested in coming on and presenting on startup club, just email us at [00:38:00] hello at startup club. But Colin, I saw you’re blinking your mic there.

My friends go for the audience too. Like we’d love to have you on stage. If you’re struggling to raise money, this would be a great time just to. Jump on stage, ask a question. It’s Friday afternoon, it’s the summer, and we’re all just talking about it. Or maybe you’ve actually succeeded at raising money and want to share your story with us.

Just raise your hand and come on stage. We’d love having people on stage. Uh, Tej, why don’t we take a little bit of a different angle here and talk about the different types of fundings for different situations. Like not, I don’t know if you know this, but less than, I believe it was 99%. of companies on the Inc.

5, 000 do not have venture capital. Again, I’m quoting too many studies here in my brain, but it’s a very high percentage in the 90s that do not have venture capital that are actually on the Inc. 5, 000. Um, a vast [00:39:00] majority have, um, funded their companies using, you know, sort of their own funding or customer funding.

We had a great speaker on John Mullins who talked about customer funded startups. And we talk a lot about him in the book and the idea different funding for different situations like everyone, especially in today’s environment. And I think that’s sort of the question now. How does a startup move forward?

I will offer one idea before I pass you the mic. Uh, one of the things that I’ve seen at work out pretty well is getting involved in the incubator accelerator or an innovation center. And I work closely with the Alan Levin Center. And I speak, uh, uh, to a cohort, uh, every month or two, I’m back there speaking on some topic, but we, we do a cohort.

Uh, and I think it’s 10 classes and it starts with a strategy session that I lay out the four sticky note business plan and [00:40:00] then, uh, it ends with, um, a pitch competition and there’s actually a section on pitching, perfecting the pitch and a colleague of mine. Uh, she’s actually, Lil Roberts actually does that section as well.

And then we have angel investors show up, and people actually pitch, they actually make connections, and they actually can connect with the community. So I’d encourage you, if you’re looking at raising money, to reach out to a local, your local university, Google it, probably it’s the easiest way of doing it, and just figure out what kind of innovation centers, or cohorts, or um, Incubators are out there and let me be very clear.

This is not just for students. I’ve had people 65 years old in the classes that we do. It happens to be at NSU, but we do get a lot of college students, but at the same time we get a lot of people from the community. So don’t think this is just for college students. You can actually get help. Connect with an incubator and, uh, and, [00:41:00] and, and, and cohort and see what that can do for you for connections.

At a minimum, it will help you hone your message. As well, there’s a lot of pitch competitions in your local community. You know what, just go do it, pitch it, fail it, and get better at it because the more you do it, the better you’ll get. And you never know, even if you don’t win the pitch competition, there might be someone in the audience who thinks that’s an interesting idea to invest in.

So I love this topic and let me just kind of step back a couple of steps here because it’s very in vogue to say, hey, raise money, right? Bootstrapping. Now it’s called bootstrapping. Before it was. Starting a business and just driving revenue, right? Going out, finding a client, making it two clients, six clients, and generating revenue.

That’s how you started a business. So it’s become so in vogue, um, that everyone just says, well, I need to raise money. So I’m going to set the stage. If you’re going to go out and raise money, typically it’s equity, right? But if you’re going to go out and raise any kind [00:42:00] of money, non dilutive or equity or whatever it might be preferred.

Have a plan, like I earlier I said about the four P’s, have a plan first of what you’re going to do with each dollar. And if you don’t have a plan, a thoughtful plan, of taking each dollar and converting it into a multiple, whether it’s two, five, ten multiple, over the coming six, twelve, twenty four, thirty six months, then you shouldn’t be raising money.

So that’s first and foremost, and it’s okay not to raise money because more companies raise money And fail then actually become unicorns. So know that before you do anything else. And by the way, when you’re raising money, right, going to market, raising equity, there’s a ton of other ways. Colin brought up, for example, incubators.

So many different incubators have popped up in the last few years. And before it was like you have to apply, you have to go through this algorithm to even get accepted now. There’s so many friendly Um, incubators out there and groups, [00:43:00] um, and just support groups of founders getting together to share Intel resources, capital, uh, or just, Hey, how do we help one another?

Right? Like a kind of a, a helpline for one another. So if you are a new founder and you’re struggling and you’ve never raised money and you need to raise money or you just want to become a little bit more stable in this economy because you think your runway is only. Three months, two months, but really right now everyone should have a runway that gets you into Q1 of 2024 because things are pretty tough right now, right?

There’s so many ways the first and easiest thing I always tell people is listen, the first thing you do when you have an account when you have a Startup before you even have revenue, you’re gonna have to open an account at a bank, right? Have one or two key banking relationships because those banking relationships will then open other doors for you as well And that could be as you generate revenue There’s revenue based, um, lines of credit and loans that you can get.

There’s, uh, if you have any kind of an asset or any kind of, [00:44:00] um, IP, real estate, whatever it might be, you can do ABL, ABL light loans, business loans. First of all, and there’s also grants, uh, Colin mentioned competitions, but grants I think are the most underserved because they’re tough. There’s no one central place that says, Hey, if you’re a SAS company doing this, here’s the 40 grants in New York City that are available.

No. It’s like a full time job. And I tell people you should hire an intern. You know, I’m in the process of doing that. Hire an intern to do things like full time. Their job is two hours a day. They go scour the internet, local grants, federal grants, statewide grants, you know, city grants, just that money sitting there.

You’d be surprised how much money there is, right? So I’ve named that there’s crowdfunding, right? Competitions, competent pitch competitions. are so cool right now because it gives notoriety to the people that are supporting the startups. It gives notoriety to the startups themselves. It helps them perfect their pitch.

And many times I was at, um, the MasterCard event a couple of weeks [00:45:00] ago, and they ended up giving away five checks of anywhere between five to 35, 000 each to brand new startups. So. pitch competitions, as Colin said, right? Um, strategic partnerships, right? You don’t even have to raise money. You can have a partnership like a, whether it’s MasterCard, whomever, and I have, and this is not a plug or promotion.

I’m not getting paid for anyone. I’m just, as an example of a recent event I went to, they do things like connect you with their clients and those clients, their clients become buyers of you. So even though you’re not raising money per se, you’re getting Uh, access to potential clients who are buying your services.

Revenue goes up and now you’re getting noticed by, uh, people that otherwise wouldn’t notice you invoice factoring, vendor financing. I can go on and on about the things that you can do, but if you’re a good founder, if you’re a founder in this economy right now, you’re probably pretty resourceful and you’re probably astute at figuring things out online.

Start Googling things like I just said. So, a b l lines of credit for startups. Um, revenue financ. Wait, you said things like that. Can you [00:46:00] just like, For all of us, you said a, b, u, l, a, b, l, um, asset based lending. So if you’re, if you have any kind of an asset, whether it’s, you have AR, you have real estate, receivable, right?

Correct. Oh, sorry. Yes. I apologize. I’m a banker by trade. So if you have accounts receivables, Any bank will lend to you. So if you say, Hey, we have a million in AR accounts receivables, right? And typically, you know, terms go to, they’ll allow up to 90 days. So any accounts receivables that are payable within 90 days.

And if it’s State or federal, they’ll allow six months because they take forever to pay, but it’s more stable for the investor or the bank. You can go out and get yourself an ABL, um, based on your AR. So I’ll give you example. You have a million in AR. You go to a bank and say, Hey, look, we have a million in AR.

So what’s your aging report? 90 [00:47:00] days. Oh, it’s about 800, 000 of it. We get paid in 90 days. Great. We’ll give you 85% of that upfront as a line or credit for a short term working capital. That’s one of 20 examples that I can give to you that you can access capital that way. Without even having to raise a dollar in the equity world or giving any kind of, um, dilution or anything like that.

So those are some of the things that any founder in your first couple of years before you start really Having strong revenues and things like that. These are things that you can do and you might not get all those But if you find a grant for a couple hundred thousand dollars that might give you enough runway to go hire someone or get that tech stack or keep yourself afloat for 12 months during a bad time, whatever it might be, then you can top on top of that.

You can do some pitch competitions, win some money. And these are all non-dilutive, right? Grants and competitions are the best ones. ’cause they’re non-dilutive. Um, and by the way, that a d l that I mentioned that is non-dilutive because it’s debt. [00:48:00] So if you can go the route of debt, if you have any kind of an asset, that’s the way to go.

Non-dilutive, right? And then you start talking about raising equity because now you’re talking about your caps stack and diluting so, Makes sense. Yeah. I mean, this is such a rich topic and you know, you said I could tell you 20 ways. Colin, I, I think we’re going to have Tej back on stage many times and I would love to go through those kind of examples of 20 ways.

Sure. I mean, there’s this, this topic, this is, you’re talking 20, 30 hours of things that you, you want to educate yourself with. Right. Um, and we’ve only gotten into. Three of the bullet points that I had so far, and we’ve been here for nearly an hour. We only cover three bullet points because this is how arduous and complex capital raising is, but it doesn’t have to be, and I’m glad you guys bought up.

What can you do in lieu of that? Start searching for grants that someone wrote in the comments. Is it for nonprofits? Yes, there’s also [00:49:00] grants. Um, I don’t just competitions for nonprofits, but there’s definitely grants out there and stipends, um, at a state level and city level. So I’m in New York city. So for New York city, there are hundreds of programs for for profits and nonprofits to get non dilutive, uh, financing and grants and things like that.

So. Fantastic. Well, before, you know, we only have 10 minutes and we’re definitely so excited to have Tej back if you, if you will, Tej, but I see Giuseppe has joined us on the stage. Giuseppe, we’d love to hear from you. Yeah, I love to be here. Every single time. No, I can learn something. How does it work? For example, raising money in USA.

I love to learn. I love to learn. What about it? Say be student for best year of life. If you want to be great. No, I’m business owner, entrepreneur and absolutely real estate is my world. I have all knowledge that I needed to raise money. Take, uh, about, you know, in Italy, [00:50:00] how does word block regulamentation, you need to have, uh, in Italy, we have like a fee, the use your name is a guarantee in USA.

You need to have always in the back, the bank, you can raise found with your private company. But, um, I love because, you know, I take notes about what you say that everybody, you know, and, uh, you know, the most important thing is, um, integrity, knowledge, experience. I give this number, Michele, if I can. 2001.

My first fund in my life in Italy was very hard to raise. 5 million Euro 2001 and, uh, we building in Dubai, a building. Okay. Last time I did it 2013, I built other 250 million. Why? Because it’s easy. People trust in your results, not in your words. When you show them [00:51:00] that everything you did, you know, has a great result, great return of investment, a great cap rate, appreciation of property.

They can trust you, can build a bridge of trust, and I’m so sure that everybody thinks that this is the right way. Show the result, and everybody wants to work with you. This is me, Giuseppe. Back to you, Michele. Thank you so much for sharing. We always love having you on stage. But Colin, We only have just a few minutes and, uh, you obviously have so much experience in this realm.

And I know you wrote a whole book on it coming out, start skill X a repeat. Do you have kind of any parting questions or anything that you can just give us any tips? Well, I think what, uh, Giuseppe said there about trust. So it was challenging for him to raise in 2001, but then in 2013, he was able to raise 250 million.

I go back to my early [00:52:00] career. I couldn’t raise a penny when I was 24 years old launching Internet Direct, which became the largest ISP in Canada, but the banks wouldn’t give me any money. Uh, the, uh, I couldn’t get any investor money. You know who backed me? My mom. 110, 000. Okay, that’s scary, isn’t it? My mom, you know, fast forward to 2012.

Giuseppe, listen to this one. I had to raise money for a domain extension called dot club and I raised 7 million in 30 days. I reached out to, uh, my LinkedIn contacts after filing a reg D under 501 C. Uh, with the s e c, so I did it correctly. We’re not talking about soliciting without, uh, for securities, without legal, uh, whatever.

And, uh, I wrote an article about this one. I, I wrote, I raised $7 million in 30 [00:53:00] days, and I sent out the notice to 43 LinkedIn contacts and raised, uh, and, uh, raised money from 27 of them. And there were one-on-one messages, don’t get me wrong. But I think the reason why it was. Relatively easy to close that offering was something called trust reputation.

Uh, in the long run, you’ll do much better if you build that up with your investor base, with people around you in your community, and eventually it becomes more and more of an asset of yours. Believe it or not, your reputation is an asset. And, uh, Tej, uh, actually, first of all, Giuseppe, so I just want to come back to you first because, you know, we’re sort of reacting there and I sort of felt what you were talking about there, Giuseppe.

So any other thoughts on that before we let Tej close us out? You know, Colin, like I said before, no, [00:54:00] Europe is very hard market in USA. Everything is easy. I don’t love the word easy, quickly and fast, but. The bureaucracy in USA, if you have a result, let me tell this, for example, everybody know that I’m the guy that in seven years I passed to sleep in the car, to be owner of 400 property over 100 employed, how is possible because this country help entrepreneur business owner, you can find money to start the business with Harmony Land.

I was not immigrant 2006, and I started to invest in USA. I find the money with Harmony Land. Yes, I paid 25% per year, but it was a great way to start it. In Italy, I had over 1, 000 employees. Bank doesn’t give you the money if you don’t have the control guarantee. In USA now, why I have power? Because 400 property, but 300 is full [00:55:00] paid.

Always, when I want to start a project, I use this 300 property as a collateral, okay? Any bank give you the money if you have a property without mortgage, without loan, and you can’t let rent, okay? And that is because when I listen, people say that it’s very hard to start a business in USA or to scale business in USA, please.

Next time you want to say that, go in Europe, go in Italy, and after you can come here to Like I said before, people want to make money fast, easy, quickly and raise funds. There are other people that need to give you the money. They need to trust in you. You are your first million. You are your brand. And absolutely you will result.

I’ll give you this example, Corinne, and I’ll finish the talk. I have a YouTube channel in Italian language. Okay? People say it’s hard. Okay. Let me tell this. Nine [00:56:00] months. Nine months of my life, when I start to live in USA, I answer for over 4, 000, 4, 000 questions in any group, real estate, in the Facebook, okay?

Any group in real estate, I was there with Google Translator and give the answer. To start to tell people, this is me. This is my knowledge. This is my expertise. After nine months, I find my first investor in my life in USA. When I find this investor, I had this great opportunity. I didn’t speak English yet, but the video has this power.

People trust, like I said before. And I show in Italian language and explain in Italian language how you can find the property, how you can update the property, how you can have a great appreciation of property, how you can use the birth strategy in the best way. Tell me why after two months, this video in Italian language, I had 18, seven investor America, [00:57:00] because like I say, you don’t need to be perfect when you show them the result.

Everybody want to invest with you if you have integrity. Knowledge, expertise, and show them the Giuseppe, back to you.

Yeah, phenomenal. I love it. You’re such an inspiration, Giuseppe. We love it. We love it when you come on, and hopefully you’ll join us on October 3rd at 2 o’clock Eastern when we’re doing the global launch event for the book, Start, Scale, Exit, Repeat. Um, Tej, do you want to close it out here? I think we’ve, we’ve learned a lot.

I know I’ve learned a lot today. From listening to you and definitely want to get you back around a show around exit as well. But Tej, any final thoughts before we close out? Yeah, this was fun because I was able to kind of talk about and dilute as much as I make it easy of the things that we do can benefit everyone, right?

So I’ll close it out with just a couple of quick tips because I [00:58:00] literally only got to three of like probably 20 points that I written because this is a very arduous process. But, um, for anyone who’s a new startup, whether you know what you’re doing, right? A couple of tips, right? Someone in the, in the audience said about shark tank.

I believe it was, um, Dana. He said shark tank, right? That’s a good reference. Tam. Tam is simply a beacon, right? That just tells you that there’s something there, but that is not, that is the total addressable market, right? So think about we just, Michele and I spoke about earlier, knowing your investor.

There’s thousands of investors. That’s the Tam. But the riches? Is in the niches. There’s that’s the thing I would say is there’s some, you’re, you’re a serviceable, obtainable market. That is what’s going to make you rich. That is what’s going to give you a nine figure exit. That is what’s going to want everyone to make right.

You will check. So when you think about what Shark Tank, right? Oh, don’t tell us about. Total addressable market because if we get 1% of 1% no, that’s that’s like talking to everybody But the sum once you get [00:59:00] there the riches are in the niches think about that So if you think you want to go broad initially everybody does but then as you get better you reiterate you pivot remember the four P’s Pivot you’re constantly pivoting pivoting your pitch deck pivoting your product pivoting your your client avatar, etc, etc And one last tip I’ll give It’s a tough market right now, even if you’re not raising money or you’re trying to, and you can’t build relationships before you need them.

If there’s one umbrella or one token statement, I would walk around on my head, build relationships before you need them. So if you’re going to raise money next year, start building relationships now, reaching out, telling them what you’re doing and saying, Hey, Mr. Investor, I’m not raising money right now, but I want to let you know I exist.

And I want, want you to see the progress you’re going to make between now and Q1 of 2024. You do that you’ll set yourself apart from every single other person practice gratitude Build relationships before you need them and don’t forget to manage the relationships you have previous investors Even if it didn’t go well stay [01:00:00] in touch give them positive updates So relationships are there to be nurtured watered and you’d be surprised right you have to starve a little bit to feast later So those my three takeaway tips and it was fun.

Thanks for having us and what amazing tips Oh, sorry. I love that. You said that I’m not sure if everyone digested that But how you approach the market size and the opportunity like that alone was worth this whole entire session. So thank you. And we’re so looking forward to having you back. Um, you know, there’s so many topics that we can do a deeper dive on.

So thank you again. And we’re looking forward to welcoming you back. So Colin, let’s wrap it. Any last comments? No, I think, I think, I think this is it. And uh, you know, one thing that We do dive deep into in the book is money. Every business requires a great story, [01:01:00] great people, money in the systems to be able to be successful.

And if you miss one of those four, then you’re going to fail. You have to lock in all four of those and you have to figure them out when you’re launching your startup. This is something you can’t think down the road. It’s something you got to think about in advance. at least enough money to get to your first stage gate, that point in time where you can pitch your company to investors.

This has been a great show. You’ve been listening to serial entrepreneur secrets revealed Giuseppe Tej, uh, Michele and Mimi, and I’m Colin C. Campbell. Thank you very much. We’ll see y’all next week, Friday, two o’clock. And if you’re listening to some podcast, it is a live show and you can come on stage and join us on clubhouse every week.

Bye for now. Excellent. Be well. Have a great week.