Sustainable Growth and Effective Networking Strategies

who's more likely to fire someone via email you no you I would fire by email yeah you would I would never do that okay that's you but I just didn't think you would like firing people yeah yeah I don't like firing people nobody likes it I hate firing people one of the hardest things notcher has learned to do is be a good people manager and firing people as part of it and my first half of my career I was terrible at it and then I learned how to do it right your your first firing as an entrepreneur is always really bad and ugly oh my God I cried first time I did it it took 2 hours she cried I cried she hated me afterwards it was just a terrible process uh when I learned how to do it correctly which is generally quickly and efficiently and businesslike um person respected me more like me more and it was faster and quicker and less painful one one my this was not my first H my first firing but one of the horrible firings I had in my career I I distinctly remember I fired him and then he asked me for a ride home he didn't a car welcome back to the startup ignition podcast we are now on episode 3 it's been been fun filming these things thanks to everybody who's tuning in watching learning understanding and on this journey with us again I'm Tyler Richards entrepreneur General partner startup ignition Ventures founder of startup ignition with my dad here this is John and let's get into it so uh last time we had a little Icebreaker that I thought was fun so we're going to do another IC breaker he's not prepping me for any of this and this time I did not prep my dad because he ruined it last time so I did not even send him the agenda this time but we're going to play a game and here's how it's going to work I'm going to read the following questions and it's called who's more likely okay and you're either going to say me you or neither okay that's all you got to say and you can go in into explaining it cuz I might defend myself okay there you go okay here we go you ready for the first one yes here's the fatherson Icebreaker for this episode ready who's more likely to invest in a terrible idea just because they know the founder me you or neither you me I agree he's going to stick to the tried hard principles and I feel like I could be swayed off of that and invest in someone that I know okay number two here we go who's more likely as an entrepreneur to pitch a startup idea that already exists wait say that who's more likely yeah who's more likely to pitch a startup idea that already exists between you and me yeah between me and you maybe me because you might be more aware of current youthful younger things that's exactly where my mind was going to was like I'm on the trends I understand the waves I'm in the news I understand what's happening in younger entrepreneurship and I feel like you might miss miss some Innovation or Tech or something you're like oh what about this and it's like that already exists I don't like conceding that but I'll concede it he concedes okay who's more likely to completely ignore an Excel spreadsheet and make a gut decision you me 100% I might have rigged that question yeah I'm way more uh kind of off the cuff well we just spent 90 minutes on a spreadsheet mentoring with a company we're looking at investing in with their spreadsheets and I have a lot of experience in that yeah so I tip my hat to him when it comes to Financial workbooks um here we go who's more likely to start and exit a billion doll company before the other probably you I'd say you i' disagree on that one really I disagree on that one really I feel like because you've taken a company pretty far to an IPO that you probably would have more stick tutiven from here forward I'm too old I don't want to be in an operating company anymore you may be somay okay that's true so that's why so you're saying if it's going to take 15 years me but if it's going to be a 3 to five year plan I say you yeah people know that we're from the Utah market and people don't realize even the most successful company in Utah history took a long time to achieve its greatness successful in what terms well let's it's qu tricks okay the Smith family Ryan Smith our local billionaire bought the Utah Jazz and he was a student I mentored him a little bit or talked to him when he was a student and I had an office by his father who was the founder of the company and people don't realize I mean that company's 25 plus years old right now I mean they were you know 12 years in a basement or a dingy office and um so you're saying to get to a billion dollars it's a long path takes time way more time the average exit for any software startup the average is 7.9 to 8.2 years so it takes a long time and if you're going to get to a billion dollar exit it's going to take longer I mean the real big unicorns the exits often are 10 12 14 years and so that's just how it is yeah I would even say yeah 15 years yeah and so but oper and and also um but even you experience this is interesting to just share like once you've kind of made money where you're kind of set and you don't have to really work again that 60 plus hour grind a week which you've experienced I've experienced long ago is it's hard to be operational again but it's way more likely from this point forward that you would do an operations role in a company to build a billion dollar company than I would because I don't want to work that hard I want to enjoy the fruits of my labor for the years I have left and I don't want to get into a 15-year grind that's true that's true okay so next one here we go who is more likely to launch a startup or product without validating um well I think we're both susceptible to that because we're human and many can be susceptible to that you and I have done that to some degree once or twice yeah um but going forward right now I'm really married to the lean start process and validating but I think you are too I think that's a 50-50 what do you think so neither I I would say I would argue neither that's what I so so if the likelihood is 1% we're both at 1% yeah okay but I'm I'm saying the actual answer would probably be neither yeah exactly okay who's more likely to fire someone via email you no you I would fire by email yeah you would I would never do that okay that's you but I just didn't think you would like firing people yeah yeah I don't like firing people nobody likes it I hate firing people one of the hardest things notar has learned to do is be a good people manager and firing people as part of it and my first half of my career I was terrible at it and then I learned how to do it right your your first firing as an entrepreneur is always really bad and ugly oh my god really I cried first time I did it it took two hours she cried I cried she hated me afterwards it was just a terrible process uh when I learned how to do it correctly which is generally quickly and efficiently and businesslike um the person respected me more liked me more and it was faster and quicker and less painful one what my this was not my first H my first firing but one of the horrible firings I had in my career I I distinctly remember I fired him and then he asked me for a ride home he didn't have a car I was like uh sure that was an awkward car ride yeah uh okay next one here we go who's more likely to take a meeting with an investor just because they're famous you me me for sure he doesn't really care about the current happenings I mean you get into the modern uh celebrity news if I know that piece of current celebrity and not you have a much broader knowledge of that if I have a sliver that's important to me it could be but also it's also from my era do you remember going to a venture Gathering and Peter vidmar was there yeah from the 84 Olympics uh and you had no clue who he was and I was like a fanboy right and uh and he was an old guy he used to look young I hadn't seen him since he was in the Olympics and he when he was young and a top gymnast and Gold Medal winner and all that and I we sat like right next to him and we talked to him all night and you made us all take a picture awkwardly and you had no idea who he was I was like who is this guy yeah um yeah so maybe me I agree but you would be for most things yeah yeah yeah so um next we have two more and then we're done and then we'll get into the meat of the podcast here okay who's more likely to make more pivots in a startup within the first six months me or you um hm more pivots I I I that's one where I think because you're now fully indoctrinated and believing in lean start up to the level I do I it's about even I say you I think I think you would overanalyze a lot more things and make more micro pivots than I would I would probably glaze over things where you would get even deeper into the weeds and be like no we got to do this this this this I'm kind of really blunt and decisive yeah so and if we if we analyze every pivot which is a pivot from mic pivot to something very minor all the way up to Major pivots which is changing your business model almost completely I would say you okay and and and and I tend to be more blunt and decisive and once I've made a decision I just do it yeah yeah okay so then the last one here we go who's I like this one who's more likely to run a company that raises and burns1 million before making $1 of Revenue you me I do not agree with that I wouldn't be I wouldn't I I I am pretty famous for being Frugal yeah I think we're both pretty Frugal I I no yeah you are you are very frugal too so but I just would say the only reason I would say you is because I have more experience yeah but I I'm I I would argue that's probably a neither but I definitely don't think it's me I I just couldn't I couldn't take in that kind of capital squander it and not achieve something neither of us do it you've heard my Google stories do I need to tell them right now yeah you want me to tell you I I don't know if anybody knows but I took a weird departure at ag50 and was head of operations for Google in the state of Utah um I helped a City sell its fiber Network to Google Fiber and then they turned around and asked me to head it up but uh during the two years I was there I got in trouble twice for being too Frugal yeah and uh it was just crazy stories and maybe I shouldn't tell those stories I don't think anybody cares and you've moved on from that doesn't matter who hears it yeah so one time a PO a purchase order was put in front of me to for a $38,000 expense to rent an ice cream truck to have people run around Provo Utah and give away ice cream to promote Google Fiber and I would not sign $38,000 for one month rental of an ice cream truck are you kidding me yeah and so I wouldn't sign it and unfortunately the powers at be at Google had to call me up and say John just sign it sign the PO when we put it in front of you and I said don't you want me to treat this like it's my own money no we don't this is a Sandbox we're just trying to find what works yeah and that's a fish out of water experience for me and I had cases where I was trying to save money on parking with three Google Executives driving from Mountain View to San Francisco and I tried to save money on parking and they said John just park the car anyway I think in a startup is a different story Google is Google but like in a startup I definitely would never spend 30 000 in an ice cream Tru to do marketing like localized marketing but I wouldn't do it if I was part of Google because it's ridiculous anyway either way it's ridiculous okay we're done with that one so I don't know who's been keeping score but who's more likely to do what but maybe we'll have Jordan put up a graphic and tally up the tally up the who won um okay moving on so I thought we would maybe shape this episode around a little bit more of of fundraising you know like startup funding trends um fundraising what we're seeing because again we're we are Venture capitalists and we run a precede Venture fund and so we're literally in the trenches every day talking to startups analyzing startups identifying what the market wants or what the market is demanding understanding you know obviously what we look for our thesis and what we want to invest in is probably different than a lot of other Venture funds but I think overall the landscape is pretty PR pretty um talkative and we talk a lot VC's actually collaborate a decent amount share knowledge share information share deals share infrastructure and so just the sheer number of pitches we hear yeah yeah but I'm just saying so I I I want to take this episode and and start off talking a little bit about fundraising because I feel like it's such a Hot Topic in startups where a lot of entrepreneurs and Founders feel like like that is the ultimate goal and I think we've even talked about this on episodes past where a lot of founders feel like once I raise capital or once I raise around like man I am in the promised land yeah I've arrived to the promised land and that's really not the case but because of that mental attitude and that that thinking around fundraising it's it's on the top of everybody my one of my favorite things to do is when I have a group of entrepreneurs in the room let's say 20 30 entrepreneurs I'm teaching or mentoring or training and some of them have raised money I'll have the people who's raised their first round or second round of funding in here and they raise their hand I and all the other entrepreneurs that haven't raised money yet and are wanting to and they think that raising the money is going to mean they've arrived and achieved things and and I always ask the ones that raise their hand that have say okay hey when you raise the money did all your problems stop did it solve all your problems did life get easier or did it actually get harder yeah do you have more accountability in your life uh are you worried more now and all of them say yeah yeah yeah in other words actually the day you deposit the money from your investors in your bank account it's exhilarating and fun but actually when the real work starts and accountability starts and it is not solving all your problems and if you get too much money more than you need it can be a source of destruction of value instead of increasing value but that's a whole another topic maybe for another podcast yeah I just I always when I think about this topic every summer or so we get our um startup ignition boot camp alumni together for a large event cuz the way the boot camp works is it's cohort based like 20 to 30 Ventures enter in each cohort so if you're not in the same cohort you really don't know a lot of the other alumni so we try to do a reunion event every year and our last one we held was last summer and you know there was about 500 people 500 people there and I think we had this question of like who has raised money and I think you asked that in front of everybody and PE those that raised their hand yeah they're looked at as like oh my gosh that's where I want to be I want to be in a situation where I've raised a decent round on my startup and I'm going to town going to the racism building what I want to build yeah and we held at that reunion at the largest VC in the state's office so and we had the managing partner there speak and so fundraising was a main topic yeah it was a huge topic that whole that whole that whole um meeting and that reunion but um so let's dive into fundraising a little bit now and and there is a few things that I want to bring up that yes we all know that fundraising is down that in 2021 2022 uh obviously that was the height of fundraising and right now it's it's not at its peak highs or you know what it was just a handful of years back but there was a Forbes article that I want to bring up today that was entitled why 2025 looks like a big year for venture capital and it just discusses um the expectations of a Resurgence of venture capital because there has been such a lack thereof 2024 and 2023 and so I want to go over this article maybe we can have Jordan again pop it up here and I can even just throw it up here on my screen but it basically goes over how a lot of the Venture ecosystem is really optimistic for 2025 to be a year yes where there's going to be a positive global economic Outlook advances in technology and A Renewed interest in a ton of different sectors and just excitement overall yeah but that shouldn't surprise you you've been hanging around me for the last few years what did I no but I it's it's surprising that that's being confirmed overall in the general Venture Capital Market cuz we've been saying that in our close circles for the last yeah but we've predicted it you just we we know exactly how it's going to go because of experience and it's just we don't know the exact month that things are going to tip one way or the other but years ago we knew this would be this way yeah yeah but there's a part in the article that I'd love to get your thoughts on that actually really generally aligns with startup ignition Ventures and and mine and your thesis around building in Venture because I feel like even the last not just since 2021 or 2022 but even the last 10 years there's been this huge movement in Venture Capital where growth at all costs where the venture capitalist game was like raise massive amounts of money in a fund throw massive amounts of capital at these different startups and just cross your fingers for the one that work best obviously not just like on a win but like doing due diligence and picking a handful of winners and the ones that succeed great let's even throw more money at them and the ones that fall away on the Wayside whatever they're gone they're dead and this article talks about how in 2025 they see that shifting that there's going to be a focus towards sustainable business models that there's going to be a focus on profitable business models and moving away from that rapid growth at all costs and that there's like a whole section about it and I was like I felt validated I was like wow this is exactly what we preach it's almost the whole model around startup ignition that you don't have to go raise tons of money reach a huge massive valuation and that's how you make tons of wealth for yourself as an entrepreneur in fact there's a whole different side of Entrepreneurship that we've been talking about for the last five 10 15 20 years and even what I implemented in my own startup which is don't raise as much Capital as you can bootstrap as much as you can preserve a lot of equity for yourself and then exit for a much more obtainable and accessible and achievable outcome and you'll actually have the exact same amount of wealth at the end of the day right and this is something you've talked about forever but it's in this Forbes article that just came out in January 2025 just recently like last week so so here's my feedback to that and I know you're loving that it being validated but for me I just say duh it's basic business duh this is uh it's core to our beliefs and Entrepreneurship inventure is is the power of Cycles every asset class is subject to the economic cycles of the macroeconomy and so we this is completely predictable the only thing we can't predict is the exact moment when things turn but it's really important the exact moment when things Peak or Valley yeah where the troughs and The Valleys uh turn in head towards the Peaks and then where the Peaks downturn towards the next trough but these Cycles happen it's as predictable as the sun coming up in the morning and the sun going down at Sunset and so it's just not quite as predictable the exact moment in time and so this is really important though super super important what you're bringing up and this is is happened many times before even the father of Lean Startup Steve blank has written about this I've written about it I've talked about it and it's just the fact that even a huge thing was um coming through the dot experience as the dot experience got to disneying Heights in the year 1999 and 20 2000 and then completely crashed in mid 2000 in a terrible 2001 2002 2003 this is happens all the time and every time we go into a trough there's a return to we got to have profit we got to have sustainability we got to do the right things we got to be careful and do real business and then things get going so revved up all of a sudden we lose that and we get into the bubble territory where nutty stuff happens so as an investor what do we want to do as an entrepreneur what do we want to do we want to start things in the trough be very careful ride the early wave of people looking for smart sustainable disciplined leaders in entrepreneurs and capitalize on that and then when do we want to sell those assets we've built up and Venture at the bubble the top when everybody else is throwing money in at the bubble we're selling and in the trough when everybody's not investing not starting we're investing and starting this is how you create wealth yeah but it's Buy Low sell High there's no secret about this process it's just the hardest thing for a human to do by low sell High by low sell high are four words that are super important to every Financial uh asset class and it's super hard for humans to do that we get caught up in the disillusionment of the negative trough and we get caught up in the irrational exuberance of the bubbles but one of the things you've had a little bit of privilege is learning for me earlier in life because of my experience I've shared with you these Cycles you're now aware of them it took me a lot of time to learn this is what needs to govern my behavior yeah and just to double underline all this as well is that there's another article that I found that was from the wall before you get to the next article no this is exact I I just to say though we're we completely concur with that first article yeah but that we concur with the second article too I'm saying it's saying the exact same thing so there's a trend moving here yeah right that that these new investment strategies that VC is moving towards smaller funding rounds lower valuations and quicker exits when like 5 10 15 years ago sounds like our Playbook yeah that's what I'm saying that's why I said I feel validated and this Wall Street Journal article is entitled Venture Capital needs a new math try this formula yeah and it t the whole article is about that movement towards that there needs to be smaller funds that take smaller funding rounds and get quicker exit and prove traction and get to an exit based off of real business not off of hype or overhyped valuations right and we've done this I we could tell a story of what you and I did together we funded a company that became a billion dollar unicorn but we sold out early got a 44x return and today sitting here today maybe the founders took some chips off the table where they could calculate a higher return but nobody else of the hundreds of millions invested in that company no other investors have gotten anything off the table well maybe explain explain why the maybe for those who are new or a budding entrepreneur or trying to get into entrepreneurships or starting their own startup or just getting into fundraising and trying to understand the landscape wh why is a high valuation early on in your startup or even a lot of capital raised off of that high valuation why it could be detrimental yeah well first of all there's a term called oh we've got to grow into the valuation what does that mean grow into the valuation if you get an early round that's too high for where you should be and get too much money a lot of Nefarious things happen too much money too fast will lead to squandering of capital and no matter how disciplined you are as a CEO for instance and all your organization knows you got a pile of money sitting in your bank account when they come to you for instance oh this trade show is only $40,000 to be in the trade show it's only C going to cost another $30,000 for building the booth and we're going to send six people there and all that and as a CEO you're going to you know want to say oh should we be spending this money but the impetus the the the the motivation happening inside your company is we got to go grow and build and build revenue up we got to do these things and so you just start spend spending money and it just starts getting out of control and that's the danger of getting too much money too fast the nefarious part of getting too high of a valuation is growing into the valuation you don't want to set yourself up to have to have a Down Round or even worse so give some numbers give some examples to that like what like what what does that mean like right let's take 2021 what did we see how many how much how much Agony have you and I seen from people funded in 2021 yeah in the hundreds and hundreds of companies we've met with okay just that let's take let's tell a story we won't name the names okay we went time ran into a company that got $6 million at a very high valuation y with no business model and revenue right in the middle of 2021 plus took a $2 million loan on top of that from Silicon Valley Bank yeah okay so they got a venture equity loan or investment of 6B does that they will do that no problem at SB they did that's what they do but 6 million Equity 2 million debt on top of it guaranteed by the founders mhm okay personal guarantees okay in 2021 so they have $8 million of capital and they quickly got to $350,000 a month burn rate which gives you just about two years MH okay and never really found the business model never really got it going and just never laid anybody off went two years and woke up two years later in mid 2023 and laid off everybody and just the founder was left sitting with nothing except 2.4 million with interest 400,000 owed to Silicon Valley Bank and we saw that repeated many many times and that's the problem with that that high valuation raising 6 million they were probably I think they were in the 20 millions of valuation well that's what I'm saying so $8 million raised their valuation was probably about 20 25 million 20 to 30 somewhere and and they to the pressure to grow into that valuation is huge and for all of our listeners listening that 30 million valuation right usually would warrant some form of Revenue right you have to have some kind of multiple offer Revenue you know it it depends on the Venture investors there's a lot that encourage this yeah but I'm just saying that's why you're kind of setting yourself up for failure because if you're already raising at a $30 million valuation on your first round of capital coming in what's your next round of capital going be we we're I'm smirking and laughing because it's just ridiculous yeah so like let's say you have to raise up 40 or 50 or 60 million on your next round then what kind of revenues do you have to achieve to be able to go get that next round you're just setting yourself up for failure so that's what he means growing into evaluation is hard we also are privy to a lot of information so just we'll share in round terms we know uh you know we'll take tiger Capital Management the number one investor in the world and Venture in the year 2021 Tyber Capital Management as far as capital deployed or fund six billion invested in 2021 uh and I don't know the exact facts right now people can look this up and check but a gargantuan 60 80% or more more of their portfolios down it's a complete Devastation and that's the problem with that and we also know even locally in our own regional market that we know Venture investors that did a hundred different investments in 2021 with 60 to 80% of those companies basically almost out of business yeah it's it was a tough time so again setting yourself up like that is is at a high valuation or a high amount basic rule of thumb when you're going to fundraised fund rais the the capital that you actually truly need not an exuberant amount and and make sure that your startup warrants that kind of capital or warrants that kind of check size because if it doesn't warrant it and you're just like I'll take it because the money's there you're gonna it's going to be hard to fundraise or continue on that kind of trajectory and fill in those big shoes that you set up for yourself can I also tell you something you've heard me say in some VC meetings and it's true the whole thing though we we talk about all these different moments in the cycle of trough and the valley and the behavior going on we will be there again and right now people are saying be smart do good business and be the this is what we like right now is a great time right three five seven years from now at some point we're going to be in a bubble and people are going to making stupid Investments and it's all going to repeat itself what and then we're gonna have another Bubble Burst and crash yeah and it's going to go I've been through four or five in my career in our pitch deck in our Venture fund we go through all those Cycles what investments we made what we reaped from them and how it's all worked and it's just literally as Dependable as the sun coming up and going down right yeah so um let's close the chapter on that so that okay now let's move on to now maybe a little bit more of a a personal experience because as we are VCS and we are looking at preed companies all the time we're literally deploying Capital as we speak literally wrote a check like two weeks ago to our newest portfolio company um but I thought maybe we would anal a deal that we that maybe the one top one two or three that we want to fund right now because we have a continuous pipeline of startups right we're talking to tens if not you know you mean just generically not by name yeah not by name we're not going to reveal anybody's name or any information or data that that could be tied back to them but I was thinking how cool would it be for our listeners to and viewers to maybe understand what we look for in an investment and we can maybe talk talk about our top one two or three or even the one that we talked to today prior to this call we had again a 90minut conversation with the founder that we is I would say I also received an email in the last 24 hours by somebody that we've turned down that said why is it that we're not a fit for you and what is your mus yeah and I just wrote that email an hour ago to that person here's the mus yeah so that's what I I think it'd be pretty insightful for everybody to to understand at least what we look for and maybe bringing real world examples to the table right now and talk about what what is it about the founding team what is it about the model what is it about the opportunity and what is it that gets us going okay why don't you take um each of those subtopics by topic and we'll just comment and move on you lead the convers so here so here we go so let's let's keep in mind the the probably one of the number one Investments that we want to do if everything continues to go on plan because due diligence with startup ignition Ventures is a bit rigorous and we have multiple meetings before we'll ever write you a check this is not just something on a whim where we go oh yeah sounds good here you go we trust you go take $500,000 no it doesn't work that way we we have a fiduciary responsibility to those who have invested in our fund to deploy that Capital responsible uh responsibly and so let's talk about our number one probably person that we are hoping to invest in if everything goes well instead of the type of business you're saying the founder first yeah yeah so let's just talk about everything like all the aspects and attributes of a fundable project okay but if you you want to well first of the first if you want to go in order of kind of is this the right type of business model right okay genre of business okay so let's go over it so let's go over it um what did we like about this deal so we oh of this deal what we like about it yeah so we had a conversation literally an hour before the filming of this podcast with this team and with this founder going over a part of our d process it's actually not in our sweet spot of B2B SAS though it's not it's not but it is still an attractive deal so this is It's a SAS business but it's not a b vertical SAS workflow management software yeah but which is by the way our number one favorite okay so let's talk let's talk about then why are we moving and why are we favoriting this the founder the founder yes okay so what what stood about out about him or the founding team that is like wow okay that is something we look for and by the way we distinguish Founders as uh in our um way of working uh we have primary secondary and tertiary Founders y so a primary founder is usually not always the found the one one the one who's original came with the idea has the passion and came up with it and is going to emerge as the business side CEO yeah okay that's the primary founder very very important consideration that person is who we look at heavily uh and then there's secondary and tertiary Founders but the primary founder is critical and um so relating back to this deal what what's attractive about him what what well he so with all these attributes let's go back to this specific deal that is probably number one on our list right now okay he is extremely detail oriented he's extremely passionate he's extremely thorough and thoughtful and he's had a success in the past although he did not take off enough money money from that deal in the past for what he created um because he didn't have some of our trainings and teachings so a strong track record well no strong track record is not always it but that helped with him but it's more of those ones I said beforehand but a previous founder he's not a first-time founder yeah and here's on this particular one he's got those attributes I said before that and then because he had a successful deal in the past even though he should have had more wealth creation for himself from it he didn't have as much because he didn't know some of the things that we teach people to make sure that they get to that Finish Line okay but he knows how to do it yeah okay and then with our new teachings to make sure he does it right to preserve his position and do it correctly and then he's got all those other positive attributes he's what we do he is what we call an excellent practitioner I'd say he's in the top two% of the people we meet that will conduct Lean Startup correctly and we've seen that yeah yeah he's proven that over the last three months comes up with a financial projection model it's excellent yeah yeah okay a quality so he he doesn't really have industry experience cuz that's a huge Factor well that's founder market fit founder market fit but I do think he has founder market fit here in the macro way because his previous company was all about movement and accuracy and protection of data yeah okay he's doing that same thing but in a different vertical different industry in a different way but that he's got strong data experience um and but and he found an incred opportunity okay around data in a certain industry we're not going to share any more than that but he he um had went and did his due diligence and he's created connections industry so right now even though when he started the idea he didn't have founder market fit the way we traditionally would love it I think right now he's got great founder market fit yes but overall he's coachable yes he's resourceful adaptable smart and decisive but also teachable and humble yes which are great attributes in a Founder okay so let's move on from founder what about the market opportunity what about the timing of the model or of the idea it what did you like is this a huge and growing Market is it a real problem yes the what he is addressing is a real you and I have talked to his customers he has a handful yep and they Rave about it again our due diligence Pro process is rigorous once we actually write a check but we are writing checks yeah talkers into we don't thisk buty we do now understand it right we have to so he's found and just scratching the CES of his opportunity it's gargantuan huge Tam so it's a huge and growing Market first of all Tam meaning total addressable Market total addressable Market big so the market and the overall huge sector or even macro sector that he's in is so important to the the future of of AI electric vehicles energy all this it's gargantuan government requirements around it municipalities and what he's addressing and he's found an incredible problem and he has solved it so are you saying timing then the timing of the opportunity is right right well just the the size of the IND just what everything's comeing together so let's boil this down and make it uh something that digestible for The Listener or viewer is um in terms of the market huge Market important to the near and long-term future of humans on planet Earth okay which is true yeah it is true in this right yeah and an intense serious labor intensive problem that needs to be fixed yep with technology and efficiency it's got all that okay so so is that are you are so the business model yeah is right the opportunity is right the founder is Right Revenue potential that that's obviously going into this equation because we I I think we he's demonstrated that he has 70 and this is going to be weird to people because they might not understand it 70 products he can come out with the first product alone is investable yeah and he's got 69 others yeah okay and and it's scalable highly scalable yeah yeah yeah highly scalable it'll be it could be rapid growth we we like that's a little bit of what we're taking we don't push we don't push for rapid growth what do we push for steady growth so we a a discipline so what one word about him too is discipline a disciplined primary founder who knows it's really important to nail your business model then build the infrastructure to support scaling activity so it's nail build scale not just nail it then scale it it's nail build scale scale and so he knows that he needs to build the infrastructure to support the scaling activity that will happen when he's got that infrastructure in place and that's a very important thing too yeah and and he is he does have a little bit of traction but more than traction it's validation that he's done he's done a lot of validation work around this idea but validation and traction are have a fuzzy line between them they're kind of interchangeable I personally believe and for those hopefully listeners and viewers here are familiar somewhat with Lean Startup if not get familiar with it but Lean Startup is about going and talking to your customers before you start building a product before you start spending money and finding out if your hypothesis for that a problem exists and your hypothesis that there's a target market that wants that problem solved if that's all true gu yeah any guess is true or not yeah if it's fact okay so but Lean Startup activity and why I said there's a fuzzy line between validation and traction is because going out and talking to customers and finding out if they really have the problem you think they have and that they're willing to pay for a solution is also a pre-sales activity it leads to your understanding of who to network with how to sell and how to package it and this particular founder has done that really well in Spades yeah insanely well he's gone out and talked to the customers and even sold some of the customers and got them on as beta clients before before raising anything and coming to us so so and again I do want to tackle because a lot of time Founders come up to me or to us and say you know if I don't have traction or if I don't have customers but it takes money to get those customers no it doesn't take that money so and for us we don't look necessarily for traction traction really helps if you're into revenues or onboarding customers that's great the more you have of it it helps your project and your deal and makes you even more fundable but if you don't have it you better have that validation you have to have the validation but you're right that there are exceptions like we also recently invested in a company that had 40,000 in monthly recurring Revenue already when they found us they were stalled in some things and needed our kind of training and mentoring to go to the next level right and and and and we commonly see after we've really a lot of our work in Pre as PR investors is not just throwing money at them yeah we are training and teaching and helping them understand how it's truly done and so what happens is right after we give them the money it's so fun the first month we usually see great sales and revenue increases and so yeah and I I and a lot of times people come up to us and say like Hey how do you guys know so much or why are you so passionate about the Lean Startup and this building it's because there truly is so much wasted energy and resources and time and money around building startups and it it just kind of annoys us to a point where it's like we have to help as many people as possible understand what they're failing at and and write the ship and get on the right I don't even know if I've told you this you might have heard me say it before but when we moved from Seattle to Utah you were just a teenager and I came to Utah and I could not believe all of the startups in Utah I found that raised at the time this is Circa 2002 is um to 2005 that raised like 300,000 to $500,000 from friends and family or Ang or somebody and they they got this money in had no clue on business model what they were doing anything it was crazy they burned through all of it and then went back to investors and said oh I think I'm close I need another $500,000 and and it's just insane and right there the whole reason I got involved in entrepreneural education and mentoring was to help stop the squandering of capital and and and increase the chance and probability that of success yeah but but let's just look at the societal benefit right now there's a fixed amount of available Capital to startups if that capital is going to very poor practitioners of startup entrepreneurship and they squander the capital that is a complete waste squander waste that Capital should be saved for those who arrive at a validated business model and then they get Capital that almost goes from venture to growth capital and we don't want to just give experimental squable money to people that haven't done what is free to do which is validate your business model and the General market is moving that way from the Articles we talked about earlier they're moving that way but it's crazy Steve blank the father of Lean Startup introduced this circuit 2007 to the world I got in to do introduced to it a couple years later tested my whole career saw that it was true back tested it started employing it it's been wonderful ever since but even today I predict out of all the entrepreneurship starting a company this week that less than 10% maybe less than 2% will practice Lean Startup yeah which is insane which is what and so that squandering to Capital is honestly a huge reason why there's such a huge failure rate in in entrepreneurship right so it's like understand the basic principles of how to build business to build a business model correctly and then raise capital on that well validated and proven factual business model I always say to people if you can come and meet with me look me Square in the eye and tell me what you're doing and I look you back and say I agree you have truly validated your business model now it's not a question of whether you're going to get the money it's a question of whether you're the right entrepreneur to execute that business model that's the only question somebody's going to execute that business model is it you but if they're that well versed and have the validation work they probably are the most experienced person take there that's a interesting point you bring up going through the Lean Startup process the entrepreneurs that are truly doing it right after so much after a little while I actually say this to them I go do you know Mr CEO primary founder you are probably in the top 50 worldwide out of seven plus billion people expert on what you're doing what you're doing and that's a true State I truly believe that's a true if executed correctly right okay so we kind of diverted from the example of our number one hopefully investable F Curr company we most like to invest in right now yes yes but so to wrap all that up I do think there's like a lot of attributes that we look for in an investable project and honestly it is weighted at times like it's like some projects like the traction trumps a lot of things or some project the founder trumps a lot of things or you know covers up a lot of the other maybe minor red flags WEA prob not going to invest in things that are huge red flags we'll probably just say hey we you're not investable for us we found this out or done this thing or done the due diligence and hey this is not a fit but if there is such a big green flag then it there is a weighted process to that that's what I'm saying it's like you can't just take this one recipe and say okay this is what I need to do here's how I'm going to be fundable because there's strength and weaknesses to every different thing and I think a lot of entrepreneurs need to understand that and that's why it's so cloudy when it comes to what is an investable fundable start up and so just keep that in mind that you need to play your strengths and you need to understand that there's a whole mass amount of attributes that we look for and if you're ticking a lot of those boxes and strongly then that becomes very and there's a couple pre-qualifying assumptions to this conversation we could have said before it is like obviously investable companies have to be scalable yeah um a small business versus a scalable Venture which I think we talked about are foundational principles that have to be met yeah a small business is not set up for external investors to invest okay um it's the primary purpose of a small business is to have the founders make a good living and they're not creating Enterprise Value SC a scare scalable Venture by Design is meant to actually create Enterprise Value so all the stakeholders shareholders gain their their Enterprise Value goes up and they create wealth so there needs to be basic attributes that have to be met foundational things but given those assumptions we're going over okay let's assume you're a scalable Venture in and in a field of endeavor that we like yeah what turns us on then yeah then what comes after that yeah so okay so we kind of went over that a little bit now then now the next thing I did is we have a an online community and I went to our online community where there was a ton of questions that were posted about fundraising and funding and uh venture capital and I kind of took a lot of those and so I I'm going throw a couple of questions at you that come directly from our Academy from our online community okay you ready yes so here we go is it ever Smart this is from a question from our community is it ever Smart to take money from an investor you don't fully trust no no why is that uh trust is the basis of relationships um I one of my good friends in life is Steph movy who's the son of stepen rovy the famous author Steven movy is also a famous author and in his own right with a book called The Speed Of Trust and the whole philosophy behind that is that the more trust in a relationship the less expensive and faster business businesses move at right and and activities go out the less trust the longer it takes and the the um less trust in the relationship the slower and more expensively goes example when people get into lawsuits with one another they're not even allowed to talk to each other yeah and they have to go through an expensive system of lawyers and courts it's the worst of all worst right in human relationships but one case that uh stepen arov used to tell and where Stephen AMR got a lot of his thinking behind his book from was just the that one time Warren Buffett went to buy a unit of Walmart $400 million unit of Walmart Warren Buffett gets with Executives at Walmart e trust they have a meeting they shake hands and agree to buy it and in 30 days a $400 million transaction closed yeah okay D dissecting that out it's because they left that and told their people just get the deal done a lot of times mergin acquisition people investment bankers lawyers accountants would want to string that out over six 8 12 months make a lot of fees a lot of things no the speed of trust the trust there so back to startups they need to trust their investors need to trust your investor and in fact of going back to that example that we were kind of talking about the attributes of this deal I think we ended the call because we were pretty hard on this founder today we were telling him a lot of things that he needed to fix and and rectify before this was a that we could actually invest and wire him any money and at the end of the call I think him and us we agreed wow we have a really good working relationship where we can be honest and true and tell you frankly how it is and he receives that and corrects the ship and moves on right and that's kind of what you need you need someone who you can trust you can rely on that you know okay they're telling me something they know what they're talking about if there's any distrust between an investor and founder it's just a train wreck W an age-old truism in this line in the entrepreneurship world is this is when you take money from an investor in the startup stage it's literally analagous to marrying somebody it's a business marriage and so what happens is just like in life marry the wrong person terrible life marry the right person Wonderful Life yeah same thing take on take in money everybody's money is the same money it's the same money yeah but take it from the wrong investor terrible experience which take it from the right investor great experience this that kind of dovetails now into the next question that I pulled from our community and if you have any questions go to Startup ignition.com create an account and and send us your questions we will look at them we monitor our community all the time here's what we do and so that Dove tailing is and specifically it's startup Academy they got to click to to create an account create an account our ISE mingle with likeed entrepreneurs um here's the next question that I pulled would you rather invest in a great team with a bad idea or a bad team with a great idea oh that's also an age- old question it's way better to invest in an a team with a B idea than a a idea with a B Team yep ex yep execution is a lot of it okay here we go another one that I pulled um what is the number one mistake Founders make in a pitch meeting in my opinion the number one mistake is wasting the time and let's set that up usually that's a very general response yeah no no yeah but I'm going to give specific usually you get anywhere from about 20 to 40 minutes up to an hour in a first meeting with an investor most entrepreneurs squander and waste that that time what you should do is take about 10 to 12 to 15 minutes max to give your pitch presentation with a slide deck and leave the rest for Q&A the Q&A portion is very very important that's when the investor sees What You're Made Of as an entrepreneur and whether they like you and want to invest in you and believe in you because they are asking questions but in your specific questions what is in the pitch deck yeah what's the mistake Founders making the pitch meeting in the pitch meeting so here's the number one mistake is the pro at the beginning you're going to go over introduce yourself problem solution use case and all of that and what the product is they spend like I've seen this when a person gets 45 minutes and they take the entire 45 minutes and they're not even off the problem solution statement yeah yeah the pitch deck is not a marketing pamphlet right you're not trying to sell this investor for the product you're selling them on the model the approach needs to be let's assume the problem solution the use case and the need are all there yeah okay that's what most investors will do they just want to hear those facts and what you're thinking they'll go test that later and talk to customers and target market later and all that but let's assume you've invented the next greatest thing since sliced bread okay that's an old saying you might not know that I know that say okay but let's say let's say that um they do let's just say that's a given but if you take just get to there 45 out of the 45 minutes you take you have not gotten to the most important part of the presentation which is how in the world are you going to sell this and generate Revenue yeah they want to know let's assume your problem solution you're addressing is amazing your product is amazing okay how are you going to go to market get revenue and create a great company that's what they want to know that's where you need to spend half of the presentation on yeah that's not what people do they literally spend 70 to 90% problem solution product explanation and never even get to that again it's not it's not a marketing flyer for them right they're not a customer of buying the product yeah so that's I think the biggest problem there's lots of other problems but that's the biggest problem okay last question here that I have from our community and listeners um what's the best way to meet investors if you don't have any warm intro to any okay well well let's first of all let's start at the very beginning of that if you've decided you're going to be a startup entrepreneur you need to understand that you need to get out of your office and go talk to your target market and go out and M mix and mingle with others in the Venture ecosystem every let's talk the United States every major Metropolitan Market has a thriving Venture ecosystem yeah um some better than others obviously um but if you're from Tampa Florida which I've had people from Tampa for I've mentored and they say oh there's nothing like you have in Utah cuz Utah is a really exceptional ecosystem yeah um uh it's amazing what's happened here in the last 20 years but I'm in Tampa Florida there's no Venture ecosystem like I you guys have in Utah and I go no that's not true in in five minutes I can go on and find all the thriving Tampa Bay Venture ecosystem okay and so you need to spruce up your LinkedIn and make it look like you're a serious entrepreneur cuz people meet you and they go look you up on LinkedIn and if you look like you're working for somebody else or just plain entrepreneur and you're not serious they're not going to take you seriously so you got to get your life in order and then start going out everybody has to eat you should be go meeting and talking to people for breakfast and lunch you should every Venture ecosystem has activities every week lots of activities go out and mix and mingle and attend these things and go out and meet new people after a while you might get bored of that and it might be less valuable to you but at the beginning you need to go build your network and that's how you start doing that um and you get out and meet people and so literally three or four days a week you should be having lunch with other people yeah and and we we love getting referrals from people that we know our network is rather big and we know a lot of people in our our this state and all the surrounding states and we get a lot of referrals and I think we value the referrals into our firm way more than anything coming in cold so it is about networking meeting people that know more people and that's the Practical steps to do it because you don't want to be startup entrepreneur and be myopic and literally sit in your apartment or home or wherever on your laptop trying to choose what colors your logo is going to have versus going out and talking to people in your industry and market and people in the Venture ecosystem investors other entrepreneurs one of the most valuable things any entrepreneur could ever do is find another entrepreneur in a reasonably similar type of business like software business and you're a software entrepreneur that's six months or so ahead of you in the ball game and you take them to lunch and go what was the number one problem the last six months and how did you overcome it and you start learning like that yeah that peer-to-peer mentoring like that that's as valuable as going with an expert like me as your Mentor from you know a sage wisdom type guy is a peer-to-peer Mentor that's just six or nine months ahead of you they've been down these paths before I I've actually seen this happen literally seen it happen in real time where somebody that was 6 months ahead of somebody else this person was over here talking and saying I got this big problem I think it's going to cost me 10,000 I can't afford that and this guy was five feet away who was about six months ahead of him and goes I can't help I overheard what you said uh I just figured that out and got it done for free yeah okay saving that guy $10,000 that happens all the time but and and so let me back up some philosophies on This Ti if I can this is why I believe universities are still important even though I think there's a crisis in higher education and most Majors don't have an Roi and most degrees are not worth much yeah but the I think you're preaching to the choir I think everybody should go to a university for one year in order to have those collisions they're called collisions what you want to have in your life happening is colliding with other people for networking but it's just having this collisions perfecting those soft skills by the way and by the way those collisions are where great ideas emerge from too you might have an idea right now that we would call a hunch okay and then you meet somebody else and they have a hunch and those hunches start colliding with one another kind of like atoms bonding okay or to form molecules creates a new hunch and it creates a new better idea to pursue and we've seen that happen and that's what people need to go out and do so so your overall answer is get out of the building My overall answer would be in an academic way saying you need to increase the collisions in your life with other human beings yep you can't just sit behind a desk or twidle your thumbs right so get out and make things happen Okay I we're we're literally at time we're going to be at time my gosh it went fast yeah so we need to cut the episode but uh to wrap it up investors are changing their strategy uh 2025 is going to be a good year uh they're focusing on smaller checks more traction they're not changing their strategy they're following the path of the cycle yeah the path of the cycle which is right now the Highlight is going to be smart entrepreneurs that say I can take your capital and be efficient with it and not squander it and I'm going to follow good business principles I'm not going to go spend uh $100,000 on stupid marketing that will never pay off I'm not going to overhire by 100% And squander money on payroll that's mushroom y we went over attributes of a fundable and investable deal uh we talked about the pitch we talked about uh current uh articles are validating all of these all of these thoughts for us so thank you for tuning in uh subscribe leave a review connect with us go some people may think I'm biased but I'm telling you Jason Kel canis better be worried you're the greatest moderator in the world now he's in trouble I don't think so hopefully Jason doesn't see this but uh yeah hit us up thank you for tuning in and we'll catch you next time thank you Rock