TSP060 | Kim Kaselionis – Transcription

Posted by John Livesay in Uncategorized | 0 comments

John Livesay:

Welcome to The Successful Pitch podcast. Today’s guest is Kim Kaselionis. She has some great insights as to what it takes to be successful when you’re pitching. It includes practice, being confident. She said, “Confidence attracts investors. Being direct and thinking about some kind of exit strategy so the investors are going to see how they get their money back.” She also says, “You can convert your social capital into your venture capital,” and finally, she said, “Have stamina and determination to overcome life’s speed bumps.” Enjoy the episode.

 

Are you a founder struggling with your investor pitch? Do you need warm introductions to the right investors to get your startup funded? Do you need a funding road map to get you there fast? All of this and more can be found in Crack the Funding Code. Join host, John Livesay and Judy Robinett, bestselling author of How to Be a Power Connector and board member of Illuminate Ventures, on their free Crack the Funding Code webinar. Simply go to judyrobinett.com – that’s J-U-D-Y-R-O-B-I-N-E-T-T dot com – and click on the webinar tab to see how to tap into their network of investors from around the world. There’s a link in the show notes as well. You’re only one click away from getting funded fast.

 

Hi, and welcome to The Successful Pitch podcast. Today’s guest is Kim Kaselionis, who is the managing partner at Breakaway Funding in the San Francisco Bay Area. That’s the hub of everything. Kim has an amazing track record with so many awards, starting from the Marin Women’s Hall of Fame in business to Innovative Community Bank of the Year finalist to being one of the most — 150 most influential women in the Bay Area in 2012 and now, of course, she’s got her pulse on crowdfunding and is going to be speaking soon because she is an expert. So we are honored to have her on the show today. Kim, welcome.

Kimberly:

Good morning John, it’s great to be here with you today.

John:

That’s our pleasure. Kim, I always love to ask my guests to talk about how did you get to where you are, how did you get to be one of the 150 most influential women in business in the Bay Area and then get to do what you’re doing with Breakaway Funding. You know, back in the day – let’s go back all the way back to your days in college. I know you have a background in business and accounting but did you always have your sights set on getting into innovative ways of funding?

Kimberly:

Not even remotely. As you know, one of my first career was the CEO of circle bank and when I was in college, I thought, “God, could there be any more boring career than one in banking?” and, boy, I was proven wrong. I was really fortunate enough to have a mentor, my mother, who is an entrepreneur in her own right and very opportunistic. So they talked about, “Are entrepreneurs born or are they made?” and I think it’s little bit of both. So I think I benefit really a lot by having a mentor who was — you know, she’s a doer and a shaker.

John:

I love it. Well, what a great role model and how you’re, in turn, the role model for many people, male and female. So you were at the bank for so many years. What made you decide, “Okay, I’m going on to something new.”? That’s always a very pivotal point for people and fascinating to me of leaving this very successful career to change it up. What was the catalyst?

Kimberly:

Well, my dear, it was not my choice. So we’re privately held institution and our small ownership braid decided that they wanted to harvest their investment and, in 2012, as you well know, the capital market still had not quite recovered. So, we were fortunate enough to get into a bidding war on the sale of the institution. So, I decided not to stay with the acquirer and instead attended an economic conference at Sonoma State University where I was introduced in equity crowdfunding and I thought, “Well, equity crowdfunding sounds pretty cool and isn’t it brilliant for banks?”. So, Breakaway Funding was really born both from some pain that I’ve experienced as the CEO of the bank, right? Having a struggle to lend and the ever increasing difficult regulatory environment and small and medium sized business lack of access to capital. So the marrying of equity crowdfunding with traditional bank financing, I thought, “Well, got to do something with that.”

John:

Yes. Well, how great for the listeners to realize that, you know, you have modeled for everyone how to reinvent yourself. You don’t have to be Madonna to reinvent yourself. You can reinvent yourself in all kinds of careers and there’s nothing more successful, in my experience from watching successful entrepreneurs, than when they personally experience a problem and figure out a solution for it and then take that into market. It seems to me that that’s exactly what you did with that. So what was it like going from the president of the bank to launching Breakaway Funding? Were there a lot of lessons learned from the bank that you could take to Breakaway, or what was some surprises that you had?

Kimberly:

Well, I think that any entrepreneur will tell you that, it is challenging, exhausting, scary, exhilarating. As long you are involved in something that you’re passionate — I think the word passionate is a little overused. But, if you are really behind and engrossed and engaged in what you’re doing, you can pretty much just keep showing up every day. So what were the surprises? The surprises are it’s really invigorating to show up every day and I know that I only have to get through the next 24 hours and then I’ll have a chance to do it all again. So, it’s just having the stamina and determination to work through life’s speed bumps.

John:

Well, I like that. We’re going to tweet that out. “Have the stamina and determination to work through life’s speed bumps.” That’s very poetic. It’s really great. What are some of the speed bumps that you encountered that required extra determination?

Kimberly:

Well, how about the fact that my business model, my revenue model didn’t unfold the way that I thought it would.

John:

Yes, let’s hear more about that because you’re not the only one that has that challenge.

Kimberly:

Right. So, when I — you know, coming to this marketplace through the lens of the banker, I thought, “Well, of course, all bankers think like me.” I couldn’t be more wrong and so when I had initially developed my business plan and the revenue model, I thought, “Oh well, banks would love to pay me the subscription model to be their marketing arm or their marketing face to help them engage in crowdfunding.” Well, that didn’t materialize. Now I’m hoping it will be kind of my encore. So, one’s I’ve had some chime over the last 18 months. I spent a lot of time educating and meeting the community banks and some of the credit unions on their opportunity that equity crowdfunding presents to them. So, I’m hoping that I will be able to take my initial business plan piece to the revenue model and have it, maybe, as my third act.

John:

Nice. So how are you monetizing Breakaway Funding now?

Kimberly:

Well, that’s an interesting question. So, we have, as all good startups, a diversified revenue streams. So we really are doing a number of different things including some consulting to startups to help them get ready market and execute their crowdfunding campaigns to loan brokerage services. So, because of my Rolodex and my background in the banking industry, I can help companies access new banking relationships. So, we get paid for doing that. So, we’ve got a couple of different ways of that we divide our revenue and one of these days, I’m hoping I’m going to get paid for speaking.

John:

There you go. Well, let’s talk about both of those things: your speaking, which I know is coming up in Los Angeles. What is your topic going to be and how did they find you for this big event?

Kimberly:

Well, that’s fantastic. You know, well, the last question first. It’s really, really important, as you well know, to network, and whether that network is being involved in social channels, whether it’s LinkedIn or Twitter or Facebook that you are engaged and you’re open to creating new relationships and new friends. So that’s one way that you can have these opportunities unfold.

So, I was introduced to Victoria via LinkedIn and she is hosting – her company as Metropo Global, based out of L.A and they are holding the Fourth Annual Global Alternative Funding Event, as you’ve mentioned, November 7th or November 6th at the Century Plaza. So, it’s going to be a full day or will have been a full day of all things private equity, how to get it, who needs, and let’s work together to make it happen.

John:

And what is your topic going to be, specifically, within that world?

Kimberly:

So, I will be moderating an equity crowdfunding panel.

John:

Oh, how great. So you get to ask the questions like I’m asking you? I love it. You’d be on both sides of the table. Yes, moderating a panel is quite challenging because you try to give everybody equal time and are there certain questions that you know you already want to ask?

Kimberly:

Well, certainly. One of the questions — one of the first questions I’m going to ask – because it’s a theme that I run into and that is, what are the one or two challenges that you, the platforms, run into when working with companies that are trying to raise capital? So, what are some of the themes – the global themes that we’re encountering. So, tell me one.

The others I would say a lot having to do more with what’s the roadmap to a successful capital raise? So, everybody’s going to have their own viewpoint there and then I want to also talk about the various security’s exemptions that are available to both investors, right? Investors of all flavors as well as entrepreneurs through which they can raise capital or which they can invest and, hopefully by that time, the SCC will have ruled on the Title III, the classic crowdfunding legislation.

So, we’re really looking forward to opening up the capital channels, the flow of capital to fund innovation and job creation in this country and create new investment opportunities for everyone.

John:

What I really love about this whole concept of crowdfunding and equity funding is it used to be your choices were much more limited, right? It was either family and friends, and then some seed angels, and then, maybe if you’re successful, you got to series A. Now, with equity crowdfunding put into the mix, a lot of startups are using that as proof of concept that people are willing to pay and that helps them get angels, right?

Kimberly:

Right, so there are four different crowdfunding models and this is not a crowdfunding conversation but the rewards-based model is a great way for businesses to get a proof of concept to your point and not only that, but also to build a community and a following which they can use a springboard then and demonstrated success to actually launch an equity based raise.

John:

We were talking earlier about one of your questions is there’s a lot of global issues now going on so can you speak to that? What’s going on outside of the US and how does that impact us?

Kimberly:

Are you talking about the regulatory front or you talking about just economics?

John:

Just economics, in general. When you’re talking about the global challenges, one of the questions that you’re going to ask at the panel, I think I’ve noticed that the whole event is global-based so I just think it’s interesting for everybody to get a perspective of, typically, angels, for example. I only like to invest with people who are within 150 miles of where they live but now with equity and crowdfunding, that geographic stuff sort of goes away a little bit, doesn’t it?

Kimberly:

Indeed. So, one of the benefits, I think, of crowdfunding is that entrepreneurs and business owners can convert their social capital into financial capital and it is a way for them to get introduced or to reach out to people, prospective investors who are aligned, that the values of the investors are aligned with the mission of the company raising capital and you’re right. There are no geographic barriers that might limit that opportunity of getting those two groups together.

So, the US is – you may well know – is way behind the rest of the world as it relates to equity crowdfunding so we are delighted that SCC is finally coming to the table and as you also may note, 25 states, to date, have enacted their own intrastate crowdfunding rules. So, it is good that the SCC is finally coming to the table because we’re likely to have 50 different interpretations of equity crowdfunding.

John:

I love that line you said. We’re going to tweet that out. “Convert your social capital into your venture capital”. That’s great. That’s such a great way of looking at it too. I have never heard anybody say that so thank you, Kim. That is really wonderful. So, what does a typical day look like for you? I think people would be very interested to hear what it’s like running Breakaway Funding from consulting to speaking to being a loan broker. I’m specifically interested in the consulting aspect of it of how do you help people figure out if this is for them and, if so, how to use it?

Kimberly:

Well, you know, they have that saying. “You have to know the rules of engagement in order to play the game”.

John:

Yes.

Kimberly:

So, really, a lot of what we do here at Breakaway is an extension of what we did at Circle Bank and that is more education and consultative in nature. So, what we do with our clients is we really try to understand, holistically, what it is that they’re trying to achieve, what resources do they have, what gaps do they need to fill, and spend a lot of time with their community. You know, I have particular philosophy as it relates to equity crowdfunding and that is that the entrepreneur and the business owner really stand a greater possibility of raising the capital if they have a community and let me just give you a real quick example.

At Circle Bank in 1990, when the bank was originally established, a group of community members got together, said, “We want to have a bank in town. We don’t want to deal with the big guys.” So, they created a business plan so they could figure out where they were going to go and how much capital they needed to get there and, at that point, they needed 3 million dollars. Well, they all looked at each other and said, “Hey, who wants to write that 3 million dollar check?” Well, nobody, of course, right? So, they said, “Okay, everybody open your Rolodex.” So, the board went to the community. They went to their social network, their social capital, invited the community to become owners of the bank, thereby raising the financial capital, converting the social capital into financial capital and, as a bonus, they were able to generate some strategic capital because those very investors became the first customers of the bank and then they went on to become the brand of Angel List. So, this is really the beauty and the benefit of harvesting, mobilizing your tribe, your community, and your social capital. We’re really about engagement.

John:

Everytime I hear someone talk about their customers become their investors, that is just music to everybody’s ears because it really shows A, you have proof of concept, but B, more importantly, they love it so much that they want to invest in it because they see the potential. That really gets a lot of people to want to join your party, doesn’t it?

Kimberly:

It does indeed, and I like to say it gives them an opportunity to double-dip. If they’re going to buy from you or they’re going to sell to you and they get to, hopefully, enjoy in the value created for the company and the wealth that it’s created, then they have the opportunity to double-dip and why not?

John:

Love it. Do you have any other examples you can share with us of your experience of what you’re doing at Breakaway with clients?

Kimberly:

Absolutely. So, in July of this year and July of 2015, the Cadillac Bar and Grill 2.0 opened. So, in the 80s and 90s, Michael Rodriguez of the Cadillac Bar and Grill owned and operated the restaurant for 17 years south of Market Street in San Francisco. Very, very profitable, very successful company. Well, his landlord was the city of San Francisco. So, when the city decided to expand the Moscone Center, they did not renew his lease. So in 2012, Michael decided he wanted to bring the Cadillac back because, again, it was a destination, it was a hub for community engagement as where people went after work for a drink and for great authentic Mexican food.

So, he developed a business plan, he determined he needed X dollars to open up the restaurant and so through harvesting his own social capital and really looking at some of the other resources in the community – his skin in the game, his community, and a community bank in San Francisco Trans Pacific National Bank, we were able to aggregate the required resources so that he could open up the Cadillac 2.0. They opened, like I said, in August of this year and have been doing very, very successful.

So, it’s not only that but there is a — you know, crowdfunding, we talk about, it’s new and it’s really the way that companies have been capitalized for many, many reason. There’s a great story in Petaluma County. There’s a hotel fancy enough; it’s called the Petaluma Hotel. In the, I think, it was the late 1800s or early 1900s, that hotel was actually crowdfunded. 100 community members got together to raise the 300 thousand or 350 thousand dollars to construct the hotel. Now, why would they do that? Well, they probably want a place for their family members to come, a restaurant to go to, a bar to go to. So, by becoming the financial capital providers, they could also become the strategic capital providers because when Aunt March comes to town or Uncle John comes to town, where are they going to stay? They’re going to stay at the hotel.

John:

Yes. Well, this whole concept of what you’re doing at Breakaway Funding really seems to support the community in a big way and I know you’ve written some great blogs about the sense of caring and everything. Can you speak a little bit about this sense of community?

Kimberly:

Again, I’m just going to go back to, really, the foundation and really the mission of community banks, which is the lens through which I see the world and it’s about engaging for mutual benefit. We are no longer living in a time where I get to benefit at your expense. You’re smart enough, there are enough resources to go around. If we’re willing to think a little differently about how we can engage, we can create relationships for mutual benefit and, really, at the end of the day, that’s what the mission of most community banks is – you know, being an integral part of their community.

John:

Kim, do you have any advice for the listeners on how to pitch their story? Whether you’re going to a bank or engaging Breakaway Funding to help them craft a story that people are going to want to help — like, for the example of the restaurant with the Cadillac, do you have any tips on the importance of getting people emotionally engaged and sharing your vision?

Kimberly:

So, sure, lots of little tidbits for one, practice. Practice pitching. I know it seems a little bit awkward sometimes to practice but it really will help you in that, maybe, moment of terror. The other is confidence. Really, people are attracted to confidence so you really need to have confidence and conviction when you are speaking about it. Passion, of course, there’s that word again. You have to be committed. It has to come from you. People can tell if you’re not authentic with your story. Be direct, right? Be direct, be really clear about what problem you’re solving, what is your unique selling proposition, how are you different, what your market is to the extent that you’ve had an opportunity to engage in a rewards based crowdfunding. Raise, point that out, and then the exit. You know, a lot of times when businesses are thinking about their company launching or expanding and they’re thinking about the capital they raised, sometimes they forget how they’re going to get their investors out.

John:

Yes, especially in the cases of restaurant. He’s like, “Well, that’s going to stay there another 20 years, right?” or, “It’s going to be 20 years before I get my money back?” Not necessarily, right?

Kimberly:

Exactly, exactly. So, I would just say be confident, be authentic, practice, be direct, and figure how your — one or more ways to get your investors out. They will be very happy about that, that you thought about them.

John:

Yes, I love that concept of being direct. One of my favorite phrases is the confused mind always says no and I work with my clients all the time on this is not clear and if it’s not clear, you’re not going to get a yes. So you need to come out and say exactly what the problem is and what the solution is because when people understand that in a clear way, then they can decide whether it’s right for them. But if you confuse them, then they’re like, “I don’t know if I want to say yes or no because I don’t understand it,” and that one thing can make or break it, don’t you think?

Kimberly:

Indeed, and you’re exactly right.

John:

Yeah, it’s really great. Kim, obviously, you are so influential, and so committed, and so passionate. You clearly walk your talk. Are there any books that you would recommend about business or even about life that you think people, as entrepreneurs seeking funding, should be reading?

Kimberly:

Well, one book that comes to mind is Startup Seed Funding for the Rest of Us: How to Raise $1 Million for Your Startup – Even Outside of Silicon Valley. I think you can get it for $4.95 on Kindle. So that will be just some — you know, there are a lot of resources out there that entrepreneurs can flip through and on the lifestyle, I would just say, sometimes get a trashy novel and just disconnect, right? We do need time to reboot and it is absolutely, in my mind, okay to take a timeout from the real world.

John:

Well, there’s been all kinds of studies to support that that if you constantly focus, focus, focus and don’t take a break, you’re not more productive. You’re less productive so that “take time to reboot” will be the other tweet from the show. That’s fantastic. Kim, how can people follow you on social media, reach out to you for future speaking engagements, consulting, et cetera.

Kimberly:

Fantastic. Well, certainly, you can visit us at our website at breakawayfunding.com or follow us @breakingfund, that B-R-E-A-K-I-N-G-F-U-N-D. That’s kind of our Twitter handle. You can reach out to me on LinkedIn. Find me at Kim Kaselionis. So, any of those options or you can call me: 415-729-9482. 415-729-9482.

John:

Great, and your own personal Twitter handle where can people follow you is just @kimkaselionis, yes?

Kimberly:

Indeed. Thank you.

John:

Nice. Well, it’s been a pleasure hearing from you and your expertise. I know you’re going to knock them dead moderating this panel and we look forward to seeing future speeches that you are going to get paid for.

Kimberly:

Well, I appreciate that and, John, it’s really — what a great service that you’re providing all of your listeners. You know, little tools of the trade and little tips that help them become even more efficient in what they’re trying to do. So, thank you for that.

John:

Thanks. My pleasure. It’s my personal passion. I love helping founders get their pitch really focused. Thanks again, Kim. It’s been a pleasure having you on the show.

Kimberly:

Thank you, John.

John:

Thanks for listening to The Successful Pitch Podcast. If you like the show, please go to iTunes and write a review and encourage your friends to write reviews too. It really helps get the word out. You know, people say that the longest distance is between someone’s mouth and their wallet. People can tell you they’re going to invest but when it comes time to write the check, they don’t do it. So how do you get people to say yes and then follow through? Visualize yourself on the left side of a riverbank and you have to cross the river and on the other side of the river is where the funding happens.

So, first, you make up your idea and then you make it real and then you make it reoccur. Once you start dipping your toe into the water to get to funding, that’s where I can help. I get you across that river faster than you would on your own with a lot less frustration that you will get when you hear a bunch of no’s and you don’t know why. So, if you want some help getting funded faster with less frustration, go to my free funding webinar, sellingsecretsforfunding.com/webinar and sign up and get in depth information on how you can get funded fast. Thanks.

TSP059 | David A. Rosen – Transcription

Posted by John Livesay in Uncategorized | 0 comments

John:

Welcome to The Successful Pitch. Today’s guest is David Rosen, the CEO of TechX Foundry. He is all about what’s going on in innovation. In fact, he won Innovator of the Year around robotics, drones, and 3D printers. David talks about the need to really figure out which way are you going to manage your company. Is it through the product, is it through the process that you’re going to do, like what your culture is and what customer satisfaction is, or is it customer-centric and focused that way? When you can explain that to an investor, you automatically are able to set yourself apart from the other founders that are pitching. He said, “You know, you really need to have an a-ha moment or a so what moment; that’s the first litmus test when you’re pitching,” and what he does is help innovators innovate by saving them time and money. Enjoy the episode.

Are you a founder struggling with your investor pitch? Do you need warm introductions to the right investors to get your startup funded? Do you need a funding road map to get you there fast? All of this and more can be found in Crack the Funding Code. Judy Robinett, bestselling author of How to Be a Power Connector and on the board of Illuminate Ventures, and I invite you to our free Crack the Funding Code webinar. Simply go to judyrobinett.com – J-U-D-Y-R-O-B-I-N-E-T-T dot com – and click on the webinar tab to see how to tap into our network of investors around the world. There’s a link in the show notes as well. You’re only one click away from getting funded fast.

John:

Hi, and welcome to The Successful Pitch podcast. Today’s guest is David Rosen who’s the CEO of TechX Foundry, which was founded in 2013 and TechX is all about creating startup teams to build the most advanced innovation center for designing, prototyping, new tech hardware systems and software. I think there’s probably a great story in there about robotics but David also concurrently does something where he won Innovator of the Year for receiving awards for national manufacturing days so we’re definitely going to want to hear about that. As if that’s not enough, he also is involved with a company called Acrelic Group where he’s been providing leadership and coaching development, helping people get funded and knowing what is involved with M&A transactions. He sits on the board of more than five advisory boards and developed critical mass to get a company from 5 to 10 million to over 100 million in 5 years. David, welcome to the show.

David:

Thank you, John. I appreciate being here and look forward to our discussion.

John:

Yes.

I always like to find out how did someone like you get started? I mean, you’ve done so many amazing things and you’ve also been involved with Signal Lake, which is an adviser to them to a VC. Did you know when you were in college that this is where you wanted to end up or was it a happy accident?

David:

You know, I kind of just connected one opportunity to the next throughout my career but I’m kind of a bootstrapper and I’ve worked since I was 11 and a half years old without working papers.

John:

Child labor, right?

David:

So, I’ve always worked and I’ve been very fortunate and very lucky. I grew up in the Midwest in a farm town without any real network connections. I just had a good family and good parents who kind of told me I could do whatever I wanted to as long as I worked hard.

John:

How great is that? You know, you can never underestimate the value of being told, at a young age, to believe in yourself.

David:

I was very lucky where they told me to believe in myself but they also gave me the foundation to actually test that out as opposed to a little bit of overpraising which, I think, can actually end up putting you in the wrong direction. You think you can do anything but don’t understand that it takes work. That can be more challenging than having to work for it but —

John:

Right.

David:

Yeah, I’ve been working and I’ve gotten very lucky. I’ve worked for some great people in my life and I started working even when I was in college. I worked my last two years full-time because I was at Boston University but then worked in Harvard where I was kind of an IT guru helping the internal IT department put in PCs and systems to the various schools and colleges at Harvard. I found myself in the middle of all that.

John:

What an exciting place to be: Harvard and the beginning of the internet. That’s great. So, what is it like — let’s just jump right into one of these many jobs that you have. What’s it like being the adviser to Signal Lake, which is a venture capital? What kind of things that you see that they look for when people pitch them? What makes them stand out from other VCs? Any insights you can give on that would be really interesting.

David:

Yeah, what I like about Signal Lake, John, is I sold my last software company. I started a software company back in 2001 and it was an enterprise application for marketing and inside sales in sales. So I had to cut my teeth on really before AWS and a lot of the cloud services were there. We had to figure out how to provision ourselves. We’re in the cloud with our own tools and technologies but also used my foundation of understanding how large companies like to buy — so after I sold that software company about three and a half years ago, I started looking what to do next and I ran into Bart Stuck, who was one of the founders of Signal Lake, and Bart is a very interesting former Bell Labs thinker and very strong technical guy and, in my career, I’ve been involved in hardware and software evaluations and evaluation and assessments. Signal Lake is very technical in how they look at companies. They’re not looking at viral software application plays as much as they are looking for new industrial solutions to bring to market.

John:

So, they’re very specific, it sounds like?

David:

Well, they’re very specific and they don’t mind looking at the potential that comes from highly complex technologies or products that are typically not consumer-driven but more industrial-driven.

John:

Interesting. But that still requires the founders to come in and pitch them even if it’s a complex product which, oftentimes I find, is even more challenging to take something so complex and be able to explain it to somebody in a way that they can simply understand it.

David:

Well, that’s the first litmus test. If it doesn’t have an “a-ha” or a “so what” for anyone, I don’t care how technical they are, it has to have some value and that’s the first litmus test, right?

John:

Great.

David: If there’s no economic value or if there’s no productivity value or if there’s no shifting change to a current marketplace then why just invest in technology?

John:

That’s great, and so many people fall so in love with their product that they don’t know how to talk about anything else, including themselves. What are some of the qualities you think investors look for in founders and what qualities did you have when you were an entrepreneur that has led to your success?

David:

You know, there’s three ways to look at managing a company. You can manage a company for its product, you can manage a company for its process, or you can manage a company for its customers and usually a company chooses one of those three dimensions to dominate how they think about their business. So, when you’ve got a product or a technology-driven company, you still have to think about it from the process or customer perspective but you’re trying to differentiate yourself based upon beating out the functionality and features of another solution but it still requires an understanding of the customer and my bias is always bringing the customer viewpoint in as opposed to looking at things from an internal perspective.

John:

Yes. I mean, I just want to talk about that for a second because it’s such an important point you brought up, David, which is if a company’s focused on engineering leading the way as opposed to being more marketing focused, then the engineers keep developing things and telling the marketing and salespeople, “Go sell this,” and the salespeople are saying, “Well, the customers don’t need it or want it,” so there’s all that conflict going on. So you’re saying if you listen to your customers before you add bells and whistles or develop something completely new, it’s a much easier way to manage your company, right?

David:

Exactly. Now, the customer is always king in my mind so I tend to focus more on customers before I focus on technology and product and, in my early days of my career, IBM might not have had the best solution from a technical perspective but the way they marketed for their customers, they always ensured that they made it clear about what their value proposition was.

John:

Right, I used to sell against IBM in the early ’80s with Amdahl and Control Data and I remember their acronym, FUD, fear, uncertainty, and doubt. If you bought anything that wasn’t IBM, they would point fingers and blame the other vendor. So, they ruled and got people to buy for a lot of variety of reasons besides the product.

David:

You’re exactly right, John, and the reality was the saying used to be you wouldn’t get fired by going with IBM.

John:

Right, and now, of course, I don’t think anybody really has that kind of dominance anymore, and what’s the second one? Let’s talk about your second way of managing the company, which is process. Describe to us the pros and cons of that.

David:

Well, that’s where you distinguish yourselves based upon how you go to market. It might be your culture of service, it might be your customer satisfaction, it might be the way you approach the market. McDonald’s is a great example of a process-oriented business. They have you thinking and they ensure that they deliver so that when you go to McDonald’s in Tokyo or you go to McDonald’s in Burma or you go to a McDonald’s in Chicago that the burger is — you know, their burger is always the same, their service is always the same, and their food is always consistent and that’s from a very strong process orientation.

John:

Got it. Starbucks is another example, I think, that does that worldwide. It’s great. Alright, so we have either being product-focused, process-focused, and then, of course, customer-focused, which is all about making the customer right. I would think, would Amazon be an example of a customer process or a based way to manage?

David: Yeah, they’re very effective at their process as well but they really mine the data of their customers to anticipate or to target which customers are going to be likely consumers of something next.

John:

Yes, if you liked this, you’ll like that. Well, I think just you giving us this insight, David, is so valuable. I’ve done many interviews and you’re the first person to spell it out like this and so for the listeners, the big takeaway is before you go pitch for an investor, figure out which of these three ways you’re going to manage your company so that you can articulate it to the investors and then get a sense of what your culture is and is not, right?

David:

Exactly. I think having clarity about which of those three is going to provide your success is very critical to your future as well.

John:

Because what I hear time and time again from investors is we really look to see how a founder thinks and are they flexible and so having these things thought out makes you stand out against all the other pitches they hear, don’t you think?

David:

Yes, I absolutely agree.

John:

Well, let’s hear about you winning Innovator of the Year. First of all, congratulations, and tell us what that was like and what did you innovate?

David:

Thank you. You know, I feel a little bit like Obama when he got the Nobel Peace prize two weeks into the job and I feel like, “Okay, now I have to innovate on something.” What’s interesting and what’s been very — what’s been driving me over the past few years is after I sold my last software company, I tried to figure out what to do next and what I found was that a growing increase in the investments going into tech hardware companies because I think there’s a lot of people out there with app fatigue and that software isn’t the only option going forward and between the four or five mega trends out there from the economics of manufacturing close to demand as opposed to manufacturing close to supply and raw materials and low cost labor that there’s an opportunity to reshore manufacturing because the US is still the largest demanding country in the world as far as I know and the fact that personalization and the demand for more unique products as opposed to, “I want one of the five million black cellphones that are being made,” people want a phone with their own picture on their back and a green ring around a red button that that supply and demand for personalization is, therefore, driving the need and demand for micromanufacturing, which plays right into smaller viands meaning an opportunity to manufacture again, locally and closer to the consumer with more personalized products so all these things are coming together around localized manufacturing and what I’m addressing is going after those opportunities, trying to make sure we’re not going to miss the next revolution in technology hardware systems and software manufacturing. You know, John, I can tell when you and I were growing up, we thought of IT jobs as the – and the white collar jobs of IT – as our nirvana and where the US was going to be going, correct?

John:

Mm-hmm, yes.

David:

We all felt that that was our wave and that’s what we were going to be good at and, in fact, during that period of time from the ’80s from 1986 to today, manufacturing companies in New Jersey, as just one example, went from 115,000 manufacturers located in New Jersey to less than 13,000 today and so those kinds of numbers are indicative that, yes, we are going to be an IT culture and we didn’t want to do manufacturing so we relegated it to offshore options. If we look at how we outsource our IT today, probably more than 50% of our IT is outsourced, right?

John:

Right, everyone thinks they can get it done cheaper, less labor costs and — well, that brings up a really great point, which is a lot of people think, “Well, I don’t need to have my tech CEO with me here in America. I can outsource that,” and I keep hearing from investors that they do not like that.

David:

So, you’re absolutely right. At some point in time, people have been outsourcing beyond the flesh and into the bone, which is a difficult thing to do. I know that’s a terrible analogy but —

John:

No, I get it. Let’s jump back to what you’re saying about personalization, which is what you won the Innovator of the Year award for. You know, I recently went to a Nike store and they allow you to customize your shoe on the computer. You know, what color laces do you want and then while you’re doing all that right at the store level. Talk about getting people to come into the store versus buying it online and then while you wait, that all magically happens so you walk out with a pair of — with the name on the tongue of your show if that’s what you want It’s amazing to see how that really is a big, big part of the trend in the future, I think.

David:

Exactly right, and that’s why I started TechX Foundry because I believe that if you look at the investment dollars from CB Insights, you’ll see that the market for hardware investments is growing faster now than the software investment marketplace and so if you also look at the new trends, New York is now the second largest market for investments in the world next to San Francisco or the west coast and Massachusetts is now number 3 so the New York metropolitan area where I’m located is right with the money backing from New York but very few companies, especially tech hardware companies, can afford to be located in Manhattan, especially now that the average cost of a condominium or the average sale of a house in New York is well over a million dollars again as the recovery’s turned in, right?

John:

Right. Well, there’s three areas that you do at TechX that I’m completely fascinated by and would love to have you talk about each one a little bit if you wouldn’t mind. One is robotics, the second is 3D printing, and the third is tech fashion. So, pick whichever one you want to start with and tell us a little bit about what you’re doing with those.

David:

So, there’s a common thread here and the common thread, John, is that all the applications, whether it’s robots that are being immigrated, robots and autonomous vehicles and even drones are all solving the same problems, right? They’re trying to interpret what’s in front of them in order to function and to do something, to accomplish something, they all need to sense whether something’s in the way or something needs to be moved and to know that a piece of grass is something to be avoided if you’re driving and so robotics and autonomous vehicles, they’re all multidisciplinary functions that integrate with software that are just going to grow in terms of number of opportunities out in the marketplace and so all these things require an ability to pull together everything from metalworking and woodworking to plastic molding and plastic forming to electronics and sensors and devices that sense things and tell a machine that’s moving to move away from it or to grab something that may be necessary and so what we’re doing with TechX Foundry is enabling people to have access to all those tools and technologies in a gym membership kind of model where you have to pay for the capital costs of that equipment. So, if you’re starting a robotics company today, you’re typically going to need a quarter of a million or a half a million dollars in technology equipment to get that business off the ground into upwards of millions of dollars and what we’re doing is we’re helping inventors and innovators and startup companies have access to those tools and technologies and eliminate those capital costs.

John:

Basically, helping innovators innovate?

David:

Helping innovators innovate but they can do it without capital cost. They’re going to do it much faster than doing it offshore because the other problem and challenge that we’ve heard from a lot of technology hardware companies is that they have three-week turnarounds from a design review before they get their next iteration or prototype iteration back and if you consider that you’ve got six or ten iterations before you come up with a prototype that you can validate, that’s potentially a half a year delay of time to cash or time working that you’re missing because you’re going offshore.

John:

That’s lost revenues, that’s competitive market share. There’s all kinds of issues that you’re fixing there.

David:

Exactly, first to market, all those issues. So, one, minimizing capital’s an important aspect for a tech hardware company, two, minimizing the amount of time it takes to develop a prototype is critical. The other thing is when you prototype offshore, you’re also losing out on the knowledge gained during the process of prototyping. So, if you are — and I know one of the 3D printer companies is experiencing this today because they – Solidoodle made its first product here in the US and they went to their version 2 and they made it outside the US and they’re subjected to a six month delay because the manufacturer that they were working with had, one, some problems and, two, a much larger customer came in and consumed the manufacturing space for their products and put the other thing on hold.

So, here you are with an order of 10,000 units and you’re not working with somebody who just got a big order from somebody 10 to 50 times your size and you just got pushed aside to get that order done for the other customer. You’ve got 2,000 out of your 10,000 units and you’re told, “Tough luck. It’s going to take a while.”

John:

Right. Wow.

David:

Manufacturing locally, people don’t know that there’s a lot of local people who can help whether they’re in Massachusetts or whether they’re in New Jersey or whether they’re in Ohio or Indiana. A ton of companies that the ones that have survived in manufacturing are very good at what they do and very efficient in what they do, they just don’t market themselves well so you don’t know how to go find them and that’s what needs to happen in terms of innovating that supply chain and I’m bringing this story background to innovation and my Innovator of the Year award.

John:

I love it. Yeah.

David: I didn’t mean to not answer that directly but how I got there is part of the reason why I got that award because I’m starting to bring more companies into local manufacturers who are having successes on developing products locally and mitigating their risk, reducing the capital to market, and increasing their time to market, which are three important aspects any tech hardware startup or any innovator, inventor who wants to get a product to market.

John:

Those are such great lessons for everybody to keep in mind when you’re pitching to get funded or running your own business. It’s really, really helpful.

David:

And how you’re managing those three things as well, right?

John:

Oh, yes, yes. It’s all about execution. That’s the other big thing that investors seek all the time and do you have any suggestions on how to prove to potential investors that you and your team are the right people to execute an idea?

David:

You know, that’s a very good question and I don’t want to sound pedantic or rote but sometimes you find startup teams of people who have barely had to manage their lunch money as their biggest responsibility before they start their companies, right?

John:

Right.

David:

So, when you take a team of two people and you now ask them to add a third person to the equation, sometimes that becomes one of the most difficult challenges and that’s where startups and founders have to really step aside and understand what are they truly bringing to the table in their startups because it’s one thing to have great inspiration and perspiration to bring something to market, but at some point in time, you’ve got to divide and conquer and you’ve got to collaborate and we’re not always being brought up in a collaborative atmosphere today.

John:

Well, you can’t do everything yourself and almost everybody brings passion and inspiration and sweat equity so you need to differentiate yourself with your skill sets being complementary. That’s what you’re saying.

David:

Exactly, and you know, the other thing, for a startup team is to always put your ego aside and that’s very hard to do when part of what’s gotten you to where you are today is your persistence and belief.

John:

Well, it’s confidence without arrogance is the way I like to look at it.

David:

I think that’s a perfect way to put it, John.

John:

Okay, great. David, is there any book that you would recommend founders to read either about business or even life?

David:

You know, I wish I was a — you know, as a bootstrapper, I haven’t always been the most academic and yet, I’ve been able to go at par with some of the top academics in the world and have some really strong debates and conversations but there’s a couple of things that come to mind: one is Lean Startup. I’ve spent half of my career advising the tech – the tech 200, tech 300 and so I’ve adapted to the phased gate array investment processes that are put into place and I bring, again, more of a market viewpoint to that strategic thinking in terms of identifying new markets for large companies to get into or for different ways to look at the portfolio businesses that they have and figure out which ones belong and which ones don’t belong. But, at the same time, Lean Thinking and The Lean Startup is starting to really break through the new ways of working and bringing technology businesses to market. I sat down with the CTO of GE appliances about a month and a half ago and GE is one of the founders of the 9-box and the strategic thinking methods that have been ingrained in companies for many years, right?

John:

Right.

David:

And they now have partnered with a MakerSpace because they realized that the 24 phased gate array process of going from a good idea to marketplace has to be changed and radicalized.

John:

Wow, if GE needs to partner and collaborate, everybody does is what I’m getting.

David:

Exactly. I mean, they had one of — the CTO said, “Why are my engineers spending time between 5 o’clock and 3 in the morning working at this MakerSpace across the street from us? And what they found was that one of their engineers devised a new product that could be applied to their refrigerators and was able to crowdfund $250,000 for that new product to make, I think it was square ice cubes and he said, “You know what? I’m not going to care about the intellectual property and I’m going to give this engineer a royalty for bringing in this product to market and we’re going to add this product to our product line.” Now, that’s not the GE I knew of the past.

John:

No. I love it. What a great story to end on, you know? It’s all about collaboration and innovation and the desire to make a difference and express yourself will keep us all at the forefront of leading interesting and creative and successful lives.

David:

And that new thinking and new ways to identify new products and bring them to the market quickly, there’s good value propositions behind them and testing them through crowdfunded methods or other methods is going to be a more pervasive way to look at product innovation, even for the largest companies.

John:

Fantastic. David, how can people follow you on social media? What’s your Twitter handle?

David:

I’m @DavidARosen at Twitter. I’m @DavidARosen at TechX Foundry. company/techx-foundry in LinkedIn. I’m @DavidARosen on LinkedIn and at techxfoundry.com on the web.

John:

Fantastic. It’s been a pleasure having you. Thank you for sharing your innovation and your insights. You are quite an inspiration to everybody.

David:

Thank you, John. I hope I wasn’t too inspirational but I’m very passionate about what I do and I’m very lucky to be around some great people in watching a new revolution of what I think is manufacturing 4.0, which is going to drive a lot of great opportunities for US manufacturers to go to market in the US and to take their products elsewhere.

John:

I’m excited to see what the robots and the 3D printers bring to all of us. Thanks again, David.

David:

Thanks, John. Be well.

John:

You too.

Thanks for listening to The Successful Pitch Podcast. If you like the show, please go to iTunes and write a review and encourage your friends to write reviews too. It really helps get the word out. You know, people say that the longest distance is between someone’s mouth and their wallet. People can tell you they’re going to invest but when it comes time to write the check, they don’t do it. So how do you get people to say yes and then follow through? Visualize yourself on the left side of a riverbank and you have to cross the river and on the other side of the river is where the funding happens.

So, first, you make up your idea and then you make it real and then you make it reoccur. Once you start dipping your toe into the water to get to funding, that’s where I can help. I get you across that river faster than you would on your own with a lot less frustration that you will get when you hear a bunch of no’s and you don’t know why. So, if you want some help getting funded faster with less frustration, go to my free funding webinar, sellingsecretsforfunding.com/webinar and sign up and get in depth information on how you can get funded fast. Thanks.