Jeffrey Fidelman—Founder & CEO of Fidelman & Company—breaks down how early-stage founders and emerging managers can run a repeatable, data-driven fundraising process. His team “productizes” investment banking: compliant and licensed advisory, a staffed outbound motion, and a new platform (Fundex) that systematizes sourcing, personalization, and follow-through. Big themes: stop hunting for silver bullets, design a weekly workflow, communicate like a pro, and ask for the sale.
Who is Jeffrey Fidelman?
Jeffrey started in traditional banking (Morgan Stanley, HSBC), helped operate a nine-figure venture fund, and now runs Fidelman & Company—an investment bank built for startups and emerging managers. He’s scaled a 40-person team that blends institutional rigor with hands-on execution, working across founder rounds and funds (typically Fund I–III/V).
Why listen: He sits at the intersection of venture and banking, translating Wall Street process into fundraising outcomes for people who don’t have time to reinvent the wheel.
The Big Idea: Productize Fundraising
Most teams approach fundraising as a one-off sprint. Jeffrey treats it like a product and a pipeline.
What “productized” looks like:
Compliance + transparency: Licenses, disclosures, real diligence—versus “Rolodex-for-rent.”
Staffed engine: Analysts and operators who do the unglamorous work (research, qualification, personalization, sequencing).
Clear incentives: A base fee to fund sustained effort, plus success economics aligned to capital raised.
Platform leverage (Fundex): A banker-backed, self-serve system for building targeted lists, managing outreach, and tracking what converts.
Who They Serve (and Who Shouldn’t Hire Them)
Startups raising institutional seed–Series A where traction matters more than vibes.
Emerging managers (often Fund I–III/V, ~$20M–$300M) who need consistent, qualified LP conversations.
When they say “no”: Unrealistic timelines, expectations misaligned with market reality, or founders who want magic, not process.
The Weekly Workflow That Moves Money
Forget the fantasy of a single intro unlocking a round. Jeffrey’s team runs a repeatable weekly rhythm:
Lead Generation
Build/refine a tight investor list by stage, sector, check size, geography, and thesis.
Prioritize based on recency of activity and fit (spearfishing > spray-and-pray).
Qualification
Confirm mandate (stage, ownership targets, reserve strategy for funds; revenue, margins, LTV/CAC for companies).
Track disqualifiers ruthlessly to avoid wasting cycles.
Personalization
Use actual signals: portfolio patterns, recent memos, partner backgrounds.
One reason to care + one clear next step. No generic “circling a round” language.
Sequenced Outreach
Multi-touch cadence (email, LinkedIn, warm paths, occasionally a thoughtful call).
5–6 touches is normal; design them up-front.
Follow-through
Treat every “maybe later” as a specific follow-up task with a date and a reason.
Log objections; update copy and filters from data, not vibes.
Newsletter/Update Layer
A monthly note to keep the pipeline warm and prime closes.
Core belief: There are no silver bullets—only consistent systems.
Pricing & Incentives (Why It Matters)
Jeffrey advocates for a transparent base fee (to fund the real work of research and outbound) plus success-based economics tied to capital raised. The structure mirrors how an internal analyst + data subscriptions would be paid—just purpose-built for fundraising.
Tools & Team Design
People: Former BDRs/SDRs often outperform traditional bankers in outbound because they think in funnels, not favors.
CRM: Move from generic tools to purpose-built workflows; Fundex grew out of internal needs for source-of-truth investor data and campaign analytics.
Experiment windows: Run 60–90-day experiments before changing copy/targeting; otherwise you mistake randomness for insight.
LP & Investor Communication
Use a simple three-part monthly update:
Last month: What happened (pipeline, wins, key metrics).
This month: What’s in motion (meetings, diligence, product/research).
Next month: What’s planned (targets, launches, hires) + optional ask (intros, talent, data).
Why it works: It’s predictable, compounding, and lets prospects “ride along” until the timing is right.
Founder & GP Pitfalls (and Fixes)
Pitfall: Waiting for perfect decks.
Fix: “Good enough” materials + more qualified conversations. Iterate from live objections.
Pitfall: Not asking for the money.
Fix: Use explicit closes: “If the rest of diligence checks out, are you comfortable taking a $X–$Y allocation?”
Pitfall: Boiling the ocean.
Fix: Start with the highest-probability 50–100 names. Earn the right to expand.
Pitfall: Over-automating.
Fix: Let AI assist research and drafting, but keep humans on qualification, nuance, and final sends.
Market Reality Check
“Venture winter” ≠ zero capital: Dollars still flow, but standards are higher and timelines longer.
Seed expectations have shifted: Revenue or sharp leading indicators help. Narrative alone is fragile.
What’s next: Infrastructure for AI and energy/compute constraints are shaping both venture theses and LP interest.
Valuation & Storytelling
Frameworks: Use comps and multiples as guardrails, not gospel; avoid outlier benchmarks to justify price.
Narrative: Investors buy a believable path—origination advantage, diligence advantage, or distribution advantage.
Decks don’t raise money—founders and their narrative do.
30–60–90 Day Action Plan
For Founders
Days 1–30
Define ICP investors (stage, check size, sector, geo).
Draft “why now/why us” narrative and a one-page.
Build first 75–100-name list; research 3 relevance signals per target.
Days 31–60
Launch a 6-touch sequence; log every objection.
Start monthly update cadence; add 10–15 “ride-along” prospects.
Book 10–15 first meetings; convert 3–5 to diligence.
Days 61–90
Tighten targeting from conversion data; refresh copy.
Formalize diligence packet (metrics, cohorts, references).
Ask for allocations explicitly; stack soft-circled commitments.
For Emerging Managers
Days 1–30
Clarify mandate (check size, ownership, geography, reserves).
Build LP map (funds of funds, family offices, HNW, endowments).
Draft a one-page with sourcing+diligence edge.
Days 31–60
Start a monthly LP note (three-part format).
Run 50–75 targeted outreaches with true personalization.
Line up 3–5 reference calls (founders, co-investors).
Days 61–90
Share pipeline quality and “how we pass.”
Test 1–2 small events/webinars to compress discovery.
Push for anchor/lead soft-circles; set a first-close target date.
What to Steal for Your Next Raise
A weekly pipeline review with real conversion metrics.
A tight investor ICP you can defend.
A 6-touch multi-channel sequence you actually finish.
A monthly update that compounds attention.
A clear close: amount, timing, and next steps.
Resources Mentioned
Book: Productize by Aisha Armstrong.
Concepts: Spearfishing > spray-and-pray; no silver bullets; “good enough → learn in the market.”
Final Word
Fundraising isn’t a moment—it’s a machine. Build the machine, feed it every week, and let data (not drama) tell you what to do next.
If you want this distilled into show-notes, chapter markers, or a LinkedIn post template for your episode page, I can spin that up too.
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Chapters:
00:01 Intro & guest background
00:37 Career path: banking to VC
02:56 Productizing fundraising
04:16 “Do it for us” inflection point
06:58 Licenses, transparency, pricing
09:42 Fundex launch & vision
10:42 Saying no & realistic timelines
12:29 Weekly lead-gen workflow
14:54 Multi-touch outreach cadence
15:49 Targeted spearfishing approach
17:03 Team design for outbound
19:26 CRM evolution to Fundex
20:39 Fee structures by vehicle
28:57 Monthly LP/GP update format
31:48 60–90 day testing windows
35:48 Market shift & venture winter
41:05 What LPs value most
43:06 Personal brand over company page
47:07 Valuation frameworks
52:00 AI infra & energy thesis
58:50 Fundex recap & close
Transcript
(00:01:12) Brian Bell
Hey, everyone. Welcome back to the Ignite podcast. Today, we’re thrilled to have Jeffrey Fiddleman on the mic. He’s the founder and CEO of Fiddleman & Co., naturally, a firm that builds investment banking for startups and funds. Before that, Jeffrey worked in investment banking at Morgan Stanley, HSBC. He did some early venture work, co-founded a few startups, and now helps founders raise capital, shape their decks, valuations, and runs fundraising as a service. He knows both the polished financial model world and what it’s like to hustle for your first dollar. Let’s dive in. Thanks for coming on.
(00:01:40) Jeffrey Fidelman
Thank you so much for having me, Brian. Well, Jeffrey, I’d love to get your origin story. What’s your background? From the Northeast originally, born and raised in New York on Long Island. I ended up going to school, graduating from Harvard, and then spent the better part of a decade in banking. First at Morgan Stanley, as you mentioned, and then at HSBC. Really cut my teeth there. Although everyone around me was English speaking, when I started, it was totally foreign language to me. And I really was able to learn how institutional processes and structured works. I then was recruited by a family office to help them run a venture fund. We were investing in early stage tech and tech enabled investments. The fund was about $120, $25 million. And we invested in about four dozen companies, leaving some capital on for dry powder and follow-on rounds. And there is really where I recognized the gap of call it institutional banking and venture funding, or rather the lack of an institutional process for venture funded companies or founders seeking venture funding. So in 2015, I left with the radical idea of starting an investment bank focused specifically on early stage companies and emerging managers. And over the past 10 years, the business has grown to about 40 people focused specifically on helping companies or managers put together their fundraising materials. So fundraising preparation, and that includes decks, models, valuation, capital structure, everything in between. And then ultimately how a lot of our clients will engage us for fundraise as a service. And that’s really where the institutional structure meets venture stage companies. So instead of selling people my Rolodex or my phone book and trying to tell people or sell them on, hey, I have 12 family offices that will invest in your business, we went back to basics and effectively productized best practices of raising capital. And what I mean by that is we went out and subscribed to things like PitchBook and Prequent, Fintrix, Dakota, CapIQ, a few other platforms that I’m probably not mentioning. We’ve aggregated the data into a single source of truth internally, and then layer an analyst on top of that to do all of the outreach on behalf of our clients. So Bell Industries calls us and wants to engage. My analyst, Alex, the analyst will call from Bell Industries or email from bell.com. So that from the investor’s perspective, it’s the company reaching out to them directly to raise the capital. And really what our function is, is to get our clients in front of those investors. We have weekly reports, weekly meetings. We support them in terms of how they should be presenting, what the narrative needs to look like. In another kind of terminology, I would call it outsource investment relations.
(00:04:10) Jeffrey Fidelman
For startups in particular, right? For startups, early stage companies, and over the past two or three years, we’ve been engaging a lot more with emerging managers. So fund managers that are raising fund one through three, one through five, anywhere from $20, $30, $50 million upwards of about $200, $300 million. The process fundamentally is exactly the same, regardless of who we’re working with. Structurally, content, of course, is going to be radically different if you’re raising a $1 million fund or a $200 million fund or a more funded round.
(00:04:41) Brian Bell
This is really interesting. What was the impetus or the aha moment to transition into this? Where did you kind of see the gap? Do you recall when that was?
(00:04:50) Jeffrey Fidelman
Well, I saw the gap when working in VC. Quite frankly, a lot of founders are so, so good at what they do. It just doesn’t happen to be putting together a deck and a model and then actually pitching and presenting. So for the first few years of this business, we were an investment bank without the banking. Meaning we were helping founders put together all of their fundraising materials and essentially giving them a fundraising strategy, a book that said, here, follow this. You will raise capital over time as long as you’re consistent. And that strategy had, here’s the email copy. Here’s what you should be saying. Structure the narrative and agenda. Here’s a list of some investors that we’ll pull from our pitch book. Go. And what ended up happening was that two weeks, six weeks, 12 weeks later, almost all of those founders would end up coming back to us and say, Jeff, this is great. Can you do it for us? And one of the biggest points of, call it friction or contention that we had at the firm was that in early stage, we didn’t want to, number one, burn our reputation, reaching out to dozens of investors for the same company over and over and over again, or companies over and over again. And similarly, I know that when I was in venture, if a broker or banker called us, that would be the first and last time we spoke to that broker or banker or we spoke to that company if we even looked at it. So there needed to be a solution in the market where advisory could actually work properly and follow best practices of what you can Google or ChatGPT or whatever platform you use to get information and effectively just take that process and productize it.
(00:06:16)
And one of the big issues that we found in starting to spin this up was PitchBook is an annual subscription only, and it’s $25,000, $30,000 a year. The other platforms are similarly priced. Then a founder is usually not going to spend the amount of time that an analyst would on going through PitchBook, creating the filters, creating then a qualification structure, and then creating personalization to all of the investors one at a time. So we thought, okay, great, we’ll have that analyst come on and do it. Because if a company brought the analyst on, they’d be responsible for another annual fee, which was the annual salary of the analyst. So we effectively took those, we built all of the infrastructure and then rent that to our clients on a month-to-month basis.
(00:06:58)
Awesome. So what is the typical, you know, we invest in a lot of pre-seed and seed, you know, for those types of founders, maybe in the seed and the series A, kind of what’s your pitch to them and how does it work? How much does it cost? I would imagine you’re a registered broker dealer to go fundraise, right?
(00:07:15)
Yeah. So we have all of our licenses, which probably sets us apart from 80% of the market.
(00:07:19)
Yeah. You’re in the top 10 or 20% right off the—
(00:07:23)
Exactly. And that’s something that was super important to us. First of all, because of kind of my background, I already had all of my licenses. But furthermore, to set us apart really from the either platforms out there or advisors out there. And that’s really what we see as kind of competition. Advisors of one, two, three people that are going out and selling their Rolodex, oftentimes taking a large retainer, disappearing for a month or two at a time, and then coming up empty handed. And ultimately what those advisors end up doing is starting to throw spaghetti at the wall just to see what sticks so that they can provide some value to their clients. And then on the other side, you have a number of these tech solutions that is almost similar to me giving a calculator to my five year old and saying, go do math, right? There’s nothing wrong with the calculator or the five year old, but you’re giving a set of tools to someone who really hasn’t fundraised before or doesn’t really have the bandwidth to interact with that platform to do it properly.
(00:08:13)
So that’s when kind of we came or how we came about this process of being mega transparent. We have weekly reports to all of our clients, all of the investors that we reach out to, their personalizations, their responses, their engagement rate, all of that, their contact information we share with our clients. It’s their data ultimately. And then we meet with our clients on a week to week basis to make sure that we’re on point with strategy and we can adjust it as needed. And I can review the calls of our clients to make sure we give them pointers on, well, what should you be saying or what you should not be saying? So in terms of pricing and how that works, currently for full service, we charge $8,500 a month and 3% of the capital that’s raised. And we came up with that pricing. If you annualize that, it’s about 100K. And if you’re looking at hiring an analyst and paying for PitchBook alone, you’re right there, if not over, depending on where you’re located. I mean, if you are in California or New York or Connecticut, your analyst salary is probably going to be closer to 80, 85K than 60K. And as we continue to grow the business, we work with a lot of pre-revenue, revenue generating companies. Really, our target market is seed to series B, so raising one to five on the lower end, 20–30 on the higher end. And what we’ve recognized is that we’re really, really good at what we do. And I say we recognize that because I don’t try to pitch people that we will raise you money but rather we will get you in front of investors, qualified and interested investors. And what we’ve now done, and we just released this maybe a week or two ago, we haven’t done a huge public push around it yet, is we’ve taken that kind of database and structured approach. We’ve productized that even further into a platform we’re calling Fundex so that people can come and really have a self-service function. So instead of paying for all of the data structure and the analyst, we’ve peeled the analyst off. And now we’re offering that at $2,500 a month with no advisory fee. Still banker backed, still reporting. Banker will help set up the copy, the campaigning. Banker will help push leads into your specific account. So it’s not just an open database and free for all. And really mimics what we’ve done over the past seven, eight years that we’ve proven out that works, and then productize it so that really more of a do-it-yourself tool for founders.
(00:10:29)
Nice. Have you ever declined to work with a startup and what are some reasons that you’ve done that in the past or would do it in the future where you’re like, I don’t think I can go raise for the startup?
(00:10:38)
So the answer is yes. People used to ask what our criteria is and I would kind of give them a cheeky answer of, well, if the check clears, we’ll work with you. That’s changed over time. I’m very, very big on setting proper expectations for our clients. And I’m happy to say that any of our past clients, regardless of whether or not they successfully raised, I believe and just ask them for LinkedIn recommendations. They all give us really, really good reviews because we ultimately deliver what we said we were going to deliver. So clients really that at this point that we would turn down proactively are ones with unrealistic expectations. So a company comes to us and say, Jeff, we want to engage you in our expectations to close on capital within 30 or 60 days. I will tell them flat out that we’re not in that type of market, A. And B, it’s going to take six to nine months before you see your first money coming in if you’re just starting cold right now and doing the outreach process. Now, if you have warm introductions, if you have friends and family participating, right, there’s outliers.
(00:11:35)
Previous investors, you know, yada yada.
(00:11:37)
Yeah. You already have your own Rolodex that you’ve kind of built up and you’re revisiting and...
(00:11:42)
Right. But that’s not a reason to engage us. You should be doing that on your own. So it’s really founders that have unrealistic expectations, I would say, is probably the number one and only reason that we would turn somebody down. I mean, again, outliers, if it’s something nefarious, if it’s something outside related and there’s red flags around it, we won’t work with them. But that happens once in a blue moon, if ever. But the expectation piece is actually more often than not.
(00:12:07)
It’s awesome. What about on the GP side? Because we also have VCs that listen to this podcast. What should they know about that side of the business?
(00:12:13)
Well, look, I think fundraising, regardless of who you are, what stage you are, has no silver bullet. Anyone trying to be out there saying that I have this greatest platform and I alone will be able to raise capital for you. The moment that someone says I will raise capital for you, I think that in this kind of audience is a red flag in and of itself. Investors today, especially in early stage companies, especially with emerging managers, want to know the management team. It’s super important to them. When I was in Morgan Stanley and a company approached us with $100 million in revenue, sure, it’s less relevant to know the management team. Of course, you want to know them, but it’s a question of who’s going to fund it rather than if it’s going to get funded. So I think what’s really important for me to explain and really how we’ve built the business is that there’s a structured approach. So our approach, regardless of company or GP approaching us, is every week our internal associate pulls about 80 to 100 investor leads based on loose criteria for the analyst. The analyst who is assigned to the opportunity will then individually go through each of those targets, first qualify them. Meaning go to their website, go to their LinkedIn, understanding their investment philosophy, go to their ex or their social media posts and really understand who they are and what they’re looking for. And then create a personalization for each one individually. Again, whether it’s an LP investing in late stage venture funds or secondary LP funds, or if it’s a angel investor or venture investor that’s specifically focused on fintech investments at the crossroads of crypto, as an example. So we get into minute detail with the personalizations that we, the analyst, puts together and then effectively puts them into what looks like a marketing campaign. So it’s a combination of calls and emails that go out over the course of about two weeks. And then if there’s real conviction around a firm or a fund, then we’ll target someone else at that firm or fund if the original investor lead target did not respond. And from there, it’s really just about us setting up meetings and calls with the GP, with the founder, to start building that relationship with the investor.
(00:14:17)
I would say that a secondary point, there are some ancillary things that we’re not necessarily in the control of, but we encourage our clients to do it, which is having consistent updates go out to investors. Again, GP or investors of a company. It very much is sales psychology process where you need to have five or six touch points with an investor prior to them closing or sales lead, right? So it’s the same psychology. It’s the same methodology. First call from our analyst, call with the founder or the GP, having a monthly newsletter go out to give them some updates, maybe over the course of two or three months. Now they’re primed for you to ask them to actually write a check or give you a term sheet for investment.
(00:14:59)
I love that. So how do you balance kind of velocity versus high touch versus the cost? I mean, you know, you have sort of the boil the ocean approach, you know, cast a wide net versus it sounds like you guys take a much more of a targeted like account-based spear phishing approach.
(00:15:13)
Yes. I try not to make any assumptions upon engaging with any type of client. And what I mean by that is, on one hand, we’re able to create criteria that are general. So if you are raising a million dollars, we’re not going to an endowment or a foundation. We’re not going to a billion dollar venture fund that is focused on late stage checks where their minimum check size is five or 10 or 20 million dollars. Alternatively, the same thing. If you’re raising 10 or $20 million, we’re not going to go after most angel investors or micro VCs where they’re not going to be able to meaningfully participate in the round. So there’s sizing geographic constraints that we initially put around the targeting of those leads. And over the first, call it two, three weeks of outreach, we take a very, very close look at the data that gets spit off of the campaigns. How are calls going with our analysts? Open reply rate of emails, call connectivity rate of the analysts doing the outreach. How are the actual investor meetings going with our clients? And then over time, because we’re so high touch with all of our clients, we start creating better filters, better criteria for what our lead targeting needs to look like from our database.
(00:16:18)
So how many people are on the team? How is the team structured?
(00:16:21)
So team is just under 40 people now. It’s structured very similarly to a traditional investment bank, consulting firm, law firm. There’s analysts, senior analysts, associate, VP, and higher. I think what’s interesting that a lot of, or a lot of people find interesting is that when we started this, we started hiring bankers to do these jobs and it did not go well. And what we found was then going out to market and hiring former BDRs and SDRs worked amazingly well.
(00:16:47)
Yeah, they’re used to grinding the... Exactly.
(00:16:50)
And what’s interesting is that the targeting is different from an outreach perspective, right? When you are an SDR, you’re selling a software product. You call someone, hey, Brian, use a different conferencing or podcasting software. You already have one. You’re used to it. It’s a tough sell. It’s an uphill battle every time somebody calls you to try to sell you on some new software or product. With what we’re doing, it’s actually the opposite, right? Investors only make money by deploying capital. Investors must constantly be originating deals. So above and aside, hey, I have the best network ever in SF or New York or Miami or Austin or wherever you are, you are actively trying as an investor to originate good deals or originate deals in general. So if someone calls you with an opportunity, especially if from your perspective, it’s the company reaching out directly or the GP reaching out directly, all of a sudden the dynamics are different. I’m not selling you something that you don’t want or need. Now you’re open to a conversation with not even the analyst. They’re not trying to pitch the business. They’re introducing what the opportunity is and trying to connect you with the founder of the target company.
(00:17:53)
Yeah. So over time, you’re building, you’re out there constantly fundraising for a variety of firms and funds. So you’re learning all the little preferences from all of these institutionals and VCs, pension funds. And so you know exactly who to call. Like if, okay, it’s a series A in AI doing this, you know, you have that in your CRM somewhere. Like, you know, you already know who to call.
(00:18:16)
Yeah. The data has been incredible. And I’m, you can probably hear, I’m pretty obsessive about data and just measuring data and making sure that we keep all the data in some sort of structure.
(00:18:25)
What do you use for CRM? Like what’s that backend look like?
(00:18:28)
So we did use HubSpot and now Fundex is the CRM we use internally. So we built, yeah, we built the business on HubSpot and there were some limitations around it because when we’re doing outreach, we’re doing it from our client’s domain, not from our own. So as we continue to build that inside of HubSpot, there were some limitations around data sharing and aggregation and how we can pull data up. So about a year ago, we had the idea of building our own. Six to nine months ago, we started building our own. And about a week ago, we launched it at least internally so that the whole process, the whole structure is exactly what our analysts now use for Fiddleman & Company as an investment bank. And we’re taking that, having productized it, and now offering that to really any founder or GP that wants to approach us and just use the database.
(00:19:17)
So on the 3%, on the fund side, it makes sense usually on the venture side, on the firm side, you’re going to take the 3% up front. But with a venture fund, you usually call the capital over three or four years. I would imagine your 3% is kind of structured like that with funds.
(00:19:35)
Yes. So on any type of, let’s call it long-term capital, so private equity, real estate, venture, it’s going to be timed based on the commitment. If it’s a hedge fund or a liquid vehicle, we, instead of taking 3%, because that would affect performance, we take 20% of management fee and 20% of carried interest on the funds that we help raise.
(00:19:54)
Right, so you prefer to do the retainer and the percentage of money raised for illiquid funds like, you know, private equity, venture capital versus taking a like some percentage of the GP or the carry or anything like that.
(00:20:05)
So we always reserve the right to convert our success fees into the round or into the vehicle that we’re helping raise for, whether it’s a company or kind of a GP.
(00:20:18)
Oh, that’s smart. So if it’s a really exciting startup that’s growing really fast, you can say, hey, we’re not going to take the 3%. We’ll take some equity in the round.
(00:20:25)
We’ll take equity, yeah. And we’ll convert the 3% into the round that we’re raising for. So it’s even money in terms of just additional investment coming in.
(00:20:32)
Oh, that’s cool. So we’ll do something along those lines. Any challenging advisories where things got derailed? Any fun stories you can tell there?
(00:20:41)
I’m always surprised by founders or GPs that end up tanking their own raises. And that’s why I’m so obsessive around setting the right expectations as well. I can tell you that one of our first fundraise-as-a-service clients, we began to optimize. We were starting to get them on consistent calls. And probably three, four weeks into it, and we have weekly calls anyway, three or four weeks into it, we’re having a conversation. And I asked the founder, did you ask for money on the call, on the investor call? And the guy throws his hands up in the air, red in the face, is yelling at me through Zoom. Why didn’t I tell him to ask for money on these investor calls? And I sat there really speechless, which is not a position I’m in often, as you can tell. I didn’t know what to say. I’m like, they’re not looking for friendship. They’re not looking to have a cup of coffee with you. They know that an investor knows—
(00:21:30)
You’re raising money, yeah.
(00:21:33)
You’re raising money. So on the call, ask—
(00:21:37)
They do ask for the sale. What is the best way for the founder to ask for the sale at the end of the call? Just like, hey, yeah, do you want to invest?
(00:21:42)
Do you want to invest or just tell them the terms of the round? We’re raising, you know, two and a half million dollars for our seed round. I would not even talk about valuation, although it’s often asked. And then talk about valuation. You should have like a loose idea, whether it’s valuation or I’m raising two and a half million for 25 percent equity. And the reality is, is that if an investor likes the business, valuation, unless absolutely absurd, will never be the breaking point of why they don’t invest. And I’m curious to hear your thoughts on it, but I’ve never come into a situation where an investor was genuinely interested in an opportunity and then declined it because there was like a 10 or 15% variance on valuation that they would have accepted.
(00:22:22)
No, I would say as an early stage VC, somewhat valuation sensitive. I go back and forth on this. I’m going to write an article on this soon. Does Valuation Matter is the title of the article, but stated another way, does entry price matter? And I’d love to see some data on this on the early stages, but my guess is it doesn’t. Especially on the early stages, we want home runs, right? We’re investing at 10 and 20, 30 caps and we want billions of dollar outcome, right? So in that case, what does it matter if you get in at 10 or 20? It doesn’t really matter. Other VCs I’ve talked to are really, really valuation sensitive. You know, they will not go above five for a pre-seed or eight. So, you know, it depends on the VC. You know, for me personally, I had one recently went from 12 and a half, 15. Fine. Whatever. 15. You told me 12 and a half, but 15. Fine. Whatever. You’re a great founder and I’m still going to invest. I’ve had ones go from 10 to 15. Fine. Whatever. Now I’ve, you know, we do a lot of Y Combinator. So, you know, those valuations can skyrocket pretty fast. You know, they’ll go from—
(00:23:18)
20 to 30 and then 40 and then 50. It starts to get a little ridiculous if you have 100K of ARR and you’re asking for a 40 or 50 million dollar valuation. That’s a lot of growth that you’re gonna have to grow into that. You’re gonna have to grow to like four or five million of ARR to grow into that valuation, something like that.
(00:23:36)
Well, I think there’s two thoughts at least that come to mind. The first is people are willing to pay what other people are willing to pay, so to speak, right? So if they’re able to raise at those types of valuations, they’ll continue to do so. And I think that the investors are probably underwriting to a less multiple. So whereas you, to your point, you’re underwriting to a 40X multiple, that’s kind of the rule of thumb, right? VC underwrites to 40X multiples, private equity underwrites to a 20, 25% IRR type of return. And then everybody else is somewhere in the middle. So I think if you’re investing out of a larger fund, you probably don’t need to underwrite to 40X, knowing that Y Combinator, knowing the type of community and network you’re putting together, that as long as you do okay as a business, you’ll continue to step up valuations and then ultimately be bought by a larger organization.
(00:24:25)
Right. Yeah. 90% of VC exits are acquisitions, right? And the average B2B software company exits for about 250 million after nine years after founding. That’s just the average.
(00:24:35)
I’m still waiting for that.
(00:24:37)
Yeah. No, I have a lot of, I’m just still waiting for exits. I’m praying for exits, as they say in our community.
(00:24:43)
Yeah. That’s amazing. Yeah. Any other, yeah. Did you want to complete that story?
(00:24:46)
So the guy’s yelling at you on Zoom. So that’s just one story around misaligned expectations and kind of founder conviction, maybe, or founder passion. So what’s really interesting is that we’ll work with some founders sometimes that there’s no conviction and there’s no passion. And it is still strange to me today where they’re paying us not a little bit of money to get them in front of investors, which we are able to do consistently. And another story I can share with you, kind of three, four months into an engagement with a company raising capital, healthy pipeline spoken with two, three dozen investors, and we asked them to follow up. So, hey, if you need help crafting a message, please let us know. But otherwise, it should come from you, the founder, and just reach out to all the investors. And if you’re not doing a newsletter every month, reach out and just give them an update. And what this particular founder did was write half a sentence, copy pasted, no personalization. And it was kind of like, hey, are you still interested in investing? And copy pasted it to all of those investors that he had a conversation with. And you can guess how many responses he got. It was minimal, if any, whatsoever. And to us, it was like, you just burned every bridge that you worked so hard on creating.
(00:19:17)
So on the 3%, on the fund side, it makes sense usually on the venture side, on the firm side, you’re going to take the 3% up front. But with a venture fund, you usually call the capital over three or four years. I would imagine your 3% is kind of structured like that with funds.
(00:19:35)
Yes. So on any type of, let’s call it long-term capital, so private equity, real estate, venture, it’s going to be timed based on the commitment. If it’s a hedge fund or a liquid vehicle, we, instead of taking 3%, because that would affect performance, we take 20% of management fee and 20% of carried interest on the funds that we help raise.
(00:19:54)
Right, so you prefer to do the retainer and the percentage of money raised for illiquid funds like, you know, private equity, venture capital versus taking a like some percentage of the GP or the carry or anything like that.
(00:20:05)
So we always reserve the right to convert our success fees into the round or into the vehicle that we’re helping raise for, whether it’s a company or kind of a GP.
(00:20:18)
Oh, that’s smart. So if it’s a really exciting startup that’s growing really fast, you can say, hey, we’re not going to take the 3%. We’ll take some equity in the round.
(00:20:25)
We’ll take equity, yeah. And we’ll convert the 3% into the round that we’re raising for. So it’s even money in terms of just additional investment coming in.
(00:20:32)
Oh, that’s cool. So we’ll do something along those lines. Any challenging advisories where things got derailed? Any fun stories you can tell there?
(00:20:41)
I’m always surprised by founders or GPs that end up tanking their own raises. And that’s why I’m so obsessive around setting the right expectations as well. I can tell you that one of our first fundraise-as-a-service clients, we began to optimize. We were starting to get them on consistent calls. And probably three, four weeks into it, and we have weekly calls anyway, three or four weeks into it, we’re having a conversation. And I asked the founder, did you ask for money on the call, on the investor call? And the guy throws his hands up in the air, red in the face, is yelling at me through Zoom. Why didn’t I tell him to ask for money on these investor calls? And I sat there really speechless, which is not a position I’m in often, as you can tell. I didn’t know what to say. I’m like, they’re not looking for friendship. They’re not looking to have a cup of coffee with you. They know that an investor knows—
(00:21:30)
You’re raising money, yeah.
(00:21:33)
You’re raising money. So on the call, ask—
(00:21:37)
They do ask for the sale. What is the best way for the founder to ask for the sale at the end of the call? Just like, hey, yeah, do you want to invest?
(00:21:42)
Do you want to invest or just tell them the terms of the round? We’re raising, you know, two and a half million dollars for our seed round. I would not even talk about valuation, although it’s often asked. And then talk about valuation. You should have like a loose idea, whether it’s valuation or I’m raising two and a half million for 25 percent equity. And the reality is, is that if an investor likes the business, valuation, unless absolutely absurd, will never be the breaking point of why they don’t invest. And I’m curious to hear your thoughts on it, but I’ve never come into a situation where an investor was genuinely interested in an opportunity and then declined it because there was like a 10 or 15% variance on valuation that they would have accepted.
(00:22:22)
No, I would say as an early stage VC, somewhat valuation sensitive. I go back and forth on this. I’m going to write an article on this soon. Does Valuation Matter is the title of the article, but stated another way, does entry price matter? And I’d love to see some data on this on the early stages, but my guess is it doesn’t. Especially on the early stages, we want home runs, right? We’re investing at 10 and 20, 30 caps and we want billions of dollar outcome, right? So in that case, what does it matter if you get in at 10 or 20? It doesn’t really matter. Other VCs I’ve talked to are really, really valuation sensitive. You know, they will not go above five for a pre-seed or eight. So, you know, it depends on the VC. You know, for me personally, I had one recently went from 12 and a half, 15. Fine. Whatever. 15. You told me 12 and a half, but 15. Fine. Whatever. You’re a great founder and I’m still going to invest. I’ve had ones go from 10 to 15. Fine. Whatever. Now I’ve, you know, we do a lot of Y Combinator. So, you know, those valuations can skyrocket pretty fast. You know, they’ll go from—
(00:23:18)
20 to 30 and then 40 and then 50. It starts to get a little ridiculous if you have 100K of ARR and you’re asking for a 40 or 50 million dollar valuation. That’s a lot of growth that you’re gonna have to grow into that. You’re gonna have to grow to like four or five million of ARR to grow into that valuation, something like that.
(00:23:36)
Well, I think there’s two thoughts at least that come to mind. The first is people are willing to pay what other people are willing to pay, so to speak, right? So if they’re able to raise at those types of valuations, they’ll continue to do so. And I think that the investors are probably underwriting to a less multiple. So whereas you, to your point, you’re underwriting to a 40X multiple, that’s kind of the rule of thumb, right? VC underwrites to 40X multiples, private equity underwrites to a 20, 25% IRR type of return. And then everybody else is somewhere in the middle. So I think if you’re investing out of a larger fund, you probably don’t need to underwrite to 40X, knowing that Y Combinator, knowing the type of community and network you’re putting together, that as long as you do okay as a business, you’ll continue to step up valuations and then ultimately be bought by a larger organization.
(00:24:25)
Right. Yeah. 90% of VC exits are acquisitions, right? And the average B2B software company exits for about 250 million after nine years after founding. That’s just the average.
(00:24:35)
I’m still waiting for that.
(00:24:37)
Yeah. No, I have a lot of, I’m just still waiting for exits. I’m praying for exits, as they say in our community.
(00:24:43)
Yeah. That’s amazing. Yeah. Any other, yeah. Did you want to complete that story?
(00:24:46)
So the guy’s yelling at you on Zoom. So that’s just one story around misaligned expectations and kind of founder conviction, maybe, or founder passion. So what’s really interesting is that we’ll work with some founders sometimes that there’s no conviction and there’s no passion. And it is still strange to me today where they’re paying us not a little bit of money to get them in front of investors, which we are able to do consistently. And another story I can share with you, kind of three, four months into an engagement with a company raising capital, healthy pipeline spoken with two, three dozen investors, and we asked them to follow up. So, hey, if you need help crafting a message, please let us know. But otherwise, it should come from you, the founder, and just reach out to all the investors. And if you’re not doing a newsletter every month, reach out and just give them an update. And what this particular founder did was write half a sentence, copy pasted, no personalization. And it was kind of like, hey, are you still interested in investing? And copy pasted it to all of those investors that he had a conversation with. And you can guess how many responses he got. It was minimal, if any, whatsoever. And to us, it was like, you just burned every bridge that you worked so hard on creating.
(00:32:54)
Yeah. So you’ve been doing this for a while. How has the fundraising landscape changed over the last few years, especially?
(00:33:01)
Two thoughts at least initially pop into mind. The first is kind of more simple, where 10 years ago as a seed investor, you would be seeding a company and providing it maybe with, I don’t know, a couple hundred thousand, maybe a few million dollars. Nowadays, seed investors are looking for half a million, a million in ARR plus. And I think it kind of has perverted the term a little bit where it doesn’t really mean anything anymore. Pre-seed is now the new seed.
(00:33:25)
Exactly.
(00:33:26)
Whatever that means.
(00:33:27)
Exactly.
(00:33:27)
And we’ll see where that changes also over the course of the next couple of years. So that’s been one of the biggest changes that even founders, when we’re having a conversation with them and they’re pre-revenue, just at revenue, looking for a seed investor, they’re surprised to hear that the seed investors want to see significant amount of revenue in their business before they make a move. From more of a macroeconomic scale, I think the past seven years have been really unlike any other in private equity, venture capital in general. And I say that because 2018, 19, 20, 21, we saw a huge amount of capital come into funds and go into companies. And you had the next years after that, totally quiet, venture winter, I think people were calling it. And the interesting part of it is when a GP raises capital, they have a certain amount of time that they must allocate or deploy that capital, right? It’s usually five to seven years, plus or minus. And we’re kind of reaching that point where there’s a lot of dry powder in these funds. Yes, granted, a lot of it is earmarked for follow-on rounds, but a lot of it is not. It’s fresh capital, so to speak, that needs to get deployed. And a GP’s worst possible outcome is to have all of this money committed and not deployed and need to return the commitments to their LPs. I mean, you’re signing your own death certificate if you’re doing that. So there’s a lot of pent up demand, almost kind of reverse bubble that I’m seeing at least where capital wants to get deployed. And not to mention that the only way you’re making money as an investor is by deploying capital. No one’s really paying 2 and 20 anymore, so to speak. Even if they are, the 2% is usually not enough to really make money in this industry. So you need to deploy that capital and deploy it well and get your carried interest. On a micro kind of economic level, end of last year, we saw things starting to pick up again. November, Q4, call it October, November, December of last year, we saw capital deployed. Things were starting to thaw out a little bit, so to speak. And then January, everything stopped. I mean, between tariffs, political events, the other reasons in January, pretty much until June, we saw very, very little activity. But just as little activity as we saw then, since June, things have started to loosen up a bit, I would say. We’ve raised probably somewhere between 30 to $50 million. I don’t have the exact number since then for our clients across funds, companies as well. And investors are now more and more proactively taking second calls, due diligence calls. And this isn’t to say that their criteria has necessarily dropped, but I think they’re just more open at least to origination, to taking those second calls, to putting out term sheets and trying to get into companies at what they feel is an appropriate cost and economics. So I see the marketing opening up. I think the IPO market is also an indication of where VC will start heading as well, because a lot of the proceeds after a company goes public goes back into investor hands. And usually after they take their Mediterranean vacation, buy Lamborghini, the rest of the money is earmarked for reinvestment. And I had been maybe overly optimistic thinking that would happen this year. But I certainly think that within the next 12 months, we’re going to see an incredible amount of especially venture capital flow back into the market, meaning like into companies’ hands.
(00:36:47)
Yeah. Yeah. We seem to have a, we’re still working through the 2021 hangover.
(00:36:51)
Yeah. More or less.
(00:36:52)
Yeah.
(00:36:53)
And, you know, these things go in cycles, right? Seven to 10 year cycles, just like other business cycles. And, you know, it’s been interesting launching my firm during the hardest fundraising environment in the last, you know, 15 or 20 years. It’s been fun.
(00:37:06)
I can imagine.
(00:37:07)
Character building.
(00:37:08)
That’s right.
(00:37:09)
Well, listen, it’s, you know, going back to what I was saying, consistency, as long as you keep doing it and you keep going at it, so to speak, eventually you’ll be the last person standing and doing it or one of the last few people, right? Like for sure, whenever you started, there was a hundred people doing that. Then it turned to 50, then 30, then 15 and now 10, right? With your type of vintage and when you started and your focus.
(00:37:32)
I even see this in my deal flow list. Cause I maintain a pretty large VC deal flow list of co-investors and follow on investors.
(00:37:39)
Yeah.
(00:37:39)
Every once in a while, just an email bounces, you know?
(00:37:43)
Yep.
(00:37:44)
Exactly.
(00:37:44)
It’s like, they’re gone.
(00:37:45)
Yep.
(00:37:46)
You know, they shut, they shut it down.
(00:37:48)
They have to.
(00:37:49)
And I see that often because it’s not, you know, one of the biggest, let’s say like 10 years ago, plus or minus one of like the two main important pages of a VC deck, right? Like when you’re raising capital as a GP, it used to be origination. What is your secret sauce of origination? How are you going to get the best deals possible? Then a few years later, everybody had kind of the same token page. It was vanilla. It was network. It was social media. It was past employership, whatever. Then it turned to diligence. Well, I already have the best network. How am I going to do the best diligence? And I think that applies very much to what you had just said in terms of cycles, where the most important aspect of what a GP can offer its LPs is something between origination and diligence. And not to say that’s it. I mean, there’s a lot more. There’s portfolio management. There’s inorganic growth of portfolio companies. There’s reporting. There’s a lot of other things there. But in my opinion, and kind of from what I’ve seen, origination and diligence are two of, if not the most important aspects of what a GP can offer its LPs.
(00:38:49)
Interesting. So what are some good ways that you could tell the story on those two items?
(00:38:53)
I think being as unique as possible on the origination piece, right? You’ll have your token pieces, right? I keep saying that, but there’s social media, there’s where I went to school, where I used to work. And I think some people have a very unique combination thereof, but there needs to be something more, right? Like I myself am an LP in all these different funds, and I’ve negotiated follow-on or co-investment rights, right? And now I’ve built a fund because I have all of those co-investment rights and that’s my unique origination. Or I run a conference or I run a podcast with all these different people on it and I can originate deals that way because I have so much exposure that other people either don’t have or it would take them 10 years to actually build. So I think that’s really important around kind of origination aspect.
(00:39:36)
Yeah. Network and brand matters a lot in venture.
(00:39:39)
Yeah. Oh, in everything. I recently had dinner with Gary Vaynerchuk. He and I were talking kind of about branding. And it was an interesting how the conversation went. And it was really focused on personal brand. And you hear him talk about this a lot on whatever social media you follow him on, if you follow him. And the reality is, is that I thought about it after he and I spoke, and it’s so true. Like you end up engaging more with a person at a company than with the company of anything, especially a startup or an early stage company, right? Like your startup has a, or your GP has a company page that I’m sure puts content out, but you as the GP or you as the founder putting content out, we’ll see so much more engagement that can then drive back to the company. So in today’s day and age, it’s almost more important to start building a personal brand, even if you’re an employee at a large company. Like if I still worked at Morgan Stanley, I mean, they had regulatory constrictions around what we could post and talk about. But let’s take banking or insurance out of it. But if you’re some salesperson at a company or business development or something responsible for product manager, you should absolutely be out there on any type of social media sharing your opinion. And it will create your personal brand that will only stand to benefit you and the company. And I think companies that try to control this are doing it wrong. I think companies that try to restrict individuals from building their own brand, they have it backwards. They should be encouraging their employees to build a personal brand because it will only reflect well on the company, as opposed to restricting those employees that ultimately you’re restricting the employee, they can’t build a personal brand or campaign or what have you. And then that’s not going to lead back to you, the company, and you’re basically shooting yourself in the foot or maybe better said, you’re biting your nose to spite your face. So I think it’s really important to encourage and support any employee of any organization to go out there and build a personal brand. And yes, of course, you want them to talk about the company as well in a good light. But in any circumstance, their exposure leads to your exposure.
(00:41:43)
Love that. And that goes double for founders and companies as well, right?
(00:41:46)
Anytime.
(00:41:47)
Oh, yeah, big time.
(00:41:48)
And I’ve noticed that from ourselves as well. I mean, we used to put a lot of effort and energy into company content and just even personal content and kind of a third-party service thinking that, oh, we just need to saturate someone’s feed to get exposure. And I don’t know, six months ago, nine months ago, something along those lines, I pulled all of that out and peeled it back. And I actually now sit, I don’t know, for an hour once a week, for an hour and a half once a week. I do my own research. I have a lot of opinions as you’re hearing. And I try to focus in on one thought and really create a thoughtful post that has data included. And I have a lot of data coming off of the company. And just having an opinion about that data and putting it out there. And I’ve seen how much engagement that has started to drive. To me, I mean, I am the company, the company is me, so to speak. But as recently as this week’s team meeting that we’ve had, I’ve begun kind of practicing what I preach. I’ve begun telling our analysts and our associates and everybody at the company, go and start having an opinion that is out loud on social media. Because that is only going to first show our intellectual capital. You’re on the front lines having discussions with investors and with our clients. You have a lot to share. Every single one of our analysts. There’s no reason that they shouldn’t be out there sharing those thoughts and opinions.
(00:43:05)
Let’s talk about valuation. Founders often get stuck here. We talked a little bit about it, but what frameworks or mental models do you advise them to think through on valuation?
(00:43:14)
You know, the simple answer is that for an early stage company, you should be doing comparative analysis. And what a comparative analysis is, you go out to the market using whatever tools you have available and come to us. We’re happy to run it for you as well. But whatever tools you have available, find complementary, supplemental, competitive companies to your own. Take a look at how they raised and what tool did they do? Was it equity, a SAFE, convertible, anything in between? Try to understand what their revenue or what their metrics were and what multiple they used to raise a valuation. Try not to use one, but use a couple of those examples and then have an average multiple that you can then apply to your revenue or your forward-looking revenue. So if you go out there, you find three or four companies that are complementary to yours. They’re valued somewhere between three and five times revenue multiple. Pick four just in the middle. And again, it’s circumstantial, so it’ll depend case to case. And that’s the multiple you’ll use. And then on the revenue side, it depends on what stage you are. If you’re pre-revenue, maybe you can apply it to kind of forward 12 month revenue and then raise it on a note. And then that valuation is in turn a cap. If you have some revenue, then you can do an average of your one and two revenue just to give yourself a little bit of a bump. In all cases, depending on the stage you are in terms of your revenue cycle, you should also discount that revenue. So if it’s pure, rather how much you’re raising should be discounted against revenue, right? So if you’re raising, I don’t know, if your operational expenses are a million dollars, but you’re considering that you’ll get 500K in revenue, you should raise a million dollars because you haven’t had any revenue. So you discount all of your revenue by 100%. In the same token, if you have some revenue coming into the business and you need to raise the same million dollars, maybe you discounted by 80 percent by 50 percent right something where you’re comfortable enough that you don’t need to raise all million because you have some revenue coming in but you’re not anticipating needing 100 of that revenue to come in in order to meet your goals and your numbers
(00:45:12)
Gotcha. We’ve been jumping back and forth between working with funds and working with founders. Maybe you could just—any other challenges, differences you want to highlight between working with two types of organizations and fundraising?
(00:45:24)
Well, look, I mean, an investor will always try to depress the valuation. A founder will always try to increase the valuation. So, you know, I would cut the outliers out of any analysis that are being done. So if you find five companies, three, four, five, four time multiple, and the fifth company is like an 18 time multiple, don’t use that because that’s just going to be an immediate reflection on what you’re doing and why you’re doing it. And like we said before, I mean, if the valuation is within a 10, 15% range of where the investor is comfortable with, the investor, if interested, will tell you that flat out and say, you know what, I can’t invest in anything over 8 million or anything over 10 million cap or valuation. The only real problem I have seen is when there’s an astronomical valuation on a company. Like they’re worth 10 and they go out with a $50 million valuation. It’s just, it’s not thought through. It’s highly ambitious. And look, do those valuations happen? Yes. And I think the media is a little bit at fault at only reporting things that are complete dumpster fires or somebody going out raising a $50 million seed round to then later learn it’s alumni of Meta or chief engineer at X that came out or the professor.
(00:46:34)
Oh yeah, we’re seeing it. We’re seeing, you know, I think the OpenAI CTO, you know, raised at a $10 billion valuation pre-product.
(00:46:41)
Pre-product, yeah.
(00:46:43)
That is not the norm.
(00:46:44)
Which is absolutely crazy. In terms of expectations, having unrealistic expectations going into a fundraise is oftentimes what will cause an emotional response when the reality sets in. Thinking that you’re going to raise a billion dollars at a 10 billion pre with no product and really believing that going to market, you’re going to get angry with a lot of advisors that tell you otherwise. You’re going to get disenchanted by a lot of VCs that look at you and say, who are you? Who are you to be raising at this valuation with no product? So I think having realistic expectations, although it might not necessarily be what you want to hear, will make you better off when you’re actually going out to raise that cap.
(00:47:20)
Switch gears and talk about the future. So looking ahead, what are you excited about over the next few years?
(00:47:25)
I’m excited for growth. I mean, quite honestly, we’re seeing a lot of really cool companies. I mean, we’re at the forefront, right? They’re coming to us basically to raise capital. So we kind of have some insight before they go to market. Really cool companies coming out. I think in terms of sectors that we’re seeing and I’m excited about is, yes, AI, but I’ll call it AI infrastructure. And I see a lot of growth there. So things like data centers, optical free space, communication, things of that nature, where it’s kind of like picks and shovels of AI, because AI is clearly going to grow at the same rate, if not faster than how the internet grew. I think energy also goes hand in hand. In the past six months, I’ve seen a dozen different energy companies, a dozen different energy technologies that I’ve seen, which is wild. I mean, I’ve seen everything from fusion, nuclear, fission technology. I’ve seen solar. I’ve seen a gasification of garbage being turned into co-generated energy. I mean, the different types of energy now, especially because of AI and the research capital that it is able to exude, has really made a lot of these energy technologies real. And I think it was Eric Schmidt, the co-founder of Google, that was talking at a conference where he said, our problem is not going to be compute. It is going to be the lack of energy to support the compute that we need. So energy, just as an industry, as a technology, as a potential investment focus for any GPs out there, I think energy is now on kind of early stages of innovation because there’s a demand for energy, clean energy for sure, but just energy in general.
(00:48:59)
Yeah, yeah, and we’re falling behind China, right? China’s adding like a whole US worth of gigawatt generation at like every year or something like that.
(00:49:09)
They are. I think, you know, there’s a—I think 2039, AI 2035, 2039 is this apocalyptic blog that was written by a bunch of OpenAI researchers. And it kind of, you read through about a decade worth of time and then it allows you to split the story into two. Whereas like AI takes over and kills everybody or AI really supplements humanity and allows us for space exploration and everything else. And I think that the race is really, it really is around energy. Because compute is there. It’s just a matter of how quickly can we make it smaller, make it faster, make it think more. But how are we going to power that? And everything now consumes energy and spits off data. I mean, I have an aura ring on. I see you have a band on as well. Our phones track things. EVs track everything. There’s red light cameras everywhere, speed cameras everywhere. There’s—I mean, you’re being tracked in some way, shape or form. And I’m not even talking about the tracking piece, just the data that comes off of that is incredible. And to process that data, we have the technology now to process it, but it often takes so much energy to do so. That’s, I mean, don’t quote me on this statistic, but for everything I’ve seen, 70 to 80% of all available data ends up getting dumped because it’s just not possible to expend the energy to digest that type of data and create an output off of it. So I’m just excited to see those things. I mean, you know, excitement is measured because every time somebody builds a lock, somebody builds a key. Every time somebody builds a bomb, somebody builds a shield. And I think that’s kind of how we have always progressed as humans. But I’m personally excited just in what we’re doing as well, in terms of having something I believe is unique to the market, just from an investment banking and fundraising perspective. We’ve helped a lot of clients. I’m looking forward to helping a lot more. And also with launching Fundex, I think this could be a really, really interesting tool for not only for founders and funds to come and approach us, but also for every advisor out there, for everyone that’s working in this industry. I don’t remember who it was, famous inventor or scientist or someone that kind of said something like, if everyone did things the way that I’m doing it, the whole industry would be better off. I always thought that that was full of it, whoever said that. And I’ve recognized only recently in the past few years that we are building something like that. If every advisor that works with or for early stage companies or placement agent that works with GPs would just run their business the way that we have built our business, everyone would be better off. I would be better off if somebody else copied our business. And that’s why I’m so transparent about what we do. Because frankly, I go into so many conversations with a black eye for a fight I was never in. Oh, you’re just another advisor. Do you even have your licenses? Oh, what are you going to charge us? 20K and then disappear for three months? Like, no, we do none of those things. We’re super transparent. We’re super hands-on. We’re high touch. We’ll meet every single week. And by the time I’m done with that, like 30 second spiel that I have for people, they sit back and say, oh my God, I wish I met you six months ago. I wish I met you nine months ago. So I think there is a change coming for the industry that I’m in. I’m hopeful that we can be a proponent of that change overall. But even if we are not the ones to do it, sharing the story, sharing the transparency, I always say tongue in cheek, nothing we do is proprietary. I’m happy to go on these podcasts and go on blogs and publish everything and anything that we do with 100% transparency, because the way that founders and funds need to raise capital is very simple. It’s hard. It takes time. No one told you it was easy because frankly, if it was, everyone would be doing it successfully. But as long as you have a structure and you’re consistent about using that structure, you will be successful.
(00:52:50)
Yeah, I love that. What is Fundex?
(00:52:51)
So Fundex is the platform that I mentioned. So Fundraise as a Service kind of aggregating all of those data sources into one place, creating a structured process behind it, and then our analysts actually executing on that process for our clients. Fundex is that where we peel back the analyst. So we provide our clients with essentially a CRM, for lack of better terms. We have a banker on the back end, pull leads, push them into our clients’ instances. The banker will still help write the copy. The banker will have reporting functions as well for our clients and still meet with them, but on a biweekly basis. And the client is really responsible for doing their own outreach. So think of it as almost PitchBook meets OpenVC with an actual banker on the back end, helping guide the person in that process.
(00:53:34)
Yeah, fascinating stuff. Let’s wrap up with some rapid fire questions.
(00:53:39)
All right.
(00:53:40)
What’s a book, a resource that changed how you think about fundraising?
(00:53:43)
Productize, Aisha Armstrong. I talk about this a lot. She wrote a book, essentially how to take a business services company and productize it. And she goes through three steps. You have a business services, you know, Jeff, you’re sitting alone when you started this business. There’s 24 hours in a day. You bill hourly. You don’t eat, sleep, go to the bathroom, see your kids, 24/7. That’s all you can bill. To then having a managed service, well, how do you actually be able to create a more structured process while still keeping it relatively manual? And then finally, how to productize, how to create a product out of that managed service. So I’ve thought a lot about that. I’ve actually read the book twice, maybe eight years ago, six years ago, when I couldn’t figure out how to apply it. And then more recently, a few more, like, I don’t know, four years ago, three years ago, where we started having this idea for creating Fundex and actually creating something that was more productized.
(00:54:33)
That’s really cool.
(00:54:34)
So I think that’s, at least for me, that was incredibly insightful.
(00:54:37)
What’s a misconception most founders have about what makes an investor ready pitch deck? What does that really mean?
(00:54:43)
That the deck will raise you money. That is absolutely not true. In fact, when we’re doing a fundraising for our clients or fundraise as a service, rather for our clients, we never share the deck. We don’t send any links. We don’t send any attachments. We send a few kind of pieces of information about the opportunity in the company to the outbound, to the investors that we’re sharing with. Of course, if they ask for a deck prior to the call, then we’ll share it. But the idea is that you want to go into a call with an investor. You want to control the narrative. The deck should be something simply you use at the end of the call to prompt them, supplement everything you’ve said on the call in black and white, probably more eloquently written out. But the deck is not what will get you the investment. It is you. It is your narrative. It is your approach to having a relationship with the investor. The deck simply solidifies everything you’ve said.
(00:55:31)
In today’s market, what’s an unconventional strategy you think is underutilized by founders raising capital?
(00:55:36)
Phone calling. I mean, literally picking up the phone and calling. I know everyone’s buried in text messages and emails and looking at open reply rates, but I can’t tell you how many times we’ve had investors tell our analysts like, holy smokes, you actually picked up the phone and called me? You’re one of 10 calls I’ve gotten this week only. And they find it so refreshing. I mean, some investors will kind of scoff at that a little bit, but more often than not, we get pleasantly surprised people saying like, wow, you actually picked up the phone and called.
(00:56:05)
Which categories of investors like that? Because as a VC, I don’t even pick up the phone, right? I just send it to voicemails. Is it like kind of the family offices and institutionals that are like, oh, that’s kind of nice to have a phone call?
(00:56:14)
Yeah, it’s kind of maybe a generational thing. The older investors are more appreciative of the phone calls, I think. So I’m not saying to spam. I’m not saying to call a million times. Yes, you should leave a message, follow up with an email and kind of create a sequence and a structured process for yourself. But more often than not, it’s kind of the older, more senior investors in age that appreciate the phone calls more so. But even like if you’re not picking up the phone and you’re sending it to voicemail, someone leaves a voicemail. I’m sure it’s transcribed. You get it in your inbox or you’ll check email saying, hey, I just left you a voicemail. So you’ll be able to connect the two together. And it’s just, it’s another form of communication that is, in my opinion, really underutilized.
(00:56:51)
So AI is continuing to penetrate areas and finance and fundraising is no exception to that. How do you think it will change how firms like yours deliver advisory?
(00:57:00)
So funny enough, two years ago, we built AI into what we do, into the qualification and personalization process. So we’ll pull a lead list for a certain client. We built an AI where we can put the client details in there, put the list in there and say, hey, qualify this list based on parameters, and then create personalizations for outreach. And it helped us increase volume three to fourfold. What we didn’t expect to happen was that none of the analysts, because they did not spend any time doing their own research, looking up a LinkedIn or a website or social media posts or blogs or whatever, they would connect with the investor, they would read that line of personalization and then fall flat on their faces. So despite volume increasing significantly, our effectiveness and efficiency of booking calls fell off a cliff. And I think that’s something that really humbled my understanding of how AI can be utilized, where it’s really there to be supplemental. We’re building in Fundex kind of a next step is to have like more of an AI matching algorithm so we can be even better at providing leads to our analysts or to our clients that are more aligned with the investment goals. But there still needs to be an element of manual research being done and not just blind calling people without knowing what to say. Yes, I think AI is coming into the industry. I’m less concerned about it, maybe because two years ago we built something and it failed spectacularly. And I have had so many conversations with clients that have come to us that have used one of those AI fundraising tools online. And it’s like a thousand emails a day burning their domain, burning their reputation. Investors are not wanting to take calls with them because they’re just throwing spaghetti at the wall to see what sticks. And that just that doesn’t work in this industry.
(00:58:38)
Well, this has been a really amazing conversation. I learned a lot. Thanks for coming on.
(00:58:42)
Yeah, thank you so much for having me, Ryan.
