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Hi, everyone, how's it going?

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My name is Sam Sugarman, and I'm an associate on the Fearless Fund team.

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I'm very excited to be giving this GVR masterclass today and to meet you all and to take all

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of your questions.

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So to start off today's presentation, here's an agenda of everything we're going to talk

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about today.

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I mean, as you'll see at the very bottom, I left the Q&A section.

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So we'll save about 10 to 20 minutes, depending on how the rest of the presentation goes.

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But as you have questions, feel free to throw them in the chat, and then we'll make sure

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to address all of those at the end.

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But in terms of today's discussion, so just walking through the agenda.

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Number one, we're going to talk about when to fundraise.

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So things that you should accomplish as a startup before you're thinking about fundraising.

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Obviously, this varies significantly by stage, but just a good way to think about it from

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the investor perspective.

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And then also, when do you need fundraising?

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When does it actually make sense for you to go for it versus when can you bootstrap or

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when should you think about alternatives?

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Number two, we're going to be talking about fundraising terms.

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So thinking about how much to raise, valuation considerations, the mechanisms by which you

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can raise capital, and then shaping out your fundraising round.

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So having a lead investor and some smaller investors, doing a party round, doing a crowd

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funding round, or other alternatives.

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As an example, diligence process, just to get an understanding of what it's typically

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like, what are the things that are normally talked about, and how can you present effectively.

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I'm going to walk through what the fearless fund diligence process is like, and the key

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items that we look for.

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And then after that, I'm going to talk more broadly about preparing for fundraising.

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So creating your pitch, what to make sure to include in there, metrics to have prepared

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for when you get follow-up questions, and then diligence items to have ready.

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And then lastly, common mistakes that we see from companies that are pitching, so that

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hopefully you're able to avoid those in the future.

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And then again, lastly, we're going to be talking through Q&A, and any questions that

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are in the chat, we're going to be reading through those and going through them.

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So starting off with when to fundraise, kind of broke this slide out into two halves, right?

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The right way and the wrong way.

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And so under both of the right and wrong options, there are steps accomplished.

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So things that you've done as a company when you're thinking about fundraising.

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And then number two is when you actually need the fundraising.

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So starting at the top left side of the slide, steps that I think are really important to

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have accomplished before you start raising capital are identifying the market opportunity

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and who the customer is.

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So that's not just saying, there's a gap in the market.

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I think I found it, and I've created a minimum viable product, so I should start fundraising.

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There's a big emphasis on product market fit when I'm thinking about this bullet in

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particular.

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So going out to a variety of potential customers, of potential users, and saying to them, would

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you use this product today?

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Would this solve a problem that isn't already being solved today?

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And if you were to use this product, are there other iterations that I need to make in order

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for it to be something that you would consider using?

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Number two, you've created a product that matches the customer's needs and is being

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adopted at a high growth rate.

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So one thing that Fearless Fund focuses on very frequently is traction.

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So that doesn't mean that you need to be generating a lot in revenue yet, but it should

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show, it should be some sort of proof of concept that your value proposition and your unique

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solution is needed in the market, and you're offering something that your competitors don't

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offer today.

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And then number three, you have validated that there's a long and sustained demand for

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your product.

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So not only are customers using it, or if it's a technology platform, not only are they

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engaging with it, but are they engaging with it repeatedly?

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If it's a consumer business, if they've bought your product before, are 40, 50% of

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your customers buying again?

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Is there a long-term need for the product that you're selling?

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On the flip side, looking at the wrong way, so maybe you have an untested idea that you

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think could be a billion-dollar company.

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That's great, but it doesn't mean that it's necessarily time to start fundraising.

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You know, before you get to that, you know, it could be a billion-dollar company.

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That's definitely possible.

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But it's really important that you at least have an understanding of what the broader

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market thinks, because maybe you think it's a great idea.

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Maybe a few peers and maybe even a few investors think it's a good idea.

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But if there's not a mass market that's willing to pay for your product and use it

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consistently, then the fundraising capital won't go to any, you know, positive use.

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Number two, you're raising because your competitors are, and you don't have a plan on

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how to use the proceeds.

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This is something that actually comes up in today's world more frequently than you would

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think it would.

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So maybe a company is getting started, and they hear about the velocity of some of their

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peers, how quickly they're growing, and how they each raise, you know, $5 million, $10

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million, and maybe the company and the founders feel like they're behind.

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So they go, and they pitch to investors, and the investors say,

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you know, what are the use of proceeds? And they say, you know, all these, you know,

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maybe it's a consumer product that has a lot of retail reach. They're saying we want to expand

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into retail, but they don't actually have a concrete plan, partnerships that they're targeting,

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a go to market strategy. And without these, you know, a venture capital investor can invest and

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feel confident that they're going to generate a substantial return if the founders don't have

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a plan that's ready to go. And then lastly, you have an idea of who the customer could be,

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but you haven't tested it yet. So it's a good step to have an understanding of who you're

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targeting as your customer. But again, until you actually go out to them and say, is this

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the product that you'll use? You start getting traction, getting your customers to start

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buying the product or utilizing the service. There's not any validation that you can go to

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an investor and say, this is why you should support me. We already have a good business.

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We want to grow. Instead of you're saying you have to believe in me, but you're taking

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an additional risk that maybe the market doesn't actually have a demand for this product.

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So going down to the bottom part of this slide of when you need fundraising.

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So the good situations, you have a proof of, you know, you have a proof of concept or traction

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and you need to make product enhancements to become scalable. So this is a situation where

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you have traction. So maybe let's say you have a thousand users with your company, right? They're

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using your product and they say, oh, this one feature in the backend, maybe it's a services

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company and there's a billing feature. They say, we'd really like you to fix up this billing feature

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and you know, in order to do that, you need a backend engineer to do that. So you go up to

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an investor and say, you know, we need to raise $250,000 that we can hire an engineer to fix this

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problem. And that will make our business more scalable. That's a really attractive proposition

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to an investor. The second one, you're launching a near-term go-to-market strategy, but you need

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a key hire to do so. This is something that comes up frequently and is, you know, not scary for an

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investor at all, because as you're founding a company, typically you'll start with, you know,

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one to three people on the founding team. And maybe there's someone focused on operations,

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someone focused on creating the product. And rarely do you have someone that's actually

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focused on sales or go-to-market strategy. So once you've developed the product, you've put

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yourself in a good position, that's a big hire. And you know, that's someone who can help accelerate

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growth substantially. So oftentimes, Fearless Fund, when we're meeting with companies,

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we see that they want to hire someone to focus on go-to-market strategy or sales,

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especially once they've identified a channel that they're targeting. And then lastly, you've secured

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purchase orders and need capital to enhance product and enhance production or fund inventory.

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So this is more tilted towards consumer products. But the idea here is that you already have purchase

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orders. You know that there's demand for your product, but you're not actually able to sell

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the product until you can make it and you need capital to be able to make it. If you're an early

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stage investor, you find that that's a low risk situation because you know that your capital is

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going directly towards the company generating revenue. So when you need fundraising on the

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bad side, you need to hire a developer to build a minimum viable product. This is not a great

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situation because if you don't have a product available, there's a risk that if I invest in

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your company, you build this product, and then you go out to potential users and they say,

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there's no need for this product in the market today. And then the investor's not in such a good

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situation. The second one, you want to use the proceeds to run a product market fit study with

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potential customers. By the time you go out and try to secure capital, this should be something

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that you've already done. Even if it's not, you know, thousands of people, you want to at least

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talk to hundreds of potential customers to make sure that there is a product market fit before

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you try and bring on an investor. Lastly, you've created a sales pipeline of potential customers

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and want to have capital ready in case you secure an order. Again, for an early stage investor,

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this is creating an additional risk that you don't necessarily need to create for an investor.

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Because if I invest in your business, and then you're not able to execute on that sales pipeline,

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then again, we're in a situation where that capital is not going to use and it's kind of

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stuck with your business. And you're making a lot of adjustments when you've already received

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an investment. So you're receiving a lot of pressure from the investor.

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So below on this slide are a few examples of good and bad situations of which to say,

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you know, I'm in a situation where I should be raising capital and I'm in a situation where

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maybe I shouldn't be. We'll be setting this deck around after so everyone can read these more

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specifically. But the idea is the companies that are raising capital have some sort of demonstrated

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traction. And the capital is going towards the use of proceeds that has already been identified.

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And, you know, it's something that an investor is feeling comfortable with.

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So you'd noticed in the consumer business on the good side, they've sold 10k of product

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at direct to consumer and they're trying to expand into a retail strategy. That would be a check from

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an investor because you're growing your potential market and you've already had proof of traction.

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From a technology business, while oftentimes they're not

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actually generating revenue by the time we invest.

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You have unique users, including active monthly users

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and daily active users,

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and the capital will be used towards a mass launch.

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And again, a go-to-market strategy

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that's been clearly laid out,

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and you have a plan,

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you just need the capital to be able to accelerate.

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On the flip side,

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you know, consumer business where it wouldn't be the case

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is if you showed a product to 50 to 100 friends,

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and they're supportive of the idea,

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and maybe you've held a meeting or two

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with a big potential customer,

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but there's not really anything that says

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there's a need for this product

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and that competitors aren't already doing the job.

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Same road technology business.

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Oftentimes these days,

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a business will get started

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because somebody will launch a blog post

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and it will go viral and you'll get a lot of traction,

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but that's just for the post.

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Maybe that interested a lot of people,

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but doesn't actually prove

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that there's a fundamental need or desire for the business.

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And again, you know,

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wanting to hire a director of sales

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before the product is ready.

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It's great that you're anticipating

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what could potentially be there,

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but your business is in a position

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where they're ready for external capital.

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So once you've decided that you've gotten to the stage

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where, you know, you're ready to go,

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it's time to be fundraising,

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there are a few considerations that you should think about.

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So the first consideration is how much capital to raise.

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And there are a few kind of sub bullets in there

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talking about what are the key considerations to think about.

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Number one is cash runway.

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So in terms of cash runway,

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that's the amount of cash that you'll have,

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the amount of months that you'll be able to last

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with the cash that you have on your balance sheet.

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So when you're raising capital,

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you wanna make sure with all of the initiatives

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that you're thinking about,

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you have at least 12 months of runway

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to achieve significant milestones.

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And the goal there is that

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if you're raising a pre-seed or a seed round,

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by the end of that 12 month period,

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you'll have been able to obtain

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certain significant milestones

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that will allow you to raise capital again

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at a much higher valuation.

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So when you raise your next round,

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you're giving up less of the company.

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The second item to consider is valuation.

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So when you're determining what your company is worth,

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you have to think about the valuations of peer companies,

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both how are they doing revenue wise?

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What are the valuations that they've recently raised at?

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What's their market potential versus yours?

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And then also key differentiators.

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So do you have a unique IP?

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Do you have growth projections that are different?

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Are you outperforming the general market?

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And in particular, the early stage market

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that's in your field.

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And then lastly, dilution.

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So how much equity are you willing to give up today?

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Oftentimes when companies are raising their first round,

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they'll give up anywhere from 15 to 35% of the business

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with 20 to 25% typically being the sweet spot.

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So it seems like a lot to give up

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that much of your business off the bat,

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but if you take the pie and you're able to grow it 10 times,

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it's worth it to give up a pretty substantial slice.

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So the second consideration to think about

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are the potential mechanisms that you can use

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when you're raising capital.

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So there are advantages to doing any of convertible debt,

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safes or equity, and there are disadvantages

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to each as well.

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So in terms of convertible debt,

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this is often what early stage companies choose to use.

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And there are a few reasons.

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For an investor, you feel safe

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because you're getting an interest rate,

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and you have a maturity date.

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So with these factors kind of incorporated,

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you know that you're gonna be receiving capital

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from the company through interest payments,

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and that's something that's beneficial for an investor.

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From the company perspective, it's beneficial

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because you don't necessarily need

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to put a valuation cap on there.

246
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So there's less pressure to think about

247
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what your company's worth today.

248
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And then additionally, kind of at the early stages,

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both convertible notes and safes

250
00:13:45.660 --> 00:13:47.280
require very little legal work.

251
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They're very standardized templates.

252
00:13:49.060 --> 00:13:51.500
So when you have a limited amount of cash in the bank,

253
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it minimizes the amount that you have to spend

254
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on legal fees.

255
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And spending 3,000 instead of spending 25,000 off the bat

256
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is a really significant difference

257
00:14:00.040 --> 00:14:01.700
when you're trying to get a capital infusion

258
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done really quickly.

259
00:14:04.100 --> 00:14:07.820
So safe investments have been used very frequently,

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created by Y Combinator.

261
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It basically lets you invest now

262
00:14:11.380 --> 00:14:13.240
for the right to equity in the future.

263
00:14:13.240 --> 00:14:16.980
So why this is advantageous for the startup company,

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it kind of acts like a convertible debt

265
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or a convertible note

266
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without the interest rate or maturity date.

267
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So you're able to get the cash in hand

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and you don't feel like you owe anyone in the near term.

269
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And then from the investor perspective,

270
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safes are really easy.

271
00:14:32.320 --> 00:14:34.100
So again, minimal legal fees

272
00:14:34.100 --> 00:14:35.900
and there's a valuation cap that's put on there.

273
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So you can determine that I'm investing in your company

274
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and it's worth $10 million today.

275
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And while it doesn't convert into equity until later,

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I'm saying it's worth 10 million.

277
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And when you raise again at a $20 million valuation,

278
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I still get to convert at that $10 million valuation

279
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because I was an early investor.

280
00:14:54.600 --> 00:14:56.900
And then lastly is an equity round.

281
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So that's kind of the most traditional option of the three.

282
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where I give you a certain amount of capital

283
00:15:02.640 --> 00:15:05.120
and in exchange for that, I get a certain number of shares

284
00:15:05.120 --> 00:15:07.320
and that equates to a particular percentage

285
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ownership of the business.

286
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And then lastly, shaping out the fundraising round.

287
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So one consideration to be thinking about

288
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is what type of investors do you wanna have?

289
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And that often reflects the stage that you're at.

290
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So having angels versus VCs

291
00:15:21.160 --> 00:15:23.440
can be beneficial in different scenarios.

292
00:15:23.440 --> 00:15:26.040
So angel investors are really helpful to have

293
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when you want a little bit less scrutiny,

294
00:15:28.360 --> 00:15:30.760
when you're raising a smaller round

295
00:15:30.760 --> 00:15:32.800
because angels typically come in with checks

296
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of up to $100,000,

297
00:15:34.520 --> 00:15:38.160
typically closer to the 25,000 to $50,000 range.

298
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And sometimes they offer very strategic benefits.

299
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For example, if I'm starting a online meetup company

300
00:15:45.040 --> 00:15:48.440
and the CEO of Eventbrite wants to be an investor,

301
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that'd be a really strategic person to know

302
00:15:50.080 --> 00:15:52.600
because they have relevant industry connections.

303
00:15:52.600 --> 00:15:54.960
On the flip side, venture capital,

304
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venture capitalists can write larger checks,

305
00:15:56.960 --> 00:15:58.280
so there's a little bit more scrutiny

306
00:15:58.280 --> 00:16:01.720
because unlike angels who are investing their own capital,

307
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venture capital funds are representing capital

308
00:16:04.280 --> 00:16:05.880
from pension funds and endowments

309
00:16:05.880 --> 00:16:08.160
who are expecting a certain return.

310
00:16:08.160 --> 00:16:10.120
So they're less willing to take a loss,

311
00:16:11.000 --> 00:16:13.560
but they also can have a lot of strategic benefits.

312
00:16:13.560 --> 00:16:16.040
For example, if you're a consumer company

313
00:16:16.040 --> 00:16:19.360
and you have mostly have a direct to consumer strategy now,

314
00:16:19.360 --> 00:16:21.840
but you wanna launch your products in retail.

315
00:16:21.840 --> 00:16:23.200
And for example, Fearless Fund,

316
00:16:23.200 --> 00:16:24.640
we have a relationship with Costco.

317
00:16:24.640 --> 00:16:26.120
They're one of our investors.

318
00:16:26.120 --> 00:16:27.880
That's a connection that we could easily make.

319
00:16:27.880 --> 00:16:29.320
So as your later stage

320
00:16:29.320 --> 00:16:31.600
and you're thinking about your go-to-market strategy,

321
00:16:31.600 --> 00:16:34.360
venture capitalists can be very helpful.

322
00:16:34.360 --> 00:16:36.600
So in terms of thinking about the setup of a round,

323
00:16:36.600 --> 00:16:38.480
you can have a round with a lead investor

324
00:16:38.480 --> 00:16:40.720
and a few smaller investors, a party round,

325
00:16:40.720 --> 00:16:42.720
and then you can also do crowdfunding.

326
00:16:42.720 --> 00:16:46.200
So a lead investor, if you're raising a million dollars,

327
00:16:46.200 --> 00:16:50.920
the lead can take anywhere from 30% to 50% plus of the round.

328
00:16:50.920 --> 00:16:52.800
It's a pro because they're the ones

329
00:16:52.800 --> 00:16:54.360
who are working with you frequently.

330
00:16:54.360 --> 00:16:55.400
They're gonna have a board seat.

331
00:16:55.680 --> 00:16:57.080
They're very invested in you.

332
00:16:57.080 --> 00:16:59.200
But on the flip side, you know that you're gonna have,

333
00:16:59.200 --> 00:17:00.800
you know, you're gonna be working with that person

334
00:17:00.800 --> 00:17:02.960
and reporting to them very frequently.

335
00:17:02.960 --> 00:17:05.319
On the flip side, with a party round,

336
00:17:05.319 --> 00:17:06.400
there's no one investor

337
00:17:06.400 --> 00:17:08.119
that's likely going to take a board seat.

338
00:17:08.119 --> 00:17:10.200
You have a lot of potential investors

339
00:17:10.200 --> 00:17:12.560
that you could work with and they'll be supportive,

340
00:17:12.560 --> 00:17:15.040
but no one that you necessarily have to report to.

341
00:17:15.040 --> 00:17:15.880
On the flip side,

342
00:17:15.880 --> 00:17:18.480
you have a higher number of investors in the round.

343
00:17:18.480 --> 00:17:21.560
So you have to manage that in a different way,

344
00:17:21.560 --> 00:17:23.200
but typically they're less,

345
00:17:23.200 --> 00:17:25.040
you know, they're gonna scrutinize you

346
00:17:25.040 --> 00:17:27.079
less than a lead investor would.

347
00:17:27.079 --> 00:17:29.920
And then lastly, crowdfunding is always an option.

348
00:17:29.920 --> 00:17:32.320
So in terms of the pros of crowdfunding,

349
00:17:32.320 --> 00:17:35.240
you get increased exposure to a bunch of smaller investors

350
00:17:35.240 --> 00:17:36.640
and potential customers.

351
00:17:36.640 --> 00:17:37.960
You have an established audience

352
00:17:37.960 --> 00:17:39.760
with centralized communication

353
00:17:39.760 --> 00:17:42.000
and you get a lot of customer feedback.

354
00:17:42.000 --> 00:17:43.800
On the flip side, it's less strategic.

355
00:17:43.800 --> 00:17:46.080
So what we talked about with angels and VCs

356
00:17:46.080 --> 00:17:47.560
adding unique value,

357
00:17:47.560 --> 00:17:49.280
that's not necessarily available

358
00:17:49.280 --> 00:17:51.080
to the same degree with crowdfunding

359
00:17:51.080 --> 00:17:52.400
because it's typically, again,

360
00:17:52.400 --> 00:17:55.480
individuals with less industry experience

361
00:17:55.480 --> 00:17:58.600
writing checks of maybe a thousand to $5,000.

362
00:17:58.600 --> 00:18:00.960
It takes, there's longer preparation time

363
00:18:00.960 --> 00:18:02.360
and sometimes there are high fees

364
00:18:02.360 --> 00:18:04.760
and strict rules associated with that approach.

365
00:18:06.920 --> 00:18:09.480
So like I mentioned earlier,

366
00:18:09.480 --> 00:18:10.720
thought it would be helpful to walk through

367
00:18:10.720 --> 00:18:12.200
an example diligence process.

368
00:18:12.200 --> 00:18:16.000
So walking through the one that Fearless Fund typically uses.

369
00:18:16.000 --> 00:18:18.640
So we have a three-stage investment process

370
00:18:18.640 --> 00:18:20.760
and this slide shows on each step,

371
00:18:21.440 --> 00:18:23.160
what are the topics that we typically discuss?

372
00:18:23.160 --> 00:18:25.080
What are we looking for specifically

373
00:18:25.080 --> 00:18:28.040
in terms of metrics or higher level content?

374
00:18:28.040 --> 00:18:30.000
And then lastly, what are the followup items

375
00:18:30.000 --> 00:18:31.960
that we typically look for?

376
00:18:31.960 --> 00:18:34.080
So during our initial meeting,

377
00:18:34.080 --> 00:18:37.320
that'll typically occur with the founders of the team

378
00:18:37.320 --> 00:18:39.200
and myself, excuse me,

379
00:18:39.200 --> 00:18:41.000
or other junior members of our team.

380
00:18:41.000 --> 00:18:44.760
So what we look for when we're speaking with a company,

381
00:18:44.760 --> 00:18:48.600
we kind of have a four level scorecard.

382
00:18:48.600 --> 00:18:50.120
So we have four criteria that we use

383
00:18:50.480 --> 00:18:52.480
and for each criteria, we rank them from one to four.

384
00:18:52.480 --> 00:18:55.160
So our four criteria are market,

385
00:18:55.160 --> 00:18:58.200
what's the size of the total potential market?

386
00:18:58.200 --> 00:19:00.000
How realistic do we think it is

387
00:19:00.000 --> 00:19:02.080
that you could get a strong market share?

388
00:19:02.080 --> 00:19:04.840
The team, what experience do they have?

389
00:19:04.840 --> 00:19:07.640
Do they compliment each other in terms of skillset?

390
00:19:07.640 --> 00:19:08.600
Third is traction.

391
00:19:08.600 --> 00:19:11.200
So is their product market fit?

392
00:19:11.200 --> 00:19:13.960
Is there substantial growth that's happened to date?

393
00:19:13.960 --> 00:19:14.880
Is there reason to believe

394
00:19:14.880 --> 00:19:17.520
that there's gonna be accelerated growth in the future?

395
00:19:18.520 --> 00:19:21.040
And then kind of the last thing is just thinking

396
00:19:21.040 --> 00:19:24.600
about the product in terms of how it's set up today.

397
00:19:24.600 --> 00:19:28.320
So if it's a technology product, is it all set up?

398
00:19:28.320 --> 00:19:29.720
Do you have to do a lot of iterations

399
00:19:29.720 --> 00:19:31.240
before you can do a mass launch?

400
00:19:31.240 --> 00:19:33.240
If you're doing a consumer

401
00:19:33.240 --> 00:19:34.760
or maybe a food and beverage business,

402
00:19:34.760 --> 00:19:36.760
is the manufacturing and supply chain set up

403
00:19:36.760 --> 00:19:39.320
that you can scale very rapidly?

404
00:19:39.320 --> 00:19:41.640
So with those criteria in mind,

405
00:19:41.640 --> 00:19:43.640
the topics we typically discuss in a first meeting

406
00:19:43.640 --> 00:19:45.560
are the problem you're addressing,

407
00:19:45.560 --> 00:19:47.160
the solution you're creating,

408
00:19:47.760 --> 00:19:50.040
the potential market size, the business model.

409
00:19:50.040 --> 00:19:52.520
So the pricing strategy that you're thinking about,

410
00:19:52.520 --> 00:19:55.880
whether you wanna target businesses, consumers,

411
00:19:55.880 --> 00:19:57.600
what specific type of customer,

412
00:19:57.600 --> 00:19:59.200
the traction that you have to date,

413
00:19:59.200 --> 00:20:00.400
an overview of the team.

414
00:20:00.000 --> 00:20:02.720
team and their experience, and then a high-level overview

415
00:20:02.720 --> 00:20:06.680
of the fundraising terms in your direct ask.

416
00:20:06.680 --> 00:20:08.480
In terms of the follow-up items, we're

417
00:20:08.480 --> 00:20:10.120
typically looking for a pitch deck,

418
00:20:10.120 --> 00:20:12.800
relevant market research, financial projections,

419
00:20:12.800 --> 00:20:13.960
and then team biographies.

420
00:20:13.960 --> 00:20:17.400
So we'll take this information, put it into a one-page summary

421
00:20:17.400 --> 00:20:19.520
because, like other venture capital firms,

422
00:20:19.520 --> 00:20:23.440
we're meeting with anywhere from 5 to 20 new companies a week.

423
00:20:23.440 --> 00:20:25.480
And so we're creating one- to two-page summaries.

424
00:20:25.480 --> 00:20:28.320
And we want to make sure that after that first meeting,

425
00:20:28.320 --> 00:20:30.400
we want to be able to present to our team and say,

426
00:20:30.400 --> 00:20:32.160
this company checks all the boxes.

427
00:20:32.160 --> 00:20:35.080
We should look at them more in depth.

428
00:20:35.080 --> 00:20:38.720
So our second step, if you work past that first stage,

429
00:20:38.720 --> 00:20:41.600
is a follow-up meeting with our portfolio operations team.

430
00:20:41.600 --> 00:20:44.000
So some of the topics we discuss more specifically

431
00:20:44.000 --> 00:20:45.080
are unit economics.

432
00:20:45.080 --> 00:20:48.600
So for every dollar of revenue that you generate,

433
00:20:48.600 --> 00:20:49.800
what's your gross margin?

434
00:20:49.800 --> 00:20:51.160
What's your net margin?

435
00:20:51.160 --> 00:20:53.800
How long until you're actually going to be profitable?

436
00:20:53.800 --> 00:20:56.720
Do you have significant costs related to marketing,

437
00:20:56.760 --> 00:20:59.720
related to the cost of goods sold, et cetera?

438
00:20:59.720 --> 00:21:00.800
Competitive landscape.

439
00:21:00.800 --> 00:21:02.880
So not only who are your competitors,

440
00:21:02.880 --> 00:21:06.760
but do one to two companies own the majority of the market?

441
00:21:06.760 --> 00:21:08.640
If I wanted an Uber or Lyft alternative,

442
00:21:08.640 --> 00:21:11.960
it'd be really difficult to compete in that market.

443
00:21:11.960 --> 00:21:13.520
The business model more in depth.

444
00:21:13.520 --> 00:21:16.640
So thinking more about the pricing strategy.

445
00:21:16.640 --> 00:21:19.040
If you're running a B2B business,

446
00:21:19.040 --> 00:21:20.760
are you targeting larger corporations

447
00:21:20.760 --> 00:21:22.480
or smaller businesses?

448
00:21:22.480 --> 00:21:23.400
Product roadmap.

449
00:21:23.400 --> 00:21:26.000
So not only the products that you have today,

450
00:21:26.040 --> 00:21:27.400
but what are the potential products

451
00:21:27.400 --> 00:21:28.720
that you could be adding on in the future?

452
00:21:28.720 --> 00:21:30.720
So if you're a food and beverage business

453
00:21:30.720 --> 00:21:33.080
and you have cookies and waffles,

454
00:21:33.080 --> 00:21:35.320
what are the other products that you can add on

455
00:21:35.320 --> 00:21:36.520
to your overall offering?

456
00:21:36.520 --> 00:21:38.240
What SKUs do you want to launch?

457
00:21:38.240 --> 00:21:41.040
Are retailers that you're in receptive to that?

458
00:21:41.040 --> 00:21:43.160
And then go-to-market strategy.

459
00:21:43.160 --> 00:21:44.840
So there are a lot of different ways that you can approach

460
00:21:44.840 --> 00:21:46.320
go-to-market strategy.

461
00:21:46.320 --> 00:21:49.600
You can use influencers and creators to generate revenue.

462
00:21:49.600 --> 00:21:51.200
You can use established partnerships

463
00:21:51.200 --> 00:21:54.760
with retailers and larger organizations.

464
00:21:54.760 --> 00:21:56.680
So just getting us feel for the fact

465
00:21:56.680 --> 00:21:59.760
that the team understands what they're gonna do,

466
00:21:59.760 --> 00:22:00.680
why they're gonna do it,

467
00:22:00.680 --> 00:22:02.840
and why that's the most effective way

468
00:22:02.840 --> 00:22:05.800
to generate additional consumer interest.

469
00:22:06.640 --> 00:22:08.720
So what we're looking for is sustainable economics.

470
00:22:08.720 --> 00:22:12.640
So as you grow, you will generate a lot of revenue.

471
00:22:12.640 --> 00:22:14.560
You're gonna be able to generate profitability

472
00:22:14.560 --> 00:22:15.920
at some point.

473
00:22:15.920 --> 00:22:18.360
Again, for tech, it typically takes a little bit longer

474
00:22:18.360 --> 00:22:20.200
than it does for consumer businesses.

475
00:22:20.200 --> 00:22:21.360
You have competitive pricing.

476
00:22:21.360 --> 00:22:24.200
So when I go to the store and look at your product

477
00:22:24.240 --> 00:22:25.320
and look at peers,

478
00:22:25.320 --> 00:22:26.400
there's no reason that I would say

479
00:22:26.400 --> 00:22:27.640
there's no way I'd buy yours.

480
00:22:27.640 --> 00:22:28.960
It's way too expensive.

481
00:22:28.960 --> 00:22:30.120
And then thoughtfulness around

482
00:22:30.120 --> 00:22:32.000
your long-term growth strategy.

483
00:22:32.000 --> 00:22:34.120
So the follow-up items, as we get more detailed,

484
00:22:34.120 --> 00:22:36.880
we want to talk about a 30, 60, 90-day plan,

485
00:22:36.880 --> 00:22:38.360
and then goals post-investment,

486
00:22:38.360 --> 00:22:39.960
so milestones that you're trying to achieve

487
00:22:39.960 --> 00:22:41.560
before you raise again,

488
00:22:41.560 --> 00:22:44.040
a deep overview of the competitors in your field,

489
00:22:44.040 --> 00:22:46.360
and then a detailed product roadmap.

490
00:22:46.360 --> 00:22:47.880
And then finally, the third stage

491
00:22:47.880 --> 00:22:49.880
is a final meeting with the general partners.

492
00:22:49.880 --> 00:22:52.000
So the topics that are discussed there,

493
00:22:52.000 --> 00:22:53.560
because they've already seen all of the notes

494
00:22:53.560 --> 00:22:55.400
from the first and second meetings,

495
00:22:55.400 --> 00:22:57.840
thinking about long-term strategy and fundraising plans.

496
00:22:57.840 --> 00:23:00.920
So if I'm a tech business and I'm raising today

497
00:23:00.920 --> 00:23:02.960
so that I can launch my product,

498
00:23:02.960 --> 00:23:05.480
I know that I'm gonna need to raise again in a year

499
00:23:05.480 --> 00:23:07.680
because I will have run out of cash at that point

500
00:23:07.680 --> 00:23:09.600
if I have 12 months of cash runway,

501
00:23:09.600 --> 00:23:11.960
but I don't plan on being profitable till 2025.

502
00:23:11.960 --> 00:23:14.000
So how much am I gonna have to raise?

503
00:23:14.000 --> 00:23:15.280
What's it gonna go to?

504
00:23:15.280 --> 00:23:17.120
Really thinking about what's happening

505
00:23:17.120 --> 00:23:18.920
three to five years down the road.

506
00:23:18.920 --> 00:23:22.320
And then also, what does the team and hiring look like?

507
00:23:22.320 --> 00:23:23.760
What are my near-term needs?

508
00:23:23.760 --> 00:23:26.200
And what are those hires going to go towards

509
00:23:26.200 --> 00:23:28.480
in terms of your near-term objectives?

510
00:23:28.480 --> 00:23:30.240
And then lastly, how can Fearless

511
00:23:30.240 --> 00:23:32.800
or the Venture Capital Fund work with the company?

512
00:23:33.760 --> 00:23:35.400
Again, like I mentioned earlier,

513
00:23:35.400 --> 00:23:36.920
whether it be retail relationships,

514
00:23:36.920 --> 00:23:40.440
talking about pricing strategy, other introductions,

515
00:23:40.440 --> 00:23:42.400
working with a marketing agency together,

516
00:23:42.400 --> 00:23:43.240
there are a lot of ways

517
00:23:43.240 --> 00:23:45.320
in which venture capital firms could support you.

518
00:23:45.320 --> 00:23:47.600
And if we're gonna take a five to 10% ownership stake

519
00:23:47.600 --> 00:23:49.920
in the company, we wanna be very hands-on

520
00:23:49.920 --> 00:23:51.960
because the investors and the founders

521
00:23:51.960 --> 00:23:54.560
are very aligned with one another at that point.

522
00:23:54.560 --> 00:23:57.160
So what we're looking for in that last conversation

523
00:23:57.160 --> 00:24:00.960
is thoughtfulness around cash burn and fundraising needs.

524
00:24:00.960 --> 00:24:03.360
So making sure you're not just raising a bunch of money

525
00:24:03.360 --> 00:24:05.600
and you're only gonna spend half of it

526
00:24:05.600 --> 00:24:08.440
when you really only needed to raise half of it.

527
00:24:08.440 --> 00:24:09.400
Thinking about hires,

528
00:24:09.400 --> 00:24:11.920
making sure you're adding the right people

529
00:24:11.920 --> 00:24:15.200
because all startups think they need a lot of capital

530
00:24:15.200 --> 00:24:16.840
off the bat to continue to grow,

531
00:24:16.840 --> 00:24:19.000
but sometimes you might think you need $2 million

532
00:24:19.000 --> 00:24:22.040
but what you really need right now is $1 million.

533
00:24:22.040 --> 00:24:23.440
And the other things are what,

534
00:24:23.440 --> 00:24:25.320
the additional 1 million is what you want

535
00:24:25.320 --> 00:24:26.320
and you can wait a little bit

536
00:24:26.320 --> 00:24:28.000
until you're later down the road.

537
00:24:28.000 --> 00:24:29.600
And that'd be beneficial for both you

538
00:24:29.600 --> 00:24:31.360
and the investor if you wait.

539
00:24:31.360 --> 00:24:33.240
And then around strategic support.

540
00:24:33.240 --> 00:24:35.160
So how can we partner together?

541
00:24:35.160 --> 00:24:37.360
And follow-up items from that last call

542
00:24:37.360 --> 00:24:39.640
might include year-to-date performance first projections.

543
00:24:39.640 --> 00:24:42.360
So just making sure whatever budget you set,

544
00:24:42.360 --> 00:24:45.560
you're around there, you're outperforming that budget,

545
00:24:45.560 --> 00:24:47.400
details on your near-term hires

546
00:24:47.400 --> 00:24:50.120
and then milestones for subsequent fundraising routes.

547
00:24:52.200 --> 00:24:54.400
So in terms of preparing for fundraising,

548
00:24:54.400 --> 00:24:57.240
the next three slides are gonna talk about

549
00:24:57.240 --> 00:24:58.840
what are the best ways you can prepare.

550
00:24:58.840 --> 00:25:00.200
So number one here is.

551
00:25:00.000 --> 00:25:01.880
the pitch deck. So these are the slides that you should be

552
00:25:01.880 --> 00:25:04.520
including. The next slide is going to be talking about key

553
00:25:04.520 --> 00:25:08.680
metrics. So if you're pitching to me, and I ask you for key

554
00:25:08.680 --> 00:25:10.680
metrics, these are the ones that I think would likely come to

555
00:25:10.680 --> 00:25:13.920
mind. And then lastly, kind of diligence items or follow up

556
00:25:13.920 --> 00:25:17.040
requests that a venture capital fund or an angel investor would

557
00:25:17.040 --> 00:25:21.560
typically ask for. So in terms of the pitch deck, kind of walk

558
00:25:21.560 --> 00:25:23.780
through the slides that we think are really important to always

559
00:25:23.780 --> 00:25:27.760
make sure to include. So the first two, kind of glance over

560
00:25:27.760 --> 00:25:31.160
those, they're pretty self explanatory. So the title, you

561
00:25:31.160 --> 00:25:32.880
know, just making sure you have an overview of who the company

562
00:25:32.880 --> 00:25:37.280
is, who the key contact is, an agenda, a slide showing what the

563
00:25:37.280 --> 00:25:39.640
content is going to be in the deck, similar to the agenda,

564
00:25:39.640 --> 00:25:43.260
this slide. And, you know, a lot of the times when you're pitching

565
00:25:43.260 --> 00:25:45.840
different companies, there's a lot of variation. Sometimes

566
00:25:45.840 --> 00:25:48.400
you'll have an hour long meeting with an investor, sometimes

567
00:25:48.400 --> 00:25:50.760
you'll be doing a five minute pitch competition. So it's

568
00:25:50.760 --> 00:25:53.120
really important to make sure you have all these slides

569
00:25:53.120 --> 00:25:56.340
available and an agenda so that if you're meeting with someone

570
00:25:56.340 --> 00:25:58.780
and they say, we don't need to talk about the problem solution

571
00:25:58.780 --> 00:26:01.460
or the traction, we just want to talk about your go to market

572
00:26:01.460 --> 00:26:04.460
strategy, and your fundraising, you're able to adjust

573
00:26:04.460 --> 00:26:06.940
accordingly, and really just hit on the slides that are most

574
00:26:06.940 --> 00:26:11.220
important. So in terms of slide three, the problem solution,

575
00:26:11.900 --> 00:26:15.400
what's the problem? How big is it? And why are you uniquely

576
00:26:15.400 --> 00:26:19.800
positioned to sell it? Market. So not only the market size, the

577
00:26:19.800 --> 00:26:23.440
TAM, the SAM and the SOM, but also are you going B2B versus

578
00:26:23.440 --> 00:26:27.080
B2C? Who's the buyer profile? Is it an individual customer? Is

579
00:26:27.080 --> 00:26:30.840
it a business? Why is it a certain demographic that you

580
00:26:30.840 --> 00:26:34.360
might be targeting? Why that customer will buy in particular

581
00:26:34.360 --> 00:26:37.640
and then largely and then lastly, sorry, market trends. So

582
00:26:37.640 --> 00:26:40.160
what are tailwinds in the industry? What's the compound

583
00:26:40.160 --> 00:26:44.080
annual growth rate that's associated with that? So if

584
00:26:44.080 --> 00:26:48.680
there are a lot of regulations around clean tech today, and we

585
00:26:48.680 --> 00:26:51.940
know that all the companies in Europe want to be fully on solar

586
00:26:51.940 --> 00:26:55.460
energy by 2050. If there's a clean tech investment, we know

587
00:26:55.460 --> 00:26:57.900
that that market is going to be growing very quickly, because

588
00:26:58.060 --> 00:26:59.940
they're getting rid of the old legacy projects, and they're

589
00:26:59.940 --> 00:27:03.620
replacing them with clean tech products. So that's a market

590
00:27:03.620 --> 00:27:05.480
that we would find very attractive. And I'd want that

591
00:27:05.480 --> 00:27:10.360
communicated to me right off the bat. In terms of traction, you

592
00:27:10.360 --> 00:27:12.140
want to make sure that you're communicating that you have a

593
00:27:12.140 --> 00:27:15.500
demonstrated proof of concept, so that you're able to say, not

594
00:27:15.500 --> 00:27:17.860
only do we think this is a good idea, but there are a lot of

595
00:27:17.860 --> 00:27:20.860
customers who are supporting this too. We have a lot of key

596
00:27:20.860 --> 00:27:24.420
metrics and trends that support this. So if it's, you know, a

597
00:27:24.420 --> 00:27:28.000
new social network, you're able to say, not only do people like

598
00:27:28.000 --> 00:27:31.820
this, but we have 10,000 daily active users, and they're

599
00:27:31.820 --> 00:27:34.420
spending an average of 15 minutes a day on the platform.

600
00:27:34.700 --> 00:27:37.740
And it's growing by, you know, five seconds a day. So we think

601
00:27:37.740 --> 00:27:40.740
we're going to have 20,000 users, and they're going to be

602
00:27:40.740 --> 00:27:44.340
spending an hour on the platform a few years from now. I think

603
00:27:44.340 --> 00:27:46.500
that's something that's super helpful. And then additionally,

604
00:27:46.500 --> 00:27:49.420
if you're going a retail or business channel, relevant

605
00:27:49.420 --> 00:27:51.620
partnerships is something you want to disclose. So if I'm

606
00:27:51.620 --> 00:27:56.500
creating templates for financial advisors, maybe I go to a few

607
00:27:56.500 --> 00:27:59.340
firms like JP Morgan and Bank of America, and I say, I've

608
00:27:59.340 --> 00:28:02.020
established partnerships with them, where we're creating three

609
00:28:02.020 --> 00:28:04.860
unique templates, we're launching a pilot now, and

610
00:28:04.860 --> 00:28:07.380
they've indicated that they want to launch kind of a long term

611
00:28:07.380 --> 00:28:10.980
contractor and order it down the road. In terms of product

612
00:28:10.980 --> 00:28:15.100
roadmap and demo, that one's pretty self explanatory, but a

613
00:28:15.100 --> 00:28:18.260
demo of the product today. So making sure that the investor or

614
00:28:18.260 --> 00:28:20.780
person that you're working with is able to understand how it

615
00:28:20.780 --> 00:28:23.220
works, because sometimes you're able to talk about how you

616
00:28:23.220 --> 00:28:26.460
provide a solution. But being able to see it always makes

617
00:28:26.460 --> 00:28:29.780
things a little bit easier. In addition to that, discussing

618
00:28:29.780 --> 00:28:32.460
near term priorities and long term additions in terms of the

619
00:28:32.460 --> 00:28:37.660
product feature. So, you know, if I'm, if I'm, you know, an

620
00:28:37.660 --> 00:28:40.420
online platform that's selling nail art, like one of our

621
00:28:40.420 --> 00:28:43.900
portfolio companies pamper, not only are they selling direct

622
00:28:43.900 --> 00:28:46.540
to consumer today, they're thinking about other channels

623
00:28:46.540 --> 00:28:49.020
they could be expanding to like partnerships with companies like

624
00:28:49.020 --> 00:28:52.980
Disney, or the NFL where they can do more license. And then

625
00:28:52.980 --> 00:28:55.380
after that, maybe they become a marketplace and they're able to

626
00:28:55.380 --> 00:28:58.100
charge commission fees. So I'm able to see over the next five

627
00:28:58.100 --> 00:29:01.060
years, not only what the opportunity is today, but where

628
00:29:01.060 --> 00:29:05.780
that opportunity is 5-10 years from now. Going on to sustainable

629
00:29:05.780 --> 00:29:10.100
differentiators, things like intellectual property, so filing

630
00:29:10.100 --> 00:29:12.780
a patent when there's an opportunity to do so. Market

631
00:29:12.780 --> 00:29:15.100
knowledge, do you really know something that the rest of the

632
00:29:15.100 --> 00:29:18.740
market doesn't know? And if so, are you the first mover in that

633
00:29:18.740 --> 00:29:20.900
market? Are you doing something that's different that no one's

634
00:29:20.900 --> 00:29:23.860
going to recognize the next one to two years? Do you have unique

635
00:29:23.860 --> 00:29:26.580
technology in place? Maybe if you're in the manufacturing

636
00:29:26.580 --> 00:29:29.100
space, you have a unique adhesive that makes it so that

637
00:29:29.100 --> 00:29:32.020
when you're creating products, it's less expensive than when

638
00:29:32.020 --> 00:29:34.380
your peers are doing it. And then how you'll defend your

639
00:29:34.380 --> 00:29:37.060
market position. I think that's something that's super, super

640
00:29:37.060 --> 00:29:40.100
important. And as it's a nice transition into the competitive

641
00:29:40.100 --> 00:29:43.540
analysis slide, because you're talking about not only are you

642
00:29:43.540 --> 00:29:46.060
unique, but you're so much better than the other companies

643
00:29:46.060 --> 00:29:49.260
that even if they create a solution that's similar, you

644
00:29:49.260 --> 00:29:51.660
have something that's different, that makes you think that

645
00:29:51.660 --> 00:29:53.940
you'll be able to continue to take up market share and they

646
00:29:53.940 --> 00:29:57.500
won't be able to cannibalize your business. Competitive

647
00:29:57.500 --> 00:29:59.860
analysis. So the competitive landscape.

648
00:30:00.000 --> 00:30:02.420
Not only what features do they offer,

649
00:30:02.420 --> 00:30:03.580
is the pricing similar?

650
00:30:03.580 --> 00:30:05.300
Is their business model similar?

651
00:30:05.300 --> 00:30:07.640
Is there any reason why a competitor

652
00:30:07.640 --> 00:30:09.820
would be preferred over your product?

653
00:30:09.820 --> 00:30:13.380
Business model, not only what is your primary revenue model,

654
00:30:13.380 --> 00:30:15.260
how else can you generate revenue today?

655
00:30:15.260 --> 00:30:17.020
What's your secondary revenue stream?

656
00:30:17.020 --> 00:30:18.860
What else is there that's down the road?

657
00:30:18.860 --> 00:30:20.660
If you're targeting customer A,

658
00:30:20.660 --> 00:30:22.140
how are you gonna reach customer B

659
00:30:22.140 --> 00:30:25.580
that actually makes up 90% of your potential market?

660
00:30:25.580 --> 00:30:27.100
And then the last few items,

661
00:30:27.100 --> 00:30:28.900
so go-to-market strategy,

662
00:30:28.980 --> 00:30:32.420
thinking about marketing, sales, and scaling.

663
00:30:32.420 --> 00:30:35.340
So how are you able to grow quickly?

664
00:30:35.340 --> 00:30:37.540
How are you able to scale your business

665
00:30:37.540 --> 00:30:39.500
in line with the marketing span

666
00:30:39.500 --> 00:30:41.580
and the additional customers that you're bringing on?

667
00:30:41.580 --> 00:30:45.060
Financials, what have you done historically?

668
00:30:45.060 --> 00:30:46.100
What have been the trends?

669
00:30:46.100 --> 00:30:47.260
Have there been any hiccups?

670
00:30:47.260 --> 00:30:49.260
If so, making sure to explain that.

671
00:30:49.260 --> 00:30:51.820
What do your unit economics look like today?

672
00:30:51.820 --> 00:30:53.900
So for every dollar of revenue you generate,

673
00:30:53.900 --> 00:30:55.740
how much do you get in gross margin?

674
00:30:55.740 --> 00:30:57.700
And then how much actually goes to you?

675
00:30:58.300 --> 00:31:01.580
And then team, so leadership team.

676
00:31:01.580 --> 00:31:03.540
You wanna make sure you have photos in there,

677
00:31:03.540 --> 00:31:06.380
you have bullet point bios, and then LinkedIn links.

678
00:31:06.380 --> 00:31:08.980
So anything that an investor would need to see about them,

679
00:31:08.980 --> 00:31:10.860
they'd be able to access very easily.

680
00:31:10.860 --> 00:31:12.540
And then also kind of leaving a placeholder

681
00:31:12.540 --> 00:31:15.620
for expected near-term hires.

682
00:31:15.620 --> 00:31:19.300
So just making sure that if there are any key hires

683
00:31:19.300 --> 00:31:20.740
that you think are essential

684
00:31:20.740 --> 00:31:22.820
and where the fundraising capital will be used towards,

685
00:31:22.820 --> 00:31:24.740
you wanna highlight that as clearly as you can

686
00:31:24.740 --> 00:31:26.600
because if the investor agrees with you,

687
00:31:26.600 --> 00:31:27.960
it'll give them a good understanding

688
00:31:27.960 --> 00:31:30.120
that you know what you're doing

689
00:31:30.120 --> 00:31:32.520
and you're kind of being selective and thoughtful

690
00:31:32.520 --> 00:31:34.280
about how you're gonna use the capital.

691
00:31:34.280 --> 00:31:37.560
And then lastly, the fundraising terms in the ask.

692
00:31:37.560 --> 00:31:39.680
So number one, just the high-level terms

693
00:31:39.680 --> 00:31:40.600
of the fundraising round.

694
00:31:40.600 --> 00:31:42.120
So how much are you raising?

695
00:31:42.120 --> 00:31:43.880
What's the valuation?

696
00:31:43.880 --> 00:31:46.480
What's the investment round that you're trying to structure?

697
00:31:46.480 --> 00:31:48.000
And then B, use of proceeds.

698
00:31:48.000 --> 00:31:51.280
So what we see most frequently is product enhancement,

699
00:31:51.280 --> 00:31:52.320
marketing and sales.

700
00:31:52.320 --> 00:31:54.480
So go-to-market strategy,

701
00:31:54.480 --> 00:31:57.600
spending on different advertising mechanisms,

702
00:31:58.640 --> 00:32:00.360
making new key hires,

703
00:32:00.360 --> 00:32:02.600
but making sure whatever the use of proceeds is,

704
00:32:02.600 --> 00:32:04.460
you're really transparent off to that

705
00:32:04.460 --> 00:32:06.420
because that's always an in-depth conversation

706
00:32:06.420 --> 00:32:07.720
that investors wanna have.

707
00:32:09.960 --> 00:32:11.880
So there are a lot of different metrics here

708
00:32:11.880 --> 00:32:14.320
and I'm not gonna go through all of them,

709
00:32:14.320 --> 00:32:15.680
but I think there are a few here

710
00:32:15.680 --> 00:32:17.920
that are very important to highlight.

711
00:32:17.920 --> 00:32:21.640
A lot of these are kind of focused on technology businesses,

712
00:32:21.640 --> 00:32:25.640
but some are focused on consumer businesses as well.

713
00:32:25.640 --> 00:32:27.000
So the ones that I would highlight

714
00:32:27.000 --> 00:32:29.080
are customer acquisition costs.

715
00:32:29.080 --> 00:32:31.520
So what's the cost of acquiring a new customer?

716
00:32:31.520 --> 00:32:33.440
It's the total cost of the sales and marketing

717
00:32:33.440 --> 00:32:34.380
that you're spending,

718
00:32:34.380 --> 00:32:37.440
divided by the number of new customers that you brought on.

719
00:32:37.440 --> 00:32:39.160
Customer lifetime value.

720
00:32:39.160 --> 00:32:42.240
It's the revenue that you receive from ongoing customers

721
00:32:42.240 --> 00:32:45.960
over the lifetime in which they are your customer.

722
00:32:45.960 --> 00:32:48.100
So you're basing this off of how long

723
00:32:48.100 --> 00:32:51.000
your average customers have stayed with you in the past,

724
00:32:51.000 --> 00:32:54.240
and then how much have these customers paid in the past?

725
00:32:54.240 --> 00:32:57.200
And one thing that investors look at very frequently

726
00:32:57.200 --> 00:32:59.080
are customer lifetime revenue

727
00:32:59.080 --> 00:33:01.640
over the customer acquisition costs.

728
00:33:01.640 --> 00:33:04.080
And why that's important is because you're saying,

729
00:33:04.080 --> 00:33:05.280
if I'm gonna spend a bunch of money

730
00:33:05.280 --> 00:33:06.640
bringing on new customers,

731
00:33:06.640 --> 00:33:08.760
I wanna make sure that they're generating

732
00:33:08.760 --> 00:33:11.660
a really substantial profit on the money that I'm spending.

733
00:33:12.640 --> 00:33:14.600
Other ones to point out are viral coefficients.

734
00:33:14.600 --> 00:33:16.560
So won't get too into it,

735
00:33:16.560 --> 00:33:19.140
but the high level idea is that

736
00:33:19.140 --> 00:33:22.180
for every consumer or new customer

737
00:33:22.180 --> 00:33:23.500
that you pay to bring on,

738
00:33:24.580 --> 00:33:26.900
oftentimes they'll refer other customers.

739
00:33:26.900 --> 00:33:29.820
So you wanna get the real value of what you're spending on.

740
00:33:29.820 --> 00:33:32.760
So if I'm spending 20 bucks and I bring on a new customer

741
00:33:32.760 --> 00:33:34.580
and their viral coefficient is two,

742
00:33:34.580 --> 00:33:36.740
maybe that actually means that they're bringing on

743
00:33:36.740 --> 00:33:39.260
two more customers that I didn't even think about.

744
00:33:39.260 --> 00:33:41.860
And so if the viral coefficient is two

745
00:33:41.860 --> 00:33:44.620
for companies in one space

746
00:33:44.620 --> 00:33:47.060
and it's 0.5 companies in another space,

747
00:33:47.060 --> 00:33:49.620
I wanna be targeting that too

748
00:33:49.620 --> 00:33:51.500
because it gives me a larger reach overall

749
00:33:51.500 --> 00:33:53.040
for the same spend.

750
00:33:53.040 --> 00:33:55.060
And then lastly, cash runway.

751
00:33:55.060 --> 00:33:57.040
So how long can your business run

752
00:33:57.040 --> 00:33:59.780
before you get another capital infusion?

753
00:33:59.780 --> 00:34:01.300
This is something that's super important

754
00:34:01.300 --> 00:34:03.380
and it's gonna come up in the majority of your discussions

755
00:34:03.380 --> 00:34:04.860
as you're fundraising

756
00:34:04.860 --> 00:34:08.219
because investors wanna make sure that if they invest,

757
00:34:08.219 --> 00:34:09.620
you're able to run your business,

758
00:34:09.620 --> 00:34:12.520
whether it's good times or whether it's bad times,

759
00:34:12.520 --> 00:34:13.739
kind of similar to a lot of stuff

760
00:34:13.739 --> 00:34:15.159
that's been happening recently,

761
00:34:15.159 --> 00:34:17.699
that you'll be able to run for 12 to 18 months

762
00:34:17.699 --> 00:34:19.120
with the cash that you have,

763
00:34:19.120 --> 00:34:22.120
if all goes poorly and you're not able to fundraise anymore.

764
00:34:24.199 --> 00:34:26.679
And then lastly, these are some of the diligence items

765
00:34:26.679 --> 00:34:28.679
and documents you wanna have available

766
00:34:28.679 --> 00:34:31.800
when an investor goes up to you and says,

767
00:34:31.800 --> 00:34:34.360
here are some things you should be able to have ready.

768
00:34:34.360 --> 00:34:37.560
The ones that I'm gonna highlight are pro forma cap table.

769
00:34:37.560 --> 00:34:41.679
So cap table being showing all of the investors

770
00:34:41.679 --> 00:34:44.120
or founding members in your company

771
00:34:44.120 --> 00:34:46.280
and how much equity they own.

772
00:34:46.280 --> 00:34:47.840
Pro forma meaning that it accounts

773
00:34:47.840 --> 00:34:48.719
for the fundraising round

774
00:34:48.719 --> 00:34:50.840
that you'll be bringing on right now.

775
00:34:50.840 --> 00:34:53.880
So an investor is able to see how much equity ownership

776
00:34:53.880 --> 00:34:55.480
will I have at the end of the round,

777
00:34:55.480 --> 00:34:57.280
but also how much will each of the founders

778
00:34:57.280 --> 00:34:58.500
and prior investors have?

779
00:34:58.500 --> 00:35:00.200
Because you wanna make sure that.

780
00:35:00.000 --> 00:35:00.900
Everyone's in line.

781
00:35:00.900 --> 00:35:03.680
And if I take a 20% stake in your business,

782
00:35:03.680 --> 00:35:06.100
I don't want your CEO to be losing 20% stake

783
00:35:06.100 --> 00:35:09.020
in that business because then we're not aligned anymore.

784
00:35:09.020 --> 00:35:11.200
And when an investor comes in, you all wanna be happy.

785
00:35:11.200 --> 00:35:13.520
You wanna be teaming up together.

786
00:35:13.520 --> 00:35:15.200
And that's something that's really important.

787
00:35:15.200 --> 00:35:18.340
And then number 10, description of exit strategy.

788
00:35:18.340 --> 00:35:21.520
So I know a lot of times when companies are fundraising,

789
00:35:21.520 --> 00:35:23.000
you know, they're just getting off the ground.

790
00:35:23.000 --> 00:35:25.000
They're not even revenue generating yet.

791
00:35:25.000 --> 00:35:27.120
But from a venture capital perspective,

792
00:35:27.160 --> 00:35:30.320
when you invest, you know, a million dollar check,

793
00:35:30.320 --> 00:35:33.200
you're thinking about generating 20, $25 million.

794
00:35:33.200 --> 00:35:34.680
You want that big return.

795
00:35:34.680 --> 00:35:36.880
So while you may not be thinking about it yet,

796
00:35:36.880 --> 00:35:38.840
it's really important to have a thoughtful answer

797
00:35:38.840 --> 00:35:41.280
around who could the potential buyers be?

798
00:35:41.280 --> 00:35:43.960
Am I a tech company that could one day IPO?

799
00:35:43.960 --> 00:35:47.120
And if so, why am I a good candidate for an IPO?

800
00:35:47.120 --> 00:35:48.760
Are there similar companies or companies

801
00:35:48.760 --> 00:35:51.120
that are in my space that have IPO'd before?

802
00:35:51.120 --> 00:35:52.800
And so just making sure you have good answers

803
00:35:52.800 --> 00:35:53.640
to that question.

804
00:35:54.040 --> 00:35:57.120
So lastly, here's some common mistakes

805
00:35:57.120 --> 00:35:59.480
that we've seen some founders make.

806
00:35:59.480 --> 00:36:01.960
As you'll see on the left-hand side,

807
00:36:01.960 --> 00:36:04.040
these might be slight exaggerations,

808
00:36:04.040 --> 00:36:05.280
but there are a lot of founders

809
00:36:05.280 --> 00:36:07.680
that have made similar mistakes like this.

810
00:36:07.680 --> 00:36:09.440
So number one is market sizing.

811
00:36:09.440 --> 00:36:12.200
If you go out and give unrealistic projections,

812
00:36:12.200 --> 00:36:14.600
a lot of investors meet with a lot of companies frequently.

813
00:36:14.600 --> 00:36:16.480
So it's pretty easy to have an understanding

814
00:36:16.480 --> 00:36:18.440
of when the unrealistic projections

815
00:36:18.440 --> 00:36:20.880
are a little bit too far-fetched.

816
00:36:20.880 --> 00:36:22.040
We know I have a lot of investors

817
00:36:22.080 --> 00:36:23.280
that are far-fetched.

818
00:36:23.280 --> 00:36:25.400
We know everyone's kind of bullish on their company

819
00:36:25.400 --> 00:36:26.360
and the opportunity,

820
00:36:26.360 --> 00:36:30.160
and it's okay to exaggerate a little bit in a positive way.

821
00:36:30.160 --> 00:36:34.760
But if you say, we're targeting $100 billion market

822
00:36:34.760 --> 00:36:36.720
and that's globally,

823
00:36:36.720 --> 00:36:39.880
but we're only targeting Manhattan and New York,

824
00:36:39.880 --> 00:36:41.520
but we think we can obtain 1%

825
00:36:41.520 --> 00:36:43.280
and generate a billion in sales,

826
00:36:43.280 --> 00:36:44.840
that's not something that's realistic.

827
00:36:44.840 --> 00:36:47.280
You're really targeting in Manhattan,

828
00:36:47.280 --> 00:36:49.360
maybe that's a $1 billion market,

829
00:36:49.360 --> 00:36:51.960
so maybe you'll generate $10 million in sales.

830
00:36:52.720 --> 00:36:54.320
And a big difference like that shows an investor

831
00:36:54.320 --> 00:36:56.480
that you don't necessarily have a strong understanding

832
00:36:56.480 --> 00:36:58.200
of what the market potential is,

833
00:36:58.200 --> 00:36:59.840
of what you're actually going to be targeting

834
00:36:59.840 --> 00:37:01.400
in the next two to three years.

835
00:37:02.360 --> 00:37:04.080
Same with competitive landscape.

836
00:37:04.080 --> 00:37:06.360
This one actually happens probably more than it should.

837
00:37:06.360 --> 00:37:08.520
So company comes to us, they say,

838
00:37:08.520 --> 00:37:11.280
we're the only company that offers this solution.

839
00:37:11.280 --> 00:37:13.160
I'll do a quick Google search while we're on the call

840
00:37:13.160 --> 00:37:16.800
and I'll say, I found five, 10 different competitors

841
00:37:16.800 --> 00:37:19.000
that are doing the exact same thing that you're doing.

842
00:37:19.000 --> 00:37:21.000
Can you explain why you're unique?

843
00:37:21.000 --> 00:37:23.680
And not only are they surprised by that answer,

844
00:37:23.680 --> 00:37:25.320
but they're not able to explain

845
00:37:25.320 --> 00:37:27.800
what their key differentiators are.

846
00:37:27.800 --> 00:37:30.480
And in terms of other common mistakes,

847
00:37:30.480 --> 00:37:33.320
fundraising, asking for an unrealistic valuation,

848
00:37:34.560 --> 00:37:37.160
not talking about your team enough.

849
00:37:37.160 --> 00:37:38.760
Sometimes that item gets overlooked

850
00:37:38.760 --> 00:37:40.800
because you're able to look up teams easily,

851
00:37:40.800 --> 00:37:42.200
but if you have accomplishments

852
00:37:42.200 --> 00:37:44.000
and you have the relevant skillset,

853
00:37:44.000 --> 00:37:45.360
you should be bragging about that

854
00:37:45.360 --> 00:37:47.760
because the first two things that I look for

855
00:37:47.760 --> 00:37:49.560
when I'm meeting with an early stage company

856
00:37:49.560 --> 00:37:50.920
are team and TAM.

857
00:37:51.680 --> 00:37:52.520
Who are the founders?

858
00:37:52.520 --> 00:37:53.480
Are they the right fit?

859
00:37:53.480 --> 00:37:55.800
And what's the large-scale market opportunity?

860
00:37:57.040 --> 00:37:58.600
And then one that I'll just point out

861
00:37:58.600 --> 00:38:01.200
because I think it's super important, initial outreach.

862
00:38:01.200 --> 00:38:03.720
Probably two to three times a week,

863
00:38:03.720 --> 00:38:05.080
companies will reach out to me

864
00:38:05.080 --> 00:38:08.200
and they don't meet our funds investment criteria.

865
00:38:08.200 --> 00:38:10.800
I know a lot of people go on Crunchbase or Pitchbook

866
00:38:10.800 --> 00:38:12.240
and find all the investors they can

867
00:38:12.240 --> 00:38:13.960
and send out a big message,

868
00:38:13.960 --> 00:38:15.320
but it's not such a great look

869
00:38:15.320 --> 00:38:17.720
if you're not being targeted with your approach.

870
00:38:18.240 --> 00:38:19.960
And so at this point,

871
00:38:19.960 --> 00:38:22.000
I'm going to exit out of the slide deck

872
00:38:22.000 --> 00:38:23.840
and kind of go through some of the questions that we have.

873
00:38:23.840 --> 00:38:25.760
So if you all have any questions,

874
00:38:25.760 --> 00:38:28.360
in addition to what you've already put in the chat,

875
00:38:28.360 --> 00:38:31.320
now would be the time to go and enter those in.

876
00:38:48.040 --> 00:38:48.880
Let's see.

877
00:38:50.520 --> 00:38:53.840
I'm not sure that we have any questions so far,

878
00:38:55.560 --> 00:38:58.040
but it looks like the team is processing any questions

879
00:38:58.040 --> 00:38:59.160
that you all may have.

880
00:39:00.520 --> 00:39:02.240
Even if there aren't any questions,

881
00:39:02.240 --> 00:39:03.920
but any kind of specific scenarios

882
00:39:03.920 --> 00:39:05.520
that I can provide guidance on,

883
00:39:06.440 --> 00:39:08.240
now's kind of the time to get it out.

884
00:39:08.240 --> 00:39:10.760
So just let me know if there's anything that comes to mind

885
00:39:10.760 --> 00:39:12.520
or ways in which we can be helpful.

886
00:39:18.720 --> 00:39:20.120
We're just going to wait for a minute or so

887
00:39:20.120 --> 00:39:21.520
and kind of process all these.

888
00:39:40.040 --> 00:39:40.880
All right.

889
00:39:40.880 --> 00:39:42.480
So first question,

890
00:39:43.440 --> 00:39:46.000
do you have any advice for outreach

891
00:39:46.040 --> 00:39:48.480
in advance of getting ready for a fundraise,

892
00:39:48.480 --> 00:39:51.040
say four to six months earlier?

893
00:39:51.040 --> 00:39:53.280
That is a very good question.

894
00:39:53.280 --> 00:39:57.280
And oftentimes, Peerless Fund communicates with companies

895
00:39:57.280 --> 00:40:00.160
long before they actually have a fundraiser.

896
00:40:00.000 --> 00:40:02.000
actually start fundraising.

897
00:40:00.160 --> 00:40:02.640
So we're going to go ahead and answer that.

898
00:40:02.000 --> 00:40:05.020
So whoever asked that question, that's very thoughtful

899
00:40:02.640 --> 00:40:04.520
And then we'll go to the next question.

900
00:40:05.020 --> 00:40:08.000
and it's definitely the right way to be approaching it.

901
00:40:08.000 --> 00:40:10.840
So in terms of outreach, I think it's really important

902
00:40:10.840 --> 00:40:14.720
to just start networking with both venture capital firms,

903
00:40:14.720 --> 00:40:16.360
angels and accelerators,

904
00:40:16.360 --> 00:40:18.000
and just to get a broader understanding

905
00:40:18.000 --> 00:40:20.640
of who the right investor could be for you.

906
00:40:20.640 --> 00:40:24.440
Because once you think about a lot of specific criteria,

907
00:40:25.280 --> 00:40:26.800
that kind of narrows it down,

908
00:40:26.800 --> 00:40:29.040
maybe you'll start off with a list of a thousand investors,

909
00:40:29.040 --> 00:40:31.400
but by the time you actually start communicating with them,

910
00:40:31.400 --> 00:40:34.520
there might only be 10 to 20 that could be a potential fit.

911
00:40:34.520 --> 00:40:36.480
So what I like to do is,

912
00:40:36.480 --> 00:40:38.440
I'll start with a list on Crunchbase,

913
00:40:38.440 --> 00:40:39.920
or I'll start Googling,

914
00:40:39.920 --> 00:40:42.800
and I'll wanna find who's investing in my sector,

915
00:40:42.800 --> 00:40:44.560
if I'm raising pre-seed capital,

916
00:40:44.560 --> 00:40:46.320
who's raising pre-seed,

917
00:40:46.320 --> 00:40:48.640
and identifying a list of people.

918
00:40:48.640 --> 00:40:50.880
And in order to start connecting with companies,

919
00:40:50.880 --> 00:40:53.320
I'll either start reaching out to junior people,

920
00:40:53.320 --> 00:40:54.920
or I would start reaching out to junior people

921
00:40:54.920 --> 00:40:55.960
on those teams,

922
00:40:55.960 --> 00:40:57.280
or I'd be going on LinkedIn

923
00:40:57.280 --> 00:40:59.120
and they're kind of developing mutual connections.

924
00:40:59.120 --> 00:41:03.160
So if I'm in the food and beverage space,

925
00:41:03.160 --> 00:41:05.120
I'll look at a lot of founders

926
00:41:05.120 --> 00:41:08.680
who at one point in time did what I did.

927
00:41:08.680 --> 00:41:11.320
So one of the founders in our Fund2 portfolio,

928
00:41:11.320 --> 00:41:13.480
her name is Denise Woodard,

929
00:41:13.480 --> 00:41:14.880
she's the founder of Partake Foods.

930
00:41:14.880 --> 00:41:17.040
So she's running a very successful

931
00:41:17.040 --> 00:41:18.280
food and beverage business,

932
00:41:18.280 --> 00:41:20.240
but at one point she was starting

933
00:41:20.240 --> 00:41:21.960
making food out of her own kitchen,

934
00:41:21.960 --> 00:41:24.360
like a lot of others are in the food and beverage space.

935
00:41:24.360 --> 00:41:27.160
So if I was an early stage founder in that space,

936
00:41:28.040 --> 00:41:28.880
and I wanted to get a feel

937
00:41:28.880 --> 00:41:30.240
for who potential investors would be,

938
00:41:30.240 --> 00:41:32.320
I'd reach out to her or a junior person on that team

939
00:41:32.320 --> 00:41:35.040
and say, hey, I'm where I think you were

940
00:41:35.040 --> 00:41:36.800
five, six, seven years ago.

941
00:41:36.800 --> 00:41:38.720
Can you give advice on how you approached

942
00:41:38.720 --> 00:41:40.440
your first fundraising process?

943
00:41:40.440 --> 00:41:42.560
Who are the investors you reached out to?

944
00:41:42.560 --> 00:41:46.440
And oftentimes when you have that kind of related story,

945
00:41:46.440 --> 00:41:47.880
that sentiment goes a long way,

946
00:41:47.880 --> 00:41:50.880
and they'll be willing to make a lot of introductions.

947
00:41:50.880 --> 00:41:52.720
And then also just getting an understanding

948
00:41:52.720 --> 00:41:54.720
of who the venture capital landscape is,

949
00:41:54.720 --> 00:41:57.280
and just starting to communicate with them briefly,

950
00:41:57.280 --> 00:41:59.440
I think is something that's very important.

951
00:42:01.240 --> 00:42:04.360
Question number two, is Crunchbase the only place

952
00:42:04.360 --> 00:42:06.360
where we can find potential investors?

953
00:42:07.200 --> 00:42:10.080
That's a good question, and the answer is no.

954
00:42:10.080 --> 00:42:12.440
It's just one, Crunchbase is probably

955
00:42:12.440 --> 00:42:14.320
the most cost effective way,

956
00:42:15.560 --> 00:42:17.560
because I think it's only like $30 a month,

957
00:42:17.560 --> 00:42:19.960
and it helps you find investors.

958
00:42:19.960 --> 00:42:22.720
But on the flip side, you can do Googling,

959
00:42:22.720 --> 00:42:24.800
you can look on TechCrunch,

960
00:42:24.800 --> 00:42:26.600
because if you go on there,

961
00:42:26.600 --> 00:42:28.880
every day they're posting stories about

962
00:42:28.880 --> 00:42:31.400
investors that have invested in startup companies.

963
00:42:31.400 --> 00:42:34.680
So if you just create a list using TechCrunch articles,

964
00:42:34.680 --> 00:42:37.200
you just say, Andreessen Horowitz,

965
00:42:37.200 --> 00:42:39.600
Fearless Fund, Precursor,

966
00:42:39.600 --> 00:42:41.000
and you just start creating that list,

967
00:42:41.000 --> 00:42:42.160
and then you can Google them

968
00:42:42.160 --> 00:42:43.400
and kind of figure out what they do.

969
00:42:43.400 --> 00:42:46.680
So they're seed investors, they only invest in FinTech.

970
00:42:46.680 --> 00:42:50.240
Maybe that's not for me, but Anthemis is a group

971
00:42:50.240 --> 00:42:53.000
that does focus in FinTech, so this makes more sense.

972
00:42:53.000 --> 00:42:54.960
Focusing on those articles and leveraging

973
00:42:54.960 --> 00:42:56.560
those kind of free resources

974
00:42:56.560 --> 00:42:58.640
is something that's really important.

975
00:42:58.640 --> 00:43:00.000
But in that case, unlike Crunchbase,

976
00:43:00.000 --> 00:43:02.040
you have to maintain your own database

977
00:43:02.040 --> 00:43:03.440
and put everything together.

978
00:43:04.880 --> 00:43:05.720
All right.

979
00:43:09.040 --> 00:43:10.480
Question number three.

980
00:43:11.960 --> 00:43:15.680
Can you give us an example of how to think through

981
00:43:15.680 --> 00:43:19.560
viral coefficient for a consumer goods company?

982
00:43:19.560 --> 00:43:22.720
Would that be a repeat purchase rate?

983
00:43:22.720 --> 00:43:24.880
That's a very good question.

984
00:43:24.880 --> 00:43:28.720
So it could be,

985
00:43:28.720 --> 00:43:31.280
but that's not exactly how I'd think about it.

986
00:43:31.280 --> 00:43:33.280
So again, I'm going to use an example

987
00:43:33.280 --> 00:43:36.200
of a food and beverage company with a retail presence.

988
00:43:36.200 --> 00:43:39.880
So if there's a company that's selling,

989
00:43:39.880 --> 00:43:43.520
you know, cookies and waffle mix,

990
00:43:43.520 --> 00:43:45.760
and I go into the store, you know,

991
00:43:45.760 --> 00:43:47.200
and they're spending a lot of money

992
00:43:47.200 --> 00:43:48.600
putting digital ads on my computer

993
00:43:48.600 --> 00:43:50.720
because they think that I'm the ideal consumer

994
00:43:50.720 --> 00:43:52.320
who wants the waffle mix or the cookies.

995
00:43:52.320 --> 00:43:55.400
And I go into the store and I go in there,

996
00:43:55.400 --> 00:43:57.640
I buy one time, I don't mention it to any of my friends

997
00:43:57.640 --> 00:44:00.320
because it's my guilty pleasure and I like these cookies,

998
00:44:00.320 --> 00:44:02.280
so I'm not going to tell anybody else about it.

999
00:44:02.280 --> 00:44:04.000
My viral coefficient is really low

1000
00:44:04.000 --> 00:44:07.320
because the spend that they're spending on me

1001
00:44:07.320 --> 00:44:09.600
isn't giving them reach to any additional customers

1002
00:44:09.600 --> 00:44:10.440
in my network.

1003
00:44:11.320 --> 00:44:13.360
Let's say I have a friend of mine, John,

1004
00:44:13.360 --> 00:44:16.280
who goes into the store, tries the waffle mix,

1005
00:44:16.280 --> 00:44:18.600
and then throws a big waffle party, right?

1006
00:44:18.600 --> 00:44:20.800
And so he has 10, 20 people over

1007
00:44:20.800 --> 00:44:22.760
and he's referring them to the business

1008
00:44:22.760 --> 00:44:24.520
because they say, oh, this waffle mix is awesome,

1009
00:44:24.520 --> 00:44:25.720
where'd you get it?

1010
00:44:25.720 --> 00:44:28.600
They've only spent money on bringing him on as a customer,

1011
00:44:28.600 --> 00:44:29.840
but in turn, they've actually been able

1012
00:44:29.840 --> 00:44:31.480
to reach 20 new customers.

1013
00:44:31.480 --> 00:44:34.760
And so his viral coefficient would be very substantial.

1014
00:44:34.760 --> 00:44:36.360
And from the business perspective,

1015
00:44:36.360 --> 00:44:38.600
that second example that I just mentioned

1016
00:44:38.600 --> 00:44:41.200
is the ideal consumer that you want to be targeting.

1017
00:44:44.320 --> 00:44:45.160
Okay.

1018
00:44:47.280 --> 00:44:48.520
Next question.

1019
00:44:49.480 --> 00:44:52.840
If you don't have much of a big audience,

1020
00:44:52.840 --> 00:44:54.800
how would you recommend crowdfunding?

1021
00:44:54.800 --> 00:44:56.480
I was able to do a round of crowdfunding

1022
00:44:56.480 --> 00:44:57.880
for a pitch competition,

1023
00:44:57.880 --> 00:44:59.720
but I would like to do another round.

1024
00:45:00.000 --> 00:45:06.560
but possibly targeting a new audience, or should I continue with my target current audience and

1025
00:45:06.560 --> 00:45:15.440
customers? Got it. Okay. So I think there are a few parts to this question. In terms of how I'd

1026
00:45:15.440 --> 00:45:22.400
recommend crowdfunding, I think it's kind of like an organic kind of go-to-market strategy. So number

1027
00:45:22.400 --> 00:45:27.520
one is just having an understanding of who your core customer is. So whoever asked this question,

1028
00:45:27.520 --> 00:45:32.720
you mentioned that you were able to do a round for a pitch competition, but you kind of focused

1029
00:45:32.720 --> 00:45:37.120
mainly on one audience and you're thinking about targeting a new audience. So like I mentioned a

1030
00:45:37.120 --> 00:45:40.880
lot of the presentation, one thing that's really important is a product market fit.

1031
00:45:41.440 --> 00:45:46.880
So if you are only targeting certain types of consumers or certain types of businesses,

1032
00:45:46.880 --> 00:45:51.600
and you think that that makes up the majority of your market, I think what's really helpful is if

1033
00:45:51.600 --> 00:45:56.400
you put all the crowdfunding information on your site, and then you start selectively targeting

1034
00:45:57.040 --> 00:46:01.840
the individual consumers or the businesses that are in that market, because that's the best use

1035
00:46:01.840 --> 00:46:06.480
of your time. And those are the people who are not only most likely to be investors,

1036
00:46:06.480 --> 00:46:11.120
but people who are likely to be customers, even if they don't invest. And to the point of viral

1037
00:46:11.120 --> 00:46:15.120
coefficiency, they're the people who will be referring others in their network, who are in

1038
00:46:15.120 --> 00:46:21.520
kind of the mass network you're targeting. If you think that with the current product or service

1039
00:46:21.520 --> 00:46:25.440
that you have, that maybe there's an ancillary market that you haven't gotten into yet, and

1040
00:46:25.440 --> 00:46:30.960
there's an opportunity there, then maybe you should try tapping into that new network. But I'd

1041
00:46:30.960 --> 00:46:35.840
really get an understanding first of who is your core customer, because oftentimes when you're

1042
00:46:35.840 --> 00:46:41.040
going into crowdfunding, it's a lot of companies who, a lot of individuals who believe in your

1043
00:46:41.040 --> 00:46:46.480
company, that would be potential customers or who would be big referrals. And so those are the ones

1044
00:46:46.480 --> 00:46:51.040
when you're doing that product market fit are the ones who'd say, you know, yes, this is a necessary

1045
00:46:51.040 --> 00:46:56.080
product. This is a unique value proposition. And you don't want to spend a lot of time going into

1046
00:46:56.080 --> 00:47:01.200
a new market, targeting someone who you think could be helpful with crowdfunding, even if

1047
00:47:01.200 --> 00:47:06.480
ultimately, you know, you're just spending a lot of time and money focusing on the wrong opportunity.

1048
00:47:06.480 --> 00:47:11.040
So maybe just asking, you know, 50, 100 people first, in that old audience and in that new

1049
00:47:11.040 --> 00:47:16.000
audience, what do you think of my product? What could I be doing better? You know, who are the

1050
00:47:16.000 --> 00:47:20.000
peers you'd use instead of me? And do you think I'm better or worse? Even basic questions like

1051
00:47:20.000 --> 00:47:24.720
that will give you an understanding of who believes in you, not only from a consumer

1052
00:47:24.720 --> 00:47:33.760
perspective, but as a potential investor. All right. Next question. What are your recommendations

1053
00:47:33.760 --> 00:47:41.440
for companies that may not have enough resources for 12 months due to the COVID-19 economic impact?

1054
00:47:41.440 --> 00:47:47.600
Sure. So I think one thing to consider, and I didn't really talk about this in the presentation,

1055
00:47:47.600 --> 00:47:53.520
is from an investor's perspective, there are things that are not necessarily deal killers,

1056
00:47:53.520 --> 00:47:59.600
but there are things that make investors kind of hesitate because and one of those things is,

1057
00:47:59.600 --> 00:48:05.680
again, having sufficient cash when you're in a downturn. So I think, number one, I think my

1058
00:48:05.680 --> 00:48:10.880
recommendation is being able to say that I know I have a limited amount of cash. And I wanted to

1059
00:48:10.880 --> 00:48:16.160
be really thoughtful and I was worried about fundraising. So maybe my cash burn was $20,000

1060
00:48:16.240 --> 00:48:21.120
a month a few months ago, but during the pandemic, during this tough fundraising environment,

1061
00:48:21.680 --> 00:48:27.440
I made key adjustments and now I'm only spending $10,000 a month. That kind of shows you when

1062
00:48:27.440 --> 00:48:32.240
things are really not going well, you're making the right adjustments. And that's something that

1063
00:48:32.240 --> 00:48:40.240
investors will be very receptive to. I think the other thing to be able to explain is in terms of

1064
00:48:40.240 --> 00:48:46.080
a year ago, is there a reason why you have less than 12 months of resources? If you projected

1065
00:48:46.080 --> 00:48:50.640
that you'd be spending $10,000 a month and you're spending $20,000, $25,000 in your missing budget,

1066
00:48:50.640 --> 00:48:54.960
that's not such a great story to tell. But if you say, hey, I was growing, but I didn't want

1067
00:48:54.960 --> 00:48:59.200
to over-raise off the bat and the environment changed on me, I think that's a more reasonable

1068
00:48:59.200 --> 00:49:03.360
story. If you've been spending efficiently, if you've been using capital towards the goals that

1069
00:49:03.360 --> 00:49:08.000
you had set when you raise capital, even if it's like a friend and family round,

1070
00:49:08.720 --> 00:49:13.360
I think that's a better story to be telling and it'll be more receptive with investors.

1071
00:49:14.320 --> 00:49:20.800
Next question. Where do you find pitch competitions? Good question.

1072
00:49:22.160 --> 00:49:28.400
So one thing that I do is just in terms of newsletters, number one, is just finding as

1073
00:49:28.400 --> 00:49:31.920
many as I can. So finding ones that are particularly relevant to my business.

1074
00:49:32.960 --> 00:49:38.640
So with Fearless Fund, we're targeting women of color founders. So oftentimes their newsletters

1075
00:49:38.640 --> 00:49:46.560
focus on pitch competitions for diverse, underrepresented founders. If we're focused

1076
00:49:46.560 --> 00:49:51.360
on the digital health sector, I'll look at a lot of digital health accelerators and venture capital

1077
00:49:51.360 --> 00:49:56.960
firms and see who's holding kind of events. And then just Googling pitch competitions generally.

1078
00:49:56.960 --> 00:50:00.080
I think oftentimes each of these different firms that are running competitions...

1079
00:50:00.000 --> 00:50:06.600
are trying to make them, you know, as well-known as possible, but separate from

1080
00:50:06.600 --> 00:50:09.640
that, if they're, if you're looking for access to different pitch competitions,

1081
00:50:09.640 --> 00:50:14.520
I'm happy to provide my email, so for anyone who has follow-ups, feel free to

1082
00:50:14.520 --> 00:50:19.460
contact me, and I will send that out separately with the materials, and I'm

1083
00:50:19.460 --> 00:50:23.920
able to go through that question with you and provide some separate resources.

1084
00:50:23.920 --> 00:50:29.280
Next question, how do you present a pitch deck when you have a product and a

1085
00:50:29.280 --> 00:50:39.280
service, but it's associated? Okay, interesting question, so my understanding

1086
00:50:39.280 --> 00:50:46.880
is that you kind of have a two-part value proposition, and they work together, so

1087
00:50:46.880 --> 00:50:51.120
maybe you have a product, then a service associated being like setting it up, or

1088
00:50:51.120 --> 00:50:56.120
maintaining the product, and how it works today. I think that's something that's

1089
00:50:56.120 --> 00:51:01.320
very unique, but it comes up in the market, and I think there are a few

1090
00:51:01.320 --> 00:51:05.360
things to consider when you're doing this. So number one, you want to be able

1091
00:51:05.360 --> 00:51:09.960
to talk about, you know, the different parts, but then the sum of the parts. So

1092
00:51:09.960 --> 00:51:14.040
number one, how do each of these work as individual kind of entities or sub parts

1093
00:51:14.040 --> 00:51:18.440
of the business, because maybe when an investor comes in, they'll say, actually

1094
00:51:18.440 --> 00:51:21.400
we don't think this services part makes sense, we want you to fully focus on the

1095
00:51:21.400 --> 00:51:26.440
product, because the product has better unit economics, if you're a products

1096
00:51:26.440 --> 00:51:30.520
business, you, you know, will have better trading multiples if you decide to

1097
00:51:30.520 --> 00:51:33.800
become a public company, and considerations like that. So you want to

1098
00:51:33.800 --> 00:51:37.840
be able to explain what each of the components are, and how maybe they would

1099
00:51:37.840 --> 00:51:41.360
be able to operate without the other, and then in addition to that, you want to

1100
00:51:41.360 --> 00:51:46.200
talk about the two of them together. So what's the total business, you know, how

1101
00:51:46.200 --> 00:51:50.480
does that operate today, and then, you know, what are the unit economics of that

1102
00:51:50.480 --> 00:51:54.640
business? Is it scalable? Are the services taking up too many resources? Is

1103
00:51:54.640 --> 00:51:58.680
the service the real unique offering? And does the product not make as much sense?

1104
00:51:58.680 --> 00:52:02.280
Then also just being able to talk about things like cross-sell opportunities,

1105
00:52:02.280 --> 00:52:07.040
product roadmaps of where can we add, where can we take away in the future, and

1106
00:52:07.040 --> 00:52:11.280
then any complications that you foresee. But I think, you know, with businesses

1107
00:52:11.280 --> 00:52:15.360
like that, it's always interesting to have a unique business model. So

1108
00:52:15.360 --> 00:52:17.840
investors always want to hear a little bit more, but they might give you a

1109
00:52:17.840 --> 00:52:21.560
little bit more scrutiny, because they might not be quite as familiar, or see as

1110
00:52:21.560 --> 00:52:27.880
many companies that have the two of those put together. And it looks like that is

1111
00:52:27.880 --> 00:52:32.480
it for questions. So I wanted to say I appreciate the time. Thank you all for

1112
00:52:32.480 --> 00:52:36.080
the very thoughtful questions, and we'll follow up separately. So if you have any

1113
00:52:36.080 --> 00:52:39.760
specific questions, like the pitch competition, or anything that I can

1114
00:52:39.760 --> 00:52:43.320
answer specifically, even if it's, you know, reviewing a deck, or thinking about

1115
00:52:43.320 --> 00:52:46.480
approaching different investors, feel free to reach out, and I'm happy to be a

1116
00:52:46.480 --> 00:52:50.520
resource. Have a good day, everyone.