Get Your Dreams Funded with Manny Fernandez
Posted by John Livesay in podcast | 0 comments
Episode Summary
Today’s guest on The Successful Pitch podcast is Manny Fernandez, who you might have seen on television CNBC’s Make Me a Millionaire Inventor. He was named the 2014 San Francisco Angel Investor of the Year. He shares with us how he had a successful exit, and the three things he’s looking for when he hears you pitch. Number one is of course, the team, and why you’re able to execute your idea. Number two, is how large is this market, because without a large market, there’s no return on investment for the investor. Finally, are you early in the market, in other words, it’s too late to be the next Uber. Enjoy the episode.
Listen To The Episode Here
Get Your Dreams Funded with Manny Fernandez
Hi and welcome to The Successful Pitch. Today’s guest is Manny Fernandez. Manny, you might know as an investor on CNBC’s Make Me a Millionaire Inventor. I’ve watched him be on that show and he’s amazing. He’s also amazing on CNBC’s Squawk Box. He’s quite successful in so many ways, and we’re just thrilled to have him here. He’s had a successful exit. He’s an active Angel Investor, and he was awarded the 2014 San Francisco Angel Investor of the Year and Equity Crowdfunding Leadership Award.
He’s not only the founder of the San Francisco Angel Groups, but he is also the founder of DreamFunded as the CEO. What that company does is crowdfund startups with an online market place. He’s got quite an interesting background. I’m going to let him tell us all about it. Manny, welcome to the show.
Thanks for having me, John. I’m honored to be here.
How to Make Money Investing in Pre-IPO Stocks
It’s great to have you. You have touched every possible touch point on how to be successful from writing a book, How to Make Money Investing in Pre-IPO Stocks, to being on television, to launching not one but two different things. I know that you have been involved with Stanford and Wells Fargo, but take us back, if you will, before you got to be on television as the investor, how did you get involved in this whole world of startups? Because so many people say, “Wow, I would like to be an investor someday, but I don’t have a clue.” What was your journey?
It all started with this thing called real estate, where not as an agent, but I just bought a piece of investment property and learned that I was pretty talented at it and then later, I wanted more. I was stuck with the question, “How do you raise money to be able to buy a hundred homes?” I networked aggressively to figure out the answer. Later at the age of 23, I created a real estate fund, then we bought a portfolio of single family homes and sold at the peak of the market. What many people didn’t know is during the down times, I was studying Computer Science out of our office. I created the online brokerage that was later acquired by the largest Century 21 franchise in Northern California. Later on, I created another real estate fund.
One thing I learned about it was how to work with other people, to invest their money appropriately and get a return. When I was attending Stanford, one of the things I learned professionally was about venture capital, Angel investing. Those are the courses that really stood out at me because it reminded me what happened so many years ago. A lot of the dynamics are the same, that one of the big differences, obviously, the asset class is different. That was the start. As I started to Angel invest and joined a group called TiE Angels and later created our own group called SF Angels. Asked for help like always, and was fortunate to network with someone do an introduction, I’d invested early in Google and Paypal. Was a former partner of this legend, Ron Conway. I learned a lot from him and I did a scary thing, John.
I had to go out, which every entrepreneur has to do. I have to go out and talk to customers about the business. It was the hardest thing that I had to learn, I had to be really high profile in Silicon Valley and that was hard to do. Look at my skin. I had to learn how to public speak and talking to entrepreneurs, those were the customers. I had to let them know that we have money for them, but I had to do it in a different way, John, where I gave them advice and education on the subject to allow them to raise money Which was unheard of because everyone want to keep the secrets, like, “Don’t tell entrepreneurs how to raise money because if you do that, then everyone will have the money.” That’s not the case. A lot of people are still stuck in fear.
Get Your Dreams Funded: I learned how to work with other people, to invest their money appropriately and get a return.
Indeed. Let’s talk about San Francisco Angel Group. I’m really interested in how that works compared to other Angel groups, for example. I know you have 30 plus accredited investors. Do you only typically fund people who are in Silicon Valley? Let’s start with that.
Yes, that was the purpose. The purpose was even more specifically in San Francisco early stage. It did go a little bit more into later stage companies, when they were doing the Series A or Series B round, some of our members had access to it. It was primarily Silicon Valley. Throughout that experience of only funding companies here, I realized there are a lot of great companies outside of Silicon Valley, in Austin, in Seattle, L.A., even Florida. At the same time, just being out there in the community, I was forced then to be a keynote speaker in many parts of the world. Many entrepreneurs wanted funding, but what was the most amazing thing, John, is many investors wanted to co-invest. I said, “Our meetings are every Thursday of every month, come on down.” Obviously, I didn’t invite people if they lived in Shanghai or Singapore or Texas and L.A. or New York. I just held their business cards. I remember that many of the entrepreneurs pulling at my heart strings, they want to get introduction to investors, and there was really no way of doing that. I just started thinking about it.
Interesting. If someone lives in San Francisco, Silicon Valley area, and wants to come pitch to the San Francisco Angels, what’s the process and what does it look like when they get in front of your group?
Primarily, you go on a website and you can apply. Some of the members, actually, they’re the best method to get an introduction, usually they’re interested, they’re investing, they’re “sponsoring” you to be presented to the group. If you’re qualified, the entrepreneurs will say their story and the entrepreneur will be asked to leave the group, then the group will ask a few questions among the group if there’s enough interest to do what you call due diligence. If there’s enough, then we will move it forward to do a little research to see if this is an investment we want to do. That’s it in a nutshell.
That’s great. Because this is The Successful Pitch, I’m always interested to hear, do they get ten minutes for a pitch and then there’s a ten minute Q and A? Is that the format you use or is it something different?
No, you’re absolutely correct. It’s approximately anywhere from seven to ten minutes, and then we ask questions among the members of the group.
Those warm introductions are so important, to get even invited to come in and pitch. I know you specialize in equity crowdfunding, the internet real estate software. Does the group itself look for high tech solutions, or is there a type of startup that you like to see come in?
Yes. Everyone in that group is very specifically focused on tech, software, internet-related startups.
Are you funding people who are pre-revenue, giving them their seed round?
Absolutely.
Those typically range anywhere from … The definition is so broad now. It could be anything as 250, all the way up to a million, typically. Is that in the ballpark of what your group does?
The interesting thing about the group, some people make a group decision and some people do it individually. Sometimes you don’t have everyone’s approval. I provided checks as low as $25,000. This will be the first check in to a company, and give them a little boost and try to connect them to other investors to fill their round. It’s not one individual cutting a check for a million, it’s multiple people coming together.
Can you tell us about a good pitch that you’ve heard, Manny, that you’re thinking, “They had me in the first three minutes, and they’ve been a big success story”, either at San Francisco Angel Group or DreamFunded.
I think that one of the things that I hear a lot is entrepreneurs, they’re not telling a story. A lot of people talk in logical terms and things that we don’t care about. One entrepreneur that worked out quite well, they talked about the market, they talked about the team, they talked about the potential for the investors to make money, and that sometimes gets our attention. I don’t know why.
The best way for the investors to feel like they’re going to make their money is to have a successful exit. It’s what I typically hear. Do you have other suggestions?
Absolutely, that’s the case. If the entrepreneur says they’re going to hold it for twenty years and give it to their step-kids, then that’s probably not the right business for us. If they think they’re going to become the next Facebook and make it go public, maybe that will work. But if they look at they’re going to potentially have an acquired, and these are the natural acquisitioners, then we can understand the thought process behind the entrepreneur. I think the best I’ve seen, they tell a story, the beginning, middle and the end. The beginning is why they created it, their personal problem, what team they have established, the great market, and they have some traction, it doesn’t mean it’s sales. At the end, where they’re going with it if they did have the money? What would it look like at the end? If you can imagine a movie, all the dynamics of it, I think the entrepreneur should probably cover that.
[Tweet “Get Your Dreams Funded: Pitch like you’re telling a story in a movie.”]
Nice, I love that. Pitch like you’re telling a story in a movie, like you’re pitching a movie and have us visualize it. Paint a picture, if you will. I like this, why you created it, how big the market is, what the team is. People are always interested in what you look for, besides sales, in terms of traction. I have some ideas, but I’d love to hear what you think is important, or what you think is valid traction if it’s not sales.
I think there’s one thing I was taught, it was three little things. I think you can screen out 90% of the startups that are presenting, or if you’re a startup, look for these dynamics. Because these are the dynamics that some investors look for for really large returns. Number one, it’s a large market. Without a large market, it’s going to be challenging to make any real money and to make it a big business. Second, early in that market. Not chase after something that’s really too late because there’s many relationships, and most of the market is already taken. Last but not least, it is the most important thing, is the team. The team who’s executing behind it, who did I piece together to make this story into a reality.
Nice. Those are great three things. We’re going to tweet that out, a large market, early in that market, and a great team. Speaking of tweeting, you have quite the award there, Manny, with being number fourteen in the top 100 Angel Investor’s to follow in Twitter. Of course I’m following you. One of 150,000 people. Congratulations on that. I couldn’t resist giving you a little shout-out on that.
Thank you. One day, it will have extra number behind, 1.5 million, because the more information we can provide to the public about how to invest or how startups can use the equity crowdfunding to raise money, the numbers will greatly grow. The motivational tweets that I provide, it really goes viral a lot.
Let’s talk about DreamFunded.com. This is different than the San Francisco Angel Groups. It’s an online capital platform, where people can invest in startups for as low as $3,000. Yet, you guys have done some major investments alongside major VC firms, like Tim Draper and Greylock, etc. Tell us, how did you get inspired to start DreamFunded? For people who are listening, maybe you could contrast and compare? Like, if this is you, then you should go to San Francisco Angels, if you have a warm intro, or if that’s not you, DreamFunded is more in line with what you need to do.
When I started Angel investing, I had a certain vision of it. When I got involved, then I had a certain reality of it. I said, “Maybe, I’ll create a group and get a few of my friends and network together so we could fund more entrepreneurs,” and more entrepreneurs were being funded. However, 99% plus unfortunately weren’t getting funded. Maybe because for whatever reason, they weren’t in our network, kind of unfair. They’re not in our network, they can’t get an intro, they can’t present in a meeting, and I had a problem with that.
Get Your Dreams Funded: Money should be more distributed to anyone that has a desire of creating a business.
In addition to that, it was other entrepreneurs that probably had a small business or a business that maybe couldn’t really scale but could do well for the entrepreneur and their community. I started thinking about that. I always had a problem with that. Money should be more distributed to anyone that has a desire of creating a business. They should be able to be backed because that’s a rare desire, an entrepreneur who wants to do something different than have a job.
One day in the fall, it was a slow period in December. This was in 2013. I had some time to go through my emails, and there are thousands of them, unfortunately, I haven’t read yet. I was going through them and I said, “It’s a good time to go back and see companies that applied and see what happened to them. I could do a self-study.” I saw two companies that presented but unfortunately were a little bit slow. It took an average of 60 days to get funding, and fortunately they had another way they got funded. They went on some big name platform and actually received the funding. I said, “Wow.” I played with the numbers of what the exit was. I’m keeping the name quiet. What was exit and what were they asking for and what our return was, and boy, when I saw seven figures, I got really frustrated. I got upset because I started thinking about all the investors who are out there that wanted to get access to it, and yet if we’re faster, then maybe we could have got in.
I started thinking about the entrepreneurs that were trying to get funded as well as the investors that want to invest. I thought back, “What am I going to do about this?” I got a stack of business cards of many investors that wanted to invest. I have endless entrepreneurs who are looking for funding. I thought back, my early 20’s, my first dream was to create a startup or create a business. My second dream after that was I need to get funded. That was almost impossible. I said, “Okay, I know that, but then now, I’m a successful investor and entrepreneur. My dream is to fund the next big thing.” It just came to me, DreamFunded. I bought the name and used our network at SF Angels.
It was an interesting time because there was this new thing called equity crowdfunding happening, t allowing accredited investors to invest. We were the fourth platform approved by Angel Capital Association, a trade organization. Almost in a short period of time, 90 days, we had 3,000 plus accredited investors signed up for many of the Angel groups nationwide. I was looking at it, I could not believe we had so much interest. Maybe many people were just checking out what was going on, but then we had some pretty well-named companies that we funded through DreamFunded and it just kept growing.
I love it. How do someone decide if they should pitch the San Francisco Angel Group or another Angel group or go to DreamFunded? What’s the criteria for getting funded via DreamFunded?
Now we’re trying to have everyone go to DreamFunded and apply there, because there’s, we call it deal flow, where we have to start there and sometimes it’s right for a group, sometimes it’s right for our platform, sometimes it’s right for our fund. We don’t know until they apply. Going to DreamFunded.com and signing up and applying, we as a team can quickly review what they’re doing. Unfortunately, not everyone is going to get accepted but some people are better to tap in this thing called equity crowdfunding, Title III of the JOBS Act. What that really means, it allows everyday people to invest. Just to say what you said earlier, at one time the minimum was $3,000, but now the minimum is $100.
DreamFunded is solving two problems. One, allowing people who are not “accredited” investors with a million in assets to invest in startups. Secondly, giving a platform without needing to have a lot of connections to investors directly to get in front of an Angel group, to possibly get seen and not only be part of equity crowdfunding, but if it’s a big enough idea, get the attention of someone like you who says, “You know what, this is equity crowdfunding and then some.” Correct?
Absolutely.
It’s really exciting. I think what you’re doing is solving so many problems for so many people that I don’t know how you have time to sleep.
[Tweet “Get Your Dreams Funded: Leverage – have a great team.”]
Leverage, my friend. I got a great team. I may be a good marketer but I have a great team, like my co-founder, Avery Haskell. He just graduated from Stanford. He has been secretly building DreamFunded with me throughout the time while he was in his dorm room. He didn’t want to get his focus off of his study. Now he is really improving the site to great ability, because we really have over a 160,000 members all around the world now signed up. We have about 20 companies that are going to be approved shortly, that’s going to be able to raise a million dollars from everyone. People are really spreading the word about DreamFunded because they see it on CNBC Make Me a Millionaire Inventor, or they may have seen it on Wall Street Journal in December or in Bloomberg in December.
The word is being spread, but the message is, entrepreneurs now, they have an interest in raising money and you’re not born in that special network where you can get access to that special club, this is for you. If you are one of the investors that are out there saying, “I don’t know how to get into that special network,” or, “I don’t want to wait for Facebook to go public. Plus, I don’t have much money, I’m not one of the accredited investors. I cannot invest $25,000 or $50,000. I just want to spend $100 or $500.” Maybe back the entrepreneur that I know, that’s going to be creating something. That’s what DreamFunded is about.
Typically, a lot of people will say, “If you’re going to use crowdfunding, equity crowdfunding or any other kind of crowdfunding, you need to “bring your own crowd.” Is that the case with the DreamFunded?
It’s partly the case. But how I started building it is that I started with the foundation of SF Angels and then many of the Angel members nationwide that are members and many of the talks that I’ve done throughout the world brought a stronger base of investors. CNBC’s Squawk Box in the studio, they tremendously increase the visibility as well as the amount of investor sign-ups. It is helpful for the entrepreneur to have a small handful of people that believe in them, to back them. Many of those people can be just found on LinkedIn, so it’s nothing too complex, it’s a combination of both. In a Shark Tank mindset, we have the hungry sharks, the smaller sharks that are ready to bite on the new startups that are going to be applying.
I’m going to shift gears a little bit. In your LinkedIn profile, it describes your successful exit, and that’s always an interesting topic for everybody to hear. Can you tell us that story?
Some things start off one way and they change and they become something different. I think that’s an important thing to know. Every entrepreneur may start off one way and end up changing their direction based on feedback. I just really wanted to create a site where I thought people want to sell their house when the market would change and they wanted a quicker way of selling it. Then the market changed, and unfortunately they didn’t have much equity in their home.
We had people all across the country who were signing up and ended up devolving into an online real estate brokerage where we receive the commission upon the sale of their house. At that time, it was so early, no one knew what this thing called short sales were. We went from zero to an excess of $5 million in sales in a very short period of time. Sometimes you get lucky. It was acquired by the Select Group Real Estate, the largest Century 21 Coldwell Banker, ERA owner in Northern California, with 60 plus offices, thousands of agents.
Congratulations. What you’ve gone through that experience, like going through due diligence. Now you know what to look for and help people that you’re funding get through that process in a way that gives the investors a great return on their investment. Is there any book, besides yours, which we have mentioned, that you would recommend to people to read either about life or about getting funded?
Think and Grow Rich by Napoleon Hill
I do have a new book that’s coming out, that’s going to help people to raise money. It will be on Kickstarter shortly to allow people to buy the book in advance. For those that want to raise up to a million or raise up to 50 million, the secrets will be in there. One book that I really love is Think and Grow Rich by Napoleon Hill. If any of your listeners are looking for a book that’s probably a free version of our book, just email [email protected]. When that book comes out, I’ll send you a copy of it, just put a headline that you heard about it on the show. There’s no cost, you can save the $20. If you feel bad that you saved the $20, just find an unfortunate person and give it to him.
That’s such a great gift. I really appreciate you doing that. Are there any final thoughts you have on giving a good pitch or just perseverance required to be a successful entrepreneur?
Yes. There’s this guy, and this gentleman came up to me late 2013.I was at this event I was judging, he came and grabbed my arm, he said, “Hey, how are you doing? Nice to meet you. Can you help me show me how to fund my hair product?” I really didn’t understand what this guy said. All I heard was, “fund my hair product.” I’m like, “Sorry, we fund software internet companies.” I turned because my attention was pulled somewhere else. He grabbed my arm and I said, “What is going on?” I turned around and looked at him, and I made a mistake because I looked at his eyes, and his eyes are really sincere. It reminded me of myself a few years ago when I was in my 20’s. “How do you raise money? What is the secret about raising private money? Hey, can you show me?”
Get Your Dreams Funded: How do you raise money? What is the secret about raising private money?
I didn’t have an answer, but instantly when he said that, I thought about it and I said, “There has been a PowerPoint that’s been used by our Angel group,” and I’ve seen it circulated throughout the Valley. For some reasons it’s helping a lot of people get funded. I said, “Tell you what, I’m going to give you my business card, you put PowerPoint on the headline, send me an email, I’ll send you a copy of the PowerPoint”, because in my mind I was going to take out the ingredients and just keep it general so people can have a framework. I gave it to him and later on, about 45 days later, he sent me an email that he raised over $600,000.
What’s interesting about that is because I’ve never seen it work outside of Silicon Valley. I’ve never seen it work outside of tech companies. For a guy who I didn’t even understand what he was saying to be able to raise that, it was like, wow. One of the things I do now is, for those that really want a framework to be able to raise money, I can’t say it’s perfect, but it allows you to think what an investor is looking for. I give this away, if you want a copy of that free PowerPoint that will help many people, just email, [email protected]. It’s no cost. It’s my community gift.
There’s a video on YouTube. Type in the word “equity crowdfunding” and it pops up, the number one most viewed video of all time for equity crowdfunding. It was a talk I did at keynote talk in Finland. I gave out that PowerPoint, and I think many people loved that gift, so they started spreading the video everywhere. Fortunately, it has over 200,000 views now. For the entrepreneurs that are looking for a template, take a look at that, GetFunded@DreamFunded. It also shows you ways to follow-up in terms of how to pitch us.
Fantastic. So much value added, so many great insights. You’re so generous with your time, your insights and your knowledge. Anybody who gets to work with you is indeed lucky, so follow you at @MannyFernandez on Twitter. Manny, I can’t thank you enough for being on The Successful Pitch today.
One last thing, there’s an upcoming TV show we’re doing. It’s a new type of show that allows the public to invest in these companies that are approved. More information will follow for those. Follow me on Twitter, Manny Fernandez on Twitter. You will find out the moment I can release it to everyone.
Good. Exciting little tidbits. That’s a great open loop. That’s how you get people intrigued, everybody. Give them a little teaser. Give them a reason to stay listening to your next tweet. Thanks again, Manny.
Links Mentioned
- J Robinett Enterprises
- John Livesay Funding Strategist
- DreamFunded
- How to Make Money Investing in Pre-IPO Stocks – Book
- Equity Crowdfunding video
- TiE Angels
- San Francisco Angel Groups
- Think and Grow Rich by Napoleon Hill
- [email protected] – get new book for free
- [email protected] – get the PowerPoint framework/template for free
- @MannyFernandez – Twitter
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Delegate Or Stay Small Forever With Jim Palmer
Posted by John Livesay in podcast | 0 comments
Episode Summary
Today’s guest on The Successful Pitch is Jim Palmer, who is the author of several books, the most recent one being on the power of decision, and he has a special offer for people at the end of the episode, where he shows you a link that you can actually get the book for free. Be sure to listen to that. He said, “If you want to be successful, you need to be a good listener to find out what problems there are to solve out there.” And, “Under promise and over deliver to keep your customer’s happy and with you all the time. That’s how you keep customer’s sticking to you like glue.” Finally, he said, “Delegate or stay small forever.”
Listen To The Episode Here
With Jim Palmer
Welcome to the Successful Pitch. Today’s guest is Jim Palmer, who is an entrepreneur, and author, a speaker, and a coach. He’s a marketing and business building expert and in demand coach. That’s for sure. He’s the founder of the Dream Business Academy, and Dream Business Coaching and Mastermind Program. He’s the host of Dream Business TV, the hit weekly web TV show watched by thousands of entrepreneurs. He’s also the host of Stick Like Glue Radio, a weekly podcast based on Jim’s unique brand of smart marketing and business building strategies.
He’s known internationally as the newsletter guru and the creator of No Hassle Newsletters, the ultimate done for you newsletter marketing program, used by literally hundreds of clients in nine countries. Jim, welcome to the show.
John, thanks. Thanks for having me on. I love your format, I love your show. It occurs to me Stick Like Glue is a good name, because we’ll be talking a lot about stickiness today.
Yes, indeed. We certainly will. You’ve done so many interesting products, including a new book you have, which is called DECIDE – The Ultimate Success Trigger. Let’s take people back to, how did you decide you wanted to become an entrepreneur, and become known as this newsletter guru? Tell us a little bit about how you became such an expert in helping entrepreneurs?
DECIDE – The Ultimate Success Trigger
John, in 2000, I was a VP of Marketing. I’ve always work for entrepreneurial companies, and I always thought that someday I am going to have my own business. I think it was part of my DNA, so to speak. But at the time, I had four teenagers and married, mortgage, and all the different things. I thought, “Now is not probably the time to do that.” After being unemployed for fifteen months and one year into the unemployment, I was first had a battle with cancer and so I got to a place in my life, cutting a fairly long story short, John, I got to a place where I was very low, my self-esteem was not very high. I thought, “There’s nowhere to go except up.” I felt really near the bottom.
I decided in October of 2001 to start a business and I knew I’d be probably some sort of a consultant or coach or marketing guy. I also knew, that’s kind of a hard road to hoe getting started, but I’d always done newsletters. I created my first newsletters when I was 21, when I used to manage a bike shop, and everywhere I went from then forward, I was doing newsletters.
I started offering newsletter services to local companies and chambers and associations and nonprofits. That really took off. Five years later, I had a multiple six figure business, I was doing well, starting to get myself together financially again. I reached the point when I had about somewhere around 20 or 22 clients where I had no more time, I felt like I was hitting a ceiling, John, and just kind of maxing out. The question came, sometimes called the question that rocked my world.
My wife asked me, “Why don’t we go on vacation? We haven’t been on vacation in five years.” Although we could afford a vacation at that point, I couldn’t understand how I was going to take off because I was my business. Like so many small business owners, you start with your skill or your talent, you open a business and you just do everything that’s required. Even as you grow, you’re still the chief cook and bottle washer to a large degree, and that’s the trap I fell into.
Crap, that’s not the life I want to have. I decided to start it over. I got immersed in internet marketing, direct response, copywriting, really focused a lot on retention in addition to leverage. I ended up creating my second business, which is one of my core businesses today, No Hassle Newsletters, branded myself the newsletter guru, just for the whole celebrity expertise type of marketing. Off we went, and quickly fast forward again, I have, I think, five different internet businesses. I do a live event called Dream Business Academy and I have my Mastermind and Coaching Program, as you mentioned, called Dream Business Coaching.
There’s so much I want to dive in there with you, Jim. One of the things is coming up with a dream business that investors would want to invest in. It’s something that’s scalable and typically investors are looking to have somebody pitch them where they can answer these two questions. Why you? Why are you uniquely qualified to execute this? Secondly, why is now the right time? Under your expertise of what a dream business is, can you give us some descriptions of how somebody who is looking to pitch an investor could think about that?
The investors are always looking for ROI. Why would he invest in a business, in a product, in an app or whatever if he can’t make money? He could stick it in the stock market and do fairly well. I suspect that if he’s going to invest with a start-up of some sort, he’s going to probably assume doing some due diligence. Obviously there’s always risks. But he’s going to want to make some sort of ROI.
Delegate Or Stay Small: In the pitching arena, it needs to be about the investors, not about you.
I would imagine very much like you see on Shark Tank, for example, when you do your pitch, really first of all, you have to know your numbers, you have to exude extreme confidence, and you have to be able to explain what you’re going to do with the money, how quickly you’re going to grow and therefore let them be able to recoup and things like that.
I think by and large, most entrepreneurs don’t get that. They don’t get that it’s not about them. I think too many people focus on them, what their needs are, what they’re going to do, and it’s the kind of the me language if you see what I’m saying. Especially in the pitching arena. I’m preaching to the choir here, John. In the pitching arena, it needs to be about them.
Yes, I always still like to tell my clients, “The more you show empathy for the investors and the more you can show that you have empathy for your customers’ problem you’re solving, the more people are going to want to fund your start up,” which is exactly what I think you were saying there.
Yes, there’s no shortage of opportunity, there’s no shortage of ideas, there’s no shortage of people who need money to either start or to increase the pace of their start up. But there is to some degree a shortage of people willing to invest. You don’t have too many chances, you don’t have too many bites at the apple before you get your stuff together.
One of the things investors look for when they decide whether they’re going to fund a startup or not is there any traction and how much income, is there proof of concept. You have some really insightful strategy on how to create more income. Can you share that with us?
One of the things I’ve been able to do is create multiple streams of revenue, and now I teach other people how to do it. The secret sauce, so to speak, is being a really good listener and keeping your eyes open as to what problems and what challenges. Frankly, just things that people, AKA your customers and prospects, are asking for. I’ll give you a quick example of how I did that. When I started No Hassle Newsletters it was originally a program where I supplied a lot of content. A number of articles that people who already had newsletters could use in their newsletter. For lack of better description, filler content.
I started doing well. I wrote my first book called The Magic of Newsletter Marketing. I talked about newsletter design and the type of content and how newsletters should be laid out, the type of paper, all that stuff. People started to say, “I’m not big enough to necessarily have a graphics team. Who do you know can design some templates for me?” I said, “I do templates.” I curated some templates which can be quickly and easily adapted to any business. I started with four different templates. That was adding value to my program but it also increased my revenue.
You could make an argument, it wasn’t a new revenue stream, it was just growing my current one. Then someone said, “Jim, I know in your book you talked about how they should be printed and folded, etc. Can you recommend a printer?” It was right about that time, John, when I started thinking. I like to be helpful. I referred people, but I also came up with an expression. I said, “I can keep referring people or I can create a new revenue stream.”
I partnered with a buddy of mine who actually is a printer. I said, “I’m going to feed you tons and tons of jobs. Some might be small, medium, some might be pretty large. But all together, it’s going to be a nice new chunk of business for you. I’m going to get the sale, I’ll collect the money, you bill me and obviously there will be a markup for me on what I charge.” That’s what we did. My third online business was Concierge Print and Mail On Demand Service.
I kept going from there. The next thing was Article Marketing. “Jim, you got a lot of writers that are producing all your content and things like that. Can you recommend a good writer?” I said, “No, but I can create a CustomArticleGenerator.com.” That’s what I did it. It wasn’t me like thinking about, “I wonder what’s the next business I’m going to start would be?” I was actually thinking about, how can I solve my customer’s problems? Instead of just referring them somewhere, how can I make them happy by solving their problem?
[Tweet “Think about how you can solve your customer’s problems.”]
Love it. It’s really, listen to what’s your customers need, figure out a way to solve that and that can be an extension of the current revenue that you’re doing. One of the things I thought was interesting since you’re such a newsletter guru, is when founders are pitching investors, typically there is more than one investor that funds around. They’re looking for let say a million dollars, maybe they get four different people who put in $250,000. During that whole process, they need to keep these investors up to date with the progress they’re making, either with new customers or possibly some press they’re getting, whatever it is, on a regular basis. Do you think startups would be wise to create a little newsletter that would go out to investors that they’d met with as a way to stay in touch versus just an email here and there?
Delegate Or Stay Small: Email is convenient, it’s inexpensive, but it’s getting completely ineffective.
Absolutely. By the way, email it’s convenient, it’s inexpensive, but it’s getting completely ineffective because so much email is not even getting through. But that will be a whole other topic. Yes, the answer is yes. When should you start? You start when you get your first client. If it costs you $5 to run off one newsletter and mail it, that’s what you should do. The thing is, people, when they want to repurchase or when they want to refer, you have to be top of mind. If you’re not top of mind, they’re going to go with somebody who they’re thinking about seeing an ad for, maybe they’ll ask somebody else.
Several years ago, I was out doing a ton of speaking around this topic. There’s a story I would say. I refinance our home. I’m going back 20 years, but it doesn’t matter. It was Sunday, I was looking in the Sunday paper under the real estate section, looking at a big grid, mortgage rates. I called three or four different people. Only one guy actually returned my call and he was super professional and said, “Mr. Palmer, I know you’re busy, how about if I can drop the forms off at your office, I’ll pick them up when you’re done. We’ll get you approved. By the way, for settlement, you don’t have to plan on an entire day, we’ll get you in and out in about 90 minutes or less.” The bottom line is he did every single thing to make it easy for me.
I started retail when I was fifteen. I’m just a student of good customer service. I started referring him. I probably sent at least three or four people, friends and a neighbor, because it was when interest rates were really dropping. Then there was about six or eight months went by, one of my neighbors said, “Interest rates are starting to tick up. Who was that guy that you used?” I said, “Honest to God, I can’t remember his name. “What was the name of the company?” I don’t know. I said. “I can get my car and take you there but I don’t know. I’ll look it up and I’ll get back to you.”
Now, it’s a true story, but imagine if that mortgage company was sending me a two page, even something as inexpensive as a two page black and white newsletter once a month, saying, “Hey, here’s a tip.” It doesn’t even have to be mortgage, because who refinances? Most people refinance every eight years, I came to learn from him as a client. What if there was some tips? How to save heating oil in the winter, or utilities, or if it’s the summer time, here’s some things you can do with your kids to get through a long car ride. Anything. By the way, a big key, it has nothing to do with the mortgage business. It has everything to do with making it fun, interesting and informative for the reader and therefore they’ll read it, and therefore they’re remember you.
Now, it’s almost counterintuitive, especially if you’re in the tech world and you think everything is email, I don’t send anything in the mail. But everyone is zigging and you zag and you actually sent somebody a hard copy of something as opposed to just yet another PDF to open up in an email. You’re talking about an actual physical newsletter, correct?
Yes, that is correct. Now, one of the examples I’ll give, let’s say you got a thousand people on your customer list, nice round numbers. This is just for easy math. Let just say five years ago you could get a ten percent deliverability or open rate, which is pretty darn good. Nobody gets that today. Let’s say you did. That means a hundred of your customers are actually opening the newsletter. Now the flip side to that, if I was a nightly news person, I had to put a negative spin on everything I would say, “90% of your customers are not hearing from you.”
[Tweet “Customers need to hear from you to remember you.”]
By the way there is a statistic from Direct Marketing Association that says every 30 days that goes by when your customers don’t hear from you, 10% of them will forget about you.” Right then and there, it’s like people say, “Jim, I can do email and it’s free.” That’s true, but if it’s only 10% effective at best … There are two numbers you need to know so you’re not so cheap, lazy and or cheap, is that if you know the lifetime value of a customer, it can obviously, John, vary by different businesses. Let’s just say an average customer is worth five grand or let’s just even go $2,000, low side. Would you not invest a dollar a month per customer when the return is likely to be that huge? Now, that doesn’t mean every single customer is going to come back and buy and buy and refer and refer. But how many does it actually take before you completely pay for your newsletter?
Exactly. I can see where you’re going. It’s a really smart use of your time and money and it’s going to separate you from the competition.
One of my longest clients is an attorney and he’s a trusted estates attorney. He does not only some financial planning but retirement planning, all things like that. He does a newsletter. I gave him so much credit because I think he mails about 3500 or 4000 newsletters. It’s a big bill every single month. Once in a while I touch base with him and, “Thanks for being a client.” I said, “I always marvel because when I see your order coming through, it’s sizable.” He goes, “That’s nothing.” He said, “Every time I mail that newsletter, I get at least two new customers by way of referral.” I said, “No way.” He goes, “Jim, clockwork, at least two. We can’t wait to get the newsletter out because I wonder who our two new clients are going to be.” I said, “What’s an average client worth to you?” He said, “Probably $25,000 to $30,000 when they get with us and stay with us.” There’s all kinds of things going on nefariously. Doing services for wills and they do some other things. Could you imagine, that is incredible ROI.
It is. You talked about sticking around if you get a new client. That’s one of the key things investors really look for, is not only if you’re selling dog food they want to see the dogs eating the food. But they want to know that those dogs are going to come back and keep eating the food so that you’re not having to start from ground zero every month on getting new customers. What are some of your tactics for this book, Stick Like Glue, to keeping customers happy? I’m assuming a newsletter is one, but there must be others.
Delegate Or Stay Small: One of the most important things to recognize with any customer relationship is you have to successfully manage their expectations.
There are. Really one of the most important things to recognize with any customer relationship is you have to successfully manage their expectations. I think Dell Computers does a wonderful job at that. I’ve been a Dell guy for twenty years. Whenever I order, almost every two years because it starts slowing down. That’s like ten years in dog’s ears or whatever. Every two years I get a new Dell and get the most powerful one I can and it’s good for a while and it slowly slows down. Whenever you place an order with Dell, they give you an expected delivery time because they build it and they ship it to you. Most of the time it’s pretty fair. It’s going to be there in seven to ten days. I can deal with that. They’re going to build me a computer. It’s not something in a box off the shelf. Don’t you know, what I’m thinking on low side is seven days. That thing arrives in four days. Let’s say I purchased probably eight Dell Computers or ten maybe over the course of my business. I know they do it, but I still smile when that thing beats the delivery date.
It’s really all about under promise and over deliver to keep customers happy. I think that’s what we’re we going to tweet out from this episode.
[Tweet “Under promise and over deliver to keep customers happy.”]
It is. There are things that I do for my customers. When someone with the No Hassle Newsletter, when they’re a client for six months, I will take my art team and we’ll custom design a masthead for their newsletter. Now, some people will say, “I want to start out, can I get that ahead of time?” Now, I normally charge $150. What we’ll do is we’ll charged it but we refund it so we can get it to them early. Sometimes when they order the masthead, we might send him $100 in print coupons to actually save on printing and postage.
That makes people incredibly happy. Now, I’m sharing now with however many people listening to your show. That’s what we do. It is standard operating procedure. If somebody said, “Could I do this?” and we just simply said, “Yes, sure.” You’re going to do it and that’s good, but it doesn’t make it special. One of the thing you want to do is make whatever you’re going to do seem special. I know in my heart I’m going to do it anyway because I really know how much I value relationships. It’s about the power of reciprocity and things like that. I know I’m going to do it, but you always want make it seem in a way like you’re going above and beyond, going out of your way. Because people just totally dig that. Again, that increases the chance that they’ll feel the need to reciprocate.
I love it. Since you’re so busy and running so many different things, and entrepreneurs like you can really relate to the challenges, especially before they get funded or even after they get funded, they still have so much on their plate. Do you have any secrets you can share on how you get so much done?
Yes, I delegate. I think it’s chapter four in my book DECIDE, which I appreciate you mentioning. The chapter is called Delegate or Stay Small Forever.
Wow, that’s a great tweet right there. I love it.
Truth of the matter is, when you are doing work that you could hire somebody, whether it’s an employee, an actual W2 employee, or a 1099 contractor. When you yourself as the owner of the business are doing task oriented things, you are worth what you would pay somebody to do that. I’ll give you an example, let say you’re having somebody do follow up phone calls to new clients. “Hey, thanks for coming.” Or you’re doing database management, or you’re actually sending out books for people that ordered books, what happens every day. If you’re doing any of that thinking, “Nobody can do it as quick and as cheap and as fast as I can. I might as well do it myself so I don’t have to pay somebody else. I’ll keep all the money.”
[Tweet “Delegate or stay small forever.”]
If you’re doing that kind of work, you’re worth about $25 to $30 an hour because you can get somebody, you can get a virtual assistant, very good, to do that for that kind of money. Now to help illustrate this, again just for easy math. If you want to earn a million dollars a year, let’s say you’re going to work 50 hours a week and you’re going to work 50 weeks a year, you’ll take two weeks off. That means you have to earn $400 an hour. If you do that, you’ll earn a million dollars. Now, if you’re doing work that’s worth $20 or $30 an hour, you are woefully going to fall short of your target.
We only have so many hours, don’t we?
I have a team of eleven people that help run No Hassle Newsletters and also social media, the print business, the custom article business. I have somebody that schedules all my interviews like this. I have somebody that specifically takes care of all my coaching clients. All I do pretty much, and I do it three days a week, I am on the phone from 8:30 to 6:00 and I go from either interview to coaching client to interview to coaching client to prospect, but they’re all scheduled. They’re all scheduled calls, Tuesday, Wednesday and Thursday. I take off Monday and Friday. Excuse me, I don’t take off, especially in the winter, but I don’t have any interruptions. Actually, Monday and Friday are very good production days. Whether I’m writing a book or producing content or doing anything, I can just sail through it for as long as I want. I don’t have to stop and refocus.
I love what you said there, Jim, that’s the key, that’s it right there. You have scheduled your time, so you’re not constantly context switching between projects. This is my time to do interviews, this is my time to write a book and I’m not crossing the tube back and forth. That’s how you are so productive.
Delegate Or Stay Small: Anything that is a high enough priority, you will find time to do it.
I was on an interview yesterday, as you and I are doing this. The question was, “You’ve written six books in six years. How in the world did you get that done?” Anything that is a high enough priority, you will find time to do it. I wrote my first book in eighteen months, I wrote my last two in 60 days and that includes editing. I actually wrote the book in about five weeks. The way I was able to do that, because I am fairly busy, I can’t jam too much more into three days a week, for sure. But what I did is, I said, “For about five weeks, maybe six weeks total, I’m going to get up even earlier than I normally get up.” I’m usually up and going by 5:00, something like that.
When I’m in book writing mode for example, I might get up at 4:00. Sometimes I don’t even need to set an alarm just because my brain doesn’t shut off. I get up at 4:00 or 4:30 and I don’t shower, I don’t do anything, I don’t eat, I don’t look at Facebook, I don’t open email. I come into my office, it’s dead quiet in the house, obviously it’s still dark outside. I open up a Word, my file, and I start typing because I’m very focused on writing. Let’s say I’m writing at 4:30. I’ll write until about 6:30 every day. At 6:30, I’ll shower, walk the dog, get some breakfast and start my day, ready for my first calls. That’s a commitment.
Now, I always find some people, “Yes, Jim, but you don’t understand the value of sleep for your health.” I totally get that. I think five or six weeks, if you were to do that, you’ll survive. Again it’s placing a high enough priority on it. The other thing I don’t’ do much of, I do a little bit, but I don’t watch a ton of TV. When I go to events or even sometimes I’m out with family, “Have you seen The Walking Dead? Have you seen this? Do you watch this?” I have no idea what any of those show are about. It’s not that people don’t need some down time. I’ll watch ten hours of football on Sunday. But generally, I just think it’s not a good use of your time.
You’re not the first person I’ve heard say that. It’s really about your priorities and what’s important to you and what you decide. The name of your book, again, is DECIDE – The Ultimate Success Trigger. We’re going to put that in the show notes for people to be able to buy it, go to Amazon or whatever their preference is on how to consume that kind of content. Jim, is there any last thoughts you want to leave our audience with on how to run a business that makes you irresistible to investors?
Yes, I’ll do that. Right before I give that though, I appreciate you mentioning DECIDE, I’d love to give your audience a free copy, if that would be okay.
My goodness, what a gift.
We’re on launch mode. If you go to Amazon, you’ll see it’s $20 and approximately $5 shipping. If you go to www.DecidedForSuccessBook.com, that would be my website for the book. You can order it there, it will be free. We just ask you to pay $6.95 for shipping and handling. I even ship internationally. I think we just shipped a book to New Finland for $28, it’s okay. It’s $6.99. Every order goes out of here in 24 to 48 hours. This book will change your life as far as the thinking, because it’s all about your mindset.
Now, the tip I’ll give you is this, John. No matter what you do, whether you have a product or service, whether you’re an entrepreneur or an investor, whatever it is. You need to understand that you will earn significantly more revenue for who you are than what you do. The amount of money you can earn is not tied to the deliverable. It’s tied to how people perceive that you are the expert, you are the one that’s going to get it done. If that’s good, I’ll leave it there.
[Tweet “You earn more revenue for who you are, not what you do”]
That’s fantastic.
I can give you an example, if you want.
You’re the newsletter guru. You’ve been on TV doing that. I’m known as the Pitch WhispererR. I’m all about getting people to know instantly who you are and what you do and how that differentiates you.
That’s exactly right. Imagine if somebody, “I got to pitch this to a bunch of investors. I could work with a coach. I could work with a communication expert. Wait a minute, the Pitch WhispererR?” I don’t know your tag line off the top of my head but I’m sure it’s pretty cool. Therefore, “That’s the guy that actually does this for a living.” They’re going to call you.
My tag line is “How to go from invisible to investable.”
I like that. You see, that tells people exactly what the benefit is of working with you. When that happens, 90% of the heavy lifting is done.
That’s fantastic. Thank you so much, Jim. It’s been a pleasure. I can’t wait to get this out so people can really dig into your wonderful book about the power of decision. DECIDE – The Ultimate Success Trigger. Thanks, Jim.
My pleasure, John. Thanks for having me on.
My pleasure.
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When Science Meets Tech, Lives Are Saved With Jay Goth
Posted by John Livesay in podcast | 0 comments
Episode Summary
Jay Goth is a fund manager here in the Los Angeles area. He talks about how being direct and specific can get you to a yes or a no in 30 seconds rather than waiting 30 days for an answer. He shares a lot of tips on how to pitch whether for a startup or for a fund. He also shares the exciting things happening in the biotech startup industry, showing that when science meets tech, lives are saved.
Listen To The Episode Here
When Science Meets Tech, Lives Are Saved With Jay Goth
Hello and welcome to The Successful Pitch. Today’s guest is Jay Goth who is a fund manager here in the Los Angeles area. He has always been an entrepreneur and enjoy the success of building large companies. After years of being a consultant and an investment banker, an entrepreneur in resident, a nonprofit director, basically a cheerleader for the startup community, he is now forming a fund where he comes up with new discoveries that literally save lives, reduce treatment costs and eliminate unnecessary surgeries and reduce human suffering. How great is that? He’s going to be a different kind of venture capitalist he says. Instead of raising money and looking for special companies, he works with a core portfolio companies to create new investment opportunities. Jay, welcome to the show. My Goodness, I love what you’re doing.
Thanks, John. I’m having a blast.
I bet. Before you became such a maverick in saving and changing the world, can you talk us back to your early days? I know you graduated from University of Colorado in Boulder. From there, you worked for some energy companies and solar. You’ve always been at the cutting edge of technology it looks like to me.
I’ve always been an entrepreneur. I started basically right out of high school, working for myself. I never really got along with bosses too well. It was the entrepreneurial life for me. Back in the 90s, after being in insurance and real estate, trying all kinds of different things, I started raising money for other people. I was terrible at it. I made a lot of friends and zero investors and learned that sometimes you don’t want friends, you want investors.
Interesting. Let’s do a deeper dive into that. People always learn so much when people are willing to talk about what didn’t work as much as what did work. What do you mean by that? You can’t be friends with the investors or you were just too focused on the relationship and not what they needed for a return?
I wanted to be friends with everybody. Sometimes when you’re getting people to write you a check, you can’t quite be so friendly. You have to take control of the situation. Initially, I generated a lot of leads. I was one of the best lead opening people anywhere I worked. The problem was I wasn’t closing people because I wasn’t really taking control. I was just ceding control over to them and they’d always give me some excuse and I wouldn’t nail them on it. I’d just go ahead and go with the flow.
Jay, I think this is so valuable. I’ve never had anybody in over 90 episodes talk about this. I’m really happy you brought this up. So many times, people get the polite no. “Come back when you have more traction. You’re too early in the market.” Or whatever the excuse is. They never get a yes. I like to say that the longest distance sometimes is between someone’s mouths and their wallet. Give us some techniques or ideas that people can use to not just take the first no.
Science Meets Tech: “I’m looking for investors who are interested in this and are willing to write a check. Is that you?”
It’s really a basic thing, asking for the order. A lot of times, we beat around the bushes. “I’d love to see you as an investor,” or this or that. What I learned is that if I start my conversation with a prospective investor, right up front, “I’m looking for investors who are interested in this and are willing to write a check. Is that you?” I was always afraid to do that. When you start that way, then all of a sudden their guard comes down a little bit. I’m not one of the guys that’s sitting there, calling them, beating around the bush. I’m a real person asking him if he’s interested in making the investment. It’s just as easy to get to no in 30 seconds as it is to get to no in 30 days.
It saves a lot of time when you’re that specific and that direct.
Right.
I love it. Let’s take a dive into what you did at Red Tail Capital. I’m interested to know what lessons you learned from that and what types of things you’re invested in.
Red Tail Capital was an investment banking operation. I was really working on mergers and acquisitions, did some debt financing for people. Really, where I learned how to pitch and the things I learned were really when I started a company called Commonwealth Energy back in the late 90s. I was one of the founding fathers of this company. Basically what had happened is we were looking for investors for a number of other companies. Every time we raised money for one of these other companies, they would blow it. They would take the money and they wouldn’t spend it the way they should and they would be coming back to us looking for more money. Our investors weren’t happen with us and we weren’t happy with the management teams. Finally, we decided, why don’t we just raise money for ourselves? With saw an opportunity in the energy deregulation here in California in the late 90s. We built a company called Commonwealth Energy and we started raising money for ourselves. John, we raised $60 million from 1500 private investors over the course of a couple of years.
Holy cow. What was the average investment to get such a large number?
We were doing it under a special California exemption so that we were using California investors and California companies. We were able to get in people who wouldn’t qualify under the “accredited” investor status. There are some looser regulations for those. We were able to get in a lot of people. The minimum investment was $10,000 but sometimes we’d package one or two investors together if they were qualified. Like I say, we raised a lot of money, but the best thing about it was we actually built a business. We build something that became the largest unregulated supplier of electricity and natural gas in the country. Ran the revenues to up to close to half a million dollars and went public on the American Stock Exchange.
Congratulations. That’s a great exit.
Yeah. All of our investors did well. It was the greatest ride of my life, I’ll tell you. That was about four years of just nonstop excitement. There were times when we thought we were going to lose everything. There were times that we were just really riding high. Of course you get to a point in the company where the entrepreneurs leave and the professional management team comes in. That’s what happened. When I left that, I went into consulting and started doing all kinds of things. The core things I learned when I was raising capital at Commonwealth Energy have always remained in my mind. There were some very simple steps that I found that were taught to me that really can help. You get to a yes a lot faster.
Please share those steps.
The first thing you want to do when you’re talking to a potential investor is you don’t want to tell them a long elaborate story because the longer your story the more confused they get.
That’s a great line. The longer your story, the more confused they get.
[Tweet “Science Meets Tech: The longer your story when pitching, the more you confuse investors.”]
A confused investor never invests.
That’s right.
Science Meets Tech: Get three yeses and then ask for the order.
We would give them a very general idea of what we were doing. Of course you have to frame it in the right way so that it sounds really good. Then we would ask them a couple of very leading questions. Something like, “The pharmaceutical market is a multi-billion dollar industry. If you were come out with a blockbuster drug, don’t you agree that there’d be a lot of money to be made?” You’re asking them questions that they almost have to say yes to. The adage that I was taught was three yeses and ask for the order. You would ask them, “Blah, blah, blah, right?” They would go, “Yeah, that makes sense.” You would ask them something else and they go, “That makes sense.” You’d ask them the third thing and as soon as they agreed with you, you’d say, “Here’s what I suggest we do. Why don’t we go ahead and put you down for an investment?” Right away, you’re taking their temperature. Of course usually they’re going to come up with an objection. “I don’t know about that.” “Let’s just get a gauge of where you’re at, what you would feel comfortable in. If everything I tell you is borne out in writing when I send you all the information that you’re going to have to review before you make the investment decision, how much would invest at this point?”
Nice. Because you’re basically becoming copilot with them and saying, “We’re going to land the plane. We’ve agreed that if everything works, the landing gear goes down and everything in due diligence checks out, that you’re going to write a check.”
Exactly. If they said, “No, I’m not going to write a check.” I say, “No matter what I send you, you’re not going to invest, right?” If they said yes then we’re at zero and it’s a good time for us to shake hands and part friends. Go find somebody who is going to write a check.
[Tweet “Science Meets Tech: Be specific and direct when you pitch.”]
There’s nothing worse in my opinion Jay, than the maybe or let me think about it. That just drags everything out. Like you said, you can get an answer in 30 seconds instead of 30 days by being specific and direct. I love it. You are no longer pitching for money because you’re on the other side of the table now.
Wrong, you’re wrong. I still have to raise money for my fund.
You’re listening to pitches and pitching. What’s the difference between pitching for money for a fund versus pitching to get a startup funded?
There’s absolutely no difference. Whenever you’re asking somebody to write a check to somebody they don’t know, to do something, it’s always a difficult situation. It’s never easy. Whether you’re a startup, a fund, an established company. I’ve worked with public companies before. It’s always the same question. What do you do? How do you make money? How am I going to make money as an investor? When am I going to see it? Those are really the things they want to know. There are a couple of different ways you can approach investing. With the biotech, I’m always talking about the greater good, I’m talking about saving lives, speeding innovation to market and really making a difference in all the people that are suffering today that don’t need to if only we can get them the right drug at the right time in the right dose. That’s what I do. That’s what gets me all fired up about biotech. As much fun as I had at Commonwealth Energy, it’s nothing compared to the rollercoaster I’m on right now.
Let’s just quickly recap. There’s such great questions that you just gave us that you could ask when you’re pitching, whether it’s to raise money for a fund or a startup. The first one I think you said was, how do you make money? One of them is, how do I, as an investor, make money? Correct?
Right.
In other words, what’s your exit strategy? In the case of a fund, I would assume that somebody gives you money for you fund, they make money when one of the companies that you fund that they also own goes public or gets sold, correct? There’s some strategy there that eventually there’ll be an exit for them to make a big return.
In a fund, it’s a little different because we’re investing in a number of companies. It’s not just one. You’re a little more diversified so your risk may be a little lower because if one doesn’t hit maybe another one will. At the same time, we’re a very specially focused, special purpose fund. We’re not out there, I’m not looking for the next investment. I’m helping actually produce the next investment. What we’ve been able to do is put together three core companies that I call our consortium or eco system if you’re in the west coast. I know east coasters don’t like that. Basically, these companies work synergistically to develop new intellectual property assets that we can then package into a new company and take to market. I’m very involved in funding these three companies to keep them going. At the same time, I’m really more focused on these new assets that we’re developing because these are the things that are going to be game changers in the medical industry.
What do you look for when somebody comes to pitch you to fund their medical biotech startup? Are you looking more at the team and their background? Are you looking at their passion for making a difference in the world or that they have a business plan? What is your criteria?
I think if you talk to investors, and I talk to them all the time, the number one thing that we always look for is management. We want to see somebody who has successfully been able to do what they tell me they’re going to do now. When I tell somebody that I started a company and we took it public, I have a little bit of credibility compared to somebody who says, “I started a company and it never really got off the ground.” I’ve done that too, believe me. You’re not an entrepreneur if you haven’t had a couple of spectacular failures. I’ve got those. Really, the management team has to be able to execute.
[Tweet “Science Meets Tech: Show that your team can execute the idea better than anyone.”]
You have two risks in biotech I think. One is the execution risk. That’s the management team. That’s the group of people that are going to make this happen. In biotech, so many times you see a great management team of scientists but you’re missing a business element. A lot of times when I see a biotech deal and I see a bunch of doctors and scientists, I’ll say, “This is all great, but who’s going to make the business part happen?” They’re like, “We all run our own operations. We understand business.” I say, “No, this is a whole different thing.” You got to talk about marketing, scaling, operations. There’s just a lot more involved than simple research. You’re translating a product that you’ve developed in a lab to a commercial product. Management is key.
Number two in biotech is really a regulatory risk. Is the FDA going to approve this or not? One out of ten drugs that starts in the clinical trial process actually makes it to becoming a drug. It takes over ten years and a billion dollars. When you’ve got that risk, that’s a very low success rate. You really got to look at how can we maximize the opportunity and increase the possibility that you’re going to get through clinical trials. Fortunately, that’s one of the things one of my portfolio companies does, is you can actually tell in advance who will respond to a drug and who won’t. So when we go in to clinical trials, we’ll be able to tell what our efficacy rate is going to be ahead of time.
One of the things I’m really interested to hear about Jay, is not only do you give money but you roll up your sleeves and get in the trenches and help these companies be successful. That’s so important.
I think a lot of venture capitalists say that they do that. To an extent, as much as they can, they do. That’s why I kept my fund size very small. I’m not looking for a whole bunch of companies. I really want to help make this happen. I’m intricately involved in all aspects of the companies’ operations, even though I don’t hold a management position and I don’t hold any vote. We do have governance positions where we can take an oversight look at the thing. Really, the key to me is if I want my investors to be happy, I got to make their investment spectacularly successful. What can I do to make that successful?
What are you working on now that you can share that you’re excited about?
Science Meets Tech: We’re coming up with a liquid biopsy that will actually just use a little bit of your blood.
We have a diagnostic that we plan on bringing to market very soon. Right now, if you get a CAT scan of your lung because you’ve had this cough for a long time and you look at the lung and there’s a mass in there, you don’t know what it is. The first thing you do is do a needle biopsy. Go in and you actually pull a piece of that mass out to see if it’s cancerous or benign or what it is. We’re coming up with a liquid biopsy that will actually just use a little bit of your blood from your arm and be able to tell with 100% accuracy whether that mass is benign or cancerous.
Wow. Early detection is everything. To make it so non-invasive is really exciting.
That’s the key. This was actually developed by a surgeon who didn’t want to do unnecessary biopsies. This is just one of the exciting things. We’ve ran the tests on 282 patients and it came out 100% accurate. We’ve done a couple of other tests for validation and they both came back with the same high accuracy rate. We’re really looking at moving this out to the market next year.
What do you do in terms of worrying about barrier to entry from competition?
The competition in the biotech sector is just super intense. Everybody you talk to knows somebody who’s working on something. I was at a conference yesterday and I must have talked to 20 people who are working on exciting biotech things. Some of them overlapped, some of them didn’t. I just talked to a gentleman today on the phone. I thought I was pitching him for an investment. It turns out he was pitching me for an investment. He’s running a diagnostics company and I’m running a fund that funds diagnostic companies. Who knows, we may be able to do something together. There’s just so much competition in the space.
What do you do about barriers to entry? We actually have a very strong intellectual property attorney. The companies have formed a relationship with a gentleman who is one of the top biological attorneys in the country when it comes to intellectual property. You want to not only protect the IP that you’ve developed, but you also want to protect how you got to that IP, what kind of strategies you need to employ to make sure nobody else can say, “We found something that’s very similar and we can use it.” Because you want to walk it up as long as you can from a greedy capitalist standpoint, but at the same time, when you’re looking at intellectual property like this, the research and dollars that go into generating it are so huge that you’ve got to be able to get your money back.
Science Meets Tech: I think what we’re going to see is this turn towards what I call precision medicine
I think, and this is me putting on my political hat a little bit, but I think the FDA is starting to take a different approach to how they look at things. They still want to maintain safety and efficacy, which is the most important thing, making sure people don’t get hurt by a drug and making sure that people are helped by a drug. I think what we’re going to see is this turn towards what I call precision medicine. That’s generally the term. You can call it personalized medicine or individual medicine. Really, we take a little bit more time before we do a diagnosis and treatment. We look at your individual human biology. We look deep into your biology to figure out, “Just because you have diabetes doesn’t mean that your diabetes is as advanced as the next guy’s diabetes and what works for him may not work for you. Why don’t we design a treatment based around you as a specific individual?”
I think we’re going there and I think that this is going to actually end up, even though drug makers won’t be selling as much of a drug because we’d be prescribing different things, I think they can actually, because the drug is going to be working, we’re going to go to a pay for performance model eventually. If I prescriber a drug for you and it doesn’t work, that drug maker is not going to get compensated.
It also sounds like we’re really going into this whole specialized, customized dosage and everything else. It’s much like marketing is very specific and customized, that medicine is going to become the same way. I love it. What impact is artificial intelligence having on medicine and what you’re doing?
It’s a good question. One of the things that we have is a bio informatics engine. It’s not artificial intelligence per se but it’s a whole new way of looking at math. We have a laboratory in Pennsylvania that we’re building right now that will be able to generate 250 million data points off of one single tissue sample. It’s looking at human tissue at a whole different way because it’s looking not only at the genetics but at the proteins, at the lipids and all of the different things that make up that little tissue sample. If you have 250 million things that you know about this sample and you’re trying to find out what is the reason for a specific outcome, why is this a diseased tissue versus a normal tissue, or whatever it is, and you have a dozen different tissue samples, 250 million times a dozen.
These data points are interacting with each other to cause whatever the problem is that you’re looking at, that’s a huge mathematical problem. A lot of people have tried applying artificial intelligence, machine learning, support vector machines, all these advanced ways of looking at math. Nobody has really been able to hit the nail on the head. Luckily I found a company that actually has done that with a whole new way of looking at math. It’s very cool. It’s almost like evolutionary math where the data actually fights itself out to find out who the victor is at the end of the day.
I love it.
It’s really cool stuff. We’re seeing all kinds of advancements. I think it’s this marriage of science and technology that is really causing a revolution in the medical industry right now. We’re right at the beginning of it. It’s very exciting.
[Tweet “Science Meets Tech: It’s causing a revolution in the medical industry.”]
Do you think the result of medicine and technology joining forces is that people will be living longer?
Absolutely. I hear people saying we’ll all be living to 150. The people who are born in the 2020s will be living to 150. I firmly believe it. The application of technology to medicine is allowing us to learn so much more about the human body and how it really interacts and what causes aging. Aging is simply our cells being unable to reproduce themselves the way they did when we were young. Because our bodies are always replenishing itself. We’re always rebuilding our cells. We start losing the ability to rebuild them properly. Why is that? There are some incredibly intelligent people who are looking at that right now, everyone from Craig Venter at Human Longevity to Dr. Michael Rose at the University of California Irvine. You name it. There’s just so many people doing this. There’s no way we’re not going to be able to live not only longer but better lives longer.
The impact that’s going to have on population growth and crowding and people not retiring at a certain age anymore, it’s all just going to be fascinating to watch.
You’re right. It’s going to be pretty incredible. Love being in the catbird seat, being able to watch all this stuff unfold.
How to Be a Power Connector: The 5+50+100 Rule for Turning Your Business Network into Profits
I bet. Is there a book that you would recommend someone who is interested in getting in getting their startup funded or learning to be a better entrepreneur or just learning about how to live a better life that you want to give a shout out to?
I’ll say two. One is self-serving because there’s a lady out there that I’ve met recently that I really love what she has to say and the way she’s able to connect people. You know her very well. Judy Robinett. How to be a Power Connector is killer. I hear she’s coming out with a new book soon. That’s one. When it comes to pitching and doing stuff, you’ve probably had people recommend this book before. Oren Klaff has a book called Pitch Anything that is just out of this world. I’ve read that probably 50 times and I’ll probably read it another 50 because I just love his approach.
Pitch Anything: An Innovative Method for Presenting, Persuading, and Winning the Deal
It’s all about how the brain works and framing everything. It’s really well done. I love it as well. Fantastic. Jay, how can people stay in touch with you on social media, your Twitter handle, all that good stuff?
The name of my fund is Forentis Fund. We have Facebook, Twitter, LinkedIn. Feel free to hit me up there. We post regularly whenever I see something cool in precision medicine. We’re always posting news up there and of course our own stuff. It’s a good way to stay in touch with me. I’m at Forentis.com. If anyone ever wants to get in touch with me, you can reach me right through the website.
Fantastic, Jay. You’ve been a great guest. I love your passion. I love that you have so many great tips on how to be successful and have a successful exit and making a difference all at the same time. Thanks so much for being on the show.
Thanks for having me, John. I really enjoyed it.
Me too. Bye.
Bye.
Links Mentioned
- J Robinett Enterprises
- John Livesay Funding Strategist
- Forentis Fund
- Forentis Fund Facebook
- Forentis Fund Twitter
- Forentis Fund LinkedIn
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