Ep. #591 - Find Startup Investors
In this episode of Startup Hustle, join Matt DeCousery and Matt Watson for Part 16 of “How to Start a Tech Company” while they discuss how to find startup investors.
Covered In This Episode
Securing that much-needed funding can do wonders in scaling up a growing company. But how do you find startup investors? Is there a place where you can meet them? What do you have to do when you meet them?
In Part 16 of “How to Start a Tech Company,” the Matts share everything they know about finding startup investors. They share their experiences in looking for investors for their own businesses. Matt and Matt will take you through the steps of finding investors, from talking to their connections to meeting VCs and angel investors. They also share vital tips for entrepreneurs to successfully secure investor checks.
Gain more knowledge about how to find startup investors in this Startup Hustle episode.
- Raising funds will be harder than you thought (0:10)
- Initial funding sources: Self-funding and Crowdfunding (1:48)
- Getting funded sucks (5:03)
- Getting traction (7:27)
- Incubators and Accelerators (11:04)
- What do VCs want? (14:21)
- What to expect when fundraising (16:17)
- The fundraising process (21:04)
- Networking and Mentorship (26:48)
- Acquisition (32:12)
- Founder’s freestyle (36:22)
- Wrapping up (39:30)
When you get somebody that is interested, you keep going. You don’t stop because there’s like a 90% chance they are interested eventually, or they flake out, right? So if you find somebody that’s interested, and you don’t pursue anybody else, there’s a huge chance that person is going to fall over, and you’re starting all over. So you got to chase everybody. And until you get a check in hand, nothing matters. You just keep going. Do not put all of your eggs in one basket.Matt Watson
When someone shows interest, you’re going to keep on it. Alright, look at this is a sales process. Don’t wait for that person to take the initiative to come and track you down.Matt DeCoursey
Make sure you’re talking to the right kinds of people. And so, to help define this even more seed stage is going to be the first investment you usually take. Series A is when you’ve got a product, you’ve got a few employees, you’re looking to really scale the business up, and you’re probably a little past the proof of concept stage. So, the key is to find VCs at the right stage and check for what you’re looking for.Matt Watson
Make it easy for people to talk to you. Just make an easy offer to go to them. Offer to be available at whatever time you mentioned earlier. You got to ask. Got to frickin ask. So just like selling, you got to ask for the sale. And just be tenacious. Don’t let it get you down. Pump the numbers up and talk to a bunch of people.Matt DeCoursey
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Following is an auto-generated text transcript of this episode. Apologies for any errors!
Matt DeCoursey 0:00
And we’re back. Back for another episode of Startup Hustle, Matt DeCoursey here with Matt Watson. Hi, Matt.
Matt Watson 0:06
Hey, what’s going on?
Matt DeCoursey 0:08
Part 16 of our 52-part series about how to start a tech company. Are you ready for episode 16?
Matt Watson 0:17
I am ready to raise some capital and find some investors. And I have some really exciting news for you.
Matt DeCoursey 0:25
Oh, no. What is it?
Matt Watson 0:27
I found the money gun.
Matt DeCoursey 0:29
Yes, that’s right. I found the money gun.
Matt Watson 0:32
No, this whole time when I was looking for the money again, the whole time. I found it, and my kids knew where it was the whole time.
Matt DeCoursey 0:40
So you have the money guy, and I had time, and I literally drove down. I took a one-hour round trip to go to our new office specifically to look for the money gun, and you had it the whole time.
Matt Watson 0:50
Well, we had to right so you must have a gold one or something somewhere? I got the red one. Yeah, the key is our topic today is about finding startup investors. And I might be one I do have a money gun so I could invest. If somebody has a great idea and they want to come over. I can spray them down with them and again, so here we go.
Matt DeCoursey 1:09
Do you know what do you know what you don’t need a money gun for? You don’t need a money gun to pay your employees when you use Gusto. And Matt, that’s who’s sponsoring today’s episode, there are a simple online payroll and benefits platform that’s built for small businesses. Gusto automatically files payroll taxes, direct deposits, your team pay, you don’t need a money gun for that dude. Plus, you can offer all kinds of benefits 401 K health insurance workman’s comp, and more. And because you’re Startup Hustle listener, you get three free months once you run your first payroll, go to gusto.com forward slash Startup Hustle once again, gusto.com forward slash Startup Hustle, use the link in the show notes. Go check them out. So well
Matt Watson 1:50
Hang on a second.
Matt DeCoursey 1:51
Well, I want Gusto to keep paying us. So hold on a minute, ammo for the money gun.
Matt Watson 1:56
All right, hold on a minute. I’ve got like 100 employees now Netrio. And they might like getting paid with the money gun. But Gusto sounds way easier than trying to find 100 people and spray money at them. I mean, maybe once a year, they would like it, but definitely not every two weeks. Yeah. Gusto sounds interesting.
Matt DeCoursey 2:16
I’ve seen you sprayed with the money gun before there’s a video on our Instagram page about that. And if you go to our YouTube channel, where you can check out Startup Hustle TV, there’s a whole montage of people firing the money down? Yes, that’s a real thing. Alright, so Matt, you know, like it or not, a money gun isn’t the way that startup investors usually send money in to anyone’s business, although I think many would receive payment that way. You know, we’ve spent the last couple episodes and you know, we are gravitating around this topic, a little a little more than some of the other ones because this is such a hot topic on the show. On May 31, we have episode 600. And I feel like we’ve talked about funding startups and about 200 of those. And yeah, and it’s not it’s not it’s not easy. So, you know, we’re gonna specifically talk about finding investors today. And you know, like, overall, like, where do we start? So, you know, this is something we’ve done, we’ve been involved with others we’ve had, God knows how many conversations about it. I mean, before we get into talking about finding startup investors, do you have any opening remarks or
Matt Watson 3:30
it’s hard. It’s like, it’s like a dating game, you’re gonna get told no, a whole lot of times, but you just gotta keep trying to find new dates, and keep hoping one of them will work out.
Matt DeCoursey 3:43
You got to keep on keeping on. And that’s, I mean, that’s a real thing. And yeah, play the field. For those of you for those of you that have been following the series, you know, the mission statement, Startup Hustle is to bring you the real truth about entrepreneurship. And that’s why on certain subjects in certain episodes, were just inherently we might sound negative, and we don’t mean to be because we want to just prepare you for what you’re going to run into. Because it’s a brutal world out there, man, finding investors and then finding the right investors is a challenge. And you know, some of that we’re gonna let’s just jump right in. Because, you know, like you said, Matt, it’s kind of a numbers game, you got to play the field, you have to you have to sow your seeds. And, you know, try to get the word out. And you know, when it comes to raising capital, I mean, the first off, are you ready to do it? Do you have your shit together? Do you have your offering? You know, well, is it? Is it presentable? Is it short? Is it concise? Does it talk about what you want, the problem you’re trying to solve and your solution? Assuming you have that together, start telling people you’re raising money. I think one of the very first things you can do is you look at like the power of social media, like how many people are you connected to you, man? only people you connected to on LinkedIn, I’m connected to 24,000. So that might be a good place to start.
Matt Watson 5:08
I think I have like 14,000. Right.
Matt DeCoursey 5:11
So you look at like, if you and I were starting a business, and we wanted to get funded right there, and I’m sure there’s some overlap in those connections, but that’s almost 40,000 people, we can potentially reach out to you now with that, I don’t think you need to just do a cold pitch in the middle of a LinkedIn messaging feature. But at the same time, let people know like Facebook, all of it. I’m raising investment capital for my new startup, I’d love to talk to you about it. You know, well, the place to start.
Matt Watson 5:42
And it depends on the stage you’re at, right? Are you at a very early stage kind of seed stage? And you’re trying to raise money from your family, your uncle, your cousin, your cousin’s best friend, whatever, right friends and family kind of thing? Or are you trying to raise money from a smaller kind of VC that does seeds? Or are you raising like a Series A? And it all depends on what stage you’re in, right? But if we’re talking about starting a startup, right, the seed stage is the hardest, for sure. And you have to start with friends and family. But I’ll be honest, I don’t really like that you have taken money from friends and family. It’s that’s
Matt DeCoursey 6:19
all don’t either. I don’t either. So when when a couple years ago, when we sat down to consider putting some funds together for Full Scale and mountain I on FullScale.io. Together, we help you build software teams quickly and affordably check it out. But we you and I, we sat down, we sat down on the conference table and, and made a list. You know, we took a good old Google Sheet. And we started looking through our own contacts, looking through our phones, looking through our emails, who do we know, and we made a, we made a, you know, a list, it was our VIP list, I still have the spreadsheet, the very one that we worked out. And we went through and I think we came up with, you know, 100, you know, kind of a list contact contacts that we were going to focus on first and probably an equal amount in a kind of a sub-list that went with that. And we, I put together a simple email. And you remember how simple that was? Because I gave it to you in a in a little text document. And it just it was that was no, that was like 200 words, it had a couple bulleted lists, it said this is what we do. This is how we’ve grown. This is what we see happening. And this is what we’re looking for. And you and I use the copy of that and send it out to a number of people. And it was effective. Right? Yeah,
Matt Watson 7:45
I mean, it’s a numbers game, right? I mean, for every for that 100, you’re gonna get 10 or 20 that are interested and five or 10 of those will actually sit down and talk to you. And hopefully you get one or two of them that are in right. It’s, it is all a numbers game.
Matt DeCoursey 8:00
Yeah. And we started with about 20 on this list, and after probably 10, maybe even 15 of them wanted to hear what we had to say. We slowed it down, you know, I remember we were like, Okay, let’s let’s work through this first list. These were the people that we wanted to do. And this is, here’s the key. These are people that we wanted to do business with the most and we felt offered the most value, not just to check. And so you know, we went went through all that. And we started taking meetings with people.
Matt Watson 8:30
Now there’s a huge lesson learned here too. When you get somebody that is interested, you keep going, you don’t stop because there’s like a 90% chance, they are interested eventually, or they flake out, right. So if you find somebody that’s interested, and then you spend the next three months screwing around talking to them, and you don’t pursue anybody else, there’s a huge chance you’re gonna get 90 days down the road, that person is going to fall over, and you’re starting all over. So you’ve got to date everybody at the same time. You got to chase everybody. And until you get a check in hand, nothing matters. You just keep going. Do not put all of your eggs in one basket.
Matt DeCoursey 9:14
I want you to envision the beginning of a marathon. Have you ever seen that when they start one and there’s like this massive cluster of people that began running and they run and they run and they run and by the time 26 miles later, there’s usually one person or a couple that have separated themselves and you know, there’s that, you know, when you’re in that earliest stage, you want a whole bunch of people in there and I think Matt, I think that’s really great advice because because I don’t zero I think you and I’d have both made this mistake before zeroing in on one person is a terrible idea terrible because
Matt Watson 9:55
worst case scenario, you want three at the finish line and you want them arguing about who’s They give you a better deal.
Matt DeCoursey 10:03
Who’s gonna give you a better deal? Or maybe you take more money than you originally thought? Yep. That’s how rounds get oversubscribed, people. It’s a lot of ponies running in the race. So yeah, man, I’m glad. Thanks for bringing that up now, you know, so that, you know, first off, who do you who can you reach out to now, as Matt mentioned, when someone shows interest, you’re going to keep on it. Alright, look, this is a sales process people if just if I Okay, Matt, here’s the email and you’re interested, I think, you know, you’re like, oh, cool, I’d like to talk about it. Don’t wait for that person to take the initiative to come track you down. Because that is going to flip your success ratio in a really terrible way. Like, it’s not going to be good. You just assume that whomever you’re reaching out to, or whoever shows interest has got Oh, 900,000 other things to do, that are competing with listening to whatever it is that you want to say you need to be aggressive, you need to be persistent. And you need to, like, be tenacious, like, you know, just keep asking, keep asking and make it easy. Hey, I’m out. That’s the easy. I’m glad you’re interested, can I come? Can I come to you whenever you’re available? And talk to you about this? Not like hey, so Okay, thank you for being interested, if you want to talk to me about it, I’m available three weeks from today, during a two hour block on this particular Tuesday in Hell, no man.
Matt Watson 11:33
And you also have to remember, let’s say you’re trying to raise $50,000, or whatever, from somebody as part of a bigger round for your seed stage or whatever, you’re chasing some person around for 50 grand to them, that 50 grand is like $5, okay, to you that 50 grand is a really big deal. To them, it’s like five bucks, so you’re the guy like chasing them around for five bucks, because they wouldn’t be investing this money with you, if that 50 grand was really 50 grand to them, they have so much money that it’s more like $5 to them.
Matt DeCoursey 12:06
I want to counter that though, because sometimes that 50 grand is like 5 million to them. Because that depending on who you’re chasing, that could be a substantial amount of money that, you know, look parting with with money, especially for risky early, early-stage investments is going to be stressful for some people. So give it give it now for us, we were we were specifically contacting and and had a new some high net worth individuals. So in that, in that case, 50 or 100 grand would have been a small amount, but we were we were seeking a lot more. But yeah, so you know, so Alright, so now you get some people on the hook, like I said, Make it easy for people to help you. If you make it easy for people to help you, you’ll get more help. I mean, I’ll say things like, you know, when are you available? I’ll come to you. Yeah. And that makes it that makes it so much easier for someone to say yes. And to do it quickly. And like why wouldn’t you you want something from that person make it easy. Like I said, what you want to avoid? Is the, you know, that inflexible bullshit, where you’re like, oh, now I’m available for an hour.
Matt Watson 13:16
I have good example this somebody wanted to meet with me about some feedback for their startup. And he kept asking me to meet him for dinner. I got kids and a wife, you know, yep, making time for dinner. That’s not real great for me. But But if he could have said like, Hey, can we jump on a Zoom meeting, I just need 10 minutes of your time, it’d been way easier. We probably we’ve already scheduled it and already had the call.
Matt DeCoursey 13:41
Now, two years ago, that wouldn’t have gone over as well as it will now. And now that’s what everyone wants to do. Yeah, one wants to leave. No one wants to quarantine ended. But people are still in quarantine mode. And it’s just efficient in many ways. So why not? And that can make that barrier to entry for those discussions that much less. Now. Look, it one thing. And I mentioned this at the beginning of the episode, like, you won’t be giving your entire pitch on LinkedIn or through messenger like you want to talk to people. I think that people do business with people, especially in this regard. Now, Matt, you just recently sold a whole company and never even met the people face to face like that kind of proves that. You can do it all virtually at this point. And it should it should improve speed accuracy. And honestly, like your ability to reach more people because like you said, trying to get that’s why everyone wanted to live out in Silicon Valley. Because you could go to a coffee shop and like get, you could send an email to someone and say, Hey, I’m raising capital and they’re like, Can you meet me at Starbucks here and I’m here right now. You know, that made it easier and that made a dance but that’s not the case anymore because people are a lot more spread out. Alright, so here’s another thing when it comes to so so we start with like your own network. Social networks just reach out to people. It’s really easy to communicate with people and just ask, you know another thing like, I’m a big fan of like, send me a booking link, you know, give me options of when you’re available. Don’t make me ask for times, like use Giga book, use Calendly, use something, send a calendar it, send a calendar, invite do something. Because when you do that, there’s something about that commitment to time, that makes the probability of the meeting occurring that much greater. It’s just like you lock it down on someone’s calendar. That’s the way people do business in the modern world. Alright, next. How about angel investor organizations, and we have on here that to help you. And by the way mountain I have and Startup Hustle, Full Scale nobody associated with this podcast has has any vested interest in this network, other than letting you know that there are 14,000 Angel investors in it. It’s Angel, capital, association.org. That’s 14,000 leads in there? Yep. How many do you need to raise your money?
Matt Watson 16:01
Well, and there are Angel, there are multiple angel groups. All over the country, wherever you live in your city, there are angel groups. And some of them are more well known. Like in Kansas City, we have the Mid American angels. But there’s like four or five other groups in town that are little angel groups, and some of them are are bunch of drinking buddies that get together and review review investment ideas, maybe at the golf course, maybe in the country club, wherever. And they do it once a month. And it’s a good old boys network, you have to you have to break into. And it’s all about networking, you got to reach out to these these angel groups. And you’ve got to ask them, like, Hey, you’re interested, you’re not interested, that’s fine. Do you know anybody else? Do you know anybody who knows my industry, anybody has expertise and what we’re trying to do, and you got to keep just going person to person to person and infiltrate these little groups. And if you can find the right little group, and it could be one of these groups of good old boys that play poker together Country Club, you got to get one of them in the in the group to like the idea, and they’ll pitch it to everybody else. Right. And ultimately, that’s the way these angel groups work.
Matt DeCoursey 17:10
Well, that’s what we found for the people that we contacted, they brought friends to the meeting letter, sometimes multiple, we had one guy brought brought three other people. So we were giving a pitch to for four people. Yep, all at the same time. And three of them were people I’d never met, you didn’t know. And and that happened a couple times. So you know, in those relationships, actually, that was just really good for business in general, because some of those people ended up giving us referrals later that turned into lucrative accounts. Yes. And so why not? And yet what I’ve done now, now, by the way, I will say that that wasn’t because we were asking either, like we just got a hold of the right people, and they said, Look, you know, I buddy up on investments with some of these other guys. And I’d like to I like their input. And next thing, you know, we got four hitters. Yes, you know, that’s pretty cool. And that is definitely how that went. All right. So now look when it comes to angels, and when it comes to that, quote, kind of friends and family, and we’ll bundle just people we know, into the angel group, I think you’re probably going to have to give more pitches. But I think that the the amount of time that it takes to actually put a check in the bank is going to be a lot lower than if you do what then if you move to the next category I want to talk about which is just general VC stuff. Now before we get into that quick reminder that taking care of employees has never been more important. And for years, gussto has been helping more than 100,000 small business owners run payroll, offer benefits onboard new employees and more. That’s why they call it the people platform. It doesn’t just look nice, it actually works. Payroll Taxes are filed, deductions are calculated and your team gets paid. You can even offer health insurance and 401k is get three months free after your first payroll when you go to gusto.com forward slash Startup Hustle once again. gusto.com forward slash Startup Hustle, don’t forget the forward slash Startup Hustle. There’s a link in the show notes. So VCs, Matt, this is more complex. And this is also if your rate if you’re looking for startup investors, and your business already has traction, we talked so much about traction in the last episode and why if you have it, your interest, your interest to VCs, now there’s in between five and 6000 VCs and funds out there now, like the idea that they don’t exist, or you can’t find them is wrong. They are everywhere. There is any everywhere dude, and people are pouring a ton of money into businesses like yours. But in order to do that, you’re gonna have to start a relationship, you’re gonna have to give a presentation and you’re gonna have to go through a process that is usually defined by them and not by you.
Matt Watson 19:47
Well, and so let’s let’s start off by clarifying a few things and explaining a few things a little more here. So VCs, you got multiple kinds of VCs, okay, you’ve got and then you have Private Equity, which are sort of similar, but they’re different private equity usually wants to acquire an entire business. So it could be like, kk are one of those big private equity firms that come in and acquire something, right, they acquire the whole thing, and they roll up some things and take it public or whatever, that’s not who you’re gonna be dealing with at an early stage, you don’t want private, it’s not going to be private equity, it’s going to be a VC. But even on the VC side, you’ve got people that dabble in small checks, they’re like, Oh, we write checks for 500 grand, that’s what we do. And then you got people that write a check for a million dollars, or $2 million. And then you’ve got people that don’t write checks for less than 20 million or 50 million, right. So the last thing you want to do is call up the people that write $20 million checks and tell them about your little startup idea that needs to raise 500 grand, you do not want to do that. So you’ve got you’ve got to look at all the pool of VCs around town, and you know, in your region and stuff and figure out what type of deals they do. Are they $500,000 checks, million dollar checks, what is their cheque size? What stage do they invest in? Are they early seed are they series A or post series A and, and make sure you’re talking to the right kinds of people. And so to help define this even more seed stage is going to usually be your first investment, you take it right Series A, usually is when you’ve got a product, you’ve got a few employees, you’re looking to really scale the business up, you’re kind of probably a little past the proof of concept stage. Okay, you’re ready to grow and scale. And then you have other other rounds later, right? So the key is you got to find VCs that are at the right stage and check size for what you’re looking for.
Matt DeCoursey 21:41
And that’s just gonna save you a lot of noise, it’s gonna save you a lot of hassle. Now, look, people are sometimes like, well, I don’t know where to find him. Do why you were doing like you were talking just now I Googled I just literally Google’s your best friend people. Like I think I’ve learned everything that I know, in this modern era from Google. I just typed in venture capital list, not venture capitalist venture capital list, and near the email@example.com never even been to the website before it says list of venture capital firms. It’s got 10,500 line items. I click it, and it’s right here. I mean, it’s right here. There’s there’s just page upon page upon page like, yeah, there you go. And it started.
Matt Watson 22:23
And the key thing is, all of these things are interconnected. So like the angel capital group stuff we talked about earlier, right? Same thing, like you could reach out to me and like, Matt, I’m interested, would you invest? And I’d be like, No, but you know what, you should probably talk to Mid America angels, you might be a perfect candidate for them. Or I might tell you like, hey, you know what, I have a friend that works over at five ELMS capital, you should talk to them. Right? And so when you talk to people, they may be a yes or no. But if there are no dig and ask for a referral, say Who Who should I talk to? who invest in my type of deal? Who in my region in my city do you recommend I should talk to? And they’ll tell you, they’ll usually tell you, yep, you just gotta keep digging, and keep chasing that carrot to the next to the next thing.
Matt DeCoursey 23:11
So So with that, you gotta, like I said earlier, you got to treat this like a sales process. So when we were doing it, we just opened a free Trello account. Cards, and we just like, Yeah, you know, like, possible, contacted not interested, you know, and just literally, we didn’t even have to spend any money on that and just move them over, you know, and down the line. And they were in or they were out. And now I kind of specialize and asking for the sale. So, you know, another thing that I think is important as we you and I sat down in creating our strategy, whether we were talking to VCs or angels, or just people that we knew. And you know, as co founders were like, who’s best to approach this person who’s best to approach this person, once we get it to here, who’s going to take over who’s going to give the presentation, blah, blah, blah. And you know, that’s so you got to get, like I said, You got to treat it. You know, this can be a full time job, but stay organized. Because you might find you’re into hundreds and hundreds of contacts, and emails out and a whole lot of stuff. I mean, you don’t even have to spend the money. Like I said, we did it with a free Trello board and a Google sheet. And, and and did it effectively. So you know,
Matt Watson 24:27
to your point earlier, this is all a sales job. And you’ve got to be good at sales. And the hardest thing is for somebody usually like me, who is a technical founder. I don’t know how to talk to customers. I don’t know how to talk to girls remotely either. But I know how to write code. Right. And the problem is, it’s hard for that kind of personality to be the person who’s fundraising it’s really difficult. If one of your co founders is more of a salesperson, more of a people person. You got to get them on it, and it is absolutely as everything we’ve said in this episode. You gotta Make it easy, you got to follow up, you got to keep chasing them. And you just got to keep keep after it. And there’s one other really important thing here. The first thing you got to do is you got to focus on getting the first investor, because all the little fish will follow the big fish. And the quicker you can get one lead investor or somebody that somebody knows, like, Oh, I got Toby rush or I got Matt Watson or I got whoever it is, and then other people in town know that person, it’s gonna be a lot easier to collect smaller checks from a bunch of other people, once you got a couple bigger names in. That’s the way all this works. It’s all a vote of confidence. If some, if the right people give you a vote of confidence, other people will just line up and follow blindly. That’s the way it works.
Matt DeCoursey 25:46
I just hand people a pen and tell them I know you. I tell them don’t come to the meeting without your checkbook. And then they walk in, I hand him a pan I say, hey, you know Watson’s in on this one. He everything he touches turns to gold, and they just start writing checks. It’s amazing. Because the pen, I hand them the pen, and it’s a black ink pen, but by the time it makes it onto the check, it’s written in gold. So I don’t know how you do that. It’s pretty impressive. Now it’s pretty impressive. But yeah, that’s right. And by the way, that that first investor that lead investor, oftentimes calls friends. Absolutely. Yeah, we did it when we raised some money for Full Scale like it. Yeah. And it was, and I won’t, I won’t name names. But person, that person sold to other people that actually worked for him. And they wrote checks to,
Matt Watson 26:33
yeah, what and that’s what you want, you want to create some FOMO, right? You want some fear of missing out? And it becomes everybody’s telling everybody Oh, would you hear about this deal? I’m getting in on this deal. Oh, he’s getting on this? Oh, well, I want to get on this deal. Right. Like that’s the way it works.
Matt DeCoursey 26:47
And the more people that get in on it, for from an investor standpoint, the risk lowers because No, you know, they don’t, that first person doesn’t feel exposed. You know, in sports, they often say that the first points are the hardest to score. So that’s, I think that translates pretty well over to now. Now you oftentimes see like, well, baseball is a good example. Like, you know, they’ll go five innings and they won’t score. And then when someone finally gets on the board. And there’s like five runs. And then the next team, you know, the bottom of the inning and another three runs, you’re like, wow, that’s like a completely different game,
Matt Watson 27:18
alright. And then the Royals lose 10 games in a row.
Matt DeCoursey 27:22
It’s 11 now and they have a doubleheader today. So they have a chance to lose twice, I have Royals depression, which I’ve learned is actually very similar to founder suppression, and how you go from, I don’t know how you go from 16, and nine, you’re good enough to go 16 And nine, and then you’re 16 and 20. Now speaking of failure, that’s the way
Matt Watson 27:39
it’s raising capital.
Matt DeCoursey 27:43
You’re gonna go for 11 streets. And on top of that, you know, like, when you get on the call with a lot of these folks, I like to talk to people, you know, like, sit down and get to know him, you’re building a relationship. And you know, and sometimes that takes time. So I’ll, you know, I’ll sit down, and I try to very quickly give a basic overview of what we do, who I am, maybe who the other players involved are. And then I ask some questions about the investor, I show interest in what they’re doing, you know, like, give me I know, we’ve met here, here and here, but give me a little more about your background, you know, what, what kind of stuff have you invested in in the past, and that data info is invaluable, because you’ll learn a lot about the investor A their background, and what kind of of value they might be able to offer pass an investment check. But sometimes you sit down and it’ll surprise you, you’ll be like, I was invested in 16 Different companies. Like what kind of investment it would they were all $50,000. Okay, you have a pretty good at that point, you would know that you’re probably not getting a check for more than 50. But that person writes a lot of checks. Yeah. And then sometimes, but you’re one of those guys, by the way. Like, you’re you’re you liked it, when you’ve invested in stuff, you’d like to pepper a whole bunch of small money out and maybe follow it up with a little more later. And that’s, that’s the way it is some people invest like that. And then you have other people that don’t want to write a check for less than 10 times that, but they’re only going to write two a year, or one or maybe none. And, you know, that gives you a good idea of what they’re doing now. I like to continue to have Okay, well, how did those investments work out? And if you got someone that’s like, well, they all went belly up. You’re gonna have a little bit of an obstacle to climb over at that point, you know, like,
Matt Watson 29:40
losers and they want to pick you. You’re like,
Matt DeCoursey 29:42
Oh, wow, I don’t know. You might need to be eight. But the point is, is by sharing that by sharing how that went, you get a good idea, in my opinion of, of what that part like how that experience has been for the investor and what they what they didn’t like. What they did, and, you know, like, we even talked to one person and you know, potential like to take the whole entire round. And we sat down, we’re like, God can, are we going to be able to fucking work with this guy? Yeah. And we were like, I don’t know, if we cut, like, and, and, you know, it was like, I don’t know, it was just it was it was questionable. So we’re like, I don’t know. And but that’s, that’s the getting to know you process because remember, once you take that money and depending on the terms like you might be given up a board seat, you might be doing a whole lot of stuff that you might not feel comfortable with. And that’s when you get into like, you know, what kind of input are you willing to take? Do you want do you need? And you know, how solid? Are you on staying true to your original vision for your startup?
Matt Watson 30:54
Well, and you know, when you’re always talking to these investors, essentially, what could How could they help you? Right? Do they have certain expertise or industry knowledge or connections, or whatever. And that can all be super valuable, way more valuable than the money. But the way you’re pitching new investors, I think the thing that you want to focus on is risk and reward. Right? At the end of the day, you’re trying to get the investors to understand the risk associated with this deal, right? Should they believe in you? Should they believe in the opportunity? What are the odds that this is going to work? Is that a really crazy ass idea? And, and there could be a risk and reward their balance, right? It could be like, this is the craziest idea. But if it works, it’s like a billion dollar idea. Where if it’s a craziest idea, and like, they might make a million dollars later, it’s like, why would anybody do this, like the risk of reward don’t make any sense at all. Like I had a guy once pitch me, it was some kind of crap about he wanted to create some kind of new kind of cell phone and want to make some new processor and chip and all this for a cell phone. I’m like, Dude, this sounds like a really difficult thing to create a new type of cell phone, like I’m out, like, just the risk of this, this doesn’t make any sense, right. And at the end of the day, that’s what all this comes down to the investors, you’re trying to get them comfortable with the risk and help them understand the risk and the potential return and reward. And you got to frame it that way.
Matt DeCoursey 32:16
Well, and I think that that’s important, too, when you’re when you’re given the pitch. So you know, one of the better investments I’ve made over the last few years is I bought, I bought a part of a company that delivers fitness equipment doesn’t do that so far from tech, like, it was me that’s fairly early a delivery company.
Matt Watson 32:34
It was fairly low reward too, right? Like, you’re not gonna be a billionaire?
Matt DeCoursey 32:39
Yes. Well, no, we weren’t, there wasn’t an exit strategy with that business. Right. But it was it, it played well, and to the things that I could provide, like I owned an office building and have a large warehouse in the back done, right, you know, just needed. And I had a founder that just needed some general advice around business and someone to lean on, you know, maybe a little extra credit to, you know, help them buy a box truck, put some money in the account and help them be smart. And that business has been killing it, you know, killing it. And, you know, so like, and so while I profiled as someone that might invest in tech, I, I, that made a lot of sense to me. And I didn’t have to put a whole lot of money into it. So it made it pretty, pretty simple. Now, another thing that I think that that you should look at. So here in the state, in the great state of Kansas, in the Sunflower State, we have a thing called Angel tax credits. And this is a pool of tax credits, not not deductions, but actual credits that companies that get approved for this program, when, when approved, angels make an investment in that company, the state will give you 50% of your investment amount up to like 50 100k, sometimes higher, talking about and
Matt Watson 34:00
talk about minimizing risk for the investor, this is how you do it. And I did three or four investments over the last 10 years, I would have never done without these credits, because it took away a lot of my room,
Matt DeCoursey 34:11
you get half the investor gets half the money back. And that’s these this is money that is part of a state economic development budget to get early stage businesses started and to create jobs. And that’s why they give those credits and in that particular case, like those credits are transferable, you can use them over a five year period, they’re really flexible now, it’s not going to necessarily translate to $5 million round, but that’s not what they’re built for. So you know, and that’s, that’s a good thing. You know, but with that, you can get some input about other companies that are on the list and some guidance about maybe where you should aim with it. So okay. So I have another investment. You know, it way to steer you towards investors in platforms like our crowd. And our crowd has been kind enough to, to sponsor quite a few episodes of the podcast and Startup Hustle TV and check that out, go to YouTube and just type in Startup Hustle, you can find lots of good advice from from more than just Matt and Matt. But these crowd and angel funding platforms are popping up everywhere. And they it’s kind of like Kickstarter. For startups. Now, things like crowdfunding and Kickstarter don’t really work that well, for tech, for tech businesses, they work well, if you are like mixtape the game, and you want to and you have a tangible product that is like 20 bucks or 50 bucks or a couple $100. And people want to want to take a chance on it. Not so great with selling equity or raising money for startups, but the platforms like our crowd are, and now they’re gonna vet you, you’re probably not a good fit for any of those. If you’re like a pre revenue, true seed stage kind of company, you need to have have something we just saw healthy hip hop and Roy Scott, they’re they’re on a platform called Republic. And they’ve been they’ve been raising money through that. And, you know, there’s a whole lot of different things that are out there and go look for them. Those can be a great way what one thing, it’s promo, I mean, those platforms are still promoting what you do, like it’s, it’s a form of marketing advertisement. And if you’re going to do any of these things, you need to be prepared to do some marketing and advertisement, not just build it and hope they come. So what do you think about those because you know, Matt, 10 years ago, those were an options for us.
Matt Watson 36:41
I think those marketplaces are great. I have a feeling it’s hard for a lot of startups to stand out on them is going to be the challenge, right? I mean, it’s kind of like a dating website, there’s there’s going to be a big pool of people on both sides. And how do you stand out from the crowd. And but that’s the thing you always have to remember when you’re trying to find investors, right is to the investor is looking for the best opportunity they can find with the least amount of risk and in the most amount of reward or upside, right. And when you get out into those platforms, you may not be the best, the best opportunity, there may be way better opportunities out there. Now, when you’re in your little circle, and in your city, you might be the best looking opportunity out there. But now all of a sudden, you’re stepping on to the global stage and you’re competing to be the best opportunity and competing for dollars. So
Matt DeCoursey 37:35
And sometimes what you do might not be easily explained through platforms like that. Alright, so last week, last week, we played our new game called things VCs have said to me. We’re going to we’re going to hack out the the VCs, and this week, we’re going to play a quick round of things. Things possible investors have said to me, I’ll go first. I don’t understand what the hell that your business does.
Matt Watson 38:03
I just wrote a couple checks to other startups, and I don’t have any money anymore.
Matt DeCoursey 38:09
When raising when raising money for Giga bucks, someone said to me, Oh, so this is exactly like Airbnb. No.
Matt Watson 38:19
I just got to divorce. I can’t do any more investment.
Matt DeCoursey 38:24
And then and then the one blanket answer that covers 80% of all entries in this game. No. All right. And that wraps up another another entry. Oh, yeah, you got more. All right. Well,
Matt Watson 38:38
I only invest, I only invest in real estate deals. And I’m not into this weird, risky startup stuff. Oh, about slides, more answers just like that one.
Matt DeCoursey 38:52
Did you send a link to the acquisition episode on Startup Hustle TV to all those people that said that as you exited yet another tech company last month,
Matt Watson 39:01
I only invest in oil fields and pipelines. And I don’t understand this Facebook stuff.
Matt DeCoursey 39:10
The future of my investment is in retail space. There you go. How’s that working out for you? And that concludes another episode of things. VCs or investors have said to me, it’s a rapidly growing game here. We might have to do like a group episode where we just have to get like 10 people on here and just kind of like, you know, play hot potato. All right, Matt. So you know, here we are at the end of episode 16 talking about how to find investors go back and remember, angel capital association.org as who we talked about, and people just google google like I found that list of 10,000 firstname.lastname@example.org Never been to the site before I just Googled venture capital list and founder one to CrunchBase they’re everywhere man like There’s like a million pages of results there. So before we get into the founders freestyle and give you some of the best advice we can for finding investors and our takeaways from today’s show, I want to remind you that today’s episode Startup Hustle was brought to you by Gusto. If you run a startup, give gusto try deposit, paychecks, file payroll taxes, get insurance, onboarding, expert, HR and more. And you get three free months when you go to gusto.com. Forward slash Startup Hustle once again, gussto.com forward slash Startup Hustle, there’s a link in the show notes. Don’t forget to click that. So they keep funding us. And we can keep doing the show because we’re gonna go raise money for Startup Hustle. We’ll see how that goes. People like Do you have any traction? Well, we’ve published 600 episodes. But do you have any traction? Maybe? So Matt, what’s what are your takeaways today? And what’s what’s your best advice out of everything we talked about today?
Matt Watson 40:52
Raising capital is a full time job. And it’s a sales job. And it’s all about networking, you got to be expected to be told no, a whole lot of times, but every time you get told no, you need to get like two more contacts from that person is like, okay, sure, you’re not going to invest. But you know, people who would, and you just got to keep lining them up and keep going on. And next thing you know, you will have invaded the rich old white guy club in your town. Good, let’s be honest. That’s probably what it is. And and you’ve got to track them all down. And wherever the money is. I’m kidding, of course. But you got to find that club and start networking through the club.
Matt DeCoursey 41:38
I mean, unfortunately, you’re right about that. Because that I mean, that’s what we ran into, you know, and we were we were prepared for that. Alright, look, I don’t want to run into any of you listening at a future event or somewhere, someday, and have you tell me that you listen to this episode, and you were unable to find investors. And I say, really, how many of you reach out to and you’re like, 10. Those are rookie numbers, people, you gotta get those numbers out. That’s it, get the numbers up. Look, get your shit together, get your numbers together, get your pitch together, get a one-pager you gather, keep it simple. Make it easy for people to talk to you. Just make an easy offer to go to them. Offer to be available at whatever time you mentioned earlier, like not wanting, you’re like, Hey, I can’t do a dinner thing. You know, I have kids, I will. I’m able and I’m ready able and willing to speak with you anytime of the day anywhere. Anyhow, what works best for you. You got to ask. Got to frickin ask. So just like selling you got to ask for the sale. And just be tenacious. Don’t let it get you down, pump the numbers up talk to a bunch of people like I was talking to someone recently that was trying to get a loan for kind of a specific type of purchase that wasn’t standard and literally went and talked to 90 banks, the 90th bank gave them the loan. A lot of people quit before that. So I mean, how bad do you want it? I think that’s really what it comes down to. Matt. I’ll see you next week for episode 17. Keep after it.
Matt Watson 43:14
Should I bring the money gun?
Matt DeCoursey 43:16
Do it because you’re gonna fund me.
Matt Watson 43:18
All right, good.
Matt DeCoursey 43:20