TSP055 | Nihal Mehta – Transcription
Posted by John Livesay in Uncategorized | 0 comments
John Livesay:
Welcome to The Successful Pitch. Today’s guest is Nihal Mehta, who is the partner at Eniac Ventures. He’s invested in so many great startups that you’ve all heard of from Airbnb to Uber. He has a really great look as to what he is looking for when he decides who he’s going to fund. 65% of it is all about the team. He wants them to not just be hungry, but be ravenous and be mission-driven, so compelled to make a difference, and he’s also looking for someone who’s got a big vision and a big market, and then he likes to see product demos because he wants to see if it works and he wants to play with it.
He’s a real specialist in the mobile world. He has a whole focus about, “As a founder, you should create the lightning and your team should be able to catch it,” and he also really talks about the need to fund founders who are humble and care about the right things. For example, really being mission-driven but not really caring about fancy cars. So those are the secrets that you’re going to learn today. Enjoy the episode.
Hi, and welcome to The Successful Pitch Podcast. Today’s guest is Nihal Mehta, who is the founding general partner of Eniac Ventures, which is a mobile venture firm. He’s founded five startups and invested in more than a hundred since 1999. Clearly, a very busy man as one of the things he did was LocalResponse: the revenues grew over 2,000% over a three-year period, which was able to place the company at the #204 slot on the 2014 Inc.’s 5000 fastest growing companies, and on the Forbes list in 2013, he was #67. So, clearly, he knows what he’s doing. He’s invested in things ranging from AdMob – which got sold to Google – Airbnb, and, of course, the famous Uber. He was named the semi-finalist for Entrepreneur of the Year and, in 2012, a top 100 coolest people in New York tech by Business Insider. So, clearly, that’s somebody I want to get to know. Welcome to the show.
Nihal Mehta:
Thanks for that crazy introduction. It’s an honor to be here. Thanks for having me.
John:
Oh, you’re very kind to say that. You know, one of the things I want to jump into, which I normally don’t do is you have this wonderful video called A Day in the Life where there’s no white space on your calendar. I just so responded to that as, “What a smart branding statement for you, your company.” I mean, I literally felt like I got to experience what a typical day was for you starting with walking your dog to work. What gave you the idea to create such a great video?
Nihal:
Yeah. I think it’s interesting, actually. It took a while to get that video on the calendar but I like to, especially during the day, just kind of run super hot in terms of optimizing your time and maximizing and then literally, having meetings every 30 minutes. I think it’s important, obviously, to have some time to follow up but, I think, during the days when everybody’s active and when you can get the most face time with folks and then kind of early mornings or late nights, you can kind of do more asynchronous things like catching up on emails or doing your work. So I feel like during the day when people are out and about is your time to make the most impact and have meetings and I’ve always done that.
John:
It’s a fascinating look at your focus is on mobile and yet you’re such a big believer in face to face, which I love the dichotomy because so many people think, “Oh, I’ll just text everybody,” and you’re like, “No, we’re going to have meetings.” One of the things that really stood out in that video was you’ve created a circle of trust. Can you talk to us a little bit about what you do and how you came up with that?
Nihal:
Yeah, I think every – so, I’m now a full-time venture capitalist, but every startup that I had created prior to becoming an investor, I think it’s really important to have a very strong management team. Especially when you’re out there pitching to investors or large customers, you need somebody to make sure the trains are running on time. So, I think I’ve been fortunate to have those at some of my companies and those companies have done well and I’ve been unfortunate to have put – not set up stellar teams at some of the companies as well, and those companies are not doing so well.
But if you look at some of the folks that are probably the most ambitious in the industry, if you look at people like Elon Musk with Tesla and SolarCity and SpaceX or if you look at Jack Dorsey with Square and Twitter, I think that’s probably the number one thing that they all say is make sure you have a killer team, a killer M team that can run the show and your job is to kind of create the lightning and their job is to catch it and make sure they can distribute it internally. But it’s definitely easier said than done. It’s a pretty big challenge to be able to do that.
John:
Well, it’s what I hear over and over again from investors like you that you’re looking for and whether you decide to fund a startup or not, when they pitch you is the importance of the team. Do you have any lessons learned that you can share with founders about how to create a good team? I’m guessing part of it is being able to articulate the vision or, as you described, to create the lightning.
Nihal:
Yeah, I think, for us now, investing from Eniac, we want to make sure the founding team is self-sufficient, meaning, they can build and ship the products themselves, and that basically requires a technical co-founder and I think our bar is higher than most where we will not invest in a business unless they have a technical co-founder. So this is somebody that, maybe, is full-stack or they can at least build a prototype and ship it, and the reason we demand that is because, first of all, if the company can’t raise additional funds, the market goes south or for whatever handful of reasons, that founding team can still work all day long, all week long, all night long to get product out. They don’t have dependencies on other folks. So, I think that’s really important.
Two, I think, when you’re building a team to garner respect of people that you recruit, you should definitely know the trade. Know the trade enough to speak the language and if you can’t, then it’s going to be very hard for you to recruit amazing people that respect you. So I think that’s another reason why we require a technical co-founder. So that’s kind of our emphasis on teams as it can be two or three folks. It doesn’t have to be a large team. Two or three folks can build and ship the product and build the company and raise seed financing and then make all the other critical hires, afterwards.
John:
Great. Can you take us back to your early days? Did you always know you wanted to end up here? Did you know you wanted to be a venture capitalist as opposed to an angel seed investor? How did you craft that? Obviously, you’ve been a very successful entrepreneur yourself first and that must help a lot.
Nihal:
Yeah, I think – I never imagined myself, actually, to being a venture capitalist. I was always a computer nerd growing up. I, like many others, kind of disassembled and reassembled the computers and root drives and operating systems at a young age. Was always tinkering, had, basically, all the phone lines and fax lines in my household occupied with bulletin boards constantly transmitting files or messages or whatever it is, pre-internet in the late ’80s and early ’90s.
You know, I was always super passionate about computers and connections, and so I think my inspiration was, I always say, kind of my only real job was working for Microsoft in 1998 as an intern the summer before my senior year of college, and getting to the valley, being a computer nerd at that time, was a dream. It was an oasis driving up and down 101 and seeing the first Yahoo billboard. This is pre-Google and kind of the gold rush that was happening.
That really got me excited, and I think I came away from that summer back to college knowing that I wanted to start something. I wanted to start a tech startup and so I did that right after college, literally accepted a job with a bank in New York, which was kind of the typical track for folks coming out of UPenn – where I graduated – but I never worked a day in my life at that bank. Instead, I started my first startup and I never looked back, and that was an amazing experience.
John:
Can you take us back? Was there a moment when you said, “I’m not going to take the expected safe route and work for a bank. I’m going to go do a startup even with all those risks and I may not have tons of experience since I’m just out of school but I’m investing in me.” Was there a moment when you said – that you made that decision and was it easy?
Nihal:
Yeah, I think, now, we coach folks, entrepreneurs all day long and we tell them to fail fast. I think, find a way to just fail fast and learn from your failure, get back up, and go at it again. The best learning will come from you swinging the bat and trying it out. Now, as a VC, I don’t tell your founders to fail fast. We hope that they’ve already failed and they’ve learned their lessons and now they’re back at it, much smarter and more experienced for a win. But I think that’s what you got to do. You got to go through the ups and downs of startups. You’ve got to learn from your own experiences. You can’t learn from just reading TechCrunch all day long. You got to get out and do it yourself.
So I was fortunate after school, after college, my parents who became entrepreneurs about 30 years ago after immigrating to this country from India, I got to see their ability to control their own destiny by not going to work anymore, but working for themselves and working from home and, eventually, in offices that kept on getting bigger and bigger and they were definitely the strongest force in my career for telling me, “Listen, there’s nothing like it and the worst-case scenario, you can go and work for this bank. The best-case scenario, you’re going to hit it out of the park and, in the worst-case scenario, you’re going to learn a ton,” and I think my first startup failed. We actually declared bankruptcy after flying super high and hundreds, maybe thousands of other startups had declared bankruptcy in 2001 during the first bubble burst.
I’m really glad I experienced that because, literally raising money, going from 2 folks – myself and my co-founder – to 40 folks, commercials on MTV, billboards on I-95 all the way down to 2 folks, and then declaring bankruptcy was an amazing experience. It was very humbling, as well and I think, after experiencing that trajectory up and down, you feel kind of invincible. You feel like you can kind of do anything. You can start anything because the worse thing that will happen is you get right back to what you’ve already experienced, and it took a little bit of time to shake it off, you know, dust yourself off, but then when you get back up, you’re much stronger and I think I’m really happy I had that experience as my first entrepreneurial experience in ’99 to 2001. That was about 14 years ago after we had to declare bankruptcy and I think I’m a much stronger entrepreneur and a much stronger investor because of that.
John:
Oh, I have no doubt. One of the things I’m constantly coaching founders on when I’m helping them with their pitch and how to approach investors is you need to stay humble and yet confident at the same time and, in your video about Day in the Life, you talk about going to a certain restaurant that looks like nothing that you could just walk by and when you go in, it’s got delicious food but the ambiance and the people there are still humble and I love that. Is there something you can speak about when you’re evaluating people who are pitching you and deciding whether you’re going to invest or not? The factor of how to balance confidence with humility?
Nihal:
Yeah, it’s actually really funny. We had an off site just last week. We’re going through our portfolio and kind of looking at — specifically analyzing lessons learned from either successes or failures and now, almost 80 or 90 companies, and there seems to be kind of a success ratio that’s kind of inversely proportional to how smooth or put together the entrepreneur is.
It’s almost like we want founders to be super scrappy, they don’t really care what they’re wearing or how they necessarily come off as super polished, but they’re super passionate about their company and their products and they think about it all the time and I think there’s a reason why Steve Jobs and Mark Zuckerberg wear the same clothes every day, and Zuck was quoted by saying, “Listen, it’s one less decision that I have to make on a daily basis,” and there’s something powerful there. It’s like you’re literally red lined to the max where you don’t have any extra time and so, literally, one less decision makes all the difference and we look for founders that really just care about the right things. They don’t care about fancy clothes and fancy cars and smooth talk and name-dropping. They care about building great products very quickly, getting data from their customers, and iterating as fast as they can to grow a very big business. So, those are some of the lessons that we’ve learned and, obviously, we’re getting better with, hopefully, with about every investment kind of identifying those types of founders.
John:
So much of pitching is all about storytelling, don’t you think?
Nihal:
Yeah, I think so. I think you definitely have to convey your message articulately. I think, these days, I always say the best pitch deck is a product. Give me a test flight. Instead of taking me through 30 slides, we probably are already somewhat familiar with the market and already somewhat familiar with the vision. Just show me the products. That also puts a little bit of a pressure and onus on entrepreneurs. I think there’s a lot of folks that cannot build and ship mobile product quickly and that kind of puts pressure on them and that’s a natural filter for us if teams are not able to show us a product that they can build quickly and iterate on it quickly as we’re tracking them, then that’s a potential red flag. But I think that’s the best deck; that’s the best way to pitch your product is, “Here, download my product. Now, play with it.”
John:
I love it. There, obviously, is a beyond a working prototype for the most part by the time they get VC money, right?
Nihal:
Yeah, I think that’s right. Listen, prototype these days is pretty easy to build, if we have a strong founding team. Again, a strong tech co-founder; you can put something together in a week. My wife runs a non-profit called Girls Who Code and she always jokes to me about it. She teaches, literally, 14-year-old girls who come in knowing nothing about computer science and in six weeks, they’re publishing to the App Store. They’re literally publishing apps for iOS company App Store. So, she jokes to me, “If 14-year-old girls can do it, you can find founders that can do it, too.”
John:
What do you think makes a good pitch besides having a great product and a great team? Are there other things like barriers to entry that you look at? Is there any other things that you think that are really important questions you ask that you wish founders had answers to that they typically don’t?
Nihal:
That’s a good question. I think we really look for three things in a team or in a pitch in a business. So, the biggest by far we mentioned is the team. I’d say that’s probably 60, 65 percent of the weight of our decision. You know, the team needs to have a tech co-founder. They need to have some history of working together. We like founders that are kind of one of two things. If they have both, even better. So, one is that they’re super hungry, maybe because of a recent failure, maybe from their last business failed, or maybe they exited but they didn’t make any money or they just made a little bit of money so they got a little taste but it could have been much bigger. So, they’re just hungry. They’re literally ravenous; they’re ready to go, you know?
John:
Got it.
Nihal:
So that’s kind of one quality. The other quality is that they’re mission-driven that they’re building a business that’s much bigger than themselves. They literally want to change the world in this little niche that they’re focused on. The best example I mentioned – Elon Musk. We’re building space travel to Mars by 2020, SpaceX. We’re going to build sustainable travel, Tesla, all of these things is very mission-driven.
So, occasionally, you got a combination of both. You get somebody that’s just come off of failure that also wants to change the world, and I think those are very unique folks with unique experiences that we want to seek out and fund and fund. So, that’s the team that’s 60, 65 percent of the equation. The other second 20% is a vision in the market. So, this is — we’re not investing in a Foursquare for puppies. This is a –
John:
Right, big enough.
Nihal:
We want a big swing. We want a company that can be at least a billion-dollar market cap independently. So, these are big industries that the entrepreneur’s going after disrupting or augmenting, and so we’ve got to make sure they think big and the market is big enough for them to grow a very big company.
Then, the remaining 15, 20 percent is the current products and it’s okay if it’s a prototype. We rarely invest in anything that’s pre-prototype, pre-launch. We want to make sure that the team is capable of building and shipping. We want to play with it. We want to also give some time to track the team to see how quickly they iterate. Get some users through the funnel, get some revenue through the funnel, whatever it might be.
We’ve all been entrepreneurs before so we know products are going to change a ton, they’re going to twist and turn, they’re going to pivot a bunch, but we want to just get our hands on some prototype and see how good the team is at responding to feedback and data from their customers.
John:
Well, I have two questions from what you just said; that’s great information. When you’re talking about mission-driven, in addition to being ravenously hungry, the mission-driven could be as big as what Elon Musk is doing, but it could also be what you had talked about earlier, I think, which is, “I’m mission-driven to make mobile ads become more relevant where people see them as content and might even welcome them as opposed to seeing them as a distraction.” Would that be a good example of being mission-driven?
Nihal:
That’s right. Yeah, that’s absolutely right. Your mission can be anything within your niche that you just feel super passionate about. Again, it’s much bigger than just yourself. It can be anything. It’s like, “I’m going to make a shoe that’s going to blow away all other shoes” or “I’m going to make ads that will not annoy users that will add value to their experience” or whatever it might be. But I think you can sense that mission-driven nature from the way the founder kind of talks about their business, how they articulate their passion.
John:
The other question I have for you is very specific about when someone’s talking about their product and you were starting to allude to getting some revenue and some people through a sales funnel. Do you ask them or hope that they have already thought this through about how much it’s going to cost them to acquire a new customer?
Nihal:
Yeah, I mean, we definitely look at unit economics for businesses that — I mean, both B2B and B2C. So, what is the acquisition cost for the customer versus what is the lifetime value? Usually, companies at the seed stage are thinking about it, but they don’t have enough data reinforcing these calculations. I think, today, those are what series A guys dive into a lot more than seed investors. I think we just want to make sure that the founders have thought about it and that there’s a path to profitability based on customer acquisition costs and lifetime value. So I think that’s important.
More important than the economics is how are you going to get customers? Let’s talk about distribution, and I think, obviously there’s Google Play and App Store and just by building and chipping an app doesn’t mean you’re going to get thousands of users overnight. You need to have a strategy. You need to have, for a consumer business, network effects are very important. So, being able to leverage your graph in Facebook or Twitter to turn the service on to others, having certain viral loops for B2B businesses where you might have less network effects, making sure your product is just so good that it just spreads by word of mouth.
John:
Yes, the virality. The earned impressions, right?
Nihal:
Yeah, I think distribution’s much more important than the economics, at the seed stage, at least.
John:
Got it. Well, you’re at the venture capital stage so you’re looking also, probably, at in addition to all these other things, what the exit strategy is to make sure you’re going to get your money back and there’s reasonable time, right?
Nihal:
Yeah, I think we’re probably a little bit different than other investors. Actually, I had a few conversations earlier today about this. We don’t invest in quick flips. We want founders to really shoot for the moon. There’s a pretty interesting quote that I heard a few weeks ago. “When you shoot for the moon, you land on the stars,” and I think –
John:
Haha, yes.
Nihal:
— it’s probably the other way around, but from an astronomy perspective.
John:
All right. Yeah, the concept is – yes.
Nihal:
But I think there’s something to be said about just going big and literally trying to build a multi-billion dollar, independent enterprise. You know, companies are bought; they’re not sold. So, as we’re going up, as your trajectory is climbing, that’s good if you have many opportunities to get bought and it might make sense, based on market conditions based on ROI to your shareholders to seek out those opportunities when they arise. But I think we’re wary of entrepreneurs creating businesses to sell them or for the sole purpose of selling it to another company. We don’t invest in quick flips. We want companies to really thrive and grow as large as they can become independently.
John:
Great. Is there a particular way you like to meet founders? Do they have to be so tall – like at Disneyland, you have to be this tall to ride the ride. Do they have to have achieved a certain amount of seed funding before they can even have a conversation with you? If so, then what’s your favorite way to – is it through warm intros? How do you like to find people?
Nihal:
We actually put on our website that you can reach out to us through somebody that we both know. I think that’s another natural filter is we’re out there all the time. We’re at events, we’re on Twitter, the four partners have fairly large independent networks. So if you can’t get to us, then there’s probably something wrong. If you can’t get to us directly, then you’re probably going to have a hard time fundraising because we’re pretty accessible. I even respond to LinkedIn and Twitter.
But I think the best intros come from credible introductions from other folks, from other investors or we actually love other founders in our portfolio making introductions. Then that’s a growing segment of our inbound deal flow. But, I think, between founder referrals, other co-investors, and just our networks, that’s probably about 70 or 80 percent of the, say, 300 to 400 deals that we get on a monthly basis and those are inbound. The other kind of 20, 30 percent are when we catch up with other co-investors, maybe the series A guys where deals are too early for them or even the pre-seed guys where deals are graduating their programs. But vast majority are inbound.
John:
Do you have a specific category? Since you have such an expertise in mobile, do you typically like to invest in things that have some connection to mobile or is it broader than that?
Nihal:
Yeah, mobile first is our thesis so that means – I think we all define it a little bit differently – but I find it can exist outside of mobile and because it’s mobile, it’s incredibly disruptive. So think about a business like Uber just can’t exist outside of mobile and just that’s little, that geolocation, GPS, satellite, whatever it might be. It makes that service magical and so it really can’t live outside of mobile.
You know, within mobile first, half the businesses we invest in are B2B, half B2C. I think we’re looking every quarter, our thematic approaches change a little bit. I think, right now, we’re looking more at mobile marketplaces, both on the demand side and on the supply side, mobile logistics, augmented reality and virtual reality, drones, mobile healthcare, mobile real estate, artificial intelligence that’s powering personal utilities. Messaging is the new app and chat is the new app. These are some of the themes, I think, that we’re thinking a lot about.
John:
Yes, I love all those topics, artificial intelligence and messaging in particular. Recently, the New York Times did a story about how Apple wants apps and Google wants people to search the web. Do you have thoughts around that?
Nihal:
Yeah, I mean, I think they’re all trying to just drive more traffic to their own bottom line. I think the app – the native app experience is still much better than native web, today. I think there probably will be a day where mobile software follows desktop software. You know, now desktop software is all in the Cloud – it’s all browser based. But 10, 15 years ago, we all had CD-ROMs and that’s how we would install software.
So I think we’ll probably get there one day – I think, probably, 10 years from now when speed is not an issue, when the browsers are so beautiful, and the OSes are so beautiful that you can’t tell the difference between native and web. But, today, I think the app is definitely the way to really capture the best experience of your company. You don’t have to ship a bunch of apps on a bunch of different operating systems.
We recommend founders just prototype on mobile web to get closer to product market fit and then roll out an app and all of us kind of roll out the iOS first just because it’s just much easier to iterate and test on and then, once you’ve kind of figured it out – it’s like the Instagram strategy – then roll out Android when traffic is growing and I think you’ve figured it out.
John:
Is there any one book that inspired you or that you would recommend founders to read either about life or business?
Nihal:
That’s a good question. There’s so many books out there that – I’m trying to think of a few. Let me grab a – let me see what’s in the Kindle right now.
John:
Okay. I love it when it’s this live. It’s happening now. He’s literally opening up his Kindle.
Nihal:
That’s right. I have two phones. I have an Android Note — a Samsung Note that I kind of read and consume media on and then an iPhone that I do most of my messaging on. So the Kindle is loading. I think, Zero to One was pretty good this year by Peter Thiel.
John:
Yes.
Nihal:
I think, from a founder perspective, I think there’s a lot of pretty awesome tips and tricks in there. I think, Ben Horowitz, The Hard Thing About Hard Things, was also very good. The Everything Store with Jeff Bezos and the Age of Amazon. Nick Bilton’s Hatching Twitter. Malcolm Gladwell’s David and Goliath. These are just kind of – this is just from this year.
John:
That’s great. No, those are all exactly what – we’ll put all those in the show notes with links to link them up. How can people follow you best? On LinkedIn and on Twitter and all that good stuff. Since you’re –
Nihal:
I think I’m pretty active, fairly active on Twitter. Just @nihalmehta.
John:
Fantastic. Well, you’ve been an incredible guest. Thank you for sharing your insights. I love your focus on what makes a good team, and I’ve never heard it described as ravenous before but definitely going to remember that and this whole concept of being mission-driven, which you certainly are. Thanks again for being on the show.
Nihal:
Thanks so much for having me.
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 than 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. Sign up, and get in depth information on how you can get funded fast. Thanks.
TSP054 | Adam Quinton – Transcription
Posted by John Livesay in Uncategorized | 0 comments
John:
Welcome to “The Successful Pitch” podcast. Today’s guest is Adam Quinton, the founder and CEO of Lucas Point Ventures. Adam has been a pitch judge many times and has great insights as to what you need to do to convince him to fund you. One is your idea has to be big, and you have to have the right team. You have to show some traction. He said a pitch deck is a prop to sell you.
He’s really not investing in your product, so don’t bother with a product demo. He’s investing in equity in your company, because most likely, the idea will change. What he’s doing is, “Tell me your creation story. How did you come up with this idea? Why are you so passionate about it? Because that’s what I’m really funding. I want to know that you have passion and energy, because that’s what I am looking for when I listen to a pitch.” Enjoy the episode.
Are you a founder struggling with your investor pitch? Do you need warm introductions to the right investors to get your start-up 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, best selling 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 Judy Robinett, 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.
Hi, and welcome to “The Successful Pitch” podcast! Today’s guest is Adam Quinton, who is the founder and CEO of Lucas Point Ventures. He’s also an adjunct professor at Columbia University. He’s got so many acknowledgements that I don’t even know where to start, but let me just give a few. One of them is in 2014, Adam was the Alley Watch named ’25 Angels You Need to Know;’ so we’re excited we get to know him. One of the ‘100 New York City Tech Influencers,’ and one of the ‘8 VCs Making Waves.’ Adam, welcome to the show. Let’s make some waves!
Adam:
Well, I’ll try our very best to do that, John.
John:
I always love to find out someone who’s as accomplished as you are. How did you get interested in the VC world? I know you have a very strong background with B of A and Merrill Lynch, but can you take us back to even just college days. Did you know that this was where you wanted to end up?
Adam:
Not at all, not at all. I would characterize myself very much as an accidental investor. I would claim no great foresight or insight. Essentially, I had a fairly long career in a sort of traditional financial, really involved in public market stuff. Left that some years back and again, pretty much accidentally fell into early stage investing, really on the recommendation of a former colleague. Got involved, got more involved, and here I am. I can’t claim to any foresight at all, but I’m glad I got here.
John:
Well, how did you get from Cambridge to America? Let’s ask about … Let’s see that journey.
Adam:
Okay, so as folks can probably tell from my bit of an accent, I started off in the UK, was born and grew up there.
John:
Yes.
Adam:
Actually, I came to the US by a fairly long stint in Asia. I moved to Asia with a prior job and spent 7 years based in Singapore, traveling around the region pretty extensively. Then, essentially because of a personnel change in the company I was working for at the time, got asked to come over to the US and fill in a position that needed to be filled pretty quickly. Actually, my sort of start in the UK was just a start, and I had a really interesting time in Asia. I have to say, I think that was very formative experience. Particularly when it comes to thinking about the importance of diversity in life, diversity in business, and also, frankly, diversity in investing.
John:
Interesting. I’ve also want to ask you about, you’ve been a pitch judge several times; once for the economic empowerment, and once for women 2.0 in two different years. What do you look for? What tips, since this is called “The Successful Pitch,” that’s what makes you the perfect guest. What do you look for when you’re listening to a pitch that you could share for the listeners?
Adam:
Okay, well I tend to look for 3 things, and I don’t think this is original, but I will cite it anyway. The first thing that when you’re doing your pitch, you need to convince me, or frankly, I think any investors, that what you’re doing could be big. I’ll qualify that in a minute, but unless you’re going to be big, you’re not really going to get anybody’s attention.
The second thing is you’ve got to convince me or at least get me to start thinking that you might have the right team to do that even if it’s just you, or you and a co-founder, or you, a co-founder and 5 other people. Whatever it is, you’ve got to convince me that the team are the people that can execute on the vision with. You’ve got to make whatever it is, big.
Then, thirdly, a helpful factor is whatever stage you’re at, convincing me that you’ve got some traction, whether it’s minimal relative to your stage, or more if you’re further along, that you’ve got some traction that validates that what you’re doing makes sense.
Then, going back to the “Can you be big?” piece. I’ll break that down a little bit more. You’ve got to convince me that the market that you’re playing into is big enough. People like to see billions, and sometimes that’s a little bit hokey, but the market size has got to be of substance. The second thing in the “Can you be big?” is have you got a solution to a really pressing problem? Something that has the potential to be big in that context. It’s got to be a big market. It’s got to be a solution that makes sense.
Then, the other piece in the “Can you make it big?” is, “Is this the right time?” It could be a great opportunity, it could be a great market, but there’s got to be something that says “Why now?” Because by definition, if this is something that somebody could have done 5 years ago, well, why didn’t they?
John:
Right.
Adam:
Why now is it uniquely a good time? That would be my sort of tips in terms of stuff I look out for.
John:
That’s terrific. I really like that element of “Why now?” Because if you’re too late, or too early, it just won’t work, right? There’s been all kinds of research about why AirBNB, for example, or Uber, is so successful was the timing was perfect with the smartphones to allow people to.
Adam:
Exactly. Yeah, yeah. Exactly.
John:
When you look for the right team, one of the things you wrote about, one of your blogs, is telling people to talk about the story of how they created their team or their idea, because that’s what makes you so memorable. Can you give us a little deep dive into that topic?
Adam:
Okay. Well, in terms of the team, a couple of things. One is, as I heard somebody say literally last week, “If you haven’t got a co-founder, find one.” The point being that obviously there can be companies that are successful, indeed, are many companies that are successful with a single co-founder, but that’s a really tough road to go down. I think from an investor’s point of view, having 2 or 3 co-founders, frankly, and the evidence suggests this is the case, it is more … It makes for a business more likely to be successful because the single co-founders brain can blow up with all the stresses on them. That’s my first point about the team.
The thing that you’re eluding to is a way that you present yourself. I think, personally is very compelling, particularly if it’s a face-to-face situation. If the founder, or founders, tell you their creation story upfront … The point being the “Why I am doing this” can be very powerful. Everybody reacts to stories, responds well to a well-told story, and if the story is the story about you, and why you got into this, that can fulfill a number of objectives. For example, without, in a way, being too intentional, you can basically communicate what your domain expertise is. Like, “I’m doing this because I live this problem, and knew there had to be a better solution.” That tells me something.
John:
Yup.
Adam:
It also helps with communicating the passion. You’ve got to be passionate. You’ve got to have energy. That comes across much better, potentially if you’re telling the foundation story. That’s important because the investor needs to know that you’re really committed to this, you have got that passion. I think it’s difficult to do, obviously if it’s not in a inter-personal face-to-face type of situation; but if you are face-to-face, think about basically putting yourself out there and telling your creation story upfront.
John:
That’s so helpful. I really, really like that. The other line that you’ve said that we want to tweet out is, “Your pitch deck is a prop for you.” That’s such a great line. Can you expand upon that just a little bit?
Adam:
Well, I’d start by saying, particularly if you’re … Say you’re presenting to a room of people. You should think about the fact that the projection system could blow up, your computer could blow up.
John:
Right.
Adam:
Nobody should be in a situation where, if the tech fails, they can’t deliver the pitch just as well as if the tech wasn’t there.
John:
Yes.
Adam:
That’s the start point for that observation, that the tech, the presentation is really a support for you. It’s a prop for you. One thing that is behind that is ultimately, different people have different opinions on this, but ultimately, particularly at the early stage, yes, I’m investing in your great idea, into your great market, with your wonderful traction; but above all things, I’m investing in you. I have to be convinced that you are the right person to do this. You are the person that understands the market, boom, boom, boom, boom, boom. It’s very much about you.
I think people who try and fill their decks with a bazillion factoids totally miss the fact that most of those factoids are utterly irrelevant, partly because a lot of them are going to be invalidated by future events, and have a lot of hypothesis in them that will be proved right or wrong. Ultimately, it’s about the you, and from that point of view, everybody should be able to deliver their pitch without any sort of PowerPoint, or whatever, support.
By the way, I’ve seen entrepreneurs get in that situation. One in particular I can remember where the tech failed, they had to deliver their presentation without their support. They did an awesomely good job, partly because it was them talking. It was them looking you straight in the face, and it connected much better, frankly.
John:
Interesting. Well, what’s your opinion about having a short product demo video as part of the pitch deck. I saw you wrote something that you thought that maybe wasn’t such a great idea sometimes.
Adam:
Again, different people have different opinions. Some people like it, some people don’t like it. I think most investors don’t get a lot out of it, particularly in an initial meeting. I certainly don’t personally. That’s for a number of a reasons. Again, I want to hear you tell your story, and crucially, I think what some entrepreneurs don’t understand is what you’re selling is not your product. I’m not buying your product. I’m buying, ultimately, an equity ownership in your company. What you’re pitching to me is different from your product. Your product is a piece of that story, but only a piece of that story.
John:
There we go.
Adam:
If you spend too much time on the product, you’re going to miss things that really matter. Like, how big is this market? Why is this a real problem? How I have the great team to solve this problem. All of those things are as important as the product.
I think some entrepreneurs think that they’re doing a product demo. They’re not. They’re doing a pitch to sell equity in their company. If they think of it like that, they’ll realize that the product demo basically takes up a lot of time that could be filled in with other stuff. From my point of view, the purpose of the first pitch is singular. There is only one purpose for your first pitch. It is not to get me to invest in your company. I will never invest in a company on the pitch.
John:
No.
Adam:
You have one purpose, and one purpose only, which is to get me to do another meeting.
John:
Exactly, yup.
Adam:
Then, in the second meeting, I can say, “Okay, well I didn’t … It’s sort of interesting. I like where you’re going. I don’t quite understand how the product works. Can you take me through that?” Then you can do the demo, that’s fine.
John:
Right, got it. Nice. That’s so helpful. Let’s play out the whole scenario. Do you typically look for warm introductions to get … How does someone get in front of someone like you, pitch to get a second meeting, and then what is … Let’s take that journey. What’s the best way for someone to get in front of someone like you to look at the pitch deck first, and then you decide if you want to have a meeting?
Adam:
That’s a complicated question, and again, different people have different approaches.
John:
Right.
Adam:
I think if you’re generalizing about the act of angel investor, VC investor, early stage investor of whatever flavor, most of them have more things coming into their inbox than they can deal with. Which is why the warm intro is so valuable, because rightly or wrongly … and you could argue wrongly, actually, but to make life management, it provides a screen and a filter.
John:
Right.
Adam:
Such that I think, particularly for some of the more active, larger VC funds, unless you have a warm intro, they won’t even look at the deck that you send in, because they simply don’t have the time.
John:
Yes.
Adam:
I think from that point of view, talking to any active investor without a warm intro is basically putting into the low odds lottery game. That intro of itself is multi-faceted because like a warm intro from John, or a warm intro from Adam, or a warm intro from let’s say, Richard Branson, again, if you don’t-
John:
Yes.
Adam:
If Richard Branson gives us a warm intro, we’ll get on the plane to see the person.
John:
Yes.
Adam:
Again, there’s different levels of strength of warm intro. In that context, we can go down that route if you want, but I think frankly, the best warm intros come from entrepreneurs.
John:
Interesting.
Adam:
Not the founders.
John:
Yes. Especially someone, if you’ve invested with them. I would assume that would really be the best.
Adam:
Well, I’ll just qualify that. The answer to that is “Yes,” but there’s a higher level than … There’s a company I’m invested in, so let’s take the example, which I think you were going to talk about a bit later, The Muse. Catherine Minshew, the CEO of The Muse, if Catherine recommends to me to speak to somebody, I would generally do that, and I will do that A) because I’m invested in The Muse, I’ve got a lot of respect for her. All entrepreneur intros are not equal.
John:
Right.
Adam:
Investors, for purely psychological reasons, will put more weight on introduction from entrepreneurs whose businesses are doing really well.
John:
Got it. Of course, that makes sense.
Adam:
The Muse is doing really well.
John:
So that’s got some credibility!
Adam:
Yeah.
John:
The other one I wanted to ask you about is, Snaps. What was it about Snaps, the team or the market, that said “Wow, this whole concept of messaging is really something I am interested in, and this team is the right team to do that?”
Adam:
Well, I’m glad you asked that question because it is a perfect example of why the team … and in this case, it was a sole-founded company, whereas, the thing to back, not the business because when I invested in Snaps, it wasn’t doing what it’s doing now. At that point, what they were trying to do is use user-generated content through a, if you want a better description, an type of app to promote brand messages in a manner that would be sort of the equivalent of a warm intro in social media. Like, I see the picture of you with some brand message attached, but it’s shared to me by a friend so it’s not intrusive advertising. That was something that they tried, were reasonably successful, but it was really not going the way that they hoped.
They pivoted, essentially around the turn of the calendar year, into using some of the same technology into the messaging space. I did not invest in their messaging platform, but I am glad that I invested in Vivian Rosenthal, who’s the founder. Because again, classic example: you invest in the founder because they’ve got vision, they’ve got passion, they’ve got commitment. They’ve got all of those things.
In this case, the founder had a vision that I invested in, but the founder had a more expansive vision and had passion, and energy, and all those other things. Such that when, basically the shit was hitting the fan, and the initial vision that the founder had wasn’t really working out, the founder had that expansive vision to say, “How can we do this differently? How can we repurpose this technology? What is the sort of social media 2 dot O space that we can use our technology in, where brands have a problem communicating with, you know, with a whole group of particularly, you know, younger, potential, you know, customers of theirs?” Again, I can claim no credit for investing into what is currently a very successful messaging tool, because when I invested in it-
John:
Yes.
Adam:
We weren’t even talking about that.
John:
Fascinating. Is there something that you like to invest in? Like some people say, “Well, I love mobile,” or “I love medical.” I’m looking … The Muse is obviously about careers and Snaps is about messaging. Is there something that you … Certain categories that you say, “This is really my sweet spot. I like to hear pitches on.”
Adam:
That’s a good question, and because I’m a sort of solo operator, I have the luxury of being able to invest in what the heck I like, and what appeals to me. I would have to say, generally speaking, things that have got some sort of B-to-B component to them that I can understand; ideally, also assist in some way, the most interesting. I’ve worked in a big company. I’ve hired people. I know some of the challenges, so from that point of view, I can only understand and be a little bit helpful, with The Muse, to use that example, again. Another company that I would cite is , which is essentially an open table for events platform. Again, I’ve organized events. I know the points, not in a deep way, but enough to at least understand what they’re doing; and again, be able to offer some advice and assist them, which I think is important for all investors to do.
John:
Yes, exactly.
Adam:
That’s the general rule, but I’ve got outliers, which again, my unconstrained format, things that I can do, because it just peaks my interest at the time. Often, well not often, I think exclusively, that is because I’m saying to myself, “I don’t know that much about this space, but this founders are just clearly exceptional. And, I don’t know what the shit they’re going to do, but they’re going to do something.”
John:
Nice. Where do you, Adam, like to fall into this whole process? Do you like to be one of the very first investors? Or, do you like to see other investors in before you come in? How much do you typically invest at the beginning?
Adam:
I’m a relatively early, not a big check person. The earliest I’ve been is literally the first check, or in fact, there were 2 of us that put the first check in to help an entrepreneur literally get off the ground from nothing. I don’t think I’ve invested in … I’ve never directly invested in a company at the stage. I’ve done early stage notes, or seed rounds. I’m relatively early from that point of view. Again, to be honest, my relatively small check in the scheme of things, can at least count for something. Where, hopefully, my time and contribution to the founders can also be of some use.
John:
Yeah.
Adam:
By the time you go to the round, you’ve got much bigger VCs involved. You’ve got a corporate governance structure, which is likely to have up to 2 VCs sitting on the board at the company. The whole relationship with the founders where their outside constituencies changes at that point. Obviously, if the company’s doing well and they are raising the round by then, the valuation is getting up there anyway, so I prefer to be earlier than that for a bunch of reasons.
John:
Right. Speaking about valuation, if someone’s pre-revenue, would you ever consider investing in that?
Adam:
I have done that. I have done that, yes. Yes.
John:
Got it. Then, it’s always such a art form, trying to figure out if you’re going to put in … I’ll just make up a number. A 100,000 dollars, right? Is that worth 5% or is that worth 10%? … Is there a lot of negotiating around that, typically?
Adam:
The honest answer is, at the early stage, at the point where you’re pre-revenue, perhaps, it depends on the business.
John:
Right.
Adam:
And what the relevant metrics are, but if you’re the first convertible note or the second convertible note, or even the seed round, valuation is probably 99% part of 1% signs. It is pretty difficult for everybody. Obviously that’s one of the reasons why people use notes at the beginning of the whole process because then it the valuation discussion. Which, I think is a bad thing, and can have adverse consequences; but anyway. To your point, yes, it is somewhat of a negotiation, but on the other hand, the market; if you can say that, is where it is. At a point in time, companies at a certain stage, doing a certain thing, you know that the pre-money’s only going to be about 3 million, or 5 million, or 10 million, or whatever it is.
Some people might get into the passing of that. “Well, you know, you’re trying to raise at a note with a cap of 10 million, I think it should only be 9 million.” Generally, I don’t get into that type of dialogue too much-
John:
Right.
Adam:
Because, if the company’s going to be successful, whether it’s 9 or 10, like what the hell does it matter? You can over-extend energy on that, but as I said before, generally speaking, for stage and for whatever the format of the team is in terms of founders, and staff, if any. You can have a generally good sense based on what other stuff is going on around you.
John:
Yes. One question I get asked quite frequently by founders that I’d love to get your input on is ‘If, let’s say, you’ve already invested in Snaps, even though it wasn’t initially messaging, but now it is, does that mean you would never hear a pitch for anybody who would be in the competitive set of Snaps? Because you’re only interested in that one company, and all your resources towards that?’
Adam:
Okay, so I think different people would have different answers to that question. I’ll just give you my perspective, which is if it was a directly competitive company, I would just say to the founder, “Look, I’m invested in a directly competitive company, and I just don’t think it’d be appropriate for us to talk.”
John:
Right.
Adam:
The point being that pretty much, in every instance that I’m familiar with, early stage investors don’t sign NDAs.
John:
Nope.
Adam:
You don’t want to be in a position where you, yourself, are compromised.
John:
Right.
Adam:
Where, frankly, you yourself are doing a disservice to the company that’s come to you. I think it’s just a question of being very transparent. If the company said, “Well, like we know you’re invested in something directly competitive. We understand that. We’d still like to talk to you.” Then, obviously at that point, it’s on them.
John:
Yes.
Adam:
I would probably say, “Look, if you’re comfortable with that, you know knowing that I’m invested in that company, I talk to that company. Okay, that’s fine, but bear in mind that I am pretty unlikely to invest in you.”
John:
Got it.
Adam:
So again, “with that additional hurdle, if you want to talk, that’s fine. But, if you think that you could get money out of me, and that’s the key reason for talking-”
John:
Yes.
Adam:
“Then, maybe you can make the decision, then, to not waste your time.”
John:
Wonderful. That’s really, really helpful. That comes up … I can’t tell you how many times people ask me that question. So, to hear your perspective on it is really fantastic. Do you have any stories of a pitch that you just said, “Oh my gosh, that tagline was so memorable.” Or, “What that founder said about their creation story really won the contest,” when you were judging that you could share with us?
Adam:
One that I remember from … This would be 2012. There was a company that has changed it’s name since then, and it’s now Media, based in Florida, which had a prior existence with a prior name. I can remember seeing the founder’s pitch, and … again, it was a while ago. I can’t exactly remember why, but I’m thinking to my point before around check those high level . Is this something that could be big? Well, yes. Is this a compelling team? Yes. Is the early traction there? In that case, there wasn’t much, but yes.
I think in that case, it was an interesting one because if you look into Media, you’ll find that the founding team is actually a husband and wife. They had this vision of making online video interactive. Ultimately, for brands in particular, adding value to the relationship that you have with people online. Instead of a linear ‘click, play, and who knows what the hell I’m doing next,’ video, you have an interactive relationship through video which keeps people engaged and ultimately brings them maybe to a purchase decision.
In that case, the creation story was particularly interesting because the husband and wife team, one, had a background in video games, video game design. The other had a background in basically traditional media with TV and each of them had a different perspective on the online video world. Both of them thought that it was missing something. In that case, blew a whole number of things, hard to impact which was more important than the other. To my point before, it was definitely big. It definitely had a good team in terms of their skill set, but particularly in that case, it was because you had this uniquely compatible husband and wife team … Hopefully husband and wife are compatible in other respects, but in a business sense.
John:
Yes.
Adam:
Their different perspectives, with just like incredibly compelling insights. Not from within the industry, from thoughtful people outside of it looking in and saying, “There’s something here that needs to be fixed and done differently.”
John:
I love it. It’s complimentary skills combined with a unique perspective is what it sounds like to me.
Adam: Yeah.
John:
Nice. Well, if you wouldn’t mind, one more generic question, which is, okay, somebody’s fortunate enough to get a warm intro into you. They give you the pitch. You say, “Ah, I want to invest in this person. I want to have a second meeting.” What happens in that second meeting? Is there typically a second pitch deck? How does a founder prepare for that second meeting?
It’s like so much effort’s spent on getting in the door, and getting a second meeting. Then people go, “Okay, now what? Well how do I prepare for the second meeting? Is it a … And how many meetings will there be, typically? I know each case is different, before I get funded. Is it 6 months, or less, or?” Can you take us down that journey at all of what happens in a second meeting and what would you look for for someone to prepare for that?
Adam:
Well, I’d actually go back to the first meeting. I’m probably a pain in the ass for some people, in that complex, because particularly if you’ve sent me the deck beforehand.
John:
Yes.
Adam:
Presenting the deck to me, from my point of view, is a waste of both of our time.
John:
Right.
Adam:
Because if I’m moderately interested, I’ve at least flicked through it anyway.
John:
Right.
Adam:
I know, at a high level, what you’re doing, why you’re doing it, where you’re at, what the team is. I can do that in literally 60 seconds of flipping through the deck, and maybe a bit more than that. You talking me through the deck is like a total waste of our time, at least from my point of view. Generally, what I prefer to do, and I’m not saying this is an explicit and Machiavellian strategy, but what I prefer to do is say “Since you’re local, thanks for the deck.” Then basically just ask questions.
John:
Yes, got it.
Adam:
I think that’s a more productive use of time, personally, in the first meeting. Also, to the extent that there’s a Machiavellian element to it, it is … You can be scripted to say, for the next 15 minutes, what you want to say. I’m not deliberately trying to throw you off balance, but to the extent I focus on things or jump around a bit. It’s effectively a test as to how flexible your mind is, whether you can jump around the way that the pain in the ass investor on the other side of the table is jumping around. We get to spend time on the stuff that I’m interested in, or concerned about, or whatever. Rather than you just going “blah, blah, blah, blah, blah” for 15 minutes through the slides.
John:
Right, dialogue.
Adam:
Then, from there, the second meeting, I think with anybody, is going to be “Okay, well” … Again, maybe it’s the product demo. “Look, I need to understand how this works. Show me how this works.” It may be something different. It’s going to revolve around what seems the most pressing thing in the investor’s mind, particularly if there’s something that they’ve got a concern about. One thing that, I think personally is pretty much always in the mind of investors, is how do I get to ‘no’ as quickly as possible? The founders want that, obviously, the founders want an honest, quick ‘no,’ if that’s the answer; but the investors do as well.
John:
Yeah.
Adam:
To the extent that you focus on, I don’t know, go to market strategy because you really don’t think the founders thought it through and it’s not really compelling. Maybe you drill down on that and you establish it actually … They’ve got a much better hold on it than you thought, and it is more plausible than you thought. Then, you move on to something else.
John:
Right.
Adam:
Or, you drill down on that: they really haven’t thought it through. What they’re doing is, best you can judge, not going to be successful. Then, you can say, “Thank you for your time, and let’s move on, because I don’t have any further interest.”
John:
Got it.
Adam:
The second meeting is more focused and it can be more positive or more negative, but it depends on that investor’s approach, I think.
John:
Do you typically ask the founders if they have an exit strategy? Is that one of your questions?
Adam:
That’s a difficult one, on a difficult one. It’s an interesting one, which has a lot of interesting east coast, west coast in it. Personally, I’m of the mindset that, I think was expressed very well by, famous New York angel who has said, “We angels, early stage investors, we’re not in the investing business. We’re in the exit business.”
John:
Yes.
Adam:
The point being, as an investor in the public markets, you always have liquidity and if something goes right or wrong, you can always enter or exit. In the private company contracts, there’s mostly no liquidity until exit. If the company cannot exit, does not exit, and also does not want to exit, ultimately you’re operating a philanthropy rather than investing enterprise.
Personally, I think exit is important. Not because I want an entrepreneur to be thinking about flipping the business, but more because it is important to establish whether they actually are open at some future point to selling the business.
John:
Yeah.
Adam:
If they say, “Oh, this is my baby. I will never sell this.”
John:
Yeah.
Adam:
Then, frankly, I would say, “Well, you know, good luck to you, but you’re not having more of my money.”
John:
Yes, right. There’s no return on investment.
Adam:
“Because I sort of want it back at some point in my lifetime.”
John:
Yes, of course. Fantastic.
Adam:
That’s my perspective on that.
John:
That’s very helpful. Adam, is there any book that you recommend founders read? Either about business or just life in general.
Adam:
I’ll mention a couple. I think one that is a stand-out in terms of helping you through the investing process is Brad Feld’s “Venture Deals,” which is I think subtitled something like ‘How to be Smarter Than Your Lawyers as an Investor or Venture Capitalist.’ I think that’s a very good founder-focused walk-through of understanding VC deals and how they work. I think for anybody, that’s really very good.
I think … I mentioned Brian Cohen. I think Brian’s book, which is focused on angel investors, and is titled something like “What Every Angel Investor Wants You to Know” is definitely a good way of getting … Obviously it’s very focused on Brian’s perspective, but is very well-known and established angels view of what you should be saying.
John:
Yes.
Adam:
How you should be saying it. I’m sure in that, Brian mentions the exit thing that we just talked about, so that would be one. Then, from … If I can offer 3, the third one, which is sort of a fun read and takes you through how wild a ride things can be is a book called “Startup Land,” that came out, I think at the end of last year by Mikkel Svane, and I’m not pronouncing his name right. He’s the founder of ZenDesk. I forget the country, I think he’s from Denmark. Anyway, he started off in Denmark, wherever it was, had to work his way through getting investors, when he started in a location where nobody knows what venture capital is, and ends up ultimately getting to the point where his company is listed publicly in the US.
John:
Wow.
Adam:
That’s quite a sort of fun ride of his-
John:
I’ll say.
Adam:
Entrepreneurial journey, which is short and fun to read.
John:
Those are great. Thank you, so much. Adam, how can people follow you on social media? What’s your Twitter and all that good stuff?
Adam:
None of the above is particularly creative, so I’m @AdamQuinton. You can follow me there. I’m fairly active on Twitter, likewise on LinkedIn. Google it and you shall find.
John:
Fantastic. Well, it’s been a pleasure. Thank you so much for sharing all of your insights into what you look for when you hear a pitch. I can see why you’re one of the VCs making waves, and one of the top influencers and angels that people need to know. Thanks for letting us get to know you a little bit better, not only as an investor but as a person.
Adam:
Thank you for your time, John. I’ve really enjoyed it, and hope to talk soon.
John:
Sounds great.
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.
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. How do you get people to say “Yes,” and then follow through? Visualize yourself on the left side of a riverbank. You have to cross the river, and on the other side of the river is where the funding happens. First you make up your idea, then you make it real, 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 than you will get when you hear a bunch of “No’s,” and you don’t know why. If you want some help getting funded faster, with less frustration, go to my free funding webinar, SellingSecretsforFunding.com/Webinar, sign up, and get in-depth information on how you can get funded fast. Thanks.
TSP053 | Claudia Iannazzo – Transcription
Posted by John Livesay in Uncategorized | 0 comments
John:
Welcome to The Successful Pitch Podcast. Today’s guest is Claudia Iannazzo who is one of the partners at Pereg Ventures. She talks about how many people she sees the pitches in the year – about 1,500 – and then, maybe, that’s about 500 people that she actually meets face to face and then from there, funds 5 of those deals. So how do you get to be one of those 5 deals? She talks about the need to be able to explain what you do clearly and concisely. But, most of all, it’s this likability factor – the need to be charming. She said, “If I don’t want to buy you a beer and have you chat to me for an hour then I probably don’t want to fund your idea because it’s such a long-term investment and a long-term relationship that your likability and your ability to charm investors, which then implies that you can charm customers and get the right team in place is really the secret sauce.” 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, best-selling 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 Judy Robinett, J-U-D-Y, R-O-B-I-N-E-T-T.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.
Hi, and welcome to The Successful Pitch Podcast. Today’s guest is Claudia Iannazzo, who is one of the chief partners at Pereg Ventures, which is a top VC. Claudia’s background is amazing. It sounds like the Amazing Race to me. She’s facilitated more than 10 billion dollars’ worth of acquisitions, divestments, IPOs, and partnerships for public companies around the globe. She started her first company in her undergrad days and she has a 15 year career spanning the 5 continents, hence the Amazing Race reference. She’s from England, and she worked in Australia, and now is in New York.
Claudia, welcome to the show.
Claudia:
Thanks, John, I appreciate you inviting me.
John:
Well, it’s just wonderful to hear from someone who has such a global perspective of what it takes to be a successful startup, what it takes to get funded. So if you wouldn’t mind, would you take us back to those days when you were growing up in England and you decided, “Ah, this is for me – getting into mergers and acquisitions.”
Claudia:
Well, it’s kind of a little bit lathered. So my parents, in the mid-80s, there was a terrible job shortage in the northern hemisphere. My parents emigrated — well moved back to Australia; they’re Australian. We landed back in Australia and my father, he couldn’t find a job. He’s a civil engineer. So he started his own company and this is in the kind of — he’s like alienated. He starts building patrol boats to the Vietnamese government so that they could patrol up and down their extensive river system. So I have — I’m the daughter of this serial entrepreneur. He’s 73 years old now and is emailing this morning because he just wants to do a very big project in Indonesia. I mean, he’s a startup junkie. So that was the environment I grew up in.
John:
Nice.
Claudia:
star father who’s serial entrepreneur, and what that means is that can be boom, bust, bust, bust, bust, boom, right?
John:
Right.
Claudia:
It’s a bit rough to be married to an entrepreneur. Then my mother, who is just so risk averse – she just thinks everybody should go an work for Walmart. So a complete, completely two different worlds. So when I started college when I was 17 in Australia, I was holding down three or four jobs paying my own wage through college, my tuition, my living. I was waiting in a couple of different bars. I was the gum switchhead in a boutique investment bank where I used to take around the faxes.
John:
Oh, I get it.
Claudia:
How long ago it was? Faxes. It was faxes. We used to take them around and we put them on paper desks and you write the initials that the people who had to read the fax. They read the fax and they hand it back to you, cross off their initials —
John:
Not exactly fast. Right.
Claudia:
Thank God, it was dumb because after kind of four months of doing this job as a 17-year-old, I just wanted to claw my eyes out with a spoon. So when one of the partners in this bank said to me, “Claudia, put the fax down. Take a look at this bid,” and he was an investor banker helping through lodge try and develop his next big project and big feathers for, I think it was a construction project. Certainly, this bid are this Utopian vision of the future. It’s got this beautiful story as to what we’re going to build in this particular woodland precinct called Melbourne Devil’s project. I thought it looked like hand drawn images that is amazing kind of Utopian existence that’s going to exist. I took one look at it and I said, “You know what, you’re going to have to tell us where you are,” and the banker is like, “What are you talking about?” and I said, “Well, that’s going to land on some bureaucrat’s desk and the bureaucrat’s going to sit there with a shop list and he’s going to go, ‘Well, where’s my community impact study and where’s my imaginary report and where’s my blah-blah-blah,'” and you’re not going to read 300 pages to what’s up with those things are. So if you don’t make it easy, you’re just going to be excluded. This investment banker looks at me and goes, “Well, Claudia, I don’t get paid to rewrite tender admission” I’m like, “Well, I’ll rewrite it for you,” and he says, “No, no, I’m not paying you. You’re the dumb little kid who delivers my faxes,” and I was like, “Why don’t I pitch your customer?” and he looked to me and he said, “You’re 17 years. You’re a teenager,” and I was. I literally was an ugly teenager with acne. I felt nothing pretty about this situation. He goes, “There’s no way I’m paying you letting you pitch my very valued, very big, Asian developer. There’s no way,” and I said, “Well, how about I get an office, a logo, some business cards that a bunch old people and I’ll get an old person to pitch the customer?” and at this point, I think he just got the whole situation ridiculous and he’s like, “Sure, they’ll be here on Thursday,” I’m like, “No problem.” So I borrowed an office somewhere in my dad’s friends and I got another friend of my classmate to do a logo and got business cards printed at like 3 a.m. in the morning, I got a bunch of old people which, at the time, were the oldest siblings of all my friends. So old was 30. I scripted one of these guys, we pitched the client. The client went, “You know what, I spent a million dollars bidding this particular project. What do you want for a compliance check?” we’re like, “15 thousand dollars?” Something outrageous and stressed down and bang, that was my first customer. I had to incorporate the company in the next week. Everything happened in the wrong order.
John:
Get the customer first, right? I love it.
Claudia:
Yeah, yeah, get the customer first. Right. Sort out the money. I had to get my dad to be a director in my first company because I was too young, under Australian rules, to even be the CEO of my own company and we kind of took it from there. By the time I finished university, I had 12 employees servicing customers all around the world. I have the huge pressure to open it up with Shanghai. I mean, everything, and I was 21 and didn’t know what I didn’t know. I literally was learning new mistakes every single day. So then I gave into my mom who was like, “You got to give up this startup thing and get a real job.” So I became a mergers acquisitions attorney. I know, terrible idea. Probably the worst thing I’ve ever done. It’s true.
John:
Sounds very dry, yes.
Claudia:
Met my husband in there so that brought it back.
John:
Oh, that’s good.
Claudia:
So after five years of doing that, I said I can’t do this anymore. I started this spacing company in London which was a property development company and that was kind of how my career evolved. Every second role was a startup and the roles in between that was the logical process. Typically doing deals and negotiations. So I served at a wide slew of different roles in different companies but I’ve also started a bunch of different companies, which is kind of cool.
John:
It’s a really great combination of your father’s entrepreneurial DNA and your mom’s risk aversion to take a job, learn something, go do a startup, go back and forth like that. It’s nice. One of the things I already like what you said that we’re going to tweet out from your episode is if you don’t make it easy, you won’t get funded. So at a young age, you knew that that no one’s going to read 300 pages and I’m assuming that still holds true to what you look for now as a VC. Well, take us up through the differences between working in Australia and America as what the ecosystem is like and pitches.
Claudia:
It’s so different.
John:
I figured.
Claudia:
So my Australian friends tell me it’s changed. But I’ve been in the US for five years now. When I left Australia, I vowed that I would never start another company in Australia again because we have this culture in Australia of something that we call the tall poppy syndrome. If somebody decides to do something different or have a go at starting a company, we think we’re doing them a kindness to point out the three or four reasons why it’s absolutely going to fail as an idea. That is very draining for an entrepreneur. Entrepreneurs have to be slightly mad to start companies in the first place. They have to ignore all the conventional wisdom which says only one in five companies exist four years after founding. So they have to go, “I’m going to be that one in five,” and so to be surrounded by people who are kind of dragging you down the whole time is very demotivating and it’s one of the reasons why I actually think the US of A has a very, very vibrant startup ecosystem because you don’t talk to people in the US. It is completely through experience. They will sit back and go, “What a great idea. Here are two people I can introduce you to.” Having thought about doing this, this, this, or this to take your idea from being good to great. So it is the exact opposite experience and I am a firm believer of that attitude being the reason why the US can unapologetically say that it is the startup capital of the world at the moment. I think it’s the attitude such as just the entrepreneurs and the investors. But it’s the attitude of the whole community. If you had to attitude of a person who will do pilots and startups. It’s the attitude of your next door neighbor who will be encouraging, I think that’s a really important difference.
John:
I love it. Well, it’s interesting you talk about one in five businesses are going to make it so why would you take that risk. The same thing is almost true for marriages, right? Why would anybody get married if one and two are going to fail. So there’s such an interesting similarities about the kinds of relationships that you look for at Pereg Ventures, for example. I mean, you really have to look at this like a business kind of marriage when you decide to invest in these founders.
Claudia:
You know, I think it’s worse than a marriage because at least — I’ve been married for years. We’re happily, deliriously married. However, if my husband pisses me off, I can divorce him and I can unilaterally divorce him. Whereas if I’m at entrepreneur and my investor pisses me off, there’s very little I can do. I’m stuck with him. Even if I don’t want to make the money anymore, I have to make the money or else I’m going to be losing all of my invested money. So it’s worse than a marriage and I’m constantly telling entrepreneurs to be super, super careful about who you set your money from. Because if that investor is seeming very corrosive or unhelpful in the investment process when they’re meant to be courting you and putting their — this is as good as it’s going to get.
John:
Right.
Claudia:
They’re going to be the most charming when they’re trying to convince you to take their chair. If that process, they’re ugly, they’re going to be hideous.
John:
It’s going to be much worse.
Claudia:
Ask members of your family if you built a company.
John:
Right, so you have to discerning, that’s for sure. What are the qualities that you look for in a founder because what you do is, if I understand properly, is you look at host C to series B, so someone has already gotten some angel funding of a million or more and has some traction before your company steps in, is that correct?
Claudia:
Exactly right. So we activist investors, we invest in marketing, advertising, and analytics check only. We’re very safe just to keep your funds, but we look to invest in companies where we can do something to improve the revenue. So we can get actively involved. I roll up the sleeves, I give up my weekends, I gear up days during the week dedicated to try and build these companies that we invest in, which means we don’t do a spray and pray. We have hundreds of companies in our portfolio. We’ll be lucky if we have 15, 20 companies in this checks portfolio because we start actively involved, which gets to the culture of an entrepreneur and the type of entrepreneur that we’d invest in. The cultures are actively involved. I won’t invest in any entrepreneur who I don’t want to buy a beer for. Being in Australia, I know. It’s easy for me to attribute everything to beer. However, let me explain. Firstly, if I was them paying five bucks for a beer for you, something’s gone horribly wrong. Certainly, if I don’t want to spend the hour with you watching you drink it, it’s highly unlikely I’m going to invest in you. So it’s really important that entrepreneurs get that it’s kind of — starting a company is the charm of it. You’ve got to charm investors to invest in you even though you really don’t have the traction you’d like to have. You got to charm people to come work for you even though you can’t really pay them what they’re worth, and you’ve got to charm customers to put their businesses at risk and engage you in order to use your platform and generate revenues. So if you’re not charming when I meet you, I’m going to have big doubts as to whether you can do those three things: investors, staff, and customers.
John:
It’s all about the likability factor, the charm factor. For me, charming has to do with passion and being interested in what someone else has to say as opposed to just being interesting. Do you like that definition?
Claudia:
I totally agree with you. So I like to invest in entrepreneurs who want to have a dialogue with me about it. If they’re just going to talk at me and lecture to me, it’s probably not worth coming and our partners come from very varied backgrounds. We’ve all been entrepreneurs, we’ve all got different connections which you bring to the table. We’ve got amazing connections to each we’ll bring to the table and we want to prepare our connections and going to find engaging. That’s the kind of model we follow almost every time.
John:
What do you think is the number one thing besides cash that the founders need? I mean, your company provides so many things, from refining the value proposition to preparing for an exit. Is there one thing that you go, “Oh, time and time again, this is really what we bring to the table in addition to our funds.”?
Claudia:
Yeah, the most important thing to most of our entrepreneurs is our ability to open doors to very important customers for them. So we haven’t yet invested in B to C. We’re in this B to B space. So what we do is we leverage our own personal connections, which are instead of at LP, the investors now earn funds. They have extensive connections. No, we have investors like Neil Byrne and Tartar, and advertising agency and — it’s just really amazing organizations and they have set their own networks. That’s really, I think, probably one of the most influencing — the second thing is – and I find I get this feedback quite a lot – is the entrepreneurs want someone who’s going to guide them to realize. Even serial entrepreneurs, technique building and analytics products. I’ve got one entrepreneur at the moment who’s really building out their product the right match. They really want him to help doing this so we run a workshop on the weekends. More than 20 phenomenal, analytic CEOs and product peoples and fax their product road maps while we can. So these are the kind of things that — and this entrepreneur was kind of looking at me and saying, “This is just phenomenal,” how I have managed to shortcut my road map development process by a year by just having super smart people that are there to get my thing. So those are the kind of thinking outside the box thinking to do so.
John:
Yes. Well, that’s great because I always love to hear those stories. What also is fascinating to me is before someone can even connect with you, they obviously have had to have had some really good connections and some traction to get their seed funding and then they get, probably, a warm introduction to you, I’m guessing, and, from there, what you do is continue to give them more warm introductions to get them customers and help them take their product to the next level, right? So it’s continually all about who you know and how you can help people and grow that, right? It’s just one network chain after the other.
Claudia:
That is true, but to a point. I have hundreds of entrepreneurs contact me directly to at least check. You can LinkedIn, page, send me a message or a note. I will answer to the phone. Usually, we’ll be at Alice. My email address is on our website, literally on our website. You click on that email address, you go to the secretary, I ask you come to me. I get entrepreneurs who DM me on Twitter. I do say to all entrepreneurs, “If you can’t get to me, you’re not trying.”
John:
Right. I mean, how much easier can you make it, right?
Claudia:
Yeah, so I know when I first started my first company company, I never raised any money because I didn’t know any investors. I didn’t know any VCs. The idea of cold calling or cold approaching a VC, well, it fills me with dread. Over here, I can say, “Bring it on.” A warm introduction is always the best way if you can get one, but if you can’t, don’t be afraid if you’re contacting the person directly through their website or LinkedIn because they really are on the other end of that email.
John:
How many pitches do you think you hear in a year versus the number of ones you actually fund? Is it that 1% number, you think?
Claudia:
Okay, so I see a thousand companies, a year. That’s my regular to pitch. This year, probably maybe 1,500. I’ll meet with 10 companies a week. So that’s about 500 a year. I’ll invest in 5.
John:
Got it. Okay, there you go. That’s what we needed to hear. So, I guess the first question is what’s your discerning factor from seeing the pitches to deciding, “Okay, I’ll meet with these people in person.”? Is it that they have a really compelling pitch deck that solves the problem that you think is interesting and has potential or is it more about them and the team?
Claudia:
Do you know? There actually are entrepreneurs, when they meet me never get the opportunity to open up their computer to show me their strength because I usually just start saying, “Well, tell me about yourself. What do you do?” and it immediately starts the question. I think you should always have your pitch stuff with you because there’s a particular topic like competitor landscape. If it comes up, you want to show it and be ready and then you can send the pitch deck across. If I could have very quickly, the first thing I’m checking with my first couple questions is are you are you with our investor mandate? Are you marketing, advertising, or analytics technology? Are you in that seed exchange from series A to series B? One country or two a little later that typically we’re in that early stage. Then, can you tell me what your product is? I know the chances are a lot of entrepreneurs can’t even tell me what they do. If you can’t tell me, the investor, what you do, you’re certainly not going to be able to tell Mary, your customer what you do. So I want to hear that they can articulate it and then, for me, it really then boils down to have they really tested it out, whether that their product is mission to market made. We call it product/market niche, which is kind of the shorthand that investors use for it. But how I look at that is do you have customers you have signed contracts with and what do those customers say about what you’re doing for them and it’s those customers seeing balance. Because, at the end of the day, for me, if your customers see the value then your investors will see the value as well. But if your customers don’t see the value and if you’re solving — if you’ve got a solution that’s looking for a problem to solve, you haven’t really worked out the pinpoint you’re solving, you’re just going to circle and not get enough traction. So that’s really what I’m looking for.
John:
That’s great and out of the 500 people that you see in a year face to face and fund those 5, do you think you typically have a pretty good gut sense when you’re meeting somebody that’s like, “Oh, this one has the potential to be one of the 5.”?
Claudia:
You know what, it goes through this — I have a complete funnel effect. I will tell you. So I meet 500 people and 100 of them I think are interesting and then I’ll sleep on it, then 50 of them I think are worth looking at closer. So unfortunately, 50 people who I had a great meeting with are going to get a no at that point. Then, of that 50, I tend to start to bounce the idea to talk to my partners and pass to other investors, see who wants that thing. We’ll draw centers what we call investigation on about probably 50 companies. We probably get down to maybe 10 that I do formal choose on. So is there a gut instinct at the start? No. My last two companies that we invested in, my first reaction was I don’t quite believe. So a company that we just invested in got announced today. I couldn’t understand what the special sauce was. It’s like, “What’s your special sauce? I don’t get it,” and that goes back to conversations with the entrepreneur to kind of really wrap my head around with special sauce. But I had an investor who was saying to me, “No, Claudia, this is really phenomenal. This is really world leading,” and, in my initial meeting, I didn’t get it. It took me a couple of meetings to get it. The second entrepreneur I invested in is a chum. He couldn’t tell me what his company did. He was terrible at telling me what his company did so I had this moment where I was like, I told who I am, “I bet you, you’re not going to be able to explain what you do to customers,” I was like, “How wrong was I?” In the third meeting, this entrepreneur had neglected to tell me that he was doing more than 10 million dollar in this recurring revenue to customers a year. That’s just how bad he was at telling a story. He forgot to tell me that he’s got 10 million dollars plus worth of happy customers.
John:
Well, that’s a big take away for the listeners. Don’t bury the lead. If you got some great traction, talk about. Don’t make people dig around or find out about later because you usually don’t get those second chances. There’s a quote on your site that I really want to talk about and get your perspective on because I find it just fascinating from Gartner, which is by 2017, the chief marketing officers are going to spend more on technology than the chief information counterparts. That’s huge! My goodness, what a shift.
Claudia:
And it is absolutely correct. In fact, I think it will probably happen next year. When we put that quote up there, that was when we first launched the fund a couple years ago and people were just arguing with us. They were saying, “No, no, no, Claudia, that’s ridiculous, blah-blah-blah.” Well, it’s how in brand and publisher, you’re absolutely wrong and, now, the marketers – the really great marketers – say they’re analytic people. I mean, they’re not just creative people. They’re analytic people, they’re technologists, they’re in a lot of big data and there’s a very different thing. They’re not truly creative types who need to speak in a dark room. They’re very different.
John:
So let me ask you, is there a book that you think founders should read, either about business or life, that could help them through this journey?
Claudia:
So I’m going to give you an unconventional answer here. I’m not going to say go read how I did it book. Well, I’m sure there are just phenomenal books out there that will help you network, to grow revenue, I mean, there’s a bunch of books out there that are phenomenal for you to go to business and I did find it valuable to read other founder’s books about how they built their business. I think that’s interesting. But, for me, as an entrepreneur, the books I suggest people read are things like Iain Banks. Go read sci-fi and think about technology. The world that we’re going to live in not like 50 years’ time and start thinking about what’s needed there. I suspect if you polled VC’s, they massively overreact to sci-fi. We’re a community of sci-fi geeks —
John:
Martian. I saw you tweeted about Martian, right?
Claudia:
That’s exactly right. We lived in this vision of the future that’s in our heads and we’re looking to technology that can help solve that future. So, for entrepreneurs, I really encourage them to kind of — I know it’s a bit wacky, but go read some great sci-fi.
John:
I love it. I know, because it gets your imagination going and gets you thinking about what’s next as opposed to what is. It’s great. Great advice.
Claudia:
That’s right.
John:
Well, Claudia, it’s been a pleasure having you on the show today. Thank you for all these insights. The numbers of how you put people through a funnel is really fascinating and the kinds of questions that people are going to expect to get asked if they’re fortunate enough to get to meet you face to face. Thanks again.
Claudia:
It’s no problem, John. My pleasure.
John:
Thanks for listening to The Successful Pitch Podcast. If you liked 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 then you make it real then you make 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 than you will get when you hear a bunch of nos 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. Sign up and get in depth information on how you can get funded fast. Thanks.