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Startup Founder Discussion TOPICS This Month
In this episode of our free Startup Fundraising Office Hours, StartupCouncil.org CEO Scott Fox demystified #VC psychology and startup #fundraising. Key Q&A included:
Samantha (Newport Beach): How to raise $30k for proof of concept hardware development and production?
John (Tustin, CA): Asked what percentage of a company to give up per round. Scott recommended 10–25% as a general rule, viewing fundraising as an iterative process of growing the total pie.
Roger (London): Asked about balancing business plan confidentiality vs the need to disclose company secrets to Silicon Valley investors.
OG (Chicago, IL): Asked about the most common red flags that will turn off investors.
[NEW FREE RESOURCE: Download the Startup Council "Fundraising Tips" free PDF here: https://www.startupcouncil.org/tips ]
Ashley (New York, NY): Inquired about approaching angel investors and how to best answer the difficult questions about competition and competitors that investors ask.
Julia (Milwaukee Wisconsin): Discussed regional networking, with Scott highlighting the importance of building local ecosystem connections.
Saamer (Detroit Michigan): What startup sectors are most popular currently with venture capital investors?
Alan (Seoul South Korea): How long does it take to raise money from angels or VCs?
And (as usual) everybody wanted to know the best resource to find early stage investors interested in their startups. Answer: Google + https://www.StartupInvestorsDirectory...
And much more, as usual!
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MasterMinds Startup Fundraising Office Hours TRANSCRIPT for June 23, 2026:
0:00
to help you puzzle out how investors think, what you should and shouldn't say, and the psychology of how venture capital works because honestly, those
0:08
secrets are not well known outside of Silicon Valley. And uh frankly, I don't think it's right that they're so guarded. Uh there's way too much
0:16
gatekeeping and way too much funding goes to people who already know each other when the fact is that the best ideas could be coming from anywhere in
0:23
any corner of the world, including yours. So, if that's why here you're here tonight, I hope that you'll join me
0:30
uh to uh toss in a question or two. And we're going to turn on the chat room here and have people come and join me as
0:37
well. Uh so, if you are on uh LinkedIn or Facebook or um what's the other one?
0:44
Oh, YouTube, of course. So, now it's up to you. You can fill in that chat room and I'll be happy to talk to you. Let me know where you're from, where you're watching, and uh what you're working on.
0:52
And of course, if you have questions, I'll be happy to do that as well. So, if you're going to want to join me backstage as well, we give priority to those folks who are members at startupconsil.org.
1:02
And that's the organization I mentioned a ago. And you can head over to startupconsil.org anytime to check that out. But if you're watching on YouTube
1:09
or um LinkedIn or Facebook, please let me know if you can hear me uh and that you can see me. That looks like uh
1:16
Roger. Hey, Roger from uh looks like a YouTube. And Nelson. Hi, Nelson. Nice to meet you both. And uh hello from Tustin.
1:24
Okay, that's right here. Hello. From how much of a startup's business plan should be founder? Okay. Yeah, we can get to that in a . Absolutely. We can talk about all those things. I guess you
1:32 can hear me and see me. Is that the [laughter] is that the thumbs up I'm getting from you guys? I appreciate that. Um, just let me know. I don't see anybody on LinkedIn yet. Is there anyone out there on LinkedIn checking in?
1:42
Because sometimes we have trouble with that and I can't look at two things at once or it'll, you know, knock down the bandwidth. So, if anybody's on LinkedIn, please chime in before we get going. I
1:50
want to make sure we've got um you know all our followers there as well. Um that'll take just a second. So let me
1:57
just tell you a few things before we get rolling here. So we have to do a couple disclaimers and then I have a new special offer for you. Okay. Sesh
2:04
checking in from Bangalore and Ashley from New York. Excellent. Nice to meet you both. And I wanted to tell you about
2:12
let's see here. What do we got here? So here we go. New Oh yeah. Like and subscribe. Of course, that's the, you know, the standard issue for social
2:20
media these days. And I mentioned this new book, right? So, the new book will be coming soon. So, you want to get on our uh mailing list for um over at
2:28
startupconsil.org so you can get free excerpts when it starts happening. There we go. There's a LinkedIn LinkedIn user.
2:35
Cool. Uh a AI, are you AI or you Al? I'm not sure. Oh, Julia from MK just left
2:42
the Summerfest TechAB. Uh Julia, that's too many acronyms for me. I'm not sure what MK is or AB. Maybe Alberta, Canada,
2:50
but maybe you can fill us in. Um, but what I was looking to show you was, let's see this. Sorry. Okay, so I need
2:58
to do a couple disclaimers. This is not qualified legal or financial advice.
3:02
Every situation is different. I'll do my best to try to help you, but don't rely on any of this. I'm just some guy you met on the internet, and we all know how
3:09
sketchy that can be. Also, this is being recorded and will be shared worldwide, so don't say anything stupid. Other than that, those are the ground rules and uh
3:17
encourage you to come and join us over at startupconsil.org. Like I said, there's a lot going on there. We actually have, I think it's nine newsletters now and we just launched a
3:26
whole bunch of new discounts. There are over $5 million worth of discounts available at startupconsil.org now for
3:34
our members. Right? So really good stuff like AWS and Notion and um uh Dropbox and Doc Sendend and uh you know all
3:42
kinds of stuff you actually use QuickBooks uh and they're long-term discounts. They're not just affiliate links. There's stuff that we especially negotiated for our members worldwide. So
3:50
if that sounds interesting to you, head over to startupconsil.org.
3:54
Okay. So let me see. Uh there's OG from Chicago and uh good mo evening or morning sesh says. Yeah, Bangalore.
4:02
Let's see. It's morning in Bangalore.
4:04
shorts night here in California but that's why I do this at night sesh especially trying to reach folks in India to try to be helpful over there so I hope this is helpful please tell your
4:12
friends the I wanted to give you the link for if anybody wants to come backstage and talk
4:18
otherwise it's just me talking which uh is okay with me I'm a pretty good talker
4:24
but let's where's the uh where's the link for the backstage
4:33
sorry Guys, hang on one second. I'm trying to give you the one that isn't um really hard to type in, you know.
4:40
That's not it. That's not it. Oh, there it is. Okay. Okay. So, you could go over here if you'd like to come on backstage
4:47
live, turn on your webcam, and talk to me directly. That's best, especially if you want to pitch, like practicing your pitch. Um we do a two- flat pitch.
4:56
No, uh slides or uh presentation. Just talk for two s. And that gives us enough to give you a hopefully helpful critique and it'll be friendly and
5:04
helpful. Don't worry, very constructive here and happy to do that if anybody wants to come backstage. So founder hours.com and that will uh link you over
5:13
to a special private chat room and get you on camera here with me if that sounds like fun to you. So other than that, let's get going with some
5:20
questions and I've got some other special offers to tell you about as we go through the evening. But there was one question. I think John already had a
5:28
question, right? So, he got first blood there. Yeah. John says, um, how how much
5:34
of a startup's business plan should be a business plan should a founder share in
5:42
an angel financing directory? Okay. So, I'm not sure exactly what that means.
5:47
How much of a plan should a founder share in?
5:52
And I thought I I thought that was a good question, John, but unfortunately I don't know what you're talking about what you're asking. Maybe you can clarify and we'll try again. I was
6:02
pretty close there. I mean, um, let's see here. So, um, I guess the question I thought you were asking, and maybe this
6:09
is it, and you can chime in if it is or not in the chat room, but how much of a company should the founder own after an investment? That's a common question I
6:17
get because venture capital, we're really talking about venture capital style businesses here tonight. And venture capital businesses are funded in waves or we call them tanches or series.
6:28
Um and so there's like a preede, a seed, and then series A, series B, series C.
6:35
So once you get on the venture capital, it's wheel. It's kind of like a hamster wheel, right? You just keep going. And the expectation is that you will raise money again in say maybe 18 or 24
6:44
months. Every two or three years, you're raising another bigger round because you're growing larger and larger. That's the whole venture capital game. So, it's a common question. How much of the company should I give up in each round?
6:55
And the answer is roughly it it's depends on a lot of things, right? But just to get your head around this, this isn't like a one-time cash infusion and
7:03
then you you grow to become Facebook, right? Big companies like that raise multiple rounds. They start with a couple million and then tens of millions
7:10
and hundreds of millions and these days they raise billions. It's insane, right?
7:14
So the rule of thumb I would say is roughly think about each round as the founder or founding team like you and a
7:21
co-founder or two are giving up something again very squishy flexible ranges but something like 10 to
7:29
20 or 25% of the company. Now obviously you can't give up 25% of the company through five rounds because there won't be any company left for you, right? So
7:37
it would be on the lower end of that if you're doing fewer financing. So you might give up say 10 or 12 or 13.6 six or something, right, in your first round
7:45
and then another 10 or 12 or 15 in the next round. That kind of idea. And it's important to note that in venture capital, you don't sell your stock, right? You issue new stock to investors.
7:57
So, to keep it super simple, if you were a solo founder and you had a hundred shares and you owned the whole company
8:04
and somebody wanted to come in and uh contribute, say a million dollars, you would not give them part of your shares.
8:12
Like you wouldn't give them 10 of your shares for a million dollars and then you own 90 and they own 10 percent. You actually issue a million dollars worth
8:19
of new shares. So now there's going to be just very roughly something like 110 or 112 uh shares on top. You still own
8:27
your hundred and they would own their 10 or 12 which would then represent about 10% of the company for a million dollars would essentially be a $10 million
8:35
valuation. So, it's important to think about that because what's happening is that venture capital is you don't take one pie
8:42
and split it up into smaller and smaller pieces for each person that's all owned by the founder. You actually make the pie a little bit bigger each time by
8:51
adding more pie to it, if that makes sense. So, it's hard to get your head around. I I remember that confused me a
8:58
lot when I uh founded when I raised my first venture capital round. Uh because that's what they talk about why they talk about dilution. dilution, you're
9:06
adding more and more uh pi [laughter] essentially so that the shares that you do own are actually a little bit less of
9:14
the company each time even though you own the same number of shares. That's the key. So hopefully that's helpful.
9:21
Um, and the range is, like I said, 10, 15, 20% per round. And hopefully you don't give up more than 60 or 70% of the
9:30
company after several rounds to the point where you get to lift off where the company's really doing well and starting to make a lot of money and hopefully profitable. And at that point,
9:38
your company can hopefully get acquired or go public because it's spinning off a lot of money. And then you might be down to say 40 or even 20% of the company.
9:47
But now you own 20% of a company that's worth say like 500 million or a billion dollars. So 20% of a billion dollar company is $200 million, right? It's
9:55
better to have that 20% of something huge than 90 or 100% of something small.
10:01 That's the whole logic of Silicon Valley. So if that's useful to you, um, let me know. Let's see. Uh, Jules says, "That's helpful." Okay, great.
10:09
[laughter]
10:10
I'm glad. Um, that's something that people don't talk about much. I don't know why. It's a it's a fundamental um premise. in Silicon Valley and it's like
10:18
so basic they never say it at least in my experience. So hopefully that's helpful to you guys. All right, let's
10:24
keep going. Um let's scroll down. Let me just see who else said what and uh let me know where you guys are from again. The rest of you
10:32
here. I see we've got a um several dozen of you here. Um uh okay. So we did Hello to Ashley in
10:41
New York and Sesh in Bangalore and Nelson in Vancouver and Jules. I'm still wondering where MK is. U MK does anybody
10:49
know else know MK Mke? That doesn't ring any bells. Fremont.
10:56
Tomar's in Fremont. That's in California. And um let's see. OG from Chicago. And Samantha from Newport Beach. That's right near here in Southern California. Shreases from Pune.
11:06
That's in India. Hello Shreas. And uh Cliverity from Fullerton. That's also near here.
11:14
Okay. Okay, here's a question.
11:18
Ashley says, "When is the best time to start raising finances?" Well, yesterday.
11:26
You want to be ahead of when you need the money. So, the best time to start raising money is well before you need it
11:33
because you're out there building relationships.
11:38
So, raising venture capital is not like getting a car loan, for example. a car loan. You go to a commercial bank. You
11:45
walk in and you say, "I have a credit score of some 720 and I have a good job with this much money and I have this much money in the bank and therefore I
11:54
want to borrow $40,000 for a car." And they will run those numbers and pretty much right there they'll say, "Okay, you're good. We'll give you a loan at
12:02
this rate and these terms and blah blah blah." And it's kind of a one-off transactional. You don't need to have a relationship with that banker. Venture
12:09
capital is not that way. Venture capital is much more complex and based largely on as you know the metrics of your
12:17
business and the potential of the growth and the pitch you do and the pitch deck and the projections and all that stuff.
12:23
But also it's based on the relationships. So if you know someone, they're going to believe all those assumptions that are compounded in your financial projections much better.
12:32
They're going to believe you that you're going to do it that what you say what you're going to do. They're going to believe that you can sell to customers.
12:37
They're going to believe that you can recruit a team. they're going to believe that you've got a handle on this domain because you're some sort of expert from your previous experience. All that
12:45
belief requires a relationship. So, this is right where things get sticky, especially say for minority folks or people who grew up not in PaloAlto,
12:54
right? If you're from somewhere else or even if you're a woman, right, that don't have traditional access to these these circles. So, they don't naturally believe you as well, which sucks, right?
13:05
which is one of the reasons I do this to try to help everybody get on the same page about how this works. So the answer to your question is when does the best time the rest best time is yesterday is
13:14
last year two years ago right as soon as you can. In other words, you want to get out and start meeting investors for a couple of reasons. The first is very
13:22
much what I said. You want to build the relationship so that when you are ready to ask for money, you don't walk in and say, "I would like to raise $500,000
13:30
from you for the seed round of my company." And they say, "Who are you?
13:34
Why should we believe you? Right? You already have relationship. And you call up your old friend who you've had lunch with three times in the last year and you see occasionally at events and you
13:42
say, "Hey, you know that thing I've been telling you about? It's ready. You're going to love it." And yeah, we are going to be raising some money, but we can talk about that once you I show you
13:50
the demo and it's super cool and you're very impressed, right? That's the kind of vibe you want to do. If you just start spraying out your pitch, you're
13:58
going to be up against people who have already done that, right? So, you need to have those relationships going and that is really
14:06
what the competition looks like. I guess that's why I'm saying yesterday if you can. So, um not trying to stress you out. I'm just saying the this is not
14:14
just purely a uh pitch and win sort of game, right? This is not a game show.
14:18
It's not a bank uh car loan type conversation. This is a relationship.
14:23
So, the sooner you can get out there, the better. And we can talk about how to do that if you'd like. But, um I wouldn't wait is what I'm saying. Even if you're not ready, you want to be out
14:31
making friends with people, making good impressions to the point where they will listen to you when it's time for you to actually ask. All right, let's see.
14:41
Sammy says, "Anyone in Australia?" Usually, yeah, usually, Sammy, we have we have a lot of Australians here.
14:47
That's one of the other reasons I do this at night by time, so we can hit Australia in the morning there. Depends on whether you're in Sydney or Perth, though, I guess, by a couple hours. Um,
14:56
Sammy fights to get government grants to entrepreneurs. I do it for free. Excellent. Well, thank you, Sammy.
15:00
That's a great great uh service. How much of the Okay, so here's John clarifying his question. How much of the business idea should be shared in joining an angel financing director?
15:13
Uh, John, I'm sorry you're typing too fast, man. I in joining an angel financing d Oh, directory, I think you mean. Okay, there. I think I got it.
15:22
[laughter]
15:23
Okay. How much of your idea should you share when you list your company online is what you're saying in a in a financial in a startup funding
15:31
directory, right? Like our uh startup investors directory or u on startup council, right? So, hold on. I'm looking for the here this we have this maybe
15:40
this is what you were talking about because I think you've been here before, right? The startup investors directory.
15:45
This is a directory we put together and you can see a special promo code there if you want to um join cheap. Um, but
15:53
that's a directory of 3,000 early stage angel investors, right? Or all kinds of investors, not just angels. Sorry. So, what John is asking now? I got it. John,
16:01
Sorry, a little slow tonight. Is if you come here for example, right, and you put your business, your listing here so that um that's my business card, right?
16:09
So that people can come and find your business and like say um uh I'm an aerospace investor and I'm looking for aerospace hardware startups. So, I'm
16:18
online searching around and John would want to have his directory somewhere so that that investor can find him, right?
16:24
Because otherwise, if you're only on your own website, you're limiting your reach. You want to make sure that your company is listed um so that it shows up
16:32
in search engine results, the oldfashioned SEO, but also these days so that it gets absorbed into chat GPT and Gemini and Claude and Grock and
16:40
everything, right? So, that shows up in AI summaries as well. So you need to have multiple touch points out there on the internet and that's one of the big services we provide at at
16:48
startupconsil.org. It's basically it's a membership directory. It's like a phone book, right? So what John's asking, how much of his business idea should he
16:55
share when he has joined startups.org and he puts up his listing where you have the ability for you to fill out multiple pages of a profile about your
17:04
company so that you can explain, you know, what it does and who you are and why you're doing it and you can share financial projections or your your pitch
17:11
deck like all that stuff, right? So that's all context for why he's asking.
17:15
So the answer I would say and by the way I want you guys to answer too. I don't have all the answers here would love to hear from all of you. I know there's
17:22
plenty of expertise um on these calls and it's not all it's not all between these ears. It's out there too. Um but my answer John would be you should share
17:31
enough of the business idea so that people believe you and are interested and probably not a whole lot more if
17:39
it's something that other people can copy. At the same time, I would balance that against the idea that you don't really need to worry too much about people copying you unless it's something
17:47
dead simple because nobody's going to choose to do it or do it as well as you do it because
17:55
you chose to do it, right? So if you're sell if like I said uh continuing with the same example I had if you're doing a hardware startup for aerospace well
18:03
that's probably because you are a pilot or you are an aircraft mechanic or you know something about aerospace that you
18:10
saw a need and you had an idea that you know convinced you to quit your job and start pursuing this. Right? So, even if
18:18
you gave me 110% of all your thoughts and plans and dreams and business plans and models and gave them to me or or to
18:25
some of the other people on our calls, we wouldn't execute it the same as you because we don't know and we don't care like you do. So, I wouldn't worry too
18:33
much about overdisclosing unless again unless it's really simple like something you patentable that people could just rip off and manufacture, you know, by
18:41
the zillions. Um, generally your problem is more about getting people's attention and getting them interested than it is
18:49
about people stealing your idea. So, I would put as much out there as you think you can afford that is attractive,
18:56
interesting, and maybe even provocative that attracts attention. That's the game these days. It's not about keeping your your idea so that nobody can know what
19:05
it is so they don't rip you off. The game is getting it out there so that somebody gives a damn can find you.
19:11
That's really your challenge. It's not it's not maintaining ownership or control. It's getting attention at all.
19:17
That's the real challenge. And that's honestly that's why we started the uh startup council directory because I want to help founders be found essentially,
19:25
right? You can't be a founder without being found. Um so I'm going to Yeah.
19:33
You can't be a founder if you can't be found. That's good. I'm going to put that in my next book. [laughter] Um but the idea is really that um
19:41
attention is is more important than than control or or ownership. Um because
19:49
yeah, nobody would do it the way you do it. Okay, I'm repeating myself. So, I hope that was helpful. Pretty vague, right? Because I don't know exactly what you're working on. All right, I'm going
19:58
along here. Let me put up the uh let's put up the chat uh here in case anybody wants to
20:06
come join me. Anybody want to talk on camera? We could do that. Be a little more interesting than me talking to myself. But I appreciate all you
20:13
listening here. Let's um let me keep looking at the chat here. Um okay, Jules
20:20
Allen's in Vancouver. Uh Anyong, Alan, looks like you're Korean. and Milwaukee.
20:27
Uh, Sesh, we have Silicon Valley investors here in Milwaukee, says Jules for summer. Oh, that's what MK meant.
20:34
Milwaukee. Okay, [laughter] thank you. Got it, Jules. Now I understand. For Summerfest Tech AI20.
20:41
Oh, that sounds cool. I didn't know about that one. I might have showed up for that. Very cool. Well, I'm sure it's beautiful in Milwaukee this time of
20:47
year. And um, let's see. Douly says from Irvine. Hey, Douly. I'd love to pitch my Startup Box next showing. What do you
20:56
reckon the best way I can do that for the next show? Um, well, next time come write down this URL that's on the screen right now. And the best way uh is to
21:05
come and um join the startup council. Um, that way you'll get the emails and uh if
21:12
you're a member, you'll get priority and we will make sure you get on the show.
21:17
I'm trying to find the right um here. Try that one. Yeah. join us. Um,
21:24
and then we will give you priority for these shows. And we're going to be doing a lot more of these shows, by the way.
21:29
Uh, it's summertime, so I'm going a little slow and I'm working on this new book, but once I get this book done and the summer's over, we're going to be doing a lot more of these uh at
21:36
different time slots as well. So, those of you like right now, we don't really serve Europe very well because the middle of the night there, right? Uh, or even the east coast of the United
21:44
States. So, we'll be doing some back in the daytime like I used to do. I've been doing these at this slot more for um at nighttime in California here, but also
21:52
for um Australia, East Asia, South Asia, and Australia, right? So, we've got a lot of folks from there, and welcome to
21:59
all of you. Um okay, next. How can I value my startup company myself at an early stage? Yeah, that's a great
22:07
question, Alan, and it's a tough one. Um the valuation game is hard. I would need to
22:15
know a little more, but let me, you know, like, are you a software company?
22:18
Are you a hardware company, are you a consumer goods or you how far along are you? All that kind of stuff. So, you can come up with a number. But here's the honest truth. It's a negotiation.
22:28
There's no proper amount. If you had, for example, a specific amount of revenue, whatever you had, $10,000 a month or a million dollars a year, even
22:37
then there would be a negotiation because the value of a company is really in theory the net present value of all
22:46
its future cash flows, which means basically how long are you going to be making a profit into the future and then discount that back by current interest
22:53
rates to come to a number. So both of those require seeing into the future in ways that nobody really can. So it's a negotiation. The numbers are made up. So
23:02
the bottom line is most first rounds are done with a valuation of2 to4 million.
23:10
That's it. Pick a number. $2.5 million.
23:13
And we're going to give you $250,000. So we want 10%. Something like that. And it
23:20
won't become real until you actually have revenues and other investors will come in and there once you have enough
23:27
numbers to actually calculate some real things then people can agree and agree and argue and negotiate but at least based on some goalposts. Right? Right
23:36
now it's completely made up and the earliest investors like myself as an angel investor when you come into a company like that you have to be
23:44
prepared to lose all the money. So, it doesn't even matter in some ways. I know it sounds funny, but the price doesn't matter so much as long as it's low, right? You can't say it's worth a
23:53
billion dollars because then, you know, that's just silly and and nobody will make any money if you do that. Um, but if it's a reasonable number, 2 million,
24:00 million, something like that, the and I get a decent percentage for my money, 15, 25%, something like that, like we
24:08
said, um, that gives me enough to grow with you. And then it's because you're going to do the work, right? I'm just putting in the money. So, I'm counting on you to then grow that pie like we
24:16
talked about earlier. And um the next round or the next next round is when the numbers get more real, but I already have a good chunk of it. And it will my
24:25
chunk will be worth it will be smaller as a part of the pie overall like we talked about, but that chunk will be increasingly um it's this the chunk will
24:33
be increasingly valuable because the pie as a whole has gotten so much larger, right? So, short version 2 to4 million. It's a negotiation mostly made up.
24:42
depends on leverage on both sides and how much cash they're putting in and of course how much you need the cash. So there's there's a uh there's an answer.
24:51
Again, anybody in the chat room that agrees, disagrees, has a better answer, please chime in. I'm not I'm not trying to lecture here. I'd be happy to hear from as many of you uh who want to contribute as you'd like. Okay, next up.
25:04
Um yeah, this is a good one.
25:13
Okay. So, if we don't have a circle to find VCs, what is the best way to find investors? I'm thinking about submitting to an incubator like Evo Nexus and Irvine for an app that's 90% done. Yes.
25:23
Okay. Great question. Very common question and a legitimate question.
25:27
The Okay. Well, there's a couple ways to do this. One, of course, is you can do it online and you research the hell out of everybody and you find people who are as
25:37
close to your ideal investor as possible. And these days there are hundreds of thousands of investors in the venture space. So even if you're
25:45
doing something very very niche, there might be someone that's interested in that. And if you can get someone who's made money in that niche before, then they're very likely to be interested in
25:53
you, at least as a mentor. And mentors often lead to investment anyway. So that's one thing I would do. That's a research angle. The other is I would be
26:01
secondgoing to events. I would build your own circle. You that's what you need to do.
26:04
You're going to need to do it eventually anyway. So you might as well get started. Like we said at the top of the show, meeting as many people as you can, not necessarily just investors, but also
26:13
attorneys and accountants and uh other especially other founders because every other founder is on the same journey, right? And you guys can uh trade
26:20
contacts, you know, especially if you're in different fields like if you're a software person and they're in biotech or something, you'll both be meeting
26:26
investors, but your biotech investors aren't going to invest in their software company and vice versa. So you can trade the people you meet that don't fit for
26:34
you, right? So build that network is is honestly the best answer because those personal contacts are great. Now an
26:40
incubator or an accelerator uh like Evo Nexus or many others those can be super helpful. In fact that's the primary
26:48
benefit of being involved with a lot of accelerators is you get kind of a credibility stamp that you have uh passed some screening right and you're
26:55
reasonably intelligent and can do a reasonable pitch and you have something going on. Basically, it's kind of a validation that you are um credible even
27:03
if you may not have raised a bunch of money or already had a bunch of profits or something, right? So, that is worth it. And then yes, of course, the network that they introduce you to. Um it it can
27:13
be really valuable. Just a tip on that though, I would be be careful in terms of well, obviously how much are they asking? I'm not picking on Evo Nexus.
27:22
They're good friends of mine. Bob and the team over there are great folks. Um but just more in general at a 30,000 foot, you know, strategic view for everyone around the world who's
27:30
listening and thinking about incubators and accelerators. Um look at of course the the terms of the deal. They're
27:38
taking some percentage. They're giving you some money. Maybe they're giving you some office space. They're giving you access to
27:45
resources or people something you know like the better you understand that is to your advantage. And then I would be
27:53
careful about who they claim to know because I've seen many um lists of
28:00
contacts and some of them are quite old, right? Um so just I would be a little careful. You know, they say we know all these people. Well, do you know them or
28:09
they have they actually invested? And when was that? You know, if it was $10,000 in 2011,
28:17
probably not so relevant, right? you know, if it was a million dollars last month, okay, cool. Let's go. But, you know, in between there's a lot of gray
28:24
area. And I think um this is a long way of saying references. Check references before you sign a deal for every deal,
28:32
including that with an incubator or an accelerator. And even if you don't join a specific program, those sorts of facilities often run programs. For
28:40
example, here in Irvine, our friends at Evo Nexus, every Thursday night, they have a great AI um salon or or meetup or
28:48
something. I'm not sure what you'd call it, but they have a different speaker every Thursday on different AI topics and they're getting really good feedback on that. So, uh even if you don't
28:55
officially join, you can certainly go hang out at a lot of the accelerators and incubators because they have a lot of people in the same place with similar interests and that's a great place to make friends and contacts. All right.
29:07
Douly says, "Uh, okay. I'd like to pitch next time." Okay. Um, best way that you recommend to prepare and get on the show. Um, well, practice your pitch.
29:19
It's two s only, right? So, we're not trying to uh, you know, don't want your whole life story. Just two s is usually enough to get to the point.
29:27
And that is kind of the point, in fact, is to get you to get to the point. A lot of founders have a beautiful 10 or even 20 presentation deck, but
29:35
when you try to get them to summarize down to say 90 or three s or something like for a pitch competition, they have real trouble. And
29:42
it takes practice. It takes anybody practice to do that. So practicing your summarization would be great. And then you might also go back onto YouTube and uh look at old episodes of this show.
29:52
I've been doing this for years and there are many many hours of me talking if that's helpful to you. lots and lots of tips that could be used to help you polish your your pitch as well. Uh if
30:01
secondthat would be useful. All right, what do we got here? Yeah, speaking of that, actually, before we get to Samantha
30:08
here, let me uh Man, this being wonky tonight. Okay, I guess I won't do that.
30:15
I guess I would just ask you all to like and subscribe and comment if you're doing this. Uh I was going to put up the banner to say that, but it won't click.
30:22
Okay, but likes and subscribes are what let us keep doing this, right? This is free. Um, but it lets me help more
30:30
people and I can't talk to all of you one-on-one. There's just not enough hours in the day. That's why I write books and I broadcast like this. So, if you think this is helpful, please like
30:38
and subscribe and make god forbid you could leave a comment, right? Because that drives all those algorithms. You guys know the same stuff that you watch.
30:45
Uh, and we're mostly active on LinkedIn and YouTube. So, that would be really helpful if you could like or subscribe or leave a comment. And actually, follow-up questions are fair game, too.
30:54
If you think of something later, you can put a question on the replay that will show up on YouTube, and we'll be try to have happy to help you out there, too.
31:01
second Okay, Samantha, we have a HA native AI product ready to go. We've invested $20,000. We're looking for another $30,000 to create 30 more hardware units
31:09
for major proof of concept. We have a buyer weight list. Should we raise? If so, how? Well, first of all, congratulations. That's wonderful. Good
31:16
job. Um, and you're ready to go. That's got to be very exciting. I'm not sure what HA has is. Uh, maybe hardware as a
31:24
service. Um, yeah, I'm guessing that's what it is because you're trying to create hardware units. Okay. So, uh, and you put in 20K
31:32
and we do another 30K. Okay. So, Samantha, you're in a bad place. Unfortunately, I think you know this.
31:38
$30,000 is not enough for investors to get excited. It's just not enough money. Um, it's not worth the trouble.
31:47
Unless it's like your uncle, right, or or your aunt or your grandma or somebody, you know, your brother-in-law.
31:53
Um, $30,000. This is one of my big pet peeves with the venture capital industry, and it's one of the reasons I
32:00
write these books and I do this show. A lot of people who are VCs, they come from money. So, they will tell you, "Oh, you need $30,000. Well, just borrow it.
32:11
Just just put it on your credit card.
32:12
Just get it from your mom." You know, that kind of stuff. A lot of people don't have that kind of money and they don't have friends or family with that kind of money either. I certainly didn't
32:20
when I started. That's exactly why I do this because most people don't have that kind of financial uh network.
32:28
The unfortunately the financial world doesn't care and they're going to expect you to float that yourself. So 20K is
32:35
great. So why not do another 30? That's going to be the answer you're going to get. Unless you can find, like I said, your aunt or a a cousin or somebody, a
32:44
friend from high school, whatever, somebody who really believes in you and already knows and likes and understands and gives you the benefit of the doubt
32:52
and has an extra 30 grand that they're ready to lose. Uh, that's a tall order.
32:56
I'm not sure how you'd want to do that with friends or family anyway, but um investors are not going to bite at 30 30 grand unless you find somebody
33:04
specifically who is into hardware as a service or knows AI or really understands the pain
33:11
you're talking about and the solution you're providing. So, my recommendation would be look at your credit cards or if you're really into it, sell your car,
33:20
you know, or something, make it happen yourself. Although I'm not recommending that it's but that's how you would most people would fund 30 grand. Just as a
33:26
quick example, my first company and I'm not recommending this. I was over $100,000 in debt on my credit cards.
33:36
Credit cards. And this is 25 years ago.
33:38
So 100 the grand was like 300 grand now probably. Um and that was really stupid, but I was committed, you know, and that's that's how you make it happen,
33:47
right? and it didn't it didn't happen in that [laughter] case but I I built myself up it through other successes obviously um so you know that's the kind
33:55
of commitment that investors are going to be looking for unfortunately so um I don't have a good answer for you a happy answer I think the answer is correct but
34:04
so either figure it out bootstrap it or find a friend family or someone who really cares already or figure out a different way to do it like do you
34:12
really need 30 could you just do one hardware unit you you know, to for the proof of concept or or five instead of 30, right? I mean, I think you need to
34:21
reexamine your goal post. There's no one sitting around waiting to write a $30,000 check uh that I know of. It's
34:27
too small. Okay, so sorry. Um, okay, moving along. And again, by the way,
34:34
that's a perfect one. Other people chime in there and tell me where I'm wrong, right? If you have ideas where she could get it, please chime in. I guess I
34:42
should say, for example, there are grants, right? you know, maybe you could get a small business innovation research grant if there was a military application. Or maybe the uh um there's
34:50
a lot of pitch competitions, right, where you could win 30 grand, right?
34:53
Maybe you go that way. There's other ways to do this. Um so I'm not trying to be discouraging. I'm trying to be um
35:00
factual but supportive. [laughter] All right. Ashley says, "Perfect answers." Okay. Well, thank you, Ashley.
35:09
I'm pivoting my travel business model.
35:11
started in Africa and intend to come to Silicon Valley August week to explore and learn more there. Well, awesome.
35:16
That sounds great. That's not so much a question actually, but that sounds fantastic. Good for you. Um, yeah, I think you should do that. You know, the book I'm working on is about
35:25
fundraising. And one of my points in the book is that you just can't underestimate how much higher the density of talent
35:34
and the velocity of information is in the Bay Area. Um, it's just there's just so many more people focused on this
35:41
stuff. It just spins way faster and um I think a visit to the Bay Area would be good for you, Ashley, if you can afford that financially and you have the time.
35:50
I think it'd be great. Great idea.
35:53
Sunonny says, "I have all my pitch decks, financials, and the story. I have the platform built. I waited too long
35:59
for funding though. It runs although it runs on very little cost. I'm the designer, engineer, and marketer." Okay.
36:08
I'm not sure what the question is, Sunny, but that sounds exciting. Um, sounds like you need to hit the pavement [laughter] and put all that all that
36:15
material to work. Okay. Tomar says, "Should we raise before finding a customer?"
36:22
Um, I was planning to get some customers SAS product. Okay. Um, no. I Tomar, I
36:30
mean, you know, there's a thousand different ways to do this, right?
36:33
There's no right or wrong answer. It depends on your situation and the products and timing and a lot of luck.
36:39
But I I wouldn't raise money at all if you don't have to. Uh the media makes it sound like venture capital is like the
36:47
only way to do this and it really really isn't. You can um run it on your credit cards like I was just talking about or you could bootstrap it or even better if
36:56
you think you can find customers run it on revenues. God forbid, you know, you could actually build a business based on revenues. That's what everybody did for
37:04
thousands of years before the banking system existed, right? If you can just make something for $10 and sell it for
37:10 25
and reinvest that 15 and do that again and again and again, you don't need investors, man. And you could end up uh owning a 100% of a real business.
37:19
You know, maybe it's only a a $10 million business, but that's 10 million that you get every year. You're doing all right, brother. Um I wouldn't sneeze
37:28
at that at all. If you really want to do venture capital, then you could raise money. Sure. So then it isn't maybe a $10 million a year business at a hundred million or a billion dollar business.
37:37
And then again, your piece of that pie is now you've got you whatever $200 million, good for you. Absolutely. That is more 200 is more than 10 for sure. Um
37:46
but you've given up some control. You know, you you're on a certain kind of growth path. But if that's what you want to do, absolutely. But even then, I
37:54
wouldn't raise until you're sure you want to raise because um you'll get a much better price if you already have customers. To be honest, I don't know
38:03
that anybody's going to invest in you anyway if you don't have a customer. So, I think your your assumption there might be wrong. Um I'm giving you the benefit
38:11
of the doubt that you could do that, but in most cases, nobody's going to invest anymore without customers. that that did happen occasionally in previous years uh
38:19
when things were just so frothy uh in the market, but these days people want customers and revenues and some proof of
38:27
uh traction and validation before they'll invest at all. So, I'm not sure you even could raise before finding a customer. But if you could, even if you
38:35
could, I'm not sure you should. So, I hope that's helpful. All right. Um
38:44
my goodness. Okay. A lot of questions in the chat room. Got to be careful what I wish for. Should I raise Oh, we did that one. Okay. Um, how should I focus my
38:54
attention? Sunny's back. Okay. It's my first time raising as a solo founder.
38:57
Where do I go? Okay. So, this is Sunny who was here a ago who said he had all his pitch decks, financials, and the stories, the platform built. Um, and
39:04
it runs very little costs, but he he now he's waiting for looking going to start looking for funding, but he may have waited too long. and he is a soloreneur
39:12
both the designer engineer and the marketer. Okay. So where do I go? Um
39:20
well there's again it depends you know I don't know what kind of business you're talking about but but the fact that you're doing all those things Sunny the
39:28
first question most investors are going to have is what kind of validation do you have? And by validation I mean two things. One is do you have any
39:36
customers? And the second is do you have any teammates? Like most incubators or accelerators do not admit solo founders
39:44
because uh they want validation too. And the validation in both cases what we're looking for as investors is does anybody
39:52
other than you care right has have you talked to any customers? Do they you know ideally you have some customers or
40:01
secondat least you have a waiting list or something something quantifiable.
40:04
Um, I talked to a hundred people and 87% of them were wildly interested. Uh, six were already with a competitor and three
40:13
thought I was nuts. Fine. But you had that 87%, right? I mean, that's a high number, but um, quantifiable numbers that demonstrate validation that isn't just from you or from your mom, right?
40:24
That's what we're looking for. And similarly in terms of a team if you are the designer the engineer and the marketer
40:31
who else is there that it's it's understandable you sound like a really bright talented person but investors
40:39
want to know that you can also recruit a team because if this is going to become a big company Sunny can't do everything no matter how smart he is. There's just
40:46
not enough hours in the day. So, what have you shown in terms of customers or human resources that other people are
40:55
interested that this is a good idea and that Sunny is the guy to make it happen or or gal I think you're a guy looks like from that tiny picture. Um, so
41:04
that's what I would be worried about. I would get that together, figure out what your answers are to those questions and then I would be looking at um I have
41:12
this idea that you were in Hawaii. Is that right? I think you wrote in right?
41:16
Um cuz I don't know the market too much in Hawaii. Sorry, I'm looking at the printouts here of the people that had emailed me beforehand. I appreciate it
41:25
when you guys Yeah, you're in Honolulu, right? I got you. Um yeah.
41:34
Okay. So, I don't know the Honolulu market much, but you are in the United States. So, I would look for the SBDC, Small Business Development Corporation.
41:42
SBDC that's a US government funded meaning your and my tax dollars resource that helps consult early stage
41:49
businesses and oftent times they will have somebody who knows something about internet businesses and they could uh
41:56
help you um uh figure out what to do basically and um are there uh local angel groups or places where you could
42:04
practice pitch competitions maybe at the University of Hawaii or whatever uh there are clubs or things like that you could get involved in because again You
42:12
want to build some relationships and um learn the language of investors so that you can speak to them in their own language. They'll trust you faster and
42:20
then maybe raise that money you were hoping for. So um hope that was helpful.
42:26
Okay, Jules from Milwaukee. Many founders here in the Midwest are nervous to meet with Silicon investors due to ideas IP being taken. What advice do I have? Get over it.
42:37
100% get over it.
42:39
Silicon Valley investors are not going to take your idea unless they're scumbags, but there are scumbags everywhere, [laughter] right? That's not
42:47
there's there's if anything, I would say a lower proportion in the venture capital industry because it's all reputation based. We cannot afford to
42:56
rip off ideas. If you're really an investor, the last thing I want to do is steal your idea. I'm busy. I don't have time to go build your idea.
43:04
I'm busy with my investments, right? I'm busy doing stuff like this, right? I or I'm rich. I'm playing golf, right?
43:10
[laughter] I'm not I'm not looking to rip off your idea. This is way overblown. And I I addressed this a few s ago in a different context, but
43:18
worrying about people stealing your idea is is naive, I guess. I don't want to say it's
43:25
it's it's nothing because it's a thing, but nobody's going to build your take your idea and build it. If it's that
43:32
simple, then somebody's going to come up with it soon separately anyway. The way that businesses differentiate themselves is by building. If you build it and make
43:41
it happen and grow the team and grow the revenues, then the investors will come to you. We're not investors. Real investors are not out there looking for ideas to steal. That's not their job.
43:52
Um, venture capitalists have a job. They are um they're entrepreneurs also. A venture capitalist raises money. Like if
44:01
seconda VC says, "I have a hund00 million fund." That's 99% of the time that's not their money. It's money that they raised
44:08
from big asset managers like insurance companies and uh pension funds and endowments and universities and and they raised that $und00 million and now their
44:16
job is in the next five to eight years to invest that $und00 million and turn it into a billion dollars. That's a big job. So from a founders's point of view,
44:25
it may look like they're just sitting back fat and happy, right? and they're just kind of picking and choosing and and harassing founders, you know, um belittling their ideas and picking one
44:34
or two winners, you know, but that's because they're hustling their butts off because they have to pick one or two that survive the 90 other ones that die
44:42
and lose their money, right? Because that $und00 million fund, you know, say they invested, they might invested in 50 different companies at
44:50
two million each and 45 of them are just going to vaporize and those two or three that are left are hopefully going to be an Uber or a Facebook or a SpaceX that
44:58
go to the moon and they repay the whole other thing. It's a very risky job and um anyway, they they don't want your
45:06
idea. They don't care. That's not what they're doing. So, I think that's um it's that's overblown concern. It's the
45:12
same idea of people want um VCs to sign a non-disclosure agreement. We will not sign non-disclosure agreements. Um we we
45:21
can't we see too many ideas, right? Um but if uh I wouldn't disclose too much to someone who you don't know if there really is something proprietary, sure.
45:31
Um you can have a version of the deck that is uh interesting and provocative but doesn't give away the secret sauce.
45:38
you know, you can even like two or three levels and you don't really tell them really what's happening until you really know them. Um, that's perfectly legit uh
45:47
and is done all the time. But I would not avoid meetings or avoid beating uh building relationships because you're scared that that's um that's that's
45:55
amateur hour. You're you're not going to get anywhere, right? You your your problem is not I said this earlier,
46:02
right? Your problem is not um your problem is is not people stealing your ideas. It's being recognized for
46:10
doing for being found at all. Right? You need attention more than you need privacy.
46:17
Okay. So, uh All right. I hope that was helpful. And if you disagree, that would be fine. [laughter]
46:24
Okay. This is Julia Ferrer from Detroit Homecoming. Oh, okay. [laughter] All right. Well, nice to see you. I hope that you're well. I hope that was
46:33
helpful [laughter] and you're welcome to disagree, like I said. Um, but uh I'm thank you for
46:39
highlighting this issue because um it's an interesting one and it comes up over and over again. I don't know where
46:46
founders get this idea that um that investors are going to steal their stuff. It's just not a thing. Um cool.
46:57
So then uh still going here u and thank you for being here Jules. We're going to be doing a lot more with the Detroit Startup Council uh coming soon by the
47:05
way. Okay. Common red flags investors see in firsttime founders raising capital. Okay that's a good general one there from uh OG in Chicago. Um common
47:15
red flags. Well uh we've covered a few of them already. You kind of get you can hear some themes, right? Don't ask me to sign an NDA. Don't be overly protective
47:23
of what you're doing because if I don't understand what you're doing, how can I possibly invest? We'll start with those two. Um,
47:31
crazy projections, right? Um, you know, we're going to make $100,000 in the first year and then $200,000 in the
47:39
second year and in the third year we're going to make 50 million. Like that how is that that's not even physically possible, right? like
47:48
we know the numbers are made up, but they can't just be complete science fiction, right? Um, founders who won't listen, founders who have no teammates
47:57
or no demonstrated validation, like I was saying a few s ago, no validation from customers or teammates, they haven't convinced anybody other
48:05
than themselves that this is a good idea. We're not going to invest in that.
48:09
The job the job of a founder is to find and build coalitions of of of um customers and uh teammates, right? And
48:19
if you're not doing that, then it's not a business, right? Um um I'm going to write that one down,
48:27
too. Build coalitions. That's good.
48:37
The other one I think the probably the first one actually this is a great segue. Thank you for asking. Um I've been doing some uh webinars. I work with
48:46
the state department quite often to do webinars for other countries to help uh entrepreneurs in other countries learn how to raise money in Silicon Valley.
48:55
And I was doing one in Pakistan in the middle of the night last week. Um and uh it was the middle of the night [laughter] really the middle of the night for me. Um, but I realized we
49:04
needed a takeaway. So, I put together this uh fundraising tips. Um, and I can show you literally just finished this
49:11
today. There it is. You This is the first the first ever viewing. And if you zoom in really close, you can you can read it maybe. But anyway, those are
49:20
tips about things that you should and should not do. So, just what you're talking about there, Oshi. Um, and you can you can have this. It's on the
49:27
startupconsil.org website. And um and I even have this. So if that looks fun to you, you can scan. Try Let's try this.
49:36
Can anybody scan this? I I was thinking that this Can you scan a QR code when I just put it up here on on uh YouTube
49:43
like this? Because this will take you to the page on startups.org. So I don't know if anybody cares, but um but if you
49:51
want to download this, you go to the the startups.org and it Oh, it it doesn't quite fit. It says tips tips because the it's investor tips. So, if this doesn't
49:59
work, startupconsil.orgtips tips um and that would be uh you could get that sheet and that would give you
50:08
some other ones that will all be in my new book of course. Um and if that's helpful, I would love to hear about it from you. There I wrote tips on it.
50:18
Okay. So, like that tips.
50:22
All right. So, let me if anybody can do that um that QR code that would I'd be very curious. Oh, just scanned. Okay, great. So, somebody did. OG. Oh, OG did.
50:33
Okay, great. Awesome. Okay. Well, hopefully that's helpful. Like, literally I'm writing a whole book about this because there's a lot, but that's a that's a few of the basic ones anyway
50:40
that I think are important and we can talk through them more later if you'd like. Okay. Um Daniel says he just submitted question via the website form.
50:49
Okay. Well, we can try to do that next time, Daniel. So that would be um July I don't know what is it 30th or something I think. Uh boutique says hi
50:59
it's going on until Friday and it's only we need more Detroit representation. Uh what is Oh the AI thing in Milwaukee.
51:09
That's awesome. I'm in California though so I don't think I'll be there but anybody that's in Detroit any of our Detroit friends please go over to
51:16
Milwaukee. Jules is love love love to see you. Um, okay. So then here, right?
51:22
Then we were off the air for a while and then okay, transmission is out.
51:33
There it is. Okay. Here's what she's saying.
51:36
Summerfest tech. A lot of Western Michigan representation, but trying to get the 313, folks. That's the uh 313 is
51:43
the area code for Detroit for those of you who don't know. So, if you're um in Michigan and up for a trip to Milwaukee, go see it. All right.
51:56
What are the most common? Did we just do this? Yeah. Okay, we just did that. OG. Okay.
52:02
Hardware as a service. Yes. Android mobile. Okay.
52:10
Okay.
52:14
What kind of numbers would be reasonable enough to work with? And how do you tackle the difficult question I hear about how different is your business
52:20
from competitors? Um, uh, the first question, Ashley, I don't know what kind of numbers you're talking about, so I can't really address that,
52:29
but um, how do you tackle the difficult question about how different is your business from competitors? Yeah, that's a great question and a common one as you're saying, and it and it's
52:36
threatening, right? Um, let me put it this way. There's no way to tackle it except head-on. You have to
52:45
be honest and you have to be honest with yourself because there's always more competition than you want to admit. As a founder, you fall in love with your
52:53
baby, right? The creation, the product, the service, the team. Um, you're in love with this and and you can't bear to think that it isn't unique [laughter]
53:02
and and going to just change the world for the better as soon as you have enough capital to get there, right? Of course, you believe that.
53:11
investors though we have a wider perspective and a common problem this is back to something that OG was asking a
53:18
common red flag is we'll ask about um competition and I got to tell you it's probably it's not 100% but probably 60%
53:27
I mean more than it's a majority of founders will say we have no competition [laughter] or at least they used to things have gotten better but that's
53:35
just ridiculous because everybody has competition if you have no competition that either means that there's not a market that's going to pay for this. So,
53:43
no one else tried or what you're doing is so complex that it pulls together a lot of different angles from different markets. And yeah, it would be really
53:51
elegant, but it is going to be impossible to sell and bill, right?
53:57
because you're pulling efficiencies across departments and across budgets and maybe across companies or or languages or time zones or you're doing
54:06
something that is really cool and elegant and would be super cool but is never going to happen and there you
54:14
might have no competition. Anybody else has competition? Absolutely they have competition and even if they don't have competition that for example is AIdriven
54:22
and softwarebased and runs on your phone in the cloud uh with magic pixie dust there is some competition that exists in
54:31
the real world that people are getting this done already and that's actually what you're selling against founders get caught up in the tech world a lot of
54:39
time at least in my space I'm mostly a software guy but we get caught up in the tech world and think everything has to be software and the fact is A lot of
54:47
businesses still run, you know, like on fax machines, [laughter] right? And um investors want to hear about the real competition, not just like what you deem
54:56
as your technical competition, but the competition that is the alternative solution that people are going to have to be talked out of in order to buy your
55:05
solution. And they're going to have to be retrained and their budgets reallocated to you from some existing paradigm. And that is the real
55:14
competition. And that is rarely um well explained in my experience by founders.
55:20
So you could get farther faster with that question answering that question Ashley if if you can say concisely right
55:29
much more quickly than I just did. But uh existing solutions are ABC they cost this much per year. Uh but the problem
55:37
is X Y and Z. And we are better because of A B C and D. And we're cheaper because of E, F, and G. and uh we think
55:45
we can sell this through to these kind of customers in a average of three weeks for an average budget size of $100,000 or something like that. That's the way
55:53
investors like to hear people speak is in equations. [laughter] So if you can come up with something like that, that'll get you through the competition uh discussion, I think, in flying form.
56:05
Okay, next up, Samantha's back. We appreciate the realistic answer. Oh, this is in
56:12
regards to the $30,000. Yeah, sorry. Um, again, you you could certainly try, right? See if your aunt will go for it,
56:19
you know. Uh, and she says, "We will bootstrap credit card it." Haha, I see your point. And we will float a 5 to 10 5 to 10 uh proof of concept instead and
56:28
then raise and give a percentage or use MRR to keep growing. Solid guidance.
56:32
Okay, good. Well, thank you. I'm glad you took that in the spirit which was intended. It's uh it's a fact of life, right? if you don't if you've got 30
56:39
grand, they're gonna investors don't want to see you bankrupt yourself because we want you to be succeed, right? But we do want to see you have a lot of skin in the game. Uh, and I've
56:48
seen this many times like we'll see somebody come in and they'll pitch and they'll say we we're raising whatever $100,000 or something or, you know, $500,000
56:56
and because I belong to some angel groups, right? And those will be like 30 or 50 of us sitting in a room all listening to this presentation. And then when the person's done and they leave, we all talk about it, right? Like what
57:04
did you think? What what do you think of the way they answered that question? or what do you think about the competition?
57:09
And and somebody will say, you know, I don't know why this person needs thinks they need 500 grand. I happen to know their dad and you know, that family's worth, you know, a billion dollars. So,
57:18
and everybody go, oh, gross, [laughter] you know, so you gota do do the best you can uh on your own and it your
57:27
contribution should be proportional to your resources is what I'm trying to say. And if you um and and like I said
57:33
to uh uh Tomar I think orar earlier um don't raise money if you don't have to.
57:38
You'll be in a better position later when you do raise money. All right.
57:43
Marie says let's always do a lot of good. Well, I'm down for that. Excellent. Okay. Manoba.
57:54
Hey South Africa. Excellent. Nice to see you. I help growth startups using techniques made for projects to reach commercial success. My main role is
58:01
getting investors. How can I reach Silicon Valley investors? Um well, let's see. To do that from South Africa, well,
58:08
I would probably it you would want to think industry specific. So, are you talking about software investors or
58:16
medical device investors or aerospace or um hardware or consumer products? Like each of those is a separate thing,
58:24
right? And each of those has their own network and their own clubs and associations and conferences and online
58:32
events. So I think you'd want to pick whatever cluster is the most applicable to your work with entrepreneurs there in South Africa. U Silicon Valley investor
58:41
is like saying I want to reach people right and there's lots of different kinds of people. So I would start with identifying your ideal investor profile
58:50
and then I would look at assuming you can't fly over to the Bay Area. Right?
58:54
I'm thinking remote. You would probably want to go uh attend events and um try
59:02
to get to know people essentially. Uh and you could send cold emails. Those work sometimes, but you really need to spend some time on LinkedIn and get to
59:10
know figure out what those people are about, what they're investing in, maybe something you have in common that you could use as a conversation starter. Um this is also going to be in my new book.
59:20
Um so I guess this Oh, and then organizations. I would look at like for in South Africa for example, I'm part of an organization called the Global
59:28
Entrepreneurship Network. Uh I'm looking around to see if I can find their something with their logo on it.
59:35
Oh, yeah. Here's a little badge. It's pretty small. What is this from? Well, can you see this logo there?
59:44
That's that there. That that circle there is the uh Global Entrepreneurship Congress logo.
59:52 That's from a conference in Australia I went to a couple years ago. Um, but they have chapters all over the world and I know they're very active in South Africa
1:00
for example. So GN um I think they're at um it's not gn.org. It's it's a very
1:00:07
hort URL. I can't remember what it is right off the bat but but Global Entrepreneurship Network. I would look at I would look at Startup Grind is another organization I used to be
1:00:16
involved in that is global. um our startup council like uh as you've heard about uh a couple times here this one behind me startup council we have people
1:00:24
all over the world um uh we even have meet a meetup group I think in Johannesburg I think I don't know what city you're in but come and join us um
1:00:33
you just got to get yourself into those circles so that you can meet those people and build relationships that's that's the answer um and LinkedIn could
1:00:40
be really good for that as well says great to see you And yeah, hi Sam.
1:00:49
Trying to see your picture. You're from Detroit, right? Didn't when we met uh in Detroit. Uh what's the most attractive category of businesses for investors?
1:00:56
Well, AI, B2B, SAS. Yeah, that's right.
1:00:59
Well, that's the joke these days in in venture capital circles is what do you invest in? Oh, I'm agnostic. I invest in anything, which means B2B SAS. AI, AI, B2B SAS.
1:01:11
Exactly. Right. So, um, no, angel investors may be, um, agnostic enough to look at anything.
1:01:22
Opportunistic might be a better word, right? So, if you're writing your own checks like I do, I'm reasonably opportunistic. But even then, I have
1:01:29
things that I specialize in because I some things I know about and some things I don't. I used to invest in medtech and all I did was lose money. So, now I
1:01:37
don't do any medtech. I don't touch it, right? If I'm going to do medical stuff, I'll buy like a public stock, you know, like um you know, Johnson and Johnson or
1:01:45
something, right? Um or a pharma company. So, almost all investors have a
1:01:51
um a specialty. So, I think um what the most attractive category is almost doesn't matter because at least from a
1:02:01
founders's point of view, uh Samir, because you wanna you want to build what you want to build, I think, right? And you gota it's like art, right? Like Picasso had to paint, right? Jimmyi Hendris had to play that guitar, right?
1:02:12
They just had to whether they're going to get paid or not. Van Gogh, you know, he didn't make any money in his own lifetime. His paintings only got very
1:02:19
expensive after he was gone, right? But he had to paint. So if you have that kind of motivation in a space hopefully that has commercial potential and
1:02:28
whether it's a mobility or infrastructure or curing cancer or whatever it is going to the moon uh
1:02:35
there will be investors there too. So um I don't think there is a most attractive but if there was yeah I guess I'd choose
1:02:44
uh AI B2B SAS also. [laughter] Um, all right.
1:02:52
Samantha's back again. Okay, Samantha, you the frequent fly miles tonight. We heard from an M&A firm that we need around a million ARR in order to get a
1:03:00
fair acquisition price, but that price, why would we sell? Do you think it's better to be a recurring revenue model alone? Um,
1:03:08
well, fair acquisition price leaves a lot of room, right? So I don't know how much you know about M&A but uh any sort of financial transaction like that is
1:03:16
generally calculated on some kind of discounted cash flow model mean um and the shortand for that is multiple. So if if you're trading on a million uh if
1:03:25
you're trading on a revenue a multiple of revenues uh and you've got could get a a six multiple on 1 million and get bought for 6 million and maybe that's
1:03:34
not enough. Other times, a similar business, just depending on other market conditions, might get a 20x multiple.
1:03:39
And the same thing could be in a different market scenario, might be worth $20 million, right? And that might be more than fair as an acquisition price, right? So, um, until it gets to
1:03:48
the time where you're really actually live, um, and you can evaluate using current interest rates and forward
1:03:56
curves and stuff. I'm not sure you can you can judge too much. Um, it sounds like you're early enough stage that, um,
1:04:04
I wouldn't worry too much about the financials. If you have a proof of concept where you could deploy 30 of your hardware units and it's an AI
1:04:11
related opportunity, which to the previous question is pretty hot space. I think I would just get on with it. And
1:04:19
um, yeah, you're going to need to hire somebody who really knows numbers anyway. Uh, and if you know, you won't want to get ripped off. Um, but if
1:04:27
people start coming to you with offers, that's a great time to hire somebody, right? Or even just an attorney. You can engage an attorney. And if you need
1:04:34
actually anybody here, if you need um referrals for a good startup attorneys, I don't mean like your uncle who does car accidents or your your cousin who
1:04:44
does divorces, right? I mean a real startup attorney. We have a bunch of those are friends of mine. And there's a form at startupconsil.org that you can
1:04:51
fill out and give us tell me what you want and what your questions are and I will connect you directly to some top people that I know that do this all day
1:04:58
every day and they'd be happy to talk to you about this kind of stuff. Um, so do you think it's better to be a recurring revenue model alone? Um, alone in terms
1:05:08
of I'm not sure what you mean. Recurring revenues are great as opposed to what you mean like uh a oneoff
1:05:16
purchases or something. I'm not sure I understand that part. But um but I I I the skepticism inherent in
1:05:23
your question, I'll validate right at that price, why would we sell? I think you always need to ask that question.
1:05:29
Why would we sell and how much would we sell? Right? You don't have to sell the whole company. You can sell pieces, right? Um or you can sell um a piece of
1:05:38
it now and contract to deliver a piece later, right? You can do anything you want in leg legal terms. Good attorneys
1:05:45
can document any kind of arrangement you can think of. You can license out part of it and then have rights to buy it back or if it goes this high, you get a bonus or it goes down, you get a bonus
1:05:53
or whatever. You can put any of that into a contract and construct things just the way you'd like so that you feel that it's fair. And of course, the
1:06:01
definition of any of any transaction is both parties, you know, have to decide that they think it's a good deal. So, that can take a lot of negotiation. And again, that's where you'd want to go
1:06:09
attorneys. But in general, I think um I would drive towards getting that million ARR and then you're gonna have a lot of options and that would be fabulous.
1:06:17
That's exactly why I do this. I would hope that that's for you. And I think you're in Orange County, so you might want to join the Orange County version of the startup council. This was the
1:06:25
first startup council right here in Southern California. And you can come join us and I can introduce you to attorneys who are here actually right here in Orange County if that's helpful to you.
1:06:34
All right. Um what does that say? Okay.
1:06:44
Servicebased concept. Sorry, I need a drink here. Is it realistic to go public? H.
1:06:58
Sorry guys, I've been talking non-stop.
1:07:01
[clears throat]
1:07:02
Is pet boarding uh realistic to go public? Uh, it could be boutique uh boutique pet. Uh, I don't know. It
1:07:10
depends on where you are and how you build it and what kind of uh business model you have, you know, like do you own the kennels or do you lease them or you what kind of pets are you talking
1:07:18
about? What are the costs and uh, etc., etc. Um, in the grand larger vision
1:07:25
scheme of things, yeah, I I mean there's lots of pets in the world and there's lots of them need boarding, right?
1:07:31
[laughter] So, um, that is that is a real business for sure. if it qualifies to go public or not is more a question of corporate strategy and growth and
1:07:39
like um how you finance the thing to um uh to grow it large enough quickly enough that people would want to buy the
1:07:47
tock that's almost a different game than the actual service of the pet boarding um but yeah in in theory I
1:07:55
would think so all right Daniel from SD thinking San Diego there two tech co-founders with a
1:08:04
near final MVP AI communications engine for core first- time founders seeking advice on next steps any tips on early stage funding or angel groups to connect
1:08:12
with I'm curious what AI comm's engine for core means let's unpack that AI
1:08:19
communications engine for core or corporates maybe you mean companies you don't mean the Marine Corps I don't
1:08:28
think [laughter] I don't know okay anyway your final MVP okay tips on early stage funding angel groups to connect Okay. So, San Diego's got a lot of great
1:08:37
uh folks. Uh and you probably know some of them. Um some of them might even be on the call here with us. The um I would
1:08:45
look at um oh Jonah Jonah Peak has a a newsletter called um something Coyote.
1:08:53
Social Coyote I think it's called Social Coyote.
1:08:57
and um Social Coyote uh covers like all the events and stuff for startups in uh
1:09:03
in San Diego. Neil Bloom of Rising Tide Partners, I think is what his group is called these days. Uh is a great guy and also very dedicated to helping founders.
1:09:13
Mike Krenn um and a lot of people in San Diego. Um yeah, I think there are Google away for you to find a whole bunch of
1:09:21
them. And my biggest tip would be to go and attend as many events as you can so that you meet the people and learn the language and make friends so that when
1:09:29
you're really ready to raise that money, you're not a stranger. That's what you're trying to avoid. You don't want to just show up with your hat in your hand looking for money and they've never
1:09:38
seen you before. Um, and along the way, you'll pick up some of the lingo and build those relationships. So, I would I would do that. There's also the biggest
1:09:45
angel group I think in Orange County in San Diego is New Fund. NU fund uh that used to be part of Tech Coast Angels
1:09:53
which is where um I've been investing for many years and new fund does a lot of early stage stuff in San Diego as well but there's a there's a lot in San
1:10:01
Diego um so I would uh I think a Google or two and you could get there pretty quickly if you have more specific
1:10:08
questions uh we can get into that as well. All right, let's see. Current projects I'm guiding now are fintech and
1:10:18
SAS compliance. I don't want to take on more projects while getting these to at least phase three were deploying an entry market. Yeah, that makes sense.
1:10:26
Sounds like you got um good stuff going on though. Good for you. Uh okay. And then back to the pet boutique.
1:10:37
Silicon Valley investors should get behind a pet boarding in West Australia.
1:10:40
ready to scale infrastructure already close to takeoff. Well, that sounds great. Um, I think you have to do a little more than show up here and ask
1:10:47
though [laughter] you probably need to identific.
1:10:54
Um, one of the things just to hopefully this is helpful. Silicon, if you say Silicon Valley in, Silicon Valley
1:11:01
investors are mostly software people and a pet boarding operation sound sounds like a real estate type uh physical
1:11:08
assets sort of play um or maybe an Airbnb for pets or something like that.
1:11:14
Uh if it is more real estate and actual dogs and dog food than software, Silicon Valley investors are less likely to be
1:11:23
interested. Just so you know, Silicon Valley is looking for scalable businesses like an Airbnb that are really is a software platform maybe that
1:11:30
you could sell to pet borders all over the world. That would probably be more interesting and have more potential of getting Silicon Valley type investors.
1:11:40
What happens to angel investors when a startup doesn't grow? We lose our money.
1:11:45
Yeah, it sucks. Yeah. Well, what's if it doesn't grow, that's one thing.
1:11:52
And that's kind of frustrating. It can could just get locked up, right? Like I'm in a company now that I invested in
1:11:59
first time probably I don't know 2018 and then again in 2020 or so 21 something like that. And they've been
1:12:07
doing fine. They're still alive, but it's six years later from the second investment and they haven't raised any more money and they haven't gotten any
1:12:16
much bigger either. They're just kind of running. So, I own a small piece of something that's just running and it's probably not going to exit. So, in other
1:12:25
words, I kind of lost my money even though the business didn't go out of business. They just didn't get big big enough to be acquired or exit or IPO or
1:12:34
something, right? Because I obviously the idea was uh put some money in and then it goes 10x and I get 10 times the money back and the founder gets 10 times
1:12:42
their the share that they had back and they're rich, right? Um, so, um, they're just supporting themselves and doing
1:12:50
okay. Um, but the investors, me and the other people put the money in, we're just kind of stuck. Um, of course, the other alternative is that the company
1:12:57
just goes under and then the money just disappears, right? Everybody goes home.
1:13:02
So, it's not, for example, it's not like debt where if you take a loan from somebody, a bank or your cousin or
1:13:10
whatever, um, they're going to want that money back, right? So if the if the company isn't doing well and it runs out
1:13:17
of money what they will be shut they will shut down the uh operation and whatever money is left like in terms of maybe there's some in the bank account
1:13:26
or you can sell some of the assets or inventory or the chairs or the computers or something get some money back and then that money is distributed back
1:13:32
proportionally to the debt holders right so you might get whatever you know 12 cents on the dollar or something you might get something back and the company
1:13:41
gets liquidated venture capital doesn't work like that or angel investors. The money goes in, you hope it takes off like a rocket, and
1:13:48
if it does, you get a bunch of money, and if it doesn't, you're basically the money's gone.
1:13:55
Not uh not anybody's favorite uh reaction. Okay. All right. A lot of questions tonight.
1:14:03
I'll do a couple more here. How long is the entire investing process? Okay. From first meeting to the company receives
1:14:11
money from angels of VCs. That depends a lot. It's a good question. The uh let me give you some real numbers then I'll explain why. The shortest might be two or three weeks.
1:14:23
Longest could be infinite obviously. But you know uh but a still successful raise that took a while might take like five months, six months, something like that.
1:14:32
So something like a few weeks to a few months is typical. Now, the funny thing about this is that
1:14:40
um when they're slow, it's often it's as often the founders
1:14:47
fault as much as the investors because the investors, we actually do this more than founders do, right? So, I've heard many times founders complain that it
1:14:56
takes so long, but a lot of times that's because the founders weren't actually ready. [laughter] So, if you're going to raise money, you
1:15:04
want to be and you want it to move quickly. You have to be ready, right? We are going to ask for everything, all kinds of due diligence documents, and
1:15:12
you want to be ready with uh uh a founders agreement and a clean cap table and cleanly incorporated in the US state
1:15:20
of Delaware as a Ccorporation. You want to have um uh board meeting s and assignments of intellectual property from all your staff and contractors. You
1:15:29
want to have uh projections and copies of all your agreements and customer agreements. And I'm like everything there's there's like 10 different
1:15:37
folders. This is part of another presentation that I was doing just last week in Pakistan that I mentioned actually. Um but uh there's a lot of
1:15:45
tuff. So a lot of times the investors may be more ready than the founders because we know what we want because we
1:15:52
do this all the time, right? So we want to see these 10 things and then when you give me those 10 things I want 10 more and you give me those 10 things I want these 20 more. Right? I mean there's a list for us. Check, check, check, check.
1:16:01
But for you it's like oh my god, you you're serious. You want this signed document of that first contract with the
1:16:08
coder that we used four years ago in Romania who wrote those first lines of code. Yeah, absolutely we do because
1:16:17
that's a a claim of ownership on the proprietary intellectual property of the company. So, you know, that kind of stuff can really slow things down. But
1:16:26
if you want to move quickly, the trick is to be prepared.
1:16:31
All right, hope that was helpful. Give me some thumbs up, guys. I'm hopefully I'm answering these things. It's taking me a while to get to them, but if they're if these are filling in blanks for you, please let me know. And again,
1:16:39
like I said, uh likes and shares and um um uh uh comments, all that kind of
1:16:46
tuff. Really much appreciated. There it is. The captions are working again.
1:16:51
Yeah. So, please do um let me know what you're thinking. Um because those little clicks help us stay on the air.
1:17:00
All right.
1:17:01
I will definitely what's this reach and JB I am in Durban I represent my
1:17:10
okay so I think you guys in Africa are talking to each other awesome okay um I have a potential
1:17:21
leverage commercial space huntington beach curious to learn what are some cool things I interested in a potential new co-working space okay Ethan that's
1:17:28
interesting um Huntington Beach that's southern in California near me. And uh yeah, co-working is a thing for sure. I
1:17:36
don't know much about that. That's a very specific business model, right? So, I'm sure there's people you could talk to about that. And um you know, if nothing else and it ends up being an
1:17:45
event space, let me know. Well, maybe we the Orange County Startup Council will come down there and have a Christmas party or something. [laughter] Um all right, so I think we're just
1:17:54
about running out of time here. Thank you, Sesh. Appreciate that. And John, as well, thank you. Just good to know I'm reaching getting the job done here. And
1:18:03
uh Daria says, "Can I have a single person startup?" 25. Sure, you can do whatever you want. Um if uh Daria, just
1:18:11
by your name, I'm guessing you might not be in the States. Uh the US has the most probably the simplest
1:18:18
um legal and regulatory regime for starting companies. We don't really need to really do anything. You can just start selling stuff. Um, if you succeed
1:18:28
in selling stuff, you're going to want to get some licenses and permits and uh probably incorporate and open a bank account and you'll get there soon
1:18:35
enough. But we don't actually have to do much of anything to start. So um but if you are perhaps like in India or in
1:18:42
other jurisdictions that I don't know as well there are maybe are other things that you need to do because I know like in India for example um I'm see I see all the time people put on their
1:18:51
websites and stuff that they're an official startup like they're licensed by the government and that's not a uh that's not a thing here in the United
1:18:59
States. So there may be more that you need to do but the fact that you're 25 doesn't scare me. Of course you can do that when you're 25. You know, Mark Zuckerberg famously dropped out of
1:19:07
college. I think he was 18 or 19 when he started Facebook, right? And that certainly went well, at least for him.
1:19:14
Um, uh, you should, you know, you should read Dar, if you're that new to this, you should read one of my books, this middle
1:19:21
one, uh, Click Millionaires Share. Um, this is available all over the world in many languages, including English, of course. Um, that would probably be
1:19:30
really helpful to you actually, uh, because that's why I wrote it was to help people start their first business.
1:19:34
uh even not necessarily a venture capital business but just a internet-based business um because that used to be a new thing. So, okay. So, I
1:19:43
think that's about it for tonight and um lovely to see you all. I appreciate you being here and if you wanted to get a copy of this fundraising PDF, that's the
1:19:52
um URL on the screen there and you can send me feedback on this as well. I didn't get to cover all these points, but hopefully it's somewhat
1:20:00
self-explanatory. I do this to try to help. So, likes and shares are appreciated. We'll be back again in a month. And like I said, I'm going to
1:20:07
tart doing probably at least twice as many of these, especially once I can get this new book done. Um, we'll be here talking about the book, right? So,
1:20:14
hopefully you all can uh participate in that and um love to see you again, of course. Um, and then we'll have uh plenty of other
1:20:23
opportunities to get together. And let me just see if there's anything else I want to tell you here before. So, yeah, a new book is coming. Um,
1:20:33
yeah, and then join us at startupconsel.org. I guess that's it.
1:20:37
Okay, so great to see you all. Thank you for joining me. I'm Scott Fox from startupsel.org.
1:20:42
Doing my best to help accelerate you in your startup dreams. And I hope to see you again soon. If you haven't already, come join our newsletters and uh join us
1:20:51
as a member at startupconsil.org. We'll help give you a lot of publicity for your startup and introduce you to uh service providers, potential clients,
1:20:59
investors. We're building the whole network there, an army to help accelerate the world and accelerate your future as an entrepreneur, too. Thanks.