TSP009 | Paul Grossinger – Transcription
Posted by John Livesay in Uncategorized0 comments
John Livesay:
Welcome to The Successful Pitch podcast. Today’s guest is Paul Grossinger who at a very young age has been winning pitches left and right. He shares the secrets of winning pitches, unfortunately it’s what people don’t like to do and that’s practice, practice, just like the joke about how to get to Carnegie Hall, but he said no matter how successful you are, that is one of the key criterias to making your pitch flow in a way that tells people who you are, what problem you’re solving and why they should invest with you. He also goes into great detail about how important it is to get to know the investors before asking them for money. Timing is everything. Enjoy the interview.
Welcome back to The Successful Pitch podcast. Today’s guest is Paul Grossinger.
Paul Grossinger:
Hi.
John:
Welcome to the show, Paul. Paul, you have an incredible background, which is from journalism to being an investor and I’d love to have you tell our listeners.
Paul:
You skipped the entrepreneur part in the middle.
John:
Yes, so tell us. You majored in journalism and then you became an entrepreneur and then you became an investor. So, I know there’s many steps from journalism to investor and we’d love to hear how you made that journey.
Paul:
Well, you know, I actually started as an entrepreneur first in college. So, when I was at Hopkins we did a network of sports websites and we built that out for a little to be a essentially a mid size sports network and that was how I got into content and really enjoying content as a medium and that was what convinced me to go study journalism at Columbia.
That’s what brought me to New York and so in the process of that term, I really enjoyed journalism and I still do quite a bit of writing for TechCo and occasionally for VentureBeat and other sites, but I didn’t want to do it for professionally for my entire career and we managed to finish with all the media successfully with my first startup and started pervasively through my second startup and so that was how I got to be an entrepreneur in New York and stay an entrepreneur in New York.
I really like the circuit and as the result of the first one, I started investing in companies, first dabbling in it and joined a few angel groups. I particularly like Golden Seeds and then evenutally now in the last year or two, I’ve really morphed into creating my own syndicates and leading my own deals. The largest, which of course is Gaingels. We invest in founders of at least one LGBT founder.
John:
Great. Tell me a little bit about your first step from being an entrepreneur to becoming an angel investor. Was it helpful that you had already been an entrepreneur just when you became an investor to see – you knew the path that some of the startups were going on?
Paul:
Yeah, it was. I think when you’re an entrepreneur to be able to see in the path the beginning and to take the company from being absolutely nothing to being a success at one ilk or the other, whether it’s a small business all the way up to Facebook as something as important and certainty I have a ton left to learn. I am not by any means have accomplished everything there is to accomplish in a career. I’m learning a lot everyday, but I think in the boarder terms of being an active entrepreneur who is sort of in the trenches the same way as the companies that I was investing in.
I really enjoy investing, because it broadens the mind. I think it exercises a whole other part of the brain that really helps you to learn how to engage with companies that are going through a lot of the same challenges yours are, just in different markets, different mediums, and different types of clients and companies and I really enjoy that and I also enjoy what it does for building my network and for me the great – the thing I really like both entrepreneurship and investing is making impact, really. Creating value and creating things that matter so entrepreneurship and investing do that in both the same and very different ways at exactly the same time.
John:
I’m really fascinated by the whole concept of what you said about how investing is a different part of your brain than being an entrepreneur, because I am all about left brain being analytical, numbers oriented and trying to get startups when they do a pitch to get to the right brain story telling, emotional connection so people can fill their passion and be inspired. Can you speak a little bit about what you look for when you hear a pitch around the brain stuff?
Paul:
I think it’s both. I mean, for me the difference between being an entrepreneur and being an investor in different part of the brain is one is operative and one is more analytical and advice oriented. You know, as an entrepreneur, you’re really operating. You need to grow the company, you have one focus and you focus only on that goal. As an investor, you really see things more from the outside. You are able to tell entrepreneurs things that they don’t really see about their own company when they’re in the trenches and you are also able to give them outside opinions about, for example, what does the company look like to another investor.
What are the actual weakness to address. What is the company look like to a potential client, one of the things to address. Does the product adequately address their concerns, is their product market thin. I mean, those are things that entrepreneur can analyze for themselves, but I think sometimes have trouble seeing that and frankly, as an entrepreneur myself I have trouble seeing that in my own companies. We all need our own advisor, it’s why therapists need therapists for themselves.
John:
Yes.
Paul:
So, in terms for what I specifically for in a pitch, you know, I care a lot about understanding the story and understanding the team and why they are the right people for that particularly company and trying to get a deeper sense of understanding of why it’s them that’s going to be able to scale that particular idea and also I like to get a sense of what the numbers are behind the market. Why is their product market there, why is this important, why is it unique, different, why is this something that’s going to actually engage me mentally and make an impact in this market.
For me, impact is not necessarily about whether or not you’re saving Nepal, although that’ll be very important, it has a much broader base and so you can make an impact by creating say, a new home security company. You can make an impact by doing a new type of health care that does home care more properly. I mean, those are both companies that I’ve invested in the last couple of years. So, you know, for me, I scare away from stuff that I think is that A) I don’t really understand and B) it doesn’t necessarily make as much of an impact on people, which I guess for me is often direct consumer related technologies around certain types of ecommerce. Sometimes I invest in that stuff, but less so.
John:
Can you tell us one or two that come to mind that you thought, wow, this is a really great pitch and how fast did you know that you probably wanna invest in that time.
Paul:
So, when PuzzleSocial pitch to us at JumpStart last year Jeb was just sensational. He had a really clear, the founder of Jeb Social’s name is Jeb Ballise and Jeb had a really amazing, crystal clear understanding exactly who his client was, exactly who his market was for the digital cross word puzzle that he built and exactly how he’d acquire new customers. He knew exactly what his metrics were per acquisition, how long the customers stayed around and how fast he paid back the customer. He broke it down for us for beta. I think he had 15 members investing, a good quarter of a million after a 45 minute conversation. Wouldn’t want to bet my life on those numbers, but clearly it was very well received and I think entrepreneur have a very direct, crystal clear understanding of what their business is and why [cuts out], where they add value, who their end user is and why their end user will pay for it, do very well.
Another one that comes to mind is ThinkCERCA. Eileen, the founder, was the former head of the curriculum for Chicago public schools and she did a pitch to a group of YPO, Young Presidents Organization investors last year and she – what ThinkCERCA does is they created a new system for managing the common core education scanner and she just, she knew everything there was to know about education (#7:59?). You could just tell that she knew that and she also knew a lot about managing a team and clearly had built a product that fit exactly what she saw the need as in the Chicago public school system from being inside it and you just knew that she was going to succeed and then PuzzleSocial are both doing very well right now. So, I would say those were two pitches that just hit the nail on the head for me.
John:
That’s great and what I really hear is the common theme with those two examples is in depth understanding of the market and an in depth understanding of the customer and that’s where I feel a lot of people try to pitch maybe a little too early. They haven’t done their home work if they haven’t lived and breathed that particular market so well, they don’t really what’s going to motivate a customer, they just think they have a good idea and they want money to flush it out.
Paul:
That’s true. The most successful entrepreneurs we see are ones that have a deep understanding of their market. Another good example of a company that has come to me and that I am in through a vehicle or two is Canary. I mean, when Adam pitched canary particularly from Charlie from Brooklyn Bridge Ventures who eventually lead his seed round and those of us who were LPs in Brooklyn Bridge Ventures were also present and part of that.
Adam had come from a partial military background, the Israeli military also had a background in security and along with his developer who was a real ace machine specialist, you could just tell that they deeply understood how to create a new [cuts out] security and they could really – you knew Adam and his colleague could really revolutionize the home security market in that regard even tho they were basically pitching us on a device cam with wires and then of course Canary has developed into a very, very successful company that’s in now deployed a bunch of different retail stores and a really huge [cuts out].
So, that’s definitely true. People who have a domain expertise in what their doing, people who really understand the market or taken the time to really get to know, that’s really important. Ace entrepreneurs who also just understand how to lead people and have charisma and drive really work, but I would say that’s true, I would say that I scare away from people who just seem to have thought, hey, you know, I discovered this problem and I can build an app to maybe try and solve it. That’s not something I really invest in or dig deep on. I scare away from companies like that.
My model which comes partly from being an entrepreneur is to really get to know companies for a while, to do my homework for several months. The only exception is when a VC that I trust is leading round, I do my homework and I meet the people and I really like them then maybe if I have two meetings with them and I know the VC leading and I really trust them, I’ll invest in a side part with them, but generally for my own syndicates and for deals where we lead it out right, you really, really got to get to know them for a while and the two deals that I’m leading right now which I can’t speak the details of them, but I can say that myself and also at least five or six other members of our syndicate new each of the founders for several years. So, it was not a situation where we just like, you know, founded on angel list and invested like an hour. I don’t do a lot of that.
John:
Do you think it’s valuable for startups to put their pitch deck on angel list or are they better off..
Paul:
Angel lists are incredibly valuable, but it’s all in how you use it. I think that angel lists, ou know, if you’re investing with a regular investor that you trust who is the lead on a syndicate deal and you know that investor has known the entrepreneur for a long time, then that’s great. If you know the entrepreneur yourself and you’re backing their deal, which is what I did with say, Datch, that also makes sense. I think it’s where you don’t know anything about the company or the investor that you’re facing problem. I really don’t know a lot of people who do that. I know there are many, but I think that generally you want to get to know the person your syndicate is backing.
John:
What’s the average amount of money that, like, they are all over the map where some say..
Paul:
Investors are all over the map. There’s no answer to that.
John:
Because a lot of startups will say, oh, I need $250,000 or somebody says, oh I need a million, and they don’t even have proof of concept yet. The odds of them getting that are pretty slim, wouldn’t you agree that they need to get some..
Paul:
I don’t invest in concepts.
John:
Got it.
Paul:
I mean, I know that’s sort of a crude answer to the answer. I just don’t. I watch a concept and I’ll watch people and I’ll help them and I’ll be a little bit of an adviser and I’ll make some intros. It’s all about relationship building, but my money will not go in until the company has developed something and proofed it out a little bit at least with beta users. Even then, you know it’s still very early and I’m stuff helping the company grow a lot, but to me, there’s no value whatsoever in the concept level. You don’t really see a premium on value and there’s just, you’re taking a massive amount of risk that’s just unnecessary.
John:
Can you tell us one of the ways that you think companies should get good traction with a potential customers? Should they – with the beta tests that you..
Paul:
Are you talking about B to B or a B to C company?
John:
B to C.
Paul:
B to C company I think that you create a beta network of a 100-200 people. So, really, that’s the alpha. Test it out first, make some changes, then use your investors combined with your personal network combined with potentially some customer partners to come up with a beta network of a few thousand then you release it. On a B to B front, I think you use your network of investors and your personal network to find 5-20 really good clients that are willing to work with you on a daily/weekly basis in beta testing.
John:
Right. I think one of the things you’re really talking about Paul is how important relationships are not only with the investors that you already trust, but also knowing these startups for quite awhile or knowing someone in your network who knows them. The odds of someone finding you that’s a stranger and having an idea and not really having any warm contacts and pitch you once and walking away with x amount of money is just – no body really does that, right? They need to know you and have several meetings. Just trying to get people a sense of expectations of how long it takes to get funding and the steps are needed besides the initial pitch meeting.
Paul:
I would turn that on its head and I would say you want investors who know you well and taken the time – were able to assist you in the round. You don’t necessarily want investors who are not valuable in that round or if you do have them in the round, you want them following on to other value-added investors. So, one thing that my best companies have done, they do what essentially is a proto seed round where they get the advisers that they want in the company with real capital. You definitely – it’s always a good idea to do that early round week and then what they also do is they then add a few important investors to that round as well and then they can add friends and family and some less valuable investors if they wish behind those and then they get that company going and then they raise the real round.
I think it takes, good investors tend to take not a lot, but a decent little bit of time to get to know the company and/or they tend to go through someone that they trust implicitly. There’s nothing wrong with what we call ‘dumb money’ in a round, but it should be following very clearly smart money. I would add further that ever single successful company I have in my portfolio has smart investors adding value and I don’t know a single company in my portfolio that only raised money from unsophisticated investors and has succeeded. Frankly, I’m not even sure I know any that survive, even those that looked like they might have, you still know for a fact they have three or five value-added bides, so put capital in your helped on the (#15:25?) as far as raising funds for your goal then maybe, you know, in those cases it might be borderline, but they still have some value on people.
John:
When someone pitches you, because you, I saw you judge people pitching and you’ve obviously won several awards. Can you talk to us about, I saw on your LinkedIn profile you won a lot of awards for best mobile app and give us an experience..
Paul:
Yeah, we won a few. We were lucky to win a few awards for Pervasive.
John:
Yes, lucky. Tell us about what’s that like and how to win something like that, because obviously that gives you so much credibility and what does it take to win when you’re pitching like that.
Paul:
You have to have confidence in your delivery. You have to practice your delivery at least 50-100 times.
John:
50-100 times everybody! I don’t think people realize that. I love that. Thank you, Paul.
Paul:
Or more. I mean, I used to, I remember when we won the New Jersey Tech Venture, New Jersey Venture Tech competition, which was a train for me from upper west side to Pen station then Pen station to Princeton, I think it was. I just practiced the pitch back and forth, back and forth the whole way and it turned out actually, it was a an hour and a half trip, but it was a three or four minute speech, so I probably practiced it 80 times just there, so by that point,because it was like right before I knew it pretty much word for word.
I think though that what you know is you want to be crisp and clean, but you don’t want to try to memorize it, because what happens then is if you stumble on a word, you’ve lost your whole setup whereas the intelligent thing is to memorize basically each sector of what you want to do. Each point you want to make and then be able to re-phrase it or permute it whichever way you need to in that situation.
That’s what I always try to do. I basically have a sense of what were the eight things I want to get across for the audience. What was the order in which I wanted to get across some of it, how much time that I have, and I’d make sure I hit all eight and I sounded crisp and clean and delivered with what you call a loud-bear tone voice and you go from there. I think generally if you pull those things together you’re going to do pretty well.
One other thing I would add and I’m sort of ad libbing on some, but don’t.. it’s never a good idea to just sort of number off the sections that you’re doing in the speech. You want to flow seemingly from point to point and you want to emphasize your strengths first. So, generally that means you emphasize the strengths of the team and why their fit for what you’re building and why this product is a good fit and then you go into other sort of minutia like, you know, what else you’re doing, basically go into team, fit, clients first.
John:
Team, fit, clients, and before the team do you talk about the problem you’re solving so people have a clear understanding of what it is?
Paul:
I always basically go with a 20 second version of what problem we’re solving and what it is in. Problems 1-2 sentences and then I go into other stuff first and then I come back to, because the reality is until people understand who you are, why you are valuable and why there’s a fit for what you’re doing, they are not going to listen huge depth about you. They want the problem is statistically, but what your solution is. So, I don’t want to say you should bury the problem or bury the solution, you definitely put it at a top, but I generally split it between putting one sentence on each that will know what you’re talking about at the top and then delve much deeper into after you’ve gone into team and the why.
John:
That’s great. That’s so helpful. I love it.
Paul:
I’ll give you an example. So, one of the companies we are investing in is, we haven’t closed the deal, so I can’t say the company’s name, but it’s a company for revolutionizing home care, right, on the health care side. Everybody knows health care is a big problem, right, so you have to say that and you have to say what the solution is in the first 20 seconds of the pitch, but going into two minutes on why home care is a deep problem before you say anything why your team is great and why you have created value-added for the problem and why you’re the product market that solve it is the wrong way to go about it, because the audience knows that there’s a problem with the employment of health care, particularly home care and its inefficiencies.
So, state that’s the problem, state that you’re in the solution and then go into the depth of why you’re unique and then you can port back actually giving the statistics on why it’s a huge problem. Does that make any sense?
John:
Yeah, it makes compete sense.
Paul:
I’m curious whether the audience would appreciate that point or whether I kind of convoluted it, because..
John:
No, I think it..well, I’ll just try to recap it the best I can is, don’t spend too much time on defining a problem that people are generally aware of. You have to initially hit it is what you’re saying in the first 20 seconds, but people need to know who you are and what your expertise in that before they’re going to be really interested and what the market fit is before they really wanna have you go into depth about how you’re solving that problem.
Paul:
That’s exactly right.
John:
The other thing I love that you said, because when I saw you judging the pitches is really, you can almost see when someone isn’t comfortable that they’ve got, okay, step one, step two, now I’m going to talk about the third step is to practice so that it’s conversational and has a flow and that’s really when you know your stuff.
Paul:
That’s exactly right.
John:
Yeah and that comes across and that’s what gives you confidence. So, it’s a catch 22. You know, the key to confidence is preparation and I love that you said you practice something 80 times just on the train ride to get to the pitch.
Paul:
Yeah, I mean, no body is perfect. So, if you don’t practice, you will not do well. I mean, anyone who thinks they can just wing a speech. I’ve given hundreds, thousands in my career and I still practice. There is no exception.
John:
Right, there is no exception to practicing. That’s going to be one of our Tweetables moments, because people think that they get to a certain level, they don’t have to practice anymore or I’ve heard people say, oh, I don’t want to over think it and I’m like, when you have a chance to pitch somebody, that’s your Superbowl of meetings, you know, athletes, since you come from a sports background with a sports network, incredible athletes at the Superbowl, they do an amazing amount of preparation and you have to think of yourself in that same vein, I believe.
Paul:
Yeah, everything that one becomes an expert in I think is a matter of practice and is a matter of running through. You know, entrepreneurship is a matter of practice. My first company I made a tremendous number of mistakes, and I think I mentioned that at the start out, on a daily basis and that’s part of growing as an entrepreneur is that you’re continually learning from your mistakes. At Pervasive we’ve made an equal amount of mistakes, you know, the funny thing is both of them are working out nicely or either have worked out or working nicely so that’s great. I mean, they’re not the next phase book, but we’re very happy with them and now working on my third company.
I mean, I am now making what I would call second mistakes, so the basic ones we’ve taken care of, but now you make second level mistakes and that’s okay. I mean, it’s part of growing and it’s part of learning and frankly, you know, part of why we do this is to learn a topic. The reality is that if you knew everything and you wouldn’t make any mistakes and there weren’t any learning moments, then it would just be boring. I mean, why would you go to work everyday?
John:
Exactly.
Paul:
If you already know everything, then wouldn’t you just lay at home and just read about history. Some thing about the past. I mean, seriously, the whole experience of what I think makes work, what makes what we do exciting is learning and creating things that haven’t been therefore, making a dent and impact in areas where there wasn’t impact before and the ability to do that is what’s so exciting and what actually makes me get up every morning in the day and set an alarm. In fact, if I knew everything that was going to happen and what’s not going to happen and wouldn’t make any mistakes in my startups, it would just be dead boring.
John:
Right. Well, that’s what, that curiosity factor that is so key to being an entrepreneur and a startup is what makes people excited about investing as well and when you can convey that passion for how you came up with the idea and how you got this team together and why you feel this is going to make an impact..
Paul:
It’s a journey.
John:
Yes, can you share with us sort of when you’re hearing someone pitch and you go, oh, that’s a very common mistake that a lot of startups made, I made it myself. Is there any one mistake that is a common mistake across all industry that you see people tend to make that maybe they could be aware of so they wouldn’t make it as much?
Paul:
There’s a lot of common mistakes that people make that I’ve made myself. I mean, one of them for example from a fund raising perspective is to start the fund raising round and incredibly early thinking that the earlier you start it, the earlier you’re going to end it. The reality is you start the fund raising round when the company is prepared to fund raise and you’re able to give the investors what they need to commit, because investors just wait until you’re ready. So, that’s one big mistake hat we make.
Another one is people tend to try to push the investors too hard before they’ve really shown value and shown why they should participate and they just assume that they meet the investor and they tell them how great they are, the investor is going to immediately invest and that’s not the case. So of my absolute favorite companies have took me awhile to really warm up to and get involved in, but once I did I really understood the value.
The other thing too is that, I tend to be a very analytical in terms of getting to know companies. You know, I take my time and I’m willing to put the time in to give companies advice on things like running through their deck. You know, just pro bono, just like to help them out or to sit down with them over coffee and give them strategic ideas or to make intros for them. You know, that’s not the kind of thing that I wanna charge for.
I mean, I know that there are people who advise and charge for that, you know, cash. I don’t do that. I do of course take advisory equity in the companies where I invest in order to have a little additional upside, but you know, the reality is that I believe in sort of providing that sort of informal help to companies, because it’s part of the value added. It’s fun for me and also builds a relationship and so as a result of doing that, I can really take my time on getting to know a company and sometimes I even invest outside of what is typical.
So, for me, companies have to be willing to allow the best investors to get to know them, but then eventually they have to present a value product and a time frame that makes sense for the investor to jump in. I don’t know if I should break that down further. Basically, it has to do with finding the right balance between, you don’t want to push to hard, but at the same time you wanna make sure that people have an ability to come in when they need to.
John:
Well, yes. What you’ve said, don’t come in too early, because if you don’t have anything that an investor needs, they are not going to say yes and even when you do have what they need, don’t push too hard.
Paul:
The other thing and I can only speak for myself, because every investor is different, but I tend to be both the hardest money and the easiest money in the sense that like, a good example is there’s a company I was getting to know for about seven months and they weren’t ready, they weren’t ready. They haven’t even been raising a round.
We just were building their stuff up, helping with their IP, helping with growth, and then all of a sudden, they – we had begun discussions about what their fund raising was and he ask me, so how do you feel about, you know, both a formal adviser and investing and it had been enough time and I said, look, I really like you guys, I really like the team, so you know what, why don’t you put me down as an investor and I don’t know the exact amount is yet, but I will invest and I’ll sign your sheet and I’ll be an adviser.
You can use me as a co-lead for the terms and it was literally a three minute discussion, but it had come because we got to know each other over such a long period of time and I really appreciated what they were doing and it was the right time. You know, if he had pitched me on investing within a month and a half when they really weren’t ready at all. They had no file IP, they had no full product employed, they had no users outside of alpha, I would have been like, look guys, you need to wait, but they came at the right time and we were close enough and I really believed in what they were doing and so literally, it was a three minute discussion. I said yes and then great and let’s move on.
John:
It’s like dating almost, right? Timing is everything. You don’t ask somebody to marry you if you’ve only known them a short time, basically.
Paul:
But, when you do ask somebody to marry you, if it’s at the right time, they tend to say yes.
John:
Exactly, because you know it’s a sympatico..
Paul:
Except when you’re at a Toronto Raptor’s game, I think it was. Like that horrible Youtube clip. I felt so bad.
John:
Yes, nothing more humiliating than that. What books do you recommend startups to read especially as it relates to pitching and getting funded.
Paul:
You know, it’s fascinating, I’m not a huge proponent of going by the book. I tend to think that every entrepreneurial experience and everyone’s companies [cuts out]. For example, I have heard certain venture capitals go out there an say everyone needs to quit their job from day one and commit to a startup and that’s just BS in my opinion. I think people have different needs. People have different families and it’s not great when someone who has a 100 million dollars plus some money they need to quit to pursue their dreams before they’re ready. So, you know, for me, it’s like, when you reach a point where you put together a team, you have a product already fit, you have people going to pay and actually create a company. Well, maybe you quit your job, you know, especially if you have kids. This is one example. I do think that Lean Startup is a good book. I think that Drive by Dan Pink.
John:
Drive? Okay.
Paul:
Purpose Economy by Aaron Hurst is a really good one to read about what drives people to succeed. What their dreams [cuts out]. Those are three zero to one [cuts out] is one we do think is a good read. Generally I think those are some good books, but I think people have to carve their own path and I think that it’s not good to say, you know, I want to be the next PTO or I wanna be the next Mark Zuckerberg. You wanna be yourself and succeed as yourself and carve your own story in the mail as it were.
I mean, we are all different. I look at myself. I haven’t created anything specular. I haven’t even created a company that would be compared as a global brand, but I’ve been lucky enough to create two good companies that are succeeding and invest in other really good companies, some of which are global brands and I’m 25. So, we’ll continue to grow out from there. I mean, we’ll check in ten years from now.
John:
Yes, my goodness I can’t wait. You’ve done a lot at 25, that’s for sure.
Paul:
A lot, a little. I think that’s great, but I think for me is just thinking about the fact that we each carve our own path and it’s different and I really have no desire to be the next anything. I like being me and I think that everyone else, you know, is in the same guard to b themselves and end up where they end up and that’s the path.
John:
That’s great. Carve your own path. That’s a great place to finish the interview. I thank you so much, Paul. Great insights and great inspiration.
Paul:
Thank you very much. It was really fun.