B-Lab Investor Panel
So I'm very honored, and pleased to welcome these guys and we'll introduce him in turn and. Just. Kind of dig in on some questions so I'm gonna start with Jennifer since she said she's right here I met. Jennifer, probably. I don't know maybe five years ago, or so and. I've. Asked Jennifer to wear two hats today, because. She recently made a transition, a professional, transition, from executive, director, of the cherry stone angel group which, is I think arguably the, the biggest most, established, angel, group in the Providence, area there are a couple of other angel, groups that are less, well organized, and, and, whatnot and the cherry stone angel group was was, around for quite a while and and I think fair, to say they felt like they were maybe a little bit of drift on process. And they, hired Jennifer, to be the executive, director, not, long after you finished, your college stuff how in the world did you become director. Of of. An angel, group so. Quickly, out of school yeah, a, lot. Professor. Of mine made an introduction, to I'm the, manager at the time for, a cherry stone and so, I started as an intern and then when I got out of school I worked for them part-time, what, did you study in school finance. Finance, okay similar numbers a numbers, person. Wall. Street or adventure I'm. Glad I went to the venture side, so. I started with them right, out of school worked. With a portfolio, company as well who was in the business of accelerating, tech. Startups, here within Rhode Island so I'm, glad to see a little bit from the entrepreneur side and then also from the investor side and then in 2014. I joined them as their executive director full-time, now, what are you doing now so, I joined Altus ventures which is a Yanam corporate venture arm for a large dental ensure he R in the state so, we make strategic investments in the oral health space in the oral health space so. We. Don't have any dental.
Deals For, you it's a pretty niche market. So, unfortunately, I can't I'm not gonna fool you a pipeline, with dental deals today. We. Like to invest in Rhode Island startups, as well because. Of us being here in the community also launched. An internal startup, and that we're spinning out now across the dental space so that's been very humbling to learn from the entrepreneur side are. You part of that venture as well. But. One question I told these guys I was gonna ask them was. How. Many pitches, have, you listened, to was. Just, an estimate, and it ends so and you've been in the biz kind, of shall we say five years. Seven. It's okay seven years so how many pitches, would you estimate you've, listened to. 25. 3 to 500, per year, okay. And. How. Many deals closed. We're. Just companies. And not rounds, problems yeah let's do companies let's do come so the distinction what's, the distinction between a company, and a round and so a company is a company and then they usually breathe three. Or four rounds of capital okay so let's do companies, not rounds, how many company, closings, did you see would you say out of twenty five hundred pitches. Fifteen, maybe. Somebody. Do the math on that. It's. A big funnel. With very, steep, sides, so. We, do about three to four new deals, a year and that includes inside of cherry stones Wow, 32.6%. Once. Thank you appreciate. It a little bit of competition, since. You opened your big mouth now, we'll now we'll introduce you I'm very, happy to have thorne Sparkman, who's the managing director of the Slayer tech fund here. In Rhode Island what. The heck is this, later tech fund and then we'll get to how many pitches you've listened to okay the Slater Technology, Fund is a seed stage venture, capital fund we focus on software, energy. And life sciences. Technology. Investments. At the seed stage so, that's investments. As Tiny, has $50,000. And as big as a million dollars and, a. Lot of the money that we have invested over the years comes from the state of Rhode Island and, we couldn't find any good deals outside of Rhode Island so we focus, entirely. On. Rhode. Island based technology, companies so, I think I, probably, invested, in in more companies. Related. To brown people, and technologies. And anyone in the world. In. Terms of the, number, of companies. The Slater fund is invested, in a hundred and thirty five companies, in. Eighteen. Years I've invested, in thirty five making. Me the most prolific, Slater. Technology. My. Estimate. Was that I look, at. 200. A year for. For. Eighteen, years and, then, I looked at 50, in California. When I ran, something like the B lab but at Berkeley. So I did two years of that when. I looked at 50 and invested, in five. Did. You say 200 pitches, a year kind of I said 200, a year to do two is but, so sometimes, you sometimes. You kind of see a list and. You count those or, you, do. This. Awful, thing they call speed, dating. Where. You see you know 20, in two hours they don't really count that okay, and, just just so you guys know a pitch there's a there's a whole spectrum of what a pitch is sometimes, the, pitch is, sitting, in the coffee shop, there's no computer, there's no deck but, the entrepreneur, is still sort of pitching, pitching, their company it's, in a more informal kind, of a thing but, we're counting those in these numbers is that right or is it just the slide. Deck kind of pitch that you're I don't. Care, if there's a slide deck or not but it takes an hour to have a serious, conversation, all right so an hour-ish, type beating is good okay, how. Did we get from, biological. Anthropology. We call it human evolutionary, biology, now is that what we call. That's. Some weird outfit, up in Cambridge yeah that's what you call it now yeah no we, don't yeah. Human, evolutionary, biology, so, how did we get from whatever the heck we call it then back in the dark ages the pleeeease teen era versus. A scene right okay yeah. I don't know I mean are you guys gonna do for the rest of your life what you study in college probably not. That. Was the second thing I studied, the first thing was Greek. So. I don't know I've done a lot of things alright, so you don't have to draw a straight line from what you do in college or. High school for that matter so, any rate I think that's I think that's kind of an interesting takeaway, message and it's and I and I hope you see it as a hopeful, thing as, a, young person that you, know you can you, don't have to have the singular purpose in mind and somehow, stick with it to be successful, fine but.
If. I had it to do all over again I would. Probably be, an engineer of some sort or be studying you, know, there's. Not a bad, plan, to come out, a little bit of cs or have, figured out how to write, a scientific, paper that's, a pretty good pretty. Good start, you can read books the rest of your life but, okay. Yeah all right so now you just both ways just crush the dreams of every history but just talk to Greek. All. Right Raonic. Raonic, Masson. Does is an entrepreneur, and so he's he's representing. The other side of the field of battle, if, we, want to call it that the other side of the table and. I, met Roenick as a student, in the prime program here, at Brown and. Just. To fill, in I do want to hear a little bit about how you ended up at Brown and and, whatnot but, Roenick, distinguished, himself in the in the prime program in, the following sense that it's it's very typical in the program as its run that, the, students are I'm, gonna say forced, to study. The, opportunity. Of something really hard text super hard science, try. To find a way to apply it a market and whatnot and then, they're allowed to kind of if they if they don't want to proceed with that they can sort of go. Down a different pathway, and. Roenick and I would say is it fair to say you were certain you sort of led, a. Missionary. Movement, away from. Plasmonics. Detectors. Or. Whatever it was and and. And, started doing a software, company and and. Now, you're how long have, you been doing Park loko so, it's been a little. Between a half years now okay, years. I live, in a dream for three and a half years it's, not glamorous I Hotel the it's not glamorous at all so. Tell us a little bit about what Park loco does and, maybe just a quick arc. Of, the financings, that you've gone through and we'll come back and dig into some, of the dynamics, of those so. Park local is essentially, a, data, analytics company, in the parking industry. We. Have a software-as-a-service, for parking, garages and, lots where, we. Help them understand, their parking trends better to data and being, better recommendations. Around pricing staffing. Managing, the inventory, in, a data-driven way so that it's more profitable, there but the parking business is more profitable to them but. Now we're kind of entering. Into this other side. Of the market where you're, building this infrastructure. That, not, just recommend, makes recommendations to, the garages and the parking lot owners but, also helps, them liquidate, the, inventory through different consumer. Channels, via the parking app a navigation. App a booking, website and, the big dreamers eventually, if you, build this infrastructure. When. The self-driving cars, become more commercial. We'll have this single. Universal. Data, layer that, can be plugged into these cars. So, that they would know essentially, where they can go and store themselves, and we plan, to combine that with not, just a parking data would also have charging, station data other maintenance data. So. That the cars can go and make a good decision around where they can go and store themselves, so it's I. Got, two two kind of numbers questions, for you one is how. Many pivots, has. Park loco done this. Is for the benefit of some, of the B lab teams who have set. New land. Speed records, for numbers of pivots in eight weeks but. I'm. Sure of you clothes. Corrector, a number of times but if in terms of like two hard pivots I I would, say we have done at least two hard too hard pivots, in three years yep because, I remember in the early going it really was a.
App To, find parking spaces. Yeah is that fair to say part, parking. Location. Park, logo yeah. Okay, so the. Inspiration. Came, from a brown technology, it was the low-power RF, transmitter, that was, being. Used by the School of Engineering in, the brain gate project, we. Were essentially finding, different applications. For. One reason or the other I thought hey these transmitters are really cheap we. Can install them on the streets, to figure out if a car is parked on on earth and build an app where, people can go and find parking, in real time. Eventually. We. Found our dogs building. It through the sensors was not a great idea because it wasn't scalable, and they had been other, projects, in in San Francisco, that tried. Installing sensors but, it didn't scale, so. We changed, a little bit but the initial idea was building and building, a parking gap that would help. Right. So, interesting. So might, the side of the question for you about the numbers is how many pitches, have, you done would you say and. Let's let's use the same metric that thorn suggests it's sort of like one so not elevator, pitches but. An actual sit down a full conversation with, a prospective, investor I, would. Say at least, anywhere. Between 150. To 200. Pitches. In mind. Okay. So 150, to 200 that's a lot yeah and, I think I think was we as we've been prepping, 150. To 200, salt, formal pitches. Does. That seem high or low to you that's. A lot in that yeah. Yep. So, so now the, next painful, question, let's. Say it's 200. Just to pick a number how, many of, those. 200, entities, people, that you've wrote. A check, an investment. Check let's say 2. Park worker so we have a pretty complicated must-have, cap table we have people. Anywhere. Between, $5,000. To. $300,000. So. But. We have about 25, people on our cap table so about 25 investors, so. That's a one-in-eight, ratio. That's you know how does that strike you is that strike. You is a good. Yield, one, in 8 sounds about right except Jennifer, yeah, I mean I think if, you're, pitching angels yep, you'll need more to fill around I think aha good point good point yeah. Yeah. I think, the, the. Conversion, also increases when you let's say when you're pitching after, having at home shape then like that that's our different sure like when, you're just starting raising, they're wrong gotcha, so it might vary depending on where you are in your fundraising process right so you can see the dynamic, the the venture guys the investors, are sort of at the 1/2 percent level, of pitches. Or of. Closes. To pitches and row. Necks it's sort of the 12% level, of, investors. 2. Pitches and so, this is why in, in a in a breakthrough lab kind of environment, and I think even in Aldens, thing there's a lot of emphasis put on pitching, because, you. Spend a lot of time doing it and, you, just can't get anywhere if you can't pitch I think, that's I think that's fair to say so. I want to talk briefly about just, the arc of the process, from when, an, investor, walks in the door to. An investor's, shop. To, when, the, check gets written and so, I'm gonna I'm gonna ask, thorn first to just kind of walk us through what happens it's later and then how. It's different, for an. Angel group let's say and then maybe a corporate, investor, because that's because you Jennifer. Said that she's a strategic. Investor, as it pertains to Delta Dental and so that's that I'll, be interested I actually don't know the there is it faster, or slower for, a corporate venture, to to, write a check, so just. Telling. So day one, hey, mr., Sparkman I, got. A great company, I'd like to come and talk to you would just lead us through the hypo super solid say it varies, a lot and. Second. Of all I would say it's I, wish. It were shorter, but. I. Mean, if. If. The entrepreneur and. The investor fell. In love with each other immediately. Immediately. Okay, which never happens there's. Always that's a good starting point maybe there's sort of one-sided, love, or, maybe there's like I'm really, intrigued, and. Yet I have my doubts about, I like you but you're trouble so, there. There you know and then there's an entire deal just process I I think, it's always I, would say it's always months, I. Would say that, it's two, months if it's, love at first sight, and you. And you start, into, diligence. You. Know. Quickly. Thereafter. So, the absolute, breakneck. Two. Months, and that never happens and, then never had and that never happened okay. Okay. So just, for fun take us to the other end of the spectrum, you. Know even give us the mean, and then you know I think that's I would say the mean. I. You, know this is terrible but I would say it is six months, because. There.
There. Has to be a, meeting where, you're. Really really intrigued with something and then, if, you're a smart. Investor, you'll, bring in people to, help you be skeptical. To have a kind of yeah but meeting. People, who should know better even, if their fear intrigued so, and, that might take a while you might have two, or three meetings where someone like me would, pull in, someone. Skeptical, and it might be oh you, know you really I don't think I would ever make investment, in something like parking, unless, you talk to my butt. And. Then, you might, not. Like one. Thing about it geez I like everything, about this except. That you don't have a first customer, so I'm really kind of you. Know when, you get that, next. Thing, yep, then. Come. Back and see me but everything else I love so that could easily add six. Months, if if, it's just a first customer. That, could add six months if it's a new, teammate, that could add two, years, gotcha, so I guess I would say mean, is, six months if, things, go well and, there are not a lot of extraneous. Kind. Of tasks. And missions to, do which, they're kind of always are right and this, plays so. Dramatically. Into the lifecycle of early-stage companies, because. As. We as we try to build a plan. An action plan for the company if we forget that it's a six month eight months 10 months process. It's. So easy to just run out of money even if you had money in the bank and you're gonna go out and raise more money if you forget that it's a 10 months whatever it is process, to get the next check in the door it's, so easy to just go bankrupt waiting, for the next financing, and, that's not even getting to the dynamic, of Nevernever, to raise money when you need money kind of psychology but it's, just a very time-consuming thing, our Angels, faster, and better, at this or that you know, yeah. So it takes way too long for. A cherry stone we would usually tell founders, start. Raising about a year before you need it yeah, so, you spend the first four, months trying to find an advocate, within the group so you have those coffee meetings and. You try to build that momentum and you start meeting a couple of the cherry stone members so that way once. You submit an application and. It, comes before us at screening you have internal, advocates, when you leave the room so, we. Would say start. A year and it will typically take four, to six months from. The time you submit to the time we invest and four months is like. Light years for us gotcha, and that super fast you have a negotiated. Term sheet and we're syndicating, and that usually still takes us four months so just to be clear what she's saying if you walk into their door with. Thor and already saying I'm in, but, I don't have enough money for the round but here are the terms if you walk in with the terms to Jennifer at cherry, stone that's, a huge accelerator. Because. It's kind of an up or down vote that, the certain, deal is on the table the. Diligence, has probably been done but even that might take four months one of the weird things about angel, groups and I think this is true even in the Boston angel community, is. That they often only, meet, once a month or, something too - even the pipeline. It's. Got these weird one-month. Boundaries. To see new deals and, if, you stumble. At the. Month thing. You're. Dead, to. Them for, like a pretty, long I mean what, if you goof up if. You're in and win it are they they're kind of like these rocket. Pitch things they're like 10 15 minutes, things you guys tee up for companies, of an evening and you, sit and it used to be you'd sit in the Slater offices, and and you. And the entrepreneurs. Are sitting like like in the green room. At Oprah, or something right there and, they all know they're competing with one another for the love of cherry, stone you know and it's like oh good luck and it's like I hope he sucks you, know, oh. Yeah you're gonna crush it I hope you suck, and. Then, it. But if you stumble, then you're, kind of dead to cherry stone for a pretty, long time you. Apply at the beginning of the month we. Meet at cherry stone at the end of the month so right there at the one oh god. You've, applied so we take a look at your application but.
It Would be rare for you to have an incoming, deal say June, first and actually, have them in July, first right because you've already built your your, pitch table, for. Performance. So, sometimes it you know the deal flow cyclical, okay so the summary super quiet so don't try to raise around in the summer just at, least if you're gonna go with angel yep because, they're, typically, retired, wealthy, individuals, you want to enjoy the Rhode Island summer so gotcha it's hard to get a deal done so, if you don't have a deal a term, sheet on the table and a deal closed, by, July. 4th at the latest, don't bother until after Labor Day it's interesting which, is just more time you, know so I think you, know the smart money on this deal, is that if if you say it's six months to raise money that's. If you start in September. You might raise by you, know April the next year but if you start raising in, April, add three. Months because there's this dead zone and, then add a month at Christmas right. Nobody doesn't yeah right and. So that's part of the weird it's not even just a decision stood I nan it's sort of the the cadence, of, meetings. And, and decision-making, and, all this kind of stuff you use that long to, start building up the momentum within, the group so people want a good idea you likely to take a coffee, meeting, with you during the summer you can meet them close to where they're. Enjoying this out through the beach so that you, so. Then you start to develop those relationships and, you go through that through that, way when it gets to September, you, have pretty good momentum internally. In the world you're, gonna get into that pipeline and follow that process so. Briefly because I'm not I'm not sure that that, corporate, strategic investing. Is the first, thing that would come to mind for most be lab ventures but some, how. Different, is it if at all on. The corporate, strategic investing. Side speed, process. So, we say no pretty quick. Because. You say no pretty quickly. No, you drag us through the mud. You. Know we have our marching, orders of what. Corporate. Pillars. Are what. We're going to invest in and what, aligns with our corporate mission and what doesn't so we only invest in certain sectors, at. Certain stages so, for us we have like we, have that pretty narrow filter, so we can take a meeting and then if it's not in the dental space and it doesn't align with our mission it's, pretty, much okay. If. It does that then it has to get into the process of I have to learn more and then, I have, to take you to my, boss and our senior, staff and we have to convince them so, still a months-long process, after you get through the first gate or do you do teeth yeah. Okay. So if, it's a clear parallel, with what we're doing and we love the concept and everybody's, excited. You know we'll take a chance and maybe cut a smaller track initially, okay and then wait to see the momentum, but we typically will not. Negotiate. The, round so you may come to us and we can we can say we love it but, you have to go get a term sheet from somebody else and that's always okay. So depending on the side of. We, may not take that initial, lead we may let somebody else do it yeah gotcha. This is this notion of syndicating, is a key concept in early stage investing, and one, of the things that's that's so, tricky is and, you've heard the word come out several times as who's the lead and that. That's not generally, a legal, term is that fair to say it's, sort of it's a it's a burden term which, investor, is going to accept, the burden of, you. Know doing the diligence, talking. To customers. Validating. The customer, interest, spending. The legal money to generate the term sheet and so some some investor, has to love this thing so much that, they're gonna take on that huge, pain and that's, why other investors, like we, love spending money we never lead because we don't either have the bandwidth. Or the knowledge or, it's mostly probably bandwidth, more than anything we just don't and so, or sometimes, it's even written to charters, which sometimes, you. Know investors, cannot, take the lead for, some weird reason so. Gotcha. Gotcha, so, Roenick I'm coming, to you. Tell. Us so just you know at the you know reasonably. Superficial. Level what it's like to talk to these chuckleheads. And and. Try to convince them to write a check and and, also the timing you know what you know because it's that is really, it's. Easy for these guys to say oh it's six months it's like when I'm running out of money six months is a long time my god so, what's, what's your view of the whole tough for an early-stage company, I think, six. To eight months can be at times lifetime, offer companies I you have to take that into account I.
Think, It's extremely, important. To. Prospect. The investor, at the an investor, before you're meeting the investor, I think one what and it sort, of takes a learning, curve to, do that like, my first six to eight months, I would. I would talk to anyone, that had, an investor, the lignin or something like that without understanding the thesis of what they invest in because, you have you, have to understand, not every master invest, in all these states so, I was like talking, to a private equity fund, asking. For $50,000. Which is pretty embarrassing because, they were they're never gonna do it it's not their thesis so, it's extremely important. To understand. Who. You're talking, to prospect. Prospecting. The investor really well, and. See. And the way you can do that is look at their previous investments, see, if they've left around if you want to invest her to lead the round see if the investor has led the round see, what their average check sizes, and if that lines up with it around size you're looking to raise. But. Otherwise just don't even ask for the meeting, I mean, if someone's not gonna lead the round there's no point I mean it's okay it's always great to make look but. They're, never gonna invite a believe so gotcha so you you, don't waste their time don't, waste your time the emotional, energy just, I mean. I think what if someone, says that you know like we, will only invest if you would, find a different if you would find a lead investor then, you only talk, to that person after, you have a lead investor there's, no point talking to them again. So. You have to be realistic, that, and you have to understand, that not, every investor, is going to invest in your company so you have to prospect, then well based, on your thesis based, on what they invest in based on the vertical say invest so, that alone, takes, at, least four, to six months to just, prospect. The right group of investors that you want to target that invest, at, the right stage so, that alone takes four to six months and, then once you have that curated, list then. You're you're now taking chances pitching, to each one of them. Lining. Up a meeting takes extremely, long if you're going to a cold link there are cold email so, it's, important. When. You while you're prospecting to understand what that common connection is to that. Can set up an intro which which definitely. Helps, you shorten, the lap time of getting, the meeting. And from there. I've. Seen like once, you have the comme ca that still takes four to six months for their delicious okay so alright well I think we've got that I think we understand now it's a time consuming and, whatnot I'm gonna ask you a question then if you if you can answer it right away go ahead if you need time to think about it then I'm gonna I'm gonna did so the question I'm curious about is. It's. Different from the one I was talking about earlier this, is what. What was kind. Of like the most thus, far because you're still a young entrepreneur but, with thus far what was the most like. Palm. Slap. Frustrating. I cannot. Believe. What. Just happened in this investment, type dialogue. Do. You want time to think about that it's just like and you're and you it's like you're going back to your partners, and you're like, God. We're. Not gonna curse on tape here but it's. Like a project so. There was those. You're gonna come up with the right now okay, so. About. A year and a half ago after we've raised our first round of funding our, appreciate.
Seed Round do you feel comfortable telling us the amounts of money or yeah but don't feel like you know, so we've in total raised about a million dollars in two rounds of financing okay. Okay. So. All those different types, of paper, the. Two rounds so far so for us all all rounds of price rounds okay, so the. Investing. Structure. Was pretty similar. Things. Were different. But. After. We restart, first round which was a little, over $600,000, we. Were talking to a pretty large strategic. For. About two, and a half to three months. Essentially. It was BMWs, venture. Of growth and. We'd. Spend about. Two. And a half months with, them, their. Requirement. Was we they needed a financial investor. To lay the round as. Opposed to a strategic, as opposed, to history so that's kind of an interesting dynamic so row necks talking to someone like Jennifer. But, in the automotive, space, and, they're, saying we, like it but we need to have him the, financial, investor, before, we can do the strategic okay, I love it keep going all right and that was because they didn't have the infrastructure, to carry out their diligence process ah they needed the financial, guy to do the hard work, yep thorne have you ever heard any of that BS before yeah okay okay. So. They. Were willing to essentially. Match the. Cheque. Size of the lead but they didn't they just didn't want to do the diligence. Process grant what we got from them so, we lined up a lead one, of our existing investors, were essentially, stepping up okay, so we, lined up a lead and, the. Start due diligence process we. We. Spend another month month and a half. With. Them and they they have people from Germany on another. Month than that would be MW that would be good, you know so, let me ask you so do, you is it strategic, to tell BMW. I've. Got a lead and here's, the person yep, and do you tell the person I've got, BMW. So, so everybody knows who's at the table okay, absolutely, so and the financial, guys probably excited, that if you've got BMW. In the room at least right, if. You think about it you just be risking the company, for any investor, B to financial, our strategic, if you say BMW, isn't, interested. And all the financial investor, okay this, is great TF I don't want to know how this turns out all those but you gotta hear it so. What. We got from them was they were doing with diligence, and, they, were planning on investing from.
Their Fund one which was a hundred million dollar fund this is BMW, this is pmw and our. Round size was going to be about. 1.5. To 2.5 million. Dollars. So. They complete, the diligence, process and. Towards. The end then, we, I, see a press release tag hey bmw's announce another fund which is a five hundred million dollar fine Wow. And. My. Emails, my, email inbox starts, getting. Filled with all these Google, ads and Google updates, I've set up on BMW and I see that okay they've raised another fund and I talked to the managing director, of BMW. Again who was out of the New York office and, they, were like stringing. Us along for a long time they weren't giving us a commitment, he had the lead ready for, your reading on them. Finally. They come back with an, answer saying, because, we've raised a five hundred million dollar fund our TSYS has changed, I don't know if like, if that was just an excuse, or not. But. That's what we got from them that can you raise so much money we can't now invest on write a check of $1,000,000, because our, most. Not you it's me what's that it's. Not you it's me. In. The face Oh unbelievable. So. That. Was one of the most frustrating relationship. Like diligence, processes, we've been through they're likely hard at home.she they. Were there willing they'd. Shown an interest there, should be. No they, walked away they. Said when you're raising a larger round you'd be interested when. The round size is over five million or so that's that, cuz now for. Our based, on our new thesis wait a second so this is very confusing which is easier, to raise a, small. Amount of money or a large amount of money what in, your experience is. I mean, I think the tough, part is you. Know if you raised, less. Than a million if. I'm looking at a company I think you're not asking for enough because it's gonna take longer it's gonna cause does that mean that you're in it if you're asking for so little that means you must not know what you're doing all right there's a really chill really family. Individual. Investors so, it's, like typically cherrystone. Bring somewhere between 250, to 500 K to. The table so if we're gonna be the only investor we don't want to do it so we want to be a piece of the round gotcha, but we also don't want to be such a small piece that we don't have a difference around. So it's, for, us you know it was kind of one to three million, was our sweet spot for the full for the full raise. So. If you try to raise more than that then we're, just not a good fit so if an entrepreneur comes, and has a meeting UK we're. Really excited we got this unbelievable venture. We're and we're raising. $100,000. To. Get to the next milestone. What's. The next what do you say at that point I mean if it's a company who could get grants, or.
You. Know what are you you. Know I think entrepreneurs. Need to think about what are those values luncheon, points their growth, cycle and you, kind of want to raise enough money to get to that inflection point yeah. It's. Most likely not going to be 100k. Yep so wait a second you said you invest as little as 50. So. What what's to attend I wants to but, didn't, air what's 210 but so, I would say that would the, point Roenick makes is, very important, you have to know a, lot, about the, fund so if you take a kind of typical. Closed. Venture. Capital fund that's four hundred million dollars they're. Gonna invest in 20 20, million dollars in 20, companies. Or. Maybe 30 million now. You, know thirty million dollars with 15 companies something, like that. It. Takes as much time, and effort to invest, a hundred grand as it, does a million so, you have to call all the references. Of the people, you. Have to call all the customers, you have to do all the work and all the term sheet all, the same amount of work and, you're only gonna get. A tiny amount of your pile invested, so. So don't bother and then you're. Gonna get the exact same amount of headaches when. If the company, goes poorly, yep and if, it goes out of business it's just as, big a blotch on your record and. So. I guess, in the end you. Might as well do. The one where, you have a chunky. Amount of money to put to work and maybe, they won't be back begging for more in you. Know within you, know maybe, I'll take two years so, there's amount of money that's so small that it either you. Know it's not interesting, to the fund for financial, reasons or. It. Maybe is signaling something about the entrepreneurs. Preparedness. To think big or something like that I think that's another good point if someone is sort of says, cheese, I think what we would like to get from you is, 20. Grand, you know it doesn't send their. Quaking, in their, quaking, they've never said a number that large in their whole lives it, doesn't suggest that.
You. Know this, is the. Fake, judgment, they have complete, confidence and. You're, gonna put 20 in and take 400 out and you, can say it without flinching. Gotcha. Okay so interesting. So that this notion of the the, conversations. That are happening between, entrepreneurs and. Investors. This. Is a slightly different thing and this is one of these whenever. You talk to experienced, investors, they get, all kind of they. Go investors. Invested, in three things. Team. Team. And, team, and. They, think they've said something really brave right, we invest in team, team and team. But. It you know and that may be kind, of there's a there's a grain, of truth to that I know but. It raises a really tough question for Early's, or young inexperienced. On, first-time entrepreneurs, first time CEOs, maybe. Maybe, team members who aren't even out of college, yet how. So, what kinds of I'll, start with thorn and then come to what, what. Okay. So I think. I. Think that is both true, and important. And painful, so I, remember. When, I was. Finishing. Graduate, school and doing my deal. Which. Was not a very good thing. It, was good, in its own way it, was not gonna make people, gazillion. Dollars and I didn't really know that at, the time that. I wasn't a good fit yep, and, and. I got and I had been doing, you, know be lab type things in Berkeley and the bay area where there were a lot of things like that and no one had really told me and the team team team thing, no. So. So, I got this really great referral, to a person, who was a good fit for what I was doing and I gave my pitch and the person said look. Here's. The kind of people we invest, in, and. He sort of said this guy super. Rock star superhuman. Strength you, know can walk through walls, I made a jillion dollars took it public blah blah blah and gave, me this list of people and was sort of name dropping and. At the end of that I was like well you. Know so. What's your point you know like. What's, your point my subscribe me. What's your point that I'm not you. Know it's I just thought that was incredibly. Painful moment, by the way to you. Okay. Okay. When, you were told you were at God when, I was told I wasn't God and I hear the types of people I felt like saying you know I'm I've never heard of you either. It's. It's it's, but it's so true you, know so, how do you deal with that I'm not really sure, how. How, do you deal with that other than to. Ignore. It make. That person, pay in life for the rest of their life. Argument. So you know we used to say I'm, sorry you couldn't get excited. Yeah. I'm sorry what was it I'm sorry I'm sorry you could get excited we're.
Doing This. That's. What the entrence going, to hear yeah, the, entrepreneur, says I'm sorry you couldn't get excited. I'm sorry I couldn't get excited bro knocking have. You ever used that line that's. An awesome line. Exciting. You're. Not gonna change so at that point you're Brut you you've hopefully, played, whatever credibility card, you have there maybe. Your, college. Professor who is a rock star in his own way says he's, the smartest person you ever had maybe you've talked, you've broken down some kind of door and talked to the BMW guy, into loving you maybe. You I mean whatever it is you've done to. Be superhuman, to that to, that date that's what, you have if you, were able to get something. Licensed. Out of Brown University by. Hook or by crook or whatever. You have is what you've got and if they can't get excited then fine you know you. What you want to say as you snooze you lose, got you I'm doing, this if you're not excited that's great but do we tell them not, try no. I mean the best investment, cherry stone man was a grad student at, MIT is. That, right I mean and he was hungry and he executed and, he. Recognized. The weaknesses that he, had that we're missing from the team and you found rock. Star advisors, who were willing to say yep I'll help you get their regulatory yep. I'll help you with your oh. It's. Kind of like if you you. Know be honest with yourself no way what you're awesome at yep and why you're the best team to execute and then round that out with that industry, experience, that maybe you don't have because you're. A grad student that's, cool I mean we need somebody who's gonna be scrappy, and hungry and, isn't gonna expect, 300k, for a salary and a start-up so there's. That balance you know you need, the scrappy. Hungry, entrepreneur, and you need the advisory. Board to help you get, over those hurdles that, maybe you haven't seen before but the industry has so you've never found yourself, and I'll get you you've. Never found yourself, just turning, away from an investment opportunity for. The mere, reason. That. They're. Too young let's, say if they don't have advisors we have you have okay, and we'll say build out like if it was a medical. Team build out your scientific advisory, board gotcha. Filled out folks you know how to get through regulatory if it's tech build out people who know how to sell. Into this market, who have those you.
Know Ability to open up I mean there's this kind of demeaning this, demeaning, phrase it's like you know come, back to us when there's an adult in the room or, we need we need to see some gray hair and, there's, all these kinds of weird things, that that people say to young entrepreneurs too. And it, can be discouraging I think so. Redick you had so. We've been in that spot before a few have funding, a lead, investor and XT ventures they. Their. Biggest, concern was we didn't have someone on their team who could sell into the parking industry, because it's a closed circle. And. There was and, you just have to be a little realistic about it obviously it's it is discouraging but. Then I think one of the things I do I ask every investor, what is your biggest concern and, if, he can solve that then would you be more interested, or more excited. So that was their biggest concern that there wasn't anyone who could sell into the parking industry, and we, turn around we start talking to all parking, executives, just asking for advice seeing, what we can gather, in about a month and a half we, we find someone, who, who's, willing to come come in he's a senior exec he has more than 20 years of experience in, selling, into the parking industry, and. We. Come, back to NXT, and we say okay if that was your biggest concern here's our guy he's willing to join us a few foundered he's willing to do take a pay cut he's willing to take the risk and. That's. A great quality that carry the day it did it carried, the day when. I, ended, up leading our first round late ago and, that's that's how things, happen, for us so you, have to be realistic about it if you. Have to constantly, think about how you can de risk the company for investors, when, someone, tells you that. This is their biggest concern, if. It is something you can control then you go and solve it gradually, rather. Than just be discouraged, and do nothing gotcha, okay interesting, but make. Sure that. Whoever's, picture you put on your slide deck is, prepared, to answer questions from investors, because we would, get into due diligence you know like oh we want to talk to that 35. Years young industry expert, and you call them up and they're like who is. And, people have actually done it yeah, they lose.
Its, Game good one, conversation. With a guy who said yeah this is really cool don't, put them on as a board, member or, an advisor because. If we call and we have that conversation now we start wondering what else have you. Fabricated. Or really. Enhanced. The true yeah right, now just make sure that those that SURS have said yes, we're gonna help you and have been active with your company yep well it to the extent that you have knowledge. That somebody's. Doing diligence, on your company that heightens, the necessity. To do that for, exactly that reason so. I'm curious, just, a couple more questions, that I have. And then I want to invite you guys so be ready to ask some questions is, there, a, minimum. Why. Don't we call a sort of. Level. Of doneness. For. The venture that, makes it invest of all what. Are phrases, what are the minimum, things that a venture, needs to be able to say they have accomplished. Already. And maybe you know your, investor said you haven't accomplished, what I think is key which is to get the, industry expertise, in the in the company but, just, in general what, are the minimum. Entry points. That would. Keep the conversation. Going, what. Do you think someone I kind. Of work backwards from. The. Same way you would value a company so, you think, of it as. How. Many. Profits. Do you have and let's multiply that by 20, oh you don't have profits yet how much, revenue. Do, you have let's multiply that times 6. Do, you have, a parodic. Yet, that. Maybe a customer, is using but hasn't paid for you get some of those right. Someone. I can call, that's where. They can say well I'm go, through this process you walk the fences, and you or, we're. Just it comes out so quickly but you're how. Am I going to evaluate it right if so on - if they're. Already selling stuff and they sold more this year than last year and it's already profitable then you, know. That that is. Eh-eh, evidence. Of satisfied. Demand, not only is there someone. As I need, they're willing to part with money enough, money that you can make a problem if you don't have that then it's like oh well, can. You give, me the phone number of anyone who said they might even think about trying this if you can't do that then, it's like well can you show me the thing or maybe a picture of it and if, you don't have that then it's like. Okay. It's gonna be tough for me to figure that out so, somewhere. Between product. Meets demand equals. You. Know in the face of a customer, equals sales profit, somewhere, along that so, unless, we're talking about you. Know. Alchemy. Where if it works you. Can you, know turn hay into gold, and, we, just don't have the product right yet. Then. I'm thinking, there's. Got to be a, product, a customer, can see otherwise. There's. Just a kind, of double line of people who who, do have that I think already our head of anything where, I would, personally chaga, line I'll talk to anyone, and look forward to talking to, all, of you guys but.
In, Terms of thinking about what I invest, in something there, would have to be the germ of oh my gosh this, is gonna make, some customer, very happy that's, really a product and it may be there may be a circumstance, where your investment, is a, commitment. To continue, a kind of a helpful conversation and, being sort of a. Unofficial. Adviser, to, somebody and maybe that's kind of what you're offering to these guys you know don't don't, burden our, conversation. With, the. Notion that I'm going to invest because I'm probably not right here right now, except. So unless something extraordinary is, gonna, be presented, but I can still be helpful and I'm sure you did that many times that cherry stone is like the, answer's no but I think, you're headed in the right direction or. Something like that and Roenick, slide yeah I got lots of people who said no, right, it's. Like oh that sounds good but that's a pain in the ass so I think it kind of goes back to to, how, you're prospecting the investor because the level of doneness would be different, for different advice, okay so yeah. But. Even at early stage I think you have to be it's, really hard being an entrepreneur, to. Be objective, about your own company, because it's something you've started this is someth your own baby and stuff like that but I, think. You, have to be objective and, and you have to think about how, the investor, is is thinking. About the company what are the risks, that they are thinking if this company has and, and, if you don't have answers, to those questions then. Essentially, it's not done yet like you have to dress the company to invite for the investors, that's, how you're, going to get anyone excited, so. External. Validation oh okay, for us you, know we'll have initial. Conversation, so if you think about that funnel the 300 to 500, like you sent me a business plan people. Who actually segue, that, makes sense to have a an, in-depth, conversations, probably about a hundred and the rest are just too. Early not. A good fit good night, yep so once you start kind of getting down there then it's gonna be move. You talked to you show me what you've done you have you executed, on a plan yeah, do you maybe you don't have revenue, yet but do you know how you're gonna monetize, it and have you talked, to people that are not your friends and family and gotten that yes. I would pay and this is about how much I'd pay for it and have you done pilots, do you have animal study whatever, your industry is there's gonna be an uncertain check marks that we're gonna go to Jack and if not it's gonna come and if the entrepreneur really believes in what they're doing and there are these either spoken, or unspoken. Minimums. To be invested, all then, it's just on them to. Keep making progress some, is it's at the credit cards, and uncle Jack and, is that is that how we make progress. It's. Always like yeah. Sorry. Dude I can't help you with that piece yeah. With somebody who can accept that risk do you like do you like companies, that have gone out and done crowdfunding. They've done they've done, Kickstarter. And these. Different things is. That smart or is that a waste of time. Okay, even, if you're just using it for pre-sales, kind, of about it not an equity play. Your. Negative on crowd equity, I I, don't. Know enough about it to be comfortable okay, all right thorny, you do you like I, don't. Know that much about it a lot of people use it as ways to generate. Demand, or. If, you can possibly raise money from your customers that's the best possible place to get it even if it's a pre-sales, kind of thing I don't think that would be incredible, okay, nice, get, did you get incredible, incredible. If you could get money from your customers, without giving them the product, yet then that's. Even better so, yeah if you could get it's competitive, it's. Really competitive I'd kick starter I don't. Know that much about it, it's old it's you, guys are like competitive but it seems, like a good. Way to do it but the, the. More you can, shorten. The distance to. Proving. That a customer's gonna buy the thing, the, more that you can prove demand, is. The dog going to eat the dog food, then. You don't have to kind of hand wave about it you can say, you.
Know Talk to my customer, he had, the problem so I bought the widget, so yeah you. Know getting, that part, done proves. A, lot. Yeah, there's my software such a great business gotcha, well, I think you know a company. Like Park logo isn't really amenable to a Kickstarter, kind of deal you know parking. Lot managers, are not trolling Kickstarter. For new tech, yeah not every company is a good fit for Kickstarter. You. Need to have a product consumer, product that you can get people excited about women, having said that I, know. That in, this day and age now there are a lot of other platforms. Like I know one called net capital lot of which. Allows even, software, companies, to do. Equity, crowdfunding. It's. Not a great thing I'm. Not sure I haven't been through it I, can. See how like. Being an entrepreneur, when you're just trying to get 50k, 200k, rise. It might be helpful you have a network. But. Again as an investor, it's still kind, of like a friends and family thing you haven't really validated, anything, so. That's. How I think, a point for running cool, ok, last question for, me and that is we. And we talked a little bit about this outside so, this is the what's. The most irritating, thing that, entrepreneurs, do, when. When they're pity either, irritating. Or. Nettlesome. Or, it's. Just like I can't believe. There's. A. Couple. Don't, tell me your projections, are conservative, because everybody, else okay. Yeah. See, this hockey stick and that's conservative. So. Don't tell me this is a conservative, estimate all, right that's a good one don't, copy and paste your whole excel sheet on a powerpoint side and say I know you can't read this this, line over here you, know in year five we're gonna get to 100 million dollars which is only ten percent of the market okay. I, think kind of try to be realistic when you go in there and I'm not a big fan of the, tag team pitch I feel like a waste a lot of time okay. So if, you are with a founder a co-founder, who you can really, nail that and keep, it succinct. And move together that's great a lot, of teams can so there's kind of a jumbled pitch and then that gets difficult for us and, that initial meeting to really understand, what you're doing in ten minutes, it's an interest is an email and that's that's for these kind of like the monthly the monthly initial. Experiencing. So trying. To trying, to have a choreographed, thing, is more distracting, than helpful, in a way sorry, take me to look awesome but, it's not interesting. Okay, throwing the thing that's just.
So. If you're not. A big fan. Of the fake. TV commercial. Beginning, to the pitch, what, is that. Commercial. Where it starts off how many times is this happen, to you so, you're stuck outside. Okay. How. Many times have you cut yourself. Six-foot, waves on Narragansett, Bay. How. Many times is the flip top popped off on your hand and you can't read all right god that's interesting. Pretty frequent, gongshow. Okay. And, so Roenick the, thing and that we sort of I said I drew out the the most frustrating, sort, of story but as. You as you think back on the many meetings you've had with people it's just like you just shake your head like I can't I can't believe they did it to me again I think. One, of the things has been when, certain, funds I've come, across they don't have a fixed ethos and it's not it's not they don't have what they don't have a thesis so. Oh I see so then you it's really nice excuses, he means an investment, thesis right this is what we're trying to achieve for our investors. You. Know our limited partners so if they so if they if they don't really have a game, plan the. Expectations. Are not lined up and I think that sort of leads, to a lot of problems. Also. Certain. Funds, I think even. When they're. Not ready to invest they wouldn't let, you know cuz they they're raising their own funds or something like that and and time, is everything, for an entrepreneur, of an early-stage company, whatever. So. They're not transparent about, their even their their capacity, or willingness, readiness, to do any investing, let alone in you yep, oh that, would be your I've seen a couple, of funds in Boston, that were in, between, funds and they were raising their own funds and if you don't take in money there are they're still taking meeting they were still taking meetings I know I can, flying, like, they're building the pipeline to the next fun but guess what you're not gonna be alive by the time they close yeah. I gotcha so, I think that was one of the most frustrating things like it was a learning curve okay, that can happen to like, you. Would never think going into a meeting right a fun cannot, forget. About investing, in your company can, just Canadian that's right right they spent, all their money in the present fund and yep yeah interesting. Okay. So I'm gonna stop and I'm gonna, just. Call up people who have questions for any one of these guys Pablo. And. Then Amelie are you next okay, Pablo, go ahead. From. An investor, so. He's asking just so they're everything has he ever refused. To take money from an investor. Who's. Actually offered, to give him money okay that's an interesting question yes, when there are lustful. I. Mean. There's a round size and if.
The Round is fold and then essentially you cannot what's what's what are you driving, at. Okay. I didn't know if I didn't know if there was a subtext, like you found something out about the, investor, and said I I don't want your money. So. We. Haven't been in that situation I know other companies, that have been there they're like. They couldn't agree on at home sheets or their tongues or don't. Open or just couldn't take the Tom's but, luckily. I've, never been in that position where, I had to walk away from a term sheet just because I thought the, terms were way too crazy or something like that yeah okay, did. You have another one. What's. G21, optimal. Strategy, for. Obtaining. Funding. I'd. Say you, know talk to me before you need money so. If I've met you like, six months before you're gonna start knocking on the door to raise money I'm gonna see you six. Months prior and, then, if you really execute, on your plan and, got a lot done in those six months I'm, gonna have more confidence in your team then when you hit me initially because then, you kind of leave the door open where I can say well you. Know you're you're still a little early so why don't we wait six months see how you execute and then follow up so almost kind, of networking. Before, you need the money okay that's, a huge is that's is that kind of what you're I mean it so that's there would be a long answer, to that but. Emily. Okay. If there's no so so the amount of money that you should ask so first. Of all you're probably gonna most. Of these companies ask for money five or six times so. You're not asking for the amount of money that you need to run unprofitably. For six years until you can turn a profit you're, actually, asking, for, enough money to. Prove. Some, point, such. That you can ask for more money really. The, average time between venture, capital rounds is 18 months so. You want to say, don't. Don't think of it in absolute terms like I should really ask for a million bucks think, of what point you. Want to prove. And. Then ask for enough. Money to, get you know kind of just beyond that point so, and. These things change there used to it used to be that you, asked for what we call a Series A you. Know which used to be the first investment. In. Order to build a product and a, series B in order to sell it and all those things have changed now. But. The, the breakpoints. Are kind, of the same so, it's. Usually, you, know I would say mmm. There's money to build. And, hopefully sell the first one product. And then. Money, to, you know scale. Which basically just means sell, more but, I think one, thing about those, so get to figure, out a milestone based. Achievement. Plan and ask, for a hundred and ten percent of the money you need to get to a milestone is what I would say we can talk about is your software, anything by the way bad number, yeah so. Yes. So what I would say is first of all I want, to introduce Luger Xie who's in the back raise your hand Lu so Lu works at the Slater Technology.
Fund But, he knows more about, building. Stock for our companies then, I will ever know since he's built and sold for companies. Including. One two weeks ago in. In the last 25, years so. First, of all this is a longer conversation and, you and I should talk and, you guys should talk with Lu and think, about what. Is going, to prove, your point the, most and. Look. It's really, hard to raise money it's really, hard to raise a million dollars really, hard so, if, you can prove a point with less than, ask for less. Just. Knowing that at a particular level, of the ass you're, gonna fall below the radar screen, of certain classes of investors and. And don't worry about it so if you only need 50 grand you're. There's certain investors. You should not waste your time on because they don't want to invest that little money yeah but don't don't gratuitously. You know blow. Up the budget, in order to get to a level to make it appealing to get. The right amount of money and then go find the right amount the right type of investor, who for whom that level, of financing, is comfortable, and can I just say that I told you I invested, $10,000. Once yeah that, guy asked for 75 million. Is. That, right. 75. Million seventy I was, like did he take your ten thousand, digits he took. Exercise. For your company to think about if somebody gave a million dollars what. Would you do with that and maybe. You can sprint faster, because you can hire a couple, more developers, so, I think try to think about if somebody, gave you not, they're gonna ask for if if somebody gave you a million dollars how would you spend it and if, you, would just hold, 850. K in the bank and gain interest then you, probably only need the 150, but if, you, have other ways that you could scale, sir develop. Faster, maybe get that bigger client, because you can hire a salesperson. Then, that's where you start to round out what you really need for the race cool. Other. Questions. Adam. All. Of your process. Of redoing. Financial. Projections, gotcha, okay. Well. So that's a different question so let's start with the question how much effort to put into pro forma financials, and projections, at all. Leaving. Aside the amount so my background is in finance so I used your projections, to get into your head about how you think your business is gonna scale so. Somebody. Who has a marketing background may look at your marketing plans somebody, may look at your sales plan whatever, the case may be for me I'm a numbers person so, I'm gonna dig in deep to your projections, to, just see kind of how do you see that business scaling, and what do you think is achievable after. Year three I'm probably not gonna put a lot of thought into years. Four and five because, they're probably just a formula, that's a multiple off of year three and it's, also the, market may change things, may be different you may have competitors, but for those first three years I'm gonna see who, do you need to hire what. Do those look like how, much you're gonna spend on marketing sales, so. It's answering, those same questions that somebody may ask a different way just using your projections, to pitch to, one. Of his advisers apparently, says just don't even bother it's, all smoke and mirrors and abstract. Don't even bother with financials, would you was, that acceptable. Just, don't. Don't go to a financial investor. Dorn, you're all food I mean I guess I would say every story is a financial story. Okay right so. If. You're asking, them for. A million dollars you're, kind of promising, they're gonna get ten million dollars back which. Means you're gonna show, us how right, yeah yeah, so, and also, saying. I, don't, have. It is not really an acceptable, answer, so. That's interesting I don't think they want to know how much you're gonna spend on paper clips in you know the fourth month of the third year but. You gotta you gotta show, them that you've done I'm, reading these guys that. You've got have done some level of diligence on, on, the, numbers I remember, Bill O'Farrell would say every time I'm pretty sure some, of these numbers are wrong you know just like it's sort of a joke, which. You but he had the numbers yeah I know after you've taken companies public I guess that said maybe a funnier jokes and, yeah. But but, then. I did it, but. People. Know they're, not the, right numbers. And. I think it's. More how you talk. About them, so. There. I think, there are wrong.
Numbers, I guess I would say there used to be a thing on the web by. This mit, enterprise forum guy called. Woodward. What's his John, Woodward the rules of thumb yeah. Yeah, yeah yeah, where. You, know if you violated, any of those kind of rules you. Could be dinged for it so you, know you. Know grow smart you know there. Are there are things that just don't. Really happen where, you could betray your own. You. Know. Yes. I wouldn't do that, I would stay within. You. Know the kind of business laws yeah. Okay. But, and and I would be able, to defend. Key. Numbers, so, he, is some it's pretty, easy for, someone like. Me to say how. Do you expect to double every year for three years you, know, right. Which yes. And if, you said she's, on the hoods all the guess work isn't it then, that woul