TSP011 | Randy Rayess – Transcription

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John Livesay:
Hi and welcome back to The Successful Pitch. Today’s guest is Randy Rayess, the co-founder of Venture Pact, which finds software developers for companies that need them. He is also an angel investor and ironically both what he does at Venture Pact and being an angel investor requires screening good talent to be on your team.

He said you need a cultural fit, good communication, and figuring out the combination of passion and the ability to motivate others. Are you a self starter or not? When you come up with your problem to solve for the market place, if you’re working on a tough problem, you need to realize it requires both patience and persistence.

Randy has some great insights as to exactly how to look at life and how to make your business successful. In fact, he was a finalist in the Innovative Awards for 2014 and he’s got all kinds of innovative ideas that he shares with us in this interview. Enjoy.

Hi and welcome to The Successful Pitch podcast. Today’s guest is Randy Rayesss who is the co-founder of Venture Pact as well as being an angel investor. So, Randy has incredible insights into investing and figuring out what the market needs as far as what the problem is to solve so much so that he was a finalist and innovative of the year for 2014, so he’s got lots to share with us. Welcome to the show, Randy.

Randy Rayess:
Thanks for having me.

John:
Randy, I gave, as you heard, a brief, brief introduction as to who you are, but I would love for you to take our listeners back to how did you get the entrepreneur bug? Was it while you were in college or even earlier?

Randy:
I think it was more a fortunate kind of stream of events where a few of my friends had recommended I check out a few companies and one of them was in LA and one of them was in San Francisco, so I kind of worked for summer in LA and then I worked in San Francisco for a bit. It was kind of working in that environment that got me into, so kind of, I stumbled upon some entrepreneurial companies and they kind of got me into that mindset. So, it was a random stream of events.

John:
Is Venture Pact your first co-founding startup or was there another company you were involved with before Venture Pact?

Randy:
Formally co-founding Venture Pact was the one where, like, the one I spend the most time on and the one we’re still working on and has been most excited. I have worked on a lot of other startups informally or formally in different types of roles. Some are more general, some are analysis roles, some are developer roles, but I think I’ve got, you know, I’m able to work different types of startups to get a sense of, you know, what are the challenges of working at small companies and what are the kind of opportunities that exist and how that varies obviously from larger companies where you have, it’s a very different working environment.

John:
Well, that’s a great segue into your experience lend you to see a problem that a lot of startups have, which is a shortage of quality software developers, correct?

Randy:
Yes.

John:
Obviously investors are very interested in who’s on your team and the synergy that you have and do you have developers that have a good track recorded of working for other startups that have been successful so you and your partner decided let’s figure out away to match developers with the right companies and that’s the dawning of Venture Pact, is that accurate?

Randy:
Yeah.

John:
How long ago did you start and how did you decide that you could come up with something that caused you to be a finalist and to be so innovative?

Randy:
Yeah, sure. I think the key for us was we had worked – so after I worked at a few startups and I got into the investing space and my business partner, Pratham, who I had known from college also had worked at a few startups, had some experience in investing. So, we both kind of recognized that when we worked with companies that there was a bottleneck when it came to executing on software building, web apps, mobile apps, and the question we thought about was this is a pretty big problem. It’s kind of consistent across the board for technology companies, it’s like, how do we get better talent, how do we get more talent, and so that’s kind of got us excited about the problem was that it was pretty, kind of, ubiquitous.

The way we thought about solving it was we knew this was tough to solve, right, a lot of companies have a problem and their solution, there’s no really good solution. It means it’s not an easy problem to solve, so we said, okay, that’s exciting, you know, we’re working on that problem. We knew it was not something you can work on overnight, that you can solve in one night, so we looked at kind of the key problems and one of the main things was just the supply/demand imbalance, which is the key issue. When you constrain yourself to a local, smaller base around your office.

So, what we got more excited about was the thought of remote work and if we could help companies figure out how to hire remote talent and help companies engage with remote talent, then you could be sitting down in New York and you can hire someone in Wisconsin. You could be sitting in San Francisco and you could hire someone from Denver. You could be sitting in Florida and hire someone in Tennessee. So, you can start doing these things that are initially were not available and suddenly the pool of talent available increases quickly.

John:
I love what you said there earlier about when you guys realized that you were working on a tough problem. If it was an easy problem, it would have already been solved by some other startup, but it’s so important for the listeners to realize that if you’re solving a problem in the market place with your product or offering or SAAS, whatever it is, if it’s a tough problem, it’s not going to get solved overnight. That’s such an important point and to realize not only are you guys helping people think outside of the box, but literally think their geographic area.

Randy:
Yeah, exactly, exactly. I think it’s one of the things with startups, it does require a lot of patience and extreme persistence, because if you’re solving a problem that’s not easy to solve, which most startups are unless you’re trying to do something and focus more on the fashion, the marketing side. If you’re more of a tech startup, usually you’re working on something that’s difficult, the product is difficult. In fashion it’s more of the marketing that’s difficult, but in any case, I think the key is that you just need to have a lot of patience. It doesn’t happen quickly.

There are very few companies that – you know, some companies will grow very quickly and able address a problem and grow bright from the first few months. Most companies to really find what, you know, what you call product market fit and then a scalable, repeatable process, post-product market fit that does take time, so you have to have the patience and the persistence to get through that.

John:
I love the iteration. So, that’s going to be one of the Tweets from this podcast. Patience and persistence from Randy Rayess. The double R meets the double P, right?

Randy:
I like it. I like it.

John:
So, tell us about being an angel investor and how being an entrepreneur helped you when you’re doing your own analysis to decide who you’re going to invest in.

Randy:
I think, everyone always says it’s the people that matter most with companies and the reason is that at the end of the day, the company, what a technology company is doing today is going to be different from what a technology – that same technology is going to be doing in three years and that’s pretty much across the board. So, the technology companies are in the business of innovation. So, when you’re in the business of innovation, what differentiates companies is talent and so talent is like the number one most important thing. That’s the key. So, the question is how do you screen talent? It’s interesting because that’s what we do. At Venture Pact, we screen development talent.

John:
I love that. Let’s just take a minute and really focus on how much insight you have into screening talent that’s going to be the right fit for a company to hire and then as an Angel investor, you had to screen the talent of the team to see if that’s the right team to invest in for you.

Randy:
Yeah, exactly, exactly. So, it’s interesting, there’s some similarities and some differences. So, with tech talent, you look at the – there’s the coding skill set, which is pretty clear, like you have to access them for coding. You’re the code, but there’s a lot of other things that need to be assessed for which is called (#8:16) and communication and then there’s remote specific things that we have to screen for, because when you hire someone who’s remote, it’s different than hiring someone who is sitting across the table from you.

So, there is remote specific things we have to do for screening, but you know, obviously communication and cultural fit and just the concept in the assessment of someone actually being a self-starter and self-motivated to be able to manage this remote environment. So, that’s the key. Vetting people for founding companies, the key difference is you’re also looking for people who you think can motivate other people to join them, can motivate other people to handle, you know, if you think of a startup. So, think about it like you have this kind of crazy marathon run with a bunch of obstacles on the run.

John:
I love that.

Randy:
And so, you want to think about which person is going to be able to get over all those obstacles and convince his team to jump with him over these obstacles. Sometimes it might take you awhile to figure it out. So, you’re going to be frustrated when you’re stuck behind one bottleneck, but you need someone who is passionate about a problem, someone who understands it, and someone who has that ability to lead and motivate teams and convince people to join even when they come across all these challenges.

John;
That is so insightful. So, when someone’s pitching an angel investor, you or anyone else, they need to come across as someone who not only is passionate and understands their market, but the key element that you really honed in on there is can you motivate other people A) to join your team and B) stay motivated to run that marathon with you. You know, that’s a lot of skills for one person to have and the need to have all that come across in a pitch is really key. Can you talk to us about some of the best pitches you’ve heard and what made you say wow, that’s someone I want to be in?

Randy:
Sure. I think one of the key things I want to qualify is that it’s a team of people that you’re vetting. It’s not one person. So, when you’re founding the startup, you’re running a team, which is different from one person or when we vet a team of developers, it’s also different from vetting a founding team that’s going to run a company, so that’s one thing I wanted – when you’re looking at vetting a team to start a company, you also want to understand the market that they’re in and what their problem is.

So, if you’re going after a food company, food tech, right, then you want to see like, what’s their experience in food and like the basic things around their understanding of that industry, but then what are the key characteristics of someone who is going to implement this, so you’re going to need someone who really understands ops and supply chain, right, operations and supply chain, and then they are going to need someone who is going to think about distribution and how to get their products wherever they need to go, which is like sales, and then you’re going to go by the technology, which is the technology product that they’re using to manage whatever they’re trying to do, so any food tech.

So, ideally you’re going to have three people, one who is a master of supply chain, one who is a master of distribution and sales, and one is who’s really good at tech, then you have a good team mix. If they’re all really talented at what they do and they have and so that’s kind of the first layer. Do they have the right combination of skills. Secondly is how excited and passionate are they about this concept, okay. So, someone who’s like been in the space and understands it and has been in it for awhile, they recognize a problem, usually the problem is well informed, right.

So, you’ve been in – you understand the space, so you have a reasonably good understanding of the problem. So, can you define the problem you’re going after very well and do you understand it and then the next thing is can you talk through or know something about problems and do you feel like they live and breathe, like this question of how to solve it – are they living and breathing and thinking about it all the time and as you discuss it with them, you can see. If you ask them a question and they don’t know the answer to it, then you’re asking them a question or – they can’t answer it intelligently and they’re like, oh, I’ve never heard of that question. Usually that’s pretty bad, because you only spent 10 minutes hearing this and you already come up with questions that they’ve never even –

John:
They haven’t even thought of.

Randy:
Yeah. Now, sometimes if it’s a younger company, you know, it might happen, but ideally, we’re like we’ve thought about that, that’s a great question and they have a bunch of things these are possibly solutions. We can’t guarantee these are right. We’re going to test them or this is why this is a bad question, that means they’re thinking about this all the time. It’s in the back of their head. So, there’s a couple of things there, but really, it’s an imperfect science to judge people. It’s an imperfect science.

John:
It’s like hiring, yes. So, when you heard a pitch besides the combination of the right people and being able to find and understand what the problem is and they live and breathe it, is there any one pitch story that stands out to you that’s like not only did they have all that come across, but they told me a story that made it interesting and memorable that made me want to invest. Is anything pop into your head for that or something you would describe Venture Pact if you were to come up with a story? Do you have a specific story of somebody not being able to find somebody and how you solve that problem and then all the great things that happened once they had the right match?

Randy:
Yeah, so I’ll take the second point, the story for Venture Pact. Yeah, I think we have a lot of stories like that and what’s interesting is – I can give you one example. So, we’re going to the company, they have a really cool, really cool product and they’re trying to say like, alright, what we’re trying to do is we’re trying to change the way companies cobrowse, so a lot of customers service people, when they’re trying to speak to their customers, you know, they’re speaking over the phone and it’s hard to really communicate the problem you have.

So, if you can actually browse the same, you know, cobrowse, and be on the same page at the same time, then it’ll be very profitable for all these customer service people and there’s obviously thousands of customer service people and all these big companies have this problem. So, they were like, okay, this is actually not an easy technology problem to solve because you have so many different browsers and different types of browsers, etc, etc,

So, they needed to scale their tech team and so they came to us and like, alright, we need to scale our tech team, you know, they’re very talented developers, but again, you can only do so much as a few developers, so they wanted to scale out their team and they were looking for people with specific language experience and specific experience with browsers, so we connected them with a team that fit criteria that they wanted which is their budget, their location preference, and the technology skills that they wanted and they were able to build that out and they built a very powerful cobrowsing platform and then they were able to sell the company for a very nice return and it was basically they had a great idea, they built a solid solution, they just needed to scale it out and they just needed tech talent.

John:
I love that story because there’s a problem, you provided the solution, scaling it, and the result was they were able to sell the company that would never have happened had they not used Venture Pact. That’s the kind of quick, easy to understand problem solution result formula that I love to work with my clients on getting that everybody can easily grasp and understand.

Can you speak a little bit, Randy, about the cultural fit. Not so much with what you’re placing people into the company, but it’s the same kind of thing when you’re wearing your angel investor hat, what do you look for in a company culturally. A) Do they have a culture defined, I guess, to see whether it’s a culture fit for you personally to invest in.

Randy:
Can you repeat the question?

John:
Sure, what do you look for in a company as an angel investor, what kind of culture do you look for to decide whether that fits you and the kind of culture you like to work in. Obviously, you’re an innovative person, so I’m guessing you like to work with companies that have that as their culture, but are there other things that you look for in a culture?

Randy:
Sure. One thing I like obviously, we like to look for companies that we work with is if we’re going to mentor that company, it’s obviously better if we have the experience relevant to what they’re looking for, so if it’s a company that’s innovating a woman’s purse company, like it’s a new woman’s purse, I don’t know that market that well, I don’t have that much experience in buying women’s purses. I just don’t know the industry.

So, I’m not able to give a lot of guidance. I can give some guidance into the tech marketing and some guidance in the tech product, but I’m not going to be the best investor for them. Like, they need someone who understands fashion and understands their customer whereas someone who is doing a market place product, right, they’re building a marketplace or they’re building something relevant to remote work or they’re building something relevant to procurement or B to B services or B to B buying or payments or things like we’ve spent a lot of time on or international transactions, international that’s where we specialize in.

So, that’s where I can add a lot more value, because we had o deal with a lot of those challenges as we built our Venture Pact, so Pratham and I can add a lot more value and my business partner and I just have a better understanding of these things. So, I think, you know, the key is like how much value can you add and how good of an understanding of a space, of the space do we have.

John:
So, you’re not just interested in giving money, you’re interested in becoming a partner with them and using your expertise to make the company grow, so you’re investing your money and your skill set it sounds like, is that accurate?

Randy:
Ya, and I think one of the ways that’s – that is accurate. I would add another point to it where that would be, you’re going to invest much better in companies that you understand. So, if I’m investing in a fashion company and it’s going to be much harder for me to really know if they’re doing something really powerful and different or not. So, that would be a main point. If I’m investing in something that I don’ understand..

John:
It’s like buying a stock that you don’t know what it does.

Randy:
Exactly, exactly.

John:
What range do you like to invest in? When someone needs a certain amount of money and you’re like, oh that’s too low for me or that’s too high for me, what is your sweet spot as an angel investor?

Randy:
I think, well, we don’t, there’s no like specific thing, even at Venture Pact, like we’re already with the companies. We’ve worked with startups that are actually building their first product and we help them build their product or we work with companies, like the one I mentioned, where they, you know, they already have a team, they already have a product. They’re just scaling it out and so, there’s I would say, we don’t usually specify that, like this is a company that we like and that we think we can help.

John:
Got it, so if somebody said, I need $250,000 and wanted to approach you as an angel investor or I need $500,000, if the fit was there, that kind of price range is something that you typically look at as an angel investor?

Randy:
Well, so, I mean, if they are looking to raise, – it depends on the round. The structure of the round and who else is investing and so our network of our investors, so obviously I have a network of people that we, that I pass deals to and we kind of think about together on deals, so it depend on the network and how much each person in the network is willing to contribute. So, we are always open to looking at deals and passing them around and it might be that I am not a good fit, but someone else I know is a good fit, so you know, there’s a lot of passing around of deals, that would depend. It’s something that would depend on the situation.

John:
Right and for someone to even become aware of you as a potential investor and your network of investors, there’s a warm connection ideally the way you like to meet people.

Randy:
Yeah, so warm connection is good, definitely. It helps validate the person. Sometimes there’s just great people who reach out directly you don’t know. It’s hard because you just don’t, like from an email, there’s a few sentences you’re reading and you’re kind of scanning, you get so many emails, it’s just hard to make a good assessment, so sometimes you’ll miss out on people that you just don’t have time to respond to. So, warm connections are good, because then you have someone else that you know that can vouch for specific things about the person.

John:
Right.

Randy:
But yeah, it’s one of those things where it’s like, ideally you just reach out to the person and you know, we can respond, but in today’s world, email has become a challenge, so warm introductions are preferred, yeah.

John:
Right, and then when someone pitches you, you prefer the pitch being live versus you looking at the pitch first before you met them.

Randy:
The key is to make sure this is (#20:00) company so, you know, a lot of times companies want to jump on a call straight away and that’s going to be tough. Usually it’s best just to kind of make sure it’s a good fit first so what you’re talking about, what’s your industry, what’s the experience, what are you trying to solve. That validation part, it’s just to make sure you’re not, because if it’s a company that I don’t have experience in, then there’s no reason for us to take your call, because I’m not going to be able to help you on it and if I can help you, it’s me introducing you to another investor, so first let me see that other investor. And see if he’s interested. So, you don’t really need to jump on a call with me. I can just see that, assess that on my own.

John:
Do you look at an actual deck or do you just a couple of lines, like a 90 second pitch.

Randy:
Yeah, sometimes (#20:44). Well, I guess the, you know, the long deck, you can’t spend that long, so you really skimming them. I would recommend shorting the decks, because if you shorten the deck, you’re choosing what I’m spending my time on, other wise, if you have a long deck, I’m choosing what I’m spending my time on and so you might have something important that I missed on.

John:
The shorter decks actually get more focused than a longer deck. That’s a great takeaway. What if someone is trying to invent some new kind of game for people to play and it’s not technically solving a problem, do you have any advice for those kinds of developers?

Randy:
Yeah, I think, there’s the standard advice, which is like, if you’re trying to build a game, you know, the way games go if you look at history and how games goes, it’s pretty kind of organize and kind of crazy somehow the way some companies go. We’ve seen some gaming companies just sky rocket in countries where there was zero marketing and overtime it takes over the small countries and then it starts to grow into other countries, so it might, I would say, the first version of your game, gaming development is not cheap.

Obviously it’s expensive, it’s time consuming, so I would try to create whatever that sticky component, what’s the stickiness of the game. I would try to build a very small game that includes that stickiness component and try it out and just try it out, you know, going through gaming forums and things like to see if it works.

Once you’ve done that, then I would start to think more about the next, it’s like, is this, because gaming is all about, it’s entertainment, so when you’re looking at entertainment companies, it’s like how sticky is it, is it entertaining or do people enjoy it, how many times are using coming back to it.

So, you want to understand your metrics and see likes which type of gamers like your product, so are they gamers who use, call it x, if you like product x, you probably like product y. So, let’s see what affiliations. There’s many things you can do to get cross market and things like that. The main thing I would say for gaming is don’t spend too long building your first product. You want to assess the stickiness.

John:
I love what you said about it if you like this game, you probably like that game. People love those kind of references, especially since it is entertainment and that’s how movies are pitched.

Randy:
Exactly.

John:
As we’re wrapping up our podcast, it went very fast, you gave so much great information. Is there any one particular book or books that you like to recommend to startups either about investing or just life in general?

Randy:
That’s a very tough question, because there’s a lot of books that I like.

John:
It’s not Sophie’s Choice, you can pick more than one.

Randy:
Okay, good. There’s, I really like the book Drive by Daniel Pink. He talks about how to motivate people, which is very important and there’s a lot of things in that book that help you, when you think about how to manage employees and work with employees, so that’s a good book.

I like the book by Grove on Only the Paranoid Survive. It’s an interesting title. About the book is he talks about the challenges of managing and leading companies and so one of the things he talks about in the book is that if you’re not paranoid and then you’re less likely to successful, because the world changes so quickly and you can quickly become comfortable in something that you once worked and no longer does or will no longer work and so what I liked about his take, as a leader, you’re a great leader is if you can act in the times of struggle.

When there’s terrible things happening in the company. If you can act without having the emotional baggage of what once was in the company, if you can act as a newcomer. So, he asks this question, like if I’m a new owner, if I came in – if they fired me and I came in as a new CEO, what would I do to revive this company and basically what that means is if I was to take out the emotional attachment that I have with our existing business, what decision would I make? And that’s how – he talks about a personal story how he moved Intel from the memory business to the microprocessor business and the reason he made that big shift was because he realize that another CEO came in, they would do that specific thing and he just had this emotional attachment to the product.

So, that was a great book and then, you know, there’s a few other solid books if you want to look at personal challenges of entrepreneurs, there is a book by Eckart Tolle (#24:41) called The Power of Now. If you want to look at the – if you’re interested in just the process, like Lean Startup, obviously, there’s Eric Ries, Lean Startup and there’s Reid Hoffman’s book on networks and how the new age of employees and he has good books there.

John:
That’s great. I really like this concept of Only the Paranoid Survive and really taking a look non-emotionally, very left-brain, like renewing your wedding vows almost.

Randy:
Yeah, yeah.

John:
And taking a whole new look of recommitting yourself to where you are. Randy, thank you so much, if our listeners want to follow you on Twitter and LinkedIn and follow what’s going on with Venture Pact, what’s the best way for them to stay in touch with someone with your insights and see what other awards you’re going to win and follow your career.

Randy:
I would say Twitter is great. My Twitter handle is @RandyRayess. LinkedIn is pretty similar just LinkedIn.com/in/RandyRayess. So, those are two ways to reach me. Of course, if you’re interested in Venture Pact, then it’s just [email protected]. So, those would be the three main ways.

John:
Fantastic. Well, Randy, I’m so excited to watch Venture Pact continue to soar and I know you’re going to do a lot of more innovative things in the marketplace and we’re thrilled to have had you on the show. Thank you again.

Randy:
Sure, thank you for having me.