Selling competition - how to raise when you have a large firm working in your field? By Greg Miaskiewicz.

Again, this is fundraising where you entered as a guest speaker with Greg masquerades Co, founder and CEO of cap based that raised one point, one million dollars. 

And this app is, we'll talk about this fundraising process and also reading while you have a Pre series competition. 

Because cap base is competing with Carter, and we'll talk about how Greg managed to differentiate themselves, differentiate cap based from Carta and seal prove to the investors that it's worth working with them. 

And we'll also talk about distributed teams and how to build them. So, Greg, last he called by, you giving us some background on yourself and on cafes. 

So, I'm, this is the second company I've found it and so I've been working on startups as an early employee or a consultant or founder or advisor for more than twelve years. 

Now, I sold the last startup. I started a, it's the real time bot detection startup, called Swarm. We sold to integral, add science in two thousand and sixteen. 

I worked that I had enrolls known as abbreviated as and I let up there are Indian advertising fraud for a couple of years before I was acquired by the private equity in July of two 

thousand, 

eighteen for around eight hundred, 

fifty million dollars. 

And so, after that acquisition went through, I left to go work on cap base in August of two thousand and eighteen. 

Guys, so what does cap base two was it about? 

You can encapsulate what we're doing as sort of like a automated back office for your companies, financial and legal and compliance tasks. 

So that includes everything from contracts management to cap tables to government violence. All right. 

Got it, so we'll, we'll, we'll get back to this, so to the differentiation between cap based and quarterly or on, but first, I want to talk about the difference in the experiences in your first company and the second company. 

So, was it much easier to fundraise for cap base compared to the first company, or was it not did the investors pay a lot of attention to your first success to the first sale that you made? So, we were a bootstrap company. 

So we sold for around the same evaluation we could have raised the seed around that in two thousand and sixteen. And so it's, it wasn't a huge exit. 

But I think a lot of people who have had early exits from their first company and go on to build, this is like,
pattern matching within they go onto build bigger,
better, 
more successful companies, 
the second time around. 

So just to some extent yes. Things have been. 

Let's compare how you acted in the first company and in cop base. So what what are the major things that you're doing differently? 

We started out, I think that my previous company building a product and figuring out, if we can build some technology that even works to solve the problem. 

Then, figured out what we're gonna do for selling that. And what the vision is around go to market. We didn't really do a lot of market research. 

We didn't talk to a lot of potential customers. 

So what a hotel and that led to some difficulties when it went to time to actually try to build scalable customer acquisition funnels. 

So we had a very difficult time with go to market, because we didn't spend a lot of time upfront, talking with customers. We just went potential customers. We just want to build something. 

So, 

the, 

some of the best startup best advice in that book, 

the lean startup is to go out there and talk to as many potential customers as possible, 

and take very detailed notes usually in a spreadsheet. 

So you can quantify how many people have a specific pinpoint. 

So, we followed that advice. I mean, for my last company, we did why Combinators? Program for super early stage companies, the fellowship program. 

So I just went through the Y C forums and I would give help to people. They were asking about something completely unrelated to what I wanted to talk to them about, but it's like an intro to someone at this company. Like cool. 

Okay now, that, since I have your email, can I talk to you about your experience founding a company? Like, the first time you did this, what was your experience for using money from investors? How much did you spend on legal and so on? 

And so,
fortunately,
these conversations that I had with potential customers, many of these founders,
who I talked to are also angel investors, 
and they liked what we were doing, 
and our vision for the company, 

and they offered to asked us if they could invest. 

So, it actually our first checks for raising money for cap, this were all entirely from founders who I was interviewing for doing product research. 

Nice, that's a nice make sure they're interviewing getting the Super available feedback and then as a bonus, you get a check as great degree. So, my major question is how to differentiate yourself from the competition. 

So, basically, it's twenty twenty. Now. Everything that you can imagine is. So already built, and the only thing you have left is, you know, trying to build something like the thing that's already out there but. 

Significant difference. So how do you manage to differentiate yourself from a company like Carla? Because they're doing somewhat similar thing right? And they're really big player in the market. So how do you manage to differentiate yourself from Carta? 

Carta it doesn't really have a very good feature set for early stage companies. They don't actually deal with the company formation and they kind of assume a company onboarding into Carta has a board setup. 

And is a more complex company. Their pricing doesn't make sense for early stage companies. It's also not transparent. So founders don't get a transparent value from their product offering. 

Instead they have a guy named Colton or Chad, calling them three times a quarter, trying to five to ten on their table. 

So, and if you look at, look at it and Carla does have a lot of market cap and these companies that are on their platform. But they have fourteen thousand customers go to their website. That's what they advertise. 

There are more technology startups being formed and given year than part of our customers. So, if we build a product, that's really geared towards early stage market and own new company formation. 

Then that's that can be a very successful wedge into the market and we're getting customers before they become customers. 

So the challenge then becomes the questioning, the line of questioning from VC is becomes, how do you keep card customers from switching to card a, at a later date as to how do you differentiate yourself? 

So so I think we've had a fairly decent reception to to framing things in our pitch that way got it. So, let's talk just a little bit about your pitch deck. I like this, you know. 

Taking the smaller, I mean, it's not a smaller niche, but it's an earlier niche of the current customers. 

I have a question so on the beach deck when you're presenting to the investors many people actually include the potential acquires. Did you do the same thing with Carta? 

Saying like, hey, if we'll be able to actually capture this niche, we, there is a high chance of us getting an acquisition offer from Carla or someone, some other big player. Do you do that? Or do you try to stay away from that? 
We try to stay away from that, because I think it gives the framing that you're gearing your company 
towards an early exit. Although I could see how some people think that that framing is useful. However,
I mean,
if it comes up in conversation, 

like, 

there are plenty of strategic acquires for a cap based we fit into the product portfolio of angel lists, 

for example, 

which is worked on republic for crowdfunding as their syndicates product for fundraising on the site or, 

you can create on angel list and they have they worked on was a coin list with file point for when iceos were a thing said part to be 

honest. 

So, they've, they've dabbled in and sort of. 

Things that things in the similar sort of extending their, their product scope and so this fits in there. 

And then you have Stripe where they have Stripe Atlas, but it's kind of a, it's, it's not a very fully complete product Stripe, you know yes. 

They can pay five hundred dollars,
and they will incorporate you and set up your bank account, 

but it doesn't really do the full company setup like the employee stock option plan the board set up and founder shares and so so it's so Stripe if they, 

if they actually wanted to build Atlas into a real company management tool and more than just lead gen into their payments product. 

Then they're also a potential strategic acquire. So there's, it's, it's, it's easy to paint that narrative. 

If people ask, but frankly, I think capital has the potential with the way that we're going about things to. 

We have the potential to take over the market with our with, by controlling the getting customers before a car to get stuff. 

By that,
I mean,
you have to figure out how to get someone who believes in your vision, who has in that work to help you,
whether that's for advisory shares or there, 
you're first investor check. 
And that might be someone you find on Twitter. 

And I've seen this successfully, 

where executed successfully, 

where founders insert themselves into conversations that VCs are having about the deficiencies of existing product solutions about products that they wish existed to get on their radar. 

And I, I mean, you can see it in public in real time on a Twitter thread. Right? Twitter I hear that thing. So many times. Every single day I still refused to use it. I can't do anything to myself. I'll definitely get on Twitter. 

There's a lot of value yeah. Startups that don't have a network going through incubators and accelerators. 

They're diminishing returns for someone who has an existing network and Silicon Valley to go through an accelerator incubator. Right right, right. Yeah. 

But, I mean, if you don't if you don't have a network, that is a way of seating your network.
And getting intros to a lot of people, whether it's customers partners or or investors right right. 

So, now, let's talk about the distributed team overseas so you've decided to build a team remotely basically, not us based. Why is that? It happened even before the current virus hit, right? 

Well, I've been running remote teams and working remotely for many years now and that's partially just how I like to work. 

That being said, 

the quality of employees oversees has gone up dramatically in part, 

because knowledge of technology tools and development tools has democratize dramatically. 

And unless you're working on some bleeding edge technology requiring specialists that are concentrated in a geographical area, you can probably higher the technical talent you need overseas. 

The same applies not just a technical talent. It also applies for marketing and growth talent. Like, we just extend the, we just hired someone for marketing growth who work that Web Summit. 

One of the probably the largest technology in startup conferences in the world in Portugal,
and his English grammar is better than most native English speakers in the US that I could hire right. Content and he can get and,
I mean,
so,
yes,
I mean, 
you're not,
you still have to,
you know,
you have to go do the work to find the right people and recruiting is is difficult.
No matter where you're hiring, but we've had really good luck hiring oversees.
And it saves us on burn rate because we're not spending so much money on Silicon Valley salaries. 

Right, right that's a great decision. Especially now with the grant wire is I think more and more people are trying to build distributed team and go overseas. So good luck people and let's go back to fundraising. 

So you're actually raising another round right now right? Yeah. So, I would describe what we raised before as as Pre saved funding. So we've just sort of started up the conversations again. 

It was kind of fruitless and pointless to talk to investors or start new conversations in March. A lot of investors were existing investments. 

They were, or they were adapting to the new reality of having to deal with pitch meetings over zoom and and getting to know a company remotely. 

I don't know what the statistics were before the pandemic, but I looked at some statistics that forty one percent of bases. 

Have now funded investors who they are entrepreneurs who they've never met and more than sixty percent would consider it. 

So, 

if if that number goes up pretty substantially, 

let's say it's like seventy percent have invested in a company that they've never met, 

or they've only, 

you know, 

talk to a resume and ninety percent are willing to consider it. 

Well, that really changes the, the playing field for, like, a lot of things like, is talent going to continue even concentrating in Silicon Valley. 

Our founders even going to move there anymore,
and it's going to have to change also how vc's work as well, 

because they're gonna have to seek out deals outside of their immediate professional network that exists the existing connections they have and do lead generation like, 

any other business to to get good deal flow at an example of a VC that is doing that is there's fast this fast of application and funding process 
that affects put together built on top of their product for kind of standardizing how you organize 
materials for investors. The brief. 

I think that's the future of inbound VC deal flow. It's going to be professionalized products and software services. 

It's not gonna be getting an introduction to every single portfolio company through someone you worked with in the past. 

Right. So I was really interested in how you're approaching right now, in terms of who do reach out to and how do you reach out to those investors? So you already have some connections to the investors of course, and how do you leverage them? 

How do you know if it's the right time to reach out as an investor and ask for a check or. 

Is it not because some investors are still seeing there and waiting for the desk to sell down a little bit. So, how do you figure it out? How do you know the timing is right? 

I usually ask what level if they told me something it was too early for them. 

When I chatted with them six months ago, 

then I add them to a list of perspective, 

investors that receive our company updates on progress we're making with the product beta customers. 

Et cetera, and so they can read that and choose to at their leisure asynchronously response. Then,
if,
you know, 

if they tell me, 

it's too early, 

I also asked them specifically what, 

what level of market penetration traction do you want, 

or would you want, 

you know, 

do you typically invest when a company achieved this level of traction? 

I asked them that point blank so that when we achieved that level of traction, I'm re, engaging. Exactly. 

At the point where they wanted us to they they want they they they they're usually typically interested in investing got it got it. 

And I was actually wondering which tools are you using to do that? So, is it just simple spreadsheet or where you put the all the emails in and then you use something like hotspot or MailChimp? What are 
the tools that you were using to send those updates? 
Or is it some software like founders suit that you're using to do that? So we actually for organizing our fundraising. We use our own investors of cap inside. 

The cap is product and we've built to in order to streamline this. 

We've also built a Chrome extension because most founders are doing their research on investors and what usually on LinkedIn or angel list. 

Without entering into fictitious contracts with fictitious entities like, how would they try the advisor flow for adding board of advisors? Nice. That's really interesting. That's great. And so we need that. 

We need to have a sandbox demo environment that we're working on figuring out how to do that. 

And we're just that company that's Pre setup that user could interact with. But in the short term, we're just doing the demo ourselves pastor is on a call. What's your recommendation go to founders? 

Should they rather pushy? Probably a little bit leggy version, but still something that investors can see just on the Internet or should they wait and show the investors just a demo that they have. 

I I think it depends on what kind of products you are building if you're building a consumer app. 

By all means, you should have the ability for people to download it. Even if it's a beta test app link. 

If you're building an enterprise platform, subscription revenue, that's a much more complex products. 

Then a guided demo is probably maybe more successful in general. There are some investors who. 

They the way that they'll do everything over email, they're the exception. But I think there's some super angels who operate this way, where they just want a video over email. 

They want a deck that has more text than a typical deck. So, they can read it, because they don't, they don't even want to bother going through the pitch process on the phone. 

So many people message them asking them to invest and they get so many intros that they have no way of dealing with inbound in a rash in a reasonable way where they could actually take 

every single punch that every single intro call. 

That's really nice. And shoot people actually customize their pitch deck to those specific investors. Or should they just send whatever they have? 

I, I think it's actually a strange because you may end up having multiple versions of a pitch deck. 

You may have a intro lightweight version of the pitch deck that you're really feel totally comfortable sharing and if people forward it around, 

you might have the more detailed pitch deck that you sent to someone who has already. 

You've already had a good chat with them. They've expressed interest and and now they're evangelizing the deal to the rest of the partners within the fund. 

You might send them the more detailed deck that and then there are specific investors who want, they don't ever want you to pitch. 
So, if you think about information density, like, how much text is on each slide, you have to balance, 
then how this deck is going to be used. 
If this deck is going to be read asynchronously, it can have more information density. 

If the deck is going to be used in a live presentation where you're presenting from the deck, 

then you should have less information density because you want to be saying those words, 

a lot of that content and elaborating with examples instead of having a lot of text on each slide that is sort of redundant with the content you're covering verbally. 

Right right. That's such a good advice. And normally yes, you do have multiple different beach decks. So, let's move to the last question of today's app is a, which is a call to action. What's the one thing that you would like the listener to do? 

As soon as the episode is over, if you're looking to start a company and launch your startup give cap is to try and sign up for our beta waiting list. And you can email me. Greg, a cap is dot com. 

And I'll get you a beta invite as soon as possible. Awesome. Perfect. I'll definitely leave a link to Kevin and to your email in the description of this episode. 

So, if you do, you want to start your company and don't want to deal with the legal issues, just check it out, right? So thanks a lot Greg for coming up. And for persevere on fundraising radio. Really appreciate it. I think it was Pre. Interesting. 

Episode discussed tons and tons of topics. I'm pretty sure I forgot something from my list, but. 

Is already too late now I said we're ripping up so thanks a lot and have a great week. Yeah, you too. Thanks for having me on.