Secrets of Equity Crowdfunding – Interview with Nathan Rose
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Episode Summary
Nathan Rose is from New Zealand but calls himself a digital nomad and lives all over Europe. He’s written a new book on equity crowdfunding, not only for the US but multiple countries across the world. He also gives out a tool at the end to use for equity crowdfunding that you’re want to be sure to listen to and start using right away. Nathan talks about how fund raising and marketing can be done simultaneously with equity crowdfunding. However, there are some downsides compared to Angel Investing and he goes into what those are.
Listen To The Episode Here
The Secrets of Equity Crowdfunding – Interview with Nathan Rose
Welcome to The Successful Pitch. Today’s guest is Nathan Rose, who is originally from New Zealand, currently talking to us from Budapest, and calls himself a digital nomad, which I just love so much. Nathan has a background in investment banking and he went to school in New Zealand and now is the director of Assemble Advisory, which has raised over $11 million. They are equity crowdfunding experts. He takes information and modeling and makes it easy for company founders. They know the market, they know it works and most of all, they can get you results. He is the author of a new book coming that is called Equity Crowdfunding: The Complete Guide for Startups and Growing Companies. Nathan, welcome to the show.
Hi, John. It’s a great pleasure to be here.
Nathan, I always like to ask my guests, how did you get into crowdfunding, in your particular case? When you were studying at university, crowdfunding was probably in its infancy and certainly nowhere it is today. How did you go from being investment banker to being an expert in crowdfunding?
What I really saw when I founded Assemble Advisory was that these startups weren’t being adequately served well enough.
The path of crowdfunding that I help with is actually quite similar to investment banking. When I was working in New Zealand, we would do a variety of deals, some bonds, some rights offers, but the path that I really enjoyed most was the early stage initial public offerings. That was growing companies, entrepreneurs with big dreams and big ambitions. Equity crowdfunding has a lot of similarities with that. It’s startups at an earlier stage. What I really saw when I founded Assemble Advisory was that these startups weren’t being adequately served well enough. The investment bankers wouldn’t generally bring their skills to bare because they needed to pay for the big expensive officers in downtown. Startups couldn’t afford those sorts of fees. There was this ground swell of entrepreneurs coming through with equity crowdfunding, which weren’t being served. That’s where I saw the opportunity to provide the services around that.
We’re always talking about who do you help and what problem do you solve when you give a good pitch. Can you describe what you’re doing in those terms?
I suppose a good example would be an entrepreneur from a sales background or from a technical background who wants to do equity crowdfunding but doesn’t know the market, doesn’t know the different platforms. Because there are a lot of them, especially in equity crowdfunding. The rewards crowdfunding which is important to distinguish here, the Kickstarters and IndieGoGos, which most people are familiar with. Really you would use one of those two platforms in the majority of cases. With equity crowdfunding, it’s much more country specific so therefore if you’re a UK company, you use one platform, if you’re a US company, you use another platform, if you’re a New Zealand company, you use another platform. It’s all subject to different securities regulation. The typical case of who I’d help would be an entrepreneur, a growing company that wants to do equity crowdfunding but needs some help to in terms of communicating their story, approaching the platform and ultimately getting funded.
What would be the main reason somebody would decide to get funded through equity crowdfunding versus an Angel for example, an Angel group?
I think there are advantages and disadvantages to both, we can go into that.
Yes, please.
I think one of the big advantages of equity crowdfunding over Angel groups is the ability to do fund raising and marketing at the same time. When you think of the startup, those two things, getting marketing exposure and raising funds, are usually number one and number two on the list of things to do. Until now, they’ve always been viewed as separate activities. When you pitch into a VC or to an Angel, you’re inside a closed shop and there’s not a lot of publicity there. When you’re doing an equity crowdfunding campaign, it’s out there in the public and a lot of people can be attracted, not just through their investment dollars but through other partnerships too.
[Tweet “Equity Crowdfunding has the ability to do fundraising and marketing at the same time.”]
Great. All right, let’s take a deep dive into this because it’s fascinating to me. I believe it will be to our listeners. You have the choice of doing friends and family obviously, then you have maybe you actually do a little rewards crowdfunding to get some proof of concept. Now, you have to decide whether you’re going to pitch to Angels with a pitch deck and all that good stuff and do it live ideally with a warm intro. Or if you’re going to use an equity crowdfunding platform in your particular country. Is there only one per country? Tell us how do people find where to go.
That’s a very good question. There are multiple crowdfunding platforms in each country. As it turns out, they tend to have network effects happening with each platform, as in the bigger ones tend to get bigger because they attract most of the investors and they attract therefore most of the biggest companies and end up getting bigger by that process. How to find them? That’s actually a really difficult thing right now. It’s something that I’m trying to solve in terms of helping people to get more knowledge about which platforms are out there and what the different strengths and weaknesses are. In the US where most of your listeners may be from, there are a couple I can talk about. There’s WeFunder, which is by far the largest right now. They’re responsible for the first title III crowdfunding offer to raise a million dollars. There’s also Republic, which is born out of Angel List as the equity crowdfunding phase of what Angel List do.
Let’s just take a minute on that. How fascinating is that, everybody? That a lot of people think, “I’m going to put my little pitch deck up on Angel List and hope for the best.” But now Angel List has said, “Ooh, we want to get into the equity crowdfunding business as well so we’ve birthed our own called Republic,” if I heard you correctly.
That’s right.
Are a lot of people doing both or do you recommend people do one or the other?
In terms of?
Doing a listing on Angel list and a listing on Republic equity crowdfunding.
I see. Generally, you don’t really have to choose.
That’s what I thought.
You have to decide which platform makes the most sense because running concurrent offers gets really messy really quickly. We can maybe talk about some of the disadvantages.
Sure. Let’s talk about what’s the downside if it’s all, gosh, if I’m going to raise money and get marketing, why wouldn’t everybody be doing that and not do anything to Angels anymore? There must be a reason to not do it and just do the Angel route. What are your thoughts on that?
You got to do a lot of the things in the background before you get ready to go.
I think the biggest reason is if you’ve got one Angel who’s ready to write a check for you. It can be done a lot more quickly. An equity crowdfunding is not just a case of putting your campaign on the sites and waiting for the internet to shower you with money. There’s typically a two or three months process that goes on behind that to put together all the author material, the video, drum up your supporters. It’s a launch, it’s a marketing campaign. You got to do a lot of the things in the background before you get ready to go. Whereas an Angel can be a lot quicker and cleaner for the companies.
Interesting. I’ve heard the phrase from my business partner, Judy Robinett, that with crowdfunding, you have to bring your own crowd. Do you like that? Do you think that’s true?
I think that is true for some platforms but not for all. This is one of the things that I always tell the entrepreneurs that I work with. There’s a really big difference in between the various platforms because the real value add of an equity crowdfunding platform is the audience that they bring to you. Bring your crowd along, that’s great. Any crowdfunding platform can do that and facilitate the payments and the process and then all that stuff. The bigger platforms are going to give you the added benefit of having their investors who are sitting there waiting for new investment opportunities to come along.
Instead of crafting a pitch deck per se, when you’re going to pitch an Angel group or VC, depending on whether you’re seed or series A, you’re talking about having videos created on the equity crowdfunding platforms, correct? Is that in lieu over the pitch deck?
It’s more as well as I think.
As well as.
You’re still going to have to put together a pitch deck and actually that pitch deck takes more of a longer form because the idea is that you’re seeking small amounts of money from lots of different people. You have to be able to tell your story completely. Because when you’re pitching to Angels, you’re in front of those Angels and they’re getting to ask you questions. There’s still that ability in the online forum but the information has to stand on its own much more in equity crowdfunding because you can’t go around shaking hands with everybody who’s going to pledge $100 at a time. That’s why the videos are so important.
A pitch deck for an Angel group typically, it’s ten slides, ten minutes and a ten minute Q&A. How much longer is a pitch deck that you recommend on an equity crowdfunding and how long should the videos be?
[Tweet “You need to be able to capture people’s attention quickly.”]
I’ll say about two to three minutes is right for a video. You need to be able to capture people’s attention quickly and then convince them to go into the offer in more detail. The video is like the hook if you like. You don’t want to make it too long, you need to make it attention grabbing. I think if there’s one area that you should spend a bit of money on, which is never a thing that startups like to hear especially when they’re trying to raise funds, get a professional video done for sure. It makes the big difference.
Nathan, would you agree that it’s really important not to spend your two minutes, three minutes on a video giving just a product demo? That’s not what people want to see in a pitch for Angels. I’m assuming, that’s not what should be in a video for equity crowdfunding. Am I right or is it a product demo?
I think you’re absolutely right. You’ve had a lot of experience with this too, John. Of course founders are very very experienced normally talking about the features of their product and selling their product but they’re least good at selling their whole business model. You’ve got to excite people about the investment opportunity too.
Terrific. One of the things in chapter three, you talk about is equity crowdfunding right for your company. You’re quoting Nathan Lawrence who raised over 800,000, is it New Zealand dollars on Snowball Effect?
That’s right.
He said, to raise that kind of money, I don’t think people think about equity crowdfunding as raising that seed round of money. When you raise it with an Angel group, that can take a while too because you have to get in front of the right group and then there’s due diligence, which is anywhere from, I don’t know, 45 to 90 days depending on how fast you go back and forth and come up with the terms. How long is a typical equity crowdfunding to raise that kind of $800,000 mark, let’s say?
It’s fairly interesting. There are I think three phases involved. There’s the phase where the offer is actually open. That would be 30 days or 45 days typically. For a lot of people, that’s all they see and they don’t see the preparation that went into that to get that campaign to go live. Before that 30 to 45 days, there’s a preparation phase where you’re putting together the video and getting all the content together. I would say that would be about two to three months that you need to budget for that or up to six months. It can easily blow out depending on how much resource that the founder can put into it and answer emails and so on. An interesting anecdote that I’ll share with you is a company called Monzo in the United Kingdom. They actually closed their crowdfunding round for a million pounds in 96 seconds, 96 seconds it was done. They’d raised their one million pounds.
All right. Let’s hear how that happened.
When you think of who was investing, it was their customers.
The funny thing is, that makes a nice headline. 96 seconds, a million pounds. Really, it was a year in the making that whole campaign. When you think of who was investing, it was their customers. Having that user engagement at the core of everything they did was what enabled them to ultimately raise in that 96 seconds.
That’s really the bring your own crowd in action right there. Your own crowd is your customers and anytime your customers become your investments in any kind of platform, you have a win and other investors want to join in because they figure if your customers want to invest, you really have figured out something that people want.
The parallels with Angel Investing are quite strong in that regard. No one in Angel Investing wants to be the first one in, but once the first one does go in or they can sense that there’s some kind of momentum in the offer, then everyone jumps in really quickly. When I said before that for the bigger platforms you can rely on their audience to some extent, that’s true but you got to generate your own momentum first. If you’re working with a big established platform with a big audience, if I could just throw a number out there it would be something like 50-50 in terms of the crowd you need to bring yourself and then the rest of the crowd will follow along with you. If you can bring that initial momentum to bare.
Let’s go back to this 800,000 round. I’m sure that wasn’t just a bunch of people pledging 100 bucks. Because typically when you raise 800,000 with Angels, it’s 250 here, 300 there, that kind of stuff. Is that how it works or is it much smaller amounts that add up to 800,000?
It can be both is the short answer. There’s a company called Haughton Honey again in the UK who raised very large numbers of small amounts of money. But there are other ones out there who put their minimum investment amount right up at 20,000. That means that you’re not going to get the crowd to come along and you’re going to just effectively do an Angel round or VC round but do it through the efficiencies afforded by the crowdfunding platform.
Would you say that when you’re raising that kind of money, 800,000, that it is typically one or two people starting off on 100,000 and then other people following with similar type sized offers?
I would say there’s a very well established thing in the equity crowdfunding world which is the concept of a lead investor. Crowdfunding absolutely has a higher rated success when you can bring an Angel investor along into the round. Effectively, they anchor the round, they might put in 25% of the round themselves and before the offer has opened, they’ve done things like negotiate the valuation, negotiate the offer terms. Make their name and the experience they have in the industry public. In that way, the people who want to just chip in $100 or $1000 can say, “Hey, there’s this really smart Angel investor here who knows what he’s talking about, who’s put their own money behind it and come up with a valuation that they’re happy with.” For mom and dad investors who find it difficult to value early stage companies, and even the professionals do find it hard, they can then follow on and invest with the Angels, which I think it’s a really good way to do it.
If I understood you properly, one way to go is to do the normal route of have a pitch deck, use your network or hire someone to get you in front of the right Angel investors. They come in and they say, “You know what, instead of having my Angel group fund this whole round, let’s go with an equity platform and I’ll give you this amount of money. I’ll be the lead investor for equity platform as opposed to the lead investor for other Angels.” From there, you start getting other people in.
Yup.
Now, doesn’t that make the cap table very complicated because you’ve got all this people putting $100, $1000 there and you’ve got to give equity each of those people? Does it cost you to have to give away more equity when you do it this way?
The valuations being achieved through equity crowdfunding are somewhat higher than pure Angel or VC rounds.
I think there’s two questions there. It doesn’t mean you have to give away more equity. I think the answer’s no. I think actually in general, the valuations being achieved through equity crowdfunding are somewhat higher than pure Angel or VC rounds.
That’s good to know.
The reason for that is when you go through an equity crowdfunding platform, often there’s more standardized documentation and you as the entrepreneur can set your own terms and then the crowd either follows along or doesn’t. The successful rounds are sometimes getting better terms. The other part of your question was about the messy cap table. There are ways to mitigate that. One of the ways is through a nominee structure, as in all of the smaller investors will end up becoming a holder in a nominee company, which I’m going to explain quickly. It means that that nominee company will vote and make decisions together. If you’re a company founder and you need some kind of shareholder resolution or you ultimately going to sell the company, then there’s just one nominee company that needs to vote and the provisional nominee manager will take care of all the investor communication for you.
Interesting. Now, is that based on a majority rules or is it the one guy who’s supposedly the professional decides for everybody?
Generally, it’s majority roles.
Got it. Let me ask you also about the cost because you write about this. There’s a price tag attached to using an equity crowdfunding agency. Is that like a broker taking a percent of the money they help you raise with Angels and VCs?
The crowdfunding platform will take a cut but generally that percentage is based on success. The fees that founders are really concerned about are the upfront costs, like getting your video done, legal work, anything like that which will be charged regardless of your success or not. It really depends on how much hand holding you need. If you can find the platform yourself, you’ve got a huge email list, which means you can just get the investors to come along or maybe you had someone in your team who’s good at the social media and the video and you can self produce all of that. The cost can be very low. If you need more hand holding by professionals, then yeah, the costs can mount up to, I’d say that maybe in the US, something like $15,000 or $20,000 might be typical, maybe less than other countries where there’s a less a restrictive regulatory regime.
I wanted to ask you one of your earlier comments about don’t expect to just put your stuff up on the equity platform and expect the magic of the internet to do all it’s work and people are just going to find you with your cool pitch deck and engaging video. What else do people need to do besides bringing their own crowd to that platform to market this?
I think you need to make the investment itself step up because you’re going to do a lot of outreach in an equity crowdfunding campaign and people need to see something good there when you direct them to the page. Otherwise they’re going to click away, never to return. I think being good at telling your story, this is exactly the same stuff as you’ve talked about on your podcast many times. Having a clear story about what the problem is, how your company solves it, why people should get excited about your uniqueness and your positioning, how it’s going to make money, all that good stuff.
[Tweet “Have a clear story about what the problem is and how you solve it.”]
Bringing your crowd to the offer, there’s so many ways to do that. I think one mistake that people make is they rely on social media too much. They think that it’s got the word crowdfunding in its name so you can run it exactly like a Kickstarter or an IndieGoGo campaign where if the product is itself just cool enough it can go viral through tweets and shares and likes and all that stuff. I think in equity crowdfunding, it’s more important to go to pitch events that the crowdfunding platform will organize.
Got it. Let’s take a moment and just pause there. That’s a really good piece of information. A lot of people will say, “I know there’s Angel groups that have meetings,” but there are actually equity crowdfunding meetings that you can go to and encourage people to go check out your platform without having to literally pitch them. I’m guessing you’re probably going to have to pitch them a little bit to intrigue them enough to want to go check out your platform. Is that right?
Yeah.
Those events?
The way that one of those events would typically work, there’d be maybe you and five other company say that are giving a short introduction and you hope that you can excite people and that audience enough that they go into your page. By the way, at those events, they do get the chance to shake your hand.
How do people find out about those events, Nathan? Is it just googling it or are there something to belong to?
Those events are organized by the platform themselves. Again, the US is a few years behind some of the rest of the world, which is unbelievable really given the home in Silicon Valley and the whole startups scene. The UK and the rest of Europe is actually quite a bit more advanced in terms of this sort of thing. There’s some places that you can find these crowdfunding pitch events. If you’re in London for example, you could sign up to the Seeder’s Blog, Crowd Cube, Syndicate Room, those are three of the big platforms in that market, or else just ask your local startup incubator or accelerator.
That leads me to the question about your insights on the title III law passing here versus what’s going on to the rest of the world. What are your thoughts on that?
It’s fantastic firstly that the US is now part of the equity crowdfunding revolution. A title III crowdfunding allows a startup to raise a million US dollar in any twelve month period. There are a few extra restrictions compared to more liberal regimes like New Zealand and the UK, but at least it’s a start and we are seeing some money being raised. One of the things that’s in place in the US for example is that ordinary investors who don’t make the sophisticated high net worth threshold, as in people who basically aren’t really rich. They can only put in $2000 maximum into each crowdfunding offer, or five percent of their annual net income. That’s in place. I guess that means that if you were in a comparable market, you could have more people putting in amounts greater than 2000. In the US at least, retail investors can only put in that 2000 in each offer.
Typically within an Angel group, if they already have one type of person they’re investing in, they won’t take on a competitor. Is there anything within certain platforms in equity crowdfunding that they say, “Oh, we’re already funding something that is in healthcare for, whatever, Doctors on Demand. We can’t have another one going on concurrently.” How does that work?
Because they’re on the site, they can see your offer too.
This is a bit like the IPO window back from the investment banking days, which was that each company would try to find a slot where they’ve got the attention all to themselves. I actually think the opposite is true in equity crowdfunding because if you’re on the platform at the same time as a bunch of other offers are, then it’s actually positive because you’re going to get the benefit of everybody else’s outreach efforts and everyone else’s audience that’ll maybe go to the platform for your competitor or for other companies, which aren’t even related to you but are just crowdfunding at the same time. Because they’re on the site, they can see your offer too.
Is there some barrier so your competition isn’t seeing all of your secrets? Because a lot of founders are so paranoid. Obviously investors don’t sign non-disclosure agreements, but do they say, “We already have this. You can’t come on here.” I’m not 100% understanding the yes or no to that.
I think the answer is no, that you will be subject to other companies coming on at the same time.
You have to put enough out there without giving away your “secret sauce”. You can say how, you can say what you’re doing, but you don’t necessarily have to go into that much detail on how you’re doing it unless you want are competition to see it. Would that be fair?
Right. We talked about advantages and disadvantages of equity crowdfunding. I think this is another of the disadvantages. If you are not comfortable with your business’ whole revenue projections and business model and what you think of the market and what you’re doing and strategy being out there in the public domain, then equity crowdfunding isn’t for you.
Got it. Much like people go from a seed round from Angels to series A with VCs, are you seeing a lot of people go and get their seed round up to a million dollars from equity crowdfunding and then VCs are more than happy to fund that just like they would an Angel round?
I think there is still something of a negative stigma around it from some Angels and VCs, as in if the cap table is messy, like a nominee structure hasn’t been used, then they might be a little more hesitant. But I will say that their perception is changing. Some Angel and VC companies, this is just true of the economy in general, some people just don’t like new ways of doing things. In Europe at least, we’re seeing that they’re becoming more comfortable with us. If they want to get access to the best companies and some of the best companies are using equity crowdfunding. Ultimately John, a VC will invest in a company no matter how messy all the structuring is if the company is a great company.
Has a huge potential and traction and a good team and all the other good stuff. I love storytelling, Nathan. I’ve saved your story about how you wrote the majority of your book in a small town in Georgia. Tell us that story.
That is Georgia, the country. Not Georgia the state.
Okay. Tell us where Georgia the country is for those of us who may not know.
Georgia is located north of Turkey and south of Russia, around the Caucus mountains, just between the Black Sea and the Caspian Sea, which is not the typical place to hang out. The reason for going there was to get away from it all for a couple of months while I wrote the majority of the book. It was successful. Two months in a little hideaway where no one knows you, it’s a good way to get a lot of work done.
I bet. Really focused. Nathan, how can people follow you on social media? Do you have a website you want to direct people to?
Sure. The website is AssembleAdvisory.com and within that is the page on the book, which is out now, AssembleAdvisory.com/book. That’s Equity Crowdfunding: The Complete Guide for Startups and Growing Companies. If you’ve heard this podcast episode and you want to know more, then now that’s available on Amazon.
Great. What is your Twitter handle?
My Twitter handle is @Assemble_ADV.
Okay, let’s repeat that for everybody. @AssembleADV.
Yup, short for advisory.
All right, great. We’ll put all this in the show notes. Nathan, thank you so much. Is there any one last bit of advice or thought you want to leave our listeners about equity crowdfunding or just being an entrepreneur in general?
I’ll share one tool if that’s okay, John.
Yes, please.
The tool is Thunderclap. Thunderclap allows you to prearrange social media shares. If you’ve got a crowdfunding campaign coming up and you want people to share the word on Facebook and Twitter, you can get them in the weeks and months leading up to your company actually launching to pre-commence on Thunderclap. That way when your campaign goes live on the arranged date, everyone tweets and Facebook shares at exactly the same time.
Brilliant. That’s a great, great thing to do. That’s bringing your crowd to the crowdfunding. There it is. Love it. Thank you for that great tool. Thank you for writing this book. Thank you for sharing your expertise with us. It’s been a pleasure.
Thanks, John. Thanks for the podcast and everything that you do too. It’s been great.
Thanks, Nathan.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
Equity Crowdfunding
Assemble Advisory
Nathan’s Twitter
Crack The Funding Code!
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The Intersection of Technology and Health – Interview with David Whelan
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
David J. Whelan is a seasoned strategy, business development, and general management executive building businesses and inspiring entrepreneurs at the intersection of technology, health, and wellness. David discusses how he combines his love for health and the tech industry into one, and what a successful pitch looks like, when aiming towards these types of investors. Listen in for so many great nuggets of wisdom from David on the topics of investing, raising capital, and building your network.
The Intersection of Technology and Health – Interview with David Whelan
Welcome to The Successful Pitch. Today’s guest is Dave Whelan, who is a seasoned strategy business development and general management executive, which builds business and inspires entrepreneurs at the intersection of technology and health and wellness. He’s a consultant and advisor and operating executive. He devotes his career to building successful businesses. He was an integral part of the creation of the New York Genome Center, a unique not for profit scientific research institute where he was a chief strategy officer and collaborated on the development of the business plan fund raising of $115 million. He launched one of the first fitness tracking wearables with 24 Fitness. He holds an MBA with honors from UCLA Anderson School and a BS in Symbolic Systems from Stanford University. Dave, congratulations on all that accomplishment and welcome to the show.
Thank you so much. I forgot about the with honors parts. I’m not even sure if I deserve that. Thank you for reminding me.
What is Symbolic Systems? What is that?
It’s Symbolic Systems. Essentially, it’s an artificial intelligence human computer interaction major at Stanford. It is indeed a real major. Marissa Mayer is probably a more famous alum of the Symbolic Systems program than me. Hopefully I can catch up with her at some point.
You’re in great company. How fantastic to be able to be that cutting edge on artificial intelligence, which is sort of the future internet of things and all kinds of stuff.
Exactly.
Wow. Let’s dive back into, what made start there? I want to hear about that. How did you even decide, “I want to learn about artificial intelligence and make that my major.”
The intersection of technology and health and wellness
You mentioned this intersection of technology and health and wellness. I’ve been in technology my whole life, or passionate about technology my whole life. The health care part came accidentally later. I was definitely one of those computer kids growing up. My first computer was a Texas Instruments, TI 994A, which was discontinued about a month after my parents invested in it for me. I switched over to Apple and I’ve been an Apple guy forever. In fact, I purchased the first Macintosh for my school district to run the high school newspaper back in the late 80s. Early adopter, and all of that got me excited about the world of artificial intelligence, which seemed to the next big thing at the time.
That led me to Carnegie Mellon for a year and then I transferred to Stanford. Loved Stanford, loved the program and was still passionate about technology. I graduated into what was not the best market for artificial intelligence. AI was in a dormant stage at the time. My first job out of college was actually with a biotech incubator, probably even before they were calling them incubators. I was hired not for my biotech expertise since I had none, but I was literally hired as the IT guy in this firm and that quickly evolved into more of an operations role. I guess I’ve actually been connected to life sciences my entire career but took a pause there after that job and spent about six years as a retained executive search consultant.
Again, this is mid to late 90s in San Francisco. It was just an amazing time for technology businesses, for telecom, eventually internet. Probably the best time ever to be a search consultant. We were building venture backs, senior management teams for again, technology companies, telecom companies, some biotech, some consumer, automotive. It was a lot of fun. I probably could’ve stayed doing that forever but I was about to turn 30, really wanted to get my MBA. At the same time, the dotcom crash was happening so it was a perfect time to take a change of scenery. I moved to LA to attend UCLA Anderson School as you mentioned.
As I said, I really loved Stanford undergrad but Anderson I think was absolutely the best time of my life. Amazing professors, especially in the world of entrepreneurship, an incredible network that I draw on every day and some great opportunities. Even though I love LA, it gave me a chance to study at London Business School on exchange, which was just an amazing opportunity in one of my favorite cities. This was beginning of second year of business school. I actually arrived in London on, I think it was the first, maybe second flight from LA to Heathrow after 9/11. Just a weird time to be travelling, weird time to be leaving the country but also an amazing time to look back and see what the world was thinking about the US during those days. A sidebar, but interesting time.
I graduated with my MBA in 2002 and I’ve spent the past almost fifteen years now as strategy consultant, advisor, interim executive. That’s been areas as broad as technology generally, in aerospace, in defense, but more and more the health and wellness space. You mentioned the wearable world, which was my entrée into that. I was working with a subsidiary of 24 Hour Fitness and we had a chance to launch what was one of the first fitness wearables and online nutrition programs. This is way back in 2004. We were absolutely ahead of our time. Lesson learned there is do not launch a fitness wearable in a world that doesn’t have the iPhone or Facebook. It will fail.
Let’s talk about that for a second because I think one of the most important things when you’re pitching an investor, there’s two questions, why you and then the big one is why now? If you have this great idea but now is not the right time for Uber or fitness wearables if people don’t have enough smartphones to use them.
Technology and Health: We had this intersection of need and technology and an amazing solution.
Exactly. First of all, we were, in some ways, lucky enough to be part of this large global organization that was looking at investments perhaps a different way than a venture investor would, but the same questions I think apply. The why now aspect in some ways made a lot of sense from a standpoint of the need was there, the technology was coming together. We had this intersection of need and technology and actually an amazing solution. The challenge comes essentially from the network effect aspect or the lack thereof in this case. When you think about something that’s very personal like fitness data, fitness tracking and ultimately hitting your goals, or when you think of anything that involves connecting with other people, you’ve got to have the tools and technology to allow for that network effect.
Again, in a world without smartphones, without Facebook, we were launching into a vacuum. The exciting thing about that is ultimately the company that we were partnered with, which is called BodyMedia, got acquired by Jawbone. Their technology is still involved in what I think will be Jawbone’s new clinical work. The founder of that company, BodyMedia, is Astro Teller, who went on to run Google X or Alphabet X, whatever they’re calling it now. The cutting edge, a bunch of new technologies. There was some amazing people that were part of that. A lot of the efforts lived on. I took that experience about health care data, again, put it in the back of my mind for a little while. I was doing some work in aerospace and defense.
A few years later, this is back in 2010, ended up getting a call from a friend of mine who was in the life sciences real estate and economic development world in New York. She had a colleague we’re working on this for, what they were calling New York Genome Center. I basically saw this as a three month consulting opportunity with a trip or two to New York that ended up being a three year crazy ride with almost weekly commutes between LA and Manhattan, where we launched this large scale, non profit research institute. I was the first business person the team.
As you said, helped to write the business plan. I was part of this massive fundraising effort, helped to recruit the launch team and ultimately set the wheels in motion for what is now a world class research facility that is part of multi million dollar NIH funding grants for things around Alzheimer’s and autism. They’re doing some amazing work. I’m convinced that someday, some aspect of cancer is going to be cured there or something like that and it’ll an amazing thought that I was involved from the beginning.
That must make your passion really strong for making a difference in the world. Talk about the fundraising for non profit of over $115 million. Is that from one big government grant or do you go pitch it, like you would if you were a profit company with Angel and VCs?
This was very much multiple funders and very much like a pitch for venture backed startup. In fact, while this was a non profit, we were in some ways running it very much like a technology startup in terms of how we built the plan, built the business model, even recruited. From a funding standpoint, we started out by talking to what will be the course stakeholders, which were the academic institutions, the large hospitals in New York and literally going door to door, drumming up support. This was maybe a little bit different from an early venture effort.
If you think about getting in front of Angels, in front of incubators and accelerators, just in front of the movers and shakers in your community. This was very much what we were doing. Helping them understand what the vision was, why New York needed this, what the opportunities would be for them and their institutions as well as beyond. Those academic leaders, academic and medical leaders in New York, then led to some of the major philanthropic funders, led to some commercial funders. Ultimately with that momentum, we were able to go to the city of New York, the state of New York and ultimately even some other, as I mentioned, more recently they’ve got an NIH funding. This builds on itself.
Technology and Health: There’s a lot of similarities in terms of how you tell the story, how you get in front of one person, which leads to others.
While I can say that raising money for a large non profit in New York is in some ways much easier than raising money for a for profit venture in San Francisco or Los Angeles. I think there’s a lot of similarities in terms of how you tell the story, how you get in front of one person, which leads to others. Ultimately, how you use one success, one small success to move the next one. Eventually, you can bring in hundreds and millions of dollars to get this thing off the ground.
You’ve talked about networking twice, once with your experience in how the UCLA Anderson MBA continues to help you with your network and now you just brought it up again, which I love, which is one network connection gets you into another network connection. Can you give an example or a case study story of that happening for you?
Sure. Again, you hit the nail on the head in terms of networks leading to other ones. Actually, I’ll start with a story. This just came to me last week. One of my inspirations in the life sciences world, who also has a connection to UCLA Anderson School, is a guy named Larry Bock. Larry lived in San Diego, actually he just passed away last week after a struggle with cancer. That’s why he’s been on my mind very much recently. I never met him but inspiration to me in terms of this guy literally built 50, 60 life sciences companies in San Diego and beyond. He was part of the Illumina founding team and the genome sequencing space. He also had a passion for STEM education, launched science fairs, science festivals.
The Rainforest: The Secret to Building the Next Silicon Valley
He was highlighted a few years ago in a book called The Rainforest, which was talking about the Silicon Valley eco system. He was highlighted as, what they call, a keystone species in anthropological or ecological standpoint. Keystone species are these standout species that somehow make connections and exist in different eco systems or pull them together. In the context of innovation, this book highlights keystone species as someone who connects people who could benefit from working together. They might not work together under normal circumstances because of things like geography or cultural differences or trust or things like that.
When I think about it, and I’ve been inspired by that my whole career as trying to be a connector. Ultimately the idea is everyone is part of hopefully several networks, maybe many networks. This could be schools, it could be workplaces, it could be religious organizations, it could be geographic communities, it could be volunteer efforts. Each of those networks hopefully is a source of amazing connections. Everyone needs to think about how they keep each of those networks fresh, how they stay connected to them, how they contribute to those networks.
Back to this idea of the keystone species and Larry Bock, how do you actually take the leap to help connect people from these vastly diverse networks in a way that they would never meet each other but once they do, something amazing comes from it? I think it’s the idea that you can be at a cocktail party with your friends and have a conversation with someone and realize that this ties into the business meeting you were in last week or the conference that you were attending last month and you start to connect the dots and start to bring people together in a way that creates these really rich interactions. Hopefully, what comes out of that are businesses that would never have existed or investment connections that wouldn’t have happened. Eventually, you can change the world because you’re connecting people in a way that is very unique, very creative and hopefully redefining an industry.
Wow, that’s great. You’re almost like the catalyst, set up those connections that would never have made. If you connect the dots first and see the big picture and then step out of the way, magic can happen.
Exactly. I was at a conference a few weeks ago called Ideas Los Angeles, which was an amazing multi cultural, multi faceted conference around both health technology and entertainment technology in LA, Silicon Valley and beyond. First of all, I invited a ton of people to this event and so I ended being able to introduce people who, not only might not have met but were in the same place. There was one person I met there who was working on an amazing integrative health and wellness business and another one of the companies that I advise, which is building conference app tools for the life sciences industry. I saw some connections there and couldn’t introduce them directly at the event and tried to introduce them after the event.
[Tweet “Technology and Health: It takes vision and creative foresight.”]
One of the individuals said, “That sounds cool. I don’t really see the connection. It doesn’t make sense right now.” I actually pushed both of them to get together and talk about their commonalities and where they might be able to collaborate. Both of them after this meeting said, “Wow, this is great. We never would’ve even thought about this. Thank you for making the connection.” Again, sometimes it takes some vision, sometimes it takes some creative foresight, sometimes it just takes luck where you hope people will connect. If they do, great. If they don’t, there’s honestly no harm and maybe they’ve met someone that at least they like socially.
You’re creating real value so when they come across someone that they can refer to you as a potential client, as a consultant, they’re more than happy to do it, which is a great way to drive business.
Exactly.
Let’s take a little dive into when you raised over $25 million with the Precision Medicine venture. That was a for profit I’m guessing, yes?
Yeah. Again, another unique angle on fundraising. This was a commercial spin off from a hospital, from a cancer hospital, that was a public benefit corporation in New York. Which means it’s a non profit enterprise that’s got ties to the state, operates somewhat independently but in many ways like a state organization. In that effort, we were really focused on the typical starting point of let’s understand what the opportunity is and build the plan and start to build the story. We were putting together relationships where we were seeking funding both from the hospital system itself as well as from, ultimately from the state, both existing state moneys, Empire State Development Corporation, which is the state’s economic development arm, and eventually teeing this up for broader external investment.
[Tweet “Technology and Health: See the opportunity, build a plan, build the story.”]
Again, a little bit of unique twist on funding. In some cases I think, when you’re in a funding situation, and you could argue it happens to people in any company when they’re going to their boss, when they’re going to the general manager, their division, and they’re trying to fight for budget for the next year. Ultimately, planning for your budget for the year, planning for budget for a product launch, a marketing strategy or an invest in a company, there’s a lot of similarities. It’s really about having your plan straight, having your numbers straight. Being able to tell a story in a really strong way to get these people not only wanting to be a investor and a funder but ultimately being an advocate, being an ally, being someone who can then take your story to the next funder. Whether that’s moving in an organization, whether it’s going to the board or whether it’s going to a larger a investor down the line. Again, I think there’s a lot of common ground there.
When you’re talking about health care and you’re saying the importance of a story when you’re pitching for this kind of money, do you give an example of one particular patient and that person’s story so it’s really specific? “If we get this money, then we can do this for this cancer hospital and save someone like XYZ person who was suffering and who doesn’t have to suffer,” for example?
I think that’s absolutely one angle. The great thing about health care is that while it’s a large industry, really the largest industry out there by some measures, it’s also very personal. Everyone has dealt with health care on their own, they certainly dealt with it with their children, with elderly relatives. Health care is just, by definition, a very personal topic. This idea that when you’re telling a story, how do you do something that can provoke, that can inspire, that can challenge, that can tease what the solution will be? Bringing it back to something that is very personal, very relatable.
Technology and Health: Build a story that can provoke, inspire, challenge, and tease.
I’ve certainly seen, not so much in an investor pitch, but certainly in public pitches or public presentations. Even the ability to bring a consumer, bring a patient into the story physically, bring them into this presentation to have them tell their story. Have them talk about where they’ve come from, who their family is, where this disease, this condition, this situation came about, what was the discovery process, what was the diagnosis process? Then either they’re pushing for a cure, which is that big north star vision, a massive goal we can think, about or they’re sharing how this solution might have helped. I find that something that the public loves, investors love but it’s also something that I think really is the way to connect the scientist and physicians to this whole investor conversation and customer conversation.
I think there’s a lot of people who give scientists or physicians a bad rap because they’re not always business people and they don’t have that business mentality. That might be true in some ways but from my standpoint, when I work with scientist and physicians, I help guide them and help them realize that in many ways, the scientific method and scientific research are really a lot like entrepreneurship. You got to identify a problem, create a hypothesis, find the funding, pilot your solution in some way, you asses the results, you course correct and then you keep at it until you’re successful.
When I get in front of scientists and talk to them about this fundraising effort shouldn’t be scary, shouldn’t be foreign. It’s actually something you do all the time anyway. This whole idea of building a company is not that different from putting together a massive experiment and hopefully coming out with some great results. Once I make those connections for scientists and physicians, it clicks in a way where they become a really strong part of the process, which then makes them that much more sellable or approachable or understandable to not only investors but ultimately the customers or consumers who are buying this.
What you’ve done is you’ve given them a story, an analogy to follow to create a story. You say, think of it in terms of how you do scientific work and then just transfer that to the ability to run a business. You create story that they are familiar with and that’s the power of storytelling. When you can get people to put themselves in the story, then they come alive. I really like what you said, when you pitch, you want to provoke, inspire and tease the solution. We’re going to tweet that out from the episode, that’s a great line. Let’s switch gears really briefly here about what you did at the Chinese Casino Game Leasing venture. That sounds interesting.
There’s some good lessons and some cautionary tales in that one for sure. As I said, the intersection of technology and health and wellness, sometimes that is very much in the health and wellness space. Sometimes it’s a little bit more on the tech space. A few years ago, actually through a business school network connection, I got introduced to a Chinese, almost family office investment group, that was in the process of assembling an investment fund to acquire some casino game leasing operations in Taiwan and the Philippines. This is a few years ago. I’ve traveled a lot of places, but at the time I had never been to Asia.
First of all, I saw this as an opportunity to learn more about Asia and hopefully I get a chance to spend some time there, which I ultimately did. A whirlwind due diligence trip to the Philippines, to Taiwan and being up in Shanghai to meet with the family. We were building, very much building a story about what this business could look like and ultimately trying to pitch it to US investors. That was my connection, was building this bridge of a story between the Shanghai family, these businesses in the Philippines and Taiwan and then US investors. We went really far down this process. Again, there’s not going to be a happy ending here. We went really far down this process. Interestingly, I was actually thinking about this longer term because the family also had investments in the massively growing, if you could imagine, retirement community business within China. If you think that the US has a large aging population and a large retirement community population, just imagine what China has with many more people.
They were actually looking at leveraging some of these technologies into mind games and games and tools for maintaining mental acuity, mental sharpness in old age. I was thinking about this from a health care standpoint all along. As we pushed forward with this effort, sadly, unfortunately, this will be my second time mentioning death on this life sciences health care podcast, not by design. Anyway, the senior member of this family passed away from a kidney transplant that didn’t take. Obviously, their business was in turmoil from that. Literally, the entire business not only collapsed and unwound, as might happen with any family business anywhere. But it was sucked back essentially to the party, to the government financial entity.
[Tweet “Technology and Health: Leverage opportunities even if they go wrong.”]
Long story short is I’m still trying to collect on that project. I’ll call it a loss at this point. Very much lessons learned about doing international business. I did learn a lot. I’ve actually been back to China twice since that for other ventures. I think if anything, what’s my personal takeaway? It’s leverage opportunities even if they don’t turn out the way you’d like to, to be able to start to get comfortable with a new market or a new geography. Now, I feel very comfortable doing business in China. I’d have to find a different way to structure a deal. I guess, you really can’t plan for everything.
What a great thing to be able to say, “I feel comfortable doing business in China.” There’s not a lot of people today that can say that. That, in and of itself, makes you extremely marketable. Before I let you go, because the half hour is already up, it goes so fast with someone like you. What is a book you would like to recommend about business or personal that you think would be inspiring for entrepreneurs?
I’ve got two books, if I can do that.
Sure.
Book about Technology and Health: The Checklist Manifesto
Because they’re so different. One, it’s a business book that’s also a health care book called The Checklist Manifesto. This is about a six, seven year old book by Harvard physician, Atul Gawande. It’s got some amazing business lessons, life lessons. Simple but powerful. How you can use checklists to get business done, get health care done, improve results. Why I love it is, I actually first encountered it back when I was doing consulting to Boeing engineering teams. They were using this as part of a way to improve their engineering efforts. Interestingly, it comes full circle because the book is about health care, using checklist in health care to improve results.
Atul Gawande actually was inspired originally to write this book and develop this process based on checklists that Boeing, once upon a time, used, Boeing test pilots used back in the 1930s. It was this aerospace into health care back into aerospace where I first saw it. Things really come full circle. If you think about going after funding, launching a computer, whatever, making sure you’re following the basic checklist and not missing a step is critical. That’s the business side.
Ready Player One by Ernest Cline
The other one which is, it’s a fiction book that everyone needs to read because it will help redefine what business looks like. It’s a five year old book called Ready Player One by Ernest Cline. Again, it’s a fiction book but if you work in technology you need to read this. It’s intersection of media and culture, virtual reality and social networking. A couple years ago when Facebook acquired Oculus Rift, there were a bunch of people who popped up on Twitter and said, “Look guys, Ready Player One is happening here.” This book is just an amazing fun read. If you’re an 80s pop culture buff, it’d fall in there. I think it really points to where the future of social media, virtual reality, augmented reality and to some extent, life, is going. If you look at the buzz of the Pokemon Go over the past week, you see how people can get so excited about some of these technologies. We’re going to see a lor more of that.
I love it. We’ll put both of those books in the show notes for people. Dave, how can people follow you on social media? What’s your Twitter, and if somebody wants you to hire you to help them in a wide variety of things from China to health care, what’s the best way to follow you on social media?
My website which has my bio and ways to connect to me is BespokeStrategy.com. I live on Twitter and I was an early person on Twitter @DJWhelan. I think I’m @DJWhelan on every social media tool out there except for Snapchat where I missed the boat. I’m @BespokeStrategy on Snapchat. You can find me there. @DJWhelan will get to me almost everywhere.
Sounds great. Thanks again Dave, for being such a great guest.
Really appreciate it. Thanks for the opportunity.
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Getting Over Rejection – Interview with Eileen Tanghal
Posted by John Livesay in podcast | 0 comments
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Episode Summary
Eileen Tanghal is the Vice President of New Business Exploration and New Business Ventures at ARM, a UK-listed chip designer. Eileen shares tips on overcoming imposter syndrome, why there’s a lack of women in venture capital, and she even dives into China’s startup culture. Eileen believes good entrepreneurs have resilience, but they also know when it’s time to move on after receiving enough rejections from investors.
Getting Over Rejection – Interview with Eileen Tanghal
Hi. Welcome to The Successful Pitch podcast. Today’s guest is Eileen Tanghal. Eileen has an amazing background. She was named in the Global Corporate Venturing Power List of 2014. She was one of the general managers of Applied Ventures and has her career soar. She’s had over nineteen years of experience working with early stage technology companies across the globe.
She led several tech investments and collaborative partnerships with companies before joining Applied Ventures, she was an investment director in the London office of a venture firm Kennet Partners. Before that, she was an investment associate at Amadeus Capital. She has been in-charged of a $200 million portfolio with over 40 companies. Now, she is the VP of new business expiration at ARM, which is a semiconductor IP design firm in the Valley. Eileen, welcome to the show.
Thanks so much.
I’m so impressed when someone’s been doing something globally, like you are, with your MBA from London Business School and your BS in Electronic Engineering and a Computer Science degree from MIT. You are one of the few women who have that kind of technical background and are in the venture capital world. What do you think that is all about, that that there’s so few women doing what you’re doing?
I’ve had this question a number of times. The first thing that people really talk about is the pipeline problem within STEM and that there are just so few women studying electrical engineering, computer science. I’m here to dispel that. I went to an MIT reunion of electronics and computer science majors in San Francisco just a couple of months ago. The chair of the department told me for the first time, out of the sophomores declaring their major, half of them are women. That’s of course up from the ten percent. I struggle to see the pipeline issue that many are talking about.
Getting Over Rejection: There’s not enough advocacy of women getting into that venture capital field.
What I think is more of the issue is, there’s not enough advocacy of women getting into that venture capital field. My own experience was that the head of the firm that I first worked for, the co-founder, woman named Anne Glover. She made it her goal and mission to find young women who she could mentor and build up. She herself is the first BVCA female chairman. Standing for British Venture Capital Association. There’s not enough advocacy.
How do you that? You probably need to start programs, Kauffman Fellows is one of them, where you encourage women to look at venture capital, to understand what it’s about, to see that really this isn’t an old boys club that people from certain schools that have certain degrees and certain connections can only get into. It is open for everyone. Again, unless I had had that mentor, someone really pushing me up, I wouldn’t have known to have gone into this field or how to be successful in it.
I’ve also heard the, I won’t name who but let’s just say, very famous venture capitalist told me the reason why it’s hard for women to be venture capitalists is because they don’t have the connections into the startup column guys. Of course, the reality is that the majority of startups are going to be these male engineers coming from certain schools. That is true, that’s unfortunately, I think, still true because of maybe the risk appetite. What he told me is that women, they don’t know how to therefor relate to that or have those guys talk to them and be comfortable talking to them.
[Tweet “Getting Over Rejection: You need advocacy to try to bring women up”]
I think that’s hogwash honestly. Last time I checked, they have no problem talking to a women and telling that woman what they’re doing. I think that if you have that mentality, that’s going to stop. This person is a very, very senior person in the industry who said that to me. You need to dispel those, whether they’re conscious or unconscious biases, and then you need advocacy to try to bring women up and show them that this is possible. I can tell you, there is a dearth of female VCs. It’s very, very hard to find any … I think it starts with you got to have advocates, you have to have training, you have to show them, bring them in as analysts and associates and then show them they can be successful.
I think that’s great, especially since you had a mentor that allowed you to get into this world, I’m guessing that you’re a mentor yourself. Is that true?
I try to be. I think at Applied, before I came over to ARM, where I am now, I did recruit a woman into our India office. I did try to train her in the industry. That was my way of maybe giving back. Yes, I do a lot of informal mentoring but formal mentorship, I’m trying to get into. The one thing that’s interesting is that whenever you think of the word mentoring, sometimes you think it’s just about women coming up.
Getting Over Rejection: A lot of women think they’re impostors, not realizing how much they’ve accomplished.
I’ll share an interesting fact with you. People who are just my peers and maybe even a couple years younger, for whatever reason they lack confidence sometimes so I do a lot of maybe talking to other women who are my peer level, trying to explain to them, “You were a lot more qualified than perhaps you’re making yourself out to be.” There’s a lot of studies on this, about when a job requisition is out, a female will not apply unless she meets 100% and a male will apply if he meets like half or less than half. There are studies.
There’s a lot of women thinking that they’re impostors, not really realizing how much they’ve accomplished. I’ll give you just an interesting case in point. I have a very close niche set of girl friends from MIT. These are very, very accomplished. They went to the hardest schools, some of them have PhDs. I don’t. There was this confidence test, how confident are you? Roughly eight or nine of us all took this. Seven of them are in the non-confident.
Wow.
This is like, “You have a PhD from Cornell, a PhD from NYU. You are near the top of your field and you don’t …” Thanks to my parents and my mentors, I am more on the confident side. They make fun of me and the other one that happened to be on there. The rest of us are going, “I don’t understand how this can be your view of yourself.” Very interesting.
A lot mentoring, yes, you mentor the young women. I’m very proud I have a niece who is currently at the Stanford Coding Camp and she’s one of just a few women. She told me she wanted to be a lawyer or the president, which of course is very heartening to me. Of course I’m going, “You should be a venture capitalist.” I’m trying to explain to her what it is. Start early like that.
You got to start somewhere. Sure.
She has a lot of confidence and I think that’s from her parents. For the girl friends that don’t, you need to help them out and say, “You’re a lot more than what you think you are.” It is really amazing how often I have to do that, and a bit sad.
It’s a subject near and dear to my heart Eileen, because I work with clients all the time. I’m telling them the importance of being confident when you pitch to investors like you. If you got a founder that doesn’t have any confidence, pitching to an investor that doesn’t feel confident in who they are, it’s a lose-lose situation. Everyone has to feel confident in who they are and what they bring to the table.
That’s right because we can tell. If you don’t feel confident, you may actually have a wonderful product and a really well executed plan but we’re getting a vibe like you don’t know what you’re talking about so then you turn off unconsciously.
Let’s take a little deeper dive into that concept of feeling like an impostor. I think everyone has a sense of that, even with the most accomplishments, whether it’s a PhD from a top school or a successful exit from another company. What is it, something inside has to snap and turn the switch for you to finally feel like you’re enough and that it’s no longer an impostor? Do you have any insights on how you have done that?
What Works for Women at Work: Four Patterns Working Women Need to Know
Yes. I have had a lot of help in that. I have a really supportive family around me, especially my parents. They are complimenting me constantly. I think sometimes it actually does take someone outside to point out to you what you have done. It was nice to get some of these awards because of course you’re like, “Oh, I didn’t realize you noticed that I had done all that.”
One of these books, What Works for Women at Work. I don’t know if you’re familiar with that book, which I think every single women should read. It’s true for everyone. A lot of women unfortunately face this ‘prove it again bias’, meaning you’ve done it before but you didn’t do it here so do it again. One way to combat that is as soon as someone gives you a compliment or recognizes what you have done, you should ask them to write it down and email it to yourself. You should keep a little bit of a book like that.
I love that.
When I’m feeling a bit down, I look back at some of those. The other thing is, I’ve just been on this leadership class. There’s something called a ‘reflected best self exercise.’ You ask your peers, not just business peers but of course people outside, when have you seen me being my best? They answer and they’ll explain. I have fortunately received that from people I work with, from my friends. Again, anytime you’re feeling a bit down, you read the reflected best self, these things that people have recognized that you’ve accomplished.
That little voice of, “You don’t know what you’re doing,” will eventually get drowned out because you’re going, “Self, look at what other people are saying.” A lot of it should be aid self-confidence buildup. That is good too. I think, what is my advice for, “Look, Eileen. I don’t want to ask 100 people to talk about how great they think I am. I want to find it in myself.” I think a lot of self-reflection, meditation, writing down what you’ve done, that will help. Again, definitely, when other people are commenting, it’s nice. It drowns out any doubt.
[Tweet “Getting Over Rejection: When have you seen me being my best?”]
I love that analogy of drowning it out. To me, it’s that great story of if you pour enough clean water into a bowl of dirty water, it will eventually get clean. That same concept with enough positive reinforcement internally and externally will drown out that negative self-talk.
For me, I always want to be liked for sure. A friend of mine, very wise friend was saying, “Look, not everyone’s going to like you. You are going to encounter situations where it isn’t going to go your way.” A lot of it too is just to say, “Look, it happened. Accept it. Move on.” That moving on part, not dwelling in the past or living for the future but living in the moment is also extremely important I think, not to keep you down if you face some setback or crisis or confidence issue.
[Tweet “Getting Over Rejection: Move on and don’t dwell on rejection.”]
That’s what it takes to be an entrepreneur and a founder, doesn’t it? Especially when you’re pitching and getting a lot of no’s from potential investors, you have to let it go. You can’t drag in that negative no or feedback from a previous investor to your next pitch.
Absolutely right. I think one thing that entrepreneurs should see is, you know what the Midas list is, the list of people who have done the best investments. I think there used to be something called the anti-Midas list, which was venture capitalists were listing the top ten or fifteen deals that they turned down, which of course ended up becoming wonderful companies. As an entrepreneur, you just got to keep that in mind. We’re human too, we make mistakes. We wake up, we get out of bed every day and have a certain mood when we get to see you.
It’s just like the movie studio business. There’s certain executives that turn down hit movies.
That’s right. You just got turned down by somebody, you go look and say, “Person missed this deal and that deal and maybe they’ve just missed mine. Move on.” It’s usually never personal. It is never personal I think. Unless you’re some fraudulent … That’s different. It’s normally, there’s no X factor or there’s no, “I’ve seen that a million times or I lost money in that already before and I don’t want to take the chance,” whatever it is. Keep going. Resilience is extremely important. Definitely, entrepreneurs need to have a high reserve of resilience.
[Tweet “Getting Over Rejection: Entrepreneurs need a high reserve of resilience.”]
I like that. A high reserve of resilience. We’ll tweet that out. Eileen, you heard so many pitches in your career. What makes a good pitch to you?
Remember, I was a venture capitalist in both Europe and here in the US.
Tell us about the differences.
Of course, the European style is much more understated. If you go there and you’re expecting the typical, The Garage Guys and Art Of The Start and sort of, “We’re going to be the Uber of dry cleaning or whatever,” that’s very American. Extremely American I’d say. I don’t want to say, “Yes, you should use a one liner to describe what your business model is and comparing it to a successful business and therefor you will get everybody’s attention.” Yes, there’s place for that.
That’s really nice because it shows enthusiasm and you’ve got it down succinctly, you understand your high value problem, you’re explaining why you have a unique solution and then the correct team that you’ve hired. If you hit all those elements, that’s really nice. I love it when I see that. “We are blah, blah, blah. We have the five world experts. We are 10X about our competition. The TAM is a couple billion dollars and growing 50%. We’re going to take that. Just in case you didn’t realize, people in our industry who’ve already exited 10X.” There’s that. That is very American style pitch.
Getting Over Rejection: The really good entrepreneurs, they tease you a little bit.
What I really like about some of the other pitches, some of the really good entrepreneurs, they tease you a little bit. They go, “We think this is …” Then some of the venture capitalist just start talking and they just let them talk and they go, “Yeah, actually we’ve seen that.” Then they’d come out with another piece of information that directly addressed whatever the thing was the venture capitalist had an issue with. I love when that happens to me actually because I’m like, “Oh God, that person really just put me in place.” Because it’s like, wow.
After you feel like you’ve looked at 20 pitches of the same thing, you go, “I know where this is going.” They say something and then they wait and then you start chiming in like, “Well, blah, blah, blah. Last time I looked at that pitch, that didn’t work. I invested in this company and they never got the X or Y, Z to work.” They just let you talk. In that stop they go, “It turns out, we’ve done ABC to address those problems and we’ve hit it.” I love that. I really, really love that. That’s my favorite because it’s like, he or she totally anticipated what I was going to ask him or her and nailed it. A lot of that is because the entrepreneur did research about me knowing what boards I sat on, knowing what companies I looked at, knowing what I’ve invested in or looked at and what my issues are.
[Tweet “Getting Over Rejection: Anticipate questions and do your research.”]
When they come, this is not, “Who are you, Eileen? Explain yourself to me.” It’s like, “She sat on the board of Plastic Logic. She has probably severe biases against doing anything plastic semiconductors. Let me find out a little more about what went wrong there and then explain why I have a breakthrough in plastic semiconductors that is going to blow her mind.”
Love it.
Like I said, that’s my favorite.
It’s basically anticipating the questions the investor will you and having really great answers to it. You’re doing your due diligence on the investor like an investor does due diligence on you.
That is the best. It’s not for flattery. I don’t really like that. Some entrepreneurs will do that. “Oh, I saw that da, da, da, da, da.” I’m like, “Yeah, that’s nice. Tell me why I’m going to like your thing better than what I’ve invested in before.”
I see you also have done some work with China at ARM. Can you tell us what’s going on with China?
China represents obviously a huge opportunity, not just for ARM, but for everyone. The pace at which innovation acceleration is happening is I believe faster than the Valley. There are some articles that are saying the typical cycle here might be five to seven years for startup, from start to transformation or exit, meaning IPO exit. I think there, it might be four, three or four years.
Getting Over Rejection: What’s been fascinating is indeed the speed at which things are getting done.
One is, we use a term called China speed. It’s probably used by a lot of people. What’s been fascinating is indeed the speed at which things are getting done, things are being innovated, ideas are coming in. I’m very proud that ARM has basically started an accelerator last year to help accelerate IOT startups in China. It was announced in China but not necessarily worldwide yet.
We are working on a fund there to invest in next generation technologies that are home grown. Not made in the US and transferred over, which is the second point, which is this mentality of we do everything here in the US or in the west and then we localize it for China. That’s not going to work. You need to, made in China for China.
It’s a cultural thing, isn’t it?
I think there’s lots of talents there to do it. It’s much faster.
When you say China speed, faster than even Silicon Valley. Is it twice as fast? Five times as fast?
It’s about, I think, 50% faster is my view. There is a sales guy here that has explained it like building a boat. Some cultures or one nation, when they’re trying to build a boat, they would put some architecture plans together, the materials, and they put it together and then they sail it. Others might look at several architectural plans, several types, try different experiments and then sail it. When they’re saying about China is they throw the wood and assemble the boat.
Got it. As it’s floating out the sea.
It’s go first then think later. You could say that seems irresponsible but actually I might argue that that’s the, talk about, lean model or fail fast. That’s definitely that model like, “Oh, guess I’m not floating. These pieces of wood are not coming together.”
I love that.
There’s a lot of them.
What you just gave us Eileen, is a great example of storytelling. Painting that picture of the difference between China speed versus Silicon Valley speed with the boat analogy. The more people put analogies and stories into their pitches, the more memorable it is and the more compelling it is. Thank you for that wonderful example.
Of course.
What is the type of company you like to invest in? Now, as a venture capitalist, I’m guessing you need to see certain amounts of revenue. It’s not seed funding where you’re pre revenue, correct?
I’ll talk in an ARM context. We at ARM are stage agnostic. Above and beyond, it should be strategic to us. Publicly, you’ll see that ARM of course is the architecture for most of the mobile devices out there. We are moving into IOT or actually already in IOT, so many of IOT type devices are ARM powered. We are incubating some businesses within ARM that are more on the software side of IOT. If you have a business that is related to connecting people, devices.
We provide technology invisibly to enable a global connected population.
What we like to say is that we want to provide technology invisibly, and that’s why a lot of people don’t know who ARM is because we try to be behind the scenes. Provide technology invisibly to enable a global connected population. If you have a piece of technology, whether it’d be software or semiconductor IP, we’re interested. Like I said, we’re stage agnostic. That is what ARM’s trying to do.
I think as most people perhaps know, when you got to corporate, it is very important that you have an executive sponsor for the investment. It’s not really about the stage, it’s about to what level are you, number one, related to ARM’s core strategy? Number two, to what extent does the executive sponsor believe he or she can influence you to be successful with ARM rather than without ARM?
How does a founder get an executive sponsor? Warm introductions?
I think the corporate development team or the incubation team or the new business venture team is like myself. We will facilitate those. We are acting like maybe the first filter. What I do is when I see something then definitely I will involve the next person and then that person will then bring it up to the exec. Because as you know, the execs within corporates are very, very busy doing their day jobs of selling. There are a couple of empowered groups and people who are able to look at a number of ideas, filter them down to a couple that they believe will make sense and then push those forward with the executive they work for or another executive. That’s how it works within ARM. I don’t want to generalize other companies.
We’ll just focus on ARM.
But in ARM’s case, that’s the way.
Can you give us a story or an example of some company that got an executive sponsor and is involved with connecting devices and people together that you heard that pitch and you went, “This is something that fits our strategy and we want to invest in it.” Now, they’re off and running and it’s already public that you funded them?
We have, in the connected device realm, we’ve actually made more acquisitions and investments. This connected device theme is pretty recent. That’s maybe the last two or three years. We acquired a company called Sensinode three years ago and we acquired a company called Sansa a year ago.
Tell us a little bit about what are those companies. What made it so compelling?
Sensinode is a connectivity platform for IOT devices. It’s to allow you to securely connect a device up to our platform. We have embed device services platform, which allows OEMs to securely create, deploy and provision IOT devices. Sensinode was really the connectivity layer, some security, some registry part. Sansa, which we bought last year, really allowed for the security. They had some novel IP for securing it, making sure the device was secured, as well as provisioning software to allow for the customer to provision, to say, “This device is a trusted entity in your network.”
Create, connect, secure, deploy, monitor, analyze IOT devices
If you want to think of it as we’re looking for technologies that can help each one of those verbs that I’ve just said, which is create, connect, secure, deploy, monitor, analyze IOT devices, that’s the spread of what we are looking at. I’m trying to think, the other companies that are related in which I believe it’s public is we are investors in a company called Trestonic. I’m trying to think of anything else as public. I don’t think there is except for Sansa, Sensinode and Trestonic.
That’s fine.
The rest are in negotiations.
Got it.
In the non IOT world and just looking at advanced semiconductors, we made an investment in a company called Pragmatic, which is about next generation plastic semiconductors. That’s an example of someone within the research group having an idea, reaching out to this company, bring it up through the CTOs organization and then the CTO ultimately sponsoring the investments and us having joint work with that company.
Apart from the connected device realm, which new business ventures, which I’m in, focuses on, there are other areas of interests within ARM. Specifically, even in the CTO and researches group around memory, next generation semis, people who are familiar with semiconductors and chips would probably … Next generation servers. That’s business as usual in terms of what ARM does. This connected is a newer, new business strategy that we’re focused on.
How wonderful for the early investors like Sansa for ARM to acquire them. That’s the ultimate successful exit, boy.
You bet.
Eileen, I love what you’ve said about confidence, getting over the impostor syndrome, getting over rejection and having what you call a high reserve of resilience. Most importantly, really anticipating the questions that you’re going to get asked when you go in to pitch. That’s been really, really helpful. We’re going to post this book that you recommended, What Works for Women at Work as one of the books that people should check out. How can people follow you? What’s your Twitter and all that good stuff?
I’ve been a little bit remiss to tweeting. My Twitter is @ETanghalVC. That is where I tend to post things. I also am avid an Facebook poster but I’m limited who I add. I sometimes post on LinkedIn so if you want to connect with me on LinkedIn. My @ETanghalVC, my tendency is to post quite a lot of things regarding women and venture capital.
Fantastic.
You want to know about that? Then definitely become one of my followers.
Great. Thanks so much, Eileen. It’s been a pleasure.
You’re welcome.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
Crack The Funding Code!
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