WEBVTT 00:00:00.000 --> 00:00:02.859 Welcome to the Innovation Conversation, a podcast 00:00:02.859 --> 00:00:05.419 about innovators, both in business and real life. 00:00:05.879 --> 00:00:08.380 Hosted by myself, Ricardo Rescual and Harry McCona. 00:00:08.480 --> 00:00:11.699 This podcast is also sponsored by ODEV Tech. 00:00:12.439 --> 00:00:14.640 ODEV Tech is your premier software development 00:00:14.640 --> 00:00:18.019 partner. Make sure you check them out at odev 00:00:18.019 --> 00:00:22.399 .tech. The podcast is also sponsored by Notion 00:00:22.399 --> 00:00:25.359 .so. Notion is offering six months for free for 00:00:25.359 --> 00:00:27.839 new users. Make sure you check out our website, 00:00:28.039 --> 00:00:30.539 thestoreofevents .co .uk to read in the software. 00:00:30.800 --> 00:00:33.380 Hi, and welcome to another episode of the Innovation 00:00:33.380 --> 00:00:36.259 Conversation. Today we are joined by Lance Kajol. 00:00:36.399 --> 00:00:38.460 Lance, welcome to the podcast. Thanks for having 00:00:38.460 --> 00:00:40.560 me. It's a real pleasure. Pleasure having you 00:00:40.560 --> 00:00:42.259 here. Lance, would you like to introduce yourself 00:00:42.259 --> 00:00:45.259 to the audience, please? Sure. Yeah, so I'm an 00:00:45.259 --> 00:00:47.939 Exodus founder. I started my first company in 00:00:47.939 --> 00:00:52.000 1995 when I dropped out of my PhD in astrophysics. 00:00:52.539 --> 00:00:54.780 Created the world's first internet privacy company 00:00:54.780 --> 00:00:58.219 after the dot com collapse. We managed to survive 00:00:58.219 --> 00:01:00.579 that and pivoted into working for the government 00:01:00.579 --> 00:01:02.820 and ended up building platforms for conducting 00:01:02.820 --> 00:01:05.219 online undercover operations for the national 00:01:05.219 --> 00:01:07.439 security community. After that, I became an angel 00:01:07.439 --> 00:01:09.680 investor and got active in advising startups, 00:01:09.900 --> 00:01:12.900 which is where I'm at. Okay. So you knew all 00:01:12.900 --> 00:01:17.340 the government secrets. That's all right. That's 00:01:17.340 --> 00:01:19.739 all compartmented, but I know my secrets. Interesting, 00:01:19.819 --> 00:01:21.760 very interesting. So it's quite interesting because 00:01:21.760 --> 00:01:24.219 your career spent many decades, but you've actually 00:01:24.219 --> 00:01:26.560 been through the dot com bubble and now the latest 00:01:26.560 --> 00:01:29.060 one. So, you know, what lessons and tips and 00:01:29.060 --> 00:01:30.819 tricks can you actually give to the, you know, 00:01:30.920 --> 00:01:32.819 the entrepreneur right now and just say, Hey, 00:01:32.840 --> 00:01:34.459 you know what, I've done all these mistakes under 00:01:34.459 --> 00:01:37.140 them. I think that one of the big things to watch 00:01:37.140 --> 00:01:39.799 for is getting too hung up on the cyclical nature 00:01:39.799 --> 00:01:43.140 of, you know, these boom bust cycles. Obviously 00:01:43.140 --> 00:01:45.780 the big thing that it impacts for a founder is 00:01:45.780 --> 00:01:48.299 fundraising. It's going to be much more difficult 00:01:48.299 --> 00:01:50.859 to raise that next round as things are getting 00:01:50.859 --> 00:01:53.739 difficult. Conversely, that tends to be when 00:01:53.739 --> 00:01:56.000 the best companies get founded, right? It's in 00:01:56.000 --> 00:01:59.000 hard times. Most people are, it's not a boom 00:01:59.000 --> 00:02:01.780 where people are all chasing the hot flashy thing 00:02:01.780 --> 00:02:04.400 of the day. That's the chance to make those really 00:02:04.400 --> 00:02:06.939 strong lasting companies that are going to grow 00:02:06.939 --> 00:02:08.659 through that. So I don't worry too much about 00:02:08.659 --> 00:02:10.960 it, but you always want to be thinking in terms 00:02:10.960 --> 00:02:12.860 of raising more money than you think, giving 00:02:12.860 --> 00:02:16.009 yourself more runway. And really being cautious 00:02:16.009 --> 00:02:18.650 about cash management because running out of 00:02:18.650 --> 00:02:21.710 cash is what kills most startups. A serious one 00:02:21.710 --> 00:02:23.389 thing, you know, from your perspective, because 00:02:23.389 --> 00:02:25.569 you're also entrepreneur, but now an investor, 00:02:26.150 --> 00:02:28.530 what's that one pet peeve you have against all 00:02:28.530 --> 00:02:29.870 startups and you just, you look at them and say, 00:02:29.870 --> 00:02:31.949 you know what? I'm not going to invest from the 00:02:31.949 --> 00:02:35.150 get -go. The thing that drives me the most nuts 00:02:35.150 --> 00:02:38.789 is over -focus on the product where people are 00:02:38.789 --> 00:02:40.870 just super excited about their technology and 00:02:40.870 --> 00:02:43.419 the feature set and what they're doing. And don't 00:02:43.419 --> 00:02:46.900 spend nearly enough time looking at their customer 00:02:46.900 --> 00:02:49.620 base and the benefits they're providing and whether 00:02:49.620 --> 00:02:52.099 they can reach them and doing all those experiments 00:02:52.099 --> 00:02:55.919 to see if they build this tool, do people actually 00:02:55.919 --> 00:02:58.919 want it? Because building things is the technical 00:02:58.919 --> 00:03:01.599 founders happy place, right? It is their comfort 00:03:01.599 --> 00:03:03.340 zone. That's where they want to go by default. 00:03:03.939 --> 00:03:06.240 And it's so important to pull back from that 00:03:06.240 --> 00:03:08.020 and spend a lot more time talking to customers 00:03:08.020 --> 00:03:10.479 and really testing out your hypothesis about 00:03:10.479 --> 00:03:13.210 what they want. What do you think makes a startup 00:03:13.210 --> 00:03:16.129 successful? I mean, I know there's many factors, 00:03:16.210 --> 00:03:17.469 but what's that one thing you kind of saying, 00:03:17.490 --> 00:03:20.129 you know what, this is going to work? I think 00:03:20.129 --> 00:03:24.849 it's when you've tested and iterated and run 00:03:24.849 --> 00:03:27.009 your experiments and you get to that spot where 00:03:27.009 --> 00:03:30.310 you feel the change from the push to the pull. 00:03:30.530 --> 00:03:32.590 When you go and talk to a customer, it's not 00:03:32.590 --> 00:03:34.469 like, let me explain why this works and here's 00:03:34.469 --> 00:03:36.979 why you should want it. And suddenly you're at 00:03:36.979 --> 00:03:38.919 the spot where as soon as you start talking to 00:03:38.919 --> 00:03:41.500 them about the way you solve their problems, 00:03:41.979 --> 00:03:44.020 they say, shut up and take my money. Like, stop 00:03:44.020 --> 00:03:46.819 telling me I want this, when can I have it? That's 00:03:46.819 --> 00:03:48.620 when you know you're onto something that I think 00:03:48.620 --> 00:03:51.800 can be really successful. I'm guessing you get 00:03:51.800 --> 00:03:54.300 a lot of pitch decks, probably way too many to 00:03:54.300 --> 00:03:56.479 even count them. How do you manage all that? 00:03:56.580 --> 00:03:58.599 And you know, what makes a successful pitch deck? 00:03:58.699 --> 00:04:00.580 What makes an unsuccessful pitch deck? And also 00:04:00.580 --> 00:04:02.219 what's the best way to actually reach out to 00:04:02.219 --> 00:04:05.199 an investor in your perspective? So a good pitch 00:04:05.199 --> 00:04:07.560 deck really needs to give me a sense of what 00:04:07.560 --> 00:04:09.419 kind of business you've got. I see a lot of people 00:04:09.419 --> 00:04:11.800 who want to give me a teaser deck, which is just 00:04:11.800 --> 00:04:13.439 going to give me a hint of what they're doing. 00:04:14.599 --> 00:04:17.839 I'm not a fan of the teaser deck because I really 00:04:17.839 --> 00:04:20.300 want to be able to make a decision right now 00:04:20.300 --> 00:04:22.360 about whether it's worth having that follow on 00:04:22.360 --> 00:04:24.459 conversation. Does it look like there's something 00:04:24.459 --> 00:04:27.819 there that is going to be worth my time? Because 00:04:27.819 --> 00:04:30.019 as you say, I get a lot. I'm going to guesstimate 00:04:30.019 --> 00:04:32.459 I get well over a thousand pitch decks a year. 00:04:33.219 --> 00:04:35.259 And I've got a lot of other items in the fire, 00:04:35.300 --> 00:04:38.360 so it's not what I spend my time doing. So I 00:04:38.360 --> 00:04:40.540 have to make some very quick triage decisions. 00:04:40.920 --> 00:04:42.720 So one of the keys with the pitch deck is to 00:04:42.720 --> 00:04:46.120 make sure that it can survive a one -minute scan, 00:04:46.720 --> 00:04:48.339 so that I'm just going to look through it, flip 00:04:48.339 --> 00:04:50.379 through the slides, look at the headlines, maybe 00:04:50.379 --> 00:04:52.759 glance at some graphs, and I'm going to very 00:04:52.759 --> 00:04:55.199 quickly say, is this worth spending five to 10 00:04:55.199 --> 00:04:57.500 minutes on, or can I just round file this and 00:04:57.500 --> 00:04:59.240 move on to the next pitch deck that I've got? 00:05:00.129 --> 00:05:01.910 That's going to be one of those real keys. And 00:05:01.910 --> 00:05:04.410 so you need to be showing me all those key aspects 00:05:04.410 --> 00:05:07.569 and it really isn't slides of your user interface. 00:05:08.110 --> 00:05:10.769 It's here's what we know about our customer base. 00:05:10.910 --> 00:05:12.709 Here's how we've tested that we can reach them, 00:05:12.709 --> 00:05:15.089 that we know what it costs to sell them. We understand 00:05:15.089 --> 00:05:18.209 our tech or our sales process or timelines. We 00:05:18.209 --> 00:05:20.990 validated all the things about the model because 00:05:20.990 --> 00:05:24.310 as an investor, I don't want to fund science 00:05:24.310 --> 00:05:26.790 experiments. I want to play T ball. I want you 00:05:26.790 --> 00:05:28.629 to have everything lined up and you just need 00:05:28.629 --> 00:05:31.560 money. to, you know, put your foot on the gas. 00:05:31.779 --> 00:05:34.339 That's the kind of thing I want. And your deck 00:05:34.339 --> 00:05:37.860 needs to show that. Now, how important is the 00:05:37.860 --> 00:05:40.779 team force for this stuff? Team is critical because 00:05:40.779 --> 00:05:42.240 I know you're going to pivot. I mean, look at 00:05:42.240 --> 00:05:44.779 my scenario. I started off doing consumer privacy 00:05:44.779 --> 00:05:46.800 and ended up doing undercover government spook 00:05:46.800 --> 00:05:51.019 stuff. Clearly different. So what you're really 00:05:51.019 --> 00:05:53.620 betting on is this group of people's ability 00:05:53.620 --> 00:05:56.939 to execute on what they're doing and Typically, 00:05:56.959 --> 00:05:59.399 it's usually the same broad area, right? Someone's 00:05:59.399 --> 00:06:01.980 not going to go from medical devices to dating 00:06:01.980 --> 00:06:04.660 websites or something like that. So they need 00:06:04.660 --> 00:06:07.579 to have the core capabilities experienced in 00:06:07.579 --> 00:06:10.439 this general space. But then I need to believe 00:06:10.439 --> 00:06:12.519 that they understand how to run a business, how 00:06:12.519 --> 00:06:15.839 to grow a business, what their strategic insight 00:06:15.839 --> 00:06:18.680 is that makes them different from the other people 00:06:18.680 --> 00:06:20.259 who are trying to solve the same problem. Cause 00:06:20.259 --> 00:06:22.360 there's always going to be others that are out 00:06:22.360 --> 00:06:25.519 there. And so, yeah, the team is the most important 00:06:25.519 --> 00:06:27.560 thing because Who knows if what they're going 00:06:27.560 --> 00:06:29.180 to end up doing will resemble that pitch deck 00:06:29.180 --> 00:06:31.819 at all. Now, you mentioned something quite fascinating, 00:06:32.060 --> 00:06:34.160 which is the ability to pivot. Now, we all know 00:06:34.160 --> 00:06:36.279 that a lot of successful scientists actually 00:06:36.279 --> 00:06:39.040 end up pivoting from their original idea, and 00:06:39.040 --> 00:06:41.899 rightfully so. Does that scare investors off? 00:06:42.009 --> 00:06:44.129 where actually that's reassuring. We need to 00:06:44.129 --> 00:06:46.170 believe that you have the right kind of mindset 00:06:46.170 --> 00:06:49.670 to do it because the odds are high that your 00:06:49.670 --> 00:06:51.990 initial guess about the product you need to build 00:06:51.990 --> 00:06:54.269 and exactly what your customers want is wrong. 00:06:54.730 --> 00:06:56.870 Odds are very high that you're wrong about that. 00:06:57.069 --> 00:06:59.170 Maybe a little bit wrong, maybe a lot wrong. 00:06:59.629 --> 00:07:03.329 So I need to believe that you have the flexibility 00:07:03.329 --> 00:07:07.889 of thought to recognize when you are off course 00:07:07.889 --> 00:07:10.470 and make that course correction. So there's a 00:07:10.470 --> 00:07:12.610 phrase I like to use. I describe it as strong 00:07:12.610 --> 00:07:16.250 convictions, loosely held. You need to be extremely 00:07:16.250 --> 00:07:17.790 focused on what you're doing. You need to be 00:07:17.790 --> 00:07:20.529 passionate. You need to believe in it. And you 00:07:20.529 --> 00:07:22.810 need to be willing to let go of that and walk 00:07:22.810 --> 00:07:24.550 away as soon as the data shows you were wrong. 00:07:24.750 --> 00:07:27.110 You know, in all your years in the market, what 00:07:27.110 --> 00:07:29.529 was, I guess you could kind of pinpoint probably 00:07:29.529 --> 00:07:31.990 the key things you always do in a successful 00:07:31.990 --> 00:07:33.610 story. The key things you always see founders 00:07:33.610 --> 00:07:35.569 do. What are they? What does that look like? 00:07:36.649 --> 00:07:38.990 I think it comes down to experimentation because 00:07:38.990 --> 00:07:41.490 every startup is unique. Every market is unique. 00:07:41.569 --> 00:07:44.750 Every moment and opportunity is unlike every 00:07:44.750 --> 00:07:47.790 single other one out there. So the two things 00:07:47.790 --> 00:07:50.209 I think that really need to be happening is test, 00:07:50.250 --> 00:07:53.250 test, test, test. Your intuition is usually terrible. 00:07:53.370 --> 00:07:57.269 I can think of lots of examples where I was absolutely 00:07:57.269 --> 00:08:00.069 convinced I knew the way to market my product, 00:08:00.089 --> 00:08:02.290 the way to sell it. This was going to be a home 00:08:02.290 --> 00:08:04.610 run direction to go. And it turned out I was 00:08:04.610 --> 00:08:07.769 totally wrong. And then others that I had no 00:08:07.769 --> 00:08:10.029 idea were going to be all that valuable, but 00:08:10.029 --> 00:08:12.069 I tried them. They looked like they had potential 00:08:12.069 --> 00:08:15.629 and those ended up being huge for me. So being 00:08:15.629 --> 00:08:19.009 able to do those sort of continuous tests and, 00:08:19.290 --> 00:08:21.029 you know, don't bet the farm. You know, you see 00:08:21.029 --> 00:08:23.449 some area over there that looks like it may be 00:08:23.449 --> 00:08:25.490 greener grass that might be a better opportunity 00:08:25.490 --> 00:08:27.709 for you. You don't want to shut down the thing 00:08:27.709 --> 00:08:29.430 that's keeping your lights on right now to go 00:08:29.430 --> 00:08:32.289 chase that, but you don't want to ignore it either. 00:08:32.370 --> 00:08:35.509 So how do you dribble enough resources? to make 00:08:35.509 --> 00:08:38.330 a really lean and efficient test to understand, 00:08:39.029 --> 00:08:41.610 is that where you want to go? And then start 00:08:41.610 --> 00:08:43.429 pursuing it. I mean, when we started the government 00:08:43.429 --> 00:08:47.190 space, it was a tiny corner of what we did, but 00:08:47.190 --> 00:08:49.370 pretty rapidly we discovered that those were 00:08:49.370 --> 00:08:51.690 big contracts, we could close them reliably, 00:08:51.870 --> 00:08:55.009 and it accelerated to be 90 % of our revenue 00:08:55.009 --> 00:08:58.509 in about three years. You know, in terms of the 00:08:58.509 --> 00:09:00.549 mindset that it takes to actually build a successful 00:09:00.549 --> 00:09:03.070 business, what do you think that actually requires? 00:09:03.110 --> 00:09:04.629 Because a lot of people talk about, you know, 00:09:04.509 --> 00:09:07.210 being super resilient, be having a lot of greed. 00:09:07.429 --> 00:09:08.929 So from your experience, what does it actually 00:09:08.929 --> 00:09:12.490 take? Pig headed stubbornness. It is a lot of 00:09:12.490 --> 00:09:14.690 it because there's so many really, really difficult 00:09:14.690 --> 00:09:16.509 times. You're going to run into challenges. You're 00:09:16.509 --> 00:09:19.570 going to be facing obstacles that feel insurmountable 00:09:19.570 --> 00:09:22.129 and you need to be willing to sort of do whatever 00:09:22.129 --> 00:09:25.850 it takes to go over around through those obstacles 00:09:25.850 --> 00:09:29.090 to get to the other side. Often those are creative 00:09:29.090 --> 00:09:31.570 approaches. I actually find a mistake. A lot 00:09:31.570 --> 00:09:34.179 of founders. make is early on, they'll start 00:09:34.179 --> 00:09:36.740 to hire in corporate people with amazing backgrounds 00:09:36.740 --> 00:09:39.539 and fantastic revenue resumes, but who haven't 00:09:39.539 --> 00:09:43.019 done the startup thing before. And their default 00:09:43.019 --> 00:09:45.820 approach to solving problems tends to be hiring 00:09:45.820 --> 00:09:47.879 a really good team, bringing in some expensive 00:09:47.879 --> 00:09:50.740 consultants and pouring money on it. Whereas 00:09:50.740 --> 00:09:53.279 with startups, it's got to be, all right, there's 00:09:53.279 --> 00:09:55.340 three of us in this room and we have what's in 00:09:55.340 --> 00:09:57.480 this room with us today. How do we get there? 00:09:57.710 --> 00:10:02.090 And it's scrappy, it's creative, it's sometimes 00:10:02.090 --> 00:10:05.490 a little extreme in some cases, but that's the 00:10:05.490 --> 00:10:08.289 sort of approach you need to be taking. In your 00:10:08.289 --> 00:10:10.289 own journey, when you were dealing with obstacles, 00:10:10.610 --> 00:10:12.649 what were you saying to yourself? Was that thing 00:10:12.649 --> 00:10:14.450 in the back of your mind, was it like a quote 00:10:14.450 --> 00:10:19.340 or a saying? What pushed you forward? So we often 00:10:19.340 --> 00:10:21.820 called it the cockroach strategy. There's that 00:10:21.820 --> 00:10:24.039 sort of joke that after the nuclear holocaust, 00:10:24.120 --> 00:10:25.799 the only thing that will survive are the cockroaches 00:10:25.799 --> 00:10:28.580 walking around. And so to some extent, especially 00:10:28.580 --> 00:10:31.919 like during big downturns in the economy, we 00:10:31.919 --> 00:10:34.200 thought about that a lot. Like, how do we just 00:10:34.200 --> 00:10:37.379 survive this? Because at some level, you can't 00:10:37.379 --> 00:10:39.559 win if you aren't alive, if you're not still 00:10:39.559 --> 00:10:42.159 in the game and still playing. And there are 00:10:42.159 --> 00:10:45.299 always new opportunities, new lucky happenstances 00:10:45.299 --> 00:10:48.059 that come along. that you can't execute on if 00:10:48.059 --> 00:10:50.879 the company has folded. So we spent a lot of 00:10:50.879 --> 00:10:52.860 time just focused on how do we survive another 00:10:52.860 --> 00:10:55.240 week, another month, another two months. So just 00:10:55.240 --> 00:10:57.139 keep it rolling forward. During the dot -com 00:10:57.139 --> 00:11:00.440 collapse, we probably spent 18 months with less 00:11:00.440 --> 00:11:02.539 than 30 days of working capital in the bank. 00:11:02.659 --> 00:11:05.980 We were right on that edge. And so you're squeezing 00:11:05.980 --> 00:11:08.159 every penny. Every investment you make has to 00:11:08.159 --> 00:11:11.679 have immediate payback. But it allowed us to 00:11:11.740 --> 00:11:14.480 continue to grow the company. We grew our way 00:11:14.480 --> 00:11:16.399 out of that pit that we were in. You know, we 00:11:16.399 --> 00:11:17.919 weren't going to get any funding at that point 00:11:17.919 --> 00:11:20.500 and discover this new opportunity, which then 00:11:20.500 --> 00:11:22.659 allowed the company to hockey stick and explode. 00:11:23.559 --> 00:11:25.620 How do you manage all that stress? Because it's 00:11:25.620 --> 00:11:27.379 a lot of stress on you when you're at that stage. 00:11:27.899 --> 00:11:29.340 So I think there's a couple of things having. 00:11:29.659 --> 00:11:32.399 co -founders or other members on your management 00:11:32.399 --> 00:11:34.960 team that you can be completely honest with is 00:11:34.960 --> 00:11:36.840 critical. You need to have someone where you 00:11:36.840 --> 00:11:39.059 can have these tough reality conversations while 00:11:39.059 --> 00:11:40.860 you're trying to put on a brave face for your 00:11:40.860 --> 00:11:42.799 team, for your investors, for your customers, 00:11:42.879 --> 00:11:44.899 that you have to be able to have that kind of 00:11:44.899 --> 00:11:48.419 real world outlet. And then personally, it was 00:11:48.419 --> 00:11:50.919 physicality. I was taking Kung Fu at the time. 00:11:50.940 --> 00:11:53.019 And so being able to a couple of nights a week, 00:11:53.419 --> 00:11:56.980 go into our school and yell and hit things and 00:11:56.980 --> 00:12:00.269 kick pads and whatever else. was hugely cathartic 00:12:00.269 --> 00:12:02.330 and allowed you to then get back in the next 00:12:02.330 --> 00:12:04.830 day. Meditation, a lot of that self -care stuff, 00:12:04.870 --> 00:12:07.129 like don't drive yourself a hundred hours a week 00:12:07.129 --> 00:12:10.309 every week for years on end. You have to have 00:12:10.309 --> 00:12:12.370 that balance because it tends to be a marathon, 00:12:12.389 --> 00:12:14.809 not a sprint, you know. During a crunch time, 00:12:14.809 --> 00:12:16.190 you're trying to deliver a version of the product 00:12:16.190 --> 00:12:18.690 you can sprint, but you have to then fall back 00:12:18.690 --> 00:12:20.549 to a maintainable pace where you're getting a 00:12:20.549 --> 00:12:22.230 good night's sleep, you're exercising, you're 00:12:22.230 --> 00:12:24.009 eating well, you're taking care of all those 00:12:24.009 --> 00:12:26.710 other systems that allow you to be working at 00:12:26.710 --> 00:12:30.120 peak performance. Now there's a lot of controversy 00:12:30.120 --> 00:12:33.120 around what actually founders and investors should 00:12:33.120 --> 00:12:34.799 say to each other. Founders are always a bit 00:12:34.799 --> 00:12:36.360 afraid of they're going to scare the investors 00:12:36.360 --> 00:12:38.960 off. From your experience as both a founder and 00:12:38.960 --> 00:12:41.320 an investor, do you think honesty is the best 00:12:41.320 --> 00:12:43.899 policy or do you think people should just fake 00:12:43.899 --> 00:12:46.159 it till they make it? I think you definitely 00:12:46.159 --> 00:12:48.679 need to be cards face up with your investors 00:12:48.679 --> 00:12:51.000 and the investors should be equally honest with 00:12:51.000 --> 00:12:52.720 the founders they're working with about what 00:12:52.720 --> 00:12:56.059 their intentions are and for ongoing support, 00:12:56.419 --> 00:12:58.460 or follow -on investments, or all of those things. 00:12:58.539 --> 00:13:01.159 On the founder's side, there is nothing worse 00:13:01.159 --> 00:13:04.100 than having me find some skeleton in your closet 00:13:04.100 --> 00:13:06.799 during due diligence. Because once I write the 00:13:06.799 --> 00:13:09.100 check, assuming I'm a fairly minority investor, 00:13:09.259 --> 00:13:11.860 I lose all my power. As soon as you cash that, 00:13:12.440 --> 00:13:14.960 I can kibitz, I can sort of talk to you, I can 00:13:14.960 --> 00:13:16.799 vote my shares, but that's not gonna move the 00:13:16.799 --> 00:13:19.740 needle. I'm trusting you to act in my best interests. 00:13:20.309 --> 00:13:22.429 Anything that suggests that there's something 00:13:22.429 --> 00:13:24.830 swirly or hinky about what you're doing is going 00:13:24.830 --> 00:13:27.570 to make me run for the hills. Which is not to 00:13:27.570 --> 00:13:29.690 say you have to focus on your dirty laundry, 00:13:29.789 --> 00:13:32.230 right? I expect you to be optimistic. We're looking 00:13:32.230 --> 00:13:35.129 for best case outcomes. You should be bullish 00:13:35.129 --> 00:13:37.610 about your total market opportunity, how big 00:13:37.610 --> 00:13:39.389 this can be, you know, where you're trying to 00:13:39.389 --> 00:13:41.590 go, the strategic vision you have for the company. 00:13:41.610 --> 00:13:44.909 That should all be bold. And you need to be realistic 00:13:44.909 --> 00:13:47.350 about how you can get there. And if you have 00:13:47.350 --> 00:13:50.539 weaknesses or issues, You should be looking for 00:13:50.539 --> 00:13:52.440 help in how to address them, right? If you've 00:13:52.440 --> 00:13:54.580 got a hole in your team, don't try to pretend 00:13:54.580 --> 00:13:58.399 you don't say, Hey, we need help from our investors 00:13:58.399 --> 00:14:00.259 to fill this thing. Or, you know, we're looking 00:14:00.259 --> 00:14:02.159 to line someone up. That's our next hire. As 00:14:02.159 --> 00:14:05.059 soon as we get this funding, whatever that may 00:14:05.059 --> 00:14:08.980 be trying to make it part of a partnership. My 00:14:08.980 --> 00:14:11.360 investors and my board of directors were a thorn, 00:14:11.399 --> 00:14:13.200 right? I mean, they asked a lot of hard questions. 00:14:13.379 --> 00:14:15.700 They put us on the spot. They really put our 00:14:15.700 --> 00:14:17.659 feet to the fire and whatever other analogies 00:14:17.659 --> 00:14:20.690 we want to use. But they were always in our corner 00:14:20.690 --> 00:14:22.289 when they were doing it and it was incredibly 00:14:22.289 --> 00:14:24.769 helpful and it really helped us stay on target 00:14:24.769 --> 00:14:27.090 because you can kind of You know start believing 00:14:27.090 --> 00:14:30.009 your own height sometimes and having the investors 00:14:30.009 --> 00:14:32.629 having that board That sort of makes sure that 00:14:32.629 --> 00:14:34.629 no have you validated that can you prove that 00:14:34.629 --> 00:14:36.730 that's right? How have you tested this idea? 00:14:37.250 --> 00:14:40.690 super valuable to have and You know coming in 00:14:40.690 --> 00:14:42.330 from Europe, and I know you're based in the US 00:14:42.700 --> 00:14:46.120 There's always a massive comparison between the 00:14:46.120 --> 00:14:48.419 two ecosystems. So what do you think makes the 00:14:48.419 --> 00:14:50.440 US so successful for startups? Because there 00:14:50.440 --> 00:14:53.200 are so many great businesses coming out of Silicon 00:14:53.200 --> 00:14:55.200 Valley. It's impressive. So what do you think 00:14:55.200 --> 00:14:58.740 makes that ecosystem so special? I think it is 00:14:58.740 --> 00:15:02.740 more focused on the hope and less on the current 00:15:02.740 --> 00:15:06.080 economics. I see When I work with a lot of European 00:15:06.080 --> 00:15:08.519 startups, it seems like the angel investment 00:15:08.519 --> 00:15:12.000 and early stage VC community is more focused 00:15:12.000 --> 00:15:17.360 on the financials. Whereas in California, the 00:15:17.360 --> 00:15:19.360 thought is generally, you're going to raise a 00:15:19.360 --> 00:15:20.899 bunch of money. You're going to lose money for 00:15:20.899 --> 00:15:25.419 quite a while. If you can get 10 million, a hundred 00:15:25.419 --> 00:15:29.679 million active users on the service or five million 00:15:29.679 --> 00:15:32.779 SaaS customers, we will work out how to make 00:15:32.779 --> 00:15:35.289 money with that. The question is, are there enough 00:15:35.289 --> 00:15:37.649 people who want the thing you're doing to allow 00:15:37.649 --> 00:15:39.870 you to grow to that size to be able to execute 00:15:39.870 --> 00:15:43.289 on it? And that tends to be more of the Silicon 00:15:43.289 --> 00:15:48.889 Valley and writ large the US venture mindset 00:15:48.889 --> 00:15:51.750 around this. So it's easier to raise. It's easier 00:15:51.750 --> 00:15:54.210 to raise bigger. It tends to be more founder 00:15:54.210 --> 00:15:57.090 friendly as well. I often see fairly founder 00:15:57.090 --> 00:16:00.870 unfriendly terms being offered by European investors 00:16:00.870 --> 00:16:04.460 and very concerned about downside. lost prevention, 00:16:05.259 --> 00:16:08.740 whereas in America it tends to be, I know a lot 00:16:08.740 --> 00:16:10.620 of my investments are going to zero. I'm fine 00:16:10.620 --> 00:16:13.259 with that because I'm working really hard to 00:16:13.259 --> 00:16:14.519 have a couple of companies that are going to 00:16:14.519 --> 00:16:16.279 return a hundred actual. The next question is 00:16:16.279 --> 00:16:17.980 always see how do you manage risk because there's 00:16:17.980 --> 00:16:21.879 a lot of risk. Numbers. I mean, I think at some 00:16:21.879 --> 00:16:24.960 level it is a statistical game. As an investor, 00:16:25.340 --> 00:16:27.440 I'm looking to make a large enough number of 00:16:27.440 --> 00:16:30.299 investments across a diversified number of companies 00:16:30.299 --> 00:16:33.620 and spaces. So that I have a high probability 00:16:33.620 --> 00:16:36.179 of having a couple of those big winners in there. 00:16:37.299 --> 00:16:39.259 And then the process becomes more about trying 00:16:39.259 --> 00:16:42.240 to avoid the losers, right? Looking at the company 00:16:42.240 --> 00:16:44.139 to say, does it even have the potential to get 00:16:44.139 --> 00:16:46.700 there? Looking at the team to say, do I believe 00:16:46.700 --> 00:16:48.940 these are the people who can absolutely kill 00:16:48.940 --> 00:16:51.679 it because a mediocre team is just not going 00:16:51.679 --> 00:16:53.620 to cut it. The startup process is so incredibly 00:16:53.620 --> 00:16:56.279 difficult. I'm looking for those few people who 00:16:56.279 --> 00:16:58.600 I believe, even if there are five other companies 00:16:58.600 --> 00:17:00.320 trying to do the same thing at the same time. 00:17:00.509 --> 00:17:02.549 These are the guys who are going to win. And 00:17:02.549 --> 00:17:05.009 so putting the thumb on the scale is critical, 00:17:05.450 --> 00:17:07.930 but the assumption is this is an incredibly high 00:17:07.930 --> 00:17:09.869 risk space. We're going to have a lot of losers 00:17:09.869 --> 00:17:12.609 in there as well. And when, when do you call 00:17:12.609 --> 00:17:15.069 it fits? When you say to start, you know, this 00:17:15.069 --> 00:17:17.289 is it. This is the end of the road. So it is 00:17:17.289 --> 00:17:20.230 incredibly important. Yeah, it's incredibly important 00:17:20.230 --> 00:17:23.029 not to chase things down. So I think that the 00:17:23.029 --> 00:17:26.170 sunk cost fallacy is the huge issue with this 00:17:26.170 --> 00:17:29.609 kind of investing. So in each round. And it's 00:17:29.609 --> 00:17:31.490 not easy to do, but at each round you really 00:17:31.490 --> 00:17:34.410 need to take a step back and say, if I had never 00:17:34.410 --> 00:17:38.390 put a single dime into this company, would I 00:17:38.390 --> 00:17:42.009 invest in them now? And if the answer is no, 00:17:42.349 --> 00:17:44.710 almost certainly shouldn't be doing a double 00:17:44.710 --> 00:17:46.690 down on that company. You'd be far better off 00:17:46.690 --> 00:17:49.069 taking that same number of dollars and putting 00:17:49.069 --> 00:17:51.730 it as something with a chance to win. Because 00:17:51.730 --> 00:17:54.549 it tends to be the case that you're not going 00:17:54.549 --> 00:17:56.529 to save the company and turn it into a radical 00:17:56.529 --> 00:18:00.279 success. You're just delaying. disaster and stretching 00:18:00.279 --> 00:18:03.660 things out into a long, you know, death process. 00:18:03.859 --> 00:18:05.599 Whereas it would be far better as soon as you 00:18:05.599 --> 00:18:08.920 realize this isn't going to work. Either pivot 00:18:08.920 --> 00:18:11.099 or shut it down and start another company, return 00:18:11.099 --> 00:18:13.759 some capital. And how do you look at founders 00:18:13.759 --> 00:18:17.220 who have been unsuccessful in the past? You know, 00:18:17.240 --> 00:18:20.039 actually I want to look at why they were unsuccessful. 00:18:20.220 --> 00:18:22.140 I think that's incredibly valuable because there's 00:18:22.140 --> 00:18:24.339 a lot of ways that companies can fail. It could 00:18:24.339 --> 00:18:26.599 be that their hypothesis just turned out to be 00:18:26.599 --> 00:18:29.240 wrong or a major competitor that they didn't 00:18:29.240 --> 00:18:31.519 expect arrived and things went the wrong way, 00:18:31.519 --> 00:18:33.579 right? It usually happens that it doesn't work 00:18:33.579 --> 00:18:35.640 out. As long as they didn't fail because they 00:18:35.640 --> 00:18:40.140 were stupid, then it's a fantastic learning experience. 00:18:40.460 --> 00:18:43.400 Most successful founders have been unsuccessful 00:18:43.400 --> 00:18:45.900 founders. Having been through the process once 00:18:45.900 --> 00:18:49.160 or twice before makes them so much more aware 00:18:49.160 --> 00:18:51.839 and savvy about the things they didn't do the 00:18:51.839 --> 00:18:53.460 first time. What are the priorities they need 00:18:53.460 --> 00:18:55.920 to focus on? Because This is one of the fundamental 00:18:55.920 --> 00:18:59.119 problems of being a first -time founder is suddenly 00:18:59.119 --> 00:19:01.079 you're an expert on whatever it is you're an 00:19:01.079 --> 00:19:02.859 expert in that's causing you to start this company. 00:19:03.259 --> 00:19:05.900 Usually you have a high level of skill in something 00:19:05.900 --> 00:19:09.380 and it isn't running startups in almost all cases. 00:19:09.519 --> 00:19:11.920 And so you've then got this strange situation 00:19:11.920 --> 00:19:14.160 where you've got to learn everything about everything 00:19:14.160 --> 00:19:17.819 all at once. They're highly technical subjects 00:19:17.819 --> 00:19:19.980 at with large implications for the success of 00:19:19.980 --> 00:19:22.910 your company. That's a completely unrealistic 00:19:22.910 --> 00:19:25.410 and unreasonable ask, but it's just the way the 00:19:25.410 --> 00:19:28.009 world works. The second or third time founder 00:19:28.009 --> 00:19:30.049 at least has been through that meat grinder a 00:19:30.049 --> 00:19:32.849 few times and understands, okay, this I can ignore, 00:19:33.049 --> 00:19:34.950 here's where I should focus, these are the priorities 00:19:34.950 --> 00:19:37.289 I should be going after, here's the order in 00:19:37.289 --> 00:19:39.349 which to execute on things to make maximum use 00:19:39.349 --> 00:19:41.089 of the cash that I have available, right? All 00:19:41.089 --> 00:19:43.529 of those things are far better in a multi -time 00:19:43.529 --> 00:19:46.509 founder as long as they have been mindful each 00:19:46.509 --> 00:19:48.190 time and are learning from their experiences. 00:19:49.519 --> 00:19:51.559 Tell me one thing, what keeps you motivated? 00:19:51.980 --> 00:19:54.180 What gets you out of bed every morning and just 00:19:54.180 --> 00:19:57.579 say I want to do things? Yeah, I think when I 00:19:57.579 --> 00:20:01.380 was actively in my company, it was really about 00:20:01.380 --> 00:20:03.680 the mission that was the most important thing 00:20:03.680 --> 00:20:05.980 to me. I cared about the work we were doing. 00:20:06.039 --> 00:20:08.400 I really cared passionately about privacy. When 00:20:08.400 --> 00:20:11.319 we were in the national security space, I had 00:20:11.319 --> 00:20:15.000 insight into the kinds of things they were using 00:20:15.000 --> 00:20:19.059 my solutions for and they were important. lives 00:20:19.059 --> 00:20:21.259 that were saved because of the technology I was 00:20:21.259 --> 00:20:23.579 deploying. That gets you up in the morning, right? 00:20:23.579 --> 00:20:26.220 That really gets you going. And then of course 00:20:26.220 --> 00:20:28.440 the team as well, the people you're working with, 00:20:28.539 --> 00:20:31.000 the energy that you have wanting to build something 00:20:31.000 --> 00:20:33.019 that supports them. And I can't tell you how 00:20:33.019 --> 00:20:34.819 rewarding it was when we finally hit our exit. 00:20:35.400 --> 00:20:37.640 And there was a substantial payout to everyone 00:20:37.640 --> 00:20:39.319 who'd been working on the team, who got their 00:20:39.319 --> 00:20:41.640 options, who was part of that process. And that 00:20:41.640 --> 00:20:44.599 was really rewarding. And these days, what gets 00:20:44.599 --> 00:20:46.920 me out of bed is working with founders. I love 00:20:46.920 --> 00:20:50.680 doing advising and coaching around that early 00:20:50.680 --> 00:20:53.119 stage process as they're really starting to coalesce 00:20:53.119 --> 00:20:55.299 and build out that business to find what it is 00:20:55.299 --> 00:20:57.480 they're going to go after. That's just a super 00:20:57.480 --> 00:21:00.619 exciting time. So what advice would you give 00:21:00.619 --> 00:21:02.779 to a founder that's just starting out, for example? 00:21:04.309 --> 00:21:06.029 It's quite a broad question though. We see there's 00:21:06.029 --> 00:21:07.809 a lot of... Yeah, absolutely. But it really comes 00:21:07.809 --> 00:21:10.650 back to testing. Don't start by building. Start 00:21:10.650 --> 00:21:13.490 by doing investigation and research, talking 00:21:13.490 --> 00:21:16.230 to customers, doing surveys, putting out some 00:21:16.230 --> 00:21:19.809 quick mock -ups. Really explore why your customers 00:21:19.809 --> 00:21:22.950 need this, what they need. Why aren't there other 00:21:22.950 --> 00:21:25.089 solutions that are out there? Is there a demand 00:21:25.089 --> 00:21:27.309 to pay for it? Are you a priority? This is a 00:21:27.309 --> 00:21:30.069 huge one. A lot of people will go and ask a customer, 00:21:30.410 --> 00:21:32.910 would this be valuable? Could you use this? And 00:21:32.910 --> 00:21:34.470 the answer is often yes, this would be a great 00:21:34.470 --> 00:21:36.789 thing to have. It would save me some money. What 00:21:36.789 --> 00:21:39.630 they don't ask is if this was sitting on the 00:21:39.630 --> 00:21:42.769 shelf, would buying and implementing this be 00:21:42.769 --> 00:21:45.509 the next thing on your list of priorities? Because 00:21:45.509 --> 00:21:47.690 usually the answer is no, I've got like eight 00:21:47.690 --> 00:21:49.630 things that are causing my house to burn down 00:21:49.630 --> 00:21:52.250 right now. I'm going to deal with those. Yours 00:21:52.250 --> 00:21:54.750 is a nice to have. I'd love to do it. You know, 00:21:54.789 --> 00:21:56.710 and I'll get around to it in eight years when 00:21:56.710 --> 00:21:58.430 I've got the rest of my priorities out of the 00:21:58.430 --> 00:22:01.579 way. And so then They've gotten all of these 00:22:01.579 --> 00:22:04.180 yeses from potential customers. And when they 00:22:04.180 --> 00:22:05.660 build it, they go back to them and say, Hey, 00:22:05.740 --> 00:22:07.579 do you want to buy it? It's like, not right now. 00:22:08.500 --> 00:22:10.740 Right. They get happy ears with the responses 00:22:10.740 --> 00:22:13.660 they hear. So really digging into what are going 00:22:13.660 --> 00:22:15.759 to be the problems? Do they have budget for this 00:22:15.759 --> 00:22:18.420 kind of thing? Can they take it on like ed tech? 00:22:18.559 --> 00:22:20.640 I see so many ed tech projects and they're doing 00:22:20.640 --> 00:22:22.900 important work that really needs to be done in 00:22:22.900 --> 00:22:26.170 education and schools have no money. And they 00:22:26.170 --> 00:22:27.890 have thousands of people trying to sell them 00:22:27.890 --> 00:22:30.029 things. It's brutally hard to sell into school 00:22:30.029 --> 00:22:32.730 systems. And they haven't really explored that 00:22:32.730 --> 00:22:35.029 to understand, you know, how do they fit in? 00:22:35.109 --> 00:22:37.390 Do the schools have budget for this? Is this 00:22:37.390 --> 00:22:41.009 a priority for you? Do they know who in the schools 00:22:41.009 --> 00:22:42.990 has the decision -making power? Because often 00:22:42.990 --> 00:22:44.569 they'll go talk to teachers. The teachers are 00:22:44.569 --> 00:22:46.809 all thumbs up. But it's the superintendent who 00:22:46.809 --> 00:22:48.529 pays for it. The superintendent, that's not their 00:22:48.529 --> 00:22:49.950 priority. So it's never going to get bought, 00:22:50.410 --> 00:22:53.200 right? All of those secondary things need to 00:22:53.200 --> 00:22:55.740 get nailed down before you even start the process 00:22:55.740 --> 00:22:59.200 of actually building the solution. This can avoid 00:22:59.200 --> 00:23:01.799 enormous amounts of waste and heartache and time 00:23:01.799 --> 00:23:05.380 and lost money. Do that groundwork first. Do 00:23:05.380 --> 00:23:07.380 you think it's hard selling to government, both 00:23:07.380 --> 00:23:11.160 local and federal? Yeah, selling to government 00:23:11.160 --> 00:23:13.380 has its own special flavors of brain damage. 00:23:13.660 --> 00:23:16.779 It is really strange. Local government tends 00:23:16.779 --> 00:23:19.059 to be radically underfunded. That's the problem 00:23:19.059 --> 00:23:21.299 there is they often just don't have the money 00:23:21.299 --> 00:23:23.720 that you'd like. Federal government, it's all 00:23:23.720 --> 00:23:26.400 about the bureaucracy and procurement processes 00:23:26.400 --> 00:23:29.420 and timelines. So, you know, you go in and start 00:23:29.420 --> 00:23:31.579 talking to them today, and it may be 18 months 00:23:31.579 --> 00:23:34.279 before you get something. Or the thing you want 00:23:34.279 --> 00:23:36.859 to bid on came out in this huge request for proposals, 00:23:37.099 --> 00:23:40.380 which is highly technical to respond to, requires 00:23:40.380 --> 00:23:42.859 a lot of experience. You know, you're some small 00:23:42.859 --> 00:23:45.200 company. You probably need to be partnering with 00:23:45.200 --> 00:23:47.180 one of the big systems integrators, which you 00:23:47.180 --> 00:23:48.680 don't even know how to do. You've never heard 00:23:48.680 --> 00:23:52.380 of these people. It's a long time to get in there. 00:23:52.460 --> 00:23:54.920 We were sort of lucky in that we were moving 00:23:54.920 --> 00:23:57.019 into a greenfield space. The government had never 00:23:57.019 --> 00:23:59.599 purchased anything like what we were doing before. 00:24:00.200 --> 00:24:02.119 Our challenge was to convince them that legally 00:24:02.119 --> 00:24:04.400 they could. They were allowed to outsource the 00:24:04.400 --> 00:24:07.470 stuff we wanted to do. But from there, it was 00:24:07.470 --> 00:24:09.450 all sole source contracts. So we were working 00:24:09.450 --> 00:24:11.230 directly with the people who were going to implement 00:24:11.230 --> 00:24:14.150 it. We're selling to the people who are owning 00:24:14.150 --> 00:24:16.049 the mission at the tip of the spear, not the 00:24:16.049 --> 00:24:18.750 IT department, not the backend. So we had sort 00:24:18.750 --> 00:24:21.029 of the best case for selling to the government. 00:24:21.410 --> 00:24:23.690 And it's still a nightmare. I can imagine. There's 00:24:23.690 --> 00:24:26.190 a lot of talk nowadays about AI and blockchain. 00:24:26.390 --> 00:24:28.250 And it feels that every startup I come across 00:24:28.250 --> 00:24:30.730 is either doing something with AI or in the blockchain. 00:24:31.230 --> 00:24:33.910 Now, is this an absolute necessity? Do people 00:24:33.910 --> 00:24:35.269 actually need to start building something on 00:24:35.269 --> 00:24:37.490 it with AI or in the blockchain? Or actually, 00:24:37.650 --> 00:24:39.569 there's still plenty of room to grow in other 00:24:39.569 --> 00:24:43.349 areas. So there's always a huge number of areas 00:24:43.349 --> 00:24:45.369 out there that people can build into. And some 00:24:45.369 --> 00:24:47.230 of my favorite businesses are the least sexy. 00:24:47.410 --> 00:24:49.970 But you discover that there's some huge unmet 00:24:49.970 --> 00:24:54.529 need in a big market that is at some level incredibly 00:24:54.529 --> 00:24:57.750 boring. And that means that there aren't 20 other 00:24:57.750 --> 00:24:59.750 startups trying to go after it. There's not every 00:24:59.750 --> 00:25:02.549 VC looking for somewhere to dump money on to 00:25:02.549 --> 00:25:05.390 launch this product. That can be a really big 00:25:05.390 --> 00:25:07.930 advantage, giving you room to grow, room to learn, 00:25:08.089 --> 00:25:11.650 some time to execute before the space gets filled 00:25:11.650 --> 00:25:14.549 up. So I think always worth looking for the size 00:25:14.549 --> 00:25:16.470 of that opportunity, not necessarily chasing 00:25:16.470 --> 00:25:18.529 the latest shiny, because by the time you start 00:25:18.529 --> 00:25:21.650 seeing it covered on the news or it's all over 00:25:21.650 --> 00:25:23.660 Reddit or whatever, you're probably on the wrong 00:25:23.660 --> 00:25:26.000 part of the hype cycle. You wanted to be in six 00:25:26.000 --> 00:25:28.839 months to a year before that when this was just 00:25:28.839 --> 00:25:32.000 starting to grow. Now, if you start, all those 00:25:32.000 --> 00:25:34.980 companies that were early adopters have a year 00:25:34.980 --> 00:25:37.200 headstart on you. You're going to start working 00:25:37.200 --> 00:25:39.039 on your product and then see a dozen competitors 00:25:39.039 --> 00:25:41.519 actually launch with theirs, right? So timing 00:25:41.519 --> 00:25:46.200 is really critical. I want to touch on AI though 00:25:46.200 --> 00:25:48.119 and blockchain real quick. I'm highly dubious 00:25:48.119 --> 00:25:50.759 of most blockchain startups I see. because they 00:25:50.759 --> 00:25:54.279 seem to be buzzword compliant. They are implementing 00:25:54.279 --> 00:25:56.839 a blockchain for things where a simple database 00:25:56.839 --> 00:25:59.140 would be far more effective, cheaper, and faster, 00:25:59.539 --> 00:26:01.400 but they want to be able to say they're using 00:26:01.400 --> 00:26:04.420 a blockchain. Blockchains are incredibly powerful 00:26:04.420 --> 00:26:07.079 for certain applications, but I find they're 00:26:07.079 --> 00:26:11.240 misused most of the time. AI! On the other hand, 00:26:11.579 --> 00:26:13.420 in some ways, I think most companies that are 00:26:13.420 --> 00:26:16.099 using AI shouldn't talk about it because it's 00:26:16.099 --> 00:26:19.000 rapidly becoming table stakes. If you are a software 00:26:19.000 --> 00:26:21.339 company or a SaaS company or a software service 00:26:21.339 --> 00:26:23.900 provider and you're not using AI in some way, 00:26:24.019 --> 00:26:27.299 what the hell's wrong with you? Right? Of course 00:26:27.299 --> 00:26:29.039 you should be using AI. It's like saying, well, 00:26:29.140 --> 00:26:31.289 we've got a website. Obviously, you've got a 00:26:31.289 --> 00:26:33.430 website. Obviously, you're going to use AI. Obviously, 00:26:33.490 --> 00:26:35.089 you're going to use, you know, programming tools 00:26:35.089 --> 00:26:36.369 or if you need an app, you're going to have an 00:26:36.369 --> 00:26:38.690 app. Those are aspects of how you're doing what 00:26:38.690 --> 00:26:41.309 you're doing, but it's the business that is being 00:26:41.309 --> 00:26:44.069 enabled by the AI that matters. This is with 00:26:44.069 --> 00:26:46.130 the exception of some deep tech companies that 00:26:46.130 --> 00:26:48.970 are doing really interesting things in AI or 00:26:48.970 --> 00:26:51.150 the foundational models, but those are few and 00:26:51.150 --> 00:26:54.009 far between. Most of them are actually just using 00:26:54.009 --> 00:26:56.410 AI and what they're doing. They should back off 00:26:56.410 --> 00:26:58.690 on how much they talk about AI. How do you find 00:26:58.690 --> 00:27:00.829 opportunities? Or did it just come your way or 00:27:00.829 --> 00:27:02.809 do you actually go actively looking for that? 00:27:03.390 --> 00:27:05.849 So I'm not doing a huge amount of active hunting 00:27:05.849 --> 00:27:08.809 right now. I am active in an angel group. So 00:27:08.809 --> 00:27:10.930 we have applications coming in there all the 00:27:10.930 --> 00:27:12.569 time. I actually run our selection committee. 00:27:12.609 --> 00:27:14.750 So I get to see all of the companies that come 00:27:14.750 --> 00:27:17.549 in very early. So that's a great source of deal 00:27:17.549 --> 00:27:20.750 flow. Of course, I just listed I'm an angel investor 00:27:20.750 --> 00:27:22.549 on LinkedIn. And so that generates something 00:27:22.549 --> 00:27:24.450 like a thousand a year. I'm in a couple of early 00:27:24.450 --> 00:27:26.839 stage funds. And those are the people who really 00:27:26.839 --> 00:27:28.819 have time to do the prospecting, right? They're 00:27:28.819 --> 00:27:30.500 going out and beating the bushes. They're looking 00:27:30.500 --> 00:27:32.339 for all these opportunities. They're going to 00:27:32.339 --> 00:27:34.779 the mixers and meeting people. And I live out 00:27:34.779 --> 00:27:36.960 in the boonies and I'm too lazy. So I'm not great 00:27:36.960 --> 00:27:39.900 about hunting down the opportunities, but that 00:27:39.900 --> 00:27:41.359 really is the way it works. If you want to be 00:27:41.359 --> 00:27:44.259 successful as an investor. Yeah. And I was just 00:27:44.259 --> 00:27:45.480 thinking, you know, for a startup, what do you 00:27:45.480 --> 00:27:46.779 think actually works better? Does it actually 00:27:46.779 --> 00:27:48.960 go face to face or send a bunch of cold emails? 00:27:49.559 --> 00:27:52.319 So if you can go face to face, that's always 00:27:52.319 --> 00:27:54.720 great. It's always better to have sort of that 00:27:54.720 --> 00:27:57.279 personal connection, you know, suggest doing 00:27:57.279 --> 00:27:59.759 pitch events, you know, go in, go into the city 00:27:59.759 --> 00:28:02.599 and get in front of potential investors. Even 00:28:02.599 --> 00:28:04.420 if these are not, maybe especially if they're 00:28:04.420 --> 00:28:06.200 not actually fundraising events, right? They're 00:28:06.200 --> 00:28:09.299 more about visibility, practice, feedback, things 00:28:09.299 --> 00:28:11.599 like that. You really want to hone that pitch. 00:28:12.059 --> 00:28:14.170 So those are great ways of meeting people. I 00:28:14.170 --> 00:28:16.269 also strongly encourage people to reach out to 00:28:16.269 --> 00:28:18.750 potential investors for feedback and advice well 00:28:18.750 --> 00:28:20.950 before their fundraising. It's never the best 00:28:20.950 --> 00:28:22.789 look when the first time I hear from someone 00:28:22.789 --> 00:28:25.769 is with their handout. It's not really what I 00:28:25.769 --> 00:28:28.230 want. Whereas if they come to me and say, hey, 00:28:28.309 --> 00:28:30.029 I'm in this space. What do you think about this 00:28:30.029 --> 00:28:32.210 space? Or, you know, I'm looking at this from 00:28:32.210 --> 00:28:34.450 this direction. What's your take on that? Or 00:28:34.450 --> 00:28:36.849 even, you know, what are your criteria for investing? 00:28:36.950 --> 00:28:38.930 I don't even want to bother you if I'm not in 00:28:38.930 --> 00:28:41.130 the right spot or let me know when to get there. 00:28:41.359 --> 00:28:44.339 Those can get the ball rolling, the simple question, 00:28:44.400 --> 00:28:46.220 something that only takes a few seconds to respond 00:28:46.220 --> 00:28:48.259 to. You're not asking for a half hour of my time 00:28:48.259 --> 00:28:51.039 or anything like that. That can then establish 00:28:51.039 --> 00:28:53.079 that connection. You get me on the update email 00:28:53.079 --> 00:28:55.759 list, so I'm getting pinged on a regular basis, 00:28:56.039 --> 00:28:58.019 reminded of what you're doing and that you're 00:28:58.019 --> 00:29:00.079 accomplishing things. So then when you're ready 00:29:00.079 --> 00:29:02.220 to fundraise, you can reach out much more likely 00:29:02.220 --> 00:29:05.660 to get success. But certainly cold outreach is 00:29:05.660 --> 00:29:07.019 going to be part of that. You're not always going 00:29:07.019 --> 00:29:10.079 to be able to have a connection. It's just a 00:29:10.079 --> 00:29:11.759 numbers game, right? You're going to be sending 00:29:11.759 --> 00:29:14.799 probably thousands of cold outreaches and making 00:29:14.799 --> 00:29:17.180 hundreds of pitches before you close your procedure. 00:29:18.240 --> 00:29:20.539 And do you invest outside of the US or just focus 00:29:20.539 --> 00:29:23.859 on the US? So personally, I am only in the US 00:29:23.859 --> 00:29:26.680 because that's the market I understand for direct 00:29:26.680 --> 00:29:29.299 investments. So some of the funds I'm into international 00:29:29.299 --> 00:29:31.779 work and I've also invested internationally through 00:29:31.779 --> 00:29:35.009 some syndicates. because I can then rely on someone 00:29:35.009 --> 00:29:38.490 who has deep cultural and geographical knowledge 00:29:38.490 --> 00:29:40.769 of the area in which they're investing. And I'm 00:29:40.769 --> 00:29:43.269 basically piggybacking on them. I also tend to 00:29:43.269 --> 00:29:44.950 write smaller checks there because I have a lower 00:29:44.950 --> 00:29:46.789 level of confidence. So I'm taking a bit more 00:29:46.789 --> 00:29:50.289 of a shotgun strategy, but largely I'm backing 00:29:50.289 --> 00:29:52.950 the syndicate lead as the horse. There's a lot 00:29:52.950 --> 00:29:54.930 of, you know, I know a lot of startups who raise 00:29:54.930 --> 00:29:57.109 seed funding and then decided to go for series 00:29:57.109 --> 00:30:00.160 A's in the US. Do you think that's the correct 00:30:00.160 --> 00:30:02.200 approach or actually it's a complete mistake? 00:30:02.339 --> 00:30:03.759 They should actually try and raise in their local 00:30:03.759 --> 00:30:06.960 geography. By the time you're hitting sort of 00:30:06.960 --> 00:30:09.220 series A, it definitely makes sense to be looking 00:30:09.220 --> 00:30:12.119 at the US. I think as you're getting into those 00:30:12.119 --> 00:30:14.940 larger, more institutional investors, they're 00:30:14.940 --> 00:30:17.640 all global at that point. And so you want to 00:30:17.640 --> 00:30:20.119 go with the investor who's most aligned with 00:30:20.119 --> 00:30:21.900 your thesis, who can bring the most strategic 00:30:21.900 --> 00:30:24.660 value to what you're doing. The fact that they're 00:30:24.660 --> 00:30:26.799 located in your backyard and you can, you know, 00:30:26.839 --> 00:30:29.640 have a meeting with them over a beer or coffee 00:30:29.640 --> 00:30:32.880 and get some advice starts to matter less and 00:30:32.880 --> 00:30:35.460 less than their ability to connect you to major 00:30:35.460 --> 00:30:38.599 partners and hook you up with the big investors 00:30:38.599 --> 00:30:41.539 you need then in your B round, C, D, E, and so 00:30:41.539 --> 00:30:45.420 forth. Now, if we could go back in time and you 00:30:45.420 --> 00:30:47.740 can go back to yourself in, I don't know, 1995 00:30:47.740 --> 00:30:49.940 when you just got started, what would you tell 00:30:49.940 --> 00:30:51.559 to yourself? What do you say? You know what? 00:30:51.559 --> 00:30:53.880 Don't do this or do this. Yeah, I definitely, 00:30:53.880 --> 00:30:56.059 I would have spent more time working, finding 00:30:56.059 --> 00:30:57.940 advisors and trying to work with them. I mean, 00:30:57.940 --> 00:30:59.859 the ecosystem of course was radically different 00:30:59.859 --> 00:31:02.319 back then. It has improved so much for founders, 00:31:02.319 --> 00:31:04.700 but I really didn't understand how much I didn't 00:31:04.700 --> 00:31:07.380 know at that time. I was, I was an astrophysicist. 00:31:07.400 --> 00:31:09.440 I was an astronomer before I started the company. 00:31:09.839 --> 00:31:12.299 I had no background in this. And so I was just 00:31:12.299 --> 00:31:15.259 trying to work it out all on my own. But yeah, 00:31:15.259 --> 00:31:18.779 I think more testing and validation would be 00:31:18.779 --> 00:31:21.000 what I'd tell myself is I made a lot of assumptions 00:31:21.000 --> 00:31:23.349 about what would work. And we sort of went in 00:31:23.349 --> 00:31:25.410 exactly what I tell everyone not to do. We doubled 00:31:25.410 --> 00:31:27.769 down on developing things too early and not testing 00:31:27.769 --> 00:31:30.170 enough. Those are the sort of things I go back 00:31:30.170 --> 00:31:32.690 and tell myself that and surrounding myself with 00:31:32.690 --> 00:31:35.150 the right people to really counterbalance the 00:31:35.150 --> 00:31:38.470 weaknesses in my own. And, you know, having that 00:31:38.470 --> 00:31:40.589 type of background, do you invest anything related 00:31:40.589 --> 00:31:42.930 to space or you actually move away from that? 00:31:43.119 --> 00:31:45.400 I've done a little space. I've done a little 00:31:45.400 --> 00:31:47.539 cybersecurity, which is sort of what my company 00:31:47.539 --> 00:31:49.619 ended up being. It's ironic. I think in some 00:31:49.619 --> 00:31:51.960 ways it's harder to get an investment from me 00:31:51.960 --> 00:31:54.279 in areas that I know really well because I can 00:31:54.279 --> 00:31:56.539 see all the weaknesses and problems, even though 00:31:56.539 --> 00:31:58.599 that's probably where I should be concentrating 00:31:58.599 --> 00:32:01.380 all my investments. Space is a tricky one just 00:32:01.380 --> 00:32:04.539 because it's got such a long time horizon to 00:32:04.539 --> 00:32:07.500 pay off. These tend to be very speculative kinds 00:32:07.500 --> 00:32:10.519 of companies, but with potentially gigantic payoffs. 00:32:11.690 --> 00:32:13.390 Now I always like to ask you a little bit of 00:32:13.390 --> 00:32:15.289 a personal question which is what's the last 00:32:15.289 --> 00:32:18.569 book you read last book? I read a book you read 00:32:18.569 --> 00:32:21.109 which is probably about so I think I just finally 00:32:21.109 --> 00:32:22.789 finally It was late to the party, but I just 00:32:22.789 --> 00:32:25.390 read nudge and I really enjoyed that. What was 00:32:25.390 --> 00:32:29.420 the biggest insight from Mitch? so Just the level 00:32:29.420 --> 00:32:32.700 of impact on choice architecture and how you 00:32:32.700 --> 00:32:36.700 design forms or intakes or what kind of defaults 00:32:36.700 --> 00:32:39.359 you use can have a huge impact, ideally for the 00:32:39.359 --> 00:32:41.579 good, but you know, they're also manipulable 00:32:41.579 --> 00:32:44.480 in many ways. But just really thinking about 00:32:44.480 --> 00:32:47.240 that kind of removing what they also call sludge 00:32:47.240 --> 00:32:49.759 from processes. We've all downloaded an app where 00:32:49.759 --> 00:32:53.380 you start some new service and immediately there's 00:32:53.380 --> 00:32:55.849 friction. in that experience or, you know, you're 00:32:55.849 --> 00:32:57.289 having to fill out forms, you're having to do 00:32:57.289 --> 00:32:58.910 things, you're having to provide and, you know, 00:32:59.130 --> 00:33:01.910 answer emails and do all sorts of things. And 00:33:01.910 --> 00:33:04.589 that tends to make you fall off. So I think one 00:33:04.589 --> 00:33:06.750 of the insights there is how clean can you make 00:33:06.750 --> 00:33:09.509 this? How much can you remove the obstacles to 00:33:09.509 --> 00:33:11.349 moving in the direction you want people to move? 00:33:12.710 --> 00:33:14.529 Definitely want to add to my list. Lance, if 00:33:14.529 --> 00:33:16.109 people want to reach out to you, what's the best 00:33:16.109 --> 00:33:18.710 way of doing so? Probably the best way is on 00:33:18.710 --> 00:33:21.619 LinkedIn. I'm Lance Coffrel at LinkedIn. or through 00:33:21.619 --> 00:33:24.759 my website. I've got a huge amount of free content 00:33:24.759 --> 00:33:27.759 for founders on YouTube and on my website. They're 00:33:27.759 --> 00:33:31.700 both feeltheboot, feeltheboot .com and feeltheboot 00:33:31.700 --> 00:33:34.920 at YouTube. Thank you so much. It's been an absolute 00:33:34.920 --> 00:33:36.799 pleasure having you on the podcast. Thank you 00:33:36.799 --> 00:33:38.420 for your time. Thanks so much. It was a blast. 00:33:39.019 --> 00:33:42.839 Thank you. All right. The podcast is also sponsored 00:33:42.839 --> 00:33:45.539 by Notion .so. Notion is offering six months 00:33:45.539 --> 00:33:48.109 for free for new users. Make sure you check out 00:33:48.109 --> 00:33:50.910 our website, thestartupevents .co .uk to read 00:33:50.910 --> 00:33:53.430 them this often. 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