Ep. #867 - Investing in Flyover Country

00:00.00
Matt DeCoursey
And we’re back for another episode of Startup Hustle. Matt DeCoursey here to have another conversation, I’m hoping helps your business grow. So regardless of where you’re at in your stage of entrepreneurship or the stage that your startup’s at. You have probably considered raising money. You’ve thought about finding investors. Maybe you’ve done it. Maybe you haven’t maybe that went well maybe it didn’t you also probably learned that raising capital in different parts of the company. Country is a different reality for startup founders and entrepreneurs. That’s exactly what we’re going to talk about today when we have a conference when we when I have a conversation about investing in flyover countries. So what does flyover country mean. If. You’re not aware. Startup Hustle is born and raised in Kansas City which is pretty much right in the middle of the United States and it is also a city an area that none of people fly over and don’t. Ever really stop to check out what’s going on. That’s not the case with today’s guest who runs a very popular venture capital fund and firm now before I introduce him today’s episode of Startup Hustle is powered by fullscale io hiring software developers is diff. Difficult and full scale can help you build a software team quickly and affordably and has the platform to help you manage that team visit fullscale.io to learn more with me today is Dan Kerr and Dan is a partner at Flyover Capital you can go to http://flyovercapital.com to learn more about what they do. There’s a link for that in the show notes straight out of my hometown of Kansas City. Dan welcome to Startup Hustle.
01:45
Dan Kerr
It’s great to be here, Matt. Thanks for having me.
01:47
Matt DeCoursey
Yeah, so I like to start all my conversations by getting a little bit of your backstory. So, let hear about it.
01:54
Dan Kerr
Well as you said I’m with Flyover Capital and I am truly from flyover country I am a native of right. In the middle of Kansas grew up in Hutchinson Kansas and went on to ah be in the financial services sector was a part of a couple of early-stage technology companies ultimately found my way to Flyover Capital. And kind of brought me back home. Ah.
04:46.52
Dann Jerr
I came from a family of entrepreneurs and always knew you could build a company anywhere at the same time as where I grew up. Ah, there were a lot of small business owners manufacturing that sort of thing. Um really leaders of the community that I was. Around as a kid but a lot of that has really left the kind of town that I grew up in. Um, so it’s been very interesting to see this sort of new formula for building technology companies outside the coast. So I’m very excited about the trajectory of, sort of non-coastal investing outside Silicon Valley becoming better and easier than ever to do that. So excited to dive in a little bit more.
03:10
Matt DeCoursey
Yeah and I want to hear more about your thoughts on so many different things today. Now just to clarify so at Flyover Capital you. You’re committed to investing in companies that aren’t Silicon Valley, I’m assuming New York City, Miami. some of the other things we’re looking straight into the in the midwest and like where does flyover country begin and where does it end.
03: 40
Dan Kerr
Yeah so. How we would define Flyover Country would be outside the 3 big coastal tech hubs. So outside of the Bay Area, New York, and Boston. When we got started at Flyover those cities metro areas would everyone call them. Ah, received over 75% of venture capital dollars. That’s still the case. Um, and so, anywhere outside of that is receiving relatively less capital. Um Flyover Capital does even a little bit more than that, we try to focus on kind of the. I would call them none-tier cities in the Midwest Southeast that are you know, big enough to have some scale to an entrepreneurial community at the same time as they definitely don’t have a big investment sector. They’re usually. Up and coming kind of transitioning from being industrial hubs and starting to be more tech hubs.
04: 40
Matt DeCoursey
So over the last few years, I’ve noticed or maybe it’s just become aware of more funds that are similar to flyover capital that are looking for value outside of like you mentioned New York, Boston, Silicon Valley, is that a trend that’s likely to continue?
05: 00
Dan Kerr
Yeah I mean it’s been a huge shift. So you know if we go take a little trip back in time ah ten years ago or so. There was really no institutional capital in most of these places. So Kansas City for instance did not have early-stage capital. Um, there were a variety of reasons for that one was, if you go back even further to http://the.comera. There were some funds that that got formed invested and burnt very badly and it took ten or fifteen years for people to come back around and start to see some signals that there is sort of a new era of, you know cloud-based internet companies that can be built. And I think ah if you take a place like Kansas City you also saw the ecosystem start to put different pieces in place here. We had Google fiber take its, you know, pick. KCK where we’re sitting today as its none um, you know planned community for fiber optics to provide more communications for the city that was a catalyst for a lot of growth. You know None years ago or so there are also a lot of support organizations that were formed to help entrepreneurs around that so we benefited. During that era as a fund because that was in the news and it was starting to give visibility to what was happening with technology. It wasn’t just um, companies being formed out of the bay area. It was starting to be other places and so, ah, investors started to be more willing to open up their checkbooks to funds going after that. Um, we were really formed because there was demand for capital. There were good companies being formed. They needed capital but coastal investors literally would say that’s flyover country. Come out to the west coast and we’ll take a look at you. You know, sounds interesting but you know we’re not going to come to Kansas City it’s a flight away. We have plenty of companies in our backyard. So we’ve seen that shift really dramatically since we started investing in 2015 you do see a lot of regional funds that have been formed. They tend to be smaller. They tend to be um, you know more region-centric um, and they don’t necessarily have every kind of company covered and what they’re going to invest in, but it’s changing and they’re starting to be a bigger ecosystem. Funds like ours also are well connected. So I’m not just talking to people that are doing something exactly like we are. We’re talking to coastal investors. So in that next round of capital comes up. We have a network and we can also connect companies that aren’t a fit for us to another kind of investor. So.
16:05.48
Dan Kerr
Still fairly unique in what we do, but the great kind of macro event is that this is shifting and investment and technology companies are being formed in more places.
08: 15
Matt DeCoursey
So if you look at the geographic footprint of Boston New York and the valley as we’ll call it which is not just San Francisco it’s San Jose
08: 26
Dan Kerr
Sure you know.
08: 28
Matt DeCoursey
The None pretty big huge markets kind of mushed together. All that said those, even though there’s a huge population center there geographically that’s a very microscopic portion of the entire United States. Do you think some of the problem in the past with investing in flyover-type companies is that it’s like from an investor standpoint. It’s like where do we start. I mean there’s like you have 47 other top 50 cities. Once you get past the top 10 they start to get pretty small. You know Kansas City is like twenty-fifth anywhere from none to none. Biggest media market. Like we’re barely big enough to have a couple pro sports teams here. So. I mean do you think that identification of like who what where and like if even getting on the radar was part of the problem?
09: 16
Dan Kerr
I think it was it was clearly partly a visibility issue. I think there were a lot of reasons why it was more concentrated twenty years ago than it is today. Back when you needed, you know, really deep experts in building computing you had hardware you had to have really concentrated expertise you needed major technical breakthroughs to even produce the kind of software that now we completely take for granted. So. That made a lot more sense when you had to have that sort of like really deep intellectual firepower to build a business now. Definitely need smart people. Definitely need people that can write code in most cases but you’re not constrained by needing to have like super deep expertise. You can have it in other areas and now also like one of the things where we think is a really good fit for the region is you have the industries here. You have the buyers. You know? So while I say 75% of venture dollars go to 3 metro areas. You still have more than 75% of GDP and fortune None companies outside of those areas so being close to the buyer is even more important than being able to build the technology in a specific location.
10:40
Dan Kerr
When you’re getting started because those companies are more likely to take a look at you. You can get the door open more easily. You have a network around you and so that’s kind of one of the things that we try to invest along is where do you have some advantages that are able to kind of give you a boost as you’re getting started.
11: 00
Matt DeCoursey
Every time I talk to someone from the valley, from New York, and our boss, they are overwhelmingly jealous of operating costs which is what surprises me because ah, there should be a lot of value out there if you look at. Okay, so my company full scale exists because have this massive shortage of developers in the United States and if you want to go out and compete with them for that talent in San Francisco, I mean better have some deep pockets. And it’s easy to run through some cash is the whole point. You’re right? There is ah a much deeper set you look at Boston and you get places like mit pumping out. genius kids Harvard you know obviously the valley’s got a lot going on New York’s always New York but I don’t know I feel like there’s got to be some value out there at play. But. You know there are smart people everywhere I try to try to convince or not convince people just remind people that when they’re some people say oh I don’t want to hire people that aren’t in the United States I’m like, there’s smart people everywhere just gotta know where to find it.
12: 05
Dan Kerr
Oh absolutely I think yeah I don’t think that ability is all at all constrained by. Geography I think there’s definitely training in education that is but you can definitely find great people everywhere. I think that you do have to have sort of a certain scale of kind of culture around how to build a high-growth technology business is going to be venture backable. That’s not something that most people can just you know, kind of um, you know, emerge, and do they need a little time around that and to kind of get kind of the cultural cues a little bit of you know. How do you hire the right people at the right time? How do you say the right things some people are natural is at that. But I think generally speaking kind of being you know, steeped in it. A little bit’s helpful. So having a little bit of mass is important but it’s not because like it’s not due to ability. It’s just ah, just exposure.
13: 04
Matt DeCoursey
I think some of that supported when you have so here in Kansas City we have things like Kaufman and the Hellsburg entrepreneurial mentoring program and pipeline entrepreneurs and you know a lot of things that in my opinion you don’t find.
13: 25
Matt DeCoursey
As many of and markets our size do you I feel like that has a lot to do you see yeah I was just at the pipeline entrepreneurs awards gala recently and like I don’t know there’s there’s ah for those of you listening. There’s a ton of stuff like that. You just got to go out and look for it. It’s probably in your backyard. But do you think that programs like that and being involved with stuff like that is the best way to get yourself on the radar and Flyover country?
13: 50
Dan Kerr
Yeah, I think I think that definitely helps. Um, ah, there are definitely different ways to build businesses. But. You know to that point I mean I think if you especially if you haven’t been around it before that kind of program whether it’s a mentoring program or an accelerator is going to at least give you some exposure to other people that are doing this kind of thing you know, ideally some education about well. Am I really the right fit for raising a certain kind of capital or where do I need to go for that. So those those those programs can be a great place to start and we are fortunate Kansas City I mean it’s been a lot of public support for those kinds of programs. Um, and you know I think I think we still have a long ways to go and how we want to build. Things in how we put in I guess how we fill gaps but but I think ah that that’s opportunity as much as anything so that’s how I look at that.
14: 46
Matt DeCoursey
So if you’re if you’re in ah, a flyover country kind of city or area. What’s the best play like. Let’s talk a little bit about getting on the radar of investors like obviously you can go to http://flyovercapital.com. That’s one that’s None place to start. But I mean how do you get noticed?
15:06
Dan Kerr
Yeah so I mean there really are a variety of ways. Um I think maybe put it in a little bit of context. If you go back ten or fifteen years like let’s be honest, venture capital is very much kind of an old boys’ network. It was very hard to crack into you had to know the right people. Um, and there are certainly certain echelons of of venture that are are like that today. Um, but I think it has become a lot more accessible than it once was as I mean the industry has grown a huge amount just in the last ten years from what it used to be just ah, a boutique industry and I somebody was at a conference I was at was talking about the stats on this I mean if you go back 30 years.
15:54
Matt DeCoursey
50 funds is prepared oh year to None
15:56
Dan Kerr
It was like the whole industry was like a billion dollars now. It’s hundreds of none and so there’s a lot of different flavors of venture investors and in any community of any size There’s probably somebody. Writing angel checks. Um, maybe has a fund. Is in a mentorship group that’s plugged into funds or is running an accelerator, which is another way to get kind of plugged into this world. Um, there’s also just no arguing that the hustle and building good relationships with people is probably the biggest thing. So just meeting people, asking that tell them what you’re doing finding people that have a common interest or you know maybe they spent time in your industry. You know, many moons ago but are interested as a personal investor in it. So like. Just getting out there and starting to talk to people. You will start to find that there there are investors out there. Maybe you haven’t heard of them before but they may be out there and I think in our part of the world. The midwest they’re actually generally pretty willing to make connections and that sort of thing. Um, if you put things in the right context and if you’re respectful of people’s time and let them know what you’re really looking for generally you know investors can at least give you some direction.
17: 21
Matt DeCoursey
Yeah I refer to the accelerators and mentoring programs and stuff like that as earning your Girl and boy scout badges because I think that for a lot. Well for you know that investors that I’ve ah all the conversations I’ve had they always look founder first. He’s give him a great idea. But if you have terrible founders or leadership or so yeah, there’s something else missing there then there’s no point. Yeah, but for so many founders that are young and it’s interesting because Hollywood portrays the tech founder as being like this twenty-year-old kid that’s like so in his dorm room like. Social network writing algorithms on a window and getting traction the next day and that’s actually not what statistics say oh statistics.
18: 10
Dan Kerr
They look like you yeah
18: 15
Matt DeCoursey
mid 40 s with some experience and yeah and stuff like that and but with that. When you’re in the younger segment That’s where I think those badges are helpful. There’s a level of validation and support I mean. Is it fair to say that the none check is without a doubt the hardest to get?
18:33
Dan Kerr
I think in most cases that’s true I think getting some credibility. Having been out there before goes miles. You know there’s ah some common you know, common statements. Rules of thumb and in the industry is like you know you’re having a failed business is like your best tuition of being able to go out and do the next one as long as you do it fail the right way. Um, but well
19:03
Matt DeCoursey
I think it’s important. Let’s talk about that for a second because I’ve given a lot of people advice about this and I give the opinion, walk-in and be as transparent as you can be. Because my opinion is that people that write big checks are sophisticated enough to figure it out by the time they write you the check. There’s a whole process with that. But I’d rather have here that someone failed and learned from it because until you do as an entrepreneur you think you’re bulletproof. And then you realize you’re not. And you’re like wow and I think I’d rather have someone on the other side of failure. I don’t want you thinking, you’re bulletproof with my money in your pocket. Yeah I think that’s an expensive lesson that a lot of us learn. Yeah at some point now out of the failure. I mean I, can we say that that’s not a disqualifying factor for someone writing you a check.
19:56
Dan Kerr
I think it is definitely not. I yeah at the same time as depending on where you’re building your business. It may be viewed as more of liability I mean I’m just not gonna be.
20:10
Matt DeCoursey
Always situational.
20:10
Dan Kerr
It is situational. Yeah but None of the things that I think has started to ah evolve in more places so like let’s take Silicon Valley. That’s absolutely acceptable there I mean they expect people have been through four different startups in areas where this is a newer idea that hey you’re going to go out and start None may work out may not but starting to see that that pattern of learning along the way um like more places are getting familiar with that. And if you have sophisticated investors and you’ve failed in a way where. Hey you did everything you could you? You have good lessons learned out of that you got as much capital back to that the prior people or to ever who’s who supported you in the past and and and didn’t you know. But can you screw people over along the way? Yeah, then then you’re gonna be ah ah I think viewed well by investors.
21:13
Matt DeCoursey
I think the key is that but admit it yeah yeah minute it be open I tell people your story is your story. Yeah. Yeah I wrote my book none million dollar bedroom in like a month people like how’d you write a book that fast? I’m like it was my story and really have to give it a whole lot of thought it already happened and it already occurred you know own it wear it and be upfront and open about the things that your organization or you are good at yeah and the things that you aren’t. Cause when I’m looking for an investor or a partner or someone I want someone? That’s as I want this to sound as least Valentine’s day-ish as possible I want people that complete me I want people that are gonna. Be good at or offer value in the places where I’m either not great or not interested and you know that’s I think that’s why it’s important to tell people because None thing I’ve learned about it investors especially you know funds and you’re like hey I gotta get this pitch like get in there and just get right to the point. Yeah. Like let’s not sugarcoat this yeah tell you what I’m good at what I’m not at where we’re at what we need and all that.
22:18
Dan Kerr
Yeah and I think I think ah you made a point just a little bit ago about you know, being honest, tell your story super important. Yeah, I think you also kind of have to know you know thyself right? If you’re a person that overs shares you may want some coaching on the right things to say because there’s you know there’s telling the truth and then there’s sort of marketing that truth in the right way so you got to that later point be succinct be right to the point here’s the problem. Here’s my solution for that problem and here’s how I’m making a business out of it I mean it’s.
22:54
Matt DeCoursey
Lead with the need and people. Yeah, it was my book editor. Yeah taught me that I can hear it in his head all the time. It’s like, anytime you want to get someone’s attention. You got a lead with the need. Yeah like this is it. This is it and I oh man, nothing drives me crazier than being 10 minutes into someone’s pitch and you’re like what do you do? Yeah, or what do you do? What’s the problem you solve now speaking to problems. Finding expert software developers does not have to be difficult you like what I did there who’s pretty that was all-natural too until I started talking out, especially when you visit fullscale.io where you can build a software team quickly and affordably use the Full Scale platform to define your technical needs and then see what available developers testers and leaders are ready to join your team. You can visit fullscale.io to learn more and you know let’s talk a little bit about talent and co-founders because this is ah a hot topic. Should I have one should I not where do I find the right people. How important how much do you care if a founder has a cofounder
24:01
Dan Kerr
You know I wouldn’t say it’s a qualifying yes or no. But I will say that many if not I think definitely the majority of our successful companies have a co-founder of some kind because it’s hard to fit all the skills into one person and building a business can be a lonely process I mean you need somebody that’s along for the journey. Um I think critical to that is that that’s the right person that is not just somebody that not just another you just another? Yeah, you don’t want them like. Just like you. You need them complimentary but you also need something that you really know and really trust and that is as invested in it as you are.
24:45
Matt DeCoursey
I’ve spoken to several investors in the past that don’t want to invest in solo founders. That’s like yeah a huge downside. There are a couple of reasons for that. One if you quit it’s game over yeah. Two, like you, mentioned it’s a little bit of a lonely existence having someone to be accountable for and to keep up with it I think is important and then mainly just like if you can find the right mix right. You know, find someone. That’s not good at the stuff that you’re good at or if you do happen to have a co-founder you’re both good at the same stuff. You need to hurry up and find the people that. Cause you’re not good at everything. Absolutely not even me Dan I’m not even know I’m not even close like for me like what’s something. You’re not good at or wasn’t as an openor.
25:30
Dan Kerr
I mean so so many things you know I’m not detailed or and
25:32
Dan Kerr
I would definitely put that one up I am not I would not be a good c o o I am not like a structured person.
25:43
Matt DeCoursey
I get the operation side of things but it’s the drawing the charts. Yeah graph I’m like there are better people for that.
25:49
Dan Kerr
Yeah I tend to be good on you know, um, you know, kind of vision and strategy and finance. Not so much on. Things that have to be done in process.
26:02
Matt DeCoursey
So then we get visionaries and you get people that are implementers. Yeah, and like our co o at Full Scale who’s been working. We’re on our None company together. All successful ventures and he said to me, he’s like I couldn’t do your job I’m like it’s good cause like I couldn’t and don’t want to do yours? yeah. And that’s a good mix. You know that’s a good mix with people that you yeah obviously as you get bigger. That’s something that I’ve gone through a tremendous learning curve with because I’ve had successful businesses in the past and ones that grew really quickly. But then all of a sudden. We just blew past our none employee
26:37
Dan Kerr
you guys are rocking at it at Full Scale.
26:40
Matt DeCoursey
Well but it’s crazy though because it’s with the smaller businesses especially in the early stage you can kind of you know it’s almost like you know you jump. It’s like when your kids play the floors lava.
26:58
Matt DeCoursey
Yeah, you’re just trying to jump to the next thing without falling in yeah and then you get to the point where you’re like okay this is a lot bigger and there’s a whole list of different things that can really kind of throw you off and and and also things that if they get off center are going to tip. Everything over one way or the other now you know, but but I never have experience running a None person company like and most people don’t until you do. how important is the founder’s experience. Yeah. When it comes you know because like I said that’s like
27:26
Dan Kerr
I think you’ve got to have some you know and from an investor’s perspective. You got to have some degree of indication in your background that you can handle those ups and downs and you could be resilient. And adaptable to a business that’s going to change so that’s just that’s absolutely cruel. That’s backward failure comes in. You know, having been through it having some scar tissue really can help position you there and I think None another thing on. You know, founders and co-founders. You know one thing that I think’s essential like if is sales like so you got to have a founder who can sell if you’re not that person you got to have somebody that can be that person. Um, if you’re building a technology startup you. Really got to have somebody that is that can run the technology organization. So ah, hearing that we’re gonna hire that person at some point I mean you’re your technology company. You’ve got to have somebody that that could do that so as your. Thinking about how you want to build your business. You don’t have to be that person yourself, but finding that compliment that fills some of those fundamental gaps and is really invested in it is super important.
28:48
Matt DeCoursey
I get red flags when I talk to people. Just remind me of a couple of them there when you’re talking to a non-technical founder and they ask me questions. So so at Full Scale we help you scale your team like build a bigger team like all this ah early stuff we mentioned it’s easy to get a couple of people and then you get this $5000000 check and you’re like I need None more people. Yeah and look. If you’re in flyover country. This is a real issue like they’re just. We’re like negative None jobs in Kansas City for IT and there aren’t people here to do it? Yeah, so but yeah, non-technical founders the red flags we run into we hear things like when it’s done. No.
29:28
Matt DeCoursey
It’s not done. You’re starting a software and technology company. You’re never going to have an existence. Yeah, where you don’t have people that yeah, there’s no the technical magic.
29:40
Dan Kerr
There’s no end state.
29:41
Matt DeCoursey
Yeah yeah, and that’s ah you know that’s ah, a big one and then also like we don’t really even. Bring in clients that don’t already have ah some kind of technical team ready. we want to augment and help you scale that. But the reason is is because well people you’re awful to work with at that stage you have no clue what you’re doing The resources are usually tight. One thing we know about personality styles is that our worst qualities show when we’re tired or when we’re stressed, so they end up not treating people. Well, it’s just a real high pressure environment. One of the things you said a few minutes ago was talking about the ups and downs and man this is a. Real thing like I actually I should have warned it I have t-shirts that say founder on him and have a guy riding a roller coaster yep through it and that’s the feeling of being an entrepreneur I’m sure if you’ve been paying attention to startups and entrepreneur. You’ll see some some pictures and memes that’ll sit. The day of an entrepreneur and they start by bursting out of bed. They’re in the corner crying. They’re maybe having a drink later and then they’re back on top of the world right? Another another phase now you mentioned like the people that can handle it now. It is more than just the ups and downs like how. How do you look at someone you’re like okay, what’s this person going to be like if I put five million bucks in their bank account. Yeah is that a real I mean is that a real concern and something you think about?
31:00
Dan Kerr
Yes, probably 1 of the most important things you think about? In fact, you know we effectively interview people all the time when they’re pitching us their businesses and we ask a lot of questions about the business and about. How you’re gonna grow the team how you’re gonna do these things but underlying that I mean I think one of the most fundamental things that I certainly do all the time is just I’m thinking about this person. What I want to work for them. Would I want them to work for me sometimes I press them on stuff that I’m I’m interested in but I’m also kind of reading the signals like in an example. Well I may challenge their business model or say why are you doing that you know like um, you know why’d you hire that person you know? Ah why are you paying yourself or so so much you know some of those things that ah
31:48
Matt DeCoursey
Is that just a seer reaction?
31:48
Dan Kerr
Yeah well I mean. It’s usually a coolup. It’s answer is a real sure question. But yes, it’s part partly what we’re looking for is how do you handle just you know if I’m just poking you on something about your business. Yeah I’m not trying to just make your life hard. But I I do kind of want to see how you react can you do you handle it and say say. Are you willing to say I don’t know sometimes are you willing to? um, ah, are you getting flustered? You know, ah you know are you feeling like or or do you handle it like somebody. That’s rarely surprised you know and you’re and you’re ready for it. You’ve got a good response. So. I think inexperienced entrepreneurs oftentimes try to answer everything you get a winding non-answer instead of something direct and again I will say including I don’t know that’s an okay answer now you want to follow that up I don’t know but um, that’s something that we’ve outlined that we’re working on. Um, or I don’t know. But um, you know we’ve the reason I don’t know that is um and so you want to have a real thought process behind it but having clarity of you know who you are what you’re trying to build and to not feel threatened by. Um, some basic questions about the business is really important I think it’s an indicator of resilience and sort of that experience of that you’re going to face just as you grow your business.
33:19
Matt DeCoursey
Because of Startup Hustle, I get a lot of hey can I run my idea by you and get your opinion which on. Pretty ah accessible but I have a rule that if I don’t tell you what you want to hear I don’t want to hear you try to talk me. It talked me out of why you’re right? Yeah I’m wrong because that’s exhausting. Yeah, and that’s kind of like you mentioned with the. Got all the answers I want I’m looking for people like in life that doesn’t have all the answers because who does the moment I think the moment you think you have all the answers is kind of that’s ah, that’s a game over. Yeah I mean you’re at least you’re flirting with it. Yeah, you’ve got two players down and one man to go because the thing is so many things are going to change and pivot and that’s actually what I want to talk about next because according to Matt Watson he’ll tell you he Matt always jokes about the pivot. He’s like my favorite moves to pivot and you know and. You know, um, your 1 pivot away from greatness. How important is it for startups and early stage companies to be able to change and adapt and do what they need to do while still staying true to what they thought they were to do
34:35
Dan Kerr
Yeah I mean I think I think. It’s fundamental for any small business startup. What has you at it as a venture-backed business which we deal with I mean it’s essential I mean not only do you have to be adaptable to a fast-moving market and deploying lots of capital really rapidly, but that capital’s like. It’s inertia. It’s the rocket fuel like if you run out of it like things start the whole ship that you’re trying to put together as you fly up can start to fall apart so you’ve got to be a person that can handle that challenge and also adapt to it in real time. Um. I think part of that personal honesty about what you don’t know is being able to identify those things that you need to fix or that you need to change or how you know willing to jump in and go on a tangent and go in that direction with conviction but quickly change if the signals aren’t right um. Yeah, yeah, and needing to move in a different direction sometimes significantly different direction.
35:40
Matt DeCoursey
I’ve got a few more things that I want to make sure we get into and some tips for getting funded but before we do that once again with me today Dan Kerr partner at Flyover Capital to go to http://flyovercapital.com there is a link. For that in the show notes and you know what I don’t do this a whole lot. But I’m gonna give you my personal stamp of approval because I’ve had such a great time. You guys are so accommodating and not full of shit and thank you. The world needs more of that. And yeah, we’ve had some other people from a flyover on the show. It’s been a while. It’s yeah, been a while we tried to schedule this a couple different times and we got snowed out once yeah I went to the Philippines another and we’ll get into a few more of these things but do you need to hire software engineers testers or leaders. That’s what we do at Full Scale. Have the people and the platform to help you build and manage a team of experts when you visit fullscale.io all you need to do is answer a few questions then let our platform match you up with our fully vetted highly experienced team of software engineers testers and leaders at Full Scale. We specialize in building long-term teams that work only for you to learn more. And you visit fullscale.io and we’re not going to mention who they are but we work with a couple of your yeah of your portfolio companies and they love having you as an investor. So let’s talk about what? okay, none of the venture capital and private equity is not evil. Had to have this conversation last Friday and so the founder said I finally took investment I was like congratulations like I don’t know I feel about it I’m like did you get what you need to have people working in your corner is everyone rowing in the same direction. Yeah, okay, then be happy about that. Um, you know what? What do you now, Sometimes you don’t have the right people. How can you tell what’s like what? what are some? What are some tips pointers or comments about finding ah the right fit for an investor? Ah.
37:39
Dan Kerr
I mean it’s a great point and I think yeah I mean surely we can categorize you know investors as not evil some are not good actors.
37:56
Matt DeCoursey
And some people think they’re like venture capital is like Darth Vader that has landed on your doorstep and is there to assimilate you?
38:01
Matt DeCoursey
Yeah and I think there are there are some bad actors there. There are funds that are aggressive and kind of bottom feeders. They’re there for a reason I mean I think. Way to view investors is they’re a tool like any other tool. It’s like you need the right one for the right task the reason for the bottom feeders is because companies are going sideways and the only person that’s willing to do it is somebody. That’s gonna take a heavy cut now. Yeah. Be aware of that if you don’t really need that.
38:33
Matt DeCoursey
And you’re also where you are for a reason. Yeah I don’t even know if this is a real term but I’m pretty sure I invented it at this point I refer to middling. Yeah, that’s like getting stuck in the middle like you’re not a new business anymore. You’ve maybe already taken some money in. You’re not getting the growth that you need. You’re not going out of business because you have enough but you’re not really moving forward and like here’s the thing is you have to have more than one better to have an auction. Yeah, so if you’re if you’re a one better kind of recipient. Yeah, you’re not going to have that you’re not going to have the best options and we’re also. I don’t know. There’s all these all this news coming out VCs. Don’t want to put money in I made a post about this in Startup Hustle chat the other day I don’t know if you saw it but it was trying to be encouraging like look There’s a ton of money out there and people that are very adapt at finding the right opportunities the right rapidly growing companies and the right kind of founders and those checks. Are gonna keep coming. Yeah, you gotta be on your game.
39:30
Dan Kerr
Yeah I mean I’ve got a lot of thoughts about this one? Um.
39:34
Matt DeCoursey
Let’s hear them, Dan. Let’s, people need to hear this stuff.
39:37
Dan Kerr
So in our area, ten years ago was simply not capital so bring it forward to today. We have lots of venture-cut-backed companies in the region. So I think that is an indicator right there that there’s demand for capital. That’s the reason we have capital and I will say being on the outside of the venture industry before I was in it. It is mysterious. You don’t know what these people are thinking and it’s kind of a closed-off space on the inside I will say most of the people, especially in this in in the region that do this, they’re they’re good people like they are doing this because they were probably a founder before some of them come from more investment backgrounds but like they’re doing this because they like they like the idea of. Building the next generation of businesses. That’s definitely what’s like our mantra at Flyover. Um, I think the key thing to think about is alignment. So when you’re talking to investors about putting capital into your company think about you know, where are you trying to go and. When that investor gives you a term sheet is that are they aligned with you in your interests or are they misaligned so when I talk about alignment is okay, they’re
40:54
Matt DeCoursey
A personal preference.
40:54
Dan Kerr
Yeah, that point yeah yeah there it’s maybe equity investment. Well, that means that they’re if you do well they do well. Um, if they put lots of crazy terms in there that they do well. Even even if you don’t do well. Um, and in there,
41:09
Matt DeCoursey
There’s a lot of about yeah too
41:09
Dan Kerr
And there yeah, they’re different degrees at that like you got to look into those details and talk to you know good counsel about what the appropriate degree of that equation is.
41:20
Matt DeCoursey
Let’s key that here because yeah, I’m not a licensed dealer broker of financial services nor am I an attorney. Go find a good one. Yeah and a good accountant too. It’s just so
41:33
Dan Kerr
So many of these things are about. You know it’s cliche but go talk to your network, like build those relationships so that you can ask another founder. What they did and who invested in them and what did they get right? The peers your peers that have done this successfully are gonna be some of the very best advisors and they may not
41:53
Matt DeCoursey
Do you recommend the businesses that you’re considering investing in at flyover contact the other portfolio companies that you work?
42:00
Dan Kerr
100 percent. like every time we I mean usually don’t say like any conversation. Go go touch them and mean I don’t want to waste time but as they as we get further in process hundred percent in fact we would rather they ask for that but that we want them to qualify us too and make sure they’re thinking about the right thing. So absolutely. The the reference of our portfolio companies for us is extremely valuable and important and there’s the best indication of you know what we do and there’s some of the best you know channels for new deals for us is hey you know. Take a look at this company that that’s in my community think you guys would like it and that’s that’s great when that happens that means we’re doing our job.
42:45
Matt DeCoursey
Yeah I think the alignment things big I think it’s important to try to find people that believe in you and that want to do more than just write a check sure. That’s you get the smart money dumb money conversation. Yeah in that regard now. Um, yeah, and we’re we’re getting a little short on time here. But I think that when you look at so many funds or family offices or all these they have a lot of really smart people that are there to help support you. And you know investors don’t write checks because they don’t want you to do well that doesn’t happen like that’s or if it does it’s. That’s very strange very rare so you know line yourself up and and get ready to you know to do business and get moving quickly which is the key too so that you mentioned some of that I think one of the things that’s a good fit some of you might have this you know None 3 year exit hope and plan and some of you want to be ended a little longer and that’s some of the stuff you’re talking about with being aligned right? because if you got someone breathing down your neck to hurry up and get an exit out in 2 years you’re like hey planning on being around a little longer than that. Yeah, that might not, you may end up clashing there. Yeah and and and intended out.
43:57
Dan Kerr
Yeah I mean. Definitely want to understand. That investor what have they invested in before and is that indicative of what you want to look like at some point um you know I think you know they’re pros and cons to different types of investors and pros and cons to different individual investors. You know you talk about like family offices like. Can be incredibly supportive sometimes they can just support your company same time as if they’re asking for 70% of your company with their investment that may not be it may not be compatible with your plans um or if you know the valuation isn’t otherwise market you know that may not be compatible with your plans or raising outside capital it can kind of put you out of the running for that. So it’s got you’ve really got to qualify ask lots of questions um of the individual investor. Talk to lots of them so that you can get a horizontal view of okay this is how I kind of stack rank them. How closely they fit what I’m doing and how you know and the values that I’m looking for in that investor.
45:00
Matt DeCoursey
Red flags that investors ask about tech companies. How soon will it take to get my money back? You’re like I don’t know yeah like that’s I mean that’s a question that a real estate investor asks. Yeah. In many cases, you know? yeah someone that’s like looking for cash flow kind of stuff and then another one is just a silly question is what percentage of the company do I get for x-mount and for me I’m just thinking if you can’t figure that out on your own then you probably haven’t done yes, before?
45:27
Dan Kerr
Yeah yeah, I’d say one of the the real common ones with. You know angels or folks that are well intended but clearly not in the game of a technology company would be things. Yeah like you know, um, you know talking about profitability. How long so let’s build. Yeah yeah, but or like profitability like that’s usually a ways away. We’re usually talking more about revenue with ah a really early stage company.
45:51
Matt DeCoursey
And those are things that you know that’s all about yeah I had a guest on recently that it was a bootstrap company. It got really big never taking a dollar in yeah she’s always run a profitable business some businesses need to operate like that. Yeah absolutely armor. You know that. Path to revenue on a lot of businesses is excruciating. Okay, so once again with me today Dan Kerr go to http://flyovercapital.com Dan what do you want to say on the way out?
46:18
Dan Ker
It’s been awesome I mean clearly go to Full Scale. We’ve had great experience with our portfolio companies. Um, and um. You know we’re big believers and in our region and in kind of the dispersion of great founders. You don’t have to be in the valley anymore, we think that this is the long term trend. Um and we’re excited to be a part of it.
46:44
Matt DeCoursey
Yeah, and yeah, one of the things on my outro that I want to look. It’s never too early to reach out to people that might invest or believe in you and you’re going to find that a lot of them are going to. They’ll just be honest to say hey look you’re a little early for what I do but let’s keep in touch. That’s not a bad thing. Yeah, you know you get to the point you are just shortening your path to what you might need later. Another thing is is I don’t want to meet you at an in-person event and you tell me you didn’t get funded and I ask how many people you reached out to and you tell me 5 yeah like. 50 to None people you got to get out there. You gotta get how bad do you want it? Put your name at it your effort and your outreach is is free. I mean well, I mean theoretically on on many levels you can control that you don’t have to have funding. You don’t have to have resources. You don’t have to have a lot of stuff to give an effort now with that still make your effort smart. You know if you own a service business. Do not spend time reaching out to a thousand funds or investors that only put money onto enterprise software.
47:51
Dan Kerr
Yeah, right? look for signals I mean, mean, make sure you’re swimming in the right pool. Yep and then absolutely network, network, network. And ah, you know, ask lots of questions. Build good relationships. Yeah sink or swim.
48:06
Matt DeCoursey
Yeah, and’s I mean that’s the thing and it really is relationship oriented. You know one of the things that I’ve found with the friendships or relationships I’ve have with the Dan Kerrs of my life is that if they’re not the right person. They’ll often tell you who is and but the thing is is if you burn those bridges on the way out or you don’t establish or build them in the none place then, makes it a little bit tougher. My final word of encouragement is for those of you that are like I’m in this small town. How am I going to do big town stuff? You know how much easier it is to stand out in Kansas City than it is in silicon valley? That’s one of the very none things I said when I became an entrepreneur first thing I didn’t. Really wasn’t outward. Didn’t do a whole lot of Hype. But when we started Gigabook and we started full scale and and start apostle I’m like this is a lot easier to stand out here.
48:58
Dan Kerr
Yeah so people love it. You people love supporting entrepreneurs.
49:00
Matt DeCoursey
Yeah and and and especially other entrepreneurs I feel this undying need you know. Look, the knowledge isn’t yours to keep it’s actually. Selfish to hang on to I’ve had so many people that took an interest in me for reasons I couldn’t explain at the time I think they saw a little bit of me or a little bit of them and me. And you know but I’ve learned as I’ve gotten older more experienced. But no I think that entrepreneurs have that they feel like. Hey I’m gonna give some advice I’m gonna give some input and you’re sitting there thinking about the time someone did that for you? And I don’t want to be the guy that just turned you away.
49:37
Dan Kerr
Yeah, so yeah, rarely rarely holding onto that tightly is gonna actually benefit you I think sharing it sharing lots of information almost is always gonna benefit you. Gonna get your word, get the word out there people aren’t gonna steal your idea. It’s horrible.
49:51
Matt DeCoursey
I and you know yeah, yeah, yeah, they’re not you know, why Watson’s the that always says this he’s like I’m not going to steal your idea I’m not passionate about it. You know, like get it out there and don’t ask people to sign a frickin’ nda before you do an initial call. That’s the last thing I’m ending on that one. All right see you next time, Dan.
50:08
Dan Kerr
Thank you.