Ep. #1048 - Raising Capital Pre-Product

Matt DeCoursey 00:00
And we’re back! Back for another episode of Startup Hustle. Matt DeCoursey here to have another conversation I’m hoping helps your business grow. So many of you are seeking funding or haven’t been able to get funding. You’re trying to maybe think, can I even get funded at all? And why can I not have a product yet? You can still get funded in pre-product phases. That’s what we’re going to talk about in today’s episode powered by FullScale.io. Hiring software developers is difficult, and Full Scale can help you build a software team quickly and affordably. Also has a platform to help you manage that team. Visit FullScale.io to learn more. That’s my company. If you didn’t know, we love talking to Startup Hustle listeners. So reach out. Let’s see if we can find a couple of solutions together. With me today, I have Adam Tank. Adam is the chief customer officer and one of the founders at Transcend. He’s the water guy and the water guy. It’s a whole lot of different stuff with that. But, well, water guy. Welcome to Startup Hustle.

Adam Tank 01:01
The water guy. Thanks, Matt. Good to be here in person.

Matt DeCoursey 01:05
Yeah. Well, it is. And I always liked the in-person show. And yeah, we’re here at our recording studio in lovely Kansas City, Kansas. Which, you know, most people don’t realize that Kansas City’s mostly in Missouri. True. Yeah, there’s someone listening to that just blew the Kansas City Chiefs plan. Missouri people, but we are in Kansas City, Kansas, today. Yeah, anyway, so I like to start my conversations with a little bit about your backstory. And let’s just, you know, who are you, man? Why are you the water guy?

Adam Tank 01:39
Who am I? And how to amp in water? Yeah. It’s an interesting story. I’ll try to keep it as short as I can. But I grew up knowing nothing about business and entrepreneurship. Absolutely nothing. I grew up in a family of basically government workers, public servants, and teachers. And the mantra that was always drilled into my head was conservative jobs, a steady paycheck every two weeks, getting insurance, knowing where your food is coming from, and don’t ever deviate from that. So when I ended up going to college, I went the very conservative route. I got a degree in microbiology and thought I was going to become a doctor. And my senior year in college, a buddy of mine entered an entrepreneurship competition for the school. And he was in business school, and I was in Arts and Sciences. I knew nothing about business at the time. And he said I don’t need you to do anything business-related. I just want you to come and help me pitch this idea to judges because you can speak, and I’m not as good of a speaker. You wrote the entire business plan. I went and pitched, and we won this competition. And that was sort of my first eye-opener into, oh my god, there’s this world. It’s not just medical school. Or graduate school, or a steady paycheck every two weeks. There’s this whole world of business and entrepreneurship that I should think about. So after I graduated, I decided to do a full-time job and went to work for a Fortune 500 company. And then, through a series of very fortunate events, I ended up in the water industry, which is something I’m unbelievably passionate about now. Not only from a societal point of view and solving technically complex problems but important problems. I love waking up every day helping people get clean water. That’s where I am today.

Matt DeCoursey 03:12
That’s a big thing, you know, and a man threw trash in the right place. People are kind of embarrassed like the planet on Sundays, but you get into a lot of that. We’re gonna, you know, thank you for helping. I always like to share with people that do. Okay, you do thankless stuff. And I say that cuz no one says thank you for the water that comes out of the faucet, and then no one thinks about it.

Adam Tank 03:40
Yeah, no one thinks about Kansas City. I don’t know where you live in Kansas City. But we just recently had a monster water main break downtown. And people were out of water for 48 hours, something like that. So that businesses, homes, and the streets were closed off. And the people that are doing the really thankless work are the ones that are out there to be when it’s 20 degrees, fixing pipes, right and taking up streets. But again, no one thinks about the fact that all of this water has to get to your house somehow. And it actually takes an incredible amount of engineering, millions of dollars, and tons of permitting. I mean, there’s a whole business, you know, the whole industry wrapped up in this. And it’s one that I enjoy tackling zones in the industry.

Matt DeCoursey 04:21
It’s infrastructure and, and necessity, you look at the I think you’d take these a lot of things for granted. You look at what happened with Flint, Michigan? Oh, yeah, a few years back. And then all of a sudden, these things are brought into the spotlight and kind of makes you wonder, you know, what’s coming out. I even don’t even remember the name of it. There was a documentary about it that had people that lived near some kind of petroleum manufacturing. They were like lighting their water on fire in the documentary. It is dark waters. I can’t be there. I can’t remember it was, yeah, it was, it was you. We’ll save the planet. Oh, yeah, I mean, dude, like you should not if you can light your water on fire when it’s coming out. Like there’s a problem, you might want to just start making a lot of noise. But that’s how things get disrupted and how things get fixed. And, you know, I have a couple of questions before actually getting into the pre-product thing, you know, about your business, Transcend, if you want to learn. Well, first off, if you want to learn more about Adam, go to Adam Tank.com. There’s a link in the show notes for that. There’s also a link to transcendinfra.com. Just scroll down and click the links. It’s so much faster than trying to type it in yourself. It’ll also give you a little perspective about what we’re talking about while you listen. Now. You know, Transcend is a SaaS provider of engineering automation tools for global engineering, construction technology, and utility sectors. And that’s a real thing. Now, those are oftentimes as well, either huge megacorps. Yep. Or municipalities. Right? That’s right. But this is very much a software and entrepreneurial venture for you guys. Right. So you have investors, or maybe we do, right? I’m assuming that at some point, based on today’s topic, you had to get that funded pre-product.

Adam Tank 06:20
We did, we had a product. So this one, we had a product, but in the past, I’ve done it without projects, so can we go either route?

Matt DeCoursey 06:27
Well, sure, let’s. Well, I think a lot of the whole mechanism of funding is easily the hottest topic that we have as far as listener engagement. It’s probably one of if not the most popular conversations that I ended up having.

Adam Tank 06:50
People would have thought when a business doesn’t have cash, you don’t have a business.

Matt DeCoursey 06:57
There’s the thing that I run into a lot is I’ll talk to someone, and they’ll be like, Man, you know, I just couldn’t get funding. And I’ll say, Well, why not? What happened? I talked to a bunch of people and I just couldn’t get anyone interested in it so well. How many people do you talk to? It’d be dude, like six? Oh, my God, I’m like, you’re like 94, short of the average. Right. And I say the average. I mean, I’m telling you, I’ve had very sophisticated, credible people that have often been successful, and other ventures that go out and still have to talk to people. Sure. So I think that’s probably if you’re in a pre-product kind of phase. Resolve your cell, and your whole thought process should resolve with, you’re going to have to go talk to a lot of people definitely.

Adam Tank 07:50
And that’s especially true if you’re looking for an angel investor or venture capital investor, someone who does it more as a call profession, not to say an angel investor is doing it professionally, because it may just be a little side thing for them. But there’s a lot of other ways that you can get a business funded that doesn’t involve going to people who do it for the financial return, at least the paper financial return, or they are, you know, their spreadsheets, that they’re doing this modeling and stuff. And there are a lot of other ways to get a business funded that, honestly, are probably going to end up with you getting diluted a lot less, especially initially. And ideally, you’re getting funded from customers. So that could be done in sales or in some type of agreement early on that if you build this thing, then they will purchase it. That’s the best type of thing a lot of people overlook.

Matt DeCoursey 08:37
Totally. That’s a really valid thing. And there are a lot of accelerators and incubators and grant-type programs, including one we have here in Kansas City that’s run by the Economic Development Corporation of Kansas City. You can say that five times in a row. Give me $1. Not gonna happen. Or you can say EDCKC without Saturn, but what they do, and so that’s like local grant money. And they did a thing over the last couple of years where they found corporate partners to sponsor a cohort. And these were like Black and Veatch was one, and that was an engineering company. And they found they go and find other companies that are doing that are solving or coming close to solving problems that they or their customers have, and then they make a small investment, there’s grant money. And you know, that’s a really ideal thing, because what’s more validating the revenue, completely agree.

Adam Tank 09:29
And that’s what you’ll find is so many entrepreneurs, at their core, are tinkerers and builders, and it’s great, but it’s also unfortunate because a lot of times they fall into this fallacy that if you build it, they will come which is the biggest entrepreneurial fallacy in the world. So, there are two things that happen when you go, and you try to sell this product or service that you haven’t even built yet, which is what I encourage you to do, try to sell this thing that your product or service that you’re planning to build before you’ve actually built it. And the reason is this, the first one is, you’re going to find how hard it is to sell shit. And it’s not easy.

Matt DeCoursey 10:09
And what’s it, especially when it’s not a proven thing?

Adam Tank 10:12
Sure, yeah. Oh, definitely. But the two things that you’re gonna learn is, can you even get in front of the right people to talk about this product or service? So that’s the first. So if you can figure that out, you’re on a good track. The second one is, once you do get to that person, they’re going to tell you if this baby that you’re planning to deliver into the world is ugly or not.

Matt DeCoursey 10:34
And if it’s what you need to hear, yes, yeah. Nice to hear.

Adam Tank 10:38
Yes. Actually, before you spend years of your life and hundreds of 1000s and millions of dollars.

Matt DeCoursey 10:42
They are doing you a favor. They’re not in critical like you should thank them, don’t I think a lot of people that haven’t gone through that come out of those meetings, the kind of an asshole man, no, he was telling you, or she was telling you the things that are stopping them from buying Harami?

Adam Tank 10:58
Correct. So I remember. So I had a robotics company that I ended up selling to a publicly traded company. And the first thing I did before I built this robot was I went to the customers that I thought would be the single biggest potential source of revenue for my company when this thing was built. And I got in front of them before I built, and I said, here’s what I’m thinking about, here’s where I think this is going to be valuable for you. Tell me, tell me where I’m wrong. And not only tell me where I’m wrong but tell me what it would take for you to buy this thing. And in what quantity at what price with what features. And they basically gave me my entire product roadmap, with all the details of what it is I needed to build. And they were early customers that would sign, which I could then take to investors to get funded. And it’s just this. It’s sort of a spiral effect. So go out to the people that you think are gonna get the most value from your product or service before you build the thing and try to sell it to them and learn what it is they actually need. That’s critical.

Matt DeCoursey 11:56
Before we hit record, I mentioned that I just this morning, which by the time you’re hearing, this will be an older post, but put up under one minute video about tips for getting in early stage startup. And the very first thing is, what problem does your business solve? And that’s you got to solve the problem for the customer. And as you mentioned, so many entrepreneurs, especially in these early stages. They’re tinkerers, they’re inventors, they’re innovators. And they don’t take enough time to stop and sell something. And it’s so with that, you know, who are your clients? And that’s, that’s another thing, too, is like, Have you identified who your target market is, who you try, it’s so much easier to solve a problem when you know who you’re solving it for? It’s even easier to solve it, we just go ask the people what the biggest problem is, like it’s my favorite question to ask in life, or at least over the last few years, what’s the biggest problem you’re trying to solve?

Adam Tank 13:00
And people are like, well, it’s like I baffle him.

Matt DeCoursey 13:02
And I shouldn’t ask him, what’s the biggest problem you’re trying to solve? Right now in your business, Adam.

Adam Tank 13:09
We have millions of dollars being needlessly spent trying to build infrastructure. And we’re trying to make it a hell of a lot more efficient.

Matt DeCoursey 13:18
But what about your business? Oh, sure. My personal as your baby.

Adam Tank 13:22
It’s always recruiting, hiring and retaining talent.

Matt DeCoursey 13:25
Yeah. That’s funny. We at Full Scale, that’s our main acronym. When people say what do you do? We say it’s rare. So recruiting, assessing, and retaining employees. That’s a big deal, man. Oh, that’s tough. But no, so everyone, what’s the biggest problem that you need to solve? If you can figure that out for the people that you want to do business with? And you can, and you can come up with a reasonable solution, or at least a reasonable attempt at a solution? And it sure gets a lot easier to give you might get? Oh, absolutely, yeah, absolutely. You know, the one problem that I think the world overwhelmingly overlooks and doesn’t really consider is peace of mind. If your solution can generate peace of mind, there is an intangible nature and value to that. That is crazy.

Adam Tank 14:16
I mean, yeah, yeah. The question is, how much would you pay me if you never had to think about this again, a lot. And I’m like, people, here’s a blank check.

Matt DeCoursey 14:23
It depends on what it is. But there’s so many things. And I mean, just personally, professionally, physically, like all of them, that you can generate peace of mind. So think about that. And like I said, people overlook it. And when you’re defining the problem that you’re solving, and you want to go out and you want to do a pre product pitch, or even a sales pitch or anything, no one wants to hear your 27 item list of features, right? I want to hear about the advantages and the benefits. That’s what I’m going to buy.

Adam Tank 15:23
Know it, learn it, if you ever catch yourself mentioning a feature, you need to train yourself to always follow with an advantage and a benefit, or just skip straight to the benefits, the benefit of of what we’re selling of this product, the solution of the software of this service is and don’t assume that the people you’re talking to that need the solution even understand that they need this tarisha fairpoint.

Matt DeCoursey 15:26
Now, if you can do that, and this is the key in a pre product pitch, plan, anything you got to know who you’re selling to, and why the benefit of that solution matters to them. And one of the benefits is solving the problem of your investors wanting to return on their money. Yeah. If you can’t lay that in the pitch, too.

Adam Tank 15:49
That’s what I tell people all the time when they think about investors and getting funding from investors.

Matt DeCoursey 15:56
They are investors, they believe in profit, that is their job, their job is our profit return.

Adam Tank 16:00
Correct. So your job is to tell them, how much am I going to make you and over what timeframe? That’s it. They’re not.

Matt DeCoursey 16:06
But people go into those meetings. And they’re like, I’ve got all these features. And this is going to change the world. And you know, and look, here’s a shot of realism. And if you’re listening in the morning, hopefully this wakes you up, but no one gives a shit. Not on the investor side, they might Oh, that’s a really neat solution I love you’re passionate about that’s great. How are we going to make money? How are we going to generate a return? Because a lot of the people that you want money from are passive individual Angel investors, you may find people at the angel level that are more challenged? Yes. Yeah, whatever it is, yes. And I’ve done that, personally, myself as an investor. But when you get a little past that, and you’re talking to XYZ fund, they’re there because they have to, they’re trying to find the best opportunities for that fun to generate.

Adam Tank 16:52
Exactly, because they have to make money for their investors. It’s not their money. I mean, you know, a GP may have a little bit of money in their own fund. But by and large, they have to report to their bosses and make money for them. Yeah. And if they don’t, yeah, they’re so well.

Matt DeCoursey 17:07
Yeah, they used to correct because they’re going to run out of money to invest. And if they don’t, if fund one doesn’t have any reasonable return, you’re not going to they’re not ready

Adam Tank 17:16
to, you can’t have your fees and your carry. And so you know, you’re not an investor.

Matt DeCoursey 17:20
I’ve seen great ideas that would have been really beneficial for society come across my desk that just had no real monetization around it. And I’ve told people that one of them was actually a family member who had a solution that would have helped medical care providers get through your lock screen to see if you had to, like a homeless guy, like go to the ER, but that guy has an iPhone somehow. And he’s passed out and they don’t, they can’t give him any treatment, because they don’t know what these things are now, and the premise was, well, this will save insurance companies a ton of money. Okay, so how and I said, Okay, that’s great. Can you prove that right?

Adam Tank 18:02
Have you talked to an insurance broker that will tell me what they told you?

Matt DeCoursey 18:05
Well, the next thing was, who do you know, Blue Cross Blue Shield? That’s gonna make a decision about this? Yeah, well, no. And I think the lesson you were looking at, so I refer to the lifecycle of cash and the lifecycle of sales. You might be looking at it like yours. Hit Like, do you have the cash to make it that far? And then also, is this something Apple should do? Not right. Like, like, this isn’t a moneymaker. Like, I don’t know how you’re gonna make money out of this. It’s a beautiful idea. I understand the problem. And it’s a noble cause. Unfortunately, this isn’t for you, unless you want to spend years driving yourself crazy just trying to get a meeting, and we’re all right. And then there’s no way to tangibly prove that, that, like, how am I going to prove that opening an app behind an operating system lock, which is a lot more difficult to do than just building an app? Correct? Yeah.

Adam Tank 19:05
Like I don’t even know how you do the FBI and DOJ can’t even figure it out. True. Good luck. True.

Matt DeCoursey 19:09
True. Yes. The point isn’t how do you prove that because there is a nature of like proof of concept especially and stuff like that because you finally get that meeting and Blue Cross Blue Shield, that’s gonna save you a ton of money. Okay? These are like high, okay, the people at the insurance company, or actuaries do those are probably really boring people that live and died, literally by life and death stats. You can show me how accurate they are. There are billions of examples of space. You know, that’s why I don’t have any friends or actuaries. They will probably tell me when I die. I just don’t think I was one of them. But, yeah, there’s, you know, you talk about that. If you can’t do all the stuff that we’re talking about. I think you have no chance.

Adam Tank 20:01
I agree. I agree. It’s just unless you know someone but even that’s only going to get you so far.

Matt DeCoursey 20:06
You have to be in the business of business. Businesses have to make money and have a profit.

Adam Tank 20:13
Your business model can’t be continually getting like to tell people we’re you know, we’re not a nonprofit, we’re not doing we’re you’re doing this for profit. Now, we’re trying to do good in the world. Don’t get me wrong. And I do think that there’s a great overlap and government diagram of profitable business and doing something good in the world. There’s definitely a sweet spot in the middle, which is where I like to play. But you got to keep in mind, without profit without revenue without cash, you’re screwed. Yeah. Which is why the nonprofit model to me is just hilarious. In many ways. Yeah. It’s tough because they should be working themselves out of a job.

Matt DeCoursey 20:43
It’s the same thing with cities. If I ran my business, the way that runs theirs, I’d be done. I would like to be like Sam SPFx, with his failed crypto exchange? Where did the billions go? I think we gotta ask that I don’t get into sex, religion or politics on this show. But I will say I do believe capitalism is secure. You’re from Princeton, New Jersey, originally, and I’m assuming that’s actually where Princeton University from here originally?

Adam Tank 21:11
Yes. But that’s where your head HQ was determined? That’s quite right. Yeah.

Matt DeCoursey 21:16
Presser of entrepreneurship. On the show, we discussed the history of entrepreneurship. A guy named Derek Leto writes books on the subject. And he proved again, and again and again, during that episode, how capitalism and entrepreneurship are, without a doubt, the biggest driver and mover of societal and every kind of change, and there and that’s because there has to be a little bit of enterprise.

Adam Tank 21:47
I was going to ask, is it just playing on the fact that humans are not gonna say greedy, I feel like it’s kind of a dirty word. We always resource things, it’s hard.

Matt DeCoursey 21:56
And we want to there is a little bit of a greed that goes to it, but you look at like what you’re doing. So if you are in your business, the premise would be like, if your SaaS company was a non, not for profit, which I have a hard time even saying that it doesn’t compute. But if that’s the case, then it’s just hard to get people to put money and resources into it. And without resources and everything, you just have less rocket fuel, you have less interest, you have less everything. And the people that I spend time with, I have a hobby over these last couple of years is studying the traits of genius. And there’s 24 of them that are really well known, like, and they’re all things you can be better at, which is the amazing thing, but one of them is enterprise, if you look at all of the people that you consider to be genius, are people that move needles, and there is there are very few that didn’t like, Okay. Marie Curie is one that didn’t have a lot of enterprise, but she started radiation and all that other stuff in that, you know, just died from that unfortunate might have had something to do with that. That was, that was scientific research. But with that later that research did become an enterprise and a lot of different stuff with it. But yeah, most of most of everything, had an enterprising nature to even the genius people that you consider. There were artists, you know, and musicians, and they’re able to accelerate what they do and actually have more time to focus on doing just that, because the enterprise nature allows them to get people around that can help them and let’s talk about that for a sec, Jerry, because if you have also mentioned in my video, if you want to check out our videos, you know, go to WWE. There’s a Startup Hustle YouTube channel, we’re on Instagram, you can follow any of the hosts, we all have personal profiles and in 2023 and beyond, we’re committed to sharing more nuggets. In short form.

Adam Tank 23:52
I love that it tick tock tick tock, suffocation of everything.

Matt DeCoursey 23:55
I hated it at first. And then I started making them like, this is so much easier.

Adam Tank 23:59
It is kind of fun. It gets a little addicting. Yeah. Well, yeah.

Matt DeCoursey 24:03
It’s also a lot easier to produce. Because, you know, years ago, there was like a production requirement. We just threw that shit out the window. Like during COVID were like, Yeah, are you even wearing pants right now? I don’t know. Okay, whatever it takes, but you can find us there’s a lot of stuff in there that you’ll find useful. With, you know, the evolution of funding, one of the things that is gonna make it easier for people to put financial support behind you as a strong team. And I used to not be a co-founder kind of person now I’m a huge advocate of it. But so in early stages, especially pre product equal and usually more weight is going to go into the founder than the actual product. Hey, people, there are great ideas everywhere.

Adam Tank 24:52
Now there. I want a great idea that has been embarrassing to me. They mean absolutely.

Matt DeCoursey 24:56
The currency that entrepreneurship trades in its execution. Yep, so having that team, and if you have credibility, especially you need to be focused maybe as much if not more on the app than the product completely.

Adam Tank 25:12
I had a friend growing up, his dad was an unbelievably successful entrepreneur, small business owner sort of blue collar, you know, run of the mill dude on the street, you’d never know that he was worth millions of dollars. I’ll never forget, I wouldn’t consider him to be bright. By any measurable standards, you’d have a conversation with him. And you’d be like, All right, I don’t know if the wheels turning in this guy’s head are not unbelievably successful, though. And here’s the reason why. I was probably 1314. At the time, occasionally, my friend would bring me in to help him work on whatever stuff in the warehouse or help run the business. And one day he was, his dad was looking for a cashier, he was trying to hire a cashier. And all he did was handwrite on a piece of paper. The cashier needed 10 bucks an hour, or whatever it was, he put it outside on the door. And whoever walked in, he was willing to hire him. And I’m thinking, Wait a second, you don’t want to do interviews with these people. You don’t want to do background checks. You don’t want to figure out if they’re druggies, if they’re going to show up, you know, day to day, whatever, you don’t want to do any of that. And you said, No, because all I need is a cashier, I can train someone to do this, if they don’t work out, they don’t work out, and I’ll find the next person. It’s not a big deal. So what we did was, we hired the first person that walked in there, a great cashier that worked for months, if not years, and that was the end of the story. He never over-thought any decision in his business, he just did it. And his whole thing was, it’s not going to make or break my business if I hire a shitty cashier, but I need the cashier now. So I’m just gonna do it, I’m just gonna execute. And that’s something that’s sort of a mantra that I’ve been with my friends and I and other entrepreneurs for 2023. At least that’s what I’ve set for myself is to keep the Nike model in mind, just do it, just to jump and build wings.

Matt DeCoursey 26:57
It helps if you have the stuff to build the wings when you jump, but nothing will make you find it or build them faster than knowing that that canyon floor is about to hit and that there’s no such thing as the right time. Now, speaking of the right time, it is the right time for Full Scale to help you find experts, software developers, and that doesn’t have to be difficult, you can make it simple. When you go to 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 leaders are ready to join your team FullScale.io To learn more, you taught that as a simplicity. We can in less than two minutes, we got all the information, we can gather all the information we need to pair you up with experts. It used to be longer and I just am obsessed with shortening that process and that simplicity. I’m in that boat with you, man. And you know, you mentioned like the just do it or the Yeah, some of the most successful people I know are not the people with 158 IQ. In fact, I don’t think I know many successful people that have a 158 IQ. You know there’s a level of determination and drive. I mean that and tenacity that are you and I like entrepreneurs with scars. No, I’m going to write a check to one Oh, wow. As his album shows me a very large scar cross. That was intense. That is definitely Wow. Yeah, so the point with the scars is as if you are okay, don’t be afraid to admit that you need help, or that you failed in the past. A lot of investors like that. And if you’re if you’re coming in, you’re this hotshot that’s never had a big fail. You’re feeling kind of bulletproof. And until you learn you’re not a real Cavalier with shit, man. It’s like there’s a there’s a there is a entrepreneurship has a way of humbling. Oh, yeah, talented, smart people. Oh, yeah. You bet. Yeah. So I said, you go into these meetings. And I think if you have a level of self awareness that that identifies what, where and what you need help with. That’s why you’re at the meeting. That’s why you need the money. That’s why you need the help. That’s why you need the funding. And I think that I think a lot of people try to avoid that, which is not the case nowadays, because it’s just simply not true.

Adam Tank 29:29
That’s the first thing, it’s just not true for any investor. Sophisticated or not should understand that. It’s never, you know, ponies and rainbows coming out your ass. Entrepreneurship sucks. It can be really, really hard. I’ve been there and the resilience factor is a huge deal. And as you mentioned, understanding where your blind spots are where you need help. Investors want to know investors want to look at your business as if it were a black box and they got $1 in on one side and $2 come out on the other. Whatever happens in between happens as long as they’re not illegal, they’re going to be cool with it. But you gotta understand how that black box works. And you got to understand the dollar that’s going in, here’s exactly what the machine looks like that’s going to produce black boxes missing part D, sure.

Matt DeCoursey 30:15
To either build that, find that or repair totally, and totally understand that and demonstrate that AI goes a long way.

Adam Tank 30:28
So that’s, that’s in back to our pre product conversation. A lot of times what the entrepreneurs are missing with that black box early on is the Cash Generation feature. Where are you going to get revenue from in a pre product environment, if you don’t have a compelling enough vision or aren’t able to sell someone to a customer on this thing that you plan to build, and at least get an LOI or MoU signed? Oftentimes, that’s all it takes to get funding from an investor because there’s a clear roadmap to you making money with this black box.

Matt DeCoursey 31:02
I did that a few years ago, I actually owned an office building. This was a while ago. And with that, we had a particularly good year at the business and my accountant was like, you know, mount, you should spend some money. And I said, Well, what can I do? How about a health and fitness program for your employees? Great idea. So I went down to the local store that sold fitness equipment, and I spent $25,000 In an hour. And the guy that sold it to me had a company that delivered the stuff and dropped it off. And it was great. We used the equipment for like two weeks before we got lazy again. But yeah, world class gym. Really no motivation to use it. Not world class motivation. But a couple of months later, the guy called me up and he said, Hey, man, I don’t want to bother you. But you know, I’ve got I, you know this, can I buy you lunch? Can I come to you, which by the way is a key thing here to make it convenient for people to hear your pitcher. But he called me up and he was you know, it was like, Hey, I’d love some advice. And I was like, you know, he had given me a discount when I bought it just because he was nice, maybe because I bought a lot of stuff. But he came over and showed me that. So he basically had a letter of intent, he had the ability to have his delivery company do all the deliveries for the local company where he worked, and they were cool without wanting that because there’s a problem, they needed to solve this real hassle lever. And this isn’t we’re talking like 10s of millions of dollars with equipment. He needed money, he needed some expertise. He needed a warehouse, which I had in the back of my building, and just kind of needed some help needed to buy a truck and some other stuff. So I did it. I did it. And the demand was there. It was what was easy. It was like it was ready to go. And I was like I just had to, you know, add water and it’s true. Sure. I told him I was upfront I was like, hey, look I can I can provide you financial resources and all these other stuff. My time is a challenge. So I can’t. I don’t want you to know, I got that right out front and ended up making an investment. And you know, he was off to the races and did really well. I got a return on my investment and fall in like six months, which was awesome. I made some money down the road and helped him grow the business. And then because I didn’t want to cover the business, he called me up one day, and I was talking to him, I was like, Do you have any interest in buying the rest of your shares? But he’s like, Dude, I thought I didn’t think you’d ever be interested. You know, for me, I’d already made sure I had done well with it. And I liked the guy and I wasn’t providing a whole lot of value at that point.

Adam Tank 33:46
And I’d had and you’re just getting what you’re getting a check every month. I was getting some residual stuff in there and 25% of the business so he got paid to work at the business, you know, and then there was some dividends and stuff that came in.

Matt DeCoursey 33:49
So why did you decide to cash out? Honestly, because I wasn’t providing value. I wasn’t doing a whole lot with that. And I really liked the guy. It wasn’t really my thing. You know, and and I debated it, I was like I could just keep getting checks and I like to provide value with a seven be involved with it.

Adam Tank 34:29
You know, and I did well with it, you know, I think five or six times my original investment back and I enjoyed it. I think it was maybe more because I liked how there’s a lot to be set for that. You know, I felt like I didn’t need the money.

Matt DeCoursey 34:31
I wasn’t always sure about taking a check. I mean that you know and I also didn’t hold his feet to the fire I may give a very reasonable price and it was a clean transaction on the way out and you know, that happened about that was six months before the pandemic oh man then when the pandemic cam you know everyone’s buying home fitness equipment and they add it in boom they went hockey. Oh, wow. Good. All right. Well, good for him. Sure. Oh, yeah, but with that I still joke. Yeah, he’s still a friend. And you know, him and his wife and I don’t know, I just, I, I made a profit on the transaction. I was happy with that.

Adam Tank 35:11
And it will support a local entrepreneur, the Kansas City ecosystem benefits from it, he creates jobs. And it’s all good stuff. Yeah, for sure.

Matt DeCoursey 35:17
Yeah. And with that, like I said, I could have just hung on to that. I mean, that’s not really the space that I’m in. So yeah, I mean, I can look back at that. And would it have probably been worth much more money for me to just kind of be that guy on the side? Sure. But if I don’t have an interest in being involved like that, I mean, it’s, I’m open to thanks. I think that’s another thing we should probably talk about is looking for the right kinds.

Adam Tank 35:45
And I was just gonna say, I would caution you then. What’s the right kind of investment to be fairly passive? Here’s do you do what you want to do? Right? If you need help, call me but the investors that really want to get their hands in your business, especially ones that don’t understand what it is you do in your industry or have connections with customers, there’s this concept of smart money versus dumb money. And if you haven’t been an entrepreneur raising capital, you may not be thinking about this. Investors should it should be a one plus one equals three equation. It shouldn’t just be we put cash in and that’s what it is. They should, in theory, bring connections, whatever profitability models, sales stuff, other investors, whatever should be defined that they want.

Matt DeCoursey 36:28
Yes, because I still have to take care to take the money. Yep. But I think that I talked to a lot of people, or have over the I mean, the last 1015 years that are really disappointed in their investors, I think that’s probably why I sold part of the movie company. I didn’t like to have disappointing partners in the past. And it sucked. And I didn’t really want to be that guy. But yeah, so establish that upfront, because a lot of people talk, they’re like, Oh, I’m so disappointed. I thought they were going to do this, I thought they were going to do that. I hear that a lot about the quote advisor. I’m like, do you pay the advisor? Or do a lot of people do? Well, you should, yes, if they are truly advisory don’t help people to give a shit, don’t expect busy people to give a shit about stuff that doesn’t really equate too much for them. So if Yeah, if a lot of the advisory boards a hot thing for a lot of people, but if you don’t pay your advisors, you shouldn’t argue they don’t have a vested interest in something, then it’s just gonna be an inconvenience, you’re gonna get a limb limit to that, right, or you’re not going to have great advisors.

Adam Tank 37:40
There’s a lot of people too, that wonder how you compensate an advisor, we won’t get into it now. But I would say reach out to me. It doesn’t matter if you have ideas on it, or myself, I’ve done this time and time and time again. And it doesn’t have to be straight cash.

Matt DeCoursey 37:58
There are many ways you can do it. Just think carefully like options, and more, you can do options, you need to think carefully about as a lot of people want to just bring on an investor or sometimes even like a co-founder, and they just give them equity.

Adam Tank 38:08
And for me, I’ve had a big title. Yeah, you gotta be real careful. And goofy.

Matt DeCoursey 38:12
And the thing is, it should be vested over time. Like, oh, yeah, oh, yeah, if you’re gonna give someone a percentage of anything, like there should be a clause that defines what reasonable contribution is, what it isn’t, and also how you get out of that, right? I had that occur with an advisor that we signed up for Giga bucks, and just got nothing and ended up sending a letter that was like, sorry, see around, you know, and that we gave them nothing, because it didn’t contribute anything. We had a couple investors. So GigaBook, what became Full Scale, in many ways. And in order to make that happen, a lot of our original co founders and people that own little pieces, they got decent checks. I mean, they retire off of them now, but no one complained about the 30,40, $50,000. Yeah, for a little tiny piece of a company in that, you know, they have very reasonably had very little to do with building. So yeah, there’s, there’s a lot to be said there, but looking for the right kind of investors as well. It also means, okay, so you talk about using the word product, and that could be software, or it could be a physical product, but if you make a physical product, you’re wasting your time if you’re chasing investors that only invest in enterprise software. And if you build enterprise software, you’re wasting your time and chasing investors that only do share fund manufacture. Yeah, or something like that.

Adam Tank 39:51
Yeah, and I think that’s a mistake a lot of people make if you’re just chasing the wrong people. Just say next and move on and find someone a little more suited and totally. Yeah, we’re fit.

Matt DeCoursey 39:52
Yeah, I mean, maybe they’ll change their mind now, you know, not not gonna happen.

Adam Tank 39:55
Now. Again, they’re there. These are professionals. This is what they do for a living. lot of times if you just do a little bit of diligence to find not only what types of businesses they invest in, but at what stage, what size, a check, they cut, when they like to come in on rounds, do they require board seats, all those things you can find so publicly available for the most part, so start to whittle down your shit before you go out to market to go and raise money. And it’ll be a lot easier for you and for them.

Matt DeCoursey 40:20
Well, that’s, you know, I was almost about to run to the founders freestyle here, but I want to, I realized I missed a key component. You need to define what you’re going to plan on doing with the money. Use of Proceeds. Yeah, I mean, and a lot of people are, okay, do not say these fucking words that your pitch. I don’t need the money. I did that once. And literally, I did and literally had the potential investor say, well, that’s where we always stop our meetings. Wow, that was a dumb thing to say. Because I didn’t need the money. I didn’t. I didn’t need the money because I don’t want to keep putting my own end, right. But that’s part of it. So if you don’t need it, then why are you here? Right? That’s right. Pretty simple. Now, speaking of needs, if you need to hire software engineers, testers or leaders Full Scale can help. We have the people, the platform and the process to help you build and manage a team of experts. All you have to do is go to FullScale.io, you’re going to answer a couple questions, literally two minutes, two minutes of questions. And our platform will match you up with fully vetted highly experienced software engineers, testers and leaders at Full Scale, we specialize in building long term teams that work only for you to learn more at FullScale.io. So here we are, man, the time was just so fast. These kinds of topics just breezed by to probably sit here for hours on this. And I don’t know if the world needs that many of my opinions. So I like to end my episodes of founders with a quick freestyle and hand you the mic and give you an opportunity to do what I’ve had people say rap recite poetry. I don’t have those skills. You don’t? I didn’t say that. They did it well. But they’ve done it. I want to say people’s ears, right? Is this a freestyle? Yeah, say whatever you want.

Adam Tank 42:26
Yeah, I think that the most common approach is either talking about key points or thanking or reminding them to shut they forgot to talk about. I would say I gotta do a quick pitch on Transcend. If you are an engineer, a utility leader, or someone that’s responsible for building our infrastructure, critical infrastructure, water, power, roads, bridges, whatever it might be, please reach out. There’s so much that can be done to accelerate these capital planning processes and master planning processes with software, it doesn’t have to be this cumbersome, multi year, pain in the ass experience that it is today. That’s one. The second one is if anything we talked about today interests you, please reach out. Not enough people take advantage of it. Our time is limited. But I do like to help entrepreneurs where I can. So Matt mentioned it earlier, Adam Tank.com, there’s a form on there, you can fill out, I try to respond to every email I get. If it’s connections to potential investors, if it’s helping you think through an idea, if it’s a kick in the ass, whatever it is, just reach out because I am someone and it sounds like that you are too. We like to help when we can, without any expectation of something in return. Because for me the return is seeing other people become successful. I didn’t have someone when I was young enough to tell me that entrepreneurship and business was a route that would allow me to be free in life and whatever freedom means to you, you can find that for yourself. But if I can help someone reach that goal that they have in mind for themselves, so that they can be free, live a life of less stress of less worry, build a better life for their families, whatever it is, I want to be able to help where and when I can so please reach out Adam Tanktop calm.

Matt DeCoursey 43:52
That’s a very Buddhist principle that gives no expectation of return. I try to live by myself. I blow minds with that. I just donated some money to a charity that has a gala that and as they were coming up to prepare to be like, Well, what do you want your what do you want the program to say? I was like, I don’t want my name. And they’re like, well, What picture do you want? I’m like, I don’t want to be on the program. And I went through like a whole thing. And I was like, well, we just don’t want you to be upset when you get your names on the program. I’m like, Who have you been getting donations from, the man like, and then the guy that runs it called me. And it was like you really don’t want it. I was like, the only way I would want my name in there is if you think that’s gonna help you somehow raise more money, right? He said, Well, I think it was I said, okay, then prove it. He’s like, wow. Save the ink and save the papers. And one of the things that I think is important here as well, first off, we forgot to mention he raised $13 million for your business. So there’s definitely experience and credibility with that. And I think that I want to go back to Ask for help. Things. And that doesn’t necessarily mean from investors all the time. Entrepreneurs, I will say, especially as I’ve gotten older, there’s been this, I believe in knowledge transfer. And it’s kind of like the village elder of sorts. As I’ve gotten older, I feel more and more that I need to help other people because I look back at my own timeline. And you know, when I was 20, as I went with other men, there were so many people that took an interest in me. And I don’t know if I, at the time, really, truly realized, like, why, but I think a lot of them saw themselves as a younger version of themselves with me. And then I think that there’s this inherent need for entrepreneurs to potentially help other ones, avoid the money pets and anguish and sleepless nights and totally empty bank accounts and, and failures that could have been avoided. And that there’s no conversion tracking metric on that when it comes to it. The thing is, knowledge is not meant to be kept. It’s meant to be transferred and shared. And there’s a very powerful thing to that. Because I think a lot of times those of us that have experience, we get a little heady and think we know a lot, and then we go and teach it, and you’re like, Wow. I just told this guy eight things to do. And I’m not doing three of them myself. And if you’re any good at what you do, there’s a self-correction mechanism. We’re getting there. I hired a mindfulness coach in the fourth quarter of 2022. And we’ll be working with her on all of this in 2023, maybe, forever, who knows, because she does a really good job of making me speak and be honest about the truth to myself. And then the end that is helpful. You know, it’s like, Yo, we are filled as humans with self-deception. We told ourselves one thing, I did a call with her, and she’s like, I’m hearing you say, I don’t know a lot about this call. And aren’t you in the business of knowing? Yes, yes. But part of the I don’t know, I didn’t know. I didn’t know I was telling myself that, essentially, we tell ourselves a lot of things you mentioned that just do it. The right time never comes, man. That’s math. The right time is never here. We tell ourselves that my book balanced me with the chapter or a section I should say called the right time now. It’s not the right time for me to do this. It’s not the right time. Now. I know you recently had a child, so starting a new business two days before the birth of your child was probably not the right time. There are exceptions to that. Yeah, sure isn’t great, but at the same time, you know, the window and doors of opportunity swing open and shut pretty quickly and pretty firmly.

Adam Tank 47:59
That’s what I mean. That’s how I like to think about it, and the opportunities will bring themselves to you, the doors will open, the timing will happen if you’re not, if you’re not taking shots, look for him. If you’re not taking shots, you’ll never walk through the door. So you have to start walking because if you don’t walk, the doors are going to be swinging open, but you’re never going to walk through them, so just get started. Just do something, do anything, and you’re right. You’re gonna be much further than that. People just sit around thinking about hockey legend Wayne Gretzky. Is that the percentage of the shots you don’t take? Yep, and you know that there’s a lot you can go down there.

Matt DeCoursey 48:28
I also talked about being aware of the shot because a lot of people take the shot and don’t look to see if it goes in or not. Some of the things we mentioned by aiming for the wrong investors by not understanding your target market, and now you’re shooting baskets in a pitch-black gym.

Adam Tank 48:53
I don’t know what you’re seeing. Betsy said ice hockey well and then not looking to see if they go out at all.

Matt DeCoursey 48:56
And these are, these are these sound like dumb little things that people say, and maybe they are, but they’re true.

Adam Tank 49:08
I think I’m gonna get back to work, man. All right, there we go.