CrowdSmart – Interview with Fred Campbell
Posted by John Livesay in podcast | 0 comments
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Episode Summary
Fred Campbell is a serial entrepreneur, and knows a thing or two about raising capital. In the early 90’s, he was having trouble raising funds for his e-card greeting network, but with enough persistence, eGreetings.com grew rapidly and became a worldwide top-20 website, with 13 million registered users. Today, Fred is the CEO and co-founder of CrowdSmart, a platform that enables user-generated scores and reviews of startups by alumni, investors, and customers. Listen in to find out what it takes to raise $40 million in capital.
Being the First to Market – Fred Campbell
Hello. Welcome to The Successful Pitch. I’m honored to have Fred Campbell, the CEO at CrowdSmart, as our guest today. Fred has raised over $40 million in various startups from Angel investors and VCs. He’s clearly an expert on how to do it. He has a business degree from Berkeley and his MBA from Stanford. He’s been involved in a number of very successful startups obviously. We’re going to ask him to walk us through some of that. What he’s doing now is fascinating in the world of artificial intelligence and helping people decide which startup to invest in. Fred, welcome to the show.
Thank you, John. I appreciate it. I’m thrilled to be here. As I was just telling you a few minutes ago, I love what you’re doing. You’re doing great work. I’m happy to be part of it.
I appreciate that, Fred. Let’s take people back. You have such a fascinating history. There was quite a bit of time, which I’m always fascinated, between getting your business degree from Berkeley and deciding to go to get your MBA from Stanford. About eleven years or so. What was the motivation there to take that much time? Because a lot of people maybe take a year or two and then they get their MBA or some people go right away. There must’ve been some compelling reason for you to say, “I’m getting my MBA.”
It’s a great question. I’m sure it’s unique for every person out there. Similar to what you were describing, I had planned to leave Berkeley, get a couple years in public accounting, get some practical experience, and then go back and get my Masters. I had started a non profit while I was at my public accounting firm, back then it was called RCM. Now it’s called probably Ernst & Young or something like that. That nonprofit, called the Christmas Carol Charity, turned into quite a large event in San Francisco. The company was getting clients as a result of that effort. It wasn’t intended for that, it was intended as a charitable effort to help Toys for Tots program.
CrowdSmart: I got a job opportunity with an investment company to be their chief financial officer when I was 26.
As a result, the company was getting a number of clients. I was getting promoted quite fast. I made manager in four years. They were keeping me around, providing me incentives just to keep me there. Then I got a job opportunity with an investment company to be their chief financial officer when I was 26 or something like that. It was a wonderful opportunity. I kept that trajectory going for a while until I got to a place where one of my early companies, I sold it, I made some money and said, “I’m going to use that money to go pay for my Masters.” I just thought it’d be a good time for me to make that pause. Stanford is obviously a wonderful university. It worked out great.
My only personal issue is being out of school for eleven years, they made me go through what they called Math Camp. It was a great experience because I got to meet all the older people that were part of the Stanford, about 30, 45 people. Eight ended up being my lifetime friends. It was a great experience as well from that point. Plus, I’m very good at math so I can do the work that took the rest of the classmates all day, I can get it done in an hour, so I went and played golf at the Stanford golf course.
You are everybody’s favorite friend with your accounting background, I’m sure. Let’s talk about what you did with Egreetings, which was basically inventing the digital greeting space in 1993 and how you grew that to one of the world’s top 20 websites with 13 million registered users. That was a huge number back then. Today, people would be thrilled to get that. The last great IPO of 99. What was that experience like and what did you learn?
That was a roller coaster ride. It was just a ton of fun. For listeners, it was also, early on, it was really hard to raise money for that company, very very hard. Any of your listeners that is developing something new that has not been done before, you’re going to get 99% of the people that are going to look at what you’re doing and scratch their head and go, “Why would I want to send a digital greeting?” I would get this from VCs often. Back then, they were 99% men. They would say, “Look, I don’t even get my wife a paper greeting card. Now you want me to send her a digital one? She would divorce me.”
It was a wonderful ride. Some of the tricks that I’ve learned, I learned from Egreetings, as to how do you get the market validation earlier in the process so you can raise that money? Because I had so much early market validation for that company, I knew that it was going to be a big success. We positioned ourselves in the marketplace and with investors to turn that into, like you said, a top 20 website. On a typical day, we would ship about 10 million digital greetings. At one point in time, it was the most significant media company on the internet. Our content was the YouTube of its day. There was a lot of aspects to Egreetings that are relevant to this day in terms of, for your listeners, how do you raise money.
There’s two things that pop out from what you just said to me, Fred. One is, if you’re in a market that technically doesn’t have any competition because you’re the first to market, how do you handle that? The second is, it seems like you handle that by showing traction. Is that accurate?
I think that’s probably more so this day and age for entrepreneurs. You have to be able to show traction, especially if your product has somewhat close competition, you have to be able to distinguish yourself from a pure traction point of view. If your company is really, it’s a cutting edge company that’s doing something that nobody else has done before, you’ll get some investor interest. I’ll talk about that. Finding an investor, early stage company that doesn’t exist, it’s creating new space, is truly like finding a needle in a haystack, finding that investor who’s willing to … Who’s already got the idea in mind. There are techniques, like what you’re doing right now in this podcast. There are techniques of turning that equation around and making sure that needle can find you.
[Tweet “CrowdSmart: You have to be able to show traction.”]
I love that. We’re going to tweet that out. Let’s have the needle find you. How are some of techniques, Fred?
Entrepreneurs inevitably are enamored as they should be with what they’re doing with their product. Building the next great thing, whatever that thing is. Their job is really about evangelizing that great thing. They need to think about their job from a point of view of, how do I get this out to the world? Inevitably, when you’re doing something that’s really innovative, you’ve got to this internal conflict going on, which is, “I don’t want to let the cat out of the bag too early. That’s a terrible expression, excuse me. I don’t want to reveal my secrets and let somebody else steal them. I’m going to keep them close to my chest and I’m going to be selective about who I talk to about it.” That doesn’t work.
From my experience, that does not work when you’re building a truly innovative company. Four of the seven companies that I’ve done are, they’ve never existed on the planet before. I remember coming out of a meeting one time, we were introduced to some of the folks there. They were doing some innovative stuff, we were doing some innovative. I left, walked out with my partner, and we had kept things pretty close to the vest. We walked out and he said, “Did you learn anything in that meeting?” I said, “No. Not a darn thing.” He said, “Neither did I. You know what, let’s try a different approach and just walk in with an open kimono.”
Walk in and reveal where we are and take the risk of losing it. At least, people will be able to embrace what we’re doing and maybe help us. That’s what I found. I’ve had another professor, a mentor of mine, say to a group of startup founders, “I tell you what, take your best idea you have and find the competitor who you think is the most aggressive. I will pay you $100,000 if you can get that company and that competitor to do what you’re doing.” Sell it to them, see if you can do that. They’re doing so many other things that they can’t do what you’re doing. They’re going to let you prove the market first and then they may jump in.
I love that. Let’s talk about that a little bit. I have so many people come to me that I work with that are so afraid of someone stealing their idea. I keep telling people, it’s about the team that executes the idea, not the idea. Investors don’t sign NDAs. More importantly, like you were saying, even if you talk to an investor and they have a competitor within their portfolio, a really good investor with integrity is not going to steal your ideas and give it to someone in their portfolio.
No. That’s exactly right, John. It is really is a paranoia that entrepreneurs have that they don’t need to. There’s no really empirical evidence that I’ve ever seen that would say that that’s true.
Great. Let’s jump in to yet another one of your wonderful companies you started, which was Lexy, the pioneer mobile platform for creating short form talk audio, which obviously I’m a big fan of, we’re doing a podcast. I’d love to hear about how to TalkRadio and Pandora all became in sync there.
CrowdSmart: Once you’ve had some success, it is easier to raise money.
Lexy was to TalkRadio what Pandora is to music, except the major difference was Pandora is a consumption platform. You use it to listen to your favorite music or to discover music. Lexy, you could use your phone to create TalkRadio content and then broadcast that out to your social media and other places. Lexy was, again, a pioneer in its space. We were, as far as I know, the first mobile based audio podcast or audio creation platform on the internet back in 2004. Partly because of the Egreetings’ success, and that’s one of the things that you know John, that your listeners probably are aware of. Once you’ve had some success, it is easier to raise money. It clearly is. People are betting on the jockey at that point in time.
Lexy was, and still is quite frankly, I’m surprised that nobody has done that company. That company was focused on doing some really fun stuff. We did a number of test markets to find out was the content that point in time really focused around … Was it sports content? Was it entertainment based content? Was it the long tail content, just people listening to whatever? What we discovered was that sports was really the key thing there. We were going to enable the sports personalities who were maybe not big enough to have their ESPN program but were clearly personalities which would pull a large crowd, like coach Calipari, now the Kentucky basketball coach, and coach Beoheim.
For the, I think the March Madness 2006 or 2007, I forgot now. Just dumb luck, we had five of the elite A coaches Lexy casting that just made it through the finals. The company was growing with 30% to 50% month on month. Our numbers were the classic hockey stick. I had raised, at that point in time, about $6 million of capital. It was an ad based business, wasn’t a lot of audio ads at that point in time. We were not generating substantial revenue even though we had … At that point in time, we broken in the top 15,000 websites in the planet. We were then growing very nicely.
The great recession came along and I was trying to raise a series B. That was the first and only time I’ve ever had in my life, hopefully won’t happen, where I could not raise money. That’s probably topic for a different conversation. I did not do what I needed to do as a CEO. I had a staff of 20 and I was running at a capital and I should have downsized the company. I should’ve let a lot of people go and made sure that my capital could sustain the company at least at a neutral place for a heck lot longer. It was a lesson. It was a very very difficult lesson for me to learn.
The big takeaway is you have to make those hard decisions in order to keep the company alive sometimes. Let’s take a dive in to, since you’ve got so much experience in raising money successfully. Thank you for sharing that. If someone like you had trouble, it makes other people not feel so bad if they’re having trouble. What differences do you see that investors are looking for in the different pitches that you give between a seed round and a series A round? Obviously, there’s some traction differences. I’d love to have you just expand upon, besides hitting milestones, what are they looking for?
We both have been at this for a while. I can tell you that raising money for each of my companies, this is company number seven right now, is that … Even for an experienced CEO, raising money off of a napkin, those days are gone. There truly was a time back in the 90s where you could raise a lot of money off of a single piece of paper. You can’t anymore, you have to have traction. What we’re seeing now, at the detriment to some extent of the entrepreneur, is what used to be the traction needed to get the series A. Hard customer revenue, key metrics, product … However your key metrics are defined, maybe downloads of your app or whatever. Those are now the seed round.
CrowdSmart: Raising money off of a napkin, those days are gone.
Seed investors have the luxury now of investing in companies that are already getting the traction that, ten years ago, would’ve been a series A investment round. That continues on. What you have to bring to the table for each round, now to get series A money, you need to show some very serious revenue traction. You might even need to be approaching a point where you’re 10 million revenue annual for a million a month run rate. The bar has gone up a lot. You hear this where you got this funding gap between the seed and the series A.
Here’s the numbers that we’ve accumulated, is that at any one moment in time right now, there’s about 300,000 startups in United States looking for capital. There’s about 70,000 of those that will get seed funding on average about half a million dollars. That’s about $30 billion a year around that number that are getting seed capital. Only 7,000 of those will go on to have any exit or follow on funding. It’s a very inefficient market right now in terms of, there’s a lot of capital for seed investment, that’s a good news for entrepreneurs. There’s a lot of startups competing for that. About in a quarter, 1/4, will get some seed financing. Unfortunately, only 10% of those go on to be successful. They’ll run out of money before they will be successful.
That leads right into my next question, which was going to be, how did you come up with the idea for CrowdSmart? Because it seems to me that’s the problem you’re solving, would that be right?
That is the problem we’re trying to solve. Because you need to show metrics in order to … We can go back to this if you want to. If you take some of the strategy of letting the needle find you, then you will get some funding. There’s enough money out there. If you got a decent idea, you’ll probably get some funding. You get one swing at the plate as a seed founder. You better have you ducks in row when you get that money. Because the clock’s ticking down and if you don’t show some serious traction to get to that series A, you will not get your follow on funding. You just won’t. It just won’t happen. There’s too many good deals that VCs are looking at these days that is stacked against you.
What CrowdSmart is intended for, what we’re doing is we’re working with, right now we’re working with communities. You need to be associated with a university, an accelerator or be in the hunt at one of the investments aggregators or one of the groups of Angel investor groups. We’re working with these communities in part because we tap those communities to get feedback in the aggregate of what they think the probability of your company is to be successful and how you can improve upon that probability to be more successful.
Our premise is, it’s kind of a “duh” once you hear it, it’s like, “Of course.” If you can aggregate and take any, I’m just going to pick something out of thin air. You can pull together a thousand drones that fly around. If you could put enthusiasts, knowledgeable experts, whatever, people who want to use that, you can pull them together and you have some new product for a drone. Either a new drone or maybe a new GPS aspect of a drone, whatever, maybe camera, GoPro. If you could aggregate the knowledge of that community, you’ll have a much much better sense for what the market need is and what a good solid product market fit would be. How do you tune your product to fit the needs of the market? If you had all that information. In our day and age of being totally interconnected, there’s really no reason why you can’t get that information earlier in the life cycle of a company. That’s what CrowdSmart does.
For me, if I was pitching, I would say CrowdSmart takes artificial intelligence plus real time intelligence of people in social media to help startups show they have a product market fit to make their funding more predictable and desirable.
CrowdSmart: We combine human and machine intelligence to turn qualitative feedback into quantifiable predictive information.
That’s great. You’re hired. That’s exactly right. We combine human and machine intelligence to turn qualitative feedback into quantifiable predictive information. That’s what we do right there. The other thing on top of that is that if you do get that information together and you … Essentially what the system creates is the FICO like score for startups. If you think of it as a FICO and you get a score of 700, you could go online right now, I’ll literally use that analogy just for a second. You could go online right now with a score of 700 and you can get a bank loan, new credit card or whatever, without them ever seeing you. The same would be true for your FICO score for your startup. If your score is solid enough, we will put money in your company.
Wow, nice. I love that because what you just did there Fred, was show people how to make an analogy that people instantly understand what your company does. We do FICO scores for startups. Boom, that’s your tagline. You don’t have to be in the startup world to understand what that is. That’s what everybody needs to have when they pitch, whether it’s a tagline or the one sentence, really easy to understand way of grabbing people’s attention. Where do you stand on storytelling? Do you give examples of how before someone used CrowdSmart they were struggling and now after using it they’re getting better results?
We’ve got a number of use cases and stories about that. Just to confirm what you just said, one of my investors in Lexy was Peter Guber family, which is major media personality in Hollywood. I sat down with him, he was introduced to us as, “This is what Lexy does.” I sat down and the first thing he said to me was, “Tell me a story.”
He’s the guy that run Sony with Jonathan, Batman and all that.
You’re absolutely true what you’re saying about being able to convey the … To merge both sides of your brain. People make investments from an emotional maze. They use logic then to basically validate it. You never will get somebody to invest in your company if you just purely go from a logical, this make sense point of view. You just won’t get more than threshold. Being able to convey that message in … We create FICO score for startups. That kind of thing, that’s a nice tagline with the emotional connection behind that. That’s part of what the story is.
For us, the story is almost no startup has come on the platform. This is a typical path for a startup. It can be discouraging for startups. They come on the platform and they’re incredibly enthusiastic about what they’re doing, they love what they’re doing and we love what they’re doing. We ask the community to give them feedback, honest, direct feedback. They almost always, the equivalent FICO score, they’ll score between 450 to 500, which probably will not get you a decent credit card basically with that analogy. Inevitably, the startups are heartbroken and about half of the startups will say, “I just need to ask a different group of people.” They didn’t get it. They didn’t understand what I’m doing. It’s not my problem, it’s their problem. They’ll act defensively.
Oh my gosh, I’m so glad you brought that up Fred. So many times when I’ve made introductions to investors, I’ll have founders, when they get a no, they say, “That’s just not the right investor.” I’ll say, “No, no, no. That’s what all of them are going to tell you. Your valuation’s too high,” or whatever the problem is.
Pitching is an art. Every pitch you need to consider as pure practice. Physicians, attorneys, they never say, “I perfected law. No, “I’m practicing law.” You as an entrepreneur are practicing your pitch all the time. How do you get better? You got to get feedback. Unfortunately, most people give feedback in a live setting or even follow on setting, the sandwich approach. “I like this. I didn’t like that. I don’t like this.” Entrepreneurs love it because they go, “I got two out of three. That’s pretty good.” No, get rid of everything that’s not in the middle. You need the substance which is unfortunately is almost always in the middle of the sandwich. What did they say? Why didn’t they like the deal? Why didn’t they connect with the deal? Do your damnest as an entrepreneur … VCs are notoriously bad at this. Angle investors are a bit better. Try hard to get honest feedback. When you get that standard letter, which basically say something like, “Not quite for us. Keep us informed, we may be interested in the future.”
[Tweet “CrowdSmart: Try hard to get honest feedback.”]
The polite no.
That’s the polite no. There’s no advantage for them to basically do something that might piss you off. Hell, you might actually make something that they want to invest in. Try really hard to get that negative feedback. As Elon Musk has said, the only feedback he goes after is the negative feedback.
Interesting. Let me ask you about CrowdSmart a little bit more. Two questions, you can take them one at a time if you want. One is, how do you make money? Two, how do founders apply to be part of CrowdSmart to get that FICO score?
I’ll answer the first one, we make money … I’m almost tempted to say the old fashioned way. Our business model is threefold. Primary way we make money is to invest in the best startups. We work with family offices, institutional investors and corporations that are looking for strategic investment. Or family offices that want to support their universities. For example, the very first family office we were associated with was a very wealthy individual whose got his name on the library at UCLA and a number of chairs.
He wanted to support the entrepreneurial efforts at UCLA. He was investing in UCLA startups that achieve this FICO score of 700 basically. He now, by the way, has said, “I like this. I like the startups. I like the deal flow you’re giving me so I actually wanted to see everything. I’m willing to invest in everything.” We charge basically half of what VCs charge. We charge a small management fee and a small carrier interest. That’s part of our revenue stream. As somebody said to us recently, “You are the ultimate seed investment platform.” Seed investment is a 90% gut, 10% data, we’re going to make it 90% data, 10% gut.
How great. I’d love to see that on a slide and reverse the images. That would make people really get it. That’s so great.
Because we’re relying upon, basically, crowdsourcing wisdom, crowdsourcing due diligence that we expect to be able to make on the order of a thousands investments a year. We’re looking to put in about a billion dollars a year when we’re at full scale probably four or five years from now. That’s one way. The other way we make money is that we do license the technology. If you’re not strategic to our investment interest, for example we’re working right now with four Japanese universities. The Japanese government has put up a billion dollars to invest in startups. It’s a job creation economy stimulus program.
These universities each have been given a quarter billion dollars to invest in the best and brightest from the university. They don’t know how to do that so they’re using our platform to figure that out. We charge for companies that can use our platform. That’s another thing. The third way we make money is to sell the data. We aggregate the data across … We’re really the only platform that will have presence at all of these different … Right now, we’re at UCLA, UC Berkeley, Sky Deck, University of Michigan and a whole bunch more that we’re in the process with right now. We can aggregate startups across that platforms. Series A investors can better target who they want to put their money in. That’s a subscription fee for accessing the data.
Fantastic. The other question is, how do founders … Do you fund seed round or do you only fund series A? How do people even get a FICO score? Do they apply online?
CrowdSmart: To get people to tell you your idea is really good when they really think it’s stupid, it’s almost impossible.
First of, we’re happy to be the first money in. We believe in our data. If you are part of an accelerator, then you can automatically qualify. If you’re not part of an accelerator, then you can use the platform. You go to CrowdSmart.io, you sign up. You’ll be invisible basically. You have to go out and get a minimum of 40 points of data, 40 individuals. We’ve heard this before, John. Wouldn’t it be easy, they can just put it up on their social media. They get to ask their friends to score, basically stuff the ballot box and they qualify. It’s amazingly hard to do that. To get 40 people to tell you your idea is really good when they really think it’s stupid, it’s almost impossible. You will learn in the process whether or not you have a mark by just tapping your own community.
I can totally validate that. You can’t get 40 people to write you a great review on iTunes for your podcast if they don’t believe it.
They don’t believe it. They just will not do it. We say, “Here’s the tools, go out in your own community. If you can get 40 of your friends and family, mentors, coaches, whatever, to rate you and rate you above a seven basically out of a 10 and give the reasons for that, we’ll elevate you to the same status that you would if you got into Y Combinator.
Nice. This has just been so great, Fred. You’ve been so generous with your insights, your information. How can people follow you personally? What is your Twitter handle?
It’s @FredCampbell. I do most of my posts on LinkedIn. If they do search for Fred Campbell CrowdSmart, they’ll be able to find me.
Fantastic. I can’t thank you enough. You’ve been a great guest. I love how the needle in the haystack find you. That’s one of my favorite all time quotes. I’m looking forward to watching you continue to help startups and shift that 90-10 data logic gut thing. It’s fantastic.
Likewise, John. You’re doing a great job. At some point in time, we’re going to combine our efforts so we can make your material available to all of the startups in our platform.
That would be amazing. I would love that. Thanks, Fred.
All right, John.
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The Intersection of Technology and Health – Interview with David Whelan
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
David J. Whelan is a seasoned strategy, business development, and general management executive building businesses and inspiring entrepreneurs at the intersection of technology, health, and wellness. David discusses how he combines his love for health and the tech industry into one, and what a successful pitch looks like, when aiming towards these types of investors. Listen in for so many great nuggets of wisdom from David on the topics of investing, raising capital, and building your network.
The Intersection of Technology and Health – Interview with David Whelan
Welcome to The Successful Pitch. Today’s guest is Dave Whelan, who is a seasoned strategy business development and general management executive, which builds business and inspires entrepreneurs at the intersection of technology and health and wellness. He’s a consultant and advisor and operating executive. He devotes his career to building successful businesses. He was an integral part of the creation of the New York Genome Center, a unique not for profit scientific research institute where he was a chief strategy officer and collaborated on the development of the business plan fund raising of $115 million. He launched one of the first fitness tracking wearables with 24 Fitness. He holds an MBA with honors from UCLA Anderson School and a BS in Symbolic Systems from Stanford University. Dave, congratulations on all that accomplishment and welcome to the show.
Thank you so much. I forgot about the with honors parts. I’m not even sure if I deserve that. Thank you for reminding me.
What is Symbolic Systems? What is that?
It’s Symbolic Systems. Essentially, it’s an artificial intelligence human computer interaction major at Stanford. It is indeed a real major. Marissa Mayer is probably a more famous alum of the Symbolic Systems program than me. Hopefully I can catch up with her at some point.
You’re in great company. How fantastic to be able to be that cutting edge on artificial intelligence, which is sort of the future internet of things and all kinds of stuff.
Exactly.
Wow. Let’s dive back into, what made start there? I want to hear about that. How did you even decide, “I want to learn about artificial intelligence and make that my major.”
The intersection of technology and health and wellness
You mentioned this intersection of technology and health and wellness. I’ve been in technology my whole life, or passionate about technology my whole life. The health care part came accidentally later. I was definitely one of those computer kids growing up. My first computer was a Texas Instruments, TI 994A, which was discontinued about a month after my parents invested in it for me. I switched over to Apple and I’ve been an Apple guy forever. In fact, I purchased the first Macintosh for my school district to run the high school newspaper back in the late 80s. Early adopter, and all of that got me excited about the world of artificial intelligence, which seemed to the next big thing at the time.
That led me to Carnegie Mellon for a year and then I transferred to Stanford. Loved Stanford, loved the program and was still passionate about technology. I graduated into what was not the best market for artificial intelligence. AI was in a dormant stage at the time. My first job out of college was actually with a biotech incubator, probably even before they were calling them incubators. I was hired not for my biotech expertise since I had none, but I was literally hired as the IT guy in this firm and that quickly evolved into more of an operations role. I guess I’ve actually been connected to life sciences my entire career but took a pause there after that job and spent about six years as a retained executive search consultant.
Again, this is mid to late 90s in San Francisco. It was just an amazing time for technology businesses, for telecom, eventually internet. Probably the best time ever to be a search consultant. We were building venture backs, senior management teams for again, technology companies, telecom companies, some biotech, some consumer, automotive. It was a lot of fun. I probably could’ve stayed doing that forever but I was about to turn 30, really wanted to get my MBA. At the same time, the dotcom crash was happening so it was a perfect time to take a change of scenery. I moved to LA to attend UCLA Anderson School as you mentioned.
As I said, I really loved Stanford undergrad but Anderson I think was absolutely the best time of my life. Amazing professors, especially in the world of entrepreneurship, an incredible network that I draw on every day and some great opportunities. Even though I love LA, it gave me a chance to study at London Business School on exchange, which was just an amazing opportunity in one of my favorite cities. This was beginning of second year of business school. I actually arrived in London on, I think it was the first, maybe second flight from LA to Heathrow after 9/11. Just a weird time to be travelling, weird time to be leaving the country but also an amazing time to look back and see what the world was thinking about the US during those days. A sidebar, but interesting time.
I graduated with my MBA in 2002 and I’ve spent the past almost fifteen years now as strategy consultant, advisor, interim executive. That’s been areas as broad as technology generally, in aerospace, in defense, but more and more the health and wellness space. You mentioned the wearable world, which was my entrée into that. I was working with a subsidiary of 24 Hour Fitness and we had a chance to launch what was one of the first fitness wearables and online nutrition programs. This is way back in 2004. We were absolutely ahead of our time. Lesson learned there is do not launch a fitness wearable in a world that doesn’t have the iPhone or Facebook. It will fail.
Let’s talk about that for a second because I think one of the most important things when you’re pitching an investor, there’s two questions, why you and then the big one is why now? If you have this great idea but now is not the right time for Uber or fitness wearables if people don’t have enough smartphones to use them.
Technology and Health: We had this intersection of need and technology and an amazing solution.
Exactly. First of all, we were, in some ways, lucky enough to be part of this large global organization that was looking at investments perhaps a different way than a venture investor would, but the same questions I think apply. The why now aspect in some ways made a lot of sense from a standpoint of the need was there, the technology was coming together. We had this intersection of need and technology and actually an amazing solution. The challenge comes essentially from the network effect aspect or the lack thereof in this case. When you think about something that’s very personal like fitness data, fitness tracking and ultimately hitting your goals, or when you think of anything that involves connecting with other people, you’ve got to have the tools and technology to allow for that network effect.
Again, in a world without smartphones, without Facebook, we were launching into a vacuum. The exciting thing about that is ultimately the company that we were partnered with, which is called BodyMedia, got acquired by Jawbone. Their technology is still involved in what I think will be Jawbone’s new clinical work. The founder of that company, BodyMedia, is Astro Teller, who went on to run Google X or Alphabet X, whatever they’re calling it now. The cutting edge, a bunch of new technologies. There was some amazing people that were part of that. A lot of the efforts lived on. I took that experience about health care data, again, put it in the back of my mind for a little while. I was doing some work in aerospace and defense.
A few years later, this is back in 2010, ended up getting a call from a friend of mine who was in the life sciences real estate and economic development world in New York. She had a colleague we’re working on this for, what they were calling New York Genome Center. I basically saw this as a three month consulting opportunity with a trip or two to New York that ended up being a three year crazy ride with almost weekly commutes between LA and Manhattan, where we launched this large scale, non profit research institute. I was the first business person the team.
As you said, helped to write the business plan. I was part of this massive fundraising effort, helped to recruit the launch team and ultimately set the wheels in motion for what is now a world class research facility that is part of multi million dollar NIH funding grants for things around Alzheimer’s and autism. They’re doing some amazing work. I’m convinced that someday, some aspect of cancer is going to be cured there or something like that and it’ll an amazing thought that I was involved from the beginning.
That must make your passion really strong for making a difference in the world. Talk about the fundraising for non profit of over $115 million. Is that from one big government grant or do you go pitch it, like you would if you were a profit company with Angel and VCs?
This was very much multiple funders and very much like a pitch for venture backed startup. In fact, while this was a non profit, we were in some ways running it very much like a technology startup in terms of how we built the plan, built the business model, even recruited. From a funding standpoint, we started out by talking to what will be the course stakeholders, which were the academic institutions, the large hospitals in New York and literally going door to door, drumming up support. This was maybe a little bit different from an early venture effort.
If you think about getting in front of Angels, in front of incubators and accelerators, just in front of the movers and shakers in your community. This was very much what we were doing. Helping them understand what the vision was, why New York needed this, what the opportunities would be for them and their institutions as well as beyond. Those academic leaders, academic and medical leaders in New York, then led to some of the major philanthropic funders, led to some commercial funders. Ultimately with that momentum, we were able to go to the city of New York, the state of New York and ultimately even some other, as I mentioned, more recently they’ve got an NIH funding. This builds on itself.
Technology and Health: There’s a lot of similarities in terms of how you tell the story, how you get in front of one person, which leads to others.
While I can say that raising money for a large non profit in New York is in some ways much easier than raising money for a for profit venture in San Francisco or Los Angeles. I think there’s a lot of similarities in terms of how you tell the story, how you get in front of one person, which leads to others. Ultimately, how you use one success, one small success to move the next one. Eventually, you can bring in hundreds and millions of dollars to get this thing off the ground.
You’ve talked about networking twice, once with your experience in how the UCLA Anderson MBA continues to help you with your network and now you just brought it up again, which I love, which is one network connection gets you into another network connection. Can you give an example or a case study story of that happening for you?
Sure. Again, you hit the nail on the head in terms of networks leading to other ones. Actually, I’ll start with a story. This just came to me last week. One of my inspirations in the life sciences world, who also has a connection to UCLA Anderson School, is a guy named Larry Bock. Larry lived in San Diego, actually he just passed away last week after a struggle with cancer. That’s why he’s been on my mind very much recently. I never met him but inspiration to me in terms of this guy literally built 50, 60 life sciences companies in San Diego and beyond. He was part of the Illumina founding team and the genome sequencing space. He also had a passion for STEM education, launched science fairs, science festivals.
The Rainforest: The Secret to Building the Next Silicon Valley
He was highlighted a few years ago in a book called The Rainforest, which was talking about the Silicon Valley eco system. He was highlighted as, what they call, a keystone species in anthropological or ecological standpoint. Keystone species are these standout species that somehow make connections and exist in different eco systems or pull them together. In the context of innovation, this book highlights keystone species as someone who connects people who could benefit from working together. They might not work together under normal circumstances because of things like geography or cultural differences or trust or things like that.
When I think about it, and I’ve been inspired by that my whole career as trying to be a connector. Ultimately the idea is everyone is part of hopefully several networks, maybe many networks. This could be schools, it could be workplaces, it could be religious organizations, it could be geographic communities, it could be volunteer efforts. Each of those networks hopefully is a source of amazing connections. Everyone needs to think about how they keep each of those networks fresh, how they stay connected to them, how they contribute to those networks.
Back to this idea of the keystone species and Larry Bock, how do you actually take the leap to help connect people from these vastly diverse networks in a way that they would never meet each other but once they do, something amazing comes from it? I think it’s the idea that you can be at a cocktail party with your friends and have a conversation with someone and realize that this ties into the business meeting you were in last week or the conference that you were attending last month and you start to connect the dots and start to bring people together in a way that creates these really rich interactions. Hopefully, what comes out of that are businesses that would never have existed or investment connections that wouldn’t have happened. Eventually, you can change the world because you’re connecting people in a way that is very unique, very creative and hopefully redefining an industry.
Wow, that’s great. You’re almost like the catalyst, set up those connections that would never have made. If you connect the dots first and see the big picture and then step out of the way, magic can happen.
Exactly. I was at a conference a few weeks ago called Ideas Los Angeles, which was an amazing multi cultural, multi faceted conference around both health technology and entertainment technology in LA, Silicon Valley and beyond. First of all, I invited a ton of people to this event and so I ended being able to introduce people who, not only might not have met but were in the same place. There was one person I met there who was working on an amazing integrative health and wellness business and another one of the companies that I advise, which is building conference app tools for the life sciences industry. I saw some connections there and couldn’t introduce them directly at the event and tried to introduce them after the event.
[Tweet “Technology and Health: It takes vision and creative foresight.”]
One of the individuals said, “That sounds cool. I don’t really see the connection. It doesn’t make sense right now.” I actually pushed both of them to get together and talk about their commonalities and where they might be able to collaborate. Both of them after this meeting said, “Wow, this is great. We never would’ve even thought about this. Thank you for making the connection.” Again, sometimes it takes some vision, sometimes it takes some creative foresight, sometimes it just takes luck where you hope people will connect. If they do, great. If they don’t, there’s honestly no harm and maybe they’ve met someone that at least they like socially.
You’re creating real value so when they come across someone that they can refer to you as a potential client, as a consultant, they’re more than happy to do it, which is a great way to drive business.
Exactly.
Let’s take a little dive into when you raised over $25 million with the Precision Medicine venture. That was a for profit I’m guessing, yes?
Yeah. Again, another unique angle on fundraising. This was a commercial spin off from a hospital, from a cancer hospital, that was a public benefit corporation in New York. Which means it’s a non profit enterprise that’s got ties to the state, operates somewhat independently but in many ways like a state organization. In that effort, we were really focused on the typical starting point of let’s understand what the opportunity is and build the plan and start to build the story. We were putting together relationships where we were seeking funding both from the hospital system itself as well as from, ultimately from the state, both existing state moneys, Empire State Development Corporation, which is the state’s economic development arm, and eventually teeing this up for broader external investment.
[Tweet “Technology and Health: See the opportunity, build a plan, build the story.”]
Again, a little bit of unique twist on funding. In some cases I think, when you’re in a funding situation, and you could argue it happens to people in any company when they’re going to their boss, when they’re going to the general manager, their division, and they’re trying to fight for budget for the next year. Ultimately, planning for your budget for the year, planning for budget for a product launch, a marketing strategy or an invest in a company, there’s a lot of similarities. It’s really about having your plan straight, having your numbers straight. Being able to tell a story in a really strong way to get these people not only wanting to be a investor and a funder but ultimately being an advocate, being an ally, being someone who can then take your story to the next funder. Whether that’s moving in an organization, whether it’s going to the board or whether it’s going to a larger a investor down the line. Again, I think there’s a lot of common ground there.
When you’re talking about health care and you’re saying the importance of a story when you’re pitching for this kind of money, do you give an example of one particular patient and that person’s story so it’s really specific? “If we get this money, then we can do this for this cancer hospital and save someone like XYZ person who was suffering and who doesn’t have to suffer,” for example?
I think that’s absolutely one angle. The great thing about health care is that while it’s a large industry, really the largest industry out there by some measures, it’s also very personal. Everyone has dealt with health care on their own, they certainly dealt with it with their children, with elderly relatives. Health care is just, by definition, a very personal topic. This idea that when you’re telling a story, how do you do something that can provoke, that can inspire, that can challenge, that can tease what the solution will be? Bringing it back to something that is very personal, very relatable.
Technology and Health: Build a story that can provoke, inspire, challenge, and tease.
I’ve certainly seen, not so much in an investor pitch, but certainly in public pitches or public presentations. Even the ability to bring a consumer, bring a patient into the story physically, bring them into this presentation to have them tell their story. Have them talk about where they’ve come from, who their family is, where this disease, this condition, this situation came about, what was the discovery process, what was the diagnosis process? Then either they’re pushing for a cure, which is that big north star vision, a massive goal we can think, about or they’re sharing how this solution might have helped. I find that something that the public loves, investors love but it’s also something that I think really is the way to connect the scientist and physicians to this whole investor conversation and customer conversation.
I think there’s a lot of people who give scientists or physicians a bad rap because they’re not always business people and they don’t have that business mentality. That might be true in some ways but from my standpoint, when I work with scientist and physicians, I help guide them and help them realize that in many ways, the scientific method and scientific research are really a lot like entrepreneurship. You got to identify a problem, create a hypothesis, find the funding, pilot your solution in some way, you asses the results, you course correct and then you keep at it until you’re successful.
When I get in front of scientists and talk to them about this fundraising effort shouldn’t be scary, shouldn’t be foreign. It’s actually something you do all the time anyway. This whole idea of building a company is not that different from putting together a massive experiment and hopefully coming out with some great results. Once I make those connections for scientists and physicians, it clicks in a way where they become a really strong part of the process, which then makes them that much more sellable or approachable or understandable to not only investors but ultimately the customers or consumers who are buying this.
What you’ve done is you’ve given them a story, an analogy to follow to create a story. You say, think of it in terms of how you do scientific work and then just transfer that to the ability to run a business. You create story that they are familiar with and that’s the power of storytelling. When you can get people to put themselves in the story, then they come alive. I really like what you said, when you pitch, you want to provoke, inspire and tease the solution. We’re going to tweet that out from the episode, that’s a great line. Let’s switch gears really briefly here about what you did at the Chinese Casino Game Leasing venture. That sounds interesting.
There’s some good lessons and some cautionary tales in that one for sure. As I said, the intersection of technology and health and wellness, sometimes that is very much in the health and wellness space. Sometimes it’s a little bit more on the tech space. A few years ago, actually through a business school network connection, I got introduced to a Chinese, almost family office investment group, that was in the process of assembling an investment fund to acquire some casino game leasing operations in Taiwan and the Philippines. This is a few years ago. I’ve traveled a lot of places, but at the time I had never been to Asia.
First of all, I saw this as an opportunity to learn more about Asia and hopefully I get a chance to spend some time there, which I ultimately did. A whirlwind due diligence trip to the Philippines, to Taiwan and being up in Shanghai to meet with the family. We were building, very much building a story about what this business could look like and ultimately trying to pitch it to US investors. That was my connection, was building this bridge of a story between the Shanghai family, these businesses in the Philippines and Taiwan and then US investors. We went really far down this process. Again, there’s not going to be a happy ending here. We went really far down this process. Interestingly, I was actually thinking about this longer term because the family also had investments in the massively growing, if you could imagine, retirement community business within China. If you think that the US has a large aging population and a large retirement community population, just imagine what China has with many more people.
They were actually looking at leveraging some of these technologies into mind games and games and tools for maintaining mental acuity, mental sharpness in old age. I was thinking about this from a health care standpoint all along. As we pushed forward with this effort, sadly, unfortunately, this will be my second time mentioning death on this life sciences health care podcast, not by design. Anyway, the senior member of this family passed away from a kidney transplant that didn’t take. Obviously, their business was in turmoil from that. Literally, the entire business not only collapsed and unwound, as might happen with any family business anywhere. But it was sucked back essentially to the party, to the government financial entity.
[Tweet “Technology and Health: Leverage opportunities even if they go wrong.”]
Long story short is I’m still trying to collect on that project. I’ll call it a loss at this point. Very much lessons learned about doing international business. I did learn a lot. I’ve actually been back to China twice since that for other ventures. I think if anything, what’s my personal takeaway? It’s leverage opportunities even if they don’t turn out the way you’d like to, to be able to start to get comfortable with a new market or a new geography. Now, I feel very comfortable doing business in China. I’d have to find a different way to structure a deal. I guess, you really can’t plan for everything.
What a great thing to be able to say, “I feel comfortable doing business in China.” There’s not a lot of people today that can say that. That, in and of itself, makes you extremely marketable. Before I let you go, because the half hour is already up, it goes so fast with someone like you. What is a book you would like to recommend about business or personal that you think would be inspiring for entrepreneurs?
I’ve got two books, if I can do that.
Sure.
Book about Technology and Health: The Checklist Manifesto
Because they’re so different. One, it’s a business book that’s also a health care book called The Checklist Manifesto. This is about a six, seven year old book by Harvard physician, Atul Gawande. It’s got some amazing business lessons, life lessons. Simple but powerful. How you can use checklists to get business done, get health care done, improve results. Why I love it is, I actually first encountered it back when I was doing consulting to Boeing engineering teams. They were using this as part of a way to improve their engineering efforts. Interestingly, it comes full circle because the book is about health care, using checklist in health care to improve results.
Atul Gawande actually was inspired originally to write this book and develop this process based on checklists that Boeing, once upon a time, used, Boeing test pilots used back in the 1930s. It was this aerospace into health care back into aerospace where I first saw it. Things really come full circle. If you think about going after funding, launching a computer, whatever, making sure you’re following the basic checklist and not missing a step is critical. That’s the business side.
Ready Player One by Ernest Cline
The other one which is, it’s a fiction book that everyone needs to read because it will help redefine what business looks like. It’s a five year old book called Ready Player One by Ernest Cline. Again, it’s a fiction book but if you work in technology you need to read this. It’s intersection of media and culture, virtual reality and social networking. A couple years ago when Facebook acquired Oculus Rift, there were a bunch of people who popped up on Twitter and said, “Look guys, Ready Player One is happening here.” This book is just an amazing fun read. If you’re an 80s pop culture buff, it’d fall in there. I think it really points to where the future of social media, virtual reality, augmented reality and to some extent, life, is going. If you look at the buzz of the Pokemon Go over the past week, you see how people can get so excited about some of these technologies. We’re going to see a lor more of that.
I love it. We’ll put both of those books in the show notes for people. Dave, how can people follow you on social media? What’s your Twitter, and if somebody wants you to hire you to help them in a wide variety of things from China to health care, what’s the best way to follow you on social media?
My website which has my bio and ways to connect to me is BespokeStrategy.com. I live on Twitter and I was an early person on Twitter @DJWhelan. I think I’m @DJWhelan on every social media tool out there except for Snapchat where I missed the boat. I’m @BespokeStrategy on Snapchat. You can find me there. @DJWhelan will get to me almost everywhere.
Sounds great. Thanks again Dave, for being such a great guest.
Really appreciate it. Thanks for the opportunity.
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Getting Over Rejection – Interview with Eileen Tanghal
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
Eileen Tanghal is the Vice President of New Business Exploration and New Business Ventures at ARM, a UK-listed chip designer. Eileen shares tips on overcoming imposter syndrome, why there’s a lack of women in venture capital, and she even dives into China’s startup culture. Eileen believes good entrepreneurs have resilience, but they also know when it’s time to move on after receiving enough rejections from investors.
Getting Over Rejection – Interview with Eileen Tanghal
Hi. Welcome to The Successful Pitch podcast. Today’s guest is Eileen Tanghal. Eileen has an amazing background. She was named in the Global Corporate Venturing Power List of 2014. She was one of the general managers of Applied Ventures and has her career soar. She’s had over nineteen years of experience working with early stage technology companies across the globe.
She led several tech investments and collaborative partnerships with companies before joining Applied Ventures, she was an investment director in the London office of a venture firm Kennet Partners. Before that, she was an investment associate at Amadeus Capital. She has been in-charged of a $200 million portfolio with over 40 companies. Now, she is the VP of new business expiration at ARM, which is a semiconductor IP design firm in the Valley. Eileen, welcome to the show.
Thanks so much.
I’m so impressed when someone’s been doing something globally, like you are, with your MBA from London Business School and your BS in Electronic Engineering and a Computer Science degree from MIT. You are one of the few women who have that kind of technical background and are in the venture capital world. What do you think that is all about, that that there’s so few women doing what you’re doing?
I’ve had this question a number of times. The first thing that people really talk about is the pipeline problem within STEM and that there are just so few women studying electrical engineering, computer science. I’m here to dispel that. I went to an MIT reunion of electronics and computer science majors in San Francisco just a couple of months ago. The chair of the department told me for the first time, out of the sophomores declaring their major, half of them are women. That’s of course up from the ten percent. I struggle to see the pipeline issue that many are talking about.
Getting Over Rejection: There’s not enough advocacy of women getting into that venture capital field.
What I think is more of the issue is, there’s not enough advocacy of women getting into that venture capital field. My own experience was that the head of the firm that I first worked for, the co-founder, woman named Anne Glover. She made it her goal and mission to find young women who she could mentor and build up. She herself is the first BVCA female chairman. Standing for British Venture Capital Association. There’s not enough advocacy.
How do you that? You probably need to start programs, Kauffman Fellows is one of them, where you encourage women to look at venture capital, to understand what it’s about, to see that really this isn’t an old boys club that people from certain schools that have certain degrees and certain connections can only get into. It is open for everyone. Again, unless I had had that mentor, someone really pushing me up, I wouldn’t have known to have gone into this field or how to be successful in it.
I’ve also heard the, I won’t name who but let’s just say, very famous venture capitalist told me the reason why it’s hard for women to be venture capitalists is because they don’t have the connections into the startup column guys. Of course, the reality is that the majority of startups are going to be these male engineers coming from certain schools. That is true, that’s unfortunately, I think, still true because of maybe the risk appetite. What he told me is that women, they don’t know how to therefor relate to that or have those guys talk to them and be comfortable talking to them.
[Tweet “Getting Over Rejection: You need advocacy to try to bring women up”]
I think that’s hogwash honestly. Last time I checked, they have no problem talking to a women and telling that woman what they’re doing. I think that if you have that mentality, that’s going to stop. This person is a very, very senior person in the industry who said that to me. You need to dispel those, whether they’re conscious or unconscious biases, and then you need advocacy to try to bring women up and show them that this is possible. I can tell you, there is a dearth of female VCs. It’s very, very hard to find any … I think it starts with you got to have advocates, you have to have training, you have to show them, bring them in as analysts and associates and then show them they can be successful.
I think that’s great, especially since you had a mentor that allowed you to get into this world, I’m guessing that you’re a mentor yourself. Is that true?
I try to be. I think at Applied, before I came over to ARM, where I am now, I did recruit a woman into our India office. I did try to train her in the industry. That was my way of maybe giving back. Yes, I do a lot of informal mentoring but formal mentorship, I’m trying to get into. The one thing that’s interesting is that whenever you think of the word mentoring, sometimes you think it’s just about women coming up.
Getting Over Rejection: A lot of women think they’re impostors, not realizing how much they’ve accomplished.
I’ll share an interesting fact with you. People who are just my peers and maybe even a couple years younger, for whatever reason they lack confidence sometimes so I do a lot of maybe talking to other women who are my peer level, trying to explain to them, “You were a lot more qualified than perhaps you’re making yourself out to be.” There’s a lot of studies on this, about when a job requisition is out, a female will not apply unless she meets 100% and a male will apply if he meets like half or less than half. There are studies.
There’s a lot of women thinking that they’re impostors, not really realizing how much they’ve accomplished. I’ll give you just an interesting case in point. I have a very close niche set of girl friends from MIT. These are very, very accomplished. They went to the hardest schools, some of them have PhDs. I don’t. There was this confidence test, how confident are you? Roughly eight or nine of us all took this. Seven of them are in the non-confident.
Wow.
This is like, “You have a PhD from Cornell, a PhD from NYU. You are near the top of your field and you don’t …” Thanks to my parents and my mentors, I am more on the confident side. They make fun of me and the other one that happened to be on there. The rest of us are going, “I don’t understand how this can be your view of yourself.” Very interesting.
A lot mentoring, yes, you mentor the young women. I’m very proud I have a niece who is currently at the Stanford Coding Camp and she’s one of just a few women. She told me she wanted to be a lawyer or the president, which of course is very heartening to me. Of course I’m going, “You should be a venture capitalist.” I’m trying to explain to her what it is. Start early like that.
You got to start somewhere. Sure.
She has a lot of confidence and I think that’s from her parents. For the girl friends that don’t, you need to help them out and say, “You’re a lot more than what you think you are.” It is really amazing how often I have to do that, and a bit sad.
It’s a subject near and dear to my heart Eileen, because I work with clients all the time. I’m telling them the importance of being confident when you pitch to investors like you. If you got a founder that doesn’t have any confidence, pitching to an investor that doesn’t feel confident in who they are, it’s a lose-lose situation. Everyone has to feel confident in who they are and what they bring to the table.
That’s right because we can tell. If you don’t feel confident, you may actually have a wonderful product and a really well executed plan but we’re getting a vibe like you don’t know what you’re talking about so then you turn off unconsciously.
Let’s take a little deeper dive into that concept of feeling like an impostor. I think everyone has a sense of that, even with the most accomplishments, whether it’s a PhD from a top school or a successful exit from another company. What is it, something inside has to snap and turn the switch for you to finally feel like you’re enough and that it’s no longer an impostor? Do you have any insights on how you have done that?
What Works for Women at Work: Four Patterns Working Women Need to Know
Yes. I have had a lot of help in that. I have a really supportive family around me, especially my parents. They are complimenting me constantly. I think sometimes it actually does take someone outside to point out to you what you have done. It was nice to get some of these awards because of course you’re like, “Oh, I didn’t realize you noticed that I had done all that.”
One of these books, What Works for Women at Work. I don’t know if you’re familiar with that book, which I think every single women should read. It’s true for everyone. A lot of women unfortunately face this ‘prove it again bias’, meaning you’ve done it before but you didn’t do it here so do it again. One way to combat that is as soon as someone gives you a compliment or recognizes what you have done, you should ask them to write it down and email it to yourself. You should keep a little bit of a book like that.
I love that.
When I’m feeling a bit down, I look back at some of those. The other thing is, I’ve just been on this leadership class. There’s something called a ‘reflected best self exercise.’ You ask your peers, not just business peers but of course people outside, when have you seen me being my best? They answer and they’ll explain. I have fortunately received that from people I work with, from my friends. Again, anytime you’re feeling a bit down, you read the reflected best self, these things that people have recognized that you’ve accomplished.
That little voice of, “You don’t know what you’re doing,” will eventually get drowned out because you’re going, “Self, look at what other people are saying.” A lot of it should be aid self-confidence buildup. That is good too. I think, what is my advice for, “Look, Eileen. I don’t want to ask 100 people to talk about how great they think I am. I want to find it in myself.” I think a lot of self-reflection, meditation, writing down what you’ve done, that will help. Again, definitely, when other people are commenting, it’s nice. It drowns out any doubt.
[Tweet “Getting Over Rejection: When have you seen me being my best?”]
I love that analogy of drowning it out. To me, it’s that great story of if you pour enough clean water into a bowl of dirty water, it will eventually get clean. That same concept with enough positive reinforcement internally and externally will drown out that negative self-talk.
For me, I always want to be liked for sure. A friend of mine, very wise friend was saying, “Look, not everyone’s going to like you. You are going to encounter situations where it isn’t going to go your way.” A lot of it too is just to say, “Look, it happened. Accept it. Move on.” That moving on part, not dwelling in the past or living for the future but living in the moment is also extremely important I think, not to keep you down if you face some setback or crisis or confidence issue.
[Tweet “Getting Over Rejection: Move on and don’t dwell on rejection.”]
That’s what it takes to be an entrepreneur and a founder, doesn’t it? Especially when you’re pitching and getting a lot of no’s from potential investors, you have to let it go. You can’t drag in that negative no or feedback from a previous investor to your next pitch.
Absolutely right. I think one thing that entrepreneurs should see is, you know what the Midas list is, the list of people who have done the best investments. I think there used to be something called the anti-Midas list, which was venture capitalists were listing the top ten or fifteen deals that they turned down, which of course ended up becoming wonderful companies. As an entrepreneur, you just got to keep that in mind. We’re human too, we make mistakes. We wake up, we get out of bed every day and have a certain mood when we get to see you.
It’s just like the movie studio business. There’s certain executives that turn down hit movies.
That’s right. You just got turned down by somebody, you go look and say, “Person missed this deal and that deal and maybe they’ve just missed mine. Move on.” It’s usually never personal. It is never personal I think. Unless you’re some fraudulent … That’s different. It’s normally, there’s no X factor or there’s no, “I’ve seen that a million times or I lost money in that already before and I don’t want to take the chance,” whatever it is. Keep going. Resilience is extremely important. Definitely, entrepreneurs need to have a high reserve of resilience.
[Tweet “Getting Over Rejection: Entrepreneurs need a high reserve of resilience.”]
I like that. A high reserve of resilience. We’ll tweet that out. Eileen, you heard so many pitches in your career. What makes a good pitch to you?
Remember, I was a venture capitalist in both Europe and here in the US.
Tell us about the differences.
Of course, the European style is much more understated. If you go there and you’re expecting the typical, The Garage Guys and Art Of The Start and sort of, “We’re going to be the Uber of dry cleaning or whatever,” that’s very American. Extremely American I’d say. I don’t want to say, “Yes, you should use a one liner to describe what your business model is and comparing it to a successful business and therefor you will get everybody’s attention.” Yes, there’s place for that.
That’s really nice because it shows enthusiasm and you’ve got it down succinctly, you understand your high value problem, you’re explaining why you have a unique solution and then the correct team that you’ve hired. If you hit all those elements, that’s really nice. I love it when I see that. “We are blah, blah, blah. We have the five world experts. We are 10X about our competition. The TAM is a couple billion dollars and growing 50%. We’re going to take that. Just in case you didn’t realize, people in our industry who’ve already exited 10X.” There’s that. That is very American style pitch.
Getting Over Rejection: The really good entrepreneurs, they tease you a little bit.
What I really like about some of the other pitches, some of the really good entrepreneurs, they tease you a little bit. They go, “We think this is …” Then some of the venture capitalist just start talking and they just let them talk and they go, “Yeah, actually we’ve seen that.” Then they’d come out with another piece of information that directly addressed whatever the thing was the venture capitalist had an issue with. I love when that happens to me actually because I’m like, “Oh God, that person really just put me in place.” Because it’s like, wow.
After you feel like you’ve looked at 20 pitches of the same thing, you go, “I know where this is going.” They say something and then they wait and then you start chiming in like, “Well, blah, blah, blah. Last time I looked at that pitch, that didn’t work. I invested in this company and they never got the X or Y, Z to work.” They just let you talk. In that stop they go, “It turns out, we’ve done ABC to address those problems and we’ve hit it.” I love that. I really, really love that. That’s my favorite because it’s like, he or she totally anticipated what I was going to ask him or her and nailed it. A lot of that is because the entrepreneur did research about me knowing what boards I sat on, knowing what companies I looked at, knowing what I’ve invested in or looked at and what my issues are.
[Tweet “Getting Over Rejection: Anticipate questions and do your research.”]
When they come, this is not, “Who are you, Eileen? Explain yourself to me.” It’s like, “She sat on the board of Plastic Logic. She has probably severe biases against doing anything plastic semiconductors. Let me find out a little more about what went wrong there and then explain why I have a breakthrough in plastic semiconductors that is going to blow her mind.”
Love it.
Like I said, that’s my favorite.
It’s basically anticipating the questions the investor will you and having really great answers to it. You’re doing your due diligence on the investor like an investor does due diligence on you.
That is the best. It’s not for flattery. I don’t really like that. Some entrepreneurs will do that. “Oh, I saw that da, da, da, da, da.” I’m like, “Yeah, that’s nice. Tell me why I’m going to like your thing better than what I’ve invested in before.”
I see you also have done some work with China at ARM. Can you tell us what’s going on with China?
China represents obviously a huge opportunity, not just for ARM, but for everyone. The pace at which innovation acceleration is happening is I believe faster than the Valley. There are some articles that are saying the typical cycle here might be five to seven years for startup, from start to transformation or exit, meaning IPO exit. I think there, it might be four, three or four years.
Getting Over Rejection: What’s been fascinating is indeed the speed at which things are getting done.
One is, we use a term called China speed. It’s probably used by a lot of people. What’s been fascinating is indeed the speed at which things are getting done, things are being innovated, ideas are coming in. I’m very proud that ARM has basically started an accelerator last year to help accelerate IOT startups in China. It was announced in China but not necessarily worldwide yet.
We are working on a fund there to invest in next generation technologies that are home grown. Not made in the US and transferred over, which is the second point, which is this mentality of we do everything here in the US or in the west and then we localize it for China. That’s not going to work. You need to, made in China for China.
It’s a cultural thing, isn’t it?
I think there’s lots of talents there to do it. It’s much faster.
When you say China speed, faster than even Silicon Valley. Is it twice as fast? Five times as fast?
It’s about, I think, 50% faster is my view. There is a sales guy here that has explained it like building a boat. Some cultures or one nation, when they’re trying to build a boat, they would put some architecture plans together, the materials, and they put it together and then they sail it. Others might look at several architectural plans, several types, try different experiments and then sail it. When they’re saying about China is they throw the wood and assemble the boat.
Got it. As it’s floating out the sea.
It’s go first then think later. You could say that seems irresponsible but actually I might argue that that’s the, talk about, lean model or fail fast. That’s definitely that model like, “Oh, guess I’m not floating. These pieces of wood are not coming together.”
I love that.
There’s a lot of them.
What you just gave us Eileen, is a great example of storytelling. Painting that picture of the difference between China speed versus Silicon Valley speed with the boat analogy. The more people put analogies and stories into their pitches, the more memorable it is and the more compelling it is. Thank you for that wonderful example.
Of course.
What is the type of company you like to invest in? Now, as a venture capitalist, I’m guessing you need to see certain amounts of revenue. It’s not seed funding where you’re pre revenue, correct?
I’ll talk in an ARM context. We at ARM are stage agnostic. Above and beyond, it should be strategic to us. Publicly, you’ll see that ARM of course is the architecture for most of the mobile devices out there. We are moving into IOT or actually already in IOT, so many of IOT type devices are ARM powered. We are incubating some businesses within ARM that are more on the software side of IOT. If you have a business that is related to connecting people, devices.
We provide technology invisibly to enable a global connected population.
What we like to say is that we want to provide technology invisibly, and that’s why a lot of people don’t know who ARM is because we try to be behind the scenes. Provide technology invisibly to enable a global connected population. If you have a piece of technology, whether it’d be software or semiconductor IP, we’re interested. Like I said, we’re stage agnostic. That is what ARM’s trying to do.
I think as most people perhaps know, when you got to corporate, it is very important that you have an executive sponsor for the investment. It’s not really about the stage, it’s about to what level are you, number one, related to ARM’s core strategy? Number two, to what extent does the executive sponsor believe he or she can influence you to be successful with ARM rather than without ARM?
How does a founder get an executive sponsor? Warm introductions?
I think the corporate development team or the incubation team or the new business venture team is like myself. We will facilitate those. We are acting like maybe the first filter. What I do is when I see something then definitely I will involve the next person and then that person will then bring it up to the exec. Because as you know, the execs within corporates are very, very busy doing their day jobs of selling. There are a couple of empowered groups and people who are able to look at a number of ideas, filter them down to a couple that they believe will make sense and then push those forward with the executive they work for or another executive. That’s how it works within ARM. I don’t want to generalize other companies.
We’ll just focus on ARM.
But in ARM’s case, that’s the way.
Can you give us a story or an example of some company that got an executive sponsor and is involved with connecting devices and people together that you heard that pitch and you went, “This is something that fits our strategy and we want to invest in it.” Now, they’re off and running and it’s already public that you funded them?
We have, in the connected device realm, we’ve actually made more acquisitions and investments. This connected device theme is pretty recent. That’s maybe the last two or three years. We acquired a company called Sensinode three years ago and we acquired a company called Sansa a year ago.
Tell us a little bit about what are those companies. What made it so compelling?
Sensinode is a connectivity platform for IOT devices. It’s to allow you to securely connect a device up to our platform. We have embed device services platform, which allows OEMs to securely create, deploy and provision IOT devices. Sensinode was really the connectivity layer, some security, some registry part. Sansa, which we bought last year, really allowed for the security. They had some novel IP for securing it, making sure the device was secured, as well as provisioning software to allow for the customer to provision, to say, “This device is a trusted entity in your network.”
Create, connect, secure, deploy, monitor, analyze IOT devices
If you want to think of it as we’re looking for technologies that can help each one of those verbs that I’ve just said, which is create, connect, secure, deploy, monitor, analyze IOT devices, that’s the spread of what we are looking at. I’m trying to think, the other companies that are related in which I believe it’s public is we are investors in a company called Trestonic. I’m trying to think of anything else as public. I don’t think there is except for Sansa, Sensinode and Trestonic.
That’s fine.
The rest are in negotiations.
Got it.
In the non IOT world and just looking at advanced semiconductors, we made an investment in a company called Pragmatic, which is about next generation plastic semiconductors. That’s an example of someone within the research group having an idea, reaching out to this company, bring it up through the CTOs organization and then the CTO ultimately sponsoring the investments and us having joint work with that company.
Apart from the connected device realm, which new business ventures, which I’m in, focuses on, there are other areas of interests within ARM. Specifically, even in the CTO and researches group around memory, next generation semis, people who are familiar with semiconductors and chips would probably … Next generation servers. That’s business as usual in terms of what ARM does. This connected is a newer, new business strategy that we’re focused on.
How wonderful for the early investors like Sansa for ARM to acquire them. That’s the ultimate successful exit, boy.
You bet.
Eileen, I love what you’ve said about confidence, getting over the impostor syndrome, getting over rejection and having what you call a high reserve of resilience. Most importantly, really anticipating the questions that you’re going to get asked when you go in to pitch. That’s been really, really helpful. We’re going to post this book that you recommended, What Works for Women at Work as one of the books that people should check out. How can people follow you? What’s your Twitter and all that good stuff?
I’ve been a little bit remiss to tweeting. My Twitter is @ETanghalVC. That is where I tend to post things. I also am avid an Facebook poster but I’m limited who I add. I sometimes post on LinkedIn so if you want to connect with me on LinkedIn. My @ETanghalVC, my tendency is to post quite a lot of things regarding women and venture capital.
Fantastic.
You want to know about that? Then definitely become one of my followers.
Great. Thanks so much, Eileen. It’s been a pleasure.
You’re welcome.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
Crack The Funding Code!
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