How to Close A 15M Round – Interview with Mark Bidwell
Posted by John Livesay in podcast | 0 comments
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Episode Summary
Mark Bidwell helps traditional organizations become more innovative and entrepreneurial in the digital economy. He helps to lead intrapreneurial change in market-leading companies such as BP Oil, the Hay Group, Syngenta, and more. Mark is also the co-host of the Innovation Ecosystem podcast, where he interviews thought leaders who are disrupting out-of-date methods, turning them into experiential growth. Mark talks about his work with Syngenta as well as how to get on the investor’s ‘good side’ on this episode.
How to Close A 15M Round – Interview with Mark Bidwell
Hi. Welcome to The Successful Pitch podcast. I’m thrilled to have today’s guest, Mark Bidwell, on with us because Mark has so much to tell us about innovation, fund raising, pitching. He actually has his own podcast called The Innovation Ecosystem podcast. He spent much of his 20 year career seeking out people and resources to help them innovate and grow businesses. He’s worked at BP, The Hay Group, which is part of Korn Ferry.
Most recently, Syngenta, where he led the creation and development of a $2 billion specialty crop business unit. He learns from other people’s experience. With his Innovation Ecosystem podcast, he brings fresh insights and perspectives and tools that you can use to get yourself funded fast.He is here to talk about how to close a 15M round, among other things. Mark, welcome to the show.
Thank you very much, John. It’s a great pleasure to be here.
You are calling in from?
From Switzerland.
Switzerland. I love it, how global the world has become. Mark, I always ask my guest to take us back to what made you decide to pursue your career. Did you know in college that you wanted to get into business and investing and raising money for startups?
No. I didn’t, actually. I’m an anthropologist by training, and the reason I studied that was because I just love reading books about different cultures and explorers and travelers. I found once I graduated that it didn’t really qualify me to do anything. I followed my father into business. He was in the food business. I worked for his home delivery supermarket startup in London. This was in 1990. From there, I got approached by British Petroleum.
I thought startup is good but actually, to get a decent graduate trainee program under my belt with a large corporation, which BP was and still is, would have made a little bit more sense to me. I joined them, was there for three years. Then I found myself in consulting because consulting I think is a great way of learning, getting a lot of exposure to a lot of industries and lot of disciplines very, very quickly. I really enjoyed that.
How to Close a 15M Round: I was in the right place at the right time and continued to help innovate in a number of different roles.
That’s where I started getting interested in innovation, business model innovation, because the consulting industry, as a business or as an industry, isn’t a particularly exciting business model. Because to make more money, you either have to work harder or charge more, and you reach a ceiling on both of those. I got involved in thinking about what other assets did this company, The Hay Group, have that they could make available to their clients?
I’ve found myself launching an internet business in the mid 90s in Europe, which was quite hard work back then. It’s hard to think of it, but it was. 20 years ago the world was very different. That got me into thinking more about business models, more about technology. I ended up going to work for the CEO in Philadelphia to help drive this program.
Finally then, family came along and we relocated from the US back to Europe, to Switzerland. I joined Syngenta to open up their biofuels business. That one thing led to another. I was in the right place at the right time and continued to help innovate in a number of different roles. I guess, I’m an accidental executive to be honest with you, John. It was never really my plan but I was continually being offered really interesting opportunities.
That took me to a place where, at the end of last year, the end of 2014, I decided there weren’t the opportunities available in that company any longer. I thought now is the time to go out on my own. That’s when I left, set up as an entrepreneur. I became chairman of one company and on the board of another company, and I’m building a business related to, but not specifically around Innovation Ecosystem. Really, helping companies and individuals become more entrepreneurial, essentially.
Wow. Let’s take a deep dive a little bit, if you don’t mind, because it’s such a fascinating story. This $2 billion Syngenta. Tell us about what that was like because it’s being an intrapreneur, it sounds like to me. You’re within this big corporate structure, but you’re being very entrepreneurial within it. Is that accurate?
Absolutely. Syngenta is the largest agri business in the world. In the previous role to that, to leading the specialty crops unit, I was looking after a portfolio of products, which were coming off patent. I was lucky enough to have a great team and a couple of quite good ideas that we were able to implement, which resulted in some really significant value creation for shareholders.
What normally happens when a product comes off patent is that the price collapses overnight, or in agriculture, it might take a couple of years. In certain pharmaceuticals it collapses overnight. Literally, as the trucks leave the Israeli manufacturing facilities at one minute past 12 full of your product. It’s an extraordinary industry.
How to Close a 15M Round: I was able to take all the previous experiences of creating the conditions for innovation and apply them across a team of many hundreds of people around the world.
Now, in our business we are able to change that dynamic completely with a completely different strategy, related to the characteristics of the product we were looking after. As a result, we are able to raise prices for two subsequent years, patent, which was unheard of in the industry. As a result of that, I was lucky enough to be offered an opportunity to form a new business unit and grow that out. It ended up as about $2.3 billion dollar business unit.
This was servicing or looking after probably 40 different crops around the world, growing in every part of the planet, essentially. It was a hugely exciting, challenging, scary role for four years. What I was able to do John, was to take all the previous experiences of creating the conditions for innovation and apply them across a team of many hundreds of people around the world. We are fortunate enough to generate some quite exciting results as well.
It’s amazing. Were you solving a particular problem of world hunger with all these crops? Or what was it that caused that incredible growth?
I guess what we did was we thought far more about the grower and what their issues were and what their problems were. A lot of these growers were based in subtropical or in tropical environments where they were … In agriculture, I think it’s the largest employer in the world, agriculture. I think it’s something at 17% of the world’s population are directly or indirectly employed by agriculture or supported by agriculture.
How to Close a 15M Round: Their issues really are not often how do they grow their crop, but it’s how do they actually ensure that long-term, they have a business so they can hand over to their children.
A lot of growers, you come from the US, there are some fantastically, wealthy industrialized, professionalized growers. They reckon there’s about 100 million professionalized growers around the world. There’s something like 500 or 600 million smallholders who are living, not quite hand to mouth, but whose family in their extended families rely on crops. What we did was we look and try to understand, what are there issues?
Their issues really are not often how do they grow their crop, but it’s how do they market their crop, how do they fund the investment in their crop, how do they actually ensure that long-term, they have a business so they can hand over to their children.
We took a very holistic view and we are able to then look at what’s available in the market and pull together a number of different solutions, which could be financial solutions. It could be traceability solutions, it could be new business models, and bundle them around our core products. That enabled us to grow our market share, as well as create more value for the overall value chain.
That’s such a huge takeaway, is you looked at something and figured out a way to see it in a different angle, an innovative way to look at something to solve a big problem, it seems like to me. Now, you’ve taken that skillset and that experience and have applied it to other things. Since this is all about how to make a successful pitch and one of the things investors look for is, obviously, rapid growth. Can you talk to us about your … Congratulations on this fifteen million series B that you’ve just closed.
This is in agriculture. It’s an architect company based in Canada. There are number of different ways that you can look at this industry. I looked at it with the management team and we figured out that this is what … The most compelling way of thinking about this is as a platform play. This company and the technology that we have enables other organizations or other products become far more efficacious and successful and perform far better in the field with our ingredient, if you like, which is the technology.
It’s almost like in Intel Inside. If you look at it that way, you’re able to tell a story to investors, which is around, “This isn’t about how much product we can actually sell to farmers, but it’s about actually we can enable a whole new category of products to become far more mainstream in the world of agriculture. Literally around the world but starting in North America and moving very quickly to Europe.” It’s using a different lens.
[Tweet “How to Close a 15M Round: We used an analogy that investors could understand.”]
I think what we did was we looked at the pharmaceutical industry and said, “Look, this is really where the biosimilars were ten years ago, which are now a huge business for a lot of big pharmaceutical companies.” Ten years ago, they were just a very very small subsegments. We used an analogy that investors could understand and say, “Look, here we are at the beginning of this curve in this industry. By the way, this is a $70 or $80 billion industry.” There aren’t many companies like ours out there, at this stage, with this technology, with this potential in front of us.
You did a couple of things there that I want to really summarize for the listeners, which is when you’re pitching, no matter whether it’s a seed round, a series A round, or in this case a series B round for $15 million, you need to paint a picture and not talk about just numbers and how something works.
Instead use analogies, see things through a different lens and then talk about how big the market is. What you’re doing is describing something that’s very disruptive, it sounds like to me, when you talked about it almost being like Intel, right?
[Tweet “How to Close a 15M Round: you need to paint a picture.”]
Yeah, absolutely. When you got a huge market opportunity in front of you, like we have, it is important to get people of a glimmer of how they can actually take advantage of that in a leveraged way. Because to build out a really significant organization with a direct salesforce, with all the standard marketing, it’s going to take an enormous amount of resource.
This is about finding a way to accelerate that growth and scale that growth, leveraging some of the other dynamics in the industry that potentially some of these investors weren’t necessarily aware of. Most investors in this space have been looking at drones, they’re looking at precision agriculture, looking at water and very few of them are actually looking at this space.
Being able to bring this space into mainstream and give them a glimpse of how it could grow into something significant, was really what we, the management team in particular, the CEO did very well to close this funding. It was probably 40% oversubscribed. We were very happy with how it developed.
[Tweet “Give investors a glimpse of the future with you”]
Wow. So you’ve really became irresistible and you had a multiple fear of missing out thing happening. You were able to select which investors you wanted to work with.
Absolutely. Now, you and your listeners will know, it’s not easy. It’s getting the first, the lead investor, which takes a lot longer than one hopes. Once that group is in place, then a number of others do fall in partly because of fear of missing out, partly because they don’t want to do a lot of the work associated with being a lead investor, and partly because you get developing more confidence and you are able to communicate with more confidence once you got the first anchor tenant on the term sheet, essentially.
Now, were you involved with the previous rounds before you got to the series B?
No, I wasn’t.
Got it.
This is the first institutional round, essentially.
Got it. Do you have any tips for the listeners on how to get that first lead investor with a pitch that makes them feel willing to be the first one? Are there incentives to being a lead investor that you give?
I think it does come back to two tips I give. Firstly, be prepared for a lot of knock backs. It’s rather like interviewing for a job, I guess. I haven’t done this for a long, long time. I do remember when I did it, that the first few interviews are an opportunity for you to polish your message and to get comfortable and confident and to hit your stride. I think it’s the same with raising money.
[Tweet “Be resilient when you pitch”]
You’re going to get a lot of pushbacks and people, for whatever reason, are not interested in you either because of timing, either because of that sectoral focus, or because they’re looking at different bite sizes or different stages. Be prepared, be resilient, be prepared to expand a lot of shoe leather in dialing for these leads. I think the second things is, understand what they’re looking for.
It’s not about you, it’s about them and their issues and how can you actually meet their needs and give them something that they genuinely want. I think, often it’s going in and selling too hard without actually listening. There’s a reason we’ve got two ears and one mouth. It’s important to remember that.
It’s all about putting yourself in the investor’s shoes, having empathy for them, as opposed to just saying what you need all the time. Is that accurate?
Absolutely.
Some of that has to do with your own due diligence and doing a deep dive on that person’s LinkedIn profile, what other investments they’ve made, any potential people you might have in common, things like that I think really help get the rapport going, get the trust going, which is all needed to get someone to take a leap of faith with you.
Absolutely. It’s a human business at the end of the day. It’s them feeling comfortable with you. Something very subtle happens here. Unless you ask them at the beginning, not necessarily using these words, but unless you are demonstrating an interest in what their needs are, then you can come up with the most compelling pitch.
[Tweet “Investing is a human business.”]
There’s always going to be something in the back of their minds saying, “They’re not really interested in me, they’re just telling a good story.” I think it’s really important to, somehow or other, demonstrate a level of empathy and interest in how can you help them, even though obviously, the dynamic is exactly the other way around. Particularly they’re sitting across from a well funded, prestigious venture capitalist.
There’s a lot of intimidation going on in the relationship because they feel they hold all the cards. I think, as you go in looking for money, have the energy that says, “I want to actually help this person.” If helping them means that they’re not going to invest in me, then that’s okay. It’s very, very subtle.
My personal belief is this is a hugely important distinction because it changes how you approach the meeting, how you hold yourself in the meeting, how you actually engage with them. Both of at a physical level, but also at a subliminal level as well, if that make sense.
Oh my gosh, Mark. I love what you just said. No one’s ever said it quite like that. What I hear you saying is you need to think of yourself as a brand and they’re a brand, and you’re equals. That you each have something of value. You may not have the same amount of money in your bank account. But as far as intelligence and integrity and character and vision, you have something to offer to them.
I’m guessing that what investors are looking for, in other words, how you can help them is by giving them an incredible opportunity and a return on their investment in a way that they hadn’t thought of. Will that be something they would want?
How to Close a 15M Round: You want people who are locked in for the journey and who have that level of mutual trust.
Absolutely. Let’s be honest, any investor in a fast-growth company, it’s a difficult journey between the management team and the investors. It’s not going to be easy. You want people who are locked in for the journey and who have that level of mutual trust.
A bad outcome is that you, for whatever reason, you raise money but there isn’t that level of trust because at the first opportunity, it’s going to blow up. That’s bad for everyone. Again, a lot of this is how you approach the meeting and it’s got to feel right. It’s not a marriage, but think about it as a long-term relationship. I think it’s going to make life a lot easier.
That’s fantastic. Now, you also have some insights about pitching for money from large corporations. Is that right?
Yes. In my last role with Syngenta, I was looking after a lot of new products and new research and development compounds that cost anything up to a quarter of a billion dollars to get to market. Often, they require significant investment in infrastructure and assets.
I got quite a lot of experience taking big projects with many hundreds and millions of dollars of capital in front of the executives, the leaders and the boards. Even though you know the individuals and you got a better sense of the politics and the relationships, it is, in many respects, the same process. It’s being totally clear what you want out of the conversation and what their needs are and the extent at which you can match the two.
[Tweet “The why is more important than the what.”]
I think the other piece here, I think the why is really important as well as just the what. I think it’s trying to connect with, trying to paint a picture of what’s possible here longer term beyond the financials is quite a useful way of thinking about it. Because it makes the conversation a little bit less dry and a little bit more engaging emotionally. Because at the end of the day, these decisions for public companies are big decisions and people need to feel they can trust you as an individual.
I love what you said. It’s important to have your numbers but you have to paint a picture and give people a sense of why this is important to you and why you’re passionate about it.
Absolutely. The Simon Sinek TED talk, which is all about the importance of the why. It’s easy to forget this because we’re all business people who go and then we talk about numbers and stuff. In actual fact, comes back to what I said early on, if you can engage people at the emotional level and get them to understand why you’re doing this, I think it’s far more powerful than the what. It’s a precursor obviously for the what, but it is actually far more powerful. It moves people, John.
[Tweet “Engage people at the emotional level. Get them to understand why you’re doing this.”]
Yes. That begs the question, which is what is your why to start The Innovation Ecosystem podcast?
It’s a really good question. I’ve been doing this work in large organizations for almost, well probably over 20 years actually, John. I’ve made lots and lots of mistakes, learned a huge amount, I got a few scars on my back. But I began to figure out how to do this. I figured it all out for myself in the sense of there were no real resources, no go to people, no places where you can educate yourself in this stuff. It’s not easy and it depends on the organization you’re in.
Coming out of the corporate world, one of the things that I was very keen to do was to make available these kinds of resources, these kinds of insights, these kinds of experiences, to people who are doing these kinds of jobs in organizations as I was. Entrepreneurs in large mature industries with long product life cycles, how can you actually help them move the needle, have an impact beyond what they’re expected to do in their day-to-day jobs?
How to Close a 15M Round: I wanted to make available these resources, insights, experiences to people.
Because there’s a lot people, particularly as you got millennials coming into the workforce, who have been wanting to leave their mark on organizations. They’re looking for purposeful work. I really wanted to resource these kinds of individuals because there’s a lot of people out there with insights and distinctions and materials. That’s my why.
I’ve teamed up with a friend of mine who’s got a business providing information to corporations and lots of links with business schools. What we’re doing is we’re interviewing a number of thought leaders in the area of innovation, change, leadership. One of your previous guest, Guy Spier, is an interviewee. Now, he runs a hedge fund.
We’re also interviewing a number of high performers. A hedge fund manager, a concert pianist, we’ve got an explorer on, and then we’ve also got some CEOs and some executives and entrepreneurs, all talking, John, about innovation, change and leadership.
Europe is not quite as advanced as North America in the podcasting world, so we’re working to create a number of digital assets such that people can consume this not just verbally over podcast, but they can download and read transcripts and that they’ve got nice designs. We’re also creating videos of the podcast as well. People can consume them in multiple ways such that if they’ve got a need for this, there’s not a technological barrier, if you like.
It doesn’t surprise me that you’re being innovate in the podcasting world and bringing things to Switzerland and Europe that haven’t been done before by incorporating not just the audio, but the transcript and the video. Good for you. Let me ask you, what about your speaking? Because I know you’re an incredible speaker. I’ve watched some of your talks online on your website. What are your favorite topics and who’s your ideal audience to speak to?
Thanks, John. It’s not something that comes easy to me, but I’m getting a bit more practice. What I like doing is, I’ve done a number of talks to organizations and industries that are mature, slow moving, regulated. It could be a banking company, a bank, it could be a glass manufacturer. Companies that have similar characteristics to the agricultural business that I came from before.
How to Close a 15M Round: What is the mindset of the entrepreneur? How do you need to think? How do you need to articulate your purpose? How do you need to make decisions?
Just helping them understand the journey that we went on over the four years, building out this $2 billion business. One of the relevant topics that they can take away, what are their takeaways? Then we’d worked with the leadership teams and start thinking about other certain things that they, as leaders, are doing that they’re getting in the way of innovation, for instance. That’s one area.
Then the other one is entrepreneurship. I’m doing a number of talks. I will have given a number, by the time this goes out to your audience, on what is the mindset of the entrepreneur? How do you need to think? How do you need to articulate your purpose? How do you need to make decisions?
Secondly, as an entrepreneur or as a leader of entrepreneurs, how do you actually want to create this space for your team to come up with innovation ideas, to explore new concepts, in a reasonably safe environment without the fear of failure, which characterizes a lot of innovation in large organizations. Those are two topics, if you like, that I’ve got a lot of energy around.
That’s fantastic. This whole concept of helping people get over the fear of failure, whether you’re an intrapreneur or entrepreneur, is desperately needed. I’m sure it’s a topic that has everyone riveted to listen to. Mark, what inspires you? What books do you like to recommend to listeners?
Sam Walton, Made in America
I do read quite a lot actually, John. Let me think. I’m just looking around my office at the moment. I guess, biographies, first of all. The first business book that I ever read was Sam Walton’s Biography, Made in America, which actually oddly enough, I took that book and reread it before I developed the post patent defense for this product I was talking about. Because the way he thinks and the way he executes and the way he identifies his core source of differentiation was fundamental for how we transformed this product. Biographies.
I read a lot of books on, I suppose, personal development and professional development books. One of the great ones that I’ve read the other day was this book by Cal Newport called Deep Work, which I found really interesting, particularly in this always on, over-scheduled world that we live in. This is about how do you actually start focusing and do really good work in a way that enables you to really differentiate yourself from the vast majority of people who are multitasking, thinking they can get stuff done.
Deep Work: Rules for Focused Success in a Distracted World
The signs is very clear now. We are not wired for multitasking and you do need to create space and focus to actually dig into stuff, to deliver deep work in a way that is value adding. Those are some examples. I’ve got probably more books piled up that I need to read, surrounding me than I have done at any point in my career.
I think that Deep Work is a great suggestion. We’re going to put all your recommendations in the show notes for people to be able to click and buy the book or look at it. This whole concept of multitasking being a myth is another great message to put out to people. If you want to be productive and focused, pick one thing to get done before you go on to try to complete a bunch of other things.
Mark, there’s many ways that people can follow you on social media and you have multiple websites. Tell us all the ways that people can follow what you’re doing, subscribe to your podcast, etc.
I’ve just put up a new website, which is MarkBidwell.com. Then the podcast is InnovationEcoSystem.net. By the time this goes out, I think a book project that I’m working on will be pretty mature as well.
Hopefully, there’ll be a number of resources, beyond the podcast interviews, that people will be able to get access to and take advantage of. I guess most importantly, come back with some feedback to us. I’m also on LinkedIn and I’m on Twitter as well.
What’s your Twitter handle?
My handle is @MarkEHB and the other one is @InnovEcoSys. I’ll give those both to you so you could put them in the show notes so that people can spell them correctly.
Fantastic. Mark, it’s been a pleasure. I can’t thank you enough for giving us your insights on how important it is to position yourself from the standpoint of what can you do for the investors instead of being someone who’s just asking for something and really focusing in on building trust and painting a picture. Thanks again.
Not at all, John. It’s has been a great pleasure. I love your podcast. I’m very pleased that we’ve managed to meet. Let me know how I can help in any way.
Links Mentioned
The Innovation Ecosystem podcast
J Robinett Enterprises
John Livesay Funding Strategist
Mark Bidwell Website
Syngenta – United States Website
Made in America by Sam Walton
Deep Work by Cal Newport
Crack The Funding Code!
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Hiring Smart People To Get Funding – Interview with Dan Weinfurter
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
Dan Weinfurter is a serial entrepreneur and the author of Second Stage Entrepreneurship. He is the founder of GrowthPlay, a company that helps drive profitable revenue growth by improving overall sales effectiveness. Dan dives into the hiring process and believes it’s better to hire no one than hire the wrong one. After all, hiring the right person is often a multi-million dollar decision. So, how can an entrepreneur hire the right person? Listen in to today’s interview for more information.
Hiring Smart People To Get Funding – Interview with Dan Weinfurter
Hi and welcome to The Successful Pitch Podcast. Today’s guest is Dan Weinfurter, the author of Second Stage Entrepreneurship. He’s also the founder and CEO of GrowthPlay, which is a sales effectiveness business consulting firm. Dan consults with many organizations, developing and implementing sales and leadership effectiveness, strategies that drive profitable growth.
Second Stage Entrepreneurship: Ten Proven Strategies for Driving Aggressive Growth
In his 25 years of being a serial entrepreneur, he’s built three, not just one, but three successful companies including Parson Group, his first start-up that landed number one on the coveted Inc 500. In addition to consulting, speaking and interim management, he guest lectures at leading business schools and was a mentor for the Clinton Foundation’s Institute for Entrepreneurial Excellence. Dan, welcome to the show.
John, pleasure to be here.
What a great background that you have and what great experience you have, especially for a podcast like this, one called The Successful Pitch. You obviously know how to sell and pitch. Can you take us back to your early career of selling and your first start up, and how did you know that that’s what you wanted to do?
It’s probably a two-part question so I’ll try to answer succinctly and then we can go from there. Right out of college, I was hired by General Electric and I went through their sales training program. That was back in the day where a company would hire a 22 year old and put him through a year of training with the hope that the 23 year old would be able to sell sophisticated services to executives in big companies. Those days are somewhat gone where companies spend that amount of time and effort bringing young people up to speed.
For me, it was really fortunate and has got me started in a career. Really, even the businesses I’ve started, the common denominator has been the buildup and deployment of an effective sales organization. My GE career lasted eight years. Subsequent to GE I’ve now done, this is my fourth actually that I’m working are now, all in business services, trying to help companies do one thing or another.
Let’s talk about the Parson Group. Did you have to raise outside funding for that, and how did you come up with the idea?
I resigned, wrote a business plan and raised essentially $4 million on a PowerPoint. I was hiring smart people in Chicago in July 1995.
The idea for Parson Group actually came from a business that I was involved with previous to starting Parson Group. It was an information technology staffing business. We watched ourselves grow and we completely and continuously outran our operational capability, which included finance and accounting. We turned to the outside staffing temporary service providers for help. As we watch what these firms did, we saw that they frankly were terrible and violated all of the things that we thought were responsible for our group at the firm that I was at.
The notion was hatched, “What if you took our business model and applied it to the finance and accounting vertical and you had capital and you built it correctly, what could you do?” After ARC, which was the firm I was at, went public, I resigned, wrote a business plan and raised essentially $4 million on a PowerPoint. We used that to hire five people in Chicago in July 1995. Six years later we had a $90 million business, all organic growth.
Amazing. I bet those investors were happy.
We needed to go back to them a couple other times.
Which is fine. That’s expected.
Which is fine.
You hit the milestones. You need more money to grow, yeah.
We did. They were very happy. It worked well for all parties involved.
Great. Let’s talk about this great book of yours. I’ve had the pleasure of reading it cover to cover. It’s just fantastic. How did you come up with the title, Second Stage Entrepreneurship?
The original title was How Hard Could It Be, which was not meant to be serious, but that was part of the problem. The editor that I was working with didn’t think that that title was right and thought it might offend people. As we were working with the publisher, which is Palgrave Macmillan, we kicked around a bunch of different ideas. Frankly, the editor at Macmillan gets credit for this. She thought that there was this void between how do you start a business and then how do you get it to the next level. Plenty of books on startups, plenty of books on sales.
But this whole, what we call second stage growth, she thought that there was a void in the market. We reshaped it a bit through the editorial process and made it far more broad-based. Instead of just talking about sales, we talked about all of the things that tend to be important in growing a business from an early stage to what we call the second stage, which is a much bigger business, obviously.
The process of hiring smart people, while it is the most important part of the growth journey for any company, ironically, my view is that it’s the least disciplined.
One of the key things that’s over and over important is hiring smart people, which you talked about in this great book. I know that investors look to that when you’re pitching for money, who’s on your team. Even as you continue to be successful and need higher and higher rounds, one investor told me that the quality of your team has to equally go up. The CEO can’t be the CFO anymore. Can you speak to some of the things you talked about, about the process of hiring smart people? In specific, I love what you wrote when you said intellectual curiosity. Tell me what that means.
So, two parts. Ironically, I think that the process of hiring smart people, while it is the most important part of the growth journey for any company, ironically, my view is that it’s the least disciplined. You think about what’s involved in hiring smart people. In most cases, it’s a million dollar and up decision that somebody is making. Seldom is the rigor applied for that level of decision making. A salesperson, for example. Seems fairly routine. It’s at least a million dollar decision. I tell people, I’ve made it wrong enough times to know that my numbers are right.
That’s great.
In a manager, so if you’re starting a new geography, that’s at least a $15 million decision. I could say the same thing there. I’ve made a mistake enough to know that that number is correct. First, I try ground people in the fact that these numbers are real. If you get the right person, great things happen. If you get the wrong person, bad things happen. The trick is that every role for every company at every stage of growth is different. You can’t just take what you’ve done in the past and apply it to the business that you’re a part of today. It might or might not work. It’s a flip of the coin.
[Tweet “Every role for every company at every stage of growth is different.”]
I teach a class at Kellogg and I was guest lecturing in this class called Digital Innovation. One of the things that the professor teaching that class pointed out, which is true, is that in the technology space, and it’s probably no different anywhere else, the founder hires his or her number two 70% of the time without defining the role and without talking to more than one person.
Really? I can understand that to finding the role because you’re going to do anything. But not talking to more than one person fascinates me.
That would be a lack of intellectual curiosity, would it not?
It would. There we go. We’ve got it defined, and you’ve brought it full circle. I love it.
It’s funny, you talk to people, and this is one of my favorite tricks, is after an interview is almost done, you ask a person, “What are you reading today?” It’s amazing to me how often you get an answer, “I don’t have time to read. Too busy. I don’t really read. I look at some magazines and newspapers but I don’t read any books.” It’s hard for me to imagine how anybody can get the information that they need to do their job correctly without reading. Furthermore, just if you’re curious about life, you ought to be picking up things, even if they’re not business related in reading. Pick up a novel, pick up a political, non-fiction book. Read something.
[Tweet “If you’re curious about life, read something.”]
Right. I couldn’t agree with you more. It’s like what you’re putting into your body for food, what are you putting into your brain through reading to keep yourself growing. One of the things you say in Second Stage Entrepreneurship is, “The cost of hiring the wrong person is higher than leaving the position unfilled.” We’re going to tweet that line out. Can you give us a story around that and around only hiring smart people?
[Tweet “Cost of hiring the wrong person is higher than not hiring a person.”]
One of the things that I learned the hard way again is it’s better to have no one in the role than the wrong person. The theory there is if you have no one, you do something about it. If you just hope that it’s going to get better, guess what? It doesn’t. I encourage all people, if you have somebody who’s not correct in the role, move that person along and then go about finding the new person. You’re going to be far better served, even in the short run.
Dan, how long do you give somebody in a new position to prove themselves? Three months? Six months? A year?
I’d give you the classic consulting answer, it depends.
Let’s say if it’s a new salesperson. Let’s say I’m a founder of a startup. I’ve got somebody who obviously needs some training and come up to speed. How much time do I give them to prove themselves, before I know it’s a wrong choice?
If you’re paying attention, it shouldn’t take very long. Again, you have to be paying attention. It’s not so much that you manage it by numbers per se, because specific numbers can be wildly good or wildly bad based on just luck and timing. But if you’re paying attention and you’re working with that person, you can see the quality of interaction they’re having with others. You can see if they’re doing the right things that are likely to make it work over time. Be a little bit lax in terms of the specific empirical outputs, but be really rigorous about the quality of the interactions and the qualitative aspects that you know will dictate success for that role over time. That’s the critical thing.
[Tweet “Hiring smart people: be really rigorous about the quality, not the numbers.”]
That’s incredibly valuable.
It could be a week, it could be a month, it could be six months. You just have to be paying attention.
I love that, because so many people just look at the numbers. If you don’t meet your quota by this time, boom, you’re out. Like you said, there’s a lot of other circumstances. If the person’s got a good work ethic and is a good culture fit, and like you said, doing what it takes, the number of sales calls, phone calls, emails, whatever it is, to be successful, then focus on that.
Now, let’s dive into this whole section you have in Second Stage Entrepreneurship about the power pitch. I love your whole philosophy that if you ask five sales people to describe what the company does, five other people who are in sales, and then five trusted customers to describe what the company does, sadly, you would probably get a lot of different answers.
You will, and it’s so fundamental and so basic.
You keep talking about the need to be targeted and consistent with your branding.
Think about it. Everybody should be able to answer these questions with complete clarity. What do you do for your customers? What do you do that’s different? What do you do that’s better? And be able to demonstrate or prove it. You should be able to do that in very short periods of time. You might only have, literally, 20 seconds to answer the question on what do you do, you might have 15. They think it’s easy and so they just wing it.
[Tweet “How are you different and better?”]
But to get that nailed down with the level of clarity and rigor that’s necessary, it actually involves a lot of practice and a fair amount of what I call preparation so that you have different versions of that for different audiences. If you’re talking to somebody at a cocktail party, it’s probably different than if you’re talking to a CEO or you have a prearranged meeting and you have that actually ready to go.
Most people think they can just wing it and they are so afraid of sounding robotic or they don’t want to memorize anything. I constantly teach people, Tiger Woods doesn’t wing it. Meryl Streep doesn’t wing it. Everybody who is a professional prepares.
They prepare. The only way that I’ve ever gotten people to take it serious is to film them and then actually show them how bad they are at it.
Yes, you really hear the stumbling and how hard it is to follow what they’re trying to say and how few people really understood what they said and all that stuff.
I go back to my GE days. We did this every day for my entire first year of training. You do these role plays and if you did it badly, they play it back three or four times until everybody in the room was laughing. It was all in good fun. We were with all these people for a year. You actually get it nailed down. This stuff all is hard and it takes practice. That’s where all this started from and it’s how it’s become part of what I use to be a critical path for business success.
Since you’re an expert in sales and managing sales teams and hiring smart people and the right team, one of the things I’d love to have you share with us is how do you get sales people who are so competitive, not only outside of the company but within the company, to start sharing best practices with each other so that the whole company can benefit?
Sales people, they’re competitive with each other but they also like to be part of the gang.
It’s a simple question but probably a complicated answer. Sales people, they’re competitive with each other but they also like to be part of the gang. There’s a fair amount of camaraderie. If everybody hates you and you’re a salesperson, that doesn’t work very well because no one will hang out with you. Effective sales teams that I’ve been part of, while they are competitive, they’re certainly more than willing to talk to their peers about what they do. Many times, they will have the point of view of, “You probably can’t do it as well as I do so I have no risk in telling you what I’m up to.”
I think the sales manager who’s doing his or her job correctly is drawing from the entire group all of the things that can be done that tend to move the meter in work in that particular business. Then bringing the team together so that those best practices are shared amongst the group in a way that they’re digestible or consumable. Most people that I’ve worked with are more than willing to be part of that process.
That’s great. Whether you’re pitching an investor for money or pitching for a new client, it’s all the same, where you have to be able to describe, as you said, what do you do that’s different and better and be able to prove it. The best way I know is through stories. You write about this is Second Stage Entrepreneurship a lot. Where you have a whole process of tell a story about a problem another client had, and be sure to name that client, and how they tried it without success, without your help. Then how you came up with the solution.
Then most importantly, which I think most people forget in these kinds of stories, is what kind of ongoing success does the client have from working with you. Can you tell us how you developed such a smart strategic way to tell a story that helps drive sales?
What’s Your Story
Actually, I read a book. This is called What’s Your Story. It’s written by a University of Chicago Business School professor by the name of Craig Wortmann, called What’s Your Story. Some of that goes back before that. My GE days, one of the things that we would do is we would build stories about where we had done this work for others in the startup world and it became a far bigger necessity for success.
If you have a company that doesn’t have a name brand and you’re trying to sell to a Fortune 500 client, you have to build credibility and trust. You can do a little bit of that by how you behave. In their heart to hearts, they want to also know, who else do you this for and how do I know that I’m not making a career limiting decision by bringing you into my firm?
The stories are a great way to build that credibility and trust, especially if you can make them personal. You name the person that you were working with and you talk about the impact that it had, not just on their business, but on them personally. Because in the end, almost everybody makes a business decision based on the impact to them personally, and then they back into the business rationale for that decision. It’s not always that way, but it almost always is that way. It’s very predictable human nature.
[Tweet “Build credibility and trust through storytelling.”]
I love that. Everyone thinks if we just do the job you’re asking us to do and there’s RFP, we’ll get the business. If you tell a story of somebody else hiring you over a competitor and that person looking so good to their boss that they got promoted, that’s an example of a personal impact.
In fact, throw the RFP away. You’re not going to win it. Unless you helped to write it, it’s a waste of time and effort. Spinning your wheels.
In reading your book, I came across that we have a mutual friend, Paul Rand, who runs his wonderful social media agency in the Midwest in Chicago, my hometown. He said, “Your brand is not what you say about yourself, it’s what your customers say about you.”
[Tweet “Your brand is what your customers say about you.”]
Exactly.
I’d love to have you speak to that, about not just your brand that you’re working for and how important it is to sell the brand of whatever company you’re working for. This whole concept of having a personal brand, I think is really essential as a salesperson. Don’t you?
It’s not only essential as a salesperson but for any role in life. Think of the politicians that are on the news right now. They all have their personal brands, which in some cases is helping them and then some cases it’s not. The other part of this is it takes a lifetime to build a reputation and not very much time at all to wreck it. What Paul talks about, and I’ll actually see him on Friday, is you should live your life as though every day is part of the building of your own personal brand.
[Tweet “It’s not so much what you say. People watch what you do.”]
Again, it’s not so much what you say. It’s people watch what you do. Just living a life where you’re true to your word and if you say you’re going to do something, you do it. If you’re building a business or you’re part of a business, make sure the business behaves in a very similar way. If you say you’re going to get back to somebody on Tuesday morning, get back to them on Tuesday morning. Not Tuesday afternoon.
Dan, you’re singing my song. That lack of integrity drives me crazy. Sometimes, you can set the bar just by doing what you say you’re going to do. If you say you’re going to follow up, follow up. That’s automatically sets you on the top, I don’t know, 10%, sadly, of salespeople who don’t follow up, the 90% that don’t.
It’s probably higher than that.
One of the things you talk about is this written monthly review. A lot of people hate reviews, a lot of people love them if they get good ones. I like this whole concept of doing it monthly instead of quarterly or twice a year. Some of the questions that you think people should be is asking is, how do you feel about last month?
I think that’s really fascinating, is to tap into people’s, do you feel proud, do you feel embarrassed, do you feel frustrated? Then, what didn’t happen that you want? This for me is the number one thing that made me successful is, what are your top ten accounts and your top ten opportunities? If you just focus on that, I think you will, the 80-20 rule kicks in, don’t you agree?
The important part is that the people who are doing really well get really good reinforcement and get the help that they need to do even better.
I would agree, because the ones that are on that top list are probably not going to get done. You think about any executive, it’s similar that they can only really act on the top five things on their list of objectives at any given point and time. If you’re trying to get to them with something that’s not on the list, good luck getting … They might listen but they’re not actually going to take action on it. Same is true with driving sales activity. When I was first told I had to this, this is one of the stories I tell on the book, I said, “You got to be kidding me. Monthly? Seriously?” I pushed back on it and I thought it was just going to be a time consuming bureaucratic process.
But it’s just the opposite. The people have to come in with the knowledge of what they did in the prior months, what they’re going to do in the current months. Probably the important part is that the people who are doing really well get really good reinforcement and get the help that they need to do even better. Sometimes those conversations just don’t happen with the people that are doing well. The people that aren’t doing well is a paper trail that’s built up over time. “Let’s see talked about last month. We’re having the same conversation again. This doesn’t really feel very good to me.
It’s groundhog’s day.
Deja vu all over again, as the saying goes. It doesn’t take very long before you realize that this is not going to work. At that point, then you don’t have to go through the charade of a performance plan. You can just move on the person because the trail is already built. The most important thing is it helps the good people do better because it reinforces the behaviors that they have put in place, that are responsible for their success.
The review forces a conversation that, “Where do you need help?” One of the big jobs of a sales manager is to really help the team, help the individuals that are part of the team be successful. It’s not to manage and control. That’s what people think. That’s not it. It’s being helpful.
One of the things you have on your GrowthPlay website is how to not only find great talent, but keep them. Can you speak to what your secret sauce is there?
It’s probably not changed in 30 years. Really, there’s two things that I think are critically important. One’s the culture of the business. Does the culture and the mission resonate with the people that are part of the team? If they’re engaged in a business that they don’t really like, good luck keeping that person over the long haul. That’s one. Then related to that is who they work for.
Probably the most important person is their direct supervisor. If it’s corrupt or bad at the top, that will engender cynicism and it will end up rotting from the top eventually. Ppeople who won’t put up with that over the long haul. The truth is when people quit, they quit their boss or their bosses first and foremost, and everything else follows.
[Tweet “When people quit, they quit their boss first and foremost.”]
It’s not for the extra X percent of money, is it? It’s about not feeling appreciated a lot.
Or you just work for a jerk. There was a study in HBR, I just read a few weeks ago, was done by some Gallup researchers. This is almost hard to believe. I think it ran last year. They pointed out that American businesses hire the wrong person in the first line managerial role 82% of the time.
Wow. Do you think part of that is if you’re a great sales person, then you get promoted, and suddenly you’re sales manager and it’s a completely different skill set?
Absolutely. In fact, the better the salesperson you are, the more likely it is that you’re not going to be a good sales manager. In fact, we have the science behind this, only 10% of successful sales people have the innate behavioral DNA to be successful sales leaders.
What’s the solution? Should they go through some training if they want to do that? Or is it just not in their DNA? Doesn’t a sales manager need to have been a sales person to understand what’s required?
As a salesperson, it’s all about yourself. As a sales leader, it’s all about the team.
That is true. In fact, you have to have been a somewhat successful salesperson to be a successful sales leader. But you have to go find the people in your sales organization or who exist elsewhere who both could sell and can lead people. It’s a narrow pool of people you’re looking at, but you got to find them or it’s not going to work. Think about it. As a salesperson, it’s all about yourself. As a sales leader, it’s all about the team. As a sales leader, the job is to facilitate an outcome through collaboration. As a salesperson, you just take charge and get it done. Much like if you think about an athlete versus a coach. It’s the same analogy.
Yes. Got it. Terrific.
If you’re really good, you don’t even realize what you’re doing. You just do it naturally. Can you train other people to do that? Maybe. Some can.
Yes. Or, do you have the patience to train them? That’s the other thing you have to realize. Just because you’re on a certain level of expertise, the junior salespeople probably aren’t. They’re going to need some hand-holding and some patience.
Very true.
Dan, how can people follow you on social media? Obviously, GrowthPlay.com. Tell us the best way to keep track of what you’re doing and how to engage with you.
I’m on Twitter at @danweinfurter. I’m on LinkedIn. I think it’s DanielWeinfurter. I have a personal website, DanWeinfurter.com. We obviously have a company website, GrowthPlay.com. All of those tend to work and work pretty well.
Fantastic. Obviously, besides the Second Stage Entrepreneurship, which we’re going to put the link in the show notes for people to buy, you also mentioned that great book, What Is Your Story. We’ll put both of those in there. Dan, any last words or thoughts to leave with the listeners about how to pitch or how to sell?
Probably the last thing, sales, in my view, is one of the last great frontiers that’s still not viewed as a discipline, like finance or marketing or engineering. Yet half the people that come out of college end up in a sales role and any white collared professional spends a significant portion of his or her time in their occupation of selling.
I think it pays everybody dividends to actually do what you would do with any discipline, which is to study and get good at it, and not just think that you can wing it. There are definite activities and processes that are proven to work in sales, just as they work in other disciplines, and give sales its due and its day in court, because it’s deserving of it.
[Tweet “Give sales its due and its day in court, because it’s deserving of it.”]
Fantastic. Dan, thanks again for being on the show and for talking about hiring smart people. You’ve been a great guest, and everybody, go get this great book, Second Stage Entrepreneurship.
John, thanks for having me on the show. I appreciate it.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
Dan Weinfurter Website
Growth Play Website
Dan on Twitter
Dan on LinkedIn
Second Stage Entrepreneurship by Daniel J. Weinfurter
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Get VC Funding – Interview Lylan Masterman
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
Lylan Masterman is a Venture Capital Investor at White Star Capital and a Kauffman Fellow. Lylan shares helpful tips for selecting good board members as well as being a good board member yourself. At White Star Capital, Lylan focuses primarily on late Seed and Series A investments, but he does offer advice on how an entrepreneur can successfully navigate between Series A to Series B rounds. Listen in for more!
Get VC Funding – Interview Lylan Masterman
Hi and welcome to The Successful Pitch podcast. Today’s guest is Lylan Masterman, who is a venture capital investor at White Star Capital in New York. He has primarily focused on late seed and series A investments. He’s also a Kauffman Fellow, where he is doing academic research project on the Internet of Things. He previously worked as a software engineer in product management for 15 years. He joined Atlas division of aQuantive in 2004 where he focused on big data. He helped lead the company’s Rich Media advertising technology platform.
He’s also led product organization for 4 early stage companies. Prior to joining that he worked at Microsoft and he’s also worked at Sierra Ventures, which is a San Francisco based VC firm. We’ll be sure to ask him the differences between San Francisco and New York, as I’m sure there’s quite a few. Lylan, welcome to the show.
Thank you, John. It’s a pleasure.
Before we get into all the wonderful things you’re doing at White Star Capital now, would you take us back to your days of being a software developer at IBM and then being a program manager at Microsoft? Did you have a vision that you were eventually going to get into VC? How did you go from that to where you are now?
White Star Capital
I was a computer science geek. I went to the University of Waterloo which, for people who are not familiar with the school, it’s considered the MIT of Canada. For the people in France, it’s the Polytechnique of Canada. From there, my last internship or coop in the ’90s was at Microsoft WebTV in California. My manager at the time, we had discussed career options. There were some people down the hall who were product managers, or by Microsoft parlance, program managers.
We talked and we agreed that that could be a really good path for me because I was getting frustrated spending hours on end, trying to fix a bug in the code that was a missing semicolon. I like the interpersonal aspect while also leveraging my technology background. I went to Microsoft full time in Redmond. I was on the first team to launch a Visual Studio .NET. The first ever .NET team in C#and J#.
Then I went to a company that I’d never heard of that time actually, in Seattle, called Atlas, part of aQuantive. We doubled and tripled the business year over year. It was just fantastic. I ended up having four jobs simultaneously. I was running the Rich Media product, behavioral targeting product, user experience, and internationalization all at the same time. Because that’s what you do when a company is growing quickly. In my last year there, Microsoft acquired us for the $6 billion, which at the time was larger than all of Microsoft’s other acquisitions combined.
That’s quite an exit there.
Yeah. Skype subsequently surpassed us. What was interesting there is that Mike Galgon was one of the co-founders of aQuantive. At one point I approached Mike for a little bit of mentorship. I was considering to go do my MBA. I was already in my 30s, so it was now or never. Mike was a great mentor for me. In the discussions, we talked about the history of aQuantive. The web was different back then, knowledge about Venture Capital is different back then. Your show was not on back then.
That’s true.
Mike, he told me about the history of starting aQuantive, which was then called Avenue A. He told me about how he and his co-founders started it, but also how he raised money from venture capitalists. I didn’t even know what a venture capitalist was. Similar to how my manager at Microsoft in the ’90s urged me think about product, Mike didn’t necessarily urged me to think about venture, quite the opposite. But he did awaken my interest into it, even though he didn’t necessarily think that would be necessarily a best choice of career. Because it’s a dark side and all.
Get VC funding: I would find the one person in the firm who I thought had the most similarities to me and I would email that person.
I started thinking more and more into it. I thought, “I might just absolutely love this.” It was a perfect timing for my career because I was going already to business school. Business school’s a great time to try something new. While at business school, I decided that I was going to try venture capital. I did not know that the economy was going to tank and that I’d be looking for an internship in 2009. What I did is I networked.
For me, what that meant was I looked up every single VC firm I was aware of or could learn about online. I read the bios of every partner in principle in the firm. I would find the one person in the firm who I thought had the most similarities to me or most affinity to me, as some people put it, and I would email that person.
I’ll give you the colloquial version of the email. Of course the email was very formal, but the colloquial version email basically said, “Hey, we have this in common. We both study mathematics, we’re both Canadian, we both work in online advertising, etc. I think what you do for your career is interesting. Do you have 20 minutes? I’d like to pick your brain.”
I love that so much because I’m constantly telling the listeners, you must do your homework on the investors you are fortunate enough to pitch. What you just did was, this is also obviously how you got a job, but it’s that same … Look at the similarities because you want to make sure that who you’re even approaching for money has a lot of things in common with you, whether it’s background, experience, connections. What you just shared is gold. I love it. Keep going.
One of the investors I reached out to is a New York investor, Geoff Judge. In my conversation with him at the end of the call, he said, “Hey, Lylan. I like you. I think you have some good potential. There’s no space at my firm to take on an intern, but let me introduce you to somebody.” He introduced me to his friend, Mark Fernandez.
Mark’s admin wrote me back and said, “Mark would be happy to have a call.” I did what you’re trained to do. Lie. “I very much would appreciate a call but I happened to actually be going to the Bay Area in a few weeks. Is Mark available to meet in person?” She said, “Yes.” Then I booked my plane ticket.
I met Mark in person. Mark made it very clear to me at the beginning of the meeting, they had never hired an intern before, they had no desire too. What I subsequently learned also is that the head of Sierra Ventures, the founder of Sierra Ventures, is Peter Wendell, who actually teaches venture capital at Stanford GSB. One can reason that if Sierra were to bring on an MBA intern, it would be from someone from GSB.
[Tweet “Get VC funding: Tenacity and persuasion is required to get someone to say yes.”]
By the end of the in-person meeting, Mark seemed interested. I think my technical background combined with fact that I was already in my 30s, didn’t need to be overly coached, had an impact. He knew that he could bring me on and I could run independently. I just owe so much to Mark for giving me that break. It was an absolute joy. From there, I had a great experience at Sierra, and then I applied for the Kauffman Fellows program.
Let me just ask you to pause because there’s another gem there. The objections you got at Sierra. Most people would just say, “Oh well.” Lying is not something we ever propose people do, but you were willing to go the extra mile, put your own money and spend your own money, your own dime, to get yourself there for that interview that didn’t look promising. But you still were willing to do it.
That’s that extra mile that a lot of people, “I’m not going to do that unless I really think I have a good shot.” You still went. You get there. All you do is hear a bunch of objections about why they never do it, and if they do it, it’s going to be from somebody from someplace else, and then you are able to turn that around. That’s the kind of tenacity and persuasive selling skills or storytelling that’s required to get someone like you now to say yes.
Get VC funding: Show that you researched me and you didn’t just simply do a copy and paste.
Very much so. The idea of what you said earlier, of researching somebody, of understanding their background, understanding your commonalities if there are some. You don’t need to have some but at least show that you researched me and you didn’t just simply do a copy and paste. Maybe we’re drastically different about something and you want to talk about that. That’s fine. Just show me that you didn’t do a copy and paste and that you’re willing to do a little bit of effort just the way I continue to do.
It can even be somewhat playful. “I see you speak French, I eat French fries, does that count?”
I haven’t received that one but, yeah. At least it would show some level of research.
And some playfulness. If you want to stand up from the crowd, sometimes you have to do something a little out there like that. You’re doing well there. Tell us about the Kauffman experience.
At Kellogg, Azeus Jelani was a year ahead of me. He’d been selected for the Kauffman Fellows program. I learned a little bit about it from him. I looked up the list of Kauffman Fellows through the history of the program. There are many fellows who are part of the who’s who of venture capital. The program is a two-year program where we meet once a quarter for three or four consecutive days. In the times that we meet once a quarter, there is a fixed curriculum.
Get VC funding: The curriculum is specifically on how to make us a better technology investor.
The curriculum is specifically on how to make us a better technology investor. The curriculum doesn’t relate to term sheets and financial terms. It’s assumed that we learn that on the job or we’ve already learned it. If we don’t then we can just ask. Let me give you two of my favorite examples of the curriculum. One example was how to be a better board member. What Kauffman did is that they invited internationally recognized VC’s who are known as being exceptional board members.
Is this advisory board members or a board member of directors?
The board of directors, because generally as a venture capitalist, that’s …
You’re on the board.
Absolutely. That training was outstanding.
Do you have one or two takeaways on what makes a great or how can you become a better board of director?
Everything that happens in Kauffman is Kauffman confidential.
Sorry, okay.
No, no. What I can say, because a friend of mine actually recently published this and so he leaked the information first, if you will.
Fair enough.
In addition to having great board members come in and speak to us, we had an entrepreneur come in and speak to us. A well-recognized CEO. At one point, the question was asked of him about his board and his level of appreciation for the board. There were many of his board members who he felt did not contribute as much as they’re capable of, they were not as helpful. He thought that all those individuals had the networks, had the skills, had the intelligence, had all the attributes required to be helpful, but just had never invested enough time and effort and mental energy.
[Tweet “Get VC funding: Time, effort and mental energy.”]
When we asked him which of these people would you want in your board. Again, the answer was surprising or was disappointingly low. The key takeaways there were often about some of the simple stuff, John. Simple. Read the deck, as a board member, read the deck a week in advance. Assuming the CEO sends it to you a week in advance. If you have questions, start asking those questions in advance so that you’re not stalling the board meeting unnecessarily.
Those are the three key elements to be successful in anything, whether it’s pitching for funding, being a good board member. It’s all, like you said, simple things. Put in your time, put in the effort. Not just effort of being busy, but mental energy. I love that. That’s such a great line.
If you just do what intuitively feels like the right thing and you make your portfolio become your priority, that should naturally occur. There’s a lot of the small things too. Your behavior in the board meeting. How often are you checking your cell phone or email? Are you writing down notes for yourself about what’s been discussed and about your follow up and your action about how to be helpful. That’s important stuff.
Sure. It shows you care.
Get VC funding: It takes an attentive board member to recognize a seminal moment and to make a certain recommendation.
It does. We should care because our job is on the line, our personal income is on the line, our reputation is on the line. In the life of most companies out there, the CEO is driving the company. But there can be one or two seminal moments where an outsider, as in a board member, will observe something that the operational team, the CEO, the C-levels, the VP’s, will not observe because they’re stuck in the wheats. It takes an attentive board member to recognize a seminal moment and to make a certain recommendation. Or to even ask the intelligent question that allows the CEO or the team to reach a certain conclusion.
I love that. That’s so great, because it works both ways, doesn’t it? When you’re pitching someone like you to get funding, you better be sure your phones turned off. You better be sure you’re listening to what you say and maybe even taking a note during the pitch meeting. You show that you’re engaged.
Absolutely. It’s fine to have your laptop open the whole time if it’s clear that you’re taking notes and you’re not overly multitasking. Or if there is something urgent in your life going on and you’re expecting a certain phone call, just say so.
Get VC funding: When I know I have another meeting, instead of being the guy who is always checking the time, I set myself an alarm.
One little thing that I try to do, and I think I do more often than not, is when I do have a meeting with someone and I know I have another meeting coming up thereafter, instead of being the guy who is always checking his cellphone for the time or checking his watch, I set myself an alarm. That way there, I’m not rudely checking the time. I trust that my alarm will notify me when it’s time to start wrapping up the meeting.
Nice. That’s very helpful. You’re meeting once a quarter. Obviously it’s a huge commitment. How to learn to be a better board member. Is there anything else you can share from those confidential quarterly meetings of what you’ve learned or no?
There was another session on how to best define your personal brand and your firm’s brand. You can imagine that the VCs that we invited to speak on the branding side were different than the board member side. Some people are much better at one than the other. For us to be able to pick and choose and learn from the best at each part of the curriculum is key to Kauffman.
On the branding, it’s all the normal stuff that we talk about, just applied to venture. Branding is especially difficult for VCs who are considered generalist. A generalist is defined as a VC who invest in many different categories.
You don’t specialize. “We only do medical or we only do fintech,” then people will say, “Okay, that’s your brand.” There’s still so much branding that can be defined. I can’t wait to talk about White Star’s branding in a second. Please keep going about, I’m really curious about what they might have told you about how important it is to have your own personal brand.
[Tweet “Get VC funding: Have a personal brand that is memorable.”]
Your personal brand and your firm brand need to be very complimentary. I certainly hope so. At the same time, we are each individuals. We each have our own way of being memorable within the firm. That’s how it is, I hope, with all firms. Be it that you organize events, be it that you wear some kind of peacock, to use a term.
At the end of the day, those are great hooks into what is the core of you and your firm. It’s fine to have that little memorable thing that gives someone a reason to remember you. Then they also have to remember you for the key two things, which are being really, really nice and being incredibly helpful or useful. Because a nice person who’s not helpful is just not all that valuable.
We’re going to tweet that out. “You must be nice and helpful, not just nice.”
[Tweet “Get VC funding: Be nice and helpful.”]
It’s absolutely critical. There are some people out there who are known as the nice guys or the nice women. It’s important to be nice, but the buck does not stop there.
I also like this concept of your personal brand is defined by what can you do to be memorable. That’s another great tweet. It’s so important. Is it something you wear, a certain hairstyle, colored socks, or you’re known as the go-to guy for events or you’re known as a go-to guy for being able to help people with their pitch or whatever it is.
That stuff is a little bit kitschy but it works, as long as it’s done effectively. Then there’s just the core fundamental parts of branding. One of the firms that I admire the most in the whole wide world is Emergence Capital. Emergence is truly a top firm, a fantastic portfolio. The people I know there, I can’t speak highly enough of.
[Tweet “Get VC funding: People know you for something important.”]
At Emergence, they defined themselves early on as the firm that invests in SaaS, before people even knew what a SaaS was. They use a couple of other terms around SaaS. Because they started investing in SaaS before the term SaaS I think was even defined. They invested early on in SalesForce.com. That’s a strong form of branding. All the other stuff helps.
First, on capital. What do they invest in? There’s something nice about either by your name or just how you define yourself externally that people know you for something important and as applicable to many entrepreneurs.
Let’s talk about the branding of White Star Capital. Before the show started, you told me a little story about how they came up with that name, White Star, for the VC.
White Star fundamentally, we are a transatlantic firm. We have investments in many parts of Western Europe including London, Paris, Berlin, Stockholm, and also in North America including New York, Montreal, Toronto, Ottawa. We even have some investments in LA and San Francisco. Looking at the history of what brings both sides of the Atlantic together, White Star Cruise Line, I may not have the exact details straight here, but it’s effectively the first cruise line, commercial cruise line, to cross the Atlantic.
Perfect. That said it all, right there. Even the little logo has a white star obviously. It instantly brands you as a place that is international and cutting edge, you being the first and all that other great stuff. In your bio, I talked that you lived San Francisco as a VC and now you’re in New York as a VC. I rarely get the chance to talk to people who’ve done both coasts and they’re so different. What would you say are some of the differences about being a VC based in New York versus San Francisco?
The differences are shrinking, I must say that, because New York is becoming very much more focused on all the industries of technology. It’s no longer so strongly focused on ad tech and fintech and fashion media and so on. That being said, the competitive dynamics in the west coast historically in the last few years, even though it is slowing down a little bit now, are different. The time it takes to make an investment at the Bay Area has shrunk because of the competitive situation.
Get VC funding: The time it takes to make an investment at the Bay Area has shrunk because of the competitive situation.
My friends who are Bay Area investors, in order to make the best investments, some of them have learned to be more proactive at creating investment theses or mini theses, if you will. Identifying some sub sector of tech and researching it in advance so that when it comes time to actually speak with a certain company that’s trying to raise the amount of money that you generally invest, that you already have your market knowledge, and so you don’t need to do catch up.
The reliance that a lot of VCs have an investing in companies that’s introduced to them, that’s decreasing. It still exist, it’s still very strong. But the proactive investors who go out there and say, “Here’s what we invest in. Here’s what we’ve established in thought leadership. Here’s where we have strong knowledge.” That allows you to make investment decisions a lot more quickly.
Now, one of the pride and glories of your portfolio is the Dollar Shave Club, which is such a success story. Can you share with us where you got involved? Was it seed into series A or how did you get involved with the Dollar Shave Club?
We are investors in a company called Science. Science is also located in LA, as is Dollar Shave Club. Science is effectively a startup incubator. They call themselves a studio. That’s what really what they are, is a startup studio. One of the startup studio companies that came out of Science was Dollar Shave Club.
By being an investor in Science, the head of Science is very good at letting his investors know when there’s something good coming from his program, from his studio. That’s when we learned about Dollar Shave Club. This was before the video came out. It was very good timing.
Get VC funding: We learned about Dollar Shave Club before the video came out. It was very good timing.
A funny story with Dollar Shave Club. I was having coffee with a friend of mine in venture capital a couple of months ago. He had taken a deep look at Dollar Shave Club, but he ended up passing. His reasons were very sound at the time. No product, no traction. They say they’re creating some video that’s going to go viral. Yeah, right. Then of course, they do the video, it goes viral. All his friends who didn’t even know that he had even looked at Dollar Shave Club are now sending him the video.
It kind of like rubbing it in your face. You can’t predict what’s going to viral or not. That’s for sure.
They didn’t know that they were rubbing it in his face, as you put it. He was like, “Darn it.” Looking back at his notes, his logic was sound.
Somehow you still did get involved with that, and it’s been a huge success.
It worked out really, really well. The most recent round of financing was quite large. The number of products that the company now has, it’s a lot more than just shaving products.
I know. I’m a customer. Everything, from what to wipe your butt with. It’s hilarious branding, but it stays consistent. It’s all funny.
It is.
It’s great. Talk about disruptive. I just love it. Now, can you share with our audience, since it’s called The Successful Pitch, what you think makes a good pitch?
Ultimately, giving a good pitch, I liken it to the word “story”. I assume some other VCs have told you the same thing. It has to be a story that gets an investor excited. Now, don’t get me wrong. Some of the best stories for me are really unsexy, boring businesses. But at the end of the day, money is sexy.
That can be misinterpreted by some people. But people who understand, the crux of what I’m saying, the genesis of what I’m saying, is that you can be doing a startup on improving database, server, something. You tell your friends, your non-geek friends, about improving something with database. Or you tell your parents, if your parents are not technically inclined, about improving something on database stuff. That doesn’t sound all that glamorous in a way.
[Tweet “Get VC funding: At the end of the day, money is sexy”]
It’s not like working on a social media startup. But still, a company that’s working on massively improving a database in some form or doing some artificial intelligence product for the enterprise, those can often also be really compelling businesses. They’ll generate meaningful revenue and meaningful recurring revenue.
It’s great. Do you often have people come to you at seed and then you’re there for their second rounds? Is that a common experience?
Yeah. There are times where we are the first institutional investor. Sometimes, that’s often a seed round. There are times where there are already great seed investors and it’s time for the company to raise an A. Those seed investors, they don’t have the capital, the check size gets too big for them. We’re there for the A. Ultimately, that’s a core part of the White Star strategy, is to do the late seed and the series A, and then help our companies get to the B. That’s very important, to the help and get to that next step.
What would you say, besides growth and traction and hitting the milestones, are some of the things that are so important to help somebody get from series A to series B?
The quality of the team.
[Tweet “Get VC funding: Quality of team is more important the more money you raise.”]
Just the same as the seed. It’s amazing how that never goes away, does it?
Yeah, but you know, suddenly when you’re trying to raise your … For every round, every subsequent round, there are higher expectations on the team. One of my colleagues, Christian Hernandez, out of London, one of the founders of White Star, he blogged about this recently. How it’s important to be leading a company that is today’s company, not yesterday’s company. Today’s company, the CEO may have been also historically doing most of the finance or heading up product.
Get VC funding: As your company continues to scale, you need to bring on leaders in each of those job functions.
At some point, the company should get big enough that the CEO should not have time to do both. You need to bring in a head of finance or the head of product, etc. It’s fine to go dabble a little bit in those areas and to coach on those areas. Ultimately at the end of the day, as your company continues to scale, you need to bring on leaders in each of those job functions.
Including, I would assume, a more impressive board of advisors than you might have at the seed round, correct?
The board of advisors can be helpful. When an entrepreneur tells me that h or she has an extraordinary board of advisors, I look at the names, I look at the titles and all that. Then what matters most to me is, these are great names and all, but what have they done for you lately? How active are they? Are they people that are in the office regularly or are they people that you have a call with one hour a week? Are they people who say, “Call me up, I’ll try to help you,” and at the end of the day, they end up calling you once or twice a year.
Very different levels of involvement.
That’s critical. Because at the end of the day, the people who are working the greatest number of hours on average in the company are often, not always, but often the most influential.
[Tweet “Get VC funding: people working the most hours are often most influential.”]
Interesting. Is there a book that you would recommend founders read about life or funding or anything you just think is important for them to know as people?
I’m going to avoid a lot of the obvious books. I’ll go a little bit off the beaten path. There is one book that I still remember something from even though I read it in 2009. The book is called The Trusted Advisor. In The Trusted Advisor, they talk about the formula for being a trusted advisor. Really, it’s not about being a trusted advisor. It’s the formula for trust.
I love it.
The formula, I call it the CRIS formula, and you’ll see why. To develop trust, you must have a high level of credibility, reliability, intimacy, and then a controlled level of self-interest. CRIS. I try to break this rule. I try to find errors in this. Ultimately, it really did come down to those four. Credibility, reliability, intimacy, and just don’t have too much self-interest.
[Tweet “Get VC funding: Credibility, reliability, intimacy and controlled self-interest.”]
Wow. Control self-interest. That is a really tough one for a lot of people. It all goes back to have a little empathy for your customer and a little empathy for the investor.
Absolutely.
Nice. It’s been such a pleasure having you on, Lylan. Is there a way that people can follow you on social media? What’s your Twitter and all that good stuff?
My twitter handle is @LylanM. I don’t publish much on LinkedIn. Actually, LinkedIn, I think I’m also LyanM. I have a specific blogging strategy that I haven’t launched yet. Stay tuned. Ultimately, through the White Star network. I’ll be publishing through there probably on Medium. Who knows?
That’s great. It’s interesting because I take the podcast and transcribe that to Medium as well. We’ll be able to do that as well for you. Thanks again, it’s been a pleasure. I love this trusted advisor criteria and how important it is for the team to continue to evolve as the funding gets bigger. Those are incredible takeaways.
I appreciate it. Thanks, John.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
Lylan Masterman Website
Lylan on LinkedIn
Dollar Shave Club Website
The Trusted Advisor by David Maister and Robert M. Galform
Crack The Funding Code!
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