Giftology: Make People Feel That They Matter with John Ruhlin
Posted by John Livesay in podcast | 0 comments
Episode Summary
Making people feel that you care and think about them through personalized gifts is the best way to make a connection. Not just because it is your obligation but because you feel it is the right thing to do to show your gratitude. Learn how to give great gives with Giftologoy author John Ruhlin. The gift-giving bar may have been set low by the advancements of technology, but this is the best time to go against the flow and make people feel one-in-a-million.
Today’s guest on The Successful Pitch is John Ruhlin who is the author of Giftology. Do you know what the ten worst gifts are to give? John does, and he has ideas on how to give great gifts that are thoughtful and consistent. One of the secrets is personalizing the gift and making it so memorable. He also has a secret about the best time to give a gift and the best time not to give a gift so they’re not lost in the clutter. He really is the master of storytelling, and he says give when it’s unexpected, and more importantly, make what you give something that people are going to talk about. It’s really worth the investment in coming up with a thoughtful gift. I can’t recommend his book and this episode enough. Enjoy it.
Listen To The Episode Here
Giftology: Make People Feel That They Matter with John Ruhlin
If I could show you how to cut through the noise, increase referrals and strengthen the retention of your clients, would you want to learn how to do that? I don’t know about you but I do, that’s why I’ve invited John Ruhlin who is the founder of the Ruhlin Group. He’s the author of the book called Giftology, which I have given out as gifts. His company is trusted by leaders of fast-growing companies to develop relationships, building strategies and VIP gifting programs that do all these important things about getting more referrals, getting the most important clients and employees, and even prospects to be personally engaged. He writes regularly for Entrepreneur, Forbes, Success. He’s literally spoken all over the world for big clients like Google and EO and countless others. John, welcome to the show.
John, thanks for having me.
I always love to ask my guests to tell their own story of origin, and you do that in Giftology, your great book. Would you give us an abbreviated version of how did you become such an expert in gifts and what you did with knives?
Giftology
That’s how most people would assume when they hear that we have the Cubs or Google as a client, they assume that I grew up either in Silicon Valley or New York or some place that’s hip and cool. The exact opposite would be true. I grew up on a farm in the middle of Ohio, one of six kids, doing the sexiest thing on the planet, milking goats every day. I learned very quickly what I did not want to do the rest of my life. I was splitting wood to heat our house. Literally our whole house or our whole farm house was heated with wood. I worked really hard, got great grades because I wanted to get out of dodge. I thought I’d go be a doctor because you’re poor and you’re trying to make a lot of money. You think, “I’m going to be a lawyer, a doctor.” I went to school to go make mom proud. She was in the health and wellness even back 30 to 40 years ago.
My life changed when I interned with a company that you referenced, the knives. I was desperate to make money and I knew enough to not graduate from school, I went to a private university with a bunch of debt. My goal was zero debt when I got out of school, which is very difficult to do because school’s expensive and how do you do that? I started interning with Cutco, the knife company, and they’ve worked with like 1.5 million college kids. They literally have some of the best sales training on the planet. I was just desperate to make money, and so I started the process. I was scared to death because I didn’t really know sales at all. My life changed because I was dating a girl at that time. Her dad was an attorney. Even though he’s an attorney, he seemed to be involved in every business deal in town. He never seemed rushed. He had more referrals than he could possibly handle. He was always giving things away, super generous, radically generous.
He’d find deals on silly stuff like noodles and he’d buy like a semi-loaded noodles and everybody at church the next Sunday, 200 people would end up with a year’s supply of noodles. I’m like, “Paul, that was $20,000, that’s crazy.” I worked up the courage to pitch him Cutco. They had pocket knives and I thought all of his clients are men, they’re CEOs of companies, maybe he’ll give away pocket knives to his clients at Christmas. I remember pitching the idea and I’m sweating because I’m nervous. He’s like, “What about the paring knives? Could we engrave those?” I’m like, “You’re going to give a kitchen item to a bunch of grown men that are running companies, like home builders and lumber yards? Paul, I’ll sell you as many paring knives as you want, but why?” He said, “In 35 years of doing business, the reason I have more deal flow that I could handle is I found that if you take care of the family, everything else in business seems to take care of itself.”
For me, it was like this lightning bolt moment. I had never heard of Robert Cialdini, Pre-Suasion and Influence and reciprocity or any of these things. I started to learn very quickly that it wasn’t really about the knife. All the knives are amazing and we still move millions of dollars of the knives. It was about the psychology of relationship building, how you invest in people, how you stand out, and how you engage with what we now call the inner circle. I started to apply these principles to the knife business and realized even brutally successful company leaders, big companies, billion-dollar companies, they suck when it comes to showing gratitude in a very thoughtful way and a consistent way. By the time I was a senior in college, I was Cutco’s largest international distributor. I have about 1.5 million people in their 70-year history by selling these knives because of these principles that I now write about seventeen years later. Like anybody else, seventeen-year overnight success, the book came out nine months ago and it’s opening doors with MIT and just insane places. A lot of what I write in the book are these timeless principles that I learned from this small country attorney back in Ohio.
[Tweet “Be thoughtful and consistent with your gifts”]
I love that story for so many reasons. It’s the ultimate rags to riches story, and there are so many life lessons in there. I’ve actually had Robert, the author of Pre-Suasion on the show. We can certainly connect what he’s talking about edifying people and planting seeds before you even ask them for anything and how that ties into gift-giving. The thing that you said now, John, that really resonates with me is you’re solving a big problem, which is even huge companies are really bad or AKA suck at giving gifts. Maybe they give gifts on a consistent basis or every holiday, but they’re not very thoughtful, or maybe in some blue moon they might have to come up with an idea that’s like, “It’s somebody’s anniversary, I’ll give them something,” or “They’re getting married and I’ll go to the registry and pick something.” It’s somewhat thoughtful to remember that, but it’s not consistent. It’s either one or the other but rarely both. Is that an accurate analysis of the problem?
Yeah. In the book we talked about the ten core things, what makes a good gift or not a great gift. The thing is, you don’t have to have all of them but if you do, it’s a home run. I think that the bar is so low right now because people just think it’s easier to send a text message versus a hand-written note, it’s easier just to order something on Amazon versus hand-selecting it or picking it and then making sure that it’s wrapped properly or that it’s personalized. There are a lot of people that are like, “I tried that gift thing, it doesn’t work.” I’m like, “You sent this piece of crap with your logo on it at Christmas.” They did everything wrong and they’re like, “Gifting doesn’t work. We cut it out of our budget.” I’m like, “Of course it didn’t work because you didn’t put any thought or strategy into it. You just randomly tossed your assistant a few dollars and said, “We made money this year, we probably should say thank you.'”
I see that from startups all the way up to $40 billion-companies. They put all the strategy in the marketing and operations and trade shows and all the same stuff that all of their competitors do, but when it comes to time to deepen relationships, and everybody says relationships are important, there’s an incongruence between what they say and what they do. They don’t realize internally when somebody gets something that’s crappy or is not personalized, it’s seared into their memory that that person doesn’t really care about me. They’re not really thoughtful, they’re not caring, that I don’t matter. People ask, “John, how did you get referred to the Cubs?” I’m like, “I planted a lot of good seeds for seven years straight and eventually timing and everything aligned together, and people went out of their way to stick their neck out and the deal came.” Most people aren’t willing to put in all the extra work to do it because they don’t think it matters. When you think something doesn’t matter, you don’t put in the effort and it becomes a self-fulfilling prophecy.
I was born in Chicago and grew up in the suburbs so I’m a big Cubs fan. It’s just a requirement if you live there. What did you do for your clients at the Cubs when they won the World Series? I’m sure that was an interesting thoughtful experience.
You have to pick your times of how you wow somebody.
What’s interesting is when you are the Cubs, you have to pick your times of how you wow somebody. A lot of what we did really led up to landing them as a client. We reached out to them and obviously sent over a nice note, congratulating them. There is so much fanfare around the team that hadn’t won in 108 years. What I love about what we do is we gift when it’s unexpected. Everybody was wanting to just flap their back and congratulate and do cool things for them after winning the World Series and then it became noise. It’s like giving gifts at the holidays. We waited a little bit and we started to put together this cool package. We’ve done a project with them where we took the Wrigley Field locker room where they’re ripping out and they didn’t know what to do with it. We built these amazing Bluetooth speakers made from the wood, 400 of them. We ended up making extras on purpose. We knew they would run out, and so we ended up sending an extra set of the speakers and we ended up making custom headphones for all the decision-makers and all the different people and even their teams. They were able to have a piece of history that was tied to our project but in a way that they weren’t expecting. Surprisingly enough, now that they’ve won, they’re like, “What can you do with these old batter circles? Can you do something with those?” I can’t say what we’re going to do with the batter circles, but it’s going to be for their top relationships.
Most people give gifts when they’re expected and it’s obligatory. That’s what ruins the gift. We don’t give gifts after referrals. “What do you mean you don’t give a gift after referral?” If somebody sends us a $500,000 referral and we send them a Starbucks gift card, it feels a little hollow. It feels like, ”I just gave you a $500,000 referral and you’re going to send me a restaurant gift certificate?“ That doesn’t feel very thoughtful.” We hand-write a note, I give gifts just because out of the blue and then that’s when they matter. People are like, “John was just thinking of me,” not “John wants something,” not “I just sent them something so now it’s a tit-for-tat transaction.” Everybody wants to be acknowledged just as being a human being, not because they did something.
In one of your chapters in your book, you talked about one of your favorite sayings, “How you do anything is how you do everything.” I personally also really like that quote. Can you bring that to life about how that relates to you and what you do with Giftology?
Yes. I think that it’s like going into an interview and your shoes aren’t shined. People notice the details, especially the higher up the food chain you go. I referenced the idea that for most people, it’s just easier to send a text message versus a hand-written note. Gifting is one of those things where the bar is really low and so it’s easier to send Harry and David Fruit of the Month Club and just put something on auto-pilot. I think that when you take the time to say even a gift matters, all of a sudden people are like, “If he put that much attention in detail into gifting, imagine what he does in his other parts of his business.” We see that halo effect over and over again. We spend $3 on our business cards and people are like, “That’s insane, why would you do that?” I’m like, “If we pay that much attention to a business card, imagine what we do when we outsource your gifts.” They’re like, “That’s true. I didn’t think about it that way.”
If you’re willing to take the minor details that most people think don’t matter and you go all in and go not 1% or 2% better but you go a 1000% better, all of a sudden people are like, “Wow.” It’s like going to a restaurant and have a nice steak dinner. You expect a good steak dinner and you expect great service and whatever else. All of a sudden the waiter knows your wife likes a certain kind of chocolate. A dessert comes out and it’s made with that chocolate. You just spent $300 on wine and dinner and steak and whatever else, and they spent $5 probably on that dessert. What do you go tell all of your friends? Do you talk about the steak was cooked perfectly and the ambiance and the mahogany wood? No, because those are all the normal stuff. You’re going to say, “They found out that my wife likes this kind of chocolate and they made a dessert that blew her mind.” You’d bragged about the $5 thing, not the $500 thing, because the $500 thing you’ve come to expect. Maybe they’re exceeding your expectations by 1% or 2%, but they took a detail and they went all in and they surprised you with it and made you look like $1 million to your significant other. All of a sudden, this $5 thing becomes the entire focus. That’s where I tell a hundred people about it.
I’ve seen people do that with mugs. I used to make fun of mugs on air. Every company on the planet gives out mugs. This gift maker, it’s what he calls himself, he makes things out of clay. He made this handmade mug for me that was a $250 mug that told my entire life story, and then he made one for my wife and he drove eight and a half hours to hand-deliver them to me. He’s a 23-year old kid. Guess who gets all of my business anytime I need to create this amazing gift experience for clients and financial advisors in startups? It didn’t matter the client. If I want to do something amazing, I call this guy up and he makes me a $250 mug. The way that he paid attention to detail and he took something mundane like a $3 mug and made it a $300 mug that became an artifact of my life, now I can’t stop talking about him. How you do anything is how you do everything. Most people are like, “It doesn’t matter,” and I’m like, “That’s exactly right, it doesn’t matter for you, but for the 1% that latched on to it, that becomes the game changer.”
[Tweet “Give When It Is Unexpected”]
Let’s talk about the detail that you did on your book cover. It’s got shiny topography on it. It looks like it’s got a black ribbon on it. It’s got the knife. I’m sure some thought and effort went into that because I’ve seen a lot of books in my day and I’ve never seen a cover like that.
It costs three times as much to print that book as it does any other normal hardback. We actually have started to convert a lot of our books over to when somebody personally orders books from me. They don’t know this but for our first 50, for guys like Michael Hyde and Darren Hardy and Seth Godin, guys that read our friends, mentors or people I wanted to be, I made 50 of these books that look just like that but they were handmade. The book was handmade and then it went into a handmade leather bag. Then that went into a linen box that was padded and it was all color-coordinated with red. It was a $200 package and with a $9-metal letterhead, and hand-wrote notes to 50 of the top relationships. That’s a $10,000 expense. People are like, “That’s insane.” I’m like, “Let’s put it this way, Michael Hyde has one of the biggest audiences on the planet. He invited us to be on his podcast as a direct result.” He’s like, “I get thousands of books sent to me per year, yours is the only one I kept this year. It’s the nicest book I’ve ever seen.” He actually read it, as well as his twenty employees. People are like, “$200, that’s insane.” I’m like, “You’ll spend $200 on freaking flashlights and pass them out like they’re candy and not thinking anything of it. I’d rather spend $200 on one thing. Basically I call it shooting with a rifle versus most people shoot with shotguns. I’m going to go blow somebody’s mind with one thing versus sending out a thousand things that are just part of the noise and just vanilla and are nothing.”
We now have a VIP version of the book. That’s not $200 a piece but they’re very expensive; a leather bag, a linen box. When people get it they’re like, “Holy crap.” They only have to read the book and they understand what we do and what we teach and what we talk about and that we actually walk our talk. There are a lot of people that are big talking heads but are you willing to put your money where your mouth is and walk it out? For us, we’re this small little firm out of the Midwest, but we’re talking to the Washington Nationals right now about doing a big project with them. One of the reason is it’s because they’ve seen that we’re willing to walk our talk and they’ve heard about it from other people. It’s not that we don’t ever screw up. There are times that we drop the ball, we’re not perfect. Our intention is to fully play full on and do things that will level it, that most people are like, “That sounds great, but I could never do that.” They talk themselves out of it before they even engage.
That has so many layers; walking your talk, being authentic. It also reminds me of how the Italians wear clothes. They’d rather have one really wonderful handmade suit and wear that every day of the week than five so-so made suits. We go visit there and you think these people are really rich. They’re wearing these multi-thousand dollar suits and they’re like, “No, that’s all they wear. That’s their one suit.”
That’s their one suit. That’s their one leather bag. That’s their one watch. I’d rather have one really nice thing. My wife is the same way. She grew up in a farm and they took care of things. She’s like, “John, I don’t need a bunch of crap.” We don’t need more stuff, but everybody has room in their house for an artifact. I think that’s where people are like, “How do you send gifts? Doesn’t everybody just want experiences?” I’m like, “Experiences are awesome, I love experiences as gifts but I like to combine it with artifacts. Every time they see the item, they’re reminded of the amazing experience that they had with you or on their own or with their family or whatever else. I’m a big believer in do one really nice thing versus a hundred mediocre things.
I’m a big believer in do one really nice thing versus a hundred mediocre things.
Speaking of your wife, you talked about her throughout the book. You dedicate the book to her, you talk about how your favorite movie was The Notebook and that you weren’t around so much. Can you tell everybody what you did for your wife since that’s one of your favorite movies together?
Telling the whole story will probably take 30 minutes and usually that’s my wrap-up story when I give keynotes. The summation of it is I was broke as a joke when I started dating my wife. I had invested in a bunch of companies and real estate and I had an employee that was stealing from me, IRS audit. It was my lowest point. It was 2007, 2008. The world melted down financially on top of that. I went from sending saunas to people and Brooks Brothers and crazy over-the-top gifting experiences to living on $1,000 a month take home. The first two years of buying the company, didn’t take a salary, not one dollar.
I wanted to out-do myself of anything I’ve done for a client. I basically recreated The Notebook’s story. I was going to be on the plane with her in disguise, had arranged with Continental at the time. At 30,000 feet, she had read this notebook that I put together of 70 pages of our story. At the end it starts talking about, “Will you love me when I get older and when I’d gained 150 pounds?” There’s this old fat dude sitting next to her. She starts to realize, I’m the old fat dude, this is her boyfriend, I get down on one knee and pulled out the ring and proposed. Our 200 closest friends were waiting to celebrate in Cleveland where she was flying to, which is where I was living at the time. Her family had driven up. That was what was supposed to happen.
Unfortunately, I ended up collapsing in the airport, having to get on life support breathing machine. The FBI showed up because there was guy in disguise in an airplane in an airport. Everything that could go wrong with the story; they took me to the hospital, I was on breathing machine. It was like Romeo and Juliet. Fortunately, I didn’t die. I woke up the next morning and six days later got out of the hospital and was able to propose with no disguise. We read the notebook together with no disguise on the airplane and fortunately she still said yes after basically putting her through hell. It’s one of those stories that was told and written about. It wasn’t the version I thought it was going to be. It took a little bit of a U-turn, but it taught me some very valuable lessons along the way. It gave me an insane story involving FBI and TSA and hospitals and breathing machines. It’s probably the craziest thing in 37 years of living that I’ve lived through.
You’ve come up with this great term. Instead of an entrepreneur, you talk about being a giverpreneur. Can you define what that is for people in a way that they could start incorporating that into their business?
Yes. I came up with the term after reading Give and Take, Adam Grant’s book. I think that everybody is wired one of three ways. We all can be all three but we tend to have the tendency towards one of the three: a giver, a taker or a matcher. I think most people are matchers. If you do something for them, they’d do something for you. There are a handful of people that are givers in business, whether you’re a sales rep, an entrepreneur, an owner, that you give without expectation of anything coming back. Then the taker is obviously somebody that takes and is just looking out for themselves. What’s interesting about his book is the best performing entrepreneurs, lawyers, doctors, everybody, are givers. They’re also the worst performers. I think that it depends on how you give and there is a strategic way to give.
As an entrepreneur, we’re all looking for ways to grow our business and invest $1 and get $5 back. To me, a giverpreneur is somebody that has that giver mindset from Give and Take that gives with no strings attached. I think that a lot of the companies that scale the fastest are those that have the best relationships and have poured into them over and over and over again. Oftentimes, your first idea as an entrepreneur doesn’t hit. It’s the second, third, fifth, tenth, whatever idea, but if you’ve given along the way and poured into people, you start to stack up relationships and doors and opportunities and resources that by the third, fourth, fifth, tenth time, the idea is right, the timing is right, you have the right people on the team. I like to surround myself with other givers, whether it’s entrepreneurially or just in general, and have contests to see who can outgive each other. It’s amazing the things that start to happen and the doors that start to open and the people you start to meet.
To me, it sounds cool, giverpreneur. Really it’s just having a giving mindset and being strategic about surrounding yourself with other givers to grow whatever the business is, whether it’s the business you started or it’s operating as an entrepreneur or somebody that’s inside another company but acts like an entrepreneur. I want to surround myself with givers because those are the best performing people on the planet. Adam’s got the research to back that.
You’re also an investor so you hear a lot of people pitching you to possibly fund their startup. What do you look for in an entrepreneur, giverpreneur when you hear a pitch? Any tips on what a good pitch is?
Having some alignment from a core value perspective is really important to us.
We have pretty strict rights here. There are a lot of people that invest in tech and these different things. We do a little bit of tech investment but in general we’re looking for companies, one, where we trust the founder and that goes without saying. There are certain industries and arenas that, just based on core values, we’re just not going to get into. That’s just not the direction that we want to take even if it’s a massive opportunity. It’s just not who we are from a faith perspective and whatever else. Having some alignment from a core value perspective is really important to us. For us it’s not always, “Is the company going to grow to be the biggest?” but “Is there an opportunity to serve a niche and do something really unique and different and serve people?” At the end of the day, even if things don’t go perfect, we like companies where there’s not a huge amount of capital needs.
There are a lot of opportunities. Look at Amazon or Zappos. We’re not looking for companies to reach $1 billion in revenue before they’re profitable. We want the old school businesses where it’s like, “If this idea gets to $5 million, it’s going to throw off a lot of cash and help a lot of people.” If they can do those things and we feel like the niche is unique enough and we really trust the founder, then we’re open to invest in it. If not, it may be a $20 billion opportunity, at the end of the day that’s not necessarily why we’re investing. We’re not looking for unicorns. I know that hedge funds and all these other companies, they’re looking for the one unicorn. We’re looking for guys that can go out. I’d love home runs but base hits are just fine too. We invest in things that we understand as well. Like the one tech company we did invest in, it’s a gifting platform. I can add value to it and I understand it. Even though we don’t normally do tech, it was an area where we were like, “This could be really cool,” so we invested.
Movie studios have that same philosophy. They can’t all be blockbusters, some of them have to be base hits, as you described, back to the baseball analogy a little bit there.
Some of the movies that are consistently profitable are the ones that go directly to DVD or to Netflix or whatever else. They’re not the sexiest thing, they’re not going to do $100 million revenue, but they cost like $1 million to make and they produce $5 million in revenue. I’ll take a 5 to 1 ratio. It may not win an Oscar but I’m okay with that.
John, let me ask you about this situation. A lot of companies are invited to come and pitch, whether a magazine coming to pitch or brand to advertise or they’re an architect firm coming in with other architect firms to pitch to get the business to build the skyscraper or airport or whatever it is. They’re not quite sure if they should give a gift when they come to present or as a follow-up gift. They don’t want to have anybody accuse them of trying to “buy the business.” What are your thoughts on the best time to give a gift when you’ve been invited to come in and pitch, or should you give a gift at all at that time?
I think it’s a case by case basis. If it’s an RFP with Walmart or somebody like that where they can’t even accept a pencil or going out for coffee, then a gift isn’t appropriate. If you know those are the kind of people that you could take them to a ballgame or you can take them out to dinner, or there are more social experiences that are acceptable, then I would look to amplify. Let me take somebody out, if we were to take him out for a steak dinner, we might have personalized steak knives waiting for them when they got to the dinner that they could take home with them. It’s a cool thing that they can take home to their spouse and use. It was part of the experience, it elevated the experience, but nobody’s feeling like they’re being bought because there’s a $200 set of steak knives that they used at the dinner table. It was part of the experience. It was cool. It showed an attention to detail and personalization and class.
We do a lot of those things for clients when they’re in pitching stages or as a follow-up like we appreciate the time. We used the knives in that way like, “Thanks for carving up the time for us to be there and be a part of the things.” I think a lot of times, it’s sometimes those little things that show an attention to detail are huge. Sometimes, you’re pitching from afar. I know one of the guys that’s a client of ours, it’s an engineering firm, I was the only one that actually dropped everything, flew out and met with them to see what their real needs were, and that’s why I got the business. I wasn’t the cheapest but I was the only one that flew across the country to meet with them and really understand their needs. That’s why I won the RFP and the pitch.
If you don’t feel comfortable, like I can’t take them out for coffee, then don’t send a gift.
I think every industry and situation is different. If you don’t feel comfortable, like I can’t take them out for coffee, then don’t send a gift. The last thing you want to do is consistently spend money and have a negative consequence. What I will say is that most people play fearful when it comes to gifting. I would rather lose one of the ten pitches because they’ve misinterpreted the gift and stand out head and shoulders above on the other nine out of ten because I did. I think most people, all they remember is the one out of ten that got sent back to them or somebody was pissed off or upset or misinterpret it. I’m like, “Focus on the other eight or nine that loved it.” I love that people play scared because it means they won’t do what I’m teaching them to do. Five out of a hundred companies that we work with, they stand out head and shoulders above because even if their competitors know our playbook, they won’t do it because they play scared.
What’s interesting is my big takeaway, there are several, but the two that really stand out is the personalization combined with going the extra mile. There’s the young boy you described who drove so far, you getting on a plane, the personalization with the names on the steak knives, not just steak knives, that’s really key. My final question for you is, you talked about if you really get to know somebody, you can even really connect with them if you come up with a clever gift for their children. Have you ever done anything for someone who may not have children, but talks about their pets all the time?
I actually just sent one to Gary Vaynerchuk‘s former assistant who now runs Vayner Capital. We hosted Gary for the day. In Saint Louis, he toured our leather factory. He was like, “This is really cool stuff.” He’s like, “Phil, that’s this company.” I looked up and saw that he had a dog named Chloe, the dog loved peppers. I sent him a knife that was handcrafted exclusively for Chloe. It said something about Chloe’s pepper slicer or something like that. Sure enough, he responded. He was like, “That’s awesome,” because it was for his dog. We’ve done that with customized collars and leashes and beds and other things that are nice, classy, useful, high-end things for somebody’s pets absolutely. In many cases, people treat their pets better than they do their kids, it’s crazy. What lengths people go to. One of the few recession-proof industries is the pet industry. People eat Skippy peanut butter and be serving their dogs filet mignon. It’s amazing to me the level that people go to for their pets. Absolutely, that sets definitely a relevant angle to take.
Any last thoughts you have you want to leave us with on how we can be a giverpreneur?
[Tweet “Be A Giver-preneur”]
I would just say that a lot of times, people don’t think they can afford us or they get afraid on outsourcing and gifting to us. The reality is there are a lot of small companies that work with us. It’s like I’m going to take my three girls bowling. You just try to keep them out of the gutter and they have the bumpers that keep your balls over. We did create a PDF that has the ten worst gifts to avoid giving, just to give people a way to say, “At least it’s not one of these ten.” It eliminates. Most people are like, “Those are the ten I normally send, so I need to avoid those.” We confirm why they’re not great gifts. If you go to GiftologyBook.com/pitch, they can go download it for free and it summarizes some of what’s in the book. Obviously the book goes into detail on strategies, percentages, follow-up, case studies, and all that stuff. Sometimes people just want a little cheat sheet for them or their marketing team of like, “Keep these ten off of the list,” and it’s usually pretty helpful. I would say that that’s what I would wrap up with as far as a, “Go do this.” If you like the book, go download the book, and if you like the book and whatever else, you can reach out to us and I’m happy to help. That’s a good first step.
Thanks, John, so much. You’ve been a great guest and a giver.
Links Mentioned
- John Ruhlin
- Giftology
- Ruhlin Group
- Cutco
- Pre-Suasion
- Influence
- Michael Hyde
- Darren Hardy
- Seth Godin
- Give and Take
- Gary Vaynerchuk
Wanna Host Your Own Podcast?
Click here to see how my friends at Brandcasting You can help
The Successful Pitch – Book Trailer
Share The Show
Did you enjoy the show? I’d love it if you subscribed today and left us a 5-star review!
-
- Click this link
- Click on the ‘Subscribe’ button below the artwork
- Go to the ‘Ratings and Reviews’ section
- Click on ‘Write a Review’
Get Your Dreams Funded with Manny Fernandez
Posted by John Livesay in podcast | 0 comments
Episode Summary
Today’s guest on The Successful Pitch podcast is Manny Fernandez, who you might have seen on television CNBC’s Make Me a Millionaire Inventor. He was named the 2014 San Francisco Angel Investor of the Year. He shares with us how he had a successful exit, and the three things he’s looking for when he hears you pitch. Number one is of course, the team, and why you’re able to execute your idea. Number two, is how large is this market, because without a large market, there’s no return on investment for the investor. Finally, are you early in the market, in other words, it’s too late to be the next Uber. Enjoy the episode.
Listen To The Episode Here
Get Your Dreams Funded with Manny Fernandez
Hi and welcome to The Successful Pitch. Today’s guest is Manny Fernandez. Manny, you might know as an investor on CNBC’s Make Me a Millionaire Inventor. I’ve watched him be on that show and he’s amazing. He’s also amazing on CNBC’s Squawk Box. He’s quite successful in so many ways, and we’re just thrilled to have him here. He’s had a successful exit. He’s an active Angel Investor, and he was awarded the 2014 San Francisco Angel Investor of the Year and Equity Crowdfunding Leadership Award.
He’s not only the founder of the San Francisco Angel Groups, but he is also the founder of DreamFunded as the CEO. What that company does is crowdfund startups with an online market place. He’s got quite an interesting background. I’m going to let him tell us all about it. Manny, welcome to the show.
Thanks for having me, John. I’m honored to be here.
How to Make Money Investing in Pre-IPO Stocks
It’s great to have you. You have touched every possible touch point on how to be successful from writing a book, How to Make Money Investing in Pre-IPO Stocks, to being on television, to launching not one but two different things. I know that you have been involved with Stanford and Wells Fargo, but take us back, if you will, before you got to be on television as the investor, how did you get involved in this whole world of startups? Because so many people say, “Wow, I would like to be an investor someday, but I don’t have a clue.” What was your journey?
It all started with this thing called real estate, where not as an agent, but I just bought a piece of investment property and learned that I was pretty talented at it and then later, I wanted more. I was stuck with the question, “How do you raise money to be able to buy a hundred homes?” I networked aggressively to figure out the answer. Later at the age of 23, I created a real estate fund, then we bought a portfolio of single family homes and sold at the peak of the market. What many people didn’t know is during the down times, I was studying Computer Science out of our office. I created the online brokerage that was later acquired by the largest Century 21 franchise in Northern California. Later on, I created another real estate fund.
One thing I learned about it was how to work with other people, to invest their money appropriately and get a return. When I was attending Stanford, one of the things I learned professionally was about venture capital, Angel investing. Those are the courses that really stood out at me because it reminded me what happened so many years ago. A lot of the dynamics are the same, that one of the big differences, obviously, the asset class is different. That was the start. As I started to Angel invest and joined a group called TiE Angels and later created our own group called SF Angels. Asked for help like always, and was fortunate to network with someone do an introduction, I’d invested early in Google and Paypal. Was a former partner of this legend, Ron Conway. I learned a lot from him and I did a scary thing, John.
I had to go out, which every entrepreneur has to do. I have to go out and talk to customers about the business. It was the hardest thing that I had to learn, I had to be really high profile in Silicon Valley and that was hard to do. Look at my skin. I had to learn how to public speak and talking to entrepreneurs, those were the customers. I had to let them know that we have money for them, but I had to do it in a different way, John, where I gave them advice and education on the subject to allow them to raise money Which was unheard of because everyone want to keep the secrets, like, “Don’t tell entrepreneurs how to raise money because if you do that, then everyone will have the money.” That’s not the case. A lot of people are still stuck in fear.
Get Your Dreams Funded: I learned how to work with other people, to invest their money appropriately and get a return.
Indeed. Let’s talk about San Francisco Angel Group. I’m really interested in how that works compared to other Angel groups, for example. I know you have 30 plus accredited investors. Do you only typically fund people who are in Silicon Valley? Let’s start with that.
Yes, that was the purpose. The purpose was even more specifically in San Francisco early stage. It did go a little bit more into later stage companies, when they were doing the Series A or Series B round, some of our members had access to it. It was primarily Silicon Valley. Throughout that experience of only funding companies here, I realized there are a lot of great companies outside of Silicon Valley, in Austin, in Seattle, L.A., even Florida. At the same time, just being out there in the community, I was forced then to be a keynote speaker in many parts of the world. Many entrepreneurs wanted funding, but what was the most amazing thing, John, is many investors wanted to co-invest. I said, “Our meetings are every Thursday of every month, come on down.” Obviously, I didn’t invite people if they lived in Shanghai or Singapore or Texas and L.A. or New York. I just held their business cards. I remember that many of the entrepreneurs pulling at my heart strings, they want to get introduction to investors, and there was really no way of doing that. I just started thinking about it.
Interesting. If someone lives in San Francisco, Silicon Valley area, and wants to come pitch to the San Francisco Angels, what’s the process and what does it look like when they get in front of your group?
Primarily, you go on a website and you can apply. Some of the members, actually, they’re the best method to get an introduction, usually they’re interested, they’re investing, they’re “sponsoring” you to be presented to the group. If you’re qualified, the entrepreneurs will say their story and the entrepreneur will be asked to leave the group, then the group will ask a few questions among the group if there’s enough interest to do what you call due diligence. If there’s enough, then we will move it forward to do a little research to see if this is an investment we want to do. That’s it in a nutshell.
That’s great. Because this is The Successful Pitch, I’m always interested to hear, do they get ten minutes for a pitch and then there’s a ten minute Q and A? Is that the format you use or is it something different?
No, you’re absolutely correct. It’s approximately anywhere from seven to ten minutes, and then we ask questions among the members of the group.
Those warm introductions are so important, to get even invited to come in and pitch. I know you specialize in equity crowdfunding, the internet real estate software. Does the group itself look for high tech solutions, or is there a type of startup that you like to see come in?
Yes. Everyone in that group is very specifically focused on tech, software, internet-related startups.
Are you funding people who are pre-revenue, giving them their seed round?
Absolutely.
Those typically range anywhere from … The definition is so broad now. It could be anything as 250, all the way up to a million, typically. Is that in the ballpark of what your group does?
The interesting thing about the group, some people make a group decision and some people do it individually. Sometimes you don’t have everyone’s approval. I provided checks as low as $25,000. This will be the first check in to a company, and give them a little boost and try to connect them to other investors to fill their round. It’s not one individual cutting a check for a million, it’s multiple people coming together.
Can you tell us about a good pitch that you’ve heard, Manny, that you’re thinking, “They had me in the first three minutes, and they’ve been a big success story”, either at San Francisco Angel Group or DreamFunded.
I think that one of the things that I hear a lot is entrepreneurs, they’re not telling a story. A lot of people talk in logical terms and things that we don’t care about. One entrepreneur that worked out quite well, they talked about the market, they talked about the team, they talked about the potential for the investors to make money, and that sometimes gets our attention. I don’t know why.
The best way for the investors to feel like they’re going to make their money is to have a successful exit. It’s what I typically hear. Do you have other suggestions?
Absolutely, that’s the case. If the entrepreneur says they’re going to hold it for twenty years and give it to their step-kids, then that’s probably not the right business for us. If they think they’re going to become the next Facebook and make it go public, maybe that will work. But if they look at they’re going to potentially have an acquired, and these are the natural acquisitioners, then we can understand the thought process behind the entrepreneur. I think the best I’ve seen, they tell a story, the beginning, middle and the end. The beginning is why they created it, their personal problem, what team they have established, the great market, and they have some traction, it doesn’t mean it’s sales. At the end, where they’re going with it if they did have the money? What would it look like at the end? If you can imagine a movie, all the dynamics of it, I think the entrepreneur should probably cover that.
[Tweet “Get Your Dreams Funded: Pitch like you’re telling a story in a movie.”]
Nice, I love that. Pitch like you’re telling a story in a movie, like you’re pitching a movie and have us visualize it. Paint a picture, if you will. I like this, why you created it, how big the market is, what the team is. People are always interested in what you look for, besides sales, in terms of traction. I have some ideas, but I’d love to hear what you think is important, or what you think is valid traction if it’s not sales.
I think there’s one thing I was taught, it was three little things. I think you can screen out 90% of the startups that are presenting, or if you’re a startup, look for these dynamics. Because these are the dynamics that some investors look for for really large returns. Number one, it’s a large market. Without a large market, it’s going to be challenging to make any real money and to make it a big business. Second, early in that market. Not chase after something that’s really too late because there’s many relationships, and most of the market is already taken. Last but not least, it is the most important thing, is the team. The team who’s executing behind it, who did I piece together to make this story into a reality.
Nice. Those are great three things. We’re going to tweet that out, a large market, early in that market, and a great team. Speaking of tweeting, you have quite the award there, Manny, with being number fourteen in the top 100 Angel Investor’s to follow in Twitter. Of course I’m following you. One of 150,000 people. Congratulations on that. I couldn’t resist giving you a little shout-out on that.
Thank you. One day, it will have extra number behind, 1.5 million, because the more information we can provide to the public about how to invest or how startups can use the equity crowdfunding to raise money, the numbers will greatly grow. The motivational tweets that I provide, it really goes viral a lot.
Let’s talk about DreamFunded.com. This is different than the San Francisco Angel Groups. It’s an online capital platform, where people can invest in startups for as low as $3,000. Yet, you guys have done some major investments alongside major VC firms, like Tim Draper and Greylock, etc. Tell us, how did you get inspired to start DreamFunded? For people who are listening, maybe you could contrast and compare? Like, if this is you, then you should go to San Francisco Angels, if you have a warm intro, or if that’s not you, DreamFunded is more in line with what you need to do.
When I started Angel investing, I had a certain vision of it. When I got involved, then I had a certain reality of it. I said, “Maybe, I’ll create a group and get a few of my friends and network together so we could fund more entrepreneurs,” and more entrepreneurs were being funded. However, 99% plus unfortunately weren’t getting funded. Maybe because for whatever reason, they weren’t in our network, kind of unfair. They’re not in our network, they can’t get an intro, they can’t present in a meeting, and I had a problem with that.
Get Your Dreams Funded: Money should be more distributed to anyone that has a desire of creating a business.
In addition to that, it was other entrepreneurs that probably had a small business or a business that maybe couldn’t really scale but could do well for the entrepreneur and their community. I started thinking about that. I always had a problem with that. Money should be more distributed to anyone that has a desire of creating a business. They should be able to be backed because that’s a rare desire, an entrepreneur who wants to do something different than have a job.
One day in the fall, it was a slow period in December. This was in 2013. I had some time to go through my emails, and there are thousands of them, unfortunately, I haven’t read yet. I was going through them and I said, “It’s a good time to go back and see companies that applied and see what happened to them. I could do a self-study.” I saw two companies that presented but unfortunately were a little bit slow. It took an average of 60 days to get funding, and fortunately they had another way they got funded. They went on some big name platform and actually received the funding. I said, “Wow.” I played with the numbers of what the exit was. I’m keeping the name quiet. What was exit and what were they asking for and what our return was, and boy, when I saw seven figures, I got really frustrated. I got upset because I started thinking about all the investors who are out there that wanted to get access to it, and yet if we’re faster, then maybe we could have got in.
I started thinking about the entrepreneurs that were trying to get funded as well as the investors that want to invest. I thought back, “What am I going to do about this?” I got a stack of business cards of many investors that wanted to invest. I have endless entrepreneurs who are looking for funding. I thought back, my early 20’s, my first dream was to create a startup or create a business. My second dream after that was I need to get funded. That was almost impossible. I said, “Okay, I know that, but then now, I’m a successful investor and entrepreneur. My dream is to fund the next big thing.” It just came to me, DreamFunded. I bought the name and used our network at SF Angels.
It was an interesting time because there was this new thing called equity crowdfunding happening, t allowing accredited investors to invest. We were the fourth platform approved by Angel Capital Association, a trade organization. Almost in a short period of time, 90 days, we had 3,000 plus accredited investors signed up for many of the Angel groups nationwide. I was looking at it, I could not believe we had so much interest. Maybe many people were just checking out what was going on, but then we had some pretty well-named companies that we funded through DreamFunded and it just kept growing.
I love it. How do someone decide if they should pitch the San Francisco Angel Group or another Angel group or go to DreamFunded? What’s the criteria for getting funded via DreamFunded?
Now we’re trying to have everyone go to DreamFunded and apply there, because there’s, we call it deal flow, where we have to start there and sometimes it’s right for a group, sometimes it’s right for our platform, sometimes it’s right for our fund. We don’t know until they apply. Going to DreamFunded.com and signing up and applying, we as a team can quickly review what they’re doing. Unfortunately, not everyone is going to get accepted but some people are better to tap in this thing called equity crowdfunding, Title III of the JOBS Act. What that really means, it allows everyday people to invest. Just to say what you said earlier, at one time the minimum was $3,000, but now the minimum is $100.
DreamFunded is solving two problems. One, allowing people who are not “accredited” investors with a million in assets to invest in startups. Secondly, giving a platform without needing to have a lot of connections to investors directly to get in front of an Angel group, to possibly get seen and not only be part of equity crowdfunding, but if it’s a big enough idea, get the attention of someone like you who says, “You know what, this is equity crowdfunding and then some.” Correct?
Absolutely.
It’s really exciting. I think what you’re doing is solving so many problems for so many people that I don’t know how you have time to sleep.
[Tweet “Get Your Dreams Funded: Leverage – have a great team.”]
Leverage, my friend. I got a great team. I may be a good marketer but I have a great team, like my co-founder, Avery Haskell. He just graduated from Stanford. He has been secretly building DreamFunded with me throughout the time while he was in his dorm room. He didn’t want to get his focus off of his study. Now he is really improving the site to great ability, because we really have over a 160,000 members all around the world now signed up. We have about 20 companies that are going to be approved shortly, that’s going to be able to raise a million dollars from everyone. People are really spreading the word about DreamFunded because they see it on CNBC Make Me a Millionaire Inventor, or they may have seen it on Wall Street Journal in December or in Bloomberg in December.
The word is being spread, but the message is, entrepreneurs now, they have an interest in raising money and you’re not born in that special network where you can get access to that special club, this is for you. If you are one of the investors that are out there saying, “I don’t know how to get into that special network,” or, “I don’t want to wait for Facebook to go public. Plus, I don’t have much money, I’m not one of the accredited investors. I cannot invest $25,000 or $50,000. I just want to spend $100 or $500.” Maybe back the entrepreneur that I know, that’s going to be creating something. That’s what DreamFunded is about.
Typically, a lot of people will say, “If you’re going to use crowdfunding, equity crowdfunding or any other kind of crowdfunding, you need to “bring your own crowd.” Is that the case with the DreamFunded?
It’s partly the case. But how I started building it is that I started with the foundation of SF Angels and then many of the Angel members nationwide that are members and many of the talks that I’ve done throughout the world brought a stronger base of investors. CNBC’s Squawk Box in the studio, they tremendously increase the visibility as well as the amount of investor sign-ups. It is helpful for the entrepreneur to have a small handful of people that believe in them, to back them. Many of those people can be just found on LinkedIn, so it’s nothing too complex, it’s a combination of both. In a Shark Tank mindset, we have the hungry sharks, the smaller sharks that are ready to bite on the new startups that are going to be applying.
I’m going to shift gears a little bit. In your LinkedIn profile, it describes your successful exit, and that’s always an interesting topic for everybody to hear. Can you tell us that story?
Some things start off one way and they change and they become something different. I think that’s an important thing to know. Every entrepreneur may start off one way and end up changing their direction based on feedback. I just really wanted to create a site where I thought people want to sell their house when the market would change and they wanted a quicker way of selling it. Then the market changed, and unfortunately they didn’t have much equity in their home.
We had people all across the country who were signing up and ended up devolving into an online real estate brokerage where we receive the commission upon the sale of their house. At that time, it was so early, no one knew what this thing called short sales were. We went from zero to an excess of $5 million in sales in a very short period of time. Sometimes you get lucky. It was acquired by the Select Group Real Estate, the largest Century 21 Coldwell Banker, ERA owner in Northern California, with 60 plus offices, thousands of agents.
Congratulations. What you’ve gone through that experience, like going through due diligence. Now you know what to look for and help people that you’re funding get through that process in a way that gives the investors a great return on their investment. Is there any book, besides yours, which we have mentioned, that you would recommend to people to read either about life or about getting funded?
Think and Grow Rich by Napoleon Hill
I do have a new book that’s coming out, that’s going to help people to raise money. It will be on Kickstarter shortly to allow people to buy the book in advance. For those that want to raise up to a million or raise up to 50 million, the secrets will be in there. One book that I really love is Think and Grow Rich by Napoleon Hill. If any of your listeners are looking for a book that’s probably a free version of our book, just email [email protected]. When that book comes out, I’ll send you a copy of it, just put a headline that you heard about it on the show. There’s no cost, you can save the $20. If you feel bad that you saved the $20, just find an unfortunate person and give it to him.
That’s such a great gift. I really appreciate you doing that. Are there any final thoughts you have on giving a good pitch or just perseverance required to be a successful entrepreneur?
Yes. There’s this guy, and this gentleman came up to me late 2013.I was at this event I was judging, he came and grabbed my arm, he said, “Hey, how are you doing? Nice to meet you. Can you help me show me how to fund my hair product?” I really didn’t understand what this guy said. All I heard was, “fund my hair product.” I’m like, “Sorry, we fund software internet companies.” I turned because my attention was pulled somewhere else. He grabbed my arm and I said, “What is going on?” I turned around and looked at him, and I made a mistake because I looked at his eyes, and his eyes are really sincere. It reminded me of myself a few years ago when I was in my 20’s. “How do you raise money? What is the secret about raising private money? Hey, can you show me?”
Get Your Dreams Funded: How do you raise money? What is the secret about raising private money?
I didn’t have an answer, but instantly when he said that, I thought about it and I said, “There has been a PowerPoint that’s been used by our Angel group,” and I’ve seen it circulated throughout the Valley. For some reasons it’s helping a lot of people get funded. I said, “Tell you what, I’m going to give you my business card, you put PowerPoint on the headline, send me an email, I’ll send you a copy of the PowerPoint”, because in my mind I was going to take out the ingredients and just keep it general so people can have a framework. I gave it to him and later on, about 45 days later, he sent me an email that he raised over $600,000.
What’s interesting about that is because I’ve never seen it work outside of Silicon Valley. I’ve never seen it work outside of tech companies. For a guy who I didn’t even understand what he was saying to be able to raise that, it was like, wow. One of the things I do now is, for those that really want a framework to be able to raise money, I can’t say it’s perfect, but it allows you to think what an investor is looking for. I give this away, if you want a copy of that free PowerPoint that will help many people, just email, [email protected]. It’s no cost. It’s my community gift.
There’s a video on YouTube. Type in the word “equity crowdfunding” and it pops up, the number one most viewed video of all time for equity crowdfunding. It was a talk I did at keynote talk in Finland. I gave out that PowerPoint, and I think many people loved that gift, so they started spreading the video everywhere. Fortunately, it has over 200,000 views now. For the entrepreneurs that are looking for a template, take a look at that, GetFunded@DreamFunded. It also shows you ways to follow-up in terms of how to pitch us.
Fantastic. So much value added, so many great insights. You’re so generous with your time, your insights and your knowledge. Anybody who gets to work with you is indeed lucky, so follow you at @MannyFernandez on Twitter. Manny, I can’t thank you enough for being on The Successful Pitch today.
One last thing, there’s an upcoming TV show we’re doing. It’s a new type of show that allows the public to invest in these companies that are approved. More information will follow for those. Follow me on Twitter, Manny Fernandez on Twitter. You will find out the moment I can release it to everyone.
Good. Exciting little tidbits. That’s a great open loop. That’s how you get people intrigued, everybody. Give them a little teaser. Give them a reason to stay listening to your next tweet. Thanks again, Manny.
Links Mentioned
- J Robinett Enterprises
- John Livesay Funding Strategist
- DreamFunded
- How to Make Money Investing in Pre-IPO Stocks – Book
- Equity Crowdfunding video
- TiE Angels
- San Francisco Angel Groups
- Think and Grow Rich by Napoleon Hill
- [email protected] – get new book for free
- [email protected] – get the PowerPoint framework/template for free
- @MannyFernandez – Twitter
Crack The Funding Code!
Register now for the free webinar
Fox 11 News Los Angeles John Livesay The Successful Pitch book
Share The Show
Did you enjoy the show? I’d love it if you subscribed today and left us a 5-star review!
-
- Click this link
- Click on the ‘Subscribe’ button below the artwork
- Go to the ‘Ratings and Reviews’ section
- Click on ‘Write a Review’
When Science Meets Tech, Lives Are Saved With Jay Goth
Posted by John Livesay in podcast | 0 comments
Episode Summary
Jay Goth is a fund manager here in the Los Angeles area. He talks about how being direct and specific can get you to a yes or a no in 30 seconds rather than waiting 30 days for an answer. He shares a lot of tips on how to pitch whether for a startup or for a fund. He also shares the exciting things happening in the biotech startup industry, showing that when science meets tech, lives are saved.
Listen To The Episode Here
When Science Meets Tech, Lives Are Saved With Jay Goth
Hello and welcome to The Successful Pitch. Today’s guest is Jay Goth who is a fund manager here in the Los Angeles area. He has always been an entrepreneur and enjoy the success of building large companies. After years of being a consultant and an investment banker, an entrepreneur in resident, a nonprofit director, basically a cheerleader for the startup community, he is now forming a fund where he comes up with new discoveries that literally save lives, reduce treatment costs and eliminate unnecessary surgeries and reduce human suffering. How great is that? He’s going to be a different kind of venture capitalist he says. Instead of raising money and looking for special companies, he works with a core portfolio companies to create new investment opportunities. Jay, welcome to the show. My Goodness, I love what you’re doing.
Thanks, John. I’m having a blast.
I bet. Before you became such a maverick in saving and changing the world, can you talk us back to your early days? I know you graduated from University of Colorado in Boulder. From there, you worked for some energy companies and solar. You’ve always been at the cutting edge of technology it looks like to me.
I’ve always been an entrepreneur. I started basically right out of high school, working for myself. I never really got along with bosses too well. It was the entrepreneurial life for me. Back in the 90s, after being in insurance and real estate, trying all kinds of different things, I started raising money for other people. I was terrible at it. I made a lot of friends and zero investors and learned that sometimes you don’t want friends, you want investors.
Interesting. Let’s do a deeper dive into that. People always learn so much when people are willing to talk about what didn’t work as much as what did work. What do you mean by that? You can’t be friends with the investors or you were just too focused on the relationship and not what they needed for a return?
I wanted to be friends with everybody. Sometimes when you’re getting people to write you a check, you can’t quite be so friendly. You have to take control of the situation. Initially, I generated a lot of leads. I was one of the best lead opening people anywhere I worked. The problem was I wasn’t closing people because I wasn’t really taking control. I was just ceding control over to them and they’d always give me some excuse and I wouldn’t nail them on it. I’d just go ahead and go with the flow.
Jay, I think this is so valuable. I’ve never had anybody in over 90 episodes talk about this. I’m really happy you brought this up. So many times, people get the polite no. “Come back when you have more traction. You’re too early in the market.” Or whatever the excuse is. They never get a yes. I like to say that the longest distance sometimes is between someone’s mouths and their wallet. Give us some techniques or ideas that people can use to not just take the first no.
Science Meets Tech: “I’m looking for investors who are interested in this and are willing to write a check. Is that you?”
It’s really a basic thing, asking for the order. A lot of times, we beat around the bushes. “I’d love to see you as an investor,” or this or that. What I learned is that if I start my conversation with a prospective investor, right up front, “I’m looking for investors who are interested in this and are willing to write a check. Is that you?” I was always afraid to do that. When you start that way, then all of a sudden their guard comes down a little bit. I’m not one of the guys that’s sitting there, calling them, beating around the bush. I’m a real person asking him if he’s interested in making the investment. It’s just as easy to get to no in 30 seconds as it is to get to no in 30 days.
It saves a lot of time when you’re that specific and that direct.
Right.
I love it. Let’s take a dive into what you did at Red Tail Capital. I’m interested to know what lessons you learned from that and what types of things you’re invested in.
Red Tail Capital was an investment banking operation. I was really working on mergers and acquisitions, did some debt financing for people. Really, where I learned how to pitch and the things I learned were really when I started a company called Commonwealth Energy back in the late 90s. I was one of the founding fathers of this company. Basically what had happened is we were looking for investors for a number of other companies. Every time we raised money for one of these other companies, they would blow it. They would take the money and they wouldn’t spend it the way they should and they would be coming back to us looking for more money. Our investors weren’t happen with us and we weren’t happy with the management teams. Finally, we decided, why don’t we just raise money for ourselves? With saw an opportunity in the energy deregulation here in California in the late 90s. We built a company called Commonwealth Energy and we started raising money for ourselves. John, we raised $60 million from 1500 private investors over the course of a couple of years.
Holy cow. What was the average investment to get such a large number?
We were doing it under a special California exemption so that we were using California investors and California companies. We were able to get in people who wouldn’t qualify under the “accredited” investor status. There are some looser regulations for those. We were able to get in a lot of people. The minimum investment was $10,000 but sometimes we’d package one or two investors together if they were qualified. Like I say, we raised a lot of money, but the best thing about it was we actually built a business. We build something that became the largest unregulated supplier of electricity and natural gas in the country. Ran the revenues to up to close to half a million dollars and went public on the American Stock Exchange.
Congratulations. That’s a great exit.
Yeah. All of our investors did well. It was the greatest ride of my life, I’ll tell you. That was about four years of just nonstop excitement. There were times when we thought we were going to lose everything. There were times that we were just really riding high. Of course you get to a point in the company where the entrepreneurs leave and the professional management team comes in. That’s what happened. When I left that, I went into consulting and started doing all kinds of things. The core things I learned when I was raising capital at Commonwealth Energy have always remained in my mind. There were some very simple steps that I found that were taught to me that really can help. You get to a yes a lot faster.
Please share those steps.
The first thing you want to do when you’re talking to a potential investor is you don’t want to tell them a long elaborate story because the longer your story the more confused they get.
That’s a great line. The longer your story, the more confused they get.
[Tweet “Science Meets Tech: The longer your story when pitching, the more you confuse investors.”]
A confused investor never invests.
That’s right.
Science Meets Tech: Get three yeses and then ask for the order.
We would give them a very general idea of what we were doing. Of course you have to frame it in the right way so that it sounds really good. Then we would ask them a couple of very leading questions. Something like, “The pharmaceutical market is a multi-billion dollar industry. If you were come out with a blockbuster drug, don’t you agree that there’d be a lot of money to be made?” You’re asking them questions that they almost have to say yes to. The adage that I was taught was three yeses and ask for the order. You would ask them, “Blah, blah, blah, right?” They would go, “Yeah, that makes sense.” You would ask them something else and they go, “That makes sense.” You’d ask them the third thing and as soon as they agreed with you, you’d say, “Here’s what I suggest we do. Why don’t we go ahead and put you down for an investment?” Right away, you’re taking their temperature. Of course usually they’re going to come up with an objection. “I don’t know about that.” “Let’s just get a gauge of where you’re at, what you would feel comfortable in. If everything I tell you is borne out in writing when I send you all the information that you’re going to have to review before you make the investment decision, how much would invest at this point?”
Nice. Because you’re basically becoming copilot with them and saying, “We’re going to land the plane. We’ve agreed that if everything works, the landing gear goes down and everything in due diligence checks out, that you’re going to write a check.”
Exactly. If they said, “No, I’m not going to write a check.” I say, “No matter what I send you, you’re not going to invest, right?” If they said yes then we’re at zero and it’s a good time for us to shake hands and part friends. Go find somebody who is going to write a check.
[Tweet “Science Meets Tech: Be specific and direct when you pitch.”]
There’s nothing worse in my opinion Jay, than the maybe or let me think about it. That just drags everything out. Like you said, you can get an answer in 30 seconds instead of 30 days by being specific and direct. I love it. You are no longer pitching for money because you’re on the other side of the table now.
Wrong, you’re wrong. I still have to raise money for my fund.
You’re listening to pitches and pitching. What’s the difference between pitching for money for a fund versus pitching to get a startup funded?
There’s absolutely no difference. Whenever you’re asking somebody to write a check to somebody they don’t know, to do something, it’s always a difficult situation. It’s never easy. Whether you’re a startup, a fund, an established company. I’ve worked with public companies before. It’s always the same question. What do you do? How do you make money? How am I going to make money as an investor? When am I going to see it? Those are really the things they want to know. There are a couple of different ways you can approach investing. With the biotech, I’m always talking about the greater good, I’m talking about saving lives, speeding innovation to market and really making a difference in all the people that are suffering today that don’t need to if only we can get them the right drug at the right time in the right dose. That’s what I do. That’s what gets me all fired up about biotech. As much fun as I had at Commonwealth Energy, it’s nothing compared to the rollercoaster I’m on right now.
Let’s just quickly recap. There’s such great questions that you just gave us that you could ask when you’re pitching, whether it’s to raise money for a fund or a startup. The first one I think you said was, how do you make money? One of them is, how do I, as an investor, make money? Correct?
Right.
In other words, what’s your exit strategy? In the case of a fund, I would assume that somebody gives you money for you fund, they make money when one of the companies that you fund that they also own goes public or gets sold, correct? There’s some strategy there that eventually there’ll be an exit for them to make a big return.
In a fund, it’s a little different because we’re investing in a number of companies. It’s not just one. You’re a little more diversified so your risk may be a little lower because if one doesn’t hit maybe another one will. At the same time, we’re a very specially focused, special purpose fund. We’re not out there, I’m not looking for the next investment. I’m helping actually produce the next investment. What we’ve been able to do is put together three core companies that I call our consortium or eco system if you’re in the west coast. I know east coasters don’t like that. Basically, these companies work synergistically to develop new intellectual property assets that we can then package into a new company and take to market. I’m very involved in funding these three companies to keep them going. At the same time, I’m really more focused on these new assets that we’re developing because these are the things that are going to be game changers in the medical industry.
What do you look for when somebody comes to pitch you to fund their medical biotech startup? Are you looking more at the team and their background? Are you looking at their passion for making a difference in the world or that they have a business plan? What is your criteria?
I think if you talk to investors, and I talk to them all the time, the number one thing that we always look for is management. We want to see somebody who has successfully been able to do what they tell me they’re going to do now. When I tell somebody that I started a company and we took it public, I have a little bit of credibility compared to somebody who says, “I started a company and it never really got off the ground.” I’ve done that too, believe me. You’re not an entrepreneur if you haven’t had a couple of spectacular failures. I’ve got those. Really, the management team has to be able to execute.
[Tweet “Science Meets Tech: Show that your team can execute the idea better than anyone.”]
You have two risks in biotech I think. One is the execution risk. That’s the management team. That’s the group of people that are going to make this happen. In biotech, so many times you see a great management team of scientists but you’re missing a business element. A lot of times when I see a biotech deal and I see a bunch of doctors and scientists, I’ll say, “This is all great, but who’s going to make the business part happen?” They’re like, “We all run our own operations. We understand business.” I say, “No, this is a whole different thing.” You got to talk about marketing, scaling, operations. There’s just a lot more involved than simple research. You’re translating a product that you’ve developed in a lab to a commercial product. Management is key.
Number two in biotech is really a regulatory risk. Is the FDA going to approve this or not? One out of ten drugs that starts in the clinical trial process actually makes it to becoming a drug. It takes over ten years and a billion dollars. When you’ve got that risk, that’s a very low success rate. You really got to look at how can we maximize the opportunity and increase the possibility that you’re going to get through clinical trials. Fortunately, that’s one of the things one of my portfolio companies does, is you can actually tell in advance who will respond to a drug and who won’t. So when we go in to clinical trials, we’ll be able to tell what our efficacy rate is going to be ahead of time.
One of the things I’m really interested to hear about Jay, is not only do you give money but you roll up your sleeves and get in the trenches and help these companies be successful. That’s so important.
I think a lot of venture capitalists say that they do that. To an extent, as much as they can, they do. That’s why I kept my fund size very small. I’m not looking for a whole bunch of companies. I really want to help make this happen. I’m intricately involved in all aspects of the companies’ operations, even though I don’t hold a management position and I don’t hold any vote. We do have governance positions where we can take an oversight look at the thing. Really, the key to me is if I want my investors to be happy, I got to make their investment spectacularly successful. What can I do to make that successful?
What are you working on now that you can share that you’re excited about?
Science Meets Tech: We’re coming up with a liquid biopsy that will actually just use a little bit of your blood.
We have a diagnostic that we plan on bringing to market very soon. Right now, if you get a CAT scan of your lung because you’ve had this cough for a long time and you look at the lung and there’s a mass in there, you don’t know what it is. The first thing you do is do a needle biopsy. Go in and you actually pull a piece of that mass out to see if it’s cancerous or benign or what it is. We’re coming up with a liquid biopsy that will actually just use a little bit of your blood from your arm and be able to tell with 100% accuracy whether that mass is benign or cancerous.
Wow. Early detection is everything. To make it so non-invasive is really exciting.
That’s the key. This was actually developed by a surgeon who didn’t want to do unnecessary biopsies. This is just one of the exciting things. We’ve ran the tests on 282 patients and it came out 100% accurate. We’ve done a couple of other tests for validation and they both came back with the same high accuracy rate. We’re really looking at moving this out to the market next year.
What do you do in terms of worrying about barrier to entry from competition?
The competition in the biotech sector is just super intense. Everybody you talk to knows somebody who’s working on something. I was at a conference yesterday and I must have talked to 20 people who are working on exciting biotech things. Some of them overlapped, some of them didn’t. I just talked to a gentleman today on the phone. I thought I was pitching him for an investment. It turns out he was pitching me for an investment. He’s running a diagnostics company and I’m running a fund that funds diagnostic companies. Who knows, we may be able to do something together. There’s just so much competition in the space.
What do you do about barriers to entry? We actually have a very strong intellectual property attorney. The companies have formed a relationship with a gentleman who is one of the top biological attorneys in the country when it comes to intellectual property. You want to not only protect the IP that you’ve developed, but you also want to protect how you got to that IP, what kind of strategies you need to employ to make sure nobody else can say, “We found something that’s very similar and we can use it.” Because you want to walk it up as long as you can from a greedy capitalist standpoint, but at the same time, when you’re looking at intellectual property like this, the research and dollars that go into generating it are so huge that you’ve got to be able to get your money back.
Science Meets Tech: I think what we’re going to see is this turn towards what I call precision medicine
I think, and this is me putting on my political hat a little bit, but I think the FDA is starting to take a different approach to how they look at things. They still want to maintain safety and efficacy, which is the most important thing, making sure people don’t get hurt by a drug and making sure that people are helped by a drug. I think what we’re going to see is this turn towards what I call precision medicine. That’s generally the term. You can call it personalized medicine or individual medicine. Really, we take a little bit more time before we do a diagnosis and treatment. We look at your individual human biology. We look deep into your biology to figure out, “Just because you have diabetes doesn’t mean that your diabetes is as advanced as the next guy’s diabetes and what works for him may not work for you. Why don’t we design a treatment based around you as a specific individual?”
I think we’re going there and I think that this is going to actually end up, even though drug makers won’t be selling as much of a drug because we’d be prescribing different things, I think they can actually, because the drug is going to be working, we’re going to go to a pay for performance model eventually. If I prescriber a drug for you and it doesn’t work, that drug maker is not going to get compensated.
It also sounds like we’re really going into this whole specialized, customized dosage and everything else. It’s much like marketing is very specific and customized, that medicine is going to become the same way. I love it. What impact is artificial intelligence having on medicine and what you’re doing?
It’s a good question. One of the things that we have is a bio informatics engine. It’s not artificial intelligence per se but it’s a whole new way of looking at math. We have a laboratory in Pennsylvania that we’re building right now that will be able to generate 250 million data points off of one single tissue sample. It’s looking at human tissue at a whole different way because it’s looking not only at the genetics but at the proteins, at the lipids and all of the different things that make up that little tissue sample. If you have 250 million things that you know about this sample and you’re trying to find out what is the reason for a specific outcome, why is this a diseased tissue versus a normal tissue, or whatever it is, and you have a dozen different tissue samples, 250 million times a dozen.
These data points are interacting with each other to cause whatever the problem is that you’re looking at, that’s a huge mathematical problem. A lot of people have tried applying artificial intelligence, machine learning, support vector machines, all these advanced ways of looking at math. Nobody has really been able to hit the nail on the head. Luckily I found a company that actually has done that with a whole new way of looking at math. It’s very cool. It’s almost like evolutionary math where the data actually fights itself out to find out who the victor is at the end of the day.
I love it.
It’s really cool stuff. We’re seeing all kinds of advancements. I think it’s this marriage of science and technology that is really causing a revolution in the medical industry right now. We’re right at the beginning of it. It’s very exciting.
[Tweet “Science Meets Tech: It’s causing a revolution in the medical industry.”]
Do you think the result of medicine and technology joining forces is that people will be living longer?
Absolutely. I hear people saying we’ll all be living to 150. The people who are born in the 2020s will be living to 150. I firmly believe it. The application of technology to medicine is allowing us to learn so much more about the human body and how it really interacts and what causes aging. Aging is simply our cells being unable to reproduce themselves the way they did when we were young. Because our bodies are always replenishing itself. We’re always rebuilding our cells. We start losing the ability to rebuild them properly. Why is that? There are some incredibly intelligent people who are looking at that right now, everyone from Craig Venter at Human Longevity to Dr. Michael Rose at the University of California Irvine. You name it. There’s just so many people doing this. There’s no way we’re not going to be able to live not only longer but better lives longer.
The impact that’s going to have on population growth and crowding and people not retiring at a certain age anymore, it’s all just going to be fascinating to watch.
You’re right. It’s going to be pretty incredible. Love being in the catbird seat, being able to watch all this stuff unfold.
How to Be a Power Connector: The 5+50+100 Rule for Turning Your Business Network into Profits
I bet. Is there a book that you would recommend someone who is interested in getting in getting their startup funded or learning to be a better entrepreneur or just learning about how to live a better life that you want to give a shout out to?
I’ll say two. One is self-serving because there’s a lady out there that I’ve met recently that I really love what she has to say and the way she’s able to connect people. You know her very well. Judy Robinett. How to be a Power Connector is killer. I hear she’s coming out with a new book soon. That’s one. When it comes to pitching and doing stuff, you’ve probably had people recommend this book before. Oren Klaff has a book called Pitch Anything that is just out of this world. I’ve read that probably 50 times and I’ll probably read it another 50 because I just love his approach.
Pitch Anything: An Innovative Method for Presenting, Persuading, and Winning the Deal
It’s all about how the brain works and framing everything. It’s really well done. I love it as well. Fantastic. Jay, how can people stay in touch with you on social media, your Twitter handle, all that good stuff?
The name of my fund is Forentis Fund. We have Facebook, Twitter, LinkedIn. Feel free to hit me up there. We post regularly whenever I see something cool in precision medicine. We’re always posting news up there and of course our own stuff. It’s a good way to stay in touch with me. I’m at Forentis.com. If anyone ever wants to get in touch with me, you can reach me right through the website.
Fantastic, Jay. You’ve been a great guest. I love your passion. I love that you have so many great tips on how to be successful and have a successful exit and making a difference all at the same time. Thanks so much for being on the show.
Thanks for having me, John. I really enjoyed it.
Me too. Bye.
Bye.
Links Mentioned
- J Robinett Enterprises
- John Livesay Funding Strategist
- Forentis Fund
- Forentis Fund Facebook
- Forentis Fund Twitter
- Forentis Fund LinkedIn
Crack The Funding Code!
Register now for the free webinar
Fox 11 News Los Angeles John Livesay The Successful Pitch book
Share The Show
Did you enjoy the show? I’d love it if you subscribed today and left us a 5-star review!
-
- Click this link
- Click on the ‘Subscribe’ button below the artwork
- Go to the ‘Ratings and Reviews’ section
- Click on ‘Write a Review’