an important topic that a lot of
entrepreneurs struggle with how to raise
investment for your business how to get
the dollars you need to start and grow
your company and I’m super excited to
have my special guest Stephen Kelly CEO
of stage back on with me again Stephen
how you doing great I would Greta me
back up it seems a little while since
we’ve been together but it’s fantastic
rightfulness I love it I love the tie
back home when London you’re off to
Dublin next week right you’re always
jet-setting we’re speaking I think I’m
keynote in it I’m cynical Web Summit
which is about hundred and twenty five
thousand people turned up in Dublin but
a huge conference around both technology
but for entrepreneurship as well and
we’ve got loads of tech companies there
but absolutely tons of startups so we’re
talking about all kind of else age can
help them in terms of managing that
money which is really critical to their
business interesting like you know a lot
of our customers are saying that we can
get paid twice as quickly as they were
before so it’s kind of getting there the
fuel the pumps the growth of companies
around cash flow we’re all about the
disruptive technology that’s going out
there so it’s a crazy time we live in
and we want to make sure all those great
entrepreneurs are taking advantage of
that I love it I love it now most people
wouldn’t think a CEO would know a lot
about angel investing and how to raise
capital for a company and I know you’re
not the typical CEO so for some extra
contacts for the people watching can you
give people a little background of what
you’ve done on the angel investing side
yeah and I walked in the shoes of a
start-up so I’ve been strapped to
business initially out of Europe and
then out of California and raised money
there but one of the principles we had
was kind of I think is what are your
phrases actually made money before you
raise money and we kind of lived that in
our DNA but since then I’ve done at
least a dozen angel investments for
businesses that have bootstrapped and
grown some of them actually in tens of
millions of dollars of revenue growth
now so they’ve done really really well
and they’ve provided some of the core
principles we’ll talk about
this Google house and I think evident
you know probably should set the scene
when you and I are talking about his
almost a disruptive thinking is it’s the
University of Life of MIT of Harvard of
Stanford but we real practitioners so
I’ve done myself you know every does
name drew investments of bootstrap to
business I was a CEO of a start-up in
the US so I’m like you actually walked
in the shoes of the guys who are on here
today and I think a lot a lot of
practical experience and tips that we
can share I love it and for those of you
who don’t fully know my background after
I sold my first company I joined a
venture capital firm was helping raise
half a million to 15 million for people
who wanted to grow and expand their
companies and I’ve done angel investing
myself I’m actually in the process of
taking over one of the business that I
invested in to be the full owner of it
because I believe in it that much and so
yeah super excited an important topic
and let’s dive in on the question so for
those of you watching if you want to ask
us a question on the right side does
that chat window you can put your
question there and we’ll do our best to
get to it the first one came in from Jay
your eyes how does a CEO gauge whether
their business is at the investment
stage or not do people often seek
investment they don’t need yeah I think
also Evan people probably and I saw this
a lot back in the crazy kind of calm
boons California people raised it’s
crazy to set but almost too much money
and when you do that it just drives the
whole mentality of the DNA of the
company in the wrong direction and it’s
a real great sensitive almost bootstrap
of business and have that hunger every
day and worry about making payroll and
sitting down on Sunday evening and
working at new expenses your cash flow
your pipeline and all that sort of stuff
so I think my my and I learned this from
you actually is kind of make money
before you raise money let’s build a
business build value for customers and
obviously you need to kind of keep a
real-time weather eye on the cash flow
and the fuel growth which is cash
but you kind of really want to focus on
the fundamentals of business and that’s
how the face and that’s on the market in
the customers and the value provided and
then you can build your financial model
and it doesn’t have to be three
dimensional sixteen dimensional
spreadsheet can be pretty simple and
then really focus on running the
business and generating the cash you
need to fuel the worth and then go and
get investment when you need to acquire
points in time yeah I think the answer
that I think to many entrepreneurs do
start looking for capital too soon and
you’re gonna lose too much of your
company right this is a lot of risk
associated with a start-up and any angel
investor VC coming in if they see a lot
of risks and they want more equity as a
result and so the more that you can show
momentum some traction some sales some
media something something that separates
you from everybody else then your
valuation will get much richer and it’ll
be a lot easier to close the sales we
would always in the venture capital firm
try to look for companies that want a
growth capital not startup capital so
like you’ve shown a proof of concept
that works maybe you’re selling in a
local geographic market and now you need
money to expand that expansion capital
is the easiest kind of money to raise
where the startup capital is the hardest
so if you don’t absolutely need it I try
to figure a way to bootstrap it up
yeah but the key thing is we’ve said
that you’ve got to know how you can
invest money and even even the words I
use are pretty pathetic on this I hate
the word spend because as soon as you
spend money implies waste if you’re in
return so as an entrepreneur you should
have a really kind of tight I um when do
you need to raise money to fuel the
growth and then you need to know how you
going to invest it you is no one just
raising money and having two million
dollars in the bank and not knowing how
you’re going to deploy it to grave
business at scale that’s a really
interesting distinction do you do you
encourage that so you have a staff of
over 10,000 people 14,000 people
something like that do you do you
encourage them to eliminate the word
spend from their vocabulary and look at
invest yeah when I was actually another
CEO it’s about 15 years ago one of my
baby
the marketing came in and you can
imagine it in those days 1880 slight
PowerPoint deck you lose the will to
live and the last slide slide 79 is the
punchline I need a 50 million dollar
budget for a brand campaign or something
happening I said look I kind of get
yellow fit in the room let’s get real
about this and the guy kept on talking
about spend spend spend I said wow we’re
not going to spend money in this company
ever like drunken sailors we’re going to
kind of focus on investment return on
investment and and it’s what we talked
about before test drive and stuff test
drive stuff till we get the data to know
what really works so we can really scale
our business and I think in the world
you know it’s great digital economy
digital marketing everything’s
accelerated now so what two years takes
weeks and months now and I think you can
really from an investment point of view
you can actually move to where this I’m
sure should I go for one big lump sum of
investment or should I do it in a number
of small economy fermented series and I
would always advocate go for kind of
small test drive stuff and to your point
you don’t give away half your business
and lose total control of it yeah I love
that and so again I love the distinction
between spend and invest and to add to
that point of raisin and rounds what you
can do is bet on yourself and so you can
raise your first round at maybe a
million dollar valuation and then say
hey if I hit these milestones will you
come and fund me but at a 1.5 million or
two million or five million valuation
and so you’re betting on yourself that
you go and hit those milestones but if
you do then it’s a lot less riskier for
the investor to get involved in so you
can end up raising the same amount of
money but over time so you get the money
you need to grow and you’ve lost less of
the company through dilution cool so
next question comes in from Salvador he
has a clothing company it’s one years
old if he’s going for an investor how
much money do you think I should ask for
so that’s a pretty generic question but
how do you how do you address how much
money you should ask for at any point in
time in your business yeah I think hey
so no you need to almost turn the
question around and say how much do I
need to fuel the growth
so again you don’t need to you know go
to Harvard or meu you know your business
you know your customers you could put a
projection around how you could grow
your business and then whether you need
to take on extra employees or to service
them or sales or marketing and this
little functions you need to keep
customers delight customers and grow us
a sustainable business model and then
once you do that is kind of work
backwards about over the next year what
do I need to fund that growth look here
your cash balance look at all the
obvious things about whether you’ve got
revolving credit a lot of businesses
probably at that stage they’re still
using their credit card to fund some of
their growth as well and then think you
know have a really rock-solid plan over
the next year 18 months this is the
best-case if I accelerate it to a sort
of stretch plan back to Evans point
could I go back and say have an option
with an investor to really kind of ramp
it up and grow faster so I think the key
question here is it’s not how much money
do I wanna raise it’s what is the
business plan to grow responsibly and
sustainably but as fast as you can to
execute them on the opportunity and then
work backwards to look at the funding
requires yeah I agree I like looking at
well here’s where we want to go in the
next year and how do we fund that before
we’re in about how do we fund the next
10 years who’s got to actually execute
your 1 year plan first and if you do
that right it’ll be way easier to raise
for what you’re gonna be doing ongoing I
would add to that when you are talking
to an investor you need to have absolute
clarity over how much you need and what
its gonna be invested into because if
there’s any hesitation if there’s any
doubt then you’re gonna make the
investor scared they’re gonna be spooked
and they’re gonna not want to invest in
you so you have to have absolute clarity
you have to know exactly where you’re
gonna be spending that money and the
Stevens point you make your plan one
year here’s what we want what we want to
do here’s where we’re gonna go and then
in your projections here’s what will
often happen an investor at least in the
VC world will look at the executive
summary of your business plan then we’ll
look at who
as part of this deal like the horse for
the course they call it right who is the
jockey who’s the team and then we look
through the financials do the financials
make sense you know here’s where you
want to be and you have to be able to
explain every single number in your
financial statement why it’s there and
if you can’t then it’s going to be
really hard to convince an investor to
want to come on board with you
yappity thing evidence you’ve got to
know where you’re going to invest it so
no bet on the management team and the
longer you’ve executed successfully the
more back in you’ll get but you’ve got
to know how you invest it because I’ve
seen companies even when they get to
like 15 20 people they go and raise a
load of money and all the stuff the bear
behavior kicks in like they design a new
logo go and you brand and stuff and you
start traveling first-class and all the
kind of nonsense that I would say waste
money rather than focused on the mission
of driving body for customers and
growing your business yeah you know the
other thing to keep in mind there for
those of you watching is raising money
can become a full-time job which means
you are not spending time executing on
your business yeah and so you can often
a fourth hat if you’re a social
entrepreneur and no investor wants to
put money into a company that isn’t
gaining traction momentum and so if you
can focus on executing and getting some
results over the next six 12 months
that’ll give you a lot of ammunition to
go talk to investors with yeah Adam one
other thing we should probably have
further guys out there is I think we
need to separate the bootstrap phase
from the growth capital phase and you’re
right the growth capital phase it’s a
sales job you’ve got a effectively if
you want to do the best of your company
and get the best terms you’ve got to
have a great presentation a great story
but just let’s not kid ourselves you can
burn up a huge amount of time going
around the hole our growth capital
investors pitch in to them and they draw
you into their own sales cycles and
process and that’s a big discretion from
running the business so you need to be
really conscious that you’re spending
time first of all or running your
business growing your business and then
the funding should be really light touch
to support the growth of the business
and it’s sometimes easier said than done
yeah I love it
very true I
reishi Captiva hello Evan hello Steven
beyond money what should an entrepreneur
look for when choosing the ideal
investor thank you
so I’d say definitely in the
bootstrapping phase Evan I’d say not
only the investor but I also extend this
to a sort of employees I love to see
companies getting partners employees
investors even supply strategic supplies
can’t put skin in the game of following
your dream believing in your story and
making your business a success so that
sort of things that look for certainly
from the investor and this translates to
our employees as well someone who’s
really committed on the idea who gets
the story gets the idea that you’ve got
whether it’s a service business product
business and then more importantly can
add value to the growth of your business
so particularly as an angel investor I
sat on a few of the boards and I chaired
a couple of the boards when we started
the businesses and I gave a lot of time
to coach and mentor that you can take
again for those businesses and even
through to the phase when they are
beyond to a growth capital as an advisor
and a coach to those guys over to y’all
at 32 years experience in the industry
and there’s a lot of guys like me out
there who have had very successful
careers and they can be really good
mentors and they’re also non-invasive
where you get into the world of VCS
there’s all restrictive covenants they
want to put warrants but also they’ve
got a seat around the board table and
they could be quite invasive in terms of
you having freedom to run your company
and pursue your dreams so I’d look for
someone with experience they’ve got time
they’ve got they’ve got real appetite
for your story and supporting you grow
your business and and therefore connect
as a tremendous coach and mentor as well
as the money they can provide at key
stages and if it works
most of these into investors I’ve been
involved in go through the distance of
multiple routes so they go through the
whole journey with
the companies as they scale and grow
them through their success I love it in
the VC world here we call the dumb money
smart money I don’t the same thing in
the UK but dumb money is just money and
you you really want that as a last
resort because you want somebody where
smart money they’re providing contacts
at providing information training
mentoring open up doors for you help you
get clients help you get media whatever
it is that you need to help grow the
business you want somebody who is
obviously yes passionate about where
you’re going
somebody you feel you can work with but
somebody who brings something extra
beyond it right whether those contacts
customers opening some kind of door for
you alongside the mentoring and training
that’s what you really want to look for
and I would honestly hold out until you
find that right person if that’s your
goal then just to accept the first check
that comes in the door because you can’t
you can’t easily get rid of investors
that that’s a that’s a long-term
decision you’re making right there so
just like when you get married you want
to make sure that you’re making the
right decision sir yeah I mean just to
add a hitch as one of the firm’s of his
chief executive law actually a couple of
times I’ve got a customer to come on the
board and be a mentor for me and later
an investor so I kind of think this is a
great time if you’re bootstrapping your
business to think outside the box who
would you like around the table giving
you all business advice that’s got a
tremendous insight into the market the
future the product innovation you’re
trying to lead that could give you
invaluable advice and give you a real
sanity check
so I aren’t always back smart money I’m
always back people who got skin in the
game and who have got a strong
commitment to you and your business grow
and being successful I love it
next Warren in an industry where in the
beginning all you can offer is a lot of
exposure how do you approach investors
what is the formula of exposure versus
dollar yeah maybe I’ll go first
I think obviously I’d run at the star
you’ve got an idea you might have a
product you might have a prototype if
you’re in the area is like advisory or
Consulting or recruiting or services
business my kind of view is you should
be profitable and cash generated from
the get-go so one of the businesses I
set up in Europe literally we were
profitable from the get-go and and part
of that is we build ourselves out to
clients so you know it’s pretty simple
business model and then I kind of think
the key areas all we’re talking about is
execution risk so one of the things that
any investor would look at what’s the
operational risk you know just a
strategy makes sense is the remark here
is this a compelling idea is the
management team really strong and then
it’s all about operational and execution
risk and obviously the further you go on
the journey and you get referenceable
customers and you get momentum then
obviously it’s easier to you know I have
a flock of people knocking at your door
and you get a lot of inbound so in those
early early stages I would advocate you
know get your idea together get a really
good story together in terms of how to
pitch the idea domain it’s the sort of
thing that your ever you could take to
your mom tell her the story and she’d
say that’s a great idea and and she
could get it so we did mystify and then
they’re not relieved they’re back in the
management team and to your point I put
a few gates in there for them around
milestones of what you wouldn’t wanted
to live on a business plan yeah in that
was in the VC world we had something
called the grand amount of the test and
that was your business plan especially
the executive summary is it something
that your grandmother would understand
so is this something that’s easy to
understand that anybody can understand
it where a lot of people write in ways
that make sense to them but are so
filled with jargon and technical terms
we remember that investors are
generalists for the most part they don’t
know your industry as well as you will
know your industry and so has to be
something that everybody can understand
so I love that point about about clarity
warrants your question about exposure
selling exposure versus investment I
would probably not look at them as an
investor in my business if I could only
offer them exposure the kind of company
that that would work with you for
exposure may not be the best company
that work with as an investor in your
business so I try to sell some kind of
sponsorship deal with them if you can
get them great exposure they
you for it it’s a transaction that you
guys create their pain for that service
but they don’t own a piece of your
business unless they get what your
company is all about the way we’re
trying to go and they can help you along
that path if you’re only offer an
exposure it may not be a good investment
opportunity for you right now the next
two questions Dasani and Bulo are
talking about basically how do you find
investors what’s the process of finding
an investor what direction you take
you’re trying to get capital how do you
go and actually find those didn’t invest
as your business yeah I think probably
the the most difficult time is when you
start up so you know you’re
bootstrapping a business I think once
you get to sort of critical mass you’ve
got revenues million two three four five
million there’s a whole kind of network
of growth capital venture capitalists
out there but in reality you know I
looked at some data the other day about
80 to 90 percent of the startups are
funded through people like us starting
businesses yourselves so that’s your own
life savings remove within your home
your credit card maybe getting a loan
from the bank stuff like that and then
the other you know factories all the
friends and family stuff although you
don’t want to take the friends and
family money you’ve got to agree some
parameters with this stuff because you
don’t want to go on vacation with them
and every night is like an investment
meeting you know you’ve got to make sure
if you do friends and families you have
delineation between the investment and
your relationship and you know all these
things you’ve got to tell them you can
make money you might get ten times or
you know I work 80 hours a week and it
doesn’t work out they go understand that
but then the other things I’d say is
that’s the obvious one so you sell
friends and family then there’s a whole
world out there of crowdsourcing and
there’s the indigo goes the Kickstarter
has all these sort of guys out there as
well in terms of crowdsourcing know I
saw relations and the crowdsourcing
market would actually exceed in terms of
the capital deployed I think it’s by
2017 the VC marketplace
so we’re seeing that whole impact of
digital and social around crowdsourcing
zhaveri way to go so the office places
as well you know let’s start if you’re
if you’re up in Massachusetts or you’re
out in Kansas you could go down to your
local by the state or even go on the
federal websites there’s loads of ways
to get help around and find capital if
you’re in a minority group there’s
specific things done for you know
minority agencies and upon the Commerce
there’s loads of stuff out in New York
and York State I think nice star where
they connect you with a network of
entrepreneurs there’s a whole load of
range of Android Vestas and the other
thing I’d say Evan is just to sort of
throw away mobile all the angel
investors I know a regular guys they’ve
done very well they’ve been very
successful they’re very approachable so
one of the kind of things in our heads
and voices to prevent us being
successful is and I couldn’t pick up the
phone to someone I couldn’t email
someone but you never know
you know if there’s someone you really
respect who’s created the business in
your industry with a lot of domain
experience I’d say try and reach out to
them because they could be an amazing an
angel investor and they might you know
look at you at the age of twenty seven
twenty eight and say I really admired
I’ve got a great story disruptive
innovator and I’m not in any danger of
bet I could be a mentor in that business
so I think there’s a lot of ways around
there to find the investment beyond sort
of friends and family and yourself and
all the traditional things that I think
go digital go crowdsourcing but also
just kind of use your common sense have
no fear and being prepared to pick up to
the phone to people but to Evans point
the more expensive you go in terms your
search for capital the more time it
takes and that’s a distraction from
running the business I love it
for clarification for those of you guys
watching a lot of the crowdsourcing is a
fantastic way to raise money but you’re
off-putting and usually not giving up a
piece of your company but if you go to
Kickstarter it’s more like marketing
right you’re you want to pitch this new
product that you want to launch we need
a million dollars to do it
$10,000 to do it your pre-selling and
you’re giving them bonuses but you don’t
lose a chunk of your company there are
other crowdsourcing options where you
are giving up you’re looking for angels
basically but majority of it is not
actually giving up an equity position
your business so it’s definitely
something worth looking at because if
you don’t have to give up equity it
saves you an insane amount of money down
the road in terms of finding investors I
think to Stevens Point most of the angel
investors are regular guys and guys and
girls ladies and most of them don’t go
to angel investment meetings most of
them are not part of an angel investment
group most of them find their deals
through their connections to their
networks and so I would want to be
telling my story the people who are
connected into those networks great
places to start with our accountants and
lawyers because they deal with business
people on an ongoing basis it’s their
job to be connected to a bunch of these
guys so if they like your story they
could probably introduce you to somebody
who could probably help you out at least
have a conversation with you and it’s
probably on your point you’re on the
crowd so that makes important almost the
other thing I’ll say you have a view on
this is you need to look at the number
of levels of kind of how do you raise
cash number one we should have probably
said this at the start there’s really
critical ways in your business to
preserve cash so things like payment
terms you want the quickest payment
terms your customers to play and you
want flexible payment terms to pay your
suppliers obvious thing you just drive
this ethos in every every employee you
hire in the company to treat the
company’s money as if it’s your own when
employees join your company if they
believe in you and the product try and
get them to be investors in the company
you know maybe they take shave their
salary reduce their salary to a set of
what the market is 70% but give them a
little equity in the company so again
everything you should be thinking in
terms of run your business you know
stage one is preserving cash and then
the other things around this is very
often when you go to customers you’ll
find customers one about your business
especially if it’s a product business so
they’re heavily invested in your future
and then almost give cash on delivery so
so they’ll they’ll pump try and they’ll
even forward load your cash so there’s a
great place to go sometimes to go and
get your customers to fund your growth
then the second sort of category is
where can you get cheap money without
dilution without giving up equity and I
think around that we’ve had a couple of
suggestions around that and you know
could use a credit card and all these
other things and then the third phase is
really you know many conscious decisions
I’m prepared to relinquish some degree
of equity to really build growth and get
some more capital in the business and
then the fourth level is probably more
growth but what you’re prepared to give
up in terms of control and there’s a
whole kind of spectrum but they’re kind
of the key thing I would advocate and
it’s so easy when you’re running your
business run that thousand miles an hour
I just think every day how do I reserve
cash as long as possible make it work
actually another thing I someone told me
20 years ago 25 years ago a nice backup
Oracle which is an early-stage company
in those days always do the one dollar
challenge as it kind of should exactly
be business if you have one dollar where
would you invest it well if you’re
marketing digital marketing product
innovation R&D and always to remember
that one dollar challenge because what
you find when you grow your business
you’re not totally in control of it
after three or four years and people
start hiring people and expenses that
are increasing and that’s a dangerous
time for business so you always come
back to the core basics of treating the
company’s money as if it’s your own and
the ethos around the one dollar
challenge so having any thoughts around
that kind of preserving cash and then
moving up through the spectrum where you
ultimately dilute a bit of control
yeah I love it yeah you’re gonna lose a
lot of equity at the early stage if you
go to investors now because again it’s
so risky for them and I would I would
encourage you to love the idea I love
the one dollar idea that’s great I would
also say if you’re targeting customers
as potential investors you may be able
to do it where they fund your growth
without you having to give up anything
in your company as an example you know I
had a software company our first
business was 19 was a biotech software
company and
one of our customers wanted the software
to be in Spanish as an example well we
didn’t have the funds to hire a Spanish
development team and put everything into
Spanish and translate everything over
and so we said you know we could do this
for you but it’s gonna cost you X
thousands of dollars and they said yes
because they really wanted it and so
they funded our development and then now
we have a Spanish version that we could
sell and anytime our customers wanted
these features we would charge them the
development cost for and then be able to
sell it to everybody else in the future
that wanted it too and so we were able
to you know a young company bootstrap it
up get the money we need it without
having to go to invest without having to
give anything up but still build the
fuel or growth so as much as you can I
mean that’s part of entrepreneurial
thinking you got it you got to think
like that you got to come up with
creative ways to fund things because you
don’t have a pile of money to sit in
your bank account and it’s it’s good
training to try keep throughout the
lifetime of your company because once
you do build and grow and you’re his
beasts funny admit frivolously
I remember one company came to us at the
venture capital business they wanted
half a million dollars there were four
of them they figured they’re each worth
$100,000 a year so that was their salary
and then they had $100,000 to actually
put into the business and grow and like
that is not something that any investor
is gonna fund right I’m not I’m not
paying for view a hundred thousand
dollars each so you can quit your jobs
and do this thing and then you only have
a hundred thousand dollars in working
capital in the business and so asking
for less bootstrapping finding
alternative sources
ideally ones where you’re not having to
lose equity for all part of the
entrepreneur’s journey and i think super
important to help you get your business
off the ground I love it I just add in
there you know everything we do we do
legally but moonlighting if you’re
employed by a big company now you’ve got
a big idea
you’ve got evenings you’ve got weekend
start test-driving and start your
business before you leave you come on it
so I got called Marc Benioff he’s the
chief executive and chairman of
salesforce.com was an employee of Oracle
and he actually started Salesforce
within the mothership of Oracle so
there’s the
the great stories where you’ve got
safety financial security and you can
really test whether your idea will work
with your dream can come true and that’s
a great platform and then typically I’ll
be honest all the businesses are angel
funded all the executives are taking a
haircut because they said skin in the
game is my time the worst thing we can
do is charge the company in the market
rate because cash is king we got to
preserve it and typically most of some
of them will work for nothing for two
years but typically they take a haircut
like 50% on their salary take no bonuses
take no cash out of the company put all
the cash to work for growth I love it
next question from Jason thanks for
hosting this event Evan and Stephen
should I wait until I have proof proof
of concept before I pitch investors or
funding or go on shows like Shark Tank I
think it depends on I think two things
you’ve got to have a great idea and test
it with the market if you don’t stuff
like Shawn tanked and you haven’t got
your ideas together around the market
you know what the issues are if it’s a
consumer product
you know what the competition’s doing
all this sort of stuff you’re gonna get
ripped to shreds but ultimately if
you’ve got a great idea
I’d always say test drive it as quickly
as you can and then get kind of real
velocity in terms of momentum as you get
early customers early adopters and stuff
like that and just as Evan said the
longer you can leave it if you can
actually be making money before you
raise money the less you die leave
yourself the less their ownership you
give up so that’s all good because you
keep control of something you love your
baby ultimately though if you want to go
and pitch it one of the things you need
to do is have a really crisp story and
be able to tell that story and try and
tell it if you can do visually in things
that land really well and then obviously
have all the stuff around the market
data market size the growth potential so
I think it’s really important to get
your pitch together get your story
together and you don’t want to have to
do a different story every kind of time
you’re going to pitch it you want to do
this once and picture to a few people
and I think that you could save yourself
a lot of time because to Evans point
what you where you want to spend those
precious 60 70 hours a week
is gone and starting your company
recruiting people recruiting customers
building your product you don’t want to
be spending it just going out pitching
your company to investors or not but in
the business yeah and you know the add
to that if you’re in that early stage
you may want to instead of going and
pitching something because you won’t
have it over no you’re gonna have so
many holes in your business plan and a
season investable poke holes in it all
day long and that makes you look bad I
would probably go in and ask for help I
would go in and and show your young on
Ratner and you want ten minutes at their
time to get some feedback on a project
and see what kind of advice and ideas
they give you and that opens the door
people to come back and say hey I
followed your advice and here’s how I’ve
grown if they really love it they’re
gonna they’re gonna be thinking
investment anyway we’ve becoming
pitching and you don’t have a solid plan
you know it’s hard to go back to those
guys because they’re think you know
that’s the guy who came in who didn’t
know what he was talking about like
you’ve made a really bad first
impression but going and asking for help
and then taking that knowledge put into
your business and coming back and
showing what you’ve done and worked on
it if they see that you’re listening to
them and you’re acting on their
suggestions it’s way easier to go back
and then pitch them whatever do you have
to grow it and gray someone you need
pastor D is asking about events what do
you think about events to find angel
investors and venture capitalists and
private equity I kind of think it’s
unless you really know around an event
why are you going there again I’m not a
big fan be honest so they could be I
don’t know say I’m thinly but quality
the pharmaceutical industry is so if
it’s very specific it may be worthwhile
but again I think it’s kind of a bit of
a lottery and it’s really difficult in
terms of that I think what you want to
do with raising money is bring as much
science to it as possible and let people
find you and if you’re just going to
event with a thousand people there it’s
really hard to find your way around so
I’ll be honest I’ll prefer you to be
sitting down doing your business thing
around your business and kind of making
money and then at the right time
go to the right events and if you get it
right you should be keynote in at these
events you shouldn’t be paying a
delicate fee and paying for your own
hotel room they should be playing for
you to turn up and you should be on
front for the stage there so so it’s
creating that excitement demand and you
do that by creating a great business and
I don’t know I’ve use that money you use
that time more importantly very business
I love that I love that they should be
paying you to come fix it you can always
count on Steve and Kelly to think big I
love it I would be looking at events
only in a marketing contact so you know
if TechCrunch is doing their annual
contest and you go for that you know the
winners they are good an insane amount
of coverage and I can really help put
your startup on the map in terms of just
meeting investors most angels and VCs
they’re not part of these groups right
especially on the angel level they don’t
go to these angel investment dinners and
again is found through informal
connections so if your goal is to raise
money then I would be working my
connections again accountants lawyers
bookkeepers people who are connected to
others we have a term in the industry
called DDI
dentists and doctors with disposable
income those are often the first
investors into a lot of businesses but
if your goal is marketing and putting a
name out there for yourself then that’s
what I would look at more the bigger
events Tom when or how do you determine
is the right time to allow investors
into your business yeah and again I
think it’s when you need growth capital
to scale it up and then I think there’s
a second element to that question
ultimately when you need advice and
input in terms of growing the business
and I think that’s a whole different
category of conversation so you need the
investment but then you know being a CEO
and a business is hard work and it can
be pretty learning and if you’ve got
someone who’s drawn that part the number
of times before they can show you a lot
of shortcuts so if you get the right
angel
and you get an angel Rhys down
you’ve done a couple of times before and
is prepared to invest as most dangers
are then they’ll give their time freedom
and generously and can save you a whole
lot of time with a lot of fame I kind of
like the bravado in this question how he
worded it to allow investors into your
business you even got to watch the ego
check you know you don’t want to go in
with a massive ego
but at the same time you don’t want to
be desperate to you never want to be
desperate going into talking to
investors or ever really in your
business you want to act out a
confidence in knowing that you have a
successful business concept that will
take off but it turns up yeah I mean I
totally agree with Stephen I don’t think
I have anything else to have on that one
the other thing put your hat on SBC when
I when I’m living in California we did
raise some money and got Sand Hill Road
if you think about it you’ve got to put
yourself in the shoes of these species
if you’re looking for growth capital
they see hundreds of businesses it’s
like Groundhog Day you know every day
their diary that calendars packed with
kind of pictures so how do you stand out
how do you make yourself different how
do you make yourself compelling how do
you make use yourself the most beautiful
baby that they’ve ever seen so it’s
worth thinking about that and if you
just go in with a standard picture
standard presentation boy have you got
to have your data together and really
knock the ball out the park but I would
encourage you to think differently and
stand out from the crowd because you’ll
gather attention that way not do crazy
stuff but there’s ways to think
differently and do something very
different
Evan you know you’ve set in the issues
of a B C yeah my my role with the VC was
weeping out all the business plans that
came in and in like 99 percent of the
plans got a no no thank you
before you even get a meeting like most
of people come in for meeting also get
rejected but just to get to the meeting
you’re already facing at 90 99 % you
know failure rate
mostly it’s because of one there’s not
enough momentum it’s like it’s just an
idea and a VC typically doesn’t fund
just an idea and to it’s not clear you
know there was some tech companies that
I was reading their executive summary
and I couldn’t understand it like I come
from a software background so I’m not
I’m not a tech idiot but I’m also not a
tech genius and back to the grandmother
to test if I can understand what your
company is doing and I have to read
paragraphs three times to try to figure
it out then it’s not going to be a fit
so again we look at executive summary
and then the management team and then
the financials and if all that looked
good then you being divided for I’m
reading to come in what what order you
I’m curious for you Stephen when you get
when you get pitched something somebody
sends you they’re playing how do you
read through it what’s what you skip
around how do you read through that
business plan yeah I think I get first
question is there a market or could they
create a market secondly their
management management is really really
compelling and then if they haven’t got
the experience that’s that’s not a
negative but then they need to do more
kind of test drive it and then
underpinning that as the financials so
they’re the kind of sort of things and
then obviously you know you know this
Evan as well
truly entrepreneurs out there you want
to give up the minimum control your
Canada company and you want to give up
the minimum equity so the longer you
leave it and the more you make more
money and grow your business without
raising cash and just back to the fact
that I think 90% of businesses are
self-funded ish initially through the
bootstrap phase the longer you can leave
it or you can actually skin even grounds
down to manageable chunks over like 12
to 18 months rather than the go alpha
kind of enough cash to survive there’s
five years the more you actually
preserve the value and the equity in the
company yeah one thing that we haven’t
talked about that also is more important
for the angels and especially the VCS is
what is their exit strategy gonna be
they want to see that you’re gonna be
out usually angel lasts longer a
lifecycle of an angel investment
companies around eight years where VC
would be more closer to five years where
they want to basically be in and out of
your business in five years or VC and
they want around 30% growth per year on
average in their investments now that’s
not going to happen in the first year
but by the time you sell it’s a
cumulative average and so not all in
this trees are built for that like a lot
of industries
if you are not in the high profit margin
high growth potential industry is
probably not a fit for a special
adventure capital investor and they’ll
want to see that it’s one of two ways
either this you know go public so you’re
gonna IPO or somebody’s gonna buy you
and if nobody in uni has ever gone
public and there’s never been any big
mergers and acquisitions in the industry
it’s also gonna be hard to attract an
investor because they’re thinking how am
I going to ever get my money back out of
this deal and so it’s not the first
thing that investors will look for but
it better be thought out in some way
because if that’s a concern of theirs
then they won’t want to put the money in
yeah actually have an ear the other
thing kind of thinking way down the
track upset around the board where there
have been some really high-quality PCs
involved and you can see that how the
behavior over the five years changed
from their input and this is the company
where about one example thirty percent
of the equity was owned by the venture
capitalists another one where about 25
percent was owned by a couple of growth
capital funds and they had a seat at the
table of the board and their attention
span diminished over the period of time
you know they’re our first two years
strategic influence mentoring last two
years all about what about the exit who
we’re talking to what inbound
conversations so it changes the dynamic
and am I actually a totally different
topic but you know you never sell a
company you only ever get all so the
best time to be bought is when you
receive the inbound and you’ve got the
hottest product in the market all the
best services company in the market or
whatever it is and then you can have a
competitive bake-off and maximize the
exit position for the investors so it
does change the dynamic so if you will
point in heaven I think you’re bang on
the money and if you’ve given up a ball
position or something like that in the
growth capital phase you need to make
sure these guys have got a really good
track record of sticking around for the
long term and not just kind of
exercising the time clock and then
turning the key at the end of the five
years yeah and just like they’re doing
an insane amount of due diligence on you
you should do due diligence on them too
right
talk to some of the other companies that
they’ve invested in and see what they’re
like as a mentor and as an investor
because you want to make sure you’re
getting the records on on your company
this is like getting married and it is
hard to kick somebody out once they’re
on board
bhima queen is writing to say what
should i have available with me when i
meet with an investor i think yeah
obviously a great company story that
you’re really proud of number one that
you could explain to Grandma
you should have stuff about market
market opportunity you should have stuff
about competitors if there’s people out
there already doing what you plan to do
and why you’re different you know key
thing is what do you do who you serve
and why you’re different and you should
have the financial model certain you
don’t have to do it kind of 25 year plan
but you should certainly have a sketched
out view of the three year plan i’m
pretty good detail around this fiscal
year and how you gonna deploy the
investment that they’re going to make
why you know back to heavens first point
really where are you going to invest
that so you really accelerate the growth
of the business how are you gonna deploy
and if they get into you know if I was
in my angel days and they were raising a
couple of million dollars I’d say well
tell me where you can invest it you must
have a pretty good idea there what’s
your marketing plan alright what’s to do
referee expansion what you reinvest on
digital mark and all these sort of
things so you need a pretty clear idea
because you run in the business they’re
going to trust you as a management team
and you’ve got to have the confidence
and the plans in place to very credible
yeah I love it I mean there’s a number
of resources and what needs to go into a
business plan there’s a lot of the
common stuff I don’t know if there’s
anything that you guys offer on Sage on
the website or a blog post somewhere
that out lights and details but most
business plans are pretty standard and
there’s a reason why all those sections
are in write is the reason why you need
to have the executive summary enough
financials and a management team the
operations plan and the sales and
marketing strategy all that stuff is
information that it was a business owner
should know throughout the business and
also investors will be interested in I
think the most important thing when
you’re going to a meeting with somebody
is to be able to talk to the business
plan but not basically read it where a
lot of the pictures that I saw the the
the entrepreneur comes in they’re like
okay
here we go let’s talk about my sales and
marketing plan and they’re like having
always to refer back to their notes it’s
like well if I wanted to read what was
on there I could just take it and read
it myself I’m interested in having a
conversation so you should be willing
and able to talk to the points in your
business plan and without having to look
through and memorize it I think that’s
super important also I would use my ears
like any good salesperson you got to use
your ears every investor has their own
way of their own investment of
philosophy their own way of attacking
things and often we get locked into this
is my sales pitch and you don’t deviate
from that where they may not care about
five of the things in your sales page
and so let them ask questions of you and
answer them openly honestly and give
them more contacts where they want that
context they ever want what are they if
you’re gonna go do pitches it’s so much
like girl for a job in reality you got
anybody believe between 30 seconds and
two minutes to really grab their
attention and come you know jumping out
of their seats and I’ve got to have all
of this so if you’re a product company
the best way to do that you should show
them the thing you’re really proud about
the product just get your product out
and show em and again just be sensible
with I don’t know if your product needs
Wi-Fi check all the Wi-Fi let’s test
drive everything so that when when you
get in there and it’s show time it’s a
show time they really remember for the
right reasons yeah so if you could give
them like a two minute three minute
product demo say start at the end this
is why we’re different you look grab
their attention and then everything else
will follow from that rather than just
do the kind of standard picture turn it
off management team the market and all
that sort of standard stuff so grab them
around why you’re so excited and why you
believe in in your product I mean it’s a
great way to go yeah I love that point
if you couldn’t visualize what’s
happening if you could do some kind of
visual demo I remember reading about the
guy who who popularized the bulletproof
vest he would go to police
Asians and tell the officer to shoot him
in the chest and of course he did it
didn’t go through and that won them over
just right there that one act
landed a whole bunch of deals for them
and so if you have a product that can’t
be demonstrated then you absolutely want
to bring it back because it’s something
different memorable bits of food
products of them gonna be tasted bright
anything that you can show that more
than just reading off of paper or
PowerPoint slide helps make you stand
out from the competition yeah they are
they doing a graphic if you’ve got real
customers and customers are great on
this say the customers can you send me a
video 30-second clip of what why you
love my product and why we’re different
and which competitors you looked at and
literally build build a visual
presentation and the best best thing is
showing the front of yourself bullet
point vest is a great fruit point but
secondly if you haven’t got that you can
stand out through customers so if you
know all these investors will say we’re
customers like that love your product
this is real a little bit sherry and
Phillip are both reading in basically
the same issue where they’re there they
want a sort of business but they haven’t
you know they don’t have any help around
them they feel like they need to invest
me before they can launch into their
business what kind of advice do you have
for them who you know they haven’t
launched their business fully until they
feel like they need investment to do it
well yeah well I guess we don’t have the
quantum of the investment they need to
stay on their business but I also we
don’t know if they’re in full-time
employment but but if they are I think
of anyways how can they shortcut or test
drive their business plan and their
product to say what are the things we
need to refine to really be ready for
primetime and then then it’s back to all
the other things we’ve said about you
know making money before we raise money
but if you do need a significant
investment you know if it’s a capital
intensive business or something like
that and you do need to invest it and
pump crime the investment side then
probably we’re talking about a different
class of investors we’re not talking
about bootstrapping your business
and around that a good way to go for his
capital intensive go to the potential
largest customers because again if it’s
a really good idea and if you offered it
you know even if one one angel
investment I did we offered the customer
I think it was a three-month exclusivity
period on a rolling basis and for that
they actually invested in the product
and the product development so so
there’s some things you can play around
with are pretty creative to really allow
you to have confidence so when you hit
the ground running you’ve got a ensure a
for success area yeah love it that’s a
cool story what I would add to it one I
would try if you’ve been a bootstrap it
I would try to start a service business
over a product business one to get to
know your customers better and two to
build a stable cash flow stream it’s a
lot harder to leverage your service
business and a product as you’re always
trading your time for money but it gives
you an income that then you can support
yourself on get close to your customers
learn about them and then launch a
product around their needs it delays a
timetable a little bit but helps ensure
that you’re building the business the
right way another idea would be to go
work at a company where you can learn a
lot of this stuff from I would try to
target a company that I want to be like
so not some huge company of a wouldn’t
go try to work at you know one of the
biggest companies in the world I try to
work at somebody who has ten employees
or less who’s really doing well on my
name is I respect the work that they’re
doing go work for them learn from them
take on as many projects as you can you
know no entrepreneur is gonna say no I
don’t want you to do more work right
they’re always they always want their
team to do more work so if you’re
volunteering they’ll help you along the
path and they’re you’re learning right
you’re learning how to how your industry
works you’re making contacts you’re
making money so you’re getting paid to
learn about your in the streets and that
will help you get the contacts and
connections to be able to then leave and
do your own thing so you know start on
the side like Stephen said before but if
you can get a job in the industry that
you want to learn from if you really
help that transition yeah Jason we
created a great product and service but
we need to make about $30,000 in
adjustments to our software in order to
scale
and move on to the second phase of our
business plan who should I be targeting
oh you know if you’ve got customers
already out there with sort of a phase
one product it’s almost a certainty
they’d want to take your phase two
product so I don’t know i don’t actually
got to say even in that example 30 30
customers or 300 customers it will be
worth going to a few of them and say you
know you selling a bit of the future you
show them a prototype but you actually
get them to fund the next phase of R&D
and you can do that through maintenance
or you could do it through contractual
vehicle that allow them to have the next
couple of upgrades or whatever so phase
2 and phase 3 see that that would be a
good way I’m just thinking like you’re
not diluting the company and are keeping
up equity and actually you really focus
on what you pulled around getting
customers to love you your product so
that’s the first place I’d go and then
the other place if you need to actually
take on some guys around R&D for phase 2
get them to come in I will always with
early-stage companies with employees
getting to invest in the company as well
so and that could be really investment
where they actually contribute for some
equity in the company or you know taking
a bit of a haircut I said on salary for
the first couple of years so I think
there’s a number of ways of doing it and
I think around this if you’ve got a
product you got customers that’s a great
platform to go back to your customers or
partners and say I need more investment
this is where you get for it show them
what it might be like you know like
Missouri men and women you know showing
me show me show me and if you’ve got a
proof point of reality there then I
think you’ll get a lot of back in for I
love it one thing we didn’t touch on was
who to go to for different size amounts
so typically if you’re looking at
venture capitalists under half a million
they’re really not that interested in
you have to have an insane story for
them they want to jump in because for
them to do a half a million dollar deal
and a 15 million dollar deal is the same
amount of work and so they don’t want to
do the smaller deals
angels usually are around they feel that
middle ground like 50,000 to half a
million
you’re looking at an angel round some
angels will come in at less than $50,000
but again it’s a lot of time for them to
do the due diligence and they want to
see the opportunity and if you know you
only asked for $10,000 that’s probably
not something that an angel investor is
interested in now a single investor who
does this as a business if it’s if it’s
a dentist that wants to put money in and
it might be dumb money they don’t
understand the industry then maybe but
under $50,000 you’re really looking at
friends and family and bootstrapping
for the most part so if you’re looking
for $30,000 it’d be I’d be looking at
myself like how can I get $30,000 I love
Stephens idea talk to your customers if
they might give you an advance if you’re
a software company you know you’re not
going out and you don’t need to buy
equipment so it’s it’s labor it’s
teamwork so to Stevens Point can you get
those guys to donate their time and in
exchange for some kind of equity or some
kind of deferred payment because the
other investment categories you need to
be asking for more money it doesn’t mean
you sure it doesn’t gonna go I need
$50,000 now so I’m gonna go after an
angel to our point back at the beginning
and what Stephen was talking about much
you want and then execute against that
plan I am and on that bomb one of the
things that did one of Aqaba days is I
think we’re the time we needed three
developers like three months and we went
out to a third-party consultancy company
pitch to the chief executives there they
gave us free people and they did the
work free of charge I think we gave them
allowing half a percent of equity away
and we’ve teed them up to be a
distribution channel and seller market
the product as well so again think
creatively if there’s people out there
it would be a channel to the marketplace
and they’ve got some of the resources in
place where you could use them for a
period of time on a project and get our
version 2 of the product out there’s
lots of creative ways you could do
structuring of the commercial
relationship around that to minimize the
equity dilution get the product to
market as quickly as possible and get
moving on your business I love it
there’s something comments or questions
coming in it looks like we put the great
topic but I you know
we’re kind of bumping up against the
clock stiva thank you so much for
spending some time with us and giving us
your time spent here you are going to be
at the web summit next week people can
watch that yeah I think we got some
periscope stuff going on so you if you
follow me at s Kelley CEO I think it
might be on this Google hell and then
we’ll be letting you know through
Twitter all the stuff and the location
periscope stuff and all the stuff around
web so I mean it’s all going to be our
broadcast online so come and join us for
that love love you today Evan as always
inspirational I always see that massive
word of belief that’s where we start and
for the perfect conversation and it’s
been a great we’re going to have Steve
would come on again next month and we
wanted advice from you guys on what
topic you want us to cover so if you
want to leave it in the chat live or in
the comments after the video is done let
us know your thoughts in the next topic
and we’ll do our best to accommodate so
thank you everybody for watching Steven
that really appreciate the time and have
an amazing time next week and we’ll see
everybody soon back Sarah thanks buddy
entrepreneurs struggle with how to raise
investment for your business how to get
the dollars you need to start and grow
your company and I’m super excited to
have my special guest Stephen Kelly CEO
of stage back on with me again Stephen
how you doing great I would Greta me
back up it seems a little while since
we’ve been together but it’s fantastic
rightfulness I love it I love the tie
back home when London you’re off to
Dublin next week right you’re always
jet-setting we’re speaking I think I’m
keynote in it I’m cynical Web Summit
which is about hundred and twenty five
thousand people turned up in Dublin but
a huge conference around both technology
but for entrepreneurship as well and
we’ve got loads of tech companies there
but absolutely tons of startups so we’re
talking about all kind of else age can
help them in terms of managing that
money which is really critical to their
business interesting like you know a lot
of our customers are saying that we can
get paid twice as quickly as they were
before so it’s kind of getting there the
fuel the pumps the growth of companies
around cash flow we’re all about the
disruptive technology that’s going out
there so it’s a crazy time we live in
and we want to make sure all those great
entrepreneurs are taking advantage of
that I love it I love it now most people
wouldn’t think a CEO would know a lot
about angel investing and how to raise
capital for a company and I know you’re
not the typical CEO so for some extra
contacts for the people watching can you
give people a little background of what
you’ve done on the angel investing side
yeah and I walked in the shoes of a
start-up so I’ve been strapped to
business initially out of Europe and
then out of California and raised money
there but one of the principles we had
was kind of I think is what are your
phrases actually made money before you
raise money and we kind of lived that in
our DNA but since then I’ve done at
least a dozen angel investments for
businesses that have bootstrapped and
grown some of them actually in tens of
millions of dollars of revenue growth
now so they’ve done really really well
and they’ve provided some of the core
principles we’ll talk about
this Google house and I think evident
you know probably should set the scene
when you and I are talking about his
almost a disruptive thinking is it’s the
University of Life of MIT of Harvard of
Stanford but we real practitioners so
I’ve done myself you know every does
name drew investments of bootstrap to
business I was a CEO of a start-up in
the US so I’m like you actually walked
in the shoes of the guys who are on here
today and I think a lot a lot of
practical experience and tips that we
can share I love it and for those of you
who don’t fully know my background after
I sold my first company I joined a
venture capital firm was helping raise
half a million to 15 million for people
who wanted to grow and expand their
companies and I’ve done angel investing
myself I’m actually in the process of
taking over one of the business that I
invested in to be the full owner of it
because I believe in it that much and so
yeah super excited an important topic
and let’s dive in on the question so for
those of you watching if you want to ask
us a question on the right side does
that chat window you can put your
question there and we’ll do our best to
get to it the first one came in from Jay
your eyes how does a CEO gauge whether
their business is at the investment
stage or not do people often seek
investment they don’t need yeah I think
also Evan people probably and I saw this
a lot back in the crazy kind of calm
boons California people raised it’s
crazy to set but almost too much money
and when you do that it just drives the
whole mentality of the DNA of the
company in the wrong direction and it’s
a real great sensitive almost bootstrap
of business and have that hunger every
day and worry about making payroll and
sitting down on Sunday evening and
working at new expenses your cash flow
your pipeline and all that sort of stuff
so I think my my and I learned this from
you actually is kind of make money
before you raise money let’s build a
business build value for customers and
obviously you need to kind of keep a
real-time weather eye on the cash flow
and the fuel growth which is cash
but you kind of really want to focus on
the fundamentals of business and that’s
how the face and that’s on the market in
the customers and the value provided and
then you can build your financial model
and it doesn’t have to be three
dimensional sixteen dimensional
spreadsheet can be pretty simple and
then really focus on running the
business and generating the cash you
need to fuel the worth and then go and
get investment when you need to acquire
points in time yeah I think the answer
that I think to many entrepreneurs do
start looking for capital too soon and
you’re gonna lose too much of your
company right this is a lot of risk
associated with a start-up and any angel
investor VC coming in if they see a lot
of risks and they want more equity as a
result and so the more that you can show
momentum some traction some sales some
media something something that separates
you from everybody else then your
valuation will get much richer and it’ll
be a lot easier to close the sales we
would always in the venture capital firm
try to look for companies that want a
growth capital not startup capital so
like you’ve shown a proof of concept
that works maybe you’re selling in a
local geographic market and now you need
money to expand that expansion capital
is the easiest kind of money to raise
where the startup capital is the hardest
so if you don’t absolutely need it I try
to figure a way to bootstrap it up
yeah but the key thing is we’ve said
that you’ve got to know how you can
invest money and even even the words I
use are pretty pathetic on this I hate
the word spend because as soon as you
spend money implies waste if you’re in
return so as an entrepreneur you should
have a really kind of tight I um when do
you need to raise money to fuel the
growth and then you need to know how you
going to invest it you is no one just
raising money and having two million
dollars in the bank and not knowing how
you’re going to deploy it to grave
business at scale that’s a really
interesting distinction do you do you
encourage that so you have a staff of
over 10,000 people 14,000 people
something like that do you do you
encourage them to eliminate the word
spend from their vocabulary and look at
invest yeah when I was actually another
CEO it’s about 15 years ago one of my
baby
the marketing came in and you can
imagine it in those days 1880 slight
PowerPoint deck you lose the will to
live and the last slide slide 79 is the
punchline I need a 50 million dollar
budget for a brand campaign or something
happening I said look I kind of get
yellow fit in the room let’s get real
about this and the guy kept on talking
about spend spend spend I said wow we’re
not going to spend money in this company
ever like drunken sailors we’re going to
kind of focus on investment return on
investment and and it’s what we talked
about before test drive and stuff test
drive stuff till we get the data to know
what really works so we can really scale
our business and I think in the world
you know it’s great digital economy
digital marketing everything’s
accelerated now so what two years takes
weeks and months now and I think you can
really from an investment point of view
you can actually move to where this I’m
sure should I go for one big lump sum of
investment or should I do it in a number
of small economy fermented series and I
would always advocate go for kind of
small test drive stuff and to your point
you don’t give away half your business
and lose total control of it yeah I love
that and so again I love the distinction
between spend and invest and to add to
that point of raisin and rounds what you
can do is bet on yourself and so you can
raise your first round at maybe a
million dollar valuation and then say
hey if I hit these milestones will you
come and fund me but at a 1.5 million or
two million or five million valuation
and so you’re betting on yourself that
you go and hit those milestones but if
you do then it’s a lot less riskier for
the investor to get involved in so you
can end up raising the same amount of
money but over time so you get the money
you need to grow and you’ve lost less of
the company through dilution cool so
next question comes in from Salvador he
has a clothing company it’s one years
old if he’s going for an investor how
much money do you think I should ask for
so that’s a pretty generic question but
how do you how do you address how much
money you should ask for at any point in
time in your business yeah I think hey
so no you need to almost turn the
question around and say how much do I
need to fuel the growth
so again you don’t need to you know go
to Harvard or meu you know your business
you know your customers you could put a
projection around how you could grow
your business and then whether you need
to take on extra employees or to service
them or sales or marketing and this
little functions you need to keep
customers delight customers and grow us
a sustainable business model and then
once you do that is kind of work
backwards about over the next year what
do I need to fund that growth look here
your cash balance look at all the
obvious things about whether you’ve got
revolving credit a lot of businesses
probably at that stage they’re still
using their credit card to fund some of
their growth as well and then think you
know have a really rock-solid plan over
the next year 18 months this is the
best-case if I accelerate it to a sort
of stretch plan back to Evans point
could I go back and say have an option
with an investor to really kind of ramp
it up and grow faster so I think the key
question here is it’s not how much money
do I wanna raise it’s what is the
business plan to grow responsibly and
sustainably but as fast as you can to
execute them on the opportunity and then
work backwards to look at the funding
requires yeah I agree I like looking at
well here’s where we want to go in the
next year and how do we fund that before
we’re in about how do we fund the next
10 years who’s got to actually execute
your 1 year plan first and if you do
that right it’ll be way easier to raise
for what you’re gonna be doing ongoing I
would add to that when you are talking
to an investor you need to have absolute
clarity over how much you need and what
its gonna be invested into because if
there’s any hesitation if there’s any
doubt then you’re gonna make the
investor scared they’re gonna be spooked
and they’re gonna not want to invest in
you so you have to have absolute clarity
you have to know exactly where you’re
gonna be spending that money and the
Stevens point you make your plan one
year here’s what we want what we want to
do here’s where we’re gonna go and then
in your projections here’s what will
often happen an investor at least in the
VC world will look at the executive
summary of your business plan then we’ll
look at who
as part of this deal like the horse for
the course they call it right who is the
jockey who’s the team and then we look
through the financials do the financials
make sense you know here’s where you
want to be and you have to be able to
explain every single number in your
financial statement why it’s there and
if you can’t then it’s going to be
really hard to convince an investor to
want to come on board with you
yappity thing evidence you’ve got to
know where you’re going to invest it so
no bet on the management team and the
longer you’ve executed successfully the
more back in you’ll get but you’ve got
to know how you invest it because I’ve
seen companies even when they get to
like 15 20 people they go and raise a
load of money and all the stuff the bear
behavior kicks in like they design a new
logo go and you brand and stuff and you
start traveling first-class and all the
kind of nonsense that I would say waste
money rather than focused on the mission
of driving body for customers and
growing your business yeah you know the
other thing to keep in mind there for
those of you watching is raising money
can become a full-time job which means
you are not spending time executing on
your business yeah and so you can often
a fourth hat if you’re a social
entrepreneur and no investor wants to
put money into a company that isn’t
gaining traction momentum and so if you
can focus on executing and getting some
results over the next six 12 months
that’ll give you a lot of ammunition to
go talk to investors with yeah Adam one
other thing we should probably have
further guys out there is I think we
need to separate the bootstrap phase
from the growth capital phase and you’re
right the growth capital phase it’s a
sales job you’ve got a effectively if
you want to do the best of your company
and get the best terms you’ve got to
have a great presentation a great story
but just let’s not kid ourselves you can
burn up a huge amount of time going
around the hole our growth capital
investors pitch in to them and they draw
you into their own sales cycles and
process and that’s a big discretion from
running the business so you need to be
really conscious that you’re spending
time first of all or running your
business growing your business and then
the funding should be really light touch
to support the growth of the business
and it’s sometimes easier said than done
yeah I love it
very true I
reishi Captiva hello Evan hello Steven
beyond money what should an entrepreneur
look for when choosing the ideal
investor thank you
so I’d say definitely in the
bootstrapping phase Evan I’d say not
only the investor but I also extend this
to a sort of employees I love to see
companies getting partners employees
investors even supply strategic supplies
can’t put skin in the game of following
your dream believing in your story and
making your business a success so that
sort of things that look for certainly
from the investor and this translates to
our employees as well someone who’s
really committed on the idea who gets
the story gets the idea that you’ve got
whether it’s a service business product
business and then more importantly can
add value to the growth of your business
so particularly as an angel investor I
sat on a few of the boards and I chaired
a couple of the boards when we started
the businesses and I gave a lot of time
to coach and mentor that you can take
again for those businesses and even
through to the phase when they are
beyond to a growth capital as an advisor
and a coach to those guys over to y’all
at 32 years experience in the industry
and there’s a lot of guys like me out
there who have had very successful
careers and they can be really good
mentors and they’re also non-invasive
where you get into the world of VCS
there’s all restrictive covenants they
want to put warrants but also they’ve
got a seat around the board table and
they could be quite invasive in terms of
you having freedom to run your company
and pursue your dreams so I’d look for
someone with experience they’ve got time
they’ve got they’ve got real appetite
for your story and supporting you grow
your business and and therefore connect
as a tremendous coach and mentor as well
as the money they can provide at key
stages and if it works
most of these into investors I’ve been
involved in go through the distance of
multiple routes so they go through the
whole journey with
the companies as they scale and grow
them through their success I love it in
the VC world here we call the dumb money
smart money I don’t the same thing in
the UK but dumb money is just money and
you you really want that as a last
resort because you want somebody where
smart money they’re providing contacts
at providing information training
mentoring open up doors for you help you
get clients help you get media whatever
it is that you need to help grow the
business you want somebody who is
obviously yes passionate about where
you’re going
somebody you feel you can work with but
somebody who brings something extra
beyond it right whether those contacts
customers opening some kind of door for
you alongside the mentoring and training
that’s what you really want to look for
and I would honestly hold out until you
find that right person if that’s your
goal then just to accept the first check
that comes in the door because you can’t
you can’t easily get rid of investors
that that’s a that’s a long-term
decision you’re making right there so
just like when you get married you want
to make sure that you’re making the
right decision sir yeah I mean just to
add a hitch as one of the firm’s of his
chief executive law actually a couple of
times I’ve got a customer to come on the
board and be a mentor for me and later
an investor so I kind of think this is a
great time if you’re bootstrapping your
business to think outside the box who
would you like around the table giving
you all business advice that’s got a
tremendous insight into the market the
future the product innovation you’re
trying to lead that could give you
invaluable advice and give you a real
sanity check
so I aren’t always back smart money I’m
always back people who got skin in the
game and who have got a strong
commitment to you and your business grow
and being successful I love it
next Warren in an industry where in the
beginning all you can offer is a lot of
exposure how do you approach investors
what is the formula of exposure versus
dollar yeah maybe I’ll go first
I think obviously I’d run at the star
you’ve got an idea you might have a
product you might have a prototype if
you’re in the area is like advisory or
Consulting or recruiting or services
business my kind of view is you should
be profitable and cash generated from
the get-go so one of the businesses I
set up in Europe literally we were
profitable from the get-go and and part
of that is we build ourselves out to
clients so you know it’s pretty simple
business model and then I kind of think
the key areas all we’re talking about is
execution risk so one of the things that
any investor would look at what’s the
operational risk you know just a
strategy makes sense is the remark here
is this a compelling idea is the
management team really strong and then
it’s all about operational and execution
risk and obviously the further you go on
the journey and you get referenceable
customers and you get momentum then
obviously it’s easier to you know I have
a flock of people knocking at your door
and you get a lot of inbound so in those
early early stages I would advocate you
know get your idea together get a really
good story together in terms of how to
pitch the idea domain it’s the sort of
thing that your ever you could take to
your mom tell her the story and she’d
say that’s a great idea and and she
could get it so we did mystify and then
they’re not relieved they’re back in the
management team and to your point I put
a few gates in there for them around
milestones of what you wouldn’t wanted
to live on a business plan yeah in that
was in the VC world we had something
called the grand amount of the test and
that was your business plan especially
the executive summary is it something
that your grandmother would understand
so is this something that’s easy to
understand that anybody can understand
it where a lot of people write in ways
that make sense to them but are so
filled with jargon and technical terms
we remember that investors are
generalists for the most part they don’t
know your industry as well as you will
know your industry and so has to be
something that everybody can understand
so I love that point about about clarity
warrants your question about exposure
selling exposure versus investment I
would probably not look at them as an
investor in my business if I could only
offer them exposure the kind of company
that that would work with you for
exposure may not be the best company
that work with as an investor in your
business so I try to sell some kind of
sponsorship deal with them if you can
get them great exposure they
you for it it’s a transaction that you
guys create their pain for that service
but they don’t own a piece of your
business unless they get what your
company is all about the way we’re
trying to go and they can help you along
that path if you’re only offer an
exposure it may not be a good investment
opportunity for you right now the next
two questions Dasani and Bulo are
talking about basically how do you find
investors what’s the process of finding
an investor what direction you take
you’re trying to get capital how do you
go and actually find those didn’t invest
as your business yeah I think probably
the the most difficult time is when you
start up so you know you’re
bootstrapping a business I think once
you get to sort of critical mass you’ve
got revenues million two three four five
million there’s a whole kind of network
of growth capital venture capitalists
out there but in reality you know I
looked at some data the other day about
80 to 90 percent of the startups are
funded through people like us starting
businesses yourselves so that’s your own
life savings remove within your home
your credit card maybe getting a loan
from the bank stuff like that and then
the other you know factories all the
friends and family stuff although you
don’t want to take the friends and
family money you’ve got to agree some
parameters with this stuff because you
don’t want to go on vacation with them
and every night is like an investment
meeting you know you’ve got to make sure
if you do friends and families you have
delineation between the investment and
your relationship and you know all these
things you’ve got to tell them you can
make money you might get ten times or
you know I work 80 hours a week and it
doesn’t work out they go understand that
but then the other things I’d say is
that’s the obvious one so you sell
friends and family then there’s a whole
world out there of crowdsourcing and
there’s the indigo goes the Kickstarter
has all these sort of guys out there as
well in terms of crowdsourcing know I
saw relations and the crowdsourcing
market would actually exceed in terms of
the capital deployed I think it’s by
2017 the VC marketplace
so we’re seeing that whole impact of
digital and social around crowdsourcing
zhaveri way to go so the office places
as well you know let’s start if you’re
if you’re up in Massachusetts or you’re
out in Kansas you could go down to your
local by the state or even go on the
federal websites there’s loads of ways
to get help around and find capital if
you’re in a minority group there’s
specific things done for you know
minority agencies and upon the Commerce
there’s loads of stuff out in New York
and York State I think nice star where
they connect you with a network of
entrepreneurs there’s a whole load of
range of Android Vestas and the other
thing I’d say Evan is just to sort of
throw away mobile all the angel
investors I know a regular guys they’ve
done very well they’ve been very
successful they’re very approachable so
one of the kind of things in our heads
and voices to prevent us being
successful is and I couldn’t pick up the
phone to someone I couldn’t email
someone but you never know
you know if there’s someone you really
respect who’s created the business in
your industry with a lot of domain
experience I’d say try and reach out to
them because they could be an amazing an
angel investor and they might you know
look at you at the age of twenty seven
twenty eight and say I really admired
I’ve got a great story disruptive
innovator and I’m not in any danger of
bet I could be a mentor in that business
so I think there’s a lot of ways around
there to find the investment beyond sort
of friends and family and yourself and
all the traditional things that I think
go digital go crowdsourcing but also
just kind of use your common sense have
no fear and being prepared to pick up to
the phone to people but to Evans point
the more expensive you go in terms your
search for capital the more time it
takes and that’s a distraction from
running the business I love it
for clarification for those of you guys
watching a lot of the crowdsourcing is a
fantastic way to raise money but you’re
off-putting and usually not giving up a
piece of your company but if you go to
Kickstarter it’s more like marketing
right you’re you want to pitch this new
product that you want to launch we need
a million dollars to do it
$10,000 to do it your pre-selling and
you’re giving them bonuses but you don’t
lose a chunk of your company there are
other crowdsourcing options where you
are giving up you’re looking for angels
basically but majority of it is not
actually giving up an equity position
your business so it’s definitely
something worth looking at because if
you don’t have to give up equity it
saves you an insane amount of money down
the road in terms of finding investors I
think to Stevens Point most of the angel
investors are regular guys and guys and
girls ladies and most of them don’t go
to angel investment meetings most of
them are not part of an angel investment
group most of them find their deals
through their connections to their
networks and so I would want to be
telling my story the people who are
connected into those networks great
places to start with our accountants and
lawyers because they deal with business
people on an ongoing basis it’s their
job to be connected to a bunch of these
guys so if they like your story they
could probably introduce you to somebody
who could probably help you out at least
have a conversation with you and it’s
probably on your point you’re on the
crowd so that makes important almost the
other thing I’ll say you have a view on
this is you need to look at the number
of levels of kind of how do you raise
cash number one we should have probably
said this at the start there’s really
critical ways in your business to
preserve cash so things like payment
terms you want the quickest payment
terms your customers to play and you
want flexible payment terms to pay your
suppliers obvious thing you just drive
this ethos in every every employee you
hire in the company to treat the
company’s money as if it’s your own when
employees join your company if they
believe in you and the product try and
get them to be investors in the company
you know maybe they take shave their
salary reduce their salary to a set of
what the market is 70% but give them a
little equity in the company so again
everything you should be thinking in
terms of run your business you know
stage one is preserving cash and then
the other things around this is very
often when you go to customers you’ll
find customers one about your business
especially if it’s a product business so
they’re heavily invested in your future
and then almost give cash on delivery so
so they’ll they’ll pump try and they’ll
even forward load your cash so there’s a
great place to go sometimes to go and
get your customers to fund your growth
then the second sort of category is
where can you get cheap money without
dilution without giving up equity and I
think around that we’ve had a couple of
suggestions around that and you know
could use a credit card and all these
other things and then the third phase is
really you know many conscious decisions
I’m prepared to relinquish some degree
of equity to really build growth and get
some more capital in the business and
then the fourth level is probably more
growth but what you’re prepared to give
up in terms of control and there’s a
whole kind of spectrum but they’re kind
of the key thing I would advocate and
it’s so easy when you’re running your
business run that thousand miles an hour
I just think every day how do I reserve
cash as long as possible make it work
actually another thing I someone told me
20 years ago 25 years ago a nice backup
Oracle which is an early-stage company
in those days always do the one dollar
challenge as it kind of should exactly
be business if you have one dollar where
would you invest it well if you’re
marketing digital marketing product
innovation R&D and always to remember
that one dollar challenge because what
you find when you grow your business
you’re not totally in control of it
after three or four years and people
start hiring people and expenses that
are increasing and that’s a dangerous
time for business so you always come
back to the core basics of treating the
company’s money as if it’s your own and
the ethos around the one dollar
challenge so having any thoughts around
that kind of preserving cash and then
moving up through the spectrum where you
ultimately dilute a bit of control
yeah I love it yeah you’re gonna lose a
lot of equity at the early stage if you
go to investors now because again it’s
so risky for them and I would I would
encourage you to love the idea I love
the one dollar idea that’s great I would
also say if you’re targeting customers
as potential investors you may be able
to do it where they fund your growth
without you having to give up anything
in your company as an example you know I
had a software company our first
business was 19 was a biotech software
company and
one of our customers wanted the software
to be in Spanish as an example well we
didn’t have the funds to hire a Spanish
development team and put everything into
Spanish and translate everything over
and so we said you know we could do this
for you but it’s gonna cost you X
thousands of dollars and they said yes
because they really wanted it and so
they funded our development and then now
we have a Spanish version that we could
sell and anytime our customers wanted
these features we would charge them the
development cost for and then be able to
sell it to everybody else in the future
that wanted it too and so we were able
to you know a young company bootstrap it
up get the money we need it without
having to go to invest without having to
give anything up but still build the
fuel or growth so as much as you can I
mean that’s part of entrepreneurial
thinking you got it you got to think
like that you got to come up with
creative ways to fund things because you
don’t have a pile of money to sit in
your bank account and it’s it’s good
training to try keep throughout the
lifetime of your company because once
you do build and grow and you’re his
beasts funny admit frivolously
I remember one company came to us at the
venture capital business they wanted
half a million dollars there were four
of them they figured they’re each worth
$100,000 a year so that was their salary
and then they had $100,000 to actually
put into the business and grow and like
that is not something that any investor
is gonna fund right I’m not I’m not
paying for view a hundred thousand
dollars each so you can quit your jobs
and do this thing and then you only have
a hundred thousand dollars in working
capital in the business and so asking
for less bootstrapping finding
alternative sources
ideally ones where you’re not having to
lose equity for all part of the
entrepreneur’s journey and i think super
important to help you get your business
off the ground I love it I just add in
there you know everything we do we do
legally but moonlighting if you’re
employed by a big company now you’ve got
a big idea
you’ve got evenings you’ve got weekend
start test-driving and start your
business before you leave you come on it
so I got called Marc Benioff he’s the
chief executive and chairman of
salesforce.com was an employee of Oracle
and he actually started Salesforce
within the mothership of Oracle so
there’s the
the great stories where you’ve got
safety financial security and you can
really test whether your idea will work
with your dream can come true and that’s
a great platform and then typically I’ll
be honest all the businesses are angel
funded all the executives are taking a
haircut because they said skin in the
game is my time the worst thing we can
do is charge the company in the market
rate because cash is king we got to
preserve it and typically most of some
of them will work for nothing for two
years but typically they take a haircut
like 50% on their salary take no bonuses
take no cash out of the company put all
the cash to work for growth I love it
next question from Jason thanks for
hosting this event Evan and Stephen
should I wait until I have proof proof
of concept before I pitch investors or
funding or go on shows like Shark Tank I
think it depends on I think two things
you’ve got to have a great idea and test
it with the market if you don’t stuff
like Shawn tanked and you haven’t got
your ideas together around the market
you know what the issues are if it’s a
consumer product
you know what the competition’s doing
all this sort of stuff you’re gonna get
ripped to shreds but ultimately if
you’ve got a great idea
I’d always say test drive it as quickly
as you can and then get kind of real
velocity in terms of momentum as you get
early customers early adopters and stuff
like that and just as Evan said the
longer you can leave it if you can
actually be making money before you
raise money the less you die leave
yourself the less their ownership you
give up so that’s all good because you
keep control of something you love your
baby ultimately though if you want to go
and pitch it one of the things you need
to do is have a really crisp story and
be able to tell that story and try and
tell it if you can do visually in things
that land really well and then obviously
have all the stuff around the market
data market size the growth potential so
I think it’s really important to get
your pitch together get your story
together and you don’t want to have to
do a different story every kind of time
you’re going to pitch it you want to do
this once and picture to a few people
and I think that you could save yourself
a lot of time because to Evans point
what you where you want to spend those
precious 60 70 hours a week
is gone and starting your company
recruiting people recruiting customers
building your product you don’t want to
be spending it just going out pitching
your company to investors or not but in
the business yeah and you know the add
to that if you’re in that early stage
you may want to instead of going and
pitching something because you won’t
have it over no you’re gonna have so
many holes in your business plan and a
season investable poke holes in it all
day long and that makes you look bad I
would probably go in and ask for help I
would go in and and show your young on
Ratner and you want ten minutes at their
time to get some feedback on a project
and see what kind of advice and ideas
they give you and that opens the door
people to come back and say hey I
followed your advice and here’s how I’ve
grown if they really love it they’re
gonna they’re gonna be thinking
investment anyway we’ve becoming
pitching and you don’t have a solid plan
you know it’s hard to go back to those
guys because they’re think you know
that’s the guy who came in who didn’t
know what he was talking about like
you’ve made a really bad first
impression but going and asking for help
and then taking that knowledge put into
your business and coming back and
showing what you’ve done and worked on
it if they see that you’re listening to
them and you’re acting on their
suggestions it’s way easier to go back
and then pitch them whatever do you have
to grow it and gray someone you need
pastor D is asking about events what do
you think about events to find angel
investors and venture capitalists and
private equity I kind of think it’s
unless you really know around an event
why are you going there again I’m not a
big fan be honest so they could be I
don’t know say I’m thinly but quality
the pharmaceutical industry is so if
it’s very specific it may be worthwhile
but again I think it’s kind of a bit of
a lottery and it’s really difficult in
terms of that I think what you want to
do with raising money is bring as much
science to it as possible and let people
find you and if you’re just going to
event with a thousand people there it’s
really hard to find your way around so
I’ll be honest I’ll prefer you to be
sitting down doing your business thing
around your business and kind of making
money and then at the right time
go to the right events and if you get it
right you should be keynote in at these
events you shouldn’t be paying a
delicate fee and paying for your own
hotel room they should be playing for
you to turn up and you should be on
front for the stage there so so it’s
creating that excitement demand and you
do that by creating a great business and
I don’t know I’ve use that money you use
that time more importantly very business
I love that I love that they should be
paying you to come fix it you can always
count on Steve and Kelly to think big I
love it I would be looking at events
only in a marketing contact so you know
if TechCrunch is doing their annual
contest and you go for that you know the
winners they are good an insane amount
of coverage and I can really help put
your startup on the map in terms of just
meeting investors most angels and VCs
they’re not part of these groups right
especially on the angel level they don’t
go to these angel investment dinners and
again is found through informal
connections so if your goal is to raise
money then I would be working my
connections again accountants lawyers
bookkeepers people who are connected to
others we have a term in the industry
called DDI
dentists and doctors with disposable
income those are often the first
investors into a lot of businesses but
if your goal is marketing and putting a
name out there for yourself then that’s
what I would look at more the bigger
events Tom when or how do you determine
is the right time to allow investors
into your business yeah and again I
think it’s when you need growth capital
to scale it up and then I think there’s
a second element to that question
ultimately when you need advice and
input in terms of growing the business
and I think that’s a whole different
category of conversation so you need the
investment but then you know being a CEO
and a business is hard work and it can
be pretty learning and if you’ve got
someone who’s drawn that part the number
of times before they can show you a lot
of shortcuts so if you get the right
angel
and you get an angel Rhys down
you’ve done a couple of times before and
is prepared to invest as most dangers
are then they’ll give their time freedom
and generously and can save you a whole
lot of time with a lot of fame I kind of
like the bravado in this question how he
worded it to allow investors into your
business you even got to watch the ego
check you know you don’t want to go in
with a massive ego
but at the same time you don’t want to
be desperate to you never want to be
desperate going into talking to
investors or ever really in your
business you want to act out a
confidence in knowing that you have a
successful business concept that will
take off but it turns up yeah I mean I
totally agree with Stephen I don’t think
I have anything else to have on that one
the other thing put your hat on SBC when
I when I’m living in California we did
raise some money and got Sand Hill Road
if you think about it you’ve got to put
yourself in the shoes of these species
if you’re looking for growth capital
they see hundreds of businesses it’s
like Groundhog Day you know every day
their diary that calendars packed with
kind of pictures so how do you stand out
how do you make yourself different how
do you make yourself compelling how do
you make use yourself the most beautiful
baby that they’ve ever seen so it’s
worth thinking about that and if you
just go in with a standard picture
standard presentation boy have you got
to have your data together and really
knock the ball out the park but I would
encourage you to think differently and
stand out from the crowd because you’ll
gather attention that way not do crazy
stuff but there’s ways to think
differently and do something very
different
Evan you know you’ve set in the issues
of a B C yeah my my role with the VC was
weeping out all the business plans that
came in and in like 99 percent of the
plans got a no no thank you
before you even get a meeting like most
of people come in for meeting also get
rejected but just to get to the meeting
you’re already facing at 90 99 % you
know failure rate
mostly it’s because of one there’s not
enough momentum it’s like it’s just an
idea and a VC typically doesn’t fund
just an idea and to it’s not clear you
know there was some tech companies that
I was reading their executive summary
and I couldn’t understand it like I come
from a software background so I’m not
I’m not a tech idiot but I’m also not a
tech genius and back to the grandmother
to test if I can understand what your
company is doing and I have to read
paragraphs three times to try to figure
it out then it’s not going to be a fit
so again we look at executive summary
and then the management team and then
the financials and if all that looked
good then you being divided for I’m
reading to come in what what order you
I’m curious for you Stephen when you get
when you get pitched something somebody
sends you they’re playing how do you
read through it what’s what you skip
around how do you read through that
business plan yeah I think I get first
question is there a market or could they
create a market secondly their
management management is really really
compelling and then if they haven’t got
the experience that’s that’s not a
negative but then they need to do more
kind of test drive it and then
underpinning that as the financials so
they’re the kind of sort of things and
then obviously you know you know this
Evan as well
truly entrepreneurs out there you want
to give up the minimum control your
Canada company and you want to give up
the minimum equity so the longer you
leave it and the more you make more
money and grow your business without
raising cash and just back to the fact
that I think 90% of businesses are
self-funded ish initially through the
bootstrap phase the longer you can leave
it or you can actually skin even grounds
down to manageable chunks over like 12
to 18 months rather than the go alpha
kind of enough cash to survive there’s
five years the more you actually
preserve the value and the equity in the
company yeah one thing that we haven’t
talked about that also is more important
for the angels and especially the VCS is
what is their exit strategy gonna be
they want to see that you’re gonna be
out usually angel lasts longer a
lifecycle of an angel investment
companies around eight years where VC
would be more closer to five years where
they want to basically be in and out of
your business in five years or VC and
they want around 30% growth per year on
average in their investments now that’s
not going to happen in the first year
but by the time you sell it’s a
cumulative average and so not all in
this trees are built for that like a lot
of industries
if you are not in the high profit margin
high growth potential industry is
probably not a fit for a special
adventure capital investor and they’ll
want to see that it’s one of two ways
either this you know go public so you’re
gonna IPO or somebody’s gonna buy you
and if nobody in uni has ever gone
public and there’s never been any big
mergers and acquisitions in the industry
it’s also gonna be hard to attract an
investor because they’re thinking how am
I going to ever get my money back out of
this deal and so it’s not the first
thing that investors will look for but
it better be thought out in some way
because if that’s a concern of theirs
then they won’t want to put the money in
yeah actually have an ear the other
thing kind of thinking way down the
track upset around the board where there
have been some really high-quality PCs
involved and you can see that how the
behavior over the five years changed
from their input and this is the company
where about one example thirty percent
of the equity was owned by the venture
capitalists another one where about 25
percent was owned by a couple of growth
capital funds and they had a seat at the
table of the board and their attention
span diminished over the period of time
you know they’re our first two years
strategic influence mentoring last two
years all about what about the exit who
we’re talking to what inbound
conversations so it changes the dynamic
and am I actually a totally different
topic but you know you never sell a
company you only ever get all so the
best time to be bought is when you
receive the inbound and you’ve got the
hottest product in the market all the
best services company in the market or
whatever it is and then you can have a
competitive bake-off and maximize the
exit position for the investors so it
does change the dynamic so if you will
point in heaven I think you’re bang on
the money and if you’ve given up a ball
position or something like that in the
growth capital phase you need to make
sure these guys have got a really good
track record of sticking around for the
long term and not just kind of
exercising the time clock and then
turning the key at the end of the five
years yeah and just like they’re doing
an insane amount of due diligence on you
you should do due diligence on them too
right
talk to some of the other companies that
they’ve invested in and see what they’re
like as a mentor and as an investor
because you want to make sure you’re
getting the records on on your company
this is like getting married and it is
hard to kick somebody out once they’re
on board
bhima queen is writing to say what
should i have available with me when i
meet with an investor i think yeah
obviously a great company story that
you’re really proud of number one that
you could explain to Grandma
you should have stuff about market
market opportunity you should have stuff
about competitors if there’s people out
there already doing what you plan to do
and why you’re different you know key
thing is what do you do who you serve
and why you’re different and you should
have the financial model certain you
don’t have to do it kind of 25 year plan
but you should certainly have a sketched
out view of the three year plan i’m
pretty good detail around this fiscal
year and how you gonna deploy the
investment that they’re going to make
why you know back to heavens first point
really where are you going to invest
that so you really accelerate the growth
of the business how are you gonna deploy
and if they get into you know if I was
in my angel days and they were raising a
couple of million dollars I’d say well
tell me where you can invest it you must
have a pretty good idea there what’s
your marketing plan alright what’s to do
referee expansion what you reinvest on
digital mark and all these sort of
things so you need a pretty clear idea
because you run in the business they’re
going to trust you as a management team
and you’ve got to have the confidence
and the plans in place to very credible
yeah I love it I mean there’s a number
of resources and what needs to go into a
business plan there’s a lot of the
common stuff I don’t know if there’s
anything that you guys offer on Sage on
the website or a blog post somewhere
that out lights and details but most
business plans are pretty standard and
there’s a reason why all those sections
are in write is the reason why you need
to have the executive summary enough
financials and a management team the
operations plan and the sales and
marketing strategy all that stuff is
information that it was a business owner
should know throughout the business and
also investors will be interested in I
think the most important thing when
you’re going to a meeting with somebody
is to be able to talk to the business
plan but not basically read it where a
lot of the pictures that I saw the the
the entrepreneur comes in they’re like
okay
here we go let’s talk about my sales and
marketing plan and they’re like having
always to refer back to their notes it’s
like well if I wanted to read what was
on there I could just take it and read
it myself I’m interested in having a
conversation so you should be willing
and able to talk to the points in your
business plan and without having to look
through and memorize it I think that’s
super important also I would use my ears
like any good salesperson you got to use
your ears every investor has their own
way of their own investment of
philosophy their own way of attacking
things and often we get locked into this
is my sales pitch and you don’t deviate
from that where they may not care about
five of the things in your sales page
and so let them ask questions of you and
answer them openly honestly and give
them more contacts where they want that
context they ever want what are they if
you’re gonna go do pitches it’s so much
like girl for a job in reality you got
anybody believe between 30 seconds and
two minutes to really grab their
attention and come you know jumping out
of their seats and I’ve got to have all
of this so if you’re a product company
the best way to do that you should show
them the thing you’re really proud about
the product just get your product out
and show em and again just be sensible
with I don’t know if your product needs
Wi-Fi check all the Wi-Fi let’s test
drive everything so that when when you
get in there and it’s show time it’s a
show time they really remember for the
right reasons yeah so if you could give
them like a two minute three minute
product demo say start at the end this
is why we’re different you look grab
their attention and then everything else
will follow from that rather than just
do the kind of standard picture turn it
off management team the market and all
that sort of standard stuff so grab them
around why you’re so excited and why you
believe in in your product I mean it’s a
great way to go yeah I love that point
if you couldn’t visualize what’s
happening if you could do some kind of
visual demo I remember reading about the
guy who who popularized the bulletproof
vest he would go to police
Asians and tell the officer to shoot him
in the chest and of course he did it
didn’t go through and that won them over
just right there that one act
landed a whole bunch of deals for them
and so if you have a product that can’t
be demonstrated then you absolutely want
to bring it back because it’s something
different memorable bits of food
products of them gonna be tasted bright
anything that you can show that more
than just reading off of paper or
PowerPoint slide helps make you stand
out from the competition yeah they are
they doing a graphic if you’ve got real
customers and customers are great on
this say the customers can you send me a
video 30-second clip of what why you
love my product and why we’re different
and which competitors you looked at and
literally build build a visual
presentation and the best best thing is
showing the front of yourself bullet
point vest is a great fruit point but
secondly if you haven’t got that you can
stand out through customers so if you
know all these investors will say we’re
customers like that love your product
this is real a little bit sherry and
Phillip are both reading in basically
the same issue where they’re there they
want a sort of business but they haven’t
you know they don’t have any help around
them they feel like they need to invest
me before they can launch into their
business what kind of advice do you have
for them who you know they haven’t
launched their business fully until they
feel like they need investment to do it
well yeah well I guess we don’t have the
quantum of the investment they need to
stay on their business but I also we
don’t know if they’re in full-time
employment but but if they are I think
of anyways how can they shortcut or test
drive their business plan and their
product to say what are the things we
need to refine to really be ready for
primetime and then then it’s back to all
the other things we’ve said about you
know making money before we raise money
but if you do need a significant
investment you know if it’s a capital
intensive business or something like
that and you do need to invest it and
pump crime the investment side then
probably we’re talking about a different
class of investors we’re not talking
about bootstrapping your business
and around that a good way to go for his
capital intensive go to the potential
largest customers because again if it’s
a really good idea and if you offered it
you know even if one one angel
investment I did we offered the customer
I think it was a three-month exclusivity
period on a rolling basis and for that
they actually invested in the product
and the product development so so
there’s some things you can play around
with are pretty creative to really allow
you to have confidence so when you hit
the ground running you’ve got a ensure a
for success area yeah love it that’s a
cool story what I would add to it one I
would try if you’ve been a bootstrap it
I would try to start a service business
over a product business one to get to
know your customers better and two to
build a stable cash flow stream it’s a
lot harder to leverage your service
business and a product as you’re always
trading your time for money but it gives
you an income that then you can support
yourself on get close to your customers
learn about them and then launch a
product around their needs it delays a
timetable a little bit but helps ensure
that you’re building the business the
right way another idea would be to go
work at a company where you can learn a
lot of this stuff from I would try to
target a company that I want to be like
so not some huge company of a wouldn’t
go try to work at you know one of the
biggest companies in the world I try to
work at somebody who has ten employees
or less who’s really doing well on my
name is I respect the work that they’re
doing go work for them learn from them
take on as many projects as you can you
know no entrepreneur is gonna say no I
don’t want you to do more work right
they’re always they always want their
team to do more work so if you’re
volunteering they’ll help you along the
path and they’re you’re learning right
you’re learning how to how your industry
works you’re making contacts you’re
making money so you’re getting paid to
learn about your in the streets and that
will help you get the contacts and
connections to be able to then leave and
do your own thing so you know start on
the side like Stephen said before but if
you can get a job in the industry that
you want to learn from if you really
help that transition yeah Jason we
created a great product and service but
we need to make about $30,000 in
adjustments to our software in order to
scale
and move on to the second phase of our
business plan who should I be targeting
oh you know if you’ve got customers
already out there with sort of a phase
one product it’s almost a certainty
they’d want to take your phase two
product so I don’t know i don’t actually
got to say even in that example 30 30
customers or 300 customers it will be
worth going to a few of them and say you
know you selling a bit of the future you
show them a prototype but you actually
get them to fund the next phase of R&D
and you can do that through maintenance
or you could do it through contractual
vehicle that allow them to have the next
couple of upgrades or whatever so phase
2 and phase 3 see that that would be a
good way I’m just thinking like you’re
not diluting the company and are keeping
up equity and actually you really focus
on what you pulled around getting
customers to love you your product so
that’s the first place I’d go and then
the other place if you need to actually
take on some guys around R&D for phase 2
get them to come in I will always with
early-stage companies with employees
getting to invest in the company as well
so and that could be really investment
where they actually contribute for some
equity in the company or you know taking
a bit of a haircut I said on salary for
the first couple of years so I think
there’s a number of ways of doing it and
I think around this if you’ve got a
product you got customers that’s a great
platform to go back to your customers or
partners and say I need more investment
this is where you get for it show them
what it might be like you know like
Missouri men and women you know showing
me show me show me and if you’ve got a
proof point of reality there then I
think you’ll get a lot of back in for I
love it one thing we didn’t touch on was
who to go to for different size amounts
so typically if you’re looking at
venture capitalists under half a million
they’re really not that interested in
you have to have an insane story for
them they want to jump in because for
them to do a half a million dollar deal
and a 15 million dollar deal is the same
amount of work and so they don’t want to
do the smaller deals
angels usually are around they feel that
middle ground like 50,000 to half a
million
you’re looking at an angel round some
angels will come in at less than $50,000
but again it’s a lot of time for them to
do the due diligence and they want to
see the opportunity and if you know you
only asked for $10,000 that’s probably
not something that an angel investor is
interested in now a single investor who
does this as a business if it’s if it’s
a dentist that wants to put money in and
it might be dumb money they don’t
understand the industry then maybe but
under $50,000 you’re really looking at
friends and family and bootstrapping
for the most part so if you’re looking
for $30,000 it’d be I’d be looking at
myself like how can I get $30,000 I love
Stephens idea talk to your customers if
they might give you an advance if you’re
a software company you know you’re not
going out and you don’t need to buy
equipment so it’s it’s labor it’s
teamwork so to Stevens Point can you get
those guys to donate their time and in
exchange for some kind of equity or some
kind of deferred payment because the
other investment categories you need to
be asking for more money it doesn’t mean
you sure it doesn’t gonna go I need
$50,000 now so I’m gonna go after an
angel to our point back at the beginning
and what Stephen was talking about much
you want and then execute against that
plan I am and on that bomb one of the
things that did one of Aqaba days is I
think we’re the time we needed three
developers like three months and we went
out to a third-party consultancy company
pitch to the chief executives there they
gave us free people and they did the
work free of charge I think we gave them
allowing half a percent of equity away
and we’ve teed them up to be a
distribution channel and seller market
the product as well so again think
creatively if there’s people out there
it would be a channel to the marketplace
and they’ve got some of the resources in
place where you could use them for a
period of time on a project and get our
version 2 of the product out there’s
lots of creative ways you could do
structuring of the commercial
relationship around that to minimize the
equity dilution get the product to
market as quickly as possible and get
moving on your business I love it
there’s something comments or questions
coming in it looks like we put the great
topic but I you know
we’re kind of bumping up against the
clock stiva thank you so much for
spending some time with us and giving us
your time spent here you are going to be
at the web summit next week people can
watch that yeah I think we got some
periscope stuff going on so you if you
follow me at s Kelley CEO I think it
might be on this Google hell and then
we’ll be letting you know through
Twitter all the stuff and the location
periscope stuff and all the stuff around
web so I mean it’s all going to be our
broadcast online so come and join us for
that love love you today Evan as always
inspirational I always see that massive
word of belief that’s where we start and
for the perfect conversation and it’s
been a great we’re going to have Steve
would come on again next month and we
wanted advice from you guys on what
topic you want us to cover so if you
want to leave it in the chat live or in
the comments after the video is done let
us know your thoughts in the next topic
and we’ll do our best to accommodate so
thank you everybody for watching Steven
that really appreciate the time and have
an amazing time next week and we’ll see
everybody soon back Sarah thanks buddy
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