TSP053 | Claudia Iannazzo – Transcription
Posted by John Livesay in Uncategorized0 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.
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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.