Today’s guest on The Successful Pitch is Jim Connor who is the executive producer at Game Changers Silicon Valley television show. He’s also involved with a lot of Angel groups up there and on the board of many, and he had a successful exit himself. He said after you have one, everybody wants to be your friend and he says a big piece of advice when in the process of negotiating your exit is don’t take your eye off the ball, keep the revenues up otherwise the people who are buying you are gonna want to renegotiate the price because the projections aren’t being met. He said you need to connect to investors when you pitch, you need to be coachable, and more importantly you need to have really great credibility while you’re giving your pitch so that your integrity comes through if you want to get a yes. Jim has all these insights and more. Enjoy the episode.
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Game Changers Silicon Valley with Jim Connor
Hi, and welcome to The Successful Pitch. I’m honored today to have Jim Connor as my guest. Jim is the executive producer at Game Changers in Silicon Valley. He is a member of the Sand Hill Angels, he was the CEO of the First Focus Learning Systems, and he’s also on the board of the Angel Capital Association and Startup Learning in addition to being on the board of several other successful startups. Jim’s been involved as an investor and advisor to emerging technology companies since 2007, and he’s also the producer of, as I mentioned, this wonderful show on PBS up in Silicon Valley called Game Changers, which I’ve had the privilege of being on. It’s a weekly technology interview about innovation. Previously, Jim was the President of JP Morgan’s SymPro, providing treasury and portfolio management software solutions, so he has an in depth knowledge of what it takes to have a good pitch and what he looks for when he hears a pitch. Jim, welcome to the show.
Thanks John, delightful to be here and nice to have met you previously during the show at Game Changers Silicon Valley.
Yes. So I always like to ask my guests to tell us their own story of origin, and you can take us back as far as you want as to … When you were back in your youth and said someday I’m going to host a television show and start an Angel group. I doubt that was on your radar, but let’s just start from working at JP Morgan.
Well let me start a little bit before that because that’s essentially how I became able to become involved in angel investing. Many people have all types of different circumstances in which they start a company and today, most people go hey we have a great idea and they find 2 or 3 co-founders, and they collaborate and they think this through and they go oh we think we have a niche, we have a tech person, we have a revenue generator, a sales person, we have a management, a visionary if you will, then they can form a company. That’s only really occurred in the last 15, 16, maybe even 20 years at most, the mid ’90s. Before that, the idea of breaking off and starting your own company really wasn’t very common, but more importantly you’re taking tremendous risks, the industry was there but it was relatively nascent, it wasn’t nearly as developed, there was almost no Angel Association or Angel Investor Group.
Most people had an inflection point that they either lost their job, the company went out of business, or something happened like that and they had an opportunity to make a decision and either find another job or do a startup, or do a business, we didn’t really refer to it as startup in those days. That’s what happened to me. I was at Xerox Computer Services, great company, division of Xerox, and one day my group of 35 people was laid off for reduced or we used to say vaporized. It no longer had a future in the company, let’s put it that way. Most got job offers to come into other divisions and I had started doing a little bit of work and helping out PCs, I was fascinated by local area networks and all this, so long story short when the group was vaporized I decided not to take the new offer, but to take severance and it gave me nine months of time to decide if I could get a business up and running. The short story is in nine months I was too far in debt, I had already signed agreements, I had a couple of employees at an office, so I had no choice at that deadline I had set myself nine, ten months out, I just had to put my head down and go forward.
We went through many pivots during the ’90s and really had about three years of insolvency, which I barely was able to get by on. In the late 1990s, early 2000s, 2002, we emerged as a leading provider of what’s called portfolio investment software, or portfolio management software specific to the bond market.
So take us back to starting Sand Hill Angels in 2006 in Palo Alto.
I didn’t start … Sand Hill Angels started in 2001 approximately, right around there, it was a small group, and again that’s in the earliest days where individual angel investors decided to collaborate and come together and pool their monies. It wasn’t me, but it was a group of insightful and well-meaning and well-intentioned guys who had been through successful exits and run businesses. They started the group around 2001. It moved along, it was very careful in recruiting new members on a one-at-a-time basis, very diligently and carefully. Through the exit I had, which was in August 2003, I actually got requested to be an investor by a number of companies. I have a saying, after you have an exit you’re everyone’s best friend. Everyone you’ve ever met comes back and says do you remember me? You start to help them out because that’s what we all do. There’s a give-back philosophy here, and I soon realize I didn’t have the background experience or knowledge to become an angel investor but I was fascinated because I was a product of the environment. So that’s when I looked at a couple angel groups. Sand Hill for me was just chemistry right away, it just fit so well and so easy that it was almost a natural step, so that’s how I joined them in roughly … I believe it was late 2004 I joined.
[Tweet “After a successful exit, everyone is your friend.”]
And you had several offices there. So before we jump into that, since you brought up … We’re gonna tweet that out, after a successful exit you become everyone’s friend. That’s a great line. Tell us what that exit was and what you learned from that.
Well I actually had three exits, three exit opportunities. The first one … And the first two we had the due diligence, and after the due diligence the timing was really up in the air. I did not have what was called an advisor at that time, I had my council, legal counsel. It was a relatively small deal, it wasn’t one of these hundred million plus deals so … And most deals are not a hundred million plus, even today, but relatively small deal, and so we thought we could probably work through it. The size of the deal and the type of companies looking to acquire us are such that they really wanted to deal with the principles, the management team directly, they didn’t want to go through a third party, so that was fine. The downside of that was that we couldn’t put any fire under their feet, if you will, we couldn’t get them to really move forward and they kept, shall we say, peeking around a little bit here, a bit there, and at one point I realized that the deal had lost its energy.
This happens. There’s a shelf life to an M&A deal. It just loses energy and sometimes it’s my fault, the company’s fault, the target’s fault, and sometimes it’s the acquirers fault. I learned later on it was the acquirers lack of carry-through, follow-through, they had management turnover but at the time I didn’t know that so I was terribly, I won’t say depressed, but I was feeling rejected because I thought I had done something wrong and I didn’t have a clue what it was and of course no one would tell me why the yield didn’t go ahead, just that things have changed, we have a different set of priorities, blah blah blah. I was thinking oh, maybe I’m damaged goods, I didn’t know for sure.
The third one, having been through two of them that didn’t work out, I took the third one very cautiously. I don’t want to say I didn’t take it seriously, I did, but I realized it was such a large company going to acquire a relatively smaller company that anything could go wrong at any time or go off track. I took a very casual … I just kept our head down and said we gotta continue to execute, continue to focus our revenue, continue to deliver great products, and that was the right attitude. When an entrepreneur gets into any M&A deal, founding team, they take their eye off the ball and go oh, here’s our exit. Of course what happens is by taking their eye off the operational side, because they kind of have to because of all the distractions of requests for information, the business revenues or something starts to go down or level off and right away the acquirer says oh, things aren’t quite going as well as we thought they were gonna go, we projected, now we’re gonna have to readjust our terms.
[Tweet “Don’t take your eye off the ball when you’re exiting.”]
Oh my gosh. Wow. Well you know you bring up a really interesting point, Jim, that I’ve never really thought about, it makes perfect sense, which is dealing with the delays and even personal rejections happen at the beginning when you’re trying to get funded, and then they happen at the end during your exit. It’s the same dance, if you will, right?
One of the keys in life is learning how to deal with rejection, I think, if you had to pick one thing. If you get rejected for some reason, you can get frustrated, you can get mad, or you can get analytical and you can start to iterate through the processes to improve on it, so rejection is gonna come no matter what. I have to say, the third opportunity did work out and go to a close because I’d had the two rejections along the way. I knew the process, I knew the ups and downs, and I just took them in stride.
So valuable. Can you take us a little behind the curtain? Because so many people are so fascinated with what does an angel group say when they’re not in front of the people pitching them? Any inside secrets or things that obviously aren’t confidential but, just the whole philosophy because I think I’m always telling people, the more empathy you have for the investor, the better your pitch will be. So if you can give us any insights as to what investors care about when they hear a pitch or what they wish people would know that would make their pitch better, that would be fantastic.
John, that’s a really great question. It’s a very long … It’s got potentially long-winded answers, I mean there are variations, but I’ll give you a couple thoughts that most entrepreneurs miss. That is how to connect with the investor or investor group. So before you go and try to make your pitch, start using all the wonderful tools we have in social network space, Facebook, LinkedIn, Twitter, whatever, to a) follow or connect to these people that you later on want to talk to, and second, contribute or make comments on their blogs, their shows, whatever they do. Get to know them through social networking, okay? You can really raise your visibility quite easily with a little bit of diligence without going to any meetings at all, but by just working the social network environment.
[Tweet “Connect and follow investors on social media before you pitch them.”]
And then in that relationship the entrepreneur almost always should be, and almost always has to be, somewhat of an expert in some area. Find that area where you’re an expert and deliver value to the investors, deliver value through your expertise, get to know them that way. You can do a number of things where you are an expert in helping. In due diligence, or making comments, or writing a blog, or more importantly, being a commentator on their blog, that’s a tremendously powerful thing.
You can really start to change … get your visibility up a little bit. Then, when you meet with the investor, take it from their point of view. You’ve got your point of view, they know your point of view too by the way, take it from their point of view, which is … They’re looking for successful companies they can build. If they ask you a question that you don’t have a great answer for … They’ll say I see you have this … You don’t have anybody in your team that knows marketing and your product and service is very dependent on a flawless execution of marketing, you want to say Bill, Mary, Jane, whatever it is or however you want to … You know, you’re right, we are aware of that problem. We would really welcome any insights, recommendations you have to people you’ve seen who are good at addressing that issue of marketing, because you have a much greater range of knowledge, visibility, and understanding of how difficult this is and so at this point, rather than us go through some iteration of trying to recruit somebody, any recommendations or contacts you can give us would be most appreciated.
Let me just restate, if I may, what Jim just said before he gives us more gold, because I don’t want you to lose this. You’re talking about the very definition of being coachable, which is versus argumentative and defensive. The fact that someone points out a flaw, or an error, or something missing, you don’t get defensive about it, you literally say you’re right. People love to hear it when they’re right. I just can’t emphasize that enough. You’re right! This is not a new thing that we’re not aware of, and you’re right. And then you took it one step further, with this whole concept of we’d love your advice, as opposed to we have all the answers. Man, if you tell … If you’re not defensive, and you’re open to advice, you come across as the all important coachable, and you just gave us specific examples of how to come across coachable and connected. So we have the two Cs from you already Jim, this is fantastic.
Good, thank you. Glad we’re making progress. Anyway, I’ll give you one more that is very high on everybody’s list. People will talk about the team and that’s a subjective area, but the other one is absolute integrity. Let’s look ahead a little bit when you don’t have integrity because you don’t always catch it upfront. Sometimes you do because you’re gonna ask questions and the person, you know they’re not quite telling you the absolute truth or they’re giving you half truths. Later on after you’ve made the investment, you realize that that values system where they’re okay telling you half truths or partial truths carries forward into the communications after you’ve funded the company.
Therefore, you get a half baked update on the business plan and the progress they’re making, you get half baked updates on potential problems, and pretty soon you find your understanding of what the communications you’ve heard from the company and what’s going on with the company are completely misaligned or out of sync, put it that way. That’s one of the reasons that the integrity is so important. I have to say that I’ve seen investors in conversations where I’ve been a part of it say well Mary doesn’t know everything but she is high, she has high integrity, you ask her a question, she’s gonna give you a straight answer. If you say Mary, do you like the dress I’m wearing, or the jacket I’m wearing, she’ll say no that’s not my favorite color, I think you would look better in a different color. She’s not gonna lie to you and say oh yeah you look wonderful, you’re so handsome, you know? That’s what you really want to see. Now you can use integrity with a little bit of diplomacy and say things in a pleasant way but you don’t want to allow the main truth, the main fact, to get diminished or to be opaque in any way.
Well what I’m hearing you say is what integrity gives you is credibility.
Because that’s really what … If someone’s … It starts at the very beginning. From the pitch, through the due diligence, and if you’re not telling the truth and being completely credible, as you said the half baked ideas, then no one’s going to … That’s just gonna continue and you’re probably gonna get a no during due diligence because you’re doing that. If I was to sum up what you just gave us, in terms of the 3 Cs, it’s connect, coachable, and credibility. Those 3 Cs would make anybody much more likely to get a yes from you or any other investor.
I’ll give you one other one here, too.
Inevitably, you don’t get funded because … First thing you think is you’re not that good at it, you’re not ready, you’re iterating through the process, and every time you get a “We’re not quite ready, you’re not quite ready for us, you don’t quite fit our profile, we didn’t get enough investors to come together,” you want to say I appreciate that feedback, I just so value the relationship I have with your group, your team, you, whatever it is, say “Can you give me any areas that I can work on to make my presentation better?” 99% of the time they’re gonna say well since you asked, I’ll give you these areas. Nobody wants to be critical of another person, but it’s relatively straight-forward to be constructively, to offer constructive advice when a person admits that something didn’t go well and they’d like to know how to do it better.
Love it. Well let’s talk a little bit about what you do on the board of Angel Capital Association and Startup Learning.
The Angel Capital Association is a group of about 220 angel groups throughout the U.S., you know there are many now. There’s been an explosive growth of angel groups. It used to be just that you had essentially what were people who more or less had been in a startup and sold it, had an exit of one type or another, there are some people that were early employees at Google and various companies like that now, Yahoo and of course Microsoft, they’ve all become … Because they’ve got enough wealth, frankly, to theoretically invest 5-10% of it in this very, very risky environment and not have their long term financial independence affected. And they love doing it, that’s the other thing. So the Angel Capital Association is the organization that does policy, public policy, whether it’s affecting laws in Washington, comes up with best practices, has annual and regional meetings to do angel training on various new topics that are coming out, works with M&A, talks about due diligence … That’s what the Angel Capital Association does.
There are 16 people, I believe, on the board, and we serve for a period of three years per term. We have our officers elected. This year the summit for the Angel Capital Association will be in San Francisco April 26th-28th.
28th … I’m sorry, 26th through the 28th, let me get it right, yeah. There are a lot of groups that come from outside the U.S., there are groups in Australia, New Zealand, all through Europe, and these are all good partners of ours also.
How important are warm introductions to you as an angel investor?
You mean for an entrepreneur?
If an entrepreneur wants to get in front of you, do most of the deals you fund end up coming through warm introductions?
Well, I’ll put it this way. Most of the deals, it’s a lot easier if it comes from a warm introduction, and there’s really two areas you can do it from. You can get a warm introduction and if it’s in my sweet spot … My sweet spot is educational and payment, so I like education applications for a variety of reasons and I like payments because I believe it’s still a great frontier out there, that the payments space still has plenty of room for innovation. If you’re in payments or if you’re in education, you can pretty well either get an introduction to me and I’m happy to meet you or talk to you, at least talk to you about it. You can probably contact me directly but you need to also give me a good reason to talk to you.
Right now we get so many emails and so many LinkedIn connections that are “Hey, I’m in life science and I’m doing something for restore vision or to prevent vision loss.” I haven’t a clue what that is, and I’m fascinated by the idea but I’m not a good lead investor. What you want to get is a lead investor or at least a lead sponsor. So you want somebody who’s got credibility in the group for that domain. You see, if I go to my group and start saying hey I just found this great vision, solution to vision care, everybody looks at me and says you’re not a life science guy, why are you bringing us … I have no credibility, if you will, in that area. But if I go and I say hey I just found this great payments, or I find something I think is a game changer in education, I will get people who will listen to me and they’re friends of mine, typically. Even if they aren’t friends they’ll listen because I’m kind of known for those two areas.
Sure. That’s really helpful. That’s fantastic. And then finally, your TV show, Game Changers, how did you come up with the name of that? I love it.
Well, yeah, I love this story myself. I have this other company called First Focus Learning Systems. We teach after school and summer camp environments for reading, writing, math, and learn to code. This is essentially K through 8th grade. We found there is such a demand. I stumbled into this, there was no magic, I stumbled into it, but I like the idea. We just thought that if you can’t read by 3rd grade, you’re in trouble. See if you can read, you can self-educate. If you can write, you can communicate your ideas for the world, and if you can code, the universe is yours. The world is yours, okay? So it’s really reading, writing, we tossed math in there, and then learn to code. But the reading and writing is so crucial to long term educational capacity, your ability to educate yourself and communicate that I did this.
This is gonna be a little bit of a long story. How do you advertise, or how do you promote your program? Well you do a video. So I went and got a couple teens, they did some video, and I really didn’t like the outcome. I’m pretty picky about it, so I said well it can’t be that hard, so I literally went and bought a camera, started shooting my own stuff, I go well this is a little bit more difficult than I thought it was. I’m not that bad. I eventually found that there was some courses, because I did a lot of YouTube self-training, some classes down at KMVT, the local community college’s station, on how to direct and how to produce shows. I went over there, took the classes, and at the end, the final, the class says well you gotta do a show now. Well I like to play tennis so I did a show on tennis for 20 minutes, and at the end of that they said you know, this wasn’t bad for a beginner. Why don’t you volunteer for a few more things, learn the equipment better, and then you might consider having your own show.
So that’s part one of the story. Part two of the story was how do you pick a name. You’d love this one. So I wrote up a business plan, like anybody else would in any kind of startup, and I said okay heres the idea behind it, here’s this, here’s that, here’s the reason, here are the names, I get five names. My favorite name was Don’t Quit Your Day Job Yet. That was my favorite name. But the group I met with, which was essentially the executive director of the station said oh I don’t know, that’s name is not gonna work. Then I had Silicon Valley Game Changers, and she literally said “Why don’t you reverse that, make it Game Changers Silicon Valley.” Shelley Wolfe, the former KMVT executive director made that suggestion. I said “I like it.”
Nice. It’s great, it’s really memorable, specific, and everyone thinks of everything being so disruptive and lots of things being changed with all the startups there so it’s really … It tells you what the show’s about and makes you want to watch it.
Let me add this … I had to write up the business plan. I had to write up the idea. If I hadn’t been willing to do that, she could’ve never made that insightful suggestion.
Ah, yes, because you gave her enough information about it.
There’s my point. That’s my point. People say I just want to talk, I don’t want to have to write this out. Well, come on now, put pen on paper, there’s a reason. It’s not that we can’t talk, it’s that we want to look at this and get insights from the printed words.
Well it’s just what you said earlier, right? If you can’t read, you’re in trouble, if you can’t write, you really can’t express yourself, and then coding, of course, is the ultimate language. But it’s not enough just to be able to talk and read, you have to be able to write so, that’s great. Jim, is there a book that you’d want to recommend as you leave our listeners that either is inspiring or informative that you would recommend for personal or business reasons?
Well there are … There’s really two books, and I’ll give the first book to you … Some people I had on the show recently called … “Decoding Silicon Valley” is the name of the book, it’s by Michelle Messina and Jonathan Baer. It’s a book about when people either come to Silicon Valley, or frankly they go to any investor group, Silicon Valley being very large and very, wide variety, a lot of depth here … It talks about when people come here, how do you get started, what do you do, what are the important points, much like we talked earlier about credibility, and coachability and things like that.
Through a variety of stories they talk about when you first arrive what do you do? Then after a few months you go to these meetings, what do you do? They intend to decipher, if you will, the mixed messages that many people get. The message people see, and the mythology is, you come here, you go to a couple coffee meetings, and in four weeks you’ve got a couple of checks and a terms sheet sitting on your desk. The reality is, it might take up to a year to really get traction and demonstrate that you’ve got a viable product. People underestimate how competitive the startup market is here in Silicon Valley, and frankly startup marketplaces come out of everywhere, but here you have so many people coming from all over the world. So this is a great book, they were on the show, we did two interviews, the first one was on the book, and the second one was what does it take to write a book? There was a great oversight also.
The other one is “The Innovators Dilemma” by Clayton M. Christensen. I like that book, I’m still reading it because I kinda cherish, as I go through I like to think about it, the innovator’s dilemma … It’s about when you’re an innovator if you’ve really got something going, when do you really want to make it visible and public? Because if it’s a great idea, people are going to copy it who are bigger, who are larger, publicly funded, a lot of resources, and they may crush your idea before it even really hits that inflection point of taking off. It’s not like wow this is really blue skies stuff, but the reality is many ideas get compromised because they got out there a little too early. I heard a famous story that there were many competitors for Microsoft and that one of them almost got away and got into the market, and then of course through fear, uncertainty, and doubt, Microsoft was able to put out the word that product or that company was never gonna make it. Nonetheless, this book about innovation and how to manage it and how to get through it is also a highly recommended book.
So those are two books, I love to read books, I love to read spy novels, as a matter of fact, I’m not sure why, but I like mysteries.
Nice. Well we’ll definitely put those two in the show notes, that’s fantastic insider information because you definitely have your pulse on everything going on in Silicon Valley and hosting a show you are up to speed, so thank you for sharing that. Thank you for being a wonderful guest. I am honored to know you on a personal level because I’m your friend regardless of whether you had a successful exit or not and I just love what you’re doing in helping entrepreneurs, so thank you, Jim.
Well John, thank you, like I said, I was delighted with your … I wouldn’t call it a performance, but your personality on the show was so insightful. I’ve never had anybody do that, and we did it realtime, as we mentioned, and so … I really enjoyed meeting you, I want to keep the relationship up. I’ll be down in Los Angeles at some point and give you a ring a couple days ahead of time, see if we can’t get lunch or something.
Can’t wait to see you again. Thanks, Jim.
Appreciate it. All right, John. Thank you.
- YouTube: www.youtube.com/user/GameChangerSV
- Book: “Decoding Silicon Valley” by Michelle Messina and Jonathan Baer
- Book: “The Innovators Dilemma” by Clayton M. Christensen
- John Livesay Funding Strategist
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