Pasadena Angels Secrets – Interview with Stephen Hall
Posted by John Livesay in podcast | 0 comments
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Episode Summary
Stephen Hall is the co-founder of ORock Cloud, an industry leader in cloud computing security. His main target audience is the Department of Defense and he discusses what it takes to pitch to that caliber. He is also a member of the Pasadena Angels and talks on why this particular angel group is different from the rest.
Pasadena Angels Secrets – Interview with Stephen Hall
Welcome to The Successful Pitch Podcast. Today’s guest is Stephen Hall. Stephen is in Los Angeles, like I am. We were referred to each other by mutual friends, which is always the best way to meet people. Those warm introductions are everything. Stephen is the co-founder of ORock Cloud, which is a data security company. He’s also a member of Pasadena Angels. Stephen, welcome to the show.
Thank you, John. Thanks for having me on the show.
It’s a pleasure. I always like to find out from people, you have some interesting background here with the Department of Treasury and the IRS and all these things. You went to USC. Tell us when you were at USC, did you always know that this is the direction you wanted to get into, being an investor and doing startup stuff in the world of security?
[Tweet “How to help Department of Defense with security.”]
Yes. When I was at USC I had several mentors. One of them is Mr. Ellis, which is now the dean of the USC Marshall School of Business. He comes from an entrepreneurial family. I learned early on that I would love to invest in startups or invest in projects that can solve big problems. That’s what I’m here today to do. I’m passionate about solving big problems and taking an idea from literally an idea on a napkin to commercialization, whether it’s through the federal government or through the private sector.
I love that. Do you have any examples, right off the get go Stephen, of something that was a napkin that became a reality?
From an investment perspective, building a real estate portfolio in my career, we built a portfolio of properties, whether it’s rental properties, industrial properties, storage facilities, town homes, things that nature. Through that process, it’s just a mechanism of finance and organization with the local municipalities to take your vision and execute the vision. Obviously in order to execute it, you also need the private sector to be able to participate and support the infrastructure. That’s an example. Also through my career, I’ve been an accountant advising literally thousands of small business owners on how to take their ideas from an idea out of their garage all the way to commercialization, whether it’s products that’s on the Home Shopping Network or chocolates that are in Costco, t-shirts that are sold in Walmart, you name it. I’ve experienced the processes of taking it from idea all the way through, whether it’s a Big Box, whether it’s Amazon.com distribution or if it’s a DoD distribution.
I love that image of from a garage to shelf, whether it’s Hewlett Packard or Steve Jobs at Apple. It’s such a great American analogy and I think unique to our culture in a way. What things would you say are the number one or two common pieces of advice you find yourself giving startups at the beginning, regardless of what it is they’re trying to do from a financial standpoint?
Number one is making sure you’re passionate about the problem you’re solving. That’s number one because it’s a long road to get you the liquidity event of more positive cashflow. Number two is making sure you’re solving a big enough problem, there’s a huge need for it.
There’s some scale and ROI for the investors.
Both, scale, ROI for the investor. More importantly, you can afford, as an entrepreneur, to staff up, to hire people, just to take some of the burden off your shoulders as you grow. Because the biggest challenge is, for entrepreneurs or founders, is the burnout phase.
Talk to us a little bit about what that burnout phase is. Does it start from day one or does it get, like at the trough of despair. I’ve had people talk about that. I’d love to hear your thoughts on the burnout phase and how to avoid it.
Pasadena Angels Secrets: Have good positive support of people around you so that way you don’t have to carry the burden.
I think it’s personality driven. I think it all comes down to support. As long as you have good positive support of people around you and a team that are experts in their area so that way you don’t have to carry the burden, it makes it a lot easier to go from point A to point B.
I’ve heard many people talk about the importance of a team but I’ve never heard anybody connect the dots like you just did. We’re going to tweet that out, “A great team helps prevent the burnout,” which is so true and something probably investors are looking at in the back of their head is, “Is this team going to work together?” Not only to be productive, but help each other from burning out.
[Tweet “Pasadena Angels Secrets: A great team helps prevent burnout.”]
Absolutely.
Tell us about the Pasadena Angels. I see you joined that back in 2013. What makes Pasadena Angels different from other Angel investment groups? What kinds of things do the Pasadena Angels like to invest in?
Great question. Pasadena Angels, it’s an amazing network of brilliant people that are risk takers. More importantly, they’re calculated risk takers that are literally experts in every field that you can imagine. For example, I’ve worked with some Angels that are retired patent attorneys that used to do medical device patents, all the way to biochemists from Caltech that can tell you when there’s a new startup talking about Biology, to explain it in the layman’s terms of what the founder’s trying to convey to us investors. It’s a brilliant group of people that are from every skill set imaginable that really collaborate and work together to help underwrite the potential investments that come through or pitches that we review. Pasadena Angels has a variety of appetite as far as what you want to invest in. What’s really neat about that is every investor comes in through a different set of lens. We’re a voluntary organization. What I mean by that is every Angel has the right to participate or elect out of participating a specific deal.
Got it.
Personally, I’ve been more focused on recurring revenue technology models.
SaaS, kind of stuff?
SaaS, absolutely. SaaS driven models or a model that solves a problem that orders a need in an industry niche.
Do you find yourself investing in people within a 150 miles of Pasadena? Would you like to invest in those kinds of companies that are in the semi-California area? Is that a criteria?
No, it’s not a criteria.
Oh, great.
It’s not a criteria. Criteria really comes down to the idea itself. The team the entrepreneur has behind them. That’s really a criteria. Where we live geographically is not a criteria.
Nice. Some Angels feel that they only are comfortable with getting to see the people on a regular basis. I’m glad to hear that that’s not an issue. What is the average range of investment that the Pasadena Angels make? Is it important for you guys to be the first or do you care?
That’s a good question. I’m going to give you a very broad answer.
Sure.
In some cases, we’ll be the seed investor. In other cases, we’ll co-invest with other Angel groups on models that are late seed, series A opportunities. When I say series A opportunities, what I’m referring to is that the valuations are treated like a seed round, which is always a positive point for the Angels, to mitigate the risk-reward scenario.
You guys can be anywhere from, I don’t know, a couple of hundred thousand dollars up to a million, depending on what the idea is and where the company is?
Correct. For example, there’s one offering right now to where I believe there’s going to be $600,000 in funding but we’re going to be co-funding with some other Angel groups through the distribution channel. What’s unique about the Pasadena Angels specifically is that some of the members of the Angels have their own incubation funds as well.
Oh, interesting.
They’ll co-invest themselves individually, plus their funds.
Nice. Oh, that’s great. I’ve never heard of that before. I love that. Obviously, the show is called The Successful Pitch. Stephen, what do you look for when someone comes to pitch at you and at the Pasadena Angels? What are the key things that make a good pitch for you?
The key items are, one, is the problem a big problem to solve? Two, based on the problem that we’re solving, what’s the size in the marketplace? Three, is the revenue model supporting the problem, is it a recurring revenue model? Finally, four is the team. Who’s behind the team to solve this problem? What are their backgrounds that make this problem exciting to solve? That way, the team, when they carry this torch from day one, they’re able to finish the race.
[Tweet “Pasadena Angels Secrets: Is the problem a big problem to solve?”]
Got it. Finish the race. It is a race. I alluded to it, the way you and I met, through warm introductions. Time and time again, I can’t emphasize this enough, for me personally and just everything I see, is the importance of your network. I’m guessing that warm introductions are you and the other Angels’ favorite way to have people approach you, is that accurate?
Absolutely. Also as an Angel, sometimes when we see a model that’s not ready, where they’re not solving a big enough problem, where the revenue model is not in place, we may turn down the investment opportunity through the Angel network. However, we’ll end up mentoring the entrepreneurs to help them get to the next phase of their evolutionary process with their model. Because so many of these entrepreneurs will come back a second or third time and pitch the same model, but then by the third time, they’re seasoned and they’re experienced with what we’re looking for. Then, at that point in time, we may potentially invest in their model. Just because we say no to some entrepreneurs doesn’t necessarily mean that we will disengage. It just means that you might want to reinvent what you’re referring to. Potentially, if some of the Angels are passionate about the problem you’re trying to solve, they’ll mentor you.
Wow, how great? What is the other projects that you’re working on that’s equally exciting? Tell us about what’s going on with Orange Rock and the cloud platform in particular.
What’s exciting is this project is called ORock Cloud. What we have done is we’ve commercialized a very secure cyber security system and their main target audience is the Department of Defense.
It doesn’t get bigger than that, does it, Stephen?
It does not. The Defense’s budget is literally a half a trillion dollars.
Oh my God. Let me wrap my head around that for a second. Nice.
We’re by far the largest military budget globally. The way to look at it is, the Department of Defense is literally ten to fifteen Walmarts inside of one.
Oh my God. What you just did there is a great example for all the listeners. If you’re going to talk about something, a problem, a size, I’m always about becoming a storyteller. You just gave us a reference. Imagine ten to fifteen Walmarts, to get a sense of how big the DoD is. Boom. Suddenly I get that. But without that, it’s hard for me to imagine how big the DoD is. Thank you for that analogy and thank you for that example of great storytelling.
You’re welcome. What’s nice and exciting about this problem, not very exciting, it’s exciting for us to solve the problem but it’s not exciting for us citizens that are all experiencing breaches. For example, locally, at the UCLA breach, some medical records for citizens of Los Angeles have been breached or your credit card information through Target or Home Depot have been breached. We’re excited to be able to create a system to minimize the breaches. We can’t guarantee that no one will hack you, but we could definitely minimize the breaches. In fact, our goal with this system is to be able to protect the highest level of systems of defense. We’re currently going through the validation phase called FedRAMP. FedRAMP is the equivalent of the FDA for healthcare. When you have a drug in healthcare, in order to distribute to a Rite Aid or a Walgreens, you need to get approved by the Federal Drug Administration to be able to distribute to the public. Congress had created another department called FedRAMP. FedRAMP is basically the FDA for cyber security.
Nice.
We’re in the final phases of validation. We’re in process as we speak and we’re about 60 days away from validation from this agency to be approved to redistribute, to resell our product to every agency in the federal government.
Holy cow. Can you give us a timeline? When did you come up with this concept? Did you get funding to get this far? When do you hope to get this completed by?
Pasadena Angels Secrets: In fact, we took down the product twice. We were comfortable with the third version.
Good question. We started the process about 36 months ago. We self-funded, us, three co-founders, have self-funded this opportunity through the seed round of $600,000. In fact, we took down the product twice. We were comfortable with the third version of this cloud product to distribute to the federal government. We’re currently in a series A round right now raising $4.5 million. I have $4 million in commitments and capital raised. I’m now having a remaining $500,000 to complete in this series A round of financing.
I would imagine that because of your track record and because you’re an investor and you put your own money in, that the people who are giving you money for the series A are so much more comfortable, because everybody has got lots of choices of what to invest in. They’re going, “Should I invest in Stephen in this big problem, who is an investor himself?” Because one of the things I love to talk to the listeners about is if you’re a founder and you can show empathy for the investors, that sets you apart from 90% of the pitches they’re going to hear, don’t you think?
Absolutely. Take it a step further. With the Department of Defense, we’re considered a small business and more importantly, we have a team of resellers. We’re choosing the channel resell model so that way we can minimize our cost of general and administrative expense. We have procured some amazing resellers that have third year real Rolodexes within the federal government. A typical contract in this arena is $6 million. The goal is to achieve through the small business procurement division, to achieve at least $7 to $15 million worth of revenue in 2016 strictly from the federal government.
That’s an amazing recoup on your investment. Really, really fast. Obviously that’s a great ROI, right off the bat. Mostly, people talk about, “It’s going to take me twelve months, eighteen months to breakeven and then I’ll start making …” You’re off the gate running with those kind of big contracts. I would imagine that there’s some applications outside of the government. For example, the Sony email hack. I think companies like that would be desperate for this solution.
Absolutely. In fact, in London, we have three locations. We have a location in Los Angeles, a location in New York, Secaucus, New Jersey and we also have a third location that’s opening in the next 30 to 45 days in London. We have a team of 200 resellers on the ground in London that are ready to go live to distribute our cyber security product throughout the European region. We forecast our revenues could be between a … It’s a wide range right now, between a million and ten million. Depending upon the distribution and the domino effect of the resell network throughout the European region.
One of the things when someone pitches an Angel or series A is talking about your competition. What makes you unique and the barrier to entry. Can you give us a sense of your competition in this very huge market, but a very niche solution?
Pasadena Angels Secrets: We’re laser-focused on solving security at the highest levels of government.
Absolutely. The number one competitor would be the Amazon Web Services, AWS, and the Amazon GovCloud. Amazon is a massive company with massive resources. They’ve done a great job being the first to market about seven years ago. As marketplace, they were, in fact, the number one, the first Cloud company to go to scale in the marketplace. However, Amazon is also a conglomerate. They’re focused in retail, as we all know, they’re on entertainment, they’re on pretty much every sector we can think of. They’re not bespoke like we are. We’re laser-focused on solving security at the highest levels of government and that’s our main focus. That’s our main differentiator, is the way set ourselves.
We’re not all things to all people. We’re very focused on just the highest level of security that’s needed. The best way to think of us is when you store items, you store your kid’s crafts and things of that nature in a box in a garage. But if you have your grandmother’s picture from 1820 when she was a child, or great grandparents, you may want to put that in your safe deposit box. That’s fireproof, that’s irreplaceable items. That’s what you want to think of, a safe deposit box of your digital needs.
See, you did it again there. It’s so fantastic for the listeners. I have to make sure that everybody heard what you just did. You gave us a competitive advantage, we’re going to tweet that out, “A laser-focus is a competitive advantage,” and then secondly, you took that concept and gave us another story. Imagine if you’re in your garage and you’ve got places to put your kid’s stuff but then you have these family heirlooms, you don’t want them all in the same place, you need to differentiate them. That’s what having a laser-focus does. You make it full circle. I see the competitive advantage and I’m thinking, “Okay, why is that important?”
[Tweet “Pasadena Angels Secrets: Laser focus is a competitive advantage.”]
Before I can even be wondering about that question, you answer it with a story. When people do that, what you just did Stephen, is the way to get people to say yes to your pitch. I don’t know if you’ve been trained to do it or if it’s just natural. Since I train people to do it, when somebody does it, it’s like watching Meryl Streep act. If you’ve been an acting teacher you can say, “Oh my God. Look what she did there and there and there.” That’s what it’s like talking to you. It’s boom, boom, boom. It’s just so great. I love it.
Thank you. It comes from the 20 years of experience and many mentors. I always recommend all the listeners to try to find somebody that you can identify with and get some mentorship. Because the mentorship is priceless to get you from point A to point B.
That goes right into the whole concept of how important it is to be coachable as a founder, especially, going back to the Pasadena Angels example, if someone comes and pitches you and they’re not quite ready, the problem’s not big enough, they don’t have a good enough story. You like them but not the idea. You’re willing to mentor them but only if they’re coachable, am I right?
Absolutely. In fact, coachability is a key item for my personal underwriting. If an individual is not coachable, I more than likely will pass on the deal just because there’s so many opportunities out there. Life’s too short. I want to be able to enjoy the conversation I’m having with some folks versus having to have an adversarial conversation just to get a deal done.
[Tweet “Pasadena Angels Secrets: If you are not coachable you will not get funded.”]
You can’t emphasize that enough. Your likability, your flexibility and yet you have to come across confident but coachable at the same time. For so many people, it’s one extreme or the other. Even learning how to be coachable is something you can be mentored on.
Absolutely.
It’s amazing how that all ends. Stephen, is there a book that you like to recommend to people either about life or business before we wrap this up?
One great book, it’s a simple book, it’s Rich Dad, Poor Dad, talking about changing your thought process from working to saving and solving problems. I love that book. It’s a basic book but it really sets a foundation in your mindset of what you’re doing as far as your day to day life, as well as influencing your peers and your relatives and friends and family and neighbors, etc.
What’s the title of it again?
It’s called Rich Dad, Poor Dad by Robert Kiyosaki.
I know it well. Fantastic. We’ll be sure to put that in the show notes. Stephen, how can people follow you on social media? What’s your Twitter, all that good stuff?
I guess I should set up a Twitter account. The easiest way to follow me would be to shoot me an email.
Got it.
That will be the easiest way to get a hold of me.
Nice. All right. Is there any last piece of advice or insight that you want to share with people? I love how you opened with being passionate about what you’re doing is the number one thing and solving a big enough problem. Those are obviously key things. It’s so exciting to hear the inside scoop on what’s going on with the DoD and security. Any last thoughts that you want to leave our listeners with?
Pasadena Angels Secrets: Many experts are passionate in their field and they’ll always make time for you.
The last thought would be, again, having a great team. If you’re going into an area that you’re passionate about and there are experts in the field, don’t hesitate to pick up the phone and talk to those experts. Never think that any expert’s too busy. What I’ve learned over the years is every expert that there are, many experts are passionate in their field and they’ll always make time for you. All you have to do is ask.
Nice. Great. We’ll definitely inspire everybody with that last one. Thank you so much for being on the show.
Thank you, John. Thanks for having us.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
ORock Cloud Website
Rich Dad Poor Dad by Robert Kiyosaki
Crack The Funding Code!
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NY Angel Pitch Secrets – Interview with Nisa Amoils
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
Nisa Amoils has a background in law, entertainment, and beauty tech. Nisa is an advisor on four boards and discusses the importance of entrepreneurs utilizing their advisory board’s expertise, on today’s show. She started investing when she went through the 37 Angels boot camp and, through her unique experiences in law, has a ton of helpful advice and pitch secrets to share with our listeners.
NY Angel Pitch Secrets – Interview with Nisa Amoils
Hi. Welcome to The Successful Pitch Podcast. Today’s guest is Nisa Amoils who is in New York City. Nisa has an amazing background from being a lawyer to working for NBC and Time Warner to now being at the heart of all things Angel investing in New York. Nisa, welcome to the show.
Thank you for having me. It’s great to be here.
It’s a pleasure. I always like to ask my guests about their background and the journey they took to becoming an investor. Can you take me back to your decision to become a corporate attorney? Did you have anywhere at the back of your mind that, “Someday, I’m going to be an investor,” or was your plan just to work in law forever?
My plan was definitely not to work in law forever. I did not have a plan to become an investor, it just happened along the way. I had gone to business school before law school, so I always knew that I wanted to do something entrepreneurial. The reason that I went to law school was I was graduating from business school, it was a recession and I thought, “This is a helpful degree. If I could get into a good enough school, I’ll go and I’ll take it. I can always use it somehow in business.” That was the plan.
Basically, I practiced law for a couple of years and knew that it wasn’t for me in the long term. It was really valuable because it really teaches you how to think and how not to get ripped off by other lawyers. I actually use it a lot when I’m doing either investing or I help startups with some of their legal questions or sometimes I can even draft documents if it’s an area that I know about or I’ll work with their outside counsel for some of the companies where I’m on the advisory board. It actually is really helpful, I find.
I’m sure. What were some of your favorite projects you got to work on, either at NBC or Time Warner?
Pitch Secrets: I was able to do big partnerships around the movies I worked on.
Actually, I would say at Time Warner, I was designated as the movie and television person. It was a corporate group that was set up to serve all the different divisions. It was right at the time when Lord of the Rings was coming out. That was great because I got to work on those movies and I was able to do big partnerships around them, promoting them and product placements with them. There were so many great movies. Devil Wears Prada was another one coming out at the time. I really had a lot of fun when I was working in the entertainment industry, being able to do those kinds of partnerships.
I was at Condé Nast when Devil Wears Prada came out, which is, for those who don’t know, all about Anna Wintour as the editor-in-chief of Vogue. Gosh, there was a ton of product placements in that movie. It was just ripe for fashion and beauty and all kinds of things.
In fact, there’s a funny story about that movie because we were working very closely with Mercedes-Benz at the time and they put a car in the movie that was … They had to cut it in half in order to film Meryl Streep playing Anna Wintour. That was something. They never cut cars in half but for that particular scene, they had to do it.
Wow, that’s fascinating. That’s a pivotal scene in the movie when she’s thinking about what’s going to be in her next move. What a fascinating background to have. One of the keys that I talk about all the time on The Successful Pitch is helping founders with their pitch and making it a story. You just gave us a great example of storytelling at its best. You took us back, you created a scene, you cut the car in half, you took something that could be very dry, like law, and made it very interesting. Thank you for that wonderful story and example.
We’re sort of glossing over. First of all, it’s very difficult to get a job at those studios. Entertainment law is very challenging. My sister’s a lawyer, that’s why I know, and I have a friend that works in law at Fox. What did you do to get your foot in the door? Because I’m thinking that there might be a story there that founders could be inspired by, much like how they have to get their foot in the door with investors. Was it some tenacity involved? Was it some connections? How did you get into getting to become an entertainment lawyer?
[Tweet “Pitch Secrets: Show investors how you think.”]
I actually started out as a corporate lawyer. I was doing mergers and acquisitions, contracts, all types of corporate law, working with SEC filings. I knew that I wanted to leave a law firm so I was just looking around and I saw this job posting. It was for an entertainment company. I thought, “Oh,” and it was USA Networks at the time, which was subsequently acquired by NBCUniversal, which is now spun out into IAC. It’s got a bunch of iterations. Basically, I just thought, “This is interesting and I like movies. Why don’t I go into this?” I wasn’t really an entertainment lawyer. I was using my business background more at that point. Just doing deals and it was Internet 1.0 and it was Barry Diller and he was acquiring a lot of different internet assets at the time. That’s how that happened.
Wow, I love that. I know what it’s like to work for Barry Diller. I helped launch The Daily Beast when Tina Brown was the editor-in-chief there.
Oh, yes. Of course. That’s great.
All right, then you make the decision to leave all that, entertainment law and all that, and go and become an investor. What made that decision?
Pitch Secrets: I was able to learn a whole new industry and be even more operational than I had been in the past.
There was actually one step in between. I’ve always been based in New York and I knew that I wasn’t going to move to LA for family reasons. I decided that I should put entertainment behind me. I had always wanted to do something entrepreneurial, so I ended up partnering with somebody on the launch of a skincare company. I did that for concept through to launch and that got me involved in the whole beauty industry. It was great because I was investing and I was able to learn a whole new industry and I was able to be even more operational than I had been in the past. That was a great experience. I decided, at the same time, that I wanted to start investing in other businesses. My time wasn’t scalable, so I knew that I had to be able to just either be on advisory board or invest in other people and that’s when I started to do it on my own. That led me into a bootcamp called 37 Angels.
I know it well.
Which is a network of women investors in New York led by a fantastic woman, Angela Lee, who you know. We, after going through the bootcamp, just started investing in startups and started really seeing more and more technology startups. That’s how I got involved. Then I subsequently joined New York Angels, which is a long established group and sees a lot of different varieties of companies, but a lot of technologies. That’s what I’ve been doing since.
How exciting. Let me just give the listeners a little background on New York Angels. They’ve invested over $45 million in entrepreneurial ventures. They have over 75 accredited Angel investors and they typically invest anywhere from 100 thousand to a million in seed in early stage companies and syndicate deals with Angel group partners and VCs up to 2 million. That is an amazing, powerful group to be part of. I’m sure they don’t just let anybody in to become part of that group like you are?
They don’t. They have an admissions committee and a process. There are 120 members now.
It even grew. Wow. Your background from M&A, because ultimately most founders, especially for Angel investors, the goal is, “How can I have an exit strategy in three to five years?” The M&A background that you bring from your legal days to actually running a skincare company and knowing the operational to being part of 37 Angels makes you the ideal candidate, I would imagine for New York Angels, yes?
They took me. That was good.
You’ve obviously heard quite a few pitches over the years. What do you think makes a good pitch?
I think there is the usual checklist that you need to go through in your pitch deck and your pitch, which is your team, your market size, your product, your go-to market strategy, your financials, your investors, existing investors, or how you plan to use the money, how much you’re raising, your terms, and exit. That is your basic high-level structure to it. I think what separates people is really how they present and how concise they are in getting that message across and how authentic and passionate the entrepreneur is. That’s what I look for when I’m hearing pitches.
[Tweet “Pitch Secrets: Be passionate, concise and authentic.”]
That’s so helpful. Concise, authentic and passionate. Those are three key elements, we’re going to tweet that out, to making a successful pitch. Do you have an example that you can share with us of a pitch you heard and you said, “Oh my God, what a passionate story? It was easy to understand. I saw the solution they were offering.” Anything jump to mind?
There are so many. I’d have to really come back to that question and think about it. There’s so many.
Is there anyone that you’ve invested in that you’re excited about that you want to talk about?
There is one that I actually did in the fall. It’s called Refresh. Basically, it is going to be starting in New York. It’s a one-stop club for women to be able to go in and change and buy whatever they need to be able to go out or go to work from there. It’s a women’s only club concept. There are a lot of different partnerships around it and it’s started by this great entrepreneur. What’s amazing about it is that she just closed her seed round, but 70% of the investors are women, which is a great example of how we’re changing the ratio and how there are more and more women investors out there. We’re really excited to see what happens with this concept. There’s some really, just a great group of investors behind it.
I know in LA and New York, these Blowout Bars are hugely successful where women can go in and get a quick blowout of their hair before going out.
Absolutely. This will include those types of services as well.
It’s almost like when you are traveling first class and you fly from LA to London and you get to go to the Virgin First Class Lounge and they have a complete place to take a shower, get your haircut, get a massage before you get back on the plane to go to South Africa or something.
Exactly. Part of the plan is, in addition to retail, there’ll be airport locations as well.
Who doesn’t want to get refreshed after a long flight?
Exactly.
How exciting. That could be very scalable, but not from a tech standpoint, which is always interesting to hear, but more of a, “This could just start popping up like Starbucks,” basically.
Exactly, or like SoulCycle.
That’s certainly a hot trend. Was there anything that you remember in that pitch that made you say, “Ahh,” you saw yourself using it and you knew your friends would use it. Is there something along those lines that you really related to from your beauty background?
There was definitely an element of that. The entrepreneur was great. When I look at investments, I always think about “why now?” because if you look at, historically, what are the best investments, it’s really a confluence of market forces coming together to make this the right time to build this type of business. I actually was just looking at the trends in terms of what women are doing and how they’re really clamoring for a club of their own. I think this is really the time to be launching something like that.
[Tweet “Pitch Secrets: Why now is key when you pitch.”]
We’re going to tweet that out. “Why now?” one of the most important questions. I’ve heard other people talk about the success of Uber and Airbnb is because the timing was so perfect. Before smartphones, nobody could use Uber, to the scale that it is. When I hear about what you’re talking about with Refresh is it’s more than just a place to go and get refreshed but it becomes a club. That transcends just the small problem of, “I need a place to freshen up.” If you start to create a community where, from city to city, and people start maybe even networking at these Refresh places, then you’re really onto something.
Exactly. That’s part of the plan.
Love it. It’s so important to keep in mind, have passion, be really concise, make it authentic, make sure that the investor can see and understand the problem and the solution, but then take it one step further and explain in your pitch why now, that this is the time that people would use this. Take it beyond just the obvious problem you’re solving into a more secondary benefit to joining Refresh so that people could go, “Ohh.” You’re not even so worried about competition coming into play if you are at the place that’s creating a sense of community. Would that be accurate?
That’s right.
Would you mind talking about when you hear pitches, what are you looking for when people come and talk about competition? I know one of the biggest mistakes new people can make is to say, “We don’t have any competition.” Let’s assume that you’re talking to a fairly sophisticated founder or somebody who’s at least gotten some training so they’re not making that mistake. What are you concerned about when you hear or see their competition slide?
Pitch Secrets: It’s all about execution.
I’m always asking how well-funded the competition is, the incumbents. It always comes down to even though they may have a slightly different attack on the market, they … It’s about execution. If one of the other companies is really much further along, that could be a real stumbling block. I’ve seen this happen over time where I invested in a company where I thought it was the greatest idea and nobody was attacking that segment of the market. It ended up that there was a much more well-funded competitor attacking a different segment of the market that ended up actually buying this company. They had raised a lot more money, they were much further along. Even though it wasn’t as great as what these people had done, they still won the game.
Interesting. That really speaks to, again, being Uber versus the competitor, Lyft. You want to be first to market whenever possible. Now, how important is it to you that the people you fund live within certain miles of New York? Do you only fund startups in the New York area?
No, I tend to also do a lot in Silicon Valley. It’s not necessary that they’d be in New York. It’s helpful if I am involved as an advisor. It’s definitely helpful because we’re on the same time zone. I could just go see them and go to meetings with them if necessary.
What percentage of the investments that you make do you end up being on the advisory board? You’re not just giving money, but you’re actually becoming part of the advisory board?
I don’t know the exact percentage. I’d say, right now, I am on four or five advisory boards.
You’ve probably invested in what? 50 or more companies?
Maybe a little bit less than that, but yeah.
Got it. People are lucky, A, to get you as an investor, and then, B, even really are luckier to get you on their advisory board. The numbers get smaller and smaller, don’t they? If one percent of pitches get funded, then out of those pitches that get funded an even smaller percent get to have you as an investor on their advisory board. Is that a key criteria when you’re looking to invest in someone? If they have a strong advisory board and the kinds of people they have?
Yes, definitely. Their extended team is very important. How they’re leveraging that advisory board is important. How much are they interacting, giving them information because there is this cycle of you give them more information, they tend to be more helpful. Then it’s a virtuous cycle from there. How strong the team is around, especially if it’s a first time entrepreneur, I think it’s really important.
[Tweet “Pitch Secrets: How you leverage your advisory board is important.”]
Got it. Nisa, would you speak to the importance of a founder being coachable. You want someone who’s passionate and confident but not arrogant, right?
Exactly. That is a very fine line. Often you don’t know if somebody is really coachable until you’re already working with them. You just try when you’re in your due diligence process to figure that out based on are they willing to listen to suggestions from you? Are they willing to make changes to the things you don’t think are going the right way? It’s really your gut telling you if this person is coachable or not.
Nice. Finally, I want to ask you because of your M&A background, do you like to see someone that’s thought through the entire process and says, “In three to five years, we could possibly give you a three to five return on your investments because we’ve identified the following two or three companies that could possibly buy us.”
Yes, definitely. I think that’s always helpful for investors who want to know what the exit is. They may not be so happy if you’re saying, “I’m going to stick it out. I’m not going to sell. I’m just going to go IPO.” That might not happen. You want to see flexibility in terms of if they get a good enough offer, are they willing to take it?
[Tweet “Pitch Secrets: Have an exit strategy to show ROI.”]
Are there any things you could share with your M&A expertise of things that you could give advice on about what to look for, what to avoid?
Could you be more specific?
Sure. If someone says, “Okay, we’ve got someone who’s interested in buying us. How do we decide which M&A firm to use? What things should we avoid when someone’s going to buy us?” Anything along those lines.
I think you have to figure out what kind of an acquisition is it. Is it an acqui-hire? They’re buying you just to get you to sign up to be talent on their team? Is it they’re really valuing the business? Is it really strategic to what they’re doing? Is it going to survive in the long term in the acquirer? Is there a cultural fit? There’s all kinds of considerations in M&A that you need to look at to figure it out.
That culture fit is so important. I’m so glad you brought that up because if they have a completely different philosophy, you probably won’t be happy there. If they’re compatible then it’s a great fit. But you definitely need to look at that. The same thing is true with the investors you take on, there has to be a cultural fit with who they are and who you are so that you value the same type of things. This has been a fascinating episode where you really shared a wide range of expertise and experience with us about pitch secrets. Are there any books that you recommend people read, either about business, investing, or just life, in general?
The Startup Playbook: Secrets of the Fastest-Growing Startups from Their Founding Entrepreneurs
Sure. There’s a great book called The Creator’s Code by Amy Wilkinson, which you may have heard of, recently written. There’s also one that I love to recommend to entrepreneurs called The Startup Playbook, which basically goes through all the different founders who were very successful in how they got to where they are.
Love it.
Of course, they’re not books, but I read a ton of newsletters. For investors, I would say there’s things like Mattermark and StrictlyVC and Ben Evans’ List and the Term Sheet by Dan Primack and TechCrunch and things like that.
Great. We’ll be sure to put all that in the show notes for people so that they can have easy access to both the books and the other things that you just mentioned. Nisa, what do you look for when someone wants to pitch to you? You want a warm introduction typically? What’s the best way for founders to get in front of you?
Generally, it is a warm introduction but I’m also on Twitter, I’m on LinkedIn. I pretty much answer every email that people send me. I try.
How nice. What is your Twitter?
It’s your last name, first name?
Yes.
Okay, got it. That’s great to know. Is there any other piece of advice you want to leave the listeners with before I let you go?
I would just say I’m a huge fan of entrepreneurs. I really encourage entrepreneurship. It’s a lot harder to be the entrepreneur than it is the investor. I’m definitely pro-entrepreneur. Keep at it.
That’s fantastic. You’ve been a great guest. Thanks for joining us today.
Thank you so much.
Links Mentioned
J Robinett Enterprises
John Livesay Funding Strategist
37 Angels Website
The Creator’s Code by Amy Wilkinson
The Startup Playbook by David Kidder
Nisa on LinkedIn
Nisa on Twitter
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The Successful Pitch – Book Trailer
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Secrets to Crowdfunding, Kim Kaselionis | TSP060
Posted by John Livesay in podcast | 0 comments
Listen To The Episode Here
Episode Summary
Kimberly Kaselionis is the Founder and Managing Partner at Breakaway Funding, a private business investment firm. She has more than 25 years of senior executive experience in the community bank and investment management industry. Kimberly has a wealth of knowledge on how to proof your idea and get funding from your customers.
What Was Covered
- 03:00 – How did Kimberly get started in this space?
- 03:45 – Are entrepreneurs born or are they made?
- 04:25 – Why did Kimberly leave the banking industry?
- 06:00 – What were some of the surprises when Kimberly launched Breakaway Funding?
- 07:05 – What kind of challenges did Kimberly face? Kimberly talks about her business revenue model.
- 09:00 – Kimberly will be a moderator at the Global Alternative Funding conference.
- 13:20 – Kimberly discusses some of the benefits of crowd funding.
- 14:30 – What does a typical day look like for Kimberly at Breakaway Funding?
- 17:35 – Kimberly shares one more example of why crowd funding is so great.
- 20:15 – We are no longer living in a time where we get to benefit at your expense.
- 20:45 – Kimberly shares tips on how to get people emotionally engaged with your vision/pitch.
- 22:30 – Remember, the confused mind always says no.
- 23:10 – We do need time to read books, so read a bad novel and relax! It’s okay to take a time out.
Tweetables
[Tweet “Have stamina and determination to overcome life’s speed bumps.”]
[Tweet “Confidence attracts investors.”]
[Tweet “Convert your social capital to venture capital.”]
[Tweet “Be engaged and engrossed to show passion.”]
Links Mentioned
Judy Robinett’ Website
Breakaway Funding
4th Annual Global Alternative Funding Forum Addresses State Of The Art Options – Los Angeles
Kim Kaselionis on Linkedin
Breakaway Funding on Twitter
Kim Kaselionis on Twitter
Startup Seed Funding for the Rest of US by Mike Belsito
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